As filed with the Securities and Exchange Commission on
November 8, 2005
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
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Massachusetts
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2834
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04-3412465
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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160 Second Street
Cambridge, Massachusetts 02142
(617) 492-5554
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
David S. Barlow
Chairman
160 Second Street
Cambridge, Massachusetts 02142
(617) 492-5554
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
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Gabor Garai
David W. Kantaros
Foley & Lardner LLP
111 Huntington Avenue
Boston, Massachusetts 02199
(617) 342-4000
(617) 342-4001 — Fax
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David K. Boston
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
(212) 728-8111 — Fax
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Approximate date of commencement of
proposed sale to the public:
As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being
registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following
box.
o
If this Form is filed to register
additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.
o
If this Form is a post-effective
amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective
registration statement for the same
offering.
o
If this Form is a post-effective
amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective
registration statement for the same
offering.
o
If delivery of the prospectus is
expected to be made pursuant to Rule 434, check the
following
box.
o
CALCULATION OF REGISTRATION FEE
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Title of each class of
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Proposed maximum
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Amount of
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securities to be registered
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aggregate offering price
(1)
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registration fee
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Common Stock, par value $0.01 per share
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$57,500,000
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$6,768
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(1)
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Estimated solely for the purpose of calculating the registration
fee pursuant to Section 6(b) and Rule 457(o) of the
Securities Act of 1933.
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The Registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The information contained in this
prospectus is not complete and may be changed. We may not sell
these securities until the Securities and Exchange Commission
declares our registration statement effective. This prospectus
is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
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Subject to Completion, dated
November 8, 2005
Shares
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
Common Stock
$ per
share
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Molecular Insight Pharmaceuticals, Inc. is
offering shares
of common stock.
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We anticipate that the initial public offering price will be
between
$ and
$ per
share.
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This is our initial public offering and no public market
currently exists for our common stock.
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Proposed trading symbol: Nasdaq National Market — MIPI.
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This investment involves risk. See “Risk Factors”
beginning on page 8.
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Per Share
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Total
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Initial public offering price
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$
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$
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Underwriting discount
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$
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$
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Proceeds, before expenses, to Molecular Insight Pharmaceuticals,
Inc.
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$
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$
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The underwriters have a 30-day option to purchase up
to additional
shares of common stock from us to cover over-allotments, if
any.
Neither the Securities and Exchange Commission nor any state
securities commission has approved of anyone’s investment
in these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense
.
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Piper Jaffray
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SG Cowen & Co.
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Oppenheimer & Co.
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Roth Capital Partners, LLC
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The date of this prospectus
is ,
TABLE OF CONTENTS
You should rely only on the information contained in the
prospectus. We have not, and the underwriters have not,
authorized any other person to provide you with different
information. This prospectus is not an offer to sell, nor is it
seeking an offer to buy, these securities in any state where the
offer or solicitation is not permitted. The information in this
prospectus is complete and accurate as of the date on the front
cover, but the information may have changed since that date.
We currently use Molecular
Insight
tm
and the Molecular Insight logo as trademarks in the United
States and other countries. We have sought U.S. trademark
registration for Molecular
Insight
tm
and plan to seek similar protection for this mark outside the
United States. We have also filed intent to use
registrations with the United States Patent and Trademark
Office for the trademarks
Ultratrace
tm
,
Zemiva
tm
and
Velepin
tm
and plan to seek similar protection for these marks outside the
United States. We use
SAAC
tm
,
SAACQ
tm
and
Nanotrace
tm
Discovery as trademarks in the United States and other
countries, and are exploring the applicability of U.S. and
foreign registration for these trademarks. All other trademarks,
trade names or services marks appearing in this prospectus
belong to their respective holders.
i
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and
should be read together with, the more detailed information and
financial statements and related notes thereto appearing
elsewhere in this prospectus. Before you decide to invest in our
common stock, you should read the entire prospectus carefully,
including the risk factors and the financial statements and
related notes included in this prospectus.
Our Business
We are a biopharmaceutical company focused on the research,
development and commercialization of innovative molecular
imaging pharmaceuticals and targeted radiotherapeutics. Our
product candidates target markets with significant unmet needs
in the areas of cardiology, oncology and neurology. We believe
that our product candidates offer significant benefits to
patients, healthcare providers and third-party payers by
enabling improved diagnosis, treatment and management of disease
in a more cost-effective manner.
Our lead product candidate, Zemiva (iodofiltic acid I 123),
is a radiolabeled fatty acid analog that we are developing as a
molecular imaging pharmaceutical for the diagnosis of
insufficient blood flow to the heart, or cardiac ischemia. We
believe that Zemiva enables improved diagnosis and management of
disease in a more cost-effective and expeditious manner and has
significant advantages over the current standard of care in both
the emergency department and non-acute settings. We have
recently completed a Phase 2b clinical trial for Zemiva. In
this clinical trial, we evaluated the safety and efficacy of
Zemiva and initial findings suggest that Zemiva has the ability
to detect areas of cardiac ischemia with results generally
consistent with the current standard of care. Moreover, Zemiva
appeared to have significant predictive value in ruling out
cases in which cardiac ischemia was not present. We believe that
these findings support our decision to advance Zemiva into
Phase 3 development and we intend to commence a
Phase 3 clinical trial for Zemiva in the first half of 2006.
Market Opportunity
The initial target market for Zemiva is for the diagnosis of
cardiac ischemia in the emergency department setting. In the
United States, approximately five to eight million chest pain
patients present to emergency departments each year requiring a
determination of whether the chest pain is caused by cardiac
ischemia or myocardial infarction (heart attack). Of these chest
pain patients, over three million are admitted to the hospital
to achieve diagnosis, of which only approximately 15% are
ultimately diagnosed with acute coronary syndrome, or ACS, an
umbrella term which refers to both cardiac ischemia and
myocardial infarction. Moreover, the current standard of care to
detect ACS results in a high rate of “missed”
diagnoses. Of the approximately 25% of patients with chest pain
who are discharged from the emergency department having not been
diagnosed with ACS or admitted for further assessment, 1% to 5%
actually have ACS. We believe these statistics highlight a
significant opportunity to reduce hospitalizations and expenses
to the healthcare system through improved diagnostic techniques.
Unnecessary hospitalizations and “missed” diagnoses
are costly in many ways. The current standard of care to detect
ACS results in an estimated $3 to $6 billion per year in
inpatient expenses that we believe could be avoided with an
improved diagnostic. The complications in discharged patients
whose ACS is “missed” account for approximately 20% of
malpractice awards against emergency department physicians even
though patients with chest pain comprise approximately 6% of a
typical emergency physician’s practice. Therefore, we
believe there is a substantial unmet need for improved diagnosis
of ACS, and thus cardiac ischemia, in emergency department
settings.
A second target market for Zemiva is for the diagnosis of
coronary disease in the non-acute setting. The non-acute setting
is principally defined as scheduled cardiac stress tests
performed in hospitals and outpatient clinics with cardiac
practices. In 2002, over nine million nuclear stress tests were
performed
1
in the United States to evaluate cardiac ischemia. While stress
tests are generally effective in terms of diagnosis, the manner
in which they are conducted is inconvenient, time consuming and
expensive because of the inherent limitations of current imaging
agents. As a result, we believe there is a substantial unmet
need for an improved imaging agent that will shorten the time
required to perform stress tests, which typically amounts to 3
to 4 hours and up to 24 hours in certain cases. By
reducing this period, we believe that patient convenience and
throughput will be increased and overall costs will be reduced.
Our Lead Product Candidate
Zemiva is a radiolabeled fatty acid analog that is also known as
BMIPP. This molecule has been sold in Japan under the name
Cardiodine in the non-acute setting for over ten years and, to
our knowledge, no significant safety events have been reported.
Cardiodine has been used in over 500,000 patients and has been
the subject of over 200 peer-reviewed articles.
We believe that Zemiva offers significant advantages over the
current standard of care with respect to the diagnosis of
cardiac ischemia in both the emergency department and non-acute
settings:
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Emergency Department.
We believe that our clinical data
show that Zemiva enables the detection of cardiac ischemia up to
30 hours following an ischemic episode. Currently available
imaging agents are only effective when used during ongoing
symptoms or within two hours after cessation of symptoms. After
this period, a time consuming and expensive series of diagnostic
tests is required, including a stress test after the patient has
been stabilized. As a result of Zemiva’s extended
“imaging window,” we believe that Zemiva will offer
more timely, convenient and cost effective diagnosis when
compared with the current standard of care.
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Non-Acute Setting.
Utilizing Zemiva, we believe a stress
test will require approximately one hour. With currently
available imaging agents such as Cardiolite and Myoview, stress
tests typically require 3 to 4 hours, and may require up to
24 hours in certain cases. By reducing the time required
for a stress test, we believe that Zemiva will offer increased
patient throughput and convenience at a lower overall cost to
the healthcare system.
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We have completed three clinical studies with Zemiva, including
two multi-center Phase 2 studies and a Phase 1 study
at Massachusetts General Hospital. Data from these studies have
been presented at leading scientific forums and we believe that
these data have supported the safety and efficacy of Zemiva.
Results from our Phase 2a trial were published recently in
the peer-reviewed journal
Circulation
and cited at the
annual American Society of Nuclear Cardiology meeting. We
believe the data demonstrate that Zemiva administered to resting
patients with cardiac ischemia safely detects an ischemic event
up to 30 hours after the event occurred, without the use of
a stress test.
In March 2005, we completed enrollment of 105 patients in our
multi-center Phase 2b clinical trial of Zemiva. This trial
was designed to evaluate the safety and feasibility of Zemiva
for the detection of cardiac ischemia in patients with suspected
ACS whose symptoms occurred within 30 hours prior to Zemiva
injection. The objectives of the study were to evaluate:
1) the performance characteristics (accuracy, sensitivity,
specificity, positive predictive value and negative predictive
value) of Zemiva imaging for detection/exclusion of ACS; and
2) the safety of a single injection of Zemiva in patients
suspected of ACS. The study was designed as an open-label
Phase 2 study that recruited high-likelihood and
intermediate- to low-likelihood ACS patients. Patients were
imaged with Zemiva for the presence or absence of altered fatty
acid metabolism due to cardiac ischemia.
Preliminary findings of this study suggest that Zemiva
demonstrates the ability to detect areas of cardiac ischemia
with results generally consistent with traditional diagnostic
techniques, including those requiring a substantially greater
time investment. Preliminary analysis also suggests that there
is a high
2
negative predictive value when Zemiva is administered to
patients at rest. We expect the findings of this study to
support the decision to continue evaluation of the safety and
efficacy of Zemiva in Phase 3 clinical research.
We anticipate that our Phase 3 clinical trial for Zemiva
will include 450 patients at 20 centers in North
America, with a possible Phase 4 follow-up requirement. We
intend to commence this clinical trial in the first half of
2006. The final protocol design and the timing of commencement
will depend on the further analysis of the results from our
Phase 2b trial data and input from the Food and Drug
Administration, or FDA.
We also expect to begin a Phase 2 clinical trial to develop
our own reference database of normal images for myocardial SPECT
imaging, or a Normals database, in the first half of 2006. A
Normals database is a valuable tool for the physician
interpreting the cardiac image, regardless of whether the study
is read by a nuclear cardiologist, nuclear medicine physician or
nuclear radiologist. Such a database enables the interpreting
physician to compare a patient’s cardiac image against that
of a “normal” image as defined by computer-compiled
data. Consistent with this standard practice, we intend to
conduct a Phase 2 clinical trial to develop our own Normals
database that will be used as part of our Phase 3 clinical
trial and in the commercialization of Zemiva, if approved by the
FDA or comparable regulatory bodies outside the United States.
This trial is expected to include approximately
120 patients.
Other Product Candidates
In addition to Zemiva, we are developing a portfolio of product
candidates for cardiovascular molecular imaging as well as for
oncological molecular imaging and targeted radiotherapy using
our proprietary technologies. Applied independently and in
combination, these technologies enable the development of novel
molecular imaging pharmaceuticals and targeted radiotherapeutics
using both small molecule and protein-based agents.
Ultratrace MIBG, for example, is our targeted radiotherapeutic
candidate for cancer, which we believe may improve the
diagnosis, treatment and monitoring of neuroendocrine tumors
such as neuroblastoma, pheochromocytoma and carcinoid. We expect
to enter clinical studies in the first half of 2006 in patients
with neuroendocrine tumors. In addition, we are developing
several preclinical product candidates that address large unmet
medical needs in the areas of prostate cancer, tumor
angiogenesis and heart failure.
Our Business Strategy
We intend to become a leader in the research, development and
commercialization of innovative molecular imaging
pharmaceuticals and targeted radiotherapeutics that improve
patient diagnosis and care. Our strategy is to build our product
portfolio in each of these areas through our internal research
efforts, use of our proprietary technologies and by acquiring or
in-licensing complementary products and technologies. We plan to
take the following steps to implement our strategy:
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Seek regulatory approval of Zemiva for the diagnosis of cardiac
ischemia in the emergency department setting;
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Develop our own specialty sales and marketing team to market
Zemiva in the United States following regulatory approval
and establish strategic collaborations to market Zemiva outside
the United States;
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Expand the indications for which Zemiva may be used, beginning
with indications in the non-acute setting;
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Advance Ultratrace MIBG into clinical trials for the detection
and treatment of neuroendocrine tumors;
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Advance the development of our preclinical product candidates;
and
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Expand our product pipeline through our proprietary platform
technologies, acquisitions and strategic licensing arrangements.
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Corporate Information
We were incorporated in the Commonwealth of Massachusetts in
1997 under the name Imaging Biopharmaceuticals, Inc. and
subsequently changed our name to Biostream, Inc. in 1998, and
subsequently changed our name again to Molecular Insight
Pharmaceuticals, Inc. in 2003. Our principal executive offices
are located at 160 Second Street, Cambridge, Massachusetts,
02142, and our telephone number is (617) 492-5554. Our
Internet site address is www.molecularinsight.com. Any
information that is included on or linked to our Internet site
is not a part of this prospectus.
In this prospectus, unless otherwise stated or the context
otherwise requires, references to “Molecular Insight,”
“MIP,” “we,” “us,”
“our,” “the Company” and similar references
refer to Molecular Insight Pharmaceuticals, Inc. and its
subsidiaries.
All references to years in this prospectus, unless otherwise
noted, refer to our fiscal years, which end on December 31.
For example, a reference to “2004” or “fiscal
2004” means the twelve-month period that ended
December 31, 2004.
4
The Offering
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Common stock offered by us
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shares
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Common stock to be outstanding after the offering
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shares
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Initial public offering price
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$ per
share
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Use of proceeds
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We intend to use the net proceeds of this offering to continue
the development and preparation for the commercialization of our
lead molecular imaging pharmaceutical candidate, Zemiva; to
initiate and expand the clinical development of Ultratrace MIBG,
our lead targeted radiotherapeutic candidate for cancer; and for
other working capital and general corporate activities. See
“Use of Proceeds.”
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Cash dividend to be paid in connection with the offering
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Contingent upon the closing of this offering, we intend to pay
to certain existing preferred stockholders a cash dividend in an
aggregate amount of
$ .
Purchasers of our common stock in this offering will not be
entitled to receive any portion of this dividend.
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Proposed Nasdaq National Market symbol
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MIPI
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The number of shares of common stock that will be outstanding
immediately after this offering is based
on shares
of common stock outstanding as
of ,
2005. The number of shares of common stock to be outstanding
after this offering assumes the automatic conversion, upon the
completion of this offering, of all shares of our preferred
stock outstanding as
of ,
2005 into an aggregate
of shares
of our common stock
and shares
of common stock issuable upon the exercise of common stock
warrants outstanding as
of ,
2005 that will expire on or prior to the completion of this
offering.
The number of shares of common stock to be outstanding after
this offering excludes the following shares:
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shares
of common stock issuable upon the exercise of stock options
outstanding as
of ,
2005, of
which options
having a weighted-average exercise price of
$ per
share were exercisable as
of ,
2005; and
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•
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shares
of common stock available for future grants under our 2005
Equity Incentive Plan.
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In addition, unless otherwise indicated, all information in this
prospectus assumes:
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a
1-for- reverse
split of our common stock to be effected before the completion
of this offering; and
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no exercise of the underwriters’ over-allotment option.
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5
Summary Consolidated Financial Data
The summary consolidated financial data set forth below should
be read in conjunction with our consolidated financial
statements and related notes thereto and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” included elsewhere in this prospectus. The
summary consolidated statements of operations data for the years
ended December 31, 2002, 2003 and 2004 are derived from our
audited consolidated financial statements included elsewhere in
this prospectus. The summary consolidated statements of
operations data for the six months ended June 30, 2004 and
2005, and the summary consolidated balance sheet data as of
June 30, 2005, are derived from our unaudited consolidated
financial statements included elsewhere in this prospectus. The
selected pro forma consolidated balance sheet data as of
June 30, 2005 is derived from unaudited pro forma
consolidated financial statements not included in this
prospectus. The historical results are not necessarily
indicative of results to be expected in any future period.
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Six Months Ended
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Year Ended December 31,
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June 30,
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2002
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2003
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2004
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2004
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2005
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(in thousands, except per share data)
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Consolidated Statements of Operations Data:
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Research and development grant revenue
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$
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624
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$
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723
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$
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569
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$
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248
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$
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427
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Operating expenses:
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Research and development
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2,317
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2,774
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5,381
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1,988
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3,990
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General and administrative
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1,562
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1,266
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3,520
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1,525
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3,042
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Amortization of licensed patent rights
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3,798
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—
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—
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—
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—
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Total operating expenses
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7,677
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4,040
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8,901
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3,513
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7,032
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Loss from operations
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(7,053
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)
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(3,317
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)
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(8,332
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)
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(3,265
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)
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(6,605
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)
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Other (expense) income
|
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Interest income
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|
3
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|
|
1
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|
20
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|
11
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|
133
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|
Interest expense
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(6
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)
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|
(3
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)
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|
|
(3
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)
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|
(1
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)
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|
|
(7
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)
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Interest expense — related parties
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(28
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)
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|
(29
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)
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|
—
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|
—
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|
|
—
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Total other (expense) income, net
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(31
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)
|
|
|
(31
|
)
|
|
|
17
|
|
|
|
10
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(7,084
|
)
|
|
|
(3,348
|
)
|
|
|
(8,315
|
)
|
|
|
(3,255
|
)
|
|
|
(6,479
|
)
|
|
Redeemable convertible preferred stock dividends and accretion
of issuance costs
|
|
|
—
|
|
|
|
(613
|
)
|
|
|
(1,312
|
)
|
|
|
(638
|
)
|
|
|
(1,710
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(7,084
|
)
|
|
$
|
(3,961
|
)
|
|
$
|
(9,627
|
)
|
|
$
|
(3,893
|
)
|
|
$
|
(8,189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common
stockholders — basic and diluted
|
|
$
|
(0.63
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to compute basic and diluted net
loss per share attributable to common stockholders
|
|
|
11,275
|
|
|
|
21,090
|
|
|
|
22,641
|
|
|
|
21,981
|
|
|
|
25,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss per common share — basic and diluted
|
|
|
|
|
|
|
|
|
|
$
|
(
|
)
|
|
|
|
|
|
$
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing pro forma net loss per common share
— basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
Actual
|
|
|
Pro Forma
(1)
|
|
|
As Adjusted
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
21,153
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
|
19,148
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
21,912
|
|
|
|
|
|
|
|
|
|
|
Long-term obligations, net of current portion
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock
|
|
|
43,809
|
|
|
|
|
|
|
|
|
|
|
Total stockholders (deficit) equity
|
|
|
(24,361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
On a pro forma basis to give effect to (i) the conversion
of all of our shares of preferred stock outstanding as of
June 30, 2005
into shares
of common stock upon the completion of this offering,
(ii) the payment to certain preferred stockholders of a
cash dividend in an aggregate amount of
$ ,
(iii) the election of certain preferred stockholders to
receive in the
aggregate shares
of common stock in lieu of a cash dividend and (iv) the
exercise of warrants outstanding as of June 30, 2005 that
will expire on or prior to the completion of this offering
for shares
of common stock.
|
|
|
|
(2)
|
On a pro forma as adjusted basis to give effect to the sale of
all of the shares of common stock in this offering at an assumed
public offering price of
$ per share
(the midpoint of the expected price range), after deducting
estimated underwriting discounts and commissions and our
estimated offering expenses.
|
7
RISK FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider the risks described below with all
of the other information included in this prospectus before
making an investment decision. If any of the possible adverse
events described below actually occurs, our business, results of
operations or financial condition would likely suffer. In such
an event, the market price of our common stock could decline and
you could lose all or part of your investment. Additional risks
and uncertainties not presently known to us or that we currently
deem immaterial may also impair our business.
Risks Related to Our Product Candidates and Operations
We are largely dependent on the success of our lead product
candidate, Zemiva, and we may not be able to successfully
commercialize this potential product.
We have incurred and will continue to incur significant costs
relating to the development and marketing of our lead product
candidate, Zemiva. We have not obtained approval to market this
potential product in any jurisdiction and we may never be able
to obtain approval or, if approvals are obtained, to
commercialize Zemiva successfully. If we fail to successfully
commercialize Zemiva, we may be unable to generate sufficient
revenue to sustain and grow our business, and our business,
financial condition and results of operations will be adversely
affected.
We have only recently begun to direct significant efforts toward
the expansion of our scientific staff and research capabilities
to identify and develop product candidates in addition to
Zemiva. We do not know whether our planned preclinical
development or clinical trials for these other product
candidates will begin on time or be completed on schedule, if at
all. In addition, we do not know whether any of our clinical
trials will result in marketable products. We do not anticipate
that any additional product candidates will reach the market for
at least several years, if at all.
If we fail to obtain regulatory approval of Zemiva, or any of
our other current or future product candidates, we will be
unable to commercialize these potential products in the United
States.
The development, testing, manufacturing and marketing of our
product candidates are subject to extensive regulation by
governmental authorities in the United States. In particular,
the process of obtaining FDA approval is costly and time
consuming, and the time required for such approval is uncertain.
Our product candidates must undergo rigorous preclinical and
clinical testing and an extensive regulatory approval process
mandated by the FDA. Such regulatory review includes the
determination of manufacturing capability and product
performance. Generally, only a small percentage of
pharmaceutical products are ultimately approved for commercial
sale.
We can give no assurance that our current or future product
candidates will be approved by the FDA or any other governmental
body. In addition, there can be no assurance that all necessary
approvals will be granted for future product candidates or that
FDA review or actions will not involve delays caused by the
FDA’s request for additional information or testing that
could adversely affect the time to market for and sale of our
product candidates. Further failure to comply with applicable
regulatory requirements can, among other things, result in the
suspension of regulatory approval as well as possible civil and
criminal sanctions.
Failure to enroll patients in our clinical trials may cause
delays in developing Zemiva or any of our other current or
future product candidates.
We may encounter delays in the development and
commercialization, or fail to obtain marketing approval, of
Zemiva or any other future product candidate if we are unable to
enroll enough patients to complete clinical trials. Our ability
to enroll sufficient numbers of patients in our clinical trials
depends on many factors, including the severity of illness of
the population, the size of the patient
8
population, the nature of the clinical protocol, the proximity
of patients to clinical sites, the eligibility criteria for the
trial and competing clinical trials. Delays in planned patient
enrollment may result in increased costs and harm our ability to
complete our clinical trials and obtain regulatory approval.
Delays in clinical testing could result in increased costs to
us and delay our ability to generate revenue.
Significant delays in clinical testing could materially impact
our product development costs. We currently expect that,
following this offering and based on our current expected
clinical protocols, we will expend at least $10 million in
connection with additional clinical trials for Zemiva. We do not
know whether planned clinical trials will begin on time, will
need to be restructured or will be completed on schedule, if at
all. Clinical trials can be delayed for a variety of reasons,
including delays in obtaining regulatory approval to commence
and continue a study, delays in reaching agreement on acceptable
clinical study terms with prospective sites, delays in obtaining
institutional review board approval to conduct a study at a
prospective site and delays in recruiting patients to
participate in a study.
In addition, we typically rely on third-party clinical
investigators to conduct our clinical trials and other
third-party organizations to oversee the operations of these
clinical trials and to perform data collection and analysis. As
a result, we may face additional delays outside of our control
if these parties do not perform their obligations in a timely
fashion. Significant delays in testing or regulatory approvals
for any of our current or future product candidates, including
Zemiva, could prevent or cause delays in the commercialization
of such product candidates, reduce potential revenues from the
sale of such product candidates and cause our costs to increase.
Our clinical trials for any of our current or future product
candidates may produce negative or inconclusive results and we
may decide, or regulators may require us, to conduct additional
clinical and/or preclinical testing for these product candidates
or cease our trials.
We will only receive regulatory approval to commercialize a
product candidate if we can demonstrate to the satisfaction of
the FDA, or the applicable foreign regulatory agency, that the
product candidate is safe and effective. We have recently
completed a Phase 2b clinical trial for Zemiva and are currently
planning a Phase 3 clinical trial for Zemiva. In addition, we
intend to commence a Phase 1 clinical trial for Ultratrace
MIBG in calendar year 2006. We do not know whether our existing
or future clinical trials will demonstrate safety and efficacy
sufficiently to result in marketable products. Because our
clinical trials for Zemiva and our other product candidates may
produce negative or inconclusive results, we may decide, or
regulators may require us, to conduct additional clinical and/or
preclinical testing for these product candidates or cease our
clinical trials. If this occurs, we may not be able to obtain
approval for these product candidates or our anticipated time to
market for these product candidates may be substantially delayed
and we may also experience significant additional development
costs. We may also be required to undertake additional clinical
testing if we change or expand the indications for our product
candidates.
If approved, the commercialization of our product candidates,
including Zemiva, may not be profitable.
In order for the commercialization of our potential products to
be profitable, our products must be cost-effective and
economical to manufacture on a commercial scale. Subject to
regulatory approval, we expect to incur significant sales,
marketing, distribution and, to the extent we do not outsource
manufacturing, manufacturing expenses in connection with the
commercialization of Zemiva and our other potential products as
we do not currently have a dedicated sales force, we do not have
manufacturing capability, and we have no experience in the
sales, marketing and distribution of pharmaceutical products. In
order to commercialize Zemiva or any of our other potential
products that we develop, we must develop sales, marketing and
distribution capabilities or make arrangements with a third
party to perform these functions. Developing a sales force is
expensive and time-
9
consuming, and we may not be able to develop this capacity. If
we are unable to establish adequate sales, marketing and
distribution capabilities, independently or with others, we may
not be able to generate significant revenue and may not become
profitable. Our future profitability will depend on many
factors, including, but not limited to:
|
|
|
|
|
|
•
|
the costs and timing of developing a commercial scale
manufacturing facility or the costs of outsourcing the
manufacturing of Zemiva;
|
|
|
|
|
•
|
receipt of FDA approval of Zemiva and our other product
candidates, as applicable;
|
|
|
|
|
•
|
the terms of any marketing restrictions or post-marketing
commitments imposed as a condition of approval by the FDA or
foreign regulatory authorities;
|
|
|
|
|
•
|
the costs of filing, prosecuting, defending and enforcing any
patent claims and other intellectual property rights;
|
|
|
|
|
•
|
costs of establishing sales, marketing and distribution
capabilities;
|
|
|
|
|
•
|
the effect of competing technological and market developments;
and
|
|
|
|
|
•
|
the terms and timing of any collaborative, licensing and other
arrangements that we may establish.
|
Even if we receive regulatory approval for Zemiva or any of our
other product candidates, we may not ever receive significant
revenues from any of them. To the extent that we are not
successful in commercializing our potential products, we will
incur significant additional losses and the price of our common
stock will be negatively affected.
We do not have patent rights to the composition of Zemiva,
and if we cannot gain and exploit a period of marketing
exclusivity under the Food, Drug & Cosmetic Act, as amended,
we may not be able to successfully commercialize Zemiva or our
other product candidates.
We do not have patent rights to the composition of Zemiva. Under
sections 505(c)(3)(D)(ii) and 505(j)(5)(D)(ii) of the Food,
Drug & Cosmetic Act, or the FDCA, as amended by the
Hatch-Waxman Act of 1984, a new chemical entity that is
granted regulatory approvals may, in the absence of patent
protections, be eligible for five years of marketing exclusivity
in the United States following regulatory approval. We believe
that the underlying active molecule in Zemiva, BMIPP, is a new
chemical entity in the United States and should be eligible for
this five-year period of marketing exclusivity in the United
States under the FDCA. This marketing exclusivity will protect
us from any other applicant utilizing the materials in support
of our new drug application during the exclusivity period. There
is, however, no assurance that BMIPP will, in fact, be
considered a new chemical entity for these purposes or be
entitled to the period of marketing exclusivity. If we are not
able to gain or exploit the period of marketing exclusivity, we
may not be able to successfully commercialize Zemiva or may face
significant competitive threats to such commercialization from
other manufacturers, including the manufacturers of generic
alternatives. Further, even if BMIPP is considered a new
chemical entity and we are able to gain five years of marketing
exclusivity, another company could also gain such marketing
exclusivity under the provisions of the FDCA, as amended by the
Hatch-Waxman Act if such company can complete a full new drug
application with a complete human clinical trial process and
obtain regulatory approval of its product.
Our proprietary rights may not adequately protect our
technologies and product candidates.
Our commercial success will depend in part on obtaining and
maintaining patent and trade secret protection of our
technologies and product candidates, as well as successfully
defending these patents against third-party challenges. We will
only be able to protect our technologies and product candidates
from unauthorized use by third parties to the extent that valid
and enforceable patents or trade secrets cover them, or in the
event they are new chemical entities eligible for the five year
period of marketing
10
exclusivity under the FDCA. Furthermore, the degree of future
protection of our proprietary rights is uncertain because legal
means afford only limited protection and may not adequately
protect our rights or permit us to gain or keep our competitive
advantage.
The patent positions of life sciences companies can be highly
uncertain and involve complex legal and factual questions for
which important legal principles remain unresolved. No
consistent policy regarding the breadth of claims allowed in
such companies’ patents has emerged to date in the United
States. The patent situation outside the United States is even
more uncertain. Changes in either the patent laws or in the
interpretations of patent laws in the United States or other
countries may diminish the value of our intellectual property.
Accordingly, we cannot predict the breadth of claims that may be
allowed or enforced in our patents or in third-party patents.
For example:
|
|
|
|
|
|
•
|
we or our licensors might not have been the first to make the
inventions covered by each of our pending patent applications
and issued patents;
|
|
|
|
|
•
|
we or our licensors might not have been the first to file patent
applications for these inventions;
|
|
|
|
|
•
|
others may independently develop similar or alternative
technologies or duplicate any of our technologies;
|
|
|
|
|
•
|
our pending patent applications and the pending patent
applications of our licensors may not result in issued patents;
|
|
|
|
|
•
|
our issued patents and issued patents of our licensors may not
provide a basis for commercially viable products, or may not
provide us with any competitive advantages, or may be challenged
and invalidated by third parties;
|
|
|
|
|
•
|
we may not develop additional proprietary technologies or
product candidates that are patentable; or
|
|
|
|
|
•
|
the patents of others may have an adverse effect on our business.
|
We also rely on trade secrets to protect our technology,
especially where we do not believe patent protection is
appropriate or obtainable. Trade secrets, however, are difficult
to protect. While we believe that we use reasonable efforts to
protect our trade secrets, our or our strategic partners’
employees, consultants, contractors or advisors may
unintentionally or willfully disclose our information to
competitors. We seek to protect this information, in part,
through the use of non-disclosure and confidentiality agreements
with employees, consultants, advisors and others. These
agreements may be breached, and we may not have adequate
remedies for a breach. In addition, we cannot ensure that those
agreements will provide adequate protection for our trade
secrets, know-how or other proprietary information and prevent
their unauthorized use or disclosure. To the extent that
consultants, key employees or other third parties apply
technological information independently developed by them or by
others to our product candidates, disputes may arise as to the
proprietary rights of the information, which may not be resolved
in our favor. If our trade secrets become known to competitors
with greater experience and financial resources, the competitors
may copy or use our trade secrets and other proprietary
information in the advancement of their products, methods or
technologies.
If we were to enforce a claim that a third party had illegally
obtained and was using our trade secrets, it would be expensive
and time consuming and the outcome would be unpredictable. In
addition, courts outside the United States are sometimes less
willing to protect trade secrets than courts in the United
States. Moreover, if our competitors independently develop
equivalent knowledge, methods and know-how, it will be more
difficult for us to enforce our patent rights, and our business
could be adversely effected.
11
If we are not able to defend the patent or trade secret
protection position of our technologies and product candidates,
then we will not be able to exclude competitors from developing
or marketing competing products and we may not generate enough
revenue from product sales to justify the cost of development of
our product candidates and to achieve or maintain profitability.
Our ability to commercialize our potential products will
depend on our ability to sell such products without infringing
the patent or proprietary rights of third parties. If we are
sued for infringing intellectual property rights of third
parties, such litigation will be costly and time consuming and
an unfavorable outcome would have a significant adverse effect
on our business.
Our ability to commercialize our potential products will depend
on our ability to sell such products without infringing the
patents or other proprietary rights of third parties. Numerous
U.S. and foreign-issued patents and pending applications, which
are owned by third parties, exist in the various areas in which
we have products. In addition, because patent applications can
take several years to issue, there may be currently pending
applications unknown to us which may later result in issued
patents that our product candidates may infringe. There could
also be existing patents of which we are not aware that our
product candidates may inadvertently infringe.
If a third party claims that we infringe on its patents or other
proprietary rights, we could face a number of issues that could
seriously harm our competitive position, including:
|
|
|
|
|
|
•
|
infringement and other intellectual property claims which, with
or without merit, can be costly and time consuming to litigate,
can delay the regulatory approval process and can divert
management’s attention from our core business strategy;
|
|
|
|
|
•
|
substantial damages for past infringement which we may have to
pay if a court determines that our products or technologies
infringe upon a competitor’s patent or other proprietary
rights;
|
|
|
|
|
•
|
a court prohibiting us from selling or licensing our products or
technologies unless the holder licenses the patent or other
proprietary rights to us, which such holder is not required to
do;
|
|
|
|
|
•
|
if a license is available from a holder, we may have to pay
substantial royalties or grant cross licenses to our patents or
other proprietary rights; and
|
|
|
|
|
•
|
redesigning our process so that it does not infringe, which may
not be possible or may require substantial time and expense.
|
Such actions could harm our competitive position and our ability
to generate revenue and could result in increased costs.
If another party obtains orphan drug exclusivity for the
drugs and indications we are targeting, we may be precluded from
commercializing our product candidates for those indications.
We intend to seek orphan drug exclusivity for Ultratrace MIBG to
be used as a targeted radiotherapeutic for the treatment of
neuroendocrine tumors. Under the Orphan Drug Act, the FDA may
grant orphan drug designation to drugs intended to treat a rare
disease or condition, which is defined by the FDA as a disease
or condition that affects fewer than 200,000 individuals in the
United States. The company that obtains the first FDA approval
for a designated orphan drug indication receives marketing
exclusivity for use of that drug for that indication for a
period of seven years. Orphan drug exclusive marketing rights
may be lost if the FDA later determines that the request for
designation was materially defective, or if the manufacturer is
unable to assure sufficient quantity of the drug. Orphan drug
designation does not shorten the development or regulatory
review time of a drug, but does provide limited advantages in
the regulatory review and approval process. Thus, orphan drug
exclusivity may not prevent other market entrants. A different
drug, or under limited
12
circumstances, such as the inability to supply sufficient
quantities of the drug for the designated indication, the same
drug, may be approved by the FDA for the same orphan drug
indication. Moreover, due to the uncertainties associated with
developing pharmaceutical products, we may not be the first to
obtain marketing approval for any orphan drug indication. Even
if we obtain orphan drug designation, a competitor may obtain
regulatory approval prior to us for the same product and
indication we are targeting and we may be prevented from
obtaining approval for that indication for seven years.
If our product candidates, including Zemiva, do not gain
market acceptance among physicians, patients and the medical
community, we will be unable to generate significant revenue, if
any.
The products that we develop may not achieve market acceptance
among physicians, patients, third-party payers and others in the
medical community. If we receive the regulatory approvals
necessary for commercialization, the degree of market acceptance
will depend upon a number of factors, including:
|
|
|
|
|
|
•
|
limited indications of regulatory approvals;
|
|
|
|
|
•
|
the establishment and demonstration in the medical community of
the clinical efficacy and safety of our product candidates and
their potential advantages over existing diagnostic compounds;
|
|
|
|
|
•
|
the prevalence and severity of any side effects;
|
|
|
|
|
•
|
our ability to offer our product candidates at an acceptable
price;
|
|
|
|
|
•
|
the relative convenience and ease of administration of our
products;
|
|
|
|
|
•
|
the strength of marketing and distribution support; and
|
|
|
|
|
•
|
sufficient third-party coverage or reimbursement.
|
The market may not accept Zemiva based on any number of the
above factors. If approved, Zemiva’s primary competition in
the emergency department setting will be the current standard of
care, which involves several diagnostic products, and its
primary competition in the non-acute setting will be existing
perfusion agents such as Cardiolite and Myoview. The market may
choose to continue utilizing the existing products for any
number of reasons, including familiarity with or pricing of
these existing products. The failure of Zemiva or any of our
product candidates to gain market acceptance could impair our
ability to generate revenue, which could have a material adverse
effect on our future business, financial condition and results
of operations.
We may need to raise additional funds in order to finance the
commercialization of our potential products by issuing
securities or through collaboration and licensing arrangements,
which may cause dilution to existing stockholders or require us
to relinquish rights to our technologies and our product
candidates.
Developing our product candidates, conducting clinical trials,
establishing manufacturing facilities and developing marketing
and distribution capabilities is expensive. We may need to
finance future cash needs through additional public or private
equity offerings, debt financings or corporate collaboration and
licensing arrangements. We cannot be certain that additional
funding will be available to us on acceptable terms, or at all.
If adequate funds are not available, we may be required to
delay, reduce the scope of or eliminate one or more of our
research or development programs or our commercialization
efforts. To the extent that we raise additional funds by issuing
equity securities, our stockholders may experience additional
dilution. Debt financing, if available, may involve restrictive
covenants. To the extent that we raise additional funds through
collaboration and licensing arrangements, it may be necessary to
relinquish some rights to our technologies or our product
candidates or grant licenses on terms that are not favorable to
us.
13
We have no commercial manufacturing facility and no
experience in manufacturing products for commercial purposes.
We have no commercial manufacturing facility and no experience
in manufacturing products for commercial purposes. We currently
contract with a Canadian manufacturing facility to supply the
BMIPP molecule we need for later stage clinical testing and for
initial product sales, although we will need to enter into
additional manufacturing arrangements for the full
commercialization of Zemiva and our manufacturing needs for all
other product candidates. We will be dependent on such third
parties to supply our products according to our specifications,
in sufficient quantities, on time, in compliance with regulatory
standards and at a competitive price. Manufacturers supplying
biopharmaceutical products must comply with FDA regulations
which require, among other things, compliance with the
FDA’s evolving regulations on current Good Manufacturing
Practices, or cGMPs, which are enforced by the FDA through its
facilities inspection program. The manufacture of products at
any facility will be subject to strict quality control, testing
and record keeping requirements, and continuing obligations
regarding the submission of safety reports and other post-market
information. We may not be able to obtain sufficient quantities
of the products we develop to meet our needs for pre-clinical or
clinical development, and we may have problems complying, or
maintaining compliance, with cGMP.
A third-party manufacturer may experience problems complying
with FDA regulations or manufacturing our product candidates in
commercial quantities. This would interrupt our supply of
products and could hinder our product testing or product sales.
We cannot be sure that we will be able to obtain an adequate
supply of product candidates on acceptable terms.
There are a limited number of manufacturers that can produce
our lead product candidate, Zemiva.
There are a limited number of manufacturers that can produce
Zemiva in compliance with applicable regulations and in
sufficient quantities for us to successfully commercialize
Zemiva. If we are unable to secure manufacturing agreements on
acceptable terms with any of these manufacturers, or there is a
shutdown or disruption in these facilities due to technical,
regulatory or other reasons, it could harm our ability to
manufacture and commercialize Zemiva. This could adversely
impact our business, financial condition and results of
operation.
If we fail to attract and retain senior management,
consultants, advisors and scientific and technical personnel,
our product development and commercialization efforts could be
impaired.
Our performance is substantially dependent on the performance of
our senior management and key scientific and technical
personnel, particularly David Barlow, the Company’s
Chairman and Chief Executive Officer, and John Babich, the
Company’s President and Chief Scientific Officer. Although
we have entered into employment agreements with five members of
our senior management, David Barlow, John Babich, John McCray,
Nicholas Borys and Bob Gallahue, there is no assurance that they
will remain in our employ for the entire term of such employment
agreements. The loss of the services of any member of our senior
management or our scientific or technical staff may
significantly delay or prevent the development of our product
candidates and other business objectives by diverting
management’s attention to transition matters and
identification of suitable replacements, if any, and could have
a material adverse effect on our business, operating results and
financial condition. We only maintain key man life insurance on
David Barlow and John Babich.
We also rely on consultants and advisors to assist us in
formulating our research and development strategy. All of our
consultants and advisors are either self-employed or employed by
other organizations, and they may have conflicts of interest or
other commitments, such as consulting or advisory contracts with
other organizations, that may affect their ability to contribute
to us.
In addition, we believe that we will need to recruit additional
executive management and scientific and technical personnel.
There is currently intense competition for skilled executives
and employees with
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relevant scientific and technical expertise, and this
competition is likely to continue. The inability to attract and
retain sufficient scientific, technical and managerial personnel
could limit or delay our product development efforts, which
would adversely affect the development of our product candidates
and commercialization of our potential products and growth of
our business.
We expect to expand our research, development, clinical
research and marketing capabilities and, as a result, we may
encounter difficulties in managing our growth, which could
disrupt our operations.
We expect to have significant growth in expenditures, the number
of our employees and the scope of our operations, in particular
with respect to those potential products that we elect to
commercialize independently or together with others. To manage
our anticipated future growth, we must continue to implement and
improve our managerial, operational and financial systems,
expand our facilities and continue to train qualified personnel.
Due to our limited resources, we may not be able to effectively
manage the expansion of our operations or train additional
qualified personnel. The physical expansion of our operations
may lead to significant costs and may divert our management and
business development resources. Any inability to manage growth
could delay the execution of our business plan or disrupt our
operations.
We have a history of losses and expect to continue to incur
losses and may not achieve or maintain profitability.
We have incurred net losses every year since our inception in
1997 and have generated no revenue from product sales or
licenses to date. As of June 30, 2005, we had an
accumulated deficit of approximately $46.2 million. We
expect to incur additional losses for at least the next several
years and cannot be certain that we will ever achieve
profitability. As a result, our business is subject to all of
the risks inherent in the development of a new business
enterprise, such as the risk that we may not obtain substantial
additional capital needed to support the expenses of developing
our technology and commercializing our potential products;
develop a market for our potential products; successfully
transition from a company with a research focus to a company
capable of either manufacturing and selling potential products
or profitably licensing our potential products to others; and/or
attract and retain qualified management, technical and
scientific staff.
We currently have no significant source of revenue and may
never become profitable.
To date, we have not generated any revenue for product sales and
we do not know when or if any of our product candidates will
generate revenue. Our ability to generate revenue depends on a
number of factors, including our ability to successfully
complete our ongoing clinical trials for Zemiva and obtain
regulatory approval to commercialize this potential product.
Even then, we will need to establish and maintain sales,
marketing, distribution and to the extent we do not outsource
manufacturing, manufacturing capabilities. We plan to rely on
one or more strategic collaborators to help generate revenues in
markets outside of the United States, and we cannot be sure that
our collaborators, if any, will be successful. If we are unable
to generate significant revenue, we may not become profitable,
and we may be unable to continue our operations. Even if we are
able to commercialize Zemiva, we may not achieve profitability
for at least several years after generating material revenue.
We have a limited operating history and potential financial
results are uncertain.
We have a limited operating history and face many of the risks
of a new business. As a result, it is difficult to accurately
forecast our potential revenue. Our revenue and income potential
is unproven and our business model is still emerging. Therefore,
we cannot make any assurance we will provide a return on
investment in the future. An investor in our common stock must
consider the challenges,
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risks and uncertainties frequently encountered in the
establishment of new technologies and products in emerging
markets and evolving industries. These challenges include our
ability to:
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execute our business model;
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create brand recognition;
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manage growth in our operations;
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create a customer base cost-effectively;
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retain customers;
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access additional capital when required; and
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attract and retain key personnel.
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We cannot be certain that our business model will be successful
or that it will successfully address these and other challenges,
risks and uncertainties.
We currently have an existing material weakness in our
internal control over financial reporting. If we are unable to
improve and maintain the quality of our system of internal
control over financial reporting, any deficiencies could
materially and adversely affect our ability to report timely and
accurate financial information about us.
In connection with the audit of our 2004 consolidated financial
statements, management identified a material weakness in our
internal control over financial reporting. This was a matter
that, in our judgment could adversely affect our ability to
record, process, summarize and report financial information
consistent with the assertions of management in our financial
statements. A material weakness is defined as a significant
deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material
misstatement of the financial statements will not be prevented
or detected. Specifically, our controls over the application of
generally accepted accounting principles were ineffective as a
result of insufficient resources and training in the accounting
and finance function. This resulted in a number of post-close
adjustments and corrections. We cannot be certain that the
measures we have taken or plan to take will ensure that we will
maintain adequate controls over our financial processes and
reporting in the future. Any failure to maintain adequate
controls or to adequately implement required new or improved
controls could harm our operating results or cause us to fail to
meet our reporting obligations. Inadequate internal control
could also cause investors to lose confidence in our reported
financial information.
Beginning no later than with our Annual Report on Form 10-K
for the fiscal year ending December 31, 2007, we will be
required to furnish a report by our management on the
effectiveness of our internal control over financial reporting.
This report will contain, among other matters, an assessment of
the effectiveness of our internal control over financial
reporting as of the end of our fiscal year, including a
statement as to whether or not our internal control over
financial reporting is effective. This assessment must include
disclosure of any material weaknesses in our internal control
over financial reporting identified by management. This report
must also contain a statement that our independent registered
public accounting firm has issued an attestation report on
management’s assessment of such internal control. If we are
unable to assert that our internal control over financial
reporting is effective as of December 31, 2007 (or if our
independent registered public accountants are unable to attest
that our management’s report is fairly stated or they are
unable to express an opinion on the effectiveness of our
internal control), we could lose investor confidence in the
accuracy and completeness of our financial reports, which could
have an adverse effect on our stock price.
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Because we have operated as a private company, we have
limited experience in complying with public company obligations,
including Section 404 of the Sarbanes-Oxley Act of 2002.
We are a small company with limited resources. We have operated
as a private company not subject to many of the requirements
applicable to public companies including Section 404 of the
Sarbanes-Oxley Act of 2002. The number and qualifications of our
finance and accounting staff are consistent with those of a
private company. We may encounter substantial difficulty
attracting qualified staff with requisite experience due to the
high level of competition for experienced financial
professionals. Furthermore, we have only recently begun a formal
process to evaluate our internal control over financial
reporting. Given the status of our efforts, coupled with the
fact that guidance from regulatory authorities in the area of
internal control over financial reporting continues to evolve,
substantial uncertainty exists regarding our ability to comply
by applicable deadlines.
We have little control over the scientists and consultants at
the various academic and research institutions with whom we have
relationships.
We have relationships with scientists and consultants at several
universities and research institutions. These individuals
conduct research at our request and, in some cases, we may
license technology from them. These researchers are not employed
by us and may have commitments to, or consulting or advisory
contracts with, other entities that may limit their availability
to work on our projects. As a result, we have limited control
over their activities and, except as otherwise required by our
agreements with these persons, we can expect only limited
amounts of their time to be dedicated to its projects. Our
ability to make new discoveries and to commercialize potential
products based on those discoveries may depend in part on
continued arrangements with researchers at academic and other
institutions. If our relationship with any of these scientists
or consultants were to be terminated, such termination could
have a material adverse effect on our ability to develop or
commercialize our potential products.
We depend on government funding, which if lost or reduced,
could have an adverse effect on our research and development.
We have relied on government research grants for a portion of
our funding, including grants awarded by the National Institutes
of Health under the Small Business Innovation Research program
and the Small Business Technology Transfer program. To date, we
have received a total of approximately $4,525,000 in grants
pursuant to these programs. Most of our government grants have
been awarded as Phase 1 grants and we expect to file Phase 2
grant applications where appropriate, but we cannot be assured
that these grants or any new Phase 1 grant applications will be
awarded to us, nor can we be sure that we will continue to be
eligible to receive such grants once this offering is completed.
Under the terms of our government grants, we have all right,
title and interest in our patents, copyrights and data
pertaining to our product development, subject to certain rights
of the government. Under existing regulations, the government
receives a royalty-free license for federal government use for
all patents developed under a government grant. In addition,
under certain circumstances the government may require us to
license technology resulting from the government funded projects
to third parties and may require that we manufacture our product
in the United States.
Funding of government grants is subject to government
appropriation and all of our government contracts contain
provisions which make them terminable at the convenience of the
government. The government could terminate, reduce or delay the
funding under any of our grants at any time. In the event we are
not successful in obtaining any new government grants or
extensions to existing grants, our research and development
efforts could be adversely affected.
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Risks Related to Our Industry
Our competitors may develop products that are less expensive,
safer or more effective, which may diminish or eliminate the
commercial success of any potential products that we may
commercialize.
We will compete with several pharmaceutical companies and our
competitors may:
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develop products and market products that are less expensive or
more effective than our future products;
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commercialize competing products before we or our partners can
launch any products developed from our product candidates;
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initiate or withstand substantial price competition more
successfully than we can;
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have greater success in recruiting skilled technical and
scientific workers from the limited pool of available talent;
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more effectively negotiate third-party licenses and strategic
relationships; and
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take advantage of acquisition or other opportunities more
readily than we can.
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We will compete for market share against large pharmaceutical
and biotechnology companies, smaller companies that are
collaborating with larger pharmaceutical companies, new
companies, academic institutions, government agencies and other
public and private research organizations. Many of these
competitors, either alone or together with their partners, may
develop new product candidates that will compete with ours, and
these competitors may, and in certain cases do, operate larger
research and development programs or have substantially greater
financial resources than we do.
If our competitors market products that are less expensive,
safer or more effective than our future products developed from
our product candidates, or that reach the market before our
potential products, we may not achieve commercial success. For
example, if approved, Zemiva will compete in the emergency
department setting with the current standard of care in the
assessment of chest pain patients who present to emergency
departments. This standard involves several diagnostic products
and procedures, in some cases involving the use of perfusion
imaging agents. If approved, Zemiva’s primary competition
in the non-acute setting will be perfusion agents such as
Cardiolite and Myoview. The market may choose to continue
utilizing the existing products for any number of reasons,
including familiarity with or pricing of these existing
products. The failure of Zemiva or any of our product candidates
to compete with products marketed by our competitors would
impair our ability to generate revenue, which would have a
material adverse effect on our future business, financial
condition and results of operations.
In addition, the life sciences industry is characterized by
rapid technological change. Because our research approach
integrates many technologies, it may be difficult for us to stay
abreast of the rapid changes in each technology. If we fail to
stay at the forefront of technological change, we may be unable
to compete effectively. Our competitors may render our
technologies obsolete by advances in existing technological
approaches or the development of new or different approaches,
potentially eliminating the advantages in our product discovery
process that we believe we derive from our research approach and
proprietary technologies.
The use of hazardous materials in our operations may subject
us to environmental claims or liabilities.
Our research and development activities involve the use of
hazardous materials, including chemicals and biological and
radioactive materials. Injury or contamination from these
materials may occur and we could be held liable for any damages,
which could exceed our available financial resources. This
liability could materially adversely affect our business,
financial condition and results of operations.
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We are subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal
of hazardous materials and waste products. We may be required to
incur significant costs to comply with environmental laws and
regulations in the future that could materially adversely affect
our business, financial condition and results of operations.
If we fail to comply with extensive regulations enforced by
the FDA and other agencies with respect to pharmaceutical
products, the commercialization of our product candidates could
be prevented, delayed or halted.
Research, preclinical development, clinical trials,
manufacturing and marketing of our product candidates are
subject to extensive regulation by various government
authorities. We have not received marketing approval for Zemiva
or our other product candidates. The process of obtaining FDA
and other required regulatory approvals is lengthy and
expensive, and the time required for such approvals is
uncertain. The approval process is affected by such factors as:
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the severity of the disease;
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the quality of submission relating to the product candidate;
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the product candidate’s clinical efficacy and safety;
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the strength of the chemistry and manufacturing control of the
process;
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the manufacturing facility compliance;
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the availability of alternative treatments;
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the risks and benefits demonstrated in clinical trials; and
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the patent status and marketing exclusivity rights of certain
innovative products.
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Any regulatory approvals that we or our partners receive for our
product candidates may also be subject to limitations on the
indicated uses for which the product candidate may be marketed
or contain requirements for potentially costly post-marketing
follow-up studies. The subsequent discovery of previously
unknown problems with the product candidate, including adverse
events of unanticipated severity or frequency, may result in
restrictions on the marketing of the product candidate and
withdrawal of the product candidate from the market.
U.S. manufacturing, labeling, storage and distribution
activities also are subject to strict regulating and licensing
by the FDA. The manufacturing facilities for our
biopharmaceutical products are subject to periodic inspection by
the FDA and other regulatory authorities and from time to time,
these agencies may send notice of deficiencies as a result of
such inspections. Our failure, or the failure of our
biopharmaceutical manufacturing facilities, to continue to meet
regulatory standards or to remedy any deficiencies could result
in corrective action by the FDA or these other authorities,
including the interruption or prevention of marketing, closure
of our biopharmaceutical manufacturing facilities, and fines or
penalties.
Regulatory authorities also will require post-marketing
surveillance to monitor and report to the FDA potential adverse
effects of our product candidates. Congress or the FDA in
specific situations can modify the regulatory process. If
approved, any of our product candidates’ subsequent failure
to comply with applicable regulatory requirements could, among
other things, result in warning letters, fines, suspension or
revocation of regulatory approvals, product recalls or seizures,
operating restrictions, injunctions and criminal prosecutions.
The FDA’s policies may change and additional government
regulations may be enacted that could prevent or delay
regulatory approval of our product candidates. We cannot predict
the likelihood, nature or extent of adverse government
regulation that may arise from future legislation or
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administrative action. If we are not able to maintain regulatory
compliance, we might not be permitted to market our product
candidates and our business could suffer.
In the future, we intend to distribute and sell our potential
products outside of the United States, which will subject us to
further regulatory risk.
In addition to seeking approval from the FDA for Zemiva in the
United States, we intend to seek the governmental approval
required to market Zemiva and our other potential products in
European Union countries such as the United Kingdom, France,
Germany, Belgium, Holland and Italy through third parties. We
may in the future also seek approvals for additional countries.
The regulatory review process varies from country to country,
and approval by foreign government authorities is unpredictable,
uncertain and generally expensive. Our ability to market our
potential products could be substantially limited due to delays
in receipt of, or failure to receive, the necessary approvals or
clearances. We anticipate commencing the applications required
in some or all of these countries following approval by the FDA;
however, we may decide to file applications in advance of the
FDA approval if we determine such filings to be both time and
cost effective. If we export any of our potential products that
have not yet been cleared for domestic commercial distribution,
such products may be subject to FDA export restrictions.
Marketing of our potential products in these countries, and in
most other countries, is not permitted until we have obtained
required approvals or exemptions in each individual country.
Failure to obtain necessary regulatory approvals could impair
our ability to generate revenue from international sources.
Market acceptance of our potential products will be limited
if users are unable to obtain adequate reimbursement from
third-party payers.
Government health administration authorities, private health
insurers and other organizations generally provide reimbursement
for products like our product candidates, and our commercial
success will depend in part on these third-party payers agreeing
to reimburse patients for the costs of our potential products.
Even if we succeed in bringing any of our product candidates to
market, we cannot assure you that third-party payers will
consider our potential products cost effective or provide
reimbursement in whole or in part for their use.
Significant uncertainty exists as to the reimbursement status of
newly approved health care products. Each of our product
candidates is intended to replace or alter existing therapies or
procedures. These third-party payers may conclude that our
product candidates are less safe, effective or cost-effective
than these existing therapies or procedures. Therefore,
third-party payers may not approve our products candidates for
reimbursement.
If third-party payers do not approve our product candidates for
reimbursement or fail to reimburse for them adequately, sales
will suffer as some physicians or their patients will opt for a
competing product that is approved for reimbursement or is
adequately reimbursed. Even if third-party payers make
reimbursement available, these payers’ reimbursement
policies may adversely affect our ability and the ability of our
potential collaborators to sell our potential products on a
profitable basis.
The trend toward managed healthcare in the United States, the
growth of organizations such as health maintenance organizations
and legislative proposals to reform healthcare and government
insurance programs could significantly influence the purchase of
healthcare services and products, resulting in lower prices and
reduced demand for our products which could adversely affect our
business, financial condition and results of operations.
In addition, legislation and regulations affecting the pricing
of our product candidates may change in ways adverse to us
before or after the FDA or other regulatory agencies approve any
of our product candidates for marketing. While we cannot predict
the likelihood of any of these legislative or regulatory
proposals, if any government or regulatory agencies adopt these
proposals, they could materially adversely affect our business,
financial condition and results of operations.
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Product liability claims may damage our reputation and, if
insurance proves inadequate, the product liability claims may
harm our business.
We may be exposed to the risk of product liability claims that
is inherent in the biopharmaceutical industry. A product
liability claim may damage our reputation by raising questions
about our product’s safety and efficacy and could limit our
ability to sell one or more products by preventing or
interfering with commercialization of our potential products.
In addition, product liability insurance for the
biopharmaceutical industry is generally expensive to the extent
it is available at all. There can be no assurance that we will
be able to obtain and maintain such insurance on acceptable
terms or that we will be able to secure increased coverage if
the commercialization of our potential products progresses, or
that future claims against us will be covered by our product
liability insurance. Moreover, there can be no assurance that
the existing coverage of our insurance policy and/or any rights
of indemnification and contribution that we may have will offset
any future claims. We currently maintain product liability
insurance of $10 million per occurrence and in the
aggregate for clinical trial related occurrences only. We
believe that this coverage is currently adequate based on
current and projected business activities and the associated
risk exposure, although we expect to increase this coverage as
our business activities and associated risks grow. A successful
claim against us with respect to uninsured liabilities or in
excess of insurance coverage and not subject to any
indemnification or contribution could have a material adverse
effect on our business, financial condition and results of
operations.
We could be negatively impacted by the application or
enforcement of federal and state fraud and abuse laws, including
anti-kickback laws and other federal and state anti-referral
laws.
We are subject to various federal and state laws pertaining to
healthcare fraud and abuse, including anti-kickback laws and
physician self-referral laws. Violations of these laws are
punishable by criminal and civil sanctions, including, in some
instances, imprisonment and exclusion from participation in
federal and state healthcare programs, including Medicare,
Medicaid and Veterans Administration health programs. Because of
the far-reaching nature of these laws, we may be required to
alter or discontinue one or more of our practices to be in
compliance with these laws. Healthcare fraud and abuse
regulations are complex, and even minor irregularities can
potentially give rise to claims that a statute or prohibition
has been violated. Any violations of these laws, or any action
against us for violation of these laws, even if we successfully
defend against it, could result in a material adverse effect on
our business, financial condition and results of operations. If
there is a change in law, regulation or administrative or
judicial interpretations, we may have to change or discontinue
our business practices or our existing business practices could
be challenged as unlawful, which could have a material adverse
effect on our business, financial condition and results of
operations. In addition, we could become subject to false claims
litigation under federal statutes, which can lead to civil money
penalties, restitution, criminal fines and imprisonment, and
exclusion from participation in Medicare, Medicaid and other
federal and state healthcare programs. These false claims
statutes include the False Claims Act, which allows any person
to bring suit on behalf of the federal government alleging the
submission of false or fraudulent claims, or causing to present
such false or fraudulent claims, under federal programs or
contracts claims or other violations of the statute and to share
in any amounts paid by the entity to the government in fines or
settlement. These suits against pharmaceutical companies have
increased significantly in recent years and have increased the
risk that a healthcare company will have to defend a false claim
action, pay fines or restitution, or be excluded from the
Medicare, Medicaid or other federal and state healthcare
programs as a result of an investigation arising out of such
action. We cannot assure you that we will not become subject to
such litigation or, if we are not successful in defending
against such actions, that such actions will not have a material
adverse effect on our business, financial condition and results
of operations. In addition, we cannot assure you that the costs
of defending claims or allegations under the False Claims Act
will not have a material adverse effect on our business,
financial condition and results of operations.
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A provision of the Social Security Act, commonly referred to as
the Federal Anti-Kickback Statute, prohibits the offer, payment,
solicitation or receipt of any form of remuneration in return
for referring, ordering, leasing, purchasing or arranging for or
recommending the ordering, purchasing or leasing of items or
services payable by Medicare, Medicaid or any other federal
health care program. The Federal Anti-Kickback Statute is very
broad in scope and many of its provisions have not been
uniformly or definitively interpreted by existing case law or
regulations. In addition, many states in which our products may
be sold have adopted laws similar to the Federal Anti-Kickback
Statute, and some of these laws are even broader than the
Federal Anti-Kickback Statute in that their prohibitions are not
limited to items or services paid for by a federal health care
program but, instead, apply regardless of the source of payment.
Violations of the Federal Anti-Kickback Statute may result in
substantial civil or criminal penalties and exclusion from
participation in federal healthcare programs.
If we choose to acquire new complementary businesses,
products or technologies, we may be unable to complete these
acquisitions or to successfully integrate them in a
cost-effective and non-disruptive manner.
Our success depends on our ability to continually enhance and
broaden our product offerings in response to changing customer
demands, competitive pressures and technologies. Accordingly, we
may in the future pursue the acquisition of complementary
businesses, products or technologies instead of developing them
ourselves. We have no current commitments with respect to any
acquisition or investment. We do not know if we will be able to
successfully complete any acquisitions or whether we will be
able to successfully integrate any acquired business, product or
technology or retain any key employees. Integrating any
business, product or technology we acquire could be expensive
and time consuming, disrupt our on-going business and distract
our management. If we are unable to integrate any acquired
businesses, products or technologies effectively, our business
will suffer. In addition, any amortization or charges resulting
from the costs of acquisitions could harm our business and
operating results.
Risks Related To Our Common Stock and This Offering
As a result of prior sales of our equity securities at prices
lower than the price in this offering, you will incur immediate
and substantial dilution of your investment.
Purchasers of our common stock in this offering will pay a price
per share that substantially exceeds the per share value of our
tangible assets after subtracting our liabilities and the per
share price paid by our existing stockholders and by persons who
exercise currently outstanding options to acquire our common
stock. Accordingly, assuming an initial public offering price of
$ per
share, you will experience immediate and substantial dilution of
approximately
$ per
share, representing the difference between our pro forma net
tangible book value per share after giving effect to this
offering and the assumed initial public offering price. In
addition, purchasers of our common stock in this offering will
have contributed
approximately %
of the aggregate price paid by all purchasers of our common
stock but will own only
approximately %
of our common stock outstanding after this offering. See the
section captioned “Dilution.”
Our stock price may fluctuate significantly and you may not
be able to resell your shares at or above the initial public
offering price.
Prior to this offering, you could not buy or sell our common
stock publicly. An active public market for our common stock may
not develop or be sustained after this offering. We will
negotiate and determine the initial public offering price with
the representatives of the underwriters based on several
factors. This price may vary from the market price of our common
stock after this offering. You may be unable to sell your shares
of common stock at or above the initial offering price due to
fluctuation in the market price of the common stock arising from
changes in our operating performance or
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prospects. In addition, the stock market, particularly in recent
years, has experienced significant volatility particularly with
respect to pharmaceutical, biotechnology and other life sciences
company stocks. The volatility of pharmaceutical, biotechnology
and other life sciences company stocks often does not relate to
the operating performance of the companies represented by the
stock. Factors that could cause this volatility in the market
price of our common stock include:
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•
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results from and any delays in our clinical trials;
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•
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failure or delays in entering additional product candidates into
clinical trials;
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•
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failure or discontinuation of any of our research programs;
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•
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delays in establishing new strategic relationships;
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•
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delays in the development or commercialization of our potential
products;
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•
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market conditions in the pharmaceutical and biotechnology
sectors and issuance of new or changed securities analysts’
reports or recommendations;
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•
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actual and anticipated fluctuations in our financial and
operating results;
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•
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developments or disputes concerning our intellectual property or
other proprietary rights;
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•
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introduction of technological innovations or new commercial
products by us or our competitors;
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•
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issues in manufacturing our potential products;
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•
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market acceptance of our potential products;
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•
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third-party healthcare reimbursement policies;
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•
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FDA or other domestic or foreign regulatory actions affecting us
or our industry;
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•
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litigation or public concern about the safety of our product
candidates; and
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•
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additions or departures of key personnel.
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These and other external factors may cause the market price and
demand for our common stock to fluctuate substantially, which
may limit or prevent investors from readily selling their shares
of common stock and may otherwise negatively affect the
liquidity of our common stock. In addition, in the past, when
the market price of a stock has been volatile, holders of that
stock have instituted securities class action litigation against
the company that issued the stock. If any of our stockholders
brought a lawsuit against us, we could incur substantial costs
defending the lawsuit. Such a lawsuit could also divert the time
and attention of our management.
If the ownership of our common stock continues to be highly
concentrated, it may prevent you and other stockholders from
influencing significant corporate decisions and may result in
entrenchment of management or conflicts of interest that could
cause our stock price to decline.
Our executive officers, directors, and their affiliates will
beneficially own or control
approximately %
of the outstanding shares of our common stock (after giving
effect to the conversion of all outstanding convertible
preferred stock following the completion of this offering.
Accordingly, these executive officers, directors and their
affiliates, acting as a group, will have substantial influence
over the outcome of corporate actions requiring stockholder
approval, including the election of directors, any merger,
consolidation or sale of all or substantially all of our assets
or any other significant corporate transactions. These
stockholders may also delay or prevent a change of control of
our company, even if such a change of control would benefit our
other stockholders. The significant concentration of stock
ownership may adversely affect the trading price of our common
stock due to investors’ perception that entrenchment of
management or conflicts of interest may exist or arise.
23
A significant portion of our total outstanding shares are
restricted from immediate resale but may be sold into the market
in the near future. This could cause the market price of our
common stock to drop significantly, even if our business is
doing well.
Sales of a substantial number of shares of our common stock in
the public market could occur at any time. These sales, or the
perception in the market that the holders of a large number of
shares intend to sell shares, could reduce the market price of
our common stock. After this offering, we will have
outstanding shares
of common stock based on the number of shares outstanding as
of , .
This includes the shares that we are selling in this offering,
which may be resold in the public market immediately. The
remaining shares,
or %
of our outstanding shares after this offering, are currently
restricted as a result of securities laws or lock-up agreements,
but will be able to be sold in the near future as set forth
below.
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Number of Shares and
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% of Total Outstanding
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Date Available for Sale Into Public Market
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shares,
or %
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days, subject to extension in
certain cases, after the date of this prospectus due to the
lock-up agreements between the holders of these shares and the
underwriters or the Company, respectively. However, the
underwriters or the Company, as applicable, can waive the
provisions of these lock-up agreements and allow these
stockholders to sell their shares at any time. Sales of these
shares by “affiliates” and sales of these shares by
non-“affiliates” who have held such shares for less
than 2 years are subject to the volume limitations, manner of
sale provisions, and public information requirements of Rule 144.
|
In addition to the foregoing, we had options to
purchase shares
of common stock and warrants to
purchase shares
of common stock outstanding and exercisable as of June 30,
2005. We intend to register the shares of common stock issuable
or reserved for issuance under our equity plans within
180 days after the date of this prospectus.
We have never paid dividends on our common stock, and except
for payment of accrued dividends to certain preferred holders,
we do not anticipate paying any cash dividends in the
foreseeable future.
We have paid no cash dividends on our common stock to date. We
currently intend to retain our future earnings, if any, to fund
the development and growth of our business. Contingent upon the
closing of this offering, we intend to pay to certain existing
preferred stockholders a one-time cash dividend in an aggregate
amount of
$ .
Following the completion of this offering and except for the
one-time dividend payment to certain preferred holders, we do
not anticipate paying any cash dividends on our capital stock
for the foreseeable future. In addition, the terms of existing
or any future debt facilities may preclude us from paying
dividends on our stock. As a result, capital appreciation, if
any, of our common stock will be your sole source of gain for
the foreseeable future.
We will have broad discretion in how we use the proceeds of
this offering and we may not use these proceeds effectively,
which could affect our results of operations and cause our stock
price to decline, or we may use the proceeds in ways with which
you disagree.
We will have considerable discretion in the application of the
net proceeds of this offering. We expect to use the majority of
the net proceeds of this offering to continue the development
and prepare for the commercialization of our lead molecular
imaging pharmaceutical candidate, Zemiva, and to initiate and
expand the clinical development of Ultratrace MIBG, our lead
targeted radiotherapeutic candidate for cancer. Because of the
number and variability of factors that determine our use of the
proceeds from this offering, our intended uses for the proceeds
of this offering may vary substantially from our currently
planned uses. Stockholders may not deem such uses desirable, and
our use of the proceeds may not yield a significant return or
any return at all for our stockholders.
24
We are currently a defendant in litigation with five of our
stockholders regarding the pricing of a prior equity
financing.
Five of our stockholders initiated a lawsuit in 2004 against us
and certain directors. The claims against us are in the nature
of a derivative action claiming that we were harmed by receiving
less money for shares we issued in 2002 than we should have
received. After commencement of this lawsuit, our Board formed a
special litigation committee of disinterested directors, who
then engaged separate, independent legal counsel to review these
claims. The special litigation committee, in conjunction with
its counsel, concluded that we should not pursue these
derivative claims and we are seeking to dismiss these claims in
court. There can be no assurance, however, that these claims
will be dismissed or will be finally determined in our favor.
Ongoing litigation could result in significant legal costs and
expenses for the Company and, if the litigation were to be
determined in a manner adverse to us, there could be no
assurance that we will not incur further expense in the nature
of damages.
Some provisions of our Restated Articles of Organization and
Amended and Restated Bylaws may inhibit potential acquisition
bids that you may consider favorable.
Our Restated Articles of Organization and Amended and Restated
Bylaws contain provisions that may enable our Board of Directors
to resist a change in control of our company even if a change in
control were to be considered favorable by stockholders. These
provisions include:
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•
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the authorization of undesignated preferred stock, the terms of
which may be established and shares of which may be issued
without stockholder approval;
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•
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advance notice procedures required for stockholders to nominate
candidates for election as directors or to bring matters before
an annual meeting of stockholders;
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•
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limitations on persons authorized to call a meeting of
stockholders;
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•
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a staggered Board of Directors; and
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•
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supermajority voting requirements to remove directors from
office.
|
These and other provisions contained in our charter and bylaws
could delay or discourage transactions involving an actual or
potential change in control of us or our management, including
transactions which our stockholders might otherwise receive a
premium for their shares over then current prices, and may limit
the ability of stockholders to remove our current management or
approve transactions that our stockholders may deem to be in
their best interest and, therefore, could adversely affect the
price of our common stock.
25
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, principally
in the sections entitled “Summary,” “Risk
Factors,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and
“Business.” Generally, you can identify these
statements because they include words such as
“anticipate,” “estimate,” “plan,”
“project,” “continuing,”
“ongoing,” “expect,” “believe,”
“intend,” “may,” “will,”
“should,” “could,” and similar expressions
to identify forward-looking statements. These statements are
only predictions. Although we do not make forward-looking
statements unless we believe we have a reasonable basis for
doing so, we cannot guarantee their accuracy, and actual results
may differ materially from those we anticipated due to a number
of uncertainties, many of which cannot be foreseen. You should
not place undue reliance on these forward-looking statements,
which apply only as of the date of this prospectus. Our actual
results could differ materially from those anticipated in these
forward-looking statements for many reasons including, among
others, the risks we face that are described in the section
entitled “Risk Factors” and elsewhere in this
prospectus.
We believe it is important to communicate our expectations to
our investors. There may be events in the future, however, that
we are unable to predict accurately or over which we have no
control. The risk factors listed on the previous pages, as well
as any cautionary language in this prospectus, provide examples
of risks, uncertainties and events that may cause our actual
results to differ materially from the expectations we describe
in our forward-looking statements. Before you invest in our
common stock, you should be aware that the occurrence of the
events described in the previous risk factors and elsewhere in
this prospectus could negatively impact our business, operating
results, financial condition and stock price.
Forward-looking statements include, but are not limited to,
statements about:
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•
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the progress and timing of our development programs, clinical
trials and pursuit of regulatory approvals for product
candidates in our development pipeline;
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•
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our expectations and capabilities relating to the
commercialization of our potential products and our product
candidates in development;
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•
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our ability to protect our intellectual property and operate our
business without infringing on the intellectual property of
others;
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•
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our ability to compete with other companies that are developing
or selling products that are competitive with our potential
products;
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•
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our estimates regarding future operating performance and capital
requirements; and
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•
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the impact of the Sarbanes-Oxley Act of 2002 and any future
changes in accounting regulations or practices in general with
respect to public companies.
|
Forward-looking statements speak only as of the date on which
they are made and, except as required by law, we undertake no
obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement is
made or to reflect the occurrence of unanticipated events. In
addition, we cannot assess the impact of each factor on our
business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from
those contained in any forward-looking statements.
26
USE OF PROCEEDS
We will have approximately
$ million
in net proceeds from the sale of our common stock in this
offering at an assumed public offering price of
$ per
share, the midpoint of the range set forth on the cover of this
prospectus, after deducting underwriting discounts and
commissions and our estimated expenses. If the
underwriters’ over-allotment option is exercised in full,
we estimate that the net proceeds will be approximately
$ million.
The principal purposes of this offering are to obtain additional
working capital, establish a public market for our common stock
and facilitate our future access to public markets. We expect to
use the majority of the net proceeds of this offering to
continue the development and prepare for the commercialization
of our lead molecular imaging pharmaceutical candidate, Zemiva,
and to initiate and expand the clinical development of
Ultratrace MIBG, our lead targeted radiotherapeutic candidate
for cancer.
In addition, we anticipate using a portion of the net proceeds
of this offering to:
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•
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expand our research and development programs (approximately
$ );
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•
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advance our pre-clinical development of new product candidates
(approximately
$ );
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•
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initiate clinical development of additional indications for
Zemiva (approximately
$ );
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•
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in-license technology and acquire or invest in businesses,
products or technologies that are complementary to our own
(approximately
$ );
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•
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fund investment in manufacturing capacity for Zemiva in
collaboration with our anticipated commercial manufacturing
partner(s) (approximately
$ );
and
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•
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fund other working capital and general corporate activities
(approximately
$ ).
|
We may also use a portion of the net proceeds for the repayment
of $5 million in debt and related interest under the
terms of a Loan and Security Agreement with Ritchie
Multi-Strategy Global, L.L.C. dated as of September 30,
2005. The debt will be used for working capital and general
corporate activities. The obligations are secured by a first
priority security interest in our assets and intellectual
property. We are required to pay interest only during the first
three months of the term of this loan, and thereafter the entire
loan will amortize over 35 months with equal monthly
principal and interest payments. The interest rate of the loan
is the lesser of (i) 395 basis points above the yield
on the three-year U.S. Treasury Notes on the closing date
of the loan and (ii) the maximum rate permitted by law. In
addition, we may also use a portion of the net proceeds to pay
Ritchie Multi-Strategy Global, L.L.C. a fee in the amount of
$250,000 if we complete this offering prior to June 30,
2006 or in the amount of $300,000 if we complete an offering
after such date.
We may also use a portion of the net proceeds to pay to certain
existing preferred stockholders a one-time cash dividend in an
aggregate amount of
$ .
We may also use a portion of the net proceeds to acquire
additional businesses, services, products or technologies or
invest in additional businesses that we believe will complement
our current or future business. However, we have no specific
plans, agreements or commitments to do so and are not currently
engaged in any negotiations for any acquisition or investment.
The amounts and timing of our use of proceeds will vary
depending on a number of factors, including the amount of cash
generated or used by our operations, the success of our product
development efforts, competitive and technological developments,
and the rate of growth, if any, of our business. As of the date
of this prospectus, we cannot specify with certainty all of the
particular uses for the net proceeds to be received upon the
completion of this offering. Accordingly, our management will
have broad discretion in the allocation of the net proceeds of
this offering. Pending the uses described above, we will invest
the net proceeds of this offering in cash, cash-equivalents,
money market funds
27
or short-term interest-bearing, investment-grade securities to
the extent consistent with applicable regulations. We cannot
predict whether the proceeds will be invested to yield a
favorable return.
Based on our operating plans, we believe that the proceeds from
this offering, together with our existing cash resources and
government grant funding will be sufficient to finance our
planned operations, including increases in spending for our
Zemiva and MIBG clinical programs and for our preclinical
product candidates through the second half of 2007.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital
stock. Contingent upon the closing of this offering, we intend
to pay to certain existing preferred stockholders a one-time
cash dividend in an aggregate amount of
$ . Following
the completion of this offering and except for the one-time
dividend payment to certain preferred holders, we anticipate
that any earnings will be retained for development and expansion
of our business and we do not anticipate paying any cash
dividends in the foreseeable future on our common stock. Our
Board of Directors has sole discretion to pay cash dividends
based on our financial condition, results of operation, capital
requirements, contractual obligations and other relevant
factors. In the future, we may also obtain loans or other credit
facilities that may restrict our ability to declare or pay
dividends.
28
CAPITALIZATION
The following table sets forth our capitalization as of
June 30, 2005:
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•
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on an actual basis;
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|
|
•
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on a pro forma basis to reflect the conversion of all shares of
preferred stock outstanding as of June 30, 2005
into shares
of common stock upon the completion of this offering, the
election of certain preferred stockholders to receive in the
aggregate shares
of common stock in lieu of a cash payment for accrued dividends
and shares
of common stock issuable upon the exercise of common stock
warrants outstanding as of June 30, 2005 that will expire
on or prior to the completion of this offering; and
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•
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on a pro forma as adjusted basis to give effect to the sale of
all of the shares of common stock in this offering at an assumed
public offering price of
$ per
share, the mid-point of the range set forth on the cover of this
prospectus, after deducting estimated underwriting discounts and
commissions and our estimated offering expenses.
|
You should read this table in conjunction with our financial
statements and related notes appearing elsewhere in this
prospectus and with the sections of this prospectus entitled
“Use of Proceeds,” “Description of Capital
Stock” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations.”
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As of June 30, 2005
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Pro Forma
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Actual
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Pro Forma
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As Adjusted
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(in thousands)
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Redeemable convertible preferred stock, $0.01 par value;
authorized 359,515 shares; 315,570 shares issued and
outstanding
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$
|
43,809
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Stockholders’ (deficit) equity:
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Common stock, $0.01 par value; authorized, 115,000,000 shares;
issued and outstanding, 26,466,283 shares
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|
265
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|
|
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|
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Additional paid-in capital
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|
23,040
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Note receivable from officer/stockholder
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(296
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)
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Deferred stock-based compensation
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(1,130
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)
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Deficit accumulated during the development stage
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(46,240
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)
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|
|
|
|
|
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Total stockholders’ equity (deficit)
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(24,361
|
)
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Total capitalization
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|
$
|
19,448
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The above table does not include:
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•
|
shares
of common stock issuable upon the exercise of stock options
outstanding as
of ,
2005, of
which options
having a weighted-average exercise price of
$ per
share were exercisable as
of ,
2005;
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•
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shares
of common stock available for future grants under our 2005
Equity Incentive Plan; and
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•
|
shares
of our common stock that may be purchased by the underwriters
pursuant to the underwriters over-allotment option.
|
29
DILUTION
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the public offering
price per share of our common stock and the pro forma as
adjusted net tangible book value per share of our common stock
after this offering. We calculate net tangible book value per
share by calculating the total assets less intangible assets and
total liabilities, and dividing it by the number of outstanding
shares of common stock.
After giving effect to the sale of shares of common stock at an
assumed initial public offering price of
$ per
share (less estimated underwriting discounts and commissions and
estimated expenses), our pro forma net tangible book value as of
June 30, 2005 would have been
$ ,
or
$ per
share. This represents an immediate increase in the pro forma as
adjusted net tangible book value of
$ per
share to existing stockholders and an immediate dilution of
$ per
share to you, as illustrated in the following table:
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Assumed initial public offering price per share
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$
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|
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|
Pro forma net tangible book value per share at June 30, 2005
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|
$
|
|
|
|
|
|
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|
Increase per share attributable to new investors
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|
$
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|
|
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Pro forma net tangible book value per share after this offering
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|
$
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|
|
|
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Dilution per share to new investors
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$
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The following table shows on a pro forma basis at June 30,
2005, the total number of shares of common stock purchased from
us, the total consideration paid to us, and the average price
per share paid by existing stockholders and by new investors
before deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by us:
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Shares Purchased
|
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|
Total Consideration
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Average Price
|
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Number
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|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Per Share
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Existing
stockholders
(1)
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|
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|
$
|
|
|
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|
$
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|
New investors
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|
Totals
|
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|
|
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|
100%
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100%
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(1)
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Includes the conversion of all of our outstanding shares of
preferred stock
into shares
of common stock upon the completion of this offering and the
election of certain preferred stockholders to receive in the
aggregate shares
of common stock in lieu of a cash payment for accrued dividends.
Also includes the exercise of outstanding warrants that will
expire on or prior to the completion of this offering
for shares
of common stock.
|
You will experience additional dilution upon exercise of
outstanding options. See “Management — 1997 Stock
Option Plan.”
30
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should
be read in conjunction with our consolidated financial
statements and related notes thereto and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” included elsewhere in this prospectus. The
selected consolidated statements of operations data for the
years ended December 31, 2002, 2003 and 2004 and the
selected consolidated balance sheet data as of December 31,
2003 and 2004 are derived from our audited consolidated
financial statements included elsewhere in this prospectus. The
selected consolidated statements of operations data for the six
months ended June 30, 2004 and 2005 and for the period from
January 10, 1997 (Date of Inception) to June 30, 2005,
and the selected consolidated balance sheet data as of
June 30, 2005, are derived from our unaudited consolidated
financial statements included elsewhere in this prospectus. The
consolidated statements of operations data for the years ended
December 31, 2000 and 2001 and the selected consolidated
balance sheet data as of December 31, 2000, 2001 and 2002
are derived from audited consolidated financial statements not
included in this prospectus. The historical results are not
necessarily indicative of results to be expected in any future
period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period From
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 10, 1997
|
|
|
|
|
|
|
Six Months
|
|
|
(Date of Inception)
|
|
|
|
|
Year Ended December 31,
|
|
|
Ended June 30,
|
|
|
to June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share data)
|
|
|
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue-research and development grants
|
|
$
|
616
|
|
|
$
|
214
|
|
|
$
|
624
|
|
|
$
|
723
|
|
|
$
|
569
|
|
|
$
|
248
|
|
|
$
|
427
|
|
|
$
|
3,285
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
3,269
|
|
|
|
3,081
|
|
|
|
2,317
|
|
|
|
2,774
|
|
|
|
5,381
|
|
|
|
1,988
|
|
|
|
3,990
|
|
|
|
23,784
|
|
|
|
General and administrative
|
|
|
1,614
|
|
|
|
1,404
|
|
|
|
1,562
|
|
|
|
1,266
|
|
|
|
3,520
|
|
|
|
1,525
|
|
|
|
3,042
|
|
|
|
16,423
|
|
|
|
Amortization of licensed patent
rights
(1)
|
|
|
2,713
|
|
|
|
3,256
|
|
|
|
3,798
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
7,596
|
|
|
|
7,741
|
|
|
|
7,677
|
|
|
|
4,040
|
|
|
|
8,901
|
|
|
|
3,513
|
|
|
|
7,032
|
|
|
|
49,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(6,980
|
)
|
|
|
(7,527
|
)
|
|
|
(7,053
|
)
|
|
|
(3,317
|
)
|
|
|
(8,332
|
)
|
|
|
(3,265
|
)
|
|
|
(6,605
|
)
|
|
|
(46,689
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
84
|
|
|
|
32
|
|
|
|
3
|
|
|
|
1
|
|
|
|
20
|
|
|
|
11
|
|
|
|
133
|
|
|
|
301
|
|
|
|
Interest expense
|
|
|
—
|
|
|
|
(10
|
)
|
|
|
(6
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
(7
|
)
|
|
|
(28
|
)
|
|
|
Interest expense — related parties
|
|
|
—
|
|
|
|
—
|
|
|
|
(28
|
)
|
|
|
(29
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(57
|
)
|
|
|
Management fee income — related party
|
|
|
33
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income, net
|
|
|
117
|
|
|
|
22
|
|
|
|
(31
|
)
|
|
|
(31
|
)
|
|
|
17
|
|
|
|
10
|
|
|
|
126
|
|
|
|
449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(6,863
|
)
|
|
|
(7,505
|
)
|
|
|
(7,084
|
)
|
|
|
(3,348
|
)
|
|
|
(8,315
|
)
|
|
|
(3,255
|
)
|
|
|
(6,479
|
)
|
|
|
(46,240
|
)
|
|
Redeemable convertible preferred stock dividends and accretion
of issuance costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(613
|
)
|
|
|
(1,312
|
)
|
|
|
(638
|
)
|
|
|
(1,710
|
)
|
|
|
(3,635
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(6,863
|
)
|
|
$
|
(7,505
|
)
|
|
$
|
(7,084
|
)
|
|
$
|
(3,961
|
)
|
|
$
|
(9,627
|
)
|
|
$
|
(3,893
|
)
|
|
$
|
(8,189
|
)
|
|
$
|
(49,875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share attributable to common
stockholders
|
|
$
|
(0.78
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
(0.63
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to compute basic and diluted net
loss per share attributable to common stockholders
|
|
|
8,832
|
|
|
|
10,437
|
|
|
|
11,275
|
|
|
|
21,090
|
|
|
|
22,641
|
|
|
|
21,981
|
|
|
|
25,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
footnotes on following page
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
As of June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
(2)
|
|
$
|
2,284
|
|
|
$
|
1,217
|
|
|
$
|
13
|
|
|
$
|
1,711
|
|
|
$
|
846
|
|
|
$
|
21,153
|
|
|
Working capital
(deficit)
(2)
|
|
|
1,901
|
|
|
|
(2,172
|
)
|
|
|
(2,128
|
)
|
|
|
(1,709
|
)
|
|
|
(2,566
|
)
|
|
|
19,148
|
|
|
Total
assets
(1)
|
|
|
9,801
|
|
|
|
5,331
|
|
|
|
212
|
|
|
|
2,232
|
|
|
|
1,573
|
|
|
|
21,912
|
|
|
Long term obligations, net of current portion
|
|
|
41
|
|
|
|
24
|
|
|
|
5
|
|
|
|
158
|
|
|
|
113
|
|
|
|
90
|
|
|
Redeemable convertible preferred stock
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,552
|
|
|
|
15,538
|
|
|
|
43,809
|
|
|
Total stockholders’ (deficit) equity
|
|
|
9,288
|
|
|
|
1,846
|
|
|
|
(5,238
|
)
|
|
|
(9,023
|
)
|
|
|
(17,831
|
)
|
|
|
(24,361
|
)
|
|
|
|
|
(1)
|
The significant reduction in total assets in 2000, 2001 and 2002
and in the decrease in amortization expense related to licensed
patent rights in periods subsequent to 2002 results from the
amortization of licensed patent rights, which was fully
amortized through December 31, 2002. The significant
increase in total assets from December 31, 2004 to
June 30, 2005 is a result of cash received for the issuance
of Series C redeemable convertible preferred stock in March
and April of 2005.
|
|
|
|
(2)
|
The significant changes in cash and cash equivalents, working
capital (deficit) and redeemable convertible preferred stock as
of December 31, 2003, 2004 and June 30, 2005 from the
previous periods presented result from cash received from the
issuance of redeemable convertible preferred stock during the
periods then ended.
|
32
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
When you read this section of this prospectus, it is
important that you also read the financial statements and
related notes included elsewhere in this prospectus. This
section of this prospectus contains forward-looking statements
that involve risks and uncertainties, such as statements of our
plans, objectives, expectations, and intentions. We use words
such as “anticipate,” “estimate,”
“plan,” “project,” “continuing,”
“ongoing,” “expect,” “believe,”
“intend,” “may,” “will,”
“should,” “could,” and similar expressions
to identify forward-looking statements. Our actual results could
differ materially from those anticipated in these
forward-looking statements for many reasons, including the
factors described below and in the “Risk Factors”
section of this prospectus.
Overview
We are a development stage company. We were organized and
commenced operations in 1997 to provide a platform to develop
and commercialize biopharmaceutical products. We have devoted
substantially all of our efforts towards the research and
development of our product candidates. We have had no revenue
from product sales and have funded our operations through the
private placement of equity securities, debt financings and
government grant funding. We have never been profitable and have
incurred a cumulative net loss of $46.2 million from
inception through June 30, 2005.
We expect to incur significant operating losses for the next
several years. Research and development expenses relating to our
product candidates will continue to increase. In particular, we
expect to incur increased development costs in connection with
clinical trials of Zemiva which we expect to commence in the
first half of 2006. General and administrative costs will
increase as we prepare for the commercialization of our product
candidates and as we begin to operate as a public company.
Financial Operations Overview
Revenue.
Our revenue to date has been derived from
National Institutes of Health, or NIH, grants. We have not had
any product sales and do not expect product sales in the near
future. In the future, we will seek to generate revenue from a
combination of product sales and collaborative or strategic
relationships as well as from further grants.
Research and Development Expense.
Research and
development expense consists of expenses incurred in developing
and testing product candidates. These expenses consist primarily
of salaries and related expenses for employees as well as fees
for consultants engaged in research and development activities,
fees paid to professional service providers for monitoring our
clinical trials and for acquiring and evaluating clinical trial
data, costs of contract manufacturing services and materials
used in clinical trials, depreciation of capital resources used
to develop our product candidates and facilities costs. We
expense research and development costs as incurred. Certain
research and development activities are partially funded by NIH
grants described above. All costs related to such grants are
included in research and development costs. We believe that
significant investment in product development is necessary and
plan to continue these investments as we seek to develop our
product candidates and proprietary technologies.
General and Administrative Expense.
General and
administrative expense consists primarily of salaries and other
related costs for personnel in executive, finance, accounting,
information technology and human resource functions. Other costs
include facility costs not otherwise included in research and
development expense, legal fees relating to patent and corporate
matters and fees for accounting services.
Stock-Based Compensation Expense.
Operating expenses
include stock-based compensation expense. Stock-based
compensation expense results from the issuance of stock-based
awards such as options
33
and restricted stock to employees, members of the Board of
Directors and consultants in lieu of cash consideration for
services received. We use the intrinsic value method of
accounting for awards to employees and members of the Board of
Directors. We use the fair value method of accounting for all
other awards. In 2005, we hired an independent third party to
assist in determining the fair value of our common stock in 2004
and 2005 for the purpose of determining compensation expense.
Compensation expense for options and restricted stock granted to
employees and nonemployees is classified either as research and
development expense or general and administrative expense based
on job function of the individual receiving the grant. See
discussion under “Critical Accounting Policies and
Estimates — Stock-Based Compensation.”
Other (Expense) Income, Net.
Other (expense) income,
net includes interest income and interest expense. Interest
income consists of interest earned on our cash, cash equivalents
and short-term investments. Interest expense consists of
interest incurred on equipment leases and on debt instruments.
Redeemable Convertible Preferred Stock Dividends and
Accretion of Issuance Costs.
Redeemable convertible
preferred stock dividends and accretion of issuance costs
consists of cumulative, undeclared dividends payable on the
securities and accretion of the issuance costs and costs
allocated to issued warrants to purchase common stock. The
issuance costs on these shares and warrants were recorded as a
reduction to the carrying value of the redeemable convertible
preferred stock when issued, and are accreted to redeemable
convertible preferred stock using the interest method through
the earliest redemption dates of each series of redeemable
convertible preferred stock (A, B and C) by a charge to
additional paid-in capital and net loss attributable to common
stockholders. Upon the completion of this offering, the
redeemable convertible preferred stock automatically converts
into common stock on a 200-for-1 basis and the cumulative but
unpaid dividends are either convertible into common stock (based
upon formulas established at each issuance date of the
securities) or payable in cash (at the accrued amount), at the
election of each holder of the redeemable convertible preferred
stock. Accordingly, upon completion of this offering, we will no
longer record dividends and accretion on the redeemable
convertible preferred stock.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and
results of operations are based on our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of
America, or GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities and expenses. On an
on-going basis, we evaluate our estimates and judgments,
including those related to accrued expenses, fair valuation of
stock related to stock-based compensation and income taxes. We
base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or
conditions.
We believe the following critical accounting policies affect our
more significant judgments and estimates used in the preparation
of our consolidated financial statements.
Accrued Expenses.
As part of the process of preparing
consolidated financial statements, we are required to estimate
accrued expenses. This process involves identifying services
that have been performed on our behalf and estimating the level
of services performed and the associated cost incurred for such
services as of each balance sheet date in our consolidated
financial statements. Examples of estimated expenses for which
we accrue include professional service fees such as legal and
accounting fees; contract service fees such as fees paid to
clinical monitors, data management organizations and
investigators in conjunction with clinical trials; fees paid to
contract manufacturers in conjunction with the production of
clinical materials; and employee bonuses. In connection with
such service fees, our estimates are most affected by our
understanding of the status and timing of
34
services provided relative to the actual levels of services
incurred by such service providers. The majority of our service
providers invoice us monthly in arrears for services performed.
In the event that we do not identify certain costs which have
begun to be incurred, or we under- or over-estimate the level of
services performed or the costs of such services, our reported
expenses for such period would be too low or too high.
Determining the date on which certain services commence, the
level of services performed on or before a given date and the
cost of such services often involves judgment. We make these
judgments in accordance with GAAP based upon the facts and
circumstances known to us. We attempt to mitigate the risk of
inaccurate estimates, in part, by communicating with our service
providers when other evidence of costs incurred is unavailable.
Stock-Based Compensation.
We issue stock awards such as
options and restricted stock to employees, members of the Board
of Directors and consultants for incentive purposes and in lieu
of cash consideration for services received. We use the
intrinsic value method of accounting for awards to employees and
members of the Board of Directors (collectively referred to as
employees for purposes of stock-based compensation) rather than
the alternative fair value accounting method provided for under
Statement of Financial Accounting Standards, or SFAS
No. 123,
Accounting for Stock-Based Compensation.
Accordingly, we have not recorded stock-based compensation
expense for stock awards issued to employees in fixed amounts
with exercise prices at least equal to the fair value of the
underlying common stock on the measurement date. If all terms
are fixed, the measurement date is the date of grant.
Stock-based compensation to the extent the fair value of our
common stock exceeds the exercise price of stock options granted
to employees on the measurement date is recorded as deferred
stock-based compensation in the equity section of the
consolidated balance sheets and is amortized on a straight-line
basis over the vesting period of the awards in the consolidated
statement of operations. In the notes to our consolidated
financial statements, we provide pro forma disclosures in
accordance with SFAS No. 123 and related
pronouncements and SFAS No. 148,
Accounting for
Stock-Based Compensation-Transition and Disclosure.
We use the fair value method of accounting for all other awards.
For stock options granted to nonemployees, the fair value of the
stock options is estimated using the Black-Scholes valuation
model. This model utilizes the estimated fair value of the
common stock and requires that, at the measurement date of the
award, which is usually the date services are completed, we make
assumptions with respect to the expected life of the option, the
volatility of the fair value of the common stock, risk free
interest rates and expected dividend yields of our common stock.
Higher estimates of volatility and expected life of the option
increase the value of an option and the resulting expense.
Stock-based compensation computed on awards to nonemployees is
recognized over the period of expected service by the
nonemployee (which is generally the vesting period). As the
service is performed, we are required to update these
assumptions and periodically revalue unvested options and make
adjustments to the stock-based compensation expense using the
new valuation. These adjustments may result in additional or
less stock-based compensation expense than originally estimated
or recorded, with a corresponding increase or decrease in
compensation expense in the consolidated statements of
operations in the periods of re-measurement. Ultimately, the
final compensation charge for each option grant to nonemployees
is unknown until the performance of services is completed. We
account for transactions in which services are received in
exchange for equity instruments based either on the fair value
of such services received from nonemployees or of the equity
instruments issued, whichever is more reliably measured. The two
factors which most effect charges or credits to operations
related to stock-based compensation for nonemployee awards are
the fair value of the common stock underlying stock options for
which such stock-based compensation is recorded and the
volatility of such fair value.
The determination of the deemed fair value of our common stock
has involved significant judgments, assumptions, estimates and
complexities that impact the amount of deferred stock-based
compensation recorded and the resulting amortization in future
periods. If we had made different assumptions, the amount of our
deferred stock-based compensation, stock-based compensation
expense, operating loss, net loss attributable to common
stockholders and net loss per share attributable to common
35
stockholders amounts could have been significantly different. We
believe that we have used reasonable methodologies, approaches
and assumptions to determine the fair value of our common stock
and that stock-based deferred compensation and related
amortization have been recorded properly for accounting purposes.
Effective January 1, 2006, we must adopt new accounting
provisions pursuant to the requirements of SFAS 123(R),
Share-Based Payment
, or SFAS 123(R).
SFAS 123(R) addresses all forms of share-based payment
awards, including shares issued under employee stock purchase
plans, stock options, restricted stock and stock appreciation
rights. SFAS 123(R) will require us to expense share-based
payment awards measured at fair value. We continue to evaluate
the effect that the adoption of SFAS 123(R) will have on
our financial position and results of operations. We currently
expect that our adoption of SFAS 123(R) may result in
additional expense for historical option awards, thereby
materially impacting our operating results in future periods.
Income Taxes.
As part of the process of preparing our
consolidated financial statements, we are required to estimate
our income tax expense in each of the jurisdictions in which we
operate. This process involves us estimating our current tax
expense together with assessing temporary differences resulting
from differing treatments of items for tax and financial
reporting purposes. These differences result in deferred tax
assets and liabilities. As a result of our historical operating
losses, as of December 31, 2004, we had federal tax net
operating loss carryforwards of $20.4 million and research
and development tax credits of $1.2 million, which expire
at various dates through 2024. As of December 31, 2004 we
had a deferred tax asset aggregating $11.4 million. We have
recorded a full valuation allowance of these otherwise
recognizable deferred tax assets due to the uncertainty
surrounding the timing of the realization of the tax benefit. In
the event that we determine in the future that we will be able
to realize all or a portion of the deferred tax asset, a
reduction in the deferred tax valuation allowance would increase
net income or reduce the net loss in the period in which such a
determination is made. The Tax Reform Act of 1986 contains
provisions that limit the utilization of net operating loss
carryforwards and credits available to be used in any given year
in the event of significant changes in ownership interest, as
defined. The amount of the net operating loss carryforwards that
may be utilized to offset future taxable income, when earned,
may be subjected to certain limitations, based upon changes in
the ownership of our stock that have and/or may occur. We have
not conducted an evaluation as to whether any portion of our tax
loss carryforwards have been limited, and therefore, based upon
the changes in ownership, a limitation may have occurred.
Results of Operations
Six months ended June 30, 2004 and 2005
Revenue — Research and Development Grants.
Revenue increased $179,000, or 72%, to $427,000 for the six
months ended June 30, 2005 from $248,000 for the six months
ended June 30, 2004. During each of the 2005 and 2004
periods we received funding under eight grants with the majority
of reimbursable expenses recorded in the 2005 period.
Research and Development Expense.
Research and
development expense increased $2.0 million, or 101%, to
$4.0 million for the six months ended June 30, 2005
from $2.0 million for the six months ended June 30,
2004. The six months ended June 30, 2004 included the Phase
2a Zemiva clinical trial costs, while the six months ended
June 30, 2005 included costs for the Phase 2b Zemiva
clinical trial which began in the second half of 2004 and
continued through the first half of 2005. The Phase 2b clinical
trial enrolled a significantly greater number of patients,
resulting in an increase of approximately $1.2 million from
the 2004 to the 2005 period. Also, contributing to the increase
was the growth in the number of research and development
personnel which resulted in $600,000 of additional expense in
the 2005 period relative to the 2004 period. Stock-based
compensation contributed to a lesser extent to the increase,
increasing by $50,000 to $68,000 in the 2005 period from $18,000
in the 2004 period.
36
As clinical sites are initiated and patients are enrolled in our
clinical programs, we anticipate incurring increased costs from
professional service firms helping to support the clinical
program by performing independent clinical monitoring, data
acquisition and data evaluation. We also anticipate incurring
increased costs related to hiring of additional research and
development and clinical personnel and increased costs
associated with production and distribution of clinical trial
material. We also expect that our research and development
expense will increase as we pursue the identification and
development of other product candidates, which we plan to fund
through our own resources or through strategic collaborations.
General and Administrative Expense.
General and
administrative expense increased $1.5 million, or 99%, to
$3.0 million for the six months ended June 30, 2005
from $1.5 million for the six months ended June 30,
2004. Of the increase, $700,000 resulted primarily from legal
fees associated with stockholder litigation, patent
applications, patent management and general corporate
representation. Also contributing to the increase was growth in
administrative headcount of three (from five to eight personnel)
which amounted to $366,000 of additional expense from the 2004
to 2005 period. Stock-based compensation increased $364,000 to
$606,000 in the 2005 period increasing from $242,000 in the 2004
period, due primarily to the effect of an increase in the fair
value of our common stock on unvested restricted shares of
common stock.
After completing this offering, we anticipate greater general
and administrative expenses, such as increased costs for
investor relations, Sarbanes-Oxley compliance and other
activities associated with operating as a publicly-traded
company. These increases will also likely include the hiring of
additional personnel. We expect to continue to incur greater
internal and external business development costs to support our
various product development efforts, which can vary from period
to period.
Other (Expense) Income, Net.
Other income, net increased
$115,000 to $126,000 for the six months ended June 30, 2005
from $11,000 for the six months ended June 30, 2004. During
the six months ended June 30, 2005 and 2004, interest
income was $133,000 and $12,000, respectively, and other
interest expense was $7,000 and $1,000, respectively. The
increase in interest income for the six months ended
June 30, 2005 compared to the six months ended
June 30, 2004 was primarily due to increased yields on
investments resulting from greater average cash balances
available for investment as a result of the sales of
Series C redeemable convertible preferred stock in March
and April of 2005.
Redeemable Convertible Preferred Stock Dividends and
Accretion of Issuance Cost.
Redeemable convertible preferred
stock dividends and accretion of issuance costs increased to
$1.7 million for the six months ended June 30, 2005
from $638,000 for the six months ended June 30, 2004. This
increase was attributable to Series B redeemable
convertible preferred stock outstanding for the entire 2005
period plus the Series C redeemable convertible preferred
stock outstanding for a portion of the 2005 period. Also
contributing to the increase in the 2005 period was a special
dividend accrued related to the Series A redeemable
convertible preferred stock in February 2005. Upon completion of
this offering no redeemable convertible preferred stock will be
outstanding, and, accordingly, there will be no further accrual
of dividends or accretion of issuance costs on these shares.
Years Ended December 31, 2004 and 2003
Revenue — Research and Development Grants.
Revenue decreased $154,000 or 21% to $569,000 for 2004 from
$723,000 for 2003. During 2004 and 2003 we received funding
under eight and six grants, respectively, with the majority of
reimbursable expenses recorded in 2003.
Research and Development Expense.
Research and
development expense increased $2.6 million, or 94%, to
$5.4 million for 2004 from $2.8 million for 2003. The
increase resulted primarily from Phase 2b clinical trial
costs for Zemiva. The Phase 2a clinical trial was completed
in the first quarter of 2003 and Phase 2b, which commenced
in the second half of 2004, had greater than three times the
number of patients (105 versus 32) and greater than twice as
many sites (10 versus 4) than Phase 2a. Clinical trial
costs increased by $1.6 million from 2003 to 2004. Also
contributing to the increase
37
were increased consulting costs of approximately $570,000 in
2004, primarily for Zemiva, and general research and development
costs. Personnel and related costs increased by $300,000 for
2004 due to an increase in staffing and bonuses. The increase
costs were offset in part by a decrease in stock-based
compensation of $188,000 to $48,000 for 2004 from $236,000 for
2003. In 2003 certain employees received stock in lieu of cash
bonuses.
The balance of our research and development expense primarily
consisted of indirect costs, such as costs for facilities and
depreciation, as well as preclinical evaluation of other product
candidates.
As clinical sites are initiated and patients are enrolled in our
clinical programs, we anticipate incurring increased costs from
professional service firms helping to support the clinical
program by performing independent clinical monitoring, data
acquisition and data evaluation. We anticipate incurring
increased costs related to hiring additional research and
development and clinical personnel and increased costs
associated with production and distribution of clinical trial
material. We also expect that our research and development
expense will increase as we pursue the identification and
development of other product candidates, which we plan to fund
through our own resources or through strategic collaborations.
General and Administrative Expense.
General and
administrative expense for 2004 was $3.5 million compared
to $1.3 million in 2003, an increase of $2.2 million
or 178%. In 2004, legal costs related to stockholder litigation
increased by $550,000 from 2003 and personnel costs, including
bonuses increased by $560,000. Contributing to the increase was
business consultant costs of $400,000, advertising, marketing
studies and investor relations costs of $235,000 and accounting
and auditing fees of $75,000, all of which increased for the
period 2004. Stock-based compensation contributed to the
increase to a lesser extent, with an increase of $55,000 to
$311,000 in 2004 from $257,000 in 2003.
After completing this offering, we anticipate higher general and
administrative expenses, such as increased costs for investor
relations, Sarbanes-Oxley compliance and other activities
associated with operating as a publicly-traded company. These
increases will also likely include the hiring of additional
personnel. We intend to continue to incur greater internal and
external business development costs to support our various
product development efforts, which can vary from period to
period.
Other (Expense) Income, Net.
Other income, net increased
to $16,000 for 2004 from a net expense of $30,000 for 2003.
During 2004 and 2003, interest income was $20,000 and $1,000,
respectively, and interest expense was $3,000 and $32,000,
respectively. The increase in interest income for 2004 compared
to 2003 was primarily due to greater average cash balances
available for investment, due to the sales of Series B
redeemable convertible preferred stock. The decrease in interest
expense was due to a decrease in indebtedness as a result of the
conversion of promissory notes to Series B redeemable
convertible stock.
Redeemable Convertible Preferred Stock Dividends and
Accretion of Issuance Costs.
Redeemable convertible
preferred stock dividends and accretion of issuance costs
increased to $1.3 million for 2004 and $613,000 for 2003.
This increase is the result of the accrual of dividends on the
Series B redeemable convertible preferred stock issued in
2004. Upon completion of this offering, no redeemable
convertible preferred stock will be outstanding, and,
accordingly, there will be no further accrual of dividends and
accretion issuance costs on these shares.
Years Ended December 31, 2003 and 2002
Revenue — Research and Development Grants.
Revenue increased $99,000, or 16%, to $723,000 for 2003 from
$624,000 for 2002. During each of 2003 and 2002 we received
funding under six grants, with the majority of reimbursable
expenses recorded in 2003.
Research and Development Expense.
Research and
development expense increased $458,000, or 20%, to
$2.8 million for the year ended December 31, 2003 from
$2.3 million for 2002. The increase
38
was due primarily to increased personnel and related costs.
Stock-based compensation contributed with an increase of
$239,000 to $236,000 for 2003 from ($3,000) for 2002. This
increase was due primarily to certain employees receiving stock
in lieu of cash bonuses in the 2003 period.
General and Administrative Expense.
General and
administrative expense decreased $300,000, or 19%, to
$1.3 million for 2003 compared to $1.6 million for
2002. The change was primarily the result of decreased legal
fees. Stock-based compensation increased to $257,000 for 2003
from $0 for 2002 due primarily to certain employees receiving
stock in lieu of cash bonuses for the 2003 period.
Other (Expense) Income, Net.
Other expense, net was
approximately $30,000 for 2003 and $31,000 for 2002. This
interest expense was directly related to promissory notes
related to Series B stock subscriptions.
Amortization of License Patent Rights.
On
February 29, 2000, we acquired all of the outstanding stock
of Biostream Therapeutics Incorporated and applied purchase
accounting to the transaction. The acquired licensed patent
rights of $9.8 million were assigned a three-year useful
life. During 2002, we accelerated the amortization of this
intangible asset as we were no longer pursuing the underlying
research. Accordingly, we fully amortized the asset as of
December 31, 2002. Amortization expense was
$3.8 million in 2002.
Redeemable Convertible Preferred Stock Dividends and
Accretion of Issuance Costs.
Redeemable convertible
preferred stock dividends and accretion of issuance costs
totaled $613,000 for 2003 for Series A redeemable
convertible preferred stock issued in 2003. Upon completion of
this offering, no redeemable convertible preferred stock will be
outstanding, and, accordingly, there will be no further accrual
of dividends and accretion issuance costs on these shares.
Liquidity and Capital Resources
Historically, we have financed our business primarily through
the issuance of equity securities, revenues from government
grants, debt financings and equipment leases. Through
June 30, 2005, we had received net cash proceeds of
$49.2 million from the issuance of shares of preferred and
common stock and $3.3 million from government grants. At
June 30, 2005, we had $21.2 million in cash and cash
equivalents available to finance future operations. Our cash and
cash equivalents were held at one financial institution at
June 30, 2005. Subsequent to June 30, 2005, cash
equivalents were moved to several institutions to reduce our
concentration. Management believes that all of the financial
institutions it uses are of high credit quality.
Since our inception, we have generated significant losses in
developing our product candidates. Accordingly, we have
historically used cash in our operating activities, and for the
six months ending June 30, 2005 we used approximately
$6.4 million to fund these activities. As we continue to
develop our product candidates and begin to incur increased
sales and marketing costs related to commercialization of our
future products, we expect to incur additional operating losses
until such time, if any, as our efforts result in commercially
viable products.
Based on our operating plans, we believe that the proceeds from
this offering, together with our existing cash resources and
government grant funding, will be sufficient to finance our
planned operations through the second half of 2007. However,
over the next several years, we will require significant
additional funds to conduct clinical and non-clinical trials,
achieve regulatory approvals and, subject to such approvals,
commercially launch Zemiva and MIBG. Our future capital
requirements will depend on many factors, including the scope of
progress made in our research and development activities and our
clinical trials. We may also need additional funds for possible
future strategic acquisitions of businesses, products or
technologies complementary to our business. If additional funds
are required, we may raise such funds from time to time through
public or private sales of equity or from borrowings. Financing
may not be available to us on acceptable terms, or at all, and
our failure to raise capital when needed could materially
adversely impact our growth plans
39
and our financial condition and results of operations.
Additional equity financing may be dilutive to holders of our
common stock and debt financing, if available, may involve
significant cash payment obligations and covenants that restrict
our ability to operate our business.
Cash flows for six months ended June 30, 2004 and
2005
Net cash used in operating activities increased by
$3.7 million to $6.3 million for the six months ended
June 30, 2005 compared to $2.6 million for the same
period in 2004. The increase in cash used was due to the
increase in the net loss of $3.3 million primarily related
to expenditures on the Phase 2b clinical trial for Zemiva.
Net cash used by investing activities decreased $53,000 to
$96,000 for the six months ended June 30, 2005 compared to
$149,000 for the same period in 2004. This decrease was due to
the expansion of research facilities in 2004.
Net cash provided by financing activities increased by
$21.9 million to $26.7 million for the six months
ended June 30, 2005 compared to $4.8 million for the
same period in 2004. In the six months ended June 30, 2005,
we raised $26.4 million from the issuance of Series C
redeemable convertible preferred stock, and in the 2004 period,
we raised $4.7 million from the issuance of Series B
redeemable convertible preferred stock, all net of expenses
incurred.
Annual cash flows
Years ended December 31, 2004 and 2003
Net cash used in operating activities increased
$3.2 million from $3.0 million for 2003 to
$6.2 million for 2004. This increase in cash used in
operations is due primarily to the significant increase in
clinical trial activity surrounding Zemiva.
Net cash used by investing activities increased by $177,000,
from $26,000 in 2003 to $203,000 in 2004. Net cash used in
investing activities in 2003 was primarily for office leasehold
improvements and the purchase of property and equipment. In 2004
net cash used in investing activities was primarily for
expansion of research facilities and the purchase of property
and equipment.
Net cash provided by financing activities increased by
$0.8 million, from $4.8 million in 2003 to
$5.5 million in 2004. In 2004, we raised $4.7 million
in Series B redeemable convertible preferred stock,
received $250,000 in cash from the sale of common stock and
warrants and issued $700,000 in promissory notes. In 2003, we
received proceeds of $2.7 million from the issuance of
Series A redeemable convertible preferred stock and
$2.1 million in advances for Series B stock
subscriptions.
Years ended December 31, 2003 and 2002
Net cash used in operating activities increased by $700,000,
from $2.3 million in 2002 to $3.0 million in 2003.
Accounts payable and accrued expenses increased by $860,000 in
the 2002 period due to limited cash resources. In 2003, there
was a decrease in accounts payable and accrued expenses of
$275,000.
Net cash used in investing activities remained fairly constant
at $26,000 in 2003 from $25,000 in 2002. The use of cash in both
years related primarily to the purchase of property and
equipment.
Net cash provided by financing activities increased
$3.6 million, from $1.2 million in 2002 to
$4.8 million in 2003. In 2003, we raised $2.7 million
in Series A redeemable convertible preferred stock and
received $2.1 million in advances for Series B stock
subscriptions. In 2002, we received $572,000 in stock
subscriptions for Series A and $550,000 from the issuance
of promissory notes and warrants.
40
Contractual Obligations
The following table summarizes our outstanding contractual
obligations as of June 30, 2005:
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Payments Due by Period
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Less than
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More than
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Contractual Obligations
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Total
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1 Year
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1-3 Years
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3-5 Years
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5 Years
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(in thousands)
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Operating leases
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$
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736
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$
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123
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$
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613
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$
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—
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$
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—
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Development and
manufacturing
(1)
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427
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427
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—
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—
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—
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$
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1,163
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$
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550
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$
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613
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$
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—
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$
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—
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(1)
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See “Strategic Agreements — Manufacturing
Agreement with MDS Nordion.”
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Operating Leases
Our commitments under operating leases consist of payments
relating to our real estate leases in Cambridge, Massachusetts,
expiring in 2008. The commitments are $123,000, $251,000,
$241,000 and $121,000 for the years 2005 (balance of year),
2006, 2007 and 2008, respectively.
Capital Leases
We have no capital leases as of June 30, 2005.
Debt
In December 2004, we issued an unsecured convertible promissory
note for $700,000, due one year from the date of issuance, at an
annual rate of 3%. In 2005, the principal balance of $700,000
plus accrued interest of $6,000 were converted into 3,493 shares
of Series C redeemable convertible preferred stock.
On September 30, 2005, we entered into a $5 million
Loan and Security Agreement with Ritchie Multi-Strategy Global,
LLC. The debt will be used for working capital and general
corporate activities. The obligations are secured by a first
priority security interest in our assets and intellectual
property. We are required to pay interest only during the first
three months of the term of the loan, and thereafter the entire
loan will amortize over 35 months with equal monthly
principal and interest payments. The interest rate of the loan
is the lesser of (i) 395 basis points above the yield on
the three-year U.S. Treasury Notes on the closing date of the
loan and (ii) the maximum rate permitted by law. In
addition, we are required to pay Ritchie Multi-Strategy Global,
L.L.C a fee in the amount of $250,000 if we complete this
offering prior to June 30, 2006, and if completed
thereafter, the fee would be in the amount of $300,000.
Off-Balance Sheet Arrangements
Other than the operating leases for our office, pilot
manufacturing and laboratory space, we do not engage in
off-balance sheet financing arrangements.
Strategic Agreements
Manufacturing Agreement with MDS Nordion
We have entered into a development and manufacturing agreement
with MDS Nordion to produce Zemiva for our clinical trial
studies. Zemiva is labeled with MDS Nordion’s high-purity
I-123 and is manufactured in a new cyclotron facility in
Vancouver, Canada. MDS Nordion is a manufacturer of I-123
production systems and the major supplier of I-123 in North
America. The agreement obligates
41
us to make certain milestone payments as well as payments for
clinical product to be used in the Phase 3 clinical trials
for Zemiva. The agreement currently expires on December 31,
2006 unless extended by mutual agreement of the parties. During
2004 and the six months ended June 30, 2005 we made
payments to MDS Nordion of $819,000 and $29,000, respectively.
We expect to pay MDS Nordion an additional $427,000, provided
that MDS Nordion completes certain milestones set forth in the
agreement. Future payments for clinical materials are at a
contractual rate and based on our material needs.
License Agreements with Georgetown University
We have entered into two license agreements with Georgetown
University. Pursuant to the first agreement, we have licensed on
an exclusive basis in the field of imaging applications, the use
of ligands for metabotropic glutamate receptors and inhibitors
of NAALADase. In exchange for these exclusive rights, we are
obligated to pay certain royalties and up to $900,000 in total
of milestone payments upon the attainment of certain approvals
in the regulatory process. Such milestone payments may be
reduced by up to 50% for subsequent new drug applications
submitted for new uses of the same compound and are creditable
against future royalty payments. Pursuant to the second license,
we have exclusive rights to analogs of cocaine, for the
therapeutic and diagnostic uses of these compounds in substance
abuse, obesity, depression, Parkinson’s disease and related
neuropsychological conditions and diseases. In exchange for
these exclusive rights, we are obligated to pay certain
royalties and up to $800,000 in total of milestone payments upon
the attainment of certain approvals in the regulatory process.
Such milestone payments may be reduced by up to 50% for
subsequent new drug applications submitted for new uses of the
same compound and are creditable against future royalty payments.
License Agreement with the University of Western
Ontario
We have entered into a license agreement with the University of
Western Ontario pursuant to which we license the patent rights
to certain polymer precursors used in the creation of the BMIPP
molecule on an exclusive basis. While the university retains the
ownership of the patent rights, we shall own any improvements to
the technology made by us or on our behalf. In exchange for
these exclusive rights, we are obligated to pay to the
University of Western Ontario certain royalty and milestone
payments. The license terminates with respect to each patent on
the earlier of July 30, 2023, or the date the applicable
patent expires and the period of exclusivity terminates upon the
expiration of each patent in each country.
License Agreement with Nihon Medi-Physics Co. Ltd.
We have entered into a license agreement with Nihon Medi-Physics
Co. Ltd., or Nihon, for access to its non-patented, confidential
clinical information related to its BMIPP product, Cardiodine.
As part of this agreement, we pay Nihon certain royalties on net
sales of our Zemiva product for its first indication, if the use
of Nihon’s clinical data enables us to omit or limit any of
the clinical trial phases in the U.S. regulatory approval
process for Zemiva. While we have used the data from Nihon in a
supportive manner, we have not been able to omit or limit the
clinical trials in support of a new drug application, or NDA,
for Zemiva, therefore, do not expect to pay any royalties to
Nihon upon sales of Zemiva.
Funding Requirements
We expect to use the majority of the net proceeds of this
offering to continue the development and prepare for the
commercialization of our lead product candidate, Zemiva, and to
initiate and expand the clinical development of Ultratrace MIBG,
our lead targeted radiotherapeutic candidates for cancer.
42
To a lesser extent, we anticipate using the net proceeds of this
offering to:
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•
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expand our research and development programs (approximately
$ );
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•
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advance our pre-clinical development of new product candidates
(approximately
$ );
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•
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initiate clinical development of additional indications for
Zemiva (approximately
$ );
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•
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in-license technology and acquire or invest in businesses,
products or technologies that are complementary to our own
(approximately
$ );
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•
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fund investment in manufacturing capacity for Zemiva in
collaboration with our anticipated commercial manufacturing
partner(s) (approximately
$ );
and
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•
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fund other working capital and general corporate activities
(approximately
$ ).
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We may also use a portion of the net proceeds for the repayment
of $5 million in debt and related interest under the terms
of a Loan and Security Agreement with Ritchie Multi-Strategy
Global, L.L.C. dated as of September 30, 2005. For a
description of the terms of the loan, see “Debt” above.
We may also use a portion of the net proceeds to pay to certain
existing preferred stockholders a one-time cash dividend in an
aggregate amount of
$ .
We may also use a portion of the net proceeds to acquire
additional businesses, services, products or technologies or
invest in additional businesses that we believe will complement
our current or future business. However, we have no specific
plans, agreements or commitments to do so and are not currently
engaged in any negotiations for any acquisition or investment.
The amounts and timing of our use of proceeds will vary
depending on a number of factors, including the amount of cash
generated or used by our operations, the success of our product
development efforts, competitive and technological developments,
and the rate of growth, if any, of our business. As of the date
of this prospectus, we cannot specify with certainty all of the
particular uses for the net proceeds to be received upon the
completion of this offering. Accordingly, our management will
have broad discretion in the allocation of the net proceeds of
this offering. Pending the uses described above, we will invest
the net proceeds of this offering in cash, cash-equivalents,
money market funds or short-term interest-bearing,
investment-grade securities to the extent consistent with
applicable regulations. We cannot predict whether the proceeds
will be invested to yield a favorable return.
We believe that the net proceeds from this offering, together
with our existing cash resources and government grant funding,
will be sufficient to finance our planned operations, including
increases in spending for our Zemiva and MIBG clinical programs
and for our preclinical product candidates through the second
half of 2007. However, over the next several years, we will
require significant additional funds to conduct clinical and
non-clinical trials, achieve regulatory approvals and, subject
to such approvals, commercially launch Zemiva and Ultratrace
MIBG. Our future capital requirements will depend on many
factors, including the scope of progress made in our research
and development activities and our clinical trials. We may also
need additional funds for possible future strategic acquisitions
of businesses, products or technologies complementary to our
business. If additional funds are required, we may raise such
funds from time to time through public or private sales of
equity or from borrowings. Financing may not be available to us
on acceptable terms, or at all, and our failure to raise capital
when needed could materially adversely impact our growth plans
and our financial condition and results of operations.
Additional equity financing may be dilutive to holders of our
common stock and debt financing, if available, may involve
significant cash payment obligations and covenants that restrict
our ability to operate our business.
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board
issued SFAS No. 123(R),
Share Based Payment.
SFAS No. 123(R) addresses accounting for
share-based awards, including shares issued under
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employee stock purchase plans, stock options, and stock awards
and stock appreciation rights. SFAS 123(R) will require us
to expense share-based with compensation cost measured using the
fair value of the awards. SFAS 123(R) is effective for us
beginning January 1, 2006. We have not yet determined the
effect that the adoption of SFAS 123(R) will have on our
financial position and results of operations, although
compensation costs recognized in operations will increase from
historical levels for all fixed awards.
Quantitative and Qualitative Disclosures about Market Risk
We have not used derivative financial instruments for
speculation or trading purposes. However, we are exposed to
market risk related to changes in interest rates. Our current
policy is to maintain an investment portfolio consisting mainly
of U.S. money market and government-grade securities, directly
or through managed funds, with maturities of one year or less.
Our cash is deposited in and invested through highly rated
financial institutions in North America. Our short-term
investments are subject to interest rate risk and will fall in
value if market interest rates increase. If market interest
rates were to increase immediately and uniformly by 10% from
levels at June 30, 2005, we estimate that the fair value of
our investment portfolio would decline by an immaterial amount.
While our cash and investment balances will increase upon
completion of this offering made by this prospectus, we will
have the ability to hold our fixed income investments until
maturity, and therefore we would not expect our operating
results or cash flows to be affected to any significant degree
by the effect of a change in market interest rates on our
investments.
Effects of Inflation
Our assets are primarily monetary, consisting of cash, cash
equivalents and short-term investments. Because of their
liquidity, these assets are not directly affected by inflation.
We also believe that we have intangible assets in the value of
our technology. In accordance with GAAP, we have not capitalized
the value of this intellectual property on our consolidated
balance sheet. Due to the nature of this intellectual property,
we believe that these intangible assets are not affected by
inflation. Because we intend to retain and continue to use our
equipment, furniture and fixtures and leasehold improvements, we
believe that the incremental inflation related to replacement
costs of such items will not materially affect our operations.
However, the rate of inflation affects our expenses, such as
those for increased personnel and contract services, which could
increase our level of expenses and the rate at which we use our
resources.
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BUSINESS
Overview
We are a biopharmaceutical company focused on the research,
development and commercialization of innovative molecular
imaging pharmaceuticals and targeted radiotherapeutics. Our
product candidates target markets with significant unmet needs
in the areas of cardiology, oncology and neurology. We believe
that our product candidates offer significant benefits to
patients, healthcare providers and third-party payers by
enabling improved diagnosis, treatment and management of disease
in a more cost-effective manner.
Our lead product candidate, Zemiva (iodofiltic acid I 123),
is a radiolabeled fatty acid analog that we are developing as a
molecular imaging pharmaceutical for the diagnosis of
insufficient blood flow to the heart, or cardiac ischemia. We
believe that Zemiva enables improved diagnosis and management of
disease in a more cost-effective and expeditious manner and has
significant advantages over the current standard of care in both
the emergency department and non-acute settings. Also known as
BMIPP, this molecule has been sold in Japan under the name
Cardiodine in the non-acute setting for over ten years with no
significant safety events reported. Cardiodine has been used in
over 500,000 patients and has been the subject of over 200
peer-reviewed articles.
We have recently completed a Phase 2b clinical trial for Zemiva.
In this clinical trial, we evaluated the safety and efficacy of
Zemiva and initial findings suggest that Zemiva has the ability
to detect areas of cardiac ischemia with results generally
consistent with the current standard of care. Moreover, Zemiva
appeared to have significant predictive value in ruling out
cases in which cardiac ischemia was not present. We believe that
these findings support our decision to commence a Phase 3
clinical trial for Zemiva in the first half of 2006.
Market Opportunity
Diagnosis of Cardiac Ischemia in the Emergency Department
Setting
The initial target market for Zemiva is for the diagnosis of
cardiac ischemia in the emergency department setting. In the
United States, approximately five to eight million chest pain
patients present to emergency departments each year to determine
whether their chest pain is caused by cardiac ischemia or
myocardial infarction (heart attack). Of these chest pain
patients, over three million are admitted to the hospital to
achieve diagnosis, of which only approximately 15% are
ultimately diagnosed with acute coronary syndrome, or ACS, an
umbrella term which refers to cardiac ischemia and myocardial
infarction. These life-threatening disorders are a major cause
of emergency medical care and hospitalization.
There are many methods used to detect cardiac ischemia and
myocardial infarction, all of which have certain limitations. A
diagnosis of cardiac ischemia is based on the clinical judgment
of the physician, who interprets and weighs findings from the
patient’s medical history, clinical exam and diagnostic
tests such as an electrocardiogram, cardiac stress test,
radionuclide imaging and coronary angiography.
Noninvasive imaging of the heart in the emergency department
setting using perfusion, or blood flow, agents is attractive to
physicians as a means to diagnose ACS. The significant medical
and economic value of imaging chest pain patients in the
emergency department setting has been demonstrated in numerous
clinical trials. While these findings are important, the
widespread use of currently available perfusion agents in the
emergency department has practical limitations due to the need
to image chest pain patients within two hours after the
cessation of chest pain symptoms.
Because of the limitations associated with the current standard
of care to detect ACS in the emergency department, diagnosis
continues to be a source of uncertainty and error. Moreover, the
current standard of care to detect ACS also results in a high
rate of “missed” diagnoses. Of the approximately 25%
of patients with chest pain who are discharged from the
emergency department having not been
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diagnosed with ACS or admitted for further assessment, 1% to 5%
actually have ACS. We believe theses statistics highlight a
significant opportunity to reduce hospitalizations and expenses
to the healthcare system through improved diagnostic techniques.
Unnecessary hospitalizations and “missed” diagnoses
are costly in many ways. The current standard of care to detect
ACS results in an estimated $3 to $6 billion per year in
inpatient expenses that we believe could be avoided with an
improved diagnostic. The complications in discharged patients
whose ACS is “missed” account for approximately 20% of
malpractice awards against emergency department physicians, even
though patients with chest pain comprise approximately 6% of a
typical emergency physician’s practice. Therefore we
believe there is a substantial unmet need for improved diagnosis
of ACS, and thus cardiac ischemia, in emergency department
settings.
Diagnosis of Cardiac Ischemia in the Non-Acute
Setting
In 2002 over nine million nuclear stress tests were performed in
the United States for the purpose of diagnosis, prognosis and
risk stratification in patients who may be at risk for cardiac
ischemia. Stress tests are performed using perfusion agents such
as Cardiolite, Myoview and generic thallium. We estimate that
the world-wide sales of these agents in the non-acute setting
were approximately $1 billion in 2004.
While myocardial perfusion stress tests are generally effective
in terms of diagnosis, the manner in which they are conducted is
inconvenient, time consuming and expensive because of the
inherent limitations of current imaging agents. As a result, we
believe there is a substantial unmet need for an improved
imaging agent that will shorten the time required to perform
stress tests, which typically amounts to 3 to 4 hours and
up to 24 hours in certain cases. By reducing this period,
we believe that patient convenience and throughput will be
increased and overall costs will be reduced.
Our Lead Product Candidate: Zemiva
Zemiva is a radiolabeled fatty acid analog that is also known as
BMIPP. This molecule has been sold in Japan under the name
Cardiodine in the non-acute setting for over ten years and, to
our knowledge, no significant safety events have been reported.
Cardiodine has been used in over 500,000 patients and has been
the subject of over 200 peer-reviewed articles.
We believe that Zemiva offers significant advantages over the
current standard of care with respect to the diagnosis of
cardiac ischemia in both the emergency department and non-acute
setting:
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Emergency Department.
We believe that our clinical data
show that Zemiva enables the detection of cardiac ischemia up to
30 hours following an ischemic episode. Currently available
imaging agents are only effective when used during ongoing
symptoms or within two hours after cessation of symptoms. After
this period, a time consuming and expensive series of diagnostic
tests is required, including a stress test after the patient has
been stabilized. As a result of Zemiva’s extended
“imaging window,” we believe that Zemiva will offer
more timely, convenient and cost effective diagnosis when
compared with the current standard of care.
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Non-Acute Setting.
Utilizing Zemiva, a stress test will
require approximately one hour. With currently available imaging
agents such as Cardiolite and Myoview, stress tests typically
require 3 to 4 hours, and may require up to 24 hours
in certain cases. By reducing the time required for a stress
test, we believe that Zemiva will offer increased patient
throughput and convenience at a lower overall cost to the
healthcare system.
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Mechanism of Action
Under normal conditions, 70% to 80% of the energy for the heart
is produced by the metabolism of fatty acids. However, in
ischemic conditions, fatty acid metabolism is drastically
reduced and the
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metabolism of carbohydrates becomes the heart’s primary
source of energy. More importantly, this shift in metabolic
activity from fatty acids to carbohydrates persists for some
time and results in a phenomenon described as “ischemic
memory” that can be evidenced in a Zemiva image of reduced
fatty acid utilization.
Zemiva is a methyl branched-chained fatty acid analog, and is
trapped in healthy heart cells that have appropriate blood
supply. In contrast, retention of Zemiva is reduced in ischemic
heart cells. Because of its high heart uptake and long retention
in healthy heart cells, Zemiva provides high quality images of
the heart. Uptake of Zemiva in the heart most likely reflects
normal fatty acid metabolism. In the setting of cardiac
ischemia, reduction in fatty acid metabolism is mirrored by
decreased cardiac uptake of Zemiva.
In the clinical setting, the finding of persistent and prolonged
disturbances in fatty acid uptake, long after resolution of
ischemic symptoms, may provide a direct imprint as to the
underlying cause of the patient’s symptoms. In patients who
present to the emergency department with acute chest pain and no
myocardial infarction, sustained alterations of myocardial fatty
acid metabolism as assessed by Zemiva have been described in the
absence of abnormalities in regional cardiac blood flow. The
potential importance of this observation is that Zemiva imaging
extends the “imaging window” for identifying cardiac
ischemia long after cessation of chest pain and restoration of
resting myocardial blood flow.
Use of BMIPP in Japan
The underlying molecule for Zemiva, BMIPP, has been approved for
use in Japan for over 10 years. BMIPP is marketed there as
Cardiodine by Nihon Medi-Physics, which is a joint venture
between Sumitomo Chemical Co., Ltd. and a subsidiary of General
Electric Company (the maker of Myoview). Cardiodine has an
established safety profile and has demonstrated clinical utility
through use in more than 500,000 patients in Japan. It has been
the subject of over 200 peer-reviewed articles. From this
clinical experience in Japan, no serious adverse events or
safety concerns related to BMIPP have been reported.
Cardiodine is used in patients with angina, myocardial infarct
and cardiomyopathy in the non-acute setting. To our knowledge,
Nihon Medi-Physics is not pursuing development in the emergency
department market and has not aggressively marketed Cardiodine
against existing perfusion agents, such as General Electric
Company’s Myoview, and generic thallium. In addition to
Cardiodine’s extensive experience in the stress test
segment, several peer-reviewed articles have described the
utility of BMIPP in Japan for imaging congestive heart failure,
left ventricular dysfunction, myocardial viability and acute
myocardial infarction.
To our knowledge, Nihon Medi-Physics does not have BMIPP patent
rights in or outside of Japan. We do, however, have an agreement
with Nihon Medi-Physics that allows us to read and reference
data from their Japanese regulatory filings and Phase 4 study in
Japan in connection with our submissions to the FDA. For Nihon
Medi-Physics to enter the U.S. marketplace for BMIPP before the
expiration of our expected market exclusivity it would need to
initiate and complete a new clinical and regulatory program and
secure manufacturing capabilities in North America. We do not
believe that Nihon Medi-Physics has initiated a clinical program
in support of an NDA, in the United States for this product.
Completed Clinical Studies
We have completed three clinical studies, including two
multi-center Phase 2 studies and a Phase 1 study at
Massachusetts General Hospital. Data from these studies have
been presented at leading scientific forums, including the
American Society of Nuclear Cardiology and the American Heart
Association annual scientific meetings. Results from our Phase
2a trial were published recently in the peer-reviewed journal
Circulation
and cited at the recent American Society of
Nuclear Cardiology meeting. Taken in the aggregate, we believe
that our clinical results provide preliminary indications of
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the safety and efficacy of Zemiva. More detailed information
with respect to these studies is as follows:
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Multi-Center Phase 2b Clinical Trial.
In March 2005, we
completed enrollment of 105 patients in our multi-center Phase
2b clinical trial of Zemiva. This trial was designed to evaluate
the safety and feasibility of Zemiva for the detection of
cardiac ischemia in patients with suspected ACS whose symptoms
occurred within 30 hours prior to Zemiva injection. The
objectives of the study were to evaluate: 1) the performance
characteristics (accuracy, sensitivity, specificity, positive
predictive value and negative predictive value) of Zemiva
imaging for detection/exclusion of ACS; and 2) the safety of a
single injection of Zemiva in patients suspected of ACS. The
study was designed as an open-label Phase 2 study that recruited
high-likelihood and intermediate- to low-likelihood ACS
patients. Patients were imaged with Zemiva for the presence or
absence of altered fatty acid metabolism due to cardiac
ischemia. Preliminary findings of this study suggest that Zemiva
demonstrates the ability to detect areas of cardiac ischemia
with results generally consistent with traditional diagnostic
techniques, including those requiring substantially greater time
to complete. Preliminary analysis also suggests that there is a
high negative predictive value when Zemiva is administered to
these patients at rest. We expect the findings of this study to
support the decision to continue evaluation of the safety and
efficacy of Zemiva in Phase 3 clinical research.
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Multi-Center Phase 2a Clinical Trial.
We enrolled 32
patients in our multi-center Phase 2a clinical trial of Zemiva.
This trial evaluated the safety and feasibility of Zemiva for
the detection of ischemia subsequent to a documented ischemic
event. The multi-center Phase 2a study was designed to
characterize the cardiac uptake of Zemiva in the hearts of
patients who have experienced an ischemic event (induced during
the exercise portion of clinically indicated stress/rest cardiac
perfusion imaging test) within 30 hours prior to study drug
administration. The results of the Zemiva cardiac images were
also compared with the results of the cardiac perfusion study.
We believe that the data demonstrate that Zemiva administered to
resting patients with ischemia safely detects an ischemic event
up to 30 hours after the event occurred, without the use of
a stress test. Currently marketed perfusion agents must be used
within two hours as recommended by the American Society of
Nuclear Cardiology’s position paper on diagnosing suspected
ischemia in the emergency department setting.
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Phase 1 Clinical Trial.
We enrolled six volunteers in our
single-center Phase 1 clinical trial of Zemiva. This trial
evaluated the safety, radiation dosimetry, organ distribution
and effects of fasting on cardiac uptake. Each volunteer was
studied twice: once while fasting and once after a predetermined
meal. Zemiva demonstrated safety, high quality cardiac images
and a five- to six-fold reduction in radiation dose compared to
current perfusion agents.
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Clinical Development Plan
Our goal is to achieve regulatory approval for Zemiva in the
United States in the most expeditious manner possible. We have
conducted two multi-center Phase 2 trials and a
Phase 1 trial. We believe that the data from these trials
as well as the safety and efficacy data from the use of BMIPP in
Japan strongly support our decision to advance Zemiva into
Phase 3 development.
As part of our U.S. regulatory strategy for Zemiva, we expect to
conduct additional clinical trials as follows:
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Phase 2 Normals Database Clinical Trial.
We expect
to begin a Phase 2 clinical trial to develop our own
reference database of normal images for myocardial SPECT
imaging, or a Normals database, in the first half of 2006. A
Normals database is a valuable tool for the physician
interpreting the cardiac image, regardless of whether the study
is read by a nuclear
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cardiologist, nuclear medicine physician or nuclear radiologist.
Such a database enables the interpreting physician to compare a
patient’s cardiac image against that of a
“normal” image as defined by computer-compiled data.
Consistent with this standard practice, we intend to conduct a
Phase 2 clinical trial to develop our own Normals database
that will be used as part of our Phase 3 clinical trial and
in the commercialization of Zemiva, if approved by the FDA or
comparable regulatory bodies outside the United States. This
trial is expected to include approximately 120 patients.
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Phase 3 Clinical Trial.
We are in the process of
designing our Phase 3 clinical trial protocol for Zemiva
and anticipate conducting a multi-center study with
approximately 450 patients at 20 centers in North
America, with a possible Phase 4 follow-up requirement. We
intend to commence this clinical trial in the first half of
2006. The final protocol design, including the number of
patients and trials, will depend upon the final results of our
Phase 2 trial data and input from the FDA.
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We believe that the data from these anticipated clinical trials,
along with the data from our previous clinical trials as well as
that derived from the use of BMIPP in Japan, will provide a
basis for us to file for regulatory approval in the United
States.
Other Product Candidates
In addition to Zemiva, we are developing a portfolio of product
candidates for cardiovascular molecular imaging as well as for
oncological molecular imaging and targeted radiotherapy using
our proprietary technologies. Applied independently and in
combination, these technologies enable the development of novel
molecular imaging pharmaceuticals and targeted radiotherapeutics
using both
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small molecule and protein-based agents. The following table
summarizes our product candidates in development:
Ultratrace MIBG
We are developing new molecular imaging pharmaceuticals and
radiotherapeutics to detect, treat and manage cancer. Ultratrace
MIBG, or MIP-120T (I 131-metaiodobenzyl-guanidine, or MIBG)
is our product candidate for the treatment of neuroendocrine
tumors, such as neuroblastoma, pheochromocytoma and carcinoid.
We plan to begin a U.S. Phase 1 clinical trial with
Ultratrace MIBG involving 6 to 10 volunteers in the first
half of 2006.
MIBG is an analog of the biogenic amine norepinephrine, which
was first described by researchers at the University of
Michigan. It has been used in its radiolabeled forms (usually
I-131 or I-123) since the early 1980s at centers that specialize
in the treatment of neuroblastoma and at centers that evaluate
patients with neuroendocrine tumors. Iodine has many useful
radioactive isotopes for use in medicine. I-123 is used
primarily for imaging and I-131 is used primarily for
therapeutic applications.
I-123 MIBG is marketed in Europe and Japan for imaging, but is
not an FDA-approved product in the United States. While I-131
MIBG is commercially available in the United States for
diagnostic purposes, it is considered a poor isotope for
diagnostic imaging since it results in a high radiation dose to
the patient and inferior image quality compared with I-123.
The mechanism by which MIBG molecules accumulate in tumors is
very selective and controlled by the protein called the
norepinephrine transporter, or NET, which is expressed in
limited amounts on the cell surface. Like the hormone
norepinephrine, MIBG is concentrated by NET and it is stored
within specific types of neuronal tissue and tumor cells. This
uptake and prolonged retention of MIBG within tumor cells
constitutes a superior targeting mechanism. However, the number
of MIBG molecules taken up by a tumor cell is limited. Thus, if
the goal is to maximize the accumulation of radioactive
molecules of MIBG in tumors so that tumors can be clearly
visualized or effectively treated by the radioactivity, the
amount of non-radioactive MIBG molecules present in the drug
formulation must be minimized.
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Through the use of our Ultratrace technology, we have created a
platform to enable the production of ultrapure radioactive MIBG.
This technology greatly reduces the amount of non-radioactive
MIBG molecules, or cold contaminants, by several orders of
magnitude and thereby enhances tumor accumulation. The
anticipated result is improved tumor visualization and
therapeutic efficacy as well as improved patient safety by
reducing chemical toxicity. Our collaborators from the
University of Glasgow demonstrated a superior and sustained
arrest of tumor growth in animal studies using high-specific
activity MIBG that is enabled by our Ultratrace platform
technology. We believe that these early but promising results
suggest a potentially significant opportunity for us to apply
our Ultratrace platform technology to develop targeted
radiotherapeutics such as Ultratrace MIBG for certain kinds of
cancer. We commenced preclinical studies for Ultratrace MIBG in
the second half of 2005, and intend to initiate a Phase 1
clinical trial in the first half of 2006.
Cardiovascular Discovery Product Candidates
We are conducting discovery studies on second-generation fatty
acid compounds that are based on enhanced structural features of
Zemiva, as well as on third-generation fatty acid analogs that
will focus on a new class of proprietary radiolabeled fatty acid
analogs. We believe that these compounds may provide us with a
robust, patented and differentiated extension to the Zemiva
franchise. In conjunction with scientists at the University of
Maryland Medical Center, we have engaged in NIH-sponsored
development of cardiovascular compounds to target the
angiotensin converting enzyme, or ACE, as markers for the
assessment of heart failure patients. Such compounds would be
novel, in that they would enable the evaluation of ACE in human
hearts with chronic ischemia and heart failure using external
imaging.
Oncology Discovery Product Candidates
Prostate cancer is the most commonly diagnosed cancer among men
in the United States, with approximately 230,000 men newly
diagnosed each year. We are engaged in discovery studies of
radiopharmaceuticals to bind to prostate specific membrane
antigen, or PSMA, that would allow us to image the tumor and
monitor response therapy. This technology employs a novel class
of synthetic dipeptides used in conjunction with our SAAC
technology. We are also collaborating with investigators at the
University of California at San Diego on the design of
peptide-modified SAAC-containing polymers to target the integrin
receptors that are found on newly growing, or angiogenic, blood
vessels within tumors. We believe that our approach should lead
to new targeting molecules that would allow us to image
angiogenesis in a variety of tumors and to monitor response to
anti-angiogenic tumor therapy.
Neurology Discovery Product Candidate
Our neurology preclinical discovery candidate, MIP-170D,
represents a class of high-affinity radiolabeled dopamine
transporter ligand that is being developed to aid in the
diagnosis of disorders that involve dopamine-rich regions of the
brain. We believe that MIP-170D has the potential to aid in the
objective diagnosis of Parkinson’s disease and Attention
Deficit Hyperactivity Disorder, or ADHD.
Our Proprietary Technology Platforms
Our core proprietary technologies drive development of our
current portfolio and should enable the research and development
of future molecular imaging pharmaceuticals and targeted
radiotherapeutic candidates. Our core proprietary technologies,
applied independently and together, include:
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Ultratrace Technology.
Our Ultratrace Technology is a
proprietary solid-phase radiolabeling technology that enables
the development of ultrapure radiopharmaceuticals, such as
Ultratrace MIBG, that display greater specificity and potency by
eliminating unwanted non-radioactive targeting molecules.
Current radiolabeling technologies are not efficient in linking
radioisotopes to the active targeting molecule. The resulting
products are
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mixtures that contain both radiolabeled and unlabeled active
targeting molecules, which are unwanted cold contaminants.
Providing no known benefits, cold contaminants bind to receptor
sites of target cancer molecules, precluding radiolabeled
molecules from being able to bind to the target sites and
deliver their radioactive therapy. Ultratrace creates ultrapure
product candidates with a substantially greater proportion of
radiolabeled targeting molecules. Our strategy is to validate
the Ultratrace platform with Ultratrace MIBG and to explore
broader applications in cancer therapy and molecular imaging.
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SAAC Technology.
The ability to reliably and robustly
incorporate medically useful radioactive metals into
biologically relevant targeting molecules is critical to the
design of successful radiopharmaceuticals for molecular imaging
and targeted radiotherapy. Single Amino Acid Chelate, or
SAAC,
is our unique metal binding chemistry platform
technology. It represents a new family of compounds with
superior metal binding properties for leading radionuclides used
for imaging and therapy, namely technetium-99m and rhenium-186
and rhenium-188. This technology incorporates a metal binding,
or chelating, group that can rapidly and efficiently bind to
technetium or rhenium for diagnostic and therapeutic uses with
an amino acid portion that allows it to be incorporated into any
peptide sequence through the use of conventional peptide
chemistry. SAAC opens up the possibility of creating many new
compounds that can be screened for molecular targeting of a
variety of disease states.
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SAACQ Technology.
Two widely employed techniques for
visualizing specific biological processes are fluorescence
microscopy and radioisotope imaging. The new fluorescence-based
technology called SAACQ enables the visualization of
radiopharmaceuticals interacting with cellular structures. This
advance promises to accelerate the development of molecular
imaging pharmaceuticals and targeted radiotherapeutics by
allowing live cell activity to be viewed by fluorescent
microscopy. SAACQ technology may enable our scientists to bridge
the gap between research in isolated cells and research in live
subjects by increasing the understanding of cellular behavior,
potentially resulting in the development of a new generation of
molecular imaging pharmaceuticals and targeted radiotherapeutics.
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Nanotrace Discovery.
Our Nanotrace Discovery targeting
platform technology allows for the rapid creation and screening
of new leads for molecular targeting of disease. We believe that
we can utilize this technology to create libraries of
radiolabeled compounds in a relatively short period of time.
These compounds can be more efficiently and effectively screened
in cell culture and in animal models than through current
screening methods. Nanotrace Discovery appears to be applicable
to major disease categories such as cardiovascular disease,
oncology and neurology.
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Our Business Strategy
We intend to become a leader in the research, development and
commercialization of innovative molecular imaging
pharmaceuticals and targeted radiotherapeutics that improve
patient diagnosis and care. Our strategy is to build our product
portfolio in each of these areas through our internal research,
using our proprietary technologies and by acquiring or
in-licensing complementary products and technologies. We plan to
take the following steps to implement our strategy:
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Seek regulatory approval of Zemiva for the diagnosis of
cardiac ischemia in the emergency department setting.
Our
primary focus is to seek regulatory approval for Zemiva in the
United States. We plan to begin a U.S. multi-center Phase 3
clinical trial with Zemiva in the first half of 2006 as well as
a Phase 2 clinical trial to develop our own Normals
database that will be used as part of our Phase 3 clinical
trial and in the commercialization of Zemiva, if approved by the
FDA and other regulatory bodies.
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Develop our own specialty sales and marketing team to market
Zemiva in the United States and establish strategic
collaborations to market Zemiva abroad.
We intend to develop
our own specialty sales and marketing team to market Zemiva in
the United States following regulatory approval. We plan to grow
our sales force from approximately 30 salespeople at product
launch to 100 individuals in order to broaden our coverage to
smaller hospitals. We expect to seek one or more strategic
partners to market Zemiva outside the United States.
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Expand the indications for which Zemiva may be used,
beginning with indications in the non-acute setting.
We
believe that Zemiva may offer significant benefits over the
current standard of care in the non-acute setting for the
diagnosis of coronary disease. Our plan is to initiate a U.S.
Phase 2 clinical trials for Zemiva in non-acute settings in
the second half of 2006. Following Phase 2 and 3 clinical
trials in the non-acute setting, we plan to file a supplemental
new drug application, or sNDA, to include the use of Zemiva in
the non-acute setting as an additional approved indication in
the Zemiva NDA. We are also exploring the use of Zemiva in other
indications such as the detection and monitoring of heart
failure, cardiomyopathy and diabetes-related cardiac disease.
|
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•
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Advance Ultratrace MIBG into clinical trials for the
detection and treatment of neuroendocrine tumors.
We believe
that Ultratrace MIBG may offer increased efficacy and reduced
side effects in the treatment of patients with certain
difficult-to-treat neuroendocrine tumors. We plan to begin
clinical trials in adult neuroendocrine tumors for Ultratrace
MIBG in the first half of 2006.
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Advance the development of our preclinical product
candidates.
We have several early stage development programs
which will expand our activity in molecular cardiology, oncology
and neurology. These programs focus on novel approaches in
target selection and the use of our technology platforms to
provide innovative new product candidates.
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Expand our product pipeline through our proprietary platform
technologies, acquisitions and strategic licensing
arrangements.
We intend to leverage our proprietary platform
technologies to grow our portfolio of product candidates for
cardiology, oncology, neurology and other areas of unmet medical
need. In addition, we intend to continue to in-license and
acquire products, product candidates and technologies that are
consistent with our research and development and business focus
and strategies.
|
Sales and Marketing
We intend to market Zemiva through our own specialty sales and
marketing team. Considering the concentrated nature of our
initial target markets, we believe that a dedicated sales force
of approximately 30 individuals upon commercial launch of Zemiva
will be sufficient to support the market for Zemiva in the first
year. Over time we plan to grow our sales force for Zemiva to
approximately 100 individuals. To support medical education
efforts for the product, we plan to hire a group of 5 to
10 medical liaisons with emergency department or nuclear
medicine expertise to provide technical training and education.
Our initial marketing focus for Zemiva will be on large
hospitals with over 200 beds that have nuclear medicine
capabilities available 24 hours a day. There are
approximately 1,800 hospitals in the United States with
emergency departments and over 200 beds. Of these, 80% have
nuclear medicine available 24 hours a day. Thus, our target
hospital focus will be on approximately 1,400 hospitals that
tend to be clustered in concentrated areas of large populations.
Approximately 76% of emergency department visits occur at
hospitals with over 200 beds.
53
Manufacturing
Zemiva is currently manufactured for our preclinical and
clinical trials at a manufacturing facility owned by MDS Nordion
located in Vancouver, Canada which is to our knowledge compliant
with current Good Manufacturing Practices or cGMP. We believe
that the MDS Nordion facility is sufficient to produce Zemiva
required for use through our clinical trials. We do not,
however, have any experience in commercial-scale manufacturing.
Therefore, if we receive FDA approval of Zemiva, we may need to
rely on contractual relationships with third-party manufacturers
for commercial scale production.
We anticipate that the manufacture of the other products in our
development pipeline will be outsourced to experienced
cGMP-compliant medical manufacturing companies.
Strategic Agreements
Manufacturing Agreement with MDS Nordion
We have entered into a development and manufacturing agreement
with MDS Nordion to produce Zemiva for our clinical trial
studies. Zemiva is labeled with MDS Nordion’s high-purity
I-123 and is manufactured in a new cyclotron facility. MDS
Nordion is a respected manufacturer of I-123 production systems
and the major supplier of I-123 in North America. The agreement
obligates us to make certain milestone payments as well as
payments for clinical product to be used in the Phase 3
clinical trial for Zemiva. The agreement currently expires on
December 31, 2006 unless extended by mutual agreement of
the parties.
License Agreements with Georgetown University
We have entered into two license agreements with Georgetown
University. Pursuant to the first agreement, we have licensed on
an exclusive basis, in the field of imaging applications, the
use of ligands for metabotropic glutamate receptors and
inhibitors of NAALADase. In exchange for these exclusive rights,
we are obligated to pay certain royalties and up to $900,000 in
total of milestone payments upon the attainment of certain
approvals in the regulatory process. Such milestone payments may
be reduced for subsequent new drug applications submitted for
new uses of the same compound and are creditable against future
royalty payments. Pursuant to the second license, we have
exclusive rights to analogs of cocaine, for the therapeutic and
diagnostic uses of these compounds in substance abuse, obesity,
depression, Parkinson’s disease and related
neuropsychological conditions and diseases. In exchange for
these exclusive rights, we are obligated to pay certain
royalties and up to $800,000 in total of milestone payments upon
the attainment of certain approvals in the regulatory process.
Such milestone payments may be reduced for subsequent new drug
applications submitted for new uses of the same compound and are
creditable against future royalty payments.
License Agreement with the University of Western
Ontario
We have entered into a license agreement with the University of
Western Ontario pursuant to which we license the patent rights
to certain polymer precursors used in the creation of the BMIPP
molecule on an exclusive basis. While the university retains the
ownership of the patent rights, we shall own any improvements to
the technology made by us or on our behalf. In exchange for
these exclusive rights, we are obligated to pay to the
University of Western Ontario certain royalty and milestone
payments. The license terminates with respect to each patent on
the earlier of July 30, 2023 or the date the applicable
patent expires, and the period of exclusivity terminates upon
the expiration of each patent in each country.
License Agreement with Nihon Medi-Physics Co. Ltd.
We have entered into a license agreement with Nihon Medi-Physics
Co. Ltd., or Nihon, for access to its non-patented, confidential
clinical information related to its product, Cardiodine. As part
of this
54
agreement, we pay Nihon certain royalties on net sales of our
Zemiva product for its first indication, if the use of
Nihon’s clinical data enables us to omit or limit any of
the clinical trial phases in the United States regulatory
approval process for Zemiva. While we have used the data from
Nihon in a supportive manner, we have not been able to omit or
limit the clinical trials in support of our Zemiva NDA and,
therefore, do not expect to pay any royalties to Nihon upon
sales of Zemiva.
Competition
We will compete for market share against large pharmaceutical
and biotechnology companies, smaller companies that are
collaborating with larger pharmaceutical companies, new
companies, academic institutions, government agencies and other
public and private research organizations. Many of these
competitors, either alone or together with their partners, may
develop new product candidates that will compete with ours, and
these competitors may, and in certain cases do, operate larger
research and development programs or have substantially greater
financial resources than we do.
If approved, Zemiva’s competition in the emergency
department setting will be the current standard of care in the
assessment of chest pain patients who present to emergency
departments. This standard involves several diagnostic products
and procedures, in some cases involving the use of perfusion
imaging agents, which in the aggregate may require several hours
or days of hospitalization to reach an ultimate diagnosis.
Perfusion imaging agents such as Cardiolite (from Bristol-Myers
Squibb Imaging), Myoview (from Amersham, a subsidiary of General
Electric Company) and thallium, are unable to reliably detect
cardiac ischemia more than two hours after the cessation of
chest pains, thereby making them of limited value in the
emergency department setting. Many patients who present with
chest pain in the emergency department are beyond the perfusion
agents’ two-hour window of active symptoms when they arrive
or their symptoms subside while waiting in the emergency
department. Additionally, as their hearts may be unstable,
stress testing with these agents is contraindicated in patients
with suspected ACS in the emergency department setting. Sales of
perfusion agents in the acute setting account for approximately
2% of the overall sales for these agents.
Perfusion agents would be, however, Zemiva’s main
competition in the non-acute market if regulatory approval is
obtained. We estimate that worldwide sales of Cardiolite,
Myoview and thallium were approximately $1 billion in 2004.
Currently, these perfusion agents are used almost exclusively in
non-acute settings in connection with stress testing where the
patient’s stress is induced (either by exercise or a
pharmacological stress agent) as they must be used within two
hours after the cessation of chest pain.
Patents and Proprietary Rights
Our success depends in part on our ability to obtain and
maintain a competitive position in the marketplace. This
includes obtaining proprietary protection for our product
candidates, technology, and know-how; preventing others from
infringing our proprietary rights; and operating without
infringing the proprietary rights of others. Our policy is to
seek to protect our proprietary position by, among other
methods, applying for and obtaining U.S. and foreign
patents relating to our proprietary technologies, inventions,
and improvements that are important to our business. This
includes obtaining patent term extensions or restorations when
possible. In addition, we rely on trade secrets, know-how,
continuing technological innovation and in-licensing
opportunities to develop and maintain our proprietary positions.
Furthermore, we intend to build brand identity in our company,
our technologies and our product candidates, and for this
purpose have applied for certain trademarks, as described below.
As of September 30, 2005, we have seven issued patents
granted to us by the United States Patent and Trademark Office
and four issued foreign patents, including counterparts to
U.S. filings. We have nine pending U.S. patent
applications, two pending filings under the Patent Cooperation
Treaty that are not
55
yet nationalized, and 34 nationalized and pending foreign
patent applications. Additionally, we have obtained licenses
from third parties for the rights to use certain proprietary
technologies and compounds. Our in-licensed technology provides
us certain rights to three issued U.S. patents, three
issued foreign patents, including counterparts to
U.S. filings, one pending U.S. patent application, and
five nationalized and pending foreign patent applications. For a
discussion of these agreements, see “Other
Agreements.” While we believe our patents and patent
applications may be important for certain aspects of our
business, such as those related to specific product candidates
such as BMIPP derivatives, which patents and applications expire
between 2016 and 2023, we believe that our success also depends
upon innovation, technical expertise, and responsiveness to the
medical needs of an aging patient population. While our patented
technology may delay or deter a competitor in offering a
competing product, we believe our technical capability should
also allow us to obtain limited market exclusivity in the United
States under the Drug Price Competition and Patent Term
Restoration Act of 1984, or the Hatch-Waxman Act, and abroad
through similar legislation.
The original patent protecting the composition of BMIPP expired
in 2003. However, we believe that Zemiva, or BMIPP, is a new
chemical entity in the United States and Europe and, therefore,
should be eligible for market exclusivity under the FDCA as
amended by the Hatch-Waxman Act. We are also pursuing three
additional patent families (in the United States and
internationally) to provide up to 18 years of new
patent-based exclusivity for certain aspects of BMIPP and
BMIPP-derivative compositions.
The Hatch-Waxman Act provides a five-year period of non-patent
marketing exclusivity to the first applicant to gain approval of
an NDA for a new chemical entity, meaning that the FDA has not
previously approved any other new drug containing the same
active agent. During the exclusivity period, the FDA may not
accept for review an abbreviated new drug application, or ANDA,
or a 505(b)(2) NDA submitted by another company for another
version of such drug, where the applicant does not own or have a
legal right of reference to all the data required for approval.
Protection under the Hatch-Waxman Act will not prevent the
filing or approval of another full NDA, but the applicant would
be required to conduct its own adequate and well-controlled
clinical trials to demonstrate safety and effectiveness. The
Hatch-Waxman Act also provides three years of marketing
exclusivity for an NDA, 505(b)(2) NDA or supplements to existing
NDAs if new clinical investigations are essential to the
approval of the applications, for example, for new indications,
dosages, or strengths of an existing drug. This three-year
exclusivity covers only the conditions associated with the new
clinical investigations and does not prohibit the FDA from
approving ANDAs for drugs containing the original active agent.
The Hatch-Waxman Act also permits a patent restoration term of
up to five years as compensation for patent term lost
during product development and the FDA regulatory review
process. However, patent term restoration cannot extend the
remaining term of a patent beyond a total of 14 years. The
patent term restoration period is generally one-half the time
between the effective date of an investigational new drug
exemption, or IND, and the submission date of an NDA, plus the
time between the submission date of an NDA and the approval of
that application. Only one patent applicable to an approved drug
is eligible for the extension and it must be applied for prior
to expiration of the patent. The United States Patent and
Trademark Office, in consultation with the FDA, reviews and
approves the application for any patent term extension or
restoration. In the future, we may consider applying for
restorations of patent term for some of our currently owned or
licensed patents to add patent life beyond the current
expiration date, depending on the expected length of clinical
trials and other factors involved in the filing of the relevant
new drug application.
The patent positions of companies like ours are generally
uncertain and involve complex legal and factual questions. Our
ability to maintain and solidify our proprietary position for
our technology will depend on our success in obtaining effective
claims and enforcing those claims once granted. We do not know
with certainty whether any of our patent applications or those
patent applications that we license will result in the issuance
of any new patents. Our issued patents and those that may issue
in
56
the future, or those licensed to us, may be challenged,
invalidated, or circumvented, which could limit our ability to
stop competitors from marketing related products, or could
affect the length of term of patent protection that we may have
for our products. In addition, the rights granted under any
issued patents may not provide us with sufficient proprietary
protection or competitive advantages against competitors with
similar technology. Furthermore, our competitors may
independently develop similar technologies or duplicate any
technology developed by us and, to the extent they seek to
protect these technologies through patents and such technologies
are determined to contain valid and enforceable claims, they
could achieve a legal determination that our products or
technologies are infringing these third-party patents. Because
of the extensive time required for development, testing and
regulatory review of a potential product, it is possible that
before any of our products can be commercialized, any related
patent may expire, or that such patent may remain in force for
only a short period following commercialization of a product
candidate, thereby reducing any advantage of the patent with
respect to that product candidate. While patent term restoration
is available under the Hatch-Waxman Act and similar laws, we
cannot predict whether such patent term restoration will be
granted to us as to any particular patent covering such product
candidate.
We rely in some circumstances on trade secrets to protect our
technology, particularly with respect to certain aspects of our
Zemiva manufacturing process. Trade secrets, however, can be
difficult to protect. We seek to protect our proprietary
technology and processes, in part, by confidentiality agreements
with our employees, consultants, scientific advisors, contract
manufacturers and other entities with whom we do business.
However, these agreements may be breached, and we may not have
adequate remedies for any breach. In addition, our trade secrets
may otherwise become known or be independently discovered by
competitors. To the extent that our employees, consultants or
contractors use intellectual property owned by others in their
work for us, disputes may arise as to the proprietary rights or
resulting know-how generated in related inventions.
We currently use Molecular
Insight
tm
and the Molecular Insight logo as trademarks in the United
States and other countries. We have sought U.S. trademark
registration for Molecular
Insight
tm
and plan to seek similar protection for this mark outside the
United States. We have also filed intent to use registrations
with the United States Patent and Trademark Office, for the
trademarks
Ultratrace
tm
,
Zemiva
tm
and
Velepin
tm
and plan to seek similar protection for these marks outside the
United States. We use
SAAC
tm
,
SAACQ
tm
and
Nanotrace
tm
Discovery as trademarks in the United States and other
countries, and are exploring the applicability of U.S. and
foreign registration for these trademarks. We cannot guarantee
any of these marks will be approved in the United States or in
foreign jurisdictions. In addition, we have obtained rights to
the following Internet domain names: www.molecularinsight.com,
www.zemiva.com, www.zemiva.org, www.zemiva.net, www.velepin.com,
www.velepin.org, www.velepin.net, www.ultratrace.org, and
www.ultratrace.net.
Government Regulation
Government authorities in the United States and foreign
countries extensively regulate, among other things, the
research, development, testing, manufacture, labeling,
promotion, advertising, distribution, sampling, marketing and
import and export of pharmaceutical products. Our molecular
imaging pharmaceuticals and targeted radiotherapeutics in the
United States will be subject to FDA regulation as drugs under
the FDCA, and require FDA approval prior to commercial
distribution. The process of obtaining governmental approvals
and complying with ongoing regulatory requirements requires the
expenditure of substantial time and financial resources. In
addition, statutes, rules, regulations and policies may change
and new legislation or regulations may be issued that could
delay such approvals. If we fail to comply with applicable
regulatory requirements at any time during the product
development process, approval process, or after approval, we may
become subject to administrative or judicial sanctions. These
sanctions could include the FDA’s refusal to approve
pending applications, withdrawals of approvals, clinical holds,
warning letters, product recalls, product seizures, total or
57
partial suspension of our operations, injunctions, fines, civil
penalties or criminal prosecution. Any agency enforcement action
could have a material adverse effect on us.
The U.S. regulatory scheme for the development and
commercialization of new pharmaceutical products can be divided
into three distinct phases: an investigational phase including
both preclinical and clinical investigations leading up to the
submission of an NDA, a period of FDA review culminating in the
approval or refusal to approve the NDA, and the post-marketing
period. Each of these phases is described below.
Preclinical Phase
The preclinical phase involves the characterization, product
formulation and animal testing necessary to prepare an IND for
submission to the FDA. The IND must be reviewed and authorized
by the FDA before the drug can be tested in humans. Once a new
pharmaceutical agent has been identified and selected for
further development, preclinical testing is conducted to confirm
pharmacological activity, to generate safety data, to evaluate
prototype dosage forms for appropriate release and activity
characteristics, and to confirm the integrity and quality of the
material to be used in clinical trials. A bulk supply of the
active ingredient to support the necessary dosing in initial
clinical trials must be secured. Data from the preclinical
investigations and detailed information on proposed clinical
investigations are compiled in an IND submission and submitted
for FDA before human clinical trials may begin. If the FDA does
not formally communicate an objection to the IND within
30 days, the specific clinical trials outlined in the IND
may go forward.
Clinical Phase
The clinical phase of drug development follows a successful IND
submission and involves the activities necessary to demonstrate
the safety, tolerability, efficacy, and dosage of the substance
in humans, as well as the ability to produce the substance in
accordance with the FDA’s cGMP requirements. Data from
these activities are compiled in an NDA requesting approval to
market the drug for a given use, or indication. Clinical trials
must be conducted under the supervision of qualified
investigators in accordance with good clinical practice, and
according to IND-approved protocols detailing, among other
things, the study objectives and the parameters, or endpoints,
to be used in assessing safety and efficacy. Each trial must be
reviewed, approved and conducted under the auspices of an
independent Institutional Review Board, or IRB, and each trial,
with limited exceptions, must include all subjects’
informed consent. The clinical evaluation phase typically
involves the following sequential process:
Phase 1 clinical trials are conducted in a limited number
of healthy subjects to determine the drug’s safety,
tolerability, and biological performance. The total number of
subjects in Phase 1 clinical trials varies, but is
generally in the range of 20 to 80 people (or less in some
cases, such as drugs with significant human experience).
Phase 2 clinical trials involve administering the drug to
subjects suffering from the target disease or condition to
evaluate the drug’s potential efficacy and appropriate
dose. The number of subjects in Phase 2 trials is typically
several hundred subjects or less.
Phase 3 clinical trials are performed after preliminary
evidence suggesting effectiveness has been obtained and safety,
tolerability, and appropriate dosing have been established.
Phase 3 clinical trials are intended to gather additional
data needed to evaluate the drug’s overall benefit-risk
relationship of the drug and to provide adequate instructions
for its use. Phase 3 trials usually include from several
hundred to several thousand subjects.
Throughout the clinical testing phase, samples of the product
made in different batches are tested for stability to establish
shelf life constraints. In addition, increasingly large-scale
production protocols and written standard operating procedures
must be developed for each aspect of commercial manufacture and
testing.
58
The clinical trial phase is both costly and time-consuming, and
may not be completed successfully within any specified time
period, if at all. The FDA closely monitors the progress of each
of the three phases of clinical trials that are conducted under
an IND and may, at its discretion, reevaluate, alter, suspend,
or terminate the testing at any time for various reasons,
including a finding that the subjects or patients are being
exposed to an unacceptable health risk. The FDA can also request
additional clinical testing as a condition to product approval.
Additionally, new government requirements may be established
that could delay or prevent regulatory approval of our products
under development. Furthermore, institutional review boards,
which are independent entities constituted to protect human
subjects in the institutions in which clinical trials are being
conducted, have the authority to suspend clinical trials in
their respective institutions at any time for a variety of
reasons, including safety issues.
New Drug Application and Review
After the successful completion of Phase 3 clinical trials,
the sponsor of the new drug submits an NDA to the FDA requesting
approval to market the product for one or more indications. An
NDA is a comprehensive, multi-volume application that includes,
among other things, the results of all preclinical and clinical
studies, information about the drug’s composition, and the
sponsor’s plans for producing, packaging, and labeling the
drug. In most cases, the NDA must be accompanied by a
substantial user fee. FDA has 60 days after submission to
review the completeness and organization of the application, and
may refuse to accept it for continued review, or refuse to file,
if the application is found deficient. After filing, the FDA
reviews an NDA to determine, among other things, whether a
product is safe and effective for its intended use. Drugs that
successfully complete NDA review may be marketed in the United
States, subject to all conditions imposed by the FDA.
Prior to granting approval, the FDA generally conducts an
inspection of the facilities, including outsourced facilities
that will be involved in the manufacture, production, packaging,
testing and control of the drug product for cGMP compliance. The
FDA will not approve the application unless cGMP compliance is
satisfactory. If the FDA determines that the marketing
application, manufacturing process, or manufacturing facilities
are not acceptable, it will outline the deficiencies in the
submission and will often request additional testing or
information. Notwithstanding the submission of any requested
additional information, the FDA ultimately may decide that the
marketing application does not satisfy the regulatory criteria
for approval and refuse to approve the application by issuing a
“not approvable” letter.
The length of the FDA’s review can range from a few months
to several years or more. Once an NDA is in effect, significant
changes such as the addition of one or more new indications for
use generally require prior approval of an sNDA including
additional clinical trials or other data required to demonstrate
that the product as modified remains safe and effective.
Fast-Track Review
The Food and Drug Administration Modernization Act of 1997, or
the Modernization Act, establishes a statutory program for
relatively streamlined approval of “Fast-Track”
products, which are defined under the Modernization Act as new
drugs or biologics intended for the treatment of a serious or
life-threatening condition that demonstrates the potential to
address unmet medical needs for this condition. Fast-Track
status requires an official designation by the FDA.
Abbreviated New Drug Application and Review
An ANDA is a type of NDA that is used for the review and
approval of a generic drug product. A generic drug product is
one that is the same as a previously approved innovator drug
product, which means it has the same active ingredient, dosage
form, strength, route of administration, quality, performance
characteristics, and intended use. An ANDA is generally not
required to include preclinical and clinical data to establish
safety and effectiveness. Instead, generic applicants must
59
scientifically demonstrate that their product is bioequivalent
to the previously approved drug, which means that it performs in
the same manner. None of the products currently under
development by Molecular Insight will be eligible for ANDA
approval, although it is possible that competing products based
on our product could be approved by this route at some future
time.
Section 505(b)(2) Applications
If a proposed drug product represents only a limited change from
a product that has already been approved by the FDA, yet differs
in more ways than those permitted under the ANDA requirements,
then the applicant may be able to submit a type of NDA referred
to as a 505(b)(2) application. This route of approval is
potentially applicable to the development of Ultratrace MIBG,
which has previously been approved as an imaging agent for
pheochromocytoma and neuroblastoma. In effect, a 505(b)(2)
applicant is permitted to rely on information in the scientific
literature, or previous safety and efficacy determinations by
the FDA, rather than submitting the full complement of clinical
or other data that would otherwise be required for NDA approval.
However, the 505(b)(2) sponsor must provide any additional
clinical or other data needed to supplement and/or establish the
relevance and applicability of prior findings for the new
product formulation.
Orphan Drug Status
Under the Orphan Drug Act, the FDA may grant orphan drug
designation to drugs intended to treat a rare disease or
condition, which is generally a disease or condition that
affects fewer than 200,000 individuals in the United States. We
may file for orphan drug designation for the use of Ultratrace
MIBG as a targeted radiotherapeutic for the treatment of
neuroendocrine tumors, however obtaining FDA approval to market
a product with orphan drug exclusivity may not provide us with a
material commercial advantage.
Orphan drug designation must be requested before submitting an
NDA. After the FDA grants orphan drug designation, the identity
of the therapeutic agent and its potential orphan use are
disclosed publicly by the FDA. Although orphan drug designation
does not shorten or otherwise convey any advantage in the
regulatory approval process, approved orphan drugs are to a
seven year period of market exclusivity during which FDA
may not approve any other application to market the same drug
for the same disease except in very limited circumstances. These
circumstances are an inability to supply the drug in sufficient
quantities, or a situation in which a subsequent product has
shown superior safety or efficacy. This exclusivity, however,
could also block the approval of our product for
seven years if a competitor obtains earlier approval of the
same drug for the same indication.
Post-Approval Phase
Once the FDA has approved a new drug for marketing, the product
becomes available for physicians to prescribe in the United
States. After approval, we must comply with post-approval
requirements, including ongoing compliance with cGMP
regulations, delivering periodic reports to the FDA, submitting
descriptions of any adverse reactions reported, and complying
with drug sampling and distribution requirements. We are
required to maintain and provide updated safety and efficacy
information to the FDA. We are also required to comply with
requirements concerning advertising and promotional labeling.
Compliance with post-approval requirements will require us to
expend time, money, and effort on an ongoing basis. We use, and
will continue to use, third-party manufacturers, including MDS
Nordion, to produce certain of our products in clinical and
commercial quantities. Future FDA inspections may identify
compliance issues at our facilities or at the facilities of our
contract manufacturers that may disrupt production or
distribution, or require substantial resources to correct.
In addition, discovery of problems with a product or the failure
to comply with requirements may result in restrictions including
withdrawal or recall of the product from the market or other
voluntary
60
or FDA-initiated action that could delay further marketing.
Newly discovered or developed safety or efficacy data may
require changes to a product’s approved labeling, including
the addition of new warnings and contraindications. Also, the
FDA may require post-market testing and surveillance to monitor
the product’s safety or efficacy, including additional
clinical studies, known as Phase 4 trials, to evaluate
long-term effects.
Other Regulation in the United States
Healthcare Reimbursement
Government and private sector initiatives to limit the growth of
healthcare costs, including price regulation, competitive
pricing, coverage and payment policies, and managed-care
arrangements, are continuing in many countries where we do
business, including the United States. These changes are causing
the marketplace to put increased emphasis on the delivery of
more cost-effective medical products. Government programs,
including Medicare and Medicaid, private healthcare insurance
and managed-care plans have attempted to control costs by
limiting the amount of reimbursement they will pay for
particular procedures or treatments. This has created an
increasing level of price sensitivity among customers for our
products. Some third-party payers must also approve coverage for
new or innovative devices or therapies before they will
reimburse healthcare providers who use the medical devices or
therapies. Even though a new medical product may have been
cleared for commercial distribution, we may find limited demand
for the product until reimbursement approval has been obtained
from governmental and private third-party payers.
Environmental Regulation
We are also subject to various environmental laws and
regulations both within and outside the United States. Like many
other pharmaceutical and medical device companies, our
operations involve the use of substances, including hazardous
wastes, which are regulated under environmental laws, primarily
manufacturing and sterilization processes. We do not expect that
compliance with environmental protection laws will have a
material impact on our consolidated results of operations,
financial position or cash flow. These laws and regulations are
all subject to change, however, and we cannot predict what
impact, if any, such changes might have on our business,
financial condition or results of operations.
Our research is also dependent on our maintenance of a
Radioactive Materials license from the Massachusetts Department
of Public Health which allows us to acquire, use and store
quantities of radioactive isotopes that are critical for the
manufacture and testing of research products.
Foreign Regulation
Whether or not we obtain FDA approval for a product, we must
obtain approval from the comparable regulatory authorities of
foreign countries before we can commence clinical trials or
marketing of the product in those countries. The approval
process varies from country to country, and the time may be
longer or shorter than that required for FDA approval. The
requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursement also vary greatly from
country to country. Although governed by the applicable
jurisdiction, clinical trials conducted outside of the United
States typically are administered under a three-phase sequential
process similar to that discussed above for pharmaceutical
products.
Under European Union regulatory systems, we may submit marketing
authorization applications either under a centralized or
decentralized procedure. The centralized procedure, which is
available for medicines produced by biotechnology or which are
highly innovative, provides for the grant of a single marketing
authorization that is valid for all European Union member
states. This authorization is a marketing authorization
approval, or MAA. The decentralized procedure provides for
mutual recognition of national approval decisions. Under this
procedure, the holder of a national marketing
61
authorization may submit an application to the remaining member
states. Within 90 days of receiving the applications and
assessment report, each member state must decide whether to
recognize approval. This procedure is referred to as the mutual
recognition procedure, or MRP.
In addition, regulatory approval of prices is required in most
countries other than the United States. We face the risk that
the prices which result from the regulatory approval process
would be insufficient to generate an acceptable return to us or
our collaborators.
Employees
As of September 30, 2005, we had 25 full-time employees and
1 part-time employee. None of our employees is represented by
labor unions or covered by collective bargaining agreements. We
have not experienced any work stoppages and we consider our
employee relations to be good.
Facilities
Our principal executive and administrative office is a leased
facility located in Cambridge, Massachusetts that consists of
approximately 6,728 square feet of office space and 1,481 square
feet of laboratory space. These facilities are occupied pursuant
to a lease agreement that expires on June 30, 2008. We
believe that our current facilities will meet our anticipated
needs for the foreseeable future.
Legal Proceedings
On June 30, 2004 a small group of stockholders comprised of
David Elmaleh, Havacom, N.V., IBS Turnaround Fund, L.P., John
Pattillo and Greg Shoukimas commenced a civil suit in
Massachusetts Superior Court against us and certain of our
present and former officers. The complaint alleges that the
officers breached fiduciary duties to us and to the plaintiffs
by approving and benefiting from stock transactions in 2001 and
2002. The plaintiffs allege that these transactions resulted in
our receiving less money in connection with the sale of stock
and in an improper dilution of certain stockholders. In March
2005, the individual defendants moved for a dismissal of the
claims asserted directly against them. On July 1, 2005, the
Court found, as a matter of law, that the individual defendants
did not breach their fiduciary duties to the plaintiffs and
dismissed those claims, leaving only the derivative claims
purportedly asserted on behalf of us pending. On
October 11, 2005 the plaintiffs served a Motion for
Reconsideration of the Court’s dismissal of their direct
claims. There has been no Court action on this motion.
Promptly after receiving notice of the service of the complaint,
the disinterested members of our Board of Directors appointed a
Special Litigation Committee, or SLC, comprised of disinterested
directors to investigate the allegations. The Special Litigation
Committee has retained independent counsel at Wilmer, Cutler,
Pickering, Hale and Dorr LLP to assist it in its investigation.
On July 14, 2005, the SLC unanimously determined that the
transactions in question were proper and submitted a report to
the remaining disinterested members of the Board of Directors
with its conclusions and the recommendation that we seek to
terminate the remaining claims against us. On July 24,
2005, the remaining disinterested members of the Board of
Directors adopted the report and its recommendations. On
August 9, 2005, our counsel served a motion to dismiss the
remaining derivative claims on plaintiffs and we await Court
action on this motion. At the present time it is not possible to
estimate the potential losses, if any, related to this lawsuit
and we continue to protect our legal rights and defend ourselves
in this suit.
We have indemnified the defendant officers pursuant to our
bylaws, and will continue to indemnify them pursuant to our
Restated Articles of Organization. See “Description of
Capital Stock — Indemnification of Directors and
Executive Officers and Limitation of Liability.”
Except for the foregoing, we are not a party to any material
legal proceedings.
62
MANAGEMENT
Executive Officers, Key Employees and Directors
The following table sets forth certain information with respect
to our executive officers, key employees and members of our
Board of Directors and a nominee to our Board of Directors as of
September 30, 2005:
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|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position(s)
|
|
|
|
|
|
|
|
|
David S. Barlow*
|
|
|
48
|
|
|
Chairman of the Board of Directors; Chief Executive Officer
|
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John W. Babich, Ph.D.*
|
|
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48
|
|
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Director; President and Chief Scientific Officer
|
|
John E. McCray*
|
|
|
55
|
|
|
Chief Operating Officer
|
|
Nicholas Borys, M.D.*
|
|
|
46
|
|
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Chief Medical Officer
|
|
Bob Gallahue, C.P.A.*
|
|
|
45
|
|
|
Chief Financial Officer
|
|
John Barrett, Ph.D.
|
|
|
51
|
|
|
Vice President of Research
|
|
Joshua Hamermesh
|
|
|
33
|
|
|
Vice President of Commercial and Business Development
|
|
Priscilla Harlan
|
|
|
52
|
|
|
Vice President, Corporate Communications
|
|
James F. Kronauge, Ph.D.
|
|
|
50
|
|
|
Vice President, Process Chemistry
|
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James Wachholz
|
|
|
52
|
|
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Vice President, Regulatory Affairs and Quality Assurance
|
|
William C. Eckelman, Ph.D.
|
|
|
64
|
|
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Director
|
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Daniel Frank
|
|
|
48
|
|
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Director
|
|
Kim Lamon, M.D., Ph.D.
|
|
|
53
|
|
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Director
|
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Harry Stylli, Ph.D.
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|
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44
|
|
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Director
|
|
Andrew Jay,
D.M.D.
(4)
|
|
|
43
|
|
|
Director
|
|
Lionel
Sterling
(4)
|
|
|
68
|
|
|
Director Nominee
|
|
|
|
|
*
|
Denotes executive officer.
|
(1)
Member
of the Audit Committee.
(2)
Member
of the Compensation Committee.
(3)
Member
of the Governance and Nominating Committee.
|
|
|
|
(4)
|
Dr. Jay has agreed to resign from our Board of Directors as
of the listing of our common stock on the Nasdaq National Market
and Mr. Sterling has agreed to join our Board of Directors
as of such time.
|
David S. Barlow
has served as the Chairman of our Board
of Directors and our Chief Executive Officer since January 2003.
He has more than 25 years of experience in the global
biopharmaceutical industry. He joined Molecular Insight as its
Chairman in early 2000 and added the Chief Executive Officer
responsibilities in January 2003. Prior to Molecular Insight,
Mr. Barlow was President, Pharmaceuticals at Sepracor Inc.
During his tenure at Sepracor from 1993 to 1999, Pharmaceuticals
was built into a fully integrated pharmaceutical company with a
strong product pipeline, a complete research and development and
United States sales and marketing capability, and several
significant corporate partnerships. Before Sepracor,
Mr. Barlow worked for Rhone-Poulenc Rorer, where he led the
turnaround of the Armour Pharmaceutical Division. He had
previously worked for Pfizer Inc and ARES-Serono in a variety of
business development and marketing positions. Mr. Barlow is
a Trustee of McLean Hospital, Bates College, and Newton Country
Day School and on the Board of Directors of New River
Pharmaceuticals. He is also a member of the President’s
Council at Massachusetts General Hospital. Mr. Barlow
received a B.A. from Bates College and an M.B.A. from Stanford
University.
63
John W. Babich, Ph.D.,
a founder of the Company in 1997,
serves as our President and Chief Scientific Officer, and is a
member of our Board of Directors. He has been an active
researcher in the field of molecular imaging and targeted
radionuclide therapy for the past 20 years. Prior to
joining the Company, he was Assistant Professor of Radiology at
Harvard Medical School and Staff Radiopharmaceutical Chemist at
Massachusetts General Hospital (MGH), Boston, Massachusetts.
Prior to joining MGH, Dr. Babich was Principal Scientist
and Head of the Radiopharmaceutical Section at the Institute of
Cancer Research in England. Dr. Babich’s current
research efforts focus on molecular imaging in cardiovascular
disease, oncology and neurology. His previous research
experience includes detection of breast and colorectal cancer
using monoclonal antibodies, pharmacological and
in vivo
biological studies of novel small molecules for targeted
therapy of neuroblastoma, the use of peptide-based molecular
imaging agents for the detection of infection and cancer, and
the use of positron emission tomography for the study of drug
behavior in humans. He has published more than 100 research
articles in a variety of peer-reviewed journals as well as
several book chapters and invited reviews. He is inventor or
co-inventor of several issued and pending patents licensed to or
property of the Company. He is also co-inventor of a cardiac
imaging product currently marketed by
Mallinckrodt-TycoHealthcare, Inc. as Ultra-Tag. Dr. Babich
recently served as President of the Society of Nuclear
Medicine’s Radiopharmaceutical Science Council.
Dr. Babich received a B.S. in Pharmacy from
St. John’s University, an M.S. from University of
Southern California, and a Ph.D. from the University of London.
John E. McCray
has served as our Chief Operating Officer
since joining Molecular Insight in March 2003. He has over
20 years of marketing, operations and public policy
experience in the biopharmaceutical industry, including product
launches, manufacturing scale-up and new market openings in
developing countries. From 1999 to 2003, Mr. McCray served
as the Chief Operating Officer at Pan Pacific Pharmaceuticals.
For six years ending in 1999, he worked with various
subsidiaries of Sepracor Inc. Before joining Sepracor,
Mr. McCray held the position of Director, Worldwide
Marketing at Armour Pharmaceutical Company. His pharmaceutical
experience also includes a five-year tenure at Pfizer Inc where
he managed reimbursement, formulary and public policy issues.
Mr. McCray received a B.A. from the University of Texas and
an M.B.A. from The Wharton School, University of Pennsylvania.
Nicholas Borys, M.D.
has served as our Chief Medical
Officer since April 2004. He has 15 years of experience in
the pharmaceutical and healthcare industry including drug
development work with molecular imaging companies. His
background includes strategic planning and management of
pharmaceutical development for FDA approval. From 2002 to 2004
he worked at Taiho Pharma USA, where he served as Chief Medical
Officer for global clinical development. Dr. Borys’
molecular imaging experience includes BRACCO Diagnostics where
he was Executive Medical Director from 2000 to 2002, responsible
for early and late stage development for international
development projects in both MRI and nuclear medicine. He also
served for six years as Director of Medical Affairs for Amersham
Healthcare, Inc. where he oversaw development of cardiovascular,
oncology and neurology products. Dr. Borys has also worked
as a senior medical affairs officer of two oncology companies,
Cytogen Corporation and Anthra Pharmaceuticals, and as Director,
Medical and Clinical Services for a division of Hoffman
La-Roche, Inc. Dr. Borys received a B.A. from Rutgers
University and an M.D. from the American University of the
Caribbean.
Bob Gallahue, C.P.A.
has served as our Chief Financial
Officer since July 2005. He has over 15 years of financial
management experience at public and private biotechnology
companies, including Millennium Pharmaceuticals, LeukoSite,
Inc., Keryx Biopharmaceuticals and VaxInnate Corp. He joined
Molecular Insight from VaxInnate, where he was Interim Chief
Financial Officer from 2004 to 2005. From 2000 to 2003, he was
Chief Financial Officer and Treasurer of Keryx
Biopharmaceuticals. Prior to Keryx, he served in financial
positions at LeukoSite, Inc., which was later acquired by
Millennium Pharmaceuticals, and Repligen Corporation.
Mr. Gallahue is a C.P.A and received a B.A. from Middlebury
College and an M.S.A. from Bentley College.
64
John A. Barrett, Ph.D.
has served as our Vice President
of Research since August 2005. He has over 20 years of
experience in the discovery and development of agents in
oncology and angiogenesis-directed tumor imaging and therapy. He
came to Molecular Insight from Infinity Pharmaceuticals where he
worked from 2003 to 2005 and served as the Senior Director
Pharmacology/ Toxicology, ADME, and Bioanalytical Chemistry.
Prior to Infinity Pharmaceuticals, Dr. Barrett was Senior
Director of Pharmacology/ Toxicology at EPIX Medical, Inc. from
2000 to 2003. In 1993, Dr. Barrett was recruited to DuPont
Merck Radiopharmaceutical Division as a Principal Research
Scientist in Biological Research Imaging, and later was
appointed as Director Discovery Biology Research Imaging and
Animal Resources. He has held positions at Rorer Pharmaceuticals
where he was Group Leader of Cardiovascular Pharmacology and as
Research Manager in Vascular Biology at the RWJ Pharmaceutical
Research Institute. Dr. Barrett received a B.S. from the
State University of New York at Oneonta and a Ph.D. from St.
John’s University.
Joshua Hamermesh
has served as our Vice President of
Commercial and Business Development since May 2005. From 1999 to
2005, he worked at Genzyme Corporation, where he was the
Business Director, Cardiac Cell Therapy and Chief Operating
Officer of the company’s MG Biotherapeutics unit.
Mr. Hamermesh held several cardiovascular product marketing
and business development positions at Genzyme, including
Director, Cardiovascular Business Development and Marketing
Manager, Genzyme Surgical Products. Previously, he was a
strategy consultant at Monitor Company. Mr. Hamermesh
received a B.A. from Amherst College and an M.B.A. from Harvard
Business School.
Priscilla Harlan
has served as our Vice President,
Corporate Communications since July 2005. From 2000 to 2005,
Ms. Harlan worked at Complete Healthcare Communications, a
medical communications consultancy, where she was an Account
Director for pharmaceutical clients. Previously, she served in
senior investor relations positions at Feinstein Kean
Healthcare, a communications consulting firm, where she designed
and implemented strategic communications initiatives for
emerging companies. Prior to that she directed corporate
communications and investor relations at Sepracor, Inc. and one
of its subsidiaries. Ms. Harlan received a B.A. in Biology
and History from the University of North Carolina.
James F. Kronauge, Ph.D.
has served as our Vice President
of Process Chemistry since August 2005. He joined the company in
December 1999. He has been an active researcher in the field of
radiology and nuclear medicine for the past 20 years and
has published more than 50 research articles in a variety of
peer-reviewed journals. He is inventor or co-inventor of six
issued patents, including one for the use of Cardiolite, a
perfusion imaging agent for the detection of cardiac ischemia.
Prior to joining Molecular Insight, he was Assistant Professor
of Radiology at Harvard Medical School and Associate Director of
Radiopharmacy in the Joint Program in Nuclear Medicine at
Brigham and Women’s Hospital, Boston, Massachusetts. His
research efforts have focused on the development of diagnostic
agents for measurement of tissue perfusion in cardiovascular
disease, developing imaging agents for the detection of various
cancers and monitoring multi-drug resistance in tumors. His
experience includes synthetic organic and inorganic chemistry,
elucidation of drug interactions by
in vitro
cell culture
techniques and
in vivo
animal models, HPLC analysis,
pharmacodynamics and metabolism studies, radiochemistry and
pharmaceutical chemistry. He has been involved with the
discovery and development of CardioGen (Bracco) and Mebrofennin
(Bracco). Dr. Kronauge received a B.S in Chemistry from the
University of Cincinnati, an M.S. from Rutgers University and a
Ph.D. in Inorganic Chemistry from M.I.T. under the guidance of
Professor Alan Davison.
James Wachholz
has served as our Vice President,
Regulatory Affairs and Quality Assurance since May 2005. He has
over 20 years of experience in regulatory affairs and
product development at biotechnology and pharmaceutical
companies. From 2003 to May 2005, he worked at Accentia
Biopharmaceuticals, where he served as Chief Regulatory Officer.
From 1998 to 2003 Mr. Wachholz worked at Sepracor Inc.,
where he served as the Executive Director of Regulatory Affairs.
Previously, Mr. Wachholz held regulatory and compliance
positions at Hybridon, Inc., Searle Pharmaceuticals and
65
Baxter International. Mr. Wacholz received a B.S. in
Biochemistry from Northwestern University and an M.B.A. from
DePaul University.
William C. Eckelman, Ph.D.
has served as a member of our
Board of Directors and Chair of our scientific advisory
committee since December 2000. From 1991 to 2004, he was Chief
of the Positron Emission Tomography (PET) Department at the
National Institutes of Health. From 1987 to 1991,
Dr. Eckelman worked at Squibb Institute for Medical
Research, where he served as the Vice President for Diagnostics
Research & Development. In addition to his research efforts,
Dr. Eckelman has been the editor-in-chief of
Nuclear
Medicine and Biology
since 1985 and a member of the
Diagnostic Radiology Study section from 1982 to 1986 and 1998 to
2001. He has also served the Society of Nuclear Medicine, the
Department of Energy and the National Academy of Sciences in
various capacities. Dr. Eckelman received the Paul C.
Aebersold Award for Outstanding Achievement in Basic Science,
Applied to Nuclear Medicine in 1988 and the American College of
Nuclear Physicians Corporate Achievement Award in 1995. He also
has received the Georg deHevesy Nuclear Pioneer Award in 1997,
the Institute for Clinical PET Distinguished Scientist Award in
2000, and the Great Golden Seal of Padua University in
recognition of contributions to Radiopharmaceutical Development
in 2002. He has published over 380 research papers, books and
book chapters. Dr. Eckelman received a B.S. from St. Louis
University, an M.A. from Washington University in St. Louis and
his Ph.D. from Washington University.
Daniel Frank
has served as a member of our Board of
Directors since 2004. Since 2001, he has worked at Cerberus
Capital Management, L.P., a private investment firm. From 1999
to 2001, Mr. Frank served as a Managing Director and
Portfolio Manager of ACI Capital Strategic Fund, a New
York-based hedge fund, and prior to that he served as a
portfolio manager for Chatterjee/ Soros Fund Management.
From 1979 to 1996, Mr. Frank was employed by Fidelity
Management and Research (Fidelity Investments). While at
Fidelity, Mr. Frank served as Assistant Portfolio Manager
to Peter Lynch on the Magellan Fund and as Vice President and
sole Portfolio Manager, for over a decade, of the Fidelity
Strategic Opportunities/ Special Situations Fund. In 1996,
Mr. Frank was ranked by Barron’s magazine as one of
the Top 100 U.S. Mutual Fund Managers. Mr. Frank
served on the Board of Directors of i-STAT Corporation from 2001
until its sale to Abbott Laboratories in 2003. From 1986 until
its sale in 1996, Mr. Frank was board member and largest
stockholder of Corsearch, a New York-based trademark research
firm that is now part of CCH-Wolters Klower Inc. Mr. Frank
received a B.S. and a B.A. from Boston University School of
Management.
Kim D. Lamon, M.D., Ph.D.
has served as a member of our
Board of Directors since 2004. He has more than 20 years of
experience in the pharmaceutical, biotechnology and diagnostics
industries. Dr. Lamon was appointed to Valeant
Pharmaceutical International’s Board of Directors in August
2002. Since January 2003, Dr. Lamon has worked at
Ribapharm, Inc., where he served as the President and Chief
Executive Officer and was subsequently appointed President and
Chief Scientific Officer upon the reacquisition of Ribapharm by
Valeant in September 2003. From 1999 to 2003, Dr. Lamon
worked at SciPharma Consulting, LLC, a consulting company to the
biotechnology, diagnostics and pharmaceutical industries, where
he served as President. From 1996 to 1999, he worked at Covance
Clinical and Periapproval Services, were he served as Corporate
Senior Vice President and Group President. From 1994 to 1996,
Dr. Lamon served as Executive Vice President and Chief
Medical Officer for Corning Clinical Laboratories (now Quest
Diagnostics, Inc.), as well as Senior Vice President of Science
and Technology for Corning Life Sciences, Inc. From 1982 to
1994, he also served as Senior Vice President and Executive
Medical Director for Rhone-Poulenc Rorer (now sanofi-aventis)
and held other senior management positions in this company.
Currently, Dr. Lamon serves on the Scientific Advisory
Board of VivoMetrics, Inc. Dr. Lamon served on the Board of
Directors of Valeant Pharmaceutical International.
Dr. Lamon received an M.D. and a Ph.D. from the Thomas
Jefferson University School of Medicine, and a B.S. in Biology
and Chemistry from Juniata College in Huntingdon, Pennsylvania.
He is trained as an internist and pharmacologist.
66
Harry Stylli, Ph.D.
has served as a member of our Board
of Directors since 2004. Dr. Stylli has been Chief
Executive Officer of Sequenom since 2005. From 2004 until 2005
he was President and Chief Executive Officer of Xenecor.
Dr. Stylli co-founded Aurora Biosciences in 1995, where he
served as Senior Vice President of Screening Technology and New
Ventures from 2001 to 2002 and as Senior Vice President of
Commercial Development from 1999 to 2001. In 2001, following the
merger between Aurora and Vertex Pharmaceuticals,
Dr. Stylli served as President of Aurora Biosciences and
Panvera. From 2002 to 2003, he served as President and Chief
Executive Officer of CovX Pharmaceuticals. From 1987 to 1995,
Dr. Stylli held varying positions of increasing
responsibility in the global discovery organization of
GlaxoSmithKline. He currently serves as a Director of Scitegic,
a privately-held bioinformatics company. Dr. Stylli
received a B.S. from the University of East London, an M.B.A
from Open University in the United Kingdom and his Ph.D. from
London University.
Andrew Jay, D.M.D.
has served as a member of our Board of
Directors since 2005 and has agreed to resign from our Board of
Directors as of the listing of our common stock on the Nasdaq
National Market. Since 2002 he has headed the Medical Solutions
Fund at Siemens Venture Capital Inc. From 1994 to 2002, he was
an analyst following the medical technology industry at Alex
Brown and Wachovia Securities. Dr. Jay’s prior
experience includes consulting for Arthur D. Little and
operating his dental practice. Dr. Jay received a B.S from
Rensselaer Polytechnic Institute, a D.M.D. from the University
of Pennsylvania and an M.B.A. from the Kellogg School at
Northwestern.
Lionel Sterling
has agreed to join our Board of Directors
as of the listing of our common stock on the Nasdaq National
Market. In 1987, Mr. Sterling founded Equity Resources
Inc., a private investment firm, where he has served as
President since 1987. He is currently a member of the Board of
Directors of Third Wave Technologies. From 1988 to 1993,
Mr. Sterling served as co-Founder and Managing Partner of
Whitehead/ Sterling, a private investment firm, and from 1981 to
1985, he served as Chairman of the Board of Rayovac Corporation.
In addition, from 1981 to 1982, Mr. Sterling served as
Executive Vice President and member of the Board of Directors of
United Brands Company, and from 1974 to 1981, he was with
American Can Company, where he served as a Chief Financial
Officer and Sector Executive. He has also served as Vice
President and a managing director of Donaldson, Lufkin &
Jenrette, Inc.’s venture capital and private investment
activities, as well as having held various operating and
financial responsibilities at ITT Corporation within its
technology and services divisions. Mr. Sterling has held a
number of public and private Board positions and has served as
an advisor to a number of venture capital and buyout firms, as
well as being an investor in a number of privately-held
companies. Mr. Sterling has been on the Board of Overseers
of New York University Schools of Business and on the Board of
Overseers of the Dartmouth Institute, and serves with a number
of non-profit organizations. Mr. Sterling received a B.A.
from Brooklyn College in New York and an M.B.A. in Finance from
New York University.
Our Board of Directors currently consists of seven members and
upon the closing of this offering, two newly created vacancies,
which can be filled by the action of a majority of the directors
then in office. Our Board of Directors has determined that, upon
the closing of this offering, four of its members will be
“independent directors” as defined under the rules of
the Nasdaq Stock Market, Inc. and Rule 10A-3(b)(i) under
the Securities Exchange Act of 1934. The independent members
will consist of Messrs. Frank, Lamon, Stylli and nominee
Sterling. Dr. Jay has agreed to resign from our Board of
Directors as of the listing of our common stock on the Nasdaq
National Market and Mr. Sterling has agreed to join our
Board of Directors as of such time.
Effective upon the closing of this offering, our Board of
Directors will divide into three classes that will serve
staggered three-year terms:
|
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|
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•
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Class I, whose initial term will expire at the annual
meeting of stockholders to be held in 2006;
|
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•
|
Class II, whose initial term will expire at the annual
meeting of stockholders to be held in 2007; and
|
67
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•
|
Class III, whose initial term will expire at the annual
meeting of stockholders to be held in 2008.
|
Upon the closing of this offering, Class I will initially
consist of Messrs. Frank, Eckelman and Lamon; Class II
will consist of Messrs. Stylli and Sterling and
Class III will consist of Messrs. Barlow and Babich.
At each annual meeting of stockholders after the initial
classification, the successors to directors whose terms will
expire on such date shall serve from the time of election and
qualification until the third annual meeting following election
and until their successors are duly elected and qualified.
Committees of the Board of Directors
Our Board of Directors has established an audit committee, a
compensation committee, and a governance and nominating
committee that will be constituted as of the completion of this
offering:
Audit Committee.
The audit committee will perform the
following functions, among others:
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•
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appointing and replacing our independent registered public
accounting firm;
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•
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reviewing compliance with legal and regulatory requirements;
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•
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evaluating our audit and internal control functions;
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•
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review the proposed scope and results of the audit; and
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•
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review and pre-approve the independent registered public
accounting firm’s audit and non-audit services rendered.
|
Upon the listing of our stock on Nasdaq, the audit committee
will consist of three independent
directors, , and .
Each member of the audit committee is able to read and
understand fundamental financial statements, including our
balance sheet, income statement and cash flows statements. Our
Board of Directors has determined
that is
an “audit committee financial expert” as that term is
defined in Securities and Exchange Commission regulations. The
Board of Directors has approved and adopted a written charter
for the audit committee, and the chairperson of the audit
committee will be selected following this offering.
Compensation Committee.
The compensation committee will
perform the following functions, among others, as set forth in
its committee charter:
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•
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recommending and approving salaries, incentive compensation, and
equity-based plans for our executive officers and managers;
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•
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reviewing corporate goals and objectives relative to executive
compensation;
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•
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evaluating our Chief Executive Officer’s performance in
light of corporate objectives;
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•
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setting our Chief Executive Officer’s compensation based on
the achievement of corporate objectives;
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•
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developing plans for Chief Executive Officer succession; and
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•
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preparing and issuing reports required under the committee
charter.
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Following this offering, the compensation committee will be
comprised of
Messrs. , and .
The chairperson of the compensation committee will be selected
following this offering.
68
Governance and Nominating Committee.
The governance and
nominating committee will perform the following functions, among
others, as set forth in its committee charter:
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•
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developing criteria for director selection;
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•
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identifying and recommending to the full Board of Directors the
director-nominees to stand for election at annual meetings of
the stockholders;
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•
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recommending members of the Board of Directors to serve on the
various committees of the Board of Directors;
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•
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evaluating and ensuring the independence of each member of each
committee of the Board of Directors;
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recommending to the Board of Directors our corporate governance
principles; and
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•
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recommending to the Board of Directors a code of conduct for our
company’s directors, officers and employees.
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The governance and nominating committee will be comprised of
Messrs. , and ,
and the chairperson of the governance and nominating committee
will be selected following this offering. Prior to this
offering, the activities of the governance and nominating
committee were conducted by the full Board.
Scientific Advisory Board.
Our Board of Directors has
established a group of respected scientists in the biochemistry,
organic and inorganic chemistry, cardiology, radiation oncology,
nuclear medicine and radiology fields to advise it on
scientific, technical and commercialization issues. The
scientific advisory board does not have any authority with
respect to the governance of our company but provides advice on
the scientific results and strategy of our products and research
and development efforts. The advisors are currently William C.
Eckelman, Ph.D., who serves as chairman; Ronald L. Van Heertum,
M.D.; Ross J. Baldessarini, M.D.; Peter Conti, M.D., Ph.D.; Alan
Davison, Ph.D., F.R.S.; Duncan H. Hunter, Ph.D.; Alan P.
Kozikowski, Ph.D.; Rob Mairs, Ph.D.; H. William Strauss, M.D.;
Vladimir Torchilin, Ph.D.; John F. Valliant, Ph.D.; Barry
Zarett, M.D.; and Jon A. Zubieta, Ph.D.
Compensation Committee Interlocks
No member of the Compensation Committee serves as a member of
the Board of Directors or compensation committee of any entity
that has one or more executive officers serving as a member of
our Board of Directors.
Director Compensation
Currently, non-employee directors who are not affiliated with
any principal stockholder receive a fee of $36,000 per year,
payable quarterly, as a retainer fee for service on our Board of
Directors and its committees. In addition, each such director
receives $1,500 for each meeting of the Board of Directors
attended in person and $500 for each meeting of the Board of
Directors attended via teleconference. All of our non-employee
and non-investor-related directors are also eligible to receive
stock option grants under our 1997 Stock Option Plan. These
grants are for the purchase of up to shares of Common
Stock and vest over a two year period with 50% of the options
vesting on the end of the first anniversary of the date of grant
and the balance upon the second anniversary of the date of grant
if the optionee is still a director as of the vesting date. The
options have a ten year term and an exercise price equal to the
fair market value of our common stock as of the date of grant.
No director who is an employee or who is affiliated with any
principal stockholder receives separate compensation for
services rendered as a director.
69
We intend to adopt a new director compensation policy to be
effective upon completion of this offering. Under this new
policy, all non-employee directors will receive $36,000 per
year, payable quarterly, as a retainer fee for service on our
Board of Directors and its committees. The non-employee
directors will also receive a fee of $1,500 for each meeting of
the Board of Directors attended in person, $500 for each meeting
of the Board of Directors attended via teleconference, and $500
for each committee meeting attended either in-person or via
teleconference. The chairman of the audit committee will receive
an additional $12,000 per year and the chairman of each other
committee of the Board of Directors will receive an additional
$8,000 per year. Under this policy, upon initial election to the
Board of Directors and upon each anniversary of such election
during the director’s three year term, a non-employee
director will receive an automatic stock option grant to
purchase 25,000 shares of our common stock. Each such option
will have a term of ten years, an exercise price equal to the
fair market value as of the date of grant and will vest at the
end of one year from the date of grant. A non-employee director
will be entitled to similar automatic option grants upon
reelection to the Board of Directors and for each year of
subsequent three year terms of service. No director who is an
employee will receive separate compensation for services
rendered as a director.
Executive Compensation
The following summary compensation table sets forth information
concerning compensation for services rendered to us in all
capacities during the year ended December 31, 2004 by our
Chief Executive Officer and other executive officers, otherwise
referred to as our named executive officers, for the year ended
December 31, 2004.
SUMMARY COMPENSATION TABLE
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Long-Term
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Annual Compensation
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Compensation
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Securities
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Other Annual
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Underlying
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All Other
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Name and Principal Position
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Year
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Salary
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Bonus
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Compensation
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Options
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Compensation
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David S. Barlow, Chief Executive Officer
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2004
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$
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215,769
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$
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176,000
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John Babich, President, Chief Scientific Officer
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2004
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200,600
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160,000
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John McCray, Chief Operating Officer
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2004
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175,000
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126,875
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Nicholas Borys, Chief Medical Officer
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2004
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147,692
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77,625
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Bob Gallahue, Chief Financial Officer
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2004*
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*
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Mr. Gallahue’s employment began on July 1, 2005.
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70
OPTIONS GRANTED LAST YEAR
The following table sets forth information with respect to
grants of stock options by us during our 2004 fiscal year to our
named executive officers. Potential realizable value represents
hypothetical gains that could be achieved for the options if
exercised at the end of the option term based upon the assumed
initial public offering price of our common stock of
$ ,
which is the mid-point of the range listed on the cover of this
prospectus. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with the rules of the
Securities and Exchange Commission and do not represent our
estimate or projection of our future common stock price.
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Potential Realizable
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Individual Grants
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Value at Assumed
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Annual
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Number
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Percentage
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Market
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Rates of Stock
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of
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of Total
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Price of
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Price
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Securities
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Options
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Underlying
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Appreciation for
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Underlying
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Granted to
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Exercise
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Security
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Option Term
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Options
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Employees
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Price
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on Date of
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Expiration
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Name
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Granted
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in 2004
(1)
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Per Share
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Grant
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Date
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5%
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10%
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David S. Barlow,
Chief Executive Officer
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John Babich,
President, Chief Scientific Officer
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John McCray,
Chief Operating Officer
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Nicholas Borys,
Chief Medical Officer
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57.14
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%
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5/13/14
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Bob Gallahue,
Chief Financial Officer
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(1)
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Based on an aggregate
of shares
subject to options granted by us to our employees in fiscal year
2004, including named executive officers.
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AGGREGATE OPTION EXERCISES IN LAST YEAR AND YEAR-END
VALUES
The following table sets forth information with respect to the
aggregate stock option exercises by our named executive officers
during our 2004 fiscal year and the year-end value of
unexercised options held by such executive officers. There was
no public trading market for our common stock as of
December 31, 2004. Accordingly, these values have been
calculated on the basis of the mid-point of the estimated price
range set forth on the cover of this prospectus, which is
$ ,
less the applicable exercise price per share, multiplied by the
number of shares issued or issuable, as the case may be, on
71
the exercise of the option. This mid-point does not necessarily
represent the actual value of our common stock at
December 31, 2004.
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Number of Unexercised
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Value of Unexercised in-the-
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Shares
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Options at Year End
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Money Options at Year End
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Acquired on
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Value
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Name
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Exercise
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Realized
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Exercisable
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Unexercisable
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Exercisable
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Unexercisable
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David S. Barlow,
Chief Executive Officer
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John Babich,
President, Chief Scientific Officer
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John McCray,
Chief Operating Officer
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Nicholas Borys,
Chief Medical Officer
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Bob Gallahue,
Chief Financial Officer
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Executive Employment Agreements
David S. Barlow.
On February 7, 2003, we entered
into an employment agreement with David S. Barlow, Chairman of
our Board of Directors and our Chief Executive Officer. Either
we or Mr. Barlow may terminate the employment agreement at
any time, with or without cause. However, if we terminate
Mr. Barlow’s employment without cause or he
voluntarily resigns for good reason, then he will be entitled to
severance compensation of one year’s base salary for the
12-month period following the date of termination and
continuation of any benefits, including health insurance, for
the 12-month period. For purposes of the agreement, good reason
means the reduction of Mr. Barlow’s salary or
insurance benefits without his consent, a significant change in
Mr. Barlow’s title, responsibilities and/or duties
which constitutes a demotion or the relocation of his principal
place of employment by more than 50 miles. Mr. Barlow
is entitled to a base salary of $330,000 per year for the year
2005. The agreement further provides that during the time of his
employment and ending one year from the termination of the
agreement, he may not solicit customers and will not engage in
or own any business that is competitive with us. In connection
with his employment, Mr. Barlow was issued an option to
purchase shares
of restricted common stock for a purchase price of
$ per
share. Mr. Barlow immediately exercised the option and
purchased the common shares pursuant to a stock restriction
agreement. The shares were paid for with a cash payment of
$32,850 and a non-interest bearing promissory note in the amount
of $295,650. On November 4, 2005, Mr. Barlow repaid
this loan in full. See discussion in note 3 of our audited
consolidated financial statements relating to the accounting
treatment pertaining to the repayment of this loan. The shares
of restricted stock vest over a four-year period, with 20%
vested on the date of purchase and 5% vesting with the close of
each three-month period thereafter while Mr. Barlow remains
employed by us. Under the agreement, Mr. Barlow is entitled
to piggy-back registration rights for the vested shares, which
he has waived for this offering. See the section captioned
“Description of Capital Stock — Registration
Rights” for a description of these rights.
John Babich.
On January 1, 2003, we entered into an
employment agreement with John Babich, our President and Chief
Scientific Officer. Either we or Mr. Babich may terminate
the employment agreement at any time, with or without cause.
However, if we terminate Mr. Babich’s employment
without cause or he voluntarily resigns for good reason, then he
will be entitled to severance compensation of one year’s
base salary for the 12-month period following the date of
termination and continuation of any benefits, including health
insurance, for the 12-month period. For purposes of the
agreement, good reason means the reduction of
Mr. Babich’s salary or insurance benefits without his
consent, a significant change in Mr. Babich’s title,
responsibilities and/or duties which constitutes a
72
demotion or the relocation of his principal place of employment
by more than 50 miles. Mr. Babich is entitled to a base
salary of $300,000 per year for the year 2005. The agreement
further provides that during the time of his employment and
ending one year from the termination of the agreement, he may
not solicit customers and will not engage in or own any business
that is competitive with us. In connection with his employment,
Mr. Babich was granted incentive stock options to purchase
up
to shares
of our common stock at an exercise price of
$ per
share. These options vest over a four-year period with 20%
vested on the date of purchase and 5% vesting with the close of
each three-month period thereafter while Mr. Babich remains
employed by us. The vesting provisions accelerate so that all of
these options are vested upon the closing of a sale of the
Company. Under the agreement, Mr. Babich is entitled to
piggy-back registration rights for the shares issued upon
exercise of these options and for his additional stock, which
rights he has waived for this offering. See the section
captioned “Description of Capital Stock —
Registration Rights” for a description of these rights.
John McCray.
On March 3, 2003, we entered into an
employment agreement with John McCray, our Chief Operating
Officer. Either we or Mr. McCray may terminate the
employment agreement at any time, with or without cause.
However, if we terminate Mr. McCray’s employment
without cause or he voluntarily resigns for good reason, then he
will be entitled to severance compensation of one year’s
base salary for the 12-month period following the date of
termination and continuation of any benefits, including health
insurance, for the 12-month period. For purposes of the
agreement, good reason means the reduction of
Mr. McCray’s salary or insurance benefits without his
consent, a significant change in Mr. McCray’s title,
responsibilities and/or duties which constitutes a demotion or
the relocation of his principal place of employment by more than
50 miles. Mr. McCray is entitled to a base salary of
$210,000 per year for the year 2005. The agreement further
provides that during the time of his employment and ending one
year from the termination of the agreement, he may not solicit
customers and will not engage in or own any business that is
competitive with us. In connection with his employment,
Mr. McCray was granted incentive stock options to purchase
up
to shares
of our common stock at an exercise price of
$ per
share. These options vest over a four-year period with 20%
vested on the date of purchase and 5% vesting with the close of
each three-month period thereafter while Mr. McCray remains
employed by us. The vesting provisions accelerate so that all of
these options are vested upon the closing of a sale of the
Company. Under the agreement, Mr. McCray is entitled to
piggy-back registration rights for the shares issued upon
exercise of these options and for his additional stock, which
rights he has waived for this offering. See the section
captioned “Description of Capital Stock —
Registration Rights” for a description of these rights.
Nicholas Borys.
On May 1, 2004, we entered into an
employment agreement with Nicholas Borys, our Chief Medical
Officer. Either we or Mr. Borys may terminate the
employment agreement at any time, with or without cause.
However, if we terminate Mr. Borys’ employment without
cause or he voluntarily resigns for good reason, then he will be
entitled to severance compensation of one year’s base
salary for the 12-month period following the date of termination
and continuation of any benefits, including health insurance,
for the 12-month period. For purposes of the agreement, good
reason means the reduction of Mr. Borys’ salary or
insurance benefits without his consent, a significant change in
Mr. Borys’ title, responsibilities and/or duties which
constitutes a demotion or the relocation of his principal place
of employment by more than 50 miles. Mr. Borys is entitled
to a base salary of $250,000 per year for the year 2005. The
agreement further provides that during the time of his
employment and ending one year from the termination of the
agreement, he may not solicit customers and will not engage in
or own any business that is competitive with us. In connection
with his employment, Mr. Borys was granted incentive stock
options to purchase up
to shares
of our common stock at an exercise price of
$ per
share. These options vest over a four-year period with 25%
vesting on each anniversary of Mr. Borys’ date of hire
as long as Mr. Borys is employed by us. The vesting
provisions accelerate so that all of these options are vested
upon the closing of a sale of the Company. Additionally,
Mr. Borys is eligible to receive an additional option to
purchase shares
of common stock if certain performance objectives are met, with
the objectives to be mutually
73
determined by Mr. Borys and us. Under the agreement,
Mr. Borys is entitled to piggy-back registration rights for
the shares issued upon exercise of these options and for his
additional stock, which rights he has waived for this offering.
See the section captioned “Description of Capital
Stock — Registration Rights” for a description of
these rights.
Bob Gallahue.
On July 1, 2005, we entered into an
employment agreement with Bob Gallahue, our Chief Financial
Officer. Either we or Mr. Gallahue may terminate the
employment agreement at any time, with or without cause.
However, if we terminate Mr. Gallahue’s employment
without cause or he voluntarily resigns for good reason, he will
be entitled to severance compensation of one year’s base
salary for the 12-month period following the date of termination
and continuation of any benefits, including health insurance,
for the 12-month period. For purposes of the agreement, good
reason means the reduction of Mr. Gallahue’s salary or
insurance benefits without his consent, a significant change in
Mr. Gallahue’s title, responsibilities and/or duties
which constitutes a demotion or the relocation of his principal
place of employment by more than 50 miles. Under the terms
of the agreement, Mr. Gallahue is entitled to a base salary
of $225,000 per year. The agreement further provides that during
the time of his employment and ending one year from the
termination of the agreement, he may not solicit customers and
will not engage in or own any business that is competitive with
us. In connection with his employment, Mr. Gallahue was
granted incentive stock options to purchase up
to shares
of our common stock at an exercise price of
$ per
share. of
these options vest in four equal installments on the anniversary
of Mr. Gallahue’s date of hire with the remainder
vesting on the fourth anniversary of the date of hire. The
vesting provisions accelerate so that all of these options are
vested upon the closing of a sale of the Company.
1997 Stock Option Plan
Our Board of Directors and stockholders adopted the 1997 Stock
Option Plan, or 1997 Plan, on January 9, 1997. The 1997
Plan provides for grants of incentive stock options, within the
meaning of Section 422 of the Internal Revenue Code of
1986, as amended, to our employees and for grants of
non-qualified stock options to our employees, consultants and
directors. The 1997 Plan was adopted to facilitate the retention
of current employees, consultants and directors as well as to
secure and retain the services of new employees, consultants and
directors, and to provide incentive for such persons to exert
maximum efforts to promote our financial success.
The 1997 Plan is administered by our Board of Directors unless
the Board of Directors delegates the administration to its
compensation committee. The administrator has the power to
administer and interpret the 1997 Plan, including determining
the terms of the options granted, the exercise price, the number
of shares subject to the option and the vesting of the options
thereof. The administrator of the 1997 Plan establishes the
option exercise price. In the case of an incentive stock option,
the exercise price must be at least the fair market value of a
share of the stock on the date of the grant or, in the case of
all options, 110% of fair market value with respect to optionees
who own at least 10% of all classes of stock. Fair market value
is determined in good faith by our Board of Directors, or the
compensation committee if so empowered, and in a manner
consistent with the Internal Revenue Code in the case of
incentive stock options.
Options granted under the 1997 Plan are generally not
transferable by the optionee except by will or the laws of
descent and distribution, and each option is exercisable, during
the lifetime of the optionee, only by the optionee. In the case
of an incentive stock option granted to an employee, the option
must be exercised within three months following the date of the
optionee’s employment other than for death or disability
(or before the termination, in the case of a termination for
cause), or 12 months following the optionee’s
termination by disability or death. However, in no event may an
option be exercised later than the earlier of the expiration of
the term of the option or ten years from the date of the grant
of the option or, where an optionee owns stock representing more
than 10% of the voting power, five years from the date of the
grant of the option in the case of incentive stock options.
74
Any incentive stock options granted to an optionee which, when
combined with all other incentive stock options becoming
exercisable for the first time in any calendar year that are
held by that person, would have an aggregate fair market value
in excess of $100,000 shall automatically be treated as
non-qualified stock options.
The 1997 Plan provides that it may be amended, modified,
suspended or terminated by our Board of Directors, or the
compensation committee if so empowered, at any time; provided,
however, that without the approval of the stockholders, there
shall be (a) no increase in the total number of shares of
stock covered by the 1997 Plan, (b) no change in the class
of persons eligible to receive incentive stock options and
(c) no extension of the period during which incentive stock
options may be granted beyond the date which is ten years
following the date the 1997 Plan was adopted. In any event, no
such amendment, modification, suspension or termination may
adversely affect the terms of any individual option previously
granted without the consent of the affected optionee. As of the
effectiveness of this offering, we expect that the 1997 Plan
will terminate and that our Board of Directors and stockholders
will have adopted the 2005 Stock Incentive Plan, or 2005 Plan.
As a result, the authority to grant incentive stock options
under the 1997 Plan will terminate, although the termination
will not affect any options outstanding on the termination date
and all such options will continue to remain outstanding and be
governed by the 1997 Plan.
As of June 30, 2005, we had options to
purchase shares
of our common stock outstanding under our 1997 Plan and
exercisable at a weighted average price of
$ per
share. As of June 30,
2005 common
shares had been issued upon exercise of options under the plan.
401(k) Savings Plan
Effective January 1, 2001, we adopted a tax-qualified
employee savings and retirement plan, or 401(k) plan, that
covers all of our employees. Pursuant to our 401(k) plan,
participants may elect to reduce their current compensation, on
a pre-tax basis, by any percentage the participant elects, up to
statutorily prescribed annual limit, and have the amount of the
reduction contributed to the 401(k) plan. The 401(k) plan also
permits us, in our sole discretion, to make employer matching
contributions equal to a specified percentage (as we determine)
of the amount a participant has elected to contribute to the
plan, and/or employer profit-sharing contributions equal to a
specified percentage (as we determine) of an employee’s
compensation. We do not currently make employer contributions to
the 401(k) plan, but may determine to do so in the future.
75
RELATIONSHIPS AND RELATED TRANSACTIONS
During the past three years, we have been a party to the
following transactions with our executive officers, directors,
holders of more than 5% of our voting securities, and their
respective affiliates.
Stock Issuances and Acquisitions
Common Stock.
In May 2003 we issued to David Barlow, our
Chairman and Chief Executive Officer, an option to
purchase shares
of our common stock for $0.10 per share, the then fair
market value of the common stock as determined by our Board of
Directors. Mr. Barlow immediately exercised the option and
purchased the common shares pursuant to a stock restriction
agreement. The shares were paid for with a cash payment of
$32,850 and a non-interest bearing promissory note in the amount
of $295,650. On November 4, 2005, Mr. Barlow repaid
this loan in full. See discussion in note 3 of our audited
consolidated financial statements relating to the accounting
treatment pertaining to the repayment of this loan.
Mr. Barlow is entitled to piggyback registration rights for
the vested shares, which he has waived for this offering. See
“Registration Rights.”
Series A Preferred Stock.
Between September 2001 and
June 2002 we received advance subscriptions in anticipation of
the issuance of our Series A Preferred Stock at a per share
price of $70. A total of 43,862.14 shares of Series A
Preferred Stock were issued on January 6, 2003 to a total
of nine investors at the $70 per preferred share price, the date
on which the Series A Preferred Stock were authorized for
issuance under our certificate of organization. Between July
2002 and December 2003, we continued to raise money in
connection with the issuance of our Series A Preferred
Stock but at $54 per preferred share. Additional shares of
Series A Preferred Stock were authorized for issuance on
January 30, 2003 and during 2003 a total of 76,455 addition
shares of Series A Preferred Stock were issued to a total
of 34 investors at the $54 per preferred share price. David
Barlow, our Chairman and Chief Executive Officer, was among the
investors purchasing Series A Preferred Stock and he
purchased 23,571.43 shares at the $70 per preferred share
price and 25,724 shares at the $54 per preferred share
price. His brother, Peter Barlow, purchased 555 shares of
Series A Preferred Stock at $54 per preferred share. Jack
and Gladys Barlow, David Barlow’s parents, purchased 429
and 370 shares of Series A Preferred Stock,
respectively, at $54 per share. John Babich, our President and
Chief Scientific Officer, purchased 641 Series A Preferred
Stock at $54 per preferred share. Each share of the
Series A Preferred Stock will automatically convert into
200 shares of Common Stock immediately prior to the closing
of this offering. In addition, holders of Series A
preferred stock have the election to receive cash or common
stock valued at $ for all accrued and unpaid dividends on
the Series A preferred stock.
Series B Preferred Stock.
Between March 4, 2004
and June 30, 2004 we issued a total of 53,663 shares
of our Series B Preferred Stock at a price of $132 per
preferred share to a total of 33 investors. In connection
with the issuance of Series B Preferred Stock, each
investor was issued a warrant to purchase Common Stock in the
Company, where the number of shares subject to such warrant
equals 20% of the dollar amount invested by such purchaser. The
warrants issued in this financing all have an exercise price of
$0.66 per common share. Cerberus Partners, L.P. and Daniel Frank
purchased 22,728 and 1,894 shares of Series B Preferred
Stock, respectively, and received warrants to
purchase and common
shares, respectively. Mr. Frank’s sister and brother
each purchased 189 shares of Series B Preferred Stock
and each received a warrant to
purchase common shares.
Daniel Frank is a member of our Board of Directors and
Mr. Frank is a Managing Director of Cerberus Capital
Management, L.P. Mr. Frank disclaims beneficial ownership
of shares of Series B Preferred Stock owned by Cerberus
Partners, L.P. and his family members. William C. Eckelman, a
member of our Board of Directors, purchased 841 shares of
Series B Preferred Stock and received a warrant to
purchase shares of Common Stock. Peter Barlow, David
Barlow’s brother, purchased 228 shares of Series B
Preferred Stock and received a warrant to
purchase shares
of Common Stock. Each share of the Series B Preferred Stock
will automatically convert
into shares
of Common Stock immediately prior to the closing of this
offering. In addition,
76
holders of Series B preferred stock have the election to
receive cash or common stock valued at
$ for
all accrued and unpaid dividends on the Series B preferred
stock.
Series C Preferred Stock.
Between March 29,
2005 and April 14, 2005 we issued a total of
141,590 shares of our Series C Preferred Stock at a
price of $202 per preferred share to a total of
52 investors. Cerberus Partners, L.P. and Daniel Frank
purchased 34,653 and 1,488 shares of Series C Preferred
Stock, respectively. Mr. Frank’s brother, sister and
mother each purchased 311, 75 and 247 shares of Series C
Preferred Stock, respectively. Daniel Frank is a member of our
Board of Directors and he is a partner in, and works for,
Cerberus Partners, L.P. Mr. Frank disclaims beneficial
ownership of shares of Series C Preferred Stock owned by
Cerberus Partners, L.P. and his family members. Siemens Venture
Capital GmbH purchased 14,851 shares of Series C Preferred
Stock. Andrew Jay, a member of our Board of Directors, is an
employee of Siemens, but disclaims beneficial ownership of the
shares owned by Siemens. Jack and Gladys Barlow, David
Barlow’s parents, purchased 495 and 148 shares of
Series C Preferred Stock, respectively. Each shares of the
Series C Preferred Stock will automatically convert
into shares
of Common Stock immediately prior to the closing of this
offering. In addition, holders of Series C preferred stock
have the election to receive cash or common stock valued at
$ for
all accrued and unpaid dividends on the Series C preferred
stock.
Loans Made to the Company by Affiliates
In June 2002, David Barlow loaned the Company $200,000, which
was converted into shares of Series A Preferred Stock at
the rate of $54 per preferred share in May 2003. The Company
does not have any further indebtedness to Mr. Barlow.
Loans Made by the Company to Affiliates
In connection with the purchase of 3,285,000 shares of
restricted common stock at $0.10 per share, David S. Barlow paid
for the shares with a cash payment of $32,850 and a non-interest
bearing promissory note in the amount of $295,650. On November
4, 2005, Mr. Barlow repaid this loan in full by paying to
the Company $295,650 in cash.
Relationship with ATP Therapeutics, Inc.
ATP Therapeutics, a wholly-owned subsidiary of ours, was
dissolved on October 26, 2005. We had previously owned
63.6% of the equity of this subsidiary with the balance of the
equity owned by Eliezer Rapaport. As of October 6, 2005, we
exchanged all the assets of ATP in exchange for the equity held
by Dr. Rapaport. These assets consisted of written records
and other items that we deemed were not material to our
operations. The entity had been formed for the purpose of
further researching and developing certain patent technology
owned by Dr. Rapaport related to the therapeutic
applications of adenosine 5-triphosphate. This technology was
licensed by Dr. Rapaport to the subsidiary and, after it
was later determined not to pursue these patents any further,
the license agreement was terminated by Dr. Rapaport.
Relationship with Biostream Therapeutics, Inc.
We no longer conduct any activities through Biostream
Therapeutics, Inc., our wholly-owned subsidiary formerly known
as Zebra Pharmaceuticals, Inc.
Consulting Agreement with William C. Eckelman
On January 1, 2005 we entered into a Consulting Agreement
with William C. Eckelman which expires on December 31,
2009, to serve as our Chief Scientific Advisor and as the
Chairman of our Scientific Advisory Board for the compensation
of $12,500 per month.
77
Relationship with Peter Barlow and Foley & Lardner LLP
The law firm of Foley & Lardner LLP has provided legal
services for the Company since February 1, 2005. From
February 1, 2005 through June 30, 2005, we paid
$415,779 in legal fees to Foley & Lardner. Peter Barlow is a
partner of Foley & Lardner LLP and is the brother of David
Barlow, our Chairman and Chief Executive Officer. Prior to
February 1, 2005, the law firm of Epstein, Becker &
Green P.C. provided legal services for the Company. Peter Barlow
was a partner of Epstein, Becker & Green P.C. during this
period.
Employment Agreements and Indemnification Agreements
We have entered into employment agreements with our executive
officers, as described more fully in the section of this
prospectus entitled “Management — Executive
Employment Agreements.” In addition, our directors and
officers are provided indemnification protections in our
Restated Articles of Organization. See “Description of
Capital Stock — Indemnification of Directors and
Executive Officers and Limitation of Liability.”
78
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the
beneficial ownership of our common stock as of
September 30, 2005 by:
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each person that beneficially owns more than 5% of our
outstanding common stock,
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•
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each of our executive officers identified in the Summary
Compensation Table above and our directors plus the director
nominee who has agreed to join our Board of Directors at the
closing of this offering, and
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•
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all directors and executive officers as a group.
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Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and includes voting or
investment power with respect to the securities. Shares of
common stock subject to options, warrants, or convertible
securities that are exercisable or convertible, or exercisable
or convertible within 60 days of September 30, 2005
are deemed to be outstanding and beneficially owned by the
person holding such options, warrants, or convertible
securities. Such shares, however, are not deemed outstanding for
purposes of computing the percentage ownership of any other
person.
Unless otherwise indicated and subject to community property
laws where applicable, each of the stockholders has sole voting
and investment power with respect to the shares beneficially
owned. Unless otherwise noted in the footnotes, the address for
each principal stockholder is in care of Molecular Insight
Pharmaceuticals, Inc. at 160 Second Street, Cambridge,
Massachusetts 02142.
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Percent of Common Stock
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Number of Shares of
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Beneficially Owned
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Common Stock
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Beneficial Owner
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Beneficially Owned
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Before Offering
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After Offering
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5% Stockholders
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Stephen
Feinberg
(1)
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13.7
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%
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Ann Barlow
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6.2
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%
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James Poitras
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6.6
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%
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Named Executive Officers, Directors, and Director Nominee
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David S. Barlow
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13.8
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%
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John
Babich
(2)
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3.1
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%
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John
McCray
(3)
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1
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%
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Nicholas
Borys
(4)
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*
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Bob Gallahue
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*
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William C.
Eckelman
(5)
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*
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Daniel
Frank
(6)
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*
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Kim
Lamon
(7)
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*
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Harry
Stylli
(8)
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*
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Andrew Jay
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—
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Lionel
Sterling
(9)
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1.1
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%
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Executive Officers, Directors, and
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Director Nominees as Group (11 persons)
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19.8
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%
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(1)
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Includes shares
of common stock
and shares
of common stock issuable upon the exercise of a warrant in all
cases held in the name of Cerberus Partners, L.P.
Mr. Feinberg has sole voting and investment power over all
of the shares of common stock held by Cerberus Partners, L.P.
and affiliates.
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Footnotes continued on following page
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(2)
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Includes shares
of common stock issuable upon the exercise of options which are
currently exercisable or which are exercisable within
60 days of September 30, 2005.
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(3)
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Includes shares
of common stock issuable upon the exercise of options which are
currently exercisable or which are exercisable within
60 days of September 30, 2005.
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(4)
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Includes shares
of common stock issuable upon the exercise of options which are
currently exercisable or which are exercisable within
60 days of September 30, 2005.
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(5)
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Includes shares
of common stock issuable upon the exercise of options which are
currently exercisable or which are exercisable within
60 days of September 30, 2005,
and shares
of shares of common stock issuable upon the exercise of a
warrant.
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(6)
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Includes shares
of common stock issuable upon the exercise of a warrant.
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(7)
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Includes shares
of common stock issuable upon the exercise of options which are
currently exercisable or which are exercisable within
60 days of September 30, 2005.
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(8)
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Includes shares
of common stock issuable upon the exercise of options which are
currently exercisable or which are exercisable within
60 days of September 30, 2005.
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(9)
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Includes shares
of common stock issuable upon the exercise of a warrant.
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80
DESCRIPTION OF CAPITAL STOCK
General
The following description of our common stock and preferred
stock and the relevant provisions of our Restated Articles of
Organization and Amended and Restated Bylaws to be effective
upon the closing of this offering are summaries and are
qualified by reference to our Restated Articles of Organization
and Amended and Restated Bylaws, copies of which have been filed
with the Securities and Exchange Commission as exhibits to our
registration statement, of which this prospectus forms a part.
Upon the closing of this offering, our authorized capital stock
will consist
of shares
of common stock, par value $0.01 per share,
and shares
of preferred stock $0.01 par value per share.
Common Stock
As of June 30, 2005 there
were shares
of common stock outstanding held of record by
238 stockholders, after giving effect to the conversion of
all outstanding shares of preferred stock upon the closing of
this offering. Additionally, as of June 30, 2005, we have
reserved an aggregate
of shares
of common stock for issuance in respect of options outstanding
under our 1997
Plan, shares
of common stock for issuance under our 2005 Equity Incentive
Plan
and shares
of common stock for issuance upon exercise of warrants.
Holders of our common stock are entitled to one vote for each
share of common stock held on all matters to be voted upon by
stockholders and do not have cumulative voting rights. In
accordance with Massachusetts law, the affirmative vote of a
majority of the shares represented and voting at a duly held
meeting at which a quorum is present shall be the act of the
stockholders. Thus, directors are elected by a plurality of the
votes of the shares present in person or by proxy at the meeting
and entitled to vote in such election.
Shares of our common stock have no preemptive rights, no
redemption or sinking fund provisions, and are not liable for
further call or assessment. The holders of such common stock are
entitled to receive dividends when and as declared by our Board
of Directors out of funds legally available for dividends. We
intend to pay to certain existing preferred stockholders a
one-time cash dividend in an aggregate amount of
$ .
Following the completion of this offering and except for the
one-time dividend payment to certain preferred holders, we do
not anticipate paying any cash dividends on our capital stock
for the foreseeable future.
Upon a liquidation, dissolution or winding-up of our Company,
holders of common stock would be entitled to receive a pro rata
distribution per share of any net assets available after the
payment of all of our debts and other liabilities. The rights,
preferences, and privileges of holders of common stock are
subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock which we may
designate and issue in the future.
Preferred Stock
Upon the closing of this offering there will be no shares of
preferred stock outstanding. Our Board of Directors will be
authorized to issue up
to shares
of preferred stock from time to time in one or more series. Our
Board also may fix the rights, preferences, privileges, and
restrictions of those shares, including dividend rights,
conversion rights, voting rights, redemption rights, terms of
sinking funds, liquidation preferences and the number of shares
constituting any series or the designation of the series. Any
preferred stock terms selected by our Board of Directors could
decrease the amount of earnings and assets available for
distribution to holders of our common stock or adversely affect
the rights and power, including voting rights, of the holders of
our common stock without any further vote or action by the
stockholders. The rights of holders of our common stock will be
subject to, and
81
may be adversely affected by, the rights of the holders of any
preferred stock that may be issued by us in the future.
The issuance of preferred stock, while providing desired
flexibility in connection with possible acquisitions and other
corporate purposes, could adversely affect the voting power or
other rights of the holders of common stock. The issuance of
preferred stock could also have the effect of delaying or
preventing a change in control or acquisition of our company or
make removal of management more difficult. We have no present
plans to issue any shares of preferred stock.
Warrants
As of June 30, 2005 we had the following warrants
outstanding to purchase a total
of shares
of our common stock:
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warrant to
purchase shares
of our common stock at an exercise price of
$ per
share that will expire upon the closing of this offering;
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•
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warrants to
purchase shares
of our common stock at an exercise price of
$ per
share that will expire upon the closing of this offering; and
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•
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warrant to
purchase shares
of our common stock at an exercise price of
$ per
share that will expire upon the closing of this offering.
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Stock Options
We have granted options to purchase shares of common stock under
our 1997 Plan. As of June 30, 2005 we had options to
purchase shares
of our common stock outstanding and exercisable under our 1997
Plan at a weighted average price of
$ per
share. As of June 30, 2005, we had not granted any options
under our 2005 Plan as such plan had not yet been established.
Registration Rights
Pursuant to the terms of a registration rights agreement, after
this offering and the conversion of all shares of preferred
stock into common stock, the holders of
approximately shares
of common stock will be entitled to certain rights with respect
to the registration of such shares under the Securities Act of
1933. Under the terms of the registration rights agreement, if
we propose to register any of our securities under the
Securities Act after this initial public offering, either for
our own account or for the account of other stockholders, the
holders are entitled to notice of such registration and may
include shares of their common stock in such registration.
Additionally, the holders of currently outstanding Series C
Preferred Stock are entitled to certain demand registration
rights pursuant to which they may require us to file up to two
registration statements under the Securities Act at our expense
with respect to their shares of common stock, provided that the
demand cannot be made within 180 days after the effective
date of this offering and only once in any twelve month period.
The holders of Series A and Series B Preferred Stock
(together) are entitled to demand registration rights as
well pursuant to which they may require us to file up to two
registration statements under the Securities Act at our expense
with respect to their shares of common stock, provided that the
portion of the shares they request for registration equals at
least 25% of the shares of common stock issuable upon the
conversion of the Series A and Series B Preferred
Stock (combined) and the gross proceeds from the sale are
reasonably expected to exceed $30 million. The holders of
Series A and Series B Preferred Stock are also limited
to one demand in any twelve month period and may not make a
demand until 180 days after the effective date of this
offering. Further, if we become eligible to register the sale of
our securities on Form S-3 under the Securities Act, the
holders of Series A, Series B and Series C
Preferred Stock are entitled to include their shares of common
stock in such registration on Form S-3. All of the
foregoing registration rights are subject to conditions and
limitations, including the right of the underwriters of an
offering to limit the number of
82
shares included in such registration and our right to defer a
registration for up to 45 days if it is in the best
interest of the Company. In connection with any of the
registrations described herein, we are obligated to indemnify
the selling stockholders and bear all registration fees, costs
and expenses.
Pursuant to a Principal Stockholder Agreement previously entered
into by the Company with each of Keith Greenfield, David
Elmaleh, John Babich, Greg Shoukimas, Enrico Petrillo and John
Connors, each of these holders of our common stock is entitled
to piggyback registration rights in this offering and we must
use our best efforts to include any shares they request be
included in this offering, subject to underwriter cutbacks.
Pursuant to the employment agreements between the Company and
each of Messrs. Barlow, Babich, McCray and Borys, each of
Messrs. Barlow, Babich, McCray and Borys are entitled to
piggyback registration rights on the same basis as the most
favorable provisions received by any third party from the
Company. Accordingly, Messrs. Barlow, Babich, McCray and
Borys have piggyback registration rights equivalent to those
granted under the Principal Stockholder Agreements described
above. Each of Messrs. Barlow, Babich, McCray and Borys
have waived their piggyback registration rights in connection
with this offering.
Indemnification of Directors and Executive Officers and
Limitation of Liability
We are a Massachusetts corporation. Section 2.02 of the
Massachusetts Business Corporation Act, or MBCA, permits a
corporation to eliminate or limit the personal liability of a
director for monetary damages for violations of the
director’s fiduciary duty, except for (i) any breach
of the director’s duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) for authorizing unauthorized distributions and
for making loans to directors, officers and certain stockholders
pursuant to Section 6.40 of the MBCA or (iv) any
transaction from which a director derived an improper personal
benefit.
Section 8 of the MBCA provides that a corporation may
indemnify directors, officers, employees and other agents and
persons who serve at its request as directors, officers,
employees or agents of another organization or who serve at its
request in any capacity with respect to any employee benefit
plan, to the extent specified or authorized by the articles of
organization, any bylaw adopted by the stockholders or a vote
adopted by the holders of a majority of the shares of stock
entitled to vote on the election of directors. Such
indemnification may include payment by the corporation of
expenses incurred in defending a civil or criminal action or
proceeding in advance of the final disposition of such action or
proceeding, upon receipt of any undertaking by the person
indemnified to repay such payment if he shall be adjudicated to
be not entitled to indemnification under Section 8 which
undertaking may be accepted without reference to the financial
ability of such person to make repayment. Any such
indemnification may be provided although the person to be
indemnified is no longer an officer, director, employee or agent
of the corporation or of such other organization or no longer
serves with respect to such employee benefit plan. No
indemnification shall be provided, however, for any person with
respect to any matter where there is a court determination that
such person, in the matter in question, did not act in good
faith in the reasonable belief that his action was in the best
interest of the corporation or, to the extent that the matter
relates to service with respect to an employee benefit plan,
that such person did not act in the best interest of the
participants or beneficiaries of such employee benefit plan.
In addition to the indemnification granted to officers and
directors under the MBCA, Article VI of our Restated
Articles of Organization provides that each person who was or is
made a party or is threatened to be made a party to or is
otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of
the fact that he or she is or was a director or an officer of
the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
83
enterprise, including service with respect to an employee
benefit plan, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee
or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held
harmless by the corporation to the fullest extent authorized by
the MBCA, as the same exists or may hereafter be amended against
all expense, liability and loss (including attorneys’ fees,
judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith.
The right to indemnification conferred in our Restated Articles
of Organization includes, in the case of a director or officer
at the level of vice president or above, and in the case of any
other officer or any employee may include (in the discretion of
the Board of Directors), the right to be paid by the Company the
expenses incurred in defending any such proceeding in advance of
its final disposition. The rights to indemnification and to the
advancement of expenses conferred in our Restated Articles of
Organization continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and inure to the benefit of
the indemnitee’s heirs, executors and administrators. We
believe that these provisions are necessary to attract and
retain qualified persons as directors and executive officers.
Additionally, the Amended and Restated Bylaws permit us to
secure insurance on behalf of any officer, director, employee,
or other agent for any liability arising out of his or her
actions in connection with their services to us, regardless of
whether our articles of incorporation or bylaws permit such
indemnification. We have obtained such insurance.
To the extent that indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing
provisions, the Securities Exchange Commission has expressed its
opinion that such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
There is pending litigation involving certain of our directors
and officers as to which indemnification had been provided by us
pursuant to our bylaws, and will continue to be provided
pursuant to our Restated Articles of Organization. See Section
“Business — Legal Proceedings” for a further
description. There is no other pending litigation or proceeding
involving our directors, officers, employees or agents pending
for which indemnification is sought, nor are we aware of any
pending or threatened litigation that may result in claims for
indemnification by any director, officer, employee or other
agent.
Potential Anti-Takeover Effect of Provisions of our Articles
of Organization and Bylaws
Our Restated Articles of Organization and Amended and Restated
Bylaws include a number of provisions that may have the effect
of deterring hostile takeovers or delaying or preventing changes
in our control or our management, including, but not limited to,
the following:
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•
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Our Board of Directors can issue up
to shares
of preferred stock, with any rights or preferences, including
the right to approve or not approve an acquisition or other
change in control.
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•
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Our Amended and Restated Bylaws provide that stockholders
seeking to present proposals before a meeting of stockholders or
to nominate candidates for election as directors at a meeting of
stockholders must provide timely notice in writing and also
specify requirements as to the form and content of a
stockholder’s notice. These provisions may delay or
preclude stockholders from bringing matters before a meeting of
stockholders or from making nominations for directors at a
meeting of stockholders, which could delay or deter takeover
attempts or changes in management.
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•
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Our Amended and Restated Bylaws provide that special meetings of
the stockholders may be called only by the President or the
Board of Directors or by the person designated in the written
request of the holders of not less
than % of all shares entitled to
vote at the meeting.
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•
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Our Board of Directors will be divided into three classes
following this offering, with each class serving a staggered
three-year term. The classification of our Board of Directors
will have the effect
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84
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of requiring at least two annual stockholder meetings, instead
of one, to replace a majority of our authorized directors, which
could have the effect of delaying or preventing a change in our
control or management.
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•
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Our Restated Articles of Organization provide that, subject to
the rights of the holders of any outstanding series of preferred
stock, all vacancies, including newly created directorships,
may, except as otherwise required by law, be filled by the
affirmative vote of a majority of directors then in office, even
if less than a quorum. In addition, our Restated Articles of
Organization provide that our Board of Directors may fix the
number of directors by resolution.
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•
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Our Restated Articles of Organization provide that, following
this offering, our directors may not be removed without cause.
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•
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Our Restated Articles of Organization do not provide for
cumulative voting for directors. The absence of cumulative
voting may make it more difficult for stockholders who own an
aggregate of less than a majority of our stock to elect any
directors to our Board.
|
These and other provisions contained in our Restated Articles of
Organization and Amended and Restated Bylaws could delay or
discourage transactions involving an actual or potential change
in control of us or our management, including transactions in
which our stockholders might otherwise receive a premium for
their shares over then current prices, and may limit the ability
of stockholders to remove our current management or approve
transactions that our stockholders may deem to be in their best
interests and, therefore, could adversely affect the price of
our common stock.
Nasdaq Trading
We have applied to have the shares of our common stock approved
for quotations on the Nasdaq National Market System under the
symbol “MIPI.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is
American Stock Transfer and Trust Company. The transfer
agent’s address is 59 Maiden Lane, New York, NY 10038
and its telephone number is (718) 921-8201.
85
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there was no market for our common
stock. Based on shares outstanding as of June 30, 2005,
upon completion of this offering, we will
have shares
of common stock outstanding, assuming no exercise of the
underwriters’ over-allotment option and no exercise of
options outstanding. Of these shares,
the shares
sold in this offering will be freely transferable without
restrictions or further registration under the Securities Act
unless such shares are purchased by our affiliates, as that term
is defined in Rule 144 and the Securities Act. No
predictions can be made as to the effect, if any, that market
sales of shares of common stock from time to time, or the
availability of shares for future sale, may have on the market
price for our common stock. Sales of substantial amounts of
common stock, or the perception that such sales could occur,
could adversely affect prevailing market prices for our common
stock and could impair our future ability to obtain capital
through an offering of equity securities.
Sale of Restricted Shares
The
remaining shares
of common stock held by our existing stockholders upon
completion of the offering will be “restricted
securities,” as that phrase is defined in Rule 144,
and may not be resold in the absence of registration under the
Securities Act or pursuant to an exemption from such
registration pursuant to exemptions provided by Rules 144
or 701 under the Securities Act. These rules are summarized
below. Of these restricted
shares, shares
will be available for resale in the public market in reliance on
Rule 144(k), %
of which are restricted by the terms of the lock-up agreements
described below. The
remaining shares
become eligible for resale in the public market at various dates
thereafter, %
of which are restricted by the terms of the lock-up agreements.
In general, under Rule 144 as currently in effect, a person
who has beneficially owned shares for at least one year,
including an “affiliate” of the Company, as that term
is defined in the Securities Act, is entitled to sell, within
any three-month period, a number of shares that does not exceed
the greater of:
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•
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one percent of the then outstanding shares of our common stock
(approximately shares
immediately following the offering); or
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•
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the average weekly trading volume during the four calendar weeks
preceding filing of notice of such sale.
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Sales under Rule 144 are also subject to certain provisions
pertaining to the manner of the sale, notice requirements and
the availability of current public information about us. A
stockholder who is deemed not to have been an
“affiliate” of ours at any time during the
90 days preceding a sale, and who has beneficially owned
restricted shares for at least two years, would be entitled to
sell such shares under Rule 144(k) without regard to the
volume limitations, manner of sale provisions or public
information requirements of Rule 144.
Rule 701 provides that the shares of common stock acquired
upon the exercise of currently outstanding options may be
resold, to the extent not restricted by the terms of the lock-up
agreements, by persons, other than affiliates, beginning
90 days after the date of this prospectus, subject only to
the manner of sale provisions of Rule 144, and by
affiliates under Rule 144 without compliance with its one
year minimum holding period, subject to certain limitations. As
of June 30, 2005, we had options to
purchase shares
of our common stock outstanding and exercisable at a weighted
average price of
$ per
share.
On ,
2005, our Board of Directors terminated our 1997 Plan and
adopted our 2005 Plan, under which an
additional shares
of common stock are reserved for issuance. We intend to register
the shares of common stock issuable or reserved for issuance
under these stock option plans within 90 days after the
date of this prospectus.
% of
our affiliates have agreed to further restrict their shares by
entering into lock-up arrangements as discussed below.
86
After the 180-day period following the closing of this offering
as it may be extended, the holders
of shares
of common stock that will be outstanding after this offering are
entitled to require us to register the sale of their shares
under the Securities Act. See “Description of Capital
Stock — Registration Rights.”
Lock-up Arrangements
Except for sales of common stock to the underwriters in
accordance with the terms of the underwriting agreement, we, all
of our executive officers and directors, and certain other
security holders, holding in the aggregate
approximately %
of our outstanding common stock, have agreed not to sell or
otherwise dispose of any shares of common stock not registered
in this offering for a period of 180 days after the date of
this prospectus, subject to extensions in certain cases, without
the prior written consent of Piper Jaffray, on behalf of the
underwriters. Upon the expiration of these lock-up agreements,
additional shares will be available for sale in the public
market. The agreements provide exceptions for (1) our sales
in connection with the exercise of options granted and the
granting of options to purchase up to an
additional shares
under the our existing stock option plans and (2) certain
other exceptions.
87
UNDERWRITING
The underwriters named below have agreed to buy, subject to the
terms of the purchase agreement, the number of shares listed
opposite their names below. Piper Jaffray & Co. and SG
Cowen & Co., LLC are acting as joint book-running
managers for this offering and, together with
Oppenheimer & Co. Inc. and Roth Capital Partners LLC,
are acting as representatives of the underwriters. The
underwriters are committed to purchase and pay for all of the
shares if any are purchased, other than those shares covered by
the over-allotment option described below.
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Number of
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Underwriters
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Shares
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Piper Jaffray & Co.
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SG Cowen & Co., LLC
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Oppenheimer & Co. Inc.
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Roth Capital Partners, LLC
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Total
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The underwriters have advised us that they propose to offer the
shares to the public at
$ per
share. The underwriters propose to offer the shares to certain
dealers at the same price less a concession of not more than
$ per
share. The underwriters may allow and the dealers may reallow a
concession of not more than
$ per
share on sales to certain other brokers and dealers. After the
offering, these figures may be changed by the underwriters.
At our request, the underwriters have reserved for sale at the
initial public offering price up
to shares
of common stock to directors, employees and person have business
relationships with or otherwise related to Molecular Insight
Pharmaceuticals. The number of shares of common stock available
for sale to the general public will be reduced to the extent
that such individuals purchase all or a portion of these
reserved shares. Any reserved shares which are not purchased
will be offered by the underwriters to the general public on the
same basis as the shares of common stock offered hereby.
We have granted to the underwriters an option to purchase up to
an
additional shares
of common stock from us at the same price to the public, and
with the same underwriting discount, as set forth in the table
above. The underwriters may exercise this option any time during
the 30-day period after the date of this prospectus, but only to
cover over-allotments, if any. To the extent the underwriters
exercise the option, each underwriter will become obligated,
subject to certain conditions, to purchase approximately the
same percentage of the additional shares as it was obligated to
purchase under the purchase agreement.
We estimate that the total fees and expenses payable by us,
excluding underwriting discounts and commissions, will be
approximately
$ .
The following table shows the underwriting fees to be paid to
the underwriters in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the
over-allotment option.
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No Exercise
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Full Exercise
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Per share
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$
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|
|
$
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|
Total
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|
$
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|
$
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We have agreed to indemnify the underwriters against certain
liabilities, including civil liabilities under the Securities
Act, or to contribute to payments that the underwriters may be
required to make in respect of those liabilities.
Except for sales of common stock to the underwriters in
accordance with the terms of the underwriting agreement, we, all
of our executive officers and directors, and certain other
security holders, holding in the aggregate
approximately %
of our outstanding common stock, have agreed not to sell or
otherwise dispose of any shares of common stock not registered
in this offering for a
88
period of 180 days after the date of this prospectus,
subject to extensions in certain cases, without the prior
written consent of Piper Jaffray, on behalf of the underwriters.
Upon the expiration of these lock-up agreements, additional
shares will be available for sale in the public market. The
agreements provide exceptions for (1) our sales in
connection with the exercise of options granted and the granting
of options to purchase up to an
additional shares
under the our existing stock option plans and (2) certain
other exceptions.
Prior to the offering, there has been no established trading
market for the common stock. The initial public offering price
for the shares of common stock offered by this prospectus was
negotiated by us and the underwriters. The factors considered in
determining the initial public offering price include the
history of and the prospects for the industry in which we
compete, our past and present operations, our historical results
of operations, our prospects for future earnings, the recent
market prices of securities of generally comparable companies
and the general condition of the securities markets at the time
of the offering and other relevant factors. There can be no
assurance that the initial public offering price of the common
stock will correspond to the price at which the common stock
will trade in the public market subsequent to this offering or
that an active public market for the common stock will develop
and continue after this offering.
To facilitate the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the
price of the common stock during and after the offering.
Specifically, the underwriters may over-allot or otherwise
create a short position in the common stock for their own
account by selling more shares of common stock than have been
sold to them by us. The underwriters may elect to cover any such
short position by purchasing shares of common stock in the open
market or by exercising the over-allotment option granted to the
underwriters. In addition, the underwriters may stabilize or
maintain the price of the common stock by bidding for or
purchasing shares of common stock in the open market and may
impose penalty bids. If penalty bids are imposed, selling
concessions allowed to syndicate members or other broker-dealers
participating in the offering are reclaimed if shares of common
stock previously distributed in the offering are repurchased,
whether in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize
or maintain the market price of the common stock at a level
above that which might otherwise prevail in the open market. The
imposition of a penalty bid may also effect the price of the
common stock to the extent that it discourages resales of the
common stock. The magnitude or effect of any stabilization or
other transactions is uncertain.
These transactions may be effected on the Nasdaq National Market
or otherwise and, if commenced, may be discontinued at any time.
In connection with this offering, some underwriters (and selling
group members) may also engage in passive market making
transactions in the common stock on the Nasdaq National Market.
Passive market making consists of displaying bids on the Nasdaq
National Market limited by the prices of independent market
makers and effecting purchases limited by those prices in
response to order flow. Rule 103 of Regulation M
promulgated by the SEC limits the amount of net purchases that
each passive market maker may make and the displayed size of
each bid. Passive market making may stabilize the market price
of the common stock at a level above that which might otherwise
prevail in the open market and, if commenced, may be
discontinued at any time.
From time to time in the ordinary course of their respective
business, certain of the underwriters and their affiliates have
engaged in and may in the future engage in commercial banking or
investment banking transactions with us and our affiliates.
89
LEGAL MATTERS
The validity of the shares of common stock issued in this
offering will be passed upon for us by the law firm of Foley
& Lardner LLP, Boston, Massachusetts. Certain legal matters
in connection with this offering will be passed upon for the
underwriters by the law firm of Willkie Farr &
Gallagher LLP, New York City, New York.
EXPERTS
Our consolidated financial statements as of December 31,
2003 and 2004 and for each of the three years in the period
ended December 31, 2004 included in this prospectus have
been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report
appearing herein and have been so included in reliance upon the
report of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the
SEC for the stock we are offering by this prospectus. This
prospectus does not include all of the information contained in
the registration statement. You should refer to the registration
statement and its exhibits for additional information. Whenever
we make reference in this prospectus to any of our contracts,
agreements or other documents, the references are not
necessarily complete and you should refer to the exhibits
attached to the registration statement for copies of the actual
contract, agreement or other document. When we complete this
offering, we will also be required to file annual, quarterly and
special reports, proxy statements and other information with the
SEC.
You can read our SEC filings, including the registration
statement, over the Internet at the SEC’s web site at
www.sec.gov. You may also read and copy any document we file
with the SEC at its Public Reference Room at 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the operation of
the public reference facilities. Our SEC filings are also
available at the office of the Nasdaq National Market. For
further information on obtaining copies of our public filings at
the Nasdaq National Market, you should call (212) 656-5060.
Our Internet website is: www.molecularinsight.com. Information
on our Internet website does not constitute a part of this
prospectus.
90
MOLECULAR INSIGHT PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
TABLE OF CONTENTS
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F-2
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Consolidated Financial Statements:
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F-3
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F-4
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F-5
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F-8
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F-10
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F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Molecular Insight
Pharmaceuticals, Inc.
Cambridge, Massachusetts
We have audited the accompanying consolidated balance sheets of
Molecular Insight Pharmaceuticals, Inc. (a development stage
company) and subsidiaries (the “Company”) as of
December 31, 2003 and 2004, and the related consolidated
statements of operations, redeemable convertible preferred stock
and stockholders’ (deficit) equity, and cash flows for each
of the three years in the period ended December 31, 2004
and the consolidated statements of redeemable convertible
preferred stock and stockholders’ (deficit) equity for the
period from January 10, 1997 (date of inception) through
December 31, 2004. These financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 2003 and 2004, and the results
of its operations and its cash flows for each of the three years
in the period ended December 31, 2004, in conformity with
accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
November 7, 2005
F-2
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
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As of December 31,
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|
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|
|
|
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As of June 30,
|
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
|
|
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|
|
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(Unaudited)
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ASSETS
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Current assets:
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|
|
|
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|
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Cash and cash equivalents
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|
$
|
1,710,500
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|
|
$
|
846,154
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|
|
$
|
21,152,694
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|
|
|
Accounts receivable — research and development grants
|
|
|
49,378
|
|
|
|
86,465
|
|
|
|
125,308
|
|
|
|
Prepaid expenses and other current assets
|
|
|
76,119
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|
|
|
254,543
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|
|
|
243,813
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|
|
|
|
|
|
|
|
|
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|
|
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Total current assets
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|
|
1,835,997
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|
|
|
1,187,162
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|
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|
21,521,815
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Property and equipment — net
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|
|
383,830
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|
|
|
378,803
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|
|
|
388,286
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|
Deposits
|
|
|
12,291
|
|
|
|
6,891
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|
|
|
1,891
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|
|
|
|
|
|
|
|
|
|
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|
Total assets
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|
$
|
2,232,118
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|
|
$
|
1,572,856
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|
|
$
|
21,911,992
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|
|
|
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|
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LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS’ DEFICIT
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Current liabilities:
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|
|
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|
|
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Notes payable
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$
|
—
|
|
|
$
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851,414
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|
|
$
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22,864
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|
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|
Capital lease obligations
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|
|
5,101
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|
|
|
—
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|
|
|
—
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|
Advances received from stockholders for stock subscriptions
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|
2,118,800
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|
|
|
—
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|
|
|
—
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|
Accounts payable
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|
|
850,916
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|
|
|
1,611,391
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|
|
|
839,903
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|
|
|
Accrued expenses
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|
|
249,812
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|
|
|
1,098,130
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|
|
|
1,204,471
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|
|
|
Accrued expenses — related parties
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|
|
320,266
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|
|
|
177,996
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|
|
|
231,464
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|
|
|
Deferred revenue — government grants
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|
|
—
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|
|
|
14,233
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|
|
|
74,976
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
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|
|
3,544,895
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|
|
|
3,753,164
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|
|
|
2,373,678
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|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred rent — less current portion
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|
|
157,987
|
|
|
|
112,847
|
|
|
|
90,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock, $0.01 par
value — at carrying value, including accrued
dividends; authorized 211,000 shares at December 31,
2003 and 2004 and 359,515 (unaudited) shares at June 30,
2005; 120,317, 173,980, 315,570 (unaudited) shares issued and
outstanding at December 31, 2003, 2004 and June 30,
2005, respectively (liquidation preference and redemption value
of approximately $10,647,000 and $7,760,000 at December 31,
2003, $21,406,000 and $15,861,000 at December 31, 2004, and
$52,596,000 (unaudited) and $45,323,000 (unaudited) at
June 30, 2005)
|
|
|
7,552,080
|
|
|
|
15,538,074
|
|
|
|
43,808,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; authorized,
78,000,000 shares at December 31, 2003 and 2004 and
115,000,000 (unaudited) shares at June 30, 2005; issued and
outstanding, 23,779,444, 25,959,142 and 26,466,283 (unaudited)
shares at December 31, 2003, 2004 and June 30, 2005,
respectively
|
|
|
237,794
|
|
|
|
259,591
|
|
|
|
264,662
|
|
|
|
Additional paid-in capital
|
|
|
22,480,605
|
|
|
|
22,381,484
|
|
|
|
23,039,918
|
|
|
|
Note receivable from officer/stockholder
|
|
|
(295,650
|
)
|
|
|
(295,650
|
)
|
|
|
(295,650
|
)
|
|
|
Deferred stock-based compensation
|
|
|
—
|
|
|
|
(415,658
|
)
|
|
|
(1,130,187
|
)
|
|
|
Deficit accumulated during the development stage
|
|
|
(31,445,593
|
)
|
|
|
(39,760,996
|
)
|
|
|
(46,239,550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ deficit
|
|
|
(9,022,844
|
)
|
|
|
(17,831,229
|
)
|
|
|
(24,360,807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable convertible preferred stock and
stockholders’ deficit
|
|
$
|
2,232,118
|
|
|
$
|
1,572,856
|
|
|
$
|
21,911,992
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-3
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period From
|
|
|
|
|
|
|
Six Months Ended
|
|
|
January 10, 1997
|
|
|
|
|
Year Ended December 31,
|
|
|
June 30,
|
|
|
(Date of Inception)
|
|
|
|
|
|
|
|
|
|
|
to
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2004
|
|
|
2005
|
|
|
June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
Revenue — research and development grants
|
|
$
|
624,161
|
|
|
$
|
723,475
|
|
|
$
|
569,273
|
|
|
$
|
247,895
|
|
|
$
|
426,962
|
|
|
$
|
3,285,403
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
2,217,003
|
|
|
|
2,700,948
|
|
|
|
5,298,317
|
|
|
|
1,946,766
|
|
|
|
3,892,651
|
|
|
|
23,033,767
|
|
|
|
Research and development — related parties
|
|
|
99,602
|
|
|
|
73,855
|
|
|
|
83,156
|
|
|
|
41,578
|
|
|
|
96,876
|
|
|
|
749,739
|
|
|
|
General and administrative
|
|
|
1,333,712
|
|
|
|
1,157,559
|
|
|
|
3,108,640
|
|
|
|
1,458,109
|
|
|
|
2,638,113
|
|
|
|
15,271,627
|
|
|
|
General and administrative — related parties
|
|
|
228,248
|
|
|
|
108,449
|
|
|
|
411,060
|
|
|
|
66,920
|
|
|
|
404,108
|
|
|
|
1,151,865
|
|
|
|
Amortization of licensed patent rights
|
|
|
3,798,329
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,767,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
7,676,894
|
|
|
|
4,040,811
|
|
|
|
8,901,173
|
|
|
|
3,513,373
|
|
|
|
7,031,748
|
|
|
|
49,974,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(7,052,733
|
)
|
|
|
(3,317,336
|
)
|
|
|
(8,331,900
|
)
|
|
|
(3,265,478
|
)
|
|
|
(6,604,786
|
)
|
|
|
(46,688,725
|
)
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
3,367
|
|
|
|
1,261
|
|
|
|
19,601
|
|
|
|
11,736
|
|
|
|
133,019
|
|
|
|
301,304
|
|
|
|
Interest expense
|
|
|
(5,540
|
)
|
|
|
(3,052
|
)
|
|
|
(3,104
|
)
|
|
|
(1,141
|
)
|
|
|
(6,787
|
)
|
|
|
(28,263
|
)
|
|
|
Interest expense–related parties
|
|
|
(28,600
|
)
|
|
|
(28,600
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(57,200
|
)
|
|
|
Management fee income–related party
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
233,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income, net
|
|
|
(30,773
|
)
|
|
|
(30,391
|
)
|
|
|
16,497
|
|
|
|
10,595
|
|
|
|
126,232
|
|
|
|
449,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(7,083,506
|
)
|
|
|
(3,347,727
|
)
|
|
|
(8,315,403
|
)
|
|
|
(3,254,883
|
)
|
|
|
(6,478,554
|
)
|
|
|
(46,239,550
|
)
|
|
Redeemable convertible preferred stock dividends and accretion
of issuance costs
|
|
|
—
|
|
|
|
(612,895
|
)
|
|
|
(1,312,132
|
)
|
|
|
(638,132
|
)
|
|
|
(1,710,267
|
)
|
|
|
(3,635,294
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(7,083,506
|
)
|
|
$
|
(3,960,622
|
)
|
|
$
|
(9,627,535
|
)
|
|
$
|
(3,893,015
|
)
|
|
$
|
(8,188,821
|
)
|
|
$
|
(49,874,844
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share attributable to common
stockholders
|
|
$
|
(0.63
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to compute basic and diluted net
loss per share attributable to common stockholders
|
|
|
11,274,886
|
|
|
|
21,089,850
|
|
|
|
22,640,633
|
|
|
|
21,981,086
|
|
|
|
25,039,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-4
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ (Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Convertible
|
|
|
|
|
|
|
|
Preferred Stock,
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
$0.01 Par Value
|
|
$0.01 Par Value
|
|
|
|
|
Treasury Stock
|
|
|
Note
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Receivable
|
|
Deferred Stock–
|
|
|
During the
|
|
|
Total
|
|
|
|
|
Number of
|
|
|
Carrying
|
|
Number of
|
|
|
|
|
Paid-In
|
|
|
Number of
|
|
|
|
|
from
|
|
Based
|
|
|
Development
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Value
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Shares
|
|
|
Cost
|
|
|
Stockholder
|
|
Compensation
|
|
|
Stage
|
|
|
(Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception of Company,
January 10, 1997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in 1997
|
|
|
—
|
|
|
$
|
—
|
|
|
|
2,996,800
|
|
|
$
|
29,968
|
|
|
$
|
528,286
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(546,000
|
)
|
|
$
|
—
|
|
|
$
|
12,254
|
|
|
Issuance of common stock for services in 1997
|
|
|
—
|
|
|
|
—
|
|
|
|
1,846,800
|
|
|
|
18,468
|
|
|
|
1,672,982
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,673,200
|
)
|
|
|
—
|
|
|
|
18,250
|
|
|
Issuance of common stock in 1998
|
|
|
—
|
|
|
|
—
|
|
|
|
792,690
|
|
|
|
7,926
|
|
|
|
1,280,195
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,288,121
|
|
|
Issuance of common stock in 1999
|
|
|
—
|
|
|
|
—
|
|
|
|
650,000
|
|
|
|
6,500
|
|
|
|
1,618,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,625,000
|
|
|
Repurchase of common stock in 1999
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(210,000
|
)
|
|
|
(50,400
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(50,400
|
)
|
|
Issuance of common stock and warrants, net of $663,406 of
issuance costs in 2000
|
|
|
—
|
|
|
|
—
|
|
|
|
2,258,200
|
|
|
|
22,582
|
|
|
|
5,230,512
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,253,094
|
|
|
Issuance of common stock for services in 2000
|
|
|
—
|
|
|
|
—
|
|
|
|
5,100
|
|
|
|
51
|
|
|
|
12,699
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,750
|
|
|
Purchase of Zebra Pharmaceuticals, Inc. in 2000
|
|
|
—
|
|
|
|
—
|
|
|
|
2,097,154
|
|
|
|
20,972
|
|
|
|
9,941,643
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,962,615
|
|
|
Retirement of treasury stock in 2000
|
|
|
—
|
|
|
|
—
|
|
|
|
(210,000
|
)
|
|
|
(2,100
|
)
|
|
|
(48,300
|
)
|
|
|
210,000
|
|
|
|
50,400
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Stock-based compensation from inception to December 31, 2002
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,660,201
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,078,399
|
|
|
|
—
|
|
|
|
4,738,600
|
|
|
Net loss from inception to December 31, 2002
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(21,014,360
|
)
|
|
|
(21,014,360
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2002
|
|
|
—
|
|
|
|
—
|
|
|
|
10,436,744
|
|
|
|
104,367
|
|
|
|
22,896,718
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(140,801
|
)
|
|
|
(21,014,360
|
)
|
|
|
1,845,924
|
|
|
Issuance of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
10,057,700
|
|
|
|
100,577
|
|
|
|
(100,577
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,273
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,273
|
)
|
|
Amortization of stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
401
|
|
|
|
—
|
|
|
|
401
|
|
|
Unamortized deferred compensation related to cancelled stock
options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(70,991
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
70,991
|
|
|
|
—
|
|
|
|
—
|
|
|
Warrants issued in connection with notes payable to stockholders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,200
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,083,506
|
)
|
|
|
(7,083,506
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2002
|
|
|
—
|
|
|
|
—
|
|
|
|
20,494,444
|
|
|
|
204,944
|
|
|
|
22,724,077
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(69,409
|
)
|
|
|
(28,097,866
|
)
|
|
|
(5,238,254
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
F-5
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ (Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Convertible
|
|
|
|
|
|
|
|
|
Preferred Stock,
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
$0.01 Par Value
|
|
|
$0.01 Par Value
|
|
|
|
|
Treasury Stock
|
|
|
Note
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Receivable
|
|
|
Deferred Stock–
|
|
|
During the
|
|
|
Total
|
|
|
|
|
Number of
|
|
|
Carrying
|
|
|
Number of
|
|
|
|
|
Paid-In
|
|
|
Number of
|
|
|
|
|
from
|
|
|
Based
|
|
|
Development
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Shares
|
|
|
Cost
|
|
|
Stockholder
|
|
|
Compensation
|
|
|
Stage
|
|
|
(Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series A redeemable convertible preferred
stock, net of $259,843 of issuance costs
|
|
|
94,697
|
|
|
$
|
5,555,610
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Issuance of Series A redeemable convertible preferred stock
as stock-based compensation
|
|
|
6,476
|
|
|
|
349,704
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Conversion of accounts payable, accrued expenses, and notes into
Series A redeemable convertible preferred stock
|
|
|
19,144
|
|
|
|
1,033,871
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Preferred stock dividends
|
|
|
—
|
|
|
|
560,926
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(560,926
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(560,926
|
)
|
|
Accretion of issuance costs
|
|
|
—
|
|
|
|
51,969
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(51,969
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(51,969
|
)
|
|
Issuance of restricted common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
3,285,000
|
|
|
|
32,850
|
|
|
|
295,650
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(295,650
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
32,850
|
|
|
Stock-based compensation for non- employee awards
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
73,773
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
73,773
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
959
|
|
|
|
—
|
|
|
|
959
|
|
|
Unamortized deferred compensation related to cancelled stock
options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68,450
|
|
|
|
—
|
|
|
|
68,450
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,347,727
|
)
|
|
|
(3,347,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2003
|
|
|
120,317
|
|
|
|
7,552,080
|
|
|
|
23,779,444
|
|
|
|
237,794
|
|
|
|
22,480,605
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(295,650
|
)
|
|
|
—
|
|
|
|
(31,445,593
|
)
|
|
|
(9,022,844
|
)
|
|
Issuance of common stock upon exercise of stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
1,975,994
|
|
|
|
19,760
|
|
|
|
174,989
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
194,749
|
|
|
Issuance of common stock upon exercise of warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
203,704
|
|
|
|
2,037
|
|
|
|
52,963
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,000
|
|
|
Issuance of Series B redeemable convertible preferred stock
and common stock warrants, net of $198,514 of issuance costs
|
|
|
52,670
|
|
|
|
6,542,786
|
|
|
|
—
|
|
|
|
—
|
|
|
|
211,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
211,000
|
|
|
Conversion of accounts payable into Series B redeemable
convertible preferred stock
|
|
|
993
|
|
|
|
131,076
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
F-6
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ (Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Convertible
|
|
|
|
|
|
|
|
|
Preferred Stock,
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
$0.01 Par Value
|
|
|
$0.01 Par Value
|
|
|
|
|
Treasury Stock
|
|
|
Note
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Receivable
|
|
|
Deferred Stock–
|
|
|
During the
|
|
|
Total
|
|
|
|
|
Number of
|
|
|
Carrying
|
|
|
Number of
|
|
|
|
|
Paid-In
|
|
|
Number of
|
|
|
|
|
from
|
|
|
Based
|
|
|
Development
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Shares
|
|
|
Cost
|
|
|
Stockholder
|
|
|
Compensation
|
|
|
Stage
|
|
|
(Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation for non- employee awards
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45,509
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45,509
|
|
|
Preferred stock dividends
|
|
|
—
|
|
|
|
1,016,920
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,016,920
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,016,920
|
)
|
|
Accretion of issuance costs and warrants
|
|
|
—
|
|
|
|
295,212
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(295,212
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(295,212
|
)
|
|
Deferred stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
728,550
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(728,550
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Amortization of deferred stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
312,892
|
|
|
|
—
|
|
|
|
312,892
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,315,403
|
)
|
|
|
(8,315,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2004
|
|
|
173,980
|
|
|
|
15,538,074
|
|
|
|
25,959,142
|
|
|
|
259,591
|
|
|
|
22,381,484
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(295,650
|
)
|
|
|
(415,658
|
)
|
|
|
(39,760,996
|
)
|
|
|
(17,831,229
|
)
|
|
Exercise of stock options and warrants (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
507,141
|
|
|
|
5,071
|
|
|
|
45,642
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,713
|
|
|
Issuance of Series C redeemable convertible preferred
stock, net of $1,106,800 of issuance costs (unaudited)
|
|
|
141,590
|
|
|
|
27,470,581
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,000
|
|
|
Series B warrant modification (unaudited)
|
|
|
—
|
|
|
|
(560,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
560,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
560,000
|
|
|
Preferred stock dividends (unaudited)
|
|
|
—
|
|
|
|
1,168,592
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,168,592
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,168,592
|
)
|
|
Accretion of issuance costs and warrants (unaudited)
|
|
|
—
|
|
|
|
191,597
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(191,597
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(191,597
|
)
|
|
Stock-based compensation for non- employee awards (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,481
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,481
|
|
|
Deferred stock-based compensation (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,350,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,350,500
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Amortization of deferred stock-based compensation (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
635,971
|
|
|
|
—
|
|
|
|
635,971
|
|
|
Net loss (unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,478,554
|
)
|
|
|
(6,478,554
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2005
(unaudited)
|
|
|
315,570
|
|
|
$
|
43,808,844
|
|
|
|
26,466,283
|
|
|
$
|
264,662
|
|
|
$
|
23,039,918
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
(295,650
|
)
|
|
$
|
(1,130,187
|
)
|
|
$
|
(46,239,550
|
)
|
|
$
|
(24,360,807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Concluded)
|
See notes to consolidated financial statements.
F-7
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative for the
|
|
|
|
|
|
|
|
|
Period From
|
|
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
January 10, 1997
|
|
|
|
|
|
|
|
|
|
|
(Date of Inception)
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2004
|
|
|
2005
|
|
|
to June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,083,506
|
)
|
|
$
|
(3,347,727
|
)
|
|
$
|
(8,315,403
|
)
|
|
$
|
(3,254,883
|
)
|
|
$
|
(6,478,554
|
)
|
|
$
|
(46,239,550
|
)
|
|
Adjustments to reconcile net loss to cash used in operating
activities, net of acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash interest expense on promissory notes payable to
stockholders
|
|
|
1,100
|
|
|
|
28,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29,700
|
|
|
|
Depreciation and amortization
|
|
|
3,927,967
|
|
|
|
92,712
|
|
|
|
106,206
|
|
|
|
52,574
|
|
|
|
61,404
|
|
|
|
10,597,223
|
|
|
|
Stock-based compensation expense (credit)
|
|
|
(2,872
|
)
|
|
|
492,886
|
|
|
|
358,403
|
|
|
|
260,295
|
|
|
|
674,452
|
|
|
|
6,302,723
|
|
|
|
Noncash rent
|
|
|
—
|
|
|
|
—
|
|
|
|
(45,140
|
)
|
|
|
(22,570
|
)
|
|
|
(22,570
|
)
|
|
|
(67,710
|
)
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,787
|
|
|
|
Changes in assets and liabilities, net of the acquisition of
Zebra Pharmaceuticals, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(5,315
|
)
|
|
|
(13,014
|
)
|
|
|
(37,087
|
)
|
|
|
40,266
|
|
|
|
(38,843
|
)
|
|
|
(63,161
|
)
|
|
|
|
Prepaid expenses
|
|
|
15,940
|
|
|
|
(4,356
|
)
|
|
|
(55,771
|
)
|
|
|
(117,792
|
)
|
|
|
10,730
|
|
|
|
(58,463
|
)
|
|
|
|
Deposits
|
|
|
1,600
|
|
|
|
—
|
|
|
|
5,400
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
(1,891
|
)
|
|
|
|
Accounts payable
|
|
|
257,222
|
|
|
|
(119,233
|
)
|
|
|
992,914
|
|
|
|
(77,603
|
)
|
|
|
(754,203
|
)
|
|
|
709,167
|
|
|
|
|
Accrued expenses and other
|
|
|
373,278
|
|
|
|
(219,743
|
)
|
|
|
951,180
|
|
|
|
784,883
|
|
|
|
106,341
|
|
|
|
1,264,313
|
|
|
|
|
Accounts payable and accrued expenses-related parties
|
|
|
230,169
|
|
|
|
63,600
|
|
|
|
(142,270
|
)
|
|
|
(243,848
|
)
|
|
|
53,468
|
|
|
|
338,131
|
|
|
|
|
Deferred revenue — government grants
|
|
|
—
|
|
|
|
—
|
|
|
|
14,233
|
|
|
|
—
|
|
|
|
60,743
|
|
|
|
74,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(2,284,417
|
)
|
|
|
(3,026,275
|
)
|
|
|
(6,167,335
|
)
|
|
|
(2,578,678
|
)
|
|
|
(6,322,032
|
)
|
|
|
(27,109,775
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(24,964
|
)
|
|
|
(26,148
|
)
|
|
|
(202,542
|
)
|
|
|
(149,326
|
)
|
|
|
(88,172
|
)
|
|
|
(864,675
|
)
|
|
|
Collection of advance and note receivable for stockholder
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
135,500
|
|
|
|
Net cash received on acquisition of Zebra Pharmaceuticals,
Inc.
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
171,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(24,964
|
)
|
|
|
(26,148
|
)
|
|
|
(202,542
|
)
|
|
|
(149,326
|
)
|
|
|
(88,172
|
)
|
|
|
(557,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances received for stock subscriptions — net
|
|
|
571,579
|
|
|
|
2,072,511
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,314,619
|
|
|
|
Proceeds from issuance of notes payable to stockholders and
issuance of warrants
|
|
|
550,000
|
|
|
|
—
|
|
|
|
700,000
|
|
|
|
—
|
|
|
|
375,000
|
|
|
|
1,645,000
|
|
|
|
Payment on notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
(120,392
|
)
|
|
|
(5,721
|
)
|
|
|
(128,550
|
)
|
|
|
(248,942
|
)
|
|
|
Proceeds from sale of Series A redeemable convertible
preferred stock — net of issuance costs
|
|
|
—
|
|
|
|
2,663,207
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,663,207
|
|
|
|
Proceeds from sale of Series B redeemable convertible
preferred stock — net of issuance costs
|
|
|
—
|
|
|
|
—
|
|
|
|
4,681,275
|
|
|
|
4,681,275
|
|
|
|
—
|
|
|
|
4,681,275
|
|
|
|
Proceeds from sale of Series C redeemable convertible
preferred stock — net of issuance costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,419,581
|
|
|
|
26,419,581
|
|
|
|
Payments on capital lease obligations
|
|
|
(16,323
|
)
|
|
|
(18,735
|
)
|
|
|
(5,101
|
)
|
|
|
(5,101
|
)
|
|
|
—
|
|
|
|
(74,999
|
)
|
|
|
Proceeds from exercise of common stock options and warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
249,749
|
|
|
|
97,111
|
|
|
|
50,713
|
|
|
|
300,462
|
|
|
|
Proceeds from sale of common stock and warrants, net of issuance
costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,168,215
|
|
|
|
Proceeds from sale of restricted stock
|
|
|
—
|
|
|
|
32,850
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32,850
|
|
|
|
Repurchase of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(50,400
|
)
|
|
|
Repayment of loan payable
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(20,000
|
)
|
|
|
Repayment of installment note payable
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,804
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
1,105,256
|
|
|
|
4,749,833
|
|
|
|
5,505,531
|
|
|
|
4,767,564
|
|
|
|
26,716,744
|
|
|
|
48,820,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(1,204,125
|
)
|
|
|
1,697,410
|
|
|
|
(864,346
|
)
|
|
|
2,039,560
|
|
|
|
20,306,540
|
|
|
|
21,152,694
|
|
|
Cash and cash equivalents — beginning of period
|
|
|
1,217,215
|
|
|
|
13,090
|
|
|
|
1,710,500
|
|
|
|
1,710,500
|
|
|
|
846,154
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents — end of period
|
|
$
|
13,090
|
|
|
$
|
1,710,500
|
|
|
$
|
846,154
|
|
|
$
|
3,750,060
|
|
|
|
21,152,694
|
|
|
$
|
21,152,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flows information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
5,540
|
|
|
$
|
3,052
|
|
|
$
|
3,105
|
|
|
$
|
1,141
|
|
|
$
|
1,043
|
|
|
$
|
59,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-8
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH
FLOWS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative for the
|
|
|
|
|
|
|
|
|
Period From
|
|
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
January 10, 1997
|
|
|
|
|
|
|
|
|
|
|
(Date of Inception)
|
|
|
|
|
2002
|
|
2003
|
|
|
2004
|
|
|
2004
|
|
|
2005
|
|
|
to June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable to stockholders including accrued interest of
$55,000 converted into Series A redeemable convertible
preferred stock
|
|
$
|
—
|
|
|
$
|
605,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
605,000
|
|
|
|
Accrued expenses and accounts payable converted into Redeemable
convertible preferred stock
|
|
|
—
|
|
|
|
79,167
|
|
|
|
131,076
|
|
|
|
—
|
|
|
|
—
|
|
|
|
210,243
|
|
|
|
Leasehold improvements paid by landlord
|
|
|
—
|
|
|
|
203,127
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
203,127
|
|
|
|
Issuance of notes payable for prepaid insurance and conversion
of accrued expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
274,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
274,000
|
|
|
|
Property and equipment financed through accounts payable
|
|
|
—
|
|
|
|
122,532
|
|
|
|
21,169
|
|
|
|
4,057
|
|
|
|
3,884
|
|
|
|
3,884
|
|
|
|
Issuance of 2,097,154 shares of common stock and 2,125,200
stock options on acquisition of Zebra Pharmaceuticals, Inc., net
of cash received
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,041,257
|
|
|
|
Acquisition of equipment under capital lease obligations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
74,999
|
|
See notes to consolidated financial statements.
F-9
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
|
|
|
|
1.
|
NATURE OF BUSINESS AND OPERATIONS
|
Nature of Business
— Molecular Insight
Pharmaceuticals, Inc. (the “Company”) was incorporated
in January 1997 and is a biopharmaceutical company focused on
the research, development and commercialization of innovative
molecular imaging pharmaceuticals and targeted radiotherapeutics
designed to improve patient diagnosis, treatment and management.
The Company is based in Cambridge, Massachusetts.
Development Stage Company
— The Company’s
revenue generating activities have been limited to research and
development services pursuant to certain governmental research
and development grants, and no revenues have been recorded from
the sale of products from its planned principal business
activity. Accordingly, the Company is classified as a
development stage company.
Operations
— The Company has incurred net
losses and negative operating cash flows since inception. As of
December 31, 2004 and June 30, 2005, the Company had
an accumulated deficit of $39.8 million and
$46.2 million, respectively, and a stockholders’
deficit of $17.8 million and $24.4 million,
respectively. The Company expects to incur additional losses and
negative operating cash flows for the foreseeable future, which
absent additional capital from the issuance of equity securities
would increase the stockholders’ deficit in future periods.
The Company has funded its operations through December 31,
2004 through the issuance of redeemable convertible preferred
stock, the issuance of common stock, borrowings from
stockholders and others and revenues earned from government
research and development grants. In 2005, the Company raised
additional capital of $27.5 million from the issuance of
redeemable convertible preferred stock (see Note 8) net of
issuance costs. The Company’s long-term success is
dependent on obtaining sufficient capital to fund the research
and development of its products, to bring about their successful
commercial release, to generate revenue and, ultimately, attain
profitable operations. The Company believes that its available
cash will be sufficient to finance its working capital and
capital requirements through at least December 2006.
To achieve its business plan, the Company may be required to
raise additional funds through public or private financings,
strategic relationships or other arrangements. It can not be
assured that such funding, if needed, will be available on terms
attractive to the Company, or at all. In addition, any financing
may be dilutive to stockholders and may involve restrictive
covenants. The Company’s failure to raise capital as and
when needed could have a negative impact on its financial
condition and its ability to pursue its business strategy.
The Company is also subject to other risks common to companies
in the biopharmaceutical industry including, but not limited to,
new technological innovations, dependence on key personnel,
protection of proprietary technology, compliance with government
regulations and approval requirements, commercialization of our
potential products, uncertainty of market acceptance of
products, competition from larger companies, ability to reach
commercial production of its product candidates, and the need to
obtain additional financing.
|
|
|
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Principles of Consolidation
— The consolidated
financial statements include the accounts of the Company, its
wholly owned subsidiary, Biostream Therapeutics, Inc.
(“BTI”) from the date of acquisition,
February 29, 2000, and its 63.6% owned subsidiary, ATP
Therapeutics, Inc. (“ATP”),
F-10
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
from the date of its incorporation on March 4, 1999. ATP
was formed as a joint venture by the Company and an independent
physician to pursue pre-clinical development of certain patents
held by the physician. The physician contributed a license on
the patents to the joint venture for a 40% interest, and the
Company received a 60% interest for its commitment to fund
development. In September 2000, the Company purchased an
additional 200,000 shares of unissued common stock of ATP
for $1,000,000 thereby increasing its ownership interest to
63.6%. The Company has recognized all of ATP’s losses as
the Company has been ATP’s sole source of funding and the
Company’s equity has absorbed all losses. The minority
interest in this investment is not material. Intercompany
accounts and transactions for all subsidiaries have been
eliminated in consolidation. As discussed in Note 12, the
Company purchased the remaining balance of ATP and plans to
liquidate the subsidiary.
Use of Estimates
— The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and use assumptions that affect reported amounts
of assets and liabilities and the disclosure of contingent
assets and liabilities at the balance sheet dates and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
Significant estimates reflected in these financial statements
include the estimated fair values of the Company’s common
and redeemable convertible preferred stock, certain accruals and
reserves, and the valuation allowance on the deferred tax assets.
Unaudited Interim Financial Statements
— The
consolidated balance sheet as of June 30, 2005, the
consolidated statements of operations and cash flows for the six
months ended June 30, 2004 and 2005, and the consolidated
statement of redeemable preferred stock and stockholders’
deficit for the six months ended June 30, 2005 are
unaudited. These unaudited interim consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America.
In the opinion of the Company’s management, the unaudited
interim consolidated financial statements have been prepared on
the same basis as the audited consolidated financial statements
and include all adjustments, consisting of normal recurring
adjustments, necessary for the fair presentation of the
Company’s financial position at June 30, 2005 and its
results of operations and cash flows for the six months ended
June 30, 2004 and 2005. The results of operations for the
interim periods are not necessarily indicative of the results to
be expected for any other interim period or any fiscal year.
Revenue Recognition
— The Company recognizes
revenue from government grants for research and development as
services are performed provided contractual agreements exist,
the fees are fixed or determinable and the collection is
probable. Amounts recognized are limited to amounts due from the
grantor based upon the contract or grant terms. The Company has
been awarded government grants from the National Institutes of
Health (“NIH”) to provide research services related to
certain areas of the Company’s research. Such grants are
generally on a cost sharing basis with the Company also
contributing to the costs of research. NIH grant revenue is
recognized on a proportional performance basis as costs are
incurred. Payments received in advance of costs being incurred
are recorded as deferred revenue.
Under the terms of the NIH grants, the Company has all right,
title and interest in its patents, copyrights and data
pertaining to its product development, subject to certain rights
of the government. Under existing regulations, the government
receives a royalty-free license for federal government use for
all patents developed under a government grant. In addition,
under certain circumstances the
F-11
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
government may require the Company to license technology
resulting from the government-funded projects to third parties
and may require that the Company manufacture its product in the
United States. However, ownership in such technology remains
with the Company.
Funding of government grants is subject to government
appropriation and all of these grants contain provisions which
allow for termination at the convenience of the government.
These grants require the Company to comply with certain
government regulations. Management believes that the Company has
complied with all regulations that, if not met, could have a
material adverse impact on the Company’s consolidated
financial statements or the Company’s eligibility for
future grant awards.
Research and Development
— Research and
development expense consists of expenses incurred in developing
and testing product candidates. These expenses consist primarily
of salaries and related expenses for personnel, fees paid to
professional service providers in conjunction with independently
monitoring clinical trials and acquiring and evaluating data in
conjunction with clinical trials, costs of contract
manufacturing services, costs of materials used in clinical
trials and research and development, depreciation of capital
assets used to develop products and costs of facilities.
Research and development costs are expensed as incurred. Certain
research and development activities are partially funded with
government grants, which are recognized as revenue.
Cash and Cash Equivalents
— Cash and cash
equivalents represent cash and highly liquid investments
purchased within three months of the maturity date and consist
of money market funds.
Property and Equipment
— Property and equipment
are recorded at cost. Leased equipment accounted for as a
capital lease is recorded at the present value of minimum lease
payments at the inception of the lease. Depreciation and
amortization is provided using the straight-line method over the
estimated lives of the related assets or over the term of the
lease (for leasehold improvements and leased equipment), if
shorter. Useful lives and lease terms range from one to seven
years.
Licensed Patent Rights
— On February 29,
2000, the Company acquired all of the outstanding stock of BTI,
which was accounted for under the purchase method of accounting.
The acquired licensed patent rights of $9.8 million were
assigned a three year useful life. During 2002, the Company
accelerated the amortization of this intangible asset as the
Company was no longer pursuing the underlying research.
Accordingly, the Company fully amortized the asset as of
December 31, 2002. Amortization expense was $3,798,329 in
2002.
Impairment of Long-Lived Assets
— The Company
reviews its long-lived assets for impairment when events or
changes in circumstances indicate that the carrying amount of a
long-lived asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the
carrying amount of an asset to future cash flows expected to be
generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the
fair value of the assets.
Income Taxes
— Deferred tax assets and
liabilities relate to temporary differences between financial
reporting and income tax bases of assets and liabilities and are
measured using enacted tax rates and laws expected to be in
effect at the time of their reversal. Valuation allowances are
established, when necessary, to reduce the net deferred tax
asset to the amount more likely than not to be realized. For
interim reporting periods, the Company uses the estimated annual
effective tax rate.
F-12
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
Stock-Based Compensation
— The Company accounts
for its stock-based awards to employees and directors in their
capacity as directors (hereafter referred to as
“employees”) using the intrinsic-value method in
accordance with Accounting Principles Board (“APB”)
Opinion No. 25,
Accounting for Stock Issued to Employees
,
and its related interpretations. The Company accounts for its
stock-based awards to nonemployees using the fair value method
in accordance with Statement of Financial Accounting Standards
(“SFAS”) No. 123,
Accounting for Stock-Based
Compensation
and Emerging Issues Task Force
(“EITF”) Issue No. 96-18,
Accounting for Equity
Instruments That are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling Goods and
Services.
See Note 3 for a more detailed discussion of
stock-based compensation. Stock compensation costs are
recognized over the service period of the awards, which is the
vesting period for employees.
The Company has adopted the disclosure provisions of
SFAS No. 123, for all employee stock-based awards. For
purposes of the pro forma disclosure, the fair value of each
employee option grant was determined using the Black-Scholes
option pricing model. The assumptions used for all grants during
the applicable periods presented are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
Year Ended December 31,
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2004
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
3.03
|
%
|
|
|
2.44
|
%
|
|
|
2.84
|
%
|
|
|
2.75
|
%
|
|
|
3.54
|
%
|
|
Expected dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
Expected option life
|
|
|
5 years
|
|
|
|
4 years
|
|
|
|
4 years
|
|
|
|
4 years
|
|
|
|
4 years
|
|
|
Expected stock price volatility
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
F-13
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
The pro forma impact on reported net loss attributable to common
stockholders was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2004
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Net loss attributable to common stockholders, as reported
|
|
$
|
(7,083,506
|
)
|
|
$
|
(3,960,622
|
)
|
|
$
|
(9,627,535
|
)
|
|
$
|
(3,893,015
|
)
|
|
$
|
(8,188,821
|
)
|
|
Add back: stock-based employee compensation expense included in
reported net loss
|
|
|
—
|
|
|
|
338,904
|
|
|
|
312,894
|
|
|
|
239,825
|
|
|
|
635,971
|
|
|
Deduct: stock-based employee compensation expense determined
under fair value method
|
|
|
(135,148
|
)
|
|
|
(486,248
|
)
|
|
|
(346,057
|
)
|
|
|
(251,542
|
)
|
|
|
(688,438
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro-forma net loss attributable to common stockholders
|
|
$
|
(7,218,654
|
)
|
|
$
|
(4,107,966
|
)
|
|
$
|
(9,660,698
|
)
|
|
$
|
(3,904,732
|
)
|
|
$
|
(8,241,288
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
(0.63
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
$
|
(0.64
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effects of applying the provisions of SFAS No. 123
on net loss as stated above is not necessarily representative of
the effects on the reported income or loss for future years due
to, among other things, the adoption of SFAS No. 123(R) (as
discussed below), the vesting period of the stock options and
the fair value of additional stock options that may be granted
in future years.
Net Loss Per Share
— Basic and diluted net loss
per common share is calculated by dividing the net loss
applicable to common stockholders by the weighted average number
of unrestricted common shares outstanding during the period.
Diluted net loss per share is the same as basic net loss per
share, since the effects of potentially dilutive securities are
anti-dilutive for all periods presented. Anti-dilutive
securities, which consist of redeemable convertible preferred
stock, common stock issuable upon
F-14
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
conversion of accrued cumulative dividends on preferred stock,
stock options, warrants and convertible debt that are not
included in the diluted net loss per share calculation,
aggregated approximately 16,200,779, 37,412,477 and 47,892,440
potential common shares as of December 31, 2002, 2003 and
2004, respectively, and 47,864,481 and 79,169,447 as of
June 30, 2004 and 2005, respectively. In addition, unvested
common stock pursuant to restricted stock awards are excluded
from the calculation of basic loss per share. The unvested
common stock are excluded from the calculation of diluted loss
per share as these are antidilutive.
The Company’s redeemable convertible preferred stock accrue
dividends (see Note 8) that may either be paid in cash or
in common stock at the election of the holder. If conversion is
elected, the number of shares into which the dividends may be
converted is based upon the conversion ratio for the redeemable
convertible preferred stock and may result in the holders of the
redeemable convertible preferred stock receiving common stock
with a fair value that is greater than the recorded amount of
accrued dividends. If the conversion feature of the accrued
dividends has an intrinsic value greater than the dividend
earned, the beneficial conversion feature is recognized and
treated as a distribution to preferred stockholders for purposes
of net loss per share calculations.
Concentration of Credit Risk and Significant
Customers
— Financial instruments which
potentially expose the Company to concentrations of credit risk
consist primarily of cash and cash equivalents. The
Company’s cash and cash equivalents were held at one
financial institution at June 30, 2005. Management believes
that the financial institution is of high credit quality. All of
the Company’s research and development revenue is from a
single United States government agency.
Guarantees: Indemnified Obligations
— The
Company’s Articles of Organization, By-Laws and agreements
with officers and directors provide that the Company indemnify
its officers and directors for certain events or occurrences
that happen by reason of the fact that the officer or director
is, was, or has agreed to serve as an officer or director of the
Company. The term of the indemnification period is for the
officer or director’s lifetime. The maximum potential
amount of future payments the Company could be required to make
under these indemnification agreements is unlimited.
The Company leases office space under a non-cancelable operating
lease (see Note 10). The Company has indemnification
arrangements under this lease that require the Company to
indemnify the landlord against claims, actions or damages
incurred in connection with the premises covered by the
Company’s lease and the Company’s use of the premises.
The Company had not experienced any losses related to these
indemnification obligations, and no claims with respect thereto
were outstanding at December 31, 2004 or June 30,
2005. The Company does not expect significant claims related to
these indemnification obligations, and consequently concluded
that the fair value of these obligations is negligible and no
related reserves were established in any period presented in the
accompanying consolidated financial statements.
Fair Value of Financial Instruments
— The
carrying amounts of the Company’s financial instruments,
which include cash equivalents, accounts receivable, accounts
payable, accrued expenses and notes payable approximate their
fair values due to the short term nature of the instruments.
Segments
— The Company conducts its operations
and manages its business as one operating segment.
Recent Accounting Pronouncements
— In December
2004, the Financial Accounting Standards Board,
(“FASB”), issued SFAS No. 123(R),
Share-Based Payment
. SFAS 123(R) addresses
accounting for
F-15
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
share-based awards, including shares issued under employee stock
purchase plans, stock options, and stock awards and stock
appreciation rights. SFAS 123(R) will require the Company
to expense share-based awards with compensation cost measured
using the fair value of the awards. SFAS 123(R) is
effective for the Company beginning January 1, 2006. The
Company has not yet determined the effect that the adoption of
SFAS 123(R) will have on its financial position and results
of operations, although compensation costs recognized in
operations will increase from historical levels for all fixed
awards.
|
|
|
|
3.
|
STOCK-BASED COMPENSATION
|
As discussed in Note 2, the Company accounts for its
stock-based awards to employees using the intrinsic-value method
and those to nonemployees using the fair value method. The
Company’s awards include common stock options, common stock
warrants and restricted common stock. Under the intrinsic-value
method, stock compensation expense is determined on the
measurement date, which is generally the grant date (except for
performance based awards), as the amount by which the fair value
of the common stock exceeds the exercise price to be paid by the
employee multiplied by the number of shares granted. Under the
fair value method, stock compensation expense is determined
based upon the fair value of the award itself on the measurement
date, which is generally the date on which the services are
completed for nonemployees. The fair value of the award is
determined using the Black-Scholes option pricing model.
In using the Black Scholes option pricing model the Company
makes certain assumptions with respect to the estimated lives of
the awards, volatility of the fair value of the common stock
during the expected option life, risk free interest rates and
dividends rates. As discussed in Note 2, no volatility is
used in estimates made for the purpose of disclosing stock-based
compensation attributable to employee awards. Volatility
estimates are used in arriving at the fair value of nonemployee
awards by taking data from comparable public companies in
similar industries and markets.
Awards to nonemployees are subject to variable accounting
whereby interim measurements of the fair value of the awards
will be made from the date of issuance through the measurement
dates of the awards. Changes in the fair value of the awards are
recorded through the Company’s statement of operations over
the performance period.
F-16
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
Stock-based compensation expense for each period presented in
the accompanying consolidated statements of operations are as
follows:
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Period From
|
|
|
|
|
Year Ended December 31,
|
|
|
June 30,
|
|
|
January 10, 1997
|
|
|
|
|
|
|
|
|
|
|
(Date of Inception)
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2004
|
|
|
2005
|
|
|
to June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Stock-based compensation charged to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
526
|
|
|
$
|
222,526
|
|
|
$
|
24,705
|
|
|
$
|
7,159
|
|
|
$
|
46,365
|
|
|
$
|
1,914,197
|
|
|
Research and development — related parties
|
|
|
(3,398
|
)
|
|
|
13,855
|
|
|
|
23,156
|
|
|
|
11,578
|
|
|
|
21,876
|
|
|
|
55,489
|
|
|
General and administrative
|
|
|
—
|
|
|
|
256,505
|
|
|
|
310,542
|
|
|
|
241,558
|
|
|
|
606,211
|
|
|
|
4,333,037
|
|
|
General and administrative — related parties
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,872
|
)
|
|
$
|
492,886
|
|
|
$
|
358,403
|
|
|
$
|
260,295
|
|
|
$
|
674,452
|
|
|
$
|
6,302,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 1997, the Company issued a total of 2,382,800 shares of
common stock to employees and nonemployees at $0.005 per share,
which was below the fair value of the common stock on the
respective measurement dates of the awards. This resulted in
stock-based compensation aggregating $4,221,699 which was
expensed as follows: $439,200 in 1997, $1,813,375 in 1998 and
$1,969,124 in 1999.
During 1998, 1999, 2000 and 2001, the Company granted stock
options to purchase a total of 757,000 shares of common stock to
employees with exercise prices below the fair market value of
the common stock on the respective measurement dates or to
nonemployees. The exercise prices ranged from $0.005 to $2.50
per share. Applying the intrinsic value method for the employee
awards and the fair value method for the nonemployee awards
resulted in stock-based compensation aggregating $514,029, of
which a credit of ($2,872) was recorded in 2002. The amount was
fully expensed by December 31, 2002.
In May of 2003, certain employees and nonemployees cancelled
their stock option agreements with exercise prices ranging from
$0.20 to $2.50 per share with a weighted-average exercise price
of $1.09. A total of 2,230,540 options were cancelled for
employees and 370,400 for nonemployees. Unamortized deferred
stock-based compensation as of May 2003 of $68,450 was expensed
upon cancellation. The Company granted, 181 days after
cancellation, options having the same terms and with an exercise
price equal to the then fair value of the Company’s common
stock on such date. Accordingly, in December 2003 the Company
issued to these same employees and nonemployees options to
purchase 2,230,540 and 370,400 shares of common stock,
respectively with an exercise price of $0.10 per share, the then
fair value per share on the date of grant. The vesting and
exercise periods for these newly issued options were consistent
with the vesting and exercise period on the cancelled shares,
with the exception of the employees’ options, which have an
exercise period of 10 years. Also in 2003, the Company
granted stock options for the purchase of 780,776 shares of
common stock to nonemployees, all with an exercise price of
$0.10 per share. Vesting for these options were either immediate
or for terms up to four years. No incremental stock-based
compensation resulted from the cancellation and re-grant of
employee options. The Company recorded stock-based
F-17
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
compensation expense relating to the awards to nonemployees,
including those awards cancelled and re-granted, of $74,732,
$32,740, and $18,596 in 2003, 2004 and the six months ended June
30, 2005, respectively, using the fair value method and based on
the Black-Scholes option-pricing model with the following
assumptions: estimated useful life of 10 years, average
risk-free interest rate of 4.3%, volatility of 65% and no
expected dividends.
Also in 2003, the Company issued 6,476 shares of Series A
redeemable convertible preferred stock in lieu of cash
compensation to certain officers and employees. The fair value
of the stock of $349,704 was recorded as stock-based
compensation expense in the year ended December 31, 2003.
During 2004 and the six months ended June 30, 2005, the
Company granted stock options to purchase 85,606 and 165,000
shares, respectively, of common stock to nonemployees at an
exercise price of $0.10 and $0.20 per share, respectively. The
Company recorded stock-based compensation expense relating to
these awards of $12,770 and $5,188 in 2004 and the six months
ended June 30, 2005, respectively, using the fair value method
and based on the Black-Scholes option-pricing model with the
following assumptions: estimated useful life of 10 years,
average risk-free interest rate of 4.23%, volatility of 66% and
no expected dividends.
During 2004 and the six months ended June 30, 2005, the
Company granted stock options to purchase 762,500 and 1,460,000
shares, respectively, of common stock to employees at an
exercise price of $0.10 and $0.20 per share, respectively. The
stated exercise prices were determined to be below the fair
value of the common stock on the measurement dates. As a result,
the Company has recorded deferred stock compensation of $137,250
in 2004 and $496,400 for the six months ended June 30, 2005
for the difference between the exercise price per share and the
fair value per share at the respective grant dates. Compensation
expense related to stock options granted to the employees was
$17,243 and $64,381 for the year ended December 31, 2004
and the six months ended June 30, 2005, respectively. As of
December 31, 2004 and June 30, 2005, the Company had
an aggregate of $120,006 and $547,326 respectively of deferred
stock-based compensation remaining to be amortized related to
these awards. Based upon the vesting periods of the awards, this
deferred stock-based compensation balance is expected to be
expensed as follows: approximately $80,000 during the remainder
of 2005; $153,000 during 2006 and 2007; $136,000 during 2008,
and $17,000 during 2009. These amounts could increase upon the
Company’s adoption of SFAS No. 123(R) on
January 1, 2006. The Company has not yet determined the
full extent that the adoption of SFAS No. 123(R) will
have on its financial position or results of operation.
During 2003, the Company issued to the Chief Executive Officer
3,285,000 shares of restricted common stock in exchange for
$32,850 in cash and the issuance of a partial recourse (50%),
non interest bearing note receivable for $295,650. These shares
are subject to Stock Restriction and Stock Pledge Agreements.
Under the terms of these Agreements, the shares vest through
February 7, 2007 and if the Chief Executive Officer were to
terminate employment for any reason prior to February 7,
2007, any unvested shares are repurchasable by the Company at
the original issuance price or a price determined based upon a
formula that changes upon the termination circumstances. As of
December 31, 2004 and June 30, 2005, 1,806,750 and
2,135,250 of these shares are vested, respectively. Every three
months thereafter another 164,250 shares are scheduled to vest.
The underlying shares issued to the Chief Executive Officer are
subject to variable accounting treatment until a measurement
date occurs. Accordingly, until the final measurement date
occurs, compensation is measured as the greater of the fair
value of the shares over the purchase cost and such compensation
F-18
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
is being recognized over the vesting term of the shares. Because
the fair value of the shares may fluctuate, any increase or
decrease in the fair value of the shares at each of the
Company’s reporting dates will result in periodic increases
and decreases in the amount of compensation expense recognized
in any reporting period. There was no compensation expense in
2003 relating to these shares because the fair value of the
shares on the issuance date and December 31, 2003 was the
same. However, in 2004, due to an increase in the fair value of
the shares, the Company recorded deferred stock-based
compensation of $591,300 and $854,100 for the year ended
December 31, 2004 and the six months ended June 30,
2005, respectively. The Company recognized $295,650, $236,520
and $571,590 of compensation expense included in general and
administrative expense pursuant to this agreement for the year
ended December 31, 2004 and for six months ended
June 30, 2004 and June 30, 2005, respectively.
Stock Option Plan
— In 1997, the Company’s
stockholders and Board of Directors approved the 1997 Stock
Option Plan (the “1997 Plan”). Under the 1997 Plan,
the Board of Directors may grant incentive stock options and
nonqualified stock options to officers, directors, and other key
employees of the Company, its subsidiaries and non-employee
officers, directors and consultants.
The 1997 Plan permits the Board of Directors to determine the
number of option shares, the exercise price, the vesting
schedule and the expiration date of stock options. With respect
to incentive stock options, the 1997 Plan provides that the
exercise price of each such option must be at least equal to
100% of the fair market value of the common stock on the date
that such option is granted (110% of fair market value in the
case of stockholders who, at the time the option is granted, own
more than 10% of the total outstanding common stock), and
requires that all such options have an expiration date before
the tenth anniversary of the date of the grant of such options
(or the fifth anniversary of the date of grant in the case of
10% stockholders). The Company has reserved
13,000,000 shares of common stock for issuance under the
1997 Plan. Options typically expire 10 years from the date
of grant and generally vest over a period of four years from the
date of grant. As of December 31, 2004 and June 30,
2005, the Company had 5,007,958 and 3,401,958 shares of common
stock, respectively available for future grant under the 1997
Plan.
In determining the exercise prices for awards and options
granted, the Company’s Board of Directors has considered
the fair value of the common stock as of the measurement date.
The fair value of the common stock has been determined by the
Board of Directors after considering a broad range of factors
including, but not limited to, the illiquid nature of an
investment in common stock, the Company’s historical
financial performance and financial position, the Company’s
future prospects and opportunity for liquidity events, and
recent sale and offer prices of the common and redeemable
convertible preferred stock in private transactions negotiated
at arm’s length. In September 2005, the Company also
obtained independent valuation reports to support the fair value
of the Company’s common stock which was determined to be
$0.28 as of December 31, 2004 and $0.54 as of June 30,
2005.
During the six months ended June 30, 2005, the Company
granted to three executive officers options providing for the
purchase of 1,280,000 shares of common stock at
$0.20 per share. Options for the purchase of
640,000 shares vest ratably over a four year period and the
remaining 640,000 shares vest upon the earlier of the
fourth anniversary of the grant date or the achievement of
performance milestones (including an initial public offering of
the Company’s common stock, regulatory approvals and other).
F-19
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
During the six months ended June 30, 2005 additional
options to purchase 345,000 common shares at $0.20 per
share were issued to other employees and vest over four years.
The Company has concluded that the deemed fair value of the
common stock on each measurement date in 2004 and through
June 30, 2005 for measuring stock-based compensation was
$0.28 and $0.54, respectively.
Certain of the Company’s option agreements provide that in
the event of a change in control of the Company, as defined, any
unvested options will become immediately vested and exercisable.
The total shares of common stock pursuant to such unvested
options as of December 31, 2004 and June 30, 2005 were
approximately 2,315,000 and 2,730,000, respectively.
Information concerning all stock option activity for the years
ended December 31, 2002, 2003, and 2004 and for the six
months ended June 30, 2005 is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
Average
|
|
|
|
|
Average
|
|
|
|
|
Average
|
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
|
|
|
of
|
|
|
Price per
|
|
|
of
|
|
|
Price per
|
|
|
of
|
|
|
Price per
|
|
|
of
|
|
|
Price per
|
|
|
|
|
Shares
|
|
|
Share
|
|
|
Shares
|
|
|
Share
|
|
|
Shares
|
|
|
Share
|
|
|
Shares
|
|
|
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Options outstanding, beginning of period
|
|
|
3,180,400
|
|
|
$
|
1.04
|
|
|
|
3,384,040
|
|
|
$
|
0.96
|
|
|
|
7,153,936
|
|
|
$
|
0.13
|
|
|
|
6,016,048
|
|
|
$
|
0.14
|
|
|
Granted
|
|
|
256,140
|
|
|
|
0.10
|
|
|
|
6,502,836
|
|
|
|
0.10
|
|
|
|
848,106
|
|
|
|
0.10
|
|
|
|
1,625,000
|
|
|
|
0.20
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,975,994
|
)
|
|
|
0.10
|
|
|
|
(507,141
|
)
|
|
|
0.10
|
|
|
Forfeited
|
|
|
(52,500
|
)
|
|
|
1.83
|
|
|
|
(132,000
|
)
|
|
|
0.90
|
|
|
|
(10,000
|
)
|
|
|
0.10
|
|
|
|
(19,000
|
)
|
|
|
0.61
|
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
(2,600,940
|
)
|
|
|
1.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, end of period
|
|
|
3,384,040
|
|
|
$
|
0.96
|
|
|
|
7,153,936
|
|
|
$
|
0.13
|
|
|
|
6,016,048
|
|
|
$
|
0.14
|
|
|
|
7,114,907
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable
|
|
|
2,741,337
|
|
|
$
|
0.88
|
|
|
|
4,504,642
|
|
|
$
|
0.14
|
|
|
|
3,471,043
|
|
|
$
|
0.16
|
|
|
|
3,482,594
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options available for grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,007,958
|
|
|
|
|
|
|
|
3,401,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value of options granted during the periods
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.20
|
|
|
|
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-20
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
The following table summarizes additional information about
stock options outstanding at December 31, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
|
|
|
Number of
|
|
|
Remaining
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
|
Range of
|
|
|
Options
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Options
|
|
|
Exercise
|
|
|
Exercise Price
|
|
|
Outstanding
|
|
|
Life (Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
90,000
|
|
|
|
3.47
|
|
|
$
|
0.01
|
|
|
|
90,000
|
|
|
$
|
0.01
|
|
|
|
0.01
|
|
|
|
221,760
|
|
|
|
5.08
|
|
|
|
0.01
|
|
|
|
221,760
|
|
|
|
0.01
|
|
|
|
0.10
|
|
|
|
5,563,088
|
|
|
|
8.64
|
|
|
|
0.10
|
|
|
|
3,018,083
|
|
|
|
0.10
|
|
|
|
0.45
|
|
|
|
12,000
|
|
|
|
6.42
|
|
|
|
0.45
|
|
|
|
12,000
|
|
|
|
0.45
|
|
|
|
1.63-2.50
|
|
|
|
129,200
|
|
|
|
5.09
|
|
|
|
1.92
|
|
|
|
129,200
|
|
|
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.005-$2.50
|
|
|
|
6,016,048
|
|
|
|
8.32
|
|
|
$
|
0.14
|
|
|
|
3,471,043
|
|
|
$
|
0.116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes additional information about
stock options outstanding at June 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
|
|
|
Number of
|
|
|
Remaining
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
|
|
|
Options
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Options
|
|
|
Exercise
|
|
|
Exercise Price
|
|
|
Outstanding
|
|
|
Life (Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
90,000
|
|
|
|
2.97
|
|
|
$
|
0.01
|
|
|
|
90,000
|
|
|
$
|
0.01
|
|
|
|
0.01
|
|
|
|
221,760
|
|
|
|
4.58
|
|
|
|
0.01
|
|
|
|
221,760
|
|
|
|
0.01
|
|
|
|
0.10
|
|
|
|
5,040,947
|
|
|
|
8.12
|
|
|
|
0.10
|
|
|
|
3,033,634
|
|
|
|
0.10
|
|
|
|
0.20
|
|
|
|
1,625,000
|
|
|
|
9.67
|
|
|
|
0.20
|
|
|
|
—
|
|
|
|
0.20
|
|
|
|
0.45
|
|
|
|
12,000
|
|
|
|
5.92
|
|
|
|
0.45
|
|
|
|
12,000
|
|
|
|
0.45
|
|
|
|
1.63-2.50
|
|
|
|
125,200
|
|
|
|
4.58
|
|
|
|
1.90
|
|
|
|
125,200
|
|
|
|
1.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.005-$2.50
|
|
|
|
7,114,907
|
|
|
|
8.23
|
|
|
$
|
0.151
|
|
|
|
3,482,594
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
PROPERTY AND EQUIPMENT
|
Property
and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Lab and other equipment
|
|
$
|
339,089
|
|
|
$
|
422,498
|
|
|
Furniture and fixtures
|
|
|
73,511
|
|
|
|
57,146
|
|
|
Leasehold improvements
|
|
|
662,802
|
|
|
|
678,041
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment, at cost
|
|
|
1,075,402
|
|
|
|
1,157,685
|
|
|
Less accumulated depreciation and amortization
|
|
|
(691,572
|
)
|
|
|
(778,882
|
)
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
383,830
|
|
|
$
|
378,803
|
|
|
|
|
|
|
|
|
|
In 2003, the Company entered into a new lease for its current
facility (See Note 10). The agreement provided for the
landlord to pay approximately 67% or up to a maximum of
approximately $205,000
F-21
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
of agreed upon leasehold improvements. The improvements were
completed in December 2003 and the space was placed into service
in January 2004. The Company’s portion of leasehold
improvements was $121,364 and the landlord’s portion was
$203,127. The Company’s portion is included in leasehold
improvements. The landlord’s portion has been recorded with
a corresponding liability recorded for deferred rent. The
deferred rent is being amortized as additional rent expense over
the remaining term of the lease. The current portion of the
deferred rent is included in accrued expenses in the
accompanying consolidated balance sheets and is shown in
Note 5. The long-term portion of deferred rent is presented
separately in the accompanying consolidated balance sheets.
Depreciation and amortization expense was $129,638, $92,712,
$106,206, $52,574 and $61,404 for the years ended
December 31, 2002, 2003 and 2004 and the six months ended
June 30, 2004 and 2005, respectively.
Accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
As of
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Professional fees
|
|
$
|
110,000
|
|
|
$
|
266,632
|
|
|
$
|
259,331
|
|
|
Accrued bonuses
|
|
|
—
|
|
|
|
521,095
|
|
|
|
422,105
|
|
|
Accrued payroll
|
|
|
11,893
|
|
|
|
32,876
|
|
|
|
14,030
|
|
|
Accrued vacation
|
|
|
17,893
|
|
|
|
49,220
|
|
|
|
49,220
|
|
|
Deferred rent — current portion
|
|
|
45,140
|
|
|
|
45,140
|
|
|
|
45,140
|
|
|
Clinical trials
|
|
|
62,312
|
|
|
|
131,620
|
|
|
|
61,806
|
|
|
Clinical trial material
|
|
|
—
|
|
|
|
—
|
|
|
|
334,230
|
|
|
Other
|
|
|
2,574
|
|
|
|
51,547
|
|
|
|
18,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
249,812
|
|
|
$
|
1,098,130
|
|
|
$
|
1,204,471
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2002, the Company issued unsecured notes payable
(“Notes”) to two members of its Board of Directors
(who are also officers and stockholders) totaling $550,000,
bearing annual interest at 10%, all payable within one year. In
addition, the Notes included detached warrants to purchase
203,704 shares of the Company’s common stock at
$0.27 per share. The principal and accrued interest of
$55,000 was converted in 2003 into 11,204 shares of
Series A redeemable convertible preferred stock at
$54.00 per share, the price at which that tranche of
Series A redeemable convertible preferred stock had been
issued. The fair value of the warrants on the date of grant was
determined to be $2,200 using the Black-Scholes option-pricing
model (and the following assumptions: life of two years (full
term), volatility of 72% and a risk-free rate of interest of
1.45%). Accordingly, $2,200 was allocated to the warrants and
recorded as a discount to the Notes and this debt discount was
amortized to interest expense over the life of the Notes (one
year). As a result, the Company recorded $1,100 of interest
expense in each of 2003 and 2002. The warrants were exercised in
2004 (see Note 9).
In February, 2004 the Company issued an unsecured note payable
to its legal counsel for approximately $103,000, representing
the then outstanding balance of invoices for professional
F-22
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
services. The note, bearing no interest, is payable in monthly
installments of $5,000 beginning in March 2004 until paid in
full in November, 2005. As of December 31, 2004 and
June 30, 2005 the outstanding balance of $52,864 and
$22,864, respectively, have been included in notes payable
in the accompanying consolidated balance sheets.
In 2004, the Company entered into two commercial financing
agreements with a vendor to finance the payment of approximately
$168,000 in insurance premiums for up to 12 months. Finance
charges of approximately $3,000 (annual percentage rates of
approximately 5-6%) was added to the principal. At
December 31, 2004, the total balance due was $98,550, and
has been included in notes payable in the accompanying
consolidated balance sheets. There was no balance outstanding as
of June 30, 2005.
In December of 2004, the Company issued an unsecured convertible
note payable to a new investor for $700,000, due one year from
the date of issuance, at an annual interest rate of 3%. The full
outstanding principal amount of the note, plus accrued interest,
had a mandatory conversion feature into either
(i) preferred stock at a price per share at which a
qualified financing, as defined, was completed subsequent to the
issuance of the note but prior to maturity, or (ii) into
shares of Series B redeemable convertible preferred stock
at the rate of $132 per share, in the event the Company was
unable to complete a qualified financing prior to maturity. In
April, 2005, the principal and accrued interest of $5,586 were
converted into 3,493 shares of Series C redeemable
convertible preferred stock (“Series C”) at
$202 per share, the price at which Series C had been
issued (See Note 8).
In March of 2005, the Company issued unsecured convertible
promissory notes to three existing stockholders (one being a
member of the Board of Directors) for a total principal of
approximately $375,000, due one year from the date of issuance,
at an annual interest rate of 3%. The full outstanding principle
amount of the notes, plus accrued interest, carried a mandatory
conversion feature into either (i) preferred stock at a
price per share at which a qualified financing, as defined, was
completed subsequent to the issuance of the notes but prior to
maturity, or (ii) into shares of Series B redeemable
convertible preferred stock at the rate of $132 per share,
in the event the Company was unable to complete a qualified
financing prior to maturity. In April, 2005, the principal
amount was converted into 1,983 shares of Series C
redeemable convertible preferred stock at $202 per share,
the price at which Series C had been issued (See
Note 8).
F-23
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
The Company has recorded no provision or benefit for income
taxes for any period presented due to its net operating losses
and doubt as to the realizability of the resulting carryforwards
of those losses and other deferred tax assets. Deferred tax
assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
6,725,000
|
|
|
$
|
8,014,000
|
|
|
|
Deferred research and development costs
|
|
|
—
|
|
|
|
1,661,000
|
|
|
|
Research and development tax credits
|
|
|
874,000
|
|
|
|
1,156,000
|
|
|
|
Property and equipment
|
|
|
112,000
|
|
|
|
136,000
|
|
|
|
Accrued expenses
|
|
|
83,000
|
|
|
|
289,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,794,000
|
|
|
|
11,256,000
|
|
|
Valuation allowance
|
|
|
7,794,000
|
|
|
|
11,256,000
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
As of December 31, 2004, the Company had net operating loss
carryforwards totaling approximately $20 million (federal)
and $17 million (state), which expire at various dates from
2011 through 2024 (federal) and from 2005 through 2009 (state).
The amount of the net operating loss carryforwards that may be
utilized to offset future taxable income, when earned, may be
subject to certain limitations, based upon changes in the
ownership of the Company’s stock that have and/or may
occur. The Company has not conducted an evaluation as to whether
any portion of its tax loss carryforwards has been limited, and
therefore, based upon the changes in ownership, a limitation may
have occurred. As of December 31, 2004, the Company had
research and development tax credits totaling approximately
$809,000 (federal) and $347,000 (state), which are available to
offset future tax liabilities when incurred and fully expire in
2024 (federal) and 2019 (state).
The Company has recorded a full valuation allowance against its
net deferred tax assets since the Company believes it is more
likely than not, that it will not be able to realize the assets.
During 2002, 2003 and 2004, the valuation allowance increased by
approximately $1,331,000, $1,400,000 and $3,595,000,
respectively. The change in the valuation allowance in each year
is due to the asset increasing each year (primarily from the net
operating loss carryforwards and research and development tax
credits) and the Company’s policy of providing a full
valuation against the asset for the reason stated above.
F-24
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
|
|
|
|
8.
|
REDEEMABLE CONVERTIBLE PREFERRED STOCK
|
The Company has authorized 359,515 shares of preferred
stock for issuance, of which certain shares are designated as
Series A redeemable convertible preferred stock
(“Series A”), Series B redeemable
convertible preferred stock (“Series B”) and
Series C redeemable convertible preferred stock
(“Series C”). The Company first issued redeemable
convertible preferred stock in 2003. The following table
summarizes the activity and other information for the redeemable
convertible preferred stock commencing in 2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A
|
|
|
Series B
|
|
|
Series C (Unaudited)
|
|
|
Total (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Carrying
|
|
|
Number
|
|
|
Carrying
|
|
|
Number
|
|
|
Carrying
|
|
|
Number
|
|
|
Carrying
|
|
|
|
|
of Shares
|
|
|
Value
|
|
|
of Shares
|
|
|
Value
|
|
|
of Shares
|
|
|
Value
|
|
|
of Shares
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares designated at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004
|
|
|
150,000
|
|
|
|
—
|
|
|
|
61,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
211,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2005 (Unaudited)
|
|
|
150,000
|
|
|
|
—
|
|
|
|
61,000
|
|
|
|
—
|
|
|
|
148,515
|
|
|
|
—
|
|
|
|
—
|
|
|
|
359,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2003
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
Issuance of Series A, net of $259,843 of issuance costs
|
|
|
94,697
|
|
|
|
5,555,610
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
94,697
|
|
|
|
5,555,610
|
|
|
Issuance of Series A as stock-based compensation
|
|
|
6,476
|
|
|
|
349,704
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,476
|
|
|
|
349,704
|
|
|
Conversion of accounts payable, accrued expenses, and notes into
Series A
|
|
|
19,144
|
|
|
|
1,033,871
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,144
|
|
|
|
1,033,871
|
|
|
Preferred stock dividends
|
|
|
—
|
|
|
|
560,926
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
560,926
|
|
|
Accretion of issuance costs
|
|
|
—
|
|
|
|
51,969
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
51,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2003
|
|
|
120,317
|
|
|
|
7,552,080
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
120,317
|
|
|
|
7,552,080
|
|
|
Issuance of Series B, net of $198,514 of issuance costs
|
|
|
—
|
|
|
|
—
|
|
|
|
52,670
|
|
|
|
6,542,786
|
|
|
|
—
|
|
|
|
—
|
|
|
|
52,670
|
|
|
|
6,542,786
|
|
|
Conversion of accrued expenses into Series B
|
|
|
—
|
|
|
|
—
|
|
|
|
993
|
|
|
|
131,076
|
|
|
|
—
|
|
|
|
—
|
|
|
|
993
|
|
|
|
131,076
|
|
|
Accretion of issuance costs
|
|
|
—
|
|
|
|
51,969
|
|
|
|
—
|
|
|
|
243,243
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
295,212
|
|
|
Preferred stock dividends
|
|
|
—
|
|
|
|
673,792
|
|
|
|
—
|
|
|
|
343,128
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,016,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2004
|
|
|
120,317
|
|
|
|
8,277,841
|
|
|
|
53,663
|
|
|
|
7,260,233
|
|
|
|
|
|
|
|
|
|
|
|
173,980
|
|
|
|
15,538,074
|
|
|
Issuance of Series C, net of $1,106,800 of issuance costs
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,590
|
|
|
|
27,470,581
|
|
|
|
141,590
|
|
|
|
27,470,581
|
|
|
Accretion of issuance costs (Unaudited)
|
|
|
|
|
|
|
24,878
|
|
|
|
|
|
|
|
91,980
|
|
|
|
|
|
|
|
74,739
|
|
|
|
|
|
|
|
191,597
|
|
|
Series B warrant modification (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(560,000
|
)
|
|
|
|
|
|
|
(560,000
|
)
|
|
Preferred stock dividends (Unaudited)
|
|
|
|
|
|
|
644,883
|
|
|
|
|
|
|
|
177,088
|
|
|
|
|
|
|
|
346,621
|
|
|
|
|
|
|
|
1,168,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-25
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A
|
|
|
Series B
|
|
|
Series C (Unaudited)
|
|
|
Total (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Carrying
|
|
|
Number
|
|
|
Carrying
|
|
|
Number
|
|
|
Carrying
|
|
|
Number
|
|
|
Carrying
|
|
|
|
|
of Shares
|
|
|
Value
|
|
|
of Shares
|
|
|
Value
|
|
|
of Shares
|
|
|
Value
|
|
|
of Shares
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2005 (Unaudited)
|
|
|
120,317
|
|
|
$
|
8,947,602
|
|
|
|
53,663
|
|
|
$
|
7,529,301
|
|
|
|
141,590
|
|
|
$
|
27,331,941
|
|
|
|
315,570
|
|
|
$
|
43,808,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation preference at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2003
|
|
|
|
|
|
$
|
10,647,000
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
10,647,000
|
|
|
December 31, 2004
|
|
|
|
|
|
|
13,979,000
|
|
|
|
|
|
|
|
7,427,000
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
21,406,000
|
|
|
June 30, 2005 (Unaudited)
|
|
|
|
|
|
|
16,044,000
|
|
|
|
|
|
|
|
7,604,000
|
|
|
|
|
|
|
|
28,948,000
|
|
|
|
|
|
|
|
52,596,000
|
|
|
Redemption value at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2003
|
|
|
|
|
|
$
|
7,760,000
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
7,760,000
|
|
|
December 31, 2004
|
|
|
|
|
|
|
8,434,000
|
|
|
|
|
|
|
|
7,427,000
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
15,861,000
|
|
|
June 30, 2005 (Unaudited)
|
|
|
|
|
|
|
8,771,000
|
|
|
|
|
|
|
|
7,604,000
|
|
|
|
|
|
|
|
28,948,000
|
|
|
|
|
|
|
|
45,323,000
|
|
In 2001, the Company collected approximately $2,820,000 in
subscriptions for a proposed issuance of Series A at
$70 per share from new and existing investors. An
additional $250,000 in subscriptions was received in the
beginning of 2002 from new and existing investors, also at
$70 per share. Subsequent to the initial subscriptions, the
Company began to experience pressure on the price being asked
from new prospective investors. The Company continued to pursue
raising equity by reducing the price per share of the proposed
Series A to $54 per share for new subscriptions, and
subsequently received approximately $380,000 in 2002 and
$2,363,000 in 2003 from new and existing investors. The Company
settled these advances by issuing a total of 94,698 shares
of Series A in 2003 at the previously described purchase
prices of $70 and $54 per share. Both existing and new
investors participated in purchasing Series A. New
investors purchased 15% and 15% of the Series A at the $70
and $54 per share price, respectively. The Company incurred
$259,843 in costs associated with the issuance of the
Series A and such costs were recorded as a reduction in the
carrying value of the Series A.
Also in 2003, the Company issued a total of 19,146 shares
of Series A at a price of $54 per share made up of
(1) conversion of two notes payable with principal of
$550,000 and accrued interest of $55,000 to two members of its
Board of Directors (who are also officers and stockholders) for
11,204 shares of Series A (see Note 6),
(2) Stock-based compensation for officers and employees in
the amount of $118,900 represented by 2,202 shares of
Series A (see Note 3), and (3) conversion of
accounts payable and accrued expenses in the amount of $310,000
for 5,740 shares of Series A. These conversions were
based upon the $54 per share price.
In the fourth quarter of 2003, subsequent to the above 2003
transactions, the Company received additional advanced stock
subscriptions aggregating $2,118,800 for a planned sale of
Series B. During 2004, the Company issued
52,670 shares of Series B at $132 per share in
exchange for the $2,118,800 of net stock subscription proceeds
received in 2003, as well as for the additional cash proceeds of
$4,833,500 received in 2004. The Company incurred $198,514 in
costs associated with the issuance of the Series B; such
costs were recorded as a reduction in the carrying value of the
Series B.
Also in 2004, the Company issued 993 shares of
Series B at a price of $132 per share in settlement of
$131,000 of accrued liabilities.
In connection with the issuance of the Series B, the
holders of Series B received warrants to
purchase 2,146,520 shares of common stock at
$0.66 per share (“Series B Warrants”). The
Series B
F-26
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
warrants were to expire on the earlier of the consummation of a
qualified financing (as defined) or five years from date of
issuance (see Note 9).
In March and April of 2005, the Company issued
136,115 shares of Series C at $202 per share for
net cash proceeds of $27.5 million. The Company incurred
$1,106,800 in costs associated with the issuance of the
Series C; such costs were recorded as a reduction in the
carrying value of the Series C.
In addition, in March 2005, the Company issued
(1) 3,493 shares of Series C at $202 per
share upon conversion of a note payable with principal of
$700,000 and accrued interest of $5,586 (see Note 6) and
(2) 1,983 shares of Series C at $202 per
share upon conversion of three notes payable with a total
principal of approximately $400,000 (see Note 6).
In connection with the issuance of the Series C, the
Company issued a warrant to purchase 99,010 shares of
the Company’s common stock to its placement agent. The
warrant expires five years from the date of grant and has an
exercise price of $1.01 per share (see Note 9).
The rights, preferences and privileges of the Series A,
Series B and Series C (collectively “Preferred
Stock”) are detailed below:
|
|
|
|
|
Voting Rights
— Generally, Series A,
Series B and Series C preferred stockholders vote
together with all other classes and series of stock as a single
class on all actions to be taken by the stockholders. The
Company’s Articles of Organization does provide that each
of Series A, B and C shall vote separately for approval of
certain transactions, including, without limitation, the
amendment of the Company’s Certificate of Organization in a
manner that would adversely affect each such series of Preferred
Stock, the liquidation or dissolution of the Company, the
acquisition of another entity, changing the Company’s line
of business, declaring dividends and similar matters.
Series A, B and C shares entitle each holder to such number
of votes per share as is equal to the number of whole shares
into which the stock is convertible, subject to certain
restrictions as defined. In accordance with an agreement signed
in 2005 among certain holders of common stock, Series A,
Series B and Series C, such holders will cause and
maintain election to the Board of Directors of one Series A
director, as designated by the Company’s Chief Executive
Officer, who shall initially be the Company’s Chief
Executive Officer, one Series B director, as designated by
Cerberus Partners, L.P., the largest holder of Series B,
one Series C director, as defined, one management director,
who shall initially be the Company’s President, and three
additional directors with appropriate industry experience and
qualified outside directors, as defined.
|
|
|
|
|
Dividends
— Dividends are cumulative whether or
not declared by the Board of Directors and accrue at a quarterly
rate per share of $1.40 for Series A, $1.65 for
Series B and at an annual rate of 5% for Series C.
Upon the occurrence of a liquidation event or mandatory
conversion, as defined, of the Series A, Series B or
Series C, the dividends accrued but unpaid, are payable by
the Company and, at the option of the holder, may be payable in
shares of the Company’s common stock at a conversion price
equal to $0.35 and $0.66 with respect to Series A and B,
respectively and with respect to Series C, the lesser of
$1.01 or the fair value of the Company’s common stock at
time of conversion. The preferred stock is senior to all common
stock with respect to dividends, and Series C is senior to
Series B with respect to dividends, and Series B is
senior to Series A with respect to dividends. No dividends
shall be paid or declared on common shares or any other class of
stock which are junior to the Preferred Stock. At
December 31, 2004 and June 30, 2005 accrued and unpaid
dividends were as follows: for Series A —
$1,234,718 and $1,879,601,
|
F-27
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
|
|
|
|
|
respectively; for Series B — $343,128 and
$520,216, respectively: for Series C — $0 and
$346,621, respectively.
|
|
|
|
|
As described above, certain Series A stockholders made
payments in 2001 and 2002 in advance of the Series A
closing which did not occur until January 2003. For many of
these stockholders, the date between their advance and issuance
of stock was much greater than was expected. In 2005, upon a
review of the Series A documents by the Company’s
newly hired legal counsel, it was brought to management’s
attention that the extended period between certain advances and
the Series A closing was not typical. Management brought
this to the attention of the Company’s Board of Directors
at a meeting in February, 2005 and, after considering the
matters, the Board of Directors approved $308,000 to be added to
the cumulative dividends accrued on the Series A held by
these investors. The original subscription agreements entered
into by these stockholders did not require a payment of interest
or dividends. The amount has been added to the carrying value of
the Series A in February 2005. This amount has not been
declared and is not to be paid in cash. However, all dividends
are payable in cash or convertible into common stock upon any
conversion of the redeemable preferred stock. On the date the
special dividend was approved, the special dividend (if
converted) would be convertible into approximately 880,000
shares of common stock which had a fair value of approximately
$475,000. The beneficial amount of $167,000 has been included in
redeemable convertible preferred stock dividends and accretion
of issuance costs in the accompanying consolidated statements of
operations for the six months ended June 30, 2005. Several
Company officers, including the Chief Executive Officer, were
recipients of the special dividend as they held Series A.
|
|
|
|
|
Liquidation
— In the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the
Company, or in the event of insolvency, as defined, the holders
of Series C are entitled to receive before any distribution
or payment is made to any holders of common stock or any other
class or series of capital stock, an amount for Series C
equal to $202 per share plus any accrued but unpaid
dividends. Upon the availability of funds after Series C
payments, Series A and B are entitled to receive, before
any distribution or payment is made to any holders of common
stock or any other class or series of capital stock, an amount
for Series A equal to $70 per share plus a 30%
compounded annual return on the original purchase price, plus
any accrued but unpaid dividends, and an amount for
Series B equal to $132 per share plus any accrued but
unpaid dividends. If such amount per share of Series A or
Series B would have been higher if each share had converted
to common stock immediately prior to such liquidating event, as
defined, then that higher amount would be paid in liquidation.
After the liquidation preference payments to all preferred
stockholders, the remaining assets of the Company available for
distribution shall be distributed ratably among the holders of
common stock.
|
|
|
|
|
If, upon any such liquidation, dissolution or winding-up of the
Company, as defined, the remaining assets of the Company
available for distribution to its stockholders are insufficient
to pay the holders of Series C the full amounts to which
they are entitled, the holders of Series C shall share
ratably in any distribution of the remaining assets and funds of
the Company pursuant to the terms of the respective agreements.
The same then holds true for the Series A and Series B
stockholders.
|
|
|
|
|
Conversion
— The Series A, Series B
and Series C are convertible at any time into common stock
on a 200-to-1 ratio. This ratio is subject to adjustment upon
certain events such as a stock split,
|
F-28
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
|
|
|
|
|
subdivision of the Company’s common stock, recapitalization
of the Company’s capital stock or similar event.
Additionally, the Series C is subject to adjustment for any
equity issued at a lower price per share pursuant to a weighted
average anti-dilution provision. Certain issuance, such as
issuances pursuant to the Company’s option plan, upon the
conversion of preferred stock or as approved by the
stockholders, are excluded for this anti-dilution protection
and, therefore, no adjustment to the conversion ratio will be
made upon those stock issuances. Through June 30, 2005, no
adjustment to the conversion price has occurred.
|
|
|
|
|
The Series A mandatorily converts into common stock
(i) immediately prior to the closing of an initial public
offering where the gross proceeds to the Company equal or exceed
$15 million and the price per share in the offering is 200%
of the then current conversion price of the Series A,
(ii) upon the sale of all or substantially all of the
Company’s common stock for a price that is at least 200% of
the Series A conversion price then in effect or
(iii) upon the consent of a majority of the Series A
to conversion. The Series B mandatorily converts into
common stock (i) immediately prior to the closing of an
initial public offering where the gross proceeds to the Company
and/or the stockholders equals or exceeds $10 million,
(ii) upon the consent of a majority of the Company’s
stockholders to effect the sale of all or substantially all of
its capital stock to a third party or (iii) upon the
consent of a majority of the Company’s stockholders to
effect the merger or consolidation of the Company with a third
party pursuant to which the Company is not the surviving entity
or there is a change in voting control of the Company. The
Series C mandatorily converts into common stock
(i) immediately prior to the closing of an initial public
offering where the gross proceeds to the Company equal or exceed
$30 million and the price per share in the offering equals
or exceeds $5 per share, or (ii) upon the consent of a
majority of the Series C to such conversion.
|
|
|
|
|
Redemption
— At the written election of any
holder of Series A made not less that 30 days prior to
defined anniversaries of the date the stock was first issued,
the Company is required to redeem shares as follows: on the
fifth anniversary in 2008, up to
33
1
/
3
%
of the shares then held, on the sixth anniversary in 2009, up to
66
2
/
3
%,
and on the seventh anniversary in 2010, up to 100% of shares
then held. These redemption rights of Series A shall
terminate, if not otherwise exercised, in 2011 on the eighth
anniversary date of the first issue date of the shares. The
redemption price is equal to the Series A purchase price
($54 or $70 per share) plus all accrued but unpaid
dividends.
|
|
|
|
|
At the written election of any holder of Series B at least
10 days prior to the date of the consummation of the
completion of a qualified financing, the Company shall redeem up
to
33
1
/
3
%
of the shares then held. A qualified financing with respect to
the Series B is defined as one in which the Company raises
an aggregate net proceeds of at least $10 million through
the sale of stock in one or more related transactions. Although
considered a Qualified Financing, the Series C was excluded
from this definition by amendment to the Company’s charter
for Series B prior to the Series C issuance in 2005.
Prior to that time, however, the Company chose 2005 as a first
date of redemption for the Series B.
|
|
|
|
|
In addition, the Series B holder may redeem up to
66
2
/
3
%
of the shares then held on the first anniversary of the issue
date, and up to 100% of the shares then held on the second
anniversary of the issue date. The redemption price is equal to
the Series B purchase price of $132 per share plus all
accrued but unpaid dividends.
|
F-29
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
|
|
|
|
|
By written notice to the Company by a majority of the holders of
Series C given at any time on or after the seventh (7th)
anniversary in 2012, subject to certain restrictions, as
defined, the Company shall redeem all, but not less than all, of
the outstanding shares of Series C. The redemption price is
equal to the Series C purchase price of $202 per share
plus all accrued but unpaid dividends.
|
|
|
|
|
The following is a schedule of redemption values (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
|
Issuance
|
|
December 31, 2004
|
|
|
June 30, 2005
|
|
|
First Date of Redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
Series A
(2)
|
|
$
|
8,434,000
|
|
|
$
|
8,771,000
|
|
|
January, 2008
|
|
Series B
(3)
|
|
|
7,427,000
|
|
|
|
7,604,000
|
|
|
Upon notice of a qualified
financing (as defined)
|
|
Series C
(4)
|
|
|
—
|
|
|
|
28,948,000
|
|
|
March, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,861,000
|
|
|
$
|
45,323,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts shown include the original purchase price plus dividends
accrued through dates shown. Amounts change due to the accrual
of dividends; therefore the actual redemption amounts, if ever
redeemed, will be different.
|
|
|
|
(2)
|
Based on the redemption period described above, shares of
Series A may be redeemed as follows: up to 40,107, 80,213
and 120,320 in 2008, 2009 and 2010, respectively. The redemption
value of these shares will increase annually due to the accrual
of dividends at a quarterly dividend rate per share of $1.40.
|
|
|
|
(3)
|
Based on the redemption criteria described above, shares of
Series B may be redeemed as follows: up to 17,888, 35,775
and 53,663 beginning on the date of a qualified financing (as
defined) followed by the first and second anniversary
thereafter, respectively. The redemption value of these shares
will increase annually due to the accrual of dividends at a
quarterly dividend rate per share of $1.65.
|
|
|
|
(4)
|
Based on the redemption period described above, all shares of
Series C may be redeemed in 2012. The redemption value of
these shares will increase annually due to the accrual of
dividends at a quarterly dividend rate per share of $5%.
|
The Company is accreting the stock issuance costs of each series
of redeemable convertible preferred stock from the original
issuance date through the earliest dates of redemption using the
effective interest method. These direct costs generally consist
of fees paid to placement agents, the fair value of warrants
issued to placement agents, legal fees, statutory fees and other
direct costs. For the Series A, B and C, the total costs of
issuance being accreted are $259,843, $198,514 and $1,106,800,
respectively. The accretion increases the carrying value of the
redeemable convertible preferred stock and reduces additional
paid-in capital. Amounts accreted are shown in the first table
of this Note.
Advances received for stock subscriptions have been classified
as current liabilities in the accompanying balance sheets as
such amounts were intended, and subsequently were, for
conversion into shares of redeemable convertible preferred stock.
On January 10, 1997, the Company issued
2,996,800 shares of common stock to its founders pursuant
to restricted stock arrangements for $12,254 in cash and
deferred stock-based compensation of $546,000.
F-30
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
In 1997, the Company issued 1,846,800 shares of common
stock to employees and nonemployees for $18,250 in cash and
deferred stock-based compensation of $1,673,200.
In 1998, the Company issued 792,690 shares of common stock
to existing and new stockholders for $1,288,121 in cash.
In 1999, the Company issued 650,000 shares of common stock
to existing and new stockholders for $1,625,000 in cash.
In 1999, the Company purchased 210,000 shares of common
stock from an employee who left the Company pursuant to a
restricted stock agreement for $50,400 (the common stock being
retired in 2000).
In 2000, the Company issued 2,258,200 shares of its common
stock for $2.50 per share, resulting in total proceeds of
$5,645,500. The Company incurred cash costs of $392,406 in
connection with the sale and committed to issue a warrant with a
fair value of $271,000. Total issuance costs were therefore
$663,406, which were charged to additional paid-in capital.
During 2000, the Company issued 5,100 shares of its common
stock for an ascribed value of $2.50 per share in exchange
for services. The ascribed amount was determined to be fair
value at the date of the transaction.
Common Stock Warrants
— As mentioned above, in
2000, the Company committed to issue a warrant to
purchase 192,544 shares of common stock that had a
fair value of $271,000. The fair value was determined using the
Black-Scholes option-pricing model (including the following
assumptions: life of six years (full term), volatility of 50%
and a risk-free rate of interest of 6.5%). Accordingly,
approximately $271,000 was included as a cost of the sale of
common stock in 2000 and was included in additional paid-in
capital.
During 2002, the Company issued warrants with a two-year
exercise period to purchase 203,704 shares of the
Company’s common stock to two officers who are also members
of the Board of Directors in connection with two notes payable
due to these individuals (see Note 6).
In connection with the issuance of the Series B, the
holders of Series B received warrants to
purchase 2,146,520 shares of common stock at
$0.66 per share (“Series B Warrants”). The
Series B Warrants were to expire on the earlier of the
consummation of a qualified financing (as defined) or five years
from date of issuance. The fair value of the Series B
Warrants at the date of grant was determined to be approximately
$211,000 using the Black-Scholes option-pricing model (including
the following assumptions: life of five years (full term),
volatility of 70% and a risk-free rate of interest of 3.07%).
Accordingly, approximately $211,000 of the net proceeds from the
sale of the Series B was subtracted from the carrying value
of the Series B and recorded as an increase to additional
paid-in capital.
In connection with the issuance of Series C in 2005, the
Series B Warrants were modified so as to not allow the
Series B Warrants to expire pursuant to the original terms.
The amendment also irrevocably waived the termination provision
for any future financings so that the warrants will only expire
five years from the date of issuance in 2004. As a result of
this modification, the Company determined the fair value of the
warrants immediately before and after the modification using the
Black-Scholes option-pricing model (including the following
assumptions: life of zero and four years (remaining terms),
respectively, volatility of 68% and a risk-free rate of interest
of 2.99%). Accordingly, the
F-31
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
incremental value of $560,000 was subtracted from the carrying
value of the Series C and recorded as an increase to
additional paid-in capital.
In 2005 the Company issued a warrant to
purchase 99,010 shares of the Company’s common
stock to its placement agent in connection with the issuance of
the Series C. The warrant is exercisable for five years at
an exercise price of $1.01 per share. The fair value of the
warrants at the date of grant was determined to be approximately
$24,000 using the Black-Scholes option-pricing model (including
the following assumptions: life of five years (full term),
volatility of 67% and a risk-free rate of interest of 4.17%).
Accordingly, approximately $24,000 was included as an issuance
cost of the Series C in 2005 and was included in additional
paid-in capital.
Common Stock Anti-Dilution Rights
— The sale of
common stock in 2000 included certain stockholder rights.
Pursuant to the agreement with these stockholders, in the next
offering in which the cumulative amount raised by the Company
equaled at least $10 million (the “Qualified
Financing”), if (i) the average per-share purchase
price of the common stock sold in such Qualified Financing was
less than $2.50 or (ii) the average per-share purchase
price of the preferred stock sold in such Qualified Financing
divided by the number of shares of common stock into which each
share of preferred stock may be converted was less than $2.50,
then those investors purchasing the common stock in 2000 had a
right to receive the number of shares of common stock necessary
to reduce their average per-share purchase price to the average
per-share purchase price in the Qualified Financing. In 2002, to
settle its obligations pursuant to this agreement, the Company
issued 10,057,700 shares of common stock to these
stockholders and recorded par value of the stock as an increase
in common stock and a reduction in additional paid-in capital.
Registration Rights.
In 1997, the Company entered into a
Principal Stockholders Agreement with each of the six founding
stockholders (at June 30, 2005 only one is currently
employed by the Company). These agreements provided, in part,
that if at any time during the succeeding 10 year period,
the Company registered any of its common stock in a public
offering either for the Company’s account or for the
account of selling stockholders, the Company will use its best
efforts to include in such registration all or any part of the
capital stock such individual requests to be registered, subject
to certain limitations. At December 31, 2004 and
June 30, 2005, total shares of common stock subject to
these rights equal 4,912,480. Additionally, the employment
agreements for several executive officers of the Company provide
that they shall each have piggyback registration rights for
shares held by them equal to the most favorable piggyback
registration rights granted by the Company to its stockholders.
Accordingly, these executive officers have the same piggyback
registration rights. The shares of common stock subject to these
rights at December 31, 2004 and June 30, 2005 were
18,146,701.
F-32
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
Reserved Shares
— The following is a summary of
common stock reserved for the following identified purposes at
December 31, 2004 and June 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
|
2004
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Conversion of Series A Redeemable Convertible Preferred
Stock
|
|
|
27,591,769
|
|
|
|
29,434,273
|
|
|
Conversion of Series B Redeemable Convertible Preferred
Stock
|
|
|
11,252,490
|
|
|
|
11,520,805
|
|
|
Conversion of Series C Redeemable Convertible Preferred
Stock
|
|
|
—
|
|
|
|
28,661,389
|
|
|
Warrants on common stock
|
|
|
2,339,064
|
|
|
|
2,438,074
|
|
|
Common stock options
|
|
|
11,024,006
|
|
|
|
10,516,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,207,329
|
|
|
|
82,571,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
COMMITMENTS AND CONTINGENCIES
|
Development and Manufacturing Agreement
— In
June 2004, the Company entered into a development and
manufacturing agreement with a third party to produce materials
for the Company’s clinical trials. The agreement provides
for the Company to make certain minimum payments, milestone
payments and payments for materials to be used in the clinical
trials. The agreement currently expires on December 31,
2006, as amended, unless extended by mutual agreement of the
parties. Amounts incurred are expensed as research and
development in the accompanying consolidated statements of
operations. For the year ended December 31, 2004 and for
the six months ended June 30, 2004 and 2005, the Company
has expensed $1,168,800, $480,576, and $556,839, respectively,
as research and development pursuant to this agreement. As of
December 31, 2004 and June 30, 2005, the Company has
included in either accounts payable or accrued expenses in the
accompanying consolidated balance sheets an aggregate of
$633,861 and $393,036, respectively, pursuant to this agreement.
The Company’s minimum obligation as of December 31,
2004 is approximately $400,000, all of which is expected to be
paid in 2005.
Licensing Agreements
— The Company has
exclusively licensed certain of its patent rights from third
parties, as well as related parties, including certain members
of the Board of Directors and the Company’s Advisory Board,
who are also stockholders of the Company. In exchange for the
exclusive rights, the Company is obligated to pay the licensor
patent expenses and a royalty on net sales of future products
ranging from 1% to 4% of net sales, depending on the license
agreement. There have been no sales of products subject to such
license agreements through December 31, 2004 and
June 30, 2005. In addition, some of the license agreements
require the Company to pay certain lump sum payments upon
attainment of certain clinical milestones, none of which has
been achieved as of December 31, 2004 and June 30,
2005. In addition, in exchange for access to non-patent,
confidential clinical information from one of the third parties
on one of its potential products, the Company has entered into
an agreement with this third party which requires the Company to
pay the third party a royalty which ranges from 2% to 7% on net
sales of a defined future product for the first indication,
depending on the extent to which the third party’s clinical
data expedites U.S. regulatory approval of the defined
product. There have been no sales of product as of
December 31, 2004 and June 30, 2005.
Two of the Company’s license agreements are with Georgetown
University. In addition to royalty obligations which are
included in the above, the agreements provide for the Company to
pay up to
F-33
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
$1.7 million upon the attainment of certain approvals in
the regulatory process. Such milestone payments may be reduced
by up to 50% for subsequent new drug applications submitted for
new uses of the same compound, if paid, would be creditable
against future royalty payments. The Company was not obligated
for any payments to Georgetown University as of
December 31, 2004 or June 30, 2005.
Operating Leases
— The Company rents laboratory
and office space located in Cambridge, Massachusetts, under a
noncancelable operating lease. The lease terminates in June 2008
and does not contain an option to renew. The lease agreement
provides that the Company pay fixed monthly rental payments of
$11,749. Total rent expense, including amortization of a
deferred rent liability, under these arrangements was $114,993,
$123,582 and $126,873 in 2002, 2003 and 2004, respectively.
Total rent expense in 2004 includes $45,140 of amortized
deferred rent pursuant to costs for leasehold improvements paid
by the landlord — see Note 4.
The Company leases an apartment for an officer at a cost of
approximately $2,000 per month pursuant to a renewable 1-year
lease (expiring in May 2008, as amended).
At December 31, 2004, minimum annual rental payments, which
exclude the effects of deferred rent, were as follows:
|
|
|
|
|
|
|
Year
|
|
Amount
|
|
|
|
|
|
|
|
2005
|
|
$
|
151,482
|
|
|
2006
|
|
|
140,982
|
|
|
2007
|
|
|
140,982
|
|
|
2008
|
|
|
70,491
|
|
|
|
|
|
|
|
|
|
$
|
503,937
|
|
|
|
|
|
|
In addition to the above minimum annual amounts, the Company
pays the landlord for taxes and common area usage. These
contingent rental payments flucutuate during the term of the
lease and, as of December 31, 2003, the approximate annual
aggregate amount is $16,000.
Subsequent to December 31, 2004, the Company amended its
laboratory and office lease to add space. The amendment provides
for an increase in the minimum annual obligation by
approximately $84,000. There were no other changes made to the
lease terms.
Employment Agreements
— The Company has
employment agreements with its officers that continue until
terminated in accordance with the provisions of the agreements.
Pursuant to the terms, the officers will receive annual base
salaries. The base salaries are adjusted annually and, as
adjusted, aggregate approximately $1 million for calendar
years after December 31, 2004. The officers are also
eligible to earn bonuses based on the discretionary
accomplishment of goals set by the Board of Directors. Either
the Company or the officer may terminate their employment
agreement at any time, with or without cause. In the event the
Company terminates the employment agreement without cause or the
officer terminates his employment for good reason, as defined,
the officer may be entitled to receive severance pay up to one
year’s base salary. In addition, each agreement provides
that in the event of a change in control of the Company, as
defined, any unvested options that the officer may hold will
become immediately vested and exercisable. The total of such
unvested options as of December 31, 2004 and June 30,
2005 was 3,111,169 and 2,772,948, respectively.
F-34
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
Employee Benefit Plan
— Effective
January 1, 2001, the Company adopted an employee savings
and retirement plan, or 401(k) plan (the “Plan”), that
covers all employees of the Company who meet certain defined
requirements. Under the terms of the Plan, employees may elect
to make tax-deferred contributions through payroll deductions
within statutory and plan limits. The Company may elect to make
discretionary matching contributions to the Plan, but has not
made any since plan inception through December 31, 2004 and
June 30, 2005.
Litigation
— On June 30, 2004 a small
group of stockholders comprised of David Elmaleh, Havacom, N.V.,
IBS Turnaround Fund, L.P., John Pattillo and Greg Shoukimas
commenced a civil suit in Massachusetts Superior Court against
the Company and certain of our present and former officers. The
complaint alleges that the officers breached fiduciary duties to
us and to the plaintiffs by approving and benefiting from stock
transactions in 2001 and 2002. The plaintiffs allege that these
transactions resulted in the Company receiving less money in
connection with the sale of stock and in an improper dilution of
certain stockholders. In March 2005, the individual defendants
moved for a dismissal of the claims asserted directly against
them. On July 1, 2005, the Court found, as a matter of law,
that the individual defendants did not breach their fiduciary
duties to the plaintiffs and dismissed those claims, leaving
only the derivative claims purportedly asserted on behalf of the
Company pending. On October 11, 2005 the plaintiffs served
a Motion for Reconsideration of the Court’s dismissal of
their direct claims. There has been no Court action on this
motion.
Promptly after receiving notice of the service of the complaint,
the disinterested members of our Board of Directors appointed a
Special Litigation Committee (“SLC”), comprised of
disinterested directors to investigate the allegations. The SLC
has retained independent counsel to assist it in its
investigation. On July 14, 2005, the SLC unanimously
determined that the transactions in question were proper and
submitted a report to the remaining disinterested members of the
Board of Directors with its conclusions and the recommendation
that the Company seek to terminate the remaining claims. On
July 24, 2005, the remaining disinterested members of the
Board of Directors adopted the report and its recommendations.
On August 9, 2005, the Company’s counsel served a
motion to dismiss the remaining derivative claims on plaintiffs
and the Company await Court action on this motion.
Pursuant to indemnification agreements between the Company and
its officers and directors, legal fees for the present and
former officers against which the action has been asserted, are
being paid by the Company.
The Company has not accrued for any losses related to these
claims as management believes no loss will be sustained as a
result of litigation.
|
|
|
|
11.
|
OTHER RELATED-PARTY TRANSACTIONS AND RELATIONSHIPS
|
Certain related party transactions are described in
Notes 3, 6, 8, 9 and 10. The following are other related
party transactions.
During 2002, 2003, 2004, and for the six months ended
June 30, 2004 and 2005, the Company expensed $203,000,
$60,000, $126,000, $30,000 and $120,000, respectively, pursuant
to consulting arrangements with members of the Board of
Directors. In 2003, approximately $79,000 of the amounts owed to
one of these directors was converted into 1,466 shares of
Series A based on $54 per share, the last price paid
for the securities by independent investors. In 2004,
approximately $111,000 of the amounts owed to one of these
directors was converted into 841 shares of Series B
based on
F-35
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
$132 per share, the last price paid for the securities by
independent investors (see Note 8). These arrangements, in
addition to remuneration for acting as a member of the Board of
Directors, compensated each party for medical and scientific
research and financial and administrative services toward
furthering the Company’s development.
Mr. David Barlow became Chairman of the Company’s
Board of Directors in 2000 and Chief Executive Officer in 2003.
During this period and continuing, Mr. Barlow’s
brother has been a partner in the law firms representing the
Company as legal counsel. Mr. Barlow’s brother has not
provided any direct service to the Company. During the years
ended December 31, 2002, 2003 and 2004 and for the six
months ended June 30, 2004 and 2005 fees due to such firms
(including costs related to the issuances of capital stock) were
$185,019, $83,565, $410,867, $132,727 and $549,509, respectively.
Combining the above mentioned consulting arrangements and legal
fees paid to related parties with the stock-based compensation
to related parties as described in Note 3, the total
charges to expense for related parties is as follows:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period From
|
|
|
|
|
|
|
|
|
|
|
|
|
January 10, 1997
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
(Date of
|
|
|
|
|
|
|
|
|
|
|
Ended June 30,
|
|
|
Inception)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Through
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2004
|
|
|
2005
|
|
|
June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Research and development — related parties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
$
|
(3,398
|
)
|
|
$
|
13,855
|
|
|
$
|
23,156
|
|
|
$
|
11,578
|
|
|
$
|
21,876
|
|
|
$
|
55,489
|
|
|
|
Consulting fees
|
|
|
103,000
|
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
30,000
|
|
|
|
75,000
|
|
|
|
694,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
99,602
|
|
|
$
|
73,855
|
|
|
$
|
83,156
|
|
|
$
|
41,578
|
|
|
$
|
96,876
|
|
|
$
|
749,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative — related parties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Consulting fees
|
|
|
100,000
|
|
|
|
79,166
|
|
|
|
66,000
|
|
|
|
—
|
|
|
|
45,000
|
|
|
|
290,166
|
|
|
|
Legal fees
|
|
|
128,248
|
|
|
|
29,283
|
|
|
|
345,060
|
|
|
|
66,920
|
|
|
|
359,108
|
|
|
|
861,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
228,248
|
|
|
$
|
108,449
|
|
|
$
|
411,060
|
|
|
$
|
66,920
|
|
|
$
|
404,108
|
|
|
$
|
1,151,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 1999 and 2000, prior to the acquisition of BTI, the Company
provided management services to BTI and received $223,334 of
income that was recorded as other income.
Included in accrued expense — related parties in the
accompanying consolidated balance sheets is the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
As of June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Consulting
|
|
$
|
317,970
|
|
|
$
|
16,515
|
|
|
$
|
31,161
|
|
|
Legal
|
|
|
2,296
|
|
|
|
161,481
|
|
|
|
200,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
320,266
|
|
|
$
|
177,996
|
|
|
$
|
231,464
|
|
|
|
|
|
|
|
|
|
|
|
|
F-36
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(Information as of June 30, 2005, for the Six Months
Ended June 30, 2004 and 2005
and for the Period From January 10, 1997 (date of
inception) Through June 30, 2005 is Unaudited)
In October 2005, the Company purchased, under an Asset Purchase
Agreement, the remaining 36.4% share of its 63.6%-owned
subsidiary ATP in exchange for certain records and contractual
rights maintained by the Company. ATP has no currently licensed
intellectual property and has closed out its Phase 1
clinical trial with the FDA. The Company intends to liquidate
the subsidiary due to its inactive status.
On September 30, 2005, the Company entered into a
$5 million Loan and Security Agreement (“Loan
Agreement”) with Ritchie Multi-Strategy Global, LLC. The
debt will be used for working capital and general corporate
activities. The obligations are secured by a first priority
security interest in the Company’s assets and intellectual
property. The Company is required to pay interest only during
the first three months of the term of the loan, and thereafter
the entire loan will amortize over 35 months with equal
monthly principal and interest payments. The interest rate of
the loan is the lesser of (i) 395 basis points above the
yield on the three-year U.S. Treasury Notes on the closing date
of the loan and (ii) the maximum rate permitted by law. In
addition, we are required to pay Ritchie Multi-Strategy Global,
L.L.C a fee in the amount of $250,000 if the Company completes
an initial public offering prior to June 30, 2006
(thereafter, the fee would be in the amount of $300,000).
|
|
|
|
13.
|
UNAUDITED QUARTERLY FINANCIAL DATA
|
The following table presents unaudited quarterly financial data
of the Company. The Company’s quarterly results of
operations for these periods are not necessarily indicative of
future results of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
Share
|
|
|
|
|
Revenue Under
|
|
|
|
|
Attributable to
|
|
|
Attributable to
|
|
|
|
|
Research and
|
|
|
|
|
Common
|
|
|
Common
|
|
|
|
|
Development Grants
|
|
|
Net Loss
|
|
|
Stockholders
|
|
|
Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
18,726
|
|
|
$
|
(859,709
|
)
|
|
$
|
(990,549
|
)
|
|
$
|
(0.05
|
)
|
|
|
Second Quarter
|
|
|
176,272
|
|
|
|
(1,203,510
|
)
|
|
|
(1,353,818
|
)
|
|
|
(0.06
|
)
|
|
|
Third Quarter
|
|
|
224,164
|
|
|
|
(600,646
|
)
|
|
|
(750,954
|
)
|
|
|
(0.04
|
)
|
|
|
Fourth Quarter
|
|
|
304,313
|
|
|
|
(683,862
|
)
|
|
|
(865,302
|
)
|
|
|
(0.04
|
)
|
|
Year Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
141,725
|
|
|
|
(1,121,200
|
)
|
|
|
(1,422,334
|
)
|
|
|
(0.07
|
)
|
|
|
Second Quarter
|
|
|
106,170
|
|
|
|
(2,133,683
|
)
|
|
|
(2,470,681
|
)
|
|
|
(0.11
|
)
|
|
|
Third Quarter
|
|
|
124,740
|
|
|
|
(2,589,134
|
)
|
|
|
(2,926,132
|
)
|
|
|
(0.13
|
)
|
|
|
Fourth Quarter
|
|
|
196,638
|
|
|
|
(2,471,386
|
)
|
|
|
(2,808,388
|
)
|
|
|
(0.12
|
)
|
|
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
267,846
|
|
|
|
(3,250,119
|
)
|
|
|
(4,159,350
|
)
|
|
|
(0.17
|
)
|
|
|
Second Quarter
|
|
|
159,116
|
|
|
|
(3,228,435
|
)
|
|
|
(4,029,471
|
)
|
|
|
(0.16
|
)
|
F-37
Shares
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
Common Stock
PROSPECTUS
Until all
dealers that effect these transactions in these securities,
whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the
dealer’s obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
|
|
|
|
Piper Jaffray
|
SG Cowen & Co.
|
|
|
|
|
Oppenheimer & Co.
|
Roth Capital Partners, LLC
|
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of
Issuance and Distribution.
The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, payable by the
registrant in connection with the sale of our common stock being
registered. All amounts are estimates, except for the Securities
and Exchange Commission registration fee, the NASD filing fee
and the Nasdaq National Market listing fee. All of these costs
and expenses will be borne by the registrant.
|
|
|
|
|
|
|
Securities and Exchange Commission filing fee
|
|
$
|
6,768
|
|
|
NASD filing fee
|
|
$
|
6,250
|
|
|
Nasdaq National Market listing fee
|
|
|
|
|
|
Blue Sky fees and expenses
|
|
|
|
|
|
Transfer agent and Registrar expenses and fees
|
|
|
|
|
|
Printing and engraving expenses
|
|
|
|
|
|
Accountants’ fees and expenses
|
|
|
|
|
|
Legal fees and expenses
|
|
|
|
|
|
Directors and officers insurance premium
|
|
|
|
|
|
Road Show
|
|
|
|
|
|
Miscellaneous
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
Item 14. Indemnification of
Directors and Officers.
We are a Massachusetts corporation. Section 2.02 of the
Massachusetts Business Corporation Act, or MBCA, permits a
corporation to eliminate or limit the personal liability of a
director for monetary damages for violations of the
director’s fiduciary duty, except for (i) any breach
of the director’s duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) for authorizing unauthorized distributions and
for making loans to directors, officers and certain shareholders
pursuant to Section 6.40 of the MBCA or (iv) any
transaction from which a director derived an improper personal
benefit.
Section 8 of the MBCA provides that a corporation may
indemnify directors, officers, employees and other agents and
persons who serve at its request as directors, officers,
employees or agents of another organization or who serve at its
request in any capacity with respect to any employee benefit
plan, to the extent specified or authorized by the articles of
organization, any bylaw adopted by the stockholders or a vote
adopted by the holders of a majority of the shares of stock
entitled to vote on the election of directors.
Such indemnification may include payment by the corporation of
expenses incurred in defending a civil or criminal action or
proceeding in advance of the final disposition of such action or
proceeding, upon receipt of any undertaking by the person
indemnified to repay such payment if he shall be adjudicated to
be not entitled to indemnification under Section 8 which
undertaking may be accepted without reference to the financial
ability of such person to make repayment. Any such
indemnification may be provided although the person to be
indemnified is no longer an officer, director, employee or agent
of the corporation or of such other organization or no longer
serves with respect to such employee benefit plan. No
indemnification shall be provided, however, for any person with
respect to any matter where there is a court determination that
such person, in the matter in question, did not act in good
faith in the reasonable belief that his action was in the best
interest of the corporation or, to the extent
II-1
that the matter relates to service with respect to an employee
benefit plan, that such person did not act in the best interest
of the participants or beneficiaries of such employee benefit
plan.
We have also adopted provisions in our Restated Articles of
Organization providing that our directors, officers, employees,
and agents shall be indemnified to the fullest extent permitted
by Massachusetts law. Additionally, the Amended and Restated
Bylaws permit us to secure insurance on behalf of any officer,
director, employee, or other agent for any liability arising out
of his or her actions in connection with their services to us,
regardless of whether our articles or incorporation or bylaws
permit such indemnification. We have obtained such insurance.
In addition to the indemnification granted to officers and
directors under the MBCA, Article VI of our Restated
Articles of Organization provides that each person who was or is
made a party or is threatened to be made a party to or is
otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of
the fact that he or she is or was a director or an officer of
the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee
benefit plan, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee
or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held
harmless by the corporation to the fullest extent authorized by
the MBCA, as the same exists or may hereafter be amended against
all expense, liability and loss (including attorneys’ fees,
judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith.
The right to indemnification conferred in our Restated Articles
of Organization includes, in the case of a director or officer
at the level of vice president or above, and in the case of any
other officer or any employee may include (in the discretion of
the Board of Directors), the right to be paid by the Company the
expenses incurred in defending any such proceeding in advance of
its final disposition. The rights to indemnification and to the
advancement of expenses conferred in our Restated Articles of
Organization continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and inure to the benefit of
the indemnitee’s heirs, executors and administrators.
We have entered into separate indemnification agreements with
our directors and executive officers, in addition to the
indemnification provided for in our articles of organization and
bylaws. These agreements, among other things, provide that we
will indemnify our directors and executive officers for any and
all expenses, including attorneys’ fees, judgments, witness
fees, damages, fines, and settlement amounts incurred by a
director or executive officer in any action or proceeding
arising out of their services as one of our directors or
executive officers, or any of our subsidiaries or any other
company or enterprise to which the person provides services at
our request. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors
and executive officers.
There is pending litigation involving two of our directors and
officers as to which indemnification is being provided pursuant
to our by-laws. See “Business — Legal
Proceedings”. There is no other pending litigation or
proceeding involving our directors, officers, employees or
agents pending for which indemnification is sought, nor are we
aware of any pending or threatened litigation that may result in
claims for indemnification by any director, officer, employee or
other agent.
II-2
Item 15. Recent Sales of
Unregistered Securities.
In the last three years, we have sold the following securities
which were not registered under the Securities Act of 1933:
|
|
|
|
|
1. We did not sell any securities during 2002. On
December 9, 2002 we
issued shares
of our common stock pursuant to anti-dilution rights held by a
total of 6 investors who had previously purchased shares of
common stock from us in 2000. With the issuance of these common
shares, the anti-dilution rights of these investors were
terminated. During 2002, we accepted advance subscriptions for
our Series A Preferred Stock, which was not issued until
2003, as described below.
|
|
|
|
|
2. During 2003, we issued and sold a total of 120,317
shares of our Series A Preferred Stock to a total of 37
investors in private placements. Those shares of Series A
Preferred Stock for which advance subscriptions were received
prior to July 2002 and were issued on January 6, 2003 were
sold for $70 per preferred share. Those shares of Series A
Preferred Stock for which subscriptions were received on or
after July 2002 and issued from January 30, 2003 through
December 2003 were sold for $54 per preferred share. Each share
of preferred stock converts to common stock on
a -to-1
basis and the price per share, on a common stock equivalent
basis, was
$ and
$ ,
respectively, per common stock equivalent.
|
|
|
|
|
3. On May 20, 2003, we
issued shares
of common stock to David Barlow upon the exercise of an option
by Mr. Barlow. The option exercise price was
$ per
share and the aggregate purchase price was paid by a payment of
$32,850 in cash and the balance by a non-interest bearing
promissory note in the amount of $295,650. On November 4,
2005, Mr. Barlow repaid this loan in full by paying to the
Company $295,650 in cash. See discussion in note 3 of our
audited consolidated financial statements relating to the
accounting treatment pertaining to the repayment of this loan.
Certain of these shares of common stock are subject to
forfeiture based upon vesting provisions in a Stock Restriction
Agreement.
|
|
|
|
|
4. From March 4, 2004 through June 30, 2004, we
issued a total of 53,663 shares of our Series B Convertible
Preferred Stock to 33 investors in a private placement for $132
per preferred share. Each share of preferred stock converts to
common stock on
a -to-1
basis and the price per share, on a common stock equivalent
basis, was
$ per
common stock equivalent. In connection with the sale of these
shares of Series B preferred stock, each investor was
issued a warrant to purchase that number of shares of common
stock equal to 20% of the aggregate dollar amount invested
divided by
$ ,
the warrant exercise price. This resulted in warrants being
issued for the purchase of a total
of shares
of common stock at an exercise price of
$ per
common share. These warrants will expire, if not exercised, in
connection with this offering.
|
|
|
|
|
5. During 2004, we
issued shares
of our Common Stock pursuant to option exercises. The options
were previously granted pursuant to our 1997 Stock Option Plan.
|
|
|
|
|
6. In June 2004, we
issued shares
of our Common Stock to James Poitras pursuant to his exercise of
a warrant to purchase common shares. The exercise price was
$ per
share. The warrant had been issued in connection with a prior
investment in the Company by Mr. Poitras.
|
|
|
|
|
7. In August 2004, we
issued shares
of our Common Stock to David Barlow pursuant to his exercise of
a warrant to purchase common shares. The exercise price was
$ per
share. The warrant had been issued in connection with a prior
investment in the Company by Mr. Barlow.
|
|
|
|
|
8. From March 29, 2005 through April 14, 2005, we
issued and sold a total of 141,590 shares of our Series C
Convertible Preferred Stock to 45 investors in a private
placement for $202
|
II-3
|
|
|
|
|
per preferred share. Each share of preferred stock converts to
common stock on
a -
to-1 basis and the price per share, on a common stock equivalent
basis, was
$ per
common stock equivalent.
|
|
|
|
|
9. In April 2005 the Company issued a warrant to purchase
an aggregate
of shares
of common stock at an exercise price of
$ to
S.G. Cowen & Co., an accredited investor, for services
rendered in connection with the sale of our Series C
Preferred Stock.
|
|
|
|
|
10. To date in 2005, the Company has
issued shares
of its Common Stock pursuant to option exercises. The options
were previously granted pursuant to our 1997 Stock Option Plan.
|
We claimed exemption from registration under the Securities Act
for the sales and issuances of securities in the transactions
described in paragraphs 2, 3 and 7 above by virtue of
Section 4(2) of the Securities Act and by virtue of
Rule 506 of Regulation D. Such sales and issuances did
not involve any public offering, were made without general
solicitation or advertising and each purchaser was an accredited
investor with access to all relevant information necessary to
evaluate the investment and represented to us that the shares
were being acquired for investment. The recipients of securities
in each of these transactions represented their intention to
acquire the securities for investment only and not with view to
or for sale in connection with any distribution thereof.
Appropriate legends were affixed to the share certificates and
instruments issued in all such transactions.
We claimed exemption from registration under the Securities Act
for the sales and issuances of securities in the transactions
described in paragraphs 4, 8 and 10 above by virtue of
Rule 701 promulgated under the Securities Act, in that they
were offered and sold either pursuant to written compensatory
plans or pursuant to a written contract relating to
compensation, as provided by Rule 701. The recipients of
securities in each of these transactions represented their
intention to acquire the securities for investment only and not
with view to or for sale in connection with any distribution
thereof and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationships with
us, to information about us.
We claimed exemption from registration under the Securities Act
for the sales and issuances of securities in the transactions
described in paragraphs 1, 5, 6 and 9 above by virtue of
Section 4(2) of the Securities Act. Such sales and
issuances did not involve any public offering, were made without
general solicitation or advertising and each purchaser was an
accredited investor with access to all relevant information
necessary to evaluate the investment and represented to us that
the shares were being acquired, or the shares issuable pursuant
to warrant exercise would be acquired, for investment purposes
only and not with a view to or for sale in connection with any
distribution thereof.
Item 16. Exhibits and
Financial Statement Schedules.
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|
|
|
|
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|
Number
|
|
|
|
|
Description of Document
|
|
|
|
|
|
|
|
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|
1
|
.1
|
|
|
|
Form of Underwriting Agreement*
|
|
|
3
|
.1
|
|
|
|
Form of Restated Articles of Organization.*
|
|
|
3
|
.2
|
|
|
|
Form of Restated Bylaws.*
|
|
|
4
|
.1
|
|
|
|
Reference is made to Exhibits 3.1 and 3.2
|
|
|
4
|
.2
|
|
|
|
Form of Common Stock Certificate.*
|
|
|
5
|
.1
|
|
|
|
Opinion of Foley & Lardner LLP.*
|
|
|
10
|
.1
|
|
|
|
Unit Purchase Agreement for the Purchase of Shares of
Series B Preferred Stock of the Company dated as of
February 23, 2004
|
|
|
10
|
.2
|
|
|
|
Stock Purchase Agreement for the Purchase of Series C
Preferred Stock of the Company dated as of March 29, 2005
|
II-4
|
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
Description of Document
|
|
|
|
|
|
|
|
|
|
10
|
.3
|
|
|
|
Amended and Restated Voting Agreement by and among the Company
and certain holders of Common Stock and Series A Preferred
Stock, the holders of Series B Preferred Stock and the
holders of Series C Preferred Stock dated as of
March 29, 2005
|
|
|
10
|
.4
|
|
|
|
Investors Rights Agreement by and between the Company and the
holders of Series C Preferred Stock dated as of
March 29, 2005
|
|
|
10
|
.5
|
|
|
|
Registration Rights Agreement by and among the Company and
certain holders of Common Stock and Series A Preferred
Stock, the holders of Series B Preferred Stock and the
holders of Series C Preferred Stock dated as of
March 29, 2005
|
|
|
10
|
.6
|
|
|
|
Lease Agreement dated as of June 19, 2003 by and between
the Company and RayJoe Limited Partnership
|
|
|
10
|
.7
|
|
|
|
Employment Agreement dated as of January 1, 2003 by and
between the Company and John Babich
|
|
|
10
|
.8
|
|
|
|
Employment Agreement dated as of February 7, 2003 by and
between the Company and David Barlow
|
|
|
10
|
.9
|
|
|
|
Employment Agreement dated as of March 3, 2003 by and
between the Company and John McCray
|
|
|
10
|
.10
|
|
|
|
Employment Agreement dated as of May 1, 2004 by and between
the Company and Nicholas Borys.
|
|
|
10
|
.11
|
|
|
|
Employment Agreement dated as of July 1, 2005 by and
between the Company and Bob Gallahue.
|
|
|
10
|
.12
|
|
|
|
License Agreement, dated as of October 25, 1999, between
the Company and Nihon Medi-Physics Co. Ltd. †
|
|
|
10
|
.13
|
|
|
|
Development, Manufacturing and Supply Agreement, dated
June 14, 2004, as amended, between the Company and MDS
Nordion, a division of MDS (Canada) Inc. †
|
|
|
10
|
.14
|
|
|
|
Exclusive License Agreement, dated as of December 29, 1997,
between the Company and Georgetown University. †
|
|
|
10
|
.15
|
|
|
|
Exclusive License Agreement, dated as of March 1, 2000,
between the Company and Georgetown University. †
|
|
|
10
|
.16
|
|
|
|
License Agreement, dated as of December 15, 2000, between
the Company and The Board of Governors of the University of
Western Ontario. †
|
|
|
10
|
.17
|
|
|
|
License Agreement, dated as of September 5, 2003, between
the Company and The Board of Governors of the University of
Western Ontario. †
|
|
|
10
|
.18
|
|
|
|
1997 Stock Option Plan
|
|
|
10
|
.19
|
|
|
|
Molecular Insight Pharmaceuticals 2005 Equity Incentive Plan*
|
|
|
23
|
.1
|
|
|
|
Consent of Deloitte & Touche LLP
|
|
|
|
|
|
|
*
|
To be filed by amendment
|
|
|
|
|
|
|
†
|
Portions of this exhibit have been omitted and filed separately
with the secretary of the Securities and Exchange Commission
pursuant to a confidential treatment request
|
All financial statement schedules have been omitted because they
are inapplicable or not required and because the information is
included elsewhere in the consolidated financial statements or
notes thereto.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
deliver to each purchaser.
II-5
The undersigned registrant hereby undertakes that:
|
|
|
|
|
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
|
|
|
|
|
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
|
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, The Commonwealth of
Massachusetts, on the 8th day of November, 2005.
|
|
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|
|
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
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|
|
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|
By: /s/ David S. Barlow
|
|
|
|
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|
David S. Barlow
|
|
|
Chairman and Chief Executive Officer
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated. Each person whose
signature appears below constitutes and appoints David S. Barlow
and John E. McCray and each of them individually, as his or her
true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to
this registration statement and any Rule 462(b)
registration statement and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as
fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either or them, or their or his
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
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Signature
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Title
|
|
Date
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|
By:
|
|
/s/ David S. Barlow
David
S. Barlow
|
|
Chief Executive Officer; Chairman of the Board
|
|
November 8, 2005
|
|
|
|
By:
|
|
/s/ John Babich, Ph.D.
John
Babich, Ph.D.
|
|
President; Director
|
|
November 8, 2005
|
|
|
|
By:
|
|
/s/ John McCray
John
McCray
|
|
Chief Operating Officer
|
|
November 8, 2005
|
|
|
|
By:
|
|
/s/ Robert Gallahue, C.P.A.
Robert
Gallahue, C.P.A.
|
|
Chief Financial Officer
|
|
November 8, 2005
|
|
|
|
By:
|
|
/s/ Daniel Frank
Daniel
Frank
|
|
Director
|
|
November 8, 2005
|
|
|
|
By:
|
|
/s/ Andrew Jay, D.M.D.
Andrew
Jay D.M.D.
|
|
Director
|
|
November 8, 2005
|
|
|
|
By:
|
|
/s/ William C. Eckelman, Ph.D.
William
C. Eckelman, Ph.D.
|
|
Director
|
|
November 8, 2005
|
|
|
|
By:
|
|
/s/ Harry Stylli, Ph.D.
Harry
Stylli, Ph.D.
|
|
Director
|
|
November 8, 2005
|
|
|
|
By:
|
|
/s/ Kim Lamon, M.D., Ph.D.
Kim
Lamon, M.D., Ph.D.
|
|
Director
|
|
November 8, 2005
|
II-7
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
Description of Document
|
|
|
|
|
|
|
|
|
|
1
|
.1
|
|
|
|
Form of Underwriting Agreement*
|
|
|
3
|
.1
|
|
|
|
Form of Restated Articles of Organization.*
|
|
|
3
|
.2
|
|
|
|
Form of Amended and Restated Bylaws.*
|
|
|
4
|
.1
|
|
|
|
Reference is made to Exhibits 3.1 and 3.2.
|
|
|
4
|
.2
|
|
|
|
Form of Common Stock Certificate.*
|
|
|
5
|
.1
|
|
|
|
Opinion of Foley & Lardner LLP.*
|
|
|
10
|
.1
|
|
|
|
Unit Purchase Agreement for the Purchase of Shares of
Series B Preferred Stock of the Company dated as of
February 23, 2004
|
|
|
10
|
.2
|
|
|
|
Stock Purchase Agreement for the Purchase of Series C
Preferred Stock of the Company dated as of March 29, 2005
|
|
|
10
|
.3
|
|
|
|
Amended and Restated Voting Agreement by and among the Company
and certain holders of Common Stock and Series A Preferred
Stock, the holders of Series B Preferred Stock and the
holders of Series C Preferred Stock dated as of
March 29, 2005
|
|
|
10
|
.4
|
|
|
|
Investors Rights Agreement by and between the Company and the
holders of Series C Preferred Stock dated as of
March 29, 2005
|
|
|
10
|
.5
|
|
|
|
Registration Rights Agreement by and among the Company and
certain holders of Common Stock and Series A Preferred
Stock, the holders of Series B Preferred Stock and the
holders of Series C Preferred Stock dated as of
March 29, 2005
|
|
|
10
|
.6
|
|
|
|
Lease Agreement dated as of June 19, 2003 by and between
the Company and RayJoe Limited Partnership
|
|
|
10
|
.7
|
|
|
|
Employment Agreement dated as of January 1, 2003 by and
between the Company and John Babich
|
|
|
10
|
.8
|
|
|
|
Employment Agreement dated as of February 7, 2003 by and
between the Company and David Barlow
|
|
|
10
|
.9
|
|
|
|
Employment Agreement dated as of March 3, 2003 by and
between the Company and John McCray
|
|
|
10
|
.10
|
|
|
|
Employment Agreement dated as of May 1, 2004 by and between
the Company and Nicholas Borys.
|
|
|
10
|
.11
|
|
|
|
Employment Agreement dated as of July 1, 2005 by and
between the Company and Bob Gallahue.
|
|
|
10
|
.12
|
|
|
|
License Agreement, dated as of October 25, 1999, between
the Company and Nihon Medi-Physics Co. Ltd.†
|
|
|
10
|
.13
|
|
|
|
Development, Manufacturing and Supply Agreement, dated
June 14, 2004, as amended, between the Company and MDS
Nordion, a division of MDS (Canada) Inc.†
|
|
|
10
|
.14
|
|
|
|
Exclusive License Agreement, dated as of December 29, 1997,
between the Company and Georgetown University.†
|
|
|
10
|
.15
|
|
|
|
Exclusive License Agreement, dated as of March 1, 2000,
between the Company and Georgetown University.†
|
|
|
10
|
.16
|
|
|
|
License Agreement, dated as of December 15, 2000, between
the Company and The Board of Governors of the University of
Western Ontario.†
|
|
|
10
|
.17
|
|
|
|
License Agreement, dated as of September 5, 2003, between
the Company and The Board of Governors of the University of
Western Ontario.†
|
|
|
10
|
.18
|
|
|
|
1997 Stock Option Plan
|
|
|
10
|
.19
|
|
|
|
Molecular Insight Pharmaceuticals 2005 Equity Incentive Plan*
|
|
|
23
|
.1
|
|
|
|
Consent of Deloitte & Touche LLP
|
|
|
|
|
*
|
To be filed by amendment
|
|
|
|
|
†
|
Portions of this exhibit have been omitted and filed separately
with the secretary of the Securities and Exchange Commission
pursuant to a confidential treatment request
|
Exhibit 10.1
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
Up to 61,000 Shares of Series B Preferred Stock
and
Warrants to Purchase Shares of Common Stock
UNIT PURCHASE AGREEMENT
dated as of February 23, 2004
UNIT PURCHASE AGREEMENT
THIS AGREEMENT is by and between Molecular Insight Pharmaceuticals, Inc.
(the "Company"), a Massachusetts corporation with principal offices at 160
Second Street, Cambridge, Massachusetts 02142, and each of the purchasers set
forth on Schedule I attached hereto (each a "Purchaser" and together the
"Purchasers").
IN CONSIDERATION of the mutual covenants contained in this Agreement and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. AUTHORIZATION OF SALE OF UNITS. Prior to the Closing (as defined in
Section 3 below), the Company will have authorized the sale of Units where each
Unit (a "Unit") shall consist of (i) that number of shares of Series B Preferred
Stock, $0.01 par value per share, of the Company (the "Preferred Shares") equal
to the aggregate amount purchased by such Purchaser divided by $132.00 per
Preferred Share and (ii) a five-year Warrant (the "Warrant") to purchase shares
of Common Stock, $0.01 par value per share, of the Company (the "Common Shares")
where such number of shares of Common Stock subject to the Warrant are equal to
(x) 0.20 times (y) the aggregate dollar amount of Preferred Shares purchased by
such Purchaser divided by the Warrant Price set forth therein. The Warrant shall
be substantially in the form of Exhibit 1 attached hereto and shall have an
exercise price per share equal to $0.66 per share. Prior to the Closing, the
Company will have authorized the sale of Units where the maximum number of
Preferred Shares purchased pursuant to such Units is 61,000 shares of Preferred
Shares for an aggregate purchase price of $8,052,000 and such sale may be
consummated in one or more transactions pursuant to Section 2 below. The
Purchasers acknowledge and agree that, prior to the Closing, the Company must
hold a meeting of its stockholders to approve the Amendment to the Articles of
Organization in substantially the form attached hereto as Exhibit 2 (the
"Amendment") and, upon approval from the stockholders, file such Amendment with
the Secretary of State for the Commonwealth of Massachusetts. Upon execution of
this Agreement, the Company will promptly call such stockholders meeting in
accordance with its charter documents and the laws of the Commonwealth of
Massachusetts. The Closing shall not occur until such Amendment is filed with
the Secretary of State for the Commonwealth of Massachusetts.
2. AGREEMENT TO SELL AND PURCHASE UNITS. Subject to the terms and
conditions of this Agreement, at the Closing (as defined below) the Company
shall sell and issue to the Purchasers, and the Purchasers shall purchase from
the Company, at a purchase price of $132.00 per Preferred Share being purchased
by such Purchaser, payable as set forth in Section 3 hereof, a Unit equal to the
number of shares of Preferred Shares set forth opposite the name of such
Purchaser on Schedule I attached hereto (the "Initial Shares"), together with a
Warrant calculated in the manner set forth in Section 1 above (the Initial
Shares and the related Warrants being the "Initial Units"). Additionally, until
5:00 p.m. (Boston time) on June 30, 2004, one or more additional persons (the
"Additional Purchasers") may purchase from the Company additional Units (the
"Additional Units") consisting of additional shares of Preferred Shares (the
"Additional Shares") and additional Warrants on the same terms and conditions as
set forth herein, such agreement to be evidenced by the delivery by one or more
of the Additional Purchasers to the Company of a counterpart signature page in
the form set forth on Schedule II attached hereto and, upon full execution of
each such Schedule II by the Company and the applicable Additional Purchaser,
Schedule I attached hereto shall be amended to
include the sale of such Preferred Shares under the heading "No. of Additional
Shares". The sale by the Company and the purchase by an Additional Purchaser of
the Additional Units shall not become effective until the Company receives
payment of the aggregate purchase price from such Additional Purchaser. Upon the
purchase of such Additional Units, an Additional Purchaser shall be deemed a
Purchaser hereunder and shall be subject to and may rely upon the
representations and warranties, terms and conditions contained herein. Each of
the Purchasers hereby waives any rights such Purchaser may have under this
Agreement or the Company's Amendment to receive notice of the sale and issuance
of such Additional Units. The Initial Shares, together with the maximum number
of Additional Shares purchasable by Additional Purchasers hereunder, shall not
exceed 61,000 shares of Series B Preferred Stock in the Company and the Company
may issue related Warrants to purchase shares of Common Stock in the Company in
accordance with Section 1 herein. Accordingly, the aggregate maximum purchase
price of the Units shall be approximately $8,052,000.
3. CLOSING AND DELIVERY OF UNITS. The closing of the sale and purchase of
the Initial Units pursuant to this Agreement shall take place at the offices of
Epstein, Becker & Green, 111 Huntington Avenue, Boston, Massachusetts 02199 as
soon as practicable, but no later than five (5) business days, after the
Company's has filed the Amendment with the Secretary of State for the
Commonwealth of Massachusetts (the "Closing"). The date of the Closing is
hereinafter referred to as the "Closing Date." At the Closing, the Company shall
deliver to the Purchasers certificates representing the Initial Shares, in such
amounts and registered in such names as set forth on Schedule I attached hereto
and the Warrant related thereto. The purchase price for the Units shall be paid
by check or wire transfer of immediately available funds to an account
designated by the Company. The Company shall deliver to the Purchasers one or
more stock certificates representing the Preferred Shares purchased by such
Purchaser and a Warrant calculated in a manner set forth in Section 1 above,
each such certificate and Warrant to be registered in the name of the Purchaser
and delivered against receipt by the Company of a certified or official bank
check or checks or wire transfer of funds in the full amount of the purchase
price for the Units being purchased hereunder. No more then 0.05% of the
aggregate purchase price paid by each Purchaser shall be allocated to the
Warrants for such Purchaser.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
hereby represents and warrants to, and covenants with, the Purchaser as follows:
4.1. Organization. The Company is duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts. The
Company has full corporate power and authority to own, operate and occupy its
properties and to conduct its business as presently conducted and is registered
or qualified to do business and in good standing in each jurisdiction in which
it owns or leases property or transacts business and where the failure to be so
qualified could be reasonably expected to have a material adverse effect upon
the business, financial condition, properties or operations of the Company.
Except for: (i) Biostream Therapeutics, Inc., a wholly-owned subsidiary; and
(ii) ATP Therapeutics, Inc., a 63.63% owned subsidiary, the Company does not
own, directly or indirectly, any interest in any corporation, association, or
other entity. The Company is not a participant in any joint venture, partnership
or similar arrangement.
4.2. Due Authorization. The Company has, or will have prior to the
Closing, all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement, and this Agreement has been, or
will be prior to the Closing, duly authorized and validly executed and delivered
by the Company and will, as of the Closing Date, constitute the legal, valid and
binding agreement of the Company enforceable against the Company in accordance
with its terms,
except as rights to indemnity and contribution may be limited by state, federal
or foreign laws or the public policy underlying such laws, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.3. Non-Contravention. The execution and delivery of this
Agreement, the issuance and sale of the Units to be sold by the Company
hereunder, the fulfillment of the terms of this Agreement and the consummation
of the transactions contemplated by this Agreement will not (i) conflict with,
or constitute a violation of or default (with the passage of time or otherwise)
under, any material agreement or instrument to which the Company is a party or
by which it is bound, or the charter, by-laws or other organizational documents
of the Company, (ii) result in the creation or imposition of any lien,
encumbrance, claim, security interest or restriction whatsoever upon any of the
material properties or assets of the Company or an acceleration of indebtedness
pursuant to any obligation, agreement or condition contained in any material
bond, debenture, note or any other evidence of indebtedness or any, material
indenture, mortgage, deed of trust or any other agreement or instrument to which
the Company is a party or by which it is bound or to which any of the property
or assets of the Company is subject, or (iii) conflict with, or result in a
violation of, any law, administrative regulation, ordinance or order of any
court or governmental agency, arbitration panel or authority applicable to the
Company. No consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, or
other governmental body is required for the valid issuance and sale of the Units
to be sold pursuant to the Agreement, other than such as have been or will be
made or obtained by the Closing and other than applicable securities filings
that may be made after the issuance and sale of the Units (which will be timely
made by the Company).
4.4 Capitalization. Upon adoption of the Amendment, the Company will
have a total authorized capitalization consisting of (i) 78,000,000 shares of
Common Stock and (ii) 211,000 shares of Preferred Stock, $0.01 par value
("Preferred Stock"), of which 150,000 shares are designated Series A Preferred
Stock ("Series A Preferred") and 61,000 shares are designated Series B Preferred
Stock ("Series B Preferred"). As of the date hereof; 20,494,444 shares of Common
Stock are issued and outstanding and 120,717 shares Series A Preferred are
issued and outstanding and, as of the Closing, 15,152 shares of Series B
Preferred will be issued and outstanding upon the consummation of the issuance
and sale of the Initial Units. The Units to be sold pursuant to this Agreement
have been, or will be prior to the Closing, duly authorized, and when issued and
paid for in accordance with the terms of this Agreement and the Amendment, will
be validly issued, fully paid and non-assessable and free of restrictions on
transfer, other than restrictions on its transfer under this Agreement, the
Amendment and under applicable state and federal securities laws. The Common
Shares to be issued upon exercise of the Warrant will be validly issued, fully
paid and non-assessable and free of restrictions on transfer, other than
restrictions on their transfer under this Agreement, the Articles of
Organization and under applicable state and federal securities laws. The
outstanding shares of capital stock of the Company have been duly and validly
issued and are fully paid and non-assessable. As of the date hereof up to
13,000,000 shares of Common Stock in total are currently authorized for grants
under the Company's stock option plan, of which 11,148,636 shares are subject to
outstanding options under the Company's stock option plan. As of the date
hereof, 1,851,364 shares are subject to options not granted pursuant to the
Company's stock option plan and 396,248 shares of Common Stock reserved for
issuance upon the exercise of outstanding warrants, excluding the Warrant to be
issued hereunder. Based upon the representations of the Purchasers set forth in
Section 5 herein, the offer, sale and issuance of the Units
as contemplated herein are exempt from the registration requirements of the
Securities Act of 1933, as amended, and neither the Company or any authorized
agent acting on behalf of the Company will take any action hereafter that would
cause the loss of such exemption.
4.5 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority is required on
the part of the Company in order to enable the Company to execute, deliver and
perform its obligations under this Agreement, except for such qualifications or
filings under applicable securities laws as may be required in connection with
the transactions contemplated by this Agreement and which may be done after the
Closing.
4.6 Litigation. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to the Company's knowledge,
threatened against the Company which questions the validity of this Agreement or
the right of the Company to enter into it, or which might result, either
individually or in the aggregate, in any material adverse change in the
business, assets or condition, financial or otherwise, of the Company.
4.7 Financial Statements. The audited financial statements of the
Company dated December 31, 2002 (the "Balance Sheet Date") and the unaudited
financial statements dated December 31, 2002 (collectively the "Financial
Statements") have been previously delivered to the Purchasers or their counsel.
Except as otherwise described therein, such Financial Statements (i) are in
accordance with the books and records of the Company, (ii) are true, correct and
complete and present fairly the financial condition of the Company at the date
or dates therein indicated and the results of operations for the period or
periods therein specified, and (iii) have been prepared in accordance with U.S.
generally accepted accounting principles applied on a consistent basis, except
that the unaudited financial statements lack footnotes and remain subject to
year-end adjustments.
4.8 Activities Since Balance Sheet Date. Since the Balance Sheet
Date, there has not been: (a) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results or business of the Company (as presently
conducted); (b) any waiver by the Company of a material debt owed to it; (c) any
pledge or sale of the Business Intellectual Property (as defined in Section 4.12
below) which is owned by the Company; or (d) to the Company's knowledge, any
other event or condition of any character which would materially and adversely
affect the assets, financial condition, operating results or business of the
Company, except that the Company is currently experiencing substantial negative
cash flow each month and expects to continue negative cash flow for the
foreseeable future.
4.9 Tax Returns and Payments. The Company has timely filed all tax
returns and reports required by law and has not been audited by any state or
federal taxing authority. All tax returns and reports of the Company are true
and correct in all material respects. The Company has paid all taxes and other
assessments shown as due on such returns and reports, except those, if any,
currently being contested by it in good faith.
4.10 Insurance. The directors and officers liability insurance
policy set forth on Schedule 4.10 attached hereto, a copy of which has been
previously provided to the Purchasers or their counsel, is in full force and
effect on the date hereof.
4.11 Employee Benefit Plans. Except as set forth on Schedule 4.11
attached hereto, the Company does not have any employee benefit plans as such
term is defined in the Employee Retirement Income Security Act of 1974.
4.12 Intellectual Property.
(a) Definitions. For purposes of this Section 4.12, the term
"Business Intellectual Property" means the patents, registrations, and
applications therefor, including divisions, continuations, continuations-in-part
and renewal applications, and including renewals, extensions and reissues set
forth on Schedule 4.12 attached hereto (collectively, "Patents") and the written
agreements related thereto and set forth on Schedule 4.12.
(b) Except for U.S. Patent No. 4,524,059 which has expired, the
Company warrants and represents that all Business Intellectual Property owned by
the Company and, to the Company's knowledge, all Business Intellectual Property
licensed to the Company and its Subsidiaries (which companies shall be
considered as a whole), is valid, subsisting and enforceable.
(c) The Company is not, to its knowledge, violating and has not, to
its knowledge, violated, in each case in any material respect, any Business
Intellectual Property rights of any Person, and there exists no event, condition
or occurrence which, with the giving of notice or lapse of time, or both, would
constitute a breach or default by the Company or, to the knowledge of the
Company, another Person under any written agreement set forth on Schedule 4.12
the result of which violation would cause the Company's projects under such
Intellectual Property Contract to be terminated. No party to any written
agreement set forth on Schedule 4.12 has given the Company written notice of
cancellation, termination or failure to renew any Intellectual Property
Contract.
(e) Except for U.S. Patent No. 4,524,059 which has expired, the
Company warrants and represents that there is no suit, action, opposition,
cancellation or other proceeding ("Proceeding") pending concerning the Business
Intellectual Property owned by the Company or, to the Company's knowledge, the
Business Intellectual Property licensed by the Company, including any Proceeding
concerning a claim or position that the Business Intellectual Property has been
violated or is invalid, unenforceable, unpatentable, unregisterable, cancelable,
or not owned or held by the Company. To the Company's knowledge, no such claim
has been threatened or asserted in writing.
(f) Except for U.S. Patent No. 4,524,059 which has expired, the
Company warrants and represents that it owns or otherwise holds valid rights to
use all Business Intellectual Property material to the business of the Company
as presently conducted. All rights in and to the Business Intellectual Property
owned by the Company are free of all liens and are fully assignable by the
Company to any Person, without payment, consent of any Person or other condition
or restriction.
4.13 Disclosure. Neither this Agreement, the Voting Agreement, the
Amendment, the Warrants or any other written exhibit or schedule attached hereto
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading.
5. REPRESENTATIONS. WARRANTIES AND COVENANTS OF EACH PURCHASER.
5.1. Investment Representations. Each Purchaser, severally and not
jointly, represents and warrants to, and covenants with, the Company that: (i)
the Purchaser is an "accredited investor" as
defined in Regulation D under the Securities Act of 1933, as amended (the
"Securities Act"), and is knowledgeable and experienced in making investments in
private placement transactions such as the purchase of the Units; (ii) the
Purchaser is acquiring the Units set forth opposite his name on Schedule I
hereto for its own account for investment and with no present intention of
distributing the Units or any of the underlying Preferred Shares, Warrants or
Common Shares issuable upon exercise of the Warrants, and no arrangement or
understanding exists with any other person regarding the distribution of any of
such Preferred Shares, Warrants or Common Shares issuable upon exercise of the
Warrants; (iii) the Purchaser will not, directly or indirectly, voluntarily
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Preferred
Shares, the Warrants or the Common Shares issuable upon exercise of the Warrants
except (a) in the event of an effective registration statement under the
Securities Act, (b) upon delivery of an opinion of counsel (which shall be in
form and substance reasonably satisfactory to the Company) that such
registration is not required, unless such sale, transfer or other disposition is
made pursuant to Section 144(k) of the Securities Act, in which case no opinion
of counsel shall be required or (c) (a) to transfers to a trust established for
the benefit of the Purchaser, (b) transfers by the Purchaser to his guardian or
conservator or (c) transfers by the Purchaser, in the event of his death, to his
executor (s) or administrator (s) or to trustee(s) under his will (collectively,
"Permitted Transferees"), provided, however, that in any such event the
Preferred Shares so transferred in the hands of each such Permitted Transferee
shall remain subject to this Agreement, and each such Permitted Transferee shall
so acknowledge in writing as a condition precedent to the effectiveness of such
transfer; (iv) for as long as the Preferred Shares included in the Units
remaining outstanding, no transfer of the Warrants shall be made by the
Purchaser unless such Preferred Shares related to such Warrants are transferred
simultaneously therewith to the same third party; (v) the Purchaser has had an
opportunity to ask questions and receive answers from the management of the
Company regarding the Company, its business and the offering of the Units; and
(vi) if an individual, the Purchaser is resident in the state set forth on the
signature page to this Agreement. Nothing herein shall be deemed a
representation or warranty by such Purchaser to hold the Units for any specific
period of time. Further, notwithstanding clause (v) to the contrary, any
inquiries or investigations made by the Purchaser shall not modify, amend or
affect such Purchaser's right to rely on the representations, warranties and
covenants contained herein.
5.2. Power, Authority, etc. Each Purchaser, severally and not
jointly, further represents and warrants to, and covenants with, the Company
that (i) the Purchaser has full right, power, authority and capacity to enter
into this Agreement to consummate the transactions contemplated hereby and
thereby has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, and (ii) upon the execution and delivery of this
Agreement, this Agreement shall constitute a valid and binding obligation of the
Purchaser enforceable in accordance with its terms, except as rights to
indemnity and contribution may be limited by state, federal or foreign laws or
the public policy underlying such laws, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3. No Public Market; Legends. Each Purchaser acknowledges and
understands that there is no public market for the Units and the securities
compromising the Units and that each Purchaser must bear the economic risk of
his investment in the Units and the securities compromising the Units for an
indefinite period of time because the Units and the securities comprising the
Units have not been registered under the Securities Act. The certificates
representing the Preferred Shares and the
Common Shares issued to Purchasers upon exercise of the Warrants will bear a
legend in substantially the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN
OPINION OF COUNSEL (WHICH SHALL BE IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED
UNLESS SUCH SALE, TRANSFER OR OTHER DISPOSITION IS MADE PURSUANT TO
RULE 144(K) OF THE SECURITIES ACT, IN WHICH CASE NO OPINION OF COUNSEL
SHALL BE REQUIRED OR EXCEPT AS OTHERWISE PERMITTED UNDER A CERTAIN
STOCK PURCHASE AGREEMENT DATED FEBRUARY 23, 2004 BETWEEN THE COMPANY
AND THE ORIGINAL HOLDER, A COPY OF WHICH IS AVAILABLE UPON REQUEST FROM
THE COMPANY FOR INSPECTION.
The Company agrees to remove such legend from the certificates
representing the Preferred Shares and the shares of Common Stock issued upon
exercise of the Warrants at such time as such capital stock may be legally sold
under Rule 144 (or any successor rule) without registration under the Securities
Act, which legend removal shall be at the request of the Purchaser and upon
receipt by the Company from the Purchaser of an opinion of counsel, which shall
be in form and substance reasonably satisfactory to the Company, that such
legend may be removed. Each Purchaser agrees that any sale, transfer, pledge,
hypothecation or other disposition of the Preferred Shares, the Warrants and any
shares of Common Stock shall be made in compliance with the requirements of this
Section 5.3 and all applicable securities laws.
5.4. Lock-up Period. Each Purchaser agrees that it shall, if so
requested by the Company, enter into an agreement providing that it shall not
offer, sell or grant an option for the sale of, or otherwise dispose of, any
shares of Common Stock or any securities convertible into or exercisable for
shares of Common Stock (including, without limitation, any options, warrants,
stock appreciation rights, or similar rights with an exercise or conversion
privilege at a price related to, or derived from, the market price of the Common
Stock) during the period of one hundred eighty (180) days after the date of any
initial public offering of the Company's Common Stock, without the prior written
consent of the Company's underwriters for such offering. Notwithstanding
anything herein to the contrary, the Purchaser shall only be required to enter
into such a lock-up agreement if a majority of the officers, directors and
holders of 5% or more of the Company's capital stock also enter into such an
agreement.
6. REDEMPTION RIGHTS. The parties hereto acknowledge and agree that the
Preferred Shares will be subject to certain redemption rights as set forth in
the Amendment.
7. RIGHTS OF FIRST REFUSAL.
(a) Right of First Refusal. The Company shall, prior to any proposed
issuance by the Company of any of its securities (other than debt securities
with no equity feature), first offer to the
Purchasers by written notice the right, for a period of thirty (30) days, to
purchase for cash at an amount equal to the price or other consideration for
which such securities are to be issued, a number of such securities so that,
after giving effect to such issuance (and the conversion, exercise and exchange
into or for, whether directly or indirectly, shares of Common Stock of all such
securities that are so convertible, exercisable or exchangeable) the Purchasers
shall each have the opportunity to purchase such number of shares of securities
such that each Purchaser will continue to maintain its same proportionate equity
ownership (on a fully-diluted basis) in the Company as of the date of such
notice (treating each such party, for the purpose of such computation, as the
holder of the number of shares of Common Stock which would be issuable to such
party upon conversion, exercise and exchange of all securities held by such
party on the date such offer is made, that are convertible, exercisable or
exchangeable into or for (whether directly or indirectly) shares of Common Stock
and assuming the like conversion, exercise and exchange of all such other
securities held by other persons).
(b) Exceptions. The participation rights of the Purchasers pursuant
to this Section 7 shall not apply to securities issued or issuable: (A) upon
conversion of any of the Company's outstanding convertible securities (including
without limitation any class or series of Preferred Stock), (B) as a stock
dividend or upon any subdivision of shares of Common Stock, provided that the
securities issued pursuant to such stock dividend or subdivision are limited to
additional shares of Common Stock, (C) solely in consideration for the
acquisition (whether by merger or otherwise) by the Company or any of its
subsidiaries of all or substantially all of the stock or assets of any other
entity, (D) pursuant to the grant or exercise of options or warrants to purchase
Common Stock granted previously or in the future to directors, officers,
employees or consultants of the Company pursuant to the Company's existing stock
option and incentive plans, as such may be amended, or (E) in connection with
any strategic partner alliance or joint venture where the parties to such
venture are not financial investors and such transaction is approved by all of
the members of the Board of Directors.
(c) Procedure. The Company's written notice to the Purchasers shall
describe the securities proposed to be issued by the Company and specify the
number of shares, price and payment terms. The Purchasers, or any of them, may
accept the Company's offer as to the full number of securities offered to it, or
any lesser number, by written notice thereof given by each such Purchaser to the
Company prior to the expiration of the aforesaid thirty (30) day period, in
which event the Company shall sell and such party shall buy, upon the terms
specified, the number of securities agreed to be purchased by such party at such
time and commensurate with the sale by the Company of all of the remainder of
such securities and as hereinafter provided. The Company shall be free, at any
time prior to ninety (90) days after the date of its notice of offer to the
Purchasers, to offer and sell to any third party or parties the remainder of
such securities proposed to be issued by the Company (including but not limited
to the securities not agreed by the Purchasers to be purchased by them), at a
price and on payment terms no less favorable to the Company than those specified
in such notice of offer to the Purchasers. If such third party sale or sales are
not consummated within such 90-day period, however, the Company shall not sell
such securities as shall not have been purchased within such period without
again complying with this Section 7.
8. CONDITIONS TO CLOSING. The Closing shall not occur until the following
conditions have been satisfied or their satisfaction waived by the Company or
the Purchasers holding a majority of the then-outstanding Preferred Shares, as
applicable:
a. The Company and the Purchasers shall have entered into a Voting
Agreement in substantially the form attached hereto as Exhibit 3 (the "Voting
Agreement").
b. The Amendment shall have been filed with the Secretary of State
for the Commonwealth of Massachusetts.
c. The Company shall have delivered to the Purchasers of the Initial
Units a certificate of good standing, dated as of a recent date, issued by the
Secretary of State for the Commonwealth of Massachusetts.
d. The Company's representations and warranties set forth herein
shall be true and correct as of the Closing and an authorized officer of the
Company shall deliver a certificate to the Purchasers certifying to the same.
e. The Purchasers shall receive a legal opinion from Epstein Becker
& Green, P.C., the Company's counsel, which opinion shall be reasonably
satisfactory to the Purchasers.
9. SURVIVAL OF REPRESENTATIONS. WARRANTIES AND AGREEMENTS. Notwithstanding
any investigation made by any party to this Agreement, all covenants,
agreements, representations and warranties made by the Company herein shall
survive the execution of this Agreement and the consummation of the transactions
contemplated herein.
10. NO FEE. The Purchasers each, severally and jointly, hereby represent
that there are no brokers or finders entitled to compensation in connection with
the transactions contemplated herein. The Company shall indemnify and hold
harmless each of the Purchasers from any claims made by third parties that such
third party is entitled to compensation from the Company in connection with the
transactions contemplated herein; provided that the Company shall not be liable
for any indemnification hereunder that arises out of or is related to a breach
of the first sentence of this Section 10.
11. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by overnight courier or (iv) sent
by registered or certified mail, return receipt requested, postage prepaid:
(a) if to the Company, to:
Molecular Insight Pharmaceuticals, Inc.
160 Second Street
Cambridge, MA 02142
Attn: Chief Operating Officer
Fax: (617)492-5664
With a copy to:
Gabor Garai
Epstein Becker & Green, P.c.
111 Huntington Avenue
Boston, MA 02199
Fax: (617)342-4001
(b) if to the Purchaser, to the address
set forth on Schedule I attached hereto
All notices, requests, consents and other communications hereunder shall
be deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telex, telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
or certified mail, on the 5th business day following the day such mailing is
made.
12. AMENDMENTS. Any term of this Agreement may be amended, or compliance
therewith waived, only with the written consent of (i) the Company and (ii) the
holders of a majority in interest of the Preferred Shares then outstanding and
issued to the Purchasers hereunder.
13. ASSIGNMENT. The rights and obligations under this Agreement may not be
assigned by the Purchasers without the prior written consent of the Company.
Notwithstanding the foregoing, the Purchaser shall have the right to assign any
of their rights or interest to any Affiliate of such Purchaser as long as such
Affiliate agrees to be bound by all the terms and conditions applicable to the
Units including, without limitation, this Agreement, the Warrant and the Voting
Agreement. As used herein, "Affiliate" shall mean, with respect to any person or
entity, any other person or entity directly or indirectly controlling,
controlled by or under common control with such Purchaser.
14. BENEFIT. All statements, representations, warranties, covenants and
agreements in this Agreement shall be binding on the parties hereto and shall
inure to the benefit of the respective successors and permitted assigns of each
party hereto. Nothing in this Agreement shall be construed to create any rights
or obligations except among the parties hereto, and no person or entity shall be
regarded as a third-party beneficiary of this Agreement.
15. EXPENSES. Each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby.
16. NO WAIVER: CUMULATIVE REMEDIES. No failure or delay on the part of any
party to this Agreement in exercising any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
17. HEADINGS. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
18. SEVERABILITY. In case any provision contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with (i) the internal laws of the Commonwealth of Massachusetts
without giving effect to its principles of conflicts of law, and (ii) United
States federal law.
20. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall constitute an original, but all of which, when taken together, shall
constitute but one instrument, and shall become effective when one or more
counterparts have been signed by each party hereto and delivered to the other
parties.
21. FURTHER ASSURANCES. From and after the date of this Agreement, upon
the request of the Purchaser or the Company, the Company and the Purchaser shall
execute and deliver such instruments, documents and other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement and the Units.
[The remainder of this page intentionally has been left blank.]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
By: /s/ David S. Barlow
-------------------
Name: David S. Barlow
Title: Chairman & CEO
|
PURCHASERS:
/s/ Frederick Frank
-------------------
Frederick Frank
|
CERBERUS PARTNERS, L.P.
By: Cerberus Associates, L.L.C.,
its general partner
By: /s/ Seth Plattus
-----------------------------------
Seth Plattus, Managing Director
|
Exhibit 10.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of this 29th
day of March, 2005, by and among Molecular Insight Pharmaceuticals, Inc., a
Massachusetts corporation (the "Company"), and the investors identified on the
signature pages hereto (each an "Investor" and collectively, the "Investors").
RECITALS:
A. The Company desires to raise up to $30,000,030 (the "Aggregate
Purchase Price") through the issuance and sale to the Investors at a per share
purchase price of $202.00 (the "Per Share Purchase Price") of up to an aggregate
of 148,515 shares (the "Series C Preferred Shares") of a newly created series of
preferred stock, par value $0.01 per share, of the Company, designated as
"Series C Convertible Preferred Stock" (the "Series C Preferred Stock"), which
Series C Preferred Stock shall have the rights, preferences and privileges set
forth in the Articles of Amendment to the Articles of Organization of the
Company, in the form of Exhibit A attached hereto (the "Articles of Amendment");
B. Upon the terms and subject to the conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as
amended, and Rule 506 promulgated thereunder, the Investors desire to purchase
from the Company, and the Company desires to issue and sell to the Investors,
such number of shares of Series C Preferred Stock, as are set forth next to each
such Investor's name on the applicable Schedule I attached hereto; and
C. Contemporaneously with the purchase and sale of the Series C
Preferred Shares at each Closing, the parties hereto will enter into an Investor
Rights Agreement, in the form attached hereto as Exhibit B (the "Investor Rights
Agreement"), which shall, among other things, set forth the rights of the
Investors to: (i) the registration of shares of common stock, par value $0.01
per share, of the Company (the "Common Stock") issuable to the Investors upon
conversion of the Series C Preferred Stock; (ii) the receipt of certain
information from the Company; and (iii) the participation in future issuances
and transfers of securities of the Company.
NOW, THEREFORE, in consideration of the mutual promises made herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and each of the Investors, severally
and not jointly, hereto agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere in
this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings set forth in this Section 1:
"Affiliate" means, with respect to any Person, any other Person
which directly or indirectly Controls, is Controlled by, or is under common
Control with, such Person. Notwithstanding the foregoing, none of the Company,
its owners, officers, directors, employees, agents or advisors (or any of their
family members) shall be deemed an "Affiliate" of an Investor, unless any such
Person is otherwise (i.e., independent of the Company) an Affiliate of such
Investor.
"Aggregate Purchase Price" has the meaning set forth in the recitals
to this Agreement.
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Articles of Amendment" has the meaning set forth in the recitals to
this Agreement.
"Articles of Organization" means the Articles of Organization of the
Company filed with the Secretary of Commonwealth of the Commonwealth of
Massachusetts on January 10, 1997, as amended.
"Board" means the Board of Directors of the Company.
"Business Day" means a day, other than a Saturday or Sunday, on
which banks in New York, New York are open for the general transaction of
business.
"Cash Placement Agent Fee" means, with respect to each Closing, the
amount payable to the Placement Agent as compensation for the issuance and sale
of the Series C Preferred Shares pursuant to this Agreement and the other
Transaction Documents, which amount is set forth on Schedule 1.
"Cerberus" means Cerberus Capital Management, L.P., for itself
and/or one or more of its Affiliates and/or accounts managed by Cerberus Capital
Management, L.P., including, without limitation, Cerberus Partners, L.P.
"Cerberus Counsel" means Lowenstein Sandler PC, counsel to Cerberus.
"Cerberus Counsel Fees" has the meaning set forth in Section 9.5.
"Closing" means, as the context in which such term is used requires,
the Initial Closing or a Follow-on Closing.
"Closing Date" means, as the context in which such term is used
requires, the Initial Closing Date or a Follow-on Closing Date.
"Co-Lead Investors" means Cerberus Partners, L.P. and MedCap
Partners, L.P.
"Commission" means the U.S. Securities and Exchange Commission or
any other successor federal agency then administering the Securities Act and
other federal securities laws.
"Common Stock" means the Common Stock and any other securities into
which or for which such Common Stock may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, consolidation, sale of assets
or other similar transaction.
"Company" has the meaning set forth in the preamble to this
Agreement.
"Company Counsel" means Foley & Lardner LLP, counsel to the Company.
"Company's Knowledge" means the actual knowledge of the key
employees of the Company and of each of the Subsidiaries, after due inquiry and
investigation.
"Confidential Information" means trade secrets, confidential
information and know-how (including but not limited to ideas, formulae,
compositions, manufacturing and production processes, procedures and techniques,
research and development information, clinical data, computer program code,
performance specifications, support documentation, drawings, specifications,
designs, business and marketing plans, and customer and supplier lists and
related information).
"Control" means the possession, direct or indirect, of the power to
direct or cause the
-2-
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Series C Preferred Stock.
"Dividend Shares" means shares of Common Stock issuable as dividends
on the Series C Preferred Stock in accordance with the terms of the Articles of
Amendment.
"Environmental Laws" has the meaning set forth in Section 4.14.
"Escrow Amount" has the meaning set forth in Section 3.1(a).
"Escrow Termination Date" means: (a) in the case of the Initial
Closing, March 29, 2005; and (b) in the case of a Follow-on Closing, ten (10)
Business Days after Cerberus' receipt of the notice contemplated by Section
6.1(r); provided, however, Cerberus may, in its sole discretion, extend an
Escrow Termination Date by giving written notice to the Company and Cerberus
Counsel of its election to so extend such Escrow Termination Date, and such
Escrow Termination Date shall be the date specified in such notice, provided,
further, however, the Escrow Termination Date with respect to the Initial
Closing shall not be later than April 11, 2005, and in the case of a Follow-on
Closing, shall not be later than the sooner of the 61st day after the Initial
Closing Date and twenty (20) Business Days after Cerberus' receipt of the notice
contemplated by Section 6.1(r), and on such extended date, if such Closing shall
not have occurred, Cerberus Counsel shall return the Escrow Amount attributable
to such Closing in accordance with Section 3.1(b).
"FDA" means the U.S. Food and Drug Administration.
"FDCA" means the U.S. Food Drug and Cosmetics Act (FDCA), 21 U.S.C.
Sec. 301 et seq., as amended, and any successor federal statute, and the rules
and regulations promulgated thereunder, all as the same shall be in effect from
time to time.
"Financial Statements" has the meaning set forth in Section 4.6.
"Follow-on Closing" has the meaning set forth in Section 2.2(d).
"Follow-on Closing Date" has the meaning set forth in Section
2.2(d).
"Follow-on Investor" means an Investor who purchases shares of
Series C Preferred Stock in a Follow-on Closing, who must be either (x) engaged
in the same or a similar business or industry as the Company (i.e., strategic
investors), (y) approved in writing by Cerberus in its reasonable discretion or
(z) a holder of Series B Convertible Preferred Stock that exercises its right to
participate in the Follow-on Closing pursuant to Section 7 of Unit Purchase
Agreement dated February 23, 2004 by and among the Company and the purchasers of
Series B Convertible Preferred Stock named therein.
"Hatch-Waxman Act" means the Drug Price Competition and Patent Term
Restoration Act of 1984 (Pub. L. 98-417 (1984)), otherwise known as the Hatch
Waxman of 1984, 21 U.S.C. 355, as amended, and any successor federal statute,
and the rules and regulations promulgated thereunder, all as the same shall be
in effect from time to time.
"Indebtedness" means all obligations, contingent and otherwise,
which should, in accordance with generally accepted accounting principles, be
classified upon the obligor's balance sheet
-3-
(or the notes thereto) as liabilities, but in any event including liabilities
secured by any mortgage on property owned or acquired subject to such mortgage,
whether or not the liability secured thereby shall have been assumed, and also
including (i) all guaranties, endorsements and other contingent obligations, in
respect of Indebtedness of others, whether or not the same are or should be so
reflected in said balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and (ii) the present value of
any lease payments due under leases required to be capitalized in accordance
with applicable Statements of Financial Accounting Standards, determined by
discounting all such payments at the interest rate determined in accordance with
applicable Statements of Financial Accounting Standards.
"Indemnified Person" has the meaning set forth in Section 8.3.
"Initial Closing" has the meaning set forth in Section 2.2(a).
"Initial Closing Date" has the meaning set forth in Section 2.2(a).
"Initial Investor" means an Investor that purchases shares of Series
C Preferred Stock at the Initial Closing.
"Intellectual Property" means all of the following: (i) patents,
patent disclosures and inventions (whether or not patentable and whether or not
reduced to practice); (ii) trademarks, service marks, trade dress, trade names,
corporate names, logos, slogans and Internet domain names, together with all
goodwill associated with each of the foregoing; (iii) copyrights and
copyrightable works; (iv) registrations, applications and renewals for any of
the foregoing; (v) Confidential Information; and (vi) computer software
(including, but not limited to, data, data bases and documentation), but
excluding off-the-shelf non-customized software.
"Investor" has the meaning set forth in the preamble to this
Agreement, and refers to, as the context in which such term is used requires, an
Initial Investor or a Follow-on Investor; provided, that, if the context does
not so require, then such term refers to all Investors under this Agreement
regardless of which Closing such Investor purchases its Series C Preferred
Stock.
"Investor Rights Agreement" has the meaning set forth in the
recitals to this Agreement.
"Key Employee" means each of David Barlow, John Babich, Nicholas
Borys and John McCray.
"License Agreements" has the meaning set forth in Section 4.13(b).
"Losses" has the meaning set forth in Section 8.2.
"Material Adverse Change" means a material adverse change in (i) the
results of operations, assets, prospects, business or condition (financial or
otherwise) of the Company and its Subsidiaries, if any, taken as a whole; (ii)
the legality, validity or enforceability of any Transaction Document; or (iii)
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents.
"Material Adverse Effect" means a material adverse effect on: (i)
the results of operations, assets, prospects, business or condition (financial
or otherwise) of the Company and its Subsidiaries, if any, taken as a whole;
(ii) the legality, validity or enforceability of any Transaction Document; or
(iii) the Company's ability to perform fully on a timely basis its obligations
under any of
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the Transaction Documents.
"Maximum Number" means 148,515 shares of Series C Preferred Stock.
"NDA" means a New Drug Application filed with the FDA.
"Per Share Purchase Price" has the meaning set forth in the recitals
to this Agreement.
"Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"Placement Agent" means SG Cowen & Co.
"Regulation D" means Regulation D, as promulgated by the Commission
under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and
any successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Series C Director" has the meaning ascribed thereto in the Articles
of Amendment.
"Series C Preferred Stock" has the meaning set forth in the recitals
to this Agreement.
"Series C Preferred Shares" has the meaning set forth in the
recitals to this Agreement.
"Shares" means the Series C Preferred Shares, the Conversion Shares
and the Dividend Shares.
"Subsidiary" or "Subsidiaries" means any corporation or trust of
which the Company and/or any of its other Subsidiaries directly or indirectly
owns at the time outstanding shares (regardless of class) of such corporation or
trust comprising more than 50% of the voting power of such corporation or trust.
"Transaction Documents" means this Agreement, the Articles of
Amendment, the Investor Rights Agreement, and each of the other agreements,
documents, certificates and instruments executed and delivered in connection
with the foregoing.
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2. Purchase and Sale of Securities; Initial and Follow-on Closings.
2.1. Purchase and Sale of Securities. Upon the terms and subject to the
conditions contained herein, at each Closing, the Company shall issue and sell,
and each Investor listed on Schedule I (in the case of the Initial Closing, and
Schedule I-A, Schedule I-B, and so on, in the case of each Follow-on Closing, if
any) attached hereto, shall severally, and not jointly, purchase, the number of
shares of Series C Preferred Stock in the amounts set forth opposite such
Investor's name on the applicable Schedule I attached hereto, in exchange for
the cash consideration set forth as the "Purchase Price" opposite such
Investor's name on the applicable Schedule I attached hereto. For purposes
hereof, the number of shares of Series C Preferred Stock with respect to each
Investor set forth on the applicable Schedule I shall be equal to the quotient
of the "Purchase Price" opposite such Investor's name on the applicable Schedule
I divided by the Per Share Purchase Price.
2.2. Closings.
(a) The initial closing of the transactions contemplated by this
Agreement (the "Initial Closing") shall take place at 10:00 a.m. at the offices
of Company Counsel, 111 Huntington Street, Boston, Massachusetts 02199, by
facsimile, e-mail or similar communication, on March 29, 2005, or as soon after
that as all of the conditions to the respective obligations of the Company and
the Initial Investors have been satisfied or waived (the "Initial Closing
Date"), or at such other location as the Company and Cerberus shall mutually
agree and/or on such other date as Cerberus shall determine in its sole
discretion, but in no event later than April 11, 2005.
(b) Upon satisfaction of the conditions to the applicable Closing
set forth in Section 6 hereof, the Company shall issue or cause to be issued to
each Investor, a certificate or certificates representing the number of shares
of Series C Preferred Stock as is set forth opposite such Investor's name on the
applicable Schedule I attached hereto, against delivery to the Company by
Cerberus Counsel, in its capacity as escrow agent hereunder, for the benefit of
such Investor of the amount set forth as the "Purchase Price" opposite such
Investor's name on the applicable Schedule I attached hereto, in immediately
available funds, by wire transfer to an account designated before the applicable
Closing in writing by the Company for such purpose.
(c) Upon satisfaction of the conditions to the applicable Closing
set forth in Section 6, the Company and Cerberus shall jointly instruct Cerberus
Counsel to release to the Company the Escrow Amount attributable to such
Closing.
(d) From time to time during the period beginning on the day after
the Initial Closing Date and ending 60 calendar days thereafter, in one or more
transactions (each, a "Follow-on Closing"), the Company may issue and sell a
number of shares of Series C Preferred Stock, up to the Maximum Number (less the
number of all shares of Series C Preferred Stock theretofore issued and sold by
the Company), on the same terms and conditions that all other shares of Series C
Preferred Stock have been issued and sold by the Company, to Follow-on Investors
who are either (x) engaged in the same or a similar business or industry as the
Company (i.e., strategic investors), (y) approved in writing by Cerberus in its
reasonable discretion or (z) holders of Series B Convertible Preferred Stock
that exercise their respective rights to participate in the Follow-on Closing
pursuant to Section 7 of Unit Purchase Agreement dated February 23, 2004 by and
among the Company and the purchasers of Series B Convertible Preferred Stock
named therein. The Company shall give written notice of each Follow-on Closing
to Cerberus as described in Section 6.1(r) at least five (5) days in advance of
such Follow-on Closing. Each Follow-on Closing shall take place at 10:00 a.m. at
the offices of Company Counsel, 111 Huntington Street, Boston, Massachusetts
02199, by facsimile, e-mail or similar communication, no less
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than five (5) days after written notice thereof has been received by Cerberus as
described in Section 6.1(r), or as soon after that as all of the conditions to
the respective obligations of the Company and the Follow-on Investors to
consummate the Follow-on Closing have been satisfied or waived (each, a
"Follow-on Closing Date"), or at such other location as the Company and Cerberus
shall mutually agree and/or on such other date as each of them shall determine
in their sole discretion, but in no event later than the 61st day after the
Initial Closing Date. With each Follow-On Closing, the Company and each
Follow-On Investor shall execute a counter part signature page to this Agreement
and each of the other Transaction Documents to which the Investors are a party,
which counterpart signature page shall be deemed an amendment to the applicable
Agreement or Transaction Document without any further action on the part of the
other Investors and notwithstanding anything to the contrary in such agreement
pertaining to amendment thereof.
3. Escrow.
3.1. (a) Simultaneously with the execution and delivery of this
Agreement by an Investor, such Investor shall: (i) promptly cause a wire
transfer of immediately available funds (U.S. dollars) in an amount representing
the "Purchase Price", as set forth on such Investor's signature page and
opposite its name on the applicable Schedule I affixed hereto, to be paid to an
escrow account of Cerberus Counsel, in its capacity as escrow agent hereunder,
set forth on Schedule II affixed hereto (the aggregate amounts being held in
escrow are referred to herein as the "Escrow Amount"); and (ii) deliver to
Cerberus a duly executed counterpart to the Investor Rights Agreement. Cerberus
Counsel shall hold the Escrow Amount in escrow in accordance with Section
3.1(b). Cerberus Counsel shall invest the Escrow Amount received pursuant to
this Section 3.1(a) in accordance with the instructions set forth on Schedule
III, annexed hereto and made a part hereof.
(b) With respect to each Closing, Cerberus Counsel shall
continue to hold the Escrow Amount in escrow (as may be invested pursuant to
Schedule III) in accordance with and subject to this Agreement, from the date of
its receipt of the funds constituting the Escrow Amount until the sooner of: (x)
the Closing Date to which such Escrow Amount applies, in which case, such Escrow
Amount shall be distributed in accordance with Section 3.3; or (y) the
applicable Escrow Termination Date applicable to such Escrow Amount (after
taking into account any extensions thereof), in which case the Escrow Amount
attributable to such Closing shall be returned to the Investors in accordance
with their written wire transfer instructions delivered to Cerberus Counsel. In
the case of an Escrow Termination Date, if Cerberus Counsel has not received
written wire transfer instructions from any Investor before the 30th day after
the applicable Escrow Termination Date, then Cerberus Counsel may, in its sole
and absolute discretion, either (x) deposit that portion of the Escrow Amount to
be returned to such Investor in a court of competent jurisdiction on written
notice to such Investor and Cerberus Counsel shall thereafter have no further
liability with respect to such deposited funds, or (y) continue to hold such
portion of the Escrow Amount pending receipt of written wire transfer
instructions from such Investor or an order from a court of competent
jurisdiction, and in case of clauses (x) and (y), the reasonable fees and
expenses of Cerberus Counsel may be deducted from such portion of the Escrow
Amount.
3.2 The Company and the Investors acknowledge and agree for the
benefit of Cerberus Counsel (which shall be deemed to be a third party
beneficiary of this Section 3.2 and of Section 9.5) as follows:
(a) Cerberus Counsel: (i) is not responsible for the
performance by the Company or the Investors of this Agreement or any of the
Transaction Documents or for determining or compelling compliance therewith;
(ii) is only responsible for (A) holding the applicable Escrow Amount in escrow
pending receipt of written instructions from the Company and Cerberus directing
the release of such Escrow Amount, (B) disbursing the applicable
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Escrow Amount in accordance with the written instructions from the Company and
Cerberus, and (C) investing the applicable Escrow Amount in accordance with
Schedule III, each of the responsibilities of Cerberus Counsel in clause (A),
(B) and (C) is ministerial in nature, and no implied duties or obligations of
any kind shall be read into this Agreement against or on the part of Cerberus
Counsel (collectively, the "Cerberus Counsel Duties"); (iii) shall not be
obligated to take any legal or other action hereunder which might in its
judgment involve or cause it to incur any expense or liability unless it shall
have been furnished with indemnification acceptable to it, in its sole
discretion; (iv) may rely on and shall be protected in acting or refraining from
acting upon any written notice, instruction (including, without limitation, wire
transfer instructions, whether incorporated herein or provided in a separate
written instruction), instrument, statement, certificate, request or other
document furnished to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper Person, and shall have no responsibility
for making inquiry as to, or for determining, the genuineness, accuracy or
validity thereof, or of the authority of the Person signing or presenting the
same; and (v) may consult counsel satisfactory to it, and the opinion or advice
of such counsel in any instance shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or advice of such counsel.
Documents and written materials referred to in this Section 3.2(a) include,
without limitation, e-mail and other electronic transmissions capable of being
printed, whether or not they are in fact printed; and any such e-mail or other
electronic transmission may be deemed and treated by Cerberus Counsel as having
been signed or presented by a Person if it bears, as sender, the Person's e-mail
address.
(b) Cerberus Counsel shall not be liable to anyone for any
action taken or omitted to be taken by it hereunder, except in the case of
Cerberus Counsel's gross negligence or willful misconduct in breach of Cerberus
Counsel Duties. IN NO EVENT SHALL CERBERUS COUNSEL BE LIABLE FOR INDIRECT,
PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGE OR LOSS (INCLUDING BUT NOT LIMITED TO
LOST PROFITS) WHATSOEVER, EVEN IF CERBERUS COUNSEL HAS BEEN INFORMED OF THE
LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION.
(c) The Company and the Investors jointly and severally,
hereby indemnify and hold harmless Cerberus Counsel from and against any and all
loss, liability, cost, damage and expense, including, without limitation,
reasonable counsel fees and expenses, which Cerberus Counsel may suffer or incur
by reason of any action, claim or proceeding brought against Cerberus Counsel
arising out of or relating to the performance of Cerberus Counsel Duties only,
unless such action, claim or proceeding is exclusively the result of the willful
misconduct or gross negligence of Cerberus Counsel.
(d) Cerberus Counsel has acted as legal counsel to Cerberus in
connection with this Agreement and the other Transaction Documents, is merely
acting as a stakeholder, in its capacity as escrow agent hereunder, and is,
therefore, hereby authorized to continue acting as legal counsel to Cerberus
including, without limitation, with regard to any dispute arising out of this
Agreement, the other Transaction Documents, the Escrow Amount or any other
matter. Each of the Company and each Investor hereby expressly consents to
permit Cerberus Counsel to represent Cerberus in connection with all matters
relating to this Agreement, including, without limitation, with regard to any
dispute arising out of this Agreement, the other Transaction Documents, the
Escrow Amount or any other matter, and hereby waives any conflict of interest or
appearance of conflict or impropriety with respect to such representation. Each
of the Company and the Investors has consulted with its own counsel specifically
about this Section 3 to the extent they deemed necessary, and has entered into
this Agreement after being satisfied with such advice.
(e) Cerberus Counsel shall have the right at any time to
resign for any reason and be discharged of its duties as escrow agent hereunder
by giving written notice of its resignation to the
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Company and Cerberus at least ten (10) calendar days prior to the specified
effective date of such resignation. All obligations of Cerberus Counsel
hereunder shall cease and terminate on the effective date of its resignation and
its sole responsibility thereafter shall be to hold the Escrow Amount, for a
period of ten (10) calendar days following the effective date of resignation, at
which time:
(i) if a successor escrow agent shall have been
appointed and have accepted such appointment in a
writing to both the Company and Cerberus, then
upon written notice thereof given to each of the
Investors or Follow-on Investors, as the case may
be, Cerberus Counsel shall deliver the Escrow
Amount to the successor escrow agent, and upon
such delivery, Cerberus Counsel shall have no
further liability or obligation; or
(ii) if a successor escrow agent shall not have been
appointed, for any reason whatsoever, Cerberus
Counsel shall at its option in its sole
discretion, either (A) deliver the applicable
Escrow Amount then held by it to a court of
competent jurisdiction selected by Cerberus
Counsel and give written notice thereof to the
Company and the Investors or Follow-on Investors,
as the case may be, or (B) continue to hold Escrow
Amount in escrow pending written direction from
the Company and Cerberus in form and formality
satisfactory to Cerberus Counsel.
(f) In the event that Cerberus Counsel shall be uncertain as
to its duties or rights hereunder or shall receive written instructions with
respect to an Escrow Amount or any portion thereunder which, in its sole
discretion, are in conflict either with other written instructions received by
it or with any provision of this Agreement, Cerberus Counsel shall have the
absolute right to suspend all further performance under this Agreement (except
for the safekeeping of such Escrow Amount) until such uncertainty or conflicting
instructions have been resolved to Cerberus Counsel's sole satisfaction by final
judgment of a court of competent jurisdiction or joint written instructions from
the Company and Cerberus. In the event that any controversy arises between the
Company and one or more of the Investors or Follow-on Investors, as the case may
be, or any other party with respect to this Agreement or any Escrow Amount,
Cerberus Counsel shall not be required to determine the proper resolution of
such controversy or the proper disposition of such Escrow Amount, and shall have
the absolute right, in its sole discretion, to deposit the Escrow Amount
pertaining to such Investor(s) with the clerk of a court selected by Cerberus
Counsel and file a suit in interpleader in that court and obtain an order from
that court requiring all parties involved to litigate in that court their
respective claims arising out of or in connection with the disputed portion of
the Escrow Amount. Upon the deposit by Cerberus Counsel of the disputed portion
of the Escrow Amount with the clerk of such court in accordance with this
provision, Cerberus Counsel shall thereupon be relieved of all further
obligations and released from all liability hereunder with respect to the
disputed portion of the Escrow Amount.
(g) The provisions of Section 3 shall survive any termination
of this Agreement.
3.3 Release of Escrow upon Closing. Cerberus Counsel, in its
capacity as escrow agent hereunder, shall, at the applicable Closing, release
that portion of the Escrow Amount attributable to such Closing in accordance
with the following:
(a) in the case of the Initial Closing, receipt of written
instructions from the Company and Cerberus that the Initial Closing shall have
been consummated, in which case, Cerberus
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Counsel shall release that portion of the Escrow Amount constituting the
aggregate "Purchase Price" reflected on the Schedule I attributable to the
Initial Closing as follows: (A) the portion of the Cash Placement Agent Fee
applicable to the Initial Closing to the Placement Agent, (B) subject to
Section 9.5, the Cerberus Counsel Fees for the Initial Closing to Cerberus
Counsel and (C) the balance of the aggregate "Purchase Price" reflected on
Schedule I to the Company; and
(b) in the case of each Follow-on Closing, if any, receipt of
written instructions from the Company and Cerberus that such Follow-on Closing
shall have been consummated, in which case, Cerberus Counsel shall release that
portion of the Escrow Amount constituting the aggregate "Purchase Price"
reflected on the applicable Schedule I attributable to such Follow-on Closing as
follows: (A) the portion of the Cash Placement Agent Fee applicable to such
Follow-on Closing to the Placement Agent, (B) subject to Section 9.5, the
Cerberus Counsel Fees for such Follow-on Closing to Cerberus Counsel, and (C)
the balance of the Escrow Amount then held by Cerberus Counsel to the Company.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor, severally and not jointly, on and as
of the date hereof and the applicable Closing Date, knowing and intending such
Investor's reliance hereon, that:
4.1. Organization, Good Standing and Qualification. Each of the
Company and its Subsidiaries, a complete list of which is set forth in Schedule
4.1 hereto, is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now
conducted and to own its properties. Each of the Company and its Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
its leasing of property makes such qualification or licensing necessary, unless
the failure to so qualify in any such jurisdiction would not have a Material
Adverse Effect.
4.2. Authorization. The Company has the requisite corporate power
and authority and has taken all requisite action on the part of the Company, its
officers, directors and stockholders necessary for: (i) the authorization,
execution and delivery of the Transaction Documents; (ii) the authorization of
the performance of all obligations of the Company hereunder or thereunder; and
(iii) the authorization, issuance (or reservation for issuance) and delivery of
the Shares. The Transaction Documents constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors' rights generally and general principles of equity.
4.3. Capitalization.
(a) Schedule 4.3(a) sets forth (without giving effect to the
Articles of Amendment): (i) the authorized capital stock of the Company on the
date hereof; (ii) the number of shares of capital stock issued and outstanding;
(iii) the number of shares of capital stock issuable, and the number of shares
of capital stock reserved for issuance, pursuant to the Company's stock plans;
and (iv) the number of shares of capital stock issuable and reserved for
issuance pursuant to securities (other than the Shares) exercisable for, or
convertible into or exchangeable for any shares of capital stock of the Company.
All of the shares of the Company's capital stock have been, or upon issuance
will be, duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights and were, or upon issuance will be, issued in full compliance
with applicable law and any rights of third parties. All of the issued and
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights, were issued in full compliance with applicable law and any rights of
third parties and are owned by the Company, beneficially and of record,
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and, except as described on Schedule 4.3(a), are subject to no lien, encumbrance
or other adverse claim. Except as set forth on Schedule 4.3(a), no Person is
entitled to preemptive or similar statutory or contractual rights with respect
to any securities of the Company. Except as described on Schedule 4.3(a), there
are no outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any of
its Subsidiaries is or may be obligated to issue any equity securities of any
kind and, except as contemplated by this Agreement, neither the Company nor any
of its Subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind. Except as described on Schedule 4.3(a) and except for
the Investor Rights Agreement, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among the Company and any of its security holders or other third
parties relating to the securities of the Company. Except as described on
Schedule 4.3(a) and except for the Investor Rights Agreement, the Company has
not granted any Person the right to require the Company to register any of its
securities under the Securities Act, whether on a demand basis or in connection
with the registration of securities of the Company for its own account or for
the account of any other Person.
(b) Schedule 4.3(b) sets forth a true and complete table
setting forth the pro forma capitalization of the Company on a fully diluted
basis giving effect to: (i) the issuance of the Series C Preferred Shares
through and including the applicable Closing; (ii) any adjustments in other
securities resulting from the issuance of the Series C Preferred Shares through
and including the applicable Closing; and (iii) the exercise or conversion of
all outstanding securities. Except as described on Schedule 4.3(b), the issuance
and sale of the Series C Preferred Shares hereunder will not obligate the
Company to issue shares of Common Stock or other securities to any other Person
(other than the Investors in their capacity as Investors hereunder) and will not
result in the adjustment of the exercise, conversion, exchange or reset price of
any outstanding security.
4.4. Valid Issuance. The Series C Preferred Shares have been duly
and validly authorized and, when issued to the Investors in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable,
shall have the rights, preferences and limitations set forth in the Articles of
Amendment and the Investor Rights Agreement and shall be free and clear of all
liens, claims, encumbrances and restrictions, except for restrictions on
transfer set forth in the Transaction Documents or imposed by applicable
securities laws. Upon the due conversion of the Series C Preferred Stock, the
Conversion Shares will be validly issued, fully paid and nonassessable, and
shall be free and clear of all liens, claims, encumbrances and restrictions,
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws. The Company has reserved a sufficient
number of shares of Common Stock for issuance upon conversion of the Series C
Preferred Stock.
4.5. Consents. The execution, delivery and performance by the
Company of the Transaction Documents and the offer, issuance and sale of the
Shares require no consent of, authorization by, exemption from, filing with or
notice to, any governmental body, agency, official or any other Person, other
than those filings that have been made pursuant to applicable state securities
laws and those post-sale filings pursuant to applicable state and federal
securities laws which the Company undertakes to file within the applicable time
periods. The Company has taken all action necessary to exempt: (i) the issuance
and sale of the Shares; (ii) the issuance of the Conversion Shares upon due
conversion of the Series C Preferred Stock; and (iii) the other transactions
contemplated by the Transaction Documents from the provisions of any
anti-takeover, business combination or control share law or statute binding on
the Company or to which the Company or any of its assets and properties may be
subject or any provision of the Company's Articles of Organization, Bylaws or
any stockholder rights agreement that is or could become applicable to the
Investors as a result of the transactions contemplated hereby, including without
limitation, the issuance of the Shares and the ownership, disposition or voting
of the Shares by the Investors or the exercise of any right granted to the
Investors pursuant to this Agreement or the other Transaction Documents.
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4.6. Financial Information. The unaudited financial statements of
the Company as of and for the (a) fiscal year ended December 31, 2003 and (b)
nine-month period ended September 30, 2004, attached hereto as Schedule 4.6,
present fairly in all material respects the financial position of the Company as
of the dates thereof and the results of operations for the periods covered
thereby, and have been prepared in accordance with generally accepted accounting
principles consistently applied, except for the absence of footnotes and normal
recurring adjustments not customarily included in such unaudited statements (the
"Financial Statements").
4.7. No Material Adverse Change. Except as identified and described
on Schedule 4.7(a), since September 30, 2004, there has not been:
(i) any change in the consolidated assets, liabilities,
financial condition or operating results of the Company from that reflected in
the Financial Statements, except for changes (x) as a result of the Company's
conduct of business in the ordinary course or as a result of the passage of
time, or (y) which have not had a Material Adverse Effect, individually or in
the aggregate;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether or not
covered by insurance, to any assets or properties of the Company or its
Subsidiaries;
(iv) any waiver, not in the ordinary course of business, by
the Company or any Subsidiary of a material right or of a material debt owed to
it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or a Subsidiary, except
which is not material to the assets, properties, financial condition, operating
results, prospects or business of the Company and its Subsidiaries, taken as a
whole;
(vi) any change or amendment to the Company's Articles of
Organization or Bylaws, or material change to any material contract or
arrangement by which the Company or any Subsidiary is bound or to which any of
their respective assets or properties is subject;
(vii) any material labor difficulties or labor union
organizing activities with respect to employees of the Company or any
Subsidiary;
(viii) any material transaction entered into by the Company or
a Subsidiary other than in the ordinary course of business;
(ix) the loss of the services of any Key Employee, or change
in the composition or duties of any executive officers of the Company or any
Subsidiary;
(x) the loss or threatened loss of any customer which has had
or could reasonably be expected to have a Material Adverse Effect; or
(xi) any other event or condition of any character that has
had or could reasonably be expected to have a Material Adverse Effect.
-12-
4.8. No Conflict, Breach, Violation or Default. The execution,
delivery and performance of the Transaction Documents by the Company and the
issuance and sale of the Shares will not (with or without the lapse of time or
the giving of notice, or both) conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under: (i) the
Company's Articles of Organization or Bylaws, both as in effect on the date
hereof (true and accurate copies of which have been provided to the Investors
before the date hereof); or (ii)(a) any statute, rule, regulation or order of
any governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company, any Subsidiary or any of their respective assets
or properties that would have a Material Adverse Effect, or (b) except as set
forth on Schedule 4.8, any agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or a Subsidiary is bound or to
which any of their respective assets or properties is subject, other than a
conflict, breach, violation or default which would not have a Material Adverse
Effect.
4.9. Tax Matters. Each of the Company and each Subsidiary has timely
prepared and filed all tax returns required to have been filed by the Company or
such Subsidiary with all appropriate governmental agencies and timely paid all
taxes shown as due thereon. The charges, accruals and reserves on the books of
the Company in respect of taxes for all fiscal periods are adequate in all
material respects, and there are no material unpaid assessments against the
Company or any Subsidiary nor, to the Company's Knowledge, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal period
or audits by any federal, state or local taxing authority except for any
assessment which is not material to the Company and its Subsidiaries, taken as a
whole. All taxes and other assessments and levies that the Company or any
Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third party
when due. There are no tax liens or claims pending or, to the Company's
Knowledge, threatened against the Company or any Subsidiary or any of their
respective assets or properties. Except as described on Schedule 4.9, there are
no outstanding tax sharing agreements or other such arrangements between the
Company and any Subsidiary or other corporation or entity. Neither the Company
nor any Subsidiary is presently undergoing any audit by a taxing authority, or
has waived or extended any statute of limitations at the request of any taxing
authority.
4.10. Title to Properties. The Company and each Subsidiary has good
and marketable title to all real properties and all other properties and assets
owned by it, in each case free from liens, encumbrances and defects that would
materially affect the value thereof or materially interfere with the use
currently made or currently planned to be made thereof by them; and the Company
and each Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use currently made or currently planned to be made thereof by them.
4.11. Certificates, Authorities and Permits. The Company and each
Subsidiary possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
4.12. No Labor Disputes. No material labor dispute with the
employees of the Company or any Subsidiary exists or, to the Company's
Knowledge, is imminent.
4.13. Intellectual Property.
(a) All Intellectual Property of the Company and its
Subsidiaries is currently
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in compliance with all legal requirements (including timely filings, proofs and
payments of fees), except where the failure to so comply with any of such
requirements, individually or in the aggregate, would not have a Material
Adverse Effect, and is valid and enforceable. Except as listed on Schedule
4.13(a), no Intellectual Property of the Company or its Subsidiaries which is
necessary for the conduct of Company's and each of its Subsidiaries' respective
businesses as currently conducted or as currently proposed to be conducted has
been or is now involved in any cancellation, dispute or litigation, and, to the
Company's Knowledge, no such action is threatened. Except as listed on Schedule
4.13(a), no patent of the Company or its Subsidiaries has been or is now
involved in any interference, reissue, re-examination or opposition proceeding.
(b) All of the licenses and sublicenses and consent, royalty
or other agreements concerning Intellectual Property which are necessary for the
conduct of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted to which the
Company or any Subsidiary is a party or by which any of their assets are bound
(other than generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000 per
license) (collectively, "License Agreements") are valid and binding obligations
of the Company or its Subsidiaries that are parties thereto and, to the
Company's Knowledge, the other parties thereto, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally, and
there exists no event or condition which will result in a material violation or
material breach of or constitute (with or without due notice or lapse of time or
both) a material default by the Company or any of its Subsidiaries or, to the
Company's Knowledge, any other party, under any such License Agreement.
(c) The Company and its Subsidiaries own or have the valid
right to use all of the Intellectual Property that is necessary for the conduct
of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted, free and clear of
all (x) liens, encumbrances or adverse claims with respect to Intellectual
Property that is owned by the Company or any of its Subsidiaries, or (y)
obligations to license all such owned Intellectual Property and Confidential
Information, other than licenses entered into in the ordinary course of the
Company's and its Subsidiaries' businesses. The Company and its Subsidiaries
have a valid and enforceable right to use all third party Intellectual Property
and Confidential Information used or held for use in the respective businesses
of the Company and its Subsidiaries as currently conducted or as currently
proposed to be conducted.
(d) The conduct of the Company's and its Subsidiaries'
businesses as currently conducted and as currently proposed to be conducted does
not and will not, to the Company's Knowledge, infringe any Intellectual Property
rights of any third party or any confidentiality obligation owed to a third
party. To the Company's Knowledge, the Intellectual Property and Confidential
Information of the Company and its Subsidiaries which are necessary for the
conduct of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted are not being
infringed by any third party. Except as set forth on Schedule 4.13(d), there is
no litigation or order pending or outstanding or, to the Company's Knowledge,
threatened, that seeks to limit or challenge or that concerns the ownership,
use, validity or enforceability of any Intellectual Property or Confidential
Information of the Company and its Subsidiaries and the Company's and its
Subsidiaries' use of any Intellectual Property or Confidential Information owned
by a third party, and, to the Company's Knowledge, there is no valid basis for
the same.
(e) The consummation of the transactions contemplated hereby
will not result in the alteration, loss, impairment of or restriction on the
Company's or any of its Subsidiaries'
-14-
ownership or right to use any of the Intellectual Property or Confidential
Information which is necessary for the conduct of the Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted.
(f) To the Company's Knowledge, all software owned by the
Company or any of its Subsidiaries, and, to the Company's Knowledge, all
software licensed from third parties by the Company or any of its Subsidiaries:
(i) is free from any material defect or programming, design or documentation
error; (ii) operates and runs in a reasonable and efficient business manner; and
(iii) conforms in all material respects to the specifications and purposes
thereof.
(g) The Company and its Subsidiaries have taken reasonable
steps to protect the Company's and its Subsidiaries' rights in their
Intellectual Property and Confidential Information. Each employee, consultant
and contractor who has had access to Confidential Information and Intellectual
Property which is necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted has executed an agreement to maintain the
confidentiality of such Confidential Information and Intellectual Property and
has executed appropriate agreements that are substantially consistent with the
Company's standard forms therefor. To the Company's Knowledge, there has been no
material disclosure of any of the Company's or its Subsidiaries' Confidential
Information or Intellectual Property to any third party without the Company's
consent.
4.14. Environmental Matters. Neither the Company nor any Subsidiary:
(i) is in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "Environmental Laws"); (ii) owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws; (iii) is liable for any off-site disposal or contamination
pursuant to any Environmental Laws; and (iv) to the Company's Knowledge, is
subject to any claim relating to any Environmental Laws; in each case, to the
extent such violation, contamination, liability or claim has had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company's Knowledge, threatened
investigation that might lead to such a claim.
4.15. Litigation. Except as set forth on Schedule 4.15, there are no
pending actions, suits or proceedings against or affecting the Company, its
Subsidiaries or any of its or their properties; and to the Company's Knowledge,
no such actions, suits or proceedings are threatened or contemplated.
4.16. Insurance Coverage. Set forth on Schedule 4.16 is a true and
complete list of all insurance policies maintained by the Company in force as of
the date of this Agreement (including name of insurer, agent, annual premium,
coverage, deductible amounts and expiration date). The Company is not in default
regarding the payment of any premiums due with respect to the insurance policies
on Schedule 4.16.
4.17. Brokers and Finders. Except as set forth on Schedule 4.17, no
Person will have, as a result of the transactions contemplated by this Agreement
or the other Transaction Documents, any valid right, interest or claim against
or upon the Company or any Subsidiary for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company.
4.18. No Directed Selling Efforts or General Solicitation. Neither
the Company nor any Affiliate, nor any Person acting on its behalf has conducted
any "general solicitation" or "general
-15-
advertising" (as those terms are used in Regulation D) in connection with the
offer or sale of any of the Securities.
4.19. No Integrated Offering. Neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any Company security under circumstances that would adversely
affect reliance by the Company on Section 4(2) of the Securities Act for the
exemption from the registration requirements imposed under Section 5 of the
Securities Act for the transactions contemplated by this Agreement or the other
Transaction Documents or would require such registration under the Securities
Act.
4.20. Private Placement. Subject to the accuracy of the
representations and warranties of the Investors contained in Section 5 hereof,
the offer and sale of the Shares to the Investors as contemplated hereby is made
in reliance upon available exemptions from the registration requirements of the
Securities Act.
4.21. Questionable Payments. Neither the Company nor any of its
Subsidiaries nor, to the Company's Knowledge, any of their respective current or
former stockholders, directors, officers, employees, agents or other Persons
acting on behalf of the Company or any Subsidiary, has on behalf of the Company
or any Subsidiary or in connection with their respective businesses: (i) used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (iii) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (iv) made any false or fictitious entries
on the books and records of the Company or any Subsidiary; or (v) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment of any nature.
4.22. Transactions with Affiliates. Except as set forth on Schedule
4.22, there are no loans, leases, royalty agreements or other continuing
transactions between the Company and (a) any Person owning 5% or more of any
class of capital stock of the Company, or (b) any member of the immediate family
of such stockholder or an officer, employee or director of the Company, or (c)
any corporation or other entity controlled by an officer, employee, director or
stockholder of the Company or a member of the immediate family of such officer,
employee, director or stockholder.
4.23. Disclosure. This Agreement, the other Transaction Documents
and certificates furnished to the Investors or their counsel by or on behalf of
the Company at the applicable Closing in connection with the transactions
contemplated hereby do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
4.24. FDA Matters. The Company has provided the Investors with a
true and accurate copy of all material correspondence with and submissions to
the U.S. Food and Drug Administration (the "FDA"). The Company has not received
from the FDA or any other governmental agency any other material communication,
written or oral, pertaining to the Company's protocols or trials. To the
Company's Knowledge, (a) neither the FDA nor any other governmental agency
intends to take an adverse position or action with respect to the Company's
protocols or trials, and (b) no facts or circumstances exist which would cause
the FDA or any other governmental agency to take such adverse position or
action.
-16-
5. Representations and Warranties of the Investors. Each of the Investors
hereby severally, and not jointly, represents and warrants to the Company on and
as of the date hereof, knowing and intending that the Company rely thereon,
that:
5.1. Authorization. The Investor has the requisite power and
authority to enter into this Agreement, the Investor Rights Agreement and any
other Transaction Document to which it is a party. The execution, delivery and
performance by the Investor of the Transaction Documents to which such Investor
is a party have been duly authorized and will each constitute the valid and
legally binding obligation of the Investor, enforceable against the Investor in
accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors' rights generally, and general
principles of equity.
5.2. Purchase Entirely for Own Account. The Shares to be received by
the Investor hereunder will be acquired for the Investor's own account, not as
nominee or agent, for investment purposes only and not with a view to the resale
or distribution of any part thereof in violation of the Securities Act, and the
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same in violation of the Securities Act. The Investor
is not a registered broker-dealer or an entity engaged in the business of being
a broker-dealer.
5.3. Investment Experience. The Investor acknowledges that it can
bear the economic risk and complete loss of its investment in the Shares and it
has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby. The Investor has significant experience in making private investments,
similar to the purchase of the Shares hereunder. The Investor understands that
its investment in the Shares involves a high degree of risk.
5.4. Disclosure of Information. The Investor has received all
additional information related to the Company and the offer and sale of the
Shares as requested by it and has had an opportunity to ask questions of and
receive answers from the Company regarding the Company, its business and the
terms and conditions of the offering of the Shares. Neither such inquiries nor
any other due diligence investigation conducted by the Investor shall modify,
amend or affect the Investor's right to rely on the Company's representations
and warranties contained in this Agreement.
5.5. Reliance on Exemptions. Each Investor understands that (i) the
Shares are being offered and sold in reliance upon specific exemptions from the
registration requirements of the U.S. federal and state securities laws and (ii)
the Company is relying upon the truth and accuracy of, and such Investor's
compliance with, the representations, warranties, agreements, acknowledgements
and understandings of such Investor set forth herein in order to determine the
availability of such exemptions and the eligibility of such Investor to acquire
the Shares. Each Investor understands that no U.S. federal or state agency or
any other government or governmental agency has passed upon the validity of or
made any recommendation or endorsement of the Shares.
5.6. Restricted Securities. The Investor understands that the Shares
are characterized as "restricted securities" under the U.S. federal securities
laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances.
5.7. Legends.
(a) It is understood that certificates evidencing such Shares
may bear a
-17-
restrictive legend in the following form, as well as any other legends that may
be required by a Transaction Document or applicable law:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE LAWS OF
ANY STATE OF THE UNITED STATES OR IN ANY OTHER JURISDICTION.
THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN
REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, OR (II) THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE
MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES
LAWS."
(b) If required by the authorities of any state in connection
with the issuance or sale of the Shares, certificates evidencing such Shares may
bear the legend required by such state authority.
5.8. Accredited Investor. The Investor is an "accredited investor"
as defined in Rule 501(a) of Regulation D.
5.9. No General Solicitation. The Investor did not learn of the
investment in the Shares as a result of any "general advertising" or "general
solicitation" as those terms are contemplated in Regulation D, as amended, under
the Securities Act. The Investor is a resident of the jurisdiction set forth
under such Investor's name on the applicable Schedule I hereto.
5.10. Brokers and Finders. Except as set forth in Schedule 5.10, no
Person will have, as a result of the transactions contemplated by this Agreement
or any other Transaction Document, any valid right, interest or claim against or
upon the Company, any Subsidiary or any other Investor for any commission, fee
or other compensation pursuant to any agreement, arrangement or understanding
entered into by or on behalf of the Investor.
6. Conditions to Closing.
6.1. Conditions to the Investors' Obligations. The obligation of the
Investors to purchase the Series C Preferred Shares at the applicable Closing is
subject to the fulfillment, to the satisfaction of each of the Investors
intending to purchase the Series C Preferred Stock in such Closing (such intent
to be manifested by such Investor's execution of a counterpart to this Agreement
with respect to the applicable Closing), on or prior to the applicable Closing
Date, of the following conditions, any of which may be waived in writing only by
(x) a majority of such Investors (measured by the dollar amount to be purchased
by each such Investor) and (y) Cerberus:
(a) The representations and warranties made by the Company in
Section 4 hereof shall be true and correct on the applicable Closing Date. The
Company shall have performed in all material respects all obligations and
conditions herein required to be performed or observed by it on or prior to the
applicable Closing Date;
(b) Except for any regulatory filings that, under applicable
law, may be made after the applicable Closing, the Company shall have obtained
or made, as the case may be, in a
-18-
timely fashion any and all authorizations, consents, permits, approvals,
registrations, filings and waivers from governmental authorities and/or other
third parties that are necessary and/or appropriate for consummation of the
purchase and sale of the Series C Preferred Shares at such Closing, all of which
shall be in full force and effect;
(c) The Company shall have executed and delivered a
counterpart to the Investor Rights Agreement to the Investors intending to
purchase the Series C Preferred Stock in such Closing;
(d) No judgment, writ, order, injunction, award or decree of
or by any court, or judge, justice or magistrate, including any bankruptcy court
or judge, or any order of or by any governmental authority, shall have been
issued, and no action or proceeding shall have been instituted by any
governmental authority, or self-regulatory organization enjoining or preventing
the consummation at such Closing of the transactions contemplated by this
Agreement or any other Transaction Document;
(e) The Company shall have delivered to the Investors
intending to purchase the Series C Preferred Stock in such Closing a
certificate, dated as of the applicable Closing Date, executed by the Chief
Executive Officer or Chief Operating Officer of the Company, certifying as to
the fulfillment of the conditions specified in subsections (a), (b) and (d) of
this Section 6.1;
(f) The Company shall have delivered to the Investors
intending to purchase the Series C Preferred Stock in such Closing a
certificate, dated as of the applicable Closing Date, executed by the Secretary
of the Company, certifying as to: (i) the resolutions of the Board authorizing
the transactions contemplated by this Agreement and the other Transaction
Documents; (ii) the Articles of Organization of the Company; and (iii) the
By-Laws of the Company, each as in effect as of the applicable Closing Date;
(g) The Company shall have delivered to the Investors
intending to purchase the Series C Preferred Stock in such Closing a good
standing certificate from the Secretary of Commonwealth of the Commonwealth of
Massachusetts;
(h) The Investors intending to purchase the Series C Preferred
Stock in such Closing shall have received a written legal opinion, in the form
attached hereto as Exhibit C, dated as of the applicable Closing date, from
Company Counsel;
(i) In the case of the Initial Closing only, Cerberus Counsel,
in its capacity as escrow agent hereunder shall have received from the Investors
intending to purchase the Series C Preferred Stock in such Closing funds to
purchase shares of Series C Preferred Stock for an aggregate purchase price of
at least $15,000,000 and the Company shall not have waived any of the conditions
set forth in Section 6.2 with respect to any Initial Investor;
(j) Since March 1, 2005, there shall not have occurred a
Material Adverse Change;
(k) The Company shall have in effect officers' and directors'
insurance from such insurance carrier and in such amounts as are in effect on
the date of this Agreement;
(l) Each officer and director of the Company shall be party to
a valid, binding and enforceable indemnification agreement with the Company in
the form reviewed by the Co-Lead Investors prior to the Initial Closing;
-19-
(m) Each Key Employee and each consultant of the Company with
access to Company Confidential Information shall be party to a valid, binding
and enforceable confidentiality agreement with the Company in the form reviewed
by the Co-Lead Investors prior to the Initial Closing;
(n) The Company shall have delivered evidence, satisfactory to
the Investors intending to purchase the Series C Preferred Stock in such
Closing, of the filing of the Articles of Amendment with the Secretary of the
Commonwealth of Massachusetts;
(o) The Company shall have delivered to the Investors
intending to purchase the Series C Preferred Stock in such Closing waivers
and/or consents from the holders of the Company's Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock sufficient to (1) permit the
issuance of the Series C Preferred Stock in accordance with the terms of this
Agreement and the Articles of Amendment at such Closing, and (2) with respect to
the Series B Convertible Preferred Stock, waive all rights of first offer or
first refusal which such holders may otherwise have in connection with the sale
and issuance of the Series C Preferred Stock at such Closing;
(p) The Company shall have amended its outstanding warrants
issued to the holders of the Series B Convertible Preferred Stock, in a manner
acceptable to Cerberus, so that such warrants shall remain in full force and
effect and shall not terminate upon any issuance of the Series C Preferred
Stock;
(r) In the case of each Follow-on Closing, (x) five calendar
days shall have elapsed since the date written notice of such Follow-on Closing
shall have been given by the Company to Cerberus, which notice shall identify
each of the Follow-on Investors intending to purchase the Series C Preferred
Stock in such Closing, and be accompanied by the Schedule I applicable to such
Follow-on Closing, and (y) Cerberus shall have approved in writing of each
Follow-on Investor intending to purchase the Series C Preferred Stock in such
Follow-on Closing who is described in clause (y) of the definition of Follow-on
Investor by executing a counterpart of such Schedule I; and
6.2. Conditions to Obligations of the Company. The Company's
obligation to sell and issue the Series C Preferred Shares at a given Closing is
subject to the fulfillment to the satisfaction of the Company on or prior to the
applicable Closing Date of the following conditions, any of which may be waived
in writing by the Company:
(a) The representations and warranties made by the Investors
in Section 5 hereof shall be true and correct in all material respects on such
Closing Date;
(b) Each of the Investors intending to purchase the Series C
Preferred Stock in such Closing shall have executed and delivered to the Company
a counterpart to this Agreement, the Investor Rights Agreement and each other
Transaction Document to which such Investor is a party;
(c) Each of the Investors intending to purchase the Series C
Preferred Stock in such Closing shall have delivered to Cerberus Counsel, as
escrow agent hereunder, the amount set forth as the "Purchase Price" opposite
such Investor's name on the applicable Schedule I attached hereto; and
(d) No judgment, writ, order, injunction, award or decree of
or by any court, or judge, justice or magistrate, including any bankruptcy court
or judge, or any order of or by any governmental authority, shall have been
issued, and no action or proceeding shall have been instituted by any
governmental authority, or self-regulatory organization enjoining or preventing
the consummation at such Closing of the transactions contemplated by this
Agreement or any other Transaction Document.
-20-
7. Covenants and Agreements of the Company.
7.1. Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of providing for the conversion of the Series C
Preferred Stock, such number of shares of Common Stock as shall from time to
time equal the number of shares sufficient to permit the conversion of the
Series C Preferred Stock issued pursuant to this Agreement in accordance with
their respective terms.
7.2. No Conflicts. The Company will not take any action, enter into
any agreement or make any commitment that would conflict or interfere in any
material respect with the Company's obligations to the Investors under the
Transaction Documents.
7.3. Unlegended Certificates. From and after the earlier of: (i) the
registration of the Shares for resale pursuant to the Investor Rights Agreement;
and (ii) the time when the Company receives from its legal counsel a written
opinion that the Shares are then eligible for transfer pursuant to Rule 144(k)
promulgated under the Securities Act, the Company shall, upon an Investor's
written request (the "Certificate Request"), promptly cause certificates
evidencing such Shares to be replaced with certificates which do not bear any
restrictive legends. When the Company is required to cause unlegended
certificates to replace previously issued legended certificates, if unlegended
certificates are not delivered to an Investor within three (3) Business Days of
submission by that Investor of legended certificate(s) to the Company's transfer
agent together with a representation letter in customary form, the Company shall
be liable to the Investor for liquidated damages equal to 1.5% of the aggregate
market price (i.e., the highest closing price during such three day period) of
the Shares evidenced by such certificate(s) for each 10-day period (or portion
thereof) beyond such three (3) Business Day-period that the unlegended
certificates have not been so delivered. Notwithstanding the foregoing, such
three (3) Business Day-period shall be extended until the Company or its
transfer agent has received from the Investor such information as is necessary
for the issuance of the unlegended certificates in accordance with applicable
Federal and state securities laws and as is reasonably requested in writing by
the Company promptly, and in no even more than one (1) Business Day, following
the Company's receipt of such Investor's Certificate Request. The Company shall
pay such amount(s) to the Investor upon demand therefor, and such payment shall
be in addition to, and not in lieu of, all other remedies and rights available
to such Investor.
7.4. Insurance. Without the approval of a majority of the Board
(which approval includes the affirmative vote of the Series C Director), the
Company shall not materially reduce the insurance coverages described in Section
4.16, including, without limitation, the directors' and officer's insurance.
7.5. Employment Agreements. The Company shall maintain employment
and non-compete agreements with all of its officers, in the form reviewed by
the Co-Lead Investors prior to the Initial Closing, and shall not amend any such
agreements except in any manner that benefits the Company or as approved by the
Board (which approval includes the affirmative vote of the Series C Director).
7.6. Confidentiality Agreements. The Company shall maintain
confidentiality agreements with each Key Employee and each consultant of the
Company with access to Confidential Information, in the form reviewed by the
Co-Lead Investors prior to the Initial Closing, and shall not amend any such
agreements except in any manner that benefits the Company or does not reduce the
confidentiality protection thereof, in each case, as approved by the Board
(which approval includes the affirmative vote of the Series C Director).
7.7. Compliance with Laws. The Company will comply in all material
respects with
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all applicable laws, rules, regulations, orders and decrees of all governmental
authorities, except to the extent non-compliance would not have a Material
Adverse Effect.
7.8. Use of Proceeds. The proceeds from the sale of the Shares shall
be used for the payment of expenses related to the transactions contemplated
hereby and for general working capital purposes consistent with the Company's
budget approved by the Board as of the Initial Closing.
7.9. Hatch-Waxman Act. The Company shall apply to qualify each drug
for which it seeks FDA approval for the marketing exclusivity provisions of the
Hatch-Waxman Act in Sections 505(j)(5)(D) and/or 505(c)(3)(D) of the FDCA,to the
maximum extent permitted by such laws, by taking the following steps, at its own
expense: (i) submitting patent information to the FDA in the form required by
the FDA to be included in a NDA; (ii) resubmitting patent information to the FDA
within 30 days after approval of an NDA or supplement to identify the patents
that apply to the drug substance (active ingredient), drug product (formulation
and composition) or approved method of use, actually approved; (iii) filing with
the FDA within 30 days after the issuance of the patent described in clause
(ii), the information required in the form of a supplement to the approved NDA
if a patent that applies to the drug substance, drug product or approved method
of use which is actually approved, issues after approval of the NDA; (iv)
submitting with the NDA prior to its approval (1) a statement that the applicant
is claiming the exclusivity described in the first sentence of this Section 7.9,
(2) a reference to the appropriate paragraph under 21 C.F.R. 314.08 that
supports its claim; (3) if the Company claims exclusivity under Sec. 21 C.F.R.
314.108(b)(2), information to show that, to the best of its knowledge or belief,
a drug has not previously been approved under Section 505(b) of the FDCA
containing any active moiety in the drug for which the Company is seeking
approval; if the company claims exclusivity under 21 C.F.R. 314.108(b)(4) or
(b)(5), information sufficient to show that the application contains new
clinical investigations that are essential to approval of the application or
supplement and were conducted or sponsored by the Company; (v) obtaining and
maintaining without interruption all U.S. and foreign patent(s) that apply to
each drug substance, drug product or approved method of use, approved by the
FDA; (vi) taking any and all legal action permitted by applicable law to
prosecute patent infringement claims against sponsors of Abbreviated New Drug
Applications, Abbreviated New Animal Drug Applications or New Drug Applications
under Section 505(b)(2) of the FDCA ("paper NDA's"); and (vii) taking such other
reasonable steps as may be necessary or required by applicable law or
regulation, as may be in effect from time to time, in order to qualify for the
aforesaid marketing exclusivity provisions.
7.10 Recordation of Patent Assignments. Promptly following, and in
any event within 30 days after, the Initial Closing Date, the Company will file
patent assignment(s) for recording accompanied by certificate(s) issued by
appropriate authorities showing a change of name or merger and the appropriate
recordation form cover sheet with the appropriate foreign and domestic
authorities, including, without limitation, the U.S. Patent & Trademark Office,
reflecting the change of the Company's name from "Biostream, Inc." to "Molecular
Insight Pharmaceuticals, Inc." with respect to all patents, foreign and
domestic, previously assigned to the Company to establish a clear chain of title
for each patent assigned to the Company, and within six (6) months after the
Initial Closing Date, the Company will provide the Co-Lead Investors with U.S.
Patent & Trademark Office official evidence of each such filing. The Company
shall diligently pursue, and use commercially reasonable efforts to complete,
the performance of its obligations under this Section 7.10.
7.11 Amendment of Licenses due to name change. Promptly following,
and in any event within one (1) year after, the date of this Agreement, the
Company will obtain, and provide copies to the Co-Lead Investors of, duly
executed, valid, binding and enforceable amendments to: (x) that certain License
Agreement, effective December 15, 2000, between Biostream, Inc., as licensee,
and The Board of Governors of the University of Western Ontario, to reflect the
change of the Company's name from "Biostream, Inc." to "Molecular Insight
Pharmaceuticals, Inc."; and (y) that certain Research Agreement
-22-
and Exclusive License, effective December 29, 1997, and that certain Exclusive
License Agreement, effective March 1, 2000, between Georgetown University, as
licensor, and Zebra Pharmaceuticals, Inc., as licensee, to reflect the merger of
Zebra Pharmaceuticals, Inc. into Biostream, Inc. and the change of the Company's
name from "Biostream, Inc." to "Molecular Insight Pharmaceuticals, Inc." The
Company shall diligently pursue, and use commercially reasonable efforts to
complete, the performance of its obligations under this Section 7.11.
8. Survival and Indemnification.
8.1. Survival. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements as of the date hereof and shall survive
until the later to occur of (x) 30 days after delivery to Cerberus of the
Company's audited financial statements, together with the auditors written
opinion thereon, for the first fiscal year ended after the Initial Closing and
(y) 15 months after the Initial Closing; provided, however, that the provisions
contained in: (a) Section 4.4 and Section 8.2(ii) hereof shall survive
indefinitely; (b) Sections 4.9 and 4.14 shall survive until 90 days after the
applicable statute of limitations.
8.2. Indemnification. The Company shall indemnify and hold harmless
each Investor and its Affiliates and the directors, officers, employees,
investors, partners and agents of each Investor and its Affiliates, from and
against any and all losses, claims, damages, liabilities and expenses incurred
by any such Person (including without limitation reasonable attorney fees and
disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement hereof) (collectively, "Losses") as a result of (i)
any breach of representation, warranty, covenant or agreement made by, or to be
performed on the part of, the Company under the Transaction Documents, or (ii)
the recall of any of the Company's products (but only to the extent such
Investor would be personally liable), and, in each case, will reimburse any such
Person for all such amounts as they are incurred by such Person.
8.3. Conduct of Indemnification Proceedings. Promptly after receipt
by any Person (the "Indemnified Person") of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 8.2, such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume and control the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Person, and shall assume the payment of all fees and expenses in
connection with such defense and such counsel; provided, however, that the
failure of any Indemnified Person to so notify the Company shall not relieve the
Company of its obligations hereunder except to the extent that the Company is
actually and materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person (x) representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them or (y) if there are one or more defenses
available to such Indemnified Person that is/are not available to the Company.
Without the prior written consent of the Indemnified Person, which consent shall
not be unreasonably withheld, delayed or conditioned, the Company shall not
effect any settlement of any pending or threatened action, claim or proceeding,
with respect to any Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability arising out
of such proceeding.
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9. Miscellaneous.
9.1. Successors and Assigns. This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or the Investors
who participated in the same Closing, as applicable; provided, however, that an
Investor may assign its rights and delegate its duties hereunder in whole or in
part, without the prior written consent of the Company, to an Affiliate or the
other Investors (regardless of the Closing in which any such Investor purchased
its Series C Preferred Stock), provided, that, no such assignment shall be
effective or confer any right on any such assignee unless, prior to such
assignment, the assignee agrees in writing that such assignee will be bound by
all provisions binding on such Investor hereunder. The provisions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Except for Cerberus Counsel,
which is an express intended third-party beneficiary hereof for the limited
purpose of Section 3.2 and Section 9.5 of this Agreement, and except for any
other provisions of this Agreement expressly to the contrary, nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement.
9.2. Counterparts: Faxes. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.
9.3. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.4. Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described: (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery; (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal with a confirming copy by first class mail;
(iii) if given by mail, then such notice shall be deemed given upon the earlier
of (A) receipt of such notice by the recipient or (B) three (3) days after such
notice is deposited in first class mail, postage prepaid; and (iv) if given by
an internationally recognized overnight air courier, then such notice shall be
deemed given one (1) Business Day after delivery to such carrier. All notices
shall be addressed to the party to be notified at the address as follows, or at
such other address as such party may designate by ten (10) days' advance written
notice to the other party:
If to the Company:
Molecular Insight Pharmaceuticals, Inc.
160 Second Street
Cambridge, Massachusetts 02142
Attn: Mr. David Barlow
Fax:(617)492-5664
With a copy to:
Foley & Lardner LLP
111 Huntington Avenue
26th Floor
-24-
Boston, Massachusetts 02199
Attn: Gabor Garai, Esq.
Fax: (617)342-4001
If to any of the Investors:
to the addresses set forth on the applicable Schedule I
attached hereto.
9.5. Expenses. The Company shall pay the reasonable fees and
expenses of Cerberus Counsel in connection with the transactions contemplated by
this Agreement (the "Cerberus Counsel Fees"), with respect to the Initial
Closing, in an amount not to exceed $60,000 through the Initial Closing Date,
and with respect to each Follow-on Closing, in an amount not to exceed $7,500
through each such Follow-on Closing Date, which Cerberus Counsel Fees shall
include, without limitation, the fees and expenses associated with the
negotiation, preparation and execution and delivery of this Agreement and the
other Transaction Documents. On the sooner of the Closing or the Escrow
Termination Date, Cerberus Counsel may apply such retainer to Cerberus Counsel
Fees and return the excess thereof, if any, to the Company. Except as set forth
above, the Company and the Investors shall each bear their own expenses in
connection with the negotiation, preparation, execution and delivery of this
Agreement. In the event that legal proceedings are commenced by any party to
this Agreement against another party to this Agreement in connection with this
Agreement or the other Transaction Documents, the party or parties which do not
prevail in such proceedings shall severally, but not jointly, pay their pro rata
share of the reasonable attorneys' fees and other reasonable out-of-pocket costs
and expenses incurred by the prevailing party in such proceedings.
9.6. Amendments and Waivers. This Agreement shall not be amended and
the observance of any term of this Agreement shall not be waived (either
generally or in a particular instance and either retroactively or prospectively)
without the prior written consent of (i) the Company and (ii) at least a
majority of the Investors holding a majority of the Series C Preferred Stock
(which majority must include Cerberus); provided, however, that any provision
hereof which impairs the rights or increases the obligations of a specific
Investor disproportionately to other Investors shall not be amended or waived
without the prior written consent of the Company and that particular Investor;
provided, further, that any provision affecting the rights or obligations of
Cerberus Counsel, shall not be waived or amended without the prior written
consent of Cerberus Counsel. Any amendment or waiver effected in accordance with
this Section 9.6 shall be binding upon each holder of any Shares purchased under
this Agreement at the time outstanding, each future holder of all such Shares,
and the Company.
9.7. Publicity. No public release or announcement concerning the
transactions contemplated by this Agreement or any other Transaction Document
shall be issued by the Company or the Investors without the prior consent of the
Company (in the case of a release or announcement by any of the Investors) or
Cerberus (in the case of a release or announcement by the Company) (which
consents shall not be unreasonably withheld), except as such release or
announcement may be required by law, in which case the Company or the Investors,
as the case may be, shall allow the Investors or the Company, as applicable, to
the extent reasonably practicable in the circumstances, reasonable time to
comment on such release or announcement in advance of such issuance.
9.8. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render
-25-
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereby waive any provision of law which renders
any provision hereof prohibited or unenforceable in any respect.
9.9. Entire Agreement. This Agreement, including the Exhibits and
Schedules (including without limitation all Disclosure Schedules and, in the
case of a Follow-on Closing, each subsequent version of Schedule I), and the
other Transaction Documents constitute the entire agreement among the parties
hereof with respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, both oral and written, between the parties
with respect to the subject matter hereof and thereof.
9.10. Further Assurances. The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
9.11. Governing Law; Consent to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the internal laws of the State
of New York without regard to the choice of law principles thereof, except that
the Shares and the designations, powers, preferences, rights of, and the
qualification, limitations and restrictions on, the Shares issued pursuant to
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts. Each of the parties hereto irrevocably submits to the
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served on
each party hereto anywhere in the world by the same methods as are specified for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. THE COMPANY AND EACH OF THE INVESTORS HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
9.12 Independent Nature of Investors' Obligations and Rights. Except
as expressly provided herein and therein, the obligations of each Investor under
this Agreement and each other Transaction Document are several and not joint
with the obligations of any other Investor (regardless of the Closing at which
such Investor purchased its Series C Preferred Stock), and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor (regardless of the Closing at which such Investor purchased its Series
C Preferred Stock) under this Agreement or any other Transaction Document. The
decision of each Investor to purchase Series C Preferred Stock pursuant to this
Agreement and the other Transaction Documents has been made by such Investor
independently of any other Investor (regardless of the Closing at which such
Investor purchased its Series C Preferred Stock). Nothing contained herein or in
any other Transaction Document, and no action taken by any Investor (including,
without limitation, any of the Co-lead Investors) pursuant hereto or thereto,
shall be deemed to constitute the Investors (regardless of the Closing at which
such Investor purchased its Series C Preferred Stock) as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by this
Agreement or the other Transaction Documents. Each Investor acknowledges that no
other Investor (including, without limitation, any of the Co-lead
-26-
Investors, and regardless of the Closing at which such Investor purchased its
Series C Preferred Stock) has acted as agent for such Investor in connection
with making its investment hereunder and that no Investor (including, without
limitation, any of the Co-lead Investors, and regardless of the Closing at which
such Investor purchased its Series C Preferred Stock) will be acting as agent of
such Investor in connection with monitoring its investment in the Shares or
enforcing its rights under this Agreement or the other Transaction Documents.
Each Investor shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out
of the other Transaction Documents, and it shall not be necessary for any other
Investor (regardless of the Closing at which such Investor purchased its Series
C Preferred Stock) to be joined as an additional party in any proceeding for
such purpose. The Company acknowledges that each of the Investors has been
provided with the same Transaction Documents for the purpose of closing a
transaction with multiple Investors at multiple Closings and not because it was
required or requested to do so by any Investor. Notwithstanding anything
contained in this Agreement or any other Transaction Document to the contrary,
neither of the Co-Lead Investors shall have any duty, fiduciary or otherwise, to
any other Investor (regardless of the Closing at which such Investor purchased
its Series C Preferred Stock) by virtue of such Investor serving as a Co-Lead
Investor or otherwise.
[signature page follows]
-27-
[COMPANY SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as
of the date first above written.
MOLECULAR INSIGHT
PHARMACEUTICALS, INC.
By: /s/ David S. Barlow
----------------------------------
Name:
Title:
|
-28-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
CERBERUS PARTNERS, L.P.
By: Cerberus Associates, LLC,
its General Partner
By: /s/ Seth Plattus
----------------------------------
Seth Plattus
Managing Director
|
MEDCAP PARTNERS, L.P.
By:___________________________________
Name: ________________________________
Title: _______________________________
-29-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
Andrew R. Midler Family Trust 5/99
Name of Investor
By: /s/ Andrew R. Midler
----------------------------------
Name: Andrew R. Midler
Title: Trustee
|
-30-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
John D. Singer, Esq.
Name of Investor
By: /s/ John D. Singer, Esq.
---------------------------
Name: John D. Singer, Esq.
Title: ________________________
|
-31-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as
of the date first above written.
INVESTOR:
MICHAEL C. DEUTSCH
Name of Investor
By: /s/ Michael C. Deutsch
---------------------------
Name: Michael C. Deutsch
Title:
|
-32-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
PATRICIA T. POITRAS REVOCABLE TRUST James W. Poitras Revocable Trust V/A
V/A 29/2004 -------------------------------------
Name of Investor
/s/ Patricia T. Poitras By: /s/ James W. Poitras
------------------------- ---------------------------------
Name: Patricia T. Poitras Name: James W. Poitras
Title: Trustee Title: Trustee
|
-33-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
Carol Frank
Name of Investor
By:
Name:
Title:
-34-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
Benjamin M. Frank Trust
Name of Investor
By: /s/ Benjamin M. Frank
-------------------------------
Name: Benjamin M. Frank
Title: Trustee
|
-35-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
[ILLEGIBLE]
Name of Investor
By:___________________________________
Name: ________________________________
Title: _______________________________
-36-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
Rajpal Sandhu and Mary Henry
Name of Investor
By: /s/ Rajpal Sandhu & Mary Henry
----------------------------------
Name: RAJPAL SANDHU & MARY HENRY
Title:
-------------------------------
420 FAMILY FARM ROAD
WOODSIDE CA - 94062
650-529-0606
Raj@RajSandhu.com
|
-37-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
Name of Investor
By: /s/ James Lenehan
__________________________________
Name: James T. Lenehan
Title: _______________________________
|
-38-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
Lionel N. Sterling Revocable Trust
Name of Investor
By: /s/ Lionel N. Sterling
----------------------------------
Name: Lionel N. Sterling
--------------------------------
Title: Trustee
-------------------------------
|
I am purchasing a total of 1,750 Series C Preferred Stock @ $202.00 per share
for a total investment of $353,500. The split between those purchased as a
Series B investor or as a Series C investor, I understand is moot.
-39-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
Richard Simon
Name of Investor
By: /s/ Richard Simon
----------------------------------
Name: Richard Simon
--------------------------------
Title:________________________________
|
-40-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
American Durham L.P.
Name of Investor
By: /s/ T.K. Duggan
---------------------------------
Name: T.K. Duggan
-------------------------------
Title: Managing Principal
------------------------------
|
-41-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
International Durham, Ltd.
Name of Investor
By: /s/ T.K. Duggan
---------------
Name: T.K. Duggan
-------------------------------
Title: Managing Principal
------------------------------
|
-42-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
Institutional Benchmarks Master Fund
Name of Investor
By: /s/ Garry Crowder
------------------
Name: Garry Crowder
-------------------------------
Title: Director
------------------------------
|
-43-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
Richard Simon
Name of Investor
By: /s/ Richard Simon
-----------------
Name: Richard Simon
--------------------------------
Title:
-------------------------------
|
-44-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
William R. Ebsworth
Name of Investor
By: /s/ William R. Ebsworth
-----------------------
Name:
-------------------------------
Title:
------------------------------
|
-45-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
/s/ Alan N. Berro
-------------------------------------
Name of Investor
By: /s/ ALAN N. BERRO
-----------------
Name:
-------------------------------
Title:
------------------------------
|
-46-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
Wesley M. Nida
Name of Investor
By:
Name:
Title:
-47-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
THE RAPTOR GLOBAL PORTFOLIO LTD.
Name of Investor
By: Investment Corporation,
Investment Advisor
By: /s/ William T. Flaherty
----------------------------------
Name: William T. Flaherty
--------------------------------
Title: Managing Director
-------------------------------
|
-48-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
THE TUDOR BVI GLOBAL PORTFOLIO LTD.
Name of Investor
By: Tudor Investment Corporation,
Trading Advisor
By: /s/ William T. Flaherty
-----------------------
Name: William T. Flaherty
--------------------
Title: Managing Director
--------------------
|
-49-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
TUDOR PROPRIETARY TRADING, L.L.C.
Name of Investor
By: /s/ William T. Flaherty
-----------------------
Name: William T. Flaherty
--------------------
Title: Managing Director
--------------------
|
-50-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
/s/ William C. Smith (WILLIAM C. SMITH)
---------------------------------------
Name of Investor
/s/ Dana Davis Smith (DANA DAVIS SMITH)
---------------------------------------
By:
-----------------------------------
Name:
--------------------------------
Title:
--------------------------------
Joint Tenants with Right of
Survivorship
|
-51-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
THE ALTAR ROCK FUND L.P.
Name of Investor
By: Tudor Investment Corporation,
General Partner
By: /s/ William T. Flaherty
-----------------------
Name: William T. Flaherty
--------------------
Title: Managing Director
--------------------
|
-52-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
/s/ June R. Frank, Trustee
--------------------------------------
Name of Investor
|
By: June R. Frank Revocable Trust
dated August 13, 2001
Name:
Title:
-53-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
/s/ John C. Otsuki
-------------------------------------
Name of Investor
|
By:
Name: John C. Otsuki
Title:
-54-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
MedCap Partners L.P.
Name of Investor
By: /s/ [ILLEGIBLE]
---------------
Name: [ILLEGIBLE]
-------------------------------
Title: Managing Member of the GP
------------------------------
|
-55-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
MedCap Master Fund, L.P.
Name of Investor
By: /s/ [ILLEGIBLE]
---------------
Name: [ILLEGIBLE]
-------------------------------
Title: Managing Member of the GP
------------------------------
|
-56-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
/s/ Kenneth L. Rubin
-------------------------------------
Name of Investor
|
By: Kenneth Rubin
Individually
Name:
Title:
To Purchase 620 shares of Series C Convertible Preferred Stock at a Purchase
Price of $202 per share. Investment proceeds $125,240.
-57-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
WILLIAM P. RICE
Name of Investor
By: /s/ William P. Rice
---------------------------
Name: WILLIAM P. RICE
--------------------------
Title:
-------------------------
|
-58-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
JAMES J. GOLL
Name of Investor
By: /s/ James J. Goll
-------------------------------
Name: James J. Goll
-----------------------------
Title:
----------------------------
(203) 656-0228
|
-59-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
/s/ James M. Hirshberg
----------------------------------
Name of Investor
By: /s/ James M. Hirshberg
----------------------------------
Name: JAMES M. HIRSHBERG
--------------------------------
Title:
-------------------------------
|
-60-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
Dana G. Doe
Name of Investor
By: /s/ Dana G. Doe
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
|
-61-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
INVESTOR:
/s/ Daniel Frank
_________________________
Name of Investor
By: _________________________
Name: DANIEL FRANK
________________________
Title:_______________________
|
-62-
Exhibit 10.3
AMENDED AND RESTATED VOTING AGREEMENT
THIS AMENDED AND RESTATED VOTING AGREEMENT is dated as of March 29, 2005
by and among Molecular Insight Pharmaceuticals, Inc., a Massachusetts
corporation (the "Company"), the holders of the Company's Series A Convertible
Preferred Stock set forth on the signature page hereto (the "Series A Holders"),
the holders of the Company's Series B Convertible Preferred Stock set forth on
the signature page hereto (the "Series B Holders"), the holders of the Company's
Series C Convertible Preferred Stock set forth on the signature page hereto (the
"Series C Holders"), and certain holders of the Company's Common Stock as set
forth on the signature page hereto (the "Common Stockholders" and together with
the Series C Holders, Series B Holders and the Series A Holders, the
"Stockholders").
WHEREAS, the Company and certain holders of its Common Stock, Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock previously
entered into a Voting Agreement dated March 4, 2004 (the "Prior Agreement")
which provided, inter alia, for certain voting agreements relating to the
election of members to the Company's Board of Directors (the "Board of
Directors"); and
WHEREAS, the Company desires to sell to the Series C Holders, and the
Series C Holders desire to purchase, shares of Series C Convertible Preferred
Stock ("Series C Preferred Stock") and, as a condition to such purchase and
sale, the Series C Holders require certain changes to the Prior Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and the investment by the Series C Holders under that certain
Stock Purchase Agreement (as defined below), the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Election of Directors. At any time at which stockholders of the
Company have the right to, or vote for or consent in writing to, the election of
directors of the Company, the Stockholders hereby agree to vote, or consent in
writing as to, all shares of capital stock of the Company then owned by them in
favor of the following actions to:
(a) cause the election to the Board of Directors of one (1)
representative designated by David Barlow ("Series A Director"), who shall
initially be David Barlow; provided, however that if David Barlow is removed as
the Series A Director for cause (as defined in Section 1(h) below) then the
Series A Director shall be designated by the Series A Holders holding a majority
of the shares of the Series A Convertible Preferred Stock; and
(b) cause the election to the Board of Directors of one (1)
representative designated by Cerberus Partners, L.P. (the "Series B Director"),
who shall initially be Daniel Frank and who shall thereafter be selected by
Cerberus Partners, L.P.; and
(c) subject to clause (i) below, cause the election to the Board of
Directors of one (1) representative designated by Cerberus Partners, L.P. (the
"Series C Director" and, together with the Series A Director and the Series B
Director, the "Investor Directors"), who shall initially be Andrew Jay; and
(d) cause the election to the Board of Directors of one (1) member
who shall be the President of the Company (the "Management Director"), who shall
initially be John Babich; provided that if the Company shall not have a
President, such position held by the Chief Executive Officer of the Company or,
if there is no President or Chief Executive Officer then serving for the
Company, such individual serving in a similar capacity; and
(e) cause the election to the Board of Directors of three (3)
members with appropriate industry experience who shall be designated by the
President of the Company in consultation with the senior management of the
Company and approved by the Series B Director, which approval shall not be
unreasonably withheld or delayed (the "Industry Directors"), who shall initially
be Harry Stylli, Kim Lamon and William Eckelman.
(f) The Company shall cause the nomination for election to the Board
of Directors of the individuals set forth in clauses (a) through and including
(e) above. Each of the directors designated in this Section 1 shall be elected
at any annual or special meeting of stockholders (or by written consent in lieu
of a meeting of stockholders) and shall serve until his or her successor is
elected and qualified, or until his or her earlier resignation or removal.
(g) The Board of Directors shall remain seven (7) members unless
changed by the vote or written consent of (i) the holders of at least fifty
percent (50%) of the then-outstanding shares of capital stock, with all classes
voting together as a single class, (ii) the holders of at least fifty percent
(50%) of the Series A Convertible Preferred Stock, (iii) the holders of at least
fifty percent (50%) of the Series B Convertible Preferred Stock and (iv) the
holders of at least fifty percent (50%) of the Series C Preferred Stock (the
vote or consent required by clauses (i) through (iv) being the "Requisite
Vote").
(h) For purposes of Section 1(a), "cause" shall mean either (i) the
conviction of, or pleading of nolo contendre to, a felony or (ii) the commission
of an act of fraud or embezzlement, in each case, by David Barlow.
(i) So long as Siemens Venture Capital GmbH ("Siemens") continues to
own Series C Preferred Stock having an aggregate Series C Stated Value of at
least Three Million Dollars ($3,000,000), Siemens shall be entitled to appoint
the Series C Director (when so appointed by Siemens, the Series C Director shall
be referred to as the "Siemens Director"); provided, however, that, upon a
Removal Event, Siemens shall immediately cease to have the right to appoint the
Series C Director and the Siemens Director shall be automatically and
immediately, without the need for any further corporate or Board of Directors
action or deed, removed from the Board of Directors. In the event of the
occurrence of a Removal Event
-2-
described in clause (i) of the definition of Removal Event only, Siemens shall
once again have the right of appointment of the Series C Director if the Board
of Directors, acting at a duly called meeting and/or by written consent, adopts
a resolution abandoning, canceling or ending the Removal Event. This right to
appoint the Series C Director is personal to Siemens and, notwithstanding
anything to the contrary herein or in any of the Transaction Documents (as
defined in the Stock Purchase Agreement), such right shall not be assignable by
Siemens, including without limitation, to any transferee of Series C Preferred
Stock (or the Common Stock issuable upon conversion thereof) by Siemens. If the
Siemens Director shall be removed from the Board of Directors pursuant to a
Removal Event as set forth in this clause (i), the Company shall provide the
Siemens Director with prompt written notice thereof (without any obligation to
disclose the details of the applicable Removal Event), but the failure to give
any such notice shall not be a condition to, or otherwise serve as a basis to
prevent, any such removal. For purposes of Sections 1 and 3 herein, the
following definitions shall apply:
(1) "Co-Lead Investors" shall mean Cerberus Partners, L.P. and
MedCap Partners, L.P.
(2) "Qualified Public Offering" shall mean the closing of a firm
commitment underwritten public offering of shares of the Company's Common Stock
pursuant to a registration statement filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, on form S-1 or its
equivalent, in which the Company's Common Stock is offered and sold to the
public at an initial public offering price equal to at least $5.00 per share,
with aggregate gross proceeds to the Company of not less than $30 million.
(3) "Removal Event" shall mean the soonest to occur of: (i) the
adoption of a resolution by the Board of Directors, acting at a duly called
meeting and/or by written consent, taking any action to pursue consideration of
any merger, consolidation, sale, lease or exchange of substantially all of its
assets, sale or exchange of its capital stock, or any other similar business
transaction involving the Corporation; (ii) June 30, 2007; and (iii) a Qualified
Public Offering.
(4) "Series C Stated Value" shall mean, with respect to each shares
of Series C Preferred Stock, $202.00, which amount shall be subject to
appropriate adjustment in the event of a stock dividend, stock split, reverse
stock split, reclassification, stock combination or other recapitalization
affecting the Series C Preferred Stock, all in accordance with the Company's
Articles of Organization, as amended to date.
(5) "Stock Purchase Agreement" shall mean that certain Stock
Purchase Agreement by and between the Company and the Series C Holders dated
March 29, 2005.
Section 2. Vacancies and Removal.
(a) Series A Director. The Series A Director may be removed during
his or her term of office, with or without cause, by and only by the affirmative
vote or written consent
-3-
of the holders of a majority of the then-outstanding shares of Series A
Convertible Preferred Stock. Each of the Stockholders agrees to, and shall, vote
all of its shares of capital stock in the same manner as the vote cast or
consent given by the holders of the majority of the Series A Convertible
Preferred Stock on the matter described in the foregoing sentence. Any vacancy
in the office of a Series A Director shall be filled by a person designated
pursuant to the terms of Section 1(a) above and each of the Stockholders agrees
to vote, and shall vote, all of its shares of capital stock of the Company in
favor of such person.
(b) Series B Director. The Series B Director may be removed during
his or her term of office, with or without cause, by and only by the affirmative
vote or written consent of Cerberus Partners, L.P. Each of the Stockholders
agrees to, and shall, vote all of its shares of capital stock in the same manner
as the vote cast or consent given by Cerberus Partners, L.P. on the matter
described in the foregoing sentence. Any vacancy in the office of the Series B
Director shall be filled by a person designated pursuant to Section 1(b) above
and each of the Stockholders agrees to, and shall, vote all of its shares of
capital stock of the Company in favor of such person.
(c) Series C Director. The Series C Director may be removed during
his or her term of office, with or without cause, by and only by the affirmative
vote or written consent of Cerberus Partners, L.P.; provided, however, that if
Siemens has the right to appoint the Series C Director pursuant to Section 1(i)
then such Siemens Director may only be removed during his or her term of office,
with or without case, by and only by the affirmative vote or written consent of
Siemens. Each of the Stockholders agrees to, and shall, vote all of its shares
of capital stock in the same manner as the vote of or consent by Cerberus
Partners, L.P. or Siemens, as the case may be, on the matter described in the
foregoing sentence. Any vacancy in the office of the Series C Director shall be
filled by a person designated pursuant to Section 1(c) above and each of the
Stockholders agrees to, and shall, vote all of its shares of capital stock of
the Company in favor of such person.
(d) Management Director. The Management Director may be removed
during his or her term of office, with or without cause, by the affirmative vote
of a majority of the members of the Board of Directors if such Management
Director no longer serves as the Company's President (or in a similar capacity
pursuant to Section 1(d) above) or by the affirmative vote or written consent
of the holders of a majority of the outstanding shares of the Series A Stock,
Series B Stock and Series C Stock voting together as a single class if such
Management Director no longer serves as Company's President (or in a similar
capacity pursuant to Section 1(d) above). Any vacancy in the office of the
Management Director shall be filled by a vote of the majority of the Board of
Directors consistent with the provisions of Section 1(d) above or by a vote of
the majority of the then-outstanding shares of capital stock of the Company, and
each of the Stockholders agrees to, and shall, vote all of its shares of capital
stock in favor of such person.
-4-
(e) Industry Directors. Any Industry Director may be removed during
his or her term of office, with or without cause, by and only by the affirmative
vote of a majority of the members of the Board of Directors (which majority
shall include at least two of the Investor Directors) or by the affirmative vote
or written consent of the holders of a majority of the outstanding shares of the
Series A Stock, Series B Stock and Series C Stock voting together as a single
class. Any vacancy in an office of an Industry Director shall be filled by a
person designated by the President of the Company in consultation with the
senior management of the Company and approved by the Series B Director, such
approval not to be unreasonably withheld or delayed, and each of the
Stockholders agrees to, and shall, vote all of its shares of capital stock in
favor of such person.
Section 3. Observer Rights. So long as all or any portion of the Series C
Preferred Stock is outstanding, the Co-Lead Investors shall have the right to
appoint one representative (a "Representative") to attend as an observer all
meetings of the Board of Directors (and each committee meeting thereof);
provided, that, in the case of telephonic meetings conducted in accordance with
the Company's by-laws and applicable law, the Representative shall be given the
opportunity to participate in such telephonic meetings to the same extent other
directors are permitted to participate. The Co-Lead Investors may replace their
Representative from time to time, and each such replacement shall be deemed a
"Representative" for purposes of this Section 3. The Co-Lead Investors shall be
required to furnish the name and address of its Representative (or any such
replacement) to the Company upon request therefore. The Company shall give each
Representative written notice of every meeting of its Board of Directors (and
any committee meeting thereof) at the same time and in the same manner as notice
is given to the directors of the Company. The Company shall bear, and reimburse
each Representative for, the reasonable costs of such Representative's
attendance at or participation in any meetings of the Board of Directors. Each
Representative shall be entitled to receive all written materials and other
information given to the directors of the Company in connection with all
meetings of the Board of Directors or otherwise at the same time and in the same
manner such materials and information are given to the directors. Prior to the
Company's obligations to provide notices and information hereunder, each
Representative shall execute and deliver to the Company a standard nondisclosure
agreement restricting the use or disclosure of any confidential information
received by such Representative pursuant to this Section 3. Each Representative
shall be entitled to consult with and advise the Board of Directors on business
issues with respect to the Company and its Subsidiaries, including management's
proposed annual operating plans for the Company and its Subsidiaries.
Notwithstanding the foregoing, the Company shall have the right to exclude any
Representative from attending any portion of a meeting and shall have the right
to withhold any written materials if the Board of Directors determines that such
exclusion or withholding is necessary due to a potential or actual conflict of
interest or determines that such exclusion or withholding is necessary to
protect the attorney-client privilege between the Company and such counsel. The
Company shall take all reasonably necessary steps to implement the provisions of
this Section 3.
-5-
Section 4. Additional Parties and Definitions. If any of the Stockholders
transfer any of its shares of the Company's capital stock, such party shall
cause the execution by such persons or entities and the Company of a counterpart
of this Agreement and an amendment adding their names as signatories hereto as a
condition of any acquisition of such shares by such person or entity. This
Agreement shall thereafter be amended to include such additional persons or
entities without the necessity of procuring an amendment to this Agreement by
the other parties hereto. The Secretary of the Company shall promptly notify the
Stockholders of any purported transfer or disposition of shares by a stockholder
under this Agreement.
Section 5. Severability; Governing Law. If any provisions of this
Agreement shall be determined to be illegal or unenforceable by any court of
law, the remaining provisions shall be severable and enforceable to the maximum
extent possible in accordance with their terms. This Agreement shall be governed
by, and construed in accordance with, the laws of the Commonwealth of
Massachusetts without giving effect to the principles of conflicts of law
thereof.
Section 6. Injunctive Relief. It is acknowledged that it will be
impossible to measure the damages that would be suffered by any party if another
party fails to comply with the provisions of this Agreement and that in the
event of any such failure, the non-defaulting party will not have an adequate
remedy at law. The non-defaulting party shall, therefore, be entitled to obtain
specific performance of any defaulting party's obligations hereunder and to
obtain immediate injunctive relief. The defaulting party shall not argue, as a
defense to any proceeding for such specific performance or injunctive relief,
that the non-defaulting party has an adequate remedy at law.
Section 7. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their permitted successors and assigns,
legal representatives and heirs. This Agreement supercedes all prior agreements
(including without limitation the Prior Agreement, which is hereby rendered null
and void and of no further force and effect), whether written or oral, by and
between the Company and the Stockholders with respect to the subject matter set
forth herein.
Section 8. Modification or Amendment. Neither this Agreement nor any
provision hereof can be modified, amended, changed, discharged or terminated
except by an instrument in writing, signed by (a) the Company (b) Cerberus
Partners, L.P. if it is then a Stockholder and (c) that number of Stockholders
representing at least 50% of the outstanding shares of the series of stock to be
affected by such amendment or change.
Section 9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
-6-
Section 10. Notices. All notices to be given or otherwise made to any part
to this Agreement shall be deemed to be sufficient if contained in a written
instrument, delivered by hand in person, by express overnight courier service,
or by electronic facsimile transmission (with a confirming copy sent by U.S.
mail, first class, postage prepaid mail), or by first class mail, postage
prepaid, addressed, if to a Stockholder, at the last address of record in the
Company's stock record books and, if to the Company, at its principal offices.
All notices shall be considered to be delivered three (3) days after dispatch in
the event of first class or registered mail, and on the next succeeding business
day in the event of facsimile transmission (with confirmation of receipt) or
overnight courier service.
Section 11. Duration of Agreement. The rights and obligations of the
Company and the Series C Holders under this Agreement shall terminate,
immediately prior to the consummation of and expressly conditioned upon a
Qualified Public Offering. The rights and obligations of the Company and the
Stockholders (other than the Series C Holders) under this Agreement shall
terminate, on the earlier to occur of the following: (a) immediately prior to
the consummation of and expressly conditioned upon a Qualified Public Offering,
(b) immediately prior to and expressly conditioned upon the consummation of the
sale of all, or substantially all, of the Company's assets or capital stock
either through a direct sale, merger, reorganization, consolidation or other
form of business combination or acquisition in which voting control of the
equity securities of the Company is transferred to a third party, or (c) ten
years from the date hereof.
-7-
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Voting Agreement to be executed as of the date first above written.
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
By: /s/ John W Babich
----------------------
John Babich, President
|
COMMON STOCKHOLDERS:
/s/ David Barlow
----------------
David Barlow
/s/ Phillip S. Magiera 04/24/05
------------------------------------
Phillip S. Magiera
|
MEYTHALER INVESTORS:
By: /s/ L. Charles Meythaler
------------------------
Name: L. Charles Meythaler
Title: Manager
/s/ Ann Barlow
--------------
Ann Barlow
/s/ John W Babich
-----------------
John Babich
|
RAPHAEL, LLC
By: _________________
Name: Enrico Petrillo
Title:
-8-
A PURCHASERS:
/s/ David Barlow
----------------
David Barlow
/s/ James Poitras
-----------------
James Poitras
/s/ Patricia T. Poitras
-----------------------
Patricia T. Poitras
|
BOTH AS INDIVIDUALS AND
AS TRUSTEES OF THEIR
RESPECTIVE REVOCABLE TRUST
James and Katherine Tambone
/s/ Okjin Kim
-------------
Okjin Kim
/s/ Ann Barlow
--------------
Ann Barlow
|
MEYTHALER INVESTORS:
By: /s/ L. Charles Meythaler
------------------------
Name: L. Charles Meythaler
Title: Manager
|
B PURCHASERS:
/s/ Frederick Frank
-------------------
Frederick Frank
|
CERBERUS PARTNERS, L.P.:
By: Cerberus Associates, L.L.C., its
general partner
By: /s/ Seth Plattus
-------------------------------
Seth Plattus, Managing Director
|
-9-
By: /s/ Gerald Izzi MD
-------------------------------
Name: Other Series B Shareholder
Title: GERALD IZZI
|
C PURCHASERS:
CERBERUS PARTNERS, L.P.:
By: Cerberus Associates, L.L.C., its
general partner
By: /s/ Seth Plattus
-------------------------------
Seth Plattus, Managing Director
|
SIEMENS VENTURE CAPITAL GMBH
By: _______________________________
Name:
Title:
-10-
C PURCHASERS:
CERBERUS PARTNERS, L.P.:
By: Cerberus Associates, L.L.C., its general partner
By: /s/ Seth Plattus
-------------------------------
Seth Plattus, Managing Director
|
SIEMENS VENTURE CAPITAL GMBH
By: _______________________________
Name:
Title:
M/M JAMES W. POITRAS
3100 SPRINGHEAD COURT
NARCOOSSEE FL 34771-8554
/s/ Patricia T. Poitras /s/ James W. Poitras
----------------------- --------------------
PATRICIA T. POITRAS JAMES W. POITRAS
|
BOTH AS INDIVIDUALS AND AS TRUSTEES OF THEIR RESPECTIVE REVOCABLE TRUSTS
-11-
C PURCHASER:
Andrew R Midler Family Trust
By: /s/ Andrew R. Midler
----------------------
Name: Andrew R. Midler
Title: Trustee
|
-12-
C PURCHASER:
John D. Singer, Esq.
By: /s/ John D. Singer, Esq.
---------------------------
Name: John D. Singer, Esq.
Title:
|
-13-
C PURCHASER:
MICHAEL C. DEUTSCH
By: /s/ Michael C. Deutsch
--------------------------
Name: Michael C. Deutsch
Title:
|
-14-
C PURCHASER:
James W. Poitras
By: /s/ James W. Poitras
-----------------------------------------------
Name: JAMES W. POITRAS REVOCABLE TRUST V/A 29 N
Title: JAMES W. POITRAS, TRUSTEE
By: /s/ Patricia T. Poitras
-----------------------------------------------
PATRICIA T. POITRAS REVOCABLE TRUST V/A 29 N
PATRICIA T. POITRAS, TRUSTEE
|
-15-
C PURCHASER:
By: /s/ Carol Frank
--------------------
Name:
Title:
|
-16-
C PURCHASER:
Benjamin M. Frank Trust
By: /s/ Benjamin M. Frank
---------------------------
Name:Benjamin M. Frank
Title: Trustee
|
-17-
C PURCHASER:
John P. Davy
By:_______________________________
Name:
Title:
-18-
C PURCHASER:
RAJPAL SANDHU
/s/ Mary C. Henry
--------------------------------
Name: Rajpal Sandhu & Mary Henry
Title:
|
-19-
C PURCHASER:
JAMES T. LENEHAN
By: /s/ James T. Lenehan
----------------------
Name: JAMES T. LENEHAN
Title:
|
-20-
C PURCHASER:
LIONEL N. STERLING REVOCABLE TRUST
By: /s/ Lionel N. Sterling
---------------------------------------
Name: LIONEL N. STERLING
Title: TRUSTEE
|
-21-
C PURCHASER:
America Durham, L.P.
By: /s/ T. K. Duggan
-------------------------
Name: T. K. DUGGAN
Title: MANAGING PRINCIPAL
|
-22-
C PURCHASER:
International Durham, Ltd.
By: /s/ T. H. Dujga
---------------------------------------
Name: T. H. Dujga
Title: [ILLEGIBLE]
|
-23-
C PURCHASER:
Institutional Benchmarks Master Fund-Canopus
By: /s/ Garry Crowder
------------------------------------------
Name: GARRY CROWDER
Title: Director
|
-24-
C PURCHASER:
RICHARD SIMON
By: /s/ Richard Simon
-------------------
Name: RICHARD SIMON
Title:
|
-25-
C PURCHASER:
By: /s/ William R. Ebsworth
---------------------------------------
Name: WILLIAM R. EBSWORTH
Title:
|
-26-
C PURCHASER:
Alan N. Berro
By: /s/ Alan N. Berro
------------------
Name:
Title:
|
-27-
C PURCHASER:
Renee M. Noto
By: /s/ Renee M. Noto
-----------------
Name:
Title:
|
-28-
C PURCHASER:
THE RAPTOR GLOBAL PORTFOLIO LTD.
By: Tudor Investment Corporation
By: /s/ William T. Flaherty
-------------------------
Name: William T. Flaherty
Title: Managing Director
|
-29-
C PURCHASER:
THE TUDOR BVI GLOBAL PORTFOLIO LTD.
By: Tudor Investment Corporation
By: /s/ William T. Flaherty
-------------------------
Name: William T. Flaherty
Title: Managing Director
|
-30-
C PURCHASER:
TUDOR PROPRIETARY TRADING, L.L.C.
By: /s/ William T. Flaherty
-------------------------
Name: William T. Flaherty
Title: Managing Director
|
-31-
C PURCHASER:
William C. Smith
Dana Davis Smith
By: /s/ William C. Smith /s/ Dana Davis Smith
--------------------------------------------
JOINT TENANTS WITH RIGHT OF SURVIVORSHIP
|
-32-
C PURCHASER:
THE ALTAR ROCK FUND L.P.
By: Tudor Investment Corporation, General Partner
By: /s/ William T. Flaherty
-------------------------
Name: William T. Flaherty
Title: Managing Director
|
-33-
C PURCHASER:
Julie R. Frank, Trustee
By: /s/ Julie R. Frank, Revocable Trust
--------------------------------------
Dated August 13, 2001
Name:
Title:
|
-34-
C PURCHASER:
By: /s/ John C. Otsuki
---------------------------------------
Name: JOHN C. OTSUKI
Title:
|
-35-
C PURCHASER:
MedCap Partners L.P.
By: /s/ [ILLEGIBLE]
---------------------------------------
Name: [ILLEGIBLE]
Title: Managing Member
|
-36-
C PURCHASER:
MedCap Master Fund, L.P.
By: /s/ [ILLEGIBLE]
---------------------------------------
Name: [ILLEGIBLE]
Title: Managing Member of the GP
|
-37-
C PURCHASER:
Kenneth Rubin
By: /s/ Kenneth Rubin
---------------------------------------
Name: Individually
Title:
|
-38-
C PURCHASER:
By: /s/ William P. Rice
---------------------------------------
Name: WILLIAM P. RICE
Title:
|
-39-
C PURCHASER:
JAMES J. GOLL
By: /s/ James J. Goll
---------------------------------------
Name: JAMES J. GOLL
Title:
|
-40-
C PURCHASER:
James M. Hirshberg
By: /s/ James M. Hirshberg
---------------------------------------
Name:
Title:
|
-41-
C PURCHASER:
Dana Doe
By: /s/ Dana Doe
---------------------------------------
Name:
Title:
|
-42-
C PURCHASER:
By: /s/ Daniel Frank
---------------------------------------
Name: Daniel Frank
Title:
|
-43-
Exhibit 10.4
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is made as of this
29th day of March, 2005, by and among Molecular Insight Pharmaceuticals, Inc., a
Massachusetts corporation (the "Company"), and the investors identified on the
signature pages hereto (each an "Investor" and collectively the "Investors").
RECITALS:
A. Pursuant to the terms of a certain Stock Purchase Agreement, of
even date herewith, by and among the Company and the Investors (as amended,
restated, supplemented or otherwise modified from time to time, the "Purchase
Agreement"), the Company is issuing to the Investors an aggregate of 148,515
shares of a newly created series of the Company's preferred stock, par value
$0.01 per share, designated as "Series C Convertible Preferred Stock" (the
"Series C Preferred Stock"); and
B. The parties hereto desire to enter into this Agreement to, among
other things, set forth the rights of the Investors with respect to: (i) the
registration of shares of Common Stock issuable to the Investors upon conversion
of the Series C Preferred Stock; (ii) the receipt of certain information from
the Company; and (iii) the participation in future issuances and transfers of
securities of the Company.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and
each Investor, severally and not jointly, hereby agree as follows:
ARTICLE I DEFINITIONS.
1.1 General Definitions. All capitalized terms not otherwise defined in
this Agreement shall have the meanings ascribed thereto in the Purchase
Agreement. As used in this Agreement, unless the context otherwise requires, the
following terms shall have the respective meanings set forth below:
"Agreement" shall have the meaning ascribed to it in the preamble to
this Agreement.
"Board" means the Board of Directors of the Company.
"Cerberus" means Cerberus Capital Management, L.P., for itself
and/or one or more of its Affiliates and/or accounts managed by Cerberus Capital
Management, L.P., including, without limitation, Cerberus Partners, L.P.
"Commission" means the U.S. Securities and Exchange Commission or
any other successor federal agency then administering the Securities Act of
1933, as amended, and other federal securities laws.
"Common Stock" means the common stock, par value $.01 per share, of
the Company, and any other securities into which or for which such Common Stock
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, consolidation, sale of assets or other similar
transaction.
"Company" shall have the meaning ascribed to it in the preamble to
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"Investor(s)" shall have the meaning ascribed to it in the preamble
to this Agreement.
"Preferred Stock" means the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock.
"Purchase Agreement" shall have the meaning ascribed to it in the
recitals to this Agreement.
"Qualified Public Offering" means a firm commitment underwritten
public offering of shares of the Common Stock in which the aggregate gross
proceeds thereof to the Company shall be no less than $30,000,000 and having a
per share offering price of at least $5.00.
"Requisite Investors" means Cerberus and Investors holding at least
a majority of the Common Stock issuable upon conversion of the then issued and
outstanding shares of Series C Preferred Stock.
"Series C Preferred Stock" shall have the meaning ascribed to it in
the recitals to this Agreement.
"Shares" shall have the meaning ascribed to it in Section 3.1.
ARTICLE II INTENTIONALLY OMITTED.
ARTICLE III TRANSFER OBLIGATIONS.
3.1 Transfers Prohibited. David Barlow, currently the Company's CEO
("Barlow"), shall not sell, assign, transfer, exchange, give, devise, pledge,
hypothecate, encumber or otherwise alienate or dispose of any shares of capital
stock of the Company (the "Shares") owned by him, or any right or interest
therein, whether voluntarily or involuntarily, by operation of law or otherwise,
except in accordance with this Agreement. Notwithstanding the foregoing or
Section 3.2 below, Barlow may transfer any or all of the Shares (i) to his
spouse or children or to a trust or partnership established for the benefit of
him, his spouse, his ex-spouse or his children, (ii) by will, or (iii) to his
Affiliates, provided that such Shares shall remain subject to this Agreement and
such permitted transferee shall, as a condition to such transfer, deliver to the
Company a written instrument confirming that such transferee shall be bound by
all of the terms and conditions of this Agreement. Except to the extent
otherwise required by applicable law, any transfer of title of any interest in
any of the Shares upon default, foreclosure, forfeit, or otherwise than by a
voluntary decision on the part of Barlow, other than any transfer upon death
(each, other than any transfer upon death, an "Involuntary Transfer"), shall be
void unless Barlow complies with this Article III and enables the Investors to
exercise in full their rights hereunder. Upon any Involuntary Transfer, the
Investors shall have the right to purchase such Shares pursuant to this Article
III and the Person to whom such Shares have been transferred (the "Involuntary
Transferee") shall have the obligation to sell such Shares in accordance with
this Article III. Upon the Involuntary Transfer of any Shares, Barlow shall
promptly (but in no event later than ten (10) days after such Involuntary
Transfer) furnish written notice to the Company and the Investors indicating
that the Involuntary Transfer has occurred, specifying the name of the
Involuntary Transferee, giving a description of the circumstances giving rise
to, and stating the legal basis for, the Involuntary Transfer. The Investors
shall have the right
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to purchase, and the Involuntary Transferee shall have the obligation to
sell, all (but not less than all) of the Shares acquired by the Involuntary
Transferee for a purchase price per share equal to the fair market value per
Share as determined in good faith by the Board and otherwise in accordance with
the provisions of Section 3.2 below. The number of Shares which each Investor
shall have the right to purchase shall be determined in the same manner as set
forth below in Section 3.2 with respect to the exercise of the Investors' right
of first refusal.
3.2. Rights of First Refusal on Voluntary Transfers.
(a) Subject to Section 3.2(c), if Barlow intends to sell, assign,
transfer or otherwise voluntarily alienate or dispose of any Shares in one
transaction or a series of related transactions (the "Selling Stockholder"),
then the Selling Stockholder shall, prior to any such transfer, give written
notice (the "Selling Stockholder's Notice") of such intention to the Company and
the Investors. The Selling Stockholder's Notice shall include the name of the
proposed transferee, the proposed purchase price per Share, the terms of payment
of such purchase price and all other matters relating to such sale and shall be
accompanied by a copy of a binding written agreement of the proposed transferee
to purchase such Shares from the Selling Stockholder. If the Selling Stockholder
is to receive non-cash consideration from the proposed transferee named in the
Selling Stockholder's Notice, the Selling Stockholder's Notice shall specify the
"Fair Market Value" (as defined in the Articles of Amendment) of such non-cash
consideration as part of the purchase price to be paid for the Offered Shares by
the Investors. The Selling Stockholder's Notice shall constitute a binding offer
by the Selling Stockholder to sell to the Investors all or any part of such
number of such Shares (the "Offered Shares") then owned by the Selling
Stockholder as are proposed to be sold in the Selling Stockholder's Notice at
the monetary price per Share designated in the Selling Stockholder's Notice,
payable as provided in Section 3.2(b). Each Investor shall have the right to
purchase all or any part of its Series C Proportionate Percentage (as defined
below) of the Offered Shares at the monetary price per Share designated in the
Selling Stockholder's Notice, payable as provided in Section 3.2(b). Not later
than twenty (20) days after delivery of the Selling Stockholders' Notice, each
holder of Series C Preferred Stock shall deliver to the Company, the other
holders of Series C Preferred Stock and the Selling Stockholder a written notice
(the "Investor Notice") stating whether such holder of Series C Preferred Stock
has accepted the offer stated in the Selling Stockholder's Notice with respect
to its Series C Proportionate Percentage of the Shares. If one or more of such
holders of Series C Preferred Stock elects not to purchase all of the Shares
which it is entitled to purchase pursuant to this Section 3.2, the other such
holders of Series C Preferred Stock, by written notice to the Selling
Stockholder within seven (7) days after the end of the twenty (20) day period
set forth above, may elect to purchase all or a part of such unpurchased Shares
without the consent of any non-purchasing holders of Series C Preferred Stock,
pro rata between or among them or in such other manner as they may agree. The
closing of any purchase of the Offered Shares by the holders of Series C
Preferred Stock shall take place no later than fifteen (15) days after the end
of the twenty (20) day period set forth above. As used herein, "Series C
Proportionate Percentage" shall mean with respect to each holder of Series C
Preferred Stock a fraction, the numerator of which is the number of shares of
Series C Preferred Stock owned by such holder, and the denominator of which is
the total number of shares of Series C Preferred Stock owned by all holders of
Series C Preferred Stock. Each Investor shall be entitled to apportion shares
purchased under this Section 3.2(a) among its partners and Affiliates.
(b) Closing. The place for the closing of any purchase and sale
described in Section 3.2(a) shall be the principal office of the Company or at
such other place as the parties shall agree in writing. At the closing, the
Selling Stockholder shall accept payment on the terms (including price) offered
by the proposed transferee named in the Selling Stockholder's Notice, provided,
however, that the Investors shall not be required to meet any non-monetary terms
of the proposed transfer, including, without limitation, delivery of
consideration in the form of other securities in exchange for the Shares
proposed to be sold, but shall be required to pay, in cash, the Fair Market
Value of such non-monetary
-3-
consideration. At the closing, the Selling Stockholder shall deliver
to the Investors in exchange for Shares purchased and sold at the closing,
certificates for the number of Shares stated in the Selling Stockholder's
Notice, accompanied by duly executed instruments of transfer.
(c) Transfers to Third Parties. If the Investors fail to accept the
offer stated in the Selling Stockholder's Notice with respect to all of the
Offered Shares, they shall not have the right to purchase any Offered Shares,
and the Selling Stockholder shall be free, subject to compliance with Section
3.3, to sell all, but not less than all, of the Offered Shares to the designated
transferee at a price and on terms no less favorable to the Selling Stockholder
than described in the Selling Stockholder's Notice, provided, however, that such
sale is consummated within ninety (90) days after the giving of the Selling
Stockholder's Notice pursuant to Section 3.2(a). As a condition precedent to the
effectiveness of a transfer pursuant to this Section 3.2(c), the proposed
transferee(s) shall agree in writing prior to such transfer to become a party to
this Agreement and shall thereafter be permitted to transfer Shares only in
accordance with this Agreement; provided, however, that if such proposed
transferee(s) is a bona fide third party, the transfer of Shares by such
transferee shall not thereafter be subject to this Section 3.2.
3.3 Participation in Sales.
(a) Co-Sale Right. To the extent that the Investors do not exercise
their respective rights of refusal as to all of the Offered Shares pursuant to
Section 3.2, then each Investor shall have the right to participate in such sale
of securities, at the same price per Share and on the same terms and conditions
as stated in the Selling Stockholder Notice (including any non-cash
consideration), up to the number of Shares equal to the aggregate number of
Offered Shares multiplied by a fraction, the numerator of which is the aggregate
number of Shares held by such Investor (calculated on an as converted basis) and
the denominator of which is the aggregate number of Shares held by the Selling
Stockholder and all participating Investors (calculated on an as converted
basis). To the extent one or more of the Investors exercise such right of
participation in accordance with the terms and conditions of this Section 3.3,
the number of Shares that the Selling Stockholder may sell in the transfer shall
be correspondingly reduced.
(b) Notices of Offer and Intent to Participate. If an Investor
wishes to participate in any sale pursuant to Section 3.3(a), it shall notify
the Selling Stockholder in writing of such intention and the number of Shares it
wishes to sell pursuant to this Section 3.3 not later than the end of the 20-day
period described in Section 3.2(a) above. If the Selling Stockholder does not
receive such notice from an Investor within such 20-day period, the Selling
Stockholder shall be free to consummate the proposed transaction without any
obligation to include such Investor's Shares in such transaction.
(c) Closing. Each participating Investor shall effect its
participation in a sale contemplated by Section 3.3(a) by promptly delivering to
the Selling Stockholder for transfer to the prospective purchaser one or more
certificates, properly endorsed for transfer, which represent the type and
number of Shares which such Investor elects to sell, or that number of shares of
Series C Preferred Stock which are at such time convertible into the number of
shares of Common Stock which such Investor elects to sell. The stock certificate
or certificates that the Investor delivers to the Selling Stockholder pursuant
to this Section 3.3(c) shall be transferred to the prospective purchaser in
consummation of the sale of the securities pursuant to the terms and conditions
specified in the Selling Stockholder Notice, and the Selling Stockholder shall
concurrently therewith remit to such participating Investor that portion of the
sale proceeds to which such participating Investor is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser or
purchasers prohibits such assignment or otherwise refuses to purchase shares or
other securities from an Investor exercising its rights of co-sale hereunder,
the Selling Stockholder shall not sell to such prospective purchaser or
purchasers any securities unless and until, simultaneously with such sale, the
Selling Stockholder shall
-4-
purchase such Shares or other securities from such participating Investor for
the same consideration and on the same terms and conditions as the proposed
transfer described in the Selling Stockholder Notice.
3.4 Legend; Termination.
(a) Each certificate representing the shares of capital stock now or
hereafter held of record or beneficially owned by Barlow shall bear a legend in
substantially the following form, until such time as the shares of capital stock
represented thereby are no longer subject to the provisions hereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF AN INVESTOR RIGHTS AGREEMENT AMONG THE
COMPANY AND CERTAIN OF ITS STOCKHOLDERS DATED AS OF MARCH ___, 2005,
AS THE SAME MAY BE AMENDED OR AMENDED AND RESTATED FROM TIME TO
TIME, WHICH, AMONG OTHER THINGS, RESTRICTS THE TRANSFER OF SUCH
SECURITIES. A COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT
THE OFFICES OF THE COMPANY OR MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST TO THE SECRETARY OF THE COMPANY.
Upon execution of this Agreement, certificates for any shares of capital stock
of the Company now or hereafter held of record or beneficially owned by Barlow
shall be surrendered to the Company for endorsement with the above legend and
then returned to Barlow, and hereafter the Company shall cause the above legend
to be placed on all certificates issued by it to or for the benefit of Barlow
which represent any additional shares of capital stock of the Company.
(b) The respective rights and obligations of the parties under this
Article III shall terminate upon the earlier to occur of (i) the consummation of
a Qualified Public Offering and (ii) the consummation of a Liquidation Event. At
any time after termination of the rights and obligations under this Article III,
the Company shall, upon Barlow's request, promptly re-issue certificate(s)
without the legend required by Section 3.4(a) representing the securities held
of record beneficially owned by Barlow evidenced by such certificate(s) as are
surrendered to the Company by Barlow for such re-issuance.
ARTICLE IV FINANCIAL STATEMENTS; INFORMATION AND INSPECTION RIGHTS.
4.1. Delivery of Financial Statements. The Company shall deliver to each
holder of shares of Series C Preferred Stock, as soon as available after the end
of each fiscal year of the Company, the audited financial statements of the
Company for such fiscal year then ended, together with the written opinion of
the auditor rendered in connection therewith. With respect to such financial
statements, if for any fiscal year, the Company shall have any Subsidiary whose
accounts are consolidated with those of the Company, then in respect of such
period, the financial statements delivered pursuant to the foregoing section
shall be the consolidated and consolidating financial statements of the Company
and all such consolidated subsidiaries.
4.2. Information Rights. The Company shall furnish to each holder of at
least 9,901 shares of Series C Preferred Stock within five (5) business days
after an executive officer of the Company or its Subsidiaries, as the case may
be, has knowledge of the occurrence of a default hereunder, or under any
material agreement of the Company or its Subsidiaries, including without
limitation any loan or financing agreement, the commencement of any lawsuit,
action, administrative or arbitration or other proceeding against or
investigation with respect to the Company or the occurrence of any event,
dispute or other development which is reasonably likely (with or without the
passage of time) to have a Material Adverse
-5-
Effect, or any effect, condition, event, or circumstance that has resulted in a
Material Adverse Effect, a statement from the President of the Company
describing such occurrence and management's anticipated response. The Company
shall furnish to each such holder such other financial and other reports or
information of the Company and its Subsidiaries as any of such holders may
reasonably request with respect to the foregoing or otherwise with respect to
the operations of the Company.
4.3. Inspection Rights. The Company shall permit each holder of at least
9,901 shares of Series C Preferred Stock, at the Company's expense, to visit and
inspect the Company's properties, to examine its books of account and records
and to discuss the Company's affairs, finances and accounts with its officers
for purposes of allowing such Investor to monitor its investment in the Company,
all at such reasonable times and upon reasonable notice as may be reasonably
requested by such Investor.
4.4. Limitations. Notwithstanding anything contained herein to the
contrary, the financial reporting requirements and information and inspection
rights contained in this Article IV (i) shall apply only for so long as the
Company is not filing periodic reports with the Commission pursuant to Section
13 or Section 15 of the Exchange Act and (ii) shall be subject to the execution
of confidentiality and non-compete agreements by the Persons requesting such
information, in form and substance reasonably satisfactory to the Company.
ARTICLE V MISCELLANEOUS.
5.1. Successors and Assigns. This Agreement may not be assigned by a party
hereto without the prior written consent of the Company or Cerberus, as
applicable; provided, however, that an Investor may assign its rights and
delegate its duties hereunder in whole or in part, without the prior written
consent of the Company, to an Affiliate and to any Person to whom such Investor
transfers any shares of the Series C Preferred Stock, provided, that, no such
assignment shall be effective or confer any right on any such assignee unless,
prior to such assignment, the assignee agrees in writing that such assignee will
be bound by all provisions binding on such Investor. The provisions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Except for any other provisions
of this Agreement expressly to the contrary, nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
5.2. Counterparts; Faxes. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.
5.3. Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
5.4. Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given as hereinafter described: (i) if given by personal delivery, then such
notice shall be deemed given upon such delivery; (ii) if given by telex or
telecopier, then such notice shall be deemed given upon receipt of confirmation
of complete transmittal with a confirming copy by first class mail; (iii) if
given by mail, then such notice shall be deemed given upon the earlier of (A)
receipt of such notice by the recipient or (B) three (3) days after such notice
is deposited in first class mail, postage prepaid; and (iv) if given by an
internationally recognized overnight air courier, then such notice shall be
deemed given one (1) Business Day after delivery to such carrier. All notices
shall be addressed to the party to be notified at the address as follows, or at
such other address as such party may designate by ten (10) days' advance written
notice to the other party:
-6-
If to the Company:
Molecular Insight Pharmaceuticals, Inc.
160 Second Street
Cambridge, Massachusetts 02142
Attn: David Barlow
Fax: (617)492-5664
With a copy to:
Foley & Lardner LLP
111 Huntington Avenue
26th Floor
Boston, Massachusetts 02199
Attn: Gabor Garai,Esq.
Fax: (617)342-4001
If to any of the Investors:
to the addresses set forth on the signature
pages attached hereto.
or to such other address as any party hereto shall notify the other
parties hereto (as provided above) from time to time.
5.5. Expenses. The Company agrees to pay all reasonable out-of-pocket
expenses relating to the establishment, due diligence and monitoring of and the
administration and exercise of any rights in, and enforcement of, the
transactions contemplated by this Agreement and the other Transactions
Documents, which arise after the date hereof, and such expenses may include, but
not be limited to legal, travel, accounting and Board attendance expenses. Such
expenses shall be paid by the Company to the Investors as incurred and upon the
request of each such Investor. In the event that legal proceedings are commenced
by any party to this Agreement against another party to this Agreement in
connection with this Agreement or the other Transaction Documents, the party or
parties which do not prevail in such proceedings shall severally, but not
jointly, pay their pro rata share of the reasonable attorneys' fees and other
reasonable out-of-pocket costs and expenses incurred by the prevailing party in
such proceedings.
5.6 Amendments and Waivers. This Agreement shall not be amended without
the prior written consent of the Requisite Investors. The Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the Requisite Investors.
5.7. Publicity. No public release or announcement concerning the
transactions contemplated by this Agreement or any other Transaction Document
shall be issued by the Company or the Investors without the prior consent of the
Company (in the case of a release or announcement by any of the Investors) or
Cerberus (in the case of a release or announcement by the Company) (which
consents shall not be unreasonably withheld), except as such release or
announcement may be required by law, in which case the Company or the Investors,
as the case may be, shall allow the Investors or the Company, as applicable, to
the extent reasonably practicable in the circumstances, reasonable time to
comment on such release or announcement in advance of such issuance.
5.8. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or
-7-
unenforceability without invalidating the remaining provisions hereof but shall
be interpreted as if it were written so as to be enforceable to the maximum
extent permitted by applicable law, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. To the extent permitted by applicable law, the
parties hereby waive any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
5.9. Entire Agreement. This Agreement, including the Exhibits and
Schedules, and the other Transaction Documents constitute the entire agreement
among the parties hereof with respect to the subject matter hereof and thereof
and supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and thereof.
5.10. Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
5.11. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York without regard to the choice of law principles thereof. Each of the
parties hereto irrevocably submits to the jurisdiction of the courts of the
State of New York located in New York County and the United States District
Court for the Southern District of New York for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such
suit, action or proceeding may be served on each party hereto anywhere in the
world by the same methods as are specified for the giving of notices under this
Agreement. Each of the parties hereto irrevocably consents to the jurisdiction
of any such court in any such suit, action or proceeding and to the laying of
venue in such court. Each party hereto irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
THE COMPANY AND EACH OF THE INVESTORS HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO OR ARISING OUT OF
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY.
5.12 Independent Nature of Investors' Obligations and Rights. Except as
expressly provided herein and therein, the obligations of each Investor under
this Agreement and each other Transaction Document are several and not joint
with the obligations of any other Investor (regardless of the Closing at which
such Investor purchased its Series C Preferred Stock), and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor (regardless of the Closing at which such Investor purchased its Series
C Preferred Stock) under this Agreement or any other Transaction Document. The
decision of each Investor to purchase Series C Preferred Stock pursuant to this
Agreement and the other Transaction Documents has been made by such Investor
independently of any other Investor (regardless of the Closing at which such
Investor purchased its Series C Preferred Stock). Nothing contained herein or in
any other Transaction Document, and no action taken by any Investor (including,
without limitation, any of the Co-lead Investors) pursuant hereto or thereto,
shall be deemed to constitute the Investors (regardless of the Closing at which
such Investor purchased its Series C Preferred Stock) as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by this
Agreement or the other Transaction Documents. Each Investor acknowledges that no
other Investor (including, without limitation, any of the Co-lead Investors, and
regardless of the Closing at which such Investor purchased its Series C
Preferred Stock) has acted as agent for such Investor in connection with making
its investment hereunder and that no Investor (including, without limitation,
any of the Co-lead Investors, and regardless of the Closing at which such
-8-
Investor purchased its Series C Preferred Stock) will be acting as agent of such
Investor in connection with monitoring its investment in the Shares or enforcing
its rights under this Agreement or the other Transaction Documents. Each
Investor shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out
of the other Transaction Documents, and it shall not be necessary for any other
Investor (regardless of the Closing at which such Investor purchased its Series
C Preferred Stock) to be joined as an additional party in any proceeding for
such purpose. The Company acknowledges that each of the Investors has been
provided with the same Transaction Documents for the purpose of closing a
transaction with multiple Investors at multiple Closings and not because it was
required or requested to do so by any Investor. Notwithstanding anything
contained in this Agreement or any other Transaction Document to the contrary,
neither of the Co-Lead Investors shall have any duty, fiduciary or otherwise, to
any other Investor (regardless of the Closing at which such Investor purchased
its Series C Preferred Stock) by virtue of such Investor serving as a Co-Lead
Investor or otherwise.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-9-
[COMPANY SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed by their duly authorized representatives,
as of the date first written above.
THE COMPANY:
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
By: /s/ David S. Barlow
-------------------
Name: David S. Barlow
Title: Chairman & CEO
/s/ David S. Barlow
-----------------------
DAVID BARLOW, SOLELY FOR PURPOSES OF
ARTICLES IV AND VI OF THE AGREEMENT
|
-10-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
CERBERUS PARTNERS, L.P.
By: Cerberus Associates, LLC,
its General Partner
By: /s/ Seth Plattus
-----------------
Seth Plattus
Managing Director
|
Address: 299 Park Avenue
22nd Floor
New York, NY 10171
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: Robert G. Minion, Esq.
Fax: (973) 597-2400
-11-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
Andrew R Midler Family Trust 5/99
By: /s/ Andrew R Midler
---------------------
Name: Andrew R Midler
Title: Trustee
|
Address: 283 Summit Ave
Mill Valley Ca 94941
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-12-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
John D. Singer, Esq.
By: /s/ John D. Singer, Esq.
-------------------------
Name: John D. Singer, Esq.
Title:
|
Address: 200 East 69th Street
Apartment #18-E
New York, NY 10021
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-13-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
MICHAEL C. DEUTSCH
By: /s/ Michael C. Deutsch
----------------------
Name: Michael C. Deutsch
Title:
|
Address: 331 Madison Ave, 3rd Floor
New York, NY 10017
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-14-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
/s/ Patricia T. Poitras By: /s/ James W Poitras
----------------------- -------------------
Patricia T. Poitras Revocable Trust Name: James W Poitras Revocable Trust
V/A 29 Nov 04 V/A 29 Nov.
Title: James W Poitras Trustee
Patricia T. Poitras Trustee
Address: M/M JAMES W. POITRAS
--------------------------
3100 SPRINGHEAD COURT
--------------------------
NARCOOSSEE FL 34771-8554
--------------------------
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
JW POITRAS@ALUM.MIT.EDU
-----------------------------------
-----------------------------------
-----------------------------------
|
-15-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
Carol Frank
By:
Name:
Title:
Address: 11529 Conway Rd
St. Louis MO 63131
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-16-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
Benjamin M. Frank Trust
By: /s/ Benjamin M. Frank
---------------------
Name: Benjamin M. Frank
Title: Trustee
|
Address: 106 Breckenwood Way
Sacramento CA 95864
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-17-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
/s/ John P. Davy
----------------------------------
By: John P. Davy
-------------------------
Name:
Title:
|
Address: 16413 NE 135th St
Redmond, WA 98052
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
KRIS DAVY
16413 NE 135 St
Redmond WA 98052
-18-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
Rajpal Sandhu
By: /s/ Mary C Henry
----------------
Name: Rajpal Sandhu & Mary Henry
Title:
|
Address: 420 FAMILY FARM ROAD
WOODSIDE, CA-94062
650-529-0606
Raj@RajSandhu.com
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-19-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
By: /s/ James T. Lenehan
--------------------
Name: James T. Lenehan
Title:
|
Address: 1586 HAMPTON RD
RYDAL, PA
19046
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-20-
[INVESTOR SIGNATURE PAGE)
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
Lionel N. Sterling Revocable Trust
By: /s/ Lionel N. Sterling
----------------------
Name: Lionel N. Sterling
Title: Trustee
|
Address: 631 WEST RD.
NEW CANAAN CT.
06840
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
LIONEL N. STERLING
c/o EQUITY RESOURCES INC. 4th FL.
5 GREENWICH OFFICE PARK
GREENWICH CT. 06831
-21-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
American Durham, L.P.
By: /s/ T.K. Duggan
--------------------
Name: T.K. DUGGAN
Title: Managing Principal
|
Address: 680 5th Ave.
22nd Floor
N.Y, N.Y 10019
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-22-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
International Durham, Ltd.
By: /s/ T.K. Duggan
--------------------
Name: T.K. Duggan
Title: Managing Principal
|
Address: 680 5th Ave.
22nd Floor
N.Y, N.Y 10019
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-23-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
International Benchmarks Master Fund
By: /s/ Garry Crowder
----------------------
Name: Garry Crowder
Title: Director
|
Address:
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-24-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
Richard Simon
By: /s/ Richard Simon
-----------------
Name:
Title:
|
Address: 219 LAKE AVENUE
NEWTON, MA 02461
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-25-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
By: /s/ William R. Ebsworth
-----------------------
Name: William R. Ebsworth
Title:
|
Address: 17 AUDUBON RD
WESTON MA 02493
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-26-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
Alan N. Berro
By: /s/ Alan N. Berro
-----------------
Name:
Title:
|
Address: P.O. BOX 15155
BEVERLY HILLS CA
90209
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-27-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
Renee M. Noto
By: /s/ Renee M. Noto
-----------------
Name:
Title:
|
Address: 275 Stanwich Road
Greenwich, CT 06530
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-28-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
THE RAPTOR GLOBAL PORTFOLIO LTD.
By: Tudor Investment Corporation,
Investment Advisor
By: /s/ William T. Flaherty
-----------------------
Name: William T. Flaherty
Title: Managing Director
|
Address: c/o Tudor Investment
Corporation
50 Rowes Wharf, 6th Floor
Boston, MA 02110
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-29-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
THE TUDOR BVI GLOBAL PORTFOLIO LTD.
By: Tudor Investment Corporation,
Trading Advisor
By: /s/ William T. Flaherty
-----------------------
Name: William T. Flaherty
Title: Managing Director
|
Address: c/o Tudor Investment
Corporation
50 Rowes Wharf, 6th Floor
Boston, MA 02110
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-30-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
TUDOR PROPRIETARY TRADING, L.L.C.
By: /s/ William T. Flaherty
-----------------------
Name: William T. Flaherty
Title: Managing Director
|
Address: 50 Rowes Wharf, 6th Floor
Boston, MA 02110
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-31-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
By: /s/ William C. Smith
--------------------
William C. Smith
/s/ Dana Davis Smith
--------------------
Dana Davis Smith
|
JOINT TENANTS WITH RIGHT
OF SURVIVORSHIP
Address: 218 RIVER PARK DRIVE
GREAT FALLS, VA 22066
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-32-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
THE ALTAR ROCK FUND L.P.
By: Tudor Investment Corporation,
General Partner
By: /s/ William T. Flaherty
-----------------------
Name: William T. Flaherty
Title: Managing Director
|
Address: c/o Tudor Investment
Corporation
50 Rowes Wharf, 6th Floor
Boston, MA 02110
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-33-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
Julie R. Frank, Trustee
By: /s/ Julie R. Frank Revocable Trust
----------------------------------
Dated August 13, 2001
Name:
Title:
|
Address: 3 Roclare Lane
St. Louis, MO 63131
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-34-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
By: /s/ John C. Otsuki
------------------
Name: John C. Otsuki
Title:
|
Address: 4718 MERIVALE RD.
CHEVY CHASE, MD 20815
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-35-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
MedCap Partners L.P.
By: /s/ [ILLEGIBLE]
---------------
Name: [ILLEGIBLE]
Title: Managing Member
|
Address: 500 Third Street, Suite 535
San Francisco, CA 94107
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-36-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
MedCap Master Fund, L.P.
By: /s/ [ILLEGIBLE]
---------------
Name: [ILLEGIBLE]
Title: Managing Member of the GP
|
Address: ATC Trustees (Cayman) Limited
[ILLEGIBLE]), 2nd Floor,
Harbour Drive
George Town, Grand Cayman
Cayman Islands
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
500 Third Street # 535
San Francisco, CA 94107
-37-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
Keneth Rubin
By: /s/ Kenneth Rubin
----------------
Name: Kenneth Rubin
Title: Individually
|
Address: 68 Barkers Point Road
Sands Point, NY 11050
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-38-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
WILLIAM P. RICE
By: /s/ William P. Rice
-------------------
Name: WILLIAM P. RICE
Title:
|
Address: P.O. BOX 1599
DUXBURY, MA 02331
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-39-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
James J. Goll
By: /s/ James J. Goll
-----------------
Name: James J. Goll
Title:
|
Address: 32 Three Wells Lane
Darien, CT 06820
(203) 656-0228
JJCG@SBCGLOBAL.NET
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-40-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
By: /s/ James M. Hirshberg
----------------------
Name: James M. Hirshberg
Title:
|
Address: 62 PRINCE ST
WEST NEWTON, MA 02465
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-41-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
By: /s/ Dana G. Doe
---------------
Name: Dana G. Doe
Title:
|
Address: [ILLEGIBLE]
Winchester, MA 01890
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-42-
[INVESTOR SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF INVESTOR:
By: /s/ Daniel Frank
----------------
Name: Daniel Frank
Title:
|
Address: 19 WHALING ROAD
DARIEN CT 06820
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
-43-
Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
this 29th day of March, 2005, by and among:
Molecular Insight Pharmaceuticals, Inc., a Massachusetts corporation
(the "Company"), the holders (the "Series A Holders") of the Series
A Convertible Preferred Stock, par value $0.01 per share, of the
Company (the "Series A Preferred Stock") set forth on Schedule A
attached hereto;
The holders (the "Series B Holders") of the Series B Convertible
Preferred Stock, par value $0.01 per share, of the Company (the
"Series B Preferred Stock") set forth on Schedule B attached hereto;
The holders (the "Series C Holders" and together with the Series A
Holders and the Series B Holders, the "Preferred Holders") of the
Series C Convertible Preferred Stock, par value $0.01 per share, of
the Company (the "Series C Preferred Stock") set forth on Schedule C
attached hereto; and
The holders (the "Common Holders" and together with the Series A
Holders, the Series B Holders and the Series C Holders, each, an
"Investor" and collectively, the "Investors") of the common stock of
the Company, par value $0.01 per share (the "Common Stock").
RECITALS:
A. Pursuant to the terms of a certain Stock Purchase Agreement, of
even date herewith, by and among the Company, Cerberus Partners, L.P. and Medcap
Partners, L.P., as the lead investors, and the other Series C Holders signatory
thereto (as may be amended, restated, supplemented or otherwise modified from
time to time, the "Purchase Agreement"), the Company is issuing to the Series C
Holders an aggregate of up to 148,515 shares (the "Series C Preferred Shares")
of the newly created Series C Preferred Stock; and
B. As a condition to the Initial Closing (and each Follow-on
Closing, if any) under the Purchase Agreement, the parties hereto desire to
enter into this Agreement to set forth, among other things, the rights of the
Investors with respect to the registration of shares of Common Stock held by and
issuable to the Preferred Holders upon conversion of the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock (the "Preferred
Stock");
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and
each Preferred Holder, severally and not jointly, hereby agree as follows:
ARTICLE I DEFINITIONS.
1.1 General Definitions. All capitalized terms used but not defined
herein shall have the meanings ascribed thereto in the Purchase Agreement. As
used in this Agreement, unless the context otherwise requires, the following
terms shall have the respective meanings set forth below:
1
"Affiliate" means, with respect to any Person, any other Person
which directly or indirectly Controls, is Controlled by, or is under common
Control with, such Person. Notwithstanding the foregoing, none of the Company,
its owners, officers, directors, employees, agents or advisors (or any of their
family members) shall be deemed an "Affiliate" of a Preferred Holder, unless any
such Person is otherwise (i.e., independent of the Company) an Affiliate of such
Preferred Holder.
"Agreement" shall have the meaning ascribed to it in the preamble to
this Agreement.
"Board" means the Board of Directors of the Company.
"Business Day" means a day, other than a Saturday or Sunday, on
which banks in New York, New York are open for the general transaction of
business.
"Cerberus" means Cerberus Capital Management, L.P., for itself
and/or one or more of its Affiliates and/or accounts managed by Cerberus Capital
Management, L.P., including, without limitation, Cerberus Partners, L.P.
"Control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Co-Lead Investors" means Cerberus Partners, L.P. and MedCap
Partners, L.P.
"Commission" means the U.S. Securities and Exchange Commission or
any other successor federal agency then administering the Securities Act and
other federal securities laws.
"Common Stock" means the common stock, par value $.01 per share, of
the Company, and any other securities into which or for which such Common Stock
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, consolidation, sale of assets or other similar
transaction.
"Company" shall have the meaning ascribed to it in the preamble to
this Agreement.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Series C Preferred Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"Initial Public Offering" means the first underwritten public
offering of the Common Stock by the Company pursuant to an effective
Registration Statement.
"Initiating Stockholders" means the Investor(s) who cause a Demand
Notice to be delivered pursuant to Section 2.1.
"Investor(s)" shall have the meaning ascribed to it in the preamble
to this Agreement.
"Other Stockholders" shall have the meaning ascribed to it in
Section 2.1(d).
2
"Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein..
"Preferred Holders" shall have the meaning ascribed to it in the
recitals to this Agreement.
"Preferred Stock" shall have the meaning ascribed to it in the
recitals to this Agreement.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
"Purchase Agreement" shall have the meaning ascribed to it in the
recitals to this Agreement.
"Register," "registered" and "registration" refer to a registration
made by preparing and filing a Registration Statement or similar document in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such Registration Statement or document.
"Registrable Securities" means: (i) the Preferred Stock; (ii) any
and all shares of Common Stock issued or issuable in respect of the Preferred
Stock upon any stock split, reverse stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, sale of assets or
similar event; (iii) the shares of Common Stock issuable as payment-in-kind
dividends on the Preferred Stock in accordance with the terms thereof; and (iv)
any other shares of Common Stock acquired by any of the Investors at any time.
Notwithstanding the foregoing, the term "Registrable Securities" shall not
include any shares which have been (i) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, (ii)
sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions and restrictive legends with respect thereto are removed
upon the consummation of such sale, (iii) registered under the Securities Act
pursuant to an effective Registration Statement filed thereunder or (iv)
publicly sold pursuant to Rule 144 under the Securities Act.
"Registration Statement" means a Registration Statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (other than a Registration Statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any Registration
Statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Requisite Series AB Holders" means (i) the holders of at least a
majority of the Common Stock then issued and outstanding but not registered,
which were issued upon conversion of the Series A Preferred Stock and Series B
Preferred Stock, or (ii) holders holding at least a majority of the Common Stock
issuable upon conversion of the then issued and outstanding shares of Series A
Preferred Stock and Series B Preferred Stock.
"Requisite Series C Holders" means Cerberus and (i) Series C Holders
holding at least a majority of the Common Stock then issued and outstanding but
not registered, which were issued upon conversion of the Series C Preferred
Stock, or (ii) Series C Holders holding at least a majority of the Common Stock
issuable upon conversion of the then issued and outstanding shares of Series C
Preferred Stock.
3
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Series A Holders" shall have the meaning ascribed to it in the
preamble to this Agreement.
"Series A Preferred Stock" shall have the meaning ascribed to it in
the preamble to this Agreement.
"Series AB Demand Registration" shall have the meaning ascribed to
it in Section 2.1(a)(ii).
"Series AB Holders" means the Series A Holders and the Series B
Holders.
"Series B Holders" shall have the meaning ascribed to it in the
preamble to this Agreement.
"Series B Preferred Stock" shall have the meaning ascribed to it in
the preamble to this Agreement.
"Series C Demand Registration" shall have the meaning ascribed to it
in Section 2.1(a)(i).
"Series C Holders" shall have the meaning ascribed to it in the
recitals to this Agreement.
"Series C Preferred Stock" shall have the meaning ascribed to it in
the recitals to this Agreement.
ARTICLE II REGISTRATION RIGHTS.
2.1 Demand Registration.
(a) At any time after the sooner of (x) the closing of an Initial
Public Offering (but not within 180 days after the effective date of the
Registration Statement filed in respect of that Initial Public Offering) and (y)
March 29, 2012, by delivery of written notice to the Company (a "Demand
Notice"):
(i) the Requisite Series C Holders may require the Company to
register for sale under the Securities Act all or any portion of the Registrable
Securities held by the Series C Holders for sale in the manner specified in such
Demand Notice (a "Series C Demand Registration"). The Requisite Series C Holders
shall be entitled to only two (2) Series C Demand Registrations pursuant to this
Section 2.1(a)(i); provided, that, they may only make demand for one such Series
C Demand Registration in any twelve month period, unless any of them shall have
had any Registrable Securities excluded from a Registration Statement that was
filed during such twelve month period; and
(ii) the Requisite Series AB Holders may require the Company
to register for sale under the Securities Act all or any portion of the
Registrable Securities held by the Series AB Holders for sale in the manner
specified in such Demand Notice; provided, that (i) the portion of the
Registrable Securities required to be so registered equals at least 25% of the
shares of Common Stock issuable upon
4
conversion of the shares of Series A Preferred Stock and Series B Preferred
Stock then outstanding and (ii) the aggregate proceeds from the sale of the
shares so registered is reasonably expected to exceed $30,000,000 (a "Series AB
Demand Registration"). The Requisite Series AB Holders shall be entitled to only
two (2) Series AB Demand Registrations pursuant to this Section 2.1(a)(ii);
provided, that, they may only make demand for one such Series AB Demand
Registration in any twelve month period, unless any of them shall have had any
Registrable Securities excluded from a Registration Statement that was filed
during such twelve month period; and
(iii) following a change in the "Series C Conversion Price"
(as that term is defined in the Articles of Amendment), such that additional
shares of Common Stock become issuable upon conversion of the outstanding Series
C Preferred Stock, the Requisite Series C Holders may require the Company to
register for sale under the Securities Act such additional shares of Common
Stock (the "Additional Shares"), but only to the extent the Additional Shares
are not at the time covered by an effective Registration Statement or such
Additional Shares cannot be added by pre-effective amendment to an existing
Registration Statement. Such Registration Statement shall include the plan of
distribution specified in the Demand Notice delivered by the Requisite Series C
Holders pursuant to this Section 2.1(a)(iii). Such Registration Statement also
shall cover, to the extent allowable under the Securities Act (including without
limitation Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Additional Shares. The Registration Statement (and each amendment
or supplement thereto, and each request for acceleration of effectiveness
thereof) shall be furnished for review in accordance with Section 2.4(a) prior
to its filing or other submission. Notwithstanding anything in this Agreement to
the contrary, no demand made pursuant to this Section 2.1(a)(iii) shall be
deemed a Series C Demand Registration that reduces the number of such Series C
Demand Registrations to which the Series C Holders are entitled hereunder; and
(iv) if the Company is then a registrant entitled to use Form
S-3 or any successor form thereto to effect the distribution of such Registrable
Securities for public sale or re-sale (as the case may be), (aa) the Requisite
Series C Holders may require the Company to register for sale or re-sale under
the Securities Act by filing a Registration Statement on Form S-3 or any
comparable or successor form thereto for a public offering of all or any portion
of the Registrable Securities held by them, or (bb) the Requisite Series AB
Holders may require the Company to register for sale or re-sale under the
Securities Act by filing a Registration Statement on Form S-3 or any comparable
or successor form thereto for a public offering of all or any portion of the of
Registrable Securities held by them, in each case, in accordance with the method
of disposition specified in the Demand Notice. Whenever the Company is required
by this Section 2.1(a)(iv) to effect the registration of Registrable Securities,
each of the procedures and requirements of Sections 2.1 and 2.4 shall apply to
such registration, and the Company shall cause such Registration Statement to be
declared effective within one hundred eighty (180) days after the Company's
receipt of the request for such registration. There shall be no limitation on
the number of registrations on Form S-3 which may be requested and obtained
under this Section 2.1, and such requests and registrations shall not reduce the
number of Series C Demand Registrations or Series AB Demand Registrations, as
the case may be, to which the Series C Holders or Series AB Holders, as the case
may be, are entitled hereunder.
(b) Following receipt of any Demand Notice under this Section 2.1,
the Company shall file a Registration Statement including the securities covered
by such Demand Notice within thirty (30) days after receipt of such Demand
Notice (the "Filing Deadline"), and the Company shall use its best efforts to
effect the registration under the Securities Act as soon as practicable, and in
any event within one hundred eighty (180) days after receipt of such Demand
Notice (the "Effectiveness Deadline"), for public sale or re-sale in accordance
with the method of disposition specified in such Demand Notice of the number of
Registrable Securities specified in such Demand Notice. If a Registration
Statement including the Registrable Securities referenced in the Demand Notice
is not (i) filed with the Commission on or
5
prior to the applicable Filing Deadline, or (ii) declared effective by the
applicable Effectiveness Deadline, then the Company shall make pro rata payments
to each Investor whose securities are to be included in such Registration
Statement, as liquidated damages (and not as a penalty, as damages are
impossible to forecast or predict and these amounts are deemed reasonable in all
respects), in an amount equal to 1.5% of the aggregate Market Price (as defined
in the Articles of Amendment) (as of the Filing Deadline) of the Investor's
securities to be included in such Registration Statement for each 30-day period
or pro rata for any portion thereof following the date by which such
Registration Statement should have been filed or declared effective, as the case
may be, for which no Registration Statement is filed or has not been declared
effective, as the case may be, with respect to the Registrable Securities. Such
payments shall be in partial compensation to the Investors, and shall not
constitute the Investors' exclusive remedy for such events. Such payments shall
be made to each Investor in cash. The amounts payable as liquidated damages
pursuant to this Section 2.1(b) shall be payable in lawful money of the United
States, and amounts payable as liquidated damages shall be paid within two (2)
Business Days of the last day of each such 30-day period during which the
Registration Statement should have been filed or been declared effective, as the
case may be, for which no Registration Statement was filed or had not yet been
declared effective, as the case may be, with respect to the Registrable
Securities.
(c) If the Initiating Stockholders intend to distribute the
Registrable Securities covered by their Demand Notice by means of an
underwriting, the Initiating Stockholders shall so advise the Company in their
Demand Notice. If the method of disposition is an underwritten public offering,
the Initiating Stockholders may designate the managing underwriter of such
offering, which designation shall be subject to the Company's approval, not to
be unreasonably withheld. The Initiating Stockholders may elect to include in
such underwriting all or any part of the Registrable Securities it holds,
subject to the limitations required by the managing underwriter as provided for
in Section 2.1(d).
(d) A Registration Statement filed pursuant to this Section 2.1 may,
subject to the following provisions and in addition to the Registrable
Securities, include (i) shares of Common Stock for sale by the Company for its
own account and (ii) shares of Common Stock held by persons other than the
Company and the Preferred Holders (the "Other Shareholders"), in each case for
sale in accordance with the method of disposition specified by the Initiating
Stockholders and subject to the exclusions provided herein. If such registration
shall be underwritten, the Company, the Preferred Holders and the Other
Shareholders proposing to distribute their shares through such underwriting
shall enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such
underwriting; the terms of which shall not be more favorable to the Company and
such Other Shareholders than the terms afforded therein to the Initiating
Stockholders. If and to the extent that the managing underwriter determines that
marketing factors require a limitation on the number of shares to be included in
such registration, then the shares of Common Stock sought to be registered by
the Preferred Holders and the Other Shareholders and shares of Common Stock to
be sold by the Company for its own account shall be excluded from such
registration to the extent so required by such managing underwriter in the
following order of priority: (1st) and unless the Other Shareholders and the
Company have otherwise agreed in writing, such exclusion shall be applied first
to the shares sought to be registered by the Other Shareholders to the extent
any such reduction is required by the managing underwriter; (2nd) then to the
shares of Common Stock of the Company to be included for its own account to the
extent any such reduction is required by the managing underwriter; (3rd) then
the shares sought to be registered by the Series AB Holders to the extent any
such reduction is required by the managing underwriter; and (4th) then to the
shares sought to be registered by the Series C Holders to the extent any such
reduction is required by the managing underwriter. In any event, all securities
to be sold other than Registrable Securities of the Series C Holders shall be
excluded prior to any exclusion of Registrable Securities of the Series C
Holders, if they are participating in such registration, whether or not they are
the Initiating Stockholders with respect to such registration. No Registrable
Securities or other securities, in either case, excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included
6
in such registration. If any of the Preferred Holders or any of the Other
Shareholders who has requested inclusion in such registration as provided above,
disapproves of the terms of the underwriting, then such Preferred Holder(s) or
such Other Shareholder(s) may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. The securities so withdrawn shall
thereupon be withdrawn from registration.
(e) The Company may delay or postpone for up to 45 consecutive
days effecting a Series AB or Series C Demand Registration if the Company has
delivered a written certificate to each Investor stating that the Board, acting
in good faith, has resolved that pursuit of such Demand Registration during such
45-day period would be detrimental to the Company and its shareholders;
provided, however, that in the event of any such postponement, the Initiating
Stockholders shall be entitled to withdraw the request for such Demand
Registration and, if such request is withdrawn, such request shall not count as
a Demand Registration hereunder; and provided, further, that the Company may not
exercise its rights under this Section 2.1(e) for more than a total 60 days in
any eighteen month period.
2.2 Piggy-Back Registration.
(a) If the Company at any time (other than pursuant to Section
2.1) proposes to register any of its securities under the Securities Act for
sale to the public, whether for its own account or for the account of other
shareholders of the Company or both (except with respect to (i) an Initial
Public Offering, (ii) Registration Statements on Forms S-4, S-8 or any successor
to such forms, (iii) any Registration Statement including only securities issued
pursuant to a dividend reinvestment plan, (iv) a Registration Statement in which
the only securities to be registered are securities issuable upon conversion of
debt securities or other convertible securities which are also being registered
or (v) another form of Registration Statement not available for registering the
Registrable Securities for sale to the public), each such time the Company shall
promptly give written notice to the Preferred Holders of its intention to do so
(each, a "Piggy-Back Notice"). Upon the written request of the Requisite Series
C Holders, received by the Company within twenty (20) days after the date of
delivery of a Piggy-Back Notice, in accordance with Section 3.4, to register any
or all of the Registrable Securities held by the Series C Holders as stated in
such request, the Company shall use its best efforts to cause the Registrable
Securities as to which registration shall have been so requested to be included
in such Registration Statement. If the Registration Statement relates to an
underwritten public offering, the Company shall so advise the Preferred Holders
as a part of a Piggy-Back Notice. In such event, the Preferred Holders' right to
include Registrable Securities in such registration shall be conditioned upon
its participation in such underwriting to the extent provided herein. The
Preferred Holders, if participating in such distribution, shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for underwriting by the Company; the terms of which shall be no less
favorable to the Preferred Holders than the terms afforded therein to the
Company.
(b) Notwithstanding any other provision of this Section 2.2, if
the managing underwriter or underwriters in the registration giving rise to the
Piggy-Back Notice determine(s) that the number of shares to be included in such
registration (including any securities that the Company and the Other
Shareholders propose to be included that are not Registrable Securities) exceeds
the largest number of shares that can be sold without having an adverse effect
on such offering (the "Maximum Offering Size"), the Company will include in such
registration, in the following priority, up to the Maximum Offering Size:
(i) first, that number of securities held by the Person(s)
(other than the Company and the Series AB Holders) who demanded such
registration, if any, as would not cause the offering to exceed the Maximum
Offering Size; and
7
(ii) second, if the Maximum Offering Size has not then been
exceeded, that number of securities proposed to be registered for the account of
the Series C Holders;
(iii) third, if the Maximum Offering Size has not then been
exceeded, that number of securities proposed to be registered for the account of
the holders of the Series A and Series B Preferred Stock, ratably between them
treating them as one series for the purpose of this clause (iii);
(iv) fourth, if the Maximum Offering Size has not then been
exceeded, that number of securities proposed to be registered by the Company for
its own account; and
(v) fifth, if the Maximum Offering Size has not then been
exceeded, any securities proposed to be registered for the account of any other
Persons (other than the Company and those Persons described in clauses (i), (ii)
and (iii) immediately above) with such priorities among them as the Company
shall determine.
(c) Any request by a Preferred Holder for inclusion in any
registration may be withdrawn, in whole or in part, at any time prior to the
effective date of the Registration Statement for such offering. No request for
inclusion of, nor the inclusion of, Registrable Securities by a Series C Holder
shall be deemed a Series C Demand Registration that reduces the number of such
Series C Demand Registrations to which the Series C Holders are entitled
hereunder.
(d) The Company shall have the right to terminate or withdraw any
registration contemplated under this Section 2.2 prior to the effectiveness of
such registration, whether or not the Series C Holders have elected to include
securities in such registration.
(e) There shall be no limitation on the number of registrations a
Preferred Holder may participate in under this Section 2.2, and any such
participation shall not reduce the number of Series C Demand Registrations to
which the Series C Holders are entitled hereunder.
2.3 Limitation on Registration. Notwithstanding anything herein to the
contrary, the Company shall not be required to file a Registration Statement
pursuant to Section 2.1 that would: (i) require the Company to execute a general
consent to service of process in any jurisdiction in order to effect such
registration if the Company is not already subject to service in such
jurisdiction, or (ii) subject the Company to taxation in a jurisdiction where
the Company is not otherwise subject to taxation.
2.4 Registration Procedures. If and whenever the Company is required by
the provisions of Section 2.1 or 2.2 to effect the registration of any
Registrable Securities under the Securities Act, the Company shall, as
expeditiously as possible:
(a) Prepare and file with the Commission a Registration Statement
on the applicable form with respect to such securities and use its best efforts
to cause such Registration Statement to become and remain effective until the
earlier of (i) the sale of all of the Registrable Securities covered thereby and
(ii) the first date when all Registrable Securities covered thereby are eligible
for sale under Rule 144(k) without regard to any volume or manner of sale
limitations; provided, however, that, as soon as practicable but in no event
later than five (5) Business Days before filing such Registration Statement, any
related prospectus or any amendment or supplement thereto (other than any
amendment or supplement made solely as a result of incorporation by reference of
documents filed with the Commission subsequent to the filing of such
Registration Statement), the Company shall furnish to the Preferred Holders and
the underwriters, if any, copies of all such documents proposed to be filed,
which documents shall be subject to review by the Preferred Holders and any such
underwriters; the Company shall not file
8
any Registration Statement or amendment thereto or any prospectus or any
supplement thereto (other than any amendment or supplement made solely as a
result of incorporation by reference of documents filed with the Commission
subsequent to the filing of such Registration Statement) to which the managing
underwriters of the applicable offering, if any, or either of the Co-Lead
Investors shall have reasonably objected in writing, within four (4) Business
Days after receipt of such documents, to the effect that such Registration
Statement or amendment thereto or prospectus or supplement thereto does not
comply in all material respects with the requirements of the Securities Act and
specifying in reasonable detail the reasons therefor (provided that the
foregoing shall not limit the a Preferred Holder's right to reasonably object,
within four (4) Business Days after receipt of such documents, to any particular
information that is to be contained in such Registration Statement, amendment,
prospectus or supplement and relates specifically to such Preferred Holder,
including without limitation any information describing the manner in which the
Preferred Holder acquired Such Registrable Securities and the intended method of
distribution of such Registrable Securities), and if the Company is unable to
file any such document due to the objections of such underwriters or either of
the Co-Lead Investors, the Company shall use its best efforts to cooperate with
such underwriters and either of the Co-Lead Investors to prepare, as soon as
practicable, a document that is responsive in all material respects to the
reasonable objections of either of the Co-Lead Investors;
(b) Permit a single law firm designated by the Co-Lead Investors
to represent all of the Series C Holders, and a single law firm designated by
the Requisite Series AB Holders to represent the Series AB Holders, to review
and comment on the Registration Statement which includes their respective
Registrable Securities and all amendments and supplements for a reasonable
period prior to filing and to respond to any reasonable objections raised by
such counsel.
(c) Prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
the period specified herein and comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by such
Registration Statement in accordance with the intended method of disposition set
forth in such Registration Statement for such period; provided, that, the
Company shall comply with the provisions of Section 2.4(a) above;
(d) Furnish to the Preferred Holders and to each underwriter
copies of the Registration Statement and each such amendment and supplement
thereto (together with all exhibits thereto) and the prospectus included therein
and any other prospectus filed under Rule 424 or Rule 434 under the Securities
Act as the Preferred Holders and such underwriter reasonably may request in
order to facilitate the disposition of the Registrable Securities covered by
such Registration Statement;
(e) Use its best efforts to register or qualify the Registrable
Securities covered by such Registration Statement under the securities or "blue
sky" laws of such jurisdictions as the sellers of the Registrable Securities or,
in the case of an underwritten public offering, the managing underwriter
reasonably shall request; provided, however, that the Company shall not be
required to (i) qualify to transact business as a foreign corporation in any
jurisdiction where it is not so qualified, (ii) consent to general service of
process or (iii) submit to taxation in any such jurisdiction, unless the Company
is already subject to service or subject to taxation in such jurisdiction;
(f) Use its best efforts to list or qualify the Registrable
Securities covered by such Registration Statement on any securities exchange or
quotation system on which the Common Stock is then listed;
(g) Comply in all material respects with all applicable rules and
regulations under the Securities Act and Exchange Act;
9
(h) Immediately notify the Preferred Holders and each underwriter
under such Registration Statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event which has resulted or would result in the prospectus contained in
such Registration Statement, as then in effect, to include an 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, in light of the
circumstances under which they were made, not misleading, and promptly prepare
and furnish to such Investor and underwriter an updated prospectus;
(i) If the offering is underwritten, and at each Preferred
Holder's request, use its best efforts to furnish on the date that Registrable
Securities are delivered to the underwriters for sale pursuant to such
registration (i) an opinion, dated such date, of counsel to the Company,
addressed to the underwriters and the Preferred Holder, to such effect as
reasonably may be requested by the underwriters, and (ii) a letter, dated such
date, from the independent public accountants retained by the Company, addressed
to the underwriters and, if applicable, the Preferred Holder, stating that they
are independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the Registration Statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects with
the applicable accounting requirements of the Securities Act, and such letter
shall additionally cover such other financial matters (including information as
to the period ending no more than five (5) Business Days prior to the date of
such letter) with respect to such registration as such underwriters reasonably
may request, and deliver copies of such letter to the Investor;
(j) For the purpose of participating in any Registration
Statement, upon reasonable notice and at reasonable times during normal business
hours, make available for inspection by the Preferred Holder, any underwriter
participating in any distribution pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by the Preferred Holder or such
underwriter, reasonable access to all financial and other records, pertinent
corporate documents and properties of the Company, as such parties may
reasonably request, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any of the Preferred Holder, such
underwriter, attorney, accountant or agent in connection with such Registration
Statement; provided, however, the Company shall neither disclose the existence
or content of any material, non-public information concerning the Company at a
time when possession of such information by the Preferred Holder would, under
applicable law, prohibit the Preferred Holder from trading in the Company's
securities;
(k) Notify the Preferred Holders (i) when the prospectus or any
prospectus supplement or post-effective amendment has been filed, and, with
respect to such Registration Statement or any post-effective amendment, when the
same has become effective, such notice to be given no later than 9:00 a.m. (New
York time) of the morning on the Business Day immediately after the declaration
of effectiveness by the Commission, (ii) immediately of any request by the
Commission for amendments or supplements to such Registration Statement or to
amend or supplement such prospectus or for additional information, (iii)
immediately of the issuance by the Commission of any stop order suspending the
effectiveness of such Registration Statement or the initiation of any proceeding
for that purpose and (iv) immediately of the suspension of the qualification of
securities covered by such registration for offering or sale in any
jurisdiction, or of the initiation of any proceeding for any of such purposes;
(k) Take such other actions as the Preferred Holders or the
underwriters reasonably request in order to expedite or facilitate the
disposition of the Registrable Securities, including, without limitation,
preparing for, and participating in, such number of "road shows" and all such
other customary selling efforts as the underwriters reasonably request in order
to expedite or facilitate such disposition;
10
(l) use its reasonable best efforts to prevent the issuance of any
stop order or other suspension of effectiveness and, if such order is issued,
obtain the withdrawal of any such order at the earliest possible moment; and
(m) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission under the Securities Act and
the Exchange Act and take such other actions as may be reasonably necessary to
facilitate the registration of the Registrable Securities hereunder; and make
available to its security holders, as soon as reasonably practicable, but not
later than the Availability Date (as defined below), an earnings statement
covering a period of at least twelve (12) months, beginning after the effective
date of each Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act (for the purpose of this
Section 2.4(m), "Availability Date" means the 45th day following the end of the
fourth fiscal quarter that includes the effective date of such Registration
Statement, except that, if such fourth fiscal quarter is the last quarter of the
Company's fiscal year, "Availability Date" means the 90th day after the end of
such fourth fiscal quarter).
2.5 Expenses. The Company shall bear all reasonable expenses incurred in
complying with Sections 2.1, 2.2 and 2.4, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, reasonable fees and disbursements of one law firm
designated by the Co-Lead Investors and one law firm designated by the Series AB
Holders, of transfer agents and registrars and costs of any insurance which
might be obtained by the Company with respect to the offering by the Company.
2.6 Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless, to the fullest
extent permitted by law, each Preferred Holder and its Affiliates and the
directors, officers, employees, investors, partners and agents of each Preferred
Holder and its Affiliates, from and against any and all losses, claims, damages,
liabilities and expenses (including without limitation reasonable attorney fees
and disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement hereof) (collectively, "Losses") to which any such
Person may become subject, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement covering any Registrable Securities, any related prospectus or
preliminary prospectus, or any amendment or supplement thereto, or any omission
or alleged omission to state in any thereof a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus or prospectus supplement, in light of the circumstances under which
they were made) not misleading; provided, however, that the Company will not be
liable in any such case to the extent any Losses arise out of or are based upon
an untrue statement of a material fact or an omission to state a material fact
in such Registration Statement, prospectus, preliminary prospectus, amendment or
supplement, as the case may be, made or omitted, as the case may be, in express
reliance upon and in strict conformity with written information furnished to the
Company by a Preferred Holder expressly for use therein. This indemnity is in
addition to any liability that the Company may otherwise have. The Company shall
also indemnify any underwriters of the Registrable Securities, selling brokers,
dealer managers and similar securities industry professionals participating in
the distribution and their officers and directors and each Person who controls
such underwriters or other Persons (within the meaning of the Securities Act) to
the same extent as provided above with respect to the indemnification of the
Preferred Holder and its Affiliates as described above, if so required by the
underwriting agreement entered into in connection with the registration of such
Registrable Securities
11
(b) In connection with any Registration Statement covering
Registrable Securities, each Preferred Holder whose Registrable Securities were
included in such Registration Statement shall furnish to the Company in writing
such information with respect to the Preferred Holder as the Company reasonably
requests for use in connection with such Registration Statement, any related
Prospectus or preliminary prospectus, or any amendment or supplement thereto,
and shall indemnify, to the fullest extent permitted by law, the Company, the
Company's directors, officers, employees and agents, each Person who controls
the Company (within the meaning of the Securities Act), against all Losses
arising out of or based upon any untrue statement of a material fact contained
in any Registration Statement covering any Registrable Securities, any related
Prospectus or preliminary prospectus, or any amendment or supplement thereto, or
any omission to state in any such prospectus, amendment or supplement, a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus or prospectus supplement, in light of the
circumstances under which they were made) not misleading, in each case to the
extent, and only to the extent, that the Losses arise out of or are based upon
an untrue statement of a material fact or an omission to state a material fact
in such Registration Statement or in such related Prospectus, preliminary
prospectus, amendment or supplement, as the case may be, made or omitted, as the
case may be, in express reliance upon and in strict conformity with written
information furnished to the Company by the Preferred Holder expressly for use
therein. Notwithstanding anything in this Agreement to the contrary, in no event
shall the Preferred Holder's indemnification obligation exceed the dollar amount
of the proceeds actually received by such Preferred Holder from the sale of the
Registrable Securities under the Registration Statement giving rise to such
obligation.
(c) Promptly after receipt by any Person (the "Indemnified
Person") of notice of any demand, claim or circumstances which would or might
give rise to a claim or the commencement of any action, proceeding or
investigation in respect of which indemnity may be sought pursuant to Section
2.7, such Indemnified Person shall promptly notify the party obligated to
provide indemnification under this Section 2.7 in respect thereof (an
"Indemnifying Party") and the Indemnifying Party shall assume the control and
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Person, and shall assume the payment of all fees and expenses
in connection with such defense and such counsel; provided, however, that the
failure of any Indemnified Person to so notify the Indemnifying Party shall not
relieve the Indemnifying Party of its obligations hereunder except to the extent
that the Indemnifying Party is actually and materially prejudiced by such
failure to notify. In any such proceeding, any Indemnified Person shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Person unless: (i) the Indemnifying Party
and the Indemnified Person shall have mutually agreed to the retention of such
counsel; or (ii) in the reasonable judgment of counsel to such Indemnified
Person (x) representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them or (y)
if there are one or more defenses available to such Indemnified Person that
is/are not available to the Indemnifying Party. Without the prior written
consent of the Indemnified Person, which consent shall not be unreasonably
withheld, delayed or conditioned, the Indemnifying Party shall not effect any
settlement of any pending or threatened action, claim or proceeding with respect
to any Indemnified Person, unless such settlement includes an unconditional
release of such Indemnified Person from all liability arising out of such
proceeding.
(d) (i) If the indemnification provided for in this Section 2.7
from the Indemnifying Party is unavailable to an Indemnified Person hereunder or
is inadequate in respect of any Losses for which indemnification is provided
under this Section 2.7, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Person, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party, on the one
hand, and Indemnified Person(s), on the other hand, in connection with the
actions that resulted in such Losses, as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Person shall be determined
12
by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Persons, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
Losses referred to above shall be deemed to include, subject to the limitations
set forth in Section 2.7(c), any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 2.7(d) were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in Section 2.7(d)(i).
Notwithstanding any other provision hereof, in no event shall the Investor's
contribution obligation exceed the excess of (A) the dollar amount of the
proceeds received by the Investor upon the sale of the Registrable Securities
giving rise to such contribution obligation over (B) the dollar amount of any
damages that the Preferred Holder has otherwise been required to pay by reason
of the untrue or alleged untrue statement or omission or alleged omission giving
rise to such obligation. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(iii) If indemnification is available under this Section 2.7,
the Indemnifying Parties shall indemnify each Indemnified Person to the fullest
extent provided in Section 2.7(a) and Section 2.7(b) without regard to the
relative fault of said Indemnifying Party or Indemnified Person or any other
equitable consideration provided for in this Section 2.7(d).
(iv) If any provision of an indemnification or contribution
clause in an underwriting agreement or agency agreement executed by or on behalf
of the Investor differs from a provision in this Section 2.7, such provision in
the underwriting agreement shall determine the Investor's rights in respect
thereof.
(e) Notwithstanding anything in this Agreement to the contrary,
the indemnities and obligations provided in this Section 2.7 shall survive the
transfer of any Registrable Securities by the Preferred Holder.
2.7 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission which may at any time permit the sale of
the Registrable Securities to the public without registration, so long as the
Company is subject to the reporting requirements of the Exchange Act, the
Company shall:
(a) make and keep public information available, as contemplated in
Rule 144(c) under the Securities Act (or any successor rule); and
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act to, among other things, remain eligible to
use Form S-3 (or any successor thereto).
2.8 Furnishing Information.
(a) The Company shall make available, during normal business
hours, for inspection and review by each of the Investors whose Registrable
Securities are to be included in a Registration Statement, and their respective
advisors and representatives (who may or may not be Affiliated with such
Investor), and any underwriter participating in any disposition of Common Stock
on
13
behalf of the such Investors pursuant to a Registration Statement or amendments
or supplements thereto or any blue sky, NASD or other filing, all financial and
other records, all filings with the Commission, and all other corporate
documents and properties of the Company as may be reasonably necessary for the
purpose of such review, and cause the Company's officers, directors and
employees, within a reasonable time period, to supply all such information
reasonably requested by such Investors or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to the filing and effectiveness of the
Registration Statement for the sole purpose of enabling such Investors and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial due diligence with respect to the Company and the
accuracy of such Registration Statement. Notwithstanding the foregoing, the
Company shall not disclose material nonpublic information to the Investors, or
to advisors to or representatives of the Investors, unless prior to disclosure
of such information the Company identifies such information as being material
nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Article II that each Preferred
Holder furnish to the Company in writing such information regarding such
Preferred Holder, the Registrable Securities held by it and the intended method
of disposition of such securities as shall be required to effect the
registration thereof.
2.9 Additional Registration Rights. As of the date hereof, neither the
Company nor any of its security holders (other than as set forth on Schedule
2.10 attached hereto) has any right to include securities of the Company in a
Registration Statement other than the Registrable Securities, and the Company
shall not, after the date hereof, enter into any agreement providing any rights
to be included with a Registration Statement to any of its security holders or
potential security holders, without the prior written consent of the Requisite
Series C Holders. Until after the effective date of a Registration Statement
which includes Registrable Securities owned by Series C Holders, the Company
shall not file any other Registration Statement solely with respect to shares to
be offered by the Company or any Series AB Holder, including, without
limitation, a Registration Statement on Form S-1, S-3, S-4 or S-8 or any
successor form to any of the foregoing, without the consent of the Requisite
Series C Holders.
2.10 Lock Up. Each Series AB Holder shall, in connection with any
registration of the Company's securities, upon the request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
agree in writing not to effect any sale, transfer, disposition or distribution
of any of its Registrable Securities (other than that included in such
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time not to exceed one
hundred eighty (180) days from the effective date of such registration as the
Company or the underwriters may specify.
ARTICLE III MISCELLANEOUS.
3.1 Successors and Assigns. This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or Cerberus, as
applicable, and, if such assignment materially adversely affects the Series AB
Holders, the Requisite Series AB Holders; provided, however, that a Preferred
Holder may assign its rights and delegate its duties hereunder in whole or in
part, without the prior written consent of any other party, to an Affiliate and
to any Person to whom such Preferred Holder transfers any of the Registrable
Securities, provided, that, no such assignment shall be effective or confer any
right on any such assignee unless, prior to such assignment, the assignee agrees
in writing that such assignee will be bound by all provisions binding on such
Preferred Holder. The provisions of this
14
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Except for any other provisions
of this Agreement expressly to the contrary, nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
3.2 Counterparts; Faxes. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.
3.3 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.4 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given as hereinafter described: (i) if given by personal delivery, then such
notice shall be deemed given upon such delivery; (ii) if given by telex or
telecopier, then such notice shall be deemed given upon receipt of confirmation
of complete transmittal with a confirming copy to be sent by first class mail;
(iii) if given by mail, then such notice shall be deemed given upon the earlier
of (A) receipt of such notice by the recipient or (B) three (3) days after such
notice is deposited in first class mail, postage prepaid; and (iv) if given by
an internationally recognized overnight air courier, then such notice shall be
deemed given one (1) Business Day after delivery to such carrier. All notices
shall be addressed to the party to be notified at the address as follows, or at
such other address as such party may designate by ten (10) days' advance written
notice to the other party:
If to the Company:
Molecular Insight Pharmaceuticals, Inc.
160 Second Street
Cambridge, Massachusetts 02142
Attn: David Barlow
Fax: (617) 492-5664
With a copy to:
Foley & Lardner LLP
111 Huntington Avenue
26th Floor
Boston, Massachusetts 02199
Attn: Gabor Garai, Esq.
Fax: (617) 342-4001
If to any of the Investors:
to the addresses set forth on the signature pages attached
hereto.
If to any Series AB Holder:
to the addresses set forth on Schedule A attached hereto.
15
or to such other address as any party hereto shall notify the other parties
hereto (as provided above) from time to time.
3.5 Expenses. In the event that legal proceedings are commenced by any
party to this Agreement against another party to this Agreement in connection
with this Agreement, the party or parties which do not prevail in such
proceedings shall severally, but not jointly, pay their pro rata share of the
reasonable attorneys' fees and other reasonable out-of-pocket costs and expenses
incurred by the prevailing party in such proceedings.
3.6 Amendments and Waivers. This Agreement shall not be amended without
the prior written consent of (i) the Requisite Series C Holders and (ii) if such
amendment materially adversely affects the Series AB Holders, the Requisite
Series AB Holders. The Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company shall
have obtained the written consent to such amendment, action or omission to act,
of (i) the Requisite Series C Holders and (ii) if such amendment, action or
omission to act materially adversely affects the Series AB Holders, the
Requisite Series AB Holders.
3.7 Publicity. No public release or announcement concerning the
transactions contemplated by this Agreement shall be issued by the Company or
any of the Preferred Holders without, in the case of a release or announcement
by any of the Preferred Holders, the prior written consent of the Company, and,
in the case of a release or announcement by the Company, prior written consent
of the Requisite Series C Holders, which in each case, shall not be unreasonably
withheld; provided, however, in the case of any release or announcement that may
be required by law, such release or announcement may be made without prior
consent, but the Company or the Requisite Series C Holders, as the case may be,
shall allow the other, to the extent reasonably practicable in the
circumstances, reasonable time to comment on such release or announcement in
advance of its dissemination.
3.8 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof but shall be interpreted as if it were written so as
to be enforceable to the maximum extent permitted by applicable law, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law which
renders any provision hereof prohibited or unenforceable in any respect.
3.9 Entire Agreement. This Agreement, including Schedules, constitutes
the entire agreement among the parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
and thereof.
3.10 Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
3.11 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York without regard to the choice of law principles thereof. Each of the
parties hereto irrevocably submits to the jurisdiction of the courts of the
State of New York located in New York County and the United States District
Court for the Southern District of New York for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such
suit, action or proceeding may be served on each party hereto anywhere in the
world by the same
16
methods as are specified for the giving of notices under this Agreement. Each of
the parties hereto irrevocably consents to the jurisdiction of any such court in
any such suit, action or proceeding and to the laying of venue in such court.
Each party hereto irrevocably waives any objection to the laying of venue of any
such suit, action or proceeding brought in such courts and irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. THE COMPANY AND EACH OF THE INVESTORS,
SERIES A HOLDERS AND SERIES B HOLDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO OR ARISING OUT OF
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY.
3.12 Independent Nature of Investors' Obligations and Rights. Except as
expressly provided herein and therein, the obligations of each Investor under
this Agreement are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of
the obligations of any other Investor under this Agreement. Nothing contained
herein, and no action taken by any Investor (including, without limitation, any
of the Co-Lead Investors) pursuant hereto or thereto, shall be deemed to
constitute the Investors as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Investors are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by this Agreement. Each Investor acknowledges that no
other Investor (including, without limitation, any of the Co-Lead Investors) has
acted as agent for such Investor in connection with this Agreement or in making
its investment in the Company and that no Investor (including, without
limitation, any of the Co-Lead Investors) will be acting as agent of such
Investor in connection with monitoring its investment in the Company or
enforcing its rights under this Agreement. Each Investor shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement, and it shall not be necessary for any
other Investor to be joined as an additional party in any proceeding for such
purpose. Notwithstanding anything contained in this Agreement to the contrary,
neither of the Co-Lead Investors shall have any duty, fiduciary or otherwise, to
any other Investor by virtue of such Investor serving as a Co-Lead Investor or
otherwise.
3.13 Injunctive Relief. It is acknowledged that it will be impossible to
measure the damages that would be suffered by an Investor if the Company fails
to comply with the provisions of this Agreement and that in the event of any
such failure, the Investor will not have an adequate remedy at law. The Investor
shall, therefore, be entitled to obtain specific performance of any of the
Company's obligations hereunder and to obtain immediate injunctive relief. The
Company shall not argue, as a defense to any proceeding for such specific
performance or injunctive relief, that the Investor has an adequate remedy at
law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
[COMPANY SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed by their duly authorized representatives,
as of the date first written above.
THE COMPANY:
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
By: /s/ David S. Barlow
-------------------------------
Name:
Title:
|
18
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
CERBERUS PARTNERS, L.P.
By: Cerberus Associates, LLC,
its General Partner
By: /s/ Seth Plattus
-----------------
Seth Plattus
Managing Director
|
Address: 299 Park Avenue
22nd Floor
New York, NY 10171
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: Robert G. Minion, Esq.
Fax: (973) 597-2400
19
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
Andrew R Midler Family Trust 5/99
By: /s/ Andrew R Midler
----------------------------------
Name: Andrew R Midler
Title: Trustee
|
Address: 283 Summit Ave
Mill Valley Ca 94941
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
20
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
John D. Singer, Esq.
By: /s/ John D. Singer, Esq.
--------------------------------
Name: John D. Singer, Esq.
Title:
|
Address: 200 East 69th Street
Apartment #18-E
New York, NY 10021
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
21
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
Michael C. Deutsch
By: /s/ Michael C. Deutsch
----------------------------------
Name: Michael C. Deutsch
Title:
|
Address: 331 Madison Ave., 3rd Floor
New York, NY 10017
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
22
[COMMON STOCKHOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF COMMON STOCKHOLDER:
POITRAS, JAMES W. & PATRICIA T., JTWROS
By: /s/ James W. Poitras
--------------------
Name: James W. Poitras
Title:
/s/ Patricia T. Poitras
------------------------
Patricia T. Poitras
|
BOTH AS INDIVIDUALS AND AS
TRUSTEES OF THEIR RESPECTIVE
REVOCABLE TRUST
Address: M/M JAMES W. POITRAS
3100 SPRINGHEAD COURT
NARCOOSSEE FL 34771-8554
|
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
23
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
Carol Frank
By: __________________________________
Name:
Title:
Address: 11529 Conway Rd.
St. Louis MO 63131
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
24
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
Benjamin M. Frank Trust
By: /s/ Benjamin M. Frank
---------------------
Name: Benjamin M. Frank
Title: Trustee
|
Address: 106 Breckenwood Way
Sacramento, CA 95864
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
25
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
[ILLEGIBLE]
By: ______________________________
Name:
Title:
Address: 16413 NE 135th St
Redmond, WA 98052
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
Kristine Davy
16413 NE 135 St
Redmond WA 98052
26
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
Rajpal Sandhu
By: /s/ Mary C Henry
----------------
Name: RAJPAL SANDHU & MARY HENRY
Title:
|
Address: 420 FAMILY FARM ROAD
WOOD SIDE, CA-94062
650-529-0606
Raj@RajSandhu.com
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
27
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
By: /s/ James T. Lenehan
-------------------------------
Name: JAMES T. LENEHAN
Title:
|
Address: 1586 HAMPTON RD
RYDAL, PA
19046
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
28
[SERIES B HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES B HOLDER:
LIONEL N. STERLING REVOCABLE TRUST
By: /s/ Lionel N. Sterling
------------------------------
Name: LIONEL N. STERLING
Title: TRUSTEE
|
Address: 631 WEST RD.
NEW CANAAN CT.
06940
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
LIONEL N. STERLING
c/o EQUITY RESOURCES INC 4th FL
5 GREENWICH OFFICE PARK
GREENWICH CT. 06831
29
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
America Durham, L.P.
By: /s/ T. K. Duggan
----------------
Name: T. K. DUGGAN
Title: MANAGING PRINCIPAL
|
Address: 680 SF Ave
22nd Floor
N.Y., N.Y. 10019
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
30
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
International Durham, L.P.
By: /s/ T. K. Duggan
----------------
Name: T. K. Duggan
Title: MANAGING PRINCIPAL
|
Address: 680 SF Ave
22nd Floor
N.Y., N.Y. 10019
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
31
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
Institutional Benchmarks Master Fund
By: Garry Crowder
Name: Garry Crowder
Title: Director
Address: _____________________________
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
32
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
RICHARD SIMON
By: /s/ Richard Simon
-----------------
Name:
Title:
|
Address: 219 LAKE AVENUE
NEWTON, MA 02461
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
33
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
By: /s/ William R. Ebsworth
--------------------------------
Name: WILLIAM R. EBSWORTH
Title:
|
Address: 17 [ILLEGIBLE] RD
WESTON MA 02493
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
34
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
Alan N. Berro
By: /s/ Alan N. Berro
-------------------
Name:
Title:
|
Address: P.O. BOX 15155
BEVERLY HILLS, CA
90209
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
35
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
Renee M Noto
By: /s/ Renee M Noto
----------------
Name:
Title:
|
Address: 275 Stanwich Road
Greenwich, CT 06830
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
36
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
THE RAPTOR GLOBAL PORTFOLIO LTD.
By: Tudor Investment Corporation,
Investment Advisor
By: /s/ William T. Flaherty
-------------------------
Name: William T. Flaherty
Title: Managing Director
|
Address: c/o Tudor Investment Corporation
50 Rowes Wharf, 6th Floor
Boston, MA 02110
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
37
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
THE TUDOR BVI GLOBAL PORTFOLIO LTD.
By: Tudor Investment Corporation,
Trading Advisor
By: /s/ William T. Flaherty
-------------------------
Name: William T. Flaherty
Title: Managing Director
|
Address: c/o Tudor Investment Corporation
50 Rowes Wharf, 6th Floor
Boston, MA 02110
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
38
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
TUDOR PROPRIETARY TRADING, L.L.C.
By: /s/ William T. Flaherty
-------------------------
Name: William T. Flaherty
Title: Managing Director
|
Address: 50 Rowes Wharf, 6th Floor
Boston, MA 02110
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
39
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
/s/ William C Smith
---------------------------------------
William C Smith
/s/ Dana Davis Smith
---------------------------------------
Dana Davis Smith
|
By: _______________________________________
JOINT TENANTS WITH RIGHT OF SURVIVORSHIP
Address: 218 RIVER PARK DRIVE
GREAT FALLS, VA
22066
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
40
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
THE ALTAR ROCK FUND L.P.
By: Tudor Investment Corporation,
General Partner
By: /s/ William T. Flaherty
-------------------------
Name: William T. Flaherty
Title: Managing Director
|
Address: c/o Tudor Investment Corporation
50 Rowes Wharf, 6th Floor
Boston, MA 02110
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
41
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
Julie R Frank, Trustee
By: /s/ Julie R Frank Revocable Trust
---------------------------------
Dated August 13, 2001
Name:
Title:
|
Address: 3 Roclare Lane
St. Louis MO 63131
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
42
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER
By: /s/ John C. Otsuki
____________________________
Name: John C. Otsuki
Title:
|
Address: 4718 MERIVALE RD.
CHEVY CHASE, MARYLAND 21815
With a copy to (which shall not be deemed
notice for purposes of the Agreement):
43
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
MedCap Partners L.P.
By: /s/ [ILLEGIBLE]
-------------------------
Name: [ILLEGIBLE]
Title: Managing Member
|
Address: 500 Third Street, Suite 535
San Francisco, CA 94107
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
44
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
MedCap Master Fund, L.P.
By: /s/ [ILLEGIBLE]
----------------------------
Name: [ILLEGIBLE]
Title: Managing Member of the GP
|
Address: ATC Trustees (Cayman) Limited
[ILLEGIBLE]
George Town,
Grand Cayman,
Cayman Islands
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
500 Third Street Suite 535
San Francisco CA 94107
45
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
Kenneth Rubin
By: /s/ Kenneth Rubin
------------------
Name: Individually
Title:
|
Address: 68 Barbers Point Road
Sands Point, NY 11050
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
46
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
By: /s/ William P. Rice
-------------------------
Name: William P. Rice
Title:
|
Address: P.O. BOX 1599
DUXBURY, MA
02331
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
47
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
JAMES J. GOLL
By: /s/ James J. Goll
-------------------------
Name: JAMES J. GOLL
Title:
|
Address: 32 Three Wells Lane
DARIEN, CT 06820
(203) 656-0228
jjcg@SBCGLOBAL.NET
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
48
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
By: /s/ James M. Hirshberg
-------------------------
Name: JAMES M. HIRSHBERG
Title:
|
Address: 62 PRINCE ST
WEST NEWTON, WA 02465
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
49
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
Dana Doe
By: /s/ Dana Doe
-------------------------
Name:
Title:
|
Address: 12 McCall Rd
Winchester, MA 01890
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
50
[SERIES C HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES C HOLDER:
By: /s/ Daniel Frank
-------------------------
Name: DANIEL FRANK
Title:
|
Address: 19 WHALING ROAD
DARIEN CT
06820
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
51
[SERIES B HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES B HOLDER:
CERBERUS PARTNERS, L.P.
By: Cerberus Associates, LLC,
its General Partner
By: /s/ [ILLEGIBLE]
--------------------------------
Name: [ILLEGIBLE]
Title: Managing Director
|
Address: 299 Park Avenue, 22nd floor
New York, NY 10171
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: Robert G. Miman, Esq.
Fax: (973)597-2400
52
[SERIES B HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES B HOLDER:
FREDERICK FRANK
By: /s/ Frederick Frank
-------------------------
Name:
Title:
|
Address: 109 East 91st Street
New York, New York 10128
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
53
[SERIES B HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, The undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES B HOLDER:
MEYTHALER INVESTMENT PARTNERS, LLC
By: /s/ L. Charles Meythaler
--------------------------------
Name: L. Charles Meythaler
Title: Managing Shareholder
|
Address: 399 Wahackme Road
New Canaan ,CT 06840
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
54
[SERIES B HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, THE undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES B HOLDER:
By: /s/ Gerald Izzi MD
--------------------------------
Name: Gerald Izzi
Title:
|
Address: 156 Ivy ST
BROOKLING MA 02446
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
55
[SERIES B HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES B HOLDER:
By: /s/ Ines Capelli
--------------------------------
Name:
Title:
|
Address: 104 Marlborough St
Boston, MA 02116
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
56
[SERIES B HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES B HOLDER:
By: /s/ John C. Otsuki
--------------------------------
Name: JOHN C Otsuki
Title:
|
Address: 4718 MERIVALE RD.
CHEVY CHASE, MD 20815
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
57
[SERIES A HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES A HOLDER:
By: /s/ Kevin Maresca
--------------------------------
Name: Kevin Maresca
Title:
|
Address: 13 Bailey Rd
Tewksbury, MA 01876
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
58
[SERIES A HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES A HOLDER:
By: /s/ John C. Otsuki
--------------------------------
Name: JOHN C. OTSUKI
Title:
|
Address: 4718 MERIVALE RD.
CHEVY CHASE, MD 20815
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
59
[SERIES A HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
first date above written.
NAME OF SERIES A HOLDER:
MEYTHALER INVESTMENT PARTNERS, LLC
By: /s/ L. Charles Meythaler
--------------------------------
Name: L. Charles Meythaler
Title: Managing Shareholder
|
Address: 399 Wahackme Road
New Canaan, CT 06840
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
60
[SERIES A HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date first above written.
NAME OF SERIES A HOLDER:
OKJIN KIM
By: /s/ Okjin Kim
--------------------------------
Name:
Title:
|
Address:____________________________
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
61
[SERIES A HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date first above written.
NAME OF SERIES A HOLDER:
ANN BARLOW
By: /s/ Ann Barlow
--------------------------------
Name:
Title:
|
Address:____________________________
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
62
[SERIES A HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES A HOLDER:
By: /s/ John F. Brennan
Deborah L. Brennan
--------------------------------
Name: John F. Brennan or
Deborah L. Brennan
Title: [ILLEGIBLE]
|
Address: 477 Far Reach Rd.
Westwood, MA 02090
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
63
[SERIES A HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES A HOLDER:
By: Jack L. Barlow
Name: Jack L. Barlow
Title: Stockholder
Address: 48 COVE ST.
DUXBURY, MA 02332
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
64
[SERIES A HOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF SERIES A HOLDER:
POITRAS, JAMES W. & PATRICIA
T., JTWROS
/s/ [ILLEGIBLE] By: /s/ James W. Poitras
--------------------------- ------------------------
Patricia T. Poitras Name: James W. Poitras
|
Title:
BOTH AS INDIVIDUALS AND AS
TRUSTEES OF THEIR RESPECTIVE Address: M/M JAMES W. POITRAS
REVOCABLE TRUST --------------------------
3100 SPRINGHEAD COURT
--------------------------
NARCOOSSEE FL 34771-8554
--------------------------
|
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
65
[COMMON STOCKHOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF COMMON STOCKHOLDER:
MICHAEL C. DEUTSCH
By: /s/ MICHAEL C. DEUTSCH
------------------------
Name: MICHAEL C. DEUTSCH
Title:
|
Address: 331 MADISON AVE., Fl. 3
NEW YORK, NY 10017
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
66
[COMMON STOCKHOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF COMMON STOCKHOLDER:
JOHN D. SINGER
By: /s/ John D. Singer
------------------------
Name: JOHN D. SINGER
Title:
|
Address: 331 Madison Ave., F1. 3
New York, NY 10017
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
67
[COMMON STOCKHOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF COMMON STOCKHOLDER:
POITRAS, JAMES W. & PATRICIA
T., JTWROS
/s/ Patricia T. Poitras By: /s/ James W. Poitras
-------------------------- ------------------------
Patricia T. Poitras Name: James W. Poitras
Title:
BOTH AS INDIVIDUALS AND AS Address: M/M JAMES W. POITRAS
TRUSTEES OF THEIR RESPECTIVE ------------------------
REVOCABLE TRUST 3100 SPRINGHEAD COURT
------------------------
NARCOOSSEE FL 34771-8554
------------------------
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
----------------------------------
----------------------------------
----------------------------------
|
68
[COMMON STOCKHOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF COMMON STOCKHOLDER:
ANN BARLOW
By: /s/ Ann Barlow
------------------------
Name:
Title:
|
Address:____________________
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
69
[COMMON STOCKHOLDER SIGNATURE PAGE)
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF COMMON STOCKHOLDER:
PHILLIP S. MAGIERA
By: /s/ Phillip S. Magiera
------------------------
Name: Phillip S. Magiera
Title: Shareholder
|
Address: 20 Strawberry Hill St.
Dover, MA 02030
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
70
[COMMON STOCKHOLDER SIGNATURE PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF COMMON STOCKHOLDER:
MEYTHALER INVESTORS, LLC
By: /s/ L. Charles Meythaler
------------------------
Name: L. Charles Meythaler
Title: Manager
|
ADDRESS: 399 Wahackme Road
New Canaan, CT 06840
With a copy to (which shall not be
deemed notice for purposes of the
Agreement):
71
[COMMON STOCKHOLDER SIGNATURE PAGE)
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
NAME OF COMMON STOCKHOLDER:
By: /s/ Jack Barlow
------------------------
Name: Jack Barlow
Title: Stockholder
|
Address: 48 COVE St.
DUXBURY, MA 02332
With a copy to (which shall not be
deemed notice for purposes of the
Agreement);
72
Exhibit 10.6
GREENWORKS MOLECULAR INSIGHT PHARMACEUTICALS LEASE
1. DATE OF LEASE: June 19, 2003
2. LANDLORD: RayJoe Limited Partnership, a Massachusetts limited partnership,
which expression shall include its heirs, executors, administrators,
successors and assigns.
2A. LANDLORD'S ADDRESS: c/o Gravestar, Inc., One Broadway, Cambridge, MA 02142
3. TENANT: MOLECULAR INSIGHT PHARMACEUTICALS, INC., which expression shall
include its heirs, executors, administrators, successors and assigns.
Please note that Tenant was formerly known as Biostream, Inc.
3A. TENANT'S ADDRESS: Greenworks Building, 160 Second Street, Cambridge,
Massachusetts 02142
4. DEMISED PREMISES: Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, upon and subject to the terms and provisions of this Lease,
Office Space containing approximately 3,064 rentable square feet of floor
area, and Laboratory Space containing approximately 1,481 rentable square
feet of floor area all as more fully shown on EXHIBIT E, attached hereto,
located in the Greenworks Building, 160 Second Street, Cambridge,
Massachusetts ("Property"), together with the right to use in common with
others entitled thereto, the hallways, stairways and elevator (if any)
necessary for access to the Demised Premises, and lavatories nearest
thereto, if there is no lavatory within the Demised Premises.
4A. ACCEPTANCE OF DEMISED PREMISES: Tenant agrees that no representations or
warranties respecting the condition of the Demised Premises and no promises
to alter, repair or improve the Demised Premises have been made by
Landlord, except as expressly provided for in this Lease. Tenant occupies
office and laboratory space at the Greenworks Building under previous
leases for office and laboratory spaces dated May 15, 1998, as amended,
scheduled to terminate on June 30, 2003.
4B. LABORATORY RELOCATION WORK: Landlord and Tenant agree to relocate Tenant's
Third Floor laboratory space located in Unit #28 and Second Floor
laboratory space located in Unit #20 to the New Laboratory Space on the
Second Floor, Units #14, #15 and #20 pursuant to the Biostream Relocation
Project Scope Summary, Design Build Specification, Electrical
Specification, Equipment List, and Cavanaugh Tocci and Plumbing Permit
Letters shown on EXHIBIT B, and Plans D.1.1, A.1.1 and A.6.1, dated May
6, 2003 shown on EXHIBIT C, known in the aggregate as the Laboratory
Relocation Work.
4C. LABORATORY RELOCATION SCHEDULE: Landlord and Tenant agree to the proposed
Laboratory Relocation Schedule provided by Marc Truant and Associates,
dated May 2, 2003 as shown on EXHIBIT D. Landlord and Tenant agree that the
attached Laboratory Relocation Schedule is provided as the most current and
viable estimate for the Laboratory Relocation Work. Landlord and Tenant
agree that neither Landlord, Gravestar, Inc., Marc Truant and Associates as
Landlord's Contractor, nor Jennifer Pinck as Landlord's
GREENWORKS MOLECULAR LEASE
-1-
Project Manager will assume any responsibility, financial or otherwise, for
any delays in the Laboratory Relocation Schedule. Good faith efforts will
be used to accommodate Tenant's needs in the event of unforeseen delays to
the Laboratory Relocation Schedule. Biostream Inc, as Tenant is solely
responsible for obtaining any and all permits and approvals for the
operation of its laboratory(ies). Marc Truant and Associates, under
contractual obligation with Landlord to provide pre-construction and
construction services, is responsible for obtaining the local building
permit required to execute the Laboratory Relocation Work and providing the
local certificate of occupancy.
4D. LABORATORY RELOCATION COST: Landlord and Tenant agree to share the cost of
the Laboratory Relocation Work as shown on EXHIBIT A, as follows:
1. The GMP Contract between Landlord and Marc Truant and Associates
estimates the cost of the Laboratory Relocation Work at $327,426. The
GMP Contract Summary includes an itemized list of additional work to
be performed for the benefit of Tenant in the amount of $19,800, which
falls outside of the scope of the original agreed-upon relocation
work.
2. Landlord agrees to pay 66.7% (2/3) of the final cost of the Laboratory
Relocation Work minus the additional work to be performed for the
benefit of Tenant (($327,426 - $19,800) x 0.667). Thus, Landlord's
contribution is estimated at $205,186.54.
3. Tenant agrees to pay 33.3% (1/3) of the final cost of the original
agreed-upon relocation work plus the additional work to be performed
for the benefit of Tenant (($307,626 x 0.333) + $19,800). Thus,
Tenant's contribution is estimated at $122,239.46.
4. Landlord and Tenant agree to share any net cost savings that may
accrue from the GMP Contract estimate proportionately. Thus, Landlord
will receive 66.7% and Tenant will receive 33.3% of any resulting net
cost savings.
5. LEASE TERM: Five (5) Lease Years.
5A. COMMENCEMENT DATE: July 1, 2003, subject to the following exception:
Pursuant to the New Laboratory Space on the Second Floor, if the Laboratory
Relocation Work is completed prior to July 1, 2003 and Tenant is in
physical possession of the New Laboratory Space on the Second Floor, all
provisions of this Lease will apply to said New Laboratory Space on the
Second Floor, except for the payment of rent, tax and operating expenses
charges, which shall be governed by the provisions of the previous
laboratory Lease (dated May 15, 1998, as amended), until June 30, 2003.
5B. TERMINATION DATE: June 30, 2008
6. PERMITTED USE: Tenant shall use the portions of the Demised Premises listed
under Exhibit E, as Office Space solely and exclusively for the purpose of
general offices and Laboratory Space solely and exclusively for the purpose
of laboratory uses in conformance with the provisions of this Lease and in
compliance with all applicable laws and regulations, including
environmental laws, regulations, ordinances, orders and standards.
GREENWORKS MOLECULAR LEASE
-2-
7. RENT:
Dates: Yearly Rent: Monthly Rent: Rent psf.
------ ------------ ------------- ---------
Office Space: 7/1/03 to 6/30/08 $79,668.00 $6,639.00 $26.00
Laboratory Space: 7/1/03 to 6/30/08 $44,430.00 $3,702.50 $30.00
|
Tenant agrees to pay rent to Landlord in monthly installments, in advance,
on the first day of each and every month during the Lease Term.
7A. PARKING CHARGE: Tenant agrees to pay $500.00 per month for the use of Five
(5) assigned parking space(s) within the Property. Landlord, at its sole
discretion, reserves the right to increase its parking charges in the
future to adjust to market conditions. Said increase becomes effective upon
30-day advance written notice to Tenant.
8. SECURITY DEPOSIT: A Security Deposit in the amount of $5,248.75 is
currently held by Landlord under the previous Lease, as security for the
punctual performance of each and every obligation under the Lease. The
Security Deposit will be refunded to Tenant within sixty (60) days after
the end of the Lease Term without interest, subject to the Tenant's
satisfactory compliance with the terms of the Lease.
9. TAX CHARGE: Tenant shall pay to Landlord as additional rent hereunder,
21.5% of real estate taxes charged to the land and buildings of which the
Demised Premises are a part of, for each Lease Year. Tenant's Tax charge of
14.5% in relation to the Office Space will be computed in excess of real
estate taxes assessed for fiscal year 2003. Tenant's Tax Charge of 7% in
relation to the Laboratory Space will be computed by multiplying the real
estate taxes by 7%, without any initial tax base. Tenant shall make
estimated monthly payments based upon reasonable projections made by
Landlord, adjusted as needed. When the actual annual Tax liability is
known, Landlord will promptly issue a written statement and refund any
overpayment to Tenant or request Tenant to pay any underpayment balance.
Tenant will pay any underpayment within 30 days after receipt of Landlord's
statement.
10. OPERATING EXPENSES CHARGE: Tenant shall pay to Landlord as additional rent
hereunder, 21.5% of all costs and expenses incurred by Landlord for each
Lease Year in connection with the operation and maintenance of the land and
buildings of which the Demised Premises are a part of. Tenant's Operating
Expenses Charge of 14.5% in relation to the Office Space will be computed
in excess of actual operating expenses for the calendar year 2003. Tenant's
Operating Expenses Charge of 7% in relation to the Laboratory Space will be
computed by multiplying the actual operating expenses by 7%, without any
initial operating expenses base. Tenant shall make estimated monthly
payments based upon reasonable projections made by Landlord, adjusted as
needed. Within 90 days after the end of each calendar year during the Lease
Term, Landlord will issue a written statement of actual annual operating
expenses and refund any overpayment to Tenant or request Tenant to pay any
underpayment balance. Tenant will pay any underpayment within 30 days after
receipt of Landlord's statement.
11. LATE PAYMENTS: Any installment of Rent, additional rent and any other
required payment not paid by Tenant within ten (10) days after the due
date, shall bear a late charge until paid, equal to the lesser of 1.5% of
the amount due for each month or the highest rate permitted by law.
GREENWORKS MOLECULAR LEASE
-3-
12. TENANT'S WORK: Upon the prior written consent of Landlord, Tenant shall, at
its own expense, complete any work in and to the Demised Premises, in a
good and workmanlike manner with materials of the highest quality, without
interference to other work or businesses within the Greenworks Building,
and in compliance with the terms of this Lease and all applicable laws,
codes, ordinances and regulations. Landlord reserves the right, upon
twenty-four (24) hours written notice to Tenant, to order Tenant to cease
any and all Tenant's Work, if such work appears to cause disharmony, does
not comply with union work rules applicable at the Property or interferes
with the orderly operation of the other Tenants within the Property.
Tenant's Work shall be performed only in accordance with applicable rules
and regulations contained in the Greenworks Policy Manual and complete
plans and specifications submitted to and approved in advance by Landlord.
13. TENANT COVENANTS & OBLIGATIONS: Tenant agrees to conform to the following
provisions during the Lease Term:
(a) Tenant will conform and abide to the rules and regulations contained in
the Greenworks Policy Manual, attached as EXHIBIT F. Landlord may, from
time to time, amend the Greenworks Policy Manual, effective upon advance
written notice to Tenant.
(b) Tenant will not make any alterations, improvements and/or additions to
the Demised Premises without the advance written consent of Landlord, not
to be unreasonably withheld. Any consent request will include such plans,
specifications and details as Landlord may reasonably request.
(c) Tenant agrees to maintain the Demised Premises in a clean, safe and
sanitary condition in accordance with all applicable federal, state and
local laws, codes, ordinances and regulations. Tenant shall not permit or
commit any waste.
(d) Tenant agrees to reimburse Landlord for the cost of replacement light
bulbs and ballasts for fluorescent light fixtures within the Demised
Premises.
(e) Tenant agrees to obtain prior written consent from Landlord before the
installation of any signage visible from the outside of the Demised
Premises.
(f) Tenant agrees not to perform or conduct any act or practice which may
injure the Demised Premises or the property, or which is unlawful,
improper, noisy, offensive or in any manner contrary to all applicable
federal, state and local laws, codes, ordinances and regulations.
(g) Tenant agrees not to do any spray painting within the Demised Premises.
(h) Tenant agrees not to allow any mechanics' liens or other similar liens
to be placed upon the Property, as a result of any work related to Tenant
or its Demised Premises. Tenant will immediately cause any such liens to be
released of record, at its sole expense.
(i) Tenant agrees to periodically shampoo and/or wax any carpeting and/or
tiled flooring within the Demised Premises, as needed to maintain them in a
clean and good operating condition.
14. LANDLORD'S RIGHT TO CHANGE THE PROPERTY: Landlord reserves the right (but
not any obligation), from time to time, to alter, replace, construct, raze
or otherwise modify any buildings, structures, improvements, systems,
equipment, signs, or any other features within the Property, provided it
does not permanently interfere with Tenant's right to use the Demised
Premises.
GREENWORKS MOLECULAR LEASE
-4-
15. LANDLORD'S ACCESS: Landlord and its designees, shall have the right (but
not any obligation) at all times, upon reasonable advance notice to Tenant,
to enter upon the Demised Premises for the purpose of inspecting or
performing routine maintenance or repairs, or for any other reasonable
purpose, as determined by Landlord. No advance notice will be required in
the event of emergencies.
16. LANDLORD'S MAINTENANCE & REPAIR OBLIGATIONS: Landlord agrees to keep in the
same good order, condition and repair, as at present, less reasonable wear
and tear, the roof, and the exterior face and structural portions of the
Demised Premises. Landlord's obligations do not apply to damage caused by
fire, other insured casualty or condemnation. Landlord shall not be
responsible to repair or restore any damage caused by any act, omission or
negligence of Tenant, its employees, agents, licensees, invitees or
contractors, and Tenant shall bear the entire cost of such damage.
16A. CLEANING: Landlord agrees to empty customary office-type waste baskets on
each business day, vacuum at least once per week and clean windows twice
per year.
17. TENANT'S INSURANCE: Tenant agrees to pay for and maintain in full force
during the Lease Term, a policy of comprehensive general liability
insurance for personal injury and property damage on an occurrence basis,
under which the Landlord or others as may be set out in written notice by
landlord to Tenant, from time to time, are named as additional insureds.
Each policy will be written by a company(ies) licensed to do business in
Massachusetts and rated A-VIII or higher by A.M. Best's Rating Agency and
will be non-cancelable without at least thirty (30) days' prior written
notice to Landlord. The minimum limits of liability of such insurance shall
be not less than $1,000,000, combined single limit for personal injury and
death, and for property damage arising out of any one incident or disaster.
Tenant shall provide Landlord with evidence of full coverage prior to
Tenant's occupancy. Tenant will provide Landlord with a renewed Certificate
of Insurance, thirty (30) days prior to the expiration of the current
policy.
17A. TENANT'S PROPERTY INSURANCE: Tenant shall keep its fixtures, equipment,
furniture and other personal property insured against loss or damage by
fire with the usual extended coverage endorsements. Tenant assumes all risk
of damage or loss to its own property arising from any cause, including
theft.
17B. INCREASE IN INSURANCE RATES: Tenant agrees that it will not use, do or
permit anything to be done in or upon the Demised Premises, which makes
voidable or increases the rate of insurance on the property or any part
thereof, and agrees to pay for any increase which may arise from such use
or action.
17C. INDEMNIFICATION: Tenant agrees to indemnify and save harmless Landlord from
and against all claims, actions or damages of whatever nature arising from
any act, omission or negligence of the Tenant or Tenant's contractors,
licensees, invitees, agents, servants or employees, on or about the Demised
Premises or Property, during the Lease Term. Landlord agrees to indemnify
and save harmless Tenant from and against all claims, actions or damages of
whatever nature arising from any act, omission or negligence of the
Landlord or Landlord's contractors, licensees, invitees, agents, servants
or employees, on or about the Demised Premises, during the Lease Term.
GREENWORKS MOLECULAR LEASE
-5-
18. UTILITIES: Landlord will provide and maintain all utilities serving the
Demised Premises. Landlord reserves the right to place and maintain within
the Demised Premises utility lines, pipes, fixtures, conduits and the like
to serve the Demised Premises and other premises. Landlord shall not be
liable to Tenant in damages or otherwise for any interruption, curtailment
or suspension of any utility services. Tenant agrees to install, maintain
and pay for all expenses associated with telephone and internet services.
19. ASSIGNMENT AND SUBLETTING: Tenant may not assign this Lease or sublet the
Demised Premises without Landlord's prior written approval, not to be
unreasonably withheld. Notwithstanding any consent, Tenant shall remain
liable to Landlord for the payment of all rents and for the full
performance of the terms of this Lease.
20. FIRE, CASUALTY AND EMINENT DOMAIN: Landlord may elect to terminate this
Lease if the Demised Premises or the Property are substantially damaged by
fire, other casualty or taken by condemnation or the right to eminent
domain. Landlord's obligation to repair and restore in the event of partial
damage by fire or other casualty is limited by the actual net amount of
insurance proceeds. Tenant may elect to terminate this Lease if Landlord
fails to give written notice within thirty (30) days after the event, of
its intention to restore the Demised Premises or Landlord fails to restore
the Demised Premises to a condition reasonably suited for its intended use
within ninety (90) days after said event. Landlord will provide Tenant with
a just and proportionate abatement of rent during the time the Demised
Premises remain substantially unsuitable for their intended use. Landlord
reserves and Tenant assigns to Landlord all rights which Tenant may have
for damages or injury to the Demised Premises for any condemnations or
takings by eminent domain.
21. SURRENDER OF PREMISES: Upon the expiration or sooner termination of this
Lease, Tenant shall remove all Tenant's equipment, furniture and other
personal property and surrender the Demised Premises in good and tenantable
order and repair and in good operating condition, except for ordinary wear
and tear. If Tenant fails to surrender the premises as required, Landlord
may retain or dispose of Tenant's property or restore the premises, all at
Tenant's expense. Any fixtures or other improvements installed by Landlord
or Tenant remain Landlord's property and should not be removed by Tenant
without Landlord's prior written consent.
21A. HOLDOVER BY TENANT: If Tenant remains in possession, after the expiration
or sooner termination of this Lease without an executed renewal, this Lease
becomes a month to month tenancy, at a monthly rental equal to two hundred
(200%) percent of the rent payable during the last month of the Lease Term,
subject to all other charges and terms contained in this Lease.
22. ENVIRONMENTAL MATTERS: Tenant agrees not to use, store, generate,
manufacture, process or dispose of (or suffer or permit the use, storage,
generating, manufacturing, processing or disposal of) oil, grease,
chemical, hazardous, toxic or dangerous materials, substances or waste at
or around the Demised Premises, Property or within any pipes, conduits,
drains, mains or ducts or into any septic, sewer, drainage or other
systems, except for materials used in Tenant's Laboratory Space solely and
exclusively for the purpose of
GREENWORKS MOLECULAR LEASE
-6-
laboratory uses in conformance with the provisions of this Lease and
stored, used and disposed in strict compliance with all applicable laws and
regulations, including environmental laws, regulations, ordinances, orders
and standards. Tenant shall at all times comply with all applicable
federal, state and local environmental laws, ordinances, orders or
regulations now or hereafter affecting or applicable to the Demised
Premises or Property. Tenant agrees to indemnify, defend, save and hold
harmless Landlord from all claims, actions, liens, demands, costs,
expenses, fines and judgments resulting from any spills or contamination of
any kind caused by the acts or omissions of Tenant or its agents,
employees, licensees, servants or contractors or any other violation of
applicable environmental laws or this Provision of this Lease. Tenant
agrees to pay all costs associated with the evaluation and remediation of
any environmental matter and enforcement of this Environmental Provision
including any reasonable engineering, consulting or legal fees and
expenses. Landlord reserves the right to request Tenant to provide data,
specifications and professional opinions in connection with any
environmental concern related to Tenant or the Demised Premises.
23. SUBORDINATION: Tenant's rights under this Lease shall be subject and
subordinate to any mortgages or deeds of trust or other instruments in the
nature of a mortgage or lien on the Property and Tenant, upon request,
shall promptly execute and deliver any written instrument necessary to show
the subordination of this Lease.
24. EVENTS OF DEFAULT: In the event that: (a) Tenant shall default in the
payment of rent or any other payments and such default shall continue for
ten (10) days; or (b) Tenant shall default in the performance of any
covenant or obligation under the terms of this Lease and such default shall
not be corrected within fifteen (15) days after written notice thereof; or
(c) Tenant shall be declared bankrupt or insolvent according to law, or, if
any assignment shall be made of Tenant's property for the benefit of
creditors, then:
Landlord shall have the right at any time thereafter, while such default
continues, to re-enter the Demised Premises and take complete possession,
to declare the term of this Lease ended, and remove the Tenant's effects,
without prejudice to any other remedies that might be otherwise used for
unpaid rents or other defaults. Tenant shall indemnify Landlord against
loss of rent and other payments that the Landlord may incur by reason of
such termination during the remainder of the Lease Term.
In the event that Tenant shall default in the performance of any covenant
or obligation under the terms of this Lease, excluding non-payment of rent
or other charges, and such default shall not be corrected within fifteen
(15) days after written notice thereof, Landlord may (but is not obligated
to do so) remedy such default at the expense of Tenant, to be paid as
additional rent.
Failure by Landlord to complain of any action or non-action on the part of
Tenant, no matter how long or frequent the same may continue, shall never
be deemed to be a waiver by Landlord of any rights hereunder.
25. NO BROKERAGE: Landlord and Tenant warrant and represent that they have had
no contact or dealings with any broker or any person or entity intending to
claim a commission, in connection with this Lease or the Demised Premises.
GREENWORKS MOLECULAR LEASE
-7-
26. LIMITATION OF LIABILITY: Landlord shall not be liable to Tenant for any
failure to perform its obligations under the terms of this Lease due to any
cause beyond Landlord's reasonable control or caused by an act or neglect
of Tenant or its servants, agents, employees or licensees. Landlord shall
never be liable to Tenant for any indirect or consequential damages. No
trustee, beneficiary, agent, employee, officer or partner of Landlord, nor
any person, firm or entity having an interest in Landlord, shall ever be
personally liable for any performance of Landlord's obligations under this
Lease or any related judgments. Landlord's obligations are limited to the
provisions of this Lease, during its ownership interest in the Property and
are not binding upon any other assets held by Landlord.
27. NOTICES: Any notice required under the terms of this Lease shall be in
writing and shall be hand-delivered or sent to Landlord at Landlord's
Address and to Tenant at Tenant's Address. Notice shall be sent by
registered or certified mail, return receipt requested, postage prepaid or
by a recognized national courier that maintains records of delivery, such
as Federal Express. Notice shall be deemed given when received, refused or
tendered for delivery, provided it is correctly addressed.
28. AUTHORIZATION: The person signing this Lease on behalf of Tenant by virtue
of his or her signature hereon personally represents and warrants to
Landlord that Tenant has taken all necessary actions to authorize his or
her signature hereon on behalf of such Tenant and that upon the signing and
delivery hereof to the Landlord by him or her, this Lease will be binding
upon Tenant.
WITNESS the execution hereof, under seal, in any number of counterpart
copies, each which shall be deemed to be an original for all purposes as of
the day and year first above written.
LANDLORD: TENANT:
RAYJOE LIMITED PARTNERSHIP MOLECULAR INSIGHT
By: KDO Real Estate Holdings, Inc. PHARMACEUTICALS, INC.
By: /s/ Deborah A. Ciolfi By: /s/ John E. McCray
------------------------ ------------------------
Deborah A. Ciolfi Name: John E. McCray
Treasurer, duly authorized. Title: COO, duly authorized
ATTEST By:
/s/ Wendy Graham Coco
------------------------------
Name: Wendy Graham Coco
Title: Dir. Business Development &
Operations
GREENWORKS MOLECULAR LEASE
|
-8-
FIRST AMENDMENT TO MOLECULAR INSIGHT PHARMACEUTICALS, INC., GREENWORKS
OFFICE LEASE
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, RayJoe Limited Partnership ("Landlord") and Molecular
InSight Pharmaceuticals, Inc., ("Tenant"), confirm the following facts and their
agreement as follows:
1. RECITALS. Landlord and Tenant are parties to a Lease Agreement dated
June 19, 2003 ("Lease"). By mutual agreement, the parties hereby agree to lease
two (2) additional office spaces until the expiration date of the Lease on June
30, 2008. The spaces are shown under attached EXHIBIT A.
The purpose of this writing is to set forth the entire agreement of the parties
with respect thereto.
2. AMENDMENT. The Lease is hereby amended as follows:
A. ADDITIONAL SPACE #1: Tenant shall lease Unit # 18, the Pioneer Financial
office space, as is, containing approximately 198 rsf, for a term of five
(5) years, commencing on September 1, 2003 until June 30, 2008 ("Additional
Space #1"). Tenant agrees that Landlord has made no representations or
warranties respecting the condition of the Additional Space #1.
B. FIXED RENT FOR ADDITIONAL SPACE #1: Provided Landlord has delivered the
Additional Space #1, Tenant shall pay Fixed Rent ("Rent"), commencing on
September 1, 2003, as follows:
Dates: Yearly Rent: Monthly Rent:
------ ------------ -------------
9/1/03 - 6/30/08 $ 5,148.00 $ 429.00
|
C. ADDITIONAL SPACE #1 AVAILABILITY CONTINGENCY: In the event that,
Additional Space #1 is not delivered to Tenant as of December 1, 2003, the
portions of this Amendment relating to Additional Space #1 will become void
and unenforceable, unless Landlord and Tenant mutually agree to extend the
delivery date for said unavailable space.
D. ADDITIONAL SPACE #2: Tenant shall lease Unit #16, currently occupied by
Stella Tarnay, as is, containing approximately 170 rsf, for a term of five
(5) years, commencing on October 1, 2003 until June 30, 2008 ("Additional
Space #2"). Tenant agrees that Landlord has made no representations or
warranties respecting the condition of the Additional Space #2.
E. FIXED RENT FOR ADDITIONAL SPACE #2: Provided Landlord has delivered the
Additional Space #2, Tenant shall pay Fixed Rent ("Rent"), commencing on
October 1, 2003, as follows:
Dates: Yearly Rent: Monthly Rent:
------ ------------ -------------
10/1/03 - 6/30/08 $ 4,416.00 $ 368.00
|
MOLECULAR INSIGHT FIRST AMENDMENT
-1-
F. ADDITIONAL SPACE #2 AVAILABILITY CONTINGENCY: In the event that,
Additional Space #2 is not delivered to Tenant as of December 1, 2003, the
portions of this Amendment relating to Additional Space #2 will become void
and unenforceable, unless Landlord and Tenant mutually agree to extend the
delivery date for said unavailable space.
G. ADDITIONAL RENT ADJUSTMENT PERCENTAGES:
1. TAX CHARGE: Tenant shall pay 16 % of real estate taxes for the
Property over the 2003 fiscal year tax base, as additional rent in
relation to its office space.
2. OPERATING COST: Tenant shall pay 16 % of operating expenses for the
Property over the 2003 calendar year base operating expenses, as
additional rent in relation to its office space.
H. BASEMENT STORAGE: Tenant shall pay a charge of $110.00 per month for its
lease of a wire cage in the basement, containing approximately 110 square
feet for storage purposes only, commencing on July 1, 2003 until June 30,
2008. Landlord shall not be liable for any damage or losses incurred by
Tenant due to theft, fire or any other cause. Tenant agrees to insure the
personal property stored in said wire cage and assumes full responsibility
for its security.
3. GENERAL. The individual signing this writing on behalf of Tenant
personally represents and warrants to Landlord that all necessary corporate
action authorizing the same has been duly taken and that upon the execution and
delivery hereof, this writing shall be binding upon the Tenant and enforceable
in accordance with its terms. Landlord and Tenant confirm that, as except as
modified hereby, the Lease remains in full force and effect upon all the other
terms and provisions.
EXECUTED as a sealed instrument_____________________________, 2003.
LANDLORD: TENANT:
RAYJOE LIMITED PARTNERSHIP MOLECULAR INSIGHT
By: KDO Real Estate Holdings, Inc. PHARMACEUTICALS, INC.
By: _____________________________ By: /s/ John E. McCray
Deborah A. Ciolfi ------------------
Treasurer, duly authorized Name: John E. McCray
Title: COO, as duly authorized.
ATTEST By:
/s/ John W. Babich
--------------------
Name: JOHN W. BABICH
Title: PRESIDENT & CSO
MOLECULAR INSIGHT FIRST AMENDMENT
|
-2-
EXHIBIT A
[FLOOR PLAN]
Exhibit 10.7
EMPLOYMENT AGREEMENT
(for John W. Babich)
EMPLOYMENT AGREEMENT (this "Agreement") dated as of January 1, 2003 (the
"Effective Date"), by and between Biostream, Inc., a Massachusetts corporation
having its principal place of business at 160 Second Street, Cambridge,
Massachusetts 02142 (the "Employer"), and John W. Babich (the "Employee").
WITNESSETH:
WHEREAS, the Employer is engaged in the business of developing and
marketing imaging Pharmaceuticals which detect human disease; and
WHEREAS, the Employee possesses the experience necessary in administration
and general and active supervision and direction of the daily operations of a
biopharmaceutical business in order to fulfill the responsibilities as President
and Chief Scientific Officer of the Employer; and
WHEREAS, the Employer desires to employ the Employee, and the Employee
desires to be employed by the Employer, all in accordance with the terms and
provisions of this Agreement.
NOW, THEREFORE, in consideration of the covenants and promises hereinafter
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employer and the Employee
represent, covenant and agree as follows:
1. Employment. The Employer hereby employs the Employee to serve as
President and Chief Scientific Officer of the Employer in accordance with the
terms and provisions of this Agreement, and the Employee hereby accepts such
employment with the Employer. Employee also shall serve as a member of the Board
of Directors of the Employer.
2. Term. The term of this Agreement shall commence on the Effective Date
and shall continue until this Agreement is terminated as hereinafter provided.
3. Compensation. As compensation for all services rendered by the Employee
to the Employer pursuant to this Agreement, the Employer shall pay to the
Employee the following amounts during the term of this Agreement:
(a) Base Compensation. The Employer shall pay to the Employee base
compensation at no less than the rate set forth on Schedule A attached hereto
and herein incorporated by reference (the "Base Compensation"). The Base
Compensation shall be payable pursuant to the Employer's standard payroll
practices, except as otherwise noted on Schedule A. The Base Compensation shall
be reviewed by the compensation committee of the Board of the Employer annually
and increases in the Base Compensation, if any, shall be evidenced by the
updating and initialing of Schedule A by both parties hereto.
(b) Incentive Bonus. In addition to the Base Compensation, the
Employee shall be eligible to receive an annual fiscal year incentive bonus with
a maximum annual amount equal to seventy-five percent (75%) of the then current
Base Compensation (the "Incentive Bonus"). Payment of the Incentive Bonus shall
be subject to the discretion of the Board and will be based upon accomplishment
of goals provided to the Employee by the CEO from time to time and based upon
scientific progress and achievement of specific corporate milestones. The Board
may elect to award the Incentive Bonus to the Employee in cash or in the
Employer's capital stock (at its then-current fair market value), but a capital
stock bonus requires the consent of the Employee.
4. Vacation and Employee Benefits.
(a) Vacation. The Employee shall be entitled to an annual paid
vacation equal to four weeks annually. Vacation shall be taken at such times so
as not to interfere with the proper operation of the Employer's business.
(b) Benefits Generally. The Employee shall be entitled to receive
and participate in such employee benefits as the Employer shall from time to
time determine to provide to its executives generally. At a minimum, the
Employee shall receive medical and dental insurance at the Employer's expense.
(c) Indemnification Rights. The Employee shall be entitled to
indemnification, including advance reimbursement of expenses, to the fullest
extent permitted by applicable law, and shall be entitled to receive an
indemnification agreement with terms equivalent to any indemnification agreement
that the Employer executes with any of its officers or directors.
(d) Registration Rights. The Employee shall be entitled to the
benefit of any so-called "piggy-back" registration rights and related provisions
that the Employer has granted or grants to any third party on the same basis as
the most favorable provisions received by any such third party.
(e) Participation Rights. The Employee shall be entitled to rights
equivalent to the Employer's outside investors with respect to rights to
purchase additional equity securities issued by the Employer in order to
maintain the Employee's percentage interest in the Employer's equity securities.
5. Stock Incentives.
(a) Options. Pursuant to the provisions of the Company's 1997 Stock
Option Plan, as may be amended from time to time (the "Plan"), and subject to
the vesting provisions described below the Company hereby grants to the Employee
an option to purchase 1,825,000 shares of its Common Stock ($.01 par value) (the
"Optioned Shares") at a price of $0.10 per share, in accordance with and subject
to all the terms and conditions of the Plan and subject to the terms and
conditions hereinafter set forth. Nothing in this section refers to or impinges
upon
2
shares currently held by or options (either vested or unvested) previously
granted to the Employee.
(b) Vesting. 20% of the options shall be vested upon Board approval
and the remainder shall be "unvested options." An additional 5% of the options
shall vest on each quarterly (three-month) anniversary of the Effective Date,
provided that the Employee is still employed by the Employer on such date or is
then receiving a Severance Package (as defined in Section 15 below). In the
event of a Change of Control (as defined below), all of the unvested options
immediately shall vest, provided that the Employee is still employed by the
Employer on the date of such Change of Control, or is then receiving a Severance
Package.
(c) Change of Control. For purposes of this Agreement "Change of
Control" shall mean the occurrence of one or more of the following events:
(i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes a
"beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act) (other than the Employer, any trustee or other fiduciary holding
securities under an employee benefit plan of the Employer, or any corporation
owned, directly or indirectly, by the stockholders of the Employer, in
substantially the same proportions as their ownership of stock of the Employer),
or any or group of persons acting in concert becomes a beneficial owner,
directly or indirectly, of securities of the Employer, representing more than
fifty percent (50%) of the combined voting power or fully diluted equity
interest of the Employer's then outstanding equity securities, except as a
result of a financing transaction where all proceeds are received directly by
the Company that is not intended as a sale of the business of the Employer; or
(ii) the stockholders of the Employer approve a merger or consolidation of the
Employer with any other corporation or other entity, other than (A) a merger or
consolidation which would result in the equity securities of the Employer
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into equity securities of the
surviving entity) fifty percent (50%) or more of the outstanding equity interest
of the Employer or such surviving entity outstanding immediately after such
merger or consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Employer (or similar transaction) in which no "person"
(as hereinabove defined) other than Employee acquires more than fifty percent
(50%) of the equity interest of the Employer's then outstanding securities; or
(iii) the stockholders of the Employer approve a plan of complete liquidation of
the Employer or an agreement for the sale or disposition by the Employer of all
or substantially all of the Employer's assets.
6. Description of Duties. During the term of this Agreement, the Employee
shall be the President and Chief Scientific Officer of the Employer and shall:
(a) Devote on a full time basis all necessary time, best efforts,
professional skills, attention and energies to the fulfillment of the duties
customarily associated with such
3
position and the accomplishment of the goals provided by the CEO of the Employer
to the Employee from time to time; and
(b) Act in accordance herewith, and in all accounts be responsible
and responsive to, the Board of Directors and the CEO of Employer.
7. General Services. During the term of this Agreement, the Employee
shall:
(a) Observe the Employer's policies and standards of conduct, as
well as customary standards of business conduct, including any standards
prescribed by law or regulation;
(b) Perform his duties hereunder in a manner that preserves and
protects the Employer's business reputation; and
(c) Do all things and render such services as may be necessary or
beneficial in carrying out any of the foregoing.
8. Non-Disclosure of Proprietary or Confidential Information and
Confidential Communications. For the purposes of this Section 8, the term
"Employer" shall include, and the protections granted the Employer hereunder
shall extend to, ATP Therapeutics, Inc., Biostream Therapeutics, Inc. (f/k/a
Zebra Pharmaceuticals, Inc.), and any other entities now or hereinafter
affiliated, acquired or created by Biostream, Inc. The Employee recognizes and
acknowledges that the marketing plans and business strategy, the names and
addresses of the Employer's customers, the particular needs and application of
such customers for diagnostic imaging techniques, the names and addresses of the
Employer's suppliers, the Employer's purchasing history with its suppliers, the
names and other pertinent data concerning the persons employed by the Employer's
suppliers who are responsible for supplying the Employer with products and
services, the Employer's proprietary computer software programs, trade secrets
and any other confidential and proprietary information concerning the business
or affairs of the Employer (including but not limited to marketing and business
plans and strategies, research protocols, procedures data, results, and cost
information) (hereinafter collectively referred to as the Confidential
Information) constitute a valuable, proprietary, special and unique asset of the
Employer's business. The Employee further recognizes and acknowledges that any
communications, whether written, oral or otherwise, that the Employer or any of
the Employer's employees has with the Employer's existing or prospective
customers and clients and affiliated research institutions and scientists are
extremely confidential (hereinafter the "Confidential Communications"). The term
Confidential Information shall exclude any information that has been made public
through no fault of the Employee.
The Employee shall not, for any reason whatsoever, during or after the
termination of his employment with the Employer, use, disclose or allow access
to, for his own benefit or for that of another, the Confidential Information or
the Confidential Communications (or any part thereof) to any person, firm,
corporation, association or other entity for any reason or for any purpose
whatsoever.
4
In the event of a breach or threatened breach by the Employee of the
provisions of this Section, the Employer shall be entitled to an injunction
restraining the Employee from so using, disclosing or allowing access to, in
whole or in part, the Confidential Information and the Confidential
Communications or from rendering any services to any person, firm, corporation,
association or other entity to whom the Confidential Information or the
Confidential Communications, in whole or in part, have been disclosed or are
threatened to be disclosed. Nothing herein shall be construed as prohibiting the
Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach, including, but not limited to, the recovery of
damages and reasonable attorneys' fees from the Employee.
Upon termination of this Agreement by either party for any reason, the
Employee shall return to the Employer any of the Confidential Information,
Confidential Communications, charts, company literature, reports, Employer
credit cards or other proprietary materials of the Employer then in the
Employee's possession and all other materials of the Employer which the Board of
Directors of the Employer requests the Employee to so return.
This Section shall in all respects survive any termination of this
Agreement and shall remain in full force and effect thereafter. In the event
that any provision of this Section 8 shall conflict with any term or condition
of any other confidentiality agreement between the Employer and the Employee,
then the more restrictive provision shall be deemed to apply in order to
accomplish the purposes of this Section 8 and such other agreements, that being
to protect the Employer's Confidential Information and Confidential
Communications.
In the event of the Employee's breach of this Section 8, the Employee
shall immediately and irrevocably forfeit future payments under the Severance
Package as hereinafter defined in Section 15. Nothing in this paragraph shall be
construed to limit or cap the Employer's damages in the event of a breach of
this Section 8.
9. Covenant Not to Compete; Non-solicitation of Employees and Customers.
For the purposes of this Section 9, the term "Employer" shall include, and the
protections granted the Employer hereunder shall extend to, ATP Therapeutics,
Inc., Biostream Therapeutics, Inc. (f/k/a Zebra Pharmaceuticals, Inc.), and any
other entities now or hereinafter affiliated, acquired or created by Biostream,
Inc. The Employee agrees that while employed by the Employer and for a
continuous period of one (1) year following the date of the termination of his
employment with the Employer either voluntarily without "Good Reason" or
involuntarily by the Company for "cause" (the "Restricted Period"), he shall not
(without the express prior written consent of the Board of Directors of the
Employer), directly or indirectly, compete with the Employer. In construing the
foregoing prohibition, the Employee shall be deemed to be competing with the
Employer if he shall become self-employed in, or accept employment with, consult
with, render services to or become associated with, own, manage, operate, join,
control, or participate in the ownership, management, operation, or control of,
or be connected in any material manner with, or directly or indirectly enter
into the employment of, or make a substantial investment in, any corporation,
partnership, proprietorship or other type of business organization or entity
which engages in, any business (a "Competing Business") involving the sale,
distribution, development or research concerning diagnostic imaging of the human
cardio-vascular system or other lines of the Employer which directly and
materially competes with the product lines in or with which the
5
Employer is then currently involved. An academic appointment shall be deemed not
to be a conflict under the terms of this section.
The Employee further agrees that, during his employment with the Employer
and during the Restricted Period, he shall not solicit any of the Employer's
employees, existing customers or prospective customers (of which the Employee is
then currently aware), affiliated research institutions or scientists, on behalf
of himself or any Competing Business.
This Section 9 shall in all respects survive any termination of this
Agreement and shall remain in full force and effect during the Restricted
Period.
In the event of the Employee's breach of this Section 9 during the
Restricted Period, the Employee shall immediately and irrevocably forfeit future
payments to the Employee under the Severance Package as hereinafter defined in
Section 15.
10. Assignment of Rights. Any and all information, data, inventions,
discoveries, materials, notebooks and other work product which the Employee
conceives, develops or acquires during his employment with the Employer, which
directly or indirectly relates to work performed for the Employer, shall be the
sole and exclusive property of the Employer. The Employee shall promptly execute
any and all documents necessary and take such further actions as the Employer
may deem necessary to assign any and all of the Employee's right, title and
interest in such property to the Employer.
11. Intellectual Property. For the purposes of this Section 11, the term
"Employer" shall include, and the protections granted the Employer hereunder
shall extend to, ATP Therapeutics, Inc., Biostream Therapeutics, Inc. (f/k/a
Zebra Pharmaceuticals, Inc.), and any other entities now or hereinafter
affiliated, acquired or created by Biostream, Inc. During the Employee's
employment at the Employer, the Employee shall promptly assist with and execute
any and all applications, assignments or other documents which an officer or
director of the Employer shall deem necessary or useful in order to obtain and
maintain patent, trademark or other intellectual property protection for the
Employer's products or services. After the termination date of his employment
with the Employer, the Employee shall use reasonable efforts to assist the
Employer on intellectual property matters as they relate to his employment, and
the Employer shall reasonably compensate the Executive for his time and expense.
12. Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to Confidential
Information, which are furnished to the Employee by the Employer or are produced
by the Employee in connection with the Employee's employment will be and remain
the sole property of the Employer. The Employee will return to the Employer all
such materials and property as and when requested by the Employer. In any event,
and whether or not the Employer so specifically requests, the Employee will
return all such materials and property immediately upon termination of the
Employee's employment for any reason. The Employee will not retain any such
material or property or any copies thereof after such termination.
6
13. Third-Party Agreements and Rights. The Employee hereby confirms that
he is not bound by the terms of any agreement with any previous employer or
other party which restricts in any way the Employee's use or disclosure of
information or the Employee's engagement in any business. The Employee
represents to the Employer that the Employee's execution of this Agreement, the
Employee's employment with the Employer and the performance of the Employee's
proposed duties for the Employer will not violate any obligations the Employee
may have to any such previous employer or other party. In the Employee's work
for the Employer, the Employee will not disclose or make use of any information
in violation of any agreements with or rights of any such previous employer or
other party, and the Employee will not bring to the premises of the Employer any
copies or other tangible embodiments of nonpublic information belonging to or
obtained from any such previous employer or other party.
14. Restricted Activities. During the term of this Agreement, the Employee
shall not engage in any business activities or ventures outside of the business
activities of the Employer without the express prior written consent of the
Employer's Board; provided, however, that nothing in this Agreement shall be
construed as preventing the Employee from:
(a) investing the Employee's assets in any company or other entity
in a manner not prohibited by Section 9 and in such form or manner as shall not
require any material activities on the Employee's part in connection with the
operations or affairs of the companies or other entities in which such
investments are made; or
(b) engaging in religious, charitable or other community or
non-profit activities that do not impair the Employee's ability to fulfill the
Employee's duties and responsibilities under this Agreement.
15. Termination.
A. Termination Without Cause.
(a) Notwithstanding anything herein to the contrary, this
Agreement may be terminated by either the Employer (by act of its Board) or the
Employee, at any time, without cause; provided, however, that the party desirous
of terminating this Agreement shall give the other party prior written notice of
such termination. In either event, the Employer may determine the Employee's
final day of employment hereunder. The date specified in any notice of
termination as the Employee's final day of employment shall be referred to
herein as the Termination Date.
(b) In the event that the Employer (by act of its Board)
terminates this Agreement without cause pursuant to this subsection (A) of
Section 15, or the Employee voluntarily resigns for Good Reason (defined below),
then the Employee shall be entitled to receive severance pay equal the Base
Compensation rate as of the Termination Date in equal monthly installments for a
period of twelve (12) months (the "Post-Termination Period") from the
Termination Date (the "Severance Package"). The Employer also agrees to make
available to the Employee, as part of the Severance Package, continuation of
group health plan benefits to the extent authorized by and consistent with 29
U.S.C. Section 1161 et seq. (commonly known as
7
"COBRA"), and any other benefits the Employee is receiving as of the Termination
Date with the cost of the regular premium for such benefits shared in the same
relative proportion by the Employer and the Employee as in effect on the
Termination Date.
(c) For purposes of this Agreement, "Good Reason" shall mean:
(i) a reduction of the Employee's salary or insurance
benefits other than a reduction approved by the Employee in writing; or
(ii) a significant change in the Employee's title,
responsibilities and/or duties which constitutes, when compared to the
Employee's title, responsibilities and/or duties as of the Effective Date, a
demotion; or
(iii) the relocation of the offices at which the
Employee is principally employed as of the Effective Date to a location more
than fifty (50) miles from such office, which relocation is not approved by the
Employee.
(d) In the event of the Employee's voluntary termination, then
the Employee shall, at the request of the CEO of the Employer, continue as an
employee of the Employer for an additional thirty (30) day period after the
Termination Date for the purpose of assisting the Employer in locating and
training a suitable replacement for the Employee. During such additional period,
the Employee shall be entitled to full compensation and benefits and the
Employee shall continue to be bound by all of the terms contained herein. Any
such extended term shall extend the Post-Termination Period by an equal number
of days.
B. Termination With Cause.
(a) The Employer (by act of its Board or CEO) may terminate
this Agreement immediately for "cause" by giving written notice to the Employee.
As used herein, the term "cause" shall mean the Employee's: (i) addiction to
illegal drugs; (ii) willful failure or refusal to perform his duties hereunder
after written notice from the CEO and an opportunity to cure; (iii) knowing acts
of dishonesty which materially adversely affect the Employer; (iv) indictment
for a felony or crime involving moral turpitude, fraud, embezzlement or
misrepresentation. In the event that this Agreement is terminated pursuant to
this subsection (B), the Employee forfeits and shall not be entitled to the
Severance Package, or other benefits or bonus of any kind whatsoever for any
period after the Termination Date set forth in the notice given by the Employer
to the Employee.
C. Disability.
(a) If the Employee shall be disabled so as to be unable to
perform the essential functions of the Employee's then existing position or
positions under this Agreement, the Employer may remove the Employee from any
responsibilities and/or reassign the Employee to another position with the
Employer during the period of such disability. If the period of disability
extends for more than six (6) months, the Employer may terminate the Employee's
employment without further liability on the part of the Employer, except that
the Employee shall
8
be entitled to the Severance Package. The Employer may elect, at its sole
discretion, to purchase a disability insurance package for the Employee. In the
event that the Employer so elects to purchase a disability insurance package and
the Employee subsequently becomes entitled to payments of the disability
insurance benefit, any payments pursuant to the Severance Package, as defined in
this Section 15, or payments of salary by the Employer will be reduced by the
amount of the disability insurance benefit payments received by the Employee.
(b) If any question shall arise as to whether during any
period the Employee is disabled so as to be unable to perform the essential
functions of the Employee's then existing position or positions, the Employee
may, and at the request of the Employer shall, submit to the Employer a
certification in reasonable detail by a physician selected by the Employer, to
whom the Employee or the Employee's guardian has no reasonable objection, as to
whether the Employee is so disabled or how long such disability is expected to
continue, and such certification shall, for the purposes of this Agreement, be
conclusive of the issue. The Employee shall cooperate with any reasonable
request of the physician in connection with such certification. If such question
shall arise and the Employee shall fail to submit such certification, the
Employer's determination of such issue shall be binding on the Employee. Nothing
in this Section 15(c) shall be construed to waive the Employee's rights, if any,
under existing law including, without limitation, the Family and Medical Leave
Act of 1993, 29 U.S.C. 2601, et seq. and the Americans with Disabilities Act, 42
U.S.C. 12101 et seq.
D. Death or Retirement. The Employee's employment under this Agreement
will be deemed to have terminated without further liability on the part of the
Employer if the Employee dies or retires.
E. Certain Termination Benefits. Unless otherwise specifically provided in
this Agreement or otherwise required by law, all compensation and benefits
payable to the Employee under this Agreement shall terminate on the date of
termination of the Employee's employment under this Agreement.
F. No Right to Continuing Employment. The Employee agrees that nothing
contained in this Agreement shall be construed to give the Employee a right to
continuing employment beyond the Termination Date.
16. Litigation and Regulatory Cooperation. During and after the Employee's
employment, the Employee shall cooperate fully with the Employer in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Employer which relate to events or
occurrences that transpired while the Employee was employed by the Employer. The
Employee's full cooperation in connection with such claims or actions shall
include, but not be limited to, being available to meet with counsel to prepare
for discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Employee's employment, the
Employee also shall cooperate fully with the Employer in connection with any
investigation or review of any federal, state or local regulatory authority as
any such investigation or review relates to events or occurrences that
transpired while the Employee was employed by the Employer. The Employer
9
shall reimburse the Employee for any reasonable out-of-pocket expenses incurred
in connection with the Employee's performance of obligations pursuant to this
Section 16.
17. Injunction. The Employee agrees that it would be difficult to measure
any damages caused to the Employer which might result from any breach by the
Employee of the promises set forth in Section 8, and that in any event money
damages would be an inadequate remedy for any such breach. Accordingly, the
Employee agrees that if the Employee breaches, or proposes to breach, any
portion of this Agreement, the Employer shall be entitled, in addition to all
other remedies that it may have, to an injunction or other appropriate
preliminary equitable relief to restrain any such breach without showing or
proving any actual damage to the Employer.
18. No Assignment. The Employee acknowledges that the services to be
rendered by him pursuant to this Agreement are unique. Accordingly, the Employee
shall not assign any of his rights or delegate any of his duties or obligations
under this Agreement.
19. Severability. Subject only to the reformation of time, geographical
and occupational limitations as set forth in Section 20 hereof, all of the terms
and provisions contained in this Agreement are severable and, in the event that
any portion or provision of this Agreement (including, without limitation, any
portion or provision of any section of this Agreement) shall to any extent be
deemed unenforceable or invalid by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared unenforceable or
invalid, shall not be affected thereby, and each portion and provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
20. Reformation of Time Geographical and Occupational Limitations. In the
event that any provision in this Agreement is held to be unenforceable by a
court of competent jurisdiction because it exceeds the maximum time,
geographical or occupational limitations permitted by applicable law, then such
provision(s) shall be and hereby are reformed to the maximum time, geographical
and occupational limitations as may be permitted by applicable law.
21. Specific Performance. Both parties recognize that the services to be
rendered under this Agreement by the Employee are special, unique and of an
extraordinary character, and that in the event of breach by the Employee of the
terms or conditions of this Agreement to be performed by him, the Employer shall
be entitled, if it so elects, to institute and prosecute proceedings in any
court of competent jurisdiction, either at law or in equity, to obtain damages
for any breach of this Agreement to enforce the specific performance thereof by
the Employee, or to enjoin the Employee from engaging in such activity, but
nothing contained herein shall be construed to prevent such other remedy in the
courts, in case of any breach of this Agreement by the Employee, as the Employer
may elect to invoke.
22. Massachusetts Law: Choice of Forum. This Agreement shall be governed,
construed and interpreted by, and in accordance with, the laws of the
Commonwealth of Massachusetts, without reference to its principles of conflicts
of laws. Any actions concerning
10
enforcement of this Agreement or in any way relating to the subject matter of
this Agreement shall be litigated only in Massachusetts state or federal courts
of proper jurisdiction and venue. Each party hereto expressly agrees to submit
to such jurisdiction and venue for the purposes of this Agreement.
Notwithstanding the foregoing, the Employer may seek to enforce the Employee's
covenants described in Sections 6,7, 8 and 9 hereof in any jurisdiction and
venue in which the Employee then resides, breaches or threatens to breach such
covenants.
23. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto, and replaces all prior agreements, promises, representations
and understandings between the Employer and the Employee whatsoever concerning
the limited subject matter hereof (other than the Stock Plan and any related
Stock Option Agreement entered into between the Employer and the Employee).
There are no other agreements, conditions or representations, oral or written,
express or implied, which form the basis for this Agreement.
24. Assignment; Successors and Assigns, Etc. Neither the Employer nor the
Employee may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
Agreement without the consent of the Employee in the event that the Employer
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity. This Agreement shall inure to the
benefit of and be binding upon the Employer and the Employee, their respective
successors, executors, administrators, heirs and permitted assigns.
25. Modification. No waiver or modification of this Agreement or of any
covenant, condition, or limitation contained herein shall be valid unless in a
writing of subsequent date hereto and duly executed by the party to be charged
therewith and no evidence of any waiver or modification shall be offered or
received in evidence in any proceeding, arbitration, or litigation between the
parties hereto arising out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, unless such waiver or modification is in
writing, duly executed as aforesaid. The parties further agree that the
provisions of this Section may not be waived except as herein set forth.
26. Section Headings. The section headings contained in this Agreement are
for convenience only, and shall in no manner be construed as part of this
Agreement.
27. Waiver of Breach. The waiver by either party of a breach or violation
of any provision of this Agreement shall not operate as, or be construed to be,
a waiver of any subsequent breach thereof.
28. Notices. Any and all notices required or permitted to be given under
this Agreement shall be sufficient if furnished in writing, sent by certified or
registered mail, return receipt requested to the party's address set forth in
the Prologue of this Agreement, or to such other address as such party may
specify in writing.
11
29. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
12
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year here above first written.
BIOSTREAM, INC.
By: /s/ David S. Barlow
--------------------
Name: David S. Barlow
Title: Chairman & CEO
/s/ John W. Babich
------------------------
John W. Babich
|
13
SCHEDULE A
(As Amended from time to time pursuant to Paragraph 3(a))
Base Compensation
Annual Rate of Base
Compensation Agreed to by Employee Agreed to by Employer
------------------- --------------------- ---------------------
$ 200,000.00
|
(Must be initialed by both parties each time amended to be effective.)
Exhibit A - Incentive Stock Option Grant
14
Exhibit 10.8
EMPLOYMENT AGREEMENT
(for David S. Barlow)
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated as of February 7,
2003 (the "Effective Date"), by and between Biostream, Inc., a Massachusetts
corporation having its principal place of business at 160 Second Street,
Cambridge, Massachusetts 02142 (the "Employer"), and David S. Barlow (the
"Employee").
WITNESSETH:
WHEREAS, the Employer is engaged in the business of developing and
marketing imaging pharmaceuticals which detect human disease; and
WHEREAS, the Employee possesses the experience necessary in administration
and general and active supervision and direction of the daily operations of a
biopharmaceutical business in order to fulfill the responsibilities as Chairman
and Chief Executive Officer of the Employer; and
WHEREAS, the Employer desires to employ the Employee, and the Employee
desires to be employed by the Employer, all in accordance with the terms and
provisions of this Agreement.
NOW, THEREFORE, in consideration of the covenants and promises hereinafter
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employer and the Employee
represent, covenant and agree as follows:
1. Employment. The Employer hereby employs the Employee to serve as
Chairman and Chief Executive Officer of the Employer in accordance with the
terms and provisions of this Agreement, and the Employee hereby accepts such
employment with the Employer. Employee also shall serve as a member of the Board
of Directors of the Employer.
2. Term. The term of this Agreement shall commence on the Effective Date
and shall continue until this Agreement is terminated as hereinafter provided.
3. Compensation. As compensation for all services rendered by the Employee
to the Employer pursuant to this Agreement, the Employer shall pay to the
Employee the following amounts during the term of this Agreement:
(a) Base Compensation. The Employer shall pay to the Employee base
compensation at no less than the rate set forth on Schedule A attached hereto
and herein incorporated by reference (the "Base Compensation"). The Base
Compensation shall be payable pursuant to the Employer's standard payroll
practices, except as otherwise noted on Schedule A. The Base Compensation shall
be reviewed by the compensation committee of the Board of the Employer annually
and increases in the Base Compensation, if any, shall be evidenced by the
updating and initialing of Schedule A by both parties hereto.
(b) Incentive Bonus. In addition to the Base Compensation, the
Employee shall be eligible to receive an annual fiscal year incentive bonus with
a maximum annual amount equal to seventy-five percent (75%) of the then current
Base Compensation (the "Incentive Bonus"). Payment of the Incentive Bonus shall
be subject to the discretion of the Board and will be based upon accomplishment
of goals provided to the Employee by the Board from time to time and based upon
revenue growth, profitability and achievement of specific corporate milestones.
The Board may elect to award the Incentive Bonus to the Employee in cash or in
the Employer's capital stock (at its then-current fair market value), but a
capital stock bonus requires the consent of the Employee.
(c) Signing Bonus. Upon execution of this Agreement, the Employee
shall be entitled to receive from the Company an amount equal to $21,153.85 (the
"Signing Bonus"). The Signing Bonus shall be paid in one lump sum on the date
that the Company commences payment of Base Compensation to the Employee pursuant
to Schedule A attached hereto, such bonus payment to be made subject to the
Employer's standard payroll practices.
4. Vacation and Employee Benefits.
(a) Vacation. The Employee shall be entitled to an annual paid
vacation equal to four weeks annually. Vacation shall be taken at such times so
as not to interfere with the proper operation of the Employer's business.
(b) Benefits Generally. The Employee shall be entitled to receive
and participate in such employee benefits as the Employer shall from time to
time determine to provide to its executives generally. At a minimum, the
Employee shall receive medical and dental insurance at the Employer's expense.
(c) Indemnification Rights. The Employee shall be entitled to
indemnification, including advance reimbursement of expenses, to the fullest
extent permitted by applicable law, and shall be entitled to receive an
indemnification agreement with terms equivalent to any indemnification agreement
that the Employer executes with any of its officers or directors.
(d) Registration Rights. The Employee shall be entitled to the
benefit of any so-called "piggy-back" registration rights and related provisions
that the Employer has granted or grants to any third party on the same basis as
the most favorable provisions received by any such third party.
(e) Participation Rights. The Employee shall be entitled to rights
equivalent to the Employer's outside investors with respect to rights to
purchase additional equity securities issued by the Employer in order to
maintain the Employee's percentage interest in the Employer's equity securities.
2
5. Stock Incentives.
(a) Options. Subject to the vesting provisions described below, the
Employee shall be entitled to purchase, simultaneously with the execution of
this Agreement, 3,285,000 shares (the "Restricted Shares") of the Employer's
common stock at a per share price equal to $0.10 per share, which is the fair
market value of such common stock as most recently determined by the Board for
purposes of incentive stock option grants. The Employee shall pay the par value
of the restricted shares ($.01 per share) in cash and shall also execute a 50%
recourse, non-interest bearing, balloon promissory note for the balance of the
purchase price in the form attached as Exhibit A hereto. The Company represents
to the Employee that the current fully diluted capitalization of the Company is
accurately set forth in the spreadsheet set forth as Exhibit B hereto, and that
the Company is under no obligation, actual or contingent, to issue any
securities other than those set forth in Exhibit B, including the notes thereto.
(b) Vesting. 20% of the restricted shares shall be vested upon
purchase and the remainder shall be "unvested shares." An additional 5% of the
restricted shares shall vest on each quarterly (three-month) anniversary of the
Effective Date, provided that the Employee is still employed by the Employer on
such date or is then receiving a Severance Package (as defined in Section 15
below). In the event of a Change of Control (as defined below), all of the
unvested restricted shares immediately shall vest, provided that the Employee is
still employed by the Employer on the date of such Change of Control, or is then
receiving a Severance Package.
(c) Restrictions. All restricted shares shall be subject to the
terms and conditions of a restricted stock agreement in the form attached hereto
as Exhibit C.
(d) Change of Control. For purposes of this Agreement "Change of
Control" shall mean the occurrence of one or more of the following events:
(i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes a
"beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act) (other than the Employer, any trustee or other fiduciary holding
securities under an employee benefit plan of the Employer, or any corporation
owned, directly or indirectly, by the stockholders of the Employer, in
substantially the same proportions as their ownership of stock of the Employer),
or any or group of persons acting in concert becomes a beneficial owner,
directly or indirectly, of securities of the Employer, representing more than
fifty percent (50%) of the combined voting power or fully diluted equity
interest of the Employer's then outstanding equity securities, except as a
result of a financing transaction where all proceeds are received directly by
the Company that is not intended as a sale of the business of the Employer; or
(ii) the stockholders of the Employer approve a merger or consolidation of the
Employer with any other corporation or other entity, other than (A) a merger or
consolidation which would result in the equity securities of the Employer
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into equity securities of the
3
surviving entity) fifty percent (50%) or more of the outstanding equity interest
of the Employer or such surviving entity outstanding immediately after such
merger or consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Employer (or similar transaction) in which no "person"
(as hereinabove defined) other than Employee acquires more than fifty percent
(50%) of the equity interest of the Employer's then outstanding securities; or
(iii) the stockholders of the Employer approve a plan of complete liquidation of
the Employer or an agreement for the sale or disposition by the Employer of all
or substantially all of the Employer's assets.
6. Description of Duties. During the term of this Agreement, the Employee
shall be the Chairman and Chief Executive Officer of the Employer and shall:
(a) Devote on a full time basis all necessary time, best efforts,
professional skills, attention and energies to the fulfillment of the duties
customarily associated with such position and the accomplishment of the goals
provided by the Board of Directors of the Employer to the Employee from time to
time; and
(b) Act in accordance herewith, and in all accounts be responsible
and responsive to, the Board of Directors of Employer.
7. General Services. During the term of this Agreement, the Employee
shall:
(a) Observe the Employer's policies and standards of conduct, as
well as customary standards of business conduct, including any standards
prescribed by law or regulation;
(b) Perform his duties hereunder in a manner that preserves and
protects the Employer's business reputation; and
(c) Do all things and render such services as may be necessary or
beneficial in carrying out any of the foregoing.
8. Non-Disclosure of Proprietary or Confidential Information and
Confidential Communications. For the purposes of this Section 8, the term
"Employer" shall include, and the protections granted the Employer hereunder
shall extend to, ATP Therapeutics, Inc., Biostream Therapeutics, Inc. (f/k/a
Zebra Pharmaceuticals, Inc.), and any other entities now or hereinafter
affiliated, acquired or created by Biostream, Inc. The Employee recognizes and
acknowledges that the marketing plans and business strategy, the names and
addresses of the Employer's customers, the particular needs and application of
such customers for diagnostic imaging techniques, the names and addresses of the
Employer's suppliers, the Employer's purchasing history with its suppliers, the
names and other pertinent data concerning the persons employed by the Employer's
suppliers who are responsible for supplying the Employer with products and
services, the Employer's proprietary computer software programs, trade secrets
and any other confidential and proprietary information concerning the business
or affairs of the Employer (including but not limited to marketing and business
plans and strategies, research protocols,
4
procedures data, results, and cost information) (hereinafter collectively
referred to as the Confidential Information) constitute a valuable, proprietary,
special and unique asset of the Employer's business. The Employee further
recognizes and acknowledges that any communications, whether written, oral or
otherwise, that the Employer or any of the Employer's employees has with the
Employer's existing or prospective customers and clients and affiliated research
institutions and scientists are extremely confidential (hereinafter the
"Confidential Communications"). The term Confidential Information shall exclude
any information that has been made public through no fault of the Employee.
The Employee shall not, for any reason whatsoever, during or after the
termination of his employment with the Employer, use, disclose or allow access
to, for his own benefit or for that of another, the Confidential Information or
the Confidential Communications (or any part thereof) to any person, firm,
corporation, association or other entity for any reason or for any purpose
whatsoever.
In the event of a breach or threatened breach by the Employee of the
provisions of this Section, the Employer shall be entitled to an injunction
restraining the Employee from so using, disclosing or allowing access to, in
whole or in part, the Confidential Information and the Confidential
Communications or from rendering any services to any person, firm, corporation,
association or other entity to whom the Confidential Information or the
Confidential Communications, in whole or in part, have been disclosed or are
threatened to be disclosed. Nothing herein shall be construed as prohibiting the
Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach, including, but not limited to, the recovery of
damages and reasonable attorneys' fees from the Employee.
Upon termination of this Agreement by either party for any reason, the
Employee shall return to the Employer any of the Confidential Information,
Confidential Communications, charts, company literature, reports, Employer
credit cards or other proprietary materials of the Employer then in the
Employee's possession and all other materials of the Employer which the Board of
Directors of the Employer requests the Employee to so return.
This Section shall in all respects survive any termination of this
Agreement and shall remain in full force and effect thereafter. In the event
that any provision of this Section 8 shall conflict with any term or condition
of any other confidentiality agreement between the Employer and the Employee,
then the more restrictive provision shall be deemed to apply in order to
accomplish the purposes of this Section 8 and such other agreements, that being
to protect the Employer's Confidential Information and Confidential
Communications.
In the event of the Employee's breach of this Section 8, the Employee shall
immediately and irrevocably forfeit future payments under the Severance Package
as hereinafter defined in Section 15. Nothing in this paragraph shall be
construed to limit or cap the Employer's damages in the event of a breach of
this Section 8.
9. Covenant Not to Compete; Non-solicitation of Employees and Customers.
For the purposes of this Section 9, the term "Employer" shall include, and the
protections granted the Employer hereunder shall extend to, ATP Therapeutics,
Inc., Biostream Therapeutics, Inc. (f/k/a
5
Zebra Pharmaceuticals, Inc.), and any other entities now or hereinafter
affiliated, acquired or created by Biostream, Inc. The Employee agrees that
while employed by the Employer and for a continuous period of one (1) year
following the date of the termination of his employment with the Employer either
voluntarily without "Good Reason" or involuntarily by the Company for "cause"
(the "Restricted Period"), he shall not (without the express prior written
consent of the Board of Directors of the Employer), directly or indirectly,
compete with the Employer. In construing the foregoing prohibition, the Employee
shall be deemed to be competing with the Employer if he shall become
self-employed in, or accept employment with, consult with, render services to or
become associated with, own, manage, operate, join, control, or participate in
the ownership, management, operation, or control of, or be connected in any
material manner with, or directly or indirectly enter into the employment of, or
make a substantial investment in, any corporation, partnership, proprietorship
or other type of business organization or entity which engages in, any business
(a "Competing Business") involving the sale, distribution, development or
research concerning diagnostic imaging of the human cardio-vascular system or
other lines of the Employer which directly and materially competes with the
product lines in or with which the Employer is then currently involved.
The Employee further agrees that, during his employment with the Employer
and during the Restricted Period, he shall not solicit any of the Employer's
employees, existing customers or prospective customers (of which the Employee is
then currently aware), affiliated research institutions or scientists, on behalf
of himself or any Competing Business.
This Section 9 shall in all respects survive any termination of this
Agreement and shall remain in full force and effect during the Restricted
Period.
In the event of the Employee's breach of this Section 9 during the
Restricted Period, the Employee shall immediately and irrevocably forfeit future
payments to the Employee under the Severance Package as hereinafter defined in
Section 15.
10. Assignment of Rights. Any and all information, data, inventions,
discoveries, materials, notebooks and other work product which the Employee
conceives, develops or acquires during his employment with the Employer, which
directly or indirectly relates to work performed for the Employer, shall be the
sole and exclusive property of the Employer. The Employee shall promptly execute
any and all documents necessary and take such further actions as the Employer
may deem necessary to assign any and all of the Employee's right, title and
interest in such property to the Employer.
11. Intellectual Property. For the purposes of this Section 11, the term
"Employer" shall include, and the protections granted the Employer hereunder
shall extend to, ATP Therapeutics, Inc., Biostream Therapeutics, Inc. (f/k/a
Zebra Pharmaceuticals, Inc.), and any other entities now or hereinafter
affiliated, acquired or created by Biostream, Inc. During the Employee's
employment at the Employer, the Employee shall promptly assist with and execute
any and all applications, assignments or other documents which an officer or
director of the Employer shall deem necessary or useful in order to obtain and
maintain patent, trademark or other intellectual property protection for the
Employer's products or services. After the termination date of his employment
with the Employer, the Employee shall use reasonable
6
efforts to assist the Employer on intellectual property matters as they relate
to his employment, and the Employer shall reasonably compensate the Executive
for his time and expense.
12. Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to Confidential
Information, which are furnished to the Employee by the Employer or are produced
by the Employee in connection with the Employee's employment will be and remain
the sole property of the Employer. The Employee will return to the Employer all
such materials and property as and when requested by the Employer. In any event,
and whether or not the Employer so specifically requests, the Employee will
return all such materials and property immediately upon termination of the
Employee's employment for any reason. The Employee will not retain any such
material or property or any copies thereof after such termination.
13. Third-Party Agreements and Rights. The Employee hereby confirms that he
is not bound by the terms of any agreement with any previous employer or other
party which restricts in any way the Employee's use or disclosure of information
or the Employee's engagement in any business. The Employee represents to the
Employer that the Employee's execution of this Agreement, the Employee's
employment with the Employer and the performance of the Employee's proposed
duties for the Employer will not violate any obligations the Employee may have
to any such previous employer or other party. In the Employee's work for the
Employer, the Employee will not disclose or make use of any information in
violation of any agreements with or rights of any such previous employer or
other party, and the Employee will not bring to the premises of the Employer any
copies or other tangible embodiments of nonpublic information belonging to or
obtained from any such previous employer or other party.
14. Restricted Activities. During the term of this Agreement, the Employee
shall not engage in any business activities or ventures outside of the business
activities of the Employer without the express prior written consent of the
Employer's Board; provided, however, that nothing in this Agreement shall be
construed as preventing the Employee from:
(a) investing the Employee's assets in any company or other entity in a
manner not prohibited by Section 9 and in such form or manner as shall not
require any material activities on the Employee's part in connection with the
operations or affairs of the companies or other entities in which such
investments are made; or
(b) engaging in religious, charitable or other community or non-profit
activities that do not impair the Employee's ability to fulfill the Employee's
duties and responsibilities under this Agreement.
15. Termination.
A. Termination Without Cause.
(a) Notwithstanding anything herein to the contrary, this
Agreement may be terminated by either the Employer (by act of its Board) or the
Employee, at any time, without cause; provided, however, that the party desirous
of terminating this Agreement shall
7
give the other party prior written notice of such termination. In either event,
the Employer may determine the Employee's final day of employment hereunder. The
date specified in any notice of termination as the Employee's final day of
employment shall be referred to herein as the Termination Date.
(b) In the event that the Employer (by act of its Board)
terminates this Agreement without cause pursuant to this subsection (A) of
Section 15, or the Employee voluntarily resigns for Good Reason (defined below),
then the Employee shall be entitled to receive severance pay equal the Base
Compensation rate as of the Termination Date in equal monthly installments for a
period of twelve (12) months (the "Post-Termination Period") from the
Termination Date (the "Severance Package"). The Employer also agrees to make
available to the Employee, as part of the Severance Package, continuation of
group health plan benefits to the extent authorized by and consistent with 29
U.S.C. Section 1161 et seq. (commonly known as "COBRA"), and any other benefits
the Employee is receiving as of the Termination Date with the cost of the
regular premium for such benefits shared in the same relative proportion by the
Employer and the Employee as in effect on the Termination Date.
(c) For purposes of this Agreement, "Good Reason" shall mean:
(i) a reduction of the Employee's salary or insurance
benefits other than a reduction approved by the Employee in writing; or
(ii) a significant change in the Employee's title,
responsibilities and/or duties which constitutes, when compared to the
Employee's title, responsibilities and/or duties as of the Effective Date, a
demotion; or
(iii) the relocation of the offices at which the
Employee is principally employed as of the Effective Date to a location more
than fifty (50) miles from such office, which relocation is not approved by the
Executive.
(d) In the event of the Employee's voluntary termination, then
the Employee shall, at the request of the Board of the Employer, continue as an
employee of the Employer for an additional thirty (30) day period after the
Termination Date for the purpose of assisting the Employer in locating and
training a suitable replacement for the Employee. During such additional period,
the Employee shall be entitled to full compensation and benefits and the
Employee shall continue to be bound by all of the terms contained herein. Any
such extended term shall extend the Post-Termination Period by an equal number
of days.
B. Termination With Cause.
(a) The Employer (by act of its Board) may terminate this
Agreement immediately for "cause" by giving written notice to the Employee. As
used herein, the term "cause" shall mean the Employee's: (i) addiction to
illegal drugs; (ii) willful failure or refusal to perform his duties hereunder
after written notice from the Board and an opportunity to cure; (iii) knowing
acts of dishonesty which materially adversely affect the Employer; (iv)
indictment for a felony or crime involving moral turpitude, fraud, embezzlement
or misrepresentation. In the
8
event that this Agreement is terminated pursuant to this subsection (B), the
Employee forfeits and shall not be entitled to the Severance Package, or other
benefits or bonus of any kind whatsoever for any period after the Termination
Date set forth in the notice given by the Employer to the Employee.
C. Disability.
(a) If the Employee shall be disabled so as to be unable to
perform the essential functions of the Employee's then existing position or
positions under this Agreement, the Employer may remove the Employee from any
responsibilities and/or reassign the Employee to another position with the
Employer during the period of such disability. If the period of disability
extends for more than six (6) months, the Employer may terminate the Employee's
employment without further liability on the part of the Employer, except that
the Employee shall be entitled to the Severance Package. The Employer may elect,
at its sole discretion, to purchase a disability insurance package for the
Employee. In the event that the Employer so elects to purchase a disability
insurance package and the Employee subsequently becomes entitled to payments of
the disability insurance benefit, any payments pursuant to the Severance
Package, as defined in this Section 15, or payments of salary by the Employer
will be reduced by the amount of the disability insurance benefit payments
received by the Employee.
(b) If any question shall arise as to whether during any
period the Employee is disabled so as to be unable to perform the essential
functions of the Employee's then existing position or positions, the Employee
may, and at the request of the Employer shall, submit to the Employer a
certification in reasonable detail by a physician selected by the Employer, to
whom the Employee or the Employee's guardian has no reasonable objection, as to
whether the Employee is so disabled or how long such disability is expected to
continue, and such certification shall, for the purposes of this Agreement, be
conclusive of the issue. The Employee shall cooperate with any reasonable
request of the physician in connection with such certification. If such question
shall arise and the Employee shall fail to submit such certification, the
Employer's determination of such issue shall be binding on the Employee. Nothing
in this Section 15(c) shall be construed to waive the Employee's rights, if any,
under existing law including, without limitation, the Family and Medical Leave
Act of 1993,29 U.S.C. 2601, et seq. and the Americans with Disabilities Act, 42
U.S.C. 12101 et seq.
D. Death or Retirement. The Employee's employment under this Agreement will
be deemed to have terminated without further liability on the part of the
Employer if the Employee dies or retires.
E. Certain Termination Benefits. Unless otherwise specifically provided in
this Agreement or otherwise required by law, all compensation and benefits
payable to the Employee under this Agreement shall terminate on the date of
termination of the Employee's employment under this Agreement.
F. No Right to Continuing Employment. The Employee agrees that nothing
contained in this Agreement shall be construed to give the Employee a right to
continuing employment beyond the Termination Date.
9
16. Litigation and Regulatory Cooperation. During and after the Employee's
employment, the Employee shall cooperate fully with the Employer in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Employer which relate to events or
occurrences that transpired while the Employee was employed by the Employer. The
Employee's full cooperation in connection with such claims or actions shall
include, but not be limited to, being available to meet with counsel to prepare
for discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Employee's employment, the
Employee also shall cooperate fully with the Employer in connection with any
investigation or review of any federal, state or local regulatory authority as
any such investigation or review relates to events or occurrences that
transpired while the Employee was employed by the Employer. The Employer shall
reimburse the Employee for any reasonable out-of-pocket expenses incurred in
connection with the Employee's performance of obligations pursuant to this
Section 16.
17. Injunction. The Employee agrees that it would be difficult to measure
any damages caused to the Employer which might result from any breach by the
Employee of the promises set forth in Section 8, and that in any event money
damages would be an inadequate remedy for any such breach. Accordingly, the
Employee agrees that if the Employee breaches, or proposes to breach, any
portion of this Agreement, the Employer shall be entitled, in addition to all
other remedies that it may have, to an injunction or other appropriate
preliminary equitable relief to restrain any such breach without showing or
proving any actual damage to the Employer.
18. No Assignment. The Employee acknowledges that the services to be
rendered by him pursuant to this Agreement are unique. Accordingly, the Employee
shall not assign any of his rights or delegate any of his duties or obligations
under this Agreement.
19. Severability. Subject only to the reformation of time, geographical and
occupational limitations as set forth in Section 20 hereof, all of the terms and
provisions contained in this Agreement are severable and, in the event that any
portion or provision of this Agreement (including, without limitation, any
portion or provision of any section of this Agreement) shall to any extent be
deemed unenforceable or invalid by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared unenforceable or
invalid, shall not be affected thereby, and each portion and provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
20. Reformation of Time Geographical and Occupational Limitations. In the
event that any provision in this Agreement is held to be unenforceable by a
court of competent jurisdiction because it exceeds the maximum time,
geographical or occupational limitations permitted by applicable law, then such
provision(s) shall be and hereby are reformed to the maximum time, geographical
and occupational limitations as may be permitted by applicable law.
10
21. Specific Performance. Both parties recognize that the services to be
rendered under this Agreement by the Employee are special, unique and of an
extraordinary character, and that in the event of breach by the Employee of the
terms or conditions of this Agreement to be performed by him, the Employer shall
be entitled, if it so elects, to institute and prosecute proceedings in any
court of competent jurisdiction, either at law or in equity, to obtain damages
for any breach of this Agreement to enforce the specific performance thereof by
the Employee, or to enjoin the Employee from engaging in such activity, but
nothing contained herein shall be construed to prevent such other remedy in the
courts, in case of any breach of this Agreement by the Employee, as the Employer
may elect to invoke.
22. Massachusetts Law: Choice of Forum. This Agreement shall be governed,
construed and interpreted by, and in accordance with, the laws of the
Commonwealth of Massachusetts, without reference to its principles of conflicts
of laws. Any actions concerning enforcement of this Agreement or in any way
relating to the subject matter of this Agreement shall be litigated only in
Massachusetts state or federal courts of proper jurisdiction and venue. Each
party hereto expressly agrees to submit to such jurisdiction and venue for the
purposes of this Agreement. Notwithstanding the foregoing, the Employer may seek
to enforce the Employee's covenants described in Sections 6, 7, 8 and 9 hereof
in any jurisdiction and venue in which the Employee then resides, breaches or
threatens to breach such covenants.
23. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto, and replaces all prior agreements, promises, representations
and understandings between the Employer and the Employee whatsoever concerning
the limited subject matter hereof (other than the Stock Plan and any related
Stock Option Agreement entered into between the Employer and the Employee).
There are no other agreements, conditions or representations, oral or written,
express or implied, which form the basis for this Agreement.
24. Assignment; Successors and Assigns, Etc. Neither the Employer nor the
Employee may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
Agreement without the consent of the Employee in the event that the Employer
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity. This Agreement shall inure to the
benefit of and be binding upon the Employer and the Employee, their respective
successors, executors, administrators, heirs and permitted assigns.
25. Modification. No waiver or modification of this Agreement or of any
covenant, condition, or limitation contained herein shall be valid unless in a
writing of subsequent date hereto and duly executed by the party to be charged
therewith and no evidence of any waiver or modification shall be offered or
received in evidence in any proceeding, arbitration, or litigation between the
parties hereto arising out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, unless such waiver or modification is in
writing, duly executed as aforesaid. The parties further agree that the
provisions of this Section may not be waived except as herein set forth.
11
26. Section Headings. The section headings contained in this Agreement are
for convenience only, and shall in no manner be construed as part of this
Agreement.
27. Waiver of Breach. The waiver by either party of a breach or violation
of any provision of this Agreement shall not operate as, or be construed to be,
a waiver of any subsequent breach thereof.
28. Notices. Any and all notices required or permitted to be given under
this Agreement shall be sufficient if furnished in writing, sent by certified or
registered mail, return receipt requested to the party's address set forth in
the Prologue of this Agreement, or to such other address as such party may
specify in writing.
29. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
12
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year here above first written.
BIOSTREAM, INC.
By: /s/ John W. Babich
------------------------
Name: John W. Babich, Ph.D.
Title: President
/s/ David S. Barlow
----------------------------
David S. Barlow
|
13
SCHEDULE A
(As Amended from time to time pursuant to Paragraph 3(a))
Base Compensation
Annual Rate of Base
Compensation Agreed to by Employee Agreed to by Employer
-------------------- --------------------- ---------------------
$220,000.00
|
The Employee agrees that payment of his Base Compensation by the Employer shall
be deferred until the first to occur of the following events: (1) the Employer
has received a cumulative total of at least $2.3 million in cash (comprised of
net cash flow from operations, gross proceeds from debt or equity financings or
the gross proceeds of any other cash-generating activities) or (2) a Change of
Control has occurred. Immediately following the occurrence of either of such
events, all deferred Base Compensation shall be paid to the Employee in cash.
(Must be initialed by both parties each time amended to be effective.)
Exhibit A - Form of Promissory Note
Exhibit B - Capitalization Spreadsheet
Exhibit C - Form of Restricted Stock Agreement
Exhibit D - Form of Stock Pledge Agreement
14
Exhibit 10.9
EMPLOYMENT AGREEMENT
(for John E. McCray)
EMPLOYMENT AGREEMENT (this "Agreement") dated as of March 3, 2003 (the
"Effective Date"), by and between Biostream, Inc., a Massachusetts corporation
having its principal place of business at 160 Second Street, Cambridge,
Massachusetts 02142 (the "Employer"), and John E. McCray (the "Employee").
WITNESSETH:
WHEREAS, the Employer is engaged in the business of developing and
marketing imaging pharmaceuticals which detect human disease; and
WHEREAS, the Employee possesses the experience necessary in administration
and general and active supervision and direction of the daily operations of a
biopharmaceutical business in order to fulfill the responsibilities as Chief
Operating Officer of the Employer; and
WHEREAS, the Employer desires to employ the Employee, and the Employee
desires to be employed by the Employer, all in accordance with the terms and
provisions of this Agreement.
NOW, THEREFORE, in consideration of the covenants and promises hereinafter
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employer and the Employee
represent, covenant and agree as follows:
1. Employment. The Employer hereby employs the Employee to serve as Chief
Operating Officer of the Employer in accordance with the terms and provisions of
this Agreement, and the Employee hereby accepts such employment with the
Employer.
2. Term. The term of this Agreement shall commence on the Effective Date
and shall continue until this Agreement is terminated as hereinafter provided.
3. Compensation. As compensation for all services rendered by the Employee
to the Employer pursuant to this Agreement, the Employer shall pay to the
Employee the following amounts during the term of this Agreement:
(a) Base Compensation. The Employer shall pay to the Employee base
compensation at no less than the rate set forth on Schedule A attached hereto
and herein incorporated by reference (the "Base Compensation"). The Base
Compensation shall be payable pursuant to the Employer's standard payroll
practices, except as otherwise noted on Schedule A. The Base Compensation shall
be reviewed by the compensation committee of the Board of the Employer annually
and increases in the Base Compensation, if any, shall be evidenced by the
updating and initialing of Schedule A by both parties hereto.
(b) Incentive Bonus. In addition to the Base Compensation, the
Employee shall be eligible to receive an annual fiscal year incentive bonus with
a maximum annual amount equal to seventy-five percent (75%) of the then current
Base Compensation (the "Incentive Bonus"). Payment of the Incentive Bonus shall
be subject to the discretion of the Board and will be based upon accomplishment
of goals provided to the Employee by the CEO from time to time and based upon
the achievement of specific corporate milestones. The Board may elect to award
the Incentive Bonus to the Employee in cash or in the Employer's capital stock
(at its then-current fair market value), but a capital stock bonus requires the
consent of the Employee.
4. Vacation and Employee Benefits.
(a) Vacation. The Employee shall be entitled to an annual paid
vacation equal to four weeks annually. Vacation shall be taken at such times so
as not to interfere with the proper operation of the Employer's business.
(b) Benefits Generally. The Employee shall be entitled to receive
and participate in such employee benefits as the Employer shall from time to
time determine to provide to its executives generally. At a minimum, the
Employee shall receive medical and dental insurance at the Employer's expense.
(c) Indemnification Rights. The Employee shall be entitled to
indemnification, including advance reimbursement of expenses, to the fullest
extent permitted by applicable law, and shall be entitled to receive an
indemnification agreement with terms equivalent to any indemnification agreement
that the Employer executes with any of its officers or directors.
(d) Registration Rights. The Employee shall be entitled to the
benefit of any so-called "piggy-back" registration rights and related provisions
that the Employer has granted or grants to any third party on the same basis as
the most favorable provisions received by any such third party.
(e) Participation Rights. The Employee shall be entitled to rights
equivalent to the Employer's outside investors with respect to rights to
purchase additional equity securities issued by the Employer in order to
maintain the Employee's percentage interest in the Employer's equity securities.
5. Stock Incentives.
(a) Options. Pursuant to the provisions of the Company's 1997 Stock
Option Plan, as may be amended from time to time (the "Plan"), and subject to
the vesting provisions described below the Company hereby grants to the Employee
an option to purchase 1,262,820 shares of its Common Stock ($.01 par value) (the
"Optioned Shares") at a price of $0.10 per share, in accordance with and subject
to all the terms and conditions of the Plan and subject to the terms and
conditions hereinafter set forth.
2
(b) Vesting. 20% of the restricted shares shall be vested upon
purchase and the remainder shall be "unvested shares." An additional 5% of the
restricted shares shall vest on each quarterly (three-month) anniversary of the
Effective Date, provided that the Employee is still employed by the Employer on
such date or is then receiving a Severance Package (as defined in Section 15
below). In the event of a Change of Control (as defined below), all of the
unvested restricted shares immediately shall vest, provided that the Employee is
still employed by the Employer on the date of such Change of Control, or is then
receiving a Severance Package.
(c) Change of Control. For purposes of this Agreement "Change of
Control" shall mean the occurrence of one or more of the following events:
(i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes a
"beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act) (other than the Employer, any trustee or other fiduciary holding
securities under an employee benefit plan of the Employer, or any corporation
owned, directly or indirectly, by the stockholders of the Employer, in
substantially the same proportions as their ownership of stock of the Employer),
or any or group of persons acting in concert becomes a beneficial owner,
directly or indirectly, of securities of the Employer, representing more than
fifty percent (50%) of the combined voting power or fully diluted equity
interest of the Employer's then outstanding equity securities, except as a
result of a financing transaction where all proceeds are received directly by
the Company that is not intended as a sale of the business of the Employer; or
(ii) the stockholders of the Employer approve a merger or consolidation of the
Employer with any other corporation or other entity, other than (A) a merger or
consolidation which would result in the equity securities of the Employer
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into equity securities of the
surviving entity) fifty percent (50%) or more of the outstanding equity interest
of the Employer or such surviving entity outstanding immediately after such
merger or consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Employer (or similar transaction) in which no "person"
(as hereinabove defined) other than Employee acquires more than fifty percent
(50%) of the equity interest of the Employer's then outstanding securities; or
(iii) the stockholders of the Employer approve a plan of complete liquidation of
the Employer or an agreement for the sale or disposition by the Employer of all
or substantially all of the Employer's assets.
6. Description of Duties. During the term of this Agreement, the Employee shall
be the Chief Operating Officer of the Employer and shall:
(a) Devote on a full time basis all necessary time, best efforts,
professional skills, attention and energies to the fulfillment of the duties
customarily associated with such position and the accomplishment of the goals
provided by the CEO of the Employer to the Employee from time to time; and
3
(b) Act in accordance herewith, and in all accounts be responsible
and responsive to, the Board of Directors and CEO of Employer.
7. General Services. During the term of this Agreement, the Employee
shall:
(a) Observe the Employer's policies and standards of conduct, as
well as customary standards of business conduct, including any standards
prescribed by law or regulation;
(b) Perform his duties hereunder in a manner that preserves and
protects the Employer's business reputation; and
(c) Do all things and render such services as may be necessary or
beneficial in carrying out any of the foregoing.
8. Non-Disclosure of Proprietary or Confidential Information and
Confidential Communications. For the purposes of this Section 8, the term
"Employer" shall include, and the protections granted the Employer hereunder
shall extend to, ATP Therapeutics, Inc., Biostream Therapeutics, Inc. (f/k/a
Zebra Pharmaceuticals, Inc.), and any other entities now or hereinafter
affiliated, acquired or created by Biostream, Inc. The Employee recognizes and
acknowledges that the marketing plans and business strategy, the names and
addresses of the Employer's customers, the particular needs and application of
such customers for diagnostic imaging techniques, the names and addresses of the
Employer's suppliers, the Employer's purchasing history with its suppliers, the
names and other pertinent data concerning the persons employed by the Employer's
suppliers who are responsible for supplying the Employer with products and
services, the Employer's proprietary computer software programs, trade secrets
and any other confidential and proprietary information concerning the business
or affairs of the Employer (including but not limited to marketing and business
plans and strategies, research protocols, procedures data, results, and cost
information) (hereinafter collectively referred to as the Confidential
Information) constitute a valuable, proprietary, special and unique asset of the
Employer's business. The Employee further recognizes and acknowledges that any
communications, whether written, oral or otherwise, that the Employer or any of
the Employer's employees has with the Employer's existing or prospective
customers and clients and affiliated research institutions and scientists are
extremely confidential (hereinafter the "Confidential Communications"). The term
Confidential Information shall exclude any information that has been made public
through no fault of the Employee.
The Employee shall not, for any reason whatsoever, during or after the
termination of his employment with the Employer, use, disclose or allow access
to, for his own benefit or for that of another, the Confidential Information or
the Confidential Communications (or any part thereof) to any person, firm,
corporation, association or other entity for any reason or for any purpose
whatsoever.
In the event of a breach or threatened breach by the Employee of the
provisions of this Section, the Employer shall be entitled to an injunction
restraining the Employee from so using, disclosing or allowing access to, in
whole or in part, the Confidential Information and the
4
Confidential Communications or from rendering any services to any person, firm,
corporation, association or other entity to whom the Confidential Information or
the Confidential Communications, in whole or in part, have been disclosed or are
threatened to be disclosed. Nothing herein shall be construed as prohibiting the
Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach, including, but not limited to, the recovery of
damages and reasonable attorneys' fees from the Employee.
Upon termination of this Agreement by either party for any reason, the
Employee shall return to the Employer any of the Confidential Information,
Confidential Communications, charts, company literature, reports, Employer
credit cards or other proprietary materials of the Employer then in the
Employee's possession and all other materials of the Employer which the Board of
Directors of the Employer requests the Employee to so return.
This Section shall in all respects survive any termination of this
Agreement and shall remain in full force and effect thereafter. In the event
that any provision of this Section 8 shall conflict with any term or condition
of any other confidentiality agreement between the Employer and the Employee,
then the more restrictive provision shall be deemed to apply in order to
accomplish the purposes of this Section 8 and such other agreements, that being
to protect the Employer's Confidential Information and Confidential
Communications.
In the event of the Employee's breach of this Section 8, the Employee
shall immediately and irrevocably forfeit future payments under the Severance
Package as hereinafter defined in Section 15. Nothing in this paragraph shall be
construed to limit or cap the Employer's damages in the event of a breach of
this Section 8.
9. Covenant Not to Compete; Non-solicitation of Employees and Customers.
For the purposes of this Section 9, the term "Employer" shall include, and the
protections granted the Employer hereunder shall extend to, ATP Therapeutics,
Inc., Biostream Therapeutics, Inc. (f/k/a Zebra Pharmaceuticals, Inc.), and any
other entities now or hereinafter affiliated, acquired or created by Biostream,
Inc. The Employee agrees that while employed by the Employer and for a
continuous period of one (1) year following the date of the termination of his
employment with the Employer either voluntarily without "Good Reason" or
involuntarily by the Company for "cause" (the "Restricted Period"), he shall not
(without the express prior written consent of the Board of Directors of the
Employer), directly or indirectly, compete with the Employer. In construing the
foregoing prohibition, the Employee shall be deemed to be competing with the
Employer if he shall become self-employed in, or accept employment with, consult
with, render services to or become associated with, own, manage, operate, join,
control, or participate in the ownership, management, operation, or control of,
or be connected in any material manner with, or directly or indirectly enter
into the employment of, or make a substantial investment in, any corporation,
partnership, proprietorship or other type of business organization or entity
which engages in, any business (a "Competing Business") involving the sale,
distribution, development or research concerning diagnostic imaging of the human
cardio-vascular system or other lines of the Employer which directly and
materially competes with the product lines in or with which the Employer is then
currently involved.
5
The Employee further agrees that, during his employment with the Employer
and during the Restricted Period, he shall not solicit any of the Employer's
employees, existing customers or prospective customers (of which the Employee is
then currently aware), affiliated research institutions or scientists, on behalf
of himself or any Competing Business.
This Section 9 shall in all respects survive any termination of this
Agreement and shall remain in full force and effect during the Restricted
Period.
In the event of the Employee's breach of this Section 9 during the
Restricted Period, the Employee shall immediately and irrevocably forfeit future
payments to the Employee under the Severance Package as hereinafter defined in
Section 15.
10. Assignment of Rights. Any and all information, data, inventions,
discoveries, materials, notebooks and other work product which the Employee
conceives, develops or acquires during his employment with the Employer, which
directly or indirectly relates to work performed for the Employer, shall be the
sole and exclusive property of the Employer. The Employee shall promptly execute
any and all documents necessary and take such further actions as the Employer
may deem necessary to assign any and all of the Employee's right, title and
interest in such property to the Employer.
11. Intellectual Property. For the purposes of this Section 11, the term
"Employer" shall include, and the protections granted the Employer hereunder
shall extend to, ATP Therapeutics, Inc., Biostream Therapeutics, Inc. (f/k/a
Zebra Pharmaceuticals, Inc.), and any other entities now or hereinafter
affiliated, acquired or created by Biostream, Inc. During the Employee's
employment at the Employer, the Employee shall promptly assist with and execute
any and all applications, assignments or other documents which an officer or
director of the Employer shall deem necessary or useful in order to obtain and
maintain patent, trademark or other intellectual property protection for the
Employer's products or services. After the termination date of his employment
with the Employer, the Employee shall use reasonable efforts to assist the
Employer on intellectual property matters as they relate to his employment, and
the Employer shall reasonably compensate the Executive for his time and expense.
12. Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to Confidential
Information, which are furnished to the Employee by the Employer or are produced
by the Employee in connection with the Employee's employment will be and remain
the sole property of the Employer. The Employee will return to the Employer all
such materials and property as and when requested by the Employer. In any event,
and whether or not the Employer so specifically requests, the Employee will
return all such materials and property immediately upon termination of the
Employee's employment for any reason. The Employee will not retain any such
material or property or any copies thereof after such termination.
13. Third-Party Agreements and Rights. The Employee hereby confirms that
he is not bound by the terms of any agreement with any previous employer or
other party which restricts in any way the Employee's use or disclosure of
information or the Employee's engagement in any business. The Employee
represents to the Employer that the Employee's
6
execution of this Agreement, the Employee's employment with the Employer and the
performance of the Employee's proposed duties for the Employer will not violate
any obligations the Employee may have to any such previous employer or other
party. In the Employee's work for the Employer, the Employee will not disclose
or make use of any information in violation of any agreements with or rights of
any such previous employer or other party, and the Employee will not bring to
the premises of the Employer any copies or other tangible embodiments of
nonpublic information belonging to or obtained from any such previous employer
or other party.
14. Restricted Activities. During the term of this Agreement, the Employee
shall not engage in any business activities or ventures outside of the business
activities of the Employer without the express prior written consent of the
Employer's Board; provided, however, that nothing in this Agreement shall be
construed as preventing the Employee from:
(a) investing the Employee's assets in any company or other entity in a
manner not prohibited by Section 9 and in such form or manner as shall not
require any material activities on the Employee's part in connection with the
operations or affairs of the companies or other entities in which such
investments are made; or
(b) engaging in religious, charitable or other community or non-profit
activities that do not impair the Employee's ability to fulfill the Employee's
duties and responsibilities under this Agreement.
15. Termination.
A. Termination Without Cause.
(a) Notwithstanding anything herein to the contrary, this
Agreement may be terminated by either the Employer (by act of its Board) or the
Employee, at any time, without cause; provided, however, that the party desirous
of terminating this Agreement shall give the other party prior written notice of
such termination. In either event, the Employer may determine the Employee's
final day of employment hereunder. The date specified in any notice of
termination as the Employee's final day of employment shall be referred to
herein as the Termination Date.
(b) In the event that the Employer (by act of its Board)
terminates this Agreement without cause pursuant to this subsection (A) of
Section 15, or the Employee voluntarily resigns for Good Reason (defined below),
then the Employee shall be entitled to receive severance pay equal the Base
Compensation rate as of the Termination Date in equal monthly installments for a
period of twelve (12) months (the "Post-Termination Period") from the
Termination Date (the "Severance Package"). The Employer also agrees to make
available to the Employee, as part of the Severance Package, continuation of
group health plan benefits to the extent authorized by and consistent with 29
U.S.C. Section 1161 et seq. (commonly known as "COBRA"), and any other benefits
the Employee is receiving as of the Termination Date with the cost of the
regular premium for such benefits shared in the same relative proportion by the
Employer and the Employee as in effect on the Termination Date.
7
(c) For purposes of this Agreement, "Good Reason" shall mean:
(i) a reduction of the Employee's salary or insurance
benefits other than a reduction approved by the Employee in writing; or
(ii) a significant change in the Employee's title,
responsibilities and/or duties which constitutes, when compared to the
Employee's title, responsibilities and/or duties as of the Effective Date, a
demotion; or
(iii) the relocation of the offices at which the
Employee is principally employed as of the Effective Date to a location more
than fifty (50) miles from such office, which relocation is not approved by the
Employee.
(d) In the event of the Employee's voluntary termination, then
the Employee shall, at the request of the CEO of the Employer, continue as an
employee of the Employer for an additional thirty (30) day period after the
Termination Date for the purpose of assisting the Employer in locating and
training a suitable replacement for the Employee. During such additional period,
the Employee shall be entitled to full compensation and benefits and the
Employee shall continue to be bound by all of the terms contained herein. Any
such extended term shall extend the Post-Termination Period by an equal number
of days.
B. Termination With Cause.
(a) The Employer (by act of its Board or CEO) may terminate
this Agreement immediately for "cause" by giving written notice to the Employee.
As used herein, the term "cause" shall mean the Employee's: (i) addiction to
illegal drugs; (ii) willful failure or refusal to perform his duties hereunder
after written notice from the CEO and an opportunity to cure; (iii) knowing acts
of dishonesty which materially adversely affect the Employer; (iv) indictment
for a felony or crime involving moral turpitude, fraud, embezzlement or
misrepresentation. In the event that this Agreement is terminated pursuant to
this subsection (B), the Employee forfeits and shall not be entitled to the
Severance Package, or other benefits or bonus of any kind whatsoever for any
period after the Termination Date set forth in the notice given by the Employer
to the Employee.
C. Disability.
(a) If the Employee shall be disabled so as to be unable to
perform the essential functions of the Employee's then existing position or
positions under this Agreement, the Employer may remove the Employee from any
responsibilities and/or reassign the Employee to another position with the
Employer during the period of such disability. If the period of disability
extends for more than six (6) months, the Employer may terminate the Employee's
employment without further liability on the part of the Employer, except that
the Employee shall be entitled to the Severance Package. The Employer may elect,
at its sole discretion, to purchase a disability insurance package for the
Employee. In the event that the Employer so elects to purchase a disability
insurance package and the Employee subsequently becomes entitled to payments of
the disability insurance benefit, any payments pursuant to the Severance
Package, as
8
defined in this Section 15, or payments of salary by the Employer will be
reduced by the amount of the disability insurance benefit payments received by
the Employee.
(b) If any question shall arise as to whether during any
period the Employee is disabled so as to be unable to perform the essential
functions of the Employee's then existing position or positions, the Employee
may, and at the request of the Employer shall, submit to the Employer a
certification in reasonable detail by a physician selected by the Employer, to
whom the Employee or the Employee's guardian has no reasonable objection, as to
whether the Employee is so disabled or how long such disability is expected to
continue, and such certification shall, for the purposes of this Agreement, be
conclusive of the issue. The Employee shall cooperate with any reasonable
request of the physician in connection with such certification. If such question
shall arise and the Employee shall fail to submit such certification, the
Employer's determination of such issue shall be binding on the Employee. Nothing
in this Section 15(c) shall be construed to waive the Employee's rights, if any,
under existing law including, without limitation, the Family and Medical Leave
Act of 1993, 29 U.S.C. 2601, et seq. and the Americans with Disabilities Act, 42
U.S.C. 12101 et seq.
D. Death or Retirement. The Employee's employment under this Agreement
will be deemed to have terminated without further liability on the part of the
Employer if the Employee dies or retires.
E. Certain Termination Benefits. Unless otherwise specifically provided in
this Agreement or otherwise required by law, all compensation and benefits
payable to the Employee under this Agreement shall terminate on the date of
termination of the Employee's employment under this Agreement.
F. No Right to Continuing Employment. The Employee agrees that nothing
contained in this Agreement shall be construed to give the Employee a right to
continuing employment beyond the Termination Date.
16. Litigation and Regulatory Cooperation. During and after the Employee's
employment, the Employee shall cooperate fully with the Employer in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Employer which relate to events or
occurrences that transpired while the Employee was employed by the Employer. The
Employee's full cooperation in connection with such claims or actions shall
include, but not be limited to, being available to meet with counsel to prepare
for discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Employee's employment, the
Employee also shall cooperate fully with the Employer in connection with any
investigation or review of any federal, state or local regulatory authority as
any such investigation or review relates to events or occurrences that
transpired while the Employee was employed by the Employer. The Employer shall
reimburse the Employee for any reasonable out-of-pocket expenses incurred in
connection with the Employee's performance of obligations pursuant to this
Section 16.
17. Injunction. The Employee agrees that it would be difficult to measure
any damages caused to the Employer which might result from any breach by the
Employee of the
9
promises set forth in Section 8, and that in any event money damages would be an
inadequate remedy for any such breach. Accordingly, the Employee agrees that if
the Employee breaches, or proposes to breach, any portion of this Agreement, the
Employer shall be entitled, in addition to all other remedies that it may have,
to an injunction or other appropriate preliminary equitable relief to restrain
any such breach without showing or proving any actual damage to the Employer.
18. No Assignment. The Employee acknowledges that the services to be
rendered by him pursuant to this Agreement are unique. Accordingly, the Employee
shall not assign any of his rights or delegate any of his duties or obligations
under this Agreement.
19. Severability. Subject only to the reformation of time, geographical
and occupational limitations as set forth in Section 20 hereof, all of the terms
and provisions contained in this Agreement are severable and, in the event that
any portion or provision of this Agreement (including, without limitation, any
portion or provision of any section of this Agreement) shall to any extent be
deemed unenforceable or invalid by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared unenforceable or
invalid, shall not be affected thereby, and each portion and provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
20. Reformation of Time Geographical and Occupational Limitations. In the
event that any provision in this Agreement is held to be unenforceable by a
court of competent jurisdiction because it exceeds the maximum time,
geographical or occupational limitations permitted by applicable law, then such
provision(s) shall be and hereby are reformed to the maximum time, geographical
and occupational limitations as may be permitted by applicable law.
21. Specific Performance. Both parties recognize that the services to be
rendered under this Agreement by the Employee are special, unique and of an
extraordinary character, and that in the event of breach by the Employee of the
terms or conditions of this Agreement to be performed by him, the Employer shall
be entitled, if it so elects, to institute and prosecute proceedings in any
court of competent jurisdiction, either at law or in equity, to obtain damages
for any breach of this Agreement to enforce the specific performance thereof by
the Employee, or to enjoin the Employee from engaging in such activity, but
nothing contained herein shall be construed to prevent such other remedy in the
courts, in case of any breach of this Agreement by the Employee, as the Employer
may elect to invoke.
22. Massachusetts Law: Choice of Forum. This Agreement shall be governed,
construed and interpreted by, and in accordance with, the laws of the
Commonwealth of Massachusetts, without reference to its principles of conflicts
of laws. Any actions concerning enforcement of this Agreement or in any way
relating to the subject matter of this Agreement shall be litigated only in
Massachusetts state or federal courts of proper jurisdiction and venue. Each
party hereto expressly agrees to submit to such jurisdiction and venue for the
purposes of this Agreement. Notwithstanding the foregoing, the Employer may seek
to enforce the
10
Employee's covenants described in Sections 6, 7, 8 and 9 hereof in any
jurisdiction and venue in which the Employee then resides, breaches or threatens
to breach such covenants.
23. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto, and replaces all prior agreements, promises, representations
and understandings between the Employer and the Employee whatsoever concerning
the limited subject matter hereof (other than the Stock Plan and any related
Stock Option Agreement entered into between the Employer and the Employee).
There are no other agreements, conditions or representations, oral or written,
express or implied, which form the basis for this Agreement.
24. Assignment; Successors and Assigns, Etc. Neither the Employer nor the
Employee may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
Agreement without the consent of the Employee in the event that the Employer
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity. This Agreement shall inure to the
benefit of and be binding upon the Employer and the Employee, their respective
successors, executors, administrators, heirs and permitted assigns.
25. Modification. No waiver or modification of this Agreement or of any
covenant, condition, or limitation contained herein shall be valid unless in a
writing of subsequent date hereto and duly executed by the party to be charged
therewith and no evidence of any waiver or modification shall be offered or
received in evidence in any proceeding, arbitration, or litigation between the
parties hereto arising out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, unless such waiver or modification is in
writing, duly executed as aforesaid. The parties further agree that the
provisions of this Section may not be waived except as herein set forth.
26. Section Headings. The section headings contained in this Agreement are
for convenience only, and shall in no manner be construed as part of this
Agreement.
27. Waiver of Breach. The waiver by either party of a breach or violation
of any provision of this Agreement shall not operate as, or be construed to be,
a waiver of any subsequent breach thereof.
28. Notices. Any and all notices required or permitted to be given under
this Agreement shall be sufficient if furnished in writing, sent by certified or
registered mail, return receipt requested to the party's address set forth in
the Prologue of this Agreement, or to such other address as such party may
specify in writing.
29. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
11
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year here above first written.
BIOSTREAM, INC.
By: /s/ David S. Barlow
-----------------------
Name: David S. Barlow
Title: Chairman & CEO
/s/ John E. McCray
---------------------------
John E. McCray
|
12
SCHEDULE A
(As Amended from time to time pursuant to Paragraph 3(a))
Base Compensation
Annual Rate of Base
Compensation Agreed to by Employee Agreed to by Employer
------------------- --------------------- ---------------------
$ 175,000.00
|
(Must be initialed by both parties each time amended to be effective.)
Exhibit A - Incentive Stock Option Grant
13
Exhibit 10.10
EMPLOYMENT AGREEMENT
(for Nicholas Borys)
EMPLOYMENT AGREEMENT (this "Agreement") dated as of May 1 2004 (the
"Effective Date"), by and between Molecular Insight Pharmaceuticals, Inc., a
Massachusetts corporation having its principal place of business at 160 Second
Street, Cambridge, Massachusetts 02142 (the "Employer"), and Nicholas Borys (the
"Employee").
WITNESSETH:
WHEREAS, the Employer is engaged in the business of developing and
marketing molecular imaging pharmaceuticals and radiotherapeutics that detect
and treat human disease; and
WHEREAS, the Employee possesses the experience necessary in administration
and general and active supervision and direction of the daily operations of a
biopharmaceutical business in order to fulfill the responsibilities as Chief
Medical Officer of the Employer; and
WHEREAS, the Employer desires to employ the Employee, and the Employee
desires to be employed by the Employer, all in accordance with the terms and
provisions of this Agreement.
NOW, THEREFORE, in consideration of the covenants and promises hereinafter
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employer and the Employee
represent, covenant and agree as follows:
1. Employment. The Employer hereby employs the Employee to serve as Chief
Medical Officer of the Employer in accordance with the terms and provisions of
this Agreement, and the Employee hereby accepts such employment with the
Employer.
2. Term. The term of this Agreement shall commence on the Effective Date
and shall continue until this Agreement is terminated as hereinafter provided.
3. Compensation. As compensation for all services rendered by the Employee
to the Employer pursuant to this Agreement, the Employer shall pay to the
Employee the following amounts during the term of this Agreement:
(a) Base Compensation. The Employer shall pay to the Employee base
compensation at no less than the rate set forth on Schedule A attached hereto
and herein incorporated by reference (the "Base Compensation"). The Base
Compensation shall be payable pursuant to the Employer's standard payroll
practices, except as otherwise noted on Schedule A. The Base Compensation shall
be reviewed by the compensation committee of the Board of the Employer annually
and increases in the Base Compensation, if any, shall be evidenced by the
updating and initialing of Schedule A by both parties hereto.
(b) Incentive Bonus. In addition to the Base Compensation, the
Employee shall be eligible to receive an annual fiscal year incentive bonus with
a maximum annual amount equal to fifty percent (50%) of the then current Base
Compensation (the "Incentive Bonus"). Payment of the Incentive Bonus shall be
subject to the discretion of the Board and will be based upon accomplishment of
goals provided to the Employee by the President and Chief Scientific Officer
from time to time and based upon the achievement of specific corporate
milestones. The Board may elect to award the Incentive Bonus to the Employee in
cash or in the Employer's capital stock (at its then-current fair market value),
but a capital stock bonus requires the consent of the Employee.
4. Vacation and Employee Benefits.
(a) Vacation. The Employee shall be entitled to paid vacation equal
to four weeks annually. Vacation shall be taken at such times so as not to
interfere with the proper operation of the Employer's business.
(b) Benefits Generally. The Employee shall be entitled to receive
and participate in such employee benefits as the Employer shall from time to
time determine to provide to its executives generally.
(c) Relocation Expenses. The Employer will reimburse the Employee
for reasonable travel expenses for weekly trips from New Hope, PA to the
Employer's offices in Cambridge and reasonable lodging expenses associated
therewith. The Employer will also be responsible for the payment of the
Employee's lease of an apartment at 157 Sixth St. in Cambridge for the period
June 1, 2004 to May 31, 2005.
5. Stock Incentives.
(a) Options. Pursuant to the provisions of the Company's 1997 Stock
Option Plan, as may be amended from time to time (the "Plan"), and subject to
the approval by the Employer's Board of Directors, the Employer will grant to
the Employee an option to purchase 250,000 shares of its Common Stock ($.01 par
value) (the "Optioned Shares") at an exercise price equal to the fair market
value of the Employer's Common Stock on the date of grant, which is currently
$0.10 per share. The Optioned Shares shall vest over a four year period in
accordance with and subject to all the terms and conditions of the Plan and a
separate stock option agreement. In the event of a Change of Control (as defined
below), all of the unvested Optioned Shares immediately shall vest, provided
that the Employee is still employed by the Employer on the date of such Change
of Control, or is then receiving a Severance Package. The Employee may be
eligible, subject to the determination of the Employer's Board of Directors, in
its sole discretion, to receive an additional option grant to purchase up to
100,000 shares of the Employer's Common Stock upon the successful achievement of
performance goals to be mutually agreed to by the Employee and the Employer.
(b) Change of Control. For purposes of this Agreement "Change of
Control" shall mean the occurrence of one or more of the following events:
2
(i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes a
"beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act) (other than the Employer, any trustee or other fiduciary holding
securities under an employee benefit plan of the Employer, or any corporation
owned, directly or indirectly, by the stockholders of the Employer, in
substantially the same proportions as their ownership of stock of the Employer),
or any or group of persons acting in concert becomes a beneficial owner,
directly or indirectly, of securities of the Employer, representing more than
fifty percent (50%) of the combined voting power or fully diluted equity
interest of the Employer's then outstanding equity securities, except as a
result of a financing transaction where all proceeds are received directly by
the Company that is not intended as a sale of the business of the Employer; or
(ii) the stockholders of the Employer approve a merger or consolidation of the
Employer with any other corporation or other entity, other than (A) a merger or
consolidation which would result in the equity securities of the Employer
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into equity securities of the
surviving entity) fifty percent (50%) or more of the outstanding equity interest
of the Employer or such surviving entity outstanding immediately after such
merger or consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Employer (or similar transaction) in which no "person"
(as hereinabove defined) other than Employee acquires more than fifty percent
(50%) of the equity interest of the Employer's then outstanding securities; or
(iii) the stockholders of the Employer approve a plan of complete liquidation of
the Employer or an agreement for the sale or disposition by the Employer of all
or substantially all of the Employer's assets.
6. Description of Duties. During the term of this Agreement, the Employee
shall be the Chief Medical Officer of the Employer and shall:
(a) devote on a full time basis all necessary time, best efforts,
professional skills, attention and energies to the fulfillment of the duties
customarily associated with such position and the accomplishment of the goals
provided by the President and Chief Scientific Officer of the Employer to the
Employee from time to time; and
(b) act in accordance herewith, and in all accounts be responsible
and responsive to, the Board of Directors and President of Employer.
7. General Services. During the term of this Agreement, the Employee
shall:
(a) observe the Employer's policies and standards of conduct, as
well as customary standards of business conduct, including any standards
prescribed by law or regulation;
(b) perform his duties hereunder in a manner that preserves and
protects the Employer's business reputation; and
3
(c) do all things and render such services as may be necessary or
beneficial in carrying out any of the foregoing.
8. Non-Disclosure of Proprietary or Confidential Information and
Confidential Communications. For the purposes of this Section 8, the term
"Employer" shall include, and the protections granted the Employer hereunder
shall extend to, ATP Therapeutics, Inc., Biostream Therapeutics, Inc. (f/k/a
Zebra Pharmaceuticals, Inc.), and any other entities now or hereinafter
affiliated, acquired or created by the Employer. The Employee recognizes and
acknowledges that the marketing plans and business strategy, the names and
addresses of the Employer's customers, the particular needs and application of
such customers for diagnostic imaging techniques, the names and addresses of the
Employer's suppliers, the Employer's purchasing history with its suppliers, the
names and other pertinent data concerning the persons employed by the Employer's
suppliers who are responsible for supplying the Employer with products and
services, the Employer's proprietary computer software programs, trade secrets
and any other confidential and proprietary information concerning the business
or affairs of the Employer (including but not limited to marketing and business
plans and strategies, research protocols, procedures data, results, and cost
information) (hereinafter collectively referred to as the "Confidential
Information") constitute a valuable, proprietary, special and unique asset of
the Employer's business. The Employee further recognizes and acknowledges that
any communications, whether written, oral or otherwise, that the Employer or any
of the Employer's employees has with the Employer's existing or prospective
customers and clients and affiliated research institutions and scientists are
extremely confidential (hereinafter the "Confidential Communications"). The term
Confidential Information shall exclude any information that has been made public
through no fault of the Employee.
The Employee shall not, for any reason whatsoever, during or after the
termination of his employment with the Employer, use, disclose or allow access
to, for his own benefit or for that of another, the Confidential Information or
the Confidential Communications (or any part thereof) to any person, firm,
corporation, association or other entity for any reason or for any purpose
whatsoever.
In the event of a breach or threatened breach by the Employee of the
provisions of this Section, the Employer shall be entitled to an injunction
restraining the Employee from so using, disclosing or allowing access to, in
whole or in part, the Confidential Information and the Confidential
Communications or from rendering any services to any person, firm, corporation,
association or other entity to whom the Confidential Information or the
Confidential Communications, in whole or in part, have been disclosed or are
threatened to be disclosed. Nothing herein shall be construed as prohibiting the
Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach, including, but not limited to, the recovery of
damages and reasonable attorneys' fees from the Employee.
Upon termination of this Agreement by either party for any reason, the
Employee shall return to the Employer any of the Confidential Information,
Confidential Communications, charts, company literature, reports, Employer
credit cards or other proprietary materials of the Employer then in the
Employee's possession and all other materials of the Employer which the Board of
Directors of the Employer requests the Employee to so return.
4
This Section shall in all respects survive any termination of this
Agreement and shall remain in full force and effect thereafter. In the event
that any provision of this Section 8 shall conflict with any term or condition
of any other confidentiality agreement between the Employer and the Employee,
then the more restrictive provision shall be deemed to apply in order to
accomplish the purposes of this Section 8 and such other agreements, that being
to protect the Employer's Confidential Information and Confidential
Communications.
In the event of the Employee's breach of this Section 8, the Employee
shall immediately and irrevocably forfeit future payments under the Severance
Package as hereinafter defined in Section 15. Nothing in this paragraph shall be
construed to limit or cap the Employer's damages in the event of a breach of
this Section 8.
9. Covenant Not to Compete; Non-solicitation of Employees and Customers.
For the purposes of this Section 9, the term "Employer" shall include, and the
protections granted the Employer hereunder shall extend to, ATP Therapeutics,
Inc., Biostream Therapeutics, Inc. (f/k/a Zebra Pharmaceuticals, Inc.), and any
other entities now or hereinafter affiliated, acquired or created by the
Employer. The Employee agrees that while employed by the Employer and for a
continuous period of one (1) year following the date of the termination of his
employment with the Employer either voluntarily without "Good Reason" or
involuntarily by the Company for "cause" (the "Restricted Period"), he shall not
(without the express prior written consent of the Board of Directors of the
Employer), directly or indirectly, compete with the Employer. In construing the
foregoing prohibition, the Employee shall be deemed to be competing with the
Employer if he shall become self-employed in, or accept employment with, consult
with, render services to or become associated with, own, manage, operate, join,
control, or participate in the ownership, management, operation, or control of,
or be connected in any material manner with, or directly or indirectly enter
into the employment of, or make a substantial investment in, any corporation,
partnership, proprietorship or other type of business organization or entity
which engages in, any business (a "Competing Business") involving the sale,
distribution, development or research concerning diagnostic imaging of the human
cardio-vascular system or other lines of the Employer which directly and
materially competes with the product lines in or with which the Employer is then
currently involved.
The Employee further agrees that, during his employment with the Employer
and during the Restricted Period, he shall not solicit any of the Employer's
employees, existing customers or prospective customers (of which the Employee is
then currently aware), affiliated research institutions or scientists, on behalf
of himself or any Competing Business.
This Section 9 shall in all respects survive any termination of this
Agreement and shall remain in full force and effect during the Restricted
Period.
In the event of the Employee's breach of this Section 9 during the
Restricted Period, the Employee shall immediately and irrevocably forfeit future
payments to the Employee under the Severance Package as hereinafter defined in
Section 15.
5
10. Assignment of Rights. Any and all information, data, inventions,
discoveries, materials, notebooks and other work product which the Employee
conceives, develops or acquires during his employment with the Employer, which
directly or indirectly relates to work performed for the Employer, shall be the
sole and exclusive property of the Employer. The Employee shall promptly execute
any and all documents necessary and take such further actions as the Employer
may deem necessary to assign any and all of the Employee's right, title and
interest in such property to the Employer.
11. Intellectual Property. For the purposes of this Section 11, the term
"Employer" shall include, and the protections granted the Employer hereunder
shall extend to, ATP Therapeutics, Inc., Biostream Therapeutics, Inc. (f/k/a
Zebra Pharmaceuticals, Inc.), and any other entities now or hereinafter
affiliated, acquired or created by the Employer. During the Employee's
employment at the Employer, the Employee shall promptly assist with and execute
any and all applications, assignments or other documents which an officer or
director of the Employer shall deem necessary or useful in order to obtain and
maintain patent, trademark or other intellectual property protection for the
Employer's products or services. After the termination date of his employment
with the Employer, the Employee shall use reasonable efforts to assist the
Employer on intellectual property matters as they relate to his employment, and
the Employer shall reasonably compensate the Executive for his time and expense.
12. Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to Confidential
Information, which are furnished to the Employee by the Employer or are produced
by the Employee in connection with the Employee's employment will be and remain
the sole property of the Employer. The Employee will return to the Employer all
such materials and property as and when requested by the Employer. In any event,
and whether or not the Employer so specifically requests, the Employee will
return all such materials and property immediately upon termination of the
Employee's employment for any reason. The Employee will not retain any such
material or property or any copies thereof after such termination.
13. Third-Party Agreements and Rights. The Employee hereby confirms that
he is not bound by the terms of any agreement with any previous employer or
other party which restricts in any way the Employee's use or disclosure of
information or the Employee's engagement in any business. The Employee
represents to the Employer that the Employee's execution of this Agreement, the
Employee's employment with the Employer and the performance of the Employee's
proposed duties for the Employer will not violate any obligations the Employee
may have to any such previous employer or other party. In the Employee's work
for the Employer, the Employee will not disclose or make use of any information
in violation of any agreements with or rights of any such previous employer or
other party, and the Employee will not bring to the premises of the Employer any
copies or other tangible embodiments of nonpublic information belonging to or
obtained from any such previous employer or other party.
14. Restricted Activities. During the term of this Agreement, the Employee
shall not engage in any business activities or ventures outside of the business
activities of the Employer without the express prior written consent of the
Employer's Board; provided, however, that nothing in this Agreement shall be
construed as preventing the Employee from:
6
(a) investing the Employee's assets in any company or other entity
in a manner not prohibited by Section 9 and in such form or manner as shall not
require any material activities on the Employee's part in connection with the
operations or affairs of the companies or other entities in which such
investments are made; or
(b) engaging in religious, charitable or other community or
non-profit activities that do not impair the Employee's ability to fulfill the
Employee's duties and responsibilities under this Agreement.
15. Termination.
A. Termination Without Cause.
(a) Notwithstanding anything herein to the contrary, this
Agreement may be terminated by either the Employer (by act of its Board) or the
Employee, at any time, without cause; provided, however, that the party desirous
of terminating this Agreement shall give the other party prior written notice of
such termination. In either event, the Employer may determine the Employee's
final day of employment hereunder. The date specified in any notice of
termination as the Employee's final day of employment shall be referred to
herein as the Termination Date.
(b) In the event that the Employer (by act of its Board)
terminates this Agreement without cause pursuant to this subsection (A) of
Section 15, or the Employee voluntarily resigns for Good Reason (defined below),
then the Employee shall be entitled to receive severance pay equal the Base
Compensation rate as of the Termination Date in equal monthly installments for a
period of twelve (12) months (the "Post-Termination Period") from the
Termination Date (the "Severance Package"). The Employer also agrees to make
available to the Employee, as part of the Severance Package, continuation of
group health plan benefits to the extent authorized by and consistent with 29
U.S.C. Section 1161 et seq. (commonly known as "COBRA"), and any other benefits
the Employee is receiving as of the Termination Date with the cost of the
regular premium for such benefits shared in the same relative proportion by the
Employer and the Employee as in effect on the Termination Date.
(c) For purposes of this Agreement, "Good Reason" shall mean:
(i) a reduction of the Employee's salary or insurance
benefits other than a reduction approved by the Employee in writing; or
(ii) a significant change in the Employee's title,
responsibilities and/or duties which constitutes, when compared to the
Employee's title, responsibilities and/or duties as of the Effective Date, a
demotion; or
(iii) the relocation of the offices at which the
Employee is principally employed as of the Effective Date to a location more
than fifty (50) miles from such office, which relocation is not approved by the
Employee.
7
(d) In the event of the Employee's voluntary termination, then
the Employee shall, at the request of the CEO of the Employer, continue as an
employee of the Employer for an additional thirty (30) day period after the
Termination Date for the purpose of assisting the Employer in locating and
training a suitable replacement for the Employee. During such additional period,
the Employee shall be entitled to full compensation and benefits and the
Employee shall continue to be bound by all of the terms contained herein. Any
such extended term shall extend the Post-Termination Period by an equal number
of days.
B. Termination With Cause.
(a) The Employer (by act of its Board, CEO or President) may
terminate this Agreement immediately for "cause" by giving written notice to the
Employee. As used herein, the term "cause" shall mean the Employee's: (i)
addiction to illegal drugs; (ii) willful failure or refusal to perform his
duties hereunder after written notice from the Company and a thirty (30) day
opportunity to cure; (iii) knowing acts of dishonesty which materially adversely
affect the Employer; (iv) indictment for a felony or crime involving moral
turpitude, fraud, embezzlement or misrepresentation. In the event that this
Agreement is terminated pursuant to this subsection (B), the Employee forfeits
and shall not be entitled to the Severance Package, or other benefits or bonus
of any kind whatsoever for any period after the Termination Date set forth in
the notice given by the Employer to the Employee.
C. Disability.
(a) If the Employee shall be disabled so as to be unable to
perform the essential functions of the Employee's then existing position or
positions under this Agreement, the Employer may remove the Employee from any
responsibilities and/or reassign the Employee to another position with the
Employer during the period of such disability. If the period of disability
extends for more than six (6) months, the Employer may terminate the Employee's
employment without further liability on the part of the Employer, except that
the Employee shall be entitled to the Severance Package. The Employer may elect,
at its sole discretion, to purchase a disability insurance package for the
Employee. In the event that the Employer so elects to purchase a disability
insurance package and the Employee subsequently becomes entitled to payments of
the disability insurance benefit, any payments pursuant to the Severance
Package, as defined in this Section 15, or payments of salary by the Employer
will be reduced by the amount of the disability insurance benefit payments
received by the Employee.
(b) If any question shall arise as to whether during any period the
Employee is disabled so as to be unable to perform the essential functions of
the Employee's then existing position or positions, the Employee may, and at the
request of the Employer shall, submit to the Employer a certification in
reasonable detail by a physician selected by the Employer, to whom the Employee
or the Employee's guardian has no reasonable objection, as to whether the
Employee is so disabled or how long such disability is expected to continue, and
such certification shall, for the purposes of this Agreement, be conclusive of
the issue. The Employee shall cooperate with any reasonable request of the
physician in connection with such certification. If such question shall arise
and the Employee shall fail to submit such certification,
8
the Employer's determination of such issue shall be binding on the Employee.
Nothing in this Section 15(c) shall be construed to waive the Employee's rights,
if any, under existing law including, without limitation, the Family and Medical
Leave Act of 1993, 29 U.S.C. 2601, et seq. and the Americans with Disabilities
Act, 42 U.S.C. 12101 et seq.
D. Death or Retirement. The Employee's employment under this Agreement
will be deemed to have terminated without further liability on the part of the
Employer if the Employee dies or retires.
E. Certain Termination Benefits. Unless otherwise specifically provided in
this Agreement or otherwise required by law, all compensation and benefits
payable to the Employee under this Agreement shall terminate on the date of
termination of the Employee's employment under this Agreement.
F. No Right to Continuing Employment. The Employee agrees that nothing
contained in this Agreement shall be construed to give the Employee a right to
continuing employment beyond the Termination Date.
16. Litigation and Regulatory Cooperation. During and after the Employee's
employment, the Employee shall cooperate fully with the Employer in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Employer which relate to events or
occurrences that transpired while the Employee was employed by the Employer. The
Employee's full cooperation in connection with such claims or actions shall
include, but not be limited to, being available to meet with counsel to prepare
for discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Employee's employment, the
Employee also shall cooperate fully with the Employer in connection with any
investigation or review of any federal, state or local regulatory authority as
any such investigation or review relates to events or occurrences that
transpired while the Employee was employed by the Employer. The Employer shall
reimburse the Employee for any reasonable out-of-pocket expenses incurred in
connection with the Employee's performance of obligations pursuant to this
Section 16.
17. Injunction. The Employee agrees that it would be difficult to measure
any damages caused to the Employer which might result from any breach by the
Employee of the promises set forth in Section 8, and that in any event money
damages would be an inadequate remedy for any such breach. Accordingly, the
Employee agrees that if the Employee breaches, or proposes to breach, any
portion of this Agreement, the Employer shall be entitled, in addition to all
other remedies that it may have, to an injunction or other appropriate
preliminary equitable relief to restrain any such breach without showing or
proving any actual damage to the Employer.
18. No Assignment. The Employee acknowledges that the services to be
rendered by him pursuant to this Agreement are unique. Accordingly, the Employee
shall not assign any of his rights or delegate any of his duties or obligations
under this Agreement.
9
19. Severability. Subject only to the reformation of time, geographical
and occupational limitations as set forth in Section 20 hereof, all of the terms
and provisions contained in this Agreement are severable and, in the event that
any portion or provision of this Agreement (including, without limitation, any
portion or provision of any section of this Agreement) shall to any extent be
deemed unenforceable or invalid by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared unenforceable or
invalid, shall not be affected thereby, and each portion and provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
20. Reformation of Time Geographical and Occupational Limitations. In the
event that any provision in this Agreement is held to be unenforceable by a
court of competent jurisdiction because it exceeds the maximum time,
geographical or occupational limitations permitted by applicable law, then such
provision(s) shall be and hereby are reformed to the maximum time, geographical
and occupational limitations as may be permitted by applicable law.
21. Specific Performance. Both parties recognize that the services to be
rendered under this Agreement by the Employee are special, unique and of an
extraordinary character, and that in the event of breach by the Employee of the
terms or conditions of this Agreement to be performed by him, the Employer shall
be entitled, if it so elects, to institute and prosecute proceedings in any
court of competent jurisdiction, either at law or in equity, to obtain damages
for any breach of this Agreement to enforce the specific performance thereof by
the Employee, or to enjoin the Employee from engaging in such activity, but
nothing contained herein shall be construed to prevent such other remedy in the
courts, in case of any breach of this Agreement by the Employee, as the Employer
may elect to invoke.
22. Massachusetts Law: Choice of Forum. This Agreement shall be governed,
construed and interpreted by, and in accordance with, the laws of the
Commonwealth of Massachusetts, without reference to its principles of conflicts
of laws. Any actions concerning enforcement of this Agreement or in any way
relating to the subject matter of this Agreement shall be litigated only in
Massachusetts state or federal courts of proper jurisdiction and venue. Each
party hereto expressly agrees to submit to such jurisdiction and venue for the
purposes of this Agreement. Notwithstanding the foregoing, the Employer may seek
to enforce the Employee's covenants described in Sections 6, 7, 8 and 9 hereof
in any jurisdiction and venue in which the Employee then resides, breaches or
threatens to breach such covenants.
23. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto, and replaces all prior agreements, promises, representations
and understandings between the Employer and the Employee whatsoever concerning
the limited subject matter hereof (other than the Stock Plan and any related
Stock Option Agreement entered into between the Employer and the Employee).
There are no other agreements, conditions or representations, oral or written,
express or implied, which form the basis for this Agreement.
24. Assignment; Successors and Assigns, Etc. Neither the Employer nor the
Employee may make any assignment of this Agreement or any interest herein, by
operation of
10
law or otherwise, without the prior written consent of the other party;
provided, however, that the Employer may assign its rights under this Agreement
without the consent of the Employee in the event that the Employer shall effect
a reorganization, consolidate with or merge into any other corporation,
partnership, organization or other entity, or transfer all or substantially all
of its properties or assets to any other corporation, partnership, organization
or other entity. This Agreement shall inure to the benefit of and be binding
upon the Employer and the Employee, their respective successors, executors,
administrators, heirs and permitted assigns.
25. Modification. No waiver or modification of this Agreement or of any
covenant, condition, or limitation contained herein shall be valid unless in a
writing of subsequent date hereto and duly executed by the party to be charged
therewith and no evidence of any waiver or modification shall be offered or
received in evidence in any proceeding, arbitration, or litigation between the
parties hereto arising out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, unless such waiver or modification is in
writing, duly executed as aforesaid. The parties further agree that the
provisions of this Section may not be waived except as herein set forth.
26. Section Headings. The section headings contained in this Agreement are
for convenience only, and shall in no manner be construed as part of this
Agreement.
27. Waiver of Breach. The waiver by either party of a breach or violation
of any provision of this Agreement shall not operate as, or be construed to be,
a waiver of any subsequent breach thereof.
28. Notices. Any and all notices required or permitted to be given under
this Agreement shall be sufficient if furnished in writing, sent by certified or
registered mail, return receipt requested to the party's address set forth in
the Prologue of this Agreement, or to such other address as such party may
specify in writing.
29. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
11
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year here above first written.
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
By: /s/ John E. McCray
-----------------------------
Name: John E. McCray
Title: COO
/s/ Nicholas Borys
---------------------------------
Nicholas Borys, M.D.
|
12
SCHEDULE A
(As Amended from time to time pursuant to Paragraph 3(a))
Base Compensation
Annual Rate of Base Compensation Agreed to by Employee Agreed to by Employer
-------------------------------- --------------------- ---------------------
$200,000.00 [ILLEGIBLE] [ILLEGIBLE]
|
(Must be initialed by both parties each time amended to be effective.)
Exhibit A - Incentive Stock Option Grant
13
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
(for Robert E. Gallahue Jr.)
EMPLOYMENT AGREEMENT (this "Agreement") dated as of July 1, 2005 (the
"Effective Date"), by and between Molecular Insight Pharmaceuticals, Inc., a
Massachusetts corporation having its principal place of business at 160 Second
Street, Cambridge, Massachusetts 02142 (the "Employer"), and Robert E. Gallahue
Jr., 544 Sharpners Pond Road, North Andover, Massachusetts 01845 (the
"Employee").
WITNESSETH:
WHEREAS, the Employer is engaged in the business of developing and
marketing imaging pharmaceuticals which detect human disease; and
WHEREAS, the Employee possesses the experience necessary in administration
and general and active supervision and direction of the daily operations of a
biopharmaceutical business in order to fulfill the responsibilities as Chief
Financial Officer of the Employer; and
WHEREAS, the Employer desires to employ the Employee, and the Employee
desires to be employed by the Employer, all in accordance with the terms and
provisions of this Agreement.
NOW, THEREFORE, in consideration of the covenants and promises hereinafter
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employer and the Employee
represent, covenant and agree as follows:
1. Employment. The Employer hereby employs the Employee to serve as Chief
Financial Officer of the Employer in accordance with the terms and provisions of
this Agreement, and the Employee hereby accepts such employment with the
Employer.
2. Term. The term of this Agreement shall commence on the Effective Date
and shall continue until this Agreement is terminated as hereinafter provided.
3. Compensation. As compensation for all services rendered by the Employee
to the Employer pursuant to this Agreement, the Employer shall pay to the
Employee the following amounts during the term of this Agreement:
(a) Base Compensation. The Employer shall pay to the Employee base
compensation at no less than the rate set forth on Schedule A attached hereto
and herein incorporated by reference (the "Base Compensation"). The Base
Compensation shall be payable pursuant to the Employer's standard payroll
practices, except as otherwise noted on Schedule A. The Base Compensation shall
be reviewed by the compensation committee of the Board of the Employer annually
and increases in the Base Compensation, if any, shall be determined in the
Employer's sole discretion and evidenced by the updating and initialing of
Schedule A by both parties hereto.
(b) Incentive Bonus. In addition to the Base Compensation, the Employee
may be eligible to receive an annual fiscal year incentive bonus with a maximum
annual amount of up to thirty percent (30%) of the Employee's then current Base
Compensation (the "Incentive Bonus"). The amount and timing of payment of the
Incentive Bonus shall be determined by the Board, in its sole discretion, and
will be based both upon accomplishment of goals provided to the Employee by the
Chairman and Chief Executive Officer from time to time and the achievement of
specific corporate milestones. The Board may elect to award the Incentive Bonus
to the Employee in cash or in the Employer's capital stock (at its then-current
fair market value).
4. Vacation and Employee Benefits.
(a) Vacation. The Employee shall be entitled to paid vacation equal to
four weeks annually. Vacation shall be taken at such times so as not to
interfere with the proper operation of the Employer's business.
(b) Benefits Generally. The Employee shall be entitled to receive and
participate in such employee benefits as the Employer shall from time to time
determine to provide to its executives generally.
5. Stock Incentives.
(a) Options. Pursuant to the provisions of the Company's 1997 Stock
Option Plan, as may be amended from time to time (the "Plan"), and subject to
the approval by the Employer's Board of Directors, the Employer will grant to
the Employee an option to purchase 875,000 shares of its Common Stock ($.01 par
value) (the "Optioned Shares") at an exercise price equal to the fair market
value of the Employer's Common Stock as of the date of grant, which is currently
$0.20 per share. Of the Optioned Shares, options for 475,000 shares shall vest
in four equal installments on the anniversary of the Employee's date of hire in
accordance with and subject to all the terms and conditions of the Plan and a
separate stock option agreement. Further, options for the remaining 400,000
shares shall vest on the fourth anniversary of the Employee's date of hire, in
accordance with and subject to all the terms and conditions of the Plan and a
separate stock option agreement; provided, that such shares may receive
acceleration of vesting, subject to the determination of the Employer's Board of
Directors, in its sole discretion, upon the successful achievement of
performance goals to be mutually agreed to by the Employee and the Employer. In
the event of a Change of Control (as defined below), all of the unvested
Optioned Shares immediately shall vest, provided that the Employee is still
employed by the Employer on the date of such Change of Control.
(b) Change of Control. For purposes of this Agreement "Change of
Control" shall mean the occurrence of one or more of the following events:
(i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes a
"beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act) (other than the
2
Employer, any trustee or other fiduciary holding securities under an employee
benefit plan of the Employer, or any corporation owned, directly or indirectly,
by the stockholders of the Employer, in substantially the same proportions as
their ownership of stock of the Employer), or any or group of persons acting in
concert becomes a beneficial owner, directly or indirectly, of securities of
the Employer, representing more than fifty percent (50%) of the combined voting
power or fully diluted equity interest of the Employer's then outstanding
equity securities, except as a result of a financing transaction where all
proceeds are received directly by the Company that is not intended as a sale of
the business of the Employer; or
(ii) the stockholders of the Employer approve a merger or consolidation of the
Employer with any other corporation or other entity, other than (A) a merger or
consolidation which would result in the equity securities of the Employer
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into equity securities of the
surviving entity) fifty percent (50%) or more of the outstanding equity
interest of the Employer or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Employer (or similar transaction) in which
no "person" (as hereinabove defined) other than Employee acquires more than
fifty percent (50%) of the equity interest of the Employer's then outstanding
securities; or
(iii) the stockholders of the Employer approve a plan of complete liquidation
of the Employer or an agreement for the sale or disposition by the Employer of
all or substantially all of the Employer's assets.
6. Description of Duties. During the term of this Agreement, the Employee shall
be the Chief Financial Officer and shall:
(a) devote on a full time basis all necessary time, best efforts,
professional skills, attention and energies to the fulfillment of the regulatory
and quality assurance duties customarily associated with such position and the
accomplishment of the goals provided by the Chairman and Chief Executive Officer
of the Employer to the Employee from time to time; and
(b) act in accordance herewith, and in all accounts be responsible and
responsive to, the Board of Directors and Chairman and CEO of Employer.
7. General Services. During the term of this Agreement, the Employee
shall:
(a) observe the Employer's policies and standards of conduct, as well
as customary standards of business conduct, including any standards prescribed
by law or regulation;
(b) perform his duties hereunder in a manner that preserves and
protects the Employer's business reputation; and
(c) do all things and render such services as may be necessary or
beneficial in carrying out any of the foregoing.
3
8. Non-Disclosure of Proprietary or Confidential Information and
Confidential Communications. For the purposes of this Section 8, the term
"Employer" shall include, and the protections granted the Employer hereunder
shall extend to, ATP Therapeutics, Inc., Biostream Therapeutics, Inc. (f/k/a
Zebra Pharmaceuticals, Inc.), and any other entities now or hereinafter
affiliated, acquired or created by the Employer. The Employee recognizes and
acknowledges that the marketing plans and business strategy, the particular
needs and application of such customers for diagnostic imaging techniques, the
Employer's proprietary computer software programs, trade secrets and any other
confidential and proprietary information concerning the business or affairs of
the Employer (including but not limited to marketing and business plans and
strategies, research protocols, procedures data, results, and cost information)
(hereinafter collectively referred to as the "Confidential Information")
constitute a valuable, proprietary, special and unique asset of the Employer's
business. The Employee further recognizes and acknowledges that any
communications, whether written, oral or otherwise, that the Employer or any of
the Employer's employees has with the Employer's existing or prospective
customers and clients and affiliated research institutions and scientists
regarding the Employer's business are extremely confidential (hereinafter the
"Confidential Communications"). The term Confidential Information shall exclude
any information that has been made public through no fault of the Employee.
The Employee shall not, for any reason whatsoever, during or after the
termination of his employment with the Employer, use, disclose or allow access
to, for his own benefit or for that of another, the Confidential Information or
the Confidential Communications (or any part thereof) to any person, firm,
corporation, association or other entity for any reason or for any purpose
whatsoever.
In the event of a breach or threatened breach by the Employee of the
provisions of this Section, the Employer shall be entitled to an injunction
restraining the Employee from so using, disclosing or allowing access to, in
whole or in part, the Confidential Information and the Confidential
Communications or from rendering any services to any person, firm, corporation,
association or other entity to whom the Confidential Information or the
Confidential Communications, in whole or in part, have been disclosed or are
threatened to be disclosed. Nothing herein shall be construed as prohibiting the
Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach, including, but not limited to, the recovery of
damages and reasonable attorneys' fees from the Employee. In the event that the
Employer seeks an injunction against the Employee and is unsuccessful, the
Employer will reimburse the Employee his attorney's fees and expenses.
Upon termination of this Agreement by either party for any reason, the
Employee shall return to the Employer any of the Confidential Information,
Confidential Communications, charts, company literature, reports, Employer
credit cards or other proprietary materials of the Employer then in the
Employee's possession and all other materials of the Employer which the Board of
Directors of the Employer requests the Employee to so return.
This Section shall in all respects survive any termination of this
Agreement and shall remain in full force and effect thereafter. In the event
that any provision of this Section 8 shall conflict with any term or condition
of any other confidentiality agreement between the Employer
4
and the Employee, then the more restrictive provision shall be deemed to apply
in order to accomplish the purposes of this Section 8 and such other agreements,
that being to protect the Employer's Confidential Information and Confidential
Communications.
In the event of the Employee's breach of this Section 8, the Employee
shall immediately and irrevocably forfeit future payments under the Severance
Package as hereinafter defined in Section 15. Nothing in this paragraph shall be
construed to limit or cap the Employer's damages in the event of a breach of
this Section 8.
9. Covenant Not to Compete: Non-solicitation of Employees and Customers.
For the purposes of this Section 9, the term "Employer" shall include, and the
protections granted the Employer hereunder shall extend to, ATP Therapeutics,
Inc., Biostream Therapeutics, Inc. (f/k/a Zebra Pharmaceuticals, Inc.), and any
other entities now or hereinafter affiliated, acquired or created by the
Employer. The Employee agrees that while employed by the Employer and for a
continuous period of one (1) year following the date of the termination of his
employment with the Employer either voluntarily without "Good Reason" or
involuntarily by the Company for "cause" (the "Restricted Period"), he shall not
(without the express prior written consent of the Board of Directors of the
Employer), directly or indirectly, compete with the Employer. In construing the
foregoing prohibition, the Employee shall be deemed to be competing with the
Employer if he shall become self-employed in, or accept employment with, consult
with, render services to or become associated with, own, manage, operate, join,
control, or participate in the ownership, management, operation, or control of,
or be connected in any material manner with, or directly or indirectly enter
into the employment of, or make a substantial investment in (other than as a
holder of not more than 3% of the total outstanding stock of a publicly held
company), any corporation, partnership, proprietorship or other type of business
organization or entity which engages in, any business (a "Competing Business")
involving the sale, distribution, development or research concerning diagnostic
molecular imaging of the myocardium or other lines of the Employer which
directly and materially competes with the product lines in or with which the
Employer is then currently involved.
The Employee further agrees that, during his employment with the Employer
and during the Restricted Period, he shall not solicit any of the Employer's
employees, existing customers or prospective customers (of which the Employee is
then currently aware), affiliated research institutions or scientists, on behalf
of himself or any Competing Business.
This Section 9 shall in all respects survive any termination of this
Agreement and shall remain in full force and effect during the Restricted
Period.
In the event of the Employee's breach of this Section 9 during the
Restricted Period, the Employee shall immediately and irrevocably forfeit future
payments to the Employee under the Severance Package as hereinafter defined in
Section 15.
10. Assignment of Rights. Any and all information, data, inventions,
discoveries, materials, notebooks and other work product which the Employee
conceives, develops or acquires during his employment with the Employer, which
directly or indirectly relates to work performed for the Employer, shall be the
sole and exclusive property of the Employer. The
5
Employee shall promptly execute any and all documents necessary and take such
further actions as the Employer may deem necessary to assign any and all of the
Employee's right, title and interest in such property to the Employer.
11. Intellectual Property. For the purposes of this Section 11, the term
"Employer" shall include, and the protections granted the Employer hereunder
shall extend to, ATP Therapeutics, Inc., Biostream Therapeutics, Inc. (f/k/a
Zebra Pharmaceuticals, Inc.), and any other entities now or hereinafter
affiliated, acquired or created by the Employer. During the Employee's
employment at the Employer, the Employee shall promptly assist with and execute
any and all applications, assignments or other documents which an officer or
director of the Employer shall deem necessary or useful in order to obtain and
maintain patent, trademark or other intellectual property protection for the
Employer's products or services. After the termination date of his employment
with the Employer, the Employee shall use reasonable efforts to assist the
Employer on intellectual property matters as they relate to his employment, and
the Employer shall reasonably compensate the Executive for his time and expense.
12. Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to Confidential
Information, which are furnished to the Employee by the Employer or are produced
by the Employee in connection with the Employee's employment will be and remain
the sole property of the Employer. The Employee will return to the Employer all
such materials and property as and when requested by the Employer. In any event,
and whether or not the Employer so specifically requests, the Employee will
return all such materials and property immediately upon termination of the
Employee's employment for any reason. The Employee will not retain any such
material or property or any copies thereof after such termination.
13. Third-Party Agreements and Rights. The Employee hereby confirms that
he is not bound by the terms of any agreement with any previous employer or
other party which restricts in any way the Employee's use or disclosure of
information or the Employee's engagement in any business. The Employee
represents to the Employer that the Employee's execution of this Agreement, the
Employee's employment with the Employer and the performance of the Employee's
proposed duties for the Employer will not violate any obligations the Employee
may have to any such previous employer or other party. In the Employee's work
for the Employer, the Employee will not disclose or make use of any information
in violation of any agreements with or rights of any such previous employer or
other party, and the Employee will not bring to the premises of the Employer any
copies or other tangible embodiments of nonpublic information belonging to or
obtained from any such previous employer or other party.
14. Restricted Activities. During the term of this Agreement, the Employee
shall not engage in any business activities or ventures outside of the business
activities of the Employer without the express prior written consent of the
Employer's Board; provided, however, that nothing in this Agreement shall be
construed as preventing the Employee from:
(a) investing the Employee's assets in any company or other entity
in a manner not prohibited by Section 9 and in such form or manner as shall not
require any material
6
activities on the Employee's part in connection with the operations or affairs
of the companies or other entities in which such investments are made; or
(b) engaging in religious, charitable or other community or
non-profit activities that do not impair the Employee's ability to fulfill the
Employee's duties and responsibilities under this Agreement.
15. Termination.
A. Termination Without Cause.
(a) Notwithstanding anything herein to the contrary, this
Agreement may be terminated by either the Employer (by act of its Board) or the
Employee, at any time, without cause; provided, however, that the party desirous
of terminating this Agreement shall give the other party prior written notice of
such termination. In either event, the Employer may determine the Employee's
final day of employment hereunder. The date specified in any notice of
termination as the Employee's final day of employment shall be referred to
herein as the Termination Date.
(b) In the event that the Employer (by act of its Board)
terminates this Agreement without cause pursuant to this subsection (A) of
Section 15, or the Employee voluntarily resigns for Good Reason (defined below),
then the Employee shall be entitled to receive severance pay equal to the Base
Compensation rate as of the Termination Date in equal monthly installments for a
period of twelve (12) months (the "Post-Termination Period") from the
Termination Date (the "Severance Package"). The Employer also agrees to make
available to the Employee, as part of the Severance Package, continuation of
group health plan benefits to the extent authorized by and consistent with 29
U.S.C. Section 1161 et seq. (commonly known as "COBRA"), and any other benefits
the Employee is receiving as of the Termination Date with the cost of the
regular premium for such benefits shared in the same relative proportion by the
Employer and the Employee as in effect on the Termination Date.
(c) For purposes of this Agreement, "Good Reason" shall mean:
(i) a reduction of the Employee's Base Compensation
other than a reduction approved by the Employee in writing; or
(ii) a significant change in the Employee's title and/or
responsibilities which constitutes, when compared to the Employee's title and/or
responsibilities as of the Effective Date, a demotion; or
(iii) the relocation of the offices at which the
Employee is principally employed as of the Effective Date to a location more
than fifty (50) miles from such office, which relocation is not approved by the
Employee.
(d) In the event of the Employee's voluntary termination, then
the Employee shall, at the request of the CEO of the Employer, continue as an
employee of the
7
Employer for an additional thirty (30) day period after the Termination Date for
the purpose of assisting the Employer in locating and training a suitable
replacement for the Employee. During such additional period, the Employee shall
be entitled to full compensation and benefits and the Employee shall continue to
be bound by all of the terms contained herein. Any such extended term shall
extend the Post-Termination Period by an equal number of days.
B. Termination With Cause.
(a) The Employer (by act of its Board, CEO or President) may
terminate this Agreement immediately for "cause" by giving written notice to the
Employee. As used herein, the term "cause" shall mean the Employee's: (i) use of
illegal drugs which impairs the Employee's performance for the Employer; (ii)
willful or repeated failure or refusal to perform his duties hereunder after
written notice from the Company and a thirty (30) day opportunity to cure; (iii)
acts of dishonesty which materially adversely affect the Employer; (iv)
indictment for a felony or other crime, or (v) commission of acts involving
moral turpitude, fraud, embezzlement or misrepresentation. In the event that
this Agreement is terminated pursuant to this subsection (B), the Employee
forfeits and shall not be entitled to the Severance Package, or other benefits
or bonus of any kind whatsoever for any period after the Termination Date set
forth in the notice given by the Employer to the Employee.
C. Disability.
(a) If the Employee shall be disabled so as to be unable to
perform the essential functions of the Employee's then existing position or
positions under this Agreement, the Employer may remove the Employee from any
responsibilities and/or reassign the Employee to another position with the
Employer during the period of such disability. If the period of disability
extends for more than six (6) months, the Employer may terminate the Employee's
employment without further liability on the part of the Employer, except that
the Employee shall be entitled to the Severance Package. The Employer may elect,
at its sole discretion, to purchase a disability insurance package for the
Employee. In the event that the Employer so elects to purchase a disability
insurance package and the Employee subsequently becomes entitled to payments of
the disability insurance benefit, any payments pursuant to the Severance
Package, as defined in this Section 15, or payments of salary by the Employer
will be reduced by the amount of the disability insurance benefit payments
received by the Employee.
(b) If any question shall arise as to whether during any period the
Employee is disabled so as to be unable to perform the essential functions of
the Employee's then existing position or positions, the Employee may, and at the
request of the Employer shall, submit to the Employer a certification in
reasonable detail by a physician selected by the Employer, to whom the Employee
or the Employee's guardian has no reasonable objection, as to whether the
Employee is so disabled or how long such disability is expected to continue, and
such certification shall, for the purposes of this Agreement, be conclusive of
the issue. The Employee shall cooperate with any reasonable request of the
physician in connection with such certification. If such question shall arise
and the Employee shall fail to submit such certification, the Employer's
determination of such issue shall be binding on the Employee. Nothing in this
Section 15(c) shall be construed to waive the Employee's rights, if any, under
existing law
8
including, without limitation, the Family and Medical Leave Act of 1993, 29
U.S.C. 2601, et seq. and the Americans with Disabilities Act, 42 U.S.C. 12101 et
seq.
D. Death or Retirement. The Employee's employment under this Agreement
will be deemed to have terminated without further liability on the part of the
Employer if the Employee dies or retires.
E. Certain Termination Benefits. Unless otherwise specifically provided in
this Agreement or otherwise required by law, all compensation and benefits
payable to the Employee under this Agreement shall terminate on the date of
termination of the Employee's employment under this Agreement.
F. No Right to Continuing Employment. The Employee agrees that nothing
contained in this Agreement shall be construed to give the Employee a right to
continuing employment beyond the Termination Date.
16. Litigation and Regulatory Cooperation. During and after the Employee's
employment, the Employee shall cooperate fully with the Employer in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Employer which relate to events or
occurrences that transpired while the Employee was employed by the Employer. The
Employee's full cooperation in connection with such claims or actions shall
include, but not be limited to, being available to meet with counsel to prepare
for discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Employee's employment, the
Employee also shall cooperate fully with the Employer in connection with any
investigation or review of any federal, state or local regulatory authority as
any such investigation or review relates to events or occurrences that
transpired while the Employee was employed by the Employer. The Employer shall
reimburse the Employee for any reasonable out-of-pocket expenses incurred in
connection with the Employee's performance of obligations pursuant to this
Section 16.
17. Injunction. The Employee agrees that it would be difficult to measure
any damages caused to the Employer which might result from any breach by the
Employee of the promises set forth in Sections 8, 9 or 10, and that in any event
money damages would be an inadequate remedy for any such breach. Accordingly,
the Employee agrees that if the Employee breaches, or proposes to breach,
Sections 8, 9 or 10 of this Agreement, the Employer shall be entitled, in
addition to all other remedies that it may have, to an injunction or other
appropriate preliminary equitable relief to restrain any such breach without
showing or proving any actual damage to the Employer.
18. No Assignment. The Employee acknowledges that the services to be
rendered by him pursuant to this Agreement are unique. Accordingly, the Employee
shall not assign any of his rights or delegate any of his duties or obligations
under this Agreement.
19. Severability. Subject only to the reformation of time, geographical
and occupational limitations as set forth in Section 20 hereof, all of the terms
and provisions contained in this Agreement are severable and, in the event that
any portion or provision of this
9
Agreement (including, without limitation, any portion or provision of any
section of this Agreement) shall to any extent be deemed unenforceable or
invalid by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances
other than those as to which it is so declared unenforceable or invalid, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
20. Reformation of Time Geographical and Occupational Limitations. In the
event that any provision in this Agreement is held to be unenforceable by a
court of competent jurisdiction because it exceeds the maximum time,
geographical or occupational limitations permitted by applicable law, then such
provision(s) shall be and hereby are reformed to the maximum time, geographical
and occupational limitations as may be permitted by applicable law.
21. Massachusetts Law: Choice of Forum. This Agreement shall be governed,
construed and interpreted by, and in accordance with, the laws of the
Commonwealth of Massachusetts, without reference to its principles of conflicts
of laws. Any actions concerning enforcement of this Agreement or in any way
relating to the subject matter of this Agreement shall be litigated only in
Massachusetts state or federal courts of proper jurisdiction and venue. Each
party hereto expressly agrees to submit to such jurisdiction and venue for the
purposes of this Agreement. Notwithstanding the foregoing, the Employer may seek
to enforce the Employee's covenants described in Sections 8,9 and 10 hereof in
any jurisdiction and venue in which the Employee then resides, breaches or
threatens to breach such covenants.
22. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto, and replaces all prior agreements, promises, representations
and understandings between the Employer and the Employee whatsoever concerning
the limited subject matter hereof (other than the Stock Plan and any related
Stock Option Agreement entered into between the Employer and the Employee).
There are no other agreements, conditions or representations, oral or written,
express or implied, which form the basis for this Agreement.
23. Modification. No waiver or modification of this Agreement or of any
covenant, condition, or limitation contained herein shall be valid unless in a
writing of subsequent date hereto and duly executed by the party to be charged
therewith.
24. Section Headings. The section headings contained in this Agreement are
for convenience only, and shall in no manner be construed as part of this
Agreement.
25. Waiver of Breach. The waiver by either party of a breach or violation
of any provision of this Agreement shall not operate as, or be construed to be,
a waiver of any subsequent breach thereof.
26. Notices. Any and all notices required or permitted to be given under
this Agreement shall be sufficient if furnished in writing, sent by certified or
registered mail, return receipt requested to the party's address set forth in
the Prologue of this Agreement. Either party may furnish the other party with a
different address in writing pursuant to this Section 26.
10
27. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
11
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year here above first written.
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
By:_______________________
Name: David S. Barlow
Title: Chairman & CEO
/s/ Robert E. Gallahue Jr.
--------------------------
Robert E. Gallahue Jr.
|
12
SCHEDULE A
(As Amended from time to time pursuant to Paragraph 3(a))
Base Compensation
Annual Rate of Base Agreed to by Employee Agreed to by Employer
Compensation
$ 225,000.00
|
(Must be initialed by both parties each time amended to be effective.)
Exhibit A - Incentive Stock Option Grant
13
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
Exhibit 10.12
LICENSE AGREEMENT
This Agreement made as of the 25th day of October 1999, by and between
Nihon Medi-Physics Co. Ltd. (the "Licensor") and Biostream, Inc. (the
"Licensee"),
WITNESSETH:
WHEREAS Licensor conducted various clinical trials in Japan and has been
selling its BMIPP product, Cardiodine, for use in diagnosing myocardial ischemia
and infarction and as a result has collected and possesses substantial
information, know-how and data from such trials;
WHEREAS Licensee has a patent on certain BMIPP product technology in the
United States;
WHEREAS Licensee desires to utilize the Confidential Information (as
defined below) to [***********************************************************]
and production capability with respect to such technology in the United States;
and
WHEREAS Licensee wishes to obtain non-exclusive license to use the
Confidential Information pursuant to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
I. Definitions
A. "Additional Indication" shall mean the second or any subsequent
indication after the First Indication for the use of MyoImage for which Licensee
receives FDA approval.
B. "BMIPP" shall mean Beta-methyl-iodo-phenyl-pentadecanoic acid, labeled
with Iodine-123.
C. "Cardiodine" shall mean Licensors BMIPP product.
D. "Confidential Information" shall mean all data submitted by Licensor to
the Ministry of Health and Welfare as of the date of this Agreement in
connection with Licensor's application for approval of Cardiodine.
E. "FDA" shall mean the United States Food and Drug Administration.
F. "First Indication" shall mean Licensee's use of MyoImage to diagnose
myocardial ischemia and infarction.
G. "MyoImage" shall mean Licensee's BMIPP product.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
H. "Net Sales" shall mean all amounts actually received, directly or
indirectly, in respect of sales of MyoImage in the Territory by Licensee,
affiliates of Licensee, or any third parties to which Licensee may license, sell
or otherwise transfer or dispose of its rights to make or sell MyoImage in the
Territory less the following items:
(1) customary trade, quantity, cash and prompt payment discounts and
non-affiliated brokers' or agents' commissions actually allowed and taken;
(2) amounts repaid or credited by reason of rejection or return;
(3) taxes levied on and/or other governmental charges made as to
production, sale, transportation, delivery or use and paid or collected by or on
behalf of Licensee;
(4) costs of insurance and packing and charges for delivery or
transportation; and
(5) rebates and price reductions or adjustments required by a law or
regulation.
I. "Technology" shall mean BMIPP, Cardiodine and MyoImage collectively.
J. "Territory" shall mean North America.
II. Licenses and Rights
A. During the term of this Agreement, and subject to all the terms and
conditions stated herein, Licensor hereby grants Licensee the
[*************]right (the "License") to use the Confidential Information solely
for and in connection with [*************************], the marketing of
MyoImage, the conduct of all aspects of clinical trials of MyoImage, any
[**********************] regarding MyoImage and the formulation, production and
distribution of MyoImage within, the Territory including copying, translating
and distributing the Confidential Information in the Territory.
B. Licensee shall be responsible at its sole cost and expense for
translating the Confidential Information into English. Licensor will cause its
employees to respond by telephone or in writing to inquiries Licensee may have
regarding the Confidential Information, provided that Licensor's employees shall
not he required to spend more than 3 employee working days in the aggregate in
assisting Licensee in this manner.
III. Warranties and Indemnification
A. Licensor represents and warrants to Licensee as follows:
1. Licensor has the right, power and authority to enter into this
Agreement and grant the rights and undertake the obligations specified herein.
2
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
2. To the best knowledge of Licensor, the information contained in the
Confidential Information was accurate as of the date of its submission to the
Ministry of Health and Welfare. No representation is made as to the validity or
ownership of any intellectual or industrial property rights inherent in the
Confidential Information.
3. No authorization, consent or approval of, or filing with or notice to
any governmental or public body or authority, is necessary for the execution,
delivery and performance of this Agreement by Licensor.
4. Neither the execution, delivery and performance of this Agreement by
Licensor nor Licensee's use of the Confidential Information pursuant to this
Agreement will conflict with or result in any violation or breach of any
agreement, instrument license, judgment, order, decree, statute, ordinance, rule
or regulation to which Licensor is a party or by which it is bound or which is
applicable to it or any of its assets.
IV. Royalties
A. Amount of Royalties Owing
1. In exchange for the License granted hereunder, Licensee shall pay to
Licensor the following royalties with respect to Net Sales for the First
Indication:
a. If Licensor provides Licensee with the Confidential
Information, and Licensee is able to [********************
*****************************************************] in
connection with the approval of the use of MyoImage for
the First Indication: [*]%
b. With respect to the use of MyoImage for the First
Indication, if the use of the Confidential Information
results in Licensee's being allowed by the FDA to [****
*******************************************************] [*]%
c. With respect to the use of MyoImage for the First
Indication, if the use of the Confidential Information
results in Licensee's being allowed by the FDA to [****
*******************************************************] [*]%
d. With respect to the use of MyoImage for the First
Indication, if the use of the Confidential Information
results in Licensee's being allowed by the FDA to [****
******************************************************
****************] [*]%
e. With respect to the use of MyoImage for the First
Indication, if the use of the Confidential Information
results in Licensee's being allowed by the FDA to [****
******************************************************
****************] [*]%
3
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
f. With respect to the use of MyoImage for the First Indication,
if the use of the Confidential Information results in Licensee's
being allowed by the FDA to [**********************************
***************************************************************
*******************************] [*]%
A Phase II or Phase III trial will be deemed to be "limited" if the FDA
specifies in writing that less than the usual standard Phase II or Phase III, as
the case may be, trial will be required. Within 30 days after Licensee receives
FDA approval to commercially market and sell MyoImage, Licensee shall deliver to
Licensor a statement [**********************************************************
*****************************], the royalty that will be due with respect to
ensuing Net Sales as a result and copies of all written communications from the
FDA with respect to the approval process.
2. Licensee shall also pay to Licensor a royalty of [*]% of Net Sales of
MyoImage for any Additional Indication.
B. Time and Method of Payment
1. Following Licensee's first sale of MyoImage, Licensee shall make
written reports and royalty payments quarterly, within 30 days following each
March 31, June 30, September 30, and each December 31, or at such other times
as the parties may from time to time agree. Each report shall state the number,
basis of calculation, description and aggregate Net Sales of MyoImage during the
completed quarter for the First Indication and for each Additional Indication
and resulting calculation of royalty payments due Licensor for such completed
quarter.
Licensee shall, as a condition of entering into any license or other
transfer or disposition of rights to make or sell MyoImage to a third party
require that such third party maintain records of sales and other information
equivalent to the records required to be maintained by Licensee hereunder, which
records shall be made available to Licensor for the purposes of calculating and
confirming royalty payments hereunder
2. All royalty payments shall be in Japanese yen converted from US dollars
at the prevailing exchange rate and made by wire transfer pursuant to such
instructions as may be specified by Licensor from time to time.
3. If any government or political subdivision requires Licensee to
withhold any tax or other amount with respect to the payment of royalties
hereunder, Licensee shall be deemed to have paid the full amount of the
royalties to Licensor and shall not be required to increase any royalty payments
to Licensor to compensate for such withholdings.
4. Licensee shall keep records showing all operations that are subject to
this Agreement and shall maintain such results for a period of three years
following the expiration or earlier termination of this Agreement. Upon
reasonable notice to Licensee, Licensor shall have the right to inspect, or to
cause an accountant or other authorized agent or agents to inspect, Licensee's
4
records to verify that Licensee has paid all royalties owing to Licensor. The
foregoing inspection rights shall survive the expiration or earlier termination
of this Agreement for a period of three years. In the event that it is
established in the course of an inspection that Licensee has been paying less
than 95% of the royalties it is obliged to pay hereunder, in addition and
without prejudice to any other remedy available to Licensor, Licensee shall
reimburse Licensor for the cost of such inspection, Any confidential information
disclosed to Licensor during any such inspection shall be held in confidence by
Licensor, not used except in connection with the enforcement of this Agreement
and not disclosed to any third parties. Licensor shall take all other actions
reasonably necessary or advisable to protect and maintain Licensee's rights in
such information. Any third party agents of Licensor to whom such confidential
information is disclosed shall be required to enter written confidentiality or
nondisclosure agreements reasonably satisfactory to Licensee with respect to
Licensee's confidential information.
V. Confidential Information
A. Licensee acknowledges that all Confidential Information is a valuable
asset of Licensor, the value of which would be substantially diminished or
destroyed by unauthorized disclosure.
B. Licensee shall not disclose any Confidential Information to vendors,
customers, or other persons except in connection with its use of the
Confidential Information as provided herein (including filings with the FDA)
without the prior written consent of Licensor.
C. Licensee shall enter into written confidentiality or nondisclosure
agreements with Licensee's employees, with vendors to Licensee, and with anyone
else to whom Confidential Information is disclosed.
D. Licensee shall take all other actions reasonably necessary or advisable
to protect and maintain Licensor's rights in all Confidential Information. These
actions shall include, without limitation:
1. Establishment and maintenance of reasonable security procedures at all
of Licensee's locations at which Confidential Information is kept or used;
2. Informing Licensee's employees with access to Confidential Information
that Confidential Information is confidential, proprietary and secret;
3. Informing Licensee's employees on a periodic basis of the importance of
maintaining the secrecy of all Confidential Information; and
4. Such other actions as Licensee takes to protect its own confidential
materials and such actions as Licensor may reasonably request to maintain the
secrecy of all Confidential Information.
E. Any information, technical data or know-how that (a) is already in
Licensee's possession at the time of its disclosure to Licensee, (b) is now or
becomes a part of the public
5
domain by virtue of a publication other than by or through the fault of Licensee
or any of its agents or employees, (c) is rightfully received from a third party
who has a right to disclose such information without restriction on disclosures
and without breach of this agreement or (d) is independently developed by
Licensee without use of Confidential Information shall not be deemed to be
Confidential Information.
VI. Termination
A. The term of this Agreement shall be from the date hereof until such
time as Licensee, its successors, affiliates, licensees and other transferees
cease to sell or distribute MyoImage in the Territory.
B. This Agreement may be terminated (1) by mutual agreement; (2) by one
party upon the occurrence of a material breach of contract by the other party;
or (3) by one party upon bankruptcy, insolvency proceeding or similar event
affecting the other party.
C. Each party hereto shall keep the other party informed of bona fide
reason or similar incidents which come to its attention with regard to this
Agreement, regardless of the origin of such report. Either party may rescind
this Agreement, with consent from the other party, which consent shall not be
unreasonably withheld, at any time prior to the official submission by the
Licensee of the Confidential Information to the FDA, but only for a bona fide
reason, which shall be limited to the definition below. A "bona fide reason"
shall mean (1) the occurrence of materially adverse results or revelations
concerning the use of Cardiodine that is likely to have an materially adverse
effect on the outcome of the FDA approval process for MyoImage; or (2) the
occurrence of materially adverse results during clinical trials of MyoImage; (3)
any other circumstances that would cause public disclosure of this Agreement or
the Confidential Information, that would have a materially adverse impact on
either party or either party's reputation. In the event that the parties do not
agree that an occurrence constitutes a bona fide reason, the parties will employ
the dispute resolution process in Section VII. Each party agrees to promptly
notify the other if a bona fide reason occurs.
D. If NMP requests rescission of this Agreement for a bona fide reason,
Licensee shall be prohibited from utilizing and disclosing Confidential
Information prior to receipt of the written judgement of the arbitrators.
E. Upon the expiration, termination, or rescission of this agreement
pursuant to section VI, A, B, C, hereof Licensee shall have no further right and
license to the Confidential Information, promptly return the Confidential
Information to NMP and continue to observe the obligations of Section V with
respect thereto.
VII. General
6
A. This Agreement constitutes the entire agreement of the parties with
respect to its subject matter, superseding all negotiations and prior agreements
between them with respect thereto.
B. The failure of either party to enforce its rights or remedies under any
part of this Agreement shall not waive its right to enforce the same part at a
different time, or to enforce other parts of this Agreement.
C. In the event that any provision of this Agreement shall be determined
to be unenforceable by any court of competent jurisdiction by reason of its
extending for too great a period of time or over too large a geographic area or
over too great a range of activities, it shall be interpreted to extend only
over the maximum period of time, geographic area or range of activities as to
which it may be enforceable.
D. If any provision of this Agreement shall be determined to be invalid,
illegal or otherwise unenforceable by any court of competent jurisdiction, the
validity, legality and enforceability of the other provisions of this Agreement
shall not be affected thereby. Any invalid, illegal or unenforceable provision
of this Agreement shall be severable, and after any such severance, all other
provisions hereof shall remain in full force and effect.
E. The Agreement shall be binding upon the parties and their respective
legal representatives, successors and assigns. Licensee may not assign its
rights hereunder without the prior written consent of Licensor.
F. This Agreement may be executed in two or more counterparts, each of
which shall be considered an original but all of which together shall constitute
one and the same instrument.
G. Licensor and Licensee are independent contractors and are not, and
shall not represent themselves as, principal and agent, partners or joint
venturers.
H. This Agreement shall be governed by and construed and enforced in
accordance with the substantive laws of Japan.
I. Any dispute arising out of, in connection with or in relation to any
provision of this Agreement shall be settled in accordance with the
then-existing Rules of Conciliation and Arbitration of the International Chamber
of Commerce. The arbitration shall be conducted by three arbitrators, one
selected by Licensee, one selected by Licensor, and the third selected by the
first two arbitrators. The arbitration shall be held in Tokyo and the proceeding
shall be conducted in Japanese if the party initiating the proceeding is
Licensee, and in New York and in the English language if the party initiating
the proceeding is Licensor. Any award or judgement shall be rendered by a
majority of the arbitrators and shall be in writing stating the reasons
therefor, and any award or judgement rendered may be entered in and shall be
enforceable by any court of competent jurisdiction.
7
J. Licensee agrees that press releases and other public announcements to
be made by it with respect to this Agreement and the translation contemplated
hereby shall be subject to the prior approval of Licensor.
K. If this Agreement is translated into another language before or after
execution, this English language version shall remain the governing version of
this Agreement.
L. Any notice required or permitted hereunder shall be considered as duly
made and effective upon delivery if made in writing and delivered to the party
for which it is intended at the following address or fax number:
If to Licensor: If to Licensee:
1-13-5 Kudankira. 160 Second Street
Chiyoda-Ku, Tokyo Cambridge, MA 02142
Fax No.: 81-3-3234-2551 Fax No.: 617-492-5664
Attn.: Miki Kurami, Manager Attn: President
|
Notices delivered by fax shall be confirmed by copy delivered by air courier or
overnight mail service.
IN WITNESS WHEREOF, the parties have through their duly authorized
representatives executed this Agreement under seal as of the date first written
above.
NIHON MEDI-PHYSICS CO. LTD,
By: /s/ [ILLEGIBLE]
------------------------
Title: President
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BIOSTREAM, INC.
By: John W. Babich
Title: CEO, President
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
Exhibit 10.13
THIS AGREEMENT made in duplicate as of this 14 day of June, 2004.
BETWEEN:
MDS NORDION, a division of MDS (Canada) Inc.
having a place of business at
447 March Road
Ottawa, Ontario, Canada K2K1X8
("Nordion")
AND:
MOLECULAR INSIGHT PHARMACEUTICALS, INC.
having a place of business at
160 Second Street
Cambridge Massachusetts, 02142 USA
("Molecular Insight Pharmaceuticals")
WHEREAS:
I. Molecular Insight Pharmaceuticals is the owner or licensee of a certain
compound known as BMIPP (as defined), a heart diagnostic imaging agent;
II. Nordion has expertise in the development of pharmaceutical processes and
radiolabelling of compounds;
III. Molecular Insight Pharmaceuticals has developed techniques and
demonstrated an ability to label Precursor with 1-123 to form BMIPP;
IV. Molecular Insight Pharmaceuticals desires that Nordion undertake at its
facility a development program based upon Molecular Insight
Pharmaceutical's technique which will allow Molecular Insight
Pharmaceuticals' Precursor to be labeled with 1-123 to form BMIPP;
V. Molecular Insight Pharmaceuticals desires that Nordion establish a
facility at its site in Vancouver, British Columbia, to produce and supply
BMIPP for use in support of Molecular Insight Pharmaceuticals' Phase III
Clinical Trials and in support of Molecular Insight Pharmaceuticals' drug
submission to the FDA.
NOW THEREFORE in consideration of the mutual covenants and agreements herein
contained, and subject to the terms and conditions hereinafter set out, the
parties hereto agree as follows:
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ARTICLE 1 - DEFINITIONS
For the purposes of this Agreement:
1.1 "Affiliate" shall mean an entity or person which controls, is controlled
by or is under common control with either party. For purposes of this
Section 1.1 control shall mean (a) in the case of corporate entities, the
direct or indirect ownership of more than one-half of the stock or
participating shares entitled to vote for the election of directors, and
(b) in the case of a partnership, the power to direct the management and
policies of such partnership.
1.2 "BMIPP" shall mean a pharmaceutical product containing 1-123 labeled
Precursor in diagnostic dosage form for cardiac imaging.
1.3 "Background Technology" shall mean all Nordion proprietary technology
existing prior to the Effective Date, including patents, copyright,
know-how, techniques, methods, processes and trade secrets which Nordion
owns or which is licensed to Nordion and, in each case, which is in
existence in the form of a writing, prototype or can otherwise be
demonstrated to be the property of Nordion prior to the Effective Date.
1.4 "Batch" shall mean a production batch of BMIPP manufactured under this
Agreement.
1.5 "Clinical Trial Batch Size" shall have the meaning attributed in Section
4.1.
1.6 "Clinical Trials" shall mean Phase III human trials for clinical
development of BMIPP in the United States.
1.7 "Commercial Phase" shall mean the period of supply of BMIPP commencing
after NDA regulatory approval has been received in the United States by
Molecular Insight Pharmaceuticals, from the FDA.
1.8 "Current Good Manufacturing Practices" or "cGMP(s)" shall mean the good
manufacturing practices required by the FDA and as set forth in the FD&C
or FDA rules and regulations for the manufacturing, testing and quality
control of pharmaceutical materials as applied to compounds, which
practices are current on the Effective Date of this Agreement and may be
supplemented, amended or modified from time to time.
1.9 "Development Phase" shall mean the period commencing from the Effective
Date until completion of the activities described in Schedule A.
1.10 "Effective Date" shall mean the date first above written.
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1.11 "FDA" shall mean the United States Food and Drug Administration.
1.12 "FD&C" shall mean the United States Federal Food, Drug and Cosmetic Act,
as amended.
1.13 "Facility" shall mean the facility to be established by Nordion at its
manufacturing site in Vancouver, British Columbia as described in Schedule
B and pursuant to cGMPs, to be used for the production of BMIPP for
diagnostic applications and purposes.
1.14 "IND" shall mean an Investigational New Drug Application as defined by the
rules and regulations promulgated under the FD&C and U.S. Public Health
Service Act and any supplements, modifications or amendments thereunder.
1.15 "Isotope" or "I-123" shall mean Iodine 123.
1.16 "Master Validation Plan" shall mean the program mutually agreed to by the
parties by which documented evidence provides assurance that the Process
will consistently produce BMIPP that meets Specifications.
1.17 "NDA" shall mean a new drug application as defined in the rules and
regulations promulgated under the FD&C and U.S. Public Health Service Act,
as supplemented, modified or amended from time to time.
1.18 "Precursor" shall mean (beta)-methyl-p-iodophenyl-pentadecanoic acid
specified in Schedule C and produced pursuant to cGMPs.
1.19 "Process" shall mean the method of formulation, dispensing, and testing of
the BMIPP developed under this Agreement and in compliance with cGMPS.
1.20 "Reference Standards" shall mean the cGMP compliant compounds as specified
in Schedule D.
1.21 "Specification(s)" shall mean those final specifications for BMIPP as set
out in Schedule E, as amended by mutual agreement of the parties from time
to time.
ARTICLE 2 - PURPOSE
2.1 Scope and Object
The scope and object of this Agreement is to carry out the development of
the Process in accordance with the responsibilities and obligations
attributed to each of the parties as set out in this Agreement. In
addition,
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this Agreement shall provide for the establishment of a Facility to be
utilized, amongst other purposes, in the production and supply of BMIPP as
required in support of Molecular Insight Pharmaceuticals' BMIPP Phase III
Clinical Trial and NDA submission to the FDA.
ARTICLE 3 - DEVELOPMENT PHASE
3.1 Development Activities
During the Development Phase, Nordion and Molecular Insight
Pharmaceuticals shall carry out their respective obligations described and
attributed in Schedule A, it being understood that some activities may be
reasonably delayed to the extent that such activity is premised on the
work or provision of data, information or technology by the other party.
It is understood and acknowledged that due to the developmental nature of
the activities to be carried out during the Development Phase, the time
for completion and sequence for carrying out the activities as set out in
Schedule A shall serve as a guide. Each party shall use their commercially
reasonable best efforts in order to carry out, in a timely manner, their
respective obligations and responsibilities set out in Schedule A.
If either party, acting in good faith, materially fails to satisfy any
milestone or is unable to meet such milestone in accordance with the
timing set out in Schedule A, such party shall provide written notice
thereof to the other party and the parties shall determine a reasonable
corrective action plan and revised milestone schedule. If the parties are
unable to determine a reasonable corrective action plan and revised
milestone schedule, the parties may submit such matter to binding
arbitration in Vancouver, British Columbia, pursuant to and conducted
under the International Commercial Arbitration Act of British Columbia,
which arbitration shall be conducted before a single arbitrator possessing
appropriate industry experience as selected by the parties. If the parties
cannot agree on a single arbitrator, the arbitrator shall be appointed in
accordance with the International Commercial Arbitration Act of British
Columbia. The decision of the arbitrators shall be final and binding.
The parties acknowledge and agree that Schedule A may be amended during
the course of the Development Phase to accommodate unforeseen events and
results. All such changes to Schedule A shall be made by written agreement
of the parties. If any change to Schedule A materially impacts the scope
of work to be provided by Nordion, Nordion will provide a written estimate
of the increase in hours of work at the rates set forth in Section 6.3,
which must be approved in advance by Molecular Insight Pharmaceuticals. No
work on such scope change shall be carried out by
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Nordion prior to Nordion's receipt of Molecular Insight Pharmaceuticals'
written approval of such change.
The parties, upon signing this Agreement, shall each designate a program
manager, who shall be responsible for coordinating communication and
monitoring performance under this Agreement. The program managers shall
meet monthly, in person or by telephone, for the purpose of reviewing the
status of the project, assessing progress against the milestones and
activities set forth in Schedule A, and determining the percentage of each
milestone completed and the payments earned, if any, in connection with
each milestone. Minutes of meetings shall be prepared, maintained and
provided to each of the parties.
3.2 Development Phase Work
In consideration of Nordion performing the Development Phase services,
Molecular Insight Pharmaceuticals shall pay Nordion in accordance with the
rates set out in Schedule F, which schedule includes amounts payable upon
achievement of milestones as well as amounts payable for each Batch
produced and supplied by Nordion hereunder. All amounts due Nordion shall
be paid by Molecular Insight Pharmaceuticals within thirty (30) days of
the date appearing on Nordion's invoice. Such invoice shall, unless
otherwise agreed, be payable in United States dollars.
3.3 Facility Program
In consideration of Nordion establishing the Facility, Molecular Insight
Pharmaceuticals will pay to Nordion a non-reimbursable facility fee of
[**********************] United States dollars (US $[********]) upon
execution of this Agreement.
After the Facility is completed, Nordion shall, in consultation with
Molecular Insight Pharmaceuticals, develop and implement a Master
Validation Plan for the Facility that will allow the production of BMIPP
under cGMPs in the volumes required by Molecular Insight Pharmaceuticals
for Phase III clinical supply as described in Section 4.1. The costs of
preparation, development and implementation of the Master Validation Plan
will be borne by Nordion. Prior to implementation, both parties shall in
writing approve the Master Validation Plan. Nordion shall ensure that the
Facility is available for the production of BMIPP for supply to Molecular
Insight Pharmaceuticals on a priority basis at least three days per week
to be mutually agreed between the parties.
3.4 Repairs and Maintenance
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After the Facility is established, Nordion shall maintain such Facility in
satisfactory operating condition as required by the Specifications,
Process and cGMPs, and all other applicable laws, regulations, rules or
orders. The cost of repairs, preventive maintenance and service contracts
for the Facility shall be borne by Nordion.
3.5 Commercial Phase Negotiations
Within thirty (30) days after completion of Milestone 2 under the
Development Phase, the parties shall for a period of at least sixty (60)
days enter into good faith negotiations for the supply of BMIPP to
Molecular Insight Pharmaceuticals, during the Commercial Phase.
ARTICLE 4 - BATCH SIZE IN SUPPORT OF NDA SUBMISSION
4.1 Clinical Supply Batch Size
The Batch size for Clinical Trial supply shall be thirty (30) doses of
BMIPP. The maximum number of vials available for shipment from any Batch
will be twenty (20) doses with the remainder being retained by Nordion for
archival and quality assurance testing. BMIPP will be shipped in an
appropriate lead shield, which will be provided at Nordion's expense. All
necessary labels for shipment will be provided by Molecular Insight
Pharmaceuticals and shall meet all applicable regulatory requirements.
ARTICLE 5 - GENERAL MANUFACTURE AND
SUPPLY OBLIGATIONS OF NORDION
5.1 BMIPP Supply
Nordion agrees to (i) use the Process to produce Batches of BMIPP that
meet the Specifications and are manufactured in conformance with cGMPs and
(ii) ship BMIPP to customers as directed by Molecular Insight
Pharmaceuticals. Nordion reserves the right to withhold from shipment any
Batch which does not conform to Specifications. The price of any Batch
required by Molecular Insight Pharmaceuticals during the term of this
Agreement shall be as set out in Schedule F. The parties agree that
Molecular Insight Pharmaceuticals will provide BMIPP at its expense and
Nordion will supply isotopes and other supplies at its expense.
5.2 Compliance with Law; Handling of BMIPP
While Precursor, Isotope and BMIPP are in its possession or under its
control, Nordion shall be responsible for compliance with applicable
statutory and regulatory requirements in the United States and Canada
regarding the development, manufacture, handling, storage, labeling,
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packaging, transportation and shipment of the Precursor, Isotope and
BMIPP.
5.3 Testing and Documentation
Nordion shall maintain accurate and complete production records with
respect to the Process, Batches and shipments and Molecular Insight
Pharmaceuticals shall have access to such records in order to determine
that each Batch was produced and tested in compliance with the
Specifications and cGMP requirements.
The tests and analyses provided in the Specifications as well as the
nature and form of records may be amended by Nordion from time to time,
subject to the consent of Molecular Insight Pharmaceuticals, which shall
not be unreasonably withheld after Nordion shall have delivered to
Molecular Insight Pharmaceuticals, in writing, an explanation of such
changes and why they are necessary or advisable.
ARTICLE 6 - GENERAL
MOLECULAR INSIGHT PHARMACEUTICALS OBLIGATIONS
6.1 Precursor and Reference Standards
Molecular Insight Pharmaceuticals or, at Molecular Insight
Pharmaceuticals' discretion its designee, shall provide Precursor and
Reference Standards to Nordion at no charge, which meets the
specifications in Schedules C and D in sufficient quantities to permit
Nordion to meet its obligations hereunder. Nordion shall only use
Precursor and Reference Standards for the manufacture of BMIPP pursuant to
this Agreement. Nordion shall store Precursor and Reference Standards in
accordance with its applicable specifications set out in Schedule C and D
respectively. Molecular Insight Pharmaceuticals shall at all times retain
title in and to such materials in Nordion's possession.
6.2 Unavailability or Scarcity of Precursor or Reference Standards
Molecular Insight Pharmaceuticals will notify Nordion upon Molecular
Insight Pharmaceuticals becoming aware of a shortage of supply of
Precursor or Reference Standards, if such shortage will impact the
manufacture of the BMIPP. Except as set out below, Molecular Insight
Pharmaceuticals shall not be liable for any delays or shortages in the
supply of Precursor or Reference Standards, provided however, that any
such shortages or delays in Precursor or Reference Standards supply will
excuse Nordion's performance of activities related to such Batch of BMIPP
only to the extent that Nordion's non-performance was caused by the
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Precursor or Reference Standards supply delay or shortage and only for a
period of time equal to the delay.
6.3 Additional Compensation to Nordion
In addition to the amounts set forth in Schedule F, Molecular Insight
Pharmaceuticals will compensate Nordion based on the rate of one hundred
and twenty-five United States dollars (US$125.00) per person per hour for
the time spent by Nordion on the following activities only and upon
Molecular Insight Pharmaceuticals prior written request:
(i) preparing and hosting Facility audits requested by Molecular Insight
Pharmaceuticals including FDA preaudit inspections;
(ii) preparing responses to FDA inquiries and preparation by Nordion of
information requested by Molecular Insight Pharmaceuticals in
support of Molecular Insight Pharmaceuticals' BMIPP NDA submission;
and
(iii) attending meetings with the FDA.
Molecular Insight Pharmaceuticals shall reimburse Nordion for all costs
incurred for travel and accommodation in carrying out the foregoing
activities. Nordion shall provide an estimate of all such activities to
Molecular Insight Pharmaceuticals prior to incurring the expenditure.
ARTICLE 7 - BMIPP SHIPMENTS
7.1 Orders and Shipments
During the term of this Agreement, Molecular Insight Pharmaceuticals will
forward orders to Nordion at its Kanata, Ontario facility by facsimile.
Each order will set forth the quantity to be produced and shipped, the
identity of the recipient, delivery destination protocol number, IND
number, applicable USNRC materials license number and IRS number. Delivery
of BMIPP to Molecular Insight Pharmaceuticals or as otherwise directed by
Molecular Insight Pharmaceuticals shall be FOB transport vehicle at
Nordion's facility in Vancouver, British Columbia. Risk of loss of BMIPP
shall pass to Molecular Insight Pharmaceuticals at point of delivery.
During the term of this Agreement Nordion shall use commercially
reasonable best efforts to meet Molecular Insight Pharmaceuticals' orders
and delivery requirements. Prior to the first shipment of BMIPP to any
third party site, Molecular Insight Pharmaceuticals shall obtain from such
third party and provide to Nordion such third party's license evidencing
proper legal authority for the receipt and possession of the BMIPP by such
third party. Molecular Insight Pharmaceuticals shall obtain all approvals,
licenses and permits required to import BMIPP into the United States.
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Nordion shall make shipping arrangements with AirNet Express or such other
carrier designated by Nordion and reasonably approved by Molecular Insight
Pharmaceuticals. All shipping costs incurred to deliver BMIPP shall be
borne by Molecular Insight Pharmaceuticals.
Molecular Insight Pharmaceuticals shall be entitled to cancel any Batch
ordered from Nordion by providing to Nordion at least two (2) business
days written notice of cancellation prior to the later of commencement of
production or the scheduled production date. The failure to give notice
hereunder shall result in Molecular Insight Pharmaceuticals being required
to pay the full purchase price of such Batch to Nordion. All orders for
BMIPP shall be forwarded by Molecular Insight Pharmaceuticals and received
by Nordion by the Friday Noon (Eastern time) prior to the week in which
BMIPP is to be manufactured.
7.2 Warranty/Recall
Nordion warrants the BMIPP will meet the Specifications and be
manufactured in accordance with cGMP's and be free from defects in
material and workmanship for the period from the date of manufacture to
the expiry date set out on each vial of BMIPP.
If either party discovers that a Batch of BMIPP does not meet the
Specifications, then the discovering party shall promptly communicate with
the other party. If Molecular Insight Pharmaceuticals determines that the
failure to meet Specifications results from an act, failure to act or
other fault of Nordion, or agent of Nordion, Nordion will promptly:
(i) repair or replace such batch of BMIPP; and
(ii) pay for shipping costs of replacement of BMIPP.
In the event that Nordion disputes Molecular Insight Pharmaceuticals'
determination that the fault id due to Nordion and/or its agent, the
parties will select a mutually acceptable outside consulting firm which
will be instructed to review the applicable information and data and
confirm or dissent from Molecular Insight Pharmaceuticals' determination.
If the consulting firm confirms Molecular Insight Pharmaceuticals'
determination, Nordion will have the obligations set out in this Section
and Nordion will pay the fees of such consulting firm. If the consulting
firm dissents from Molecular Insight Pharmaceuticals' determination or
determines that the failure to meet Specifications was due to products,
information or services supplied by Molecular Insight Pharmaceuticals,
Nordion will not have the obligations set out in this Section with respect
to the disputed Batch and Molecular Insight Pharmaceuticals will pay the
fees for such consulting firm.
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ARTICLE 8 - LICENSE
8.1 Royalty-Free License
Molecular Insight Pharmaceuticals hereby provides to Nordion a
nonexclusive, nontransferable, royalty-free license during the term of
this Agreement to use the patents, data, information and technology
provided by Molecular Insight Pharmaceuticals relating to BMIPP and the
radiolabelling of 1-123 with Precursor for the sole purpose of assisting
Nordion in carrying out its obligations set out in this Agreement.
Molecular Insight Pharmaceuticals represents and warrants that the
technology provided by Molecular Insight Pharmaceuticals relating to BMIPP
allows for BMIPP to be terminally sterilized while still meeting the
specifications set out in Schedule E.
ARTICLE 9 - MOLECULAR INSIGHT PHARMACEUTICALS
REPRESENTATIONS AND WARRANTIES
9.1 Molecular Insight Pharmaceuticals' Representations and Warranties
Molecular Insight Pharmaceuticals represents, warrants and covenants that:
(i) it has full right, power and authority to enter into this Agreement;
(ii) it is the owner or has the right of use of the patents, data,
information and technology supplied to Nordion by Molecular Insight
Pharmaceuticals to assist Nordion in manufacturing BMIPP and in
carrying out its obligations hereunder;
(iii) to Molecular Insight Pharmaceuticals' knowledge, there is no action
or proceeding pending or threatened against Molecular Insight
Pharmaceuticals before any court, administrative agency or other
tribunal which might have an adverse material effect on its ability
to perform its obligations hereunder;
(iv) it has the right to grant the license in section 8.1 and right to
permit Nordion to use the patents, technology and know how provided
to the extent required to assist Nordion in carrying out its
obligations under this Agreement;
(v) it has not received any notice of adverse claim or infringement of
any patent, copyright, or misappropriation of trade secrets in
connection with the use and exploitation of the Precursor, Reference
Standard or BMIPP;
(vi) to Molecular Insight Pharmaceuticals' best information and belief,
use or sale of Precursor, Reference Standards and BMIPP and the
data, information, technology and know how used in the Process and
manufacture of BMIPP contributed by Molecular Insight
Pharmaceuticals do not infringe any valid third party patent,
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pending published patent application or other intellectual property
right.
ARTICLE 10 - NORDION'S REPRESENTATIONS AND WARRANTIES
10.1 Representations and Warranties
Nordion represents, warrants and covenants that:
(i) it has full right and authority to enter into this Agreement;
(ii) it is the owner or has the right to use the data, information and
technology contributed by it with respect to the Background
Technology and other proprietary technology contributed by Nordion
during the Agreement;
(iii) the Background Technology contributed by Nordion does not, to
Nordion's best information and belief, infringe any patents,
copyright or other industrial or intellectual property rights of
third parties;
(iv) it has not received any notice of adverse claim of infringement of
any patent or misappropriation of trade secrets in connection with
the use and exploitation of the data, information and technology
used with respect to Background Technology contributed by Nordion;
and
(v) to Nordiont's knowledge, there is no action or proceeding pending or
threatened against Nordion before any court, administrative agency
or other tribunal which might have a adverse material effect on
Nordion's ability to perform its obligations hereunder.
ARTICLE 11 - INDEMNITY
11.1 Indemnification by Molecular Insight Pharmaceuticals
Molecular Insight Pharmaceuticals agrees to indemnify, defend and hold
Nordion and its Affiliates and their respective directors, officers,
employees and agents, harmless from and against any damages, claims,
liabilities and expenses (including, but not limited to, reasonable
attorney's fees) resulting from any third party claims or suits ("General
Claims Against Nordion") arising out of (a) Molecular Insight
Pharmaceuticals' or a third party's use, handling or shipment of Reference
Standards, Precursor or BMIPP, (b) Molecular Insight Pharmaceuticals'
breach of any of its obligations, warranties or representations hereunder,
or (c) Molecular Insight Pharmaceuticals' negligent acts or omissions or
willful misconduct. Notwithstanding the foregoing, Molecular Insight
Pharmaceuticals will not be required to indemnify, defend and hold Nordion
and its Affiliates and their respective directors, officers, employees and
agents harmless from and against any General Claims Against Nordion to the
extent that such claims arise out of (i) Nordion's
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breach of any of its obligations, warranties or representations hereunder;
(ii) Nordion's negligent acts or omissions or willful misconduct; (iii)
any failure of Nordion to manufacture, handle, store, label, package,
transport or ship BMIPP in accordance with this Agreement, cGMPs or any
other applicable laws, rules, regulations or other requirements of any
applicable governmental entity; or (iv) any failure of Nordion to
manufacture BMIPP consistent with the Specifications and requirements set
forth herein or with the applicable sections of Molecular Insight
Pharmaceuticals' IND in the United States. Notwithstanding anything in
this Section 11.1, "General Claims Against Nordion" shall not include "IP
Claims Against Nordion" as described in Section 11.3.
11.2 Indemnification by Nordion
Nordion agrees to indemnify, defend and hold Molecular Insight
Pharmaceuticals and its Affiliates and their respective directors,
officers, employees and agents, harmless from and against any damages,
claims, liabilities and expenses (including, but not limited to,
reasonable attorney's fees) resulting from any third party claims or suits
("General Claims Against Molecular Insight Pharmaceuticals") arising out
of (a) Nordion's manufacture, handling, storage, labeling, packaging or
delivery of the BMIPP; (b) Nordion's breach of any of its obligations,
warranties or representations hereunder; (c) Nordion's negligent acts or
omissions or willful misconduct; (d) any failure of the BMIPP to meet the
Specifications; or (e) any failure of Nordion to manufacture, handle,
store, label, package, transport or ship BMIPP in accordance with this
Agreement or cGMPs or any other applicable laws, regulations or other
requirements of any applicable governmental entity. Notwithstanding the
foregoing, Nordion will not be required to indemnify, defend and hold
Molecular Insight Pharmaceuticals and its Affiliates and their respective
directors, officers, employees and agents harmless from and against any
General Claims Against Molecular Insight Pharmaceuticals to the extent
that such claims arise out of (i) Molecular Insight Pharmaceuticals'
breach of any of its obligations, warranties or representations hereunder;
(ii) Molecular Insight Pharmaceuticals' negligent acts or omissions or
willful misconduct; (iii) any defect or failure of Reference Standards or
Precursor to meet applicable specifications or (iv) Molecular Insight
Pharmaceuticals' or third party's use of BMIPP. Notwithstanding anything
in this Section 11.2, "General Claims Against Molecular Insight
Pharmaceuticals" shall not include "IP Claims Against Molecular Insight
Pharmaceuticals" as described in Section 11.4.
11.3 Intellectual Property Claims Against Nordion
Molecular Insight Pharmaceuticals agrees to indemnify, defend and hold
Nordion and its Affiliates and their respective directors, officers,
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employees and agents, harmless from and against any damages, claims,
liabilities and expenses (including, but not limited to, reasonable
attorneys' fees) resulting from any third party claims or suits arising
out of any proceeding instituted by or on behalf of a third party based
upon a claim that the Process, method of manufacture, use or sale of the
Reference Standards, Precursors or BMIPP infringes a United States or
Canadian patent or any other intellectual property or proprietary right of
a third party ("IP Claims Against Nordion"). Notwithstanding the
foregoing, to the extent the Process or method of manufacture is developed
or contributed by Nordion, Molecular Insight Pharmaceuticals will not be
required to indemnify, defend or hold harmless Nordion or its Affiliates,
and their respective directors, officers, employees and agents from and
against IP Claims Against Nordion.
11.4 Intellectual Property Claims Against Molecular Insight Pharmaceuticals
Nordion agrees to indemnify, defend and hold harmless Molecular Insight
Pharmaceuticals and its Affiliates, and their respective directors,
officers, employees and agents from and against any damages, claims,
liabilities and expenses (including, but not limited to, reasonable
attorney's fees) resulting from any third party claims or suits arising
out of any proceeding instituted by or on behalf of a third party based
upon a claim that the Background Technology, the method of manufacture of
BMIPP or the Process, to the extent developed or contributed by Nordion,
infringes a United States or Canadian patent or any other intellectual
property or proprietary right of a third party ("IP Claims Against
Molecular Insight Pharmaceuticals").
11.5 Infringement
In the event that any portion of the Background Technology or technology
developed or contributed by Nordion under this Agreement becomes the
subject of a claim for a patent, copyright or other industrial or
intellectual property rights infringement action by a third party, Nordion
may,
(i) if such technology was contributed by Nordion, procure the right to
continue using the radiolabelling technology within a reasonable
time not to exceed sixty (60) days; or
(ii) modify the Process (to the extent developed or contributed by
Nordion) to become non-infringing; or
(iii) if neither (i) nor (ii) are possible, upon written notice to
Molecular Insight Pharmaceuticals immediately cease its activities
and/or terminate this Agreement.
The cost and expense of any opinion of counsel sought by Nordion under
this section shall be borne by Nordion. Nordion reserves the right to
control and direct the defense and/or settlement of such claim with legal
counsel of its choosing; provided, however, that it may not settle such
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claims without the prior written consent of Molecular Insight
Pharmaceuticals, which shall not be unreasonably withheld or delayed;
provided, further that no such consent from Molecular Insight
Pharmaceuticals shall be required if such settlement includes a full
release of Molecular Insight Pharmaceuticals.
In the event that any portion of the Process that was developed or
contributed by Molecular Insight Pharmaceuticals becomes the subject of a
claim for a patent, copyright or other industrial or intellectual property
rights infringement action by a third party, Molecular Insight
Pharmaceuticals may, (i) within a reasonable time not to exceed sixty (60)
days procure the right to continue using the Process or technology, (ii)
modify the Process, to the extent contributed by Molecular Insight
Pharmaceuticals, to become non-infringing or (iii) if neither (i) nor (ii)
are reasonably possible, Molecular Insight Pharmaceuticals may terminate
this Agreement upon written notification to Nordion. Molecular Insight
Pharmaceuticals reserves the right to control an direct the defense and/or
settlement of such claims with legal counsel of its choosing; provided,
however, that it may not settle such claims without the prior written
consent of Nordion, which shall not be unreasonably withheld or delayed;
provided, further that no such consent from Nordion shall be required if
such settlement includes a full release of Nordion.
11.6 Indemnification Procedures
A party (the "indemnitee") which intends to claim indemnification under
this Article 11 shall promptly notify the other party (the "Indemnitor")
in writing of any action, claim or other matter in respect of which the
Indemnitee or any of its directors, officers, employees or agents intend
to claim such indemnification; provided, however, the failure to provide
such notice within a reasonable period of time shall not relieve the
Indemnitor of any of its obligations hereunder except to the extent the
Indemnitor is materially prejudiced by such failure. The Indemnitor shall
be entitled to control the defense of and/or settle any such action, claim
or other matter. The Indemnitee agrees to the complete control of such
defense or settlement by the Indemnitor, provided, however, any settlement
of such claims shall require the Indemnitee's prior written consent unless
such settlement includes a full release of the Indemnitee, in which case
no consent shall be required. The Indemnitee and its directors, officers,
employees and agents shall co-operate fully with the Indemnitor and its
legal representatives in the investigation and defence of any action,
claim or other matter covered by this indemnification. The Indemnitee
shall have the right, but not the obligation, to be represented by counsel
of its own selection and at its own expense.
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ARTICLE 12 - PATENTS AND TECHNOLOGY
12.1 Ownership of Work Performed
The portion of the Process as developed or contributed by Molecular
Insight Pharmaceuticals shall be the sole and exclusive property of
Molecular Insight Pharmaceuticals. Except to the extent the Process is
developed or contributed by Molecular Insight Pharmaceuticals, Molecular
Insight Pharmaceuticals agrees and acknowledges that any and all ideas,
technology, method, data, information, inventions, improvements,
derivative works and works of authorship conceived, written, created or
first reduced to practice in the performance of the development of the
Process, Background Technology and improvements to the Background
Technology during the term of this Agreement, shall be the sole and
exclusive property of Nordion.
ARTICLE 13 - REGULATORY MATTERS
13.1 Regulatory Status
Upon Nordion's reasonable request, Molecular Insight Pharmaceuticals shall
provide updates to Nordion on (i) the progress of Clinical Trials related
to BMIPP, and (ii) submissions to the FDA and other jurisdictions and
regulatory agencies for marketing authorization with respect to BMIPP.
13.2 Molecular Insight Pharmaceuticals Responsibilities
It shall be the responsibility of Molecular Insight Pharmaceuticals or its
designee to file, obtain and maintain an IND, registrations, listings,
authorizations and approvals as the FDA or any other applicable
governmental entity may require to enable use of BMIPP in Clinical Trials
in the United States. Nordion shall provide directly to Molecular Insight
Pharmaceuticals, or at Nordion's discretion for the purpose of protection
of its proprietary technology with respect to the manufacture of the
Isotope, directly to the regulatory authority all required information in
its possession necessary to assist Molecular Insight Pharmaceuticals in
filing, obtaining and maintaining all licenses, registrations, listings,
authorizations and approvals of any governmental entities necessary for
the use of BMIPP in support of Molecular Insight Pharmaceuticals' BMIPP
NDA submission.
13.3 Nordion Responsibilities
Nordion shall be responsible for obtaining and maintaining all necessary
Facility licenses, registrations, authorizations and approvals which are
necessary to develop, manufacture, handle, store, label, package,
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16
transport and ship BMIPP under cGMP conditions and other regulatory
requirements including, but not limited to, the use and handling of
radioactive materials.
At Nordion's expense, Nordion shall update its existing 1-123 bulk
chemical or facility description Drug Master File ("DMF") with the FDA as
may be required for Molecular Insight Pharmaceuticals' NDA for BMIPP in
accordance with Schedule A. Nordion hereby grants Molecular Insight
Pharmaceuticals a right of reference to such DMF, and upon request shall
provide a letter of access to the DMF allowing regulatory review of the
DMF by the FDA in conjunction with Molecular Insight Pharmaceuticals'
BMIPP submissions. At Nordion's expense, Nordion shall apply for and seek
a DMF for BMIPP in accordance with Schedule A.
13.4 Government Inspections, Compliance Review and Inquiries
Upon request of any governmental entity or any third party entity
authorized by a governmental entity, such entity shall, for the purpose of
regulatory review, have access to observe and inspect the (i) Facility,
(ii) procedures used for the storage of Reference Standards and Precursor,
and (iii) manufacturing, testing, storage and shipping of BMIPP, including
Process development operations, and auditing the Facility for compliance
with cGMP and/or other applicable regulatory standards. Nordion shall give
Molecular Insight Pharmaceuticals prompt written notice of any upcoming
inspections or audits by a governmental entity of the Facility or any of
the foregoing and shall allow Molecular Insight Pharmaceuticals to
participate in such audits by being present at any FDA close out meeting
and shall provide Molecular Insight Pharmaceuticals with a written summary
of such inspection or audit following completion thereof. Nordion agrees
to use commercially reasonable efforts to promptly rectify or resolve any
deficiencies noted by a government entity in a report or correspondence
issued to Nordion.
13.5 Access to the Facility
Molecular Insight Pharmaceuticals shall have reasonable access to the
Facility at least once per calendar quarter during the Development Phase
for the purpose of observing Process development relating to BMIPP.
Molecular Insight Pharmaceuticals shall provide to Nordion at least five
(5) business days prior written notice of requested access to the Facility
for the purpose of this Section. All such information disclosed to
Molecular Insight Pharmaceuticals or its employees or agents, shall be
deemed to be Nordion's Confidential Information as such term is defined in
Section 14.1 of this Agreement.
13.6 Recalls
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Molecular Insight Pharmaceuticals shall notify Nordion promptly if BMIPP
is the subject of a recall or correction (a "Recall"), and Molecular
Insight Pharmaceuticals and/or its designee shall have sole responsibility
for the handling and disposition of such Recall. Molecular Insight
Pharmaceuticals and/or its designee shall bear the costs of any Recall of
BMIPP unless and to the extent such Recall shall have been the result of
Nordion's or its employees acts of omissions or any product defects for
which Nordion is responsible in which case Nordion shall to such extent be
responsible for all of Molecular Insight Pharmaceuticals' out-of-pocket
costs incurred for:
(i) notification of recall to Nordion and third parties;
(ii) return shipment of any defective BMIPP to Nordion; and
(iii) replacement of BMIPP.
In the event that Nordion disputes Molecular Insight Pharmaceuticals'
determination that the fault is due to Nordion and/or to its agent, the
parties will select a mutually agreeable outside consulting firm which
will be instructed to review the applicable information and data and to
confirm or dissent from Molecular Insight Pharmaceuticals' determination.
If the consulting firm confirms Molecular Insight Pharmaceuticals'
determination, Nordion will pay the fees of such consulting firm. If the
consulting firm dissents from Molecular Insight Pharmaceuticals'
determination Nordion will not have the obligations set forth herein with
respect to the Recall and Molecular Insight Pharmaceuticals will pay the
fees of such consulting firm. Molecular Insight Pharmaceuticals and/or its
designee shall maintain records of all sales, shipping records of BMIPP
and customers in sufficient detail to adequately administer a Recall for
the period of time as required by applicable regulation.
13.7 New Regulatory Requirements
Each party shall promptly notify the other of new regulatory requirements
of which it becomes aware which are relevant to the manufacture of BMIPP
under this Agreement and which are required by the FDA and other
applicable governmental entities and the parties shall confer with each
other with respect to the best means to implement and comply with such
requirements.
13.8 Records
Nordion shall maintain all records necessary to evidence compliance with
(i) all applicable laws, regulations and other requirements of applicable
governmental entities in the United States and Canada relating to the
supply and manufacture of BMIPP; (ii) the Specifications; and (iii)
obligations under this Agreement. All such records shall be maintained by
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Nordion for at least two (2) years after termination or expiration of this
Agreement. Nordion shall provide to Molecular Insight Pharmaceuticals
reasonable access to such records upon request. Prior to destruction of
any record after such time, Nordion shall give written notice to Molecular
Insight Pharmaceuticals. Molecular Insight Pharmaceuticals shall have the
right to request that Nordion maintain such records in an off site storage
facility for such longer periods as Molecular Insight Pharmaceuticals
requests, provided that Molecular Insight Pharmaceuticals pays all costs
associated with such off site storage.
ARTICLE 14 - CONFIDENTIALITY
14.1 Confidentiality and Exceptions
During the term of this Agreement and for a period of ten (10) years
thereafter, each party hereto shall maintain in confidence the content of
the transactions contemplated herein, all technology including Background
Technology and improvements thereto, Nordion proprietary technology,
Molecular Insight Pharmaceuticals proprietary technology, trade secrets,
know-how, data, processes, methods, techniques, formulas and test data
(collectively "Confidential Information") and other information disclosed
to such party by the other party which is identified as "Confidential
information" by the disclosing party. This obligation of confidentiality
shall not apply to the extent that it can be established by the party in
receipt of such information, that the information:
(i) was already known to the receiving party at the time of disclosure;
(ii) was generally available to the public or otherwise part of the
public domain at the time of its disclosure;
(iii) became generally available to the public or otherwise part of the
public domain after its disclosure to the receiving party through no
act or omission of the receiving party;
(iv) was disclosed to the receiving party by a third party who was not
known or ought to be known to the receiving party to have
obligations restricting disclosure of such information; or
(v) was independently developed by the receiving party without any use
of Confidential Information of the disclosing party.
Each party agrees that it will take the same steps to protect the
confidentiality of the other party's Confidential Information as it takes
to protect its own proprietary and confidential information, which shall
in no event be less than commercially reasonable steps. Each party, and
its employees and agents shall protect and keep confidential and shall not
use, publish or otherwise disclose to any third party, except as permitted
by this Agreement, as necessary to perform its obligations hereunder, or
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with the other party's written consent, the other party's Confidential
Information.
It is agreed that disclosure of data, information or technology by
Molecular Insight Pharmaceuticals or Nordion to the other under this
Agreement shall not constitute any grant, option or license under any
patent, technology or other rights, held by Molecular Insight
Pharmaceuticals or Nordion. Any use of the data, information and
technology provided by Molecular Insight Pharmaceuticals to Nordion which
relates to Precursor, Reference Standards or radiolabelling of Precursor
shall be for the limited purpose of assisting Nordion in carrying out its
obligations under this Agreement. All data, information, or technology
supplied by one party to the other to assist in carrying out the
obligations hereunder shall remain the property of such party and shall be
returned to the other party upon termination of this Agreement.
ARTICLE 15 - DISCLOSURE OF INFORMATION
15.1 Authorized Disclosure
Notwithstanding section 14.1 each party may disclose Confidential
Information to the extent such disclosure is reasonably necessary for
prosecuting or defending litigation and/or complying with applicable
government laws or regulations, provided that if a party is required by
law or regulation to make any such disclosure of the other party's
Confidential Information it will give reasonable notice to the other party
of such disclosure requirement.
ARTICLE 16 - TERM AND TERMINATION
16.1 Initial Term
The term of this agreement shall commence upon the Effective Date and,
unless terminated earlier pursuant to this agreement, or extended upon
mutual agreement of the parties, shall expire on December 31, 2005.
16.2 Termination Without Cause
Molecular Insight Pharmaceuticals may terminate this Agreement without
cause or penalty upon thirty- (30) day's prior written notice to Nordion.
Upon such termination, Nordion shall be entitled to retain all amounts
paid by Molecular Insight Pharmaceuticals and Molecular Insight
Pharmaceuticals shall pay to Nordion any amounts due and/or earned but not
yet paid.
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16.3 Termination for Breach
This Agreement may be terminated by either party in the event of the
material breach by the other party of the terms and conditions hereof;
provided, however, the other party shall first give to the breaching party
written notice of the proposed termination of this Agreement (a "Breach
Notice"), specifying the grounds therefor. Upon receipt of such Breach
Notice, the breaching party shall have such time as necessary, but in any
event not more than thirty (30) days to cure such breach. Notwithstanding
the foregoing, if the breaching party does not cure such breach within
such cure period, the other party may terminate the Agreement without
prejudice to any other rights or remedies which may be available to the
non-breaching party.
16.4 Bankruptcy
This Agreement may be terminated by a party in the event the other party
files a petition in bankruptcy, is adjudicated a bankrupt, makes an
assignment for the benefit of its creditors, or otherwise seeks relief
under or pursuant to any bankruptcy, insolvency or reorganization statute
or proceeding, or if a petition in bankruptcy is filed against it which is
not dismissed within ninety (90) days or proceedings are taken to
liquidate the assets of such party.
ARTICLE 17 - SURVIVAL
17.1 Consequences or Termination or Expiration
Upon expiration or termination of this Agreement, the obligations of the
parties under Articles 9, 10, 11, 12, 14, 15, 19 and 24 shall survive such
expiration or termination in accordance with its terms.
ARTICLE 18-NOTICES
18.1 Any notice to be sent to a party hereunder shall be forwarded to:
Nordion at: MDS Nordion
447 March Road
Ottawa, ON
K2K 1X8
Attention: Senior Vice President, Nuclear Medicine
Fax:
Molecular Insight Pharmaceuticals at:
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Molecular Insight Pharmaceuticals, Inc.
160 Second Street
Cambridge, MA
Attention: Chief Operating Officer
Fax: 617-492-5664
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Any notice required or authorized to be given by a party to the other in
accordance with the provisions of this Agreement shall, unless otherwise
specifically stipulated, be in writing and delivered personally, by a
nationally recognized overnight courier, or if by electronic facsimile
confirmed by certified or registered mail. Notice shall be deemed
delivered upon receipt.
ARTICLE 19 - LIMITED LIABILITY
19.1 Disclaimer
In no event shall either party be liable to the other party for indirect,
punitive, contingent, incidental, special or consequential damages.
19.2 Limitation of Product Warranty
MOLECULAR INSIGHT PHARMACEUTICALS ACKNOWLEDGES THAT NORDION IS
MANUFACTURING AND SUPPLYING BMIPP TO MEET SPECIFICATIONS. EXCEPT AS
EXPRESSLY SET OUT IN THIS AGREEMENT, NORDION HEREBY DISCLAIMS ALL OTHER
WARRANTIES OR CONDITIONS, WHETHER EXPRESS OR IMPLIED, STATUTORY OR
OTHERWISE, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OR
CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 20 - ASSIGNMENT AND SUBCONTRACTING
20.1 No Assignment
This Agreement shall enure to the benefit of and shall be binding upon the
heirs, executors, administrators, successors and permitted assigns of the
parties. Neither Nordion nor Molecular Insight Pharmaceuticals shall
assign this Agreement or any portion of this Agreement without the written
approval of the other party, which approval shall not be unreasonably
withheld; provided, however, that Molecular Insight Pharmaceuticals may
assign this Agreement without Nordion's consent in connection with the
sale of all or substantially all of its stock or assets to a third party
or in connection with a merger, consolidation or similar transaction.
ARTICLE 21 - COMPLIANCE
21.1 Compliance with Laws
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
22
This Agreement and Nordion's and Molecular Insight Pharmaceuticals'
obligations hereunder shall be carried out in compliance with all
applicable laws, by-laws, rules, regulations and orders of all applicable
Federal, State, Provincial and Municipal governments.
ARTICLE 22 - NON-WAIVER
22.1 Non-Waiver of Rights
Failure by either party to enforce at any time any of the provisions of
this Agreement shall not be constructed as a waiver of its rights
hereunder. Any waiver of a breach of any provision hereof shall not be
effective unless in writing and shall not affect either party's rights in
the event of any additional breach.
22.2 Force Majeure
Neither party shall be liable to the other for failure to perform or delay
in performing its obligations under this Agreement by virtue of the
occurrence of an event of Force Majeure. In the event of Force Majeure,
the party affected shall promptly notify the other and shall exert
commercially reasonable efforts to eliminate, cure or overcome such event
and to resume performance of its obligations. In the event such Force
Majeure affecting either party continues for more than thirty (30) days
the party not subject of the Force Majeure may terminate this Agreement.
"Force Majeure" shall mean an occurrence which prevents, delays or
interferes with the performance by a party of any of its obligations
hereunder if such event occurs by reason of any act of God, flood, power
failure, fire, explosion, casualty or accident, or war, revolution, civil
commotion, acts of public enemies, blockage or embargo, or any law, order
or proclamation of any government, failure of suppliers or usually
supplier to provide materials, equipment or machinery, interruption of or
delay in transportation, strike or labor disruption.
ARTICLE 23 - INSURANCE
23.1 Product Liability Insurance
During the term of this Agreement and for a period of one (1) year
thereafter Molecular Insight Pharmaceuticals at its own expense shall
provide and maintain a products liability insurance policy issued by a
reputable insurance company with respect to BMIPP. Such policy shall add
Nordion as an additional insured and shall have a limit of liability of
not less than [*************] United States dollars ($[*********]US) per
occurrence and in the aggregate. Molecular Insight Pharmaceuticals shall
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be solely responsible for any deductible or retention associated with this
policy and such deductible or retention amounts shall not affect Nordion's
interests. The policy shall contain a cross liability clause and shall
provide for severability of interest such that breach of a policy
condition committed by any one insured shall not adversely affect the
rights of the other insured. Nordion shall be provided thirty (30) days'
prior written notice of any material change to the policy and such change
shall be subject to Nordion's prior written consent, which consent shall
not be unreasonably withheld. Nothing contained in this Section shall be
deemed to limit in any way the indemnification provisions contained in
this Agreement.
ARTICLE 24 - PUBLICATION
24.1 Publicity
The parties agree that, except as may otherwise be required by applicable
laws, regulations, rules or orders or in connection with obtaining
regulatory approvals for BMIPP, no information concerning this Agreement
and the transactions contemplated herein shall be made public by either
party without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed. In the event either party decides
to issue a press release announcing the execution of this Agreement, it
shall not do so without the prior written approval of the other party.
A copy of any proposed press release shall be provided to the other party
for approval at least three (3) business days prior to any proposed
release.
In the event that this Agreement or any portion of its contents is
required to be disclosed by Molecular Insight Pharmaceuticals or Nordion
pursuant to Security Exchange Commission rules or regulations or other
federal or state authorities, Molecular Insight Pharmaceuticals or
Nordion, as the case may be, shall provide reasonable notice to the other
prior to any such disclosure in order that, to the extent possible while
enabling the party to comply with the applicable laws, rules and
regulations, the content so disclosed does not include information which
may reasonably be considered by the other as confidential, proprietary
and/or commercially sensitive information.
ARTICLE 25 - DISPUTE RESOLUTION
25.1 Dispute Resolution
Except as otherwise set out, in the event that at any time during the term
of this Agreement, a disagreement, dispute, controversy or claim should
arise relating to the (i) interpretation of or performance under this
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Agreement or the attribution of liability or breach thereof; or (ii)
scientific or technical issues in connection with Nordion or Molecular
Insight Pharmaceuticals' performance under this Agreement, the parties
will attempt, in good faith, to resolve their differences for a period of
thirty (30) days following written notice from one party to the other
specifying such dispute(s). In the event the parties are unable to work
out a resolution of the issue during such 30-day period, either party
shall be free to take any action and seek any remedy it may have at law or
in equity including specific performance and injunctive relief.
ARTICLE 26 - INDEPENDENT CONTRACTOR
26.1 No Joint Venture
The parties agree that with respect to the transactions contemplated
herein that they shall both be acting as independent contractors and
nothing herein shall constitute the parties as entering into a joint
venture or partnership, nor shall anything herein constitute either party
as an agent of the other for any purpose whatsoever.
ARTICLE 27 - SEVERABILITY
27.1 Invalid Provisions
If any provision or term of this Agreement is found unenforceable under
any of the laws or regulations applicable thereto, all other conditions
and provisions of this Agreement shall nevertheless remain in full force
and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement to effect the original
intent of the parties as closely as possible in a mutually acceptable
manner, in order that the transaction contemplated hereby be consummated
as originally contemplated to the greatest extent possible.
ARTICLE 28 - AGREEMENT
28.1 Entire Agreement
This Agreement, including the Schedules hereto which are incorporated
herein, constitute the entire agreement of the parties with respect to the
subject matter hereof and supersedes all proposals, oral or written, and
all negotiations, conversations, or discussions. This Agreement may not be
modified, amended, rescinded, canceled or waived, in whole or in part,
except by written amendment signed by both parties hereto.
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ARTICLE 29 - LAW
30.1 Applicable Law
This Agreement shall be governed and construed in accordance with the laws
of the Province of Ontario, Canada, without reference to its principles on
conflict of laws. The application of the United Nations Convention for the
International Sale of Goods is expressly excluded.
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IN WITNESS WHEREOF the parties hereto have executed this agreement as of
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the date first above written.
MDS Nordion, Molecular Insight Pharmaceuticals, Inc.
a division of MDS (Canada) Inc.
By: /s/ Gerry Vantellingen By: /s/ John W. Babich
--------------------------- ------------------------
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#63441 v1 - Agreement/Molecular Insight/Final
SCHEDULE A
Scope of Work
Commence
ACTIVITY Duration -------------
-------- -------- Y weeks from
X weeks Effective Date
-------- --------------
1. Activity 1 - Technology Transfer
a) Review Customer Supplied Documentation 2 1
b) Write, review and approve Preliminary Safety Analysis Report(PSAR) 3 2
c) Experimental Design for Scale-Up 2 2
d) Scale-Up to 1 Ci (up to 10 runs maximum)
i) Show reproducibility of procedure 5 5
ii) Increase yield to 80% after quenching and isolation
(commercially reasonable best efforts)
iii) Verify autoclavability of formulation. Establish excipient
ranges
e) Scale up to 4 Ci (up to 5 runs) 3 10
f) Document experiments and archive data (HPLC traces, 3 13
logbooks, etc.)
Milestone 1 : Complete Technology Transfer 0 16
2. Activity 2- Reformulation and Purification
a) Develop HPLC Separation Method 6 4
b) Develop Automation: sample transfer and collection 4 4
c) Develop compatibility of HPLC collected fraction with 2 4
Formulation. Establish excipients
d) IQ/OQ and validate autoclave. 5 4
e) IQ/OQ/PQ for HPLC and equipment. 6 16
f) Draft Master Batch Record for Molecular Insight approval. 2 19
Milestone 2: Complete Reformulation and Purification 0 21
3. Activity 3- Develop Dispensing Equipment
a) Develop dispensing setup for 30 vial capability 10 9
- IQ/OQ/PQ Dispensing
- Seal and crimp
b) Develop container/ closure system 8 11
- Complete closure test and integrity
- Complete recoverability of dose from Container Test
c) Establish Class 100 conditions for dispensing box at vial 1 19
opening.
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d) IQ/OQ/PQ Shielded boxes (SB) 2 20
- calibrate gauges
- establish airborne I-123 detection system
e) IQ/OQ/PQ Laminar Air Flow (LAF) Assembling Area. . 2 20
f) Initiate Environmental Monitoring in LAF, SB and 3 20
Controlled Access Room,
Milestone 3: Complete Dispensing Equipment Development 0 22
4. Activity 4- Develop Q.C. Test Methods
a) HPLC Method for Final Product. 4 22
- verify 1) BMIPP
2) UDCA
3) Any other identified
impurities as per specifications in
Schedule F.
- establish 1) Radiochemical Purity
2) Chemical purity - Quantitative method
Note: this is a method transferred from Molecular Insight
- Write and approve Standard Test Method (STM)
b) IQ/OQ/PQ Dose Calibrator 2 26
Write and Approve STM
c) Gamma Spectroscopy 1 26
- Calibration Protocol
- NIST traceability
- 159 keV Identification (ID) for I-123
- Write.and approve STM
d) Endotoxin Test (USP) 1 28
- Dilution to overcome Inhibition/Enhancement
- Maximum valid dilution
- Qualification of test method
- Write and approve STM
e) Sterility Test (USP) 1 28
- Establish sampling size
- Write and approve STM
f) Product Release Form (PRF) 1 29
- Identify all documents necessary for batch release
Milestone 4: Complete QC Test Methods Development 0 30
5. Activity 5- Validation of New Process
a) Write and approve Master Validation Plan 8 4
- Equipment: Analytical and Process
- Analytical Methods
- Process
- Final Product Stability
b) Method Transfer Validation 6 30
- Analytical Methods
- References Standards (shelf-life; ID)
- Precursor (ID; shelf-life)
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c) Validation Protocols 2 36
d) Six Process Runs to fine tune process 6 28
e) Train Operators 6 28
- 3 Production technicians
- 3 QC/QA
- 2 Packaging
Milestone 5: Complete Validation of New Process 34
6. Activity 6- Perform GMP Equivalency Run (Validation Runs) 3 34
a) Perform three runs (1 Ci of I-123) 3 37
b) Compile all data for validation files 0 40
Milestone 6: Complete Validation Runs
7. Activity 7- Prepare Development Report
a) Document all experimentation 6 31
b) Archive all data/logbooks 6 31
c) Write and approve Development Report 6 39
- Process Description and Development
- Master Formula
- Impurities profiles (standards to be provided by
Molecular Insight)
- Excipient Ranges
- Final Product Specifications
- Scale-Up rationale
- Equivalence to previous formulation ( to be done in
conjunction with Molecular Insight at their cost)
- Qualification of Reference Standards to be done by
Molecular Insight
- Precursor made under cGMPs to be provided by
Molecular Insight
- Analytical Method and Validation to be done by
Molecular Insight
- Bioburden Profiles for Raw Material
- Environmental data - house isolates
- Molecular insight to provide stability indicating
methods for final product
- Define Utilities
- Cleaning Protocol
Milestone 7: Submit Development Report 45
8. Activity 8- DMF / CMC Package
a) Provide SOPs/STMs for CMC section of NDA 3 37
b) Provide flowcharts 3 37
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c) Establish Review and Approval responsibility for 3 37
documents
d) Establish Recall procedure 3 37
e) Establish responsibilities of 3 37
1) Deviations
2) Change Control
3) Product Release
4) Failure Investigation
5) Out-of-Spec Investigation
6) Draft required procedures
Milestone 8: DMF/CMC Package Complete 40
9. Activity 9- Prepare for PAI
a) audit for cGMP compliance (with customer) 3 40
b) Review findings and establish action plan 3 40
c) Review costs of ongoing and enhanced compliance (to be 3 40
billed to Molecular Insight as required)
NOTE: PAI readiness will
require additional staffing and/or consultants that will be charged
to Molecular Insight.
Milestone 9: Ready for PAI 43
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Pcdocs 62635
SCHEDULE B
FACILITY RESOURCES FOR CONTRACT MANUFACTURE OF BMIPP
THE FOLLOWING EQUIPMENT IS USED TO MANUFACTURE BMIPP:
- Laminar Flow Hood for reagent and equipment preparation
- Three Lead shielded glove boxed with HEPA filtration and Nuclear
Ventilation
- Box 1 reaction, separation, formulation box containing
semi-preparative automated HPLC for drug substance isolation
- Box 2 has the function to act as a dispensing area. The
dispensing environment is class 100
- Box 3 is the terminal sterilization box containing an
autoclave and a remote handling ball and tong manipulator
- Specialized shielding assemblies are used for the safe transport of
formulated unit dose radiopharmaceuticals
- Fume hood with nuclear ventilation for QC analysis
- HPLC equipment for QC analysis
- Dose calibrator
- Particle check station
- Gamma Spectroscopy system
- Refrigerator
SOME GENERAL FEATURES OF THE MANUFACTURING AREA AND SUPPORT SERVICES ARE:
- The room is environmentally and radiation monitored
- There are waste handling systems in place to deal with chemical waste
streams as well as solid and liquid radioactive wastes
- The entire manufacturing environment is cGMP regulated
- Qualified and trained staff with experience in diagnostic
radiopharmaceutical manufacture are employed
- The entire manufacturing facility is supported by a calibration department
- A fully outfitted microbiology lab is available for microbiological and
environmental tests (Most importantly LAL tests for pyrogenicity)
- There is an attached microbiology clean room used for sterility tests and
filtration.
- This clean room contains a class 100 glove box.
NOTE: EQUIPMENT OTHER THAN THAT LISTED ABOVE (SUCH AS HOT CELLS ETC.) MAY BE
USED DURING DEVELOPMENT
SCHEDULE C
BMIPP PRECURSOR SPECIFICATIONS
Note: 1. Supplied by Molecular Insight Pharmaceuticals and MDS Nordion to do
identification only
SCHEDULE D
REFERENCE STANDARDS SPECIFICATIONS
Note: 1. Supplied by Molecular Insight Pharmaceuticals and MDS Nordion to do
identification only
SPECIFICATION SHEET
TCI America, 9211 N Harborgate St,
Portland, OR 97203 Version Date 3/7/02 Form No. :SS. 057.02
Material BMIPP (INACTIVE COMPONENT/PRECURSOR) Code No.: Z3398
Formula: C(22)H(35)IO(2) Molecular Wt.: 458.42 CAS No.: 116754-87-1
Synonym(s): 15-(p-Iodophenyl)-
3-methylpentadecanoic Acid Storage Conditions:<or=4C(degree)
Frequency Test Acceptance Criteria Test Procedure
------------------ ---------------------------------- --------------------------------------- -----------------------
0,3,6,9, 12, Appearance Colorless or white crystals or powder SLT QC 339
18,24,36,
48, 60mo
0-60 months Identification FTIR Identical to reference standard SLT QC 327
After manufacture UV-VIS Identical to reference standard SLT QC 371
0 - 60 months HPLC Retention time corresponds with that of SLT QC 358
the reference standard within +/- 3%
0-60 months Purity Assay (HPLC) > or = 95% SLT QC 358
After manufacture Purity, Melting point 51-56(degree)C SLT QC 322
After manufacture Purity, Water analysis (KF) Report results SLT QC 329
0 - 60 months Impurities, HPLC Related < or = 2.0 % any single species SLT QC 358
0 - 60 months Methyl 15-(p-Iodophenyl)-3 < or = 0.1% SLT QC 358
Methylpentadecanoate
After manufacture Heavy metals < or = 20 ppm SLT QC 332 (Method II)
After manufacture Residual Solvents
Hexane < or = 290 ppm SLT QC 340
Methanol < or = 3000 ppm SLT QC 340
Ethyl Acetate < or = 5000 ppm SLT QC 340
Ethanol < or = 5000 ppm SLT QC 340
Isopropanol < or = 5000 ppm SLT QC 340
After manufacture Organic Volatile Impurities
Methylene Chloride < or = 500 ppm SLT QC 340
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SCHEDULE E
BMIPP SPECIFICATIONS
SPECIFICATION SHEET Page 1 of 1
DRUG PRODUCT SPECIFICATION SHEET
Molecular Insight, 160 Second ST, Cambridge, MA Version Date (ACTIVE COMPONENT)
02142 4/13/04
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Material [(123)I]-BMIPP CODE NO.: MIP 1000
Formula: C(22)H(35)IO(2) Molecular Wt.: 454.42 CAS No.: 116754-87-1
Synonym(s): [(123)I]-15-(p-Iodophenyl)-3-methylpentadecanoic Acid
TEST ACCEPTANCE CRITERIA TEST METHOD TESTING SCHEDULE
Appearance Clear, Colorless Solution Visual observation Test Completed prior
STM 12 to release of drug
Radionuclide Identity Gamma-Photon emission at 159 +/- Gamma ray Spectroscopy, Test Completed prior
5 keV STM 23
to release of drug
Radionuclide Impurity <or= 2.5% I-125 at TOC Gamma ray Spectroscopy, Confirmation Test of
<or= 110 (mu)Ci/mL I-125 at TOC STM 21 component Nal, After
decay of I-123, 2
weeks after release
Radioactivity 3.6 to 4.4 mCi/mL Dose Calibrator Test Completed prior
Concentration STM 27 to release of drug
Radiochemical Identity* R(r) value between 0.30 to Normal phase TLC Test Completed prior
0.50
STM 16 to release of drug
Radiochemical Purity >95% as I-123-BMIPP Reverse phase HPLC Test Completed prior
Radiometric detector to release of drug
STM 17
Chemical Concentration 0.36 to 0.44 mg/ml Reverse phase HPLC Test Completed prior
UV-VIS detector to release of drug
STM 17
Radiochemical Impurity <or= 5% as free I-123 Reverse phase HPLC Test Completed prior
Radiometric detector to release of drug
STM 17
Radiometric Assay for 4.5 to 5.5 mCi per (1.25 mL) Dose Calibrator Test Completed prior
unit dose vial at TOC
Osmolarity STM 11 to release of drug
Ratio to Saline 0.8 to Osmometer, compare with Test Completed prior
1.0 normal saline
STM 18 to release of drug
pH Range 8.2 to 9.2 pH paper Test Completed prior
STM 19 to release of drug
Bacterial Endotoxin <or=4.0 EU/ml Limulus Amebocyte Lysate
test on diluted drug
product Test Completed prior
STM 14 to release of drug
Sterility No turbidity or growth 2 week incubation in Test initiated
Fluid Thioglycollate within 24 hours of release
Medium &
Trypticase Soy Broth
STM 13
Package Inspection No damage Visual Test Completed prior
STM 15 to release of drug
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Note: All STM numbers will be changed to equivalent MDS Nordion document
numbers.
* This TLC test may be replaced by HPLC.
TOC = Time of Calibration; 1500 h PT, one day after manufacture
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
PRICE SCHEDULE F
1. FACILITY ESTABLISHMENT FEE:
This is a one-time fee for the establishment of the facility described in
Schedule B.
PRICE: $[*******] US
Note: Fee is payable upon signing of the Agreement
2. MILESTONES PAYMENTS:
MILESTONE DESCRIPTION PRICE US$
--------- ----------- ---------
Milestones 1 & 2 Technology Transfer & $[*******].
Reformulation and Purification
Milestone 3 Dispensing Equipment $[*******].
Milestone 4 QC Test Methods $[******].
Milestone 5 Validation of New Process $[*******].
Milestone 6 GMP Validation Runs $[******].
Milestone 7 Development Report $[******].
Milestone 8 DMF/CMC Package for $[******].
BMIPP
Milestone 9 Prepare for PAI Not included at this
time - estimated $[******].
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Notes - [***] of each Milestone payment is due upon signing of the
Agreement, [***] when the specific Milestone is commenced and the
remainder of each Milestone Payment is due upon completion of the
Milestone.
3. BATCHES FOR PHASE III CLINICAL SUPPLY:
Price: US$ [******]. per Batch
Notes - a) Batch runs are ~30 doses of BMIPP of which 20 are shippable
b) Payment is due within 30 days of the date appearing on
Nordion's invoice.
Pcdocs62680
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447 March Road Tel: +1 613 592 2790
Ottawa, ON K2K 1X8 Fax: +1 613 592 6937
Canada www.mds.nordian.com
[MDS NORDION LOGO]
Science Advancing Health
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May 25, 2005
Molecular Insight Pharmaceuticals Inc.
160 Second Street
Cambridge, Massachusetts
02142
USA
Dear Sirs:
RE: AMENDMENT #1 TO AGREEMENT BETWEEN MDS NORDION, A DIVISION OF MDS (CANADA)
INC. (SUCCESSOR TO MDS NORDION INC.) AND MOLECULAR INSIGHT PHARMACEUTICALS
INC. DATED THE 14th DAY OF JUNE, 2004
Reference is made to the agreement between MDS Nordion and Molecular Insight
Pharmaceuticals Inc., dated the 14th day of June 2004 (the "Agreement").
In consideration of $1.00 and other valuable consideration the receipt of
sufficiency of which is hereby acknowledged, the parties desire to extend the
terms of the Agreement.
Section 16.1 of the Agreement shall be amended in its entirety and shall read as
follows:
"The term of this Agreement shall commence upon the Effective
Date, and unless terminated earlier pursuant to this Agreement,
shall expire on December 31, 2006."
All other terms and conditions in this Agreement shall remain in full force and
effect.
The foregoing amendment shall be effective as of the date first written above.
If you agree with the foregoing, please execute this agreement in the space
provided below.
Sincerely,
We agree this 25th day of May, 2005
MDS NORDION MOLECULAR INSIGHT PHARMACEUTICALS INC.
Per: /s/ Gerry Vantellingen Per: /s/ John E. McCray
---------------------------- ------------------------------
Name: Gerry Vantellingen Name: John E. McCray
Title: Vice President, Sales Title: Chief Operating Officer
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
Exhibit 10.14
RESEARCH AGREEMENT
AND EXCLUSIVE LICENSE
Effective as of December 29, 1997, GEORGETOWN UNIVERSITY, a not-for-
profit corporation of the District of Columbia, having a principal address of
37th & "O" Streets, N.W., Washington, D.C. 20057 ("LICENSOR"), and ZEBRA
PHARMACEUTICALS, a Massachusetts corporation, having a principal place of
business at 38 Hartman Road, Newton, Massachusetts 02159 ("LICENSEE") agree as
follows:
1. BACKGROUND
1.1 -- LICENSOR is the owner by assignment of inventions directed
generally to cocaine analogs, and specifically piperidine analogs thereof (the
"Invention(s)").
1.2 -- LICENSOR wishes to have the Invention(s) and related technologies
perfected and marketed at the earliest possible time in order that products
resulting therefrom may be available for public use and benefit.
1.3 -- LICENSEE wishes to acquire a license under said Invention(s) and
Licensed Patent(s), for the purpose of undertaking development, to manufacture,
use, and sell Licensed Produce(s) in the Licensed Field of Use.
2. DEFINITIONS
2.1 -- "Patent Rights" refers to LICENSOR's rights arising from
Provisional U.S. Patent Application Serial No. 60/042,775, filed April 7, 1997,
entitled "Analogs of Cocaine" and naming as inventors Alan P. Kozikowski and
Gian Luca Araldi, including the information contained in said application with
respect to the Invention(s), any foreign patent applications corresponding
thereto, any divisions, continuations, reissues, or reexaminations thereof, and
any patent(s) issuing or granted therefrom. Such patent application(s) are the
"Licensed Application(s)" and any resulting issued patents are the "Licensed
Patent(s)."
2.2 -- "Technology" means any existing technical data and information
provided to LICENSEE by LICENSOR or its employees or contractors relating to
Invention(s), including, without limitation, any biochemical, preclinical,
clinical, manufacturing, formulation, and scientific research information of a
confidential nature.
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2.3 -- "Licensed Product(s)" means any compound, product or part thereof
in the Licensed Field of Use, the manufacture, use, or sale of which:
(a) is covered by a valid claim of an issued, unexpired Licensed Patent(s)
directed to the Invention(s). A claim of an issued, unexpired Licensed Patent(s)
shall be presumed to be valid unless and until it has been held to be invalid by
a final judgment of a court of competent jurisdiction from which no appeal can
be or is taken;
(b) is covered by any claim being prosecuted in Licensed Application(s).
2.4 -- "Net Sales" means the gross revenue of the Licensed Product(s) in
the form in which it is sold or used, whether or not assembled (and without
excluding therefrom any components or subassemblies thereof, whatever their
origin and whether or not patent impacted) less the following items:
(a) Import, export, excise, value added and sales taxes, plus custom
duties;
(b) Costs of insurance, packing, and transportation from the place of
manufacture to the customer's premises or point of installation;
(c) Normal and customary quantity and cash discounts, and
(d) Credit for returns, allowances, or trades actually given.
2.5 -- "Licensed Field of Use" means therapeutic and diagnostic uses of
transporters for neurotransmitters, including dopamine, serotonin and
norepinephrine, for substance abuse, obesity, depression, Parkinson's disease,
and related neuro psychological conditions or diseases.
2.6 -- "Exclusive" means LICENSOR has not granted and shall not grant
further licenses in the Licensed Field of Use, so long as this Agreement is
fully operative.
2.7 -- "Regulatory Approval" means any approval or clearance by any
governmental agency or agencies having authority to regulate the use or sale of
any Licensed Product(s) in the pertinent jurisdiction or territory.
2.8 -- "LICENSEE" is understood to include all of its Affiliates. An
Affiliate of LICENSEE shall mean any corporation or other business entity
controlled by, controlling, or under common control with LICENSEE as of the date
of this Agreement. For this purpose, "control" means direct or indirect
beneficial ownership:
(a) Of at least fifty percent (50%) of the voting stock; or
(b) Of at least fifty percent (50%) interest in the income of such
corporation or other business.
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
3. RESEARCH AGREEMENT
3.1 -- LICENSOR shall perform pre-clinical pharmacology and new compound
synthesis sufficient to identify, if feasible, a lead compound suitable for
development into a Licensed Product. (see attached Statement of Work and Budget)
3.2 -- Within two months of execution of this agreement, LICENSEE agrees
to pay to LICENSOR its costs, including overhead, incurred to-date in connection
with the preparation, filing and prosecution of the Licensed Applications, which
costs have been estimated by LICENSOR to be $2,500.
3.3 -- LICENSEE shall fund the LICENSOR's research as follows:
(a) LICENSEE shall pay to LICENSOR, upon execution of this
Agreement, an initial amount of $[******], which shall fund LICENSOR's initial
year of research.
(b) On the first day of both the 12th and 24th full calendar months
after the execution of this Agreement, LICENSEE shall pay to LICENSOR $[*****]
to fund an additional year of research, unless LICENSOR and LICENSEE agree that
such additional research is not necessary.
(c) If at any time LICENSOR shall determine that any of the above
sums are inadequate to fund the research or other work necessary to permit the
development of a Licensed Product, it shall notify LICENSEE of the amount that
LICENSOR reasonably believes will be necessary to fund the remaining research.
LICENSEE shall then have 60 days to notify LICENSOR, in writing, whether it is
willing to agree to provide such additional amounts. If LICENSEE does not agree
to provide such amounts, then either party may terminate this Agreement by
written notice to the other. Such termination will not apply to any previously
developed Licensed Products.
3.4 -- LICENSEE shall perform all toxicological, Phase I, Phase II or
other tests or studies necessary to obtain approval of a NDA and shall prepare,
prosecute and file any IND or NDA necessary to secure approval of all feasible
Licensed Products based on the Invention(s), Patent Rights or Technology in the
Licensed Field of Use. Upon notification from LICENSOR, as to any prospective
product, that LICENSOR has completed its research pursuant to paragraph 3.1,
LICENSEE shall promptly begin such studies and tests and diligently proceed with
them until approval has been obtained for all feasible Licensed Products.
LICENSEE shall thereafter use its best efforts to market, promote, manufacture
and sell any Licensed Products developed pursuant to this Agreement. If LICENSEE
determines that a potential Licensed product is not feasible, it
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
shall notify LICENSOR. Such notification shall relinquish any rights of LICENSEE
in said Licensed Product. Any dispute between the parties as to the feasibility
of a Licensed Product shall be resolved pursuant to Article 16 below.
3.5 -- LICENSEE shall provide to LICENSOR, at least semi-annually, a
written report comprehensively describing its progress toward fulfillment of its
obligations pursuant to paragraph 3.4. If LICENSEE fails to make continuous and
reasonable progress toward the development of each feasible Licensed Product,
LICENSOR may notify LICENSEE of its dissatisfaction. In such event, LICENSOR and
LICENSEE shall negotiate in good faith in an attempt to resolve the basis for
such dissatisfaction. Should LICENSOR remain dissatisfied 30 days after such
notification, LICENSOR may, in its sole discretion, terminate this Agreement.
4. GRANT
4.1 -- LICENSOR hereby grants and LICENSEE hereby accepts a worldwide
license in the Licensed Field of Use to make, have made, use, and sell Licensed
Product(s).
4.2 -- Said license, which includes the right to sublicense, shall be
Exclusive in the Licensed Field of Use.
5. ROYALTIES
5.1 -- (a) LICENSEE shall pay LICENSOR $[******] upon execution of this
Agreement;
(b) LICENSEE shall pay to LICENSOR benchmark royalties relating to each
Licensed Product as follows:
(1) $[*******] within 30 days after the IND approval;
(2) $[*******] within 30 days after commencement of Phase I tests;
(3) $[*******] within 30 days after commencement of Phase II tests;
(4)$[*******] upon filing and an additional $[*******] upon approval
of the NDA.
LICENSEE may investigate more than one Licensed Product through Phase II
tests, without paying more than one set of benchmark royalties. If LICENSEE
should choose to submit multiple NDAs or an NDA covering more than one Licensed
Product, then the benchmark royalties relating to additional Licensed Products
shall be reduced by [**]%. If, after obtaining approval of an NDA, LICENSEE
attempts to develop additional
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Licensed Products, benchmark royalties relating to such products will by reduced
by 50%.
5.2 -- In addition, LICENSEE shall pay LICENSOR earned royalties on Net
Sales by LICENSEE of [*****] percent ([*]%). LICENSEE shall pay to LICENSOR, as
royalties relating to any sublicense, the greater of (a) [*]% of Net Sales by
such sublicensee or (b) [*************************] percent ([****]%) of any
compensation LICENSEE receives from the sublicensee. If the Licensed Product is
solely for diagnostic use in the Licensed Field of Use, LICENSEE shall pay
LICENSOR earned royalties on Net Sales by LICENSEE or any sublicensee of [***]
percent ([*]%).
5.3 -- The royalty on sales in currencies other than U.S. Dollars shall be
calculated using the appropriate foreign exchange rate for such currency quoted
by the Wall Street Journal, on the close of business on the last banking day of
each calendar quarter. Royalty payments to LICENSOR shall be in U.S. Dollars.
5.4 -- In the event that the Patent Rights relating to a particular
Licensed Product are finally determined or adjudged by the Patent and Trademark
Office or a court of competent jurisdiction to be unpatentable or invalid, or
upon the expiration of the last patent covering such Licensed Product, LICENSEE
shall be entitled to a [**]% reduction in all royalties related to such Licensed
Product accruing pursuant to this Article 5, commencing on the effective date of
such determination, judgment or expiration.
6. REPORTS, PAYMENTS, AND ACCOUNTING
6.1 -- Quarterly Royalty Payment and Report --LICENSEE shall make written
reports and royalty payments to LICENSOR within ninety (90) days after the end
of each calendar quarter following the first commercial sale. This report shall
state the number, description, and aggregate Net Sales of Licensed Produce(s)
during such completed calendar quarter, and resulting calculation of earned
royalty payment due LICENSOR for such completed calendar quarter. Concurrent
with the making of each such report, LICENSEE shall include payment due LICENSOR
of royalties for the calendar quarter covered by such report.
6.2 -- Accounting -- LICENSEE agrees to keep records for a period of
two (2) years showing the manufacturing, sales, use, and other disposition of
products sold or otherwise disposed of under the license herein granted in
sufficient detail to enable the royalties payable hereunder by LICENSEE to be
determined, and further agrees to permit its books and records to be examined by
LICENSOR from time to time to the extent necessary to verify reports provided
for in Paragraph 5.1. Such examination is to be
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made by LICENSOR, at its expense. If LICENSOR determines that LICENSEE has, for
any reason, failed to pay adequate royalties, LICENSEE shall immediately upon
notice thereof pay to LICENSOR any owed royalties plus interest at the rate of
eleven percent (11% per annum, compounded daily, calculated from the date upon
which such royalties should have been paid to the date of actual payment of
LICENSOR).
7. WARRANTY
LICENSOR represents and warrants that it has not granted the Patent Rights
or any rights in any Licensed Product(s) to any third party, except for United
States government rights which may have been required by law. LICENSOR also
represents and warrants that, to the best of LICENSOR'S knowledge, information
and belief, the Invention(s) are novel.
8. INFRINGEMENT
8.1 -- LICENSEE shall notify LICENSOR of any suspected infringement of the
Patent Rights by a third party.
8.2 -- In the event that information becomes known to or is brought to the
attention of LICENSEE that others without license are unlawfully infringing upon
rights granted to LICENSEE pursuant to this Agreement, LICENSEE shall diligently
prosecute any infringer at LICENSEE's cost and expense. LICENSEE arid LICENSOR
acknowledge and agree that, although LICENSOR shall have the right at LICENSOR'S
option to prosecute infringers, LICENSOR is not desirous of being a party to any
such infringement suit. LICENSEE shall not join LICENSOR as a party-plaintiff to
any suit which LICENSEE may institute unless necessary for the maintenance of
said suit, and then only with the prior knowledge and written consent of
LICENSOR. In such event, LICENSOR shall not be chargeable for any costs or
expenses. LICENSOR shall execute all documents necessary for the prosecution of
any infringement suit brought by LICENSEE and provide other such support as
LICENSEE may require, all however at the expense, with respect to travel and the
like, of LICENSEE. LICENSEE is under no obligation to defend an action brought
by a third party alleging that the Patent Rights infringe an issued U.S. patent
or to defend a declaratory judgment action brought by a third party asserting
that the Patent Rights are invalid as anticipated by, or obvious over, prior
art.
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8.3 -- In the event that LICENSOR decides to institute suit, it shall
notify LICENSEE in writing. LICENSEE's failure to notify LICENSOR in writing,
within thirty (30) days after the date of notice, that it will join in enforcing
the patent pursuant to the provisions hereof, shall be deemed conclusively to be
LICENSEE's assignment to LICENSOR of all rights, causes of actions, and damages
resulting from any such alleged infringement, and LICENSOR shall be entitled to
retain the entire amount of any recovery or settlement. Furthermore, at its
option, LICENSOR may join LICENSEE as plaintiff.
8.4 -- LICENSOR shall be entitled to the percentage of any recovery
obtained in any infringement suit brought by LICENSEE equal to the amount to
which LICENSOR would be entitled under the sublicensee royalty provision of this
Agreement had said recovery been paid to LICENSEE as sublicense royalties by the
defendant in said infringement suit. LICENSEE may deduct its reasonable costs
and attorneys fees incurred in prosecuting such suit, to the extent such costs
and fees are not otherwise recovered, prior to calculating the share owing to
LICENSOR pursuant to this provision.
8.5 -- Should either LICENSOR or LICENSEE commence a suit under the
provisions of Paragraphs 8.2 or 8.3 and thereafter elect to abandon the same,
it shall give timely notice to the other party which may, if it so desires,
continue prosecution of such suit; provided, however, that the sharing of
expenses and any recovery in such suit shall be agreed upon between LICENSOR and
LICENSEE.
9. PROSECUTION OF LICENSED PATENTS
9.1 -- LICENSEE agrees to accept liaison and financial responsibilities,
as hereinafter set forth, for the prosecution, by a patent lawyer in independent
practice, who shall be nominated by LICENSEE and approved by GEORGETOWN, of the
Licensed Applications. Said financial responsibilities shall not only include
the costs of prosecution but also the payment of maintenance fees, where
required, to maintain said patent applications and patents, if issued, in force
and effect for as long as possible. It is further agreed that the patent lawyer
selected by LICENSEE and approved by GEORGETOWN shall be required, if so desired
by GEORGETOWN, to keep a patent lawyer selected by GEORGETOWN informed of all
steps in the prosecution and maintenance of said Patent Rights. Written approval
will be required from GEORGETOWN to the patent lawyer selected by LICENSEE for
actions concerning this patent.
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9.2 -- Within two (2) weeks of notification to GEORGETOWN by LICENSEE of
the identity of the patent lawyer, GEORGETOWN will furnish to the patent lawyer
nominated in accordance with paragraph 9.1 above:
(a) Complete file histories of all of the patent applications constituting
said Licensed Applications; and
(b) An executed power of attorney or powers of attorney appointing such
patent lawyer as attorney of record in connection with all of said Licensed
Applications.
9.3 -- GEORGETOWN shall have the right at any time, by notice in writing
and sent to LICENSEE by registered mail, to assume and continue at its own
expense, direction of the prosecution of any of said Licensed Applications. Upon
receipt by LICENSEE of any such notice from GEORGETOWN, LICENSEE and the patent
lawyer nominated in accordance herewith shall provide in two weeks from the time
of notice an executed power of attorney and all the file histories of the patent
applications constituting said Licensed Applications. Upon receipt of this
documentation, LICENSEE and the patent attorney nominated by LICENSEE shall be
relieved of all future responsibilities to prosecute the Licensed Applications
to which the notice is directed. If, for any reason, prosecution is to be
abandoned by LICENSEE, GEORGETOWN will be notified in sufficient time to assume
prosecution. LICENSEE shall bear all cost to maintain the patent prosecution
until such time that Georgetown can assume patent prosecution.
10. TERMINATION
10.1 -- LICENSOR may terminate this Agreement:
(a) if LICENSEE is in default in payment of royalties or providing
of reports; or
(b) if LICENSEE is in material breach of any provision hereof; and
LICENSEE fails to remedy any such default or breach within thirty (30) days
after written notice thereof by LICENSOR;
(c) pursuant to paragraph 3.3 or 3.5; or
(d) if LICENSEE is unable to provide adequate assurance of future
performance within sixty (60) days of written notice of LICENSOR's reasonable
belief that LICENSEE may not be able to perform its future obligations under
this Agreement, whether such belief is due to LICENSEE's financial circumstances
or other factors.
10.2 -- Surviving any termination are:
(a) LICENSEE's obligation to pay royalties accrued or accruable;
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(b) Any cause of action or claim of LICENSEE or LICENSOR, accrued or
to accrue, because of any breach or default by the other party; and
(c) The provisions of Articles 6 and 8.
10.3 -- In the event of termination of this Agreement for any reason, any
and all rights granted LICENSEE hereunder, including any rights granted by
LICENSEE to any sublicensee, shall cease and terminate, and all such rights
shall revert to LICENSOR. LICENSEE shall diligently thereafter return to
LICENSOR, or to LICENSOR's designated attorneys, any files or other documents in
its possession or in the possession of its attorneys, agents or sublicensees,
relating to pending or issued Licensed Patent(s), and shall execute any and all
documents necessary to return control of said Licensed Patent(s) until such time
as control has properly been transferred to LICENSOR. Further, LICENSEE shall
immediately return to LICENSOR all research data, biological and other material
(including but not limited to licensed cell lines), prototypes, process
information, clinical data, and the like of LICENSOR in its possession or in the
possession of its sublicensees.
11. CONFIDENTIALITY
11.1 -- LICENSEE agrees not to disclose or transfer any technical reports,
data and information provided to the LICENSEE by LICENSOR, including the
contents of Licensed Applications to any person other than its employees and
consultants, without prior written approval of LICENSOR. Should LICENSEE wish to
disclose any such information to a third party, it shall provide LICENSOR with
the identity of such party, the purpose of the disclosure, the text of the
proposed disclosure and a proposed confidentiality agreement to be executed by
the third party prior to disclosure of the confidential information. LICENSOR
shall respond within ten working days of any such request for consent to
disclosure, which consent will not be unreasonably withheld.
11.2 -- LICENSEE shall not utilize any Invention, Patent Rights or
Technology in connection with any research or product development in which it
may engage except pursuant to this Agreement. Upon request, LICENSEE shall
permit LICENSOR access to its records and facilities sufficient to confirm
whether such use is occurring.
11.3 -- LICENSEE shall not use LICENSOR's name or refer to LICENSOR in any
promotion, marketing or solicitations without providing LICENSOR a copy of any
such proposed use or reference and obtaining LICENSOR's prior approval in
writing.
11.4 -- LICENSOR shall have the right to distribute information relating
to the Invention(s) to (i) academic investigators at not-for-profit institutions
for non-commercial
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research purposes, and (ii) third parties for the purpose of obtaining chemical,
physical, or biological analysis or characterization of any information
necessary for furtherance of LICENSOR's academic research. Nothing in this
Paragraph shall limit the right of LICENSOR to disclose any information which,
through no fault of LICENSOR, becomes generally available to the public.
11.5 -- Nothing in this Agreement shall limit in any way LICENSOR's
ability to undertake (i) the filing of any report required by any public
authority, or (ii) the non-public disclosure and discussion of information
between investigators and their academic colleagues.
12. PUBLICATION RIGHTS
12.1 -- LICENSOR shall have the right to publish, disclose and disseminate
("Right to Publish") in whole or in part, any data and information related to
the Invention(s). LICENSEE agrees that it shall not under any circumstances use
the name or names of the LICENSOR or of its employees or contractors, or any
adaptation thereof, (i) in any advertising, promotional, or sales literature,
securities prospectus, press release or other publicity relating to any
invention, discovery or other commercially exploitable product or process, (ii)
on any invention, discovery or other commercially exploitable product or
process, or (iii) generally on any matter arising out of this Agreement, without
prior written consent of LICENSOR.
13. ASSIGNMENT
LICENSEE may not assign any right or delegate any obligation under this
Agreement without the prior written consent of LICENSOR. Consent of the LICENSOR
shall not be unreasonably withheld with respect to publicly traded companies.
Any change in the ownership interests in LICENSEE that exceeds 50% within a
one-year period shall be deemed an assignment.
14. INDEMNIFICATION
14.1 -- LICENSEE agrees that during the term of this Agreement and
thereafter, it will indemnify, defend and hold GEORGETOWN, its trustees,
officers, employees and affiliates, harmless against all claims and expenses,
including legal expenses and attorneys' fees, arising out of the death of or
injury to any person or persons, or out of any damage to property, and against
any other claim, proceeding, demand, expense and
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liability of any kind whatsoever resulting from the production, manufacture,
sales, use, consumption or advertisement of Licensed Products by LICENSEE.
15. NOTICES
All notices under this Agreement shall be deemed to have been fully given
when done in writing and deposited in the United States mail, registered or
certified, and addressed as follows:
To LICENSOR: To LICENSEE:
GEORGETOWN UNIVERSITY ZEBRA PHARMACEUTICALS
Director Attn: David Elmaleh
Office of Technology Transfer 38 Hartman Road
2115 Wisconsin Avenue, N.W. Newton, MA 02159
Suite 108
Washington, D.C. 20007
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Either party may change its address upon notice to the other party as
provided herein.
16. DISPUTE RESOLUTION
Should the parties hereafter have any dispute as to their obligations
pursuant to this Agreement, they shall first attempt to resolve such dispute
among themselves. If such efforts are not successful, the exclusive method for
resolving such a dispute shall be arbitration as described herein.
Either party may elect to submit the issue to arbitration by giving
written notice to the other party and naming an arbitrator. The other party will
then have 30 days to select its own arbitrator. Once both arbitrators have been
selected they shall meet within 30 days of the appointment of the second
arbitrator and select a third arbitrator mutually agreeable to them.
If the dispute relates to the scope of the Patent Rights, Field of Use or
Technology or the feasibility of a Licensed Product, then all arbitrators
selected pursuant to this provision shall have adequate scientific
qualifications, including an advanced degree in a field related to biochemistry
and significant research experience.
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Once the patent of arbitrators have been chosen, they shall conduct an
arbitration on the disputed issue or issues in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The third arbitrator
shall serve as the presiding arbitrator, although, in the event of dispute among
the arbitrators, the majority decision of the arbitration panel shall be
binding. The decision of the arbitrators shall be final and either party may
apply to a court located in the District of Columbia to enter judgment based on
the arbitrator's decision. All costs of the arbitrators and the arbitration,
other than the respective parties' attorneys' fees and costs, shall be borne
equally by the parties.
17. WAIVER
None of the terms, covenants, and conditions of this Agreement can be
waived except by the written consent of the party waiving compliance.
18. APPLICABLE LAW
This Agreement shall be construed, interpreted, and applied in accordance
with the laws of the District of Columbia and applicable federal laws.
19. ENTIRE AGREEMENT
This writing constitutes the entire agreement of the parties and there are
no promises, understandings, or agreements of any kind pertaining to this
agreement other than those written in this agreement.
[Signatures follow on page 13]
12
IN WITNESS WHEREOF the parties thereto have executed this Agreement in
duplicate originals by their duly authorized officers or representatives.
Date 12-5-97 Date 12/18/97
For GEORGETOWN UNIVERSITY For XEBRA PHARMACEUTICALS
By : /s/ Gregory B. Raymond By : /s/ David Elmaleh
---------------------- -----------------------
Gregory B. Raymond David Elmaleh, Ph.D.
Acting Chief Operating Officer President
/s/ Arthur Raines
--------------------------------------
Arthur Raines, Ph.D.
Acting Associate Dean for Research Operations
/s/ Wm. Jack Hartman
--------------------------------------
Wm. Jack Hartman
Director of Research Grants and Contracts
/s/ Carol Tracy Carr
--------------------------------------
Carol Tracy Carr, Esq.
Director, Office of Technology Transfer
|
13
STATEMENT OF WORK CONCERNING THE RESEARCH
CONTRACT BETWEEN GU AND ZEBRA PHARMACEUTICALS.
PREPARED BY PROFESSOR KOZIKOWSKI, GU MEDICAL CENTER
Immediate therapies are needed for the treatment of cocaine abuse
worldwide. In this direction, we have recently identified a piperidine-based
analog of cocaine (specifically, the trans isomer of 1-methyl
-4-(4-chlorophenyl)piperidine-3-carboxylic acid methyl ester) that binds to the
cocaine recognition site with comparable affinity to cocaine; additionally, this
compound acts as an inhibitor of dopamine uptake. In spite of the compound's
potency, it has been observed that in discrimination studies in rats, the
compound exhibits only weak cocaine- and amphetamine-like effects. Unlike
cocaine, this compound has weak motor stimulant effects and is not
self-administered by rats. These results appear to be promising from the
standpoint of discovering a possible medication for drug abuse treatment. In
order to properly follow up on these encouraging preliminary results, it is our
plan to conduct further chemical analog synthesis, in vitro pharmacological
studies, and in vivo animal experiments on the 4-phenylpiperidine analogs with
the objective to improve upon the biological profile of this compound.
Within the context of the research contract with Zebra Pharmaceuticals, it
is our intention to pursue the following specific aim:
To conduct additional structure-activity relationship studies in this
piperidine series in order to establish that we are advancing the best compound
as a possible medication. These studies would include preparation of the lead
structure in larger amounts in optically pure form, and the design and synthesis
of related analogs embodying the following structural changes: a) modification
of the nature and position of the substituent borne by the
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
Phenyl ring; b) replacement of the N-methyl group by other alkyl groups and
sulfonyl groups, as well as isosteric replacement of NMe by CH(2) and O; c)
replacement of the ester group by alkyl and alkenyl groups.
A budget that reflects how the initial one year budget of $[******] will
be spent is attached.
AMENDMENT TO RESEARCH AGREEMENT AND EXCLUSIVE LICENSE
Dated October 27, 2005
Between Molecular Insight Pharmaceuticals, Inc. (formerly designated in the
above referenced Agreement as Zebra Pharmaceuticals) and Georgetown University.
This Amendment serves to modify the Agreement entered into December 29,
1997 for Patent Rights and Technology related to US Patent Application Serial
No. 60/042,775 (filed April 7, 1997) entitled "Analogs of Cocaine", as well as
any foreign applications corresponding thereto, and any divisions,
continuations, or any reexaminations thereof, and will be enforceable on the
date of the last signature of this Second Amendment.
Molecular Insight Pharmaceuticals, Inc. and Georgetown University agree
that the following provisions in the above referenced agreement shall be
modified as follows:
PREAMBLE
The Agreement preamble formerly reciting:
Effective as of December 29, 1997, GEORGETOWN UNIVERSITY, a not-for-profit
corporation of the District of Columbia, having a principal address at 37th & O
Streets, N.W., Washington, D.C. 20057 ("LICENSOR") and ZEBRA PHARMACEUTICALS, a
Massachusetts corporation, having a principal place of business at 160 Second
St., Cambridge, Massachusetts 02142 ("LICENSEE"), agrees as follows:
Shall be replaced by:
Effective as of December 29, 1997, GEORGETOWN UNIVERSITY, a not-for-profit
corporation of the District of Columbia, having a principal address at 37th & O
Streets, N.W., Washington, D.C. 20057 ("LICENSOR") and MOLECULAR INSIGHT
PHARMACEUTICALS, a Massachusetts corporation, having a principal place of
business at 160 Second St., Cambridge, Massachusetts 02142 ("LICENSEE"), agree
as follows:
2. DEFINITIONS
Section 2.1 formerly reciting:
2.1 "Patent Rights" refers to LICENSOR's rights arising from U.S.
Provisional Patent Applications Serial No. 60/042,775, filed April 7, 1997
entitled "Analogs of Cocaine", and naming as inventors Alan P. Kozikowski, and
Gian Luca Araldi, including the information contained in said application with
respect to the Invention(s) any foreign patent applications corresponding
thereto, any United States divisions, continuations, reissues, or
reexaminations thereof, and any patent(s) issued or granted therefrom. Such
patent application(s) are the "Licensed Application(s)" and any resulting
patents are the "Licensed Patent(s)."
Shall be replaced by:
2.1 "Patent Rights" refers to LICENSOR's rights arising from U.S.
Provisional Patent Application Serial No. 60/042,775, filed April 7, 1997
entitled "Analogs of Cocaine", including the information contained in said
application with respect to the Invention(s) any foreign patent applications
corresponding thereto, any United States divisions, continuations, continuations
in-part to the extent the claims are directed to subject matter specifically
described in PCT/US98/07081, reissues, or reexaminations thereof, and any
patent(s) issued or granted therefrom, specifically, 6,180,648, 6,472,422 and
6,806,281, all to the extent owned or controlled by Georgetown. Such patent
application(s) are the "Licensed Application(s)" and any resulting patents are
the "Licensed Patents(s)."
In witness thereof, the parties have executed this Amendment on the dates
indicated.
MOLECULAR INSIGHT GEORGETOWN UNIVERSITY
PHARMACEUTICALS, INC.
By: By: /s/ Martin A. Mullins
-------------------------- --------------------------
Name: John W. Babich Name: Martin Mullins
Title: President and CSO Title: Vice President
Office of Technology Transfer
Date: Date: 11/1/05
|
2
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
Exhibit 10.15
EXCLUSIVE LICENSE AGREEMENT
Effective as of 1 March 2000, GEORGETOWN UNIVERSITY, a not-for-profit
corporation of the District of Columbia, having a principal address at 37th & O
Streets, N.W., Washington, D C. 20057 ("LICENSOR"), and ZEBRA PHARMACEUTICALS, a
Massachusetts corporation, having a principal place of business at 160 Second
St., Cambridge, Massachusetts 02142 ("LICENSEE"), agree as follows:
1. BACKGROUND
1.1 LICENSOR is the owner by assignment or obligation of assignment to
certain Technology directed generally to Ligands for Metatrobic Glutamate
Receptors and Inhibitors of NAALADase (as further defined herein).
1.2 LICENSOR wishes to have the Technology developed and marketed at the
earliest possible time in order that products resulting therefrom may be
available for public use and benefit.
1.3 LICENSEE wishes to acquire a license under said Technology for the
purpose of undertaking development, to manufacture, use and sell Licensed
Product(s) in the Licensed Field of Use.
2. DEFINITIONS
2.1 "Patent Rights" refers to LICENSOR's rights arising from U.S.
Provisional Patent Applications Serial No. 60/166,915, filed 22 November 1999
"Ligands for Metatrobic Glutamate Receptors and Inhibitors of NAALADase" and
Serial No. 60/131,627 filed 28 April 1999 entitled "Ligands for Metatrobic
Glutamate Receptors and Inhibitors of NAALADase" and naming as inventors Alan P.
Kozikowski, Jarda T. Wroblewski and Fajun Nan including any foreign patent
applications corresponding thereto, any United States divisions, continuations,
reissues, or reexaminations thereof, and any United States or foreign patent(s)
issued or granted therefrom and any United States or foreign patents or patent
applications claiming Technology. Such patent application(s) are the "Licensed
Application(s)" and any resulting issued patents are the "Licensed Patent(s)."
2.2 "Technology" means any technical data, know-how, material, research
results and other information provided to LICENSEE by LICENSOR or its employees
or contractors relating "Ligands for Metatrobic Glutamate Receptors and
Inhibitors of NAALADase" including, without limitation, any biochemical,
preclinical, clinical, manufacturing, formulation, and scientific research
information of a confidential nature whether patentable or unpatentable.
2.3 "Licensed Product(s)" means any compound, product or part thereof,
device, method or service, the manufacture, use, or sale of which:
Page 2
(a) is covered by a valid claim of an issued, unexpired Licensed
Patent(s). A claim of an issued, unexpired Licensed Patent(s) shall be presumed
to be valid unless and until it has been held to be invalid by a final judgment
of a court of competent jurisdiction from which no appeal can be or is taken;
(b) is covered by any claim being prosecuted in Licensed
Application(s).
2.4 "Net Sales" means the gross revenue generated by sale of the Licensed
Product(s) or use of the Licensed Process(es) in the form in which it is sold or
used, whether or not assembled (and without excluding therefrom any components
or subassemblies thereof, whatever their origin and whether or not patent
impacted) less the following items:
(a) Import, export, excise, value added and sales taxes, plus custom
duties;
(b) Costs of insurance, packing and transportation from the place of
manufacture to the customer's premises or point of installation;
(c) Normal and customary quantity and cash discounts; and
(d) Credit for returns, allowances, or trades actually given.
2.5 "Licensed Field of Use" means any diagnostic or therapeutic use
concerning "Ligands for Metatrobic Glutamate Receptors and Inhibitors of
NAALADase".
2.6 "Exclusive" means LICENSOR has not granted and shall not grant further
licenses in the Licensed Field of Use, so long as this Agreement is in effect.
2.7 "Regulatory Approval" means any approval or clearance by any
governmental agency or agencies having authority to regulate the use or sale of
any Licensed Product(s) in the pertinent jurisdiction or territory.
2.8 "LICENSEE" is understood to include Zebra and any and all of its
Affiliates. An Affiliate of LICENSEE shall mean any corporation or other
business entity controlled by, controlling, or under common control with
LICENSEE during the term of this Agreement. For this purpose, "control" means
direct or indirect beneficial ownership:
(a) of at least fifty percent (50%) of the voting stock; or
(b) of at least fifty percent (50%) interest in the income of such
corporation or other business.
2.9 "First Commercial Sale" means the first sale of a Licensed Product at
an arms length transaction with a third party un-Affiliated with any party to
this Agreement.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
Page 3
3. GRANT
3.1 LICENSOR hereby grants and LICENSEE hereby accepts a worldwide license
in the Licensed Field of Use to make, have made, use, sell, and have sold
Licensed Product(s) and to use Technology.
3.2 Said license, which includes the right to sublicense, shall be
Exclusive in the Licensed Field of Use.
4. ROYALTIES, PAYMENTS AND MILESTONES
4.1 During the term of this Agreement, LICENSEE agrees to assume
responsibility for future patent prosecution and maintenance costs as provided
in the following Article 8.1.
4.2 LICENSEE shall use good faith efforts to develop, obtain clinical
approval for, manufacture, market and promote Licensed Products.
4.3 LICENSOR shall have the right to terminate or render this license
nonexclusive at any time after two (2) years from the date of the license if, in
LICENSOR's reasonable judgment, LICENSEE:
(i) has not put the licensed subject matter into commercial use in
the country or countries where licensed, directly or through a sublicense, and
is not keeping the licensed subject matter reasonably available to the public,
or
(ii) is not demonstrably engaged in research, development,
manufacturing, marketing or licensing program, as appropriate, directed toward
this end.
In making this determination, LICENSEE shall take into account the normal course
of such programs conducted with sound and reasonable business practices and
judgment and shall take into account the reports provided hereunder by LICENSEE.
4.4 (a) LICENSEE shall pay to LICENSOR benchmark royalties relating to
each Licensed Product as follows:
(1) $[******] within thirty (30) days after the IND approval;
(2) $[*******] within thirty (30) days after approval of Phase
II tests
Page 4
(3) $[*******] within thirty (30) days after approval of Phase
III tests; and
(4) $[*******] within thirty (30) days after the approval of
the NDA.
LICENSEE may investigate more than one Licensed Product through Phase II tests,
without paying more than one set of benchmark royalties. If LICENSEE should
choose to submit multiple NDAs or an NDA covering more than one Licensed
Product, then the benchmark royalties relating to additional Licensed Products
as set forth in 4.3 (3) and (4) above shall be reduced by fifty percent (50%).
If, after obtaining approval of an NDA, LICENSEE attempts to develop additional
Licensed Products, benchmark royalties relating to such products will be reduced
by 50%.
4.5 Fifty percent ([**]%) of the total milestone fees paid to Licensor by
Licensee as provided in 4.4 above, shall be creditable against earned royalties
as provided in 4.6 up to a maximum of fifty percent ([**]%) of such royalties
until such credit is fully consumed.
4.6 In addition, LICENSEE shall pay LICENSOR earned royalties of two
percent ([*]%) on Net Sales of any diagnostic Licensed Product and three
percent ([*]%) on Net Sales of any therapeutic Licensed Product in the country
in which the Licensed Product is made, used or sold. LICENSEE shall pay to
LICENSOR, as royalties relating to any sublicense, the greater of (a) the
applicable royalty as set forth above or (b) twenty percent ([**]%) of any
compensation LICENSEE receives from the sublicensee.
4.7 The royalty on sales in currencies other than U.S. Dollars shall be
calculated using the appropriate foreign exchange rate for such currency quoted
by the Wall Street Journal, on the close of business on the last banking day of
each calendar quarter. Royalty payments to LICENSOR shall be in U.S. Dollars.
4.8 In the event that the Patent Rights relating to a particular Licensed
Product are finally rejected as being unpatentable by the U.S. Patent and
Trademark Office or as being invalid by a court of competent jurisdiction, or
upon the expiration of the last patent covering such Licensed Product, LICENSEE
shall be entitled to a [*****] percent ([**]%) reduction in all royalties
related to such Licensed Product accruing pursuant to this Article 4.6,
commencing on the effective date of such determination, judgment or expiration.
5.REPORTS.PAYMENTS AND ACCOUNTING
5.1 Quarterly Royalty Payment and Report. LICENSEE shall make written
reports and royalty payments to LICENSOR within ninety (90) days after the end
of each calendar quarter following the First Commercial Sale. This report shall
state the number, description, and aggregate Net Sales of Licensed Product(s)
during such completed calendar quarter, and resulting calculation of earned
royalty payment due LICENSOR for
Page 5
such completed calendar quarter. Concurrent with the making of each such report,
LICENSEE shall include payment due LICENSOR of royalties for the calendar
quarter covered by such report.
5.2 Annual Progress Reports. LICENSEE shall provide annual written
progress reports within sixty (60) days after the anniversary date of the
effective date of this agreement. The reports shall include sufficient detail to
allow LICENSEE to determine progress on research and development, manufacturing,
sublicensing, marketing and sales during the previous twelve (12) months as well
as plans for the coming year.
5.3 Accounting. LICENSEE agrees to keep records for a period of two (2)
years showing the manufacturing, sales, use, and other disposition of products
sold or otherwise disposed of under the license herein granted in sufficient
detail to enable the royalties payable hereunder by LICENSEE to be determined,
and further agrees to permit its books and records to be examined from time to
time by a certified public accountant of a nationally recognized accounting
firm, who is selected and paid for by LICENSOR, but no more than once per
calendar year, to the extent necessary to verify reports provided for in
Paragraph 5.1. Such examination is to be made by LICENSOR, at its expense and
all such information obtained shall be treated as confidential information
pursuant to Article 10. If LICENSOR determines that LICENSEE has, for any
reason, failed to pay adequate royalties, LICENSEE shall immediately upon notice
thereof pay to LICENSOR any owed royalties plus interest at the rate of eleven
percent (11%) per annum, compounded daily, calculated from the date upon which
such royalties should have been paid to the date of actual payment of LICENSOR.
6. WARRANTY
LICENSOR represents and warrants that it has the right to grant LICENSEE
the license granted herein and that it has not granted the Patent Rights or any
rights in any Licensed Product(s) to any third party, except for United States
government rights which may have been required by law. LICENSOR also represents
and warrants that, to the best of LICENSOR's knowledge, information and belief,
the Invention(s) are novel.
7. INFRINGEMENT
7.1 LICENSOR and LICENSEE shall promptly give notice to the other in
writing of any alleged infringement of Patent Rights. The parties shall
thereupon confer as to what steps are to be taken to stop or prevent such
infringement.
7.2 LICENSEE shall have the first right to defend Patent Rights against
any infringer at LICENSEE's cost and expense including by bringing any legal
action for infringement or defending any counterclaim of invalidity or action of
a third party for declaratory judgment of non-infringement, which LICENSEE, in
its sole discretion,
Page 6
decides is reasonable and necessary for it to undertake. LICENSEE shall bring or
defend or may settle any such actions solely at its own expense and through
counsel of its selection and will be entitled to retain any settlement or damage
award received except as provided for in Article 7.5; provided, however, that
LICENSOR shall be entitled in each instance to participate through counsel of
its own selection and its own expense. LICENSEE and LICENSOR acknowledge and
agree that, although LICENSOR shall have the right at LICENSOR's option to
prosecute infringers as provided in the following Article 7.3, LICENSOR is not
desirous of being a party to any such infringement suit. LICENSEE shall not join
LICENSOR as a party-plaintiff in any suit which LICENSEE may institute unless
necessary for the maintenance of said suit, and then only with the prior
knowledge and written consent of LICENSOR. In such event, LICENSOR shall not be
chargeable for any costs or expenses. LICENSOR shall execute all documents
necessary for the prosecution of any infringement suit brought by LICENSEE and
provide other such support as LICENSEE may require including having its
employees testify when requested and make available relevant records, papers,
information, samples, specimens and the like, all however at the expense, with
respect to travel and the like, of LICENSEE.
7.3 LICENSOR shall have the right to defend the Patent Rights against
infringement in the event that LICENSEE declines to exercise its rights to
defend Patent Rights under Article 7.2 and shall have sole discretion to file
and prosecute, defend or settle such infringement and declaratory judgment
action at its own expense through counsel of its own selection and will be
entitled to retain any settlement or damage award received; provided, however,
that LICENSEE shall be entitled in each instance to participate through counsel
of its own selection and at its own expense. LICENSEE shall have no
responsibility or financial obligation with respect to any such infringement
action except to provide reasonable assistance to LICENSOR as requested and
LICENSOR shall reimburse LICENSEE for LICENSEE's out-of-pocket expenses in
connection with any such assistance. LICENSEE shall execute all documents
necessary for the prosecution of any infringement suit brought by LICENSOR and
provide other such support as LICENSOR may require, including having its
employees testify when requested and make available relevant records, papers,
information, samples, specimens and the like, all however at the expense, with
respect to travel and the like, of LICENSOR.
7.4 In the event that LICENSOR decides to institute suit, LICENSOR shall
be entitled to retain the entire amount of any recovery or settlement.
Furthermore, at its option, LICENSOR may join LICENSEE as plaintiff.
Page 7
7.5 LICENSOR shall be entitled to the percentage of any recovery obtained
in any infringement suit brought by LICENSEE equal to the amount to which
LICENSOR would be entitled under the sublicensee royalty provision of this
Agreement had said recovery been paid to LICENSEE as sublicense royalties by the
defendant in said infringement suit. LICENSEE may deduct its reasonable costs
and attorneys' fees incurred in prosecuting such suit, to the extent such costs
and fees are not otherwise recovered, prior to calculating the share owing to
LICENSOR pursuant to this provision.
7.6 Should either LICENSOR or LICENSEE commence a suit under the
provisions of Paragraphs 7.2 or 7.3 and thereafter elect to abandon the same, it
shall give timely notice to the other party which may, if it so desires,
continue prosecution of such suit; provided, however, that the sharing of
expenses and any recovery in such suit shall be agreed upon between LICENSOR and
LICENSEE.
7.7 LICENSEE during the period of this Agreement, shall have the sole
right in accordance with the terms and conditions herein to sublicense any
alleged infringer, and LICENSOR shall be entitled to royalties therefrom as
specified in Article 4.6.
8. PROSECUTION OF LICENSED PATENTS
8.1 LICENSEE agrees to accept liaison and financial responsibilities, as
hereinafter set forth, for the prosecution, by a patent lawyer in independent
practice, who shall be nominated by LICENSEE and approved by LICENSOR, of the
Licensed Applications. Said financial responsibilities shall not only include
the costs of prosecution but also the payment of maintenance fees, where
required, to maintain said patent applications and patents, if issued, in force
and effect for as long as possible. It is further agreed that the patent lawyer
selected by LICENSEE and approved by LICENSOR shall be required, if so desired
by LICENSOR, to keep a patent lawyer selected by LICENSOR informed of all steps
in the prosecution and maintenance of said Patent Rights. Written approval will
be required from LICENSOR to the patent lawyer selected by LICENSEE for actions
concerning this patent.
8.2 Within two (2) weeks of notification to LICENSOR by LICENSEE of the
identity of the patent lawyer, LICENSOR will request that its counsel furnish to
the patent lawyer nominated in accordance with Paragraph 8.1 above:
(a) Complete file histories of all of the patent applications
constituting said Licensed Applications; and
(b) An executed power of attorney or powers of attorney appointing
such patent lawyer as attorney of record in connection with all of said Licensed
Applications.
Page 8
8.3 LICENSOR shall have the right at any time, by notice in writing and
sent to LICENSEE by registered mail, to assume and continue at its own expense,
direction of the prosecution of any of said Licensed Applications. Upon receipt
by LICENSEE of any such notice from LICENSOR, LICENSEE and the patent lawyer
nominated in accordance herewith shall provide in two weeks from the time of
notice an executed power of attorney and all the file histories of the patent
applications constituting said Licensed Applications. Upon receipt of this
documentation, LICENSEE and the patent attorney nominated by LICENSEE shall be
relieved of all future responsibilities to prosecute the Licensed Applications
to which the notice is directed. In which event, LICENSOR agrees to use its good
faith efforts to apply for, seek prompt issuance of, and maintain during the
term of this Agreement, Patent Rights to the extent necessary to cover both
broadly and specifically Licensed Products. LICENSEE shall have reasonable
opportunity to advise LICENSOR and shall cooperate with LICENSOR in such filing,
prosecution and maintenance. LICENSOR shall use its good faith efforts to
furnish LICENSEE with copies of any patent application sufficiently in advance
of its anticipated filing date to give LICENSEE a reasonable opportunity to
review and comment thereon.
LICENSOR also agrees to furnish LICENSEE with copies of all substantive
communications to and from U. S. and foreign patent offices regarding Licensed
Applications and in good faith shall consider the reasonable comments of
LICENSEE regarding all communications and filings to and from the respective
patent office. If, for any reason, prosecution or maintenance of a particular
patent application or patent in a particular country is to be abandoned by
LICENSEE, LICENSOR will be notified in sufficient time to assume prosecution.
LICENSEE shall bear all cost to maintain the patent prosecution until such time
that LICENSOR can assume patent prosecution.
9. TERM AND TERMINATION
9.1 The Term of this Agreement shall be for a period beginning with the
Effective Date and extending until the later often (10) years after the First
Commercial Sale or the last to expire valid claim of Patent Rights covering a
Licensed Product, unless sooner terminated as herein provided. Thereafter,
LICENSEE'S license granted in 3.1 shall be a fully paid up, non-exclusive
license. Surviving any termination are: (a) LICENSEE's obligation to pay
royalties accrued or accruable; and (b) Any cause of action or claim of LICENSEE
or LICENSOR, accrued or to accrue, because of any breach or default by the other
party.
9.2 Upon any material breach or default under this Agreement by LICENSEE,
LICENSOR may give written notice thereof to LICENSEE, and LICENSEE, shall have
thirty (30) days thereafter to cure such breach or default. If such breach or
default is not so cured, LICENSOR, may then in its sole discretion and option
(a) terminate this Agreement and the licenses granted herein or (b) seek such
other relief as may be provided by law in such circumstances by giving written
notice thereof to LICENSEE.
Page 9
9.3 LICENSEE shall have the right to terminate this Agreement at any time
upon ninety (90) days written notice to LICENSOR and payment of all amounts due
LICENSOR through the effective date of termination.
9.4 Upon termination of this Agreement under any provision, all further
obligations of the parties under this Agreement shall terminate without further
liability of any party to another; provided, however, that the publicity and
confidentiality obligations of the parties contained in Section 10 hereof, shall
survive any such termination for the periods set forth therein. Termination
shall not relieve any party of any obligation occurring prior to such
termination, of any liability for a breach of, or for any misrepresentation
under this Agreement or be deemed to constitute a waiver of any available remedy
(including specific performance if available) for any such breach or
misrepresentation, provided, however, that neither party shall be liable for
consequential, punitive or special damages including without limitation, lost
profits. LICENSEE and any sublicensee thereof may, however, after the effective
date of such termination, sell all Licensed Products, and complete Licensed
Products in the process of manufacture and fulfill all orders for Licensed
Products at the time of such termination and sell the same, provided that
LICENSEE shall pay to LICENSOR the royalties thereon as required by Article 4 of
this Agreement and shall submit the reports required by Article 5 hereof on the
sales of such Licensed Products.
9.5 In the event of termination of this Agreement for any reason, any and
all rights granted LICENSEE hereunder, including any rights granted by LICENSEE
to any sublicensee, shall cease and terminate, and all such rights shall revert
to LICENSOR. LICENSEE shall diligently thereafter return to LICENSOR, or to
LICENSOR's designated attorneys, any files or other documents in its possession
or in the possession of its attorneys, agents or sublicensees, relating to
pending or issued Licensed Patent(s), except that one copy of each such document
may be retained by LICENSEE's attorney for the purpose of ensuring compliance
hereunder. LICENSEE and shall also execute any and all documents necessary to
return control of said Licensed Patent(s) until such time as control has
properly been transferred to LICENSOR. Further, LICENSEE shall immediately
return to LICENSOR all research data, biological and other material (including
but not limited to licensed cell lines), prototypes, process information,
clinical data and the like of LICENSOR in its possession or in the possession of
its sublicensees.
10. PUBLICITY AND CONFIDENTIALITY
10.1 Neither party shall use the name of the other in any form of
advertising or promotion without the prior written approval of the other. The
parties may, however, acknowledge Sponsor's support for, and subject to the
obligations of confidentiality set forth in 10.3, the nature of the
investigations being pursued under this Agreement. In any such statement, the
relationship of the parties shall be accurately and appropriately described.
Page 10
10.2 Confidential Items. Confidential Items shall mean any proprietary
information or materials belonging to the disclosing party clearly marked
CONFIDENTIAL (whether or not patentable) including, but not limited to,
formulations, techniques, methodology, equipment, data, reports, know-how,
sources of supply, patent positioning, consultants and business plans, including
any negative developments, which are communicated to, learned by, or otherwise
acquired by the party receiving such information or materials during or in the
course of this Agreement, further including information concerning the
existence, scope or activities of any research and development project of the
disclosing party.
10.3 Each party shall hold in confidence for a period of three (3) years,
and shall not disclose to any person outside its respective organization, any
Confidential Items disclosed to it by the other party to this Agreement. The
party receiving such Confidential Items shall use such Confidential Items only
for the limited purpose for which it was disclosed and shall not exploit such
Confidential Items for its own benefit or the benefit of another without the
prior written consent of the disclosing party. Each party shall disclose
Confidential Items of the other party under this Agreement only to persons
within its organization and to consultants who have a need to know such
Confidential Items in the course of the performance of their duties and who are
bound to protect the confidentiality of such Confidential Items.
10.4 The confidentiality and non-use obligations of the receiving party
shall not apply to any Confidential Item(s) which is received by one party from
the other party and which:
(i) is disclosed in a printed publication available to the public, is described
in an issued patent anywhere in the world, is otherwise in the public domain at
the time of disclosure, or becomes publicly known through no breach of this
Agreement by the receiving party;
(ii) becomes known to the receiving party through disclosure by sources other
than the disclosing party having the right to disclose such Confidential Items;
(iii) is disclosed pursuant to the requirements of a governmental agency or any
law requiring disclosure thereof, provided that the disclosing party is provided
with prior written notice of any such disclosure;
(iv) is generally disclosed to third parties by the disclosing party without
similar restrictions on such third parties;
(v) is approved for release by written authorization of an officer of the
disclosing party; or
(vi) is already known by the receiving party as evidenced by its prior written
records;
Page 11
provided, however, that a breach of the foregoing obligations shall not be
absolved by the subsequent occurrence of any of the above exceptions.
11. PUBLICATION
Subject to all other terms of this Agreement, including those concerning
confidentiality, LICENSOR's investigators have the right to publish or otherwise
publicly disclose information. However, LICENSOR will provide LICENSEE with
copies of articles reporting on research involving the TECHNOLOGY prior to their
submission for publication in order to provide LICENSOR an opportunity to
determine if patentable inventions or Confidential Items are disclosed. LICENSEE
shall inform LICENSOR and LICENSOR'S author(s) within thirty (30) days after
receipt of the material whether in its judgment the material contains
information on which patent applications may or should be filed and the
identification of any LICENSEE Confidential Items to be removed therefrom.
Submission then may be delayed up to an additional sixty (60) days to allow
filing of appropriate patent applications.
12. ASSIGNMENT
This Agreement shall not be assignable by either party without the prior
written consent of the other party, except that LICENSEE may assign this
Agreement to an entity, which acquires all or substantially all of the assets to
which this Agreement pertains without the prior written consent of LICENSOR.
13. INDEMNIFICATION
13.1 LICENSEE agrees that during the term of this Agreement and
thereafter, it will indemnify, defend and hold LICENSOR, its trustees, officers,
employees and affiliates, harmless against all claims and expenses, including
legal expenses and attorneys' fees, arising out of the death of or injury to any
person or persons, or out of any damage to property, and against any other
claim, proceeding, demand, expense and liability of any kind whatsoever
resulting from the production, manufacture, sales, use, consumption or
advertisement of Licensed Products by LICENSEE.
14. NOTICES
All notices under this Agreement shall be deemed to have been fully given
when done in writing and deposited in the United States mail, registered or
certified, and addressed as follows:
Page 12
TO LICENSOR:
William J. Hartman
Director of Research and Technology Development Services
Georgetown University Medical Center
Suite 177, Bldg. D.
4000 Reservoir Road, N.W.
Washington, D.C. 20007
TO LICENSEE:
ZEBRA PHARMACEUTICALS
Attn: John Babich
160 Second St.
Cambridge, MA 02142
Either party may change its address upon notice to the other party as
provided herein.
15. DISPUTE RESOLUTION
Should the parties hereafter have any dispute as to their obligations
pursuant to this Agreement, they shall first attempt to resolve such dispute
among themselves. If such efforts are not successful, the exclusive method for
resolving such a dispute shall be arbitration as described herein.
Either party may elect to submit the issue to arbitration by giving
written notice to the other party and naming an arbitrator. The other party will
then have thirty (30) days to select its own arbitrator. Once both arbitrators
have been selected they shall meet within thirty (30) days of the appointment of
the second arbitrator and select a third arbitrator mutually agreeable to them.
Once the panel of arbitrators have been chosen, they shall conduct an
arbitration on the disputed issue or issues in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The third arbitrator
shall serve as the presiding arbitrator, although, in the event of dispute among
the arbitrators, the majority decision of the arbitration panel shall be
binding. The decision of the arbitrators shall be final and either party may
apply to a court located in the District of Columbia to enter judgment based on
the arbitrator's decision. All costs of the arbitrators and arbitration, other
than the respective parties' attorneys' fees and costs, shall be borne equally
by the parties.
Page 13
16. WAIVER
None of the terms, covenants and conditions of this Agreement can be
waived except by the written consent of the party waiving compliance.
17. APPLICABLE LAW
This Agreement shall be construed, interpreted and applied in accordance
with the laws of the District of Columbia and applicable federal laws.
18. ENTIRE AGREEMENT
This writing constitutes the entire agreement of the parties and there are
no promises, understandings or agreements of any kind pertaining to this
Agreement other than those written in this Agreement.
IN WITNESS WHEREOF, the parties thereto have executed this Agreement in
duplicate originals by their duly authorized officers or representatives.
For LICENSOR For LICENSEE:
By: /s/ Robert J. Halonen /s/ John W. Babich
--------------------------- ----------------------------
Robert J. Halonen, Ph.D. John W. Babich
Chief Financial Officer President and CEO
2-23-00 3/3/00
--------------------------- ----------------------------
Date Date
/s/ William J. Hartman
----------------------------
William J. Hartman, Director
Research & Technology Development Services
2/23/00
--------------------------
Date
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AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT
Dated March 1, 2000
Between BioStream Inc. (formerly designated Zebra Pharmaceuticals in the
above-referenced Agreement) and Georgetown University
This amendment serves to modify the original agreement entered into March
1, 2000, for Patent Rights and Technology related to US Patent Application
Serial Nos. 60/131,627 filed April 28, 1999, and 60/166,195 filed November 22,
1999, both entitled "Ligands for Metabotropic Glutamate Receptors and
Inhibitors of NAALADase", foreign applications corresponding thereto, and any
divisions, continuations, or reexaminations thereof, and will be enforceable on
the date of the last signature of this Amendment.
BIOSTREAM and GEORGETOWN UNIVERSITY agree that the following provisions of the
above-referenced agreement shall be modified as follows:
2. DEFINITIONS
SECTION 2.5
Section 2.5 formerly;
2.5 "Licensed Field of Use" means any diagnostic or therapeutic use concerning
"Ligands for Metabotropic Glutamate Receptors and Inhibitors of NAALADase".
Shall be replaced by:
2.5 "Licensed Field of Use" means use of "Ligands for Metabotropic Glutamate
Receptors and Inhibitors of NAALADase" under "Patent Rights" for imaging
applications only. Use of said compounds for development or sale of therapeutic
compounds is specifically precluded.
8. PROSECUTION OF LICENSED PATENTS
SECTION 8.4 SHALL BE ADDED;
8.4 In the event that LICENSOR exclusively licenses "Patent Rights" for fields
of use other than specified in Section 2.5, LICENSOR shall compensate LICENSEE,
from licensing revenue received from said license, for 50% of patent costs
incurred by LICENSOR according to section 4.1. LICENSOR and LICENSEE shall each
pay 50% of any and all patent costs incurred after the effective date of any
such exclusive license.
In witness thereof, the parties have executed the Amendment on the dates
indicated.
BIOSTREAM GEORGETOWN UNIVERSITY
By: /s/ John W. Babich By: /s/ Martin A. Mullins
____________________________ ______________________________
Name: John W. Babich Name: Martin Mullins
__________________________ _____________________________
Title: President Title: Vice President
_________________________ Office of Technology Transfer
_____________________________
Date: 02/14/03 Date: 1/27/2003
__________________________ _____________________________
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SECOND AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT
Dated October 27, 2005
Between Molecular Insight Pharmaceuticals, Inc. (formerly designated in the
above referenced Agreement as BioStream Inc., and prior to that, Zebra
Pharmaceuticals) and Georgetown University.
This Second Amendment serves to modify the Agreement entered into March 1,
2000 and Amended February 14, 2003, for Patent Rights and Technology related to
US Patent Application Serial Nos. 60/131,627 (filed April 28, 1999) and
60/166,195 (filed November 22, 1999), both entitled "Ligands for Metabotropic
Glutamate Receptors and Inhibitors of NAALDase", as well as any foreign
applications corresponding thereto, and any divisions, continuations, or any
reexaminations thereof, and will be enforceable on the date of the last
signature of this Second Amendment.
Molecular Insight Pharmaceuticals, Inc. and Georgetown University agree
that the following provisions in the above referenced agreement shall be
modified as follows:
PREAMBLE
The Agreement preamble formerly reciting:
Effective as of 1 March, 2000, GEORGETOWN UNIVERSITY, a not-for-profit
corporation of the District of Columbia, having a principal address at 37th & O
Streets, N.W., Washington, D.C. 20057 ("LICENSOR") and ZEBRA PHARMACEUTICALS, a
Massachusetts corporation, having a principal place of business at 160 Second
St. Cambridge, Massachusetts 02142 ("LICENSEE"), agree as follows:
Shall be replaced by:
Effective as of 1 March, 2000, GEORGETOWN UNIVERSITY, a not-for-profit
corporation of the District of Columbia, having a principal address at 37th & O
Streets, N.W., Washington, D.C. 20057 ("LICENSOR") and MOLECULAR INSIGHT
PHARMACEUTICALS, a Massachusetts corporation, having a principal place of
business at 160 Second St., Cambridge, Massachusetts 02142 ("LICENSEE"), agree
as follows:
2. DEFINITIONS
Section 2.1 formerly reciting:
2.1 "Patent Rights" refers to LICENSOR's rights arising from U.S.
Provisional Patent Applications Serial No. 60/166,195, filed November 22, 1999
"Ligands for Metabotropic Glutamate Receptors and Inhibitors of NAALDase", and
Serial No. 60/131,627 filed April 28, 1999, entitled "Ligands for Metabotropic
Glutamate Receptors and Inhibitors of NAALDase", and naming as inventors Alan P.
Kozikowski, Jarda T Wroblewski and Fajun Nan, including any
foreign patent applications corresponding thereto, any United States divisions,
continuations, reissues, or reexaminations thereof, and any United States or
foreign patent(s) issued or granted therefrom and any United States or foreign
patents or patent applications claiming Technology. Such patent application(s)
are the "Licensed Application(s)" and any resulting patents are the "Licensed
Patents(s)."
Shall be replaced by:
2.1 "Patent Rights" refers to LICENSOR's rights arising from U.S.
Provisional Patent Applications Serial No. 60/166,195, filed November 22, 1999
"Ligands for Metabotropic Glutamate Receptors and Inhibitors of NAALADase", and
Serial No. 60/131,627 filed April 28, 1999, entitled "Ligands for Metabotropic
Glutamate Receptors and Inhibitors of NAALADase", originally converted as
U.S.S.N. 09/559,978, and which are now U.S.S.N., 10/374,765 and U.S. Patent
6,528,499, and further including any foreign patent applications corresponding
thereto, any United States divisions, continuations, continuations in-part to
the extent the claims are directed to subject matter specifically described in
USSN 09/559,978, reissues, or reexaminations thereof and any United States or
foreign patent(s) issued or granted therefrom and any United States or foreign
patents or patent applications corresponding thereto all to the extent owned or
controlled by Georgetown. Such patent application(s) are the "Licensed
Application(s)" and any resulting patents are the "Licensed Patents(s)."
In witness thereof, the parties have executed this Second Amendment on the
dates indicated.
MOLECULAR INSIGHT GEORGETOWN UNIVERSITY
PHARMACEUTICALS, INC.
By: By: /s/ Martin Mullins
____________________________ ______________________________
Name: John W. Babich Name: Martin Mullins
Title: President and CSO Title: Vice President
Office of Technology Transfer
Date: Date: 10/28/05
____________________________ ______________________________
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2
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
Exhibit 10.16
LICENSE AGREEMENT
THIS AGREEMENT made December 15, 2000.
BETWEEN:
THE BOARD OF GOVERNORS OF
THE UNIVERSITY OF WESTERN ONTARIO,
(the "University")
AND:
BIOSTREAM, INC.
a corporation incorporated under the laws of the State of Massachusetts,
and having a place of business at 160 Second Street, Cambridge, MA,
(the "Licensee")
WHEREAS:
A. The University has been engaged in research in the course of which it has
invented or developed a certain technology due to the efforts of the
Inventors in the Department of Chemistry of the University;
B. The Licensee wishes to obtain from the University and the University has
agreed to grant a license to the Licensee to use or cause to be used such
technology to manufacture, market, sell, distribute, lease and/or license
or sublicense products derived or developed from such technology;
NOW THEREFORE in consideration of the premises and of the mutual covenants set
forth in this Agreement, the parties hereto agree as follows:
SECTION 1 - DEFINITIONS
1.01 In this Agreement, unless a contrary intention appears:
(a) "Affiliate" means any corporation, company, partnership, joint
venture or other entity which controls, is controlled by, or is
under common control with, a party to this Agreement; for purposes
of this Section 1.01(a), control shall mean, in the case of
corporate entities, the direct or indirect ownership of voting
shares carrying more than 50% of the votes for the election of
directors and sufficient votes to elect a majority of the board of
directors;
(b) "Business Day" means every day other than Saturday, Sunday, and
statutory holidays in the State of Massachusetts;
(c) "Confidential Information" means the Technology and the information
provided to the University pursuant to Section 8.01;
(d) "Date of Commencement" or "Commencement Date" means the date on
which this Agreement shall come into force, which shall be the
fifteenth day of December, 2000;
(e) "Field of Use" means all uses of the Technology;
(f) "Net Revenue" means the total of all amounts invoiced by Licensee
and its authorized Affiliates and sublicensees and agents for sales
of Products, which for the purposes of royalty payments shall be
limited to those sold in such portions of the Territory to which
Patent Rights apply, net of all separately invoiced and actually
incurred charges relating to such sales, for: (a) credits,
allowances, discounts and rebates to, and chargebacks from the
account of, purchasers in respect of Products; (b) actual freight
and insurance costs incurred in transporting Products to such
purchasers; (c) reasonable and customary cash, quantity and trade
discounts and other price reduction programs in respect of Products;
(d) sales, use value-added and other direct taxes incurred in
respect of Products; and (e) customs duties, surcharges and other
governmental charges incurred in connection with the exportation or
importation of Products. Product shall be deemed to have been sold
and included in Net Revenue the earlier of delivery or payment.
Where any Net Revenue is derived from a country other than Canada,
it shall be converted to the equivalent in Canadian dollars on the
date received by the Licensee or any such Affiliate at the rate of
exchange set by the Bank of Montreal in Toronto for such date, of
converting the currency of such revenue into Canadian dollars. The
amount of Canadian dollars resulting from such conversion shall be
included in the Net Revenue;
(g) "Licensee Improvement" means any addition to or modification of a
component or a material useful in the Technology or the Patent
Rights made by the Licensee or by any authorized Affiliate,
sublicensee, or agent,
(h) "Licensee Processed Material" means any substance, product, or
compound that is processed by the Licensee or by any of its
authorized Affiliates, sublicensees, or agents and which utilizes
the Technology,
(i) "Milestone Payments" has the meaning set forth in Section 5.02,
(j) "Materials" means any substance, product or compound (including all
cell lines, vectors, plasmids, clones, micro organisms, anti-bodies,
antigens, test plates, reagents, chemicals, compounds, physical
samples, models and specimens) delivered by the University to the
Licensee or to any authorized Affiliate, sublicensee, or agent,
(k) "Patent Rights" means pending US National Phase patent application
No. 09/529,017, "Preparation of Radiolabelled Haloaromatics Via
Polymer-Bound
Intermediates", the inventions described and claimed therein, and
any divisions, continuations, continuations-in-part to the extent
that their claims are dominated by existing Patents, and patents
issuing thereon or reissues thereof; and any and all foreign patents
and patent applications corresponding thereto.
(l) "Product(s)" means any goods, products or Licensee Processed
Material covered by one or more claims of the University Patent
Rights or University Improvement or of any Licensee Improvement,
manufactured with or utilizing any Technology,
(m) "Related Person(s)" has the meaning assigned to it in section 251 of
the Income Tax Act of Canada,
(n) "Royalty Due Dates" means the last Business Day of January, April,
July, and October of each and every year during which this Agreement
remains in full force and effect,
(o) "Technology" means the Patent Rights and any and all Materials,
knowledge, know-how and/or techniques invented, developed and/or
acquired, prior to or after the Date of Commencement, by the
University or the Licensee, relating to Patent Rights and is useful
or necessary to the development or production of Products,
(p) "Territory" means worldwide,
(q) "University Improvement" means any addition to or modification of a
component or a material useful in the Technology or the Patent
Rights made by the University,
(r) "University Trade-marks" means any mark, trade-mark, service mark,
logo, insignia, seal, design or other symbol or device used by the
University and associated with or referring to the University or any
of its facilities.
SECTION 2 - PROPERTY RIGHTS IN AND TO THE TECHNOLOGY
2.01 OWNERSHIP. The parties acknowledge and agree that the University shall
retain ownership of the Patent Rights and Materials and shall own all
University Improvements made both before and after the Commencement Date.
Licensee shall own all Licensee Improvements.
2.02 FURTHER ASSURANCES. The Licensee shall, at the request of the University,
enter into such further agreements and execute any and all documents as
may be required to confirm that ownership of the Technology resides with
the University.
2.03 LICENSEE TO REPORT LICENSEE IMPROVEMENTS. From time to time and in any
event no more than once every six months, the Licensee shall, at the
request of the
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
University, deliver in writing the details of any and all Licensee
Improvements, modifications and enhancements made by it relating to the
Technology.
SECTION 3 - GRANT OF RIGHTS
3.01 LICENSE. Subject to the terms and conditions hereof, the University hereby
grants to the Licensee and its authorized Affiliates a perpetual,
royalty-bearing exclusive license to manufacture, use, market, sell and
distribute Products within the Field of Use in the Territory and to
commercially exploit the Technology within the Field of Use in the
Territory. Notwithstanding any other provision hereof, the parties
acknowledge and agree that the University shall have the right to use the
Technology and Licensee Improvements without charge whatsoever for
research, scholarly publication, teaching and other non-commercial uses.
3.02 SUBLICENSING. The Licensee may grant sublicenses of the Technology,
subject to the terms and conditions of Section 3.03.
3.03 SUBLICENSES. Licensee shall provide a true and complete copy of any
sublicense agreement or any amendment or termination thereof within thirty
(30) days of entering into any such sublicense agreement, or any amendment
or termination thereof. All sublicense agreements executed by Licensee
pursuant to this Section 3.03 shall be consistent with the terms of this
Agreement including but not limited to Diligence, Milestones, Reports,
Insurance, Termination and Indemnity. Licensee agrees to forward to
Licensor on an annual basis a copy of any report received by Licensee from
its sublicensee(s) which is pertinent to an accounting for the payment of
Milestone Payments (as defined in Section 5.02), royalties or other
sublicense income under such sublicense agreements. Licensee is
responsible for the performance of the sublicensee(s) relevant to this
Agreement. In no event will a Licensee sublicensee be permitted to further
sublicense or to assign or transfer any rights which have been granted to
it by Licensee. Upon termination of this Agreement, any and all existing
sublicenses granted by Licensee shall be assigned to the University.
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SECTION 4 - TERM
4.01 TERM. This Agreement shall terminate on the expiration of the last patent
obtained pursuant to Section 7 herein, unless earlier terminated pursuant
to Section 13 herein.
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SECTION 5 - INITIAL LICENSE FEE, MILESTONE PAYMENTS AND ROYALTIES
5.01 INITIAL LICENSE FEE. The Licensee agrees to pay to the University, as an
initial license fee, the sum of $[******] (Canadian funds). The said sum
shall be paid concurrently with the execution of this Agreement. The said
sum shall not be refundable to the Licensee under any circumstances, in
whole or in part.
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
5.02 MILESTONE PAYMENTS. Licensee shall pay the University milestone product
development payments with respect to the development of Product as set
forth in the table below, each payment becoming due and payable on the
first date of completion of such milestone regardless of the country in
which such milestone is completed. Regardless of the number of Products
successfully completing a milestone, payment will be made only upon the
first such successful completion by any Product.
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Milestone Payment
-------------------------------------- ----------------
Initiation of Phase I Clinical Trail Canadian $[******]
Completion of Phase II Clinical Trial Canadian $[******]
Completion of Phase III Clinical Trial Canadian $[******]
Grant of Regulatory Approval Canadian $[******]
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5.03 ROYALTIES.
In consideration of the license granted hereunder, the Licensee shall pay
to the University:
(a) a royalty of [**************] percent ([***]%) of Net Revenue. For
greater clarification, on sales between the Licensee, and/or its
Affiliates, sublicensees or agents for resale purposes, the royalty
shall be paid only on the resale value; and
(b) In the case of sublicenses or other arrangements with third parties
with whom the Licensee is undertaking any efforts to further develop
or commercialize the Technology and/or Product(s) jointly or in
association with such third party, the Licensee shall also pay to
University [****] percent ([*]%) of any income or other
consideration received (e.g. license issue fees, milestone payments,
etc. but excluding reimbursement by sublicensee or the third party
of Licensee's out-of-pocket expenses for research and development).
The non-royalty payment provided for in this Section 5.03(b) will
not apply to the first Product to which the Milestone Payments under
Section 5.02 are applicable; and
(c) In the case of any other sublicenses to third parties, Licensee
shall also pay to University a percentage of any income or other
consideration received (e.g. license issue fees, milestone payments,
etc.) according to the following sliding scale:
(i) if sublicensed within one year after commencement of this
Agreement, [*****] percent ([**]%),
(ii) if sublicensed within year two or three after
commencement of this Agreement, [******] percent ([**]%),
(iii) if sublicensed within year four or five after
commencement of this Agreement, [***] percent ([**]%),
(iv) if sublicensed within year six after commencement of this
Agreement or any time thereafter, [*****] percent ([*]%).
5.04 ROYALTY PAYMENT DATES. The royalty shall become due and payable on each
Royalty Due Date and shall be calculated with respect to the Net Revenue
of the
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
Licensee in the three month period immediately preceding the month in
which the applicable Royalty Due Date falls.
5.05 CURRENCY OF PAYMENTS. All payments made by the Licensee to the University
hereunder shall be made in Canadian dollars without any reduction or
deduction of any nature or kind whatsoever, except as may be prescribed by
Canadian law.
5.06 MINIMAL ANNUAL ROYALTY. The Licensee shall pay a minimum annual royalty to
the University of the sum of [************] dollars (Cdn$[******]) which
is payable at the end of each calendar year in which Licensee does not
sponsor research in the area of radiolabelling technology, at University
at a level of at least [**************] dollars (Cdn$[******]) in that
calendar year. There shall be no requirement for a minimum, annual royalty
in the year 2000. Minimum annual royalties payable under this Section 5.06
shall be credited against the annual running royalty payable under Section
5.03.
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SECTION 6 - ASSIGNMENT
6.01 ASSIGNMENT BY THE LICENSEE. Except as provided for in Section 7 herein,
the Licensee will not assign, transfer, mortgage, charge or otherwise
dispose of any or all of the rights, duties or obligations granted to it
under this Agreement without the prior written consent of the University.
The University is prepared to allow an assignment of the License Agreement
with prior written notification to the University. If this License
Agreement is assigned independently of a sale of the Licensee, as a going
concern, other than as an assignment to an Affiliate, then the University
is entitled to the same percentage of proceeds or, consideration as per
the sliding scale pursuant to Section 5.03. The assignee or the Affiliate
as the case may be shall be responsible for performance of the terms of
this License Agreement as though the original signatory thereto.
6.02 ASSIGNMENT BY THE UNIVERSITY. The University shall have the right to
assign its rights, duties and obligations under this Agreement to a
corporation or society of which it is the sole shareholder, in the case of
a corporation with share capital, or of which it controls the membership,
in the case of a corporation or society without share capital. In the
event of such an assignment, the Licensee will release, remise and forever
discharge the University from any and all obligations or covenants,
provided however that such corporation executes a written agreement which
provides that such corporation shall assume all such obligations or
covenants from the University and that the Licensee shall retain all
rights granted to the Licensee pursuant to this Agreement.
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SECTION 7 - PATENTS
7.01 PATENT RIGHTS. Licensee hereby recognizes and acknowledges the validity of
the Patent Rights licensed hereunder and agrees not to contest such
validity either directly or indirectly by assisting other parties.
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7.02 PATENT PROSECUTION: PATENT COSTS. Licensee shall reimburse the University
for invoiced patent costs incurred related to Patent Rights, in the total
amount of Cdn$12,111 within thirty (30) days of receiving copies of
invoices for such patent costs. From and after the date of this Agreement,
the Licensee shall have primary responsibility for the filing, prosecution
and maintenance of patents and/or patent applications worldwide for those
inventions within the Patent Rights, at the Licensee's expense. The
Licensee shall consult with the University as to the prosecution and
maintenance of all such patent applications within the Patent Rights
reasonably prior to any substantive deadline or action, and shall not
substantially limit the scope of patent protection without the
University's consent. The Licensee shall furnish the University with
copies of all relevant documents upon filing the same with the patent
office of any country.
7.03 COPIES OF PATENT RELATED MATERIALS. The University shall provide the
Licensee with copies of the patent applications and the entire prosecution
history thereof relating to the Patent Rights.
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SECTION 8 - CONFIDENTIALITY AND PUBLICATION
8.01 DUTY OF CONFIDENTIALITY. The parties hereto acknowledge and agree that
they will treat the Confidential Information as confidential and that they
will use all reasonable efforts not to disclose or communicate or cause to
be disclosed or communicated the Confidential Information to any person or
corporation except as permitted under a sublicense. Such reasonable
efforts will be no less than the efforts used by the receiving party to
protect its own confidential information.
8.02 LICENSEE INTERNAL PROGRAM. Each of the parties covenants and agrees that
it will initiate and maintain an appropriate internal program limiting the
internal distribution of the Confidential Information to its officers,
servants or agents and requiring appropriate non-disclosure agreements
from any and all persons who may have access to the Confidential
Information.
8.03 PUBLICATION. The University shall be permitted to present at symposia,
national or regional professional meetings, and to publish in journals or
other publications, accounts of its research relating to the Technology
provided that the Licensee shall have been furnished copies of the
disclosure proposed therefor at least 30 days in advance of the
presentation or publication date. If the Licensee does not within 20 days
after receipt of the proposed disclosure object to such presentation or
publication on the grounds that it contains Confidential Information or
confidential information with respect to Licensee Improvements or material
that is patentable, the University may proceed with the presentation or
publication. In the event that the Licensee objects to the presentation or
publication on the grounds,
(a) that it contains Confidential Information or confidential
information with respect to Licensee Improvements, the University
shall co-operate in all reasonable
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respects in making revisions to any proposed disclosures to remove
all Confidential Information or confidential information with
respect to Licensee Improvements to the satisfaction of the
Licensee; or
(b) that it contains material that is patentable, the Licensee may
request that the intended disclosure be delayed for an additional
period not exceeding 90 days to permit such patenting to occur.
After such period has elapsed, the University shall be free to
present and/or publish said disclosures.
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SECTION 9 - ACCOUNTING RECORDS
9.01 ACCOUNTING RECORDS. The Licensee shall maintain at its principal place of
business, separate accounts and records of business done pursuant to this
Agreement, such accounts and records to be in sufficient detail to enable
proper payments to be made under this Agreement, and the Licensee shall
require Affiliates, sublicensees, and agents to keep similar accounts.
9.02 REPORTS. The Licensee shall deliver to the University by no later than 30
days after the Royalty Due Date, together with the royalty payable
thereunder, a report (the "Accounting") setting out particulars of the
sale, distribution, leasing or sublicensing of the Technology and/or
Products as shall be pertinent to the payment of royalties, including the
following:
(a) the number of Products sold by Licensee and its authorized
Affiliates or permitted sublicensees or agents in each country
during the applicable royalty period:
(b) the Gross Revenue for each Product or Technology charged by Licensee
and its Affiliates or permitted sublicensees or agents during the
applicable royalty period;
(c) a calculation of Net Revenue in each country, including a listing of
applicable deductions;
(d) total royalty payable on Net Revenue in Canadian dollars, together
with the exchange rates used for conversion which shall be the rate
of exchange established by the Bank of Montreal in Toronto on the
date payment is received by the Licensee; and
(e) withholding taxes, if any, required to be deducted as a payment by
the University with respect to such royalty payment.
Licensee shall also provide to the University periodic reports of all
significant stages and milestones in the development, manufacture and
sale, distribute, leasing or sublicensing of the Technology and/or
Products, including but not limited to, the milestones described in
Section 5.02, by no later than thirty (30) days following the
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completion of such stage or milestone; such reports shall be in sufficient
detail to enable the University to assess the status of all required
regulatory approvals relating to the Products, and whether the Licensee is
meeting its obligations under Section 10.01 hereof during the relationship
between the parties.
9.03 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). The calculation of
royalties shall be made in accordance with generally accepted accounting
principles from time to time approved by the American Institute of
Certified Public Accountants (or any successor institute) applicable as at
the date on which any calculation is required to be made, and applied on a
consistent basis.
9.04 RETENTION OF ACCOUNTS AND RECORDS. The Licensee shall retain the accounts
and records referred to in Section 9.01 for at least three (3) years after
the date upon which they were made and shall permit any duly authorized
representative of the University to inspect such accounts and records
during normal business hours of the Licensee at the University's expense
provided University gives Licensee at least two days notice of its intent
to conduct such an inspection. The Licensee shall furnish such reasonable
evidence as such representative will deem necessary to verify the
Accounting and will permit such representative to make copies of or
extracts form such accounts, records and agreements at the University's
expense.
9.05 SURVIVAL OF THIS SECTION AFTER TERMINATION. Notwithstanding the
termination of this Agreement, this Section 9 shall remain in full force
and effect until:
(c) all payments, including but not limited to royalties, required to be
made by the Licensee to the University under this Agreement have
been made by the Licensee to the University, and
(b) any other claims of any nature or kind whatsoever of the University
against the Licensee have been settled.
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SECTION 10 - PRODUCTION AND MARKETING
10.01 DILIGENCE BY LICENSEE. The Licensee shall use commercially reasonable
efforts to: (a) promote, market and sell the Products; (b) utilize the
Technology; and (c) meet or cause to be met the world market demand for
the Products within jurisdictions where Patent Rights exist. The Licensee
shall also comply with the research and development timeline provided in
Schedule "B".
10.02 RESTRICTION ON USE OF UNIVERSITY TRADE-MARKS, NAME. The Licensee shall not
use any of the University Trade-marks or make reference to the University
or its name in any advertising publicity whatsoever, without the prior
written consent of the University. No prior written consent by the
University is required when University is identified solely for the
purposes of disclosures required by law or providing factual information
so long as in either instance there is no implied endorsement of any
Product or use by the Licensee of the Patent Rights. Acknowledgements
customary in scientific publications are expected.
10.03 EVALUATION. In the event that the University is of the view that the
Licensee is in breach of the covenant contained in this Section 10, the
University shall notify the Licensee and the parties hereto shall appoint
an independent evaluator (the "Evaluator"), mutually acceptable to both
parties, to review the efforts made by the Licensee with respect to the
promotion, marketing, sale and distribution of the Products and the
Technology (the "Evaluation").
10.04 EVALUATION (CONTINUED). In the event that the parties cannot agree on the
Evaluator, the Evaluator shall be chosen by arbitration in accordance with
Section 16.03. Evaluations shall be limited to one per calendar year.
10.05 EFFECT OF EVALUATION. If the Evaluator determines that the Licensee is in
breach of the covenant contained in this Section 10, then the University
shall have the right to terminate this Agreement as provided in Section 13
herein. If the Evaluator determines that the Licensee is not in breach of
the covenant contained in this Section 10, then the University shall not
terminate this Agreement for breach of this Section.
10.06 COST OF EVALUATION. The cost of an evaluation hereunder shall be borne 50%
by the Licensee and 50% by the University.
SECTION 11 - INSURANCE
11.01 INSURANCE REQUIRED FOR LICENSEE. One month prior to the first sale of a
Product, the Licensee will give notice to the University of the terms and
amount of the comprehensive public liability and product liability
insurance which it has placed in respect of the same, which in no case
shall be less than the insurance which a reasonable and prudent
corporation carrying on a similar business would acquire. This insurance
shall be placed with a reputable and financially secure insurance carrier,
shall include the University, the Board of Governors, its faculty,
officers, employees, students and agents as additional insureds, and shall
provide primary coverage with respect to the activities contemplated by
this Agreement. Such policy shall include severability of interest and
cross-liability clauses and shall provide that the policy shall not be
canceled or materially altered except upon at least 30 days' written
notice to the University. The University shall have the right to require
reasonable amendments to the terms or the amount of coverage contained in
the policy. Failing the parties agreeing on the appropriate terms or the
amount of coverage, then the matter shall be determined by arbitration as
provided for herein. The Licensee shall provide the University with
certificates of insurance evidencing such coverage seven days before
commencement of sales of any Product and the Licensee covenants not to
sell any Product before such certificate is provided and approved by the
University.
11.02 INSURANCE REQUIRED FOR SUBLICENSEES. The Licensee shall require that each
sublicensee under this Agreement shall procure and maintain, during the
term of the sublicense, public liability and product liability insurance
in reasonable amounts, with a reputable and financially secure insurance
carrier. The Licensee covenants that no party shall be subrogated to the
rights of the Licensee for the purposes of pursuing any claim against the
University.
11.03 INSURANCE NOT TO AFFECT INDEMNITIES. The existence of any insurance
policies above will not relieve the Licensee from their obligations under
the indemnification provisions contained in this Agreement.
SECTION 12 - DISCLAIMER OF WARRANTIES, LIMITATION OF LIABILITY
12.01 NO WARRANTIES. The University makes no representations or warranties,
either express or implied, with respect to the Technology or Products and
specifically disclaims any implied warranty of merchantability or fitness
for a particular purpose. The University warrants and represents that it
has the authority to license the Patent Rights to the Licensee in
accordance with the terms herein.
12.02 NO LIABILITY FOR LOSS OF PROFITS. The University shall not under any
circumstances be liable for any loss of profits, be they direct,
consequential, incidental, or special or other similar or like damages
arising from any defect, error or failure to perform with respect to the
Technology or Products, even if the University has been advised of the
possibility of such damages.
12.03 FURTHER LIMITATION OF LIABILITY. Notwithstanding any other provision of
this Agreement, the University shall not be liable for any indirect,
consequential, incidental, special or other similar damages, that may
arise in any manner.
12.04 ADDITIONAL DISCLAIMERS. Nothing in this Agreement shall be construed as:
(a) a warranty or representation by the University as to the validity or
scope of the License granted pursuant to this Agreement,
(b) a warranty or representation by the University that anything made,
used, sold or otherwise disposed of under the License granted in
this Agreement is or will be free from infringement of patents,
copyrights, trade-marks, registered design or other intellectual
property rights,
(c) an obligation by the University to bring or prosecute actions or
suits against third parties for infringement of patents, copyrights,
trade-marks, registered design or other intellectual property or
contractual rights, or
(d) the conferring by the University of the right to use in advertising
or publicity the University Trade-marks.
12.05 ENFORCEMENT OF TECHNOLOGY. In the event of an alleged infringement of the
Technology or any right with respect to the Technology, the Licensee shall
have the right to prosecute litigation designed to enjoin infringers of
the Technology upon notification to the University. The University agrees
to co-operate to the extent of executing all necessary documents and to
vest in the Licensee the right to institute any such suits so long as all
the direct or indirect costs and expenses of bringing and conducting any
such litigation or settlement shall be borne by the Licensee and in such
event recoveries shall enure to the Licensee.
12.06 INFRINGEMENT ACTIONS BY THIRD PARTIES. In the event of any complaint
alleging infringement or violation of any patent or other proprietary
rights is made against the Licensee with respect to the use of the
Technology or the manufacture, use or sale of the Products, the following
procedure shall be adopted:
(a) the Licensee shall promptly notify the University upon receipt of
any such complaint and shall keep the University fully informed of
the actions and positions taken by the complainant and taken or
proposed to be taken by the Licensee,
(b) subject to this section, all costs and expenses incurred by the
Licensee in investigating, resisting, litigating and settling such a
complaint, including the payment of any award of damages and/or
costs to any third party, shall be borne by the Licensee,
(c) no decision or action concerning or governing any final disposition
of the complaint shall be taken without full consultation with and
by the University,
(d) the University may elect to participate formally in any litigation
involving the complaint, to the extent that the court may permit but
any additional expenses generated by such formal participation shall
be borne entirely by the University (subject to the possibility of
recovery of some or all of such additional expenses from the
complainant),
(e) if the complainant is willing to accept an offer of settlement and
one of the parties to this Agreement is willing to make or accept
such offer and the other is not, then the unwilling party shall
conduct all further proceedings at its own expense, and shall be
responsible for the full amount of any damages, costs, accounting of
profits and settlement costs in excess of those provided in such
offer, but shall be entitled to retain into itself the benefit of
any litigated or settled result entailing a lower payment of costs,
damages, accounting of profits and settlement costs than that
provided in such offer.
(f) the royalties and any milestone payments payable pursuant to this
Agreement shall be paid by the Licensee to the University in trust
from the date the complaint is made until such time as a resolution
of the complaint has been
finalized. If the complainant prevails in the complaint, then the
royalties paid to the University in trust pursuant to this Section
shall be returned to the Licensee, provided that the amount returned
to the Licensee hereunder shall not exceed the amount paid by the
Licensee to the complainant in the settlement or other disposition
of the complaint including reasonable Licensee legal costs. If the
complainant does not prevail in the complaint, then the University
shall be entitled to all royalties paid to it pursuant to this
Section. Where the Licensee is thereafter obliged to also make
royalty payments to the complainant (the "Third Party Payment"), it
shall be entitled to deduct such Third Party Payment from the
royalties otherwise payable hereunder, provided that the royalties
payable to the University shall not be reduced by more than 50% of
the royalties as currently calculated, had the complainant not been
successful.
SECTION 13 - TERMINATION FOR DEFAULT
13.01 This Agreement may be terminated by either party, upon giving notice in
writing to the other of its intention to do so, in the event that:
(a) such party makes an assignment for the benefit of creditors,
appoints a receiver or manager for itself or a substantial part of
its assets, or otherwise takes advantage of any statute or law
designed for the relief of debtors; or
(b) such party is petitioned under any legislation in respect to
bankruptcy or insolvency legislation by a third party and does not
successfully challenge such petition within sixty (60) days
following the filing of such petition; or
(c) any resolution is passed or order made or other steps taken for the
winding up, liquidation or other termination of the corporate
existence of such party, unless such is taken in conjunction with a
corporate restructuring or reorganization or sale of the party as a
going concern, or if such party ceases to carry on business;
it being acknowledged that termination shall be effective upon delivery of
a notice in accordance with Section 16.09 for any of (a), (b) or (c)
hereof, without any further period of time permitted to such defaulting
party to cure the default;
(d) such party fails to pay any monies required to be paid pursuant to
this Agreement within five (5) days of the date due for payment,
provided that written notice of such default has been delivered by
the other party in accordance with Section 16.09 and the defaulting
party fails within ten (10) Business Days after receipt of such
notice to make such payment;
(e) such party fails to perform or otherwise breaches any material
obligation hereunder, and such defaulting party has not cured the
default, failure or breach within thirty (30) days following the
giving of written notice in accordance with Section 16.09 hereof, or
such longer period as may be
reasonably required in the circumstances, so long as the defaulting
party is diligently pursuing its obligations to cure; or
(f) if the Licensee grants a security interest in the Technology to any
other party without the prior written consent of the University.
In no event, shall any such notice of termination or intention to terminate be
deemed to waive any rights of such party's right to claim damages or to any
other remedy which the party giving the notice of breach may have as a
consequence of the other party's failure or breach.
13.02 Intentionally deleted.
13.03 RIGHTS UPON TERMINATION. If this Agreement is terminated pursuant to
Section 13.01,
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(a) all remaining Materials shall be returned to the University;
(b) all rights to the Technology (except Licensee Improvements) and the
University Improvements shall revert to the University; and
(c) the Licensee shall cease to use the Technology (except Licensee
Improvements to the extent practicing Licensee Improvements would
not infringe Patent Rights) in any manner whatsoever or to
manufacture the Products within five days of the date on which this
Agreement is terminated ("Effective Date of Termination"),
Saturdays, Sundays and statutory holidays excepted. The Licensee
shall then deliver or cause to be delivered to the University a
complete final accounting of all Net Revenue and of all other
amounts payable to the Licensee in respect of the sublicensing of
the Technology and/or the sale or distribution of Products, within
30 days from the Effective Date of Termination. The accounting will
also specify, in or on such terms as the University may in its sole
discretion require, the inventory or stock of Products manufactured
and remaining unsold (the "Unsold Products") on the Effective Date
of Termination. If requested by the University, the Unsold Products
shall be sold under the direction of the University until the Unsold
Products have all been sold or the University waives any further
interest in the Unsold Products. The Licensee will make royalty
payments to the University in the same manner specified in Section 5
herein on all Unsold Products.
13.04 PRESERVATION OF ALL REMEDIES AND RIGHTS. Upon any termination of this
Agreement, the non-defaulting party shall have the right to enforce one or
more remedies successively or concurrently in accordance with applicable
law and retains all rights and remedies against the defaulting party. The
University may proceed to enforce payment of all debts owed to the
University and to exercise any or all of the
rights and remedies contained herein or otherwise available to the
University by law or in equity.
13.05 NON-WAIVER. No condoning, excusing or overlooking by any party of any
default, breach or non-observance by any other party at any time or times
in respect of any covenants, provisos, or conditions of this Agreement
shall operate as a waiver of such party's rights under this Agreement in
respect of any continuing or subsequent default, breach or non-observance,
so as to defeat in any way the rights of such party in respect of any such
continuing or subsequent default or breach and no waiver shall be inferred
from or implied by anything done or omitted by such party, save only an
express waiver in writing.
No exercise of a specific right or remedy by any party precludes it from
or prejudices it in exercising another right or pursuing another remedy or
maintaining an action to which it may otherwise be entitled either at law
or in equity.
SECTION 14 - INDEMNITY
14.01 LICENSEE'S INDEMNITY. The Licensee hereby agrees to indemnify and hold
harmless the University, its Board of Governors, officers, employees and
agents against any and all claims arising out of the exercise of any
rights of the Licensee under this Agreement including, without limiting
the generality of the foregoing, against any damages or losses,
consequential or otherwise, arising from or out of the use of Technology
or Products licensed under this Agreement by the Licensee or its
Affiliates, sublicensees, or agents, or their customers or end-users
howsoever the same may arise.
14.02 ACKNOWLEDGEMENT OF EXPERTISE BY LICENSEE. The Licensee covenants and
agrees that it has the expertise necessary to handle the Technology and
the Products with care and without danger to the Licensee, its employees,
agents, or the public. The Licensee covenants that it will not accept
delivery of the Technology until it has requested and received from the
University all necessary information and advice to ensure that it is
capable of handling the Technology in a save and prudent manner in
accordance with this Section 14.02.
14.03 COMPLIANCE BY LICENSEE WITH LAWS. The Licensee covenants and agrees that
it will comply with all laws, regulations and ordinances, whether federal,
provincial, municipal or otherwise with respect to the Materials, the
Technology and/or this Agreement.
SECTION 15 - ADDITIONAL COVENANTS OF LICENSEE
15.01 CHANGE OF CONTROL. Unless otherwise agreed between the parties, the
Licensee shall notify the University in writing within 30 days following:
(a) the sale of a controlling interest (as defined in 1.01(a)) in the
Licensee to pass to any person or persons other than those having a
controlling interest at the date hereof whether by reason of
purchase of shares or otherwise, or
(b) a reorganization of the Licensee (whether by merger, amalgamation or
otherwise) or the transfer of any part of its business to a
subsidiary or associated company.
15.02 POWER OF ENTRY. The Licensee shall permit any duly authorized
representative of the University during normal business hours and at the
University's sole risk and expense with two days notice to enter upon and
into any premises of the Licensee for the purpose of inspecting the
Products and the manner of their manufacture and the use of the Materials
and the Technology and generally of ascertaining whether or not the
provisions of this Agreement have been, are being, or will be complied
with by the Licensee.
SECTION 16 - GENERAL
16.01 RELATIONSHIP. Nothing contained herein shall be deemed or construed to
create between the parties hereto a partnership, joint venture or
employment relationship. No party shall have the authority to act on
behalf of any other party, or to commit any other party in any manner or
cause whatsoever or to use any other party's name in any way not
specifically authorized by this Agreement. No party shall be liable for
any act, omission, representation, obligation or debt of any other party,
even if informed of such act, omission, representation, obligation or
debt.
16.02 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
16.03 DISPUTE RESOLUTION. In the event of a dispute between the parties arising
out of or in connection with this Agreement or regarding the
interpretation of the provisions hereof, the procedure set forth in
Schedule "A" shall apply.
16.04 INTERIM PROTECTION. Section 16.03 shall not prevent a party hereto from
applying to a court of competent jurisdiction for interim protection such
as, by way of example, an interim injunction.
16.05 ENUREMENT. Subject to the limitations hereinbefore expressed, this
Agreement shall enure to the benefit of and be binding upon the parties,
and their respective successors and permitted assigns.
16.06 HEADINGS. Marginal headings as used in this Agreement are for the
convenience of reference only and do not form a part of this Agreement and
are not be used in the interpretation hereof.
16.07 SURVIVAL OF COVENANTS. The terms and provisions, covenants and conditions
contained in this Agreement which by the terms hereof require their
performance by the parties hereto after the expiration or termination of
this Agreement including, without limitation the provisions of Section 8,
shall be and remain in force notwithstanding such expiration or other
termination of this Agreement for any reason whatsoever.
16.08 SEVERABILITY. In the event that any part, section, clause, paragraph or
subparagraph of this Agreement shall be held to be indefinite, invalid,
illegal or otherwise violable or unenforceable, the entire agreement shall
not fail on account thereof, and the balance of the Agreement shall
continue in full force and effect.
16.09 NOTICES. All notices, requests, directions or other communications
required or permitted herein will be in writing and will be delivered to
the parties hereto respectively as follows:
If to the Licensee:
Biostream, Inc.
160 Second Street
Cambridge, Massachusetts
USA 02142
Attention: Dr. John Babich, President and C.E.O.
Telecopier No: 617-492-5664
If to the University:
Respecting administrative and financial matters, and interpretation,
amendment or termination of this Agreement:
Office of Industry Liaison
Stevenson-Lawson Building
Room 319
The University of Western Ontario
London, Ontario
N6A 5B8
Attention: Director
Telecopier No: 519-661-3907
FOR SCIENTIFIC AND TECHNICAL MATTERS:
Department of Chemistry
Faculty of Science
The University of Western Ontario
London, Ontario
N6A 5B8
Attention: Duncan Hunter
Telecopier No: 519-661-3022
In order for any notice, request, direction, or other communication to be
effective, it will be delivered in person or sent by registered mail or
facsimile (followed by hard copy) addressed to the party for whom it is
intended at the above-mentioned address and will be deemed to have been
received if delivered in person, when so delivered; and if sent by
registered mail, when the postal receipt is acknowledged by the other
party; if sent by facsimile, when transmitted. Notwithstanding the
foregoing, any notice where a party gives notice of termination or of its
intention to terminate under Section 13 shall be delivered by courier with
signed receipt. The address of either party may be changed by notice in
the manner set out in this provision.
16.10 ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
between the parties and no modifications hereof shall be binding unless
executed in writing by the parties hereto.
16.11 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
16.12 NUMBER, GENDER. Whenever the singular or masculine or neuter is used
throughout this Agreement the same shall be construed as meaning the
plural or feminine or body corporate when the context of the parties
hereto may require.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first written above.
THE BOARD OF GOVERNORS OF
THE UNIVERSITY OF WESTERN ONTARIO
By: /s/ Douglas S. Gill
---------------------------------------
Douglas Gill
Director, Office of Industry Liaison
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I have authority to bind the University.
BIOSTREAM, INC.
By: /s/ John W. Babich
---------------------------------------
Name: JOHN W. BABICH
Title: PRESIDENT
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By:
Name:
Title:
I/we have authority to bind the Corporation.
SCHEDULE "A"
DISPUTE RESOLUTION
In the event a dispute or disagreement (hereinafter called "Dispute") arises
between the parties in connection with the interpretation of any provision of
this Agreement or the compliance or non-compliance therewith, or the validity or
enforceability thereof, or the performance or non-performance of either party to
the Agreement, the following Dispute resolution process shall be followed by the
parties:
i. A Dispute will be deemed to have arisen upon the delivery of a written
notice by one party to the other describing the Dispute (herein called the
"Dispute Notice"). Upon delivery of the Dispute Notice, the parties agree
to attempt to resolve the Dispute in a prompt and expeditious manner.
Except for the Dispute Notice, all communications between the parties will
be on a without prejudice basis.
ii. If the parties have not been able to resolve the dispute in a prompt and
expeditious manner after delivery of the Dispute Notice, either party may
at any time thereafter request by written notice to the other party that
the Dispute be escalated to Senior Management.
iii. In the event such a request with written notice is made, each party shall
make available the senior executives specified in the following subsection
("Senior Management") who shall meet within fifteen (15) Business Days
after such request is made at the offices of the party which received the
request to attempt to resolve the Dispute.
iv. The Senior Management appointee for each party is as follows:
Licensee: Dr. John Babich, President and CEO
University: Mr. Doug Gill, Director, Office of Industry Liaison
Either party may change its Senior Management appointee upon prior written
notice to the other.
In case such Dispute is not settled amicably by Senior Management within thirty
(30) days of escalation to Senior Management, such Dispute shall be arbitrated
by an Arbitration Board acting in accordance with the provisions of the
Arbitration Act, 1991 (Ontario), whose decision shall be final and binding upon
the parties. The Arbitration Board shall consist of the person or person that
the parties may agree on and in default of agreement within twenty (20) days
following the expiration of the above-mentioned thirty (30) day period, each of
the parties in dispute shall nominate one member to serve on the Arbitration
Board and shall give notice to the other party of the name of its nominee. If
one party fails to give this notice within fifteen (15) days after the other
party has done so, then the member nominated by the other party shall constitute
the
Arbitration Board. If each party gives this notice, then the two members so
nominated by agreement shall select a third member who shall be Chairman. If the
original two members are unable to agree upon a third member within thirty (30)
days after the second notice has been given, then either party may apply to a
Judge of an appropriate court of the jurisdiction in which the arbitration will
take place to appoint the third member who shall be unconditionally accepted by
both parties. The place of arbitration for disputes for which arbitration is
initiated by either party shall be Toronto, Ontario. Each member shall have
knowledge of and experience in the nuclear medicine industry. The language of
any arbitration will be English.
The arbitration hearing shall commence within sixty (60) days after appointment
of the Arbitration Board is done and shall be completed and a binding award
rendered in writing within sixty (60) days after commencement of the hearing
unless exceptional circumstances warrant delay. The decision of the Arbitration
Board may be entered in any court of competent jurisdiction and execution
entered thereupon forthwith. The law specified in Section 16.02 of This
Agreement above shall apply.
Each party shall bear the cost of preparing its own case. The Arbitration Board
shall have the right to include in the award the prevailing party's costs of
arbitration and reasonable fees of attorneys, accountants, engineers and other
professionals incurred by it in connection with the arbitration.
Notwithstanding the provisions of this Schedule "A", the parties recognize that
a party may desire to seek emergency, provisional, or summary relief (including
temporary injunctive relief) to enforce the provisions of this Agreement
relating to protection of Intellectual Property and/or Confidential Information.
A party may seek such relief, provided, however, that immediately following the
issuance of any emergency, provisional, temporary injunctive or summary relief,
any such judicial proceedings shall be stayed (and each party shall consent to
such stay) pending resolution of any related underlying claims between the
parties.
SCHEDULE "B"
DILIGENCE BY LICENSEE
Years 2001 and 2002 Licensee is funding additional research by way of a two-year
contract research agreement with the University. During this period there shall
be no additional diligence requirements.
During the year 2003, Licensee will label one Product candidate with the
licensed technology and complete all animal toxicology studies necessary to file
an IND in the US and shall file an IND either in the US or its equivalent in
Canada.
During the year 2004, Licensee will begin a Phase I clinical trial of a Product
candidate.
During the year 2005, Licensee will begin a Phase II clinical trial of a Product
candidate.
During the year 2006, Licensee will begin a Phase III clinical trial of a
Product candidate.
During the year 2007, Licensee will file a US NDA or its equivalent in Canada
for a Product candidate.
Licensee will achieve its first sale of Product within six months of US FDA
approval of a NDA or equivalent approval in Canada.
If at any time the Product candidate fails in human trials, Licensee shall
within 30 days of that determination notify the University and Licensee shall
have the opportunity to label another Product candidate with the licensed
technology and the timeline for Diligence by Licensee shall be restarted.
In any year after 2002 if Licensee funds additional research on the licensed
technology at the same or greater levels as in 2001 and 2002, then the Section
10.01 diligence requirements shall be waived for that year.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
Exhibit 10.17
EXCLUSIVE LICENSE AGREEMENT
THIS AGREEMENT made as of September 5th, 2003.
BETWEEN:
MOLECULAR INSIGHT PHARMACEUTICALS, INC. F/K/A BIOSTREAM, INC.
a corporation incorporated under the laws of the State of
Massachusetts, and having a place of business at 160 Second Street,
Cambridge, MA, (the "Licensee")
AND:
THE UNIVERSITY OF WESTERN ONTARIO,
a corporation under the Universities Act (Ontario)
(the "University")
WHEREAS:
A) the University is the owner of certain Technology (as defined herein)
relating to the University's Invention Numbers 01-003 and 02-018 known as:
"Polymer Precursors of Radiolabeled Compounds and Methods of Making and
Using the Same" and "Polymer-Supported Propenyl Mesylates as Precursors
for the Radiolabelling of Amines, Sulfides and Ethers" respectively, and
has the authority and capacity to grant licenses to the Technology;
B) the University wishes to have the Technology developed and commercialized
to benefit the public and is willing to grant a license to any underlying
Patent Rights thereto; and
C) the Licensee wishes to obtain from the University and the University has
agreed to grant a license to the Licensee to commercially exploit the
Technology on the terms set out.
NOW THEREFORE in consideration of the premises and of the mutual covenants set
forth herein, the parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 For purposes of this Agreement, the following words and phrases shall have
the following meanings:
(a) "Business Day" means every day other than Saturday, Sunday, and
statutory holidays in the Province of Ontario or the Commonwealth of
Massachusetts;
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(b) "Confidential Information" means scientific, technical and/or
business information (including written descriptions, drawings,
samples, compositions, formulae, visual demonstrations, prototypes
and other data) which is disclosed by one party (the "Discloser") to
the other party (the "Recipient") and which is in each case marked
or identified (either in writing or orally) as confidential at the
time of disclosure.
(c) "Effective Date" means the date on which this Agreement shall come
into effect, which shall be the 5th day of September, 2003;
(d) "Field of Use" means all uses of the Technology;
(e) "Net Revenue" means all revenues and receipts directly or indirectly
receivable by the Licensee and, where sublicensing is permitted
hereunder, its sub-licensees or payable to the Licensee and its
sub-licensees, from third party use, sale, distribution, leasing or
sublicensing of Licensed Products and/or the use of Licensed
Processes, calculated on the basis of the Licensee's fiscal year, or
part thereof, less the following amounts relating to such sales: (i)
discounts allowed in amounts that are reasonable and customary in
the trade; (ii) actual freight and insurance costs incurred in
transporting Licensed Products to such purchasers; (iii) sales, use,
value-added and other direct taxes incurred in respect of sale of
Licensed Products; (iv) customs duties, surcharges and other
governmental charges incurred in connection with the export or
import of Licensed Products; and (v) amounts credited or allowed on
returns. No deductions shall be made for commissions or fees paid to
persons whether independent sales agents, or are employed by the
Licensee or its sub-licensee, or for other similar costs.
Notwithstanding anything in this Agreement to the contrary, revenues
and receipts shall be considered directly or indirectly receivable
by Licensee when the Licensee receives such amounts owed to it;
provided, however, that the Licensee has exercised commercially
reasonable efforts to collect all amounts owed to it by its
sub-licensees or other third parties in connection with the licenses
granted hereunder in a timely manner. Licensed Products shall be
deemed to have been sold and included in the Net Revenue of the
Licensee and sub-licensee when invoiced, or if not invoiced, when
delivered or paid for, whichever is the first to occur. Under no
circumstances shall Net Revenue include any grant money or other
funding received by the Licensee as re-imbursement of expenses
associated with the research and development of the Technology by
the Licensee.
(f) "Licensee" is the party of the first part and includes any
corporation which controls, is controlled by, or is under common
control with the Licensee; for this purpose, "control" means the
direct or indirect ownership of voting shares carrying more than 50%
of the votes for the election of directors;
(g) "Licensee Improvement" means any technology, whether patentable or
not, that is developed by or under the direction of the Licensee and
whose use would infringe one or more claims or rights under the
Patent Rights or whose development has relied upon the Technology;
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(h) "Licensed Process" means any process which relies in whole or in
part upon the Technology or which is covered in whole or in part by
an issued, unexpired claim or pending claim contained in the Patent
Rights;
(i) "Licensed Product" means any product or part thereof which:
(i) relies in whole or in part, upon the Technology, or is
utilized to practise a Licensed Process; or
(ii) is produced or processed by using a Licensed Process; or
(iii) is covered in whole or in part by an issued, unexpired claim
or a pending claim contained in the Patent Rights in the
country in which any such product or part thereof is made,
used or sold.
(j) "Materials" means any substance, product or compound (including all
cell lines, vectors, plasmids, clones, micro organisms, anti-bodies,
antigens, test plates, reagents, chemicals, compounds, physical
samples, models and specimens) delivered by the University to the
Licensee, and the Materials specifically described in Schedule "C",
and all progeny, mutants and derivatives thereof supplied by the
University;
(k) "Milestone Payments" has the meaning set forth in Section 5.2;
(l) "Patent Rights" means any of the following intellectual property of
the University:
(i) patents and/or patent applications listed in Schedule "A";
(ii) patents issued from the applications listed in Schedule "A",
or from divisions or continuations of such applications, or
any re-issues of such patents; or
(iii) such other statutory or common law protection as may be
available to the University in connection with such patents or
patent applications listed on Schedule A.
(m) "Royalty Due Date" means the date 30 days following the last day of
March, June, September and December of each and every year during
which this Agreement remains in full force and effect, commencing on
January 30, 2004;
(n) "Territory" means worldwide;
(o) Technology" means any and all knowledge, know-how, information,
software and/or techniques invented, developed or acquired or being
invented, developed and/or acquired prior to or after the Effective
Date by the University, and any Materials related thereto, all of
which are related to the Patent Rights, University Improvements or
Licensee Improvements as applicable, provided that for the purposes
of determining University
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ownership of Technology, Licensee Improvements developed solely by
the Licensee shall be excluded.
(p) "University Improvement" means any technology, whether patentable or
not, that is created by the University under the research program of
Dr. Duncan Hunter or whose use would infringe one or more claims or
rights under the Patent Rights; and
(q) "Trade-marks" means any mark, trademark, service mark, logo,
insignia, seal, design or other symbol or device used by the
University or Licensee and associated with or referring to either of
the University or Licensee, as the case may be, or any of its
facilities, property or products.
ARTICLE 2 - GRANT OF RIGHTS AND TERM
2.1 LICENSE. Subject to the terms and conditions of this Agreement, the
University hereby grants to the Licensee the right and license, within the
Field of Use and in the Territory, to use, modify, improve, sublicense or
otherwise exploit, for commercial and non-commercial purposes, the
Technology, the Patent Rights, and/or University Improvements as
applicable, and, to make, have made, use, lease, sell, distribute and
import Licensed Products and to use, modify, improve, sublicense and
otherwise exploit, for commercial and non-commercial purposes, the
Licensed Processes, until the end of the earlier of 20 years from the
Effective Date of this Agreement or the term for which a patent or patents
under the Patent Rights are granted, and in the latter instance, on a
country by country basis, unless this Agreement is sooner terminated
according to the terms hereof. Notwithstanding anything to the contrary,
the license granted hereunder shall not be construed to confer any rights
or benefits upon the Licensee by implication, or otherwise, as to any
patents, technology or rights not specifically included in the Technology.
2.2 PERIOD OF EXCLUSIVITY. In order to establish a period of exclusivity for
the Licensee, the University hereby agrees that it shall not grant any
other license to make, have made, use, lease, sell and distribute the
Technology, the Patent Rights, the University Improvements or the Licensed
Products or to utilize Licensed Processes in the Territory for the Field
of Use during the period of time commencing the Effective Date and
terminating upon expiration of any patent issued on a country by country
basis.
2.3 RIGHTS RETAINED BY UNIVERSITY. Nothing in this Agreement shall affect the
University's right to use the Technology or to use and distribute the
Materials to third parties for research, teaching and other non-commercial
uses and the Licensee hereby grants back to the University rights to use
the Patent Rights, whether for the University's own purposes or in
conjunction with other similar research institutions, for research,
teaching and other non-commercial applications, including technical
services and industrially sponsored research. This grant to the University
expressly excludes any rights to use the Patent Rights alone or in
conjunction with others, for commercial purposes.
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2.4 OWNERSHIP, IMPROVEMENTS. The parties acknowledge that the University shall
retain ownership of the Technology excluding all Licensee Improvements.
The Licensee shall own all Licensee Improvements, provided that the
Licensee hereby grants to the University a perpetual, non-exclusive
royalty-free right to use all Licensee Improvements solely for research,
teaching and other non-commercial uses in accordance with the rights
granted under Section 2.3.
2.5 REPORT OF IMPROVEMENTS. From time to time and in any event at least
annually:
(a) the Licensee shall disclose in writing to the University the details
of all Licensee Improvements; and
(b) the University shall disclose in writing to the Licensee the details
of all University Improvements, for the purposes of causing same to
be part of the grant of rights in the Technology hereunder.
2.6 RESTRICTION ON DISCLOSURE; USE OF TRADE-MARKS. Neither party shall
disclose any of the financial terms and conditions of this Agreement but
shall be entitled to reveal the parties and the nature of the license
granted. Neither Party shall use any of the other's Trade-marks or make
reference to the other for any advertising or publicity purposes, without
the prior written consent of that party. Notwithstanding the foregoing,
the parties (and their representatives) may disclose to any person or
entity the tax treatment and tax structure of the transactions
contemplated by this Agreement and any materials (including opinions and
other tax analyses) provided to them relating to the tax treatment and tax
structure of the transactions contemplated herein.
ARTICLE 3 - SUBLICENSES
3.1 SUBLICENSES. The Licensee shall have the right to grant sublicenses of the
rights, privileges and licenses granted hereunder within the Territory
during the exclusive period of this Agreement in accordance with the
provisions of Section 3.2. Upon any termination of this Agreement, and at
the election of the University, any sub-licensees' rights shall also
terminate.
3.2 COVENANTS OF SUB-LICENSEES.
(a) Licensee covenants and agrees that it shall cause any sublicense
agreement entered into by it to contain, on the part of such
sub-licensee, covenants in favour of the University with respect to
the obligations set forth in Sections 3.1, 6.1 and Articles 10 and
12 herein, and that to the extent there exists an inconsistency
between the sublicense agreement and this Agreement, any such
inconsistency or conflict will be resolved in favour of this
Agreement. In granting any sublicense hereunder, the Licensee
undertakes to observe and perform any obligations of the
sub-licensee, to intent that none of the rights, entitlements or
remedies of the University are impaired by the granting of such
sublicense. The Licensee shall deliver to the University a true copy
of such sublicense agreement upon execution.
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
(b) In addition, all sublicenses shall be subject to the following
conditions:
(i) in no event will a sub-licensee be permitted to further
sublicense or to assign or transfer any rights which have been
granted to it by the Licensee (except to the extent that such
assignment is in connection with the sale of all or
substantially all of the assets or stock of such sub-licensee
or in connection with the merger or similar transaction
between such sub-licensee and a third party and University is
notified of such assignment); and
(ii) the Licensee shall not be entitled to receive from any
sub-licensee any consideration or matter of value in lieu of
cash payments not otherwise part of Net Revenue, in
consideration for any sublicense under this Agreement, without
the express prior written consent of the University.
ARTICLE 4 - LICENSEE'S PERFORMANCE OBLIGATIONS
4.1 LICENSEE'S COMMERCIALIZATION DUE DILIGENCE; MILESTONE OBLIGATIONS. The
Licensee shall use commercially reasonable efforts to bring one or more
Licensed Products or Licensed Processes to market through a thorough,
concerted and diligent program for exploitation of the Technology and to
continue active, diligent marketing efforts for one or more Licensed
Products or Licensed Processes during the entire period that this
Agreement is in effect, in order to meet the milestones set out on
Schedule "D" from time to time.
4.2 ACKNOWLEDGEMENT OF EXPERTISE BY LICENSEE. The Licensee covenants and
agrees that it has the expertise necessary to handle the Technology,
Materials, the Licensed Products and the Licensed Processes with care and
without danger to the Licensee, its employees, agents, or the public, and
to observe and perform the covenants and obligations set out herein.
4.3 COMPLIANCE BY LICENSEE WITH LAWS. The Licensee covenants and agrees that
it will comply with all laws, regulations and ordinances, whether federal,
provincial, state, municipal or otherwise, as appropriate, with respect to
the Materials, the Technology, the Licensed Products, the Licensed
Processes and this Agreement.
4.4 FAILURE TO MEET PERFORMANCE REQUIREMENTS. In the event the Licensee fails
to meet any of the milestones or performance criteria set forth in
Schedule D, or observe and perform the obligations set forth under any of
Sections 4.1 or 4.3, such shall constitute a default under this Agreement
pursuant to Section 13.2 hereof.
4.5 NO PRIOR SECURITY INTERESTS. The Licensee covenants that it will not grant
a security interest in or to the Technology.
ARTICLE 5 - FEES, ROYALTIES AND PAYMENTS
5.1 INITIAL LICENSE FEE. The Licensee shall pay to the University, an initial
license fee with respect to the issuance of the license, of Canadian
$[******]. The said sum shall
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
be deemed earned and due immediately upon the Effective Date, and shall
not be refundable to the Licensee in whole or in part under any
circumstances.
5.2 ROYALTY FOR DISCOVERY, RESEARCH AND DEVELOPMENT USES.
(a) The Licensee shall pay to the University, in advance, an annual fee
of Canadian $[******] ([***************] dollars) per year for seven
years commencing on the anniversary of the Effective Date beginning
one year after the Effective Date, and thereafter on each successive
anniversary of the Effective Date. The parties are agreed that no
payment shall be required for that period from the Effective Date to
the first anniversary thereof; and
(b) As further consideration for the value of the Technology for
application as a discovery tool and use as a research and
development platform by the Licensee ("Research Uses"):
(i) Licensee shall pay to the University a royalty of [********]
percent ([***]%) of the Net Revenue receivable by the Licensee
that is attributable to products sold, made, or distributed
directly by Licensee to third parties where such products rely
upon such Research Uses and which no longer are relying upon
the Technology directly;
(ii) Where Licensee provides Research Uses to third parties on a
fee-for-service basis, Licensee shall pay a royalty to the
University of [**************] percent ([***]%) of the Net
Revenue receivable by the Licensee in connection with such
fee-for-service work which relies upon such Research Uses; and
(iii) Where the Licensee has previously provided to third parties
Research Uses on a fee-for-service basis and such third party
thereafter sells, makes or distributes a product that relies
on such Research Uses, the Licensee shall pay to the
University a royalty of [********************] ([***]%) of the
Net Revenue receivable by the Licensee as a royalty payment
from such third party in connection with products which rely
upon such Research Uses and which do not require a sublicense
of the Technology.
5.3 MILESTONE PAYMENTS. The Licensee shall pay to the University milestone
product development payments with respect to achievement of each of the
enumerated events arising from the development of each of the Licensed
Products and/or Licensed Processes, all as set forth in the table below,
with each payment becoming due and payable on the first date of completion
for each element of every Class ("Class" means any of Cardiology,
Oncology, Central Nervous System, Infection, and Vascular Disease) of
Licensed Product and/or Licensed Process of such milestone, regardless of
the country in which achievement of such milestone first occurs:
Milestone Payment
--------- -------
Initiation of Phase I Clinical Trial Canadian $[******]
Completion of Phase II Clinical Trial Canadian $[******]
Completion of Phase III Clinical Trial Canadian $[******]
Grant of Regulatory Approval Canadian $[******]
|
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[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
For certainty with respect to milestone product development payments,
there are four (4) milestones anticipated for each of the five (5)
Classes.
5.4 ANNUAL ROYALTIES AND PAYMENTS. In consideration of the license granted
hereunder, the Licensee shall pay to the University subject to Section 5.6
below:
(a) a royalty of [**************] percent ([***]%) of Net Revenue; For
greater clarification, on sales between Licensee, and/or its
Affiliates, sub-licensees or agents for resale purposes, the royalty
shall be paid only on the resale value by such Affiliate,
sublicense, or agent. Such royalties shall become due and payable on
each Royalty Due Date, and shall be calculated with respect to Net
Revenue for the calendar quarter immediately preceding the month in
which the applicable Royalty Due Date occurs; and
(b) in addition to such annual royalties in subsection (a) hereof, [****
***********] percent ([***]%) of:
(i) initial up-front fees, or other consideration (including
equity or other participation), or in-kind or non-monetary
contribution, if any, receivable by Licensee upon its
execution of or pursuant to the terms of any sub-license
agreement related to the use of the Technology, Materials,
Licensed Products or Licensed Processes; and
(ii) any payments or other consideration (including equity or other
participation), or in-kind or non-monetary contribution
receivable by Licensee upon the successful achievement of
milestones set forth in, and pursuant to the terms of, any
sublicense agreement related to the use of the Technology,
Materials, Licensed Products or Licensed Processes. The
Licensee shall be entitled to deduct from any of the foregoing
consideration received that portion which is a reimbursement
of its direct, out-of-pocket costs for research projects
funded on behalf of the sub-licensee relating to the
Licensee's Improvements after the effective date of the
sub-license agreement.
Any payments under this subsection (b) shall be following receipt by the
Licensee of the fees, consideration, or in-kind or non-monetary
contribution, provided Licensee has exercised commercially reasonable
efforts to collect such amount or entitlement owing.
Notwithstanding anything herein to the contrary, the University
acknowledges and agrees, that it is not entitled to any compensation,
royalty or payment whatsoever in connection with any payments or other
consideration (including equity or other participation), with respect to
third party equity investments in the Licensee which are not directly
attributable to the sub-licensing of any of the Technology, Materials,
Licensed Products or Licensed Processes.
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5.5 CURRENCY AND PLACE OF PAYMENTS. All payments to be made by the Licensee to
the University hereunder shall be made in Canadian dollars at London,
Ontario without deduction of taxes or other fees of any other kind
whatsoever, which may be imposed by any government, and which taxes or
fees shall be paid by the Licensee. Where any payment or amount is
denominated in a currency other than Canadian dollars, it shall be
converted to the equivalent in Canadian dollars at the rate of exchange
set by the Bank of Montreal in Toronto, Canada for converting the currency
of such amount into Canadian dollars, on the last Business Day of the
reporting period to which such payment relates.
5.6 NO DUPLICATION OF PAYMENTS. For clarification, the royalties owed pursuant
to clauses (b)(i), or (b)(iii) of Section 5.2 and clause (a) of Section
5.4 are to be independent of each other.
ARTICLE 6 - RECORDS AND REPORTING
6.1 ACCOUNTING RECORDS. The Licensee shall maintain at its principal place of
business, separate accounts and records of transactions arising pursuant
to this Agreement, such accounts and records to be in sufficient detail to
enable proper returns to be made under this Agreement, and the Licensee
shall include a similar requirement of its sub-licensees in any sublicense
agreement.
6.2 REPORTS. The Licensee shall deliver to the University by no later than
each Royalty Due Date, together with the royalty payment required, a
report (the "Accounting") setting out particulars of the sale,
distribution, leasing or sublicensing of the Licensed Products and/or
Licensed Processes as shall be requisite for the payment of royalties,
including the following:
(a) the number of Licensed Products sold by Licensee and all
sub-licensees in each country during the applicable royalty period;
(b) the gross revenue for Licensed Products charged by Licensee and all
sub-licensees during the applicable royalty period;
(c) an accounting for all Licensed Processes used, sold, leased, or, if
applicable, licensed by the Licensee and all sub-licensees;
(d) a calculation of Net Revenue in each country including a listing of
applicable deductions and evidence of the Licensee's payment of
withholding taxes;
(e) a listing of additional payments or consideration from sub-licensees
under Section 5.4(b); and
(f) total royalties payable on Net Revenue in Canadian dollars, together
with the exchange rates used for any currency conversion in
accordance with Section 5.5.
The Licensee shall also provide to the University periodic reports at all
significant stages and milestones in the development, manufacture and
sale, distribution,
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leasing or sublicensing of the Licensed Products and/or Licensed
Processes, including but not limited to, the milestones described in
Sections 4.1, 4.4 and 5.2, by no later than thirty (30) days following the
completion of such stage or milestone; such reports shall be in sufficient
detail to enable the University to assess the status of all required
regulatory approvals relating to the Licensed Products, and whether the
Licensee is meeting its obligations under Sections 4.1, 4.4 and 5.2 during
the term of this Agreement.
6.3 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). The calculation of
royalties shall be made in accordance with generally accepted accounting
principles from time to time approved by the Federal Bureau of Accounting
Standards applied on a consistent basis with the Licensee's past
practices. Licensee certifies that its accounting practices comply with
the Federal Bureau of Accounting Standards.
6.4 RETENTION OF ACCOUNTS AND RECORDS. The Licensee shall retain the accounts
and records referred to in Section 6.1 for at least three (3) years after
the date upon which they were made.
6.5 AUDIT RIGHT. During the term of this Agreement and for one (1) year
thereafter, the University may at its cost and expense audit or cause to
be audited, no more than once in any twelve month period, the applicable
books, records of other relevant materials of the Licensee referable
hereto, to verify any report rendered hereunder. The audit must be on
reasonable advance, written notice, and be conducted during normal
business hours of the Licensee. The Licensee shall furnish such reasonable
evidence as such representative will deem necessary to verify the
Accounting and may permit such representative to make copies of or
extracts from such accounts, records and agreements at the University's
expense. If the audit reveals an underpayment by the Licensee of three (3)
percent or more of royalties payable in any fiscal year of the Licensee,
the Licensee shall pay to the University such deficiency within fifteen
(15) days of the determination thereof, together with interest thereon
from the date such amount was due to the date of payment, and shall
further reimburse the University for its full and reasonable out-of-pocket
costs of the audit. In any other instance of overpayment or underpayment
by the Licensee, the appropriate payment of such deficiency or refund
shall be made within fifteen (15) days following the determination
thereof, together with interest thereon and the University shall bear its
own costs of the audit.
6.6 POWER OF ENTRY. The Licensee shall permit any duly authorized
representative of the University during normal business hours and at the
University's sole risk and expense to enter upon and into any premises of
the Licensee for the purpose of inspecting the Products and the manner of
their manufacture, and the use of the Materials, the Technology and the
Licensed Processes; and generally ascertaining whether or not the
provisions of this Agreement have been and, are being complied with by the
Licensee.
6.7 SURVIVAL OF THIS ARTICLE AFTER TERMINATION. Notwithstanding the
termination of this Agreement, this Article 6 shall remain in full force
and effect until:
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(a) all payments and royalties required to be made by the Licensee to
the University under this Agreement have been made by the Licensee
to the University; and
(b) any other claims of any nature or kind whatsoever of the University
against the Licensee arising out of the termination have been
settled.
ARTICLE 7 - REPRESENTATIONS AND WARRANTIES
7.1 Each of the University and the Licensee warrants and represents to the
other, and acknowledges that the other has relied upon the completeness
and accuracy of such representations and warranties in entering into this
Agreement, namely:
i) it has the corporate capacity to enter into this Agreement and to
perform each of its obligations hereunder; and
ii) it has duly authorized, executed and delivered the Agreement, and
the Agreement constitutes a legal, valid and binding obligation of
it, enforceable against it in accordance with its terms, except only
as such enforcement may be limited by applicable bankruptcy,
insolvency and other laws of general application affecting the
enforcement of creditors' rights and subject to general equitable
principles.
7.2 The University warrants and represents to the Licensee, and acknowledges
that the Licensee has relied upon the completeness and accuracy of such
representation and warranties in entering into this Agreement, namely:
i) as at the date hereof, it has all right, title and interest in and
to the Technology and the Patent Rights, free and clear of any
security interests, liens or other similar encumbrances and
possesses all rights necessary to grant the license set forth
herein;
ii) as at the date hereof, there is no litigation or other claim pending
or threatened involving the Technology or the Patent Rights;
iii) as of the date hereof, there is no claim pending or, to the
University's knowledge, threatened by a third party alleging that
the Technology or Patent Rights infringes the intellectual property
rights of such third party and the University has no reason to
believe that there is a basis for such claim; and
iv) it has not entered into any options, licenses or other agreements
with third parties relating to the Technology or Patent Rights which
would conflict with the rights and licenses granted to the Licensee
herein.
ARTICLE 8 - PATENT PROSECUTION
8.1 PATENT RIGHTS. The Licensee hereby recognizes and acknowledges the
ownership rights of the University to the Technology, as applicable, the
validity of the Patent Rights licensed hereunder, and agrees not to
contest the ownership of the Technology or the validity of the Patent
Rights, either directly or indirectly by assisting other parties, nor to
initiate or participate with an interference application in connection
with Patent Rights.
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8.2 PATENT PROSECUTION AND PATENT COSTS. The Licensee shall pay for all
reasonable fees and costs relating to the filing, prosecution and
maintenance of the Patent Rights incurred after the Effective Date and
during the term of the Agreement on behalf of the University: provided,
however, that, subject to Section 8.4 below, the Licensee shall control
the process of, and select counsel of its choosing for, such filing,
prosecution and maintenance. The Licensee shall have primary
responsibility for the filing, prosecution and maintenance of patents
and/or patent applications worldwide for those inventions within the
Patent Rights, at the Licensee's expense, provided that the Licensee shall
consult with the University as to the prosecution and maintenance of all
such patent applications within the Patent Rights prior to any substantive
deadline or action, and shall not substantially limit the scope of patent
protection without the University's consent, which consent shall not be
unreasonably withheld or delayed. The Licensee shall furnish the
University with copies of all relevant documents upon filing the same with
the patent office of any country. Subject to Section 8.4 below, the
University shall not take any action with respect to such patents or
patent applications without the Licensee's prior written consent.
8.3 COPIES OF PATENT RELATED MATERIALS. The University shall provide the
Licensee with copies of the patent applications and all official
correspondence with the respective patent and trademarks office(s)
relating to the Patent Rights which exist as of the Effective Date. In
addition, the Licensee shall provide to the University copies of all
patent applications, maintenance therefor and all official correspondence
with the respective Patent and Trademark Office relating to the Patent
Rights from and after the Effective Date, in accordance with its
obligations under Section 8.2 hereof, in order that the University is
advised sufficiently in advance of any deadlines for patent prosecution or
maintenance in connection with the Patent Rights.
8.4 UNIVERSITY PATENT PROSECUTION. In the event that the University has
notified the Licensee in writing that it desires to file for patent
protection in a country or countries and the Licensee declines to do so in
writing, the university shall notify the Licensee in writing of its
intention to file for such patent protection in such country or countries
(the "Patent Notice", which Patent Notice must specifically state the
country and scope of the patent protection desired) and, if the Licensee
has not responded within ten (10) business days after its receipt of the
Patent Notice that the Licensee will seek such patent protection pursuant
to this Section 8, the University may file for, prosecute and maintain
such patent (as set forth in the Patent Notice) with counsel of its
choosing. The University will provide copies of all documents related
thereto to the Licensee. Notwithstanding the foregoing, the University
must have a good faith business reason for seeking such patent protection
pursuant to this Section 8.4 prior to delivering the Patent Notice to the
Licensee.
8.5 UNIVERSITY RIGHTS RE PROSECUTION. In the event that the Licensee fails to
prosecute any application or maintain the existence of Patent Rights for
which the Licensee is responsible hereunder, the University shall be
entitled to assume the obligations of the Licensee, as contemplated by
Section 8.2 hereof, and may elect that the Licensee's failure to
diligently prosecute and/or maintain such Patent Rights is a default of
the Licensee for which termination rights by the University are
exercisable in accordance with Article 13. Notwithstanding anything herein
to the contrary, the University's termination rights set forth in this
Section 8.5 shall not be applicable with
Page 12 of 27
respect to any patents which the Licensee has declined to pursue pursuant
to Section 8.4 or for which the patent process has not been initiated by
either party in such country or countries.
ARTICLE 9 - INFRINGEMENT
9.1 Enforcement of Rights Against Third Parties.
(a) In the event of an alleged infringement of the Patent Rights or an
unauthorized use of the Technology by a third party in the Territory
for the Field of Use after the Effective Date, the Licensee shall
have the obligation to prosecute, at its own expense, any such
alleged infringement, upon receipt of prior written notice of such
claim from the University. The University agrees to co-operate to
the extent of executing all necessary documents to vest in the
Licensee the right to institute any such suits, and the right to use
the University's name as a party plaintiff. No settlement, consent,
judgment or other voluntary final disposition of the suit may be
entered into without the consent of the University, which consent
shall not unreasonably be withheld or delayed. At any time during
the prosecution of the action by the Licensee, the University may
participate, at its own expense, in the prosecution of such action.
The Licensee shall indemnify the University against any order for
costs that may be made against the University in such proceedings.
(b) In the event that the Licensee undertakes assertion of rights with
respect to the Technology or the enforcement of the Patent Rights by
litigation, the Licensee may withhold up to fifty percent (50%) of
the payments otherwise thereafter due to the University under
Article 5 hereunder and apply such withheld amounts toward
reimbursement of up to fifty percent (50%) of Licensee's expenses,
including reasonable attorneys' fees, in connection therewith. Any
recovery of damages by Licensee for each such suit shall be issued
in the name of the Licensee and the University jointly, and shall be
applied first in satisfaction of all of any unreimbursed expenses
and legal fees of Licensee relating to such suit, and next applied
for all payments to the University under Article 5 past due or
withheld pursuant to this Article 9. The balance remaining
thereafter from any such recovery shall be divided equally between
the Licensee and the University. The Licensee shall provide to the
University an accounting for all costs, expenses and disbursements
incurred with respect to the defence or enforcement of the action.
In the event that the enforcement of the Patent Rights by the
Licensee is not successful, or the Licensee does not recover 50% of
its legal fees and expenses from the withheld royalty amounts, the
Licensee surrenders and foregoes any further entitlement to offset
any amounts against the royalty payments otherwise payable under
Article 5.
(c) In the event that the enforcement of the Patent Rights by the
Licensee or the University is not successful, the Licensee shall
have the right to terminate this Agreement upon sixty (60) days
written notice to the University, provided that the obligations of
the Licensee for payment under Section 9.1 (b) have been fulfilled.
Alternatively, the Licensee and the University may enter
Page 13 of 27
renegotiations of a new royalty rate, having regard to the nature
and extent of the Technology and/or Patent Rights as are available
to be licensed to the Licensee, pursuant to a revised agreement.
(d) Notwithstanding the foregoing, the University shall have the right
to enter into a contract with the successful third party with
respect to licensing of rights from it in order to permit the
continued use of the License hereunder for the Technology, and in
such case, the terms of this Agreement shall continue in full force
and effect.
9.2 CO-OPERATION BETWEEN THE PARTIES. In any infringement suit to enforce the
Patent Rights pursuant to this Agreement, the University shall, at the
request and expense of the Licensee, cooperate in all respects and, to the
extent possible, have its employees testify when requested and make
available relevant records, papers, information, samples, specimens and
the like.
9.3 RIGHT TO SUBLICENSE ALLEGED INFRINGER. The Licensee shall have the right,
in accordance with the terms and conditions herein, including without
limitation Article 5, to sublicense any alleged infringer in the Territory
for the Field of Use for future use of the Technology or the Patent
Rights, as the case may be.
9.4 INFRINGEMENT ACTIONS BY THIRD PARTIES. In the event that a complaint
alleging infringement or violation of any patent or other proprietary
rights is made against the Licensee with respect to the use of the
Technology or the Patent Rights after the Effective Date, the following
procedure shall be adopted:
(a) the Licensee shall promptly notify the University upon receipt of
any such complaint and shall keep the University fully informed of
the actions and positions taken by the complainant and taken or
proposed to be taken by the Licensee;
(b) subject to this section, all costs and expenses incurred by the
Licensee in investigating, resisting, litigating and settling such a
complaint, including the payment of any award of damages and/or
costs to any third party, shall be borne by the Licensee;
(c) no settlement or compromise of the complaint shall be taken without
full consultation with and approval by the University, which
approval shall not be unreasonably withheld or delayed;
(d) the University may elect to participate formally in any litigation
involving the complaint, to the extent that the court may permit,
but any additional expenses generated by such formal participation
shall be borne entirely by the University (subject to the
possibility of recovery of some or all of such additional expenses
from the complainant); and
(e) if the complainant is willing to accept an offer of settlement and
one of the parties to this Agreement is willing to make or accept
such offer and the other is not, then the unwilling party shall
conduct all further proceedings at its own expense, and shall be
responsible for the full amount of any damages, costs, accounting of
Page 14 of 27
profits and settlement costs in excess of those provided in such
offer, but shall be entitled to retain unto itself the benefit of
any litigated or settled result entailing a lower payment of costs,
damages, accounting of profits and settlement costs than that
provided in such offer.
9.5 UNIVERSITY INDEMNIFICATION. Notwithstanding anything herein to the
contrary, the University shall indemnify and hold harmless the Licensee
for any breach of representations and warranties set forth in Article 7
herein. In the event of a claim for indemnification by the Licensee
pursuant to this Section 9.5, the Licensee shall provide written notice of
such claim to the University and the University, in the case such claim
involves a third party, shall assume the defense and/or settlement of such
claim at its sole cost and expense; provided, however, that the University
may not settle or otherwise compromise such claim without the prior
written consent of the Licensee, which consent shall not be unreasonably
withheld or delayed and which consent shall not be required if such
settlement or compromise includes a full release of the Licensee and the
ability of the Licensee to continue to use and exploit the license and
other rights granted herein.
ARTICLE 10 - CONFIDENTIALITY
10.1 MUTUAL OBLIGATION OF CONFIDENTIALITY. Each party shall treat all
Confidential Information in respect of which it is the Recipient as
confidential and shall not disclose any Confidential Information to any
third party or use the Confidential Information for any purpose other than
for the purposes of fulfilling its obligations under this Agreement. The
Recipient shall use at least the same standard of care in protecting the
Confidential Information as it uses in protecting its own information of a
similar nature but, in any event, no less than a reasonable standard of
care. Without limiting the generality of the foregoing, the Licensee shall
not, both during the term of this Agreement and at all times thereafter,
disclose any of the University's Confidential Information to any person
other than a prospective permitted sublicensee or an employee of or
consultant to the Licensee who shall have entered into a confidential
disclosure agreement in form and substance satisfactory to the University.
Any Confidential Information will be disclosed within the Recipient only
on a "need to know" basis.
10.2 EXCLUSIONS FROM CONFIDENTIALITY. Notwithstanding Section 10.1, the
obligations regarding confidentiality shall not apply to information
which:
(a) was in Recipient's possession before receipt from the Disclosing
Party, as established by documentary evidence; or
(b) is or becomes a matter of public knowledge without breach of this
Agreement by Recipient; or
(c) is received by Recipient from a third party which had no duty of
confidentiality with respect to it; or
(d) is independently developed by the Recipient as established by
documentary evidence; or
Page 15 of 27
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(e) is made subject to an order by judicial or administrative process
requiring Recipient to disclose any or all of the information,
provided that the Recipient shall use reasonable efforts in the
circumstances to promptly notify the Disclosing Party of such
requirement to enable the Disclosing Party to oppose such process,
before disclosure occurs; or
(f) is disclosed by Recipient with the Disclosing Party's prior written
approval.
10.3 INJUNCTION. The parties acknowledge that if a party breaches the
provisions of this Article 10, there may not be an adequate remedy at law
through damages. Accordingly, the parties agree that a non-defaulting
party shall have the right to seek and obtain temporary and permanent
injunctive relief to restrain a violation of this Article 10. The parties
acknowledge that the provisions herein are reasonable, and are fully
required to protect the legitimate interests of the affected party.
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ARTICLE 11 - DISCLAIMER OF WARRANTIES BY UNIVERSITY AND LIMITATION OF LIABILITY
11.1 DISCLAIMER OF WARRANTIES BY THE UNIVERSITY. Except as expressly set forth
in this Agreement, the University, its trustees, officers, employees,
students and agents make no representations or warranties of any kind,
either express or implied, and there are no conditions, either express or
implied. Without limiting the generality of the foregoing, there are no
express or implied warranties of merchantability or fitness for a
particular purpose, or the absence of latent or other defects. The
Licensee acknowledges that it has been advised by the University to
undertake its own due diligence, including independent legal advice, with
respect to the Technology and the terms of this Agreement.
11.2 LIMITATION OF THE UNIVERSITY'S LIABILITY. Except for claims for
indemnification pursuant to Section 9.5 herein, the aggregate damages for
which the University shall be liable shall not exceed the amount of
royalties paid by the Licensee to the University for the year in which the
cause of action giving rise to the damages occurred. In no event shall the
University, its trustees, officers, students, employees or agents be
liable for any indirect, consequential, incidental, or special damages of
any kind whatsoever, including, but not limited to, economic damage or
injury to property or lost profits, even if the University has been
advised of or knows of the possibility of such damages.
11.3 LIMITATION OF THE LICENSEE'S LIABILITY. In no event shall the Licensee,
its officers, directors, consultants, employees or agents be liable for
any indirect, consequential, incidental, or special damages of any kind
whatsoever, including but not limited to, economic damage or injury to
property or lost profits, even if the Licensee has been advised of or
knows of the possibility of such damages.
11.4 ADDITIONAL DISCLAIMERS. Nothing in this Agreement shall be construed as:
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(a) an obligation by the University to bring or prosecute actions or
suit against third parties for infringement of copyrights,
trade-marks, registered design or other intellectual property or
contractual rights, or
(b) the conferring by either party of any right to use in advertising,
publicity or otherwise the Trade-marks or the name of the other
party.
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ARTICLE 12 - LICENSEE INDEMNITY AND INSURANCE
12.1 LICENSEE'S INDEMNITY. The Licensee shall at all times during the term of
this Agreement and thereafter, indemnify, defend and hold harmless the
University, its trustees, directors, officers, employees, students and
agents, against all claims, proceedings, demands and liabilities of any
kind whatsoever (including but not limited to reasonable legal fees and
disbursements) incurred in connection with the Licensee's use of the
Technology or the Materials, or from the Licensee's production,
manufacture, sale, use, lease, consumption or advertisement of the
Licensed Product(s) and/or Licensed Process(es), or arising from any right
or obligation of the Licensee hereunder, excepting only claims that the
Patent Rights infringe intellectual property rights of third parties.
12.2 INSURANCE REQUIRED FOR LICENSEE. Prior to the first sale of a Licensed
Product or use of a Licensed Process, the Licensee will give notice to the
University of the terms and amount of the comprehensive public liability
and product liability insurance which it has placed in respect of the
same, together with a certificate therefor. Such insurance shall be no
less than the insurance which a reasonable and prudent corporation
carrying on a similar business would acquire. This insurance shall be
placed with a reputable and financially secure insurance carrier, shall
include the University, as an additional insured, shall contain a waiver
of subrogation against the University, and shall provide that the policy
shall not be cancelled or materially amended except upon at least thirty
(30) days' written notice to the University. The Licensee covenants not to
sell any Licensed Product nor use any Licensed Process before such
insurance is effective. The Licensee shall require that each sub-licensee
under this Agreement shall procure and maintain equivalent insurance
coverages.
12.3 INSURANCE NOT TO AFFECT INDEMNITIES. The existence of any insurance
policies will not relieve the Licensee from its obligations under the
indemnification provisions contained in this Agreement.
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ARTICLE 13 - TERMINATION
13.1 TERMINATION BY THE UNIVERSITY. The University may, at its option and in
its sole discretion, terminate this Agreement immediately on the happening
of any one or more of the following events by delivering notice in writing
to that effect to the Licensee:
(a) if the Licensee is more than thirty (30) days in arrears of fees,
royalties or payments due under this Agreement, which is not cured
within ten (10) business days after written notice thereof;
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Page 17 of 27
(b) if the Licensee fails to observe or perform any other obligations
required hereunder, including the failure to meet milestones as
provided under Section 4.4, and such failure continues for a period
in excess of thirty (30) days following written notice;
(c) if the Licensee grants a security interest in any of the rights
under or in this Agreement in priority to any interest claimed by
the University;
(d) if the Licensee seeks creditor protection; or if any execution,
sequestration, or any another process of any court becomes
enforceable against the Licensee; or if any such process is levied
on the rights under this Agreement or upon any of the monies due to
the University and is not released or satisfied by the Licensee
within sixty (60) days thereafter;
(e) if any resolution is passed or order made or other steps taken for
the winding up, liquidation or other termination of the existence of
the Licensee, or if the Licensee ceases or threatens to cease to
carry on its business.
13.2 TERMINATION BY EITHER PARTY. In addition to Section 13.1, if either party
shall be in default under or shall fail to comply with the terms of this
Agreement and if such default is not cured within thirty (30) days after
written notice of such default, or such default is not cured within such
further reasonable period of time as may be necessary, provided that the
defaulting party is diligently seeking to remedy such default, then the
non-defaulting party shall have the right to terminate this Agreement
immediately by giving written notice to that effect to the party in
default
13.3 RIGHTS UPON TERMINATION. If this Agreement is terminated pursuant to
Section 13.1 or 13.2 hereof;
(a) all Confidential Information of the University and all remaining
Materials shall be returned to the University;
(b) all Confidential Information of the Licensee shall be returned to
the Licensee;
(c) all rights to the Technology, other than Licensee Improvements, and
including, without limitation any rights to Patent Rights, Materials
or use of Licensed Products or Licensed Processes and any other
rights granted hereunder shall revert to the University; and
(d) The Licensee and any sub-licensee thereof may sell all Licensed
Products remaining in inventory or stock on the effective date of
the termination of this Agreement (the "Effective Date of
Termination") and may complete any Licensed Products in the process
of manufacture on the Effective Date of Termination, provided that
the Licensee shall otherwise cease to use the Licensed Processes or
to manufacture the Licensed Products or to practise the Technology
in any manner whatsoever. The Licensee shall then deliver or cause
to be delivered to the University a complete final accounting of all
Net Revenue and of all other amounts payable to the Licensee in
respect of the sublicensing of the Technology and/or the sale or
distribution of Licensed
Page 18 of 27
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Products and/or Licensed Processes, and shall make payments to the
University required by Article 5 hereof, all within ninety (90) days
following the Effective Date of Termination.
13.4 PRESERVATION OF ALL REMEDIES AND RIGHTS. Upon any termination of this
Agreement, the non-defaulting party shall have the right to enforce one or
more remedies successively or concurrently in accordance with applicable
law and retains all rights and remedies against the defaulting party. The
University may proceed to enforce payment of all debts owed to the
University and to exercise any or all of the rights and remedies contained
herein or otherwise available to the University by law or in equity.
13.5 NON-WAIVER. No condoning, excusing or overlooking by any party of any
default, breach or non-observance by any other party at any time or times
in respect of any covenants, provisos, or conditions of this Agreement
shall operate as a waiver of such party's rights under this Agreement in
respect of any continuing or subsequent default, breach or non-observance,
so as to defeat in any way the rights of such party in respect of any such
continuing or subsequent default or breach and no waiver shall be inferred
from or implied by anything done or omitted by such party, save only an
express waiver in writing.
No exercise of a specific right or remedy by any party precludes it from
or prejudices it in exercising another right or pursuing another remedy or
maintaining an action to which it may otherwise be entitled either at law
or in equity.
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ARTICLE 14 - GENERAL
14.1 RELATIONSHIP. Nothing contained herein shall be deemed or construed to
create between the parties hereto a partnership, joint venture or
employment relationship. No party shall have the authority to act on
behalf of the other party, or to commit the other party in any manner or
cause whatsoever or to use the other party's name in any way not
specifically authorized by this Agreement. Neither party shall be liable
for any act, omission, representation, obligation or debt of the other
party, even if informed of such act, omission, representation, obligation
or debt.
14.2 GOVERNING LAW. This Agreement shall be governed by and construed and
applied in accordance with the laws of the Province of Ontario and the
laws of Canada applicable in such Province, except that questions
regarding the construction and effect of any patent shall be determined by
the laws of the country in which the patent was granted.
14.3 DISPUTE RESOLUTION. In the event of a dispute between the parties arising
out of or in connection with this Agreement or regarding the
interpretation of the provisions hereof other than in connection with
whether an event of default has occurred, the procedure set forth in
Schedule "B" shall apply.
14.4 ENUREMENT, SURVIVAL OF COVENANTS. Subject to the limitations hereinbefore
expressed, this Agreement shall enure to the benefit of and be binding
upon the parties, and their respective successors and permitted assigns.
The terms and
Page 19 of 27
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provisions, covenants and conditions contained in this Agreement which by
the terms hereof require their performance by the parties hereto after the
expiration or termination of this Agreement shall be and remain in force
notwithstanding such expiration or other termination of this Agreement for
any reason whatsoever.
14.5 NO ASSIGNMENT. Neither the Licensee nor the University shall be entitled
to assign, transfer, mortgage, charge or otherwise dispose of this
Agreement or any interest therein, or of any of the rights, duties or
obligations granted hereunder (any of the foregoing being an
"Assignment"), without the express written consent of the other, such
consent not to be unreasonably withheld or delayed, and any attempt to
effect such Assignment shall cause such Assignment to be void. Assignment
shall not include any assignment by operation of law, or any change in
shareholder control of the Licensee, if a corporation, it being agreed
that the Licensee may assign the Agreement, and its rights hereunder,
without the University's prior consent upon the sale of all or
substantially all of the Licensee's stock or assets to a third party or
upon the consummation of a merger or similar transaction by the Licensee
with a third party. Within thirty (30) days, Licensee will provide written
notice of such assignment.
14.6 ENTIRE AGREEMENT; SEVERABILITY. This Agreement sets forth the entire
understanding between the parties and no modifications hereof shall be
binding unless set forth in a written agreement or other document executed
by the parties hereto. In the event that any part, section, clause,
paragraph or subparagraph of this Agreement shall be held to be invalid,
illegal or otherwise unenforceable, the entire agreement shall not fail on
account thereof, and the balance of this Agreement shall continue in full
force and effect.
14.7 HEADINGS, NUMBER, GENDER. Marginal headings as used in this Agreement are
for the convenience of reference only and do not form a part of this
Agreement and are not be used in the interpretation hereof. Whenever the
singular or masculine or neuter is used throughout this Agreement the same
shall be construed as meaning the plural or feminine or body corporate
when the context of the parties hereto may require.
14.8 NOTICES. All notices, requests, directions or other communications
("Notices") required or permitted herein will be in writing and will be
delivered to the parties hereto respectively as follows:
IF TO THE LICENSEE:
Molecular InSight Pharmaceutical, Inc. f/k/a Biostream, Inc.
160 Second Street
Cambridge, MA
USA 02142
Attention: John E. McCray, COO
Facsimile No: 617-492-5664
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With a copy to:
Gabor Garai, Esq.
Epstein Becker & Green, P.C.
111 Huntington Avenue
Boston, MA
USA 02199
Facsimile No.: 617-342-4001
IF TO THE UNIVERSITY:
Respecting administrative and financial matters, amendment or termination
of this Agreement:
Office of Industry Liaison
Stevenson-Lawson Building
Room 319
The University of Western Ontario
London, Ontario N6A 5B8
Attention: Director
Facsimile No: 519-661-3907
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Respecting scientific and technical matters:
Department of Chemistry
Faculty of Science
The University of Western Ontario
London, Ontario
N6A 5B8
Attention: Dr. Duncan Hunter
Facsimile No: 519-661-3022
In order for any notice, request, direction, or other communication to be
effective, it will be delivered by courier or sent by facsimile (followed
by hard copy) addressed to the party for whom the Notice is intended at
the above-mentioned address and will be deemed to have been received on
the date of delivery if delivered by courier, and if sent by facsimile, on
the next business day following electronic confirmation of the successful
transmission of the facsimile. The address of either party may be changed
by notice in the manner set out in this provision.
14.9 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
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THE UNIVERSITY OF WESTERN ONTARIO
By: /s/ Douglas S. Gill
-----------------------------------
Doug Gill
Director, Office of Industry Liaison
I have authority to bind the University.
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MOLECULAR INSIGHT PHARMACEUTICAL, INC.
f/k/a Biostream, Inc.
By: /s/ John W. Babich
-----------------------------------
John W. Babich
President
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I have authority to bind the Corporation.
Page 22 of 27
SCHEDULE A
United States Patent Applications and Foreign Patent Applications:
"Polymer Precursors of Radiolabeled Compounds and Methods of Making and
Using the Same"
PCT PCT/IB02/01958 and US filed 03/04/2002
Inventors: Duncan Hunter and Mustafa Janabi
Derived from US Provisionals 60/272,324 (filed 03/02/2001) and 60/280,225
(filed 03/30/2001) (our ref 01-003).
United States Provisional Patent Application:
"Prosthetic Groups Useful in the Synthesis of Radiopharmaceuticals"
Serial No. 60/467,752, filed May 2, 2003
Inventors: Duncan Hunter and Karen Gagnon
(our ref. 02-018).
Page 23 of 27
SCHEDULE B
DISPUTE RESOLUTION
In the event a dispute or disagreement (hereinafter called "Dispute") arises
between the parties in connection with the interpretation of any provision of
this Agreement or the compliance or non-compliance therewith, or the validity or
enforceability thereof, or the performance or non-performance of either party to
the Agreement, the following Dispute resolution process shall be followed by the
parties:
i. A Dispute will be deemed to have arisen upon the delivery of a written
notice by one party to the other describing the Dispute (herein called the
"Dispute Notice"). Upon delivery of the Dispute Notice, the parties agree
to attempt to resolve the Dispute in a prompt and expeditious manner.
Except for the Dispute Notice, all communications between the parties will
be on a without prejudice basis.
ii. If the parties have not been able to resolve the dispute in a prompt and
expeditious manner after delivery of the Dispute Notice, which time period
shall not exceed thirty (30) days after such notice, either party may at
any time thereafter request by written notice to the other party that the
Dispute be escalated to Senior Management.
iii. In the event such a request with written notice is made, each party shall
make available the senior executives specified in the following subsection
("Senior Management") who shall meet within fifteen (15) Business Days
after such request is made at the offices of the party which received the
request to attempt to resolve the Dispute.
iv. The Senior Management appointee for each party is as follows:
Licensee: John W. Babich, President
University: Vice-President, Research
Either party may change its Senior Management appointee upon prior written
notice to the other.
In case such Dispute is not settled amicably by Senior Management within thirty
(30) days of escalation to Senior Management, such Dispute shall be arbitrated
by a single arbitrator acting in accordance with the provisions of the
Arbitration Act, 1991 (Ontario), whose decision shall be final and binding upon
the parties. The arbitrator shall be the person that the parties may agree on
and in default of agreement within twenty (20) days following the expiration of
the above-mentioned thirty (30) day period, then either party may apply to a
Judge of a court having jurisdiction to appoint the single arbitrator who shall
be unconditionally accepted by both parties. The place of arbitration for
disputes for which arbitration is initiated by either party shall be London,
Ontario. The arbitrator as selected or appointed shall have knowledge of and
experience in the pharmaceutical industry. The language of any arbitration will
be English.
Page 24 of 27
The arbitration hearing shall commence within sixty (60) days after appointment
of the arbitrator is done and shall be completed and a binding award rendered in
writing within sixty (60) days after commencement of the hearing unless
exceptional circumstances warrant delay. The decision of the arbitrator may be
entered in any court of competent jurisdiction and execution entered thereupon
forthwith. The law specified in Section 14.2 of this Agreement shall apply.
Each party shall bear the cost of preparing its own case. The arbitrator shall
have the right to include in the award the prevailing party's costs of
arbitration and reasonable fees of attorneys, accountants, engineers and other
professionals incurred by it in connection with the arbitration. Failing a
specific award, the parties shall share equally the costs of the arbitrator and
arbitration proceedings.
Notwithstanding the provisions of this Schedule, the parties recognize that a
party may desire to seek emergency, provisional, or summary relief (including
temporary injunctive relief) to enforce the provisions of this Agreement
relating to protection of intellectual property and/or Confidential Information.
A party may seek such relief, provided, however, that immediately following the
issuance of any emergency, provisional, temporary injunctive or summary relief,
any such judicial proceedings shall be stayed (and each party shall consent to
such stay) pending resolution of any related underlying claims between the
parties.
Page 25 of 27
SCHEDULE C
DESCRIPTION OF MATERIALS
Intentionally left blank.
Page 26 of 27
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
SCHEDULE D
COMMERCIALIZATION DUE DILIGENCE REQUIREMENTS
AND MILESTONES
A. Licensee shall support contract research in the laboratory of Dr. Duncan
Hunter in the amount of Canadian $[******] for the period May 1, 2003 to
September 30, 2004. Licensee shall commit resources internally at a level
not less than Canadian $[******] for the period from October 1, 2004 to
September 30, 2005.
B. Commencing August 1, 2005 for a period not to exceed thirty (30) days,
Licensee and University shall negotiate in good faith further
commercialization due diligence requirements and milestones to be
incorporated into this Schedule D. Such negotiation will consider the
commercial readiness of the Technology and Licensee's commercialization
plans. It is anticipated such further commercialization due diligence
requirements and milestones will include for example levels of research
support, anticipated timelines for identification of lead compounds,
advancement through clinical trial phases and ultimate commercial sales.
Page 27 of 27
INDUSTRY LIAISON
The University of Western Ontario
[Research Western Logo] 1151 Richmond St. N. - Stevenson-Lawson Building, Room 328
London, Ontario - Canada - N6A 5B8
Tel: 519-661-4183 or 519-850-2307 - Fax: 519-661-3907
anavarre@uwo.ca
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AMENDMENT TO THE LICENSE MADE SEPTEMBER 5, 2003 FOR TECH IDS 01-003 AND 02-018
POLYMER SUPPORTED ALDEHYDES, ACIDS AND ACTIVATED ESTERS AS PRECURSORS FOR RADIO
LABELLING OF AMINE BEARING COMPOUNDS.- TECH ID 01-003
POLYMER SUPPORTED PROPENYL MESYLATES AS PRECURSORS FOR THE RADIO LABELLING OF
AMINES, SULFIDES AND ETHERS.- TECH ID 02-018
Hereby we agree to add Article 5.4(c):
The University of Western Ontario will provide Molecular Insight
Pharmaceuticals, Inc. with administrative support for and monitoring of
prosecution done by a single Patent Agent Firm.
The service fee of Canadian $2000.00 is payable annually on April 30th
starting in 2005.
Molecular Insight Pharmaceuticals, Inc. The University of Western Ontario
/s/ Dr. John Babich /s/ Dr. Alex Navarre
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Dr. John Babich Dr. Alex Navarre, Ph.D. M.B.A.
President and CSO Director, Industry Liaison
Date: Date:
I have the authority to bind the Company I have the authority to bind the
University.
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AN/ch
Exhibit 10.18
IMAGING BIOPHARMACEUTICALS, INC.
1997 STOCK OPTION PLAN
1. PURPOSE OF PLAN
The purpose of this plan (the "Plan") is to encourage key employees
(including officers and directors who are employees), and officers, directors
and consultants who are not employees, of Imaging Biophmaecuticals, Inc., a
Massachusetts corporation, and any present or future subsidiary and parent of
Imaging Biopharmaecuticals, Inc. (hereinafter collectively referred to as the
"Company") to acquire shares of common stock of Imaging Biopharmaecuticals,
Inc., $.01 par value, (the "Common Stock") and thereby increase their
proprietary interest in the Company's success and provide an added incentive to
remain in the employ of, or continue to render services to, the Company. The
words "parent" and "subsidiary" shall be interpreted in accordance with Section
422 and Section 424 of the Internal Revenue Code of 1986, as amended from time
to time (the "Code"). It is intended that options granted under the Plan shall
constitute either "incentive stock options" within the meaning of-Section 422 of
the Code or "non-qualified options" as determined by the Board of Directors of
Imaging Biophmaecuticals, Inc. in its sole discretion and indicated on each form
of option grant (the "Option Grant"). The terms of the Plan and Option Grants
shall be construed accordingly. Only employees of the Company shall be eligible
to receive incentive stock options.
2. SHARES RESERVED UNDER THE PLAN
Subject to the adjustment provided in Section 9, the aggregate
number of shares of Common Stock of Imaging Biophannaecuticals, Inc. which may
be issued and sold pursuant to options granted under the Plan shall not exceed
178,200 shares of Common Stock, which may be either authorized and unissued
shares or treasury shares. If any options granted under the Plan shall terminate
or expire without being fully exercised, the shares that have not been purchased
will again become available for purposes of the Plan.
3. ADMINISTRATION
The Plan shall be administered solely by the Board of Directors. A
majority of the members present at any meeting at which a quorum is present, and
any acts approved in writing by all of the members of the Board of Directors
without a meeting, shall constitute the acts of the Board of Directors. The
Board of Directors shall have the powers granted to it throughout this Plan. The
Board of Directors is authorized to interpret the Plan and, subject to the
provisions of the Plan, to prescribe, amend, and rescind rules and regulations
relating thereto. The Board of Directors is further authorized, subject to the
express provisions of the Plan, to alter or amend the form of Option Grant
attached hereto and to make all other determinations necessary or advisable in
the administration of the Plan. The interpretation and administration by the
Board of Directors of any provisions of the Plan and the Option Grant shall be
find and conclusive on all
persons having any interest therein
No member of the Board of Directors shall be held liable for any
action or determination made in good faith with respect to the Plan or any
option granted thereunder.
4. OPTION GRANTS
Options to purchase shares of Common Stock under the Plan may be
granted to key employees (including officers and directors who are employees)
and officers, directors and consultants of the Company who are not employees of
the Company. In selecting the individuals to whom options will be granted and in
deciding how many shares of Common Stock will be subject to each option, the
Board of Directors shall give consideration to the importance of an individual's
duties, experience with the Company, future value to the Company, present and
potential contribution to the success of the Company, and to such other factors
as the Board of Directors may deem relevant. Subject to the express provisions
of the Plan and the forms of Option Grant incorporated herein by reference as
from time to time altered or amended, the Board of Directors shall have
authority to determine with respect to each option Grant the number of
installments, the number of shares of Common Stock in each installment and the
exercise dates, and, to the extent not inconsistent with the applicable
provisions of the Code, if any, the Board of Directors may specify additional
restrictions and conditions. Each incentive stock option shall expire not later
than ten years from the date of the grant of such option.
Except as provided in Section 7 below, no incentive stock option may
be granted to any employee who, at the time such option is granted, owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company within the meaning of Section 422 of the Code.
The date of grant of an option to an individual under the Plan
shall be the date the Board of Directors votes to grant the option, but no
optionee shall have the right to exercise his option until the Company has
executed and delivered the Option Grant to such optionee. Each option granted
under the Plan shall be evidenced by and subject to the terms and conditions of
the Option Grant which is incorporated into the Plan by reference as from time
to time altered or amended.
No stock option may be transferred by the optionee other than by
will or the laws of descent and distribution, and, solely in the case of
non-qualified options, by a distribution pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act or the rules thereunder, and can be exercised during the
optionees life only by him.
5. OPTION PRICE
The price per share at which each option granted under the Plan may
be exercised shall be determined by the Board of Directors subject to the
provisions of this Section 5. In the case of an incentive stock option, the
exercise price shall not be less than the fair market value
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per share on the date of grant, as determined by the Board of Directors in good
faith, in accordance with applicable provisions of the Code then in effect with
respect to incentive stock options.
6. LIMITATION ON AMOUNT
The aggregate fair market value (determined at the time the option
is granted) of the stock with respect to which incentive stock options are
exercisable for the first time by an individual during any calendar year under
all plans of the Company shall not exceed $100,000.
7. SPECIAL RULE FOR 10 PERCENT SHAREHOLDERS
The Board of Directors may grant incentive stock options under this
Plan to persons who own more than 10 percent of the combined voting stock of the
Company if (i) at the time of the Option Grant the price per share at which the
option may be exercised is at least 110 percent of the fair market value of the
stock subject to the option and (ii) such option is not exercisable after the
expiration of five years from the date such option is granted.
8. NON-OUALIFIED OPTIONS
Notwithstanding the provisions of Sections 4, 5,6 and 7 of this
Plan, the Board of Directors may grant options which in one or more respects do
not meet the requirements for incentive stock options established by Section 422
of the Code. The Board of Directors shall indicate on each Option Grant whether
an incentive stock option within the meaning of Section 422 of the Code or a
non-qualified option is thereby granted.
Except as otherwise provided in this Plan, the Board of Directors,
in its sole discretion, shall establish the terms and conditions for each
non-qualified option which it grants. Such terms and conditions may, but need
not, include some or all of the provisions of Section 4, 5,6 and 7 of this Plan
with respect to incentive stock options. If the Board of Directors grants an
option which in all respects meets the requirements for incentive stock options
it may nonetheless designate such option a non-qualified option on the Option
Grant, in which case it shall be deemed not to be an incentive stock option.
9. ADJUSTMENT OF SHARES RESERVED UNDER THE PLAN
The aggregate number and kind of shares reserved under the Plan, the
maximum number of shares as to which options may be granted to any individual
and the option price per share shall be appropriately adjusted by the Board of
Directors in the event of any recapitalization of the Company.
10. DISSOLUTION OR REORGANIZATION
Prior to a dissolution, liquidation, merger, consolidation, or
reorganization of the Company (the "Event"), the Board of Directors may decide
to terminate each outstanding option. If the Board of Directors so decides, such
option shall terminate as of the effective date of the
3
Event, but the Board of Directors shall suspend the exercise of all outstanding
options a reasonable time prior to the Event, giving each optionee not less than
fourteen days' written notice of the date of suspension, prior to which an
optionee may purchase in whole or in part the shares available to him as of the
date of receipt of the notice. If the Event is not consummated, the suspension
shall be removed and all options shall continue in full force and effect.
11. AMENDMENT AND TERMINATION OF PLAN
The Board of Directors may amend, suspend, or terminate the Plan,
including the form of Option Grant incorporated herein by reference. No such
action, however, may, without approval or ratification by the shareholders, make
any change which, pursuant to the Code or regulations thereunder, requires
action by the shareholders. No such action may, without the consent of the
holder of the option, alter or impair any option previously granted.
In any event, the Plan shall terminate 10 years from the date of
adoption by the Board of Directors. Any shares remaining under the Plan at the
time of termination which are not subject to outstanding options and any shares
which thereafter become available because of the expiration or termination of an
option shall cease to be reserved for purposes of the Plan.
12. RIGHT TO TERMINATE EMPLOYMENT
Nothing contained herein or in any Option Grant executed pursuant
hereto shall restrict the right of the Company to terminate the employment of
any optionee at any time.
13. DATE OF ADOPTION AND APPROVAL
The date of adoption of this Plan by the Board of Directors and the
Plan's effective date is January 9, 1997. The date of approval of this Plan by
the Shareholders of Imaging Biopharmaceuticals, Inc. is January 9, 1997.
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Amendments to 1997 Stock Option Plan
1. On March 5, 1998, Imaging Biopharmaceuticals, Inc. changed its name to
Biostream, Inc.
2. On February 29,2000 the 1997 Stock Option Plan was amended by the
company's stockholders to increase the number of authorized shares of common
stock available for issuance thereunder from 178,200 shares to 678,200 shares of
Common Stock.
3. On April 12,2000 the Board of Directors of Biostream, Inc. declared a
2-for-1 common stock split, which split was approved by the stockholders on
April 13,2000.
4. On January 23,2003 the 1997 Stock Option Plan was amended by the
company's stockholders to increase the number of authorized shares of common
stock available for issuance thereunder to an aggregate total of 13,000,000
shares of Common Stock.
5. On April 25,2003 Biostream, Inc. changed its name to Molecular Insight
Pharmaceuticals, Inc.
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EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form S-1 of our report
dated November 7, 2005 relating to the financial statements of Molecular Insight
Pharmaceuticals Inc. and subsidiaries appearing in the Prospectus, which is part
of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
November 7, 2005
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