EXHIBIT 10.1

 

EXECUTION VERSION

 

STOCK PURCHASE AGREEMENT

 

between

 

Eli Lilly and Company

 

(the “Purchaser”)

 

and

 

United Therapeutics Corporation

 

(the “Company”),

 

Dated as of November  14 , 2008

 

 

ARTICLE I. DEFINITIONS			1
	1.1	Defined Terms	1
	1.2	Other Defined Terms	5
	1.3	Construction	6
ARTICLE II. PURCHASE AND SALE OF THE SHARES			6
	2.1	Purchase and Sale of the Shares	6
	2.2	Closing	7
	2.3	Deliveries at Closing	7
	2.4	Other Closing Matters	7
ARTICLE III. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY			8
	3.1	Organization and Qualification	8
	3.2	Capitalization	8
	3.3	Authority for this Agreement; Valid Issuance of Shares	9
	3.4	Consents and Approvals; No Violation	10
	3.5	Reports; Financial Statements	11
	3.6	Litigation	11
	3.7	Compliance with Law; No Default	12
	3.8	Absence of Certain Changes	12
	3.9	Exemption from Registration	12
	3.10	No Brokers	12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER			13
	4.1	Organization	13
	4.2	Authorization	13
	4.3	Consents and Approvals; No Violation	13
	4.4	No Brokers	14
	4.5	Investment Purpose	14
	4.6	Sophistication and Financial Condition of the Purchaser	14
	4.7	Financing	14
	4.8	Ownership	14
ARTICLE V. ADDITIONAL AGREEMENTS OF THE PURCHASER AND THE COMPANY			15
	5.1	Reasonable Best Efforts; Consents and Governmental Approvals	15
	5.2	Conduct of Business of the Company	16
	5.3	Market Listing	16
	5.4	Notification of Certain Matters	16
	5.5	Press Releases	16
	5.6	Legends	17

 

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ARTICLE VI. CONDITIONS TO THE CONSUMMATION OF THE TRANSACTIONS			17
	6.1	Conditions to Each Party’s Obligations	17
	6.2	Conditions to Obligations of the Purchaser	18
	6.3	Conditions to Obligations of the Company	19
ARTICLE VII. TERMINATION			19
	7.1	Termination	19
	7.2	Notice of Termination	20
	7.3	Effect of Termination	20
ARTICLE VIII. MISCELLANEOUS			20
	8.1	Assignment	20
	8.2	Notices	21
	8.3	Governing Law	22
	8.4	Effectiveness: Entire Agreement; Amendments and Waivers	22
	8.5	Multiple Counterparts	23
	8.6	Severability	23
	8.7	Titles; Currency; Schedules	23
	8.8	Fees and Expenses	23
	8.9	Representation of Counsel; Mutual Negotiation	23
	8.10	No Third Party Beneficiaries	24
	8.11	Non-Survival of Representations and Warranties	24
	8.12	Time of Essence	24

 

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this “ Agreement ”), dated as of November 14, 2008, is made by and between Eli Lilly and Company, an Indiana corporation (the “ Purchaser ”), and United Therapeutics Corporation, a Delaware corporation (the “ Company ”).

 

RECITALS

 

WHEREAS, the Purchaser desires to purchase from the Company, and the Company desires to sell to the Purchaser, a number of shares of the Company’s common stock, par value $.01 per share (the “ Common Stock ”) (rounded to the nearest whole number) equal to One Hundred and Fifty Million Dollars ($150,000,000) divided by the Per Share Price.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1                                  Defined Terms .  As used herein, the terms below shall have the following meanings:

 

“ Action ” shall mean any action, order, writ, injunction, judgment or decree or any claim, suit, litigation, proceeding, dispute, arbitration, mediation, inquiry, audit, assessment or investigation, or any similar event, occurrence or proceeding.

 

“ Action of Divestiture or Limitation ” shall mean (i) executing or carrying out agreements or submitting to the requirements of any Governmental Entity providing for a license, sale or other disposition of any assets or businesses or categories of assets or businesses of the Purchaser, the Company or their respective Affiliates, or the holding separate of any of their respective assets or businesses or imposing or seeking to impose any limitation on the ability of the Purchaser, the Company or their respective Affiliates to own such assets or to acquire, hold or exercise full rights of ownership with respect to such assets or on their respective abilities to conduct their respective businesses, (ii) modification of a Permit with respect to the Company or any of its Affiliates or the terms of any contract or agreement material to the Company or any of its Affiliates in a manner that would adversely affect the business of the Company or any of its Affiliates or the Purchaser or (iii) the imposition of any condition or limitation that would adversely affect the business of the Company, the Purchaser or their respective Affiliates in connection with any approval required in connection with the transactions contemplated hereby or that restricts the businesses of the Purchaser, the Company or any of their respective Affiliates,

 

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or that would adversely affect the anticipated benefits to the Purchaser or the Company of the transactions contemplated by this Agreement or the License Agreement.

 

“ Affiliate ” shall mean, with respect to any Person, any Person that, directly or indirectly, controls such Person, any Person that such Person controls, or any Person that is under common control with such Person.  For purposes of the preceding sentence, the term “control” shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of a Person through voting securities, by contract or otherwise.

 

“ Beneficial Owner ” or “ Beneficial Ownership ” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act.

 

“ Business Day ” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in New York City are authorized by Law or executive order to remain closed.

 

“ Bylaws ” shall mean the Bylaws of the Company, as amended through the date of this Agreement.

 

“ Certificate of Incorporation ” shall mean the Company’s Certificate of Incorporation as in effect as of the date of this Agreement, including any amendments thereto.

 

“ Closing Date ” shall mean the date of the Closing, which shall be the third Business Day following satisfaction or waiver of the conditions set forth in Article VI , other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions or, if the parties hereto shall mutually agree upon a different date, the date upon which they shall have mutually agreed.

 

“ Confidentiality Agreement ” shall mean the Confidentiality Agreement, dated February 25, 2008 between the Company and the Purchaser.

 

“ Convertible Notes ” shall mean the Company’s 0.50% Convertible Senior Notes due 2011.

 

“ GAAP ” shall mean accounting principles generally accepted in the United States of America, including generally accepted accounting principles as interpreted by the SEC as reflected in Regulation S-X promulgated under the Exchange Act as in effect from time to time or otherwise.

 

“ Governmental Entity ” shall mean any federal, state, county, municipal, local or foreign government, any legislature, agency, authority, bureau, branch, department, division, commission, court, regulator, tribunal, magistrate, justice, multi-national organization, quasi-governmental body, or other similar recognized organization, body or instrumentality of any federal, state, county, municipal, local, or foreign

 

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government or any other similar recognized organization, body or instrumentality exercising similar powers or authority.

 

“ HSR Act ” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

 

“ Law ” shall mean any law (statutory, common, or otherwise), constitution, treaty, convention, statute, ordinance, code, regulation, rule or other similar authority enacted, adopted, promulgated, or applied by any Governmental Entity and any judgment, decision, decree or order of any Governmental Entity.

 

“ License Agreement ” shall mean the License Agreement, dated the date hereof, by and between the Purchaser and the Company.

 

“ Lien ” shall mean any mortgages, deeds of trust, liens (statutory or other) pledges, security interests, claims, covenants, conditions, restrictions, options, rights of first offer or refusal, charges, easements, rights-of-way, encroachments, Third Party rights, building or use restrictions or other encumbrances or title defects of any kind or nature, including any agreements to give any of the foregoing in the future.

 

“ Manufacturing and Supply Agreement ” shall mean the Manufacturing and Supply Agreement, dated the date hereof, by and between the Purchaser, Lilly del Caribe, Inc., a Cayman Island corporation, and the Company.

 

“ Material Adverse Effect ” shall mean a material adverse event, change, effect, condition or occurrence on or with respect to (i) the business, assets, liabilities, results of operations or financial condition of the Company and its Subsidiaries taken as a whole, or (ii) the ability of the Company to timely perform its obligations under and consummate the transactions contemplated by this Agreement; provided , however , that, Material Adverse Effect shall not be deemed to include any event, change, effect, condition or occurrence to the extent resulting from, or attributable to, (A) changes in the economy or financial markets, including, without limitation, prevailing interest rates and market conditions, generally in the United States or globally or that are the result of acts of war or terrorism, except to the extent any of the same disproportionately affects the Company and its Subsidiaries, taken as a whole, as compared to other companies in the industry in which the Company and its Subsidiaries operate, (B) changes that are proximately caused by factors generally affecting the industry in which the Company and its Subsidiaries operate, except to the extent any of the same disproportionately affects the Company and its Subsidiaries taken as a whole, (C) changes or proposed changes, in each case after the date hereof, in Law or GAAP, except to the extent any of the same disproportionately affects the Company and its Subsidiaries, taken as a whole, as compared to other companies in the industry in which the Company and its Subsidiaries operate, (D) this Agreement, the License Agreement or the Manufacturing and Supply Agreement, (E) expenses (including legal fees, costs and expenses relating to any litigation) and costs arising as a result of the transactions contemplated by this Agreement, the License Agreement or the Manufacturing and Supply Agreement, (F) public disclosure

 

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of the transactions contemplated by this Agreement, the License Agreement or the Manufacturing Agreement, (E) actions or omissions of the Company or any of its Subsidiaries with the prior written consent of the Purchaser in furtherance of the transactions contemplated by this Agreement, the License Agreement or the Manufacturing and Supply Agreement or otherwise required to be taken by the Company or any of its Subsidiaries under any such agreement, (F) changes in the market price or trading volume of the Common Stock, (G) the failure of the Company to meet any internal or public projections, forecasts or estimates of revenues or earnings (but not the underlying cause of such failure), (H) any change or announcement of a potential change in the rating of the Company by a credit rating agency or any equity analyst (but not the underlying cause of such change or potential change) or (I) actions taken by the Purchaser or its Affiliates in breach of the Purchaser’s obligations hereunder.

 

“ Material Subsidiaries ” shall mean the following Subsidiaries of the Company: Lung Rx, Inc., a Delaware corporation; and United Therapeutics Europe, Ltd., a United Kingdom company.

 

“ Options ” shall mean options to purchase capital stock of the Company issued by the Company pursuant to the United Therapeutics Corporation Amended and Restated Equity Incentive Plan.

 

“ Permits ” shall mean, with respect to the Company or any of its Subsidiaries, all licenses, permits, franchises, approvals, authorizations, consents or orders of, or filings with, or notifications to, any Governmental Entity, or any other Person, necessary or desirable for the past, present or anticipated conduct of, or relating to the operation of the businesses of or the ownership of the assets of, the Company and/or any of its Subsidiaries.

 

“ Per Share Price ” shall mean a price per share equal to 0.90 multiplied by the lesser of (x) the average closing price for the Common Stock quoted on the NASDAQ Global Select Market during the five (5) trading day period ending on (and including) November 14, 2008 and (y) the average closing price for the Common Stock quoted on the NASDAQ Global Select Market during the five (5) trading day period commencing on (and including) November 17, 2008.

 

 “ Person ” shall mean any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, limited liability company or Governmental Entity or other entity.

 

“ Purchased Call Option ” shall mean the privately-negotiated convertible note hedge transaction with respect to Common Stock entered into on October 24, 2006 between the Company and Deutsche Bank AG London, which covers, subject to customary anti-dilution adjustments, approximately 3,323,332 shares of Common Stock at a strike price of approximately $75.2257 per share.

 

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“ Purchaser Material Adverse Effect ” shall mean a material adverse event, change, effect, condition or occurrence on or with respect to the ability of the Purchaser to timely perform its obligations under and consummate the transactions contemplated by this Agreement.

 

“ Rights ” shall mean r ights granted under the First Amended and Restated Rights Agreement between the Company and the Bank of New York, dated as of June 30, 2008.

 

“ Share Tracking Awards ” shall mean cash-settled awards issued by the Company under the United Therapeutics Corporation Share Tracking Awards Plan.

 

“ Subsidiary ” shall mean, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of capital stock entitled (wi thout regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by any such Person, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any such Person.

 

“ Third Party ” means any Person who is not an Affiliate of the Company nor the Purchaser.

 

“ Warrants ” means the warrants issued by the Company on October 24, 2006 to Deutsche Bank AG London to acquire, subject to customary anti-dilution adjustments, approximately 3,323,332 shares of Common Stock at a strike price of $105.6890 per share.

 

 “ Voting Securities ” shall mean at any time shares of any class of capital stock of the Company which are then entitled to vote generally in the election of directors.

 

1.2                                  Other Defined Terms .  In addition to the terms defined in the Introduction and Recitals to this Agreement or in Section 1.1 , the following terms shall have the meanings defined for such terms in the Sections set forth below:

 

Term		Section
“Aggregate Purchase Price”		2.1
“Breaching Party”		7.3
“Closing”		2.2
“Company SEC Reports”		3.5(a)
“Company Securities”		3.2
“Common Stock”		Recitals
“Exchange Act”		3.4(b)
“Other Antitrust Law”		3.4(b)
“Preferred Stock”		3.2

 

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Term		Section
“SEC”		3.5(a)
“Securities Act”		3.5(a)
“Shares”		2.1

 

1.3                                  Construction .

 

(a)                                   Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; (iv) the terms “Article” or “Section” refer to the specified Article or Section of this Agreement; (v) the word “including” shall mean “including, without limitation;” (vi) the word “or” shall be disjunctive but not exclusive and (vii) the words “made available” shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available.

 

(b)                                  References to agreements and other documents shall be deemed to include all subsequent amendments and other modifications thereto.

 

(c)                                   References to statutes shall include all regulations promulgated thereunder and references to statutes or regulations shall be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation.

 

(d)                                  “knowledge” of the Company means actual knowledge of the following senior executive officers of the Company: Martine A. Rothblatt, Ph.D, Roger Jeffs, Ph.D, Paul A. Mahon and John Ferrari.

 

(e)                                   The annexes, schedules and exhibits to this Agreement are a material part hereof and shall be treated as if fully incorporated into the body of the Agreement.

 

(f)                                     Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified and shall be counted from the day immediately following the date from which such number of days are to be counted.

 

(g)                                  All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.

 

ARTICLE II.

PURCHASE AND SALE OF THE SHARES

 

2.1                                  Purchase and Sale of the Shares .   Upon the terms and subject to the conditions contained herein, on the Closing Date, the Company shall sell, convey, transfer, assign and deliver to the Purchaser, and the Purchaser shall purchase and accept from the

 

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Company, free and clear of any and all Liens, at a price per share equal to the Per Share Price, a number of shares of Common Stock (rounded up to the nearest whole number) (the “ Shares ”) determined by dividing (i) One Hundred and Fifty Million Dollars ($150,000,000) (the “ Aggregate Purchase Price ”) by (ii) the Per Share Price.

 

2.2                                  Closing .  Upon the terms and conditions set forth herein, the closing (the “ Closing ”) of the transactions contemplated herein shall occur at 10:00 a.m. local time on the Closing Date at the offices of Latham & Watkins LLP, 885 Third Avenue, New York, New York 10022 (or by the exchange of documents and instruments by mail, courier, facsimile or email to the extent mutually acceptable to the parties hereto) or such other place or time agreed to by the Company and the Purchaser.

 

2.3                                  Deliveries at Closing .  To effect the sale and purchase of the Shares and the delivery of the Aggregate Purchase Price referred to in Section 2.1 , the Company and the Purchaser shall deliver the following:

 

(a)                                   Wire Instructions .  No later than three (3) Business Days prior to the Closing Date, the Company shall provide to the Purchaser wire transfer instructions for the receipt of the Aggregate Purchase Price.

 

(b)                                  Closing Certificate .  At the Closing, the Company shall deliver to the Purchaser a certificate setting forth the number of Shares and the Aggregate Purchase Price, each calculated in accordance with this Agreement, which certificate shall conclusively evidence the Aggregate Purchase Price and number of Shares for purposes of this Agreement, absent manifest error.

 

(c)                                   Instruments of Possession .  At the Closing, the Company shall deliver to the Purchaser a certificate representing the Shares (which may bear the legends provided for in Section 5.6 ) free and clear of all Liens.

 

(d)                                  Payment of Transfer Taxes .  At the Closing, the Company shall deliver such evidence as may be reasonably requested by the Purchaser of full payment of any and all amounts that will become due and payable upon Closing in connection with obtaining consents, waivers, agreements and permits required for, and stock transfer taxes and any sales, use or other taxes imposed by reason of, the transfer of the Shares to the Purchaser and any deficiency, interest or penalty, as applicable, asserted with respect thereto.

 

(e)                                   Purchase Price .  Upon the terms and subject to the conditions contained herein, at the Closing, the Purchaser shall pay the Aggregate Purchase Price to the Company by wire transfer of immediately available funds.

 

2.4                                  Other Closing Matters .  Each of the parties shall take such other actions required hereby to be performed by it prior to or on the Closing Date, including, without limitation, satisfying the conditions set forth in Article VI .  The Company and the Purchaser shall take all additional reasonable steps as may be necessary or desirable,

 

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including the execution and delivery of additional documents, to consummate the transactions contemplated hereby, including, but not limited to, to ensure that the Purchaser is given possession of and good and marketable title to the Shares, free and clear of all Liens as of the Closing Date.

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY

 

As an inducement to the Purchaser to enter into this Agreement, the Company hereby makes as of the date hereof and as of the Closing Date, the following representations and warranties to the Purchaser.

 

3.1          Organization and Qualification .   The Company and each of its Subsidiaries is a duly organized and validly existing entity in good standing (to the extent such concepts are recognized in the applicable jurisdiction) under the Laws of its jurisdiction of incorporation, with all corporate power and authority to own its properties and conduct its business as currently conducted.  The Company and each of its Subsidiaries is duly qualified and in good standing as a foreign corporation authorized to do business in each of the jurisdictions in which the character of the properties owned or held under lease by it or the nature of the business transacted by it makes such qualification necessary and where the failure to be so qualified and in good standing as a foreign corporation authorized to do business would reasonably be expected to have a Material Adverse Effect.  The Company has heretofore made available to the Purchaser true, correct and complete copies of the Certificate of Incorporation and Bylaws (or similar governing documents) as currently in effect for the Company and each of its Material Subsidiaries.  Neither the Company nor any of its Subsidiaries, directly or indirectly, owns any interest in any Person other than the Company’s Subsidiaries, other than investments by the Company in U.S. treasury notes, certificates of deposit, commercial paper and other similar securities in the ordinary course of the Company’s business.

 

3.2          Capitalization .  The authorized capital stock of the Company consists of (i) 100,000,000 shares of Common Stock and (ii) 10,000,000 shares of preferred stock, par value $0.01 per share (the “ Preferred Stock ”).  As of the date hereof, 23,255,723 shares of Common Stock and no Preferred Stock were issued and outstanding, and 4,381,632 shares of Common Stock and no Preferred Stock were held in the Company’s treasury.  In addition, as of such date, there were outstanding Options to purchase an aggregate of 4,797,774 shares of Common Stock and no Preferred Stock. Since such date, the Company has not issued any shares of Common Stock or Preferred Stock other than the issuance of Common Stock upon the exercise of Options outstanding on such date, has not granted any options, restricted stock, warrants or rights or entered into any other agreements or commitments to issue any shares of Common Stock or Preferred Stock, and has not split, combined or reclassified any of its shares of capital stock.  All of the outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid and nonassessable and are free of preemptive rights.  Except for the Options, the

 

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Convertible Notes, the Purchased Call Option, the Warrants, the Rights and the Share Tracking Awards, there are no outstanding (i) securities of the Company or any of its Material Subsidiaries convertible into or exchangeable for shares of capital stock or Voting Securities or ownership interests in the Company or any of its Material Subsidiaries, (ii) options, warrants, rights or other agreements or commitments to acquire from the Company or any of its Material Subsidiaries, or obligations of the Company or any of its Material Subsidiaries to issue, any capital stock, Voting Securities or other ownership interests in (or securities convertible into or exchangeable for capital stock or Voting Securities or other ownership interests in) the Company or any of its Material Subsidiaries, (iii) obligations of the Company or any of its Material Subsidiaries to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any capital stock, Voting Securities or other ownership interests in the Company or any of its Material Subsidiaries (the items in clauses (i), (ii) and (iii), together with the capital stock, Voting Securities and other ownership interests of the Company or each of its Material Subsidiaries, being referred to collectively as “ Company Securities ”) or (iv) obligations of the Company or any of its Subsidiaries to make any payments directly or indirectly based (in whole or in part) on the price or value of the shares of Common Stock or Preferred Stock. Neither the Company nor any of its Subsidiaries has any outstanding stock appreciation rights, phantom stock, performance-based rights or similar rights or obligations, except for the Share Tracking Awards.  Except for the Company’s obligation to repurchase shares of Common Stock from Toray Industries, Inc. (as disclosed in the Company SEC Reports), there are no outstanding obligations, commitments or arrangements, contingent or otherwise, of the Company or any of its Subsidiaries to purchase, redeem or otherwise acquire any Company Securities.  There are no voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries or, to the knowledge of the Company, any other Person is a party with respect to the voting of capital stock of the Company. The Company or one or more of its Subsidiaries is the holder of record and the Beneficial Owner of all the equity interests of each of the Material Subsidiaries, free and clear of any Lien, including any limitation or restriction on the right to vote, pledge or sell or otherwise dispose of such equity interests.

 

3.3          Authority for this Agreement; Valid Issuance of Shares .

 

(a)           The Company has all necessary corporate power and authority to enter into this Agreement and to perform its obligations hereunder.  The execution, delivery and performance by the Company of this Agreement have been duly and validly authorized by all necessary corporate action.  This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the Purchaser, constitutes a valid and binding agreement of the Company and is enforceable against the Company in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar Laws affecting creditors’ rights generally and, subject to general principles of equity, including good faith and fair dealing, regardless of whether in a proceeding at equity or at law).

 

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(b)           The issuance of the Shares has been duly authorized by all requisite corporate action. When the Shares are issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, the Shares will be duly and validly issued and outstanding, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state and federal securities laws and, except as otherwise set forth herein, the Purchaser shall be entitled to all rights accorded to a holder of shares of Common Stock . The Company has reserved a sufficient number of shares of Common Stock for issuance to the Purchaser in accordance with the Company’s obligations under this Agreement.

 

3.4          Consents and Approvals; No Violation .

 

(a)           Neither the execution and delivery of this Agreement by the Company nor the consummation of the transactions contemplated hereby will: (i) violate or conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws or the respective certificates of incorporation or bylaws or other similar governing documents of any Subsidiary of the Company; (ii) assuming all consents, approvals, authorizations and permits contemplated by clauses (i) through (iii) of subsection (b) below have been obtained, and all filings and notifications described in such clauses have been made, conflict with or violate any Laws; (iii) violate or conflict with, or result in a breach of any provision of, or require any consent, waiver or approval or result in a default or give rise to any right of termination, cancellation, modification or acceleration (or an event that, with the giving of notice, the passage of time or otherwise, would constitute a default or give rise to any such right) under, any of the terms, conditions or provisions of any note, bond, mortgage, lease, license, agreement, contract, indenture or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets may be bound; (iv) result (or, with the giving of notice, the passage of time or otherwise, would result) in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries; or (v) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its Subsidiaries or by which any of their respective properties or assets are bound, except, in case of clauses (ii), (iii), (iv) and (v), as have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(b)           The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby by the Company do not and will not require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity except (i) the pre-merger notification requirements under the HSR Act, or applicable state or foreign antitrust or competition Laws (“ Other Antitrust Laws ”), (ii) the applicable requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and the rules and regulations promulgated thereunder and (iii) any such consent, approval, authorization, permit, filing or notification the failure of which to make or obtain has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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3.5          Reports; Financial Statements .

 

(a)           Since December 31, 2005, the Company has timely filed or furnished all forms, reports, statements, certifications and other documents (the “ Company SEC Reports ”) required to be filed or furnished by it with or to the Securities and Exchange Commission (the “ SEC ”), all of which have complied, as to form, as of their respective filing dates in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), the Exchange Act and the Sarbanes-Oxley Act of 2002 and, in each case, the rules and regulations of the SEC promulgated thereunder.  None of the Company SEC Reports, including any financial statements or schedules included or incorporated by reference therein, at the time filed or furnished, and giving effect to any amendments or supplements thereto filed prior to the date of this Agreement, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  To the knowledge of the Company, none of the Company SEC Reports is the subject of ongoing SEC review or outstanding SEC comment.  None of the Company’s Subsidiaries is required to file periodic reports with the SEC pursuant to the Exchange Act.

 

(b)           Except in the case of unaudited financial statements as permitted by Form 10-Q, the audited and unaudited consolidated financial statements (including the related notes thereto) of the Company and its Subsidiaries included (or incorporated by reference) in the Company SEC Reports, as amended or supplemented prior to the date of this Agreement, have been prepared in accordance with GAAP applied on a consistent basis and fairly present, in all material respects, the consolidated financial position of the Company and its Subsidiaries as of their respective dates, and the consolidated income, stockholders equity, results of operations and changes in consolidated financial position or cash flows for the periods presented therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments that are not material in amount or nature).  All of the Company’s Subsidiaries other than Northern Therapeutics, Inc. are consolidated for accounting purposes.

 

(c)           To the Company’s knowledge, neither the Company nor any of its Subsidiaries has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) that would be required to be disclosed on the Company’s most recent consolidated balance sheet filed with the SEC (including the notes thereto) in conformity with GAAP that are not disclosed in the Company SEC Reports or reserved on the most recent consolidated balance sheet of the Company included in the Company SEC Reports, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses since December 31, 2007 or which, individually or in the aggregate, do not or would not reasonably be expected to have a Material Adverse Effect.

 

3.6          Litigation .  Except as disclosed in the Company SEC Reports, the Company has not received notice of any claim, action, suit, proceeding, arbitration, mediation or

 

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governmental investigation that is pending or, to the knowledge of the Company, threatened against or relating to the Company or any of its Material Subsidiaries or any properties or assets of the Company or any of its Material Subsidiaries, other than any such claim, action, suit, proceeding, arbitration, mediation or governmental investigation that (i) does not seek material injunctive relief and (ii) would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

3.7          Compliance with Law; No Default .  To the knowledge of the Company, neither the Company nor any of its Material Subsidiaries is, or has been since December 31, 2005, in conflict with, in default with respect to or in violation of: (i) any Law applicable to the Company or any of its Material Subsidiaries or by which any property or asset of the Company or any of its Material Subsidiaries is bound or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its Material Subsidiaries is a party or by which the Company or any of its Material Subsidiaries, or any property or asset of the Company or any of its Material Subsidiaries, is bound or affected, except in any such case as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect .

 

3.8          Absence of Certain Changes .  Except as set forth in the Company SEC Reports filed and publicly available prior to the date hereof (excluding the disclosures in any “Risk Factors” or “Forward Looking Statements” sections and any other disclosures included in the Company SEC Reports which are predictive or forward looking in nature), since December 31, 2007 there has not been any change, development, event, condition, occurrence or effect that individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect.

 

3.9          Exemption from Registration .  Subject to, and in reliance on, the representations, warranties and covenants made herein by the Purchaser, the issuance and sale of the Shares in accordance with the terms and on the bases of the representations and warranties set forth in this Agreement, may and shall properly occur pursuant to one or more applicable exemptions from the registration requirements of the Securities Act.

 

3.10        No Brokers .  None of the Company or any of its officers, directors, employees, holders of Shares or Affiliates, has employed or made, or will enter into or make, any agreement, contract, arrangement or understanding with any broker, finder or similar agent or any Person that will result in any liability of the Purchaser or any of its Affiliates, for any finder’s fee, brokerage fee or commission or similar payment in connection with the transactions contemplated hereby nor is there any claim by any Person, or to the knowledge of the Company, any basis for a claim by any Person for any such finder’s fee, brokerage fee or commission or similar payment.

 

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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

As an inducement to the Company to enter into this Agreement, the Purchaser hereby makes the following representations and warranties as of the date hereof and as of the Closing Date:

 

4.1          Organization .  The Purchaser is duly organized, validly existing and in good standing as a corporation under the Laws of the jurisdiction of its organization with all corporate power and authority to own its properties and conduct its business as currently conducted.  The Purchaser is duly qualified and in good standing as a foreign corporation authorized to do business in each of the jurisdictions in which the character of the properties owned or held under lease by it or the nature of the business transacted by it makes such qualification necessary and where the failure to be so qualified and in good standing as a foreign corporation authorized to do business would reasonably be expected to have a Purchaser Material Adverse Effect.

 

4.2          Authorization .  The Purchaser has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  The execution, delivery and performance of this Agreement by the Purchaser have been duly and validly authorized by all necessary corporate action.  This Agreement has been duly and validly executed and delivered by the Purchaser and, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding agreement of the Purchaser enforceable against the Purchaser in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

 

4.3          Consents and Approvals; No Violation .

 

(a)           Neither the execution and delivery of this Agreement by the Purchaser nor the consummation of the transactions contemplated hereby will: (i) violate or conflict with or result in any breach of any provision of the respective certificates of incorporation or bylaws or similar governing documents of the Purchaser; (ii) assuming all consents, approvals, authorizations and permits contemplated by clauses (i) through (iii) of subsection (b) below have been obtained, and all filings and notifications described in such clauses have been made, conflict with or violate any Laws; (iii) violate or conflict with, or result in a breach of any provision of, or require any consent, waiver or approval or result in a default or give rise to any right of termination, cancellation, modification or acceleration (or an event that, with the giving of notice, the passage of time or otherwise, would constitute a default or give rise to any such right) under, any of the terms, conditions or provisions of any note, bond, mortgage, lease, license, agreement, contract, indenture or other instrument or obligation to which the Purchaser is a party or by which the Purchaser or any of its properties or assets may be bound; or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Purchaser or by which any of its respective properties or assets are bound, except in the case of clauses (ii) and

 

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(iii), which would not reasonably be expected to have a Purchaser Material Adverse Effect.

 

(b)           The execution, delivery and performance of this Agreement by the Purchaser and the consummation of the transactions contemplated hereby by the Purchaser do not and will not require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity except (i) the pre-merger notification requirements under the HSR Act and Other Antitrust Laws, (ii) the applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder, and (iii) any such consent, approval, authorization, permit, filing or notification the failure of which to make or obtain would not reasonably be expected to have a Purchaser Material Adverse Effect.

 

4.4          No Brokers .  None of the Purchaser or any of its officers, directors, employees, holders of Shares or Affiliates, has employed or made, or will enter into or make, any agreement, contract, arrangement or understanding with any broker, finder or similar agent or any Person that will result in any liability of the Company or any of its Affiliates, for any finder’s fee, brokerage fee or commission or similar payment in connection with the transactions contemplated hereby nor is there any claim by any Person, or to the knowledge of the Purchaser, any basis for a claim by any Person for any such finder’s fee, brokerage fee or commission or similar payment.

 

4.5          Investment Purpose .  The Purchaser is acquiring the Common Stock solely for the purpose of investment and not with a view to, or for offer or sale in connection with, any distribution thereof.

 

4.6          Sophistication and Financial Condition of the Purchaser .  The Purchaser (a) is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act, (b) is a sophisticated investor and, (c) by virtue of its business or financial experience, is capable of evaluating the merits and risks of the investment in the Shares. The Purchaser has been provided an opportunity to ask questions of and receive answers from representatives of the Company concerning the terms and conditions of this Agreement and the purchase of the Shares contemplated hereby. The Purchaser is able to bear the economic risk of holding the Shares for an indefinite period (including total loss of its investment), and (either alone or together with its advisors) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its investment.

 

4.7          Financing .  The Purchaser has, or will have as of the Closing, sufficient cash, available lines of credit or other sources of immediately available funds to enable it to make payment of the Aggregate Purchase Price hereunder.

 

4.8          Ownership .  Neither the Purchaser nor any of its Subsidiaries has Beneficial Ownership of any shares of Common Stock except for shares of Common Stock Beneficially Owned by employee benefit plans of the Purchaser or its Affiliates in the ordinary course of business.

 

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ARTICLE V.
ADDITIONAL AGREEMENTS OF THE PURCHASER AND THE COMPANY

 

5.1          Reasonable Best Efforts; Consents and Governmental Approvals .

 

(a)           Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement (including, without limitation, satisfying the closing conditions in Article VI hereto).  Without limiting the foregoing, each of the Company and the Purchaser agrees to use its reasonable best efforts to: (i) obtain, and cause (with respect to the Company) the Company’s and (with respect to the Purchaser) the Purchaser’s respective directors, officers, employees, Affiliates or other related Persons as may be so required to obtain, all material consents, approvals and authorizations that are required to be obtained under any Federal, state, local or foreign Law as promptly as practicable after the date hereof, (ii) prevent the entry, enactment or promulgation of any threatened or pending injunction or order that could materially adversely affect the ability of the parties hereto to consummate the transactions under this Agreement, (iii) lift or rescind any injunction or order that could materially adversely affect the ability of the parties hereto to consummate the transactions under this Agreement, (iv) in the event that any action, suit, proceeding or investigation relating hereto or to the transactions contemplated hereby is commenced, whether before or after the date of this Agreement, cooperate to defend vigorously against it and respond thereto, and (v) effect all necessary registrations and filings and submissions of information requested by any Governmental Entity.

 

(b)           Each of the Company and the Purchaser agrees to make any required submissions under the HSR Act and Other Antitrust Laws which the Company or the Purchaser determines should be made, in each case, with respect to the transactions contemplated hereby and by the License Agreement and the Manufacturing and Supply Agreement, as promptly as reasonably practicable, and in any event within ten (10) calendar days, after the date of this Agreement and to supply as promptly as reasonably practicable any additional information and documentary material that may be requested pursuant to the HSR Act or Other Antitrust Laws and use its reasonable best efforts to take or cause to be taken all actions necessary, proper or advisable consistent with this Section 5.1 to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable, and the Purchaser and the Company shall cooperate with one another (i) in promptly determining whether any filings are required to be or should be made or consents, approvals, permits or authorizations are required to be or should be obtained under any other federal, state or foreign Law or regulation in connection with the consummation of the transactions contemplated by this Agreement, the License Agreement and the Manufacturing and Supply Agreement and (ii) in promptly making any such filings, furnishing information required in connection therewith and seeking to obtain

 

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as expeditiously as practicable any such consents, permits, authorizations, approvals or waivers.

 

(c)           Notwithstanding anything in this Agreement to the contrary, nothing contained in this Agreement shall be deemed to require the Purchaser, the Company or any of their respective Affiliates to take or agree to take any Action of Divestiture or Limitation.

 

5.2          Conduct of Business of the Company .  Except as expressly required by this Agreement, during the period from the date of this Agreement to the Closing the Company will not take or omit to be taken any action, or permit its Subsidiaries to take or to omit to take any action, that would result in a Material Adverse Effect.

 

5.3          Market Listing .  The Company shall use its best efforts to effect the listing of the Shares on the NASDAQ Global Select Market.

 

5.4          Notification of Certain Matters .  From the date hereof and until the Closing, the Company shall give prompt written notice to the Purchaser of: (a) the occurrence, or failure to occur, of any event, which occurrence or failure would reasonably be expected to cause any representation or warranty contained in this Agreement or in any exhibit, schedule, certificate, document or written instrument attached hereto and made by the Company or its Subsidiaries to be untrue or inaccurate in any material respect; (b) any default, the written threat or commencement of any Action, or any development that occurs before the Closing, of which the Company has knowledge, that would reasonably be expected to result in a Material Adverse Effect; (c) any failure of the Company, any of its Subsidiaries or any of their respective Affiliates, holders of Shares or officers or directors to comply with, perform or satisfy, in any respect, any covenant, condition or agreement to be complied with, performed by or satisfied by it under this Agreement or any exhibit, schedule, certificate, document or written instrument attached hereto; (d) any written notice or other communication received by the Company from any person alleging that the consent of such person is or may be required in connection with the execution, delivery or performance of this Agreement, or the transactions contemplated herein; and (e) any written notice or other communication received by the Company from any Governmental Entity in connection with this Agreement or the transactions contemplated herein; provided that such disclosure shall not be deemed to cure, or to relieve the Company and its Subsidiaries of any liability or obligation with respect to, any breach of or failure to satisfy any representation, warranty, covenant or agreement or to satisfy any condition hereunder.

 

5.5          Press Releases .  Each of the Company and the Purchaser agrees that no public release or announcement concerning the transactions contemplated hereby shall be issued by any party without the prior written consent of the Company and the Purchaser (which consent shall not be unreasonably withheld, conditioned or delayed), except as such release or announcement may be required by Law or the rules or regulations of any applicable United States or non-U.S. securities exchange or regulatory or governmental body to which the relevant party is subject or submits, in which case the party required to

 

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make the release or announcement shall use its reasonable best efforts to allow the other party reasonable time to comment on such release or announcement in advance of such issuance, it being understood that the final form and content of any such release or announcement, to the extent so required, shall be at the final discretion of the disclosing party.

 

5.6          Legends .

 

(a)           Certificates for the Shares shall bear a legend in substantially the following form:

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE OR ANY FOREIGN REGULATORY REGIMES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE AND FOREIGN SECURITIES LAWS, AND PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES (THE “COMPANY”) MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS.

 

(b)           Any holder of Shares may request the Company to remove any or all of the legends described in this Section 5.6 from the certificates evidencing such Shares by submitting to the Company such certificates as the Company reasonably requires, together with an opinion of counsel reasonably satisfactory to the Company to the effect that such legend or legends are no longer required under the Securities Act or any other applicable Laws, as the case may be.

 

ARTICLE VI.
CONDITIONS TO THE CONSUMMATION OF THE TRANSACTIONS

 

6.1          Conditions to Each Party’s Obligations .  The respective obligations of the parties to effect the transactions contemplated hereby shall be subject to the satisfaction, on or prior to the Closing Date, of the following conditions:

 

(a)           No Injunctions or Restraints; Illegality .  No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition shall be in effect preventing the consummation of the transactions contemplated by this Agreement.  No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity

 

17

 

that prohibits or makes illegal consummation of the purchase or sale of the Shares or any other transaction contemplated hereby.  No Governmental Entity shall have filed any claim, action, suit, proceeding, arbitration, mediation or investigation seeking to enjoin, restrain or otherwise prohibit the transactions contemplated by this Agreement.

 

(b)                                  HSR Act .  All filings to be made under the HSR Act and Other Antitrust Laws with respect to this Agreement and the transactions contemplated hereby shall have been made and the applicable waiting period, including all extensions thereof, under the HSR Act and other Antitrust Laws shall have expired or been terminated.

 

(c)                                   Other Agreements .  Each of the License Agreement and the Manufacturing and Supply Agreement shall be in full force and effect.

 

6.2                                 Conditions to Obligations of the Purchaser .  The obligations of the Purchaser to purchase the Shares and to consummate the transactions contemplated hereby are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by the Purchaser in accordance with Sections 8.2 and 8.4 :

 

(a)                                   Representations and Warranties .  Each of the representations and warranties of the Company contained in Article III shall be true and correct (i) in all respects, if such representations and warranties are qualified by materiality, Material Adverse Effect or similar terms and phrases and (ii) in all material respects, if such representations and warranties are not qualified by materiality, Material Adverse Effect or similar terms and phrases, in each case at and as of the date hereof and the Closing Date, as though such representations and warranties were made on the Closing Date (except for representations and warranties that expressly speak only as of a specific date or time other than the Closing Date, which representations and warranties shall continue on the Closing Date to have been true and correct (in all material respects, if such representations and warranties are not qualified by materiality, Material Adverse Effect or similar terms and phrases) as of such specific date or time).

 

(b)                                  Performance of Obligations of the Company .  The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date.

 

(c)                                   Officer’s Certificate from the Company .  The Company shall have furnished to the Purchaser, at or prior to the Closing, a certificate dated the Closing Date signed by the Chief Executive Officer or Chief Financial Officer of the Company certifying that the conditions set forth in Sections 6.2(a)  and (b)  have been satisfied with respect to the Company.

 

(d)                                  Closing Certificate .  The Company shall have delivered a closing certificate in accordance with Section 2.3(b) .

 

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(e)                                   Market Listing . On or prior to the Closing Date, the Shares to be delivered at Closing shall be listed on the NASDAQ Global Select Market in accordance with Section 5.3 .

 

6.3                                 Conditions to Obligations of the Company .  The obligations of the Company to sell the Shares and to consummate the transactions contemplated hereby are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by the Company in accordance with Sections 8.2 and 8.4 :

 

(a)                                   Representations and Warranties .  Each of the representations and warranties of the Purchaser contained in Article IV shall be true and correct (i) in all respects, if such representations and warranties are qualified by materiality, Purchaser Material Adverse Effect or similar terms and phrases and (ii) in all material respects, if such representations and warranties are not qualified by materiality, Purchaser Material Adverse Effect or similar terms and phrases, in each case at and as of the date hereof and the Closing Date, as though such representations and warranties were made on the Closing Date (except for representations and warranties that expressly speak only as of a specific date or time other than the Closing Date, which representations and warranties shall continue on the Closing Date to have been true and correct as of such specific date or time).

 

(b)                                  Performance of Obligations of the Purchaser .  The Purchaser shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date.

 

(c)                                   Officer’s Certificate from the Purchaser .  The Purchaser shall have furnished to the Company, at or prior to the Closing, a certificate dated the Closing Date signed by an authorized officer of the Purchaser certifying that the conditions set forth in Sections 6.3(a)  and (b)  have been satisfied with respect to the Purchaser.

 

ARTICLE VII.
TERMINATION

 

7.1                                 Termination .  This Agreement may be terminated, and the purchase and sale of the Shares abandoned, at any time prior to the Closing:

 

(a)                                   by mutual written consent of the Purchaser and the Company at any time;

 

(b)                                  by the Purchaser or the Company if the Closing shall not have occurred on or before March 4, 2009, except that neither the Purchaser, on the one hand, nor the Company, on the other hand, may terminate this Agreement if the failure of the Closing to occur is due to the failure of such party to perform in all material respects each of its obligations required to be performed at or prior to the Closing;

 

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(c)                                   by the Purchaser or the Company, if an event or events shall occur which render compliance with one or more of the conditions set forth in Section 6.1 impossible except that neither the Purchaser, on the one hand, nor the Company, on the other hand, may terminate this Agreement if the failure of the Closing to occur is due to the failure of such party to perform in all material respects each of its obligations required to be performed at or prior to the Closing;

 

(d)                                  by the Purchaser, if an event or events shall occur which render compliance with one or more of the conditions set forth in Section 6.2 impossible and such condition (or conditions) is not waived by the Purchaser; provided that the Purchaser is not in breach in any material respect of its representations, warranties, covenants or agreements contained in this Agreement; or

 

(e)                                   by the Company, if an event or events shall occur which render compliance with one or more of the conditions set forth in Section 6.3 impossible, and such condition (or conditions) is not waived by the Company; provided that the Company is not in breach in any material respect of its or his representations, warranties, covenants or agreements contained in this Agreement.

 

7.2                                 Notice of Termination .  The party desiring to terminate this Agreement pursuant to Section 7.1 shall give written notice of such termination to the other party in accordance with Section 8.2 , specifying the provision hereof pursuant to which such termination is effected.

 

7.3                                 Effect of Termination .  Upon the termination of this Agreement pursuant to Section 7.1 , all obligations of the parties hereto under this Agreement shall terminate, except for the obligations under this Section 7.3 and Article VIII , and there shall be no liability of any party hereto to any other party and each party hereto shall bear its own fees, costs and expenses incurred by it or on its behalf in connection with the negotiation, preparation, execution and performance of this Agreement and no party shall have any further obligation to any other party; provided , however , that termination of this Agreement by the Purchaser or the Company pursuant to clause (c), (d) or (e) of Section 7.1 , respectively, by reason of any breach of this Agreement shall not relieve the defaulting or breaching party (the “ Breaching Party ”), whether or not it is the terminating party, of liability for direct damages actually incurred by the other party, not including consequential, incidental and/or special damages, as a result of any breach of this Agreement by the Breaching Party.

 

ARTICLE VIII.
MISCELLANEOUS

 

8.1                                 Assignment .  None of this Agreement or any of the rights or obligations hereunder may be assigned by the Company without the prior written consent of the Purchaser, or by the Purchaser without the prior written consent of the Company.  Without limiting the generality of the foregoing, the Company agrees to the assignment by the Purchaser of its rights pursuant to this Agreement to any Affiliate or Subsidiary thereof,

 

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any partnership controlled thereby, any successor in interest thereto and the Company agrees to execute any and all appropriate agreements or instruments that the Purchaser may reasonably request in order to effect or evidence such assignment or consent; provided , however , that such assignment or consent shall not relieve the Purchaser of its obligations under this Agreement.  Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligation hereunder.

 

8.2                                 Notices .  All notices, consents, waivers, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy upon receipt of telephonic or electronic confirmation, provided that a copy is mailed by regular mail, return receipt requested; the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service ( e.g. , Federal Express); and upon receipt, if sent by certified or registered mail, return receipt requested.  In each case notice shall be sent to:

 

if to Purchaser, to:

 

Eli Lilly and Company

Lilly Corporate Center

Indianapolis, Indiana  46285

Fax: 

Telephone: 

Attention:  General Counsel

 

with a copy to (which shall not constitute notice to Purchaser):

 

Latham & Watkins LLP

885 Third Avenue

New York, New York  10022
Fax: 

Telephone: 
Attention: 

 

if to the Company, to:

 

United Therapeutics Corporation

1110 Spring Street

Silver Spring, Maryland  20910

Fax: 

Telephone: 

Attention:  Chief Executive Officer

 

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with a copy to:

 

United Therapeutics Corporation

Office of the General Counsel

1735 Connecticut Avenue, N.W.

3 ^rd Floor
Washington, D.C. 20009

Fax: 

Telephone: 

Attention:  General Counsel

 

with a copy to (which shall not constitute notice to the Company):

 

Gibson, Dunn & Crutcher LLP

1050 Connecticut Ave., NW
Washington, D.C. 20036

Fax: 

Telephone: 

Attention: 

 

or to such other place and with such other copies as either party may designate as to itself by written notice to the others.

 

8.3                                 Governing Law .  This Agreement, and any dispute arising out of, relating to, or in connection with this Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware without giving effect to any choice or conflict of Law provision or rule (whether of the State of Delaware of any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware.

 

8.4                                 Effectiveness: Entire Agreement; Amendments and Waivers .  This Agreement shall become effective on the parties hereto when all parties hereto have executed and delivered this Agreement.  This Agreement, the License Agreement, the Manufacturing and Supply Agreement and the Confidentiality Agreement, together with all exhibits and schedules hereto and thereto, constitute the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties.  The parties agree that neither this Agreement, nor the transactions contemplated hereby, shall violate Section 9 of the Confidentiality Agreement.  In no event shall this Agreement be deemed to constitute a waiver of, or otherwise modify, amend or terminate, any rights granted to the Company pursuant to the Confidentiality Agreement, except as expressly set forth herein.  No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by all of the parties hereto indicating their intention to amend this Agreement.  Neither the failure nor any delay by any party in exercising any right, power or privilege under this Agreement will operate as a waiver of any right, power or privilege under this Agreement, and no waiver of any of the provisions of this

 

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Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided in such waiver in writing.  In addition, no notice to or demand on one party will be deemed a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement.

 

8.5                                 Multiple Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

8.6                                 Severability .  In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument; provided , however , that in no event shall the Purchaser be required to acquire less than all of the Shares.

 

8.7                                 Titles; Currency; Schedules .  The titles, captions or headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.  Unless otherwise specified, all references contained in this Agreement to dollars or “$” will mean United States Dollars.

 

8.8                                 Fees and Expenses .

 

(a)                                   The Company .  The Company shall pay all of the fees, costs and expenses incurred by the Company and its Subsidiaries incident to or in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including, without limitation, legal, investment banking and accounting expenses, payments made in connection with obtaining consents, waivers, agreements and Permits, any stock transfer, real property transfer, documentary transfer or other similar taxes and sales, use or other taxes imposed by reason of the sale of the Common Stock and any deficiency, interest or penalty asserted with respect thereto.  In addition, the Company shall pay one half of the aggregate HSR Act filing fees paid with respect to the transactions contemplated hereby.

 

(b)                                  The Purchaser .  The Purchaser shall pay all of the fees, costs and expenses incurred by it incident to or in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby.  In addition, the Purchaser shall pay one half of the aggregate HSR Act filing fees paid with respect to the transactions contemplated hereby.

 

8.9                                 Representation of Counsel; Mutual Negotiation .  Each party has been represented by counsel of its choice in negotiating this Agreement.  This Agreement shall therefore be deemed to have been negotiated and prepared at the joint request, direction

 

23

 

and construction of the parties, at arm’s length, with the advice and participation of counsel, and will be interpreted in accordance with its terms without favor to any party.

 

8.10                           No Third Party Beneficiaries .  This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective permitted successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, including, without limitation, by way of subrogation.

 

8.11                           Non-Survival of Representations and Warranties .  The representations and warranties contained herein or in any schedule, instrument or other writing delivered pursuant hereto shall not survive the Closing.  The covenants and agreements contained herein of the parties hereto shall survive the Closing without limitation (except for those which by their terms contemplate a shorter survival time).

 

8.12                           Time of Essence .  With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.

 

[signature pages follow]

 

24

 

IN WITNESS WHEREOF , the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

	ELI LILLY AND COMPANY
	By	/s/ John C. Lechleiter
		Name: John C. Lechleiter
		Title: President & Chief Executive Officer
	UNITED THERAPEUTICS CORPORATION
	By	/s/ Roger A. Jeffs
		Name: Roger A. Jeffs
		Title: President & Chief Operating Officer

 

 

[Signature Page to Stock Purchase Agreement]

 

Exhibit 10.2

 

Pursuant to 17 C.F.R. § 240.24b-2, confidential information (indicated by [***]) has been omitted and has been filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission.

 

EXECUTION VERSION

 

LICENSE AGREEMENT

 

BY AND BETWEEN

 

ELI LILLY AND COMPANY

 

AND

 

UNITED THERAPEUTICS CORPORATION

 

DATED

 

NOVEMBER 14, 2008

 

 

TABLE OF CONTENTS

 

 

 

					Page
ARTICLE 1 Definitions					1
1.1	“Adverse Event”			1
1.2	“Affiliate”			2
1.3	“Applicable Law”			2
1.4	“Business Day”			2
1.5	“Business Opportunity”			2
1.6	“Calendar Quarter”			2
1.7	“Calendar Year”			2
1.8	“Change of Control”			2
1.9	“Commercialize”			2
1.10	“Commercialization Plan”			3
1.11	“Commercially Reasonable Efforts”			3
1.12	“Competitive Product”			3
1.13	“Compound”			3
1.14	“Confidential Information”			3
1.15	“Confidentiality Agreement”			3
1.16	“Control”			3
1.17	“Corporate Marks”			3
1.18	“Detail” or “Detailing”			3
1.19	“Development”			3
1.20	“Dollar” or “$”			4
1.21	“Domain”			4
1.22	“Effective Date”			4
1.23	“Existing Patents”			4
1.24	“FDA”			4
1.25	“Field”			4
1.26	“GAAP”			4
1.27	“Glaxo ICOS License”			4
1.28	“GMP”			4
1.29	“ICOS”			4
1.30	“ICOS Lilly Agreements”			4
1.31	“Indemnitee”			4
1.32	“Information”			4
1.33	“Invention”			5
1.34	“JSC” or “Joint Steering Committee”			5
1.35	“Lilly Commercialization Activities”			5
1.36	“Lilly Know-How”			5
1.37	“Lilly Patents”			5
1.38	“Lilly Product Marks”			5
1.39	“Manufacturing and Supply Agreement”			5
1.40	“Net Sales”			6
1.41	“New Patents”			6
1.42	“Ongoing Lilly Trials”			6

 

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1.43	“Patents”		6
1.44	“Product”		6
1.45	“Promotion” or “Promote”		6
1.46	“Pulmonary Arterial Hypertension” or “PAH”		7
1.47	“Quality Agreement”		7
1.48	“Reasonable Cost”		7
1.49	“Regulatory Approval”		7
1.50	“Regulatory Authority”		7
1.51	“Regulatory Filings”		7
1.52	“Safety Agreement”		7
1.53	“Secondary Indication”		7
1.54	“Term”		7
1.55	“Territory”		7
1.56	“Third Party”		7
1.57	“United Therapeutics Commercialization Activities”		7
1.58	“United Therapeutics Know-How”		8
1.59	“United Therapeutics Promotional Materials”		8
1.60	“United Therapeutics Sales Representative”		8
1.61	“Useful”		8
1.62	“Valid Claim”		8
ARTICLE 2 Grant of Rights			8
2.1	License Grant to United Therapeutics		8
2.2	License Grant to Lilly		8
2.3	Sublicensing		9
2.4	Right of First Negotiation		9
2.5	Representation and Warranty, and Negative Covenant		10
2.6	Potential Preferred Partners		10
2.7	No Other Rights		11
ARTICLE 3 Governance			11
3.1	General		11
3.2	Joint Steering Committee		11
3.3	Areas Outside the JSC’s Authority		13
3.4	Operating Principles		14
3.5	Alliance Managers		16
3.6	Independence		16
ARTICLE 4 Joint Obligations and Diligence			17
4.1	Conduct of the Parties		17
4.2	Commercially Reasonable Efforts		17
4.3	Initial Transfer of Know-How		17
4.4	Sharing of Development and Commercialization Information		17
4.5	Sharing of Market Research		18

 

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4.6	Duty to Confer and Consult		18
4.7	Quality Agreement		18
ARTICLE 5 Development and Regulatory Activities			18

 

5.1	Current Status of Development of Product		18
5.2	Clinical Development Activities.		18
5.3	Regulatory Matters		20
5.4	Interactions with Authorities; Regulatory Inquiry, Inspection, and Audit		23
5.5	Drug Safety		24
5.6	Product Withdrawals and Recalls		25
5.7	Development Expenses		25
ARTICLE 6 Commercialization			26
6.1	Principles of Commercialization		26
6.2	Commercialization Plan		27
6.3	Commercialization Activities		27
6.4	Commercialization Costs		28
6.5	Advertising and Promotional Materials		28
6.6	United Therapeutics Sales Representatives		29
6.7	Complaints and Inquiries		30
6.8	Product Selling Prices		30
6.9	Product Integrity		31
6.10	Lilly Covenant Not to Compete		31
ARTICLE 7 Payment			31
7.1	Upfront Payment		31
7.2	Royalty Payments		31
7.3	Payments and Reports		32
7.4	Taxes		32
7.5	Wire Transfers		33
7.6	Audit Rights		33
7.7	Late Payments		34
7.8	Payments to United Therapeutics		34
ARTICLE 8 Inventions and Patents			34
8.1	Inventions		34
8.2	Patent Prosecution		35
8.3	Pediatric Exclusivity in the Territory		36
8.4	OTC Rights; Authorized Generic in the Territory		36
8.5	Infringement Defense		37
8.6	Enforcement of Patent Rights		37
8.7	Enforcement of Other Government-Conferred Rights		38
8.8	Information and Updates		38
8.9	No Challenges to the Lilly Patents		39

 

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ARTICLE 9 Trademark Usage and Maintenance			39
9.1	Ownership of Trademarks		39
9.2	Lilly Product Marks License Grant		39
9.3	Use of the Trademarks		39
9.4	Quality Control		40
9.5	Use of Trademark Designations		40
9.6	Infringement of Lilly Product Marks		41
9.7	Costs		41
9.8	Third-Party Trademark Claims		41
ARTICLE 10 Representations, Warranties, and Covenants			41
10.1	Representations, Warranties and Covenants		41
10.2	Representations and Warranties of Lilly		42
10.3	Covenant of United Therapeutics		45
10.4	Disclaimer		45
ARTICLE 11 Confidentiality			45
11.1	Treatment of Confidential Information		45
11.2	Exceptions		45
11.3	Authorized Disclosures		46
11.4	Securities Filings		47
11.5	Publicity		47
11.6	Publication		47
11.7	Patient Information		48
11.8	Confidentiality Agreement		48
ARTICLE 12 Indemnification			48
12.1	Indemnification by United Therapeutics		48
12.2	Indemnification by Lilly		49
12.3	Procedure		49
12.4	Insurance		50
12.5	No Consequential or Punitive Damages		50
ARTICLE 13 Term and Termination			50
13.1	Term		50
13.2	Unilateral Termination by United Therapeutics		51
13.3	Material Breach		51
13.4	Unilateral Termination by Lilly		51
13.5	Consequences of Expiration or Termination		52
13.6	Survival		56
13.7	No Waiver of Remedies		56

 

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ARTICLE 14 Dispute Resolution			56
14.1	Disputes		56
14.2	Governing Law; Dispute Resolution		57
ARTICLE 15 Miscellaneous			58
15.1	Entire Agreement		58
15.2	Assignment		58
15.3	Amendments		59
15.4	Bankruptcy		59
15.5	Non-Waiver		59
15.6	Severability		59
15.7	Notice		59
15.8	Further Assurances		60
15.9	Force Majeure		60
15.10	Independent Contractors		61
15.11	Performance by Affiliates		61
15.12	No Third Party Beneficiaries		61
15.13	Interpretation		61
15.14	Counterparts		62

 

v

 

EXHIBITS
Exhibit 1.13		Compound
Exhibit 1.37		Lilly Patents
Exhibit 1.44		Product
Exhibit 1.52		Safety Agreement Table of Contents
Exhibit 5.1		Ongoing Lilly Trials
Exhibit 5.2(f)		[***]™ Phase IV Clinical Plan
Exhibit 6.2		Commercialization Plan
Exhibit 7.5		Wire Instructions
Exhibit 10.2(j)		Encumbrances and Licenses
Exhibit 10.2(k)		Claims, Actions, Suits or Proceedings
Exhibit 10.2(p)		Alleged Inventor Claims, Actions, Suits or Proceedings
Exhibit 11.5		Press Release

 

vi

 

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT (the “ Agreement ”) is made and entered into as of November 14 , 2008 (the “ Execution Date ”), effective as of the Effective Date, by and between Eli Lilly and Company, an Indiana corporation, having its principal place of business at Lilly Corporate Center, Indianapolis, Indiana 46285, (“ Lilly ”) and United Therapeutics Corporation, a Delaware corporation, having its principal place of business at 1110 Spring Street, Silver Spring, Maryland 20910 (“ United Therapeutics ”).  Lilly and United Therapeutics are referred to individually as a “ Party ” and collectively as the “ Parties .”

 

RECITALS

 

WHEREAS , as of the Execution Date, Lilly is manufacturing and selling its proprietary active pharmaceutical ingredient tadalafil under the brand name Cialis® for treatment of erectile dysfunction;

 

WHEREAS , Lilly is developing and seeking regulatory approval for, and intends to manufacture and sell, tadalafil under a separate Lilly brand name for treatment of pulmonary arterial hypertension, and owns or otherwise controls certain related intellectual property rights;

 

WHEREAS , United Therapeutics has developed proprietary methods and know-how regarding the development, marketing, promotion, and commercialization of pharmaceutical products for the treatment of pulmonary hypertension;

 

WHEREAS , Lilly wishes to grant to United Therapeutics, and United Therapeutics wishes to accept, certain rights to market, promote, and commercialize tadalafil under a separate Lilly brand name for the treatment of pulmonary hypertension; and

 

WHEREAS , contemporaneously with the execution of this Agreement, Lilly and United Therapeutics are entering into a manufacturing and supply agreement pursuant to which Lilly and/or its Affiliates (as defined below) will supply tadalafil under such separate Lilly brand name to United Therapeutics for commercialization purposes, and a stock purchase agreement for the purchase by Lilly of certain common stock of United Therapeutics;

 

NOW , THEREFORE , in consideration of the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:

 

ARTICLE 1

DEFINITIONS

 

The following terms shall have the following meanings as used in this Agreement:

 

1.1          “ Adverse Event ” shall mean any undesirable medical occurrence in a patient or clinical investigation subject administered a pharmaceutical product and which does not necessarily have to have a causal relationship with the treatment, including any variant of an “adverse drug experience” as those terms are defined at either 21 C.F.R. Section 312.32 or 21

 

1

 

C.F.R. Section 314.80 and the relevant non-FDA equivalents, whether arising in or outside of a clinical study .

 

1.2          “ Affiliate ” shall mean (a) an entity that owns directly or indirectly a controlling interest in a Party, by stock ownership or otherwise, (b) any entity in which a Party owns a controlling interest, by stock ownership or otherwise, or (c) any entity under common control with a Party, directly or indirectly.  Solely for purposes of the foregoing sentence, “controlling interest” and “control” shall mean the power, whether or not exercised, to direct the management and affairs of a Party, directly or indirectly, whether through the ownership of voting securities, by contract, or otherwise.  The direct or indirect ownership of fifty percent (50%) or more of a Party’s outstanding voting securities shall in any case be deemed to confer “control.”

 

1.3          “ Applicable Law ” shall mean all laws, statutes, ordinances, codes, rules, and regulations that have been enacted by a government authority and which are in force as of the Effective Date or come into force during the Term, in each case to the extent that the same are applicable to the performance by the Parties of their respective obligations under this Agreement, including, with respect to the United States, the Prescription Drug Marketing Act, the Federal Food, Drug and Cosmetics Act of 1938, as amended, the Health Insurance Portability and Accountability Act, the Federal Anti-Kickback Statute, and any applicable FDA regulations relating to sampling practices.

 

1.4          “ Business Day ” shall mean any day that is not a Saturday or a Sunday or a day on which the New York Stock Exchange is closed.

 

1.5          “ Business Opportunity ” shall have the meaning set forth in Section 2.4(a).

 

1.6          “ Calendar Quarter ” shall mean each of the three (3) month periods ending on March 31, June 30, September 30, and December 31, provided that the first Calendar Quarter during the Term shall commence on the Effective Date and end on March 31, 2009.

 

1.7          “ Calendar Year ” shall mean each twelve (12) month period beginning on January 1 and ending on December 31, provided that the first Calendar Year during the Term shall commence on the Effective Date and end on December 31, 2009.

 

1.8          “ Change of Control ” shall mean (a) the acquisition of control of United Therapeutics by a Third Party or (b) the sale or other disposition of all or substantially all of the assets of United Therapeutics to a Third Party.  Solely for purposes of the foregoing sentence, “control” shall mean the power whether or not exercised, to direct the management and affairs of United Therapeutics, directly or indirectly, whether through the ownership of voting securities, by contract, or otherwise.  The direct or indirect ownership of fifty percent (50%) or more of United Therapeutics’ outstanding voting securities shall in any case be deemed to confer “control.”

 

1.9          “ Commercialize ” (and, with correlative meanings, the terms “ Commercializing ” and “ Commercialization ”) shall mean any and all activities relating to the commercialization of the Product, including the Promotion, Detailing, distribution, sale, offer for sale, and importation of the Product after Regulatory Approval of the Product, excluding any and all manufacturing of the Product.

 

2

 

1.10        “ Commercialization Plan ” shall have the meaning set forth in Section 6.2.

 

1.11        “ Commercially Reasonable Efforts ” shall mean with respect to each Party, commercially reasonable efforts in accordance with the business, legal, medical and scientific judgment of a similarly situated company, and in accordance with the efforts and resources a similarly situated company would use for a product owned by it or to which it has rights, which is of similar market potential, at a similar stage in its product life, taking into account the competitiveness of the marketplace, the proprietary position of the product, the regulatory structure involved, the profitability of the product and other relevant factors.

 

1.12        “ Competitive Product ” shall mean any phosphodiesterase 5 inhibitor.

 

1.13        “ Compound ” shall mean the bulk active pharmaceutical ingredient tadalafil as set forth on Exhibit 1.13.

 

1.14        “ Confidential Information ” of a Party shall mean all Information disclosed by such Party to the other Party during the Term, including any and all Information exchanged between the Parties under the Manufacturing and Supply Agreement or the Confidentiality Agreement.

 

1.15        “ Confidentiality Agreement ” shall mean the Confidentiality Agreement between the Parties effective February 25, 2008.

 

1.16        “ Control ” shall mean, with respect to any information or intellectual property right, possession by a Party of the ability (whether by ownership, license, or otherwise) to grant access, a license, or a sublicense to such information or intellectual property right without violating the terms of any agreement or other arrangement with any Third Party as of the time such Party would first be required hereunder to grant the other Party such access, license or sublicense.

 

1.17        “ Corporate Marks ” shall mean, with respect to each of the Parties, the corporate name of such Party or those of Affiliates of such Party, and its and their trade names, trademarks, service marks, domain names, and associated logos and designs; provided that Corporate Marks shall not include the Lilly Product Marks.

 

1.18        “ Detail ” or “ Detailing ” shall mean, with respect to Promotion of the Product in the Field in the Territory under the Commercialization Plan, the activity undertaken by a United Therapeutics Sales Representative with respect to a target physician or other individuals or entities with prescribing authority involved or potentially involved in prescribing the Product, to provide information about the benefits and features of the Product in an effort to increase the number of physicians or other individuals or entities with prescribing authority prescribing the Product, and/or the number of prescriptions for the Product.

 

1.19        “ Development ” (and, with correlative meanings, the terms “ Develop ” and “ Developing ”) shall mean the clinical development, and regulatory activities with respect to seeking Regulatory Approval of the Product for any indication in the Field in the Territory, and post-approval studies, including label extensions in support of the Product in the Field in the

 

3

 

Territory and any studies required by a Regulatory Authority, and excluding any and all manufacturing of the Product.

 

1.20                         “ Dollar ” or “ $ ” shall mean the legal tender of the United States of America.

 

1.21                         “ Domain ” shall mean, with respect to United Therapeutics, the Product in the Field in the Territory, and, with respect to Lilly, products containing the Compound outside the Field in the Territory, and in all fields outside the Territory.

 

1.22                         “ Effective Date ” shall mean the Closing Date as defined in the Stock Purchase Agreement.

 

1.23                         “ Existing Patents ” shall have the meaning set forth in Section 8.2(c).

 

1.24                         “ FDA ” shall mean the United States Food and Drug Administration, or any successor organization.

 

1.25                         “ Field ” shall mean the treatment, amelioration, and prevention of any and all forms of pulmonary hypertension in humans, including (a) all WHO classifications of pulmonary hypertension in the Venice 2003 Revised Classification system and (b) all forms of pulmonary hypertension secondary to other indications.

 

1.26                         “ GAAP ” shall mean generally accepted accounting principles in the United States, consistently applied.

 

1.27                         “ Glaxo ICOS License ” shall mean that Collaboration Agreement dated October 3, 1991 and amended January 24, 1997 by and among: Glaxo Group Limited, SmithKline Beecham Corporation, doing business as GlaxoSmithKline, successor in interest to Glaxo Wellcome Inc. and ICOS.

 

1.28                         “ GMP ” shall mean the current Good Manufacturing Practices of the FDA, as then in effect.

 

1.29                         “ ICOS ” shall mean ICOS Corporation.

 

1.30                         “ ICOS Lilly Agreements ” shall mean the Research and Development Service Agreement dated September 30, 1998 between Lilly, and Lilly ICOS LLC, and the Marketing and Sales Service Agreement dated as of September 30, 1998 as amended and restated as January 1, 2003 between Lilly and ICOS (assigned to ICOS Technology Services LLC).

 

1.31                         “ Indemnitee ” shall mean, with respect to a Party, such Party and its Affiliates, and their respective directors, officers, employees, agents, contractors and licensees.

 

1.32                         “ Information ” shall mean (a) technical or economic information, techniques and data relating to the research, non-clinical development, Development, manufacture, use or Commercialization of the Product, including inventions, practices, methods, knowledge, know-how, skills, experience, test data, including pharmacological, toxicological, preclinical and clinical test data, results, protocols including data relating to Product safety, test data,

 

4

 

formulations, specifications, analytical and quality control data, regulatory strategies, regulatory submissions, correspondence and communications, marketing, pricing, distribution, cost, sales, manufacturing, patent and legal data or descriptions, and strategies for the research, non-clinical development, Development, manufacture, use or Commercialization of the Product and (b) compositions of matter, devices, articles of manufacture, assays and biological, chemical or physical materials relating to research, non-clinical development, Development, manufacture, use or Commercialization of the Product.

 

1.33                         “ Invention ” shall mean any invention or discovery, whether or not patentable, made as a result of the activities of a Party or the Parties pursuant to this Agreement performed after the Effective Date that is necessary or useful in the research, non-clinical development, Development, manufacture, use, or Commercialization of the Product.

 

1.34                         “ JSC ” or “ Joint Steering Committee ” shall have the meaning set forth in Section 3.1.

 

1.35                         “ Lilly Commercialization Activities ” shall have the meaning set forth in Section 6.3(c).

 

1.36                         “ Lilly Know-How ” shall mean all Information that (a) is Controlled by Lilly at any time during the Term and (b) is necessary or useful in the research, non-clinical development, Development, use or Commercialization of the Product.  Notwithstanding anything herein to the contrary, Lilly Know-How shall exclude Lilly Patents, Lilly’s Corporate Marks and Lilly Product Marks.

 

1.37                         “ Lilly Patents ” shall mean all Patents that cover the composition or method of using the Product in the Field in the Territory that are Controlled by Lilly at any time during the Term.  As of the Execution Date, the Lilly Patents are as set forth on Exhibit 1.37.

 

1.38                         “ Lilly Product Marks ” shall mean the certain, separate Lilly brand name to be used in connection with marketing and sale of the Product in the Field, distinct from the brand name Cialis®, anticipated as of the Execution Date to be [***] ^TM , and all other trademarks used or intended for use by Lilly or its Affiliates during the Term in connection with the marketing or sale of the Product in the Field in the Territory, or intended for use by United Therapeutics or its Affiliates during the Term in connection with the marketing or sale of the Product in the Field in the Territory, and approved by Lilly (which approval shall not be unreasonably withheld), other than Corporate Marks of Lilly and the Corporate Marks of United Therapeutics.

 

1.39                         “ Manufacturing and Supply Agreement ” shall mean that certain Manufacturing and Supply Agreement entered into by Lilly, an Affiliate of Lilly and United Therapeutics of even date herewith, pursuant to which Lilly has agreed to supply to United Therapeutics, and United Therapeutics has agreed to purchase from Lilly, all of United Therapeutics’ requirements for the Product, subject to, and in accordance with, the terms and conditions set forth in this Agreement and such Manufacturing and Supply Agreement.

 

5

 

1.40                         “ Net Sales ” shall mean the amount billed for sales of the Product by United Therapeutics, any Affiliate of United Therapeutics, and any sublicensee of United Therapeutics or an Affiliate of United Therapeutics to Third Parties, less:

 

(a)                   discounts, including cash discounts, or rebates, retroactive price reductions or allowances actually allowed or granted from the billed amount;

 

(b)                   credits or allowances actually granted upon claims, rejections or returns, including recalls, regardless of the party requesting such;

 

(c)                   freight postage, shipping and insurance charges paid for delivery of Product to the customer; and

 

(d)                   taxes or other governmental charges levied on or measured by the billing amount whether absorbed by the billing or billed party.

 

Such amounts shall be determined from the books and records of United Therapeutics, Affiliates of United Therapeutics, and sublicensees of United Therapeutics or Affiliates of United Therapeutics, maintained in accordance with GAAP.  United Therapeutics agrees that the determination of such amounts will be made using United Therapeutics’ then-current standard procedures and methodologies for external reporting of financial results in reports filed with the Securities and Exchange Commission.

 

1.41                         “ New Patents ” shall have the meaning set forth in Section 8.2(a).

 

1.42                         “ Ongoing Lilly Trials ” shall have the meaning set forth in Section 5.1.

 

1.43                         “ Patents ” shall mean (a) unexpired letters patent (including inventor’s certificates) in the Territory that have not been held invalid or unenforceable by a court of competent jurisdiction from which no appeal can be taken or has been taken within the required time period, including any substitution, extension, term restoration, registration, confirmation, reissue, re-examination, renewal or any like filing thereof and (b) pending applications for letters patent in the Territory, including any continuation, division or continuation-in-part thereof and any provisional applications, in each case, so long as such application is being diligently prosecuted.

 

1.44                         “ Product ” shall mean that prescription pharmaceutical product, the active ingredient of which is the Compound, in finished form and formulation, as further described on Exhibit 1.44, which may be modified from time to time in accordance with the Manufacturing and Supply Agreement.

 

1.45                         “ Promotion ” or “ Promote ” shall mean the marketing and advertising of the Product in the Field in the Territory in accordance with the Commercialization Plan, including medical education, information and communication, market development and medical liaison activities.

 

6

 

1.46                         “ Pulmonary Arterial Hypertension ” or “ PAH ” shall mean all WHO classifications of pulmonary arterial hypertension identified in the Venice 2003 Revised Classification system.

 

1.47                         “ Quality Agreement ” has the meaning set forth in Section 4.7.

 

1.48                         “ Reasonable Cost ” shall mean, with respect to a Party, the reasonable costs and expenses (including full time equivalent costs and Third Party costs) as then calculated, from time to time, by such Party for its internal accounting purposes, such calculation performed consistently with the practice across such Party’s organization.  In any circumstance where Reasonable Costs are expected to exceed one hundred thousand Dollars, the Parties will develop a budget for such circumstance and agree upon a full time equivalent rate that is appropriate for such circumstance.

 

1.49                         “ Regulatory Approval ” shall mean any approvals, licenses, registrations or authorizations of any Regulatory Authority, whether or not conditional, that are necessary for the commercial sale of the Product in the Field in the Territory and obtained as a result of activities under this Agreement.

 

1.50                         “ Regulatory Authority ” shall mean any and all supranational, national, or regional, state, provincial or other local government, court, governmental agency, authority, board, bureau, instrumentality, regulatory agency, department, bureau, commission, council or other government entity, whose approval or authorization is necessary for, or to whom notice must be given prior to, the Development, manufacture, use or Commercialization of the Product in the Territory or the designation of the Product as an orphan drug (or equivalent designation) in the Territory, including, with respect to the United States, the FDA.

 

1.51                         “ Regulatory Filings ” shall mean all applications, filings, dossiers and the like (excluding routine Adverse Event expedited or periodic reporting), submitted to a Regulatory Authority in the Territory for the purpose of obtaining Regulatory Approval from that Regulatory Authority in the Territory, but do not include submission of promotional materials to Division of Drug Marketing, Advertising, and Communications of the FDA (DDMAC).

 

1.52                         “ Safety Agreement ” shall have the meaning set forth in Section 5.5(a).  An example of the table of contents of a Safety Agreement is attached hereto as Exhibit 1.52.

 

1.53                         “ Secondary Indication ” shall mean any indication in the Field other than PAH.

 

1.54                         “ Term ” shall have the meaning set forth in Section 13.1.

 

1.55                         “ Territory ” shall mean the United States of America and Puerto Rico, and United States of America-based Department of Defense and/or Department of Veterans Affairs depots to the extent that such agencies purchase Product in the United States.

 

1.56                         “ Third Party ” shall mean any entity other than a Party or its Affiliates.

 

1.57                         “ United Therapeutics Commercialization Activities ” shall have the meaning set forth in Section 6.3(a).

 

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1.58                         “ United Therapeutics Know-How ” shall mean Information, including any and all protocols for conducting preclinical and clinical studies and data and results obtained from such preclinical and clinical studies, including data relating to Product safety, that (a) is within the Control of United Therapeutics at any time during the Term, and (b) is necessary or useful in the research, non-clinical development, Development, manufacture, use, or Commercialization of the Product.

 

1.59                         “ United Therapeutics Promotional Materials ” shall have the meaning set forth in Section 6.5(a).

 

1.60                         “ United Therapeutics Sales Representative ” shall mean an employee of United Therapeutics or its permitted contractors and a member of United Therapeutics’ sales force engaged in the conduct of Details of the Product and trained as provided under this Agreement and the Commercialization Plan.

 

1.61                         “ Useful ” shall mean, with respect to United Therapeutics, reasonably likely to be necessary or materially useful in the Development or Commercialization of the Product in United Therapeutics’ Domain, and, with respect to Lilly, reasonably likely to be necessary or materially useful in the Development, manufacture or Commercialization of products containing the Compound in Lilly’s Domain.

 

1.62                         “ Valid Claim ” shall mean a claim within a Lilly Patent that has not expired, lapsed, or been cancelled or abandoned, and that has not been dedicated to the public, disclaimed, or held unenforceable, invalid, or been cancelled by a court or administrative agency of competent jurisdiction in an order or decision from which no appeal has been or can be taken, including through opposition, re-examination, reissue, or disclaimer.

 

ARTICLE 2

GRANT OF RIGHTS

 

2.1                                License Grant to United Therapeutics.   Subject to the terms and conditions of this Agreement, Lilly hereby grants to United Therapeutics an exclusive (even as to Lilly), non-transferable (subject to Sections 2.3 and 15.2), sublicenseable (subject to Section 2.3) license, under the Lilly Know-How and the Lilly Patents, to Develop and Commercialize the Product in the Field in the Territory during the Term.  Notwithstanding the foregoing, Lilly may conduct research and other development activities with the Compound including, in connection with Lilly’s Development, manufacture and Commercialization of the Product in Lilly’s Domain; provided that Lilly shall not have the right to conduct any clinical study of the Product in the Field in the Territory, other than the Ongoing Lilly Trials, without the prior written consent of United Therapeutics.

 

2.2                                License Grant to Lilly.   Subject to the terms and conditions of this Agreement, United Therapeutics hereby grants to Lilly, under any and all United Therapeutics Know-How, a royalty-free, non-exclusive, sublicenseable license to:

 

(a)                                   make and have made the Compound and the Product for use in the Field in the Territory;

 

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(b)                                   in connection with Lilly’s research, non-clinical development, Development, manufacture, and Commercialization of the Product in the Field outside the Territory, conduct Development with respect to the Compound and the Product in the Field in the Territory;

 

(c)                                   Develop, make and have made, use and Commercialize the Compound and the Product outside the Field in the Territory; and

 

(d)                                   Develop, make and have made, use and Commercialize the Compound and the Product in any and all fields outside the Territory;

 

provided that (i) Lilly shall not have the right to conduct any clinical study of the Product in the Field in the Territory, other than the Ongoing Lilly Trials, without the prior written consent of United Therapeutics, and (ii) United Therapeutics shall not have the right to conduct any clinical study of the Product outside the Field in the Territory or in any field outside the Territory, without the prior written consent of Lilly.  Any sublicense of the rights granted by Lilly to United Therapeutics shall be consistent with and subject to the terms and conditions of this Agreement.  Lilly shall be responsible for the performance by its sublicensees of all the terms of this Agreement imposed on Lilly as if such sublicensee were Lilly hereunder as such terms pertain to the rights sublicensed to such sublicensee.

 

2.3                                Sublicensing.

 

(a)                                   The license granted to United Therapeutics in Section 2.1 is not sublicenseable without the prior written consent of Lilly, except to (i) United Therapeutics’ Affiliates or (ii) Third Party independent contractors on a fee-for-service basis solely for the purpose of performing activities on behalf of United Therapeutics in connection with this Agreement.  Any such permitted sublicense (A) if granted to a United Therapeutics’ Affiliate, shall terminate, with respect to such Affiliate, upon such Affiliate ceasing to be an Affiliate of United Therapeutics; and (B) shall be consistent with and subject to the terms and conditions of this Agreement.  A final executed copy of any sublicense agreement shall be provided to Lilly within fourteen (14) days after its execution; provided that the financial terms of any such sublicense agreement may be redacted to the extent not pertinent to an understanding of United Therapeutics’ obligations or benefits under this Agreement.

 

(b)                                   United Therapeutics shall be responsible for the performance by its sublicensees of all the terms of this Agreement imposed on United Therapeutics as if such sublicensee were United Therapeutics hereunder as such terms pertain to the rights sublicensed to such sublicense.

 

2.4                                Right of First Negotiation.

 

(a)                                   In the event that Lilly, at any time during the Term, desires to grant rights to a Third Party under any Lilly Know-How or any Lilly Patents to Develop or Commercialize the Product in the Field in any country outside the Territory (other than Japan) (any such potential grant referred to as a “ Business Opportunity ” for the purposes of this Section 2.4), Lilly agrees to notify United Therapeutics of such Business Opportunity, and provide United Therapeutics with information available to Lilly that is reasonably necessary for United

 

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Therapeutics to evaluate the Business Opportunity.  Lilly shall discuss exclusively with United Therapeutics the Business Opportunity for a period of one hundred twenty (120) days following the date of such notice (such period referred to as a “ Negotiation Period ” for the purposes of this Section 2.4).  Unless otherwise agreed between the Parties, Lilly will not negotiate or discuss the Business Opportunity with any Third Party, or disclose to any Third Party any of the information regarding the Business Opportunity, until the expiry of the Negotiation Period.  In the event that Lilly and United Therapeutics have not agreed upon the terms and conditions pursuant to which Lilly would grant such rights to United Therapeutics within the Negotiation Period, Lilly shall be free to discuss the Business Opportunity with and disclose information regarding same to any Third Party, subject to Section 2.4(b).

 

(b)                                   After expiration of the Negotiation Period, Lilly will not grant such rights to any Third Party under terms that, when considered as a whole, are less favorable to Lilly than the terms last offered by Lilly to United Therapeutics during the discussions between the Parties during the Negotiation Period.

 

2.5                                Representation and Warranty, and Negative Covenant.

 

(a)                                   United Therapeutics represents and warrants that, as of the Effective Date, no Patent Controlled by United Therapeutics or an Affiliate of United Therapeutics covers, or would be infringed by, the activities contemplated under the terms of this Agreement, including (i) the Development and Commercialization of the Product by United Therapeutics in United Therapeutics’ Domain or (ii) the Development, manufacture, and Commercialization of the Product in Lilly’s Domain.

 

(b)                                   United Therapeutics covenants that neither it nor its Affiliates or sublicensees shall use or practice the Lilly Know-How and the Lilly Patents for any use or purpose except as expressly permitted in this Agreement.  United Therapeutics agrees to impose the covenant contained in this Section 2.5(b) on all of its Affiliates and sublicensees.

 

(c)                                   Lilly shall not, during the Term or thereafter assert nor cause to be asserted against United Therapeutics or its Affiliates or sublicensees any intellectual property right not licensed to United Therapeutics under this ARTICLE 2 that is or might be infringed by reason of United Therapeutics’ or its Affiliates’ or sublicensees’ Development and Commercialization of the Product in accordance with this Agreement.  Lilly agrees to impose the covenant contained in this Section 2.5(c) on all of its Affiliates.

 

2.6                                Potential Preferred Partners.   Each Party sees potential value in the other Party as a possible route to market for future products in the other Party’s area of experience and expertise. In furtherance thereof, from time to time, Lilly may disclose to United Therapeutics certain opportunities available to Lilly for products for orphan indications, and United Therapeutics may disclose to Lilly certain opportunities available to United Therapeutics for products in Lilly’s area of expertise, and in either case, if so disclosed, the Parties may choose to discuss the development and commercialization of such opportunities with each other.  In order to implement the objectives under this Section 2.6, the Parties anticipate that, on each anniversary of the Execution Date, the CEO of United Therapeutics and the Senior Vice President of Corporate Strategy and Policy of Lilly, or their designees, shall meet at a mutually

 

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agreeable location in New York City to review one or two potential strategic development and commercialization opportunities from each Party.  Notwithstanding anything to the contrary, this Section 2.6 creates and imposes no binding obligation on either Party with respect to the development or commercialization of any future product opportunities.

 

2.7                                No Other Rights.

 

(a)                                   No right or license under any United Therapeutics Know-How, or under any Lilly Know-How or any Lilly Patents, is granted or shall be granted by implication.  For clarity, except as expressly set forth in this Agreement, (i) no right or license is granted to United Therapeutics, under any Lilly Know-How or any Lilly Patents, to conduct research and/or non-clinical development with respect to the Compound and/or the Product, or to manufacture the Compound and/or the Product, (ii) Lilly retains all rights under all Lilly Know-How and all Lilly Patents in Lilly’s Domain, and (iii) Lilly shall have sole control of manufacture of the Compound and the Product for use in United Therapeutics’ Domain (subject to the express terms of the Manufacturing and Supply Agreement and this Agreement), and any and all research, non-clinical development, Development, manufacture, use, Commercialization of the Compound and/or the Product in Lilly’s Domain.

 

(b)                                   Except as otherwise provided herein, no right, express or implied, is granted under this Agreement to either Party to use in any manner the Corporate Marks of the other Party in connection with the performance of this Agreement.

 

ARTICLE 3

GOVERNANCE

 

3.1                                General.   The Parties desire to establish a joint steering committee (the “ Joint Steering Committee ” or “ JSC ”), which shall oversee the Parties’ activities under this Agreement and facilitate communications between the Parties with respect to the manufacture and supply of the Product for use, and the Development and Commercialization of the Product, in the Field in the Territory under this Agreement.

 

3.2                                Joint Steering Committee.

 

(a)                                   Formation and Purpose.  Within forty-five (45) days after the Effective Date, each Party shall appoint three (3) members of its management to be its JSC representatives.  Each Party may replace its JSC representatives by written notice to the other Party.  The purpose of the JSC shall be to provide a forum for joint discussion between the Parties in order to (i) coordinate the manufacture and supply of the Product for use, and the Development and Commercialization of the Product, in the Field in the Territory, (ii) keep United Therapeutics generally advised of Lilly’s activities that would affect such Development and Commercialization of the Product in the Field in the Territory, and (iii) identify activities that would be of mutual benefit with respect to the Product.  The JSC shall have the membership and shall operate by the procedures set forth in Section 3.4.

 

(b)                                   Specific Responsibilities of the JSC.  In addition to its overall responsibility for coordinating the Parties’ activities under this Agreement, the JSC shall, in particular and in a timely manner:

 

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(i)                                     monitor progress of the Development of the Product in the Field in the Territory, including the Ongoing Lilly Trials;

 

(ii)                                 review and, as further described in Section 6.2, comment upon the Commercialization Plan, and all updates or amendments thereto;

 

(iii)                             review and comment upon plans for Development of the Product in the Field, including clinical trial protocols, monitoring plans, and data disclosure plans included with each such protocol, and all updates or amendments thereto;

 

(iv)                                review any and all clinical trials, including audit plans with respect thereto, conducted by United Therapeutics with respect to the Product in the Field in the Territory and conducted by Lilly with respect to the Ongoing Lilly Trials;

 

(v)                                    review any and all audit reports and action plans with respect thereto provided by United Therapeutics pursuant to Section 5.2(d);

 

(vi)                                review confirmation of United Therapeutics’ completion of any monitoring and quality oversight actions required to be taken pursuant to this Agreement;

 

(vii)                            review any serious and/or persistent site non-compliance issues that affect patient safety and/or data integrity along with the corrective action plan, each to the extent regarding the Product in the Field in the Territory;

 

(viii)                        facilitate the flow of information with respect to the Commercialization of the Product in the Field in the Territory by United Therapeutics and Commercialization of the Product in the Field outside the Territory by Lilly, where such information is Useful to the other Party;

 

(ix)                               facilitate mechanisms for discussion between the Parties with respect to submission of Regulatory Filings for the Product in the Field in the Territory, including processes for preparing Regulatory Filings for the Product in the Field in the Territory consistent with Lilly’s standard operating procedures;

 

(x)                                   facilitate mechanisms for discussion between the Parties with respect to Development of the Product in the Field, including the contents and submission of Regulatory Filings, to the extent such Development and such Regulatory Filings are Useful to United Therapeutics or to Lilly;

 

(xi)                               facilitate communication between the Parties with respect to all serious adverse events or significant safety issues for products which contain the Compound in all fields throughout the world to the extent such information is Useful to United Therapeutics or to Lilly, consistent with the terms of the Safety Agreement and coordinate efforts of the Parties to ensure proper reporting of all Adverse Events for the Product in the Field in the Territory in accordance with Applicable Law and consistent with the terms of the Safety Agreement;

 

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(xii)                           facilitate the flow of information with respect to any material new studies of which either Party becomes aware which relate to the Product in the Field (whether inside or outside of the Territory);

 

(xiii)                       facilitate the flow of publicly available information with respect to any material studies of which either Party becomes aware which relate to any Competitive Product controlled by a Third Party in the Field throughout the world, in either case to the extent such information is Useful to United Therapeutics or to Lilly;

 

(xiv)                          facilitate the flow of information with respect to any material studies being conducted by Lilly which relate to products which contain the Compound outside the Field throughout the world, to the extent such information would be reasonably likely to materially adversely affect the Product in United Therapeutics’ Domain;

 

(xv)                              implement policies and procedures for providing United Therapeutics with copies of all correspondence and communications with Regulatory Authorities relating to products which contain the Compound in PAH, and in the event that United Therapeutics pursues any Secondary Indication with the approval of Lilly as described in Section 5.2(i), such Secondary Indication, to the extent such correspondence and communications are Useful to United Therapeutics;

 

(xvi)                          implement policies and procedures for providing United Therapeutics with updates regarding all correspondence and communications with Regulatory Authorities relating to products which contain the Compound in all fields throughout the world other than PAH, and in the event that United Therapeutics pursues any Secondary Indication with the approval of Lilly as described in Section 5.2(i), such Secondary Indication, to the extent such correspondence and communications are reasonably likely to materially adversely affect the Product;

 

(xvii)                      coordinate the availability, timing, and amount of placebo to be supplied by Lilly to United Therapeutics for the Development of the Product in the Field in the Territory and for supply of the Product in the Field in the Territory, and procedures for forecasting and ordering such placebo and Product pursuant to the Manufacturing and Supply Agreement;

 

(xviii)                  monitor Lilly’s manufacturing capacity for the Product for use in the Field in the Territory pursuant to the Manufacturing and Supply Agreement;

 

(xix)                         establish subcommittees as needed to address issues in the Development and Commercialization of the Product in the Field in the Territory, and address disputes or disagreements arising in any subcommittee so established; and

 

(xx)                             perform such other functions as the Parties may agree in writing.

 

3.3                                Areas Outside the JSC’s Authority.  The JSC shall have no authority other than that expressly set forth in Section 3.2, and, except as expressly stated therein, shall have no authority with respect to any action or decision relating to Lilly’s Domain, or the manufacture of

 

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the Product. In no event shall the JSC have the right to modify or amend, or waive the terms of, or either Party’s compliance with, this Agreement.

 

3.4                                Operating Principles . The Parties hereby acknowledge and agree that the deliberations and decision-making of the JSC, and any subcommittee established by the JSC, shall be in accordance with the following operating principles:

 

(a)                                   Chairpersons. The JSC shall have co-chairpersons. Each of United Therapeutics and Lilly shall select from their representatives a co-chairperson for the JSC. The co-chairpersons of the JSC shall be responsible for calling meetings, preparing and circulating an agenda in advance of each meeting of the JSC, and preparing and issuing minutes of each meeting within thirty (30) days thereafter. The JSC co-chairperson of a Party shall call a meeting of the JSC promptly upon the written request of the other co-chairperson to convene such a meeting. Such minutes will not be finalized until both chairpersons review and confirm the accuracy of such minutes in writing.

 

(b)                                   Meetings. The JSC shall hold meetings at such times as it elects to do so, but in no event shall such meetings be held less frequently than twice per Calendar Year. The JSC shall meet alternately at Lilly’s facilities in Indianapolis, Indiana, and United Therapeutics’ facilities in Silver Spring, Maryland, or at such locations as the Parties may otherwise mutually agree. Other employees of each Party (including the Alliance Managers, as defined in Section 3.5(a)) involved in the Development, manufacture, or Commercialization of the Product in the Field in the Territory may attend meetings of the JSC as nonvoting participants, and, with the consent of each Party, consultants, representatives, or advisors involved in the Development, manufacture, or Commercialization of the Product may attend meetings of the JSC as nonvoting observers; provided that such Third Party representatives are under obligations of confidentiality and non-use applicable to the Confidential Information of each Party and that are at least as stringent as those set forth in ARTICLE 11; and provided that the term of such obligations may be reduced by mutual agreement of the Parties so as to be commercially reasonable based on the circumstances. Each Party shall be responsible for all of its own expenses associated with participating in the JSC. Meetings of the JSC may be held by audio or video teleconference with the mutual consent of the Parties; provided that one (1) JSC meeting per Calendar Year shall be held in person.

 

(c)                   Decision Making. The JSC is an advisory body only, and the rights and authorities of the Parties are set forth in this Agreement, including Section 3.4(c)(ii) and 3.4(c)(iii). The Parties shall use Commercially Reasonable Efforts to cause their respective members of the JSC to act in good faith and cooperate with one another. Any disagreement between the Parties shall be first submitted to the Alliance Managers in order to facilitate a resolution and then, if not resolved, at the election of either Party, be referred for resolution pursuant to ARTICLE 14.  Notwithstanding the foregoing, each Party has final decision-making authority with respect to certain matters pursuant to 3.4(c)(ii) and 3.4(c)(iii), and no decision made in accordance with such final decision-making authority shall be subject to any dispute resolution mechanism or procedure under ARTICLE 14.  Notwithstanding anything else in this Agreement or the Manufacturing and Supply Agreement, in no event shall either Party exercise its final decision-making authority in a manner that would have the effect of modifying, or would

 

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otherwise be in conflict with, the terms of this Agreement or the Manufacturing and Supply Agreement.

 

(ii)                                 Lilly shall have final decision-making authority regarding any and all matters relating to:

 

(1)                                  research, non-clinical development, and Development, including all Regulatory Filings for submission to Regulatory Authorities;

 

(2)                                  manufacture of the Product, subject to the terms of the Manufacturing and Supply Agreement;

 

(3)                                  any product containing the Compound in Lilly’s Domain;

 

(4)                                  any recall or withdrawal of the Product in accordance with Section 5.6;

 

(5)                                  patent strategy in respect of all Lilly Patents, subject to Section 8.2; and

 

(6)                                  any matter that would be reasonably likely to materially adversely affect Cialis®;

 

provided that, if Lilly exercises its decision-making authority under this Agreement, including under Section 3.4(c)(ii)(1), 3.4(c)(ii)(2), 3.4(c)(ii)(4), 3.4(c)(ii)(5), 3.4(c)(ii)(6), 5.2(i), 6.2, 8.2(c), 8.3, 8.6(d), 8.7 or 9.8, Lilly will make a good faith effort to consult with United Therapeutics prior to making any decision that is reasonably likely to be material to United Therapeutics, and, if United Therapeutics requests, provide to United Therapeutics a reasonably detailed written explanation of the basis for such decision. If the Parties disagree on such decision, Lilly agrees, at United Therapeutics’ request, to make available a member of Lilly’s Executive Committee within ten (10) business days to discuss such matter; provided, however, that such a discussion will not affect Lilly’s right to exercise its final decision-making authority with respect to such decision.

 

(iii)                             Subject to Section 3.4(c)(ii) or as otherwise expressly set forth in this Agreement, United Therapeutics shall have final decision-making authority regarding any and all matters relating to Commercialization of the Product in the Field in the Territory, subject to ARTICLE 6.

 

(iv)                                When exercising its decision-making authority under this Agreement, each Party shall:

 

(1)                                  keep the other Party closely informed about its activities related to the decision;

 

(2)                                  closely consult with the other Party on such activities and the possible decision(s) to be made and confer in good faith with the other Party respecting same;

 

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(3)                                  with respect to Lilly, in evaluating any decision, treat the Product in United Therapeutics’ Domain as if it is a proprietary product solely of Lilly; and

 

(4)                                  exercise its decision-making authority in accordance with the principles set forth in Section 4.1.

 

(d)                                   Meeting Agendas. Each Party shall disclose to the other Party proposed agenda items along with appropriate information at least ten (10) Business Days in advance of each meeting of the JSC; provided that, under exigent circumstances requiring JSC input, a Party may provide its agenda items to the other Party within a lesser period of time in advance of the meeting, or may propose that there not be a specific agenda for a particular meeting, so long as such other Party consents to such later addition of such agenda items or the absence of a specific agenda for such JSC meeting.

 

3.5                                Alliance Managers.

 

(a)                                   Each of the Parties shall appoint a single individual to act as that Party’s point of contact for communications between the Parties relating to the activities conducted under this Agreement (each, an “ Alliance Manager ”).  Each Party may change its designated Alliance Manager from time to time upon written notice to the other Party. Any Alliance Manager may designate a substitute to temporarily perform the functions of that Alliance Manager by written notice to the other Party.

 

(b)                                   Each Alliance Manager shall be charged with creating and maintaining a collaborative work environment between the Parties and within the JSC. Each Alliance Manager will also:  (i) be the point of first referral in all matters of conflict resolution; (ii) coordinate the relevant functional representatives of the Parties in developing and executing strategies and plans for the Product in the Field in the Territory; (iii) provide a single point of communication for seeking consensus both internally within the respective Parties’ organizations and between the Parties regarding key strategy and plan issues; (iv) identify and bring disputes to the attention of the JSC in a timely manner; (v) plan and coordinate cooperative efforts and internal and external communications; and (vi) take responsibility for ensuring that governance activities, such as the conduct of required JSC meetings and production of meeting minutes occur as set forth in this Agreement, and that relevant action items resulting from such meetings are appropriately carried out or otherwise addressed.

 

(c)                                   The Alliance Managers shall use good faith efforts to attend all JSC meetings and support the co-chairpersons of the JSC in the discharge of their responsibilities. Alliance Managers shall be nonvoting participants in JSC meetings, unless they are also appointed members of the JSC pursuant to Section 3.2(a); provided, however, that an Alliance Manager may bring any matter to the attention of the JSC in order to facilitate a resolution of such matter.

 

3.6                                Independence. Subject to the terms of this Agreement, the activities and resources of each Party shall be managed by such Party, acting independently and in its individual capacity. The relationship between the Parties is that of independent contractors, and

 

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neither Party shall have the power to bind or obligate the other Party in any manner, other than as is expressly set forth in this Agreement.

 

ARTICLE 4

JOINT OBLIGATIONS AND DILIGENCE

 

4.1                                Conduct of the Parties. The Parties’ mutual objective is to permit United Therapeutics, pursuant to and in accordance with the terms of this Agreement, to Develop and Commercialize the Product in United Therapeutics’ Domain while not taking any action that would be reasonably likely to materially adversely affect development and commercialization of products containing the Compound in Lilly’s Domain. Each Party shall conduct itself and its activities hereunder consistent with that understanding, consistent with sound and ethical business and scientific practices. Each Party intends, in working with the other Party to Develop and Commercialize the Product in the Field in the Territory and otherwise as set forth in this Agreement, to assign responsibilities for the various operational aspects of the Development and Commercialization of the Product in United Therapeutics’ Domain to those portions of each Party’s organization that have the most appropriate resources, expertise, and responsibility for such functions. In all matters related to such activities, the Parties shall strive to balance, as best as reasonably possible, their respective legitimate interests and concerns and to realize the economic potential of the Product in United Therapeutics’ Domain and products containing the Compound in Lilly’s Domain (taking into account the risks and costs of further Development and Commercialization).

 

4.2                                Commercially Reasonable Efforts. Each Party shall use Commercially Reasonable Efforts to conduct the Development to obtain Regulatory Approval for the Product for use in the Field in the Territory and to carry out those activities for which it is responsible as set forth in each Commercialization Plan, it being understood that activities set forth in such Commercialization Plan with respect to later years, when compared to the then-present year, shall be of a less definitive nature than those set forth for the then-present year.

 

4.3                                Initial Transfer of Know-How. After the Effective Date, the Parties shall use Commercially Reasonable Efforts to transfer any Lilly Know-How to United Therapeutics that United Therapeutics, acting reasonably, may request.

 

4.4                                Sharing of Development and Commercialization Information

 

(a)                   From time to time during the Term, United Therapeutics, acting reasonably, may request access to any Lilly Know-How that is Useful to United Therapeutics, and Lilly shall use Commercially Reasonable Efforts to provide such access. From time to time during the Term, Lilly, acting reasonably, may request access to any United Therapeutics Know-How that is Useful to Lilly, and United Therapeutics shall use Commercially Reasonable Efforts to provide such access.

 

(b)                   During the Term, each Party shall use Commercially Reasonable Efforts to make available to the other Party information that is Useful to the other Party relating to the Development or Commercialization of the Product in the Field at no cost to such other Party.

 

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4.5                                Sharing of Market Research. Each Party may, at its discretion and expense, undertake such market surveys, market research and analyses thereof relating to the Product in the Field (whether inside or outside of the Territory) as it deems fit, and such information shall be and remain the Confidential Information of the Party undertaking same. During the Term, each Party shall, to the extent it is capable of doing so, make any such information, to the extent such information is Useful to the other Party, available to the other Party at no cost to that other Party.

 

4.6                                Duty to Confer and Consult. The Parties shall confer in good faith regarding their respective activities under this Agreement and the strategies for pursuing same. Each Party shall closely consult with the other Party on its activities under this Agreement, and shall keep the other Party closely informed where such information is Useful to the other Party.

 

4.7                                Quality Agreement. The Parties will negotiate the terms and conditions of an agreement regarding quality-related aspects of the relationship between Lilly and United Therapeutics including quality assurance procedures (the “ Quality Agreement ”).

 

ARTICLE 5

DEVELOPMENT AND REGULATORY ACTIVITIES

 

5.1                                Current Status of Development of Product. As of the Effective Date, Lilly holds the Regulatory Approval for a product containing the Compound in a certain finished form and formulation under the Lilly brand name Cialis® for treatment of erectile dysfunction, has conducted clinical trials for the Product in the Field, has submitted a New Drug Application to the FDA for Regulatory Approval for the Product in PAH in the Territory, and is conducting certain clinical trials for the Product as of the Effective Date set forth in Exhibit 5.1 (the “ Ongoing Lilly Trials ”).

 

5.2                                Clinical Development Activities.

 

(a)                                   Lilly will use Commercially Reasonable Efforts to complete the Ongoing Lilly Trials, and any follow-on analysis and reporting and filing results with the FDA with respect thereto.

 

(b)                                   Subject to Sections 5.2(a), 5.2(c), 5.2(d), 5.2(e) and 5.2(f), United Therapeutics’ Development Activities shall include conducting (or having conducted) all clinical trials (including Phase IV studies) for the Product in the Field in the Territory other than the Ongoing Lilly Trials. Each Party agrees and acknowledges that the other Party shall not be in breach of this Agreement solely as a result of the failure of the Product in any clinical trial.

 

(c)                                   If the Parties agree in advance in writing that Lilly shall conduct any clinical development activities on behalf of United Therapeutics in United Therapeutics’ Domain, other than with respect either to the Ongoing Lilly Trials or as otherwise set forth in Section 5.2(e), then the Parties, acting reasonably, shall agree upon a protocol for each such activity.

 

(d)                                   In the event that the FDA requires any additional clinical study to be performed for the Product prior to obtaining Regulatory Approval of the Product in PAH in the

 

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Territory, United Therapeutics shall be responsible for conducting such study; provided that, prior to initiation of any such study, United Therapeutics shall notify Lilly, and submit to Lilly the protocol for such study, including any and all quality plans with respect thereto, including a plan for monitoring and auditing such study, and shall implement any and all of Lilly’s comments and suggestions regarding such study protocol and quality plans, which comments and suggestions shall be made to United Therapeutics as soon as reasonably possible, and in any event within sixty (60) days after Lilly’s receipt of the protocol and quality plans. For clarity, United Therapeutics shall not conduct any such study prior to obtaining Lilly’s approval, not to be unreasonably withheld, with respect to such study and such study protocol and quality plans. If the FDA requires any additional non-clinical study to be performed for the Product prior to obtaining Regulatory Approval of the Product in PAH in the Territory, the Parties will confer to determine what actions should be taken.

 

(e)                                   In the event that the FDA conditions initial Regulatory Approval for Product in PAH in the Territory upon a commitment to conduct following Regulatory Approval any additional non-clinical study or any additional clinical study for the Product, Lilly and United Therapeutics will use Commercially Reasonable Efforts to conduct such study. Lilly, acting reasonably, shall establish the protocol for such study, including any and all quality plans with respect thereto, including a plan for monitoring and auditing such study.

 

(f)                                     The Parties acknowledge that United Therapeutics intends to conduct certain Phase IV studies for the Product, as further described on Exhibit 5.2(f); provided, however, that all such studies shall be limited to PAH, and in the event that United Therapeutics pursues any Secondary Indication with the approval of Lilly as described in Section 5.2(i), such Secondary Indication. United Therapeutics, prior to initiating any such Phase IV study, will provide the protocol for such Phase IV study to Lilly, together with other information related to such Phase IV study requested by Lilly, for review and approval, such approval not to be unreasonably withheld.

 

(g)                                  United Therapeutics will not support, either directly or indirectly, any investigator initiated trial (“ IIT ”) with the Product unless, prior to the initiation of such an IIT, United Therapeutics provides the protocol for such IIT to Lilly, together with other information related to such IIT requested by Lilly, for review and approval, such approval not to be unreasonably withheld. The Parties will establish, as soon as practicable after the Effective Date, a standard procedure for the review and, where appropriate, approval by Lilly of the protocol, and other related information, for an IIT.

 

(h)                                  In the event that United Therapeutics desires to conduct any label enhancement study for the Product for PAH (other than a study required by FDA as described in Section 5.2(e) or for a Secondary Indication as described in Section 5.2(i)) after obtaining Regulatory Approval for the Product in PAH in the Territory, United Therapeutics shall provide the protocol for such study to Lilly, together with other information related to such study requested by Lilly, for review and approval, such approval not to be unreasonably withheld.

 

(i)                                     The Parties acknowledge and agree that, under the terms of this Agreement, Lilly has granted rights to United Therapeutics in the Field, which includes Secondary Indications, but that United Therapeutics will not conduct any Development or

 

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Commercialization activities with respect to any Secondary Indication without the prior consent of Lilly which may be given in Lilly’s sole discretion. In the event that United Therapeutics desires to conduct any Development activities, including any clinical study, with respect to the Product in a Secondary Indication in the Territory, United Therapeutics will notify Lilly and submit to Lilly the plan for such Development, and shall not conduct any such Development without the prior written consent of Lilly, which may be withheld in Lilly’s sole discretion. If Lilly consents to the conduct of such Development, United Therapeutics shall submit to Lilly the protocol for any study that United Therapeutics intends to conduct in connection with such Development, including for example any and all quality plans with respect thereto and a plan for monitoring and auditing such study. United Therapeutics shall not conduct any such study prior to obtaining Lilly’s approval, which may be withheld in Lilly’s sole discretion. In the event that Lilly approves such a plan for Development for a Secondary Indication, and studies conducted under such plan for Development achieve pre-specified primary endpoints, Lilly will not thereafter object to the pursuit of Regulatory Approval for such Secondary Indication, except based on valid safety, quality, or material regulatory concerns.

 

(j)                                     United Therapeutics shall from time to time provide a list of Third Party contractors used in the conduct of Development activities under this Agreement, and Lilly may object to the use of same by providing notice of such objection to United Therapeutics. United Therapeutics will not use such contractors without the prior written consent of Lilly. United Therapeutics shall disclose any data to any Third Party only as necessary for such Third Party to conduct the Development activities assigned to such Third Party and under obligations of confidentiality and non-use applicable to the Confidential Information of each Party that are at least as stringent as those set forth in ARTICLE 11; provided that the term of such obligations may be reduced so as to be commercially reasonable based on the circumstances. United Therapeutics shall provide a full audit report and any requested supporting documentation with respect to any and all audits performed by United Therapeutics of any Third Party contractors and/or clinical trial sites used by United Therapeutics to conduct Development activities under this Agreement. Lilly shall have the right to audit together with United Therapeutics, any and all source data produced by United Therapeutics and/or any Third Party contractors, particularly those Third Party contractors whose activities would be material to the conduct of a study with specific reference to the quality of data to be obtained from such study, and/or clinical trial sites used by United Therapeutics to conduct Development activities. United Therapeutics shall notify the JSC of any serious and/or persistent site non-compliance issues, with respect to clinical trials conducted by United Therapeutics under this Agreement, along with a plan for correcting such issues. United Therapeutics shall provide confirmation to the JSC upon completion of any such corrective measures.

 

(k)                                 Each Party will have the responsibility for publication plans surrounding all studies, including authorship, abstract, poster, slide, and manuscript content and submission plans, conducted by such Party, subject to Section 11.6.

 

5.3                                Regulatory Matters.

 

(a)                                   Lilly Responsibilities in Lilly’s Domain. As between Lilly and United Therapeutics, Lilly shall be solely responsible for any and all regulatory activities with respect to the Compound and products containing the Compound in Lilly’s Domain, including filing of all

 

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Regulatory Filings for the Compound and such products, maintenance of all Regulatory Approvals, an y reports or submissions required to be made to any non-governmental Third Party payors, and any and all regulatory matters arising after obtaining Regulatory Approval, including post-marketing inquiries and safety surveillance activities.

 

(b)                                   Overview of Responsibilities in the Field and in the Territory. As between Lilly and United Therapeutics, subject to the terms of this Agreement, Lilly shall be responsible for regulatory activities with respect to the Product in the Field in the Territory, as described in Sections 5.3(c), 5.3(d), 5.4, 5.5 and 5.6, except with respect to preparation of any and all Regulatory Filings for all indications in the Field (other than for the Ongoing Lilly Trials), which shall be the responsibility of United Therapeutics as described in Section 5.3(d).  United Therapeutics shall cooperate with Lilly and take reasonable actions to assist Lilly in obtaining Regulatory Approvals for the Product in the Field in the Territory, including in the drafting and review of all Regulatory Filings for the Product in the Field in the Territory.

 

(c)                                   Regulatory Activities by Lilly in the Field and in the Territory.

 

(i)                                     Lilly shall cooperate with United Therapeutics and be responsible for and shall use Commercially Reasonable Efforts to conduct all regulatory activities with respect to seeking and maintaining Regulatory Approval for the Product for use in the Field in the Territory, including:

 

(1)                                  preparing, filing and prosecuting Regulatory Filings and seeking and maintaining Regulatory Approvals for (i) the New Drug Application Lilly filed with the FDA for Regulatory Approval for the Product for the treatment of Pulmonary Arterial Hypertension, and (ii) the Ongoing Lilly Trials;

 

(2)                                  subject to Section 5.2(i), reviewing, filing and prosecuting Regulatory Filings and seeking and maintaining Regulatory Approvals for Secondary Indications as prepared by United Therapeutics; and

 

(3)                                  addressing all regulatory matters arising after obtaining Regulatory Approval, including, only for purposes of example but not limitation, regulatory post-marketing inquiries.

 

(ii)                                 United Therapeutics will control the NDC number for the Product and, as holder of the NDC number, be responsible for all obligations with respect to providing pricing reports to government authorities having responsibility for pricing matters, including those Regulatory Authorities overseeing matters relating to Medicare and Medicaid.

 

(iii)                             The Parties anticipate seeking Regulatory Approval for registration of a separate Lilly Product Mark for the Product in the Field in the Territory. Lilly shall make Commercially Reasonable Efforts to apply for and secure registration of a Lilly Product Mark for the Product in the Field in the Territory.

 

(iv)                                Lilly will provide United Therapeutics with prompt detailed written notice of all updates and revisions of any kind or nature to the Regulatory Filings for the Product in the Field in the Territory. At United Therapeutics’ reasonable request, Lilly shall

 

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provide United Therapeutics with all Information and documentation relating to any such regulatory activities. Lilly shall keep United Therapeutics informed about all regulatory activities or developments with respect to Lilly’s Domain that are reasonably likely to materially adversely affect United Therapeutics’ Domain.

 

(d)                                   Regulatory Activities by United Therapeutics in the Field and in the Territory. With respect to the preparation and filing of Regulatory Filings for the Product in the Field in the Territory for all Secondary Indications, and for all post-marketing studies following the Regulatory Approval of the Product in the Field in the Territory:

 

(i)                                     United Therapeutics shall be responsible for and, if it opts to proceed with any such Regulatory Filing, shall use Commercially Reasonable Efforts to prepare all such Regulatory Filings for review and approval by Lilly.

 

(ii)                                 Lilly shall provide upon United Therapeutics’ request information regarding Lilly’s processes for filing Regulatory Filings as necessary for United Therapeutics to prepare all such Regulatory Filings in a form that is consistent with such processes, and United Therapeutics shall prepare all such Regulatory Filings in a form that is consistent with such processes.

 

(iii)                             United Therapeutics shall submit to Lilly each such proposed Regulatory Filing prepared for Lilly’s comments and review, such review and comments to be transmitted to United Therapeutics as soon as reasonably possible, and in any event within the periods set forth in this Section 5.3(d)(iii).  Unless Lilly notifies United Therapeutics in writing of Lilly’s proposed modification of a Regulatory Filing prepared by United Therapeutics hereunder within sixty (60) days of Lilly’s receipt thereof, such Regulatory Filing shall be deemed approved by Lilly as to form and substance and ready for filing with the relevant Regulatory Authority. If Lilly notifies United Therapeutics, pursuant to Lilly’s exercise of its authority under Section 3.4(c)(ii), that such proposed Regulatory Filing lacks necessary information, is not in accordance with Lilly’s processes for preparing Regulatory Filings, does not comply with Applicable Laws, or otherwise is not appropriate for filing with the relevant Regulatory Authority, it shall so notify United Therapeutics during such sixty (60) day period, and the Parties shall meet and confer with respect to any changes or additions recommended by Lilly. In addition, the JSC shall establish mechanisms or guidelines for the interactions following such meeting of the Parties with respect to the submission of Regulatory Filings for the Product in the Field in the Territory, including the submission of information as a follow up to any such submitted Regulatory Filing, which mechanisms or guidelines shall be consistent with the Parties’ obligations described in this Section 5.3.

 

(iv)                                Following Lilly’s approval of a Regulatory Filing under this Section 5.3 (either by express approval or by failure to reject as provided in Section 5.3(d)(iii)), Lilly agrees to file promptly, in its own name, such Regulatory Filing with the proper Regulatory Authority, with a copy of each such Regulatory Filing to be simultaneously delivered to United Therapeutics.

 

(e)                                   Ownership of Regulatory Filings. All Regulatory Approvals and Regulatory Filings, including all global databases, relating to the Product in the Field in the

 

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Territory shall be solely owned by Lilly and held in the name of Lilly or its designated Affiliates. Lilly shall designate a representative to serve as the designated regulatory official for the Product in the Field in the Territory for purposes of receiving communications from the FDA.

 

5.4                                Interactions with Authorities; Regulatory Inquiry, Inspection, and Audit.

 

(a)                                   Except with respect to marketing materials or as may be required by Applicable Law, United Therapeutics shall not communicate regarding the Product in the Field in the Territory with any Regulatory Authority unless explicitly requested or permitted in writing to do so by Lilly or unless so ordered by a Regulatory Authority, in which case United Therapeutics shall provide notice of such order promptly to Lilly. United Therapeutics may communicate with Regulatory Authorities regarding marketing materials for the Product in the Field in the Territory in accordance with an approach that ensures appropriate regulatory disclosure, which approach shall be mutually agreed upon by the Parties prior to any such communication; provided, however, that United Therapeutics, upon Lilly’s request, will deliver to Lilly a copy of any and all such marketing materials prior to filing such marketing materials with FDA. Each Party shall promptly provide the other Party with copies of all written or electronic correspondence or communications received by it from Regulatory Authorities to the extent such correspondence or communications are Useful to the other Party; provided, however, that Lilly’s obligation with respect to correspondence and communications relating to the manufacture of Product will be governed by the terms of the Manufacturing and Supply Agreement and not by this Section 5.4(a).  If such correspondence or communication requires a response, the Parties shall collaborate to prepare a draft response, which draft shall be subject to approval by Lilly (either by express approval or by failure to reject as provided in Section 5.3(d)(iii)), and where so approved by Lilly, filed by the Party from whom the FDA requested a response.

 

(b)                                   To the extent possible, and as soon as reasonably possible, Lilly shall provide to United Therapeutics reasonable written notice of all meetings and conference telephone calls with any Regulatory Authority in which matters that would be expected to relate to the Product in the Field in the Territory will be discussed. United Therapeutics shall have the right to have reasonable representation present at all such meetings and have reasonable representation attend each such conference telephone call with any Regulatory Authority in which matters that would be expected to relate to the Product in the Field in the Territory will be discussed, in each case as silent observers (except with respect to marketing materials) and to the extent permitted by such relevant Regulatory Authority. Notwithstanding anything to the contrary in this Agreement: United Therapeutics will not have a right to have representation at any meeting or in any conference telephone call that would be expected to relate to Cialis® or the manufacture of Product; and, if United Therapeutics is represented at any meeting or conference call in which matters relating to Cialis® or the manufacture of Product will be discussed, United Therapeutics will excuse itself from those discussions. To the extent possible, and as soon as reasonably possible, United Therapeutics shall provide to Lilly reasonable written notice of all meetings and conference telephone calls with any Regulatory Authority in the Territory in which matters that would be expected to relate to the Compound or the Product will be discussed. Lilly shall have the right to have reasonable representation present at all such meetings and have reasonable representation attend each such conference telephone call with any

 

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Regulatory Authority in the Territory relating to the Compound or the Product, in each case, to the extent permitted by such relevant Regulatory Authority.

 

(c)           Each Party shall notify the other Party within one (1) Business Day after it receives information about the initiation of any investigation or inquiry by any Regulatory Authority concerning the Development, manufacture, use or Commercialization of the Product in the Field to the extent such investigation or inquiry would be reasonably likely to materially adversely affect the other Party’s Domain.

 

(d)           If a Regulatory Authority desires to conduct an inspection or audit with regard to the Product of a Party’s facility or a facility under contract with a Party with respect to the activities of either Party relevant to this Agreement, such Party shall permit and cooperate with such inspection or audit, and shall cause the contract facility to permit and cooperate with such Regulatory Authority during such inspection or audit.  Lilly shall have the right to file all responses to any Regulatory Authority in connection with any such inspection or audit of any facility, where permitted by Applicable Law, and if it cannot do so under Applicable Law, then Lilly shall have the right to approve any such response that may be prepared by United Therapeutics prior to its submission to the relevant Regulatory Authority (either by express approval or by failure to reject as provided in Section 5.3(d)(iii)).  The Party so inspected or audited shall conform its activities under this Agreement to any commitments made in such a response, except to the extent that such Party believes in good faith that such commitments violate Applicable Law.

 

5.5          Drug Safety.

 

(a)           Adverse Event Reporting.  Lilly shall be responsible for all activities related to the processing, evaluation, and reporting of Adverse Events to appropriate authorities, in accordance with local requirements, for the Product for all indications (including the Field) in all Territories.  United Therapeutics shall assist Lilly in the surveillance, receipt, evaluation, and reporting of Adverse Events for the Product in the Field in the Territory.  United Therapeutics and Lilly shall enter into a safety agreement setting forth a process regarding compliance with all Applicable Laws and both Parties’ obligations related to such Adverse Event responsibilities for the Product (the “ Safety Agreement ”).  In addition, the Safety Agreement will set forth procedures for sharing information between the Parties regarding Adverse Events specific to the Field.  The Parties shall commence negotiation of such safety agreement within thirty (30) days after the Execution Date.  Notwithstanding the forgoing, United Therapeutics shall notify the JSC of any serious and/or persistent site non-compliance issues, with respect to Development and Commercialization activities conducted by United Therapeutics under this Agreement, that affect patient safety and/or data integrity along with a plan for correcting such issues.  United Therapeutics shall provide written confirmation to the JSC upon completion of any such corrective measures.  The Safety Agreement will provide that Lilly shall provide United Therapeutics with aggregated safety information related to Compound (excluding Adverse Events resulting from Development activities conducted outside the Field), subject to redaction by Lilly from such reports of proprietary information.

 

(b)           Right to Audit.  Each Party shall have the right to perform audits of the other Party’s pharmacovigilance activities relating to the Parties’ activities under the terms of

 

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this Agreement including compliance by the other Party with Applicable Law.  The frequency of such audits will be no more than once in any three (3) year period during the Term; provided that such audits may be more frequent if, in the auditing Party’s sole discretion, more frequent audits are necessary by a risk-based approach, and except in ‘for cause’ situations where, in the event of a serious or potentially serious issue, additional audits may be conducted.  The notification of one party’s intent to conduct such an audit will be provided in writing to the other Party within a reasonable time period in advance, based upon the particular circumstances of the situation.

 

5.6          Product Withdrawals and Recalls.  In the event that (a) an event, incident, or circumstance has occurred which may result in the need for a recall or other removal of the Product or any lot or lots thereof from the market in the Field in the Territory; (b) any Regulatory Authority in the Territory threatens or initiates any action to remove the Product from the market in the Field in the Territory; or (c) any Regulatory Authority in the Territory requires distribution of a “Dear Doctor” letter or its equivalent, regarding use of the Product in the Field in the Territory, Lilly shall promptly advise United Therapeutics in writing with respect thereto, and shall provide to United Therapeutics copies of all relevant correspondence, notices, and any other related documents.  Unless otherwise agreed by the Parties, Lilly shall be responsible for conducting the recall.  No recall shall be commenced in the Territory without Lilly’s prior written consent, such consent not to be unreasonably withheld.  United Therapeutics shall, upon reasonable request by Lilly assist Lilly in the conduct of any such recall or withdrawal in the Territory, which recall or withdrawal shall be controlled by Lilly in Lilly’s sole discretion.  Each Party will cooperate with the other Party in the performance of any recall or withdrawal. To the extent any recall of the Product is implemented as a result of Lilly’s fault or negligence, in addition to any obligations under ARTICLE 12, Lilly shall (i) bear all of Lilly’s costs and all Reasonable Costs incurred by United Therapeutics in connection with such recall and (ii) either, at its sole option, replace or credit United Therapeutics for the cost of the relevant lots of the Product subject to the recall.  For any and all recalls of the Product in the Field in the Territory required to the extent due to any other reason, United Therapeutics shall bear all of United Therapeutics’ costs and Lilly’s Reasonable Costs incurred in connection with such recall.

 

5.7          Development Expenses.  As between Lilly and United Therapeutics:

 

(a)           Except as provided in Sections 5.7(b), 5.7(c), 5.7(d) and 5.7(f), Lilly shall bear any and all of its costs and expenses incurred in connection with its Development under this Agreement, and United Therapeutics shall bear any and all its the costs and expenses incurred in connection with its Development under this Agreement.

 

(b)           If the FDA requires any additional clinical study to be performed for the Product prior to obtaining Regulatory Approval of the Product in PAH in the Territory as described in Section 5.2(d), United Therapeutics, at its cost and expense, shall be responsible for conducting such additional clinical study(ies) and Lilly will bear the regulatory costs and expenses incurred in connection with such additional clinical study(ies).

 

(c)           If the FDA conditions initial Regulatory Approval for Product in PAH in the Territory upon a commitment to conduct, following Regulatory Approval, any additional non-clinical study or any additional clinical study for the Product as described in Section 5.2(e), the Parties shall bear equally the Reasonable Costs of the Parties incurred in connection with

 

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such non-clinical study or such additional clinical study, as applicable in accordance with a budget to be agreed upon by the Parties and Lilly will bear the regulatory costs and expenses incurred in connection with such additional clinical study(ies).

 

(d)           If United Therapeutics pursues clinical development in a Secondary Indication pursuant to and in accordance with Section 5.2(i), United Therapeutics shall bear: any and all costs and expenses incurred in connection with such clinical development; and shall reimburse Lilly for Lilly’s Reasonable Costs in connection with making Regulatory Filings and seeking Regulatory Approval for such Secondary Indication in accordance with a budget to be agreed upon by the Parties.

 

(e)           If Lilly uses any Information obtained in the conduct of the Development referred to in one or more of Section 5.7(b) or 5.7(d) in filing for a regulatory approval for the Product outside the Territory for any indication for which a regulatory approval for the Product has not been obtained previously outside the Territory (a “ New Indication ”), then Lilly shall reimburse United Therapeutics an amount equal to fifty percent (50%) of the reasonable costs and expenses (including full time equivalent costs and Third Party costs) as having been calculated by United Therapeutics for its internal accounting purposes, such calculation performed consistently with the practice across such United Therapeutics’ organization, incurred by United Therapeutics in connection with the conduct of the Development that gave rise to the Information.  The full time equivalent rate shall be one that is appropriate for such circumstance. Payment by Lilly of such amount shall be due upon obtaining regulatory approval for such New Indication, and paid by Lilly within ten (10) days after the date of such regulatory approval.

 

(f)            If Lilly conducts any clinical development activities on behalf of United Therapeutics in United Therapeutics’ Domain pursuant to Section 5.2(c), United Therapeutics shall reimburse Lilly for Lilly’s Reasonable Costs for such activities.

 

ARTICLE 6

COMMERCIALIZATION

 

6.1          Principles of Commercialization.  The Parties intend to Commercialize the Product in the Field in the Territory as set forth in this ARTICLE 6.  Initially, the Parties intend to Develop and Commercialize the Product for PAH in the Territory but, if United Therapeutics requests that Development and Commercialization be pursued in any Secondary Indication, and Lilly approves such Development and Commercialization as described in Section 5.2(i), the Parties may seek to obtain Regulatory Approvals under this Agreement for one or more Secondary Indications within the Territory.  Lilly shall manufacture and supply the Product for such Development and Commercialization pursuant to the Manufacturing and Supply Agreement.  Each Party shall appoint a representative to be such Party’s single point of contact to facilitate information flow between the Parties relating to each Party’s experience and relationships in such Party’s Domain to assist the other Party in the other Party’s Domain.  Each Party shall first address any communications relating to Commercialization to such representatives unless otherwise agreed to by the Parties on a case-by-case basis.   Such representatives shall, without limitation, coordinate direct involvement or meetings with subject matter experts within each Party’s internal organization and/or its field account management

 

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