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Form S-1

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MannKind Corporation

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Delaware		2834		13-3607736
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

28903 North Avenue Paine

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Alfred E. Mann

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Copies to:

Frederick T. Muto, Esq. Jeremy D. Glaser, Esq. Cooley Godward LLP 4401 Eastgate Mall San Diego, California 92121 (858) 550-6000		Robert M. Smith, Esq. Dewey Ballantine LLP 1950 University Avenue, Suite 500 East Palo Alto, California 94303-2225 (650) 845-7000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:    o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:    o 

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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:    o 

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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:    o 

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If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box:    o

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Calculation of Registration Fee

Title of Each Class of		Proposed Maximum		Amount of
Securities to be Registered		Aggregate Offering Price(1)		Registration Fee
Common Stock, par value $0.01 per share		$86,250,000		$10,928

(1)	Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. Includes $11,250,000 of shares that the underwriters have the option to purchase to cover over-allotments.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS	Subject to completion	April 30, 2004

                      Shares

	MannKind Corporation

This is the initial public offering of our common stock. No public market currently exists for our common stock. We are offering all of the                 shares of our common stock offered by this prospectus. We expect the public offering price to be between $               and $                per share.

We have applied to have our common stock approved for quotation on The Nasdaq National Market under the symbol “MNKD.”

Investing in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in our common stock in “Risk factors” beginning on page 9 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

		Per share				Total
Public offering price		$				$
Underwriting discounts and commissions		$				$
Proceeds, before expenses, to us		$				$

The underwriters may also purchase up to an additional                 shares of our common stock at the public offering price, less the underwriting discounts and commissions payable by us, to cover over-allotments, if any, within 30 days from the date of this prospectus. If the underwriters exercise this option in full, the total underwriting discounts and commissions will be $               and our total proceeds, before expenses, will be $               .

The underwriters are offering the common stock as set forth under “Underwriting.” Delivery of the shares will be made on or about                     , 2004.

UBS Investment Bank

	Piper Jaffray

	Wachovia Securities

	Jefferies & Company, Inc.

	Harris Nesbitt Gerard

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You should rely only on the information provided in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with additional information or information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of shares of our common stock.

Through and including                     , 2004 (the 25th day after the date of this prospectus), federal securities laws may require all dealers that effect transactions in our common stock, whether or not participating in this offering, to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

TABLE OF CONTENTS

Prospectus summary			1
Risk factors			9
Special note regarding forward-looking statements			28
Use of proceeds			29
Dividend policy			29
Capitalization			30
Dilution			32
Selected financial data			34
Management’s discussion and analysis of financial condition and results of operations			37
Business			46
Management			68
Certain relationships and related party transactions			91
Principal stockholders			95
Description of capital stock			97
Shares eligible for future sale			104
Underwriting			107
Legal matters			111
Experts			111
Where you can find additional information			111
Index to financial statements			F-1
Exhibit 1.1
Exhibit 3.1
Exhibit 3.2
Exhibit 3.3
Exhibit 3.4
Exhibit 3.5
Exhibit 3.6
Exhibit 3.7
Exhibit 4.2
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 10.6
Exhibit 10.7
Exhibit 10.8
Exhibit 10.9
Exhibit 10.10
Exhibit 10.11
Exhibit 10.12
Exhibit 10.13
Exhibit 10.14
Exhibit 10.15
Exhibit 21.1
Exhibit 23.1

Technosphere® is our registered trademark and we have applied to register MedTone^TM with the US Patent and Trademark office. We have also applied for or registered company trademarks in other jurisdictions, including Europe and Japan. This prospectus also contains trademarks and service marks of other companies that are the property of their respective owners.

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Prospectus summary

This summary highlights selected information appearing elsewhere in this prospectus and may not contain all of the information that is important to you. This prospectus includes information about the shares we are offering as well as information regarding our business and detailed financial data. You should read this prospectus in its entirety. Unless the context requires otherwise, the words “MannKind,” “we,” “company,” “us” and “our” refer to MannKind Corporation and its subsidiary.

OVERVIEW

We are a biopharmaceutical company focused on the development and commercialization of therapeutic products for diseases such as diabetes, cancer, inflammatory and autoimmune diseases. Our lead product, the Technosphere Insulin System, which is currently in late Phase II clinical trials for the treatment of diabetes, consists of our dry powder Technosphere formulation of insulin and our MedTone inhaler through which the powder is inhaled into the deep lung. We believe the performance characteristics, convenience and ease of use of our proprietary Technosphere Insulin System have the potential to change the way diabetes is treated.

According to the American Diabetes Association, in the United States diabetes is estimated to cost society over $132 billion each year and is currently the fifth leading cause of death by disease. The United States Centers for Disease Control, or CDC, estimated that as of 2002 approximately 18.2 million people in the United States, or 6.3% of the population, suffered from type 1 or type 2 diabetes. The CDC further estimated that 13 million cases were diagnosed and under treatment as of 2002 and that 1.3 million new cases would be diagnosed per year beyond that date. According to the CDC, type 2 diabetes is the more prevalent form of the disease, affecting approximately 90% to 95% of people diagnosed with diabetes.

Typically, the treatment of type 2 diabetes starts with management by diet and exercise and progresses to treatment with various non-insulin oral medications and then to treatment with insulin. Treatment through diet and exercise has not been an effective long-term solution for the vast majority of patients with type 2 diabetes. Non-insulin oral medications, which act by increasing the amount of insulin produced by the pancreas or by increasing the sensitivity of insulin-sensitive cells, generally have significant adverse effects and are limited in their ability to manage the disease effectively. Insulin therapy usually involves administering several subcutaneous injections of insulin each day. However, this treatment regimen is inadequate for many reasons, including the inconvenience and pain associated with injections that lead patients not to comply adequately with the prescribed treatment.

Because of the problems associated with the conventional administration of insulin by injection, patients and their physicians have sought alternative methods for the delivery of insulin. One alternative to conventional insulin therapy being pursued by a number of pharmaceutical and biotechnology companies is the inhalation of an insulin formulation into the deep lung, where it can be absorbed directly into the bloodstream. Delivering insulin through the pulmonary route is less invasive than administering it by injection, which, we believe, should increase patient compliance. We anticipate that the first pulmonary insulin product developed by another pharmaceutical company may be ready for commercial sale as early as 2005. However, based on published reports, we believe this product, as well as other pulmonary insulin products in development of which we are aware, will not address a significant shortcoming of conventional insulin therapy. In particular, it would appear that these pulmonary insulin products, if and when approved, may not deliver insulin to the bloodstream rapidly enough to approximate the so-called first-phase insulin release spike that is observed in healthy individuals.

The first-phase insulin release spike occurs when a healthy person begins to eat a meal. At the beginning of the meal, the body responds with a sharp spike of insulin release that acts as a signal to the liver to shut off its release of glucose into the bloodstream. This signal turns off the source of

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In contrast, we have observed in our clinical trials that our Technosphere Insulin System produces a profile of insulin levels in the bloodstream that does approximate the natural first-phase insulin release spike.

The clinical data below show this approximation in more detail. The chart on the left shows the mean changes in blood insulin levels of 12 patients with type 1 diabetes who inhaled a dose of our Technosphere Insulin prior to eating a standardized meal. By studying patients with type 1 diabetes, we were able to observe the response to administration of Technosphere Insulin without interference from the natural production of insulin. The key feature of the response shown on the left is the time taken for blood insulin levels to peak, which was approximately ten minutes in this study. The magnitude of the response is related to the dose of Technosphere Insulin administered; we have observed in our clinical trials that the timing of the response is consistent across a range of doses. For comparison purposes, these data are presented next to a chart that shows data published in the American Journal of Medicine from nine healthy individuals who were rapidly administered a glucose solution intravenously—an experimental protocol that allowed investigators to evaluate the characteristics of the normal first-phase insulin release. These charts show that the rapid time-to-peak blood insulin levels produced by the Technosphere Insulin System approximates the rapid rise that has been demonstrated for first-phase insulin release in healthy individuals, which generally occurs within six minutes after food reaches the digestive system.

Technosphere Insulin approximation		First-phase insulin release
of first-phase insulin release		in healthy individuals

To date, we have conducted multiple Phase I and Phase II clinical trials of our Technosphere Insulin System involving more than 200 individuals in Europe and the United States. We are currently conducting randomized, placebo-controlled late Phase II clinical trials, which, when fully-enrolled, will involve approximately 340 individuals with type 2 diabetes in Europe and the United States. We expect results from some of these clinical trials to be available in the fourth quarter of 2004 with additional data to follow in early 2005. We intend to initiate Phase III clinical trials in the United States in the first half of 2005, subject to acceptance of our Phase III protocols by the United States Food and Drug Administration, or FDA.

ADVANTAGES OF OUR DIABETES THERAPY

We believe that our Technosphere Insulin System has advantages over other competitive pulmonary insulin delivery systems, principally due to our proprietary technology. These advantages include:

•	Approximates natural first-phase insulin release spike. Typically, regular insulin delivered by subcutaneous injection results in peak insulin levels in about 120 to 180 minutes. Insulin suppliers have developed “rapid-acting” insulin analogs, which are variations of insulin that reach peak blood levels in 45 to 90 minutes. Based on our analysis of published reports, we believe that other

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	pulmonary insulin products in development deliver peak insulin levels in 35 to 90 minutes. In contrast, our clinical trials have shown that our Technosphere Insulin System produces peak insulin levels in 10 to 14 minutes, which approximates the timing of the body’s natural first-phase insulin release spike.
•	Ease of use. Our MedTone inhaler is light, is easy to use and fits in the palm of the patient’s hand. To administer a dose, the patient opens the device, inserts a single-dose cartridge of Technosphere Insulin powder into the inhaler, inserts the mouthpiece into the mouth and takes a deep breath, thereby drawing the powder deep into the lungs. Moreover, we believe the timing for administering Technosphere Insulin is more convenient than subcutaneous injection. In our clinical trials, the optimal time for taking a dose of Technosphere Insulin has been found to be at the start of a meal or shortly thereafter. With subcutaneous injection, the user must try to time a dose 30 to 45 minutes before the expected mealtime.
•	More efficient delivery of pulmonary insulin. Based on our clinical trials of Technosphere Insulin and on our analysis of published reports of the performance of other pulmonary insulin systems in development, we believe that the inhalation of a specified amount of insulin formulated as Technosphere Insulin produces blood insulin levels over a measured period of time that are approximately three times greater than that produced by the same amount of insulin administered via the pulmonary delivery systems being developed by other pharmaceutical companies.
•	Safety. Based on our clinical trials to date, Technosphere Insulin appears to cross lung tissue rapidly, with no observed accumulation of either insulin or the carrier particles in the lung. In addition, our preclinical studies have shown that the Technosphere material does not need to be metabolized to be eliminated and is rapidly excreted in the urine. Technosphere Insulin has not generated any serious, drug-related adverse events in our clinical trials to date.

Because of these advantages, we believe our Technosphere Insulin System will be beneficial in patients that have advanced to the point of requiring conventional insulin therapy, patients that are being treated with non-insulin oral medications as well as patients currently using diet and exercise therapy but who are having difficulty achieving proper blood glucose control. As a result, we believe that our Technosphere Insulin System has the potential to become the first line of therapy for the treatment of type 2 diabetes following diet and exercise, which would represent a paradigm shift in the treatment of this disease.

OUR STRATEGY FOR DIABETES THERAPY

•	Commercialize our Technosphere Insulin System for the insulin-using diabetes market. We intend to advance our Technosphere Insulin System into and through Phase III clinical trials and then into commercialization, with the goal of establishing a significant presence for Technosphere Insulin in the insulin-using diabetes market.
•	Establish our Technosphere Insulin System as the preferred drug therapy within the broader population of people with type 2 diabetes. Our target markets also include patients with type 2 diabetes who are currently using conventional therapies other than insulin, such as management by diet and exercise and by non-insulin oral medications. Given the potential advantages of our product, we believe our Technosphere Insulin System has the potential to become the preferred drug therapy for the broader type 2 diabetes population.
•	Seek a strategic collaboration for the development, marketing and commercialization of our Technosphere Insulin System. We are actively exploring collaborations with large pharmaceutical companies in the United States, Europe and Japan that would provide marketing, sales and financial resources to develop, commercialize and sell our Technosphere Insulin System. To date, we have not licensed or transferred any of our rights to this product and we believe this will enable us to obtain advantageous terms in potential collaborations. We intend to retain worldwide manufacturing rights for our Technosphere Insulin System.

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OUR RESEARCH PROGRAMS

We are developing additional applications for our proprietary Technosphere formulation technology by formulating other drugs for pulmonary delivery, primarily for metabolic and immunological diseases. We are currently collaborating with Novo Nordisk A/S to develop a Technosphere formulation for pulmonary delivery of an undisclosed drug. We believe our proprietary Technosphere formulation technology can also be extended to other forms of local administration, such as gastrointestinal delivery, because of its apparent ability to stabilize drugs and facilitate transport across cellular membranes.

We are also developing therapies for the treatment of solid-tumor cancers. We have conducted initial studies of our cancer therapy in Europe and the United States, including Phase I/ II clinical trials in the United States that involved 42 patients who had progressed to late stages of skin cancer. We observed that the delivery of a prototype formulation was well tolerated by patients and produced an appropriate response by their immune system. Although we believe that our clinical data to date have been encouraging, we have continued to refine our cancer therapy program. We have developed several product candidates and expect to begin preclinical safety tests for one of these product candidates later this year, with the goal of commencing clinical trials in 2005.

RISKS AFFECTING US

We are subject to a number of risks, which you should be aware of before you decide to buy our common stock. These risks are discussed more fully in “Risk factors.” We are a development stage company with no commercial products. We have not received regulatory approval for, nor received commercial revenues from, any of our product candidates. It is possible that we may never successfully commercialize any of our product candidates. As of December 31, 2003, we had an accumulated deficit of $367.0 million. We expect to continue to incur losses over at least the next several years, and we may never become profitable. Since our inception, we have funded our operations principally through the sale of equity securities, and we expect that we will need to secure additional funding or raise additional capital to enable us to continue to develop and commercialize our Technosphere Insulin System and other product candidates and for other reasons. We cannot assure you that we will be able to obtain additional financing on acceptable terms, or at all.

CORPORATE INFORMATION

We were incorporated in the State of Delaware on February 14, 1991. Our principal executive offices are located at 28903 North Avenue Paine, Valencia, California 91355, and our telephone number at that address is (661) 775-5300. Our website address is http://www.mannkindcorp.com. The information contained in, and that can be accessed through, our website is not incorporated into and does not form a part of this prospectus.

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The offering

Common stock offered by us		shares
Common stock to be outstanding after this offering		shares
Use of proceeds		We estimate that the net proceeds from this offering will be approximately $           million , or $           million if the underwriters exercise their over-allotment option in full, assuming an initial public offering price of $           per share. We intend to use the net proceeds from this offering to continue the development and prepare for the commercialization of our Technosphere Insulin System, to expand our Technosphere Insulin System manufacturing operations and quality systems, to expand our other product development programs, to fund operations, to provide working capital and for other general corporate purposes. See “Use of proceeds.”
Proposed Nasdaq National Market symbol		MNKD

The number of shares of our common stock shown in the table above to be outstanding after the closing of this offering is based on approximately 59,924,182 shares of our common stock outstanding as of December 31, 2003 and excludes:

•	6,380,789 shares of our common stock issuable upon exercise of options outstanding as of December 31, 2003, with a weighted average exercise price of $3.48 per share, of which options to purchase 2,185,887 shares were exercisable as of that date at a weighted average exercise price of $3.32 per share;
•	130,126 shares of our common stock issuable upon exercise of warrants outstanding as of December 31, 2003, with a weighted average exercise price of $16.89 per share, all of which were exercisable as of that date;
•	1,010,902 shares of our common stock available for future grant under our 2004 Equity Incentive Plan as of December 31, 2003;
•	additional shares of our common stock reserved for future issuance under our 2004 Equity Incentive Plan effective as of the completion of this offering; and
•	shares of our common stock reserved for future issuance under our 2004 Non-Employee Directors’ Stock Option Plan and 2004 Employee Stock Purchase Plan, which we have adopted effective upon the completion of this offering.

Unless otherwise indicated, all information in this prospectus assumes:

•	a one-for     reverse split of our common stock to be completed prior to the closing of this offering;
•	the conversion, upon the closing of this offering, of all 267,354 shares of our Series A redeemable convertible preferred stock outstanding as of December 31, 2003, all 192,618 shares of our Series B convertible preferred stock outstanding as of December 31, 2003 and all 980,392 outstanding shares of our Series C convertible preferred stock, into an aggregate of            shares of our common stock, based on an assumed initial public offering price of $           per share; and
•	that the underwriters do not exercise their option to purchase up to            shares of our common stock to cover over-allotments, if any.

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Summary financial data

We were incorporated in February 1991 under the laws of the State of Delaware as Pharmaceutical Discovery Corporation, or PDC. On December 12, 2001, AlleCure Corp., or AlleCure, and CTL ImmunoTherapies Corp., or CTL, merged with wholly-owned subsidiaries of PDC. Pursuant to the merger, all of the outstanding shares of capital stock of AlleCure and CTL were exchanged for shares of capital stock of PDC, and AlleCure and CTL became wholly-owned subsidiaries of PDC. In connection with the merger, PDC changed its name to MannKind Corporation. On December 31, 2002, AlleCure and CTL merged with and into MannKind and ceased to be separate entities. For periods prior to January 1, 2002, the results of operations have been presented on a combined basis. For periods subsequent to December 31, 2001, the financial statements of MannKind and its wholly-owned subsidiaries have been presented on a consolidated basis.

The following statements of operations data for the years ended December 31, 1999 and 2000 are unaudited. The following statement of operations data for the years ended December 31, 2001, 2002 and 2003, and for the period from February 14, 1991, the date of our inception, to December 31, 2003, and the balance sheet data as of December 31, 2003, are derived from our audited financial statements. The statement of operations data for each of the three years in the period ended December 31, 2003 and for the period from February 14, 1991, the date of our inception, to December 31, 2003 and the balance sheet data at December 31, 2003 were derived from our financial statements, which have been audited by Deloitte & Touche LLP, independent auditors, and are included elsewhere in this prospectus. The historical results are not necessarily indicative of results to be expected in any future period. See the notes to the audited financial statements included elsewhere in this prospectus for an explanation of the method used to determine the number of shares used in computing historical and pro forma basic and diluted net loss per share.

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The following financial data is only a summary and should be read in conjunction with our financial statements and the related notes included elsewhere in this prospectus and “Management’s discussion and analysis of financial condition and results of operations.” The following selected financial data is not intended to replace our financial statements included elsewhere in this prospectus.

																								Cumulative
																								period from
				Year ended December 31,																				February 14,
																								1991 (date of
																								inception) to
Statement of operations data:				1999				2000				2001				2002				2003				December 31, 2003
				(in thousands, except per share data)
Revenue				$	74			$	154			$	326			$	—			$	—			$	2,858
Operating expenses:
	Research and development				3,994				20,542				19,763				42,724				45,613				143,647
	General and administrative				1,654				4,854				10,629				13,215				20,699				57,457
	In-process research and development costs				—				—				19,726				—				—				19,726
	Goodwill impairment				—				—				—				151,428				—				151,428
		Total operating expenses			5,648				25,396				50,118				207,367				66,312				372,258
Loss from operations					(5,574	)			(25,242	)			(49,792	)			(207,367	)			(66,312	)			(369,400	)
Other income (expense)					50				204				288				487				(25	)			(2,196	)
Interest income (expense)					(155	)			379				1,261				617				459				4,639
Loss before provision for income taxes					(5,679	)			(24,659	)			(48,243	)			(206, 263	)			(65,878	)			(366,957	)
Income taxes					—				(2	)			(2	)			(2	)			(1	)			(14	)
Net loss					(5,679	)			(24,661	)			(48,245	)			(206,265	)			(65,879	)			(366,971	)
Deemed dividend related to beneficial conversion feature of convertible preferred stock					—				—				—				(1,421	)			(1,017	)			(2,438	)
Accretion on redeemable preferred stock					—				(149	)			(239	)			(251	)			(253	)			(892	)
Net loss applicable to common stockholders				$	(5,679	)		$	(24,810	)		$	(48,484	)		$	(207,937	)		$	(67,149	)		$	(370,301	)
Basic and diluted net loss per share:
	Historical			$	(0.46	)		$	(1.32	)		$	(1.53	)		$	(5.14	)		$	(1.21	)
	Pro forma(1)																			$
Shares used to compute basic and diluted net loss per share:
	Historical				12,374				18,835				31,601				40,416				55,463
	Pro forma(1)

(1)

Pro forma to give effect to the conversion, upon the closing of this offering, of all 267,354 shares of our Series A redeemable convertible preferred stock outstanding as of December 31, 2003, all 192,618 shares of our Series B convertible preferred stock outstanding as of December 31, 2003 and all 980,392 outstanding shares of our Series C convertible preferred stock, at an assumed initial public offering price of $         per share, into             shares of our common stock.

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		As of December 31, 2003
										Pro forma as
Balance sheet data:		Actual				Pro forma(1)				adjusted(2)
		(in thousands)
Cash, cash equivalents and marketable securities			$55,945			$				$
Working capital			49,097
Total assets			125,876
Deferred compensation and other liabilities			404
Redeemable convertible preferred stock			5,188
Deficit accumulated during the development stage			(366,971	)
Total stockholders’ equity			111,577

(1)	Pro forma to give effect to the conversion, upon the closing of this offering, of all 267,354 shares of our Series A redeemable convertible preferred stock outstanding as of December 31, 2003, all 192,618 shares of our Series B convertible preferred stock outstanding as of December 31, 2003 and all 980,392 outstanding shares of our Series C convertible preferred stock, at an assumed initial public offering price of $         per share, into             shares of our common stock.
(2)	Pro forma as adjusted to give further effect to the sale of                                    shares we are offering pursuant to this prospectus and the receipt of the estimated net proceeds therefrom.

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Risk factors

Investing in our common stock involves a high degree of risk. You should consider carefully the risks described below and the other information in this prospectus, including the financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our common stock. If any of the following risks actually occur, they may materially harm our business and our financial condition and results of operations. In this event, the market price of our common stock could decline, and you could lose part or all of your investment.

RISKS RELATED TO OUR BUSINESS

We have a history of operating losses, we expect to continue to incur losses, and we may never become profitable.

We have never been profitable, and, as of December 31, 2003, we had an accumulated deficit of $367.0 million and a net loss of $65.9 million for the year ended December 31, 2003. The accumulated deficit has resulted principally from the write-off of goodwill, costs incurred in our research and development programs and general operating expenses. We expect to make substantial expenditures and to incur additional operating losses in the future in order to further develop and commercialize our product candidates, including costs and expenses to complete clinical trials, seek regulatory approvals and market our product candidates. This accumulated deficit may increase significantly as we expand development and clinical trial efforts. Our losses have had, and are expected to continue to have, an adverse impact on our working capital, total assets and stockholders’ equity. Our ability to achieve and sustain profitability depends upon obtaining regulatory approvals for and successfully commercializing our Technosphere Insulin System, either alone or with third parties. We do not currently have the required approvals to market any of our product candidates, and we may not receive them. We may not be profitable even if we succeed in commercializing any of our product candidates. As a result, we cannot be sure when we will become profitable, if at all.

If we fail to raise additional capital, our financial condition and business will suffer.

Based upon our current expectations, we believe that our existing capital resources, including the proceeds of this offering, will enable us to continue planned operations into the second quarter of 2005. However, we cannot assure you that our plans will not change or that changed circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate. Accordingly, we expect that we will need to raise additional capital for the continued development and commercialization of our Technosphere Insulin System and other product candidates and for other reasons. We cannot assure you that we will be able to obtain this additional financing on acceptable terms or at all. Any future financing may dilute or otherwise adversely affect your investment. For example, new investors could have rights superior to existing stockholders. If adequate funds are not available, we may be required to delay, reduce the scope of, relinquish rights with respect to, or

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eliminate the development and marketing of some or all of our product candidates. The lack of adequate funds by us could result in the loss of your entire investment.

The amount of additional funds we need will depend on a number of factors, including:

•	the rate of progress and costs of our clinical trials and research and development activities, including costs of procuring clinical materials and expanding our own manufacturing facilities;
•	actions taken by the FDA and other regulatory authorities;
•	our success in establishing strategic business collaborations;
•	the timing and amount of milestone or other payments we might receive from potential third parties;
•	the timing and amount of payments we might receive from potential licenses;
•	the costs of discontinuing projects and technologies or decommissioning existing facilities, if we undertake those activities;
•	our degree of success in commercializing our Technosphere Insulin System or our other product candidates;
•	the emergence of competing technologies and products and other adverse market developments; and
•	the costs of preparing, filing, prosecuting, maintaining and enforcing patent claims and other intellectual property rights or defending against claims of infringement by others.

We have identified a need to raise additional capital to assist us in funding our clinical trials and in managing our Technosphere Insulin System through to commercialization. We have raised capital in the past primarily through the private placement of equity securities. We intend to raise additional capital through strategic business collaborations. In addition, we may in the future pursue the sale of equity and/or debt securities, or the establishment of other funding facilities. We also may seek to raise additional capital by pursuing opportunities for the licensing, sale or divestiture of certain intellectual property and other assets, including our Technosphere technology platform. We cannot assure you, however, that any strategic collaborations, sales of securities or sale or license of assets will be available to us on a timely basis or on acceptable terms, if at all. We may be required to enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop independently, and any such relationships may not be on terms as commercially favorable to us as might otherwise be the case. In the event that sufficient additional funds are not obtained through strategic collaboration opportunities, licensing arrangements, sales of securities and/or asset sales on a timely basis, we may be required to reduce expenses through the delay, reduction or curtailment of our projects, including our Technosphere Insulin System development activities, or further reduction of costs for facilities and administration.

We depend heavily on the successful development and commercialization of our lead product candidate, the Technosphere Insulin System, which is still under development, and our other product candidates, which are in early stages of preclinical development.

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We have expended significant time, money and effort in the development of our lead product candidate, the Technosphere Insulin System, which has not yet received regulatory approval and which may never be commercialized. Before we can market and sell our Technosphere Insulin System, we will need to advance our Technosphere Insulin System to Phase III clinical trials and demonstrate in these trials that our Technosphere Insulin System is safe and effective. We currently anticipate conducting several pivotal Phase III clinical trials as well as several special population studies involving, in total, several thousand patients, which will require the expenditure of additional time and resources. We must also receive the necessary approvals from the FDA and similar foreign regulatory agencies before this product can be marketed in the United States or elsewhere. Even if we were to receive regulatory approval, we ultimately may be unable to gain market acceptance of our Technosphere Insulin System for a variety of reasons, including the treatment and dosage regimen, potential adverse effects, the availability of alternative treatments and cost effectiveness. If we fail to commercialize our Technosphere Insulin System, our business, financial condition and results of operations will be materially and adversely affected.

We are seeking to develop and expand our portfolio of product candidates through our internal research programs and through licensing or otherwise acquiring the rights to therapeutics in the areas of cancer and immunology. All of these product candidates will require additional research and development and significant preclinical, clinical and other testing prior to seeking regulatory approval to market them. Accordingly, these product candidates will not be commercially available for many years, if at all.

A significant portion of the research that we are conducting involves new and unproven technologies. Research programs to identify new product candidates require substantial technical, financial and human resources. Even if our research programs identify candidates that initially show promise, these candidates may fail to progress to clinical development for any number of reasons, including discovery upon further research that these candidates have adverse effects or other characteristics that indicate they are unlikely to be effective drugs or therapeutics. In addition, the clinical results we obtain at one stage are not necessarily indicative of future testing results. If we fail to successfully complete the development and commercialization of our Technosphere Insulin System or develop or expand our other product candidates, or are significantly delayed in doing so, our business and results of operations will be harmed and the value of our stock could decline.

If we fail to enter into a strategic collaboration with respect to our Technosphere Insulin System, our most clinically advanced program, we may not be able to execute on our business model.

If we are not able to enter into collaborations for our product candidates at relatively early stages, we could be required to undertake and fund further development, clinical trials, manufacturing and marketing activities solely at our own expense. For example, we are currently seeking to enter into a collaboration with respect to our Technosphere Insulin System. If we are not able to enter into a collaboration prior to the commencement of Phase III clinical trials, upon successful completion of our Phase II clinical trials we intend to fund the initial Phase III clinical trials ourselves from the proceeds of this offering. Failure to enter into a collaboration with respect to our Technosphere Insulin System following initial Phase III clinical trials or for any other product candidate would substantially increase our requirements for capital, which might not be available on favorable terms, or at all. Alternatively,

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we would have to substantially reduce our development efforts, which would delay or otherwise impede the commercialization of our product candidates.

If testing of a particular product candidate does not yield successful results, we will be unable to commercialize that product candidate.

•	safety and efficacy results obtained in our preclinical and initial clinical testing may be inconclusive or may not be predictive of results obtained in later-stage clinical trials or following long-term use and we may be forced to stop developing product candidates that we currently believe are important to our future;
•	the data collected from clinical trials of our product candidates may not be sufficient to support FDA or other regulatory approval;
•	after reviewing test results, we or any potential collaborators may abandon projects that we previously believed were promising; and
•	our product candidates may not produce the desired effects or may result in adverse health effects or other characteristics that preclude regulatory approval or limit their commercial use if approved.

Our Technosphere Insulin System is intended for multiple uses per day. Due to the size and time frame over which the clinical trials are conducted, the results of clinical trials may not be indicative of the effects of long-term use. If long-term use of our product results in adverse health effects or reduced efficacy or both, the FDA or other regulatory agencies may terminate our ability to market and sell our Technosphere Insulin System, may narrow the approved indications for use or otherwise require restrictive product labeling, or may require further clinical trials, which may be time-consuming and expensive, and may not produce favorable results.

As a result of any of these events, the FDA, other regulatory authorities, our collaborators or we may suspend or terminate clinical trials or marketing of our Technosphere Insulin System at any time. Any suspension or termination of our clinical trials or marketing activities may harm our business and results of operations and the market price of our common stock may decline.

If third-party payors do not reimburse customers for our products, they might not be used or purchased, which would adversely affect our revenues.

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In the United States and elsewhere, sales of prescription pharmaceuticals still depend in large part on the availability of reimbursement to the consumer from third-party payors, such as governmental and private insurance plans. Third-party payors are increasingly challenging the prices charged for medical products and services. In addition, because each third-party payor individually approves reimbursement, obtaining these approvals is a time-consuming and costly process that will require us to provide scientific and clinical support for the use of each of our products to each third-party payor separately with no assurance that approval will be obtained. This process could delay the market acceptance of new products and could have a negative effect on our revenues and operating results. Even if we succeed in bringing one or more products to market, we cannot be certain that these products will be considered cost-effective or that reimbursement to the consumer will be available, in which case our business and results of operations will be harmed and the market price of our common stock may decline.

If we do not achieve our projected development goals in the timeframes we announce and expect, the commercialization of our product candidates may be delayed and our business will be harmed.

•	our ability to obtain adequate funding;
•	the rate of progress, costs and results of our clinical trial and research and development activities;
•	the receipt of approvals by our competitors and by us from the FDA and other regulatory agencies;
•	other actions by regulators;
•	our ability to access sufficient, reliable and affordable supplies of components used in the manufacture of our product candidates, including insulin and other materials for our Technosphere Insulin System;
•	the costs of expanding and maintaining manufacturing operations, as necessary;
•	the extent of scheduling conflicts with participating clinicians and clinical institutions; and
•	our ability to identify and enroll patients who meet clinical trial eligibility criteria.

In addition, if we do not obtain sufficient additional funds through strategic collaborations, sales of securities or the sale or license of our assets on a timely basis, we may be required to reduce expenses by delaying, reducing or curtailing our Technosphere Insulin System or other product development activities, which may impact our ability to meet milestones. If we fail to commence or complete, or experience delays in or are forced to curtail, our proposed clinical programs or otherwise fail to adhere to our projected development goals in the timeframes we announce and expect, our business and results of operations will be harmed and the market price of our common stock may decline.

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If our third-party collaborators do not perform satisfactorily or if our collaborations fail, development or commercialization of our product candidates may be delayed and our business could be harmed.

If we enter into collaborative arrangements, we will have less control over the timing, planning and other aspects of our clinical trials, and the sale and marketing of our product candidates. We cannot assure you that we will be able to enter into satisfactory arrangements with third parties as contemplated or that any of our existing or future collaborations will be successful.

If we are unable to manage growth in connection with our transition from an early-stage development company to a company that commercializes therapeutics, our operations will suffer.

We have never manufactured any of our product candidates in commercial quantities, and if we fail to develop an effective manufacturing capability for our product candidates or to engage third-party manufacturers with this capability, we may be unable to commercialize these products.

We have never manufactured any of our product candidates in commercial quantities. As our product candidates move through the regulatory process, we will need to either develop the capability of manufacturing on a commercial scale or engage third-party manufacturers with this capability, and we cannot assure you that we will be able to do either successfully. The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, especially in scaling up initial production. These problems include difficulties with production costs and yields, quality control and assurance and shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. In addition, before we would be able to produce commercial quantities of Technosphere Insulin at our Danbury facility, it will have to undergo a pre-approval inspection by the FDA. The expansion process and preparation for the FDA’s pre-approval inspection for commercial production at the Danbury facility could take an additional six months or longer. If we use a third-party supplier to formulate Technosphere Insulin or produce its raw material, the transition could also require significant start-up

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time to qualify and implement the manufacturing process. If we engage a third-party manufacturer, our third-party manufacturer may not perform as agreed or may terminate its agreement with us.

Any of these factors could cause us to delay or suspend clinical trials, regulatory submissions, required approvals or commercialization of our product candidates, entail higher costs and result in our being unable to effectively commercialize our products. Furthermore, if we or our potential third-party manufacturers fail to deliver the required commercial quantities of our products on a timely basis and at commercially reasonable prices, and we were unable to promptly find one or more replacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalent volume and on a timely basis, we would likely be unable to meet demand for our products and we would lose potential revenues.

If our suppliers fail to deliver materials and services needed for the production of our Technosphere Insulin System in a timely and sufficient manner, or they fail to comply with applicable regulations, our business and results of operations will be harmed and the market price of our common stock may decline.

If we fail to enter into collaborations with third parties, we will be required to establish our own sales, marketing and distribution capabilities, which could delay the commercialization of our products and harm our business.

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collaborations, that any such collaboration will be successful or, if not, that we will successfully develop our own sales, marketing and distribution capabilities.

We face substantial competition in the development of our product candidates and may not be able to compete successfully, and our product candidates may be rendered obsolete by rapid technological change.

Many of our existing or potential competitors have, or have access to, substantially greater financial, research and development, production and sales and marketing resources than we do and may be better equipped than we are to develop, manufacture, market and sell competing products.

The rapid rate of scientific discoveries and technological changes could result in one or more of our products becoming obsolete or noncompetitive. Our competitors may develop or introduce new products that would render our technology and our Technosphere Insulin System less competitive, uneconomical or obsolete. Our future success will depend not only on our ability to develop our products but to improve them and to keep pace with emerging industry developments. We cannot assure you that we will be able to do so.

We also expect to face increasing competition from universities and other non-profit research organizations. These institutions carry out a significant amount of research and development in the areas of diabetes, cancer and inflammatory and autoimmune diseases. These institutions are becoming increasingly aware of the commercial value of their findings and are more active in seeking patent and other proprietary rights as well as licensing revenues.

If our products do not become widely accepted by physicians, patients, third-party payors and the healthcare community, we may be unable to generate significant revenue, if any.

The degree of market acceptance of any medical product depends on many factors, including:

•	the willingness and ability of patients and the healthcare community to adopt new technologies;
•	the ability to manufacture the product in sufficient quantities with acceptable quality and at an acceptable cost;
•	the perception of patients and the healthcare community, including third-party payors, regarding the safety, efficacy and benefits of the product compared to those of competing products or therapies;
•	the convenience and ease of administration of the products relative to existing treatment methods;

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•	the pricing and reimbursement of our products relative to existing treatment therapeutics and methods; and
•	marketing and distribution support for our products.

Physicians will not recommend our products until clinical data or other factors demonstrate the safety and efficacy of our products as compared to other treatments. Even if the clinical safety and efficacy of our product candidates is established, physicians may elect not to recommend these product candidates for a variety of factors, including the reimbursement policies of government and third-party payors and the effectiveness of our competitors in marketing their therapies. Because of these and other factors, our products may not gain market acceptance, which would materially harm our business, financial condition and results of operations.

If product liability claims are brought against us, we may incur significant liabilities and suffer damage to our reputation.

We currently carry global liability insurance in amounts we believe are reasonable to cover us from potential damages arising from current and previous clinical trials of our Technosphere Insulin System. In addition, we carry local policies per trial. We intend to obtain product liability coverage for commercial sales in the future. However, insurance coverage in our industry can be very expensive and difficult to obtain and we cannot assure you that we will be able to obtain sufficient coverage at an acceptable cost, if at all. If we are sued for any injury caused by our technology or products, or by third-party products that we manufacture, our liability could exceed our insurance coverage and total assets.

We deal with hazardous materials and must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

When we purchased the facilities located in Danbury, Connecticut, there was a soil cleanup plan in process. As part of the purchase, we obtained an indemnification from the seller related to the remediation of the soil for all known environmental conditions that existed at the time the seller acquired the property. The seller is, in turn, indemnified for these known environmental conditions by

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the previous owner. We also received an indemnification from the seller for environmental conditions created during its ownership of the property and for environmental problems unknown at the time that the seller acquired the property. These latter indemnities are limited to the purchase price that we paid for the Danbury facilities. In the event that any cleanup costs are imposed on us and we are unable to collect the full amount of these costs and expenses from the seller or the party responsible for the contamination, we may be required to pay these costs and our business and results of operations may be harmed.

If we lose any key employees or scientific advisors, our operations and our ability to execute our business strategy could be materially harmed.

The loss of the services of any principal member of our management and scientific staff, including Messrs. Mann, Edstrom, Burns and Anderson and Drs. Cheatham and Thomson, could significantly delay or prevent the achievement of our scientific and business objectives. All of our employees are “at will” and we currently do not have employment agreements with any of the principal members of our management or scientific staff, and we do not have key person life insurance to cover the loss of any of these individuals. Replacing key employees may be difficult and time-consuming because of the limited number of individuals in our industry with the skills and experience required to develop, gain regulatory approval of and commercialize our product candidates successfully.

We have relationships with scientific advisors at academic and other institutions to conduct research or assist us in formulating our research, development or clinical strategy. These scientific advisors are not our employees and may have commitments to, and other obligations with, other entities that may limit their availability to us. We have limited control over the activities of these scientific advisors and can generally expect these individuals to devote only limited time to our activities. Failure of any of these persons to devote sufficient time and resources to our programs could harm our business. In addition, these advisors may have arrangements with other companies to assist those companies in developing technologies that may compete with our product candidates.

If our Chief Executive Officer is unable devote sufficient time and attention to our business, our operations and our ability to execute our business strategy could be materially harmed.

Our facilities that are located in Southern California may be affected by natural disasters.

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carry for fire damage and for business interruption may be insufficient to compensate us for any losses that we may incur.

RISKS RELATED TO REGULATORY APPROVALS

Our product candidates must undergo rigorous preclinical and clinical testing and regulatory approvals, which could be costly and time-consuming and subject us to unanticipated delays or prevent us from marketing any products.

•	product design, development, manufacture and testing;
•	product labeling;
•	product storage and shipping;
•	pre-market clearance or approval;
•	advertising and promotion; and
•	product sales and distribution.

Clinical testing can be costly and take many years, and the outcome is uncertain and susceptible to varying interpretations. We expect, based on our interactions with the FDA and on our understanding of the interactions between the FDA and other pharmaceutical companies developing pulmonary insulin delivery systems, that we will need safety data covering at least two years from patients treated with our Technosphere Insulin System and that we must conduct a two-year carcinogenicity study of Technosphere Insulin in rodents. We cannot be certain when or under what conditions we will undertake further clinical trials, including a Phase III program for our Technosphere Insulin System. The clinical trials of our product candidates may not be completed on schedule, and the FDA or foreign regulatory agencies may order us to stop or modify our research or these agencies may not ultimately approve any of our product candidates for commercial sale. The data collected from our clinical trials may not be sufficient to support regulatory approval of our various product candidates, including our Technosphere Insulin System. Even if we believe the data collected from our clinical trials are sufficient, the FDA has substantial discretion in the approval process and may disagree with our interpretation of the data. Our failure to adequately demonstrate the safety and efficacy of any of our product candidates would delay or prevent regulatory approval of our product candidates, which could prevent us from achieving profitability.

The requirements governing the conduct of clinical trials and manufacturing and marketing of our product candidates, including our Technosphere Insulin System, outside the United States vary widely from country to country. Foreign approvals may take longer to obtain than FDA approvals and can require, among other things, additional testing and different clinical trial designs. Foreign regulatory approval processes include all of the risks associated with the FDA approval processes. Some of those agencies also must approve prices of the products. Approval of a product by the FDA does not ensure approval of the same product by the health authorities of other countries. In addition, changes in regulatory policy in the United States or in foreign countries for product approval during the period of product development and regulatory agency review of each submitted new application may cause delays or rejections.

The process of obtaining FDA and other required regulatory approvals, including foreign approvals, is expensive, often takes many years and can vary substantially based upon the type, complexity and

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novelty of the products involved. To our knowledge, no pulmonary insulin product has yet been approved for marketing and we are not aware of any precedent for the successful commercialization of products based on our technology or technologies similar to ours. The FDA likely will regulate our Technosphere Insulin System as a “combination product” because of the complex nature of the system that includes the combination of a new drug (Technosphere Insulin) and a new medical device (the MedTone inhaler used to administer the insulin). There have been some indications from the FDA that the review of a future marketing application for our Technosphere Insulin System will involve three separate review groups of the FDA: (1) the Metabolic and Endocrine Drug Products Division; (2) the Pulmonary Drug Products Division; and (3) the Center for Devices and Radiological Health within the FDA that reviews medical devices. We currently understand that the Metabolic and Endocrine Drug Products Division will be the lead group and will obtain consulting reviews from the other two FDA groups. The FDA has not made an official final decision in this regard, however, and we can make no assurances at this time about what impact FDA review by multiple groups will have on the review and approval of our product or whether we are correct in our understanding of how the Technosphere Insulin System will be reviewed.

We are developing our Technosphere Insulin System as a new treatment for diabetes utilizing unique, proprietary components. The fact that we are seeking approval of a new combination-product therapy may lengthen the product development and regulatory review process, increase our development costs and result in the delay or prevention of the commercialization of our Technosphere Insulin System. The FDA advised us that the Technosphere Insulin System must be tested as an entire system and that changes to either the MedTone inhaler, the Technosphere material or the insulin could result in FDA requirements to repeat clinical studies because the agency will not permit bridging studies. Bridging studies are traditionally performed on investigational medical products to demonstrate relevance of data obtained on older generation products to newer changed products. Our product candidates that are currently in development for the treatment of cancer and autoimmune and inflammatory diseases also face similar obstacles and costs.

We have only limited experience in filing and pursuing applications necessary to gain regulatory approvals, which may impede our ability to obtain timely approvals from the FDA or foreign regulatory agencies, if at all. We will not be able to commercialize our Technosphere Insulin System and other product candidates until we have obtained regulatory approval, and any delay in obtaining, or inability to obtain, regulatory approval could harm our business. In addition, regulatory authorities may also limit the segments of the diabetes population to which we or others may market our Technosphere Insulin System or limit the target population for our other product candidates.

If we do not comply with regulatory requirements at any stage, whether before or after marketing approval is obtained, we may be subject to criminal prosecution, fined or forced to remove a product from the market or experience other adverse consequences, including restrictions or delays in obtaining regulatory marketing approval. Additionally, we may not be able to obtain the labeling claims necessary or desirable for product promotion. We may also be required to undertake post-marketing trials. In addition, if we or other parties identify adverse effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and a reformulation of our products, additional clinical trials, changes in labeling of, or indications of use for, our products and/or additional marketing applications may be required. If we encounter any of the foregoing problems, our business and results of operations will be harmed and the market price of our common stock may decline.

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Even if we obtain regulatory approval for our product candidates, we will be subject to stringent, ongoing government regulation.

If we or any potential third-party manufacturer or supplier fail to comply with these cGMP or QSR requirements, regulatory authorities may subject us to regulatory action, including criminal prosecutions, fines and suspension of the manufacture of our products.

Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the indicated uses for which the product candidate may be marketed or contain requirements for potentially costly post-marketing follow-up clinical trials.

Adverse events in related technology fields or in other companies’ clinical trials could delay or prevent us from obtaining regulatory approval or negatively impact public perception of our product candidates.

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RISKS RELATED TO INTELLECTUAL PROPERTY

If we are unable to protect our proprietary rights, we may not be able to compete effectively, or operate profitably.

Moreover, the issuance of a patent is not conclusive as to its validity or enforceability and it is uncertain how much protection, if any, will be afforded by our patents if we attempt to enforce them and they are challenged in court or in other proceedings, such as oppositions, which may be brought in US or foreign jurisdictions to challenge the validity of a patent. A third party may challenge the validity or enforceability of a patent after its issuance by the US Patent and Trademark Office, or USPTO.

We also rely on unpatented technology, trade secrets, know-how and confidentiality agreements. We require our officers, employees, consultants and advisors to execute proprietary information and invention and assignment agreements upon commencement of their relationships with us. We also execute confidentiality agreements with outside collaborators. There can be no assurance, however, that these agreements will provide meaningful protection for our inventions, trade secrets or other proprietary information in the event of unauthorized use or disclosure of such information. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business, results of operations and financial condition could be adversely affected.

If we become involved in lawsuits to protect or enforce our patents or the patents of our collaborators or licensors, we would be required to devote substantial time and resources to prosecute or defend such proceedings.

Interference proceedings brought by the USPTO may be necessary to determine the priority of inventions with respect to our patent applications or those of our collaborators or licensors. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and be a distraction to our management. We may not be able, alone or with our collaborators and licensors, to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States. We may not prevail in any litigation or interference proceeding in which we are involved. Even if we do prevail, these proceedings can be very expensive and distract our management.

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Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, the market price of our common stock may decline.

If our technologies conflict with the proprietary rights of others, we may incur substantial costs as a result of litigation or other proceedings and we could face substantial monetary damages and be precluded from commercializing our products, which would materially harm our business.

A third party may claim that we are using inventions covered by such third party’s patents and may go to court to stop us from engaging in our normal operations and activities. These lawsuits can be expensive and would consume time and other resources. There is a risk that a court would decide that we are infringing a third party’s patents and would order us to stop the activities covered by the patents, including the commercialization of our products. In addition, there is a risk that we would have to pay the other party damages for having violated the other party’s patents, be required to obtain a license from the other party in order to continue to commercialize the affected products, or design our products in any manner that does not infringe a valid patent. We may not prevail in any legal action, and a required license under the patent may not be available on acceptable terms or at all. We also may not be able to develop a non-infringing product design on commercially reasonable terms, or at all.

Although we own a number of domestic and foreign patents and patent applications relating to our Technosphere Insulin System and cancer vaccine products under development, we have identified certain third-party patents that a court may interpret to restrict our freedom to operate (that is, to cover our products) in the areas of Technosphere formulations, pulmonary insulin delivery and the treatment of cancer. Specifically, we have identified certain third-party patents having claims relating to chemical compositions of matter and pulmonary insulin delivery that may trigger an allegation of infringement upon the commercial manufacture and sale of our Technosphere Insulin System. We have also identified third-party patents disclosing methods of use and compositions of matter related to DNA-based vaccines that also may trigger an allegation of infringement upon the commercial manufacture and sale of our cancer therapy. If a court were to determine that our inhaled insulin products or cancer therapies were infringing any of these patent rights, we would have to establish with the court that these patents were invalid in order to avoid legal liability for infringement of these patents. However, proving patent invalidity can be difficult because issued patents are presumed valid. Therefore, in the event that we are unable to prevail in an infringement or invalidity action we will have to either acquire the third-party patents outright or seek a royalty-bearing license. Royalty-bearing licenses effectively increase production costs and therefore may materially affect product profitability. Furthermore, should the patent holder refuse to either assign or license us the infringed patents, it may be necessary to cease manufacturing the product entirely and/or design around the patents. In either event, our business would be harmed and our profitability could be materially adversely impacted.

Patent litigation is costly and time-consuming. Among other things, such litigation may divert the attention of key personnel and we may not have sufficient resources to bring these actions to a successful conclusion. At the same time, some of our competitors may be able to sustain the costs of

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complex patent litigation more effectively than we can because they have substantially greater resources. Although patent and intellectual property disputes in the pharmaceutical area have often been settled for licensing or similar arrangements, associated costs may be substantial and could include ongoing royalties. An adverse determination in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our products or result in substantial monetary damages, which would adversely affect our business and results of operations and cause the market price of our common stock to decline. See “Business— Intellectual Property and Proprietary Technology.”

We may not obtain trademark registrations for our potential trade names.

RISKS RELATED TO THIS OFFERING

Our stock price may be volatile and, as a result, you could lose some or all of your investment.

•	the progress and results of our clinical trials;
•	announcements by us or our competitors concerning their clinical trial results, acquisitions, strategic alliances, technological innovations and new approved commercial products;
•	the availability of critical materials used in developing and manufacturing our Technosphere Insulin System or other product candidates;
•	developments concerning our patents, proprietary rights and potential infringement claims;
•	the expense and time associated with, and the extent of our ultimate success in, securing regulatory approvals;
•	changes in securities analysts’ estimates of our financial and operating performance;
•	sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders; and
•	discussion of our Technosphere Insulin System, our other product candidates, competitors’ products, or our stock price by the financial and scientific press, the healthcare community and online investor communities such as chat rooms.

Any of these risks, as well as other factors, could cause the market price of our common stock to decline and may result in a loss of some or all of your investment.

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If other biotechnology and biopharmaceutical companies or the securities markets in general encounter problems, the market price of our common stock could be adversely affected.

In the past, following periods of large price declines in the public market price of a company’s securities, securities class action litigation has often been initiated against that company. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which would hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.

Alfred E. Mann, our Chairman, Chief Executive Officer and principal stockholder, can individually control our direction and policies, and his interests may be adverse to the interests of our other stockholders. After his death, his stock will be left to his funding foundations for distribution to various charities, and we cannot assure you of the manner in which those entities will manage their holdings.

We have been advised by Mr. Mann that upon his death, his shares of our capital stock will be left to the Alfred E. Mann Medical Research Organization, or AEMMRO, and AEM Foundation for Biomedical Engineering, or AEMFBE, not-for-profit medical research foundations that serve as funding organizations for Mr. Mann’s various charities, including the Alfred Mann Foundation, or AMF, and the Alfred Mann Institute at the University of Southern California, and that may serve as funding organizations for any other charities that he may establish. The AEMMRO is a membership foundation consisting of six members, including Mr. Mann, four of his children and Dr. Joseph Schulman, the director of AMF. The AEMFBE is a membership foundation consisting of five members, including Mr. Mann and the same four of his children. Although we understand that the members of AEMMRO and AEMFBE have been advised of Mr. Mann’s objectives for these foundations, once Mr. Mann’s shares of our capital stock become the property of the foundations, we cannot assure you as to how those shares will be distributed or how they will be voted.

Mr. Mann has agreed to certain provisions regarding the disposition of his shares, including a prohibition on the sale of his shares for a period of 180 days following the date of this prospectus. See “Underwriting.”

The future sale of our common stock could negatively affect our stock price.

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sold in this offering will be freely tradable without restriction under the federal securities laws unless purchased by our affiliates. The remaining shares of common stock outstanding after this offering will be available for public sale subject in some cases to volume and other limitations. See “Shares eligible for future sale.” Substantially all of our shares outstanding after this offering (excluding the shares sold in this offering) will be subject to the lock-up agreements with the underwriters described under “Underwriting.”

If our common stockholders sell substantial amounts of common stock in the public market, or the market perceives that such sales may occur, the market price of our common stock may decline. After this offering, the holders of approximately 2,673,540 shares of our common stock and the holders of warrants to purchase 130,126 shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. Furthermore, if we were to include in a company-initiated registration statement shares held by those holders pursuant to the exercise of their registrations rights, the sale of those shares could impair our ability to raise needed capital by depressing the price at which we could sell our common stock.

In addition, we will need to raise substantial additional capital in the future to fund our operations. If we raise additional funds by issuing equity securities, the market price of our common stock may decline and our existing stockholders may experience significant dilution.

If an active, liquid trading market for our common stock does not develop, you may be unable to sell your shares quickly or at the market price.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

If we do not effectively use our broad discretion in how we use the proceeds of this offering, our results of operations could suffer and the value of our stock could decline.

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corporate purposes that do not yield a significant return or any return at all for our stockholders. See “Use of proceeds.”

As a new investor, you will incur substantial dilution as a result of this offering, and as a result, the market price of our common stock may decline.

Because we do not expect to pay dividends in the foreseeable future, you must rely on stock appreciation for any return on your investment.

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Special note regarding forward-looking statements

This prospectus contains forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled “Risk factors,” “Management’s discussion and analysis of financial condition and results of operations” and “Business.” These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

•	the progress or success of our research, development and clinical programs, the timing of completion of enrollment in our clinical trials, the timing of the interim analyses and the timing or success of the commercialization of our Technosphere Insulin System, or any other products or therapies that we may develop;
•	our ability to market, commercialize and achieve market acceptance for our Technosphere Insulin System, or any other products or therapies that we may develop;
•	our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
•	our estimates for future performance; and
•	our estimates regarding anticipated operating losses, future revenues, capital requirements and our needs for additional financing.

In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. We discuss many of these risks in this prospectus in greater detail under the heading “Risk factors.” Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus forms a part completely and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this prospectus or incorporated herein by reference, whether as a result of new information, future events or otherwise. Because of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not transpire. Factors that could cause actual results or conditions to differ from those anticipated by these and other forward-looking statements include those described in the “Risk factors” section and elsewhere in this prospectus.

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Use of proceeds

We estimate that we will receive net proceeds from the sale of shares of our common stock in this offering of approximately $           million ($           million if the underwriters exercise their over-allotment option in full), based upon an assumed initial public offering price of $           per share and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds from this offering to:

•	continue the development and prepare for the commercialization of our Technosphere Insulin System;
•	expand our Technosphere Insulin System manufacturing operations and quality systems;
•	expand our other product development programs; and
•	fund operations, to provide working capital and for other general corporate purposes.

Any remaining net proceeds may be used to in-license or acquire additional technologies. We have no current plans, agreements or commitments with respect to any acquisitions or in-licensing, and we are not currently engaged in any negotiations with respect to any transactions of that nature.

As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering. Accordingly, our management will have broad discretion in the application of the net proceeds, and investors will be relying on the judgment of our management regarding the application of the proceeds of this offering. Pending these uses, we plan to invest the net proceeds in short-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the United States. The goal with respect to the investment of these net proceeds is capital preservation and liquidity so that funds are readily available to fund our research and development operations. On December 12, 2003, our board of directors adopted our written investment policy. The investment policy imposes restrictions on our investments in order to ensure that we preserve our principal and maintain our liquidity. Any investment of the net proceeds from this offering will be made in accordance with the terms of our investment policy.

Dividend policy

We have never declared or paid any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business. Accordingly, we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors.

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Capitalization

The following table sets forth our capitalization as of December 31, 2003:

•	on an actual basis;
•	on a pro forma basis to give effect to the conversion, upon the closing of this offering, of all 267,354 shares of our Series A redeemable convertible preferred stock outstanding as of December 31, 2003, all 192,618 shares of our Series B convertible preferred stock outstanding as of December 31, 2003 and all 980,392 outstanding shares of our Series C convertible preferred stock, based on an assumed initial public offering price of $           per share, into an aggregate of            shares of our common stock; and
•	on a pro forma as adjusted basis to give further effect to the sale in this offering of            shares of our common stock at an assumed initial public offering price of $           per share and the receipt of the estimated net proceeds therefrom, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

				As of December 31, 2003
												Pro forma as
				Actual				Pro forma				adjusted
								(unaudited)				(unaudited)
				(in thousands, except share and
				per share data)
Cash, cash equivalents and marketable securities					$55,945			$				$
Deferred compensation and other liabilities					404
Series A redeemable convertible preferred stock, $0.01 par value per share; 267,354 shares authorized, issued and outstanding, actual; no shares issued and outstanding, pro forma or pro forma as adjusted					5,188				—				—
Stockholders’ equity:
	Series B convertible preferred stock, $0.01 par value per share; 192,618 shares authorized, issued and outstanding, actual; no shares issued and outstanding, pro forma or pro forma as adjusted				15,000				—				—
	Series C convertible preferred stock issuable				50,000				—				—
	Series C convertible preferred stock subscriptions receivable				(18,153	)			—				—
	Common stock, $0.01 par value per share; 100,000,000 shares authorized; 59,924,182 shares issued and outstanding, actual;           and            shares issued and outstanding, pro forma and pro forma as adjusted, respectively				599
	Additional paid-in capital				432,742
	Notes receivable from stockholders				(1,412	)
	Notes receivable from officers				(228	)
	Deficit accumulated during the development stage				(366,971	)
		Total stockholders’ equity			111,577
		Total capitalization			$117,169			$				$

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You should read the information in the table above in conjunction with “Management’s discussion and analysis of financial condition and results of operations” and our financial statements and accompanying notes appearing elsewhere in this prospectus.

The number of shares in the table above excludes:

•	6,380,789 shares of our common stock issuable upon exercise of options outstanding as of December 31, 2003, with a weighted average exercise price of $3.48 per share, of which options to purchase 2,185,887 shares were exercisable as of that date, with a weighted average exercise price of $3.32 per share;
•	130,126 shares of our common stock issuable upon exercise of warrants outstanding as of December 31, 2003, with a weighted average exercise price of $16.89 per share, all of which were exercisable as of that date;
•	1,010,902 shares of our common stock available for future grant under our 2004 Equity Incentive Plan as of December 31, 2003;
•	additional shares of our common stock reserved for future issuance under our 2004 Equity Incentive Plan effective as of the completion of this offering; and
•	shares of our common stock reserved for future issuance under our 2004 Non-Employee Directors’ Stock Option Plan and 2004 Employee Stock Purchase Plan, which we have adopted effective upon the completion of this offering.

We expect to complete a one-for-          reverse split of our common stock prior to the closing of this offering. All share amounts set forth in the table above have been retroactively adjusted to give effect to this stock split.

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Dilution

If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share you pay in this offering and the net tangible book value per share of our common stock immediately after this offering. Our net tangible book value as of December 31, 2003 was approximately $111.6 million, or $1.86 per share of our common stock. Net tangible book value per share is equal to our total tangible assets minus total liabilities and redeemable convertible preferred stock, all divided by the number of shares of our common stock outstanding as of December 31, 2003. Our pro forma net tangible book value as of December 31, 2003 was approximately $           million, or $           per share of our common stock. Pro forma net tangible book value per share gives effect to the conversion, upon the closing of this offering, of all then outstanding shares of our preferred stock, based on an assumed initial public offering price of $           per share, into an aggregate of                      shares of our common stock.

After giving further effect to the sale of the                      shares of our common stock offered by this prospectus at an assumed initial public offering price of $           per share, after deducting underwriting discounts and commissions and our estimated offering expenses, our pro forma as adjusted net tangible book value as of December 31, 2003 would have been approximately $           million, or $           per share of our common stock. This represents an immediate increase in pro forma net tangible book value of $           per share to existing stockholders and an immediate dilution of $           per share to new investors. The following table illustrates this calculation on a per share basis:

Assumed initial public offering price per share							$
	Net tangible book value per share as of December 31, 2003		$
	Decrease per share attributable to the conversion of our convertible preferred stock and redeemable convertible preferred stock
	Pro forma net tangible book value as of December 31, 2003
	Increase per share attributable to the offering
Pro forma as adjusted net tangible book value per share after this offering
Dilution per share to new investors							$

If the underwriters exercise their over-allotment option in full, pro forma as adjusted net tangible book value will increase to $           per share, representing an increase to existing stockholders of $           per share, and there will be an immediate dilution of $           per share to new investors.

The following table summarizes, on a pro forma as adjusted basis as of December 31, 2003, after giving effect to this offering and the conversion upon the closing of this offering of all of our shares of convertible preferred stock and redeemable convertible preferred stock outstanding as of that date, the total number of shares of our common stock purchased from us and the total consideration and average price per share paid by existing stockholders and by new investors:

Total shares

Total consideration

Average price

Number

%

Amount

%

per share

Existing stockholders

%

$

%

$

New investors

Total

%

$

%

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If the underwriters exercise their over-allotment option in full, the following will occur:

•	the pro forma as adjusted percentage of shares of our common stock held by existing stockholders will decrease to approximately      % of the pro forma as adjusted total number of shares of our common stock outstanding immediately after this offering; and
•	the pro forma as adjusted number of shares of our common stock held by new investors will increase to                     , or approximately      % of the total pro forma as adjusted number of shares of our common stock outstanding immediately after this offering.

The tables and calculations above are based on 59,924,182 shares of our capital stock outstanding as of December 31, 2003 and exclude:

•	6,380,789 shares of our common stock issuable upon exercise of options outstanding as of December 31, 2003, with a weighted average exercise price of $3.48 per share, of which options to purchase 2,185,887 shares were exercisable as of that date, with a weighted average exercise price of $3.32 per share;
•	130,126 shares of our common stock issuable upon exercise of warrants outstanding as of December 31, 2003, with a weighted average exercise price of $16.89 per share, all of which were exercisable as of that date;
•	1,010,902 shares of our common stock available for future grant under our 2004 Equity Incentive Plan as of December 31, 2003;
•	additional shares of our common stock reserved for future issuance under our 2004 Equity Incentive Plan effective as of the completion of this offering; and
•	shares of our common stock reserved for future issuance under our 2004 Non-Employee Directors’ Stock Option Plan and 2004 Employee Stock Purchase Plan, which we have adopted effective upon the completion of this offering.

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Selected financial data

We were incorporated in February 1991 under the laws of the State of Delaware as Pharmaceutical Discovery Corporation, or PDC. On December 12, 2001, AlleCure and CTL merged with wholly-owned subsidiaries of PDC. Pursuant to the merger, all of the outstanding shares of capital stock of AlleCure and CTL were exchanged for shares of capital stock of PDC, and AlleCure and CTL became wholly-owned subsidiaries of PDC. In connection with the merger, PDC changed its name to MannKind Corporation. On December 31, 2002, AlleCure and CTL merged with and into MannKind and ceased to be separate entities. For periods prior to January 1, 2002, the results of operations have been presented on a combined basis. For periods subsequent to December 31, 2001, the financial statements of MannKind and its wholly-owned subsidiaries have been presented on a consolidated basis.

The following statement of operations data for the years ended December 31, 1999 and 2000 are unaudited. The following statement of operations data for the years ended December 31, 2001, 2002 and 2003, and for the period from February 14, 1991, the date of our inception, to December 31, 2003, and the balance sheet data as of December 31, 1999, 2000, 2001, 2002 and 2003, are derived from our audited financial statements. The statement of operations data for each of the three years in the period ended December 31, 2003 and for the period from February 14, 1991 (date of inception) to December 31, 2003 and the balance sheet data at December 31, 2002 and 2003 were derived from our financial statements, which have been audited by Deloitte & Touche LLP, independent auditors, and are included elsewhere in this prospectus. The balance sheet data at December 31, 2001 were derived from our financial statements, which have been audited by Deloitte & Touche LLP and are not included in this prospectus. The historical results are not necessarily indicative of results to be expected in any future period. See the notes to the audited financial statements included elsewhere in this prospectus for an explanation of the method used to determine the number of shares used in computing historical and pro forma basic and diluted net loss per share.

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The following financial data is only a summary and should be read in conjunction with our financial statements and the related notes included elsewhere in this prospectus, and “Management’s discussion and analysis of financial condition and results of operations.” The following selected financial data is not intended to replace our financial statements included elsewhere in this prospectus.

																								Cumulative
																								period from
																								February 14,
				Year ended December 31,																				1991 (date of
																								inception) to
Statement of operations data:				1999				2000				2001				2002				2003				December 31, 2003
				(in thousands, except per share data)
Revenue				$	74			$	154			$	326			$	—			$	—			$	2,858
Operating expenses:
	Research and development				3,994				20,542				19,763				42,724				45,613				143,647
	General and administrative				1,654				4,854				10,629				13,215				20,699				57,457
	In-process research and development costs				—				—				19,726				—				—				19,726
	Goodwill impairment				—				—				—				151,428				—				151,428
		Total operating expenses			5,648				25,396				50,118				207,367				66,312				372,258
Loss from operations					(5,574	)			(25,242	)			(49,792	)			(207,367	)			(66,312	)			(369,400	)
Other income (expense)					50				204				288				487				(25	)			(2,196	)
Interest income (expense)					(155	)			379				1,261				617				459				4,639
Loss before provision for income taxes					(5,679	)			(24,659	)			(48,243	)			(206,263	)			(65,878	)			(366,957	)
Income taxes					—				(2	)			(2	)			(2	)			(1	)			(14	)
Net loss					(5,679	)			(24,661	)			(48,245	)			(206,265	)			(65,879	)			(366,971	)
Deemed dividend related to beneficial conversion of convertible preferred stock					—				—				—				(1,421	)			(1,017	)			(2,438	)
Accretion on redeemable preferred stock					—				(149	)			(239	)			(251	)			(253	)			(892	)
Net loss applicable to common stockholders				$	(5,679	)		$	(24,810	)		$	(48,484	)		$	(207,937	)		$	(67,149	)		$	(370,301	)
Basic and diluted net loss per share:
	Historical			$	(0.46	)		$	(1.32	)		$	(1.53	)		$	(5.14	)		$	(1.21	)
	Pro forma(1)																			$
Shares used to compute basic and diluted net loss per share:
	Historical				12,374				18,835				31,601				40,416				55,463
	Pro forma(1)

(1)

Pro forma to give effect to the conversion, upon the closing of this offering, of all 267,354 shares of our Series A redeemable convertible preferred stock outstanding as of December 31, 2003, all 192,618 shares of our Series B convertible preferred stock outstanding as of December 31, 2003 and all 980,392 outstanding shares of our Series C convertible preferred stock, at an assumed initial public offering price of $         per share, into          shares of our common stock.

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		As of December 31,
Balance sheet data:		1999				2000				2001				2002				2003
		(in thousands)
Cash, cash equivalents and marketable securities			$2,226				$35,053				$53,730				$31,052				$55,945
Working capital			5,450				29,081				47,477				24,171				49,097
Total assets			9,296				42,645				251,487				104,773				125,876
Deferred compensation and other liabilities			7,500				132				231				207				404
Redeemable convertible preferred stock			—				4,445				4,684				4,935				5,188
Deficit accumulated during the development stage			(21,921	)			(46,582	)			(94,827	)			(301,092	)			(366,971	)
Total stockholders’ equity (deficit)			(745	)			31,890				235,017				90,773				111,577

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Management’s discussion and analysis of financial condition

You should read the following discussion of our financial condition and results of operations in conjunction with our financial statements and the notes to those statements included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, including those set forth under “Risk factors” and elsewhere in this prospectus, our actual results may differ materially from those anticipated in these forward-looking statements.

OVERVIEW

We are a biopharmaceutical company focused on the development and commercialization of therapeutic products for diseases such as diabetes, cancer, inflammatory and autoimmune diseases. Our lead product, the Technosphere Insulin System, which is currently in late Phase II clinical trials for the treatment of diabetes, consists of our dry powder Technosphere formulation of insulin and our MedTone inhaler through which the powder is inhaled into the deep lung. We believe the performance characteristics, convenience and ease of use of our proprietary Technosphere Insulin System have the potential to change the way diabetes is treated.

Since our inception in 1991 through December 31, 2003, we have incurred a cumulative net loss of $367.0 million. We do not anticipate receiving revenues from the sales of any product prior to regulatory approval and commercialization of our Technosphere Insulin System. We expect to make substantial expenditures and to incur additional operating losses in the future in order to further develop and commercialize our product candidates, including costs and expenses to complete clinical trials, seek regulatory approvals and market our product candidates. We currently do not have the required approvals to market any of our product candidates, and we may not receive them. We may not be profitable even if we succeed in commercializing any of our product candidates.

In 2003, we raised $100.0 million through private placements of our equity securities, comprised of 10,479,582 shares of common stock sold at a weighted average price of $4.77 per share and 980,392 shares of Series C convertible preferred stock that were subscribed for in 2003 at a price of $51.00 per share. Of the $50.0 million of Series C convertible preferred stock subscribed for in 2003, $31.8 million, representing the purchase price for 624,449 shares of Series C convertible preferred stock, was received in 2003 and $18.2 million, representing the purchase price of the remaining 355,943 shares of Series C convertible preferred stock, was received in the first quarter of 2004. All of the shares of our Series C convertible preferred stock were issued in the first quarter of 2004.

We were incorporated in February 1991 under the laws of the State of Delaware as PDC. On December 12, 2001, AlleCure and CTL merged with wholly-owned subsidiaries of PDC. Pursuant to the merger, all of the outstanding shares of capital stock of AlleCure and CTL were exchanged for shares of capital stock of PDC, and AlleCure and CTL became wholly-owned subsidiaries of PDC. In connection with the merger, PDC changed its name to MannKind Corporation. On December 31, 2002, AlleCure and CTL merged with and into MannKind and ceased to be separate entities.

RESEARCH AND DEVELOPMENT EXPENSES

Our research and development expenses consist mainly of costs associated with the clinical trials of our product candidates, the salaries, benefits and stock-based compensation of research and development personnel, laboratory supplies and materials, facility costs, costs for consultants and related contract research, licensing fees, and depreciation of laboratory equipment.

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Our research and development staff conducts our internal research and development activities, which include research, product development, clinical development and manufacturing and related activities. This staff is divided between our facilities in Valencia, California and Danbury, Connecticut. We expense research and development costs as we incur them.

Due to the risks inherent in the clinical trial process, we are unable to estimate with any certainty the costs we will incur in the continued development of our product candidates for commercialization. However, we expect our research and development costs to increase as we continue to develop new applications for our proprietary therapeutics and drug-delivery technologies, refine our manufacturing processes and move our other product candidates through preclinical and clinical trials.

Clinical development timelines, likelihood of success and total costs vary widely. Although we are currently focused primarily on advancing the Technosphere Insulin System through continuing Phase II and into and through Phase III clinical trials, we anticipate that we will continue to determine which research and development projects to pursue, and how much funding to direct to each project, on an ongoing basis, in response to the scientific and clinical success of each product candidate.

GENERAL AND ADMINISTRATIVE EXPENSES

Our general and administrative expenses consist primarily of salaries, benefits and stock-based compensation for administrative, finance, business development, human resources, legal and information systems support personnel. In addition, general and administrative expenses include business insurance and professional services costs.

CRITICAL ACCOUNTING POLICIES

We have based our discussion and analysis of our financial condition and results of operations on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis we evaluate our estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making estimates of expenses such as stock option expenses and judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. The significant accounting policies that are critical to the judgments and estimates used in the preparation of our financial statements are described in more detail below.

Goodwill, intangibles and other long-lived assets

•	significant changes in our strategic business objectives and utilization of the assets;
•	a determination that the carrying value of such assets can not be recovered through undiscounted cash flows;

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•	loss of legal ownership or title to the assets; or
•	the impact of significant negative industry or economic trends.

If we believe our assets to be impaired, the impairment we recognize is the amount by which the carrying value of the assets exceeds the fair value of the assets. Any write-downs would be treated as permanent reductions in the carrying amount of the asset and an operating loss would be recognized. In addition, we base the useful lives and related amortization or depreciation expense on our estimate of the useful lives of the assets. If a change were to occur in any of the above-mentioned factors or estimates, our reported results could materially change. During 2002, we identified adverse economic indicators that compelled us to reevaluate goodwill for impairment. We reevaluated goodwill for impairment and determined the goodwill to be zero at December 31, 2002. We recorded an impairment of the value of goodwill related to AlleCure and CTL of $151.4 million during 2002. Accordingly, as of December 31, 2003, the carrying value of goodwill was zero.

To date, we have had recurring operating losses and the recoverability of our long-lived assets is contingent upon executing our business plan. If we are unable to execute our business plan, we may be required to write down the value of our long-lived assets in future periods.

Stock-based compensation

The measurement date for stock-based compensation, if any, in connection with an employee stock option is generally the option grant date. However, modifying option terms subsequent to the grant date can result in a re-measurement of stock-option compensation on the modification date and thereafter under certain circumstances. On October 7, 2003, our board of directors approved a re-pricing program for certain outstanding options to purchase shares of the Company’s common stock granted under each of its stock plans. Under the re-pricing program, each holder of outstanding options granted under the stock plans who was an employee of the Company on November 5, 2003 could elect to exchange up to all of their outstanding options that had an exercise price greater than $2.65 for re-priced stock options with an exercise price of $2.65 per share and a term of four years. The option re-pricing became effective on November 5, 2003. Each replacement option vests 50% in November 2004 and the remaining 50% vests by November 2005. Employees who voluntarily resign in the 12-month period beginning November 5, 2003 will forfeit their re-priced options. Employees who are involuntarily terminated in the 12-month period beginning November 5, 2003 will vest 50% upon termination. Compensation cost for all options re-priced under the re-pricing program will be re-measured on a quarterly basis until the options are exercised, canceled or expire.

Stock options issued to consultants are accounted for in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or

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Services. Under SFAS No. 123, stock-based compensation for stock options granted to consultants is equal to the fair value of the stock options rather than the intrinsic value under APB No. 25. We determine the fair value of options granted to consultants using the Black-Scholes option valuation model, which was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. The Black-Scholes option valuation model requires the input of highly subjective assumptions, including the estimated fair value of our common stock and expected stock price volatility. Stock-based compensation related to options granted to consultants is generally re-measured periodically as the underlying options vest.

We recognized stock-based compensation expense of $1.6 million in 2001, $352,000 in 2002 and $4.5 million in 2003. Stock-based compensation expense includes amounts attributable to certain issuances of common stock for notes receivable that we have accounted for as in-substance stock options and are further described in the notes to our financial statements. Stock-based compensation expense for 2002 includes the reversal of approximately $815,000 of stock-based compensation attributable to an in-substance stock option because the intrinsic value of the in-substance stock option was zero at December 31, 2003. Stock-based compensation expense is assigned to operating expense categories in our statements of operations according to nature of the services rendered by the employee or consultant to whom the expense applies.

Because there has been no public market for our common stock, we have estimated the fair value of our equity instruments. If future market conditions dictate significant changes in the estimates of fair value, or if a public market establishes a value for our common stock that is significantly higher than our estimated value, our results of operations could be materially impacted. In future periods we are required to re-measure stock-based compensation cost for all employee options re-priced under the re-pricing program that remain outstanding and to periodically re-measure the stock-based compensation cost of options we have granted to consultants. Since the amount of compensation cost attributable to the re-priced options and consultant options is dependent on the fair value of the Company’s common stock underlying the options on the future re-measurement dates, the amount of stock-based compensation recognized in any given future period cannot be predicted and may have a material impact on our results of operations.

Accounting for income taxes

RESULTS OF OPERATIONS

Years ended December 31, 2003 and 2002

Revenues

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Research and development expenses

General and administrative expenses

Other income (expense)

Interest income

Years ended December 31, 2002 and 2001

Revenues

Research and development expenses

General and administrative expenses

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In-process research and development costs

Goodwill and impairment

Other income (expense)

Interest income

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations primarily through the private placement of equity securities with our majority stockholder and his affiliated entities, who have invested approximately $228.5 million of the approximately $328.5 million that we have raised to date. In 2003, we raised $100.0 million through private placements of our equity securities, comprising 10,479,582 shares of common stock sold at an average price of $4.77 per share, and 980,392 shares of Series C convertible preferred stock that were subscribed for in 2003 at a price of $51.00 per share. Of the $50.0 million of Series C convertible preferred stock subscribed for in 2003, $31.8 million, representing the purchase price of 624,449 shares of Series C convertible preferred stock, was received in 2003 and $18.2 million, representing the purchase price of the remaining 355,943 shares of Series C convertible preferred stock, was received in the first quarter of 2004. All of the shares of our Series C convertible preferred stock were issued in the first quarter of 2004.

As of December 31, 2003, we had $55.9 million in cash, cash equivalents and marketable securities. This amount does not include $18.2 million that we collected in the first quarter of 2004 related to subscriptions received in December 2003 for 355,943 shares of Series C convertible preferred stock. We believe that our available cash, cash equivalents, and marketable securities, together with the net proceeds of this offering, will be sufficient to fund anticipated levels of operations into the second quarter of 2005.

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We expect that we will need to raise additional capital for a number of reasons, including the further development and commercialization of our Technosphere Insulin System and other product candidates. We cannot assure you that we will be able to obtain this financing on acceptable terms or at all. Any future financing may dilute or otherwise adversely affect your investment. For example, new investors could have rights superior to existing stockholders. If adequate funds are not available, we may be required to delay, reduce the scope of, relinquish rights with respect to, or eliminate the development and marketing of some or all of our product candidates. The lack of adequate funds could result in the loss of your entire investment.

Until we can generate significant cash from our operations, if ever, we expect to fund our activities primarily from the proceeds from strategic collaboration agreements, if any, that we may enter into, existing cash reserves, the sale of additional equity securities, sale of debt securities or the establishment of other funding facilities. We cannot assure you that we will be successful in entering into strategic collaborations or in our future financing efforts.

Having insufficient funds may require us to delay, scale back or eliminate some or all of our research or development programs or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Failure to obtain adequate financing also may adversely affect our ability to operate as a going concern. If we raise additional funds by issuing equity securities, substantial dilution to the stockholders’ percentage ownership of our company would result. If we raise additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and requirements to maintain specific financial ratios that may restrict our ability to operate our business.

Our operating activities used net cash of $52.8 million in 2003, $48.7 million in 2002 and $21.2 million in 2001. During these periods, we recorded increasing expenses caused principally by increases in research and development, expanded clinical trials, business planning and recruitment of management and technical staff, which resulted in increasing operating cash outflows. We expect our negative operating cash flow to continue for several years.

Our investing activities generated $4.1 million in 2003, principally from the proceeds from the net sales and purchases of marketable securities of $9.2 million, offset by the purchase of property and equipment of $5.2 million. Our investing activities used $45.3 million in 2002 and $39.7 million in 2001. In 2002, purchases of property and equipment used $34.1 million and net purchases and sales of marketable securities used $11.2 million. In 2001, investing activities consisted entirely of the purchase of property and equipment.

Our financing activities provided cash of $82.8 million in 2003, generated primarily from the collection of $31.8 million of stock subscriptions for 624,449 shares of Series C convertible preferred stock and $50.0 million from the sale of 10,479,582 shares of common stock. In 2002, financing activities generated $60.2 million primarily from the sale of 12,467,271 shares of common stock, which provided $58.9 million in proceeds. In 2001, financing activities generated $79.5 million primarily from the sale of 9,156,233 shares of common stock, which provided $78.0 million in proceeds.

As of December 31, 2003, we did not have any off balance sheet financing arrangements.

COMMITMENTS AND CONTINGENCIES

Our contractual obligations consist of operating leases, purchase obligations, capital lease commitments and deferred compensation. Certain stockholders and officers elected to defer part or all of their compensation from 1991 through 1998, resulting in total deferred compensation of

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$1.6 million at December 31, 2003. The amounts due for deferred compensation are non-interest-bearing with no repayment terms. Our other obligations are included in the table below.

At December 31, 2003, our total capital lease commitments were not material. Future payments under our operating lease obligations and open purchase commitments consist of the following at December 31, 2003 (in thousands):

		Payments due in
																		After
Contractual obligations		Total				2004				2005				2006				2006
Open purchase order commitments(1)		$	7,264			$	5,430			$	917			$	917				—
Operating lease obligations			693				596				97				—				—
Total contractual obligations		$	7,957			$	6,026			$	1,014			$	917				—

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(1)	The amounts included in open purchase order commitments are subject to performance under the purchase order by the supplier of the goods or services and do not become our obligation until such performance is rendered. The amount shown is principally for the purchase of materials for our clinical trials and the acquisition of manufacturing equipment.

RELATED PARTY TRANSACTIONS

For a description of our related party transactions see “Certain relationships and related party transactions.”

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board (FASB) issued Financial Interpretation Number 46, Consolidation of Variable Interest Entities (FIN 46) with the objective of improving financial reporting by companies involved with variable interest entities. FIN 46 clarifies the application of Accounting Research Bulletin No. 51 to certain entities, defined as variable interest entities, in which equity investors do not have characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated support from other parties. In December 2003, the FASB issued a revision to FIN 46, or FIN 46R, to clarify some of the provisions of FIN 46. We currently have no entities that have the characteristics of a variable interest entity. Furthermore, our adoption of the remaining provisions of FIN 46R in the quarter ended March 31, 2004 did not have an impact on our financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. This statement establishes how a company classifies and measures certain financial instruments with characteristics of both liabilities and equity, including redeemable preferred stock. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the interim period commencing July 1, 2003, except for mandatory redeemable financial instruments of nonpublic companies, which is effective for fiscal periods beginning after December 31, 2004. The adoption did not have a material impact on its financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have not used derivative financial instruments for speculation or trading purposes. However, we are exposed to market risk related to changes in interest rates. Our investment policy is designed to preserve capital and provide liquidity to meet projected cash requirements. Our investment portfolio currently consists of US government securities, bank obligations and corporate debt instruments for

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which the maturity dates average less than twelve months. We currently do not hedge against interest rate exposure. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of our interest-sensitive financial instruments at December 31, 2003 or 2002, respectively. The modeling technique that we used measures the change in fair values arising from an immediate, hypothetical shift in market interest rates and assumes that ending fair values include principal and accrued interest. Declines in interest rates over time will, however, reduce our interest income while increases in interest rates over time will increase our interest expense. Due to the nature of our short-term investments, we believe that we are not subject to any material market risk exposure. We do not have any foreign currency or other derivative financial instruments.

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Business

OVERVIEW

We are a biopharmaceutical company focused on the development and commercialization of therapeutic products for diseases such as diabetes, cancer, inflammatory and autoimmune diseases. Our lead product, the Technosphere Insulin System, which is currently in late Phase II clinical trials for the treatment of diabetes, consists of our dry powder Technosphere formulation of insulin and our MedTone inhaler through which the powder is inhaled into the deep lung. We believe the performance characteristics, convenience and ease of use of our proprietary Technosphere Insulin System have the potential to change the way diabetes is treated.

In our clinical trials to date, we have observed that our Technosphere Insulin System produces a profile of insulin levels in the bloodstream that approximates the insulin profile normally seen in healthy individuals immediately following the beginning of a meal. As a result, we believe that our Technosphere Insulin System will be beneficial not only for insulin-using diabetes patients but also for patients with type 2 diabetes who are currently using conventional therapies other than insulin. Consequently, we believe the Technosphere Insulin System has the potential to become the first line of therapy for the treatment of type 2 diabetes following diet and exercise, reflecting a paradigm shift in the treatment of this disease.

To date, we have conducted multiple Phase I and Phase II clinical trials of our Technosphere Insulin System involving more than 200 individuals in Europe and the United States. Our Technosphere Insulin System has had a favorable safety profile in our clinical trials to date. We are currently conducting randomized, placebo-controlled late Phase II clinical trials, which, when fully-enrolled, will involve approximately 340 individuals with diabetes in Europe and the United States. At this time, we expect results from some of these clinical trials to be available in the fourth quarter of 2004 with additional data to follow in early 2005. We intend to initiate Phase III clinical trials in the United States in the first half of 2005, subject to acceptance of our Phase III protocols by the FDA.

Our Technosphere Insulin System utilizes our proprietary Technosphere formulation technology, which is based on a class of organic molecules that are designed to self-assemble into small particles onto which drug molecules can be loaded. We are in the process of developing additional Technosphere-based products for the delivery of other drugs. We also have research programs focused on the development of therapies for cancer, inflammation and autoimmune disorders.

OVERVIEW OF DIABETES

Diabetes is a major disease characterized by the body’s inability to properly regulate levels of blood glucose, or blood sugar. The cells of the body utilize glucose as fuel, which is consumed 24 hours a day. Between meals, when glucose is not being supplied from food, the liver releases glucose into the blood to sustain adequate levels. Insulin is a hormone produced by the pancreas that regulates the body’s blood glucose levels. Patients with diabetes develop abnormally high levels of glucose, a state known as hyperglycemia, either because they produce insufficient levels of insulin or because they fail to respond adequately to insulin produced by the body. Over time, poorly controlled levels of blood glucose can lead to major complications, including significant weight gain, blindness, loss of circulation, kidney failure, impotence, heart attack, stroke and death.

According to the American Diabetes Association, or ADA, in the United States diabetes is estimated to cost society over $132 billion each year and is currently the fifth leading cause of death by disease. Data from the United States Centers for Disease Control, or CDC, and the National Institutes of Health indicate that the risk of death due to heart disease and the risk of stroke are up to four times

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higher in adults with diabetes than in those without the disease. Diabetes is the leading cause of new cases of blindness among adults, kidney disease and non-traumatic lower-limb amputations. The CDC estimated that, as of 2002, approximately 18.2 million people in the United States, or 6.3% of the population, suffered from diabetes. The CDC further estimated that 13 million cases were diagnosed and under treatment as of 2002 and that 1.3 million new cases would be diagnosed per year beyond that date. The ADA estimated that, in 2002, the direct costs for required drug treatment of diabetes in the United States were approximately $12 billion, of which approximately $7 billion were for insulin and delivery supplies and approximately $5 billion were for non-insulin oral medications.

There are two major forms of diabetes, type 1 and type 2. Type 1 diabetes is characterized by a complete lack of insulin secretion by the pancreas, so insulin must be supplied from outside the body in order to sustain life. In type 2 diabetes, the pancreas continues to produce insulin; however, over time it becomes increasingly unable to secrete adequate amounts of insulin to support metabolism. According to the CDC, type 2 diabetes is the more prevalent form of the disease, affecting approximately 90% to 95% of people diagnosed with diabetes.

The illustration below summarizes published reports of the insulin-secretion profiles at meal time of healthy individuals and of patients with type 2 diabetes. When a healthy person begins to eat a meal, the pancreas responds with the two phases of insulin release into the bloodstream that are depicted by the solid line in the illustration below. The first phase of insulin release takes the form of a sharp spike in insulin that acts as a signal to the liver to shut off its release of glucose into the bloodstream. In the second phase of insulin release, the pancreas secretes an extended wave of insulin that acts on cells throughout the body, enabling them to absorb the glucose ingested from the meal.

Insulin-secretion profiles at meal time

As depicted by the dashed line in the illustration, individuals with early type 2 diabetes cannot produce the first-phase insulin release spike and, as a result, their liver continues to release glucose while they absorb additional glucose from the meal. This can worsen high blood sugar levels. This state forces the pancreas to compensate by secreting excessive amounts of insulin during the second phase. Over time, this repeated cycle of inadequate early release followed by over-insulinization is correlated with subsequent exhaustion of the overall ability of the pancreas to secrete additional amounts of insulin at any point following a meal, which is depicted by the dotted line in the illustration. This situation is further complicated by a decline in the ability of insulin-sensitive cells throughout the body to respond to insulin — a state known as insulin resistance. The inability to maintain control over blood glucose levels predisposes the patient with diabetes to serious, adverse health consequences.

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Challenges of treating type 2 diabetes

Insulin therapy usually involves administering several subcutaneous injections of insulin each day. However, this treatment regimen is inadequate for many reasons, including:

•	Patients dislike injecting themselves with insulin due to inconvenience and pain, and so tend not to comply adequately with prescribed treatment regimens. As a result, they do not properly medicate themselves.
•	Even when properly administered, subcutaneous injections of insulin do not replicate the natural first-phase insulin spike. Instead, injected insulin enters the bloodstream over a period of several hours. The consequence is for patients with diabetes to have inadequate levels of insulin present at the initiation of a meal and to be over-insulinized between meals. This results in high blood glucose levels early after meal onset followed by a tendency for glucose to fall to abnormally low levels, a state known as hypoglycemia, during the period between meals. Hypoglycemia can result in loss of mental acuity, confusion, increased heart rate, hunger, sweating and faintness and, at very low glucose levels, loss of consciousness, coma and death.

Because of the problems associated with the conventional administration of insulin by injection, patients and their physicians have sought alternative methods for the delivery of insulin, including insulin pumps and oral delivery of insulin. Insulin pumps are generally considered appropriate only for a small segment of the diabetes population. The development of an effective oral insulin formulation has been hampered by problems of delivering a sufficient supply of insulin to the body at the time when it is needed. Because insulin is largely broken down in the digestive system, much of the insulin delivered orally does not enter the bloodstream and there is an undesirable variability in the rate of insulin absorption.

One alternative to conventional insulin therapy being pursued by a number of pharmaceutical and biotechnology companies is the inhalation of an insulin formulation into the deep lung, where it can be absorbed directly into the bloodstream. Delivering insulin through the pulmonary route is less invasive than administering it by injection, which, we believe, should increase patient compliance and lead to better glucose control in patients with type 2 diabetes.

We anticipate that the first pulmonary insulin product developed by another pharmaceutical company may be approved for commercial sale as early as 2005. Although this product should be an important development for diabetes care, we believe that it will only partially address the shortcomings of conventional insulin therapy. A long sought-after goal in the treatment of diabetes has been to produce a profile of insulin levels in the bloodstream that approximates the first-phase insulin release spike normally seen in healthy individuals following the beginning of a meal. Based on published reports, it would appear that the first pulmonary insulin products, if and when approved, may not deliver insulin to the bloodstream rapidly enough to approximate the natural first-phase insulin release spike.

THE MANNKIND SOLUTION

Based upon our clinical data, we believe our Technosphere Insulin System will be the first commercially available therapy to produce a profile of insulin levels in the bloodstream that

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approximates the natural first-phase insulin release spike normally seen in healthy individuals following the beginning of a meal.

The clinical data below show this approximation in more detail. The chart on the left shows the mean changes in blood insulin levels of 12 patients with type 1 diabetes who inhaled a dose of our Technosphere Insulin prior to eating a standardized meal. By studying patients with type 1 diabetes, we were able to observe the response to administration of Technosphere Insulin without interference from the natural production of insulin. The key feature of the response shown on the left is the time taken for blood insulin levels to peak, which was approximately ten minutes in this study. The magnitude of the response is related to the dose of Technosphere Insulin administered; we have observed in our clinical trials that the timing of the response is consistent across a range of doses. For comparison purposes, these data are presented next to a chart that shows data published in 1981 in the American Journal of Medicine from nine healthy individuals who were rapidly administered a glucose solution intravenously — an experimental protocol that allowed investigators to evaluate the characteristics of the normal first-phase insulin release. These charts show that the rapid time-to-peak blood insulin levels produced by the Technosphere Insulin System approximates the timing that has been demonstrated for first-phase insulin release in healthy individuals, which generally occurs within six minutes after food reaches the digestive system.

Technosphere Insulin approximation		First-phase insulin release
of first-phase insulin release		in healthy individuals

By approximating the first-phase insulin release spike, our Technosphere Insulin System may allow patients to achieve greater control over their glucose levels, which we expect may reduce exhaustion of insulin-secreting cells in the pancreas and possibly also reduce the degree of insulin resistance. This effect would be beneficial in patients that have advanced to the point of requiring conventional insulin therapy, patients that are being treated with non-insulin oral medications as well as patients currently using diet and exercise therapy but who are having difficulty achieving proper glucose control. As a result, we believe our Technosphere Insulin System has the potential to become the first line of therapy for the treatment of type 2 diabetes following diet and exercise, which would represent a paradigm shift in the treatment of the disease.

Our proprietary pulmonary delivery platform consists of our dry powder Technosphere formulation and our MedTone inhaler through which the powder is delivered into the deep lung. Our Technosphere formulation technology is centered on a class of organic molecules that are designed to self-assemble into small particles. Certain drugs, such as insulin, can be loaded onto these particles. The structural characteristics of loaded Technosphere particles (particle size and surface topography) impart aerodynamic properties that we believe make them particularly well suited for inhalation delivery.

In order to formulate Technosphere Insulin, we combine solutions of insulin and the Technosphere material to form a mixture, which is then dried to form the insulin-loaded powder. In our preclinical

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studies, we have observed that the Technosphere Insulin formulation is able to pass through the surface cells of the lung more rapidly than insulin alone. We believe this attribute is largely why our Technosphere Insulin System can approximate the natural first-phase insulin release spike.

We have developed a proprietary, palm-sized and easy-to-use dry powder inhaler for use with proprietary, single-use, disposable, plastic cartridges containing Technosphere-formulated drugs. The inhaler has been used in multiple Phase I and Phase II clinical trials with Technosphere Insulin. We believe that our MedTone inhaler, shown below, is one of the smallest, lightest and least complicated devices currently in development for the pulmonary delivery of insulin. The compact size and the design of our inhaler make it easy to use and unobtrusive, which we believe should facilitate patient compliance. It also incorporates several features designed to ensure that the drug is delivered appropriately to the deep lung, including:

•	breath actuation, which means that the patient does not need to coordinate a breath with any manipulation of the device, such as priming or pumping; and
•	an airflow regulator that is intended to deliver a consistent airflow from patient to patient and from use to use, even in patients with restricted airflow capacity.

The MedTone inhaler in the closed position

We believe that our Technosphere Insulin System has advantages over other competitive pulmonary insulin delivery systems, principally due to our proprietary technology. These advantages include:

•	Approximates natural first-phase insulin release spike. A major advantage of our Technosphere Insulin System is the speed with which the insulin is delivered to the patient’s bloodstream. Typically, regular insulin delivered by subcutaneous injection is delivered to the bloodstream slowly, resulting in peak insulin levels in about 120 to 180 minutes. Insulin suppliers have developed “rapid-acting” insulin analogs, which are variations of insulin that reach peak blood levels in 45 to 90 minutes. Based on our analysis of published reports, we believe that other pulmonary insulin products in development deliver peak insulin levels in 35 to 90 minutes. This timing does not approximate the natural first-phase insulin release spike, which generally occurs within six minutes after food reaches the digestive system. In contrast, our clinical trials have shown that our Technosphere Insulin System produces peak insulin levels in 10 to 14 minutes, which approximates the timing of the body’s natural first-phase insulin release spike. Because our product produces an early insulin profile that resembles that seen in healthy individuals, we anticipate that our insulin therapy will be used to achieve better control over the patient’s glucose levels throughout the day, especially following a meal.
•	Ease of use. Our MedTone inhaler is light, is easy to use and fits in the palm of the patient’s hand. To administer a dose, the patient opens the device, inserts a single-dose cartridge of Technosphere Insulin powder into the inhaler, inserts the mouthpiece into the mouth and takes a deep breath, thereby drawing the powder deep into the lungs. Moreover, we believe the timing for administering Technosphere Insulin is more convenient than subcutaneous injection. In our clinical

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	trials, the optimal time for taking a dose of Technosphere Insulin has been found to be at the start of a meal or shortly thereafter. With subcutaneous injection, the user must try to time a dose 30 to 45 minutes before the expected mealtime.
•	More efficient delivery of pulmonary insulin. Based on our clinical trials of Technosphere Insulin and on our analysis of published reports of the performance of other pulmonary insulin systems in development, we believe that the inhalation of a specified amount of insulin formulated as Technosphere Insulin produces blood insulin levels over a measured period of time that are approximately three times greater than that produced by the same amount of insulin administered via the pulmonary delivery systems being developed by other pharmaceutical companies.
•	Safety. Based on our clinical trials to date, Technosphere Insulin appears to cross lung tissue rapidly, with no observed accumulation of either insulin or the carrier particles in the lung. In addition, our preclinical studies have shown that the Technosphere material does not need to be metabolized to be eliminated and is rapidly excreted in the urine. Technosphere Insulin has not generated any serious, drug-related adverse events in our clinical trials to date.

OUR CLINICAL TRIAL RESULTS

We have conducted multiple Phase I and Phase II clinical trials of the Technosphere Insulin System in more than 200 individuals in Europe and the United States. We are currently conducting two late Phase II multi-center clinical trials: one in the United States, which, when fully-enrolled, will involve approximately 140 individuals with diabetes and one in Europe, which, when fully-enrolled, will involve approximately 200 individuals with diabetes.

The first of our completed clinical trials were performed in Europe as Phase I trials in healthy volunteers. These clinical trials produced the first evidence in humans that inhalation of Technosphere Insulin was accompanied by a rapid rise in blood insulin levels. The chart below shows the mean profiles of insulin delivery into the bloodstream in five healthy volunteers following administration of Technosphere Insulin and following administration of insulin by subcutaneous injection. These data indicated that the administration of Technosphere Insulin could produce peak insulin levels in a much shorter period of time than could subcutaneous injection, fast enough to suggest that our product might be used to approximate the first-phase insulin release spike.

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Rapid changes in blood insulin levels after Technosphere Insulin

We performed additional clinical trials in Europe and the United States as Phase II investigations in patients with type 1 and type 2 diabetes. These clinical trials evaluated various measures of the performance and safety of the Technosphere Insulin System, including the variability of insulin delivered to the bloodstream following inhalation as well as the variability of the effect of our Technosphere Insulin System on blood glucose levels. The results indicated that our Technosphere Insulin System produced no greater variability than that obtained with traditional subcutaneous insulin administration. In fact, a specified dose of Technosphere Insulin appeared to be able to maintain consistent blood glucose levels despite differences in the caloric content of a meal. This is unlike the situation with conventional subcutaneous injection of insulin, which has to be closely tied to the amount of food eaten in order to avoid the risk of hyper- or hypoglycemia. Another finding that emerged from our completed Phase II clinical trials was that the optimal time for individuals with diabetes to inhale Technosphere Insulin is immediately before the first mouthful of food or within 15 minutes thereafter. We believe this highly convenient treatment regimen should lend itself to compliant and reliable self-administration by patients, given that most other forms of insulin delivery that are currently marketed recommend dosing up to 45 minutes before a meal begins, raising issues such as miscalculation of time or unanticipated change in meal availability.

Our Phase I and II clinical trials have indicated that use of the Technosphere Insulin System is associated with high insulin bioavailability, which is a measure of the amount of insulin that is transferred to the bloodstream from the dosage form of the product. Bioavailability is typically expressed as a relative measure, compared to the amount of insulin that enters the bloodstream over the same period of time following the subcutaneous administration of the same quantity of regular human insulin. Based on the results of our clinical trials and on our analysis of published reports of the performance of other pulmonary insulin systems in development, we believe that the relative bioavailability associated with our Technosphere Insulin System is up to three times greater than that reported for the other inhaled insulin platforms.

We are currently conducting two randomized, placebo controlled late Phase II clinical trials, one in the United States and the other in Europe. These clinical trials will provide further information on safety of the Technosphere Insulin System and its efficacy in maintaining blood glucose control. These clinical trials will also assist with the selection of appropriate doses of Technosphere Insulin for use in subsequent Phase III clinical trials. Twenty-seven clinical research centers are participating in the

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US study and thirty centers are participating in the European trial. These sites include major university research centers as well as well-known diabetes specialty clinics.

We plan to conduct multiple Phase III safety and efficacy clinical trials in different regions of the world, including the United States and Europe. We anticipate that the first US-based Phase III clinical trials will start in the first half of 2005, although our current plans allow for the initiation of the Phase III program in other countries as early as the last quarter of 2004, subject to the regulatory approval process of the relevant jurisdictions. We anticipate that the total Phase III program will involve several thousand patients using the Technosphere Insulin System alone or in combination with other therapies. In the United States, we have initiated the first of several long-term safety clinical trials, which will follow the safety experience of the individuals who participate in our Phase II and Phase III clinical trials.

No serious, drug-related adverse events have been recorded in our clinical trials to date. In some patients, we have observed mild coughing and some hypoglycemic events, all classified as mild to moderate. The other adverse events reported in our clinical trials— including backache, common cold, anemia and diarrhea— were found to be unrelated to the administration of Technosphere Insulin. We have an ongoing program of safety surveillance and adverse event reporting for the purpose of evaluating the ongoing safety data concerning the use of our Technosphere Insulin System.

OUR RESEARCH PROGRAMS

Additional applications of our proprietary technosphere formulation technology

We are developing additional applications for our proprietary Technosphere formulation technology by formulating other drugs for pulmonary delivery, primarily for metabolic and immunological diseases. In addition, we are currently involved in a collaborative research project with Novo Nordisk A/S to develop a Technosphere formulation for the pulmonary delivery of an undisclosed drug. We anticipate that we will have completed the formulation work plan by mid-2004, at which point Novo Nordisk A/S will evaluate the feasibility of continuing the collaboration.

Immunology research programs

The immune system is a network of cells and organs that defends the body against infection and abnormal cells, such as cancer and transplanted cells. A key element of the immune system is its ability to distinguish between healthy cells and foreign or diseased cells that do not belong in the body. The immune system accomplishes this task by recognizing distinctive molecules found on the surface of each cell as either normal or abnormal, and responding to them appropriately.

Any substance capable of triggering an immune response is known as an antigen. An antigen can be all or part of a pathogenic organism or it can be a by-product of diseased cells. Certain specialized cells of the immune system sample antigens present in the body and present small fragments, known as epitopes, of foreign antigens to other cells of the immune system whose function is to destroy any cell

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that expresses the same epitope; this is known as cell-mediated immunity. In this way, the immune system can launch a very specific response to infection or disease.

We are developing therapies for the treatment of solid-tumor cancers using our proprietary technologies for discovering critical tumor-related antigens, for designing DNA- and peptide-based compounds that evoke a cell-mediated immune response to those antigens and for delivering the compounds in vivo to the immune system in a manner that stimulates a potent response.

We believe that our therapeutic approach addresses several deficiencies inherent in earlier approaches to cancer immunotherapy, including:

•	Specificity. We target cancer epitopes to which the immune system has not developed a tolerance, instead of targeting the dominant epitopes expressed by cancerous cells, many of which are tolerated by the immune system. We have developed technology to identify the non-tolerated epitopes on the cancer cell surface and we have developed a method of modifying these epitopes that is designed to activate an immune response. Through this process, we believe that the body’s tolerance of the cancer cells can be broken, leading to the destruction of the cancer by the immune system.
•	Administration. Our compounds are delivered directly into the patient’s lymph nodes, where studies have shown they will have the greatest impact. In contrast to the conventional subcutaneous or intramuscular route of administration, we believe that the direct delivery of our compounds will bring local high concentrations of the active components of our compounds into contact with high concentrations of the cells needed to generate a potent cell-mediated immune response.
•	Selectivity, potency and duration of response. We deliver our therapeutic compounds in a manner that we believe primes the immune system to respond to cancer cells expressing specific epitopes, in much the same way that a chronic infection evokes a progressively increased immune response to an invading bacteria. Our administrative regimen is designed to boost the immune response over the course of a treatment cycle so that it becomes increasingly potent and long acting.

We have conducted initial studies of our cancer therapy in Europe and the United States, including Phase I/ II clinical trials in the United States that involved 42 patients who had progressed to late stages of skin cancer. We observed that the delivery of a prototype formulation, targeting a single cancer epitope, was well tolerated by melanoma patients and produced a response by their immune system against that specific epitope. In late stages of such diseases, there are usually multiple generations of such cells, expressing multiple epitopes. Although we believe that our clinical data to date have been encouraging, we have continued to refine our cancer therapy program. We have developed several product candidates and expect to begin preclinical safety tests for one of these product candidates later this year, with the goal of commencing clinical trials in 2005.

To complement our cancer products and to broaden our addressable market, we are also developing drugs targeted toward inflammatory and autoimmune diseases. Several common diseases, including multiple myeloma, rheumatoid arthritis, lupus and multiple sclerosis, are characterized by the dysfunction of key cells in the immune system, called B-cells and T-cells, which are agents of the immune system that the body uses to destroy infectious and aberrant materials. We have focused our attention on certain proteins that govern the development and function of B-cells and T-cells. By changing the activity of these proteins, we believe we can modify the immune response associated with a variety of immune system diseases. We have identified a number of molecules that are effective at changing the activity of these proteins in vitro and are in the process of optimizing these molecules.

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OUR STRATEGY

Our objective is to develop products in the major therapeutic areas of diabetes, cancer, inflammatory and autoimmune diseases. Our strategy is to achieve this objective by doing the following:

•	Commercialize our Technosphere Insulin System for the insulin-using diabetes market. We intend to advance our Technosphere Insulin System into and through Phase III clinical trials and then into commercialization, with the goal of establishing a significant presence for Technosphere Insulin in the insulin-using diabetes market. We believe that the market for insulin products will expand significantly among patients with type 2 diabetes as a result of the entry of other pulmonary insulin products, primarily due to the non-invasive nature of pulmonary insulin delivery. We believe the advantages of the Technosphere Insulin System, as compared to other pulmonary insulin products, will enable us to capture a significant portion of the existing and expanded insulin-using diabetes market.
•	Establish our Technosphere Insulin System as the preferred drug therapy within the broader population of people with type 2 diabetes. Our target markets also include patients with type 2 diabetes who are currently using conventional therapies other than insulin, including:

•	Patients currently using diet and exercise therapy but who are having difficulty achieving proper blood glucose control;
•	Patients for whom diet and exercise therapy has failed but who otherwise would have started non-insulin oral medications; and
•	Patients currently using non-insulin oral medications.

We believe our Technosphere Insulin System will be the first commercially available therapy to produce a profile of insulin levels in the bloodstream that approximates the first-phase insulin release spike normally seen in healthy individuals following the beginning of a meal. We believe that no other conventional therapy has demonstrated that it can approximate the first-phase insulin release spike, and we are not aware of any other therapy in development that makes this claim. As a result, we believe that our Technosphere Insulin System has the potential to become the preferred drug therapy for the broader population of people with type 2 diabetes.

•	Seek a strategic collaboration for the development, marketing and commercialization of our Technosphere Insulin System. We are actively exploring collaborations with large pharmaceutical companies in the United States, Europe and Japan that would provide marketing, sales and financial resources to commercialize and sell our Technosphere Insulin System. We have not licensed or transferred any of our rights to this product and we believe this will enable us to obtain advantageous terms in potential collaborations. We intend to retain worldwide manufacturing rights for our Technosphere Insulin System.
•	Expand our proprietary Technosphere formulation technology for the delivery of other drugs. We are developing additional applications for our proprietary Technosphere formulation technology by formulating other drugs for pulmonary delivery, primarily for metabolic and immunological diseases. We are currently collaborating with Novo Nordisk A/S to develop a Technosphere formulation for the pulmonary delivery of an undisclosed drug. We believe our proprietary Technosphere formulation technology can also be extended to other forms of local administration, such as gastrointestinal delivery, because of its apparent ability to stabilize drugs and facilitate transport across cellular membranes.
•	Build upon our expertise in immune system diseases to develop new drugs. We intend to build upon our expertise and intellectual property portfolio to develop new treatments for diseases other than diabetes. We are conducting research programs focused on the development of therapeutic

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	compounds for the active immunological treatment of cancer as well as inflammatory and autoimmune diseases.

SALES AND MARKETING

We currently have no sales, marketing or distribution capabilities and have no experience as a company in marketing or selling pharmaceutical products. Our efforts have primarily been directed at developing products for a number of different markets. Assuming that we receive regulatory approval for our product candidates, we anticipate that we will have to pursue different sales and marketing strategies tailored to each particular product and market segment. In order to commercially market any of our products, we will also need either to develop a sales and marketing infrastructure ourselves or collaborate with third parties who have greater sales and marketing capabilities and have access to potentially large markets.

Although we believe that establishing our own sales and marketing organizations in North America would have substantial advantages, we recognize that this will not be practical for some of our products and that collaborating with companies with established sales and marketing capabilities in a particular market or markets may be a more effective alternative for some products. To date, we have retained worldwide commercialization rights for all of our products, including our lead product, the Technosphere Insulin System. We believe that this will give us the flexibility to enter into favorable collaborations to provide the necessary sales and marketing support.

Our goal is to have our partners fund the clinical development and commercial launch of the Technosphere Insulin System in their respective countries. We are currently seeking to enter into collaborations to assist us in the development and commercialization of our Technosphere Insulin System in the United States, Europe and Japan, and we may also create in-house sales and marketing operations in certain key markets, particularly in the United States.

MANUFACTURING AND SUPPLY

An independent third party manufactures our MedTone inhaler and the cartridges that are inserted into it. We rely on this manufacturer to comply with relevant regulatory requirements, including compliance with QSRs. We believe our manufacturer has the capacity to meet our Phase III clinical and initial commercial requirements and that it complies with relevant regulatory requirements. We purchase bulk insulin under a long-term contract with a global producer of insulin that we believe has sufficient capacity to provide us with our initial commercial quantities of the drug. We must rely on our insulin supplier to maintain compliance with relevant regulatory requirements including cGMP. Currently, we manufacture the raw Technosphere material, but we are in the process of developing a relationship with a secondary manufacturer to supply us with commercial quantities of this raw material. Like us, our third-party manufacturers are subject to extensive governmental regulation.

We formulate and fill the Technosphere Insulin powder into plastic cartridges and blister package the cartridges in a manufacturing suite in our Danbury facility. We believe that our Danbury facility has adequate capacity to meet our currently anticipated clinical trial needs. We are continuing to increase our filling and packaging capacity through the acquisition of new equipment and the construction of new clean rooms and other manufacturing facilities. We believe that these building improvements have been adequately validated to date and that the facility continues to conform with cGMP. We recently initiated the design and construction of a modular filling and packaging system that will increase our filling and packaging capacity. The new system is designed to operate in a very small space and can be expanded using multiple units to meet our currently anticipated commercial production needs.

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INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY

Our success will depend in large measure on our ability to obtain and enforce our intellectual property rights, effectively maintain our trade secrets and avoid infringing the proprietary rights of third parties. Our policy is to file patent applications on what we deem to be important technological developments that might relate to our product candidates or methods of using our product candidates and to seek intellectual property protection in the United States, Europe, Japan and selected other jurisdictions for all significant inventions. We have obtained, are seeking and will continue to seek patent protection on the compositions of matter, methods and devices flowing from our research and development efforts. We are also in-licensing certain technology.

Our core patents claim the composition of matter of the Technosphere material as well as the methods for manufacturing unloaded Technosphere particles and Technosphere particles that incorporate drugs. The first of these patents expires in 2012, but subsequent patents provide additional coverage of the composition of matter of the current product until 2020. We also hold patents that claim methods of using Technosphere particles for the pulmonary delivery of drugs. These patents relating to Technosphere Insulin do not expire until 2015. In addition, we are prosecuting a number of patent applications related to the MedTone inhaler device and the capsules that contain the dry powder. We have filed and intend to continue to file additional patent applications on improvements to the Technosphere technology and its manufacture, as well as on specific compositions of matter formed using this technology in combination with drugs. To date, we have been issued nine US and foreign Technosphere-related patents and have filed a number of applications in different jurisdictions claiming inventions related to the Technosphere technology and the dry powder inhaler.

Our cancer immunotherapy program is built on proprietary methods for the selection, design and administration of epitopes. We have filed a number of patent applications relating to this technology, both as methods of use and compositions of matter. We are pursuing patents on the use of our administration method to induce and maintain a cell-mediated immune response in many jurisdictions and have been granted patents in Australia and New Zealand, which do not expire until 2017. We also have patent applications related to differential antigen processing and nucleic acid-encoded immunogen designs, which we expect will provide us with protection until 2020 or later. In addition to the applications on these broad technologies, we have filed and will continue to file patent applications on specific compounds and the protocols for administering them. A number of patent applications related to this technology are now pending in the United States and internationally.

In the area of immune modulation, we have obtained exclusive licenses to a number of patents and patent applications covering compositions of matter and methods for modulating activity of certain proteins involved in the application of B-cells and T-cells. These licenses are worldwide and include the right to sublicense. We have also filed and will continue to file additional patent applications on improvements to these technologies.

The fields of pulmonary drug delivery and cancer therapies are crowded and a substantial number of patents have been issued in these fields. In addition, because patent positions can be highly uncertain and frequently involve complex legal and factual questions, the breadth of claims obtained in any application or the enforceability of issued patents cannot be predicted. Further, there can be substantial delays in commercializing pharmaceutical products, which can partially consume the statutory period of exclusivity through patents.

In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued, either in the United States or abroad. Statutory differences in patentable subject matter may limit the protection we can obtain on some of our inventions outside of the United States. For example, methods of treating humans are not patentable in many countries outside of the United States. These and other issues may limit the patent protection we will be able to secure internationally.

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Consequently, we do not know whether any of our pending or future patent applications will result in the issuance of patents or, to the extent patents have been issued or will be issued, whether these patents will be subjected to further proceedings limiting their scope, will provide significant proprietary protection or competitive advantage, or will be circumvented or invalidated. Furthermore, patents already issued to us or our pending applications may become subject to disputes that could be resolved against us. In addition, patent applications in the United States filed before November 29, 2000 are currently maintained in secrecy until the patent issues, although in certain countries, including the United States for applications filed after November 29, 2000, applications are generally published 18 months after the application’s priority date. In any event, because publication of discoveries in scientific or patent literature often trails behind actual discoveries, we cannot be certain that we were the first creator of inventions covered by our pending patent applications or that we were the first to file patent applications on such inventions.

Although we own a number of domestic and foreign patents and patent applications relating to our Technosphere Insulin System and cancer vaccine products under development, we have identified certain third-party patents that a court may interpret to restrict our freedom to operate (that is, to cover our products) in the areas of Technosphere formulations, pulmonary insulin delivery and the treatment of cancer. Specifically, we have identified certain third-party patents having claims relating to chemical compositions of matter and pulmonary insulin delivery that may trigger an allegation of infringement upon the commercial manufacture and sale of our Technosphere Insulin System. We have also identified third-party patents disclosing methods and compositions of matter related to DNA-based vaccines that also may trigger an allegation of infringement upon the commercial manufacture and sale of cancer therapy. We believe, based in part on advice of counsel, that we are not infringing any valid claims of any patent owned by a third party. However, if a court were to determine that our inhaled insulin products or cancer therapies were infringing any of these patent rights, we would have to establish with the court that these patents were invalid in order to avoid legal liability for infringement of these patents. Proving patent invalidity can be difficult because issued patents are presumed valid. Therefore, in the event that we are unable to prevail in an infringement or invalidity action we will either have to acquire the third-party patents outright or seek a royalty-bearing license. Royalty-bearing licenses effectively increase production costs and therefore may materially affect product profitability. Furthermore, should the patent holder refuse to either assign or license us the infringed patents, it may be necessary to cease manufacturing the product entirely and/or design around the patents. In either event, our business would be harmed and our profitability could be materially adversely impacted. If third parties file patent applications, or are issued patents claiming technology also claimed by us in pending applications, we may be required to participate in interference proceedings in the USPTO to determine priority of invention. We may be required to participate in interference proceedings involving our issued patents and pending applications.

We also rely on trade secrets and know-how, which are not protected by patents, to maintain our competitive position. We require our officers, employees, consultants and advisors to execute proprietary information and invention and assignment agreements upon commencement of their relationships with us. These agreements provide that all confidential information developed or made known to the individual during the course of our relationship must be kept confidential, except in specified circumstances. These agreements also provide that all inventions developed by the individual on behalf of us must be assigned to us and that the individual will cooperate with us in connection with securing patent protection on the invention if we wish to pursue such protection. There can be no assurance, however, that these agreements will provide meaningful protection for our inventions, trade secrets or other proprietary information in the event of unauthorized use or disclosure of such information.

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We also execute confidentiality agreements with outside collaborators. However, disputes may arise as to the ownership of proprietary rights to the extent that outside collaborators apply technological information developed independently by them or others to our projects, or apply our technology to outside projects, and there can be no assurance that any such disputes would be resolved in our favor. In addition, any of these parties may breach the agreements and disclose our confidential information or our competitors might learn of the information in some other way. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business, results of operations and financial condition could be adversely affected.

COMPETITION

The pharmaceutical and biotechnology industries are intensely competitive and characterized by rapidly evolving technology and intense research and development efforts. We expect to compete with companies, including the major international pharmaceutical companies, and other institutions that have substantially greater financial, research and development, marketing and sales capabilities and have substantially greater experience in undertaking preclinical and clinical testing of products, obtaining regulatory approvals and marketing and selling biopharmaceutical products. We will face competition based on, among other things, product efficacy and safety, the timing and scope of regulatory approvals, ease of use and cost.

We believe our Technosphere Insulin System provides us with important competitive advantages in the delivery of insulin when compared with currently known alternatives. However, new drugs or further developments in alternative drug delivery methods may provide greater therapeutic benefits, or comparable benefits at lower cost, than our Technosphere Insulin System. There can be no assurance that existing or new competitors will not introduce products or processes competitive with or superior to our product candidates.

We have set forth below more detailed information about certain of our competitors. The following is based on information currently available to us.

Pulmonary and oral insulin delivery systems

There are also several companies, including Nobex Corporation, Generex Biotechnology Corporation and Emisphere Technologies, Inc., that are pursuing development of products for the oral delivery of insulin. We believe these products are currently in relatively early clinical trials.

Non-insulin oral medications

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Squibb Company as Glucophage, has also been widely used for the treatment of type 2 diabetes. Insulin sensitizers, including Avandia, which is being marketed by GlaxoSmithKline PLC, and Actos, which is being marketed by Takeda Pharmaceuticals North America, Inc./Eli Lilly & Company, are increasingly being used to treat type 2 diabetes.

Injected insulin

Immunotherapy

GOVERNMENT REGULATION AND PRODUCT APPROVAL

The FDA and comparable regulatory agencies in state, local and foreign jurisdictions impose substantial requirements upon the clinical development, manufacture and marketing of medical devices and drug products. These agencies, through regulations that implement the Food, Drug and Cosmetic Act, as amended, or FDCA, and other regulation, regulate research and development activities and the development, testing, manufacture, labeling, storage, shipping, approval, advertising, promotion, sale and distribution of such products. In addition, if our products are marketed abroad, they also are subject to export requirements and to regulation by foreign governments. The regulatory clearance process is generally lengthy, expensive and uncertain. Failure to comply with applicable FDA and other regulatory requirements can result in sanctions being imposed on us or the manufacturers of our products, including hold letters, civil or criminal fines or other penalties, product recalls, or seizures, or total or partial suspension of production or injunctions, refusals to permit products to be imported into or exported out of the United States, refusals of the FDA to grant approval of drugs or to allow us to enter into government supply contracts, withdrawals of previously approved marketing applications and criminal prosecutions.

The steps typically required before a new pharmaceutical product for use in humans may be marketed in the United States include:

•	Preclinical studies that include laboratory evaluation of product chemistry and formulation, as well as animal studies to assess the potential safety and efficacy of the product. Certain preclinical tests must be conducted in compliance with good laboratory practice regulations. Violations of these regulations can, in some cases, lead to invalidation of the studies, requiring such studies to be replicated. In some cases, long-term preclinical studies are conducted while clinical studies are ongoing.
•	Submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials may commence. The results of the preclinical studies are submitted to the FDA as part of the IND. Unless the FDA objects, the IND becomes effective 30 days following receipt by the FDA.

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•	Approval of clinical protocols by independent investigational review boards, or IRBs, at each of the participating clinical centers conducting a study. The IRBs consider, among other things, ethical factors, the potential risks to individuals participating in the trials and the potential liability of the institution. The IRB also approves the consent form signed by the trial participants.
•	Adequate and well-controlled human clinical trials to establish the safety and efficacy of the product. Clinical trials involve the administration of the drug to healthy volunteers or to patients under the supervision of a qualified medical investigator according to an approved protocol. The clinical trials are conducted in accordance with protocols that detail the objectives of the study, the parameters to be used to monitor participant safety and efficacy or other criteria to be evaluated. Each protocol is submitted to the FDA as part of the IND. Companies also must generally determine the details of properly treating pediatric patients with a drug and this can sometimes mean that specific pediatric studies must be performed. Human clinical trials are typically conducted in the following four sequential phases that may overlap or be combined:

	•	In Phase I, the drug is initially introduced into a small number of individuals and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. Phase I clinical trials are often conducted in healthy human volunteers and such cases do not provide evidence of efficacy. In case of severe or life-threatening diseases, the initial human testing is often conducted in patients rather than healthy volunteers. Because these patients already have the target disease, these studies may provide initial evidence of efficacy traditionally obtained in Phase II clinical trials. Consequently, these types of trials are frequently referred to as Phase I/ II clinical trials. The FDA receives reports on the progress of each phase of clinical testing and it may require the modification, suspension or termination of clinical trials if it concludes that an unwarranted risk is presented to patients or healthy volunteers.
	•	Phase II involves clinical trials in a limited patient population to further identify any possible adverse effects and safety risks, to determine the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
	•	Phase III clinical trials are undertaken to further evaluate dosage, clinical efficacy and to further test for safety in an expanded patient population at geographically dispersed clinical study sites. Phase III clinical trials usually include a broader patient population so that safety and efficacy can be substantially established. Phase III clinical trials begin once Phase II evaluations demonstrate that a dosage range of the product is effective and has an acceptable safety profile.
	•	Phase IV clinical trials are performed if the FDA requires, or a company pursues, additional clinical trials after a product is approved. These clinical trials may be made a condition to be satisfied after a drug receives approval. The results of Phase IV clinical trials can confirm the effectiveness of a product candidate and can provide important safety information to augment the FDA’s voluntary adverse drug reaction reporting system.

•

Concurrent with clinical trials and preclinical studies, companies also must develop information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product and the manufacturer must develop methods for testing the quality, purity, and potency of the final products. Additionally, appropriate packaging must be selected and tested and chemistry stability studies must be conducted to demonstrate that the product does not undergo unacceptable deterioration over its shelf-life.

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•	Submission to the FDA of a new drug application, or NDA, for non-biological drugs such as insulin, based on the clinical trials. The results of pharmaceutical development, preclinical studies, and clinical trials are submitted to the FDA in the form of an NDA for approval of the marketing and commercial shipment of the product.
•	The FDA reviews all NDAs submitted before it accepts them for filing. It may request additional information rather than accepting an application for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. The FDA has substantial discretion in the approval process and may disagree with an applicant’s interpretation of the data submitted in its NDA and information. Also, as part of this review, the FDA may refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation. The FDA is not bound by the recommendation of an advisory committee. Manufacturing establishments often also are subject to inspections prior to NDA approval to assure compliance with cGMP and with manufacturing commitments made in the relevant marketing application. Under the Prescription Drug User Fee Act, or PDUFA, submission of an NDA with clinical data requires payment of a fee. In fiscal year 2004 the required fee is $573,500. In return, the FDA assigns a goal for standard applications of 10 months from acceptance of the application to return of a first “complete response,” in which the FDA may approve the product or request additional information. There can be no assurance that an application will be approved within the performance goal timeframe established under PDUFA.
•	FDA approval of the NDA must be granted prior to any commercial sale or shipment of the product. The FDA may deny an NDA approval if safety, efficacy or other regulatory requirements are not satisfied. The FDA may also require additional testing or information before approving the NDA. If regulatory approval of the product is granted, such approval may require post-marketing testing and surveillance to monitor the safety of the product or may entail limitations on the indicated uses for which the product may be marketed or advertised. The FDA may require additional testing or information before approving the NDA. In addition, product approval may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following the commencement of marketing.

Clinical trials are designed and conducted in a variety of ways. A “placebo-controlled” trial is one in which the trial tests the results of a group of patients, referred to as an “arm” of the trial, receiving the drug being tested against those of an arm that receives a placebo, which is a substance of identical appearance that is not therapeutic in a medical or chemical sense. In a “double-blind” study, neither the researcher nor the patient knows into which arm of the trial the patient has been placed, or whether the patient is receiving the drug or the placebo. “Randomized” means that upon enrollment, patients are placed into one arm or the other at random by computer. “Parallel control” trials generally involve a study arm with a patient population that is not exposed to the study medication (i.e., is either on placebo or standard treatment protocols) for comparison to the drug being tested and groups are assigned upon patient admission to the study and remain in those groups for the duration of the study. An “open label” study is one where the researcher and the patient know that the patient is receiving the drug. A trial is said to be “pivotal” if it is designed to meet statistical criteria with respect to pre-determined “endpoints,” or clinical objectives, that the sponsor believes, based usually on its interactions with the relevant regulatory authority, will be sufficient for regulatory approval. In most cases, at least two “pivotal” Phase III clinical trials are necessary for approval. Under the Pediatric Research Equity Act of 2003, an NDA also must include an assessment, generally based on clinical study data, on the safety and efficacy of a drug for all relevant pediatric populations. The

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statute provides for waivers or deferrals in certain situations but we can make no assurances that such situations will apply to us or our products.

Medical products containing a combination of new drugs, biological products, or medical devices may be regulated as “combination products” in the United States. A combination product generally is defined as a product comprised of components from two or more regulatory categories (e.g., drug/device, device/biologic, drug/biologic). Each component of a combination product is subject to the requirements established by the FDA for that type of component, whether a new drug, biologic, or device. In order to facilitate premarket review of combination products, the FDA designates one of its centers to have primary jurisdiction for the premarket review and regulation of both components. The determination whether a product is a combination product or two separate products is made by the FDA on a case-be-case basis. We have had discussions with the FDA about the status of our Technosphere Insulin System as a combination product and we have been told that the FDA considers our product a combination drug/device. There have been some indications from the FDA that the review of a future marketing application for our Technosphere Insulin System will involve three separate review groups of the FDA: (1) the Metabolism and Endocrine Drug Products Division; (2) the Pulmonary Drug Products Division; and (3) the Center for Devices and Radiological Health within the FDA that reviews Medical Devices. Although the FDA has not made an official final decision in this regard, we currently understand that the Metabolic and Endocrine Drug Products Division will be the lead group and obtain consulting reviews from the other two FDA groups.

The testing and approval process requires substantial time, effort and financial resources. We cannot be certain that any approval of our products will be granted on a timely basis, if at all. If any of our products are approved for marketing by the FDA, we will be subject to continuing regulation by the FDA, including record-keeping requirements, reporting of adverse experiences with the product, submitting other periodic reports, drug sampling and distribution requirements, notifying the FDA and gaining its approval of certain manufacturing or labeling changes, and complying with certain electronic records and signature requirements. Prior to and following approval, if granted, all manufacturing sites are subject to inspection by the FDA and other national regulatory bodies and must comply with cGMP, QSR and other requirements enforced by the FDA and other national regulatory bodies through their facilities inspection program. Foreign manufacturing establishments must comply with similar regulations. In addition, our drug-manufacturing facilities located in Connecticut and the facilities of our insulin supplier and the supplier of our MedTone inhaler and cartridges are subject to federal registration and listing requirements and, if applicable, to state licensing requirements. Facilities are subject to inspection by the FDA and similar national agencies, as well as state and local authorities at any time. Failure, including those of our insulin and MedTone inhaler suppliers, to obtain and maintain applicable federal registration or state license, or to meet the inspection criteria of the FDA or the other national regulatory bodies, would disrupt our manufacturing processes and would harm our business. In complying with standards set forth in these regulations, manufacturers must continue to expend time, money and effort in the area of production and quality control to ensure full compliance. Currently, we believe we are operating under all of the necessary guidelines and permits.

It is not yet clear to what extent we will be subject to regulations governing medical devices separate from those governing drugs. After the FDA permits a device to enter commercial distribution, however, numerous regulatory requirements apply. These include:

•	product labeling regulations;
•	general prohibition against promoting products for unapproved or “off-label” uses;
•	corrections and removals (e.g., recalls);

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•	establishment registration and device listing;
•	general prohibitions against the manufacture and distribution of adulterated and misbranded devices; and
•	the Medical Device Reporting regulation, which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur. Failure to comply with these regulatory requirements could result in civil fines, product seizures, injunctions, and/or criminal prosecution of responsible individuals and us. Further, the company we have contracted to manufacture our MedTone inhaler and cartridges will be subject to the QSRs, which require manufacturers to follow elaborate design, testing, control, documentation and other quality assurance procedures during the manufacturing process of medical devices, among other requirements.

Failure to adhere to regulatory requirements at any stage of development, including the preclinical and clinical testing process, the review process, or at any time afterward, including after approval, may result in various adverse consequences. These consequences include action by the FDA or other national regulatory body that has the affect of delaying approval or refusing to approve a product; suspending or withdrawing an approved product from the market; seizing or recalling a product; or imposing criminal penalties against the manufacturer. In addition, later discovery of previously unknown problems may result in restrictions on a product, its manufacturer, or the NDA holder, or market restrictions through labeling changes or product withdrawal. Also, new government requirements may be established or they may change at any time that could delay or prevent regulatory approval of our products under development. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.

In addition, the FDA imposes a number of complex regulations on entities that advertise and promote drugs, which include, among others, standards for and regulations of direct-to-consumer advertising, off-label promotion, industry sponsored scientific and educational activities, and promotional activities involving the Internet. The FDA has very broad enforcement authority under the FDCA, and failure to comply with these regulations can result in penalties, including the issuance of a warning letter directing us to correct deviations from FDA standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA, and state and federal civil and criminal investigations and prosecutions.

Products manufactured in the United States and marketed outside the United States are subject to certain FDA regulations, as well as regulation by the country in which the products are to be sold. We also would be subject to foreign regulatory requirements governing clinical trials and drug product sales if products are marketed abroad. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries usually must be obtained prior to the marketing of the product in those countries. The approval process varies from jurisdiction to jurisdiction and the time required may be longer or shorter than that required for FDA approval.

Product development and approval within this regulatory framework take a number of years, involve the expenditure of substantial resources and are uncertain. Many drug products ultimately do not reach the market because they are not found to be safe or effective or cannot meet the FDA’s other regulatory requirements. In addition, there can be no assurance that the current regulatory framework will not change or that additional regulation will not arise at any stage of our product development that may affect approval, delay the submission or review of an application or require additional expenditures by us. There can be no assurance that we will be able to obtain necessary regulatory clearances or approvals on a timely basis, if at all, for any of our product candidates under

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development, and delays in receipt or failure to receive such clearances or approvals, the loss of previously received clearances or approvals, or failure to comply with existing or future regulatory requirements could have a material adverse effect on our business and results of operations.

Under European Union regulatory systems, marketing authorizations may be submitted either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid for all European Union member states. The decentralized procedure provides for mutual recognition of national approval decisions. Under this latter procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the application and assessment report, each member state must decide whether to recognize approval. We plan to choose the appropriate route of European regulatory filing in an attempt to accomplish the most rapid regulatory approvals. However, the chosen regulatory strategy may not secure regulatory approvals or approvals of the chosen product indications. In addition, these approvals, if obtained, may take longer than anticipated.

We cannot assure you that any of our product candidates will prove to be safe or effective, will receive regulatory approvals, or will be successfully commercialized.

In addition to the foregoing, we are subject to numerous federal, state and local laws relating to such matters as laboratory practices, the experimental use of animals, the use and disposal of hazardous or potentially hazardous substances, controlled drug substances, safe working conditions, manufacturing practices, environmental protection and fire hazard control. We may incur significant costs to comply with those laws and regulations now or in the future.

Patent restoration and marketing exclusivity

Hatch-Waxman requires a competitor that submits an ANDA for a copy of one of our drugs or otherwise relies in part on data from one of our drugs regarding its safety and efficacy, to notify us of their application and potential infringement of our patent rights. Hatch-Waxman Act places certain timing requirements on us with respect to filing an infringement action against such an ANDA applicant, if we choose to do so.

While Hatch-Waxman Act provides competitors the ability to market copies of innovator products with the submission of significantly less clinical data, the Act also provides for the restoration of a portion of a product’s patent term that is lost during a drug’s clinical development and NDA review by the FDA. Hatch-Waxman also provides for a statutory protection, known as market exclusivity, which prohibits the FDA’s approval or acceptance of certain competitor drug applications. Patent term restoration can return up to five years of patent term for a patent that covers a new product or its use to compensate for time lost during product development and the regulatory review process. This period is generally one-half the time between the effective date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application, subject to a maximum extension of five years and no extension can extend the total patent life beyond 14 years after the drug approval date. The application for patent term extension is subject to approval

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by the USPTO, in conjunction with the FDA. It takes at least six months to obtain approval of the application for patent term extension, and there can be no guarantee that the application will be granted.

Hatch-Waxman also provides for differing periods of statutory protection for new drugs approved under an NDA. Among the types of exclusivity are those for a “new molecular entity” and those for a new formulation or a new indication for a previously approved drug. MannKind’s lead product, the Technosphere Insulin System is an innovative change to a previously approved product with the same active ingredient, insulin. Marketing exclusivity for the Technosphere Insulin System, if granted by the FDA, likely would prohibit the agency from approving another drug that relies, at least in part, on data regarding the safety and efficacy of our new formulation for that same active ingredient for three years. This three-year exclusivity, however, only covers the innovation associated with the NDA to which it attaches. Thus, the three-year exclusivity would not prohibit the FDA from approving applications for drugs containing the same active ingredient but without our new innovative change.

The FDA Modernization Act of 1997 included a pediatric exclusivity provision that was extended by the Best Pharmaceuticals for Children Act of 2002. Pediatric exclusivity is designed to provide an incentive to manufacturers for conducting research about the safety and efficacy of their products in children. Pediatric exclusivity, if granted, provides an additional six months of market exclusivity in the United States for new or currently marketed drugs, if certain pediatric studies requested by the FDA are completed by the applicant. To obtain this additional six months of exclusivity, it would be necessary for us to first receive a written request from the FDA to conduct pediatric studies and then to conduct the requested studies according to a previously agreed timeframe and submit the report of the study. There can be no assurances that we would receive a written request from the FDA and if so that we would complete the studies in accordance with the requirements for this six month exclusivity. The current pediatric exclusivity provision is scheduled to end on October 1, 2007 and there can be no assurances that it will be reauthorized.

EMPLOYEES

As of December 31, 2003, we had 205 full-time employees. Approximately 72 of these employees were engaged in research and development, 58 in manufacturing, 33 in clinical, regulatory affairs and quality assurance and 42 in administration, finance, management, information systems, corporate development and human resources. Thirty of our employees have a Ph.D. degree and/or M.D. degree and are engaged in activities relating to research and development, manufacturing, quality assurance and business development. None of our employees is subject to a collective bargaining agreement. We believe our relations with our employees are good.

SCIENTIFIC ADVISORS

We seek advice from a number of leading scientists and physicians on scientific, technical and medical matters. These advisors are leading scientists in the areas of pharmacology, chemistry, immunology and biology. Our scientific advisors are consulted regularly to assess, among other things:

•	our research and development programs;
•	the design and implementation of our clinical programs;
•	our patent and publication strategies;
•	market opportunities from a clinical perspective;
•	new technologies relevant to our research and development programs; and
•	specific scientific and technical issues relevant to our business.

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The following are some of our scientific advisors and their primary affiliations:

Name		Primary affiliation
Harvey Cantor, M.D.		Professor of Pathology at Harvard Medical School
James J. Collins, D.Phil		Professor at Boston University
Alexander Fleming, M.D.		Chief Executive Officer of the Kinexum Corporation
Laurie Glimcher, M.D.		Member of the National Academy of Sciences and Professor of Immunology at Harvard Medical School
Edward S. Horton, M.D.		Chief of Clinical Research at the Joslin Diabetes Center
Thomas Kundig, M.D.		Professor at the University of Zurich
Harold E. Lebovitz, M.D.		Professor of Medicine and the Chief of Endocrinology Emeritus at the State University of New York — Brooklyn
Frederick Levy, Ph.D.		Associate Member of the Ludwig Institute for Cancer Research
Greg Petsko, Ph.D.		Professor at Brandeis University
Barrett Rollins, M.D., Ph.D.		Associate Professor of Medicine at Harvard Medical School
Jesse Roth, M.D.		Chief Geriatrician of the Long Island Jewish Medical Center
Jay S. Skyler, M.D.		Chief of Diabetes & Endocrinology at the University of Miami School of Medicine
Rolf Zinkernagel, M.D., Ph.D.		Nobel Laureate in Medicine and Institute Director at the University of Zurich

FACILITIES

In early 2001, we acquired a facility in Danbury, Connecticut to house our Technosphere-related activities, including development and manufacturing of Technosphere Insulin. This facility includes two buildings comprising approximately 187,000 square feet and currently house our research and development, administrative and manufacturing functions, including the Technosphere Insulin formulation, filling and packaging plant. We also lease approximately 20,000 square feet of laboratory space in Elmsford, New York, pursuant to an 11-year, renewable lease that expires in October 2004. We believe that our facility in Danbury has sufficient space to contain additional Technosphere Insulin manufacturing capacity necessary to satisfy potential commercial demand for our products for several years after we launch our Technosphere Insulin System and other Technosphere-related products.

We own and occupy approximately 120,000 square feet of laboratory, office and manufacturing space in Valencia, California. The facility contains our principal executive offices and houses our research and development laboratories for our cancer and other immunology programs. We also use this facility to provide support for the development of our Technosphere programs.

LEGAL PROCEEDINGS

We are not currently a party to any material legal proceedings. We may from time to time become a party to legal proceedings arising in the ordinary course of business.

WEBSITE

We maintain an Internet website at http://www.mannkindcorp.com. The information in, or that can be accessed through, our website is not incorporated into and does not form a part of this prospectus.

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Management

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth our current executive officers and directors and their ages as of December 31, 2003:

Name		Age				Position(s)
Alfred E. Mann			78			Chairman of the Board of Directors and Chief Executive Officer
Hakan S. Edstrom			53			President, Chief Operating Officer and Director
Richard L. Anderson			64			Corporate Vice President and Chief Financial Officer
Dan R. Burns			52			Corporate Vice President and President, MannKind BioPharmaceuticals
Wayman Wendell Cheatham, M.D., FACE			55			Corporate Vice President and Senior Vice President, Medical & Regulatory Affairs, MannKind BioPharmaceuticals
David Thomson, Ph.D., J.D.			37			Corporate Vice President, Associate General Counsel and Corporate Secretary
Kathleen Connell, Ph.D.(1)(2)(3)			56			Director
Ronald Consiglio(2)(3)			60			Director
Llew Keltner, M.D., Ph.D.			53			Director
Michael Friedman, M.D.(1)(2)			60			Director

(1)	Member of the Compensation Committee.
(2)	Member of the Nominating and Corporate Governance Committee.
(3)	Member of the Audit Committee.

Alfred E. Mann has been one of our directors since April 1999, our Chairman of the Board since December 2001 and our Chief Executive Officer since October 2003. He founded and formerly served as Chairman and Chief Executive Officer of MiniMed, Inc., a publicly traded company focused on diabetes therapy and microinfusion drug delivery that was acquired by Medtronic, Inc. in August 2001. Mr. Mann also founded and, from 1972 through 1992, served as Chief Executive Officer of Pacesetter Systems and its successor, Siemens Pacesetter, a manufacturer of cardiac pacemakers. Since 1993, Mr. Mann has served as Chairman and a Chief Executive Officer of Advanced Bionics Corporation, a medical device manufacturer. Mr. Mann holds a bachelor’s and master’s degree in Physics from the University of California at Los Angeles, honorary doctorates from Johns Hopkins University, the University of Southern California and Western University and is a member of the National Academy of Engineering.

Hakan S. Edstrom has been our President and Chief Operating Officer since April 2001 and has served as one of our directors since December 2001. Mr. Edstrom was with Bausch & Lomb, Inc., a health care product company, from January 1998 to April 2001, advancing to the position of Senior Corporate Vice President and President of Bausch & Lomb, Inc. Americas Region. From 1981 to 1997, Mr. Edstrom was with Pharmacia Corporation, where he held various executive positions, including President and Chief Executive Officer of Pharmacia Opthalmics Inc. Mr. Edstrom is currently a director of Q-Med AB, a biotechnology and medical device company, and Ixion Biotechnology, Inc., a biotechnology company. Mr. Edstrom was educated in Sweden and holds a master’s degree in Business Administration from the Stockholm School of Economics.

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Richard L. Anderson has been our Corporate Vice President and Chief Financial Officer since October 2002. He was previously Senior Vice President, Chief Financial Officer and Secretary at NeoRx Corporation, a Seattle-based publicly traded biotechnology company. From January 1997 to September 2002, Mr. Anderson held various executive positions at NeoRx, including President, Chief Operating Officer and Senior Vice President, Finance and Operations. Mr. Anderson holds a master’s degree in Management from Johns Hopkins University, a master’s degree in Solid State Physics from the University of Maryland and a bachelor’s degree in Physics from Bucknell University.

Dan R. Burns has been our Corporate Vice President and President of MannKind BioPharmaceuticals, which is our Danbury, Connecticut operation, since September 2002. Prior to joining us, he served as Chief Executive Officer of Trophix Pharmaceuticals, Inc., a pharmaceutical company in 1997, and from 1998 to 1999 he served as Chief Executive Officer of ProScript, Inc., a biopharmaceutical company. From 2000 to 2002, he served as Chief Executive Officer of HealthTalk Interactive, a pharmaceutical services firm. Mr. Burns has held senior executive positions internationally and domestically with Bristol Myers Squibb. Mr. Burns holds degrees in Psychology and Business Administration from McMaster University and Mohawk College.

Wayman Wendell Cheatham, M.D., FACE has been our Corporate Vice President and Senior Vice President, Medical & Regulatory Affairs of MannKind BioPharmaceuticals since August 2002. From April 1999 to August 2002, he was Vice President of Medical & Regulatory Affairs for Takeda Pharmaceuticals North America, Inc., a manufacturer of ethical pharmaceuticals. From August 1996 to April 1999, Dr. Cheatham served as Director of Medical Affairs for Novo Nordisk Pharmaceuticals, Inc., a manufacturer of pharmaceutical preparations. Dr. Cheatham received his M.D. degree from the Pennsylvania State University College of Medicine in 1975. Dr. Cheatham has also been nominated to serve as a member of the board of directors of the American Diabetes Association beginning June 2004.

David Thomson, Ph.D., J.D. has been our Corporate Vice President, Associate General Counsel and Corporate Secretary since January 2002. Prior to joining us, he practiced corporate/commercial and securities law at the Toronto law firm of Davies Ward Phillips & Vineberg LLP from May 1999 through December 2001, except for a period from May to December 2000, when he served as Vice President, Business Development for CTL ImmunoTherapies Corp. From March 1994 to August 1996, Dr. Thomson held a post-doctoral position at the Rockefeller University, where he conducted medical research in the Laboratory of Neurophysiology. Dr. Thomson obtained his bachelor’s degree, master’s degree and Ph.D. degree from Queens University and obtained his J.D. degree from the University of Toronto.

Kathleen Connell, Ph.D. has been one of our directors since November 2003. Currently, Dr. Connell is president of Connell Group, an investment advisory firm and teaches international finance at the UC Berkeley Haas School of Business. From 1995 to 2002, she served as State Controller of California. Her prior experience includes serving as a president of a NASD-registered investment banking firm, as vice-president of a New York-based bank and as the founder and Chair of the UCLA Center for Finance and Real Estate at the John E. Anderson School of Management, where she taught for five years. Dr. Connell holds a Ph.D. degree from the University of California, Los Angeles.

Ronald Consiglio has been one of our directors since October 2003. Since 1999, Mr. Consiglio has been the managing director of Synergy Trading, a securities-trading partnership. From 1999 to 2001, Mr. Consiglio was Executive Vice President and Chief Financial Officer of Trading Edge, Inc., a national automated bond-trading firm. His prior experience includes serving as Senior Vice President and Chief Financial Officer of Cantor Fitzgerald & Co. and as a member of its board of directors. Mr. Consiglio is currently a member of the board of directors of Natrol, Inc, a manufacturer of dietary supplements and a trustee on the board of directors of Metropolitan West Trust, a management

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investment company. Mr. Consiglio holds a bachelor’s degree in Accounting from California State University at Northridge.

Llew Keltner, M.D., Ph.D. has been one of our directors since October 2003. He founded EPISTAT, an international pharmaceutical and health care strategy company and has served as its Chief Executive Officer since 1985. He has also served as Chief Executive Officer of MetaStat, an oncology drug development firm, since 1994. In addition, Dr. Keltner is Chairman of Light Sciences Corporation, a company developing light-activated drugs. Dr. Keltner is currently on the board of directors of Infostat, Inc., a contract research organization, Oregon Life Sciences, a venture investment company focused on the bio-med and biotech sectors, LKHealthnet Inc., a company that acquires healthcare network assets, and Goodwell Technologies, Inc., a provider of real-time communications and collaboration services in the health care, financial, travel and lodging and other industries. Dr. Keltner holds a master’s degree in Epidemiology and Biostatistics, a Ph.D. degree in Biomedical Informatics and a medical degree from Case Western Reserve University.

Michael Friedman, M.D. has been one of our directors since December 2003. Currently, Dr. Friedman is the President and Chief Executive Officer of the City of Hope National Medical Center. Previously, from September 2001 until April 2003, Dr. Friedman held the position of Senior Vice President of Research and Development, Medical and Public Policy, for Pharmacia Corporation and, from July 1999 until September 2001, was a Senior Vice President of Searle, a subsidiary of Monsanto Company. From 1995 until June 1999, Dr. Friedman served as Deputy Commissioner for Operations for the FDA, and was Acting Commissioner and Lead Deputy Commissioner from 1997 to 1998. Dr. Friedman holds a bachelor’s degree, magna cum laude, from Tulane University, New Orleans, Louisiana, and a doctorate in medicine from the University of Texas, Southwestern Medical School.

BOARD COMPOSITION

Our business and affairs are managed under the direction of our board of directors. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors meets regularly on a quarterly basis and additionally as required. Written board materials are distributed in advance of meetings as a general rule, and our board of directors schedules meetings with and presentations from members of our senior management on a regular basis.

Our board of directors consists of six members, two of which are employees of ours. Three of these directors, Dr. Connell, Mr. Consiglio and Dr. Friedman are independent directors, as defined by Rule 4200(a)(14) of the National Association of Securities Dealers.

In accordance with the terms of our amended and restated certificate of incorporation and bylaws, upon the completion of this offering, our board of directors will be divided into three classes, class I, class II and class III, with each class serving staggered three-year terms. At each annual meeting of our stockholders, the directors or their successors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election.

Upon the completion of this offering, the members of the classes will be divided as follows:

•	the class I directors will be Dr. Connell and Dr. Keltner, and their term will expire at the annual meeting of our stockholders to be held in 2005;
•	the class II directors will be Dr. Friedman and Mr. Edstrom, and their term will expire at the annual meeting of our stockholders to be held in 2006; and

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•	the class III directors will be Mr. Consiglio and Mr. Mann, and their term will expire at the annual meeting of our stockholders to be held in 2007.

The classification of the board of directors may have the effect of delaying or preventing changes in the control of our management or us.

Our amended and restated certificate of incorporation provides that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed between the three classes so that, as nearly as possible, each class will consist of one-third of the directors. Our directors may be removed for cause by the affirmative vote of the holders of a majority of our voting stock and may be removed without cause by the affirmative vote of the holders of at least two-thirds of our voting stock.

Over the past year, our board of directors has devoted considerable time to further improving our governance by addressing the rules promulgated under the Sarbanes-Oxley Act of 2002 and the proposals and requirements of Nasdaq. In connection with such activities, our board of directors has evaluated its role and function, and examined the following, among other things:

•	board and board committee meeting schedules;
•	board committee governance and composition; and
•	the size and composition of our board of directors and director independence.

As a result of its evaluation and recent corporate governance rules enacted under the Sarbanes-Oxley Act of 2002 and Nasdaq, our board of directors has:

•	revised the charter of our audit committee of the board;
•	created a separate compensation committee and a nominating and corporate governance committee of the board;
•	approved the audit committee’s formation of a disclosure committee;
•	adopted a code of business conduct and ethics governing our employees, officers and directors to promote high standards of integrity by conducting our affairs in an honest and ethical manner; and
•	adopted a policy of non-retaliation and a procedure for reporting complaints to protect our employees against unlawful retaliation as a result of their lawful, good-faith reporting of violations of federal or state law or our code of business conduct and ethics by us or any of our agents.

BOARD COMMITTEES

Our board of directors has an audit committee, compensation committee and nominating and corporate governance committee, each of which has the composition and responsibilities described below. Our board of directors is responsible for determining the composition of the members of these key committees.

Audit committee

•	evaluating the independent auditors qualifications, independence and performance;
•	determining the engagement of the independent auditors;
•	approving the retention of the independent auditors to perform any proposed permissible non-audit services;

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•	monitoring the rotation of partners of the independent auditors on our engagement team as required by law;
•	reviewing our financial statements;
•	reviewing our critical accounting policies and estimates;
•	discussing with management and the independent auditors the results of the annual audit and the review of our quarterly financial statements; and
•	reviewing and evaluating, at least annually, the performance of the audit committee and its members, including compliance of the audit committee with its charter.

We have appointed Mr. Consiglio as our audit committee financial expert. Both our independent auditors and internal financial personnel regularly meet privately with our audit committee and have unrestricted access to this committee.

Compensation committee

•	reviewing and recommending policy relating to compensation and benefits of our officers and employees, including reviewing and approving corporate goals and objectives relevant to compensation of our chief executive officer and other senior officers, evaluating the performance of these officers in light of those goals and objectives, and setting compensation of these officers based on such evaluations;
•	administering our benefit plans and the issuance of stock options and other awards under our stock plans;
•	reviewing and establishing appropriate insurance coverage for our directors and executive officers;
•	recommending the type and amount of compensation to be paid or awarded to members of our board of directors, including consulting, retainer, meeting, committee and committee chair fees and stock option grants or awards;
•	reviewing and approving the terms of any employment agreements, severance arrangements, change-of-control protections and any other compensatory arrangements for our executive officers; and
•	reviewing and evaluating, at least annually, the performance of the compensation committee and its members, including compliance of the compensation committee with its charter.

Nominating and corporate governance committee

•	planning for succession with respect to the position of CEO and other senior executives;
•	reviewing and recommending nominees for election as directors;
•	assessing the performance of the board of directors and monitoring committee evaluations;
•	suggesting, as appropriate, ad-hoc committees of the board of directors;
•	developing guidelines for board composition; and

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•	reviewing and evaluating, at least annually, the performance of the nominating and corporate governance committee and its members, including compliance of the nominating and corporate governance committee with its charter.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to establishing our compensation committee, our board of directors as a whole made decisions relating to compensation of our executive officers. Drs. Glen Nelson, Donald Drakeman and Edward L. Korwek, former directors, served on our compensation committee in 2002 and 2003. During 2002 and 2003, none of our executive officers served as a member of the board of directors or compensation committee of any other entity that had one or more executive officers who served on our board of directors or compensation committee.

DIRECTOR COMPENSATION AND REIMBURSEMENT

Each of our non-employee directors was granted an option to purchase 30,000 shares of our common stock under our 2004 equity plan upon joining our board. These options vest over three years. Effective upon the closing of this offering, non-employee directors will receive an option to purchase 30,000 shares of our common stock and annual grants to purchase 10,000 shares of our common stock under the 2004 Non-Employee Directors’ Stock Option Plan, which is described elsewhere in this prospectus. Commencing in 2004, each of our non-employee directors will receive an annual retainer of $15,000. Each non-employee director who serves as a committee chair will receive an additional retainer of $2,000 per year. In addition, we reimburse our non-employee directors for their expenses incurred in connection with attending board and committee meetings, and these directors receive $1,500 for each meeting of the board attended in person, $750 for each telephonic board meeting attended and $750 for each meeting of a committee attended in person or by phone. See also “Certain relationships and related transactions—Other transactions.”

EXECUTIVE COMPENSATION

Summary compensation table

The following table provides information for the fiscal year ended December 31, 2003, regarding compensation awarded to, earned by or paid to our chief executive officers, each of our four other most highly compensated executive officers whose combined salary and bonus for 2003 exceeded $100,000 and an additional individual for whom disclosures would have been provided but for the

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fact that the individual was not serving as an executive officer at the end of 2003. We refer to the individuals listed in the table below as our “named executive officers” elsewhere in this prospectus.

											Long-term
			Annual compensation(1)								compensation
											securities				All other
Name and principal position(s)			Salary				Bonus				underlying options				compensation
Alfred E. Mann				$100,000			$	—				722,917			$	—
	Chief Executive Officer and Chairman of the Board of Directors
Michael G. Page				350,015	(2)			—				264,012				166,385	(3)
	Former Chief Executive Officer and Director
Solomon S. Steiner				36,676	(4)			—				513,415				452,148	(4)
	Former Senior Vice President, Technology and Director
Hakan S. Edstrom				322,115				87,000				999,618				—
	President, Chief Operating Officer and Director
Dan R. Burns				273,963				—				400,000				44,731	(5)
	Corporate Vice President and President, MannKind BioPharmaceuticals
Richard L. Anderson				280,288				—				350,000				59,950	(6)
	Corporate Vice President and Chief Financial Officer
David Thomson				223,269				63,000				327,285				37,842	(7)
	Corporate Vice President, Associate General Counsel and Corporate Secretary

(1)	In accordance with the rules of the SEC, the compensation described in this table does not include medical, group life insurance or other benefits which are available generally to all of our salaried employees and certain perquisites and other personal benefits received which do not exceed the lesser of $50,000 or 10% of any named executive officer’s salary and bonus disclosed in this table.
(2)	In October 2003, Dr. Michael Page’s employment with us terminated. In accordance with the terms of his severance agreement, we are obligated to pay Dr. Page his base salary at the rate of $330,000 per year for up to 18 months.
(3)	In connection with Dr. Page’s resignation, he received a severance payment of $165,000. Also includes $1,385 in auto allowance.
(4)	In February 2003, Dr. Solomon Steiner’s employment with us terminated. In accordance with the terms of his settlement agreement, we were obligated to pay Dr. Steiner approximately $1,049,288 over three years, comprised of $775,365 in deferred compensation from prior years and the remainder comprised of other severance-related items. In 2003, we paid his base salary through February. Additionally, we paid $258,455 in deferred compensation, $192,655 in severance-related items and $1,038 in auto allowance.
(5)	Includes $35,731 in temporary housing reimbursements and $9,000 in auto allowance.
(6)	Includes $50,546 in relocation reimbursements and $9,404 in auto allowance. Does not include compensation related to an amount loaned to Mr. Anderson, which has been subsequently repaid, or an amount paid to Mr. Anderson for the purchase of his residence, by a limited liability company that is not owned or controlled by us but is controlled by Mr. Mann. See Note 7 to the financial statements for further information.
(7)	Includes $28,842 in relocation reimbursements and $9,000 in auto allowance. Does not include compensation related to an amount loaned to Mr. Thomson, which has been subsequently repaid, by a limited liability company that is not owned or controlled by us but is controlled by Mr. Mann. See Note 7 to the financial statements for further information.

Stock option grants in 2003

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2004 equity plan prior to its amendment and restatement. In 2003, we granted options to purchase a total of 4,994,657 shares of our common stock, with a weighted average exercise price of $3.12 per share, to our employees, including grants to our named executive officers. This total includes 2,344,717 options issued under the repricing program in exchange for 2,344,717 outstanding options that were tendered into the program for cancellation. All options granted to our named executive officers are nonstatutory stock options that do not qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or the Code. Under the terms of our 2004 Equity Incentive Plan, any options to purchase shares of our common stock that expire or are otherwise terminated are returned to the option pool and become available for future grant under the plan. Options expire ten years from the date of grant. See “Employee benefit plans—2004 Equity Incentive Plan.”

The exercise price per share of each option granted to our named executive officers was equal to the fair market value or 85% of the fair market value of our common stock as determined by our board of directors on the date of the grant. The exercise price is payable in cash, by promissory note, shares of our common stock previously owned by the optionee or pursuant to the net exercise of the option. In determining the fair market value of the stock granted on the grant date, our board of directors considered many factors, including:

•	our absolute and relative levels of revenues and other operating results;
•	the fact that our options involved illiquid securities in a nonpublic company;
•	prices of preferred stock issued by us to outside investors in arm’s-length transactions;
•	the rights, preferences and privileges of our preferred stock over our common stock; and
•	the likelihood that our common stock would become liquid through an initial public offering, a sale of us or another event.

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Options granted in 2003

The following table provides information concerning grants of options to purchase shares of our common stock under our 2004 equity plan to our named executive officers in 2003. No stock appreciation rights covering our common stock were granted to our named executive officers in 2003.

																		Potential
																		realizable value
		Individual grants																at assumed
																		annual rates
		Number																of stock price
		of																appreciation
		securities				% of total												for option
		underlying				options granted				Exercise or								term(2)
		options				to employees in				base price				Expiration
Name		granted				fiscal year(1)				per share				date				5%				10%
Alfred E. Mann			—				—	%		$	—				—
Michael G. Page			250,000				5.0				4.25				4/7/05
Solomon S. Steiner			—				—				—				—
Hakan S. Edstrom			699,618	(3)			14.0				2.65				11/5/07
			300,000				6.0				2.65				11/20/13
Dan R. Burns			250,000	(3)			5.0				2.65				11/5/07
			150,000				3.0				2.65				11/20/13
Richard L. Anderson			250,000	(3)			5.0				2.65				11/5/07
			100,000				2.0				2.65				11/20/13
David Thomson			150,000	(3)			3.0				2.65				11/5/07
			150,000				3.0				2.65				11/20/13

(1)	Based on 4,994,657 options granted during the fiscal year ended December 31, 2003 under our 2004 equity plan, including grants to executive officers.
(2)	Potential realizable values are computed by (a) multiplying the number of shares of common stock subject to a given option by an assumed public offering price of $        per share, (b) assuming that the aggregate stock value derived from that calculation compounds at the annual 5% or 10% rate shown in the table for the entire term of the option and (c) subtracting from that result the aggregate option exercise price. The 5% and 10% assumed annual rates of stock price appreciation are mandated by the rules of the SEC and do not represent our estimate or projection of future common stock prices.
(3)	Represents the replacement, pursuant to our option re-pricing program, of options granted in an earlier year.

Aggregated option exercises during 2003 and fiscal year-end option values

The value realized and the value of unexercised in-the-money options at December 31, 2003 are based on an assumed initial public offering price of $          per share, less the per share exercise price, multiplied by the number of shares subject to the option, without taking into account any taxes that

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may be payable in connection with the transaction. Options outstanding as of December 31, 2003 may not be exercised prior to vesting.

										Number of securities
										underlying unexercised								Value of unexercised
										options at fiscal								in-the-money options
										year-end								at fiscal year-end
		Shares acquired
Name		on exercise				Value realized				Exercisable				Unexercisable				Exercisable				Unexercisable
Alfred E. Mann			—				—				180,729				542,188
Michael G. Page			—				—				264,012				—
Solomon S. Steiner			—				—				513,415				—
Hakan S. Edstrom			—				—				—				999,618
Dan R. Burns			—				—				—				400,000
Richard L. Anderson			—				—				—				350,000
David Thomson			—				—				20,464				306,821

EMPLOYEE BENEFIT PLANS

1991 Stock Option Plan

Administration. Our board of directors administers the 1991 plan, but the board may delegate authority to administer the plan to a committee of three or more members of the board.

Eligibility of awards. The 1991 plan provided for the grant to our employees of:

•	incentive stock options, or ISOs, as defined under Section 422 of the Code; and
•	nonstatutory stock options, or NSOs, which are not intended to qualify as ISOs under the Code.

Stock options were granted under the 1991 plan pursuant to stock option agreements. Generally, the exercise prices for ISOs granted under the 1991 plan were at least 100% of the fair market value of the common stock subject to the options on the date of grant. However, the exercise prices for ISOs granted under the 1991 plan to any person who, at the time of the grant, owned or was deemed to own stock possessing more than 10% of the total combined voting power of us or any affiliate of ours, referred to as a 10% stockholder, were at least 110% of the fair market value of the stock subject to the options on the date of grant. The exercise prices for NSOs granted under the 1991 plan were at least 85% of the fair market value of the common stock subject to the options on the date of grant. All outstanding options granted under the 1991 plan are fully vested.

In general, the term of stock options granted under the 1991 plan may not exceed ten years, but the term of ISOs granted to 10% stockholders may not exceed five years. Unless the terms of an optionee’s stock option agreement provide otherwise, if an optionee’s service with us terminates for any reason other than death, the optionee may exercise any vested options for up to three months from the termination of service. However, in the event the optionee is an employee of ours and is terminated for cause (as defined in the 1991 plan), all options held by the optionee under the 1991 plan will terminate in their entirety immediately.

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Additional provisions. Our board of directors has the authority to amend outstanding options granted under the 1991 plan, except that no amendment may adversely affect an option without the optionee’s written consent. Our board of directors also has the power to amend the 1991 plan. However, some amendments also require stockholder approval.

Transferability. Generally, an optionee may not transfer a stock option granted under the 1991 plan other than by will or the laws of descent and distribution.

1999 Stock Plan

Administration. Our board of directors administers the 1999 plan, but the board may delegate authority to administer the plan to a committee of two or more non-employee members of the board.

Eligibility of awards. The 1999 plan provides for the grant of ISOs, NSOs, restricted stock awards, stock purchase warrants, stock appreciation rights, phantom stock and other awards. ISOs were granted solely to our employees, including officers. Under the 1999 plan, our non-employee directors were only eligible to receive NSOs as described below.

Stock awards were granted under the 1999 plan pursuant to stock award agreements. Generally, the exercise prices for ISOs granted under the 1999 plan were at least 100% of the fair market value of the common stock subject to the options on the date of grant. However, the exercise prices for ISOs granted under the 1999 plan to 10% stockholders were at least 110% of the fair market value of the stock subject to the options on the date of grant. The exercise prices for NSOs granted under the 1999 plan were at least 85% of the fair market value of the common stock subject to the options on the date of grant. Options granted under the 1999 plan vest as provided in the option award agreement. Upon the sale of all or substantially all of our assets or certain changes in our control, all outstanding awards under the 1999 plan will immediately vest and become fully exercisable.

In general, the term of stock options granted under the 1999 plan may not exceed ten years, but the term of ISOs granted to 10% stockholders may not exceed five years. If an optionee’s service relationship with us, or any affiliate of ours, terminates due to disability or death, the optionee, or his or her beneficiary, may exercise any vested options for up to 6 months after the date of termination. If an optionee’s relationship with us, or any affiliate of ours, terminates for any reason other than disability or death, the optionee may exercise any vested options for up to 30 days after the date of termination.

Acceptable consideration for the purchase of shares of our common stock under the 1999 plan was determined by our board of directors as set forth in the stock award agreements.

Additional provisions. Our board of directors has the authority to amend outstanding awards granted under the 1999 plan, except that no amendment may adversely affect an award without the recipient’s written consent. Our board of directors also has the power to amend the 1999 plan. However, some amendments also require stockholder approval.

Transferability. Stock awards granted under the 1999 plan may be transferred as provided in the award agreement. Generally, options granted under the plan may not be transferred other than by will or the laws of descent and distribution, a gift to family members or transfers to certain trusts.

Non-employee director options. The 1999 plan provided for initial and annual grants of NSOs to our non-employee directors. The exercise prices for the options were 100% of the fair market value of the

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common stock subject to the options on the date of grant. Under the 1999 plan, 25% of our shares of common stock subject to NSOs granted to our non-employee directors vested on the grant date, and an additional 25% vested on each of the following three anniversaries of the grant date. NSOs granted to our non-employee directors under the 1999 plan have a term of eight years. In general, if a non-employee director ceases to be a non-employee director of us or one of our subsidiaries, due to disability or death, the optionee, or his or her beneficiary, may exercise any vested options for up to one year following the date the service relationship ends. Otherwise, the optionee may exercise any vested options for up to one month after the date the service relationship ends.

Allecure Corp. 2000 Stock Option and Stock Plan and CTL ImmunoTherapies Corp. 2000 Stock Option and Stock Plan

Administration. Pursuant to the Merger, our board of directors administers the AlleCure plan and the CTL plan, but the board may delegate authority to administer the plans to a committee of the board.

Eligibility of awards. The AlleCure plan and the CTL plan provided for the grant of ISOs, NSOs and stock purchase rights. ISOs were granted solely to AlleCure’s and CTL’s former employees.

Awards. Stock options were granted under the AlleCure plan and CTL plan pursuant to stock option agreements. Generally, the exercise prices for ISOs were at least 100% of the fair market value of the common stock subject to the options on the date of grant. However, the exercise prices for ISOs granted under the plans to 10% stockholders were at least 110% of the fair market value the date of grant. The exercise prices for NSOs granted under the plans were at least 85% of the fair market value of the common stock subject to the options on the date of grant. Options granted under the AlleCure plan and the CTL plan vest at the rate specified in the option agreements, but must vest at a rate of least 20% per year.

In general, the term of options granted under the AlleCure plan and the CTL plan may not exceed ten years, but ISOs granted to 10% stockholders may not exceed five years. Unless the terms of an optionee’s stock option agreement provide for earlier or later termination, if an optionee’s service relationship with us, or a subsidiary of ours, terminates for any reason other than disability or death, the optionee may exercise any vested options for up to three months after the date the service relationship ends. Unless the terms of an optionee’s stock option agreement provide otherwise, in the event an optionee’s service relationship with us, or a subsidiary of ours, terminates due to disability or death, the optionee, or his or her beneficiary, may exercise any vested options for up to 12 months after the date the service relationship ends.

The AlleCure and CTL plan provide that acceptable consideration for the purchase of common stock issued pursuant to options granted under the plans includes cash, common stock previously owned by the optionee, a promissory note and other legal consideration previously approved by the board of directors of AlleCure or CTL, as the prior administrators of the plans.

Generally, an optionee may not transfer a stock option or stock purchase right granted under the AlleCure plan or CTL plan other than by will or the laws of descent and distribution.

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Corporate transactions or changes in control. In the event we liquidate or dissolve, our board of directors may provide for the immediate vesting of all outstanding options under the AlleCure plan and the CTL plan. Any options or stock purchase rights outstanding under the plans will terminate immediately prior to any liquidation or dissolution of us. In addition, in the event we merge or sell all or substantially all of our assets, all outstanding stock awards under the AlleCure plan and the CTL plan either will be assumed, continued or substituted for by any surviving or acquiring entity. If the surviving or acquiring entity elects not to assume, continue or substitute for these awards, each optionee will be given notice of the transaction and permitted to exercise all outstanding awards held under the AlleCure plan or CTL plan for a period of 15 days after notice is provided.

Additional provisions. Our board of directors has the authority to amend outstanding awards granted under the AlleCure plan and CTL plan, except that no amendment may adversely affect an award without the recipient’s written consent. Our board of directors has the power to amend the plans. However, some amendments also require stockholder approval.

2004 Equity Incentive Plan

Share reserve. An aggregate of                      shares of our common stock are reserved for issuance under the 2004 equity plan. Shares subject to stock awards granted under the 2004 equity plan that are forfeited to us or repurchased by us, as well as shares subject to stock awards granted under the plan that are withheld on exercise of the award or that expire or otherwise terminate without being exercised, will be returned to the plan and become available for issuance under the plan. As of December 31, 2003, options to purchase 3,979,098 shares of our common stock subject to the terms of the 2004 equity plan prior to its amendment and restatement were outstanding. As of the date hereof, no shares of our common stock have been issued under the terms of the 2004 equity plan as amended and restated.

Administration. Our board of directors will administer the 2004 equity plan, but the board may delegate authority to administer the plan to a committee of one or more members of the board. Subject to the terms of the 2004 equity plan, the plan administrator will determine the stock award recipients and grant dates, the numbers and types of stock awards to be granted under the 2004 equity plan, and the terms and conditions of the stock awards, including the period of their exercisability and vesting. Subject to the limitations set forth below, the plan administrator will also determine the exercise price, purchase price or strike price, as applicable, for stock awards granted under the plan.

Eligibility of awards. The 2004 equity plan provides for the grant of ISO, NSOs, restricted stock awards, stock appreciation rights, phantom awards stock and other awards based in whole or in part by reference to our common stock. ISOs may be granted solely to our employees, including officers. All other stock awards under the 2004 equity plan may generally be granted to our employees, directors, officers and consultants.

Stock options. Stock options are granted under the 2004 equity plan pursuant to stock option agreements. Generally, the exercise price for an ISO cannot be less than 100% of the fair market value

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of the common stock subject to the option on the date of grant. The exercise price for an NSO cannot be less than 85% of the fair market value of the common stock subject to the option on the date of grant. Options granted under the 2004 equity plan vest at the rate specified in the stock option agreement. In addition, following this offering, our 2004 equity will allow for the early exercise of options granted. All shares of our common stock acquired through options exercised early may be subject to repurchase by us. Options granted under the plan prior to its amendment and restatement must vest at the rate of at least 20% per year and may not be exercised early.

In general, the term of stock options granted under the 2004 equity plan may not exceed ten years. With respect to options granted under the plan following this offering, unless the terms of an optionee’s stock option agreement provide for earlier termination, if an optionee’s service relationship with us, or any affiliate of ours, terminates due to disability, death or retirement, the optionee, or his or her beneficiary, generally may exercise any vested options for up to 12 months in the event of disability and up to 18 months in the event of death after the date the service relationship ends. If an optionee’s relationship with us, or any affiliate of ours, ceases for any reason other than disability or death, the optionee may exercise any vested options for up to three months after the termination of service, unless the terms of the stock option agreement provide for earlier termination. However, in the event the optionee’s service with us, or an affiliate of ours, is terminated for cause (as defined in the plan), all options held by the optionee under the 2004 equity plan will terminate in their entirety on the date of termination.

With respect to options granted under the 2004 equity plan prior to this offering, if an optionee’s service with us is terminated due to disability or death, the optionee, or his or her beneficiary, may exercise any vested options for up to six months after the date of termination. If an optionee’s service with us is terminated for any reason other than disability or death, the optionee may exercise any vested options for up to 30 days after the date of termination. However, in the event an optionee’s service with us is terminated for cause under the terms of the plan, all options held by the optionee under the plan will terminate under the plan on the date of termination.

Acceptable consideration for the purchase of our common stock issued under the 2004 equity plan will be determined by our board of directors and may include cash or common stock previously owned by the optionee, or may be paid through a deferred payment arrangement, a broker assisted exercise, the net exercise of the option or other legal consideration or arrangements approved by our board of directors.

Generally, options granted under the 2004 equity plan may not be transferred other than by will or the laws of descent and distribution unless the optionee holds an NSO and the related option agreement provides otherwise. However, an optionee may designate a beneficiary who may exercise the options granted under the plan following the optionee’s death.

Tax limitations on stock option grants. ISOs may be granted only to our employees. The aggregate fair market value, determined at the time of grant, of shares of our common stock subject to ISOs that are exercisable for the first time by an optionee during any calendar year under all of our stock plans may not exceed $100,000. The options or portions of options that exceed this limit are treated as NSOs. No ISO may be granted to a 10% stockholder unless the following conditions are satisfied:

•	the option exercise price is at least 110% of the fair market value of the stock subject to the option on the grant date; and
•	the term of any ISO award must not exceed five years from the grant date.

Section 162(m). When we become subject to the requirements of Section 162(m) of the Code, which denies a deduction to publicly held corporations for certain compensation paid to specified employees in a taxable year to the extent that the compensation exceeds $1.0 million, no person may be granted

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options under the 2004 equity plan covering more than                      shares of our common stock in any calendar year.

Restricted stock awards. Restricted stock awards are purchased through a restricted stock award agreement. To the extent required by law, the purchase price for restricted stock awards must be at least the par value of the stock. The purchase price for a restricted stock award may be payable in cash or through a deferred payment or related arrangement, the recipient’s past services performed for us, or any other form of legal consideration or arrangement acceptable to our board of directors. Rights to acquire shares under a restricted stock award may be transferred only as set forth in the restricted stock award agreement.

Stock appreciation rights. Stock appreciation rights are granted under the 2004 equity plan pursuant to stock appreciation rights agreements. The plan administrator determines the strike price for a stock appreciation right. Stock appreciation rights granted under the plan vest at the rate specified in the stock appreciation rights agreement.

The plan administrator determines the term of stock appreciation rights granted under the 2004 equity plan. Unless the terms of an awardee’s stock appreciation rights agreement provides otherwise, if an awardee’s service relationship with us, or any affiliate of ours, terminates for any reason, the awardee, or his or her beneficiary, may exercise any vested stock appreciation rights for up to three months after the date the service relationship ends unless the terms of the agreement provide for earlier or later termination.

Phantom stock. Phantom stock awards are granted under the 2004 equity plan pursuant to phantom stock award agreements. A phantom stock award may require the payment of at least the par value of the option subject to the award. Payment of any purchase price may be made in cash or common stock previously owned by the recipient or a combination of the two. All phantom stock awards will be forfeited upon termination of the holder’s service relationship with us, or any affiliate of ours, to the extent not vested on that date.

Other stock awards. The plan administrator may grant other awards based in whole or in part by reference to our common stock. The plan administrator will set the number of shares under the award, the purchase price, if any, the timing of exercise and vesting and any repurchase rights associated with these awards.

Corporate transactions and changes in control. In the event of certain corporate transactions, all outstanding stock awards granted under the 2004 equity plan following this offering either will be assumed, continued or substituted for by any surviving or acquiring entity. If the surviving or acquiring entity elects not to assume, continue or substitute for these awards, the vesting provisions of these awards will generally be accelerated and the awards will be terminated if not exercised prior to the effective date of the corporate transaction. We may assign any repurchase or reacquisition rights held by us with respect to outstanding stock awards to the surviving or acquiring entity. Following certain change in control transactions, the vesting and exercisability of certain stock awards granted under the 2004 equity plan following this offering generally will be accelerated only if and to the extent provided in the awardee’s award agreement.

Additional provisions. Our board of directors has the authority to amend outstanding awards granted under the 2004 equity plan, except that no amendment may adversely affect an award without the recipient’s written consent. Our board of directors has the power to amend, suspend or terminate the 2004 equity plan. However, some amendments also require stockholder approval.

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2004 Employee Stock Purchase Plan

Share reserve. An aggregate of                      shares of our common stock are reserved for issuance pursuant to purchase rights granted to our employees or to employees of any of our affiliates under the purchase plan. On the first day of each calendar year, for a period of 10 years beginning on January 1, 2005, the share reserve will increase by the lesser of:

•	shares;
•	10% of the total number of shares of our common stock outstanding on that date; or
•	an amount determined by our board of directors.

However, under the terms of the purchase plan, in no event shall the annual increase cause the total number of shares reserved under the plan to exceed 10% of the total number of shares of our capital stock outstanding on December 31 of the prior year. As of the date hereof, no shares of common stock had been purchased under the purchase plan.

Administration. Our board of directors will administer the purchase plan, but the board may delegate authority to administer the plan to a committee of one or more members of the board. Subject to the terms of the purchase plan, the plan administrator will determine grant dates for purchase rights, interpret the purchase plan and purchase rights and establish rules for the administration of the plan.

Eligibility. The purchase plan is implemented by offerings of rights to eligible employees. Our board of directors will establish the criteria for determining which employees are eligible to participate in an offering. Generally, all regular employees, including executive officers, who work more than 20 hours per week and are customarily employed by us or by any of our affiliates for more than five months per calendar year may participate in the purchase plan. Eligible employees may be granted rights only if the rights, together with any other rights granted under employee stock purchase plans, do not permit such employee’s rights to purchase our stock to accrue at a rate which exceeds $25,000 of the fair market value of such stock for each calendar year in which such rights are outstanding. In addition, no employee shall be eligible for the grant of any rights under the purchase plan if immediately after such rights are granted, the employee has voting power over 5% or more of our outstanding capital stock, measured by vote or value. For purposes of the purchase plan, stock which may be purchased under an outstanding purchase right is treated as owned by an employee. All outstanding purchase rights granted to an employee will terminate if the employee ceases to be employed by us or by any of our affiliates.

Offerings. Under the purchase plan, employees may purchase shares of our common stock during offerings through payroll deductions. Offerings may last up to 27 months. The first offering will begin on the effective date of this offering and last approximately six months, with one purchase occurring at the end of the six-month period. Eligible employees who participate in an offering may have up to 20% of their earnings for the period of that offering withheld for the purchase of common stock under the purchase plan. The price paid for common stock on the purchase dates will be determined by the plan administrator and will not be less than the lower of 85% of the fair market value of a share of our common stock on the first day of the offering period or 85% of the fair market value of a share of our common stock on the purchase date. Employees may end their participation in the offering at any time during the offering period, and participation ends automatically on termination of employment.

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Transferability. Generally, a purchase right granted under the purchase plan may not be transferred other than by will or the laws of descent and distribution. However, an employee may designate a beneficiary who may exercise the purchase right following the optionee’s death.

Corporate transactions. In the event of certain corporate transactions, any outstanding rights to purchase our stock under the purchase plan will be assumed, continued or substituted for by the surviving or acquiring entity. If the surviving or acquiring entity elects not to assume, continue or substitute for these rights, then the participants’ accumulated contributions will be used to purchase shares of our common stock within ten days prior to the corporate transaction and the purchase rights will terminate immediately thereafter.

Other provisions. Our board of directors has the authority to amend or terminate the purchase plan. However, no amendment or termination of the purchase plan or outstanding offering may adversely affect any outstanding rights to purchase shares of our common stock other than an amendment or termination as a result of an accounting treatment for the purchase plan that is detrimental to our best interests. Amendments generally will be submitted for stockholder approval only to the extent required by law or applicable exchange rules.

2004 Non-Employee Directors’ Stock Option Plan

Share reserve. An aggregate of                      shares of our common stock are reserved for issuance under the directors plan. Shares subject to options granted under the directors plan that expire or otherwise terminate without being exercised, or that are withheld upon the exercise of an option, will be returned to the plan and become available for issuance under the plan. As of the date hereof, no shares of common stock have been issued under the directors plan.

Administration. Our board of directors will administer the directors plan, but the board may delegate authority to administer the plan to a committee of one or more members of the board.

Automatic grants. Pursuant to the terms of the directors plan, upon the completion of this offering, each of our non-employee directors will automatically receive an initial option grant to purchase                      shares of our common stock. Each person who is not an employee of ours who is first elected or appointed to our board of directors after the closing of this offering will receive an initial option grant on the date of his or her election or appointment to purchase                      shares of our common stock. Any person who is a non-employee director on the day of an annual meeting of our stockholders will automatically be granted an option to purchase                      shares of our common stock under the directors plan on that date, the annual grant. However, in the event a non-employee director has not been a non-employee director since the date of the preceding annual meeting of our stockholders, that director will receive an annual grant that has been reduced pro rata for each full quarter prior to the date of grant during which such person did not serve as a non-employee director.

Terms. In general, the term of the stock options granted under the directors plan may not exceed 10 years and the exercise price for the options cannot be less than 100% of the fair market value of the common stock on the date of grant. Acceptable consideration for the purchase of our common stock issued under the directors plan will be determined by our board of directors and may include cash or common stock previously owned by the optionee or may be paid through a broker assisted exercise or net exercise feature. All options granted under the directors plan vest in full on the grant date. An optionee whose service relationship with us or any of our affiliates, whether as a non-employee director or subsequently as an employee, director or consultant of either us or one of our

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affiliates, ceases for any reason may exercise options for the term provided in the option agreement to the extent the options were exercisable on the date of termination.

Transferability. Generally, an option granted under the directors plan may not be transferred other than by will or by the laws of descent and distribution or pursuant to the terms of the option agreement. However, an optionee may designate a beneficiary who may exercise the option following the optionee’s death.

Corporate transactions. In the event of certain corporate transactions, all outstanding options granted under the directors plan either will be assumed, continued or substituted for by any surviving entity. If the surviving or acquiring entity elects not to assume, continue or substitute for these options, the options will be terminated if not exercised prior to the effective date of the corporate transaction.

Additional provisions. Our board of directors may amend or terminate the directors plan at any time. However, some amendments will require stockholder approval and no amendment or termination may adversely affect a non-employee director’s outstanding options without the non-employee director’s written consent.

401(k) PLAN

We sponsor a 401(k) plan that is a defined contribution plan. Employees who complete one month of service with us prior to an open enrollment date are eligible to participate in our 401(k) plan. Participants may make pre-tax contributions to the 401(k) plan each year of up to the statutorily prescribed annual limit, which is $13,000 for 2004. Under the plan, each employee is fully vested in his or her deferred salary contributions after two years of service. Employee contributions are held in trust as required by law and invested by the plan’s trustee according to the employee’s instructions. Under our 401(k) plan, we may also make discretionary contributions and matching contributions, subject to established limits and a vesting schedule. During the year ended December 31, 2003, we contributed an aggregate of $235,000 to our 401(k) plan. The 401(k) plan is intended to qualify under Section 401(a) of the Code so that contributions to the 401(k) plan, and income earned on these contributions, are not taxable to participants until withdrawn or distributed from the plan.

EXECUTIVE SEVERANCE AGREEMENTS

On August 1, 2003, we entered into executive severance agreements with Drs. Cheatham and Thomson and Messrs. Edstrom, Anderson and Burns. Each agreement is for a period of two years and will be automatically renewed for additional one-year periods unless either party gives notice to terminate the agreement at least 90 days prior to the end of its initial term or any subsequent term.

The agreements provide that each executive is an “at will” employee and that his employment with us may be terminated at any time by the employee or us. Under the agreements, in the event we terminate an executive’s employment without cause (as defined below) or the employee terminates his employment with us for good reason (as defined below), the employee is generally entitled to receive the following:

•	the portion of the employee’s annual base salary earned through the termination date that was not paid prior to his termination, if any;
•	on the condition the employee executes a general release and settlement agreement, or Release, in favor of us, the employee’s annual base salary on the date of termination for a period of 18 months following his termination, subject to certain limitations;

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•	on the condition the employee executes a Release, an amount equal to the average annual bonus received by the employee for the three years prior to his termination (or the prior period up to three years during which the employee was one of our executive officers and received a bonus);
•	in the event the employee met the performance criteria for earning an annual bonus prior to his termination, a portion of the annual bonus earned for the year based on the number of days worked during the year;
•	any compensation previously deferred by the employee and any accrued paid time-off that the employee is entitled to under our policy; and
•	on the condition the employee executes a Release, health insurance and, under certain circumstances, life, disability and other insurance benefits for a period expiring on the earlier of 18 months following his termination or until he qualifies for related benefits from another employer.

In addition, the executive severance agreements provide that, on the condition the employee executes a Release, each vested stock option held by the employee on the date of termination will be exercisable for a period ending on the earlier of 18 months following that date or the end of the original term of the option.

Under the agreements, an employee may be terminated for cause if he, among other things:

•	refuses to carry out or satisfactorily perform any of his lawful duties or any lawful instruction of our board of directors or senior management;
•	violates any local, state or federal law involving the commission of a crime other than a minor traffic offense;
•	is grossly negligent, engages in willful misconduct or breaches a fiduciary obligation to us;
•	engages in any act that materially compromises his reputation or ability to represent us with investors, customers or the public; or
•	reaches a mandatory retirement age established by us.

Under the agreements, good reason includes, among other things:

•	a reduction of the executive’s annual base salary to a level below his salary as of August 1, 2003;
•	a material diminution in the executive’s position, authority, duties or responsibilities with us, subject to certain limitations;
•	an order by us to relocate the executive to an office located more than 50 miles from the executive’s current residence and worksite;
•	any non-renewal of the executive severance agreement by us, on the condition that the executive may terminate the agreement for good reason only during the 30-day period after he receives notice from us that we intend to terminate the agreement; and
•	any material violation of the executive severance agreement by us.

Under the agreements, an employee must inform us if he intends to terminate his agreement for good reason. We have 30 days from the date we receive notice of the employee’s intent to terminate the agreement for good reason to cure the default.

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CHANGE OF CONTROL AGREEMENTS

On August 1, 2003, we entered into change of control agreements with Drs. Cheatham and Thomson and Messrs. Edstrom, Anderson and Burns. Each agreement is for a period of two years and will be automatically renewed for additional one-year periods unless either party gives notice to terminate the agreement at least 90 days prior to the end of its initial term or any subsequent term.

Under the agreements, a change of control will be deemed to occur upon:

•	any transaction that results in a person or group acquiring beneficial ownership of 50% or more of our voting stock, other than us, one of our employee benefit plans, Mr. Mann or any other entity in which Mr. Mann holds a majority of the beneficial interests;
•	any merger, consolidation or reorganization of us in which our stockholders immediately prior to the transaction hold less than 50% of the voting power of the surviving entity following the transaction, subject to certain limitations;
•	any transaction in which we sell all or substantially all of our assets, subject to certain limitations;
•	our liquidation; or
•	any reorganization of our board of directors in which our incumbent directors (as defined in the agreements) cease for any reason to constitute a majority of the members of our board.

The agreements provide that in the event of a change of control, the employee is generally entitled to maintain the same position, authority and responsibilities held before the change of control, as well as the following compensation and benefits during the period ending on the earlier of 24 months following the change of control or the termination of his employment with us:

•	his annual base salary in an amount equal or greater to his annual salary as of the date the change of control occurs;
•	an annual bonus in an amount equal to the average annual bonus received by him for the three years prior to his termination (or the prior period up to three years during which he was one of our executive officers and received a bonus);
•	medical, dental and other insurance, and any other benefits we may offer to our executives; and
•	prompt reimbursement for all reasonable employment expenses incurred by him in accordance with our policies and procedures.

Under the change of control agreements, we may terminate an executive with or without cause (as defined below) and the executive may terminate his employment with us for good reason (as defined below) or any reason at any time during the 2-year period following a change of control. In the event we terminate an executive without cause or an executive terminates his employment with us for good reason, he is generally entitled to receive the following:

•	the portion of his annual base salary earned through the termination date that was not paid prior to his termination, if any;
•	on the condition the employee executes a Release in favor of us, the employee’s annual base salary on the date of termination for a period of 18 months following his termination, subject to certain limitations;
•	on the condition the employee executes a Release, an amount equal to 150% of his average annual bonus received by the employee for the three years prior to his termination (or the prior period up to three years during which the employee was one of our executive officers and received a bonus);

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•	in the event the employee met the performance criteria for earning an annual bonus prior to his termination, a portion of the annual bonus earned for the year based on the number of days worked during the year;
•	any compensation previously deferred by the employee and any accrued paid time-off that the employee is entitled to under our policy; and
•	on the condition the employee executes a Release, health insurance and, under certain circumstances, life, disability and other insurance benefits for a period expiring on the earlier of 18 months following his termination or until he qualifies for related benefits from another employer.

In addition, the agreements provide that, on the condition the employee executes a Release, each option to purchase shares of our common stock held by him as of the termination date will become fully vested and exercisable at any point during the term of the option, subject to certain limitations.

Under the agreements, in the event we terminate an employee with cause or an employee terminates his employment with us without good reason, his agreement will terminate without any further obligation to either party.

The change of control agreements provide that an employee may be terminated for cause if he, among other things:

•	refuses to carry out or satisfactorily perform any of his lawful duties or any lawful instruction of our board of directors or senior management;
•	violates any local, state or federal law involving the commission of a crime other than a minor traffic offense;
•	is grossly negligent, engages in willful misconduct or breaches a fiduciary obligation to us;
•	engages in any act that materially compromises his reputation or ability to represent us with investors, customers or the public; or
•	reaches a mandatory retirement age established by us before a change of control occurs.

Under the agreements, good reason includes, among other things:

•	a failure by us to make all compensation payments and provide all insurance and related benefits to the employee required under the agreement during his employment following a change of control, subject to certain limitations;
•	a material diminution in the employee’s position, authority, duties or responsibilities with us;
•	an order by us to relocate the employee to an office located more than 50 miles from the employee’s current residence and worksite;
•	any non-renewal of the change of control agreement by us, on the condition that the employee may terminate the agreement for good reason only during the 30-day period after he receives notice from us that we intend to terminate the agreement; and
•	any material violation of the change of control agreement by us.

Under the change of control agreements, an employee must inform us if he intends to terminate his agreement for good reason. We have 30 days from the date we receive notice of the employee’s intent to terminate the agreement for good reason to cure the default.

The executive and change of control agreements provide that in the event an executive becomes entitled to benefits under both agreements, compensation payments and other benefits will be coordinated to ensure the executive is entitled to receive the benefits described above without duplicating coverage.

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LIMITATIONS OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

We were incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law, or DGCL, generally provides that a Delaware corporation may indemnify any person who is, or is threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that the person is or was an officer, director, employee or agent of the corporation, or is or was serving at the request of the corporation as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding, provided that the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may also indemnify any person who is, or is threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses which the officer or director has actually and reasonably incurred.

Our amended and restated certificate of incorporation and amended and restated bylaws provide for the indemnification of our directors and executive officers to the fullest extent permitted under the DGCL and other applicable laws.

As permitted by Delaware law, we have entered into indemnity agreements with each of our directors and executive officers. These agreements generally require us to indemnify our directors and executive officers against any and all expenses (including attorneys’ fees), witness fees, damages, judgments, fines, settlements and other amounts incurred (including expenses of a derivative action) in connection with any action, suit or proceeding, whether actual or threatened, to which any of these individuals may be made a party by reason of the fact that he or she is or was a director, officer or employee of ours or one of our affiliates, provided that he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. Under the indemnification agreements, all expenses incurred by one of our directors or executive officers in defending any such action, suit or proceeding in advance of its final disposition shall be paid by us upon delivery to us of an undertaking, by or on behalf of the director or executive officer, to repay all advanced amounts if it is ultimately determined that the director or executive officer is not entitled to be indemnified by us under his or her indemnification agreement, our amended and restated bylaws or the DGCL. The indemnification agreements also set forth certain procedures that will apply in the event any of our directors or executive officers brings a claim for indemnification under his or her indemnification agreement.

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In addition, Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for:

•	any transaction from which the director derives an improper personal benefit;
•	acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
•	improper payment of dividends or redemptions of shares; or
•	any breach of a director’s duty of loyalty to the corporation or its stockholders.

Our amended and restated certificate of incorporation includes such a provision.

There is currently no pending litigation or proceeding involving any of our directors or executive officers for which indemnification is being sought. We are not currently aware of any threatened litigation that may result in claims for indemnification against us by any of our directors or executive officers.

We have an insurance policy covering our officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act of 1933, as amended, or Securities Act, or otherwise. The policy expires on March 14, 2005.

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Certain relationships and related party transactions

The following is a description of transactions or series of transactions since January 1, 2000 to which we have been a party, in which the amount involved in the transaction or series of transactions exceeds $60,000, and in which any of our directors, executive officers or persons who we know held more than five percent of any class of our capital stock, including their immediate family members, had or will have a direct or indirect material interest, other than compensation arrangements, which are described under “Management.”

MERGER OF PDC, CTL AND ALLECURE

On December 12, 2001, we acquired AlleCure and CTL, and these entities became wholly-owned subsidiaries of ours. Pursuant to the terms of the acquisition, all outstanding shares of capital stock of CTL were exchanged for 7,514,785 shares of our common stock and 267,354 shares of our Series A preferred stock. In addition, all outstanding shares of capital stock of AlleCure were exchanged for 11,091,825 shares of our common stock and 192,618 shares of our Series B preferred stock. Following the acquisition, we changed our name from Pharmaceutical Discovery Corporation to MannKind Corporation. On December 31, 2002, we merged AlleCure and CTL with and into us and became one entity. Our shares of preferred stock issued to the former stockholders of AlleCure and CTL in connection with the merger on December 12, 2001, or the Merger, constitute 100% of the shares of Series A preferred stock and Series B preferred stock issued by us to date.

Prior to the Merger, Alfred E. Mann, our Chief Executive Officer and Chairman of the Board of Directors, held approximately 63.1% of the outstanding shares of common stock and 83.4% of the outstanding shares of preferred stock of CTL, approximately 51.7% of the outstanding shares of common stock and 100% of the outstanding shares of preferred stock of AlleCure and approximately 76% of the outstanding shares of common stock of PDC. In the Merger, in exchange for all of the outstanding shares of capital stock of AlleCure and CTL held by Mr. Mann, he received 222,982 shares of our Series A preferred stock and 192,618 shares of our Series B preferred stock, and 10,481,551 shares of common stock, which, when combined with his holdings of PDC common stock, totalled 24,321,088 shares of our common stock.

In connection with the Merger, we assumed the obligation under a warrant issued by CTL for the purchase of 355,273 shares of our common stock at an exercise price of $7.04 per share initially issued to Mr. Mann by CTL on March 30, 2001. This warrant expired unexercised on March 31, 2003.

SEVERANCE AGREEMENTS

Dr. Solomon Steiner ceased to be an employee and a director of ours on February 6, 2003 pursuant to a settlement agreement with us. Under the settlement agreement, we became obligated to pay Dr. Steiner approximately $1,049,288 over three years, comprised of approximately $775,365 in deferred compensation from prior years and the remainder comprised of severance-related items. We have paid approximately $451,110 of this amount. An additional $271,378 is due in April 2004, $42,500 is due in September 2004 and the remaining $284,300 is due in April 2005. The settlement agreement further provides that the options held by Dr. Steiner to purchase up to 139,755 shares of our common stock remain fully exercisable through April 2007, and options to purchase up to 373,660 shares of our common stock remain fully exercisable until at least April 2006.

Dr. Stephen McCormack resigned as an employee and a director of ours in February 2003 pursuant to a settlement agreement with us dated March 28, 2003. Under the settlement agreement, we became

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obligated to pay Dr. McCormack his base salary at the rate of approximately $22,468 per month through December 2003, and a lump sum payment of $67,404 in February 2005.

Mr. John Simard resigned as an employee and a director of ours in September 2002 pursuant to a post-employment agreement with us. The post-employment agreement provides that options held by Mr. Simard to purchase up to 90,950 shares of our common stock remain fully exercisable until January 2, 2006.

Dr. Michael Page, our Chief Executive Officer from January 1, 2003, resigned as an employee and a director of ours effective October 7, 2003. Under the terms of a severance agreement, we are obligated to pay Dr. Page his base salary at the rate of approximately $27,500 per month through April 2005 and a severance payment of $165,000. The agreement also provides for accelerated vesting of an option held by Dr. Page permitting him to purchase up to 250,000 shares of our common stock until April 7, 2005.

LOANS TO FORMER DIRECTORS AND FORMER EXECUTIVE OFFICERS

On May 18, 2000, CTL sold and issued 1,965,000 shares of its common stock to Mr. Simard in exchange for a promissory note in the aggregate principal amount of $1,179,000. The promissory note was due in May 2005, was full recourse as to both principal and interest, and was collateralized by the underlying shares of common stock issued in connection with the note. The note accrued interest at a fixed interest rate, which was less than the market interest rate available for a loan of similar size and terms from a third party. As a result, CTL recognized compensation expense of approximately $121,000 in 2002, which was equal to the amount of the discount on the promissory note based on the difference between a market interest rate and the fixed interest rate and the term of the note. In connection with the Merger, Mr. Simard’s shares of common stock of CTL were exchanged for 357,434 shares of our common stock and we were assigned the benefit of the promissory note. All outstanding principal and interest accrued under the note were repaid in full in March 2002.

On September 15, 2000, December 15, 2000 and April 2, 2001, AlleCure sold and issued an aggregate of 1,715,000 shares of its common stock to Dr. McCormack in exchange for three promissory notes in the aggregate principal amount of $1,963,380. The promissory notes are due at various dates from 2005 to 2006, are full recourse as to both principal and interest and are collateralized by the underlying shares of common stock issued in connection with the notes. The notes are pre-payable by Dr. McCormack and he has no service obligation to us under the terms of the stock purchase. The note-for-stock transaction was accounted for as in-substance stock option grants to an employee. As a result, AlleCure recognized stock-based compensation expense of $815,000 during 2001 in connection with these notes, which represented the intrinsic value of the in-substance stock options. This amount was reversed in 2002 because the in-substance options had no intrinsic value as of December 31, 2002. In connection with the Merger, Dr. McCormack’s shares of common stock of AlleCure were exchanged for 330,340 shares of our common stock and we were assigned the benefit of the promissory notes. As of December 31, 2003, an aggregate of $2,274,474 in principal and accrued interest was outstanding under the notes.

COMMON STOCK FINANCINGS

From January 2001 through December 31, 2003, we sold shares of our common stock in private financings as follows:

•	on June 30, 2001 and on August 31, 2001, we sold 477,144 and 3,578,584 shares of common stock, respectively, for a purchase price of $8.38 per share;

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•	on May 2, 2002 we sold an aggregate of 701,546 shares of common stock for a purchase price of $8.41 per share;
•	during the period of June 2002 through December 2002 we sold 11,765,300 shares of common stock for a purchase price of $5.00 per share;
•	during the period February 2003 through May 2003 we sold an aggregate of 8,514,945 shares of common stock for a purchase price of $4.60-$4.85 per share;
•	on August 9, 2003 we sold an aggregate of 1,964,637 shares of common stock for a purchase price of $5.09 per share; and
•	on December 22, 2003 we sold an aggregate of 124,602 shares of common stock for a purchase price of $5.00 per share.

The investors in these financings included the following executive officers, directors, holders of more than five percent of our securities, and the immediate family members and affiliated entities of each:

Purchaser			Shares
Directors and executive officers
	Alfred E. Mann(1)			4,180,330
Immediate family members
	Claude Girault(2)			200,000
	Howard Mann(3)			814,031
	Richard Mann(4)			438,906
	Carla Mann(5)			300,000
	Kevin Mann(6)			80,000
	Alfred Mann, Jr.(7)			120,000
	Robert Mann(8)			59,453
	Rosalind Koff(9)			77,000
5% or greater stockholders
	Biomed Partners, LLC(10)			7,261,495
	Biomed Partners II, LLC(10)			7,218,087

	(1)	Alfred E. Mann holds the shares set forth opposite his name as trustee of the Alfred E. Mann Living Trust dated April 9, 1999.
	(2)	Claude Girault is the spouse of Alfred E. Mann.
	(3)	Howard Mann holds the shares set forth opposite his name as trustee of the Howard T. and Joni C. Mann Family Trust. Howard Mann is the son of Alfred E. Mann.
	(4)	Richard Mann holds the shares set forth opposite his name as trustee of the Richard Mann Family Trust #1, the Richard Mann Family Trust #2 and the Richard and Cheryl Mann Revocable Living Trust. Richard Mann is the son of Alfred E. Mann.
	(5)	Carla Mann holds the shares set forth opposite her name as trustee of the Carla Mann Revocable Trust. Carla Mann is the daughter of Alfred E. Mann.
	(6)	Kevin Mann is the son of Alfred E. Mann.
	(7)	Alfred Mann, Jr. is the son of Alfred E. Mann.
	(8)	Robert Mann is the brother of Alfred E. Mann.
	(9)	Rosalind Koff is the sister of Alfred E. Mann.

(10)	The Alfred E. Mann Living Trust is the Managing Member of Biomed Partners, LLC and Biomed Partners II, LLC and Alfred Mann, as trustee of the Alfred E. Mann Living Trust, has voting and dispositive power over the shares set forth opposite the names of each of these entities.

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SERIES C CONVERTIBLE PREFERRED STOCK FINANCING

On December 31, 2003 we sold 980,392 shares of our Series C convertible preferred stock in a private financing at a price of $51.00 per share, including 364,589 shares to the Alfred E. Mann Living Trust.

We intend to effect a one-for-          reverse split of our common stock prior to the closing of this offering. Following the reverse split of our common stock, upon the closing of this offering, the outstanding shares of our Series A preferred stock, Series B preferred stock and Series C convertible preferred stock will automatically convert into an aggregate of            shares of our common stock.

INDEMNIFICATION AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS

We have entered into indemnification agreements with each of our directors and executive officers, in addition to the indemnification provided for in our amended and restated certificate of incorporation and amended and restated bylaws. See “Management— Limitations of liability and indemnification of officers and directors.”

CONSULTING SERVICES

In 2002, while he was one of our directors, Dr. Page provided us with consulting services relating to our research and development programs. We paid Dr. Page approximately $124,000 for his services. We did not enter into a written agreement with Dr. Page regarding his consulting services.

In 2004, we engaged one of our directors, Llew Keltner, to provide consulting services to our management in connection with our efforts to seek potential partners in the development and commercialization of our Technosphere Insulin System. As of March 31, 2004, we have paid Dr. Keltner approximately $36,900 for consulting services rendered.

OTHER TRANSACTIONS

In connection with certain meetings of our board of directors and on other occasions when our business necessitated air travel for Mr. Mann and other MannKind employees, we utilized Mr. Mann’s private aircraft and we paid the charter company that manages the aircraft on behalf of Mr. Mann approximately $441,000 in 2002 and approximately $321,278 in 2003.

From January 2002 to October 2003, we leased property located in Sylmar, California from Sylmar Biomedical Park LLC, a company owned by Mr. Mann. Under the lease, we paid Sylmar Biomedical Park approximately $39,081 and $19,709 during the years ended December 31, 2002 and 2003, respectively.

On December 11, 2001, Mr. Mann entered into a put agreement with Mr. Simard whereby Mr. Simard had the right to require Mr. Mann to purchase 357,434 shares of our common stock held by Mr. Simard for a fixed price of approximately $2,948,830, or $8.25 per share. In February 2002 Mr. Simard exercised a portion of the put for approximately $1,921,000, or 232,832 shares, which Mr. Mann paid to Mr. Simard in cash. Mr. Simard resigned in September 2002 and, pursuant to a post-employment agreement that was formalized and executed in January 2003, we assumed Mr. Mann’s remaining obligation under the put agreement of approximately $1,028,000. In December 2002, Mr. Simard exercised the remaining 124,602 shares covered by the put agreement and we paid Mr. Simard approximately $1,028,000 in cash in January 2003. In connection with our assumption of the remaining obligations under the put agreement, Mr. Mann agreed to purchase 124,602 shares of common stock for an aggregate price of approximately $623,000. This price corresponded to the estimated fair value per share of our common stock at the time we entered into the agreement with Mr. Mann, which had declined below the exercise price of the put. We recorded approximately $405,000 as a stock-based compensation expense representing the intrinsic value of the 124,602 shares of common stock subject to the put agreement at the time that we assumed the obligations thereunder.

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Principal stockholders

The following table sets forth information regarding beneficial ownership of our capital stock as of December 31, 2003, as adjusted to reflect the sale of shares of our common stock in this offering, by the following:

•	each person, or group of affiliated persons, known by us to be the beneficial owner of more than five percent of any class of our voting securities;
•	each of our directors;
•	each of the named executive officers; and
•	all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and is generally based on voting or investment power with respect to securities. Under SEC rules, in computing the number of shares beneficially owned and the percentage ownership, In addition, options and warrants to purchase shares of our capital stock that are exercisable within 60 days of December 31, 2003 are deemed to be beneficially owned by the persons holding these options or warrants for the purpose of determining beneficial ownership and computing percentage ownership of that person but are not treated as outstanding for the purpose of computing any other person’s ownership percentage.

All percentages in this table are based on a total of 59,924,182 shares of common stock outstanding on December 31, 2003 and                      shares of common stock to be outstanding following completion of this offering, including 4,912,765 shares of our common stock issuable upon conversion of all outstanding shares of our preferred stock and shares issuable pursuant to options and warrants that are currently exercisable or exercisable within 60 days of December 31, 2003, in accordance with the rules promulgated by the SEC. Except as indicated in the footnotes below, we believe, based on information furnished to us and subject to applicable community property laws, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Unless otherwise indicated, the address for each

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of the stockholders in the table below is MannKind Corporation, 28903 North Avenue Paine, Valencia, California 91355.

Percent of shares

beneficially owned

Number of shares

Beneficial owner

beneficially owned

Before offering

After offering

Named executive officers and directors:

Alfred E. Mann(1)

42,727,608

65.9

%

Hakan S. Edstrom

—

*

*

Richard L. Anderson

—

*

*

Dan R. Burns

—

*

*

David Thomson(2)

86,272

*

*

Solomon S. Steiner(3)

1,750,727

2.7

%

Kathleen Connell

—

*

*

Ronald Consiglio

—

*

*

Michael Friedman

—

*

*

Llew Keltner

—

*

*

All directors and executive officers as a group (10 persons)

44,564,607

68.7

%

Five percent stockholders:

Biomed Partners, LLC

7,261,495

11.2%

Biomed Partners II, LLC

7,218,087

11.1%

	*	Represents beneficial ownership of less than one percent.

(1)	Includes 23,472,522 shares held by the Alfred E. Mann Living Trust, 4,469,045 shares issuable upon conversion of preferred stock held by the Alfred E. Mann Living Trust, 306,459 shares issuable to Alfred E. Mann upon the exercise of options vested as of 60 days following December 31, 2003, 7,261,495 shares held by Biomed Partners, LLC and 7,218,087 shares held by Biomed Partners II, LLC. The Alfred E. Mann Living Trust is the Managing Member of Biomed Partners, LLC and Biomed Partners II, LLC and Alfred E. Mann, as trustee of the Alfred E. Mann Living Trust, has voting and dispositive power over the shares set forth opposite the names of each of these entities.
(2)	Includes 20,464 shares issuable to Dr. Thomson upon the exercise of options vested as of 60 days following December 31, 2003.
(3)	Includes 513,415 shares issuable to Dr. Steiner upon the exercise of options vested as of 60 days following December 31, 2003.

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Description of capital stock

The following description of our capital stock gives effect to the amendment and restatement of our certificate of incorporation and bylaws and a one-for-     reverse stock split, each of which will occur before the closing of this offering, and the conversion, upon the closing of this offering, of all then outstanding shares of our preferred stock, at an assumed initial public offering price of $           per share, into                      shares of our common stock.

Upon completion of this offering, our authorized capital stock will consist of 100,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of undesignated preferred stock, par value $0.01 per share. The following description of our capital stock does not purport to be complete and is subject to, and qualified in its entirety by, the DGCL and our restated certificate of incorporation and bylaws, which are filed as exhibits to the registration statement of which this prospectus forms a part.

COMMON STOCK

Outstanding shares

Voting rights

Dividends

Liquidation, dissolution or winding up

Rights and preferences

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holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of any outstanding shares of our of preferred stock, which we may designate and issue in the future.

PREFERRED STOCK

Our current certificate of incorporation authorizes 5,000,000 shares of preferred stock, including:

•	267,354 shares designated Series A preferred stock;
•	192,618 shares designated Series B preferred stock; and
•	980,393 shares designated Series C preferred stock.

See Note 9 of the notes to our financial statements for a description of our currently outstanding preferred stock. Upon the closing of this offering, all outstanding shares of our Series A preferred stock, Series B preferred stock and Series C preferred stock will be converted into                      shares of our common stock, at an assumed initial public offering price of $               per share. Following the conversion, our certificate of incorporation will be amended and restated to delete all references to these shares of preferred stock.

Under our amended and restated certificate of incorporation to be filed upon completion of this offering, our board of directors will have the authority, without further action by our stockholders, to issue up to 10,000,000 shares of our undesignated preferred stock in one or more series and to fix or alter the rights, preferences, privileges, qualifications and restrictions granted to or imposed upon any wholly unissued series of preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption and any liquidation preferences, and to establish from time to time the number of shares constituting any such series. The issuance of preferred stock could result in one or more of the following:

•	decreasing the market price of our common stock;
•	restricting dividends on our common stock;
•	diluting the voting power of our common stock;
•	impairing the liquidation rights of our common stock; or
•	delaying or preventing a change in control of us.

We currently have no plans to issue any shares of our undesignated preferred stock.

WARRANTS

As of December 31, 2003, warrants to purchase an aggregate of 130,126 shares of our common stock, with a weighted average exercise price of $16.89 per share, were issued and outstanding. Each warrant contains provisions for the adjustment of the exercise price and the number of shares issuable upon the exercise of the warrant in the event we declare and issue any stock dividends or effect any stock split, reclassification or consolidation of our capital stock.

STOCK OPTIONS

As of December 31, 2003, options to purchase an aggregate of 6,380,789 shares of our common stock were outstanding under our equity incentive plans, comprised of:

•	options to purchase 379,501 shares of our common stock granted under the 1991 plan, all of which were exercisable as of that date;

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•	options to purchase 916,291 shares of our common stock granted under the 1999 plan, 913,280 of which were exercisable as of that date;
•	options to purchase 50,034 shares of our common stock granted under the AlleCure plan, 26,078 of which were exercisable as of that date;
•	options to purchase 332,948 shares of our common stock granted under the CTL plan, 314,513 of which were exercisable as of that date;
•	options to purchase 722,917 shares of our common stock granted outside our equity incentive plans, 180,729 of which were exercisable as of that date; and
•	options to purchase 3,979,098 shares of our common stock granted under our 2004 equity plan, 371,786 of which were exercisable as of that date.

The options outstanding as of December 31, 2003 had a weighted average exercise price of $3.48 per share of our common stock.

As of December 31, 2003, 1,010,902 shares of our common stock were subject to options available for future grant under our 2004 equity plan. In March 2004, our board of directors adopted, and our stockholders subsequently approved, effective upon completion of this offering, our director plan and purchase plan and an increase in the number of shares available for grant under our 2004 equity plan. See “Management — Employee benefit plans.”

REGISTRATION RIGHTS

Beginning 180 days after the completion of this offering, holders of an aggregate of                      shares of our common stock or their transferees will be entitled to rights with respect to the registration of these shares under the Securities Act, subject to limitations and restrictions described below.

Demand registration rights

Under the Rights Agreement, at any time after 180 days following the completion of this offering, the holders of a majority of the shares of our common stock (on an as converted basis) subject to the Rights Agreement may require us, on not more than two occasions, to file a registration statement under the Securities Act covering these shares as long as the aggregate sale price of these shares to the public is at least $5 million, subject to certain limitations. We will also be required to use our best efforts to have the registration statement declared effective. However, if we believe in our reasonable judgment that proceeding with the registration would have a material and adverse impact on any financing, acquisition, reorganization or other material transaction involving us, we may delay filing the registration statement for a period not to exceed 60 days. Also, if the stockholders requesting registration request that the shares be offered for distribution through an underwriting, we may reduce the number of shares of our common stock requested to be registered upon the advice of our underwriters. If shares of our stock requested to be included in a registration must be excluded pursuant to the underwriters’ advice, we will register a portion of the shares requested to be registered on a pro rata basis upon the holders of our stock requesting registration.

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Piggyback registration rights

We have also granted registration rights to holders of outstanding warrants to purchase up to 130,126 shares of our common stock. Under the terms of the warrants, in the event we propose to register any shares of our common stock on a registration statement, these warrantholders have unlimited rights to request that their shares of common stock issued upon exercise of the warrants and any other shares of our common stock held by the warrantholders be included in the registration. However, if we are offering shares for distribution through an underwriting, we may reduce the number of shares of our common stock requested to be registered by the warrantholders upon the advice of our underwriters. If shares of our stock requested to be included in a registration must be excluded pursuant to the underwriters’ advice, we will register a portion of the shares requested to be registered on a pro rata basis upon the holders of our stock requesting registration.

Transferability

Expenses

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE OF INCORPORATION AND BYLAWS

We are subject to Section 203 of the DGCL, which regulates acquisitions of some Delaware corporations. In general, Section 203 prohibits, with some exceptions, a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the date of the transaction in which the person became an interested stockholder, unless:

•	the board of directors of the corporation approved the business combination or the other transaction in which the person became an interested stockholder prior to the date of the business combination or other transaction;
•	upon consummation of the transaction that resulted in the person becoming an interested stockholder, the person owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares owned by persons who are directors and also officers of the corporation and shares issued under employee stock plans under which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
•	on or subsequent to the date the person became an interested stockholder, the board of directors of the corporation approved the business combination and the stockholders of the corporation

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	authorized the business combination at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3% of the outstanding stock of the corporation not owned by the interested stockholder.

Section 203 of the DGCL generally defines a “business combination” to include any of the following:

•	any merger or consolidation involving the corporation and the interested stockholder;
•	any sale, transfer, pledge or other disposition of 10% or more of the corporation’s assets or outstanding stock involving the interested stockholder;
•	in general, any transaction that results in the issuance or transfer by the corporation of any of its stock to the interested stockholder;
•	any transaction involving the corporation that has the effect of increasing the proportionate share of its stock owned by the interested stockholder; or
•	the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an “interested stockholder” as any person who, together with the person’s affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock.

Section 203 of the DGCL could depress our stock price and delay, discourage or prohibit transactions not approved in advance by our board of directors, such as takeover attempts that might otherwise involve the payment to our stockholders of a premium over the market price of our common stock.

Amended and restated certificate of incorporation and bylaw provisions

•	Our board of directors can issue up to 10,000,000 shares of preferred stock with any rights or preferences, including the right to approve or not approve an acquisition or other change in our control.
•	Our restated certificate of incorporation provides that all stockholder actions upon completion of this offering must be effected at a duly called meeting of holders and not by written consent.
•	Our amended and restated bylaws provide that special meetings of the stockholders may be called only by the Chairman of our board of directors, by our Chief Executive Officer, by our board of directors upon a resolution adopted by a majority of the total number of authorized directors or, under certain limited circumstances, by the holders of at least 5% of our outstanding voting stock.
•	Our amended and restated bylaws provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide timely notice in writing and also specify requirements as to the form and content of a stockholder’s notice. These provisions may delay or preclude stockholders from bringing matters before a meeting of our stockholders or from making nominations for directors at a meeting of stockholders, which could delay or deter takeover attempts or changes in our management.
•	Following this offering, our board of directors will be divided into three classes, with each class serving a staggered three-year term. The classification of our board of directors will have the effect of requiring at least two annual stockholder meetings, instead of one, to replace a majority of our

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	directors, which could have the further effect of delaying or preventing a change in our control or a change in our management.
•	Our amended and restated certificate of incorporation provides that, subject to the rights of the holders of any outstanding series of preferred stock, all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum. In addition, our amended and restated certificate of incorporation provides that our board of directors may fix the number of directors by resolution.
•	Our amended and restated bylaws provide that, following this offering, our directors may not be removed without cause.
•	Our amended and restated certificate of incorporation does not provide for cumulative voting for directors. The absence of cumulative voting may make it more difficult for stockholders who own an aggregate of less than a majority of our voting stock to elect any directors to our board of directors.

These and other provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. However, these provisions could delay or discourage transactions involving an actual or potential change in control of us or our management, including transactions in which our stockholders might otherwise receive a premium for their shares over market price of our stock and may limit the ability of stockholders to remove our current management or approve transactions that our stockholders may deem to be in their best interests and, therefore, could adversely affect the price of our common stock.

LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS

We have adopted provisions in our amended and restated certificate of incorporation that limit the liability of our directors for monetary damages for breach of their fiduciary duties, except for liability that cannot be eliminated under the DGCL. Delaware law permits corporations to eliminate the personal liability of their directors for monetary damages for breach of their fiduciary duties as directors, except liability for any of the following:

•	any breach of their duty of loyalty to the corporation or its stockholders;
•	acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
•	unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or
•	any transaction from which the director derived an improper personal benefit.

This limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

Our amended and restated certificate of incorporation and our amended and restated bylaws also provide that we must indemnify our directors and executive officers and may indemnify our other officers and employees and other agents to the fullest extent permitted by law. We believe that indemnification under our bylaws covers at least negligence on the part of indemnified parties. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent

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for any liability arising out of his or her actions in this capacity, regardless of whether our bylaws would permit indemnification.

We have also entered into separate indemnification agreements with our directors and executive officers. These agreements among other things, provide for indemnification of our directors and executive officers for expenses, judgments, fines and settlement amounts incurred by them in any action or proceeding arising out of their services as a director or executive officer or at our request. We believe that these provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws and the indemnification agreements are necessary in order for us to attract and retain qualified persons as directors and executive officers.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is expected to be Chase Mellon Investor Services. Chase Mellon Investor Services’ address is 400 South Hope Street, Suite 400, Los Angeles, California 90071.

NASDAQ NATIONAL MARKET LISTING

There is currently no established public trading market for our common stock. We have applied to have our common stock quoted on The Nasdaq National Market under the trading symbol “MNKD.”

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Shares eligible for future sale

Prior to this offering, no public market existed for our common stock. Future sales of substantial amounts of common stock in the public market, or the perception that these sales could occur, could adversely affect prevailing market prices of our common stock.

Based on 59,924,182 shares of our common stock outstanding on December 31, 2003, upon completion of this offering, we will have                      shares of common stock outstanding, assuming no exercise of currently outstanding options or warrants or the underwriters’ over-allotment option and the conversion, upon the closing of this offering, of all shares of preferred stock into common stock. All of the shares sold in this offering, plus any additional shares sold upon exercise of the underwriters’ over-allotment option, will be freely transferable without restriction under the Securities Act unless they are held by our “affiliates,” as that term is defined under the Securities Act and the rules and regulations promulgated thereunder. The remaining shares of our common stock held by existing stockholders are restricted securities. Restricted securities may be sold in the public market only if registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 promulgated under the Securities Act, which are summarized below, or another exemption.

LOCK-UP AGREEMENTS

We, our executive officers and directors and substantially all of our existing stockholders have entered into lock-up agreements with the underwriters. Under these agreements, subject to certain exceptions, we and each of these persons may not, without the prior written approval of UBS Securities LLC, offer, sell, contract to sell or otherwise dispose of, directly or indirectly, or hedge, our common stock or securities convertible into or exchangeable or exercisable for our common stock. These restrictions will be in effect for a period of 180 days after the date of this prospectus. The 180-day lock-up period may be extended for up to 37 additional days under certain circumstances where we announce or pre-announce earnings or material news or a material event within approximately 18 days prior to, or approximately 16 days after, the termination of the 180-day period. Even under those circumstances, however, the lock-up period will not extend if we are actively traded, meaning that we have a public float of at least $150.0 million and average trading volume at least $1.0 million per day. At any time and without public notice, UBS Securities LLC may, in its sole discretion, release all or some of the securities from these lock-up agreements. See “Underwriting.”

RULE 144

In general, under Rule 144 of the Securities Act as currently in effect, beginning 90 days after the effective date of the registration statement of which this prospectus forms a part, a person who has beneficially owned shares of our common stock that are restricted securities for at least one year, including the holding period of any prior owner other than us or one of our affiliates, would be entitled to sell the number of restricted shares within any three-month period that does not exceed the greater of:

•	one percent of the number of shares of our common stock then outstanding, which will equal approximately                      shares immediately after the offering; or
•	the average weekly reported trading volume of our common stock on The Nasdaq National Market during the four preceding calendar weeks.

Sales of restricted shares under Rule 144 are also subject to requirements regarding the manner of sale, notice and the availability of current public information about us.

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RULE 144(k)

Under Rule 144(k) of the Securities Act as currently in effect, a stockholder who is not one of our affiliates at any time during the 3 months preceding a sale and who has beneficially owned the restricted securities proposed to be sold for at least two years, including the holding period of any prior owner other than us or an affiliate of us, may sell those restricted securities without complying with the manner of sale, notice, public information or volume limitation provisions of Rule 144. However, these manner of sale, notice, public information and volume restrictions always apply to affiliates who sell shares in reliance on Rule 144.

RULE 701

Our directors, officers, other employees and consultants who acquired or will acquire shares of our common stock upon exercise of options granted under our equity incentive plans prior to this offering or who were granted options by AlleCure or CTL and assumed by us in connection with the Merger are entitled to rely on the resale provisions of Rule 701 under the Securities Act. Rule 701, as currently in effect, permits our affiliates and non-affiliates to sell their shares of our common stock issued pursuant to Rule 701 in reliance on Rule 144 beginning 90 days after the effective date of the registration statement of which this prospectus forms a part. Non-affiliates may sell Rule 701 shares without having to comply with the one-year holding period restrictions, subject only to the manner of sale provisions of Rule 144. Affiliates may also sell Rule 701 shares without having to comply with the one-year holding period restrictions, but they must meet the manner of sale, notice, public information and volume limitation provisions of Rule 144. However, substantially all Rule 701 shares of our common stock are subject to lock-up agreements described below and will only become eligible for sale at the expiration of the 180-day lock-up period.

SALE OF RESTRICTED SHARES

As of December 31, 2003,                      shares of our common stock outstanding on a pro forma basis, assuming conversion of our preferred stock prior to consummation of this offering, will become eligible for sale under Rule 144 and Rule 701 without registration approximately as follows:

•	shares of our common stock will be eligible for sale in the public market without restriction as of the effective date of the registration statement of which this prospectus is a part;
•	shares of our common stock will be eligible for sale in the public market under Rule 144 or Rule 701, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, subject to the volume, manner of sale and other limitations under those rules; and
•	the remaining                      shares of our common stock will become eligible for sale in the public market from time to time under Rule 144.

The discussion above does not take into consideration the effect of lock-up agreements as described above. Additionally, of the 6,380,789 shares issuable upon exercise of options to purchase our common stock outstanding as of December 31, 2003, approximately                      shares will be vested and eligible for sale 180 days after the effective date of this offering under Rule 701.

REGISTRATION RIGHTS

The holders of 2,803,666 shares of our common stock (after giving effect to the conversion of our Series A preferred stock and the exercise of our outstanding warrants), or their transferees, have the right in specified circumstances to require us to register their shares under the Securities Act for resale beginning 180 days from the effective date of this offering. If those holders, by exercising their demand

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registration rights, cause a large number of shares to be registered and sold in the public market, such sales could have an adverse effect on the market price for our common stock. In addition, if at any time we are required to include in a registration initiated either for our account or for the account of our other securityholders shares held by these holders upon the exercise of their piggyback registration rights, these sales may have an adverse effect on our ability to raise needed capital. See “Description of capital stock—Registration rights.”

STOCK OPTIONS AND FORM S-8 REGISTRATION STATEMENTS

As of December 31, 2003, options to purchase 379,501 shares of our common stock were outstanding under the 1991 plan, options to purchase 916,291 shares of our common stock were outstanding under the 1999 plan, options to purchase 50,034 shares of our common stock were outstanding under the AlleCure plan, options to purchase 332,948 shares of our common stock were outstanding under the CTL plan, options to purchase 3,979,098 shares of our common stock were outstanding under the 2004 equity plan and options to purchase 722,917 shares of our common stock were outstanding having been granted outside of our equity incentive plans. In addition, 1,010,902 shares of our common stock were subject to options available for future grant under our 2004 equity plan, and we have reserved for issuance, effective as of the closing of this offering,           additional shares of our common stock for issuance under our 2004 equity plan, and            shares of our common stock for issuance under our 2004 directors plan and purchase plan.

We intend to register the shares subject to these plans and the options on a registration statement on Form S-8 under the Securities Act following this offering. Subject to the lock-up agreements, the restrictions imposed under the 1991 plan, the 1999 plan, the AlleCure plan, the CTL plan, the 2004 equity plan and related option agreements, shares of common stock issued under these plans or agreements after the effective date of any registration statement on Form S-8 will be available for sale in the public market without restriction to the extent that they are held by persons who are not our affiliates.

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Underwriting

We are offering the shares of our common stock described in this prospectus through the underwriters named below. UBS Securities LLC, Piper Jaffray & Co., Wachovia Capital Markets, LLC, Jefferies & Company, Inc. and Harris Nesbitt Corp. are the representatives of the underwriters. UBS Securities LLC is the sole book-running manager for this offering. We have entered into an agreement with the representatives. Subject to the terms and conditions of the underwriting agreement, each of the underwriters has severally agreed to purchase the number of shares of common stock listed next to its name in the following table:

			Number of
Underwriters			shares
UBS Securities LLC
Piper Jaffray & Co.
Wachovia Capital Markets, LLC
Jefferies & Company, Inc.
Harris Nesbitt Corp.
	Total

The underwriting agreement provides that the underwriters must buy all of the shares if they buy any of them. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ over-allotment option described below.

Our common stock is offered subject to a number of conditions, including:

•	receipt and acceptance of our common stock by the underwriters; and
•	the underwriters’ right to reject orders in whole or in part.

We have been advised by the representatives that the underwriters intend to make a market in our common stock but that they are not obligated to do so and may discontinue making a market at any time without notice.

In connection with this offering certain of the underwriters or securities dealers may distribute prospectus electronically.

Sales of shares made outside the United States may be made by affiliates of the underwriters.

OVER-ALLOTMENT OPTION

We have granted the underwriters an option to buy                     additional shares of our common stock. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with this offering. The underwriters have 30 days from the date of this prospectus to exercise this option. If the underwriters exercise this option they will each purchase additional shares approximately in proportion to the amounts specified in the table above.

COMMISSIONS AND DISCOUNTS

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $           per share from the initial public offering price. Any of these securities dealers may resell any shares purchased from the underwriters to other brokers or dealers at a discount of up to $           per share from the initial public offering price. If all the shares are not sold

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at the initial public offering price, the representatives may change the offering price and the other selling terms. Upon execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and upon the terms stated therein and, as a result, will thereafter bear any risk associated with changing the offering price to the public or other selling terms. The underwriters have informed us that they do not expect discretionary sales to exceed 5% of the shares of common stock to be offered.

The following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase up to                     additional shares.

			No exercise				Full exercise
Per share			$				$
	Total		$				$

We estimate that the total expenses of the offering payable by us, excluding underwriting discounts and commissions, will be approximately $          .

At our request, some of the underwriters have reserved for sale, at the initial public offering price, up to                      shares of our common stock being offered for sale to some of our directors, officers, employees, business affiliates and others identified by us. At the discretion of our management, other parties, including our employees, may participate in the reserved share program. The number of shares available for sale to the general public in the offering will be reduced to the extent these persons purchase reserved shares. Any reserved shares not purchased by these persons will be offered by the underwriters to the general public on the same terms as the other shares.

NO SALES OF SIMILAR SECURITIES

We, our executive officers and directors and substantially all of our existing stockholders have entered into lock-up agreements with the underwriters. Under these agreements, subject to certain exceptions, we and each of these persons may not, without the prior written approval of UBS Securities LLC, offer, sell, contract to sell or otherwise dispose of, directly or indirectly, or hedge, our common stock or securities convertible into or exchangeable or exercisable for our common stock. These restrictions will be in effect for a period of 180 days after the date of this prospectus. The 180-day lock-up period may be extended for up to 37 additional days under certain circumstances where we announce or pre-announce earnings or material news or a material event within approximately 18 days prior to, or approximately 16 days after, the termination of the 180-day period. Even under those circumstances, however, the lock-up period will not extend if we are actively traded, meaning that we have a public float of at least $150.0 million and average trading volume at least $1.0 million per day. At any time and without public notice, UBS Securities LLC may, in its sole discretion, release all or some of the securities from these lock-up agreements.

INDEMNIFICATION

We have agreed to indemnify the underwriters against certain liabilities, including certain liabilities under the Securities Act. If we are unable to provide this indemnification, we have agreed to contribute to payments the underwriters may be required to make in respect of those liabilities.

NASDAQ NATIONAL MARKET QUOTATION

We have applied to have our common stock approved for quotation on The Nasdaq National Market under the trading symbol “MNKD.”

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PRICE STABILIZATION, SHORT POSITIONS, PASSIVE MARKET MAKING

In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our common stock, including:

•	stabilizing transactions;
•	short sales;
•	purchases to cover positions created by short sales;
•	imposition of penalty bids;
•	syndicate covering transactions; and
•	passive market making.

Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of the common stock while the offering is in progress. These transactions may also include short sales of our common stock, which involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering and purchasing shares of common stock in the open market to cover positions created by short sales. Short sales may be “covered short sales,” which are short positions in an amount not greater than the underwriters’ over-allotment option referred to above, or may be “naked short sales,” which are short positions in excess of that amount.

The underwriters may close out any covered short position by either exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option.

Naked short sales are sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchased in this offering.

The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.

As a result of these activities, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. The underwriters may carry out these transactions on The Nasdaq National Market, in the over-the-counter market or otherwise.

DETERMINATION OF OFFERING PRICE

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiation by us and the representatives of the underwriters. The principal factors to be considered in determining the initial public offering price include:

•	the information set forth in this prospectus and otherwise available to the representatives;
•	the history of, and the prospects for, the industries in which we compete;
•	our past and present financial performance and an assessment of our management;

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•	our prospects for future earnings and the present state of our development;
•	the general condition of the securities markets at the time of this offering;
•	the recent market prices of, and the demand for, publicly traded common stock of generally comparable companies; and
•	other factors deemed relevant by the underwriters and us.

AFFILIATIONS

Certain of the underwriters and their affiliates have provided in the past and may provide from time to time certain commercial banking, financial advisory, investment banking and other services for us for which they will be entitled to receive separate fees. The underwriters may, from time to time, engage in transactions with us and perform services for us in the ordinary course of their business.

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Legal matters

The validity of our shares of common stock being offered by this prospectus and certain other legal matters will be passed upon for us by Cooley Godward LLP, San Diego, California. Dewey Ballantine LLP, East Palo Alto, California, is counsel for the underwriters in connection with this offering.

Experts

The financial statements included in this prospectus, and the financial statements from which the Selected financial data included in this prospectus have been derived, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein and elsewhere in the registration statement. Such financial statements and Selected financial data have been included herein and elsewhere in this Registration Statement in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

Where you can find additional information

We have filed with the SEC a registration statement on Form S-1 under the Securities Act that registers the shares of our common stock to be sold in this offering. This prospectus does not contain all of the information in the registration statement, including the exhibits and schedules filed with the registration statement. The rules and regulations of the SEC allow us to omit from this prospectus certain information included in the registration statement. For further information about us and our common stock, you should refer to the registration statement and the exhibits and schedules filed with the registration statement. With respect to the statements contained in this prospectus regarding the contents of any agreement or any other document, in each instance, the statement is qualified in all respects by the complete text of the agreement or document, a copy of which has been filed as an exhibit to the registration statement of which this prospectus forms a part. You may obtain copies of any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, DC 20549, at prescribed rates. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information about issuers that file electronically with the SEC. The address of that website is http://www.sec.gov.

Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended. Under the Exchange Act, we will file annual, quarterly and current reports, as well as proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available for inspection and copying at the SEC’s Public Reference Room and the website of the SEC referred to above.

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MannKind Corporation and Subsidiary (A Development Stage Company)

		Page
Independent Auditors’ Report			F-2
Consolidated Balance Sheets			F-3
Statements of Operations			F-4
Statements of Stockholders’ Equity (Deficit)			F-5
Statements of Cash Flows			F-8
Notes to Financial Statements			F-10

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Independent Auditors’ Report

Board of Directors

We have audited the accompanying consolidated balance sheets of MannKind Corporation and subsidiaries (a development stage company) (the “Company”) as of December 31, 2002 and 2003 and the related statements of operations, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2003 and for the period from February 14, 1991 (date of inception) to December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of MannKind Corporation and subsidiaries at December 31, 2002 and 2003 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 and for the period from February 14, 1991 (date of inception) to December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Los Angeles, California

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MannKind Corporation and Subsidiary (A Development Stage Company)

				December 31,
				2002				2003
Assets
Current assets:
	Cash and cash equivalents				$19,917				$54,120
	Marketable securities				11,135				1,825
	Prepaid expenses and other current assets				949				1,859
		Total current assets			32,001				57,804
Property and equipment—net					72,675				67,323
Restricted cash					—				559
Other assets					97				190
Total					$104,773				$125,876
Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable				$4,209				$1,926
	Accrued expenses and other current liabilities				1,757				4,015
	Payable to stockholder								1,406
	Deferred compensation—current				1,864				1,360
		Total current liabilities			7,830				8,707
Deferred compensation									284
Other liabilities					207				120
		Total liabilities			8,037				9,111
Commitments and contingencies
	Series A redeemable convertible preferred stock, $0.01 par value—267,354 shares authorized, issued and outstanding at December 31, 2002 and 2003, respectively; aggregate liquidation value, $5,188 as of December 31, 2003				4,935				5,188
Common stock subject to repurchase					1,028				—
Stockholders’ equity:
	Series B convertible preferred stock, $0.01 par value—192,618 shares authorized, issued and outstanding at December 31, 2002 and 2003, respectively; aggregate liquidation value, $15,000 at December 31, 2003				15,000				15,000
Series C convertible preferred stock issuable									50,000
Series C convertible preferred stock subscriptions receivable									(18,153	)
	Common stock, $0.01 par value—100,000,000 shares authorized; 49,391,711 and 59,924,182 shares issued and outstanding at December 31, 2002 and 2003, respectively				494				599
Additional paid-in capital					377,681				432,742
Notes receivable from stockholders					(1,310	)			(1,412	)
Notes receivable from officers									(228	)
Deficit accumulated during the development stage					(301,092	)			(366,971	)
		Total stockholders’ equity			90,773				111,577
Total					$104,773				$125,876

See notes to financial statements.

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MannKind Corporation and Subsidiary (A Development Stage Company)

																Cumulative period
																from
																February 14, 1991
				Year ended December 31,												(date of inception)
																to December 31,
				2001				2002				2003				2003
Revenue				$	326			$	—			$	—			$	2,858
Operating expenses:
	Research and development				19,763				42,724				45,613				143,647
	General and administrative				10,629				13,215				20,699				57,457
	In-process research and development costs				19,726				—				—				19,726
	Goodwill impairment				—				151,428				—				151,428
		Total operating expenses			50,118				207,367				66,312				372,258
Loss from operations					(49,792	)			(207,367	)			(66,312	)			(369,400	)
Other income (expense)					288				487				(25	)			(2,196	)
Interest income					1,261				617				459				4,639
Loss before provision for income taxes					(48,243	)			(206,263	)			(65,878	)			(366,957	)
Income taxes					(2	)			(2	)			(1	)			(14	)
Net loss					(48,245	)			(206,265	)			(65,879	)			(366,971	)
Deemed dividend related to beneficial conversion feature of convertible preferred stock					—				(1,421	)			(1,017	)			(2,438	)
Accretion on redeemable preferred stock					(239	)			(251	)			(253	)			(892	)
Net loss applicable to common stockholders				$	(48,484	)		$	(207,937	)		$	(67,149	)		$	(370,301	)
Basic and diluted net loss per share:
	Historical			$	(1.53	)		$	(5.14	)		$	(1.21	)
	Pro Forma (unaudited)											$	(1.11	)
Shares used to compute basic and diluted net loss per share:
	Historical				31,601				40,416				55,463
	Pro Forma (unaudited)												60,321

See notes to financial statements.

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STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

															Series C
											Series C				convertible																								Deficit
			Series B								convertible				preferred																Notes				Notes				accumulated
			convertible								preferred				stock												Additional				receivable				receivable				during the
			preferred stock								stock				subscriptions				Common stock								paid-in				from				from				development
			Shares				Amount				issuable				receivable				Shares				Amount				capital				stockholders				officers				stage				Total
BALANCE, FEBRUARY 14, 1991
	Issuance of common stock for cash			—				$—				$—				$—				2,993				$30				$870				$—				$—				$—				$900
	Net loss			—				—				—				—				—				—				—				—				—				(911	)			(911	)
BALANCE, FEBRUARY 29, 1992				—				—				—				—				2,993				30				870				—				—				(911	)			(11	)
	Issuance of common stock for cash and services			—				—				—				—				220				2				886				—				—				—				888
	Capital contribution			—				—				—				—				—				—				20				—				—				—				20
	Net loss			—				—				—				—				—				—				—				—				—				(1,175	)			(1,175	)
BALANCE, FEBRUARY 28, 1993				—				—				—				—				3,213				32				1,776				—				—				(2,086	)			(278	)
	Issuance of common stock for cash			—				—				—				—				32				—				526				—				—				—				526
	Issuance of stock for notes receivable			—				—				—				—				24				—				400				(400	)			—				—				—
	Net loss			—				—				—				—								—				—				—				—				(1,156	)			(1,156	)
BALANCE, FEBRUARY 28, 1994				—				—				—				—				3,269				32				2,702				(400	)			—				(3,242	)			(908	)
	Issuance of common stock for cash and services			—				—				—				—				109				1				1,804				—				—				—				1,805
	Collection of stock subscription			—				—				—				—				—				—				—				400				—				—				400
	Net loss			—				—				—				—				—				—				—				—				—				(2,004	)			(2,004	)
BALANCE, DECEMBER 31, 1994				—				—				—				—				3,378				33				4,506				—				—				(5,246	)			(707	)
	Issuance of common stock for services			—				—				—				—				1				—				8				—				—				—				8
	Exercise of stock options			—				—				—				—				3				—				22				—				—				—				22
	Stock compensation			—				—				—				—				—				—				384				—				—				—				384
	Net loss			—				—				—				—				—				—				—				—				—				(2,815	)			(2,815	)
BALANCE, DECEMBER 31, 1995				—				—				—				—				3,382				33				4,920				—				—				(8,061	)			(3,108	)
	Issuance of common stock for cash and services			—				—				—				—				4				—				59				—				—				—				59
	Exercise of stock options			—				—				—				—				7				1				11				—				—				—				12
	Stock compensation			—				—				—				—				—				—				126				—				—				—				126
	Net loss			—				—				—				—				—				—				—				—				—				(2,570	)			(2,570	)
BALANCE, DECEMBER 31, 1996				—				—				—				—				3,393				34				5,116				—				—				(10,631	)			(5,481	)
	Issuance of common stock for cash and services			—				—				—				—				1,644				16				180				—				—				—				196
	Stock compensation			—				—				—				—				—				—				2				—				—				—				2
	Exercise of stock options			—				—				—				—				82				1				134				—				—				—				135
	Conversion of notes payable			—				—				—				—				36				1				59				—				—				—				60
	Net loss			—				—				—				—				—				—				—				—				—				(2,280	)			(2,280	)
BALANCE, DECEMBER 31, 1997				—				—				—				—				5,155				52				5,491				—				—				(12,911	)			(7,368	)
	Issuance of common stock for cash and services			—				—				—				—				6,757				68				12,658				—				—				—				12,726
	Stock compensation			—				—				—				—				—				—				150				—				—				—				150
	Exercise of stock options			—				—				—				—				205				2				23				—				—				—				25
	Conversion of notes payable			—				—				—				—				644				6				1,196				—				—				—				1,202
	Net loss			—				—				—				—				—				—				—				—				—				(3,331	)			(3,331	)
BALANCE, DECEMBER 31, 1998				—				—				—				—				12,761				128				19,518				—				—				(16,242	)			3,404
	Issuance of common stock																			487				5				529																534
	Conversion of notes payable																			239				2				993																995
	Net loss																																							(5,679	)			(5,679	)

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															Series C
											Series C				convertible																								Deficit
			Series B								convertible				preferred																Notes				Notes				accumulated
			convertible								preferred				stock												Additional				receivable				receivable				during the
			preferred stock								stock				subscriptions				Common stock								paid-in				from				from				development
			Shares				Amount				issuable				receivable				Shares				Amount				capital				stockholders				officers				stage				Total
BALANCE, DECEMBER 31, 1999				—				—				—				—				13,487				135				21,040				—				—				(21,921	)			(746	)
	Conversion of notes payable			—				—				—				—				188				2				1,072				—				—				—				1,074
	Issuance of preferred stock for cash			193				15,000				—				—				—				—				—				—				—				—				15,000
	Issuance of common stock for cash, services and notes			—				—				—				—				14,072				141				33,850				(2,358	)			—				—				31,633
	Discount on notes below market rate			—				—				—				—				—				—				—				241				—				—				241
	Accrued interest on notes			—				—				—				—				—				—				—				(117	)			—				—				(117	)
	Purchase of Series A redeemable convertible preferred stock			—				—				—				—				—				—				(993	)			—				—				—				(993	)
	Amount in excess of redemption obligation			—				—				—				—				—				—				999				—				—				—				999
	Accretion to redemption value on Series A redeemable convertible preferred stock			—				—				—				—				—				—				(149	)			—				—				—				(149	)
	Stock-based compensation			—				—				—				—				—				—				9,609				—				—				—				9,609
	Net loss			—				—				—				—				—				—				—				—				—				(24,661	)			(24,661	)
BALANCE, DECEMBER 31, 2000				193				15,000				—				—				27,747				278				65,428				(2,234	)			—				(46,582	)			31,890
	Issuance of common stock for cash			—				—				—				—				9,156				91				77,939				—				—				—				78,030
	Cash received for common stock to be issued			—				—				—				—				—				—				3,900				—				—				—				3,900
	Issuance of common stock for services			—				—				—				—				9				—				60				—				—				—				60
	Exercise of stock options			—				—				—				—				3				—				13				—				—				—				13
	Accrued interest on notes			—				—				—				—				—				—				—				(189	)			—				—				(189	)
	Payments on notes receivable			—				—				—				—				—				—				—				28				—				—				28
	Accretion to redemption value on Series A redeemable convertible preferred stock			—				—				—				—				—				—				(239	)			—				—				—				(239	)
	Stock-based compensation			—				—				—				—				—				—				1,565				—				—				—				1,565
	Issuance of put option by stockholder			—				—				—				—				—				—				(2,949	)			—				—				—				(2,949	)
	Record merger of entities			—				—				—				—				—				—				171,154				—				—				—				171,154
	Net loss			—				—				—				—				—				—				—				—				—				(48,245	)			(48,245	)
BALANCE, DECEMBER 31, 2001				193				15,000				—				—				36,915				369				316,871				(2,395	)			—				(94,827	)			235,018
	Issuance of common stock for cash			—				—				—				—				11,766				118				58,697				—				—				—				58,815
	Issuance of common stock for cash already received			—				—				—				—				701				7				(7	)			—				—				—				—
	Issuance of stock award to employee			—				—				—				—				10				—				84				—				—				—				84
	Cash received for common stock issuable			—				—				—				—				—				—				98				—				—				—				98
	Accrued interest on notes			—				—				—				—				—				—				—				(229	)			—				—				(229	)
	Payments on notes receivable			—				—				—				—				—				—				—				1,314				—				—				1,314
	Beneficial conversion feature of Series B convertible preferred stock			—				—				—				—				—				—				1,421				—				—				—				1,421
	Deemed dividend related to beneficial conversion feature of Series B convertible preferred stock			—				—				—				—				—				—				(1,421	)			—				—				—				(1,421	)
	Accretion to redemption value on Series A redeemable convertible preferred stock			—				—				—				—				—				—				(251	)			—				—				—				(251	)
	Stock-based compensation			—				—				—				—				—				—				268				—				—				—				268

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															Series C
											Series C				convertible																								Deficit
			Series B								convertible				preferred																Notes				Notes				accumulated
			convertible								preferred				stock												Additional				receivable				receivable				during the
			preferred stock								stock				subscriptions				Common stock								paid-in				from				from				development
			Shares				Amount				issuable				receivable				Shares				Amount				capital				stockholders				officers				stage				Total
	Put option redemption by stockholder			—				—				—				—				—				—				1,921				—				—				—				1,921
	Net loss			—				—				—				—				—				—				—				—				—				(206,265	)			(206,265	)
BALANCE, DECEMBER 31, 2002				193				15,000				—				—				49,392				494				377,681				(1,310	)			—				(301,092	)			90,773
	Issuance of Series C convertible preferred stock subscriptions			—				—				50,000				(50,000	)			—				—				—				—				—				—				—
	Cash collected on Series C convertible preferred stock subscriptions			—				—				—				31,847				—				—				—				—				—				—				31,847
	Issuance of common stock for cash			—				—				—				—				10,480				105				49,895				—				—				—				50,000
	Non-cash compensation expense of officer resulting from stockholder contribution			—				—				—				—				—				—				70				—				—				—				70
	Issuance of common stock for cash already received			—				—				—				—				52				—				—				—				—				—				—
	Notes receivable by stockholder issued to officers			—				—				—				—				—				—				225				—				(225	)
	Accrued interest on notes			—				—				—				—				—				—				—				(102	)			(3	)			—				(105	)
	Beneficial conversion feature of Series B convertible preferred stock			—				—				—				—				—				—				1,017				—				—				—				1,017
	Deemed dividend related to beneficial conversion feature of Series B convertible preferred stock			—				—				—				—				—				—				(1,017	)			—				—				—				(1,017	)
	Accretion to redemption value on Series A redeemable convertible preferred stock			—				—				—				—				—				—				(253	)			—				—				—				(253	)
	Stock-based compensation			—				—				—				—				—				—				4,501				—				—				—				4,501
	Put shares sold to majority stockholder			—				—				—				—				—				—				623				—				—				—				623
	Net loss			—				—				—				—				—				—				—				—				—				(65,879	)			(65,879	)
BALANCE, DECEMBER 31, 2003				193				$15,000				$50,000				$(18,153	)			59,924				$599				$432,742				$(1,412	)			$(228	)			$(366,971	)			$(111,577	)

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MannKind Corporation and Subsidiary (A Development Stage Company)

																		Cumulative
																		period from
																		February 14,
																		1991 (date of
						Years ended December 31,												inception) to
																		December 31,
						2001				2002				2003				2003
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss						$(48,245	)			$(206,265	)			$(65,879	)			$(366,971	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization					1,350				5,072				7,657				16,067
		In-process research and development					19,726												19,726
		Stock-based compensation expense					1,565				352				4,501				16,689
		Discount on stockholder notes below market rate																	241
		Non-cash compensation expense of officer resulting from stockholder contribution													70				70
		Stock issued for services					60												747
		Loss (gain) on sale and abandonment/disposal of property and equipment					(7	)			27				2,803				2,823
		Accrued interest expense on notes payable to stockholders																	1,538
		Accrued interest on notes					(189	)			(229	)			(105	)			(640	)
		Goodwill impairment									151,428								151,428
		(Gain) loss on available-for-sale securities, net									67				76				143
		Changes in assets and liabilities:
			Prepaid expenses and other current assets				(266	)			1,402				(910	)			(1,859	)
			Restricted cash												(559	)			(559	)
			Other assets				(227	)			254				(93	)			(190	)
			Accounts payable				5,034				(1,157	)			(2,283	)			1,926
			Accrued expenses and other current liabilities				56				387				2,258				4,015
			Other liabilities				(21	)							(87	)			120
			Payment of deferred compensation								(5	)			(220	)			1,644
				Net cash used in operating activities			(21,164	)			(48,667	)			(52,771	)			(153,042	)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of marketable securities										(71,055	)			(50,060	)			(121,115	)
	Sales of marketable securities										59,853				59,294				119,147
	Purchase of property and equipment						(39,673	)			(34,147	)			(5,183	)			(86,305	)
	Proceeds from sale of property and equipment						17								75				92
				Net cash (used in) provided by investing activities			(39,656	)			(45,349	)			4,126				(88,181	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Cash received for common stock to be issued						3,900												3,900
	Repurchase of common stock														(1,028	)			(1,028	)
	Issuance of common stock for cash						78,043				58,913				50,000				235,840
	Put shares sold to majority stockholder														623				623
	Borrowings under lines of credit						84												4,220
	Proceeds from notes receivables						28				1,314								1,742
	Principal payments on notes payable						(2,558	)			(24	)							(1,667	)
	Payable to stockholder														1,406				1,406
	Issuance of Series B convertible preferred stock for cash																		15,000
	Collection of Series C convertible preferred stock subscriptions receivable														31,847				31,847
	Borrowings on notes payable																		3,460
				Net cash provided by financing activities			79,497				60,203				82,848				295,343

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															Cumulative
															period from
															February 14,
															1991 (date of
			Years ended December 31,												inception) to
															December 31,
			2001				2002				2003				2003
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				$18,677				$(33,813	)			$34,203				$54,120
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD				35,053				53,730				19,917				—
CASH AND CASH EQUIVALENTS, END OF PERIOD				$53,730				$19,917				$54,120				$54,120
SUPPLEMENTAL CASH FLOWS DISCLOSURES:
	Cash paid for income taxes			$2				$2				$1				$14
	Interest paid in cash			$55				$16				$4				$75
	Accretion on redeemable convertible preferred stock			$(239	)			$(251	)			$(253	)			$(892	)
	Issuance of common stock upon conversion of notes payable			$—				$—				$—				$3,331
	Increase in additional paid-in capital resulting from merger			$171,154				$				$				$171,154
	Issuance of common stock for notes receivable			$				$				$				$2,758
	Issuance of put option by stockholder			$(2,949	)			$				$				$(2,949	)
	Put option redemption by stockholder			$				$1,921				$				$1,921
	Notes receivable by stockholder issued to officers			$				$				$225				$225
	Issuance of Series C convertible preferred stock subscriptions			$				$				$50,000				$50,000
	Issuance of Series A redeemable convertible preferred stock			$				$				$				$4,296

See notes to financial statements.

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MannKind Corporation and Subsidiary (A Development Stage Company)

1.	Description of business and basis of presentation

Business—MannKind Corporation (the “Company”) is a biopharmaceutical company focused on the development and commercialization of therapeutic products for diseases such as diabetes, cancer, inflammatory and autoimmune diseases. The Company’s lead product, the Technosphere Insulin System, which is currently in late Phase II clinical trials for the treatment of diabetes, consists of our dry-powder Technosphere formulation of insulin and our MedTone inhaler through which the powder is inhaled into the deep lung.

Basis of Presentation—The Company is considered to be in the development stage as its primary activities since incorporation have been establishing its facilities, recruiting personnel, conducting research and development, business development, business and financial planning, and raising capital. Since its inception the Company has reported accumulated net losses of $366,971,000 which include a goodwill impairment charge of $151,428,000 (see Note 2), and negative cash flow from operations of $153,042. It is costly to develop therapeutic products and conduct clinical trials for these products. Based upon the Company’s current expectations, management believes the Company’s existing capital resources will enable it to continue planned operations through the third quarter of 2004. Management plans to raise additional funds through the issuance of equity securities in an initial public offering of its common stock. Management believes the Company’s existing capital resources together with proceeds anticipated from the initial public offering will enable it to continue planned operations into the second quarter of 2005. However, the Company cannot provide assurances that its plans will not change or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently anticipates. If planned operating results are not achieved or the Company is not successful in raising additional equity financing, management believes that planned expenditures could be reduced substantially; extending the time period over which the Company’s currently available capital resources will be adequate to fund the Company’s operations.

On December 12, 2001, the stockholders of AlleCure Corp. (“AlleCure”) and CTL ImmunoTherapies Corp. (“CTL”) voted to exchange their shares for shares of Pharmaceutical Discovery Corporation (“PDC”). Upon approval of the merger, PDC then changed its name to MannKind Corporation. PDC was incorporated in the State of Delaware on February 14, 1991. The stockholders of PDC did not vote on the merger. At the date of the merger, Mr. Alfred Mann owned 76% of PDC, 59% of AlleCure and 69% of CTL. Accordingly, only the minority interest of AlleCure and CTL was stepped up to fair value using the purchase method of accounting. As a result of this purchase accounting, in-process research and development of $19,726,000 and goodwill of $151,428,000 were recorded at the entity level. The historical basis of PDC and the historical basis relating to the ownership interests of Alfred Mann in AlleCure and CTL have been reflected in the financial statements. For periods prior to December 12, 2001, the results of operations have been presented on a combined basis. All references in the accompanying financial statements and notes to the financial statements to number of shares, sales price and per share amounts of the Company’s capital stock have been retroactively restated to reflect the share exchange ratios for each of the entities that participated in the merger.

For periods subsequent to December 12, 2001, the accompanying financial statements have been presented on a consolidated basis and include the wholly-owned subsidiaries, AlleCure and CTL. On December 31, 2002, AlleCure and CTL merged with and into MannKind and ceased to be separate entities.

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2.	Summary of significant accounting policies

Reclassifications—Certain reclassifications have been made to the prior years financial statements to conform to the 2003 presentation.

Unaudited Pro Forma Net Loss Per Share—Unaudited pro forma net loss per share for the year ended December 31, 2003 is computed using the weighted average number of common shares outstanding, including the pro forma effects of the automatic conversion of the Company’s Series A and B convertible preferred stock into shares of the Company’s common stock effective upon the closing of the Company’s proposed initial public offering. Conversion of the Series A and B convertible preferred stock is assumed to have occurred as of January 1, 2003. The following table summarizes the components of the unaudited pro forma net loss per share for the year ended December 31, 2003:

Net loss			$(65,879,000	)
Deemed dividend related to beneficial conversion features of convertible preferred stock			(1,017,000	)
Accretion to preferred stockholders			(253,000	)
Net loss attributable to common stockholders			$(67,149,000	)
Shares used in computing basic and diluted net loss per share			55,462,564
Adjusted to reflect the effect of the assumed conversion of convertible preferred stock			4,858,647
Weighted average shares used in computing pro forma basic and diluted net loss per share			60,321,211
Pro forma basic and diluted net loss per share attributable to common stockholders			$(1.11	)

Financial Statement Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents—The Company considers all highly liquid investments with a purchased maturity date of 90 days or less to be cash equivalents.

Concentration of Credit Risk—Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and marketable securities. Cash and cash equivalents consist primarily of interest-bearing accounts and are regularly monitored by management and held in high credit quality institutions.

Marketable Securities—The Company accounts for marketable securities as available for sale, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Debt and Equity Securities. Unrealized holding gains and losses for available-for-sale securities are reported as a separate component of stockholders’ equity until realized.

Deferred Offering Costs—In connection with its proposed initial public offering, the Company has $464,216 of deferred offering costs included in prepaid expenses and other current assets in the accompanying balance sheet at December 31, 2003.

Fair Value of Financial Instruments—The carrying amounts of financial instruments, which include cash equivalents, marketable securities, accounts payable, accrued expenses and other current liabilities and payable to stockholder, approximate their fair values due to their relatively short maturities. The

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carrying amounts of the notes receivable from stockholders and officers reflect market rates of interest for similar loans of similar amounts and terms available from a third party (see Notes 6 and 7).

Goodwill and Identifiable Intangibles—Upon adoption of SFAS No. 142, Goodwill and Other Intangible Assets, on January 1, 2002, the Company discontinued the amortization of goodwill, and under the initial transitional test, the Company determined there was no impairment of goodwill. Goodwill and intangible assets with indefinite lives are tested for impairment at least annually, and any related impairment losses are recognized in earnings when identified. During the year ended December 31, 2002, the Company identified adverse economic indicators affecting two of its divisions, CTL and AlleCure, which have goodwill assigned to them. The adverse economic indicators led the Company to perform an evaluation for potential impairment. The value of the reporting units determined in the first step of the impairment analysis indicated that the potential for impairment existed in both reporting units. The Company performed the second step as of December 31, 2002 for both the potentially impaired reporting units and determined that its goodwill balance of $151,428,000 was impaired. The impairment loss was recorded in the fourth quarter of the year ended December 31, 2002. As the goodwill was acquired in December 2001, no amortization was recorded in the prior year. Consequently, the net loss in previous years was not affected by amortization of goodwill.

Property and Equipment—Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the term of the lease or the service lives of the improvements, whichever is shorter. Assets under construction are not depreciated until placed into service.

Impairment of Long-Lived Assets—The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value. For the year ended December 31, 2003, the Company recorded a write-down of long-lived assets of approximately $2,154,000.

Income Taxes—Deferred income tax assets and liabilities are recorded for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the income tax basis of assets and liabilities. A valuation allowance is recorded to reduce net deferred income tax assets to amounts that are more likely than not to be realized.

Stock-Based Compensation—At December 31, 2003, the Company has three stock-based compensation plans, which are described more fully in Note 10. The Company accounts for employee stock options using the intrinsic value method in accordance with Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and its interpretations, and has adopted the disclosure-only alternative of SFAS No. 123, Accounting for Stock-Based Compensation. Stock options issued to consultants are accounted for in accordance with the provisions of Emerging Issues Task Force Issue (“EITF”) No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, and FASB Interpretation No. 28 (“FIN 28”), Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans.

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Under SFAS No. 123 the Company estimates the fair value of each stock option at the grant date or modification date, if any, by using the Black-Scholes option-pricing model with the following weighted-average assumptions as of December 31:

		2001				2002				2003
Risk-free interest rate			4.94	%			3.53	%			2.90	%
Expected lives			8  years				8  years				4  years
Volatility			100	%			100	%			100	%

The weighted-average expected lives for the year ended December 31, 2003 decreased to approximately 4 years from 8 years for each of the years ended December 31, 2001 and 2002 primarily because options granted during 2003 under the re-pricing program described in Note 10 have a 4-year term.

Had compensation cost been determined under the accounting provisions of SFAS No. 123, the Company’s net loss would have been adjusted to the pro forma amounts indicated below (in thousands):

		Year ended December 31,
		2001				2002				2003
Net loss—as reported			$(48,245	)			$(206,265	)			$(65,879	)
Add: Stock-based employee compensation expense included in reported net loss			1,565				352				4,501
Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards			(3,943	)			(5,724	)			(6,863	)
Net loss—pro forma			(50,623	)			(211,637	)			(68,241	)
Deemed dividend related to beneficial conversion features of convertible preferred stock			—				(1,421	)			(1,017	)
Accretion on redeemable preferred stock			(239	)			(251	)			(253	)
Net loss applicable to common stockholders—pro forma			$(50,862	)			$(213,309	)			$(69,511	)
Basic and diluted loss attributable to common stockholders per share, as reported			$(1.53	)			$(5.14	)			$(1.21	)
Basic and diluted loss attributable to common stockholders per share, pro forma			$(1.61	)			$(5.28	)			$(1.25	)

Research and Development—Research and development expenses consist primarily of costs associated with the clinical trials of the Company’s product candidates, manufacturing supplies and other development materials, compensation and other expenses for research and development personnel, costs for consultants and related contract research, facility costs and depreciation. Expenditures relating to research and development are expensed as incurred.

Net Loss Per Share Of Common Stock—Basic net loss per share excludes dilution for potentially dilutive securities and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Potentially dilutive securities are excluded from the computation of diluted net loss per share for all of the periods presented in the accompanying

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statements of operations because the reported net loss in each of these periods results in their inclusion being antidilutive.

Potentially dilutive securities outstanding are summarized as follows:

		Year ended December 31,
		2001				2002				2003
Series A redeemable convertible preferred stock on an as converted basis			2,673,540				2,673,540				2,673,540
Series B convertible preferred stock on an as converted basis			1,926,180				2,108,602				2,239,225
Stock warrants			485,399				485,399				130,126
Common stock options			2,325,803				5,713,808				6,380,789

Segment Information—Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as one segment operating entirely in the United States of America.

Exit or Disposal Activities—SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. FAS No. 146 addresses financial accounting and reporting for the costs associated with exit or disposal activities and EITF Issue No. 94-3 “Liability Recognition for Certain Employee Termination Benefits and Costs to Exit and Disposal Activity (Including Certain Costs Incurred in a Restructuring)”. SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred and establishes that fair value is the objective for initial measurements of the liability.

Included in general and administrative expense for the year ended December 31, 2003 are approximately $2,163,000 of costs related to the consolidation of the Company’s separate California facilities into the Company’s Valencia facility. The $2,163,000 consists of $1,077,000 in severance costs, $438,000 in office closure costs and $648,000 related to the abandonment of fixed assets. Payments of $1,406,000 have been made as of December 31, 2003. The remaining liability of $109,000 is included in accrued expenses and other current liabilities at December 31, 2003.

Recently Issued Accounting Standards—In January 2003, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation Number 46, Consolidation of Variable Interest Entities (“FIN 46”) with the objective of improving financial reporting by companies involved with variable interest entities. FIN 46 clarifies the application of Accounting Research Bulletin No. 51 to certain entities, defined as variable interest entities, in which equity investors do not have characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated support from other parties. In December 2003, the FASB issued a revision to FIN 46 (“FIN 46R”) to clarify some of the provisions of FIN 46. The Company currently has no entities which have the characteristics of a variable interest equity. Furthermore, the Company’s adoption of the remaining provisions of FIN 46R in the quarter ended March 31, 2004 did not have an impact on the Company’s financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. This statement establishes how a company classifies and measures certain financial instruments with characteristics of both liabilities and equity, including

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redeemable preferred stock. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the interim period commencing July 1, 2003, except for mandatory redeemable financial instruments of nonpublic companies, which is effective for fiscal periods beginning after December 31, 2004. Adoption of this statement did not have a material impact on the Company’s financial statements.

3.	Investment in securities

The following is a summary of the available-for-sale securities classified as current assets (in thousands).

		December 31, 2002								December 31, 2003
		Cost basis				Fair value				Cost basis				Fair value
US government securities			$9,336				$9,336				$518				$518
Corporate debt instruments			1,799				1,799				1,307				1,307
			$11,135				$11,135				$1,825				$1,825

The maturity dates for debt securities at December 31, 2002 and 2003 is less than one year. Proceeds from the sale and maturities of available-for-sale securities amounted to approximately $59,853,000 and $59,294,000 for the years ended December 31, 2002 and 2003, respectively. Gross realized losses for available-for-sale securities were approximately $(67,000) for the year ended December 31, 2002. Gross realized losses for available-for-sale securities were approximately $(76,000) for the year ended December 31, 2003. Gross realized gains for available-for-sale securities were insignificant for the years ended December 31, 2002 and 2003. Gross realized gains and losses for available-for-sale securities are recorded as other income (expense). Unrealized gains and losses for available-for-sale securities for all periods presented were not material.

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4.	Property and equipment

Property and equipment consist of the following (dollar amounts in thousands):

		Estimated
		useful				December 31,
		life
		(years)				2002				2003
Land			—			$	5,273			$	5,273
Buildings			39				9,566				9,566
Building improvements			5–39				29,089				36,115
Machinery and equipment			3–10				17,304				15,782
Furniture, fixtures and office equipment			7–10				3,101				3,448
Computer equipment and software			3–5				2,181				2,763
Leasehold improvements							1,816				627
Construction in progress							4,630				789
Deposits on equipment							8,125				5,656
							81,085				80,019
Less accumulated depreciation and amortization							(8,410	)			(12,696	)
Property and equipment — net						$	72,675			$	67,323

Depreciation and amortization expense for the years ended December 31, 2001, 2002, 2003, and the cumulative period from February 14, 1991 (date of inception) to December 31, 2003 was $1,350,000, $5,072,000, $7,657,000 and $16,067,000, respectively.

5.	Accrued expenses and other current liabilities

Accrued expenses and other current liabilities are comprised of the following (in thousands):

		December 31,
		2002				2003
Salary and related expenses		$	846			$	2,004
Research and clinical trial costs			417				1,224
Other			494				787
Accrued expenses and other current liabilities		$	1,757			$	4,015

6.	Notes receivable from stockholders

During the year ended December 31, 2000, the Company issued an aggregate of 714,000 shares of common stock to an executive of CTL and a consultant of CTL in exchange for full recourse notes receivable of $1,179,000 each, for an aggregate amount of $2,358,000. The notes bear interest at fixed rates and are payable in five years. The notes are prepayable at the option of the note holder. The notes are collateralized by the underlying common stock. The note holders have no further obligation to provide services to the Company under the terms of the stock purchases. The notes bear fixed rates of interest that were less than market rates of interest available for similar loans of similar amounts and terms from a third party; consequently, the Company recognized compensation expense equal to

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the discount on the notes based on market rates of interest and the terms of the notes. The total discount on the notes of $241,000 was expensed to general and administrative expense during the year ended December 31, 2000 as the note holders had no further obligation to the Company. During the year ended December 31, 2002, the executive of CTL paid his $1,179,000 note in full along with $135,000 of accrued interest.

Notes receivable reflected in stockholders’ equity consist of the following:

		December 31,
		2002				2003
Principal		$	1,179,000			$	1,179,000
Accrued interest			131,000				233,000
Total		$	1,310,000			$	1,412,000

In December 2001, the Company’s majority stockholder entered into an agreement (the “Put” agreement) with the executive of CTL that permits the executive to require the majority stockholder to purchase approximately 357,000 shares from the executive with the note receivable for a fixed price of approximately $2,949,000, or $8.25 per share. In accordance with SEC Staff Accounting Bulletin Topic 5.T, Accounting for Expenses or Liabilities Paid by Principal Stockholder, the Company recorded the Put obligation of the majority stockholder as common stock subject to repurchase and as a decrease in additional paid-in capital. In February 2002 the executive exercised a portion of the Put for approximately $1,921,000 (233,000 shares), which was paid in cash by the majority stockholder. The Company reflected the partial redemption of the Put by the majority stockholder as a decrease in common stock subject to repurchase and an increase in additional paid-in capital. The executive resigned in September 2002 and, pursuant to a post-employment agreement that was formalized and executed in January 2003, the Company modified the terms of options to purchase 90,950 shares of common stock held by the former executive (see Note 12—Severance agreements) and assumed the majority stockholder’s remaining Put obligation of approximately $1,028,000. The remaining $1,028,000 of the Put (124,000 shares) was exercised in December 2002 and paid in cash by the Company in January 2003. During the year ended December 31, 2002, the estimated fair value per share of the Company’s common stock declined below the exercise price of the Put. As a result, during the year ended December 31, 2002 the Company recorded $405,000 of stock-based compensation expense, which was the difference between the amount paid to the former executive and the amount received from the majority stockholder and represented the intrinsic value of the 124,000 shares subject to the Put. In December 2003, the majority stockholder purchased the 124,000 shares for an aggregate price of approximately $623,000.

The Company issued 330,000 shares of common stock to an executive of AlleCure in exchange for notes receivable, in the amounts of $1,214,000 during the year ended December 31, 2000 and $750,000 during the year ended December 31, 2001. The notes bear interest at fixed rates and are payable in five years. The notes are pre-payable at the option of the note holder. The notes are collateralized by the underlying common stock. The note holder has no further obligation to the Company under the terms of the stock purchase. During the first quarter of 2003, the executive was terminated by the Company (See Note 12—Severance agreements). The note-for-stock transactions are being accounted for as in-substance stock option grants to an employee. The in-substance stock option grants had no intrinsic value as of the transaction dates. The pre-payment feature of the notes results in the exercise price of the in-substance stock option being unknown until the notes are paid in full. Accordingly, the Company is required to measure the intrinsic value of the in-substance stock options

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on the balance sheet date of each financial reporting period. During 2001, the Company recorded approximately $815,000 of stock-based compensation expense, which is included in general and administrative expense, relating to the in-substance stock options. This amount was reversed in 2002 because the in-substance stock options had no intrinsic value as of December 31, 2002. There was no stock-based compensation expense recorded for the in-substance options in 2003 because they had no intrinsic value as of December 31, 2003.

During the year ended December 31, 2000 and during the year ended December 31, 2001, the Company issued an aggregate 2,104,000 shares of common stock to various consultants in exchange for notes receivable aggregating approximately $10,923,000. The notes bear interest at fixed rates and are payable in five years. The notes are pre-payable at the option of the note holders. The notes are collateralized by the underlying common stock. The note holders have no further obligation to the Company under the terms of the stock purchases. The note-for-stock transactions are being accounted for as in-substance stock option grants to non-employees. Since the in-substance stock options were 100% vested and nonforfeitable upon issuance, a measurement date is deemed to have occurred on the issuance date. Accordingly, the Company recorded stock-based compensation expense equal to the estimated fair value of the in-substance options of $8,372,000 in 2000 and $15,000 in 2001. These amounts, which are included in research and development expense in the accompanying statements of operations, were estimated using the Black-Scholes option-pricing model and the following weighted-average assumptions: volatility of 100%, term of five years, interest rate of 5.06%.

7.	Notes receivable from officers

In March 2003, a limited liability company controlled by the Company’s majority stockholder loaned the aggregate principal sum of $225,000 to two officers pursuant to promissory notes and purchased the principal residence owned by one officer as part of his relocation to California. In accordance with SEC Staff Accounting Bulletin Topic 5.T, Accounting for Expenses or Liabilities Paid by Principal Stockholder, the Company recorded the loans from the majority stockholder as an increase in additional paid-in capital and as a note receivable, which is classified within stockholders’ equity. In addition, $70,000 was recorded as compensation expense with a corresponding credit to additional paid-in capital representing the amount of the residential purchase price paid to one officer that exceeded the appraised value. This $70,000 is included in general and administrative expenses on the Company’s statement of operations for the year ended December 31, 2003. The notes bear fixed rates of interest that were less than market rates of interest available for similar loans of similar amounts and terms from a third party. Consequently, the Company also recognized a non-cash compensation expense equal to the discount on the notes. The total discount on the notes of approximately $14,000 was amortized to compensation expense over the term of the note. The notes are secured by the officers’ title and interest in future bonus payments, if any, from the Company. As of December 31, 2003, the amount owed to the lender pursuant to the notes receivable was $228,000, including accrued interest. As of April 15, 2004, both notes had been fully repaid.

8.	Deferred compensation

Certain stockholders and officers elected to defer part or all of their compensation from 1991 through 1998 due to cash flow difficulties in those years. The amounts due for deferred compensation are non interest-bearing with no repayment terms.

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Deferred compensation consists of the following (in thousands):

		December 31,
		2002				2003
Deferred compensation to stockholders and officers		$	1,864			$	1,644
Less non-current portion			—				(284	)
Deferred compensation—current		$	1,864			$	1,360

In February 2003, pursuant to a settlement agreement with one of the officers, the Company agreed to pay the deferred compensation amount outstanding to the former officer in the amount of approximately $775,000 in three payments. As of December 31, 2003 the Company has paid approximately $220,000 of this amount. An additional $271,000 is due in April 2004 and the remaining $284,000 is due in April 2005. The settlement also obligated the Company to make certain severance related payments which are more fully described in Note 12—Severance agreements.

9.	Common and preferred stock

Common Stock—The Company is authorized to issue 100,000,000 shares of common stock. As of December 31, 2003, 59,924,182 shares of common stock are issued and outstanding.

As of December 31, 2003, the Company had reserved shares of common stock for issuance as follows:

Common stock options			6,380,789
Conversion of Series A preferred stock			2,673,540
Conversion of Series B preferred stock			2,239,225
Exercise of warrants			130,126
			11,423,680

Preferred Stock—The Company is authorized to issue 5,000,000 shares of preferred stock.

Liquidation Preferences of Preferred Stock—In the event of liquidation, dissolution or winding-up of the Company, the Series C convertible preferred stockholders shall be entitled to receive in preference to the common stockholders, Series A redeemable convertible preferred stockholders and the Series B convertible preferred stockholders, a per share amount equal to $51.00 plus all declared and unpaid dividends. After such distributions have been made, the Series A redeemable convertible preferred stockholders and the Series B convertible preferred stockholders shall be entitled to receive on an equal basis, in the case of the Series A redeemable convertible preferred stockholders, a per share amount equal to $16.22, plus all accrued and unpaid dividends (whether or not declared) and, in the case of the Series B convertible preferred stockholders, a per share amount equal to $77.88, plus all declared and unpaid dividends. After such distributions have been made, the Series C convertible preferred stockholders and the common stockholders shall be entitled to receive on a pro rata basis a distribution per share equivalent to that made to the Series A redeemable convertible preferred stockholders. After such distributions have been made, any remaining assets of the Company will be distributed pro rata among the Series A redeemable convertible preferred stockholders, Series C convertible preferred stockholders and the common stockholders based on the number of common shares held by each, assuming conversion of all convertible preferred stock at the then applicable conversion rate.

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Series A Redeemable Convertible Preferred Stock—As of December 31, 2003, the Company had outstanding 267,354 shares of 5.12% cumulative dividend Series A redeemable convertible preferred stock. The rights, preferences and privileges of the holders of Series A redeemable convertible preferred stock are as follows:

•	Each share of Series A redeemable convertible preferred stock is convertible into 10 shares of common stock (subject to adjustment in the event of the issuance of common stock below a price per share of $1.62). Shares will automatically be converted in the event of a public offering of common stock in which the aggregate net proceeds equal or exceed $20 million, the price paid in such offering reflects a pre-offering valuation of at least $30 million and the common stock is approved for quotation on the Nasdaq National Market or certain other stock exchanges. The Series A convertible preferred stock offering was determined not to contain a beneficial conversion feature on the offering commitment date. However, if the conversion price is adjusted downward at a future date a beneficial conversion charge would be recorded by the Company as a reduction in retained earnings or, in the absence of retained earnings, additional paid-in capital, and an increase in additional paid-in capital. In the period of the charge, if any, net income applicable to common stockholders and net income per share would be reduced.
•	At any time following September 30, 2002, within 30 days of a written request by a Series A redeemable convertible preferred stockholder, the Company shall redeem for cash a sum equal to the redemption value of $16.22 per share, together with all unpaid cumulative dividends. The cumulative dividends for Series A redeemable convertible preferred stock are accrued annually so that the carrying value will equal the redemption amount on September 30, 2002 and thereafter. In addition, differences between the redemption amount and the net proceeds received (i.e., the costs of financing) were accreted through September 30, 2002.
•	Each share of Series A redeemable convertible preferred stock has the same voting rights as the common stock into which it is convertible.
•	Dividends may be declared at the discretion of the board of directors and are cumulative. Per annum dividends of $0.83 per share of Series A redeemable convertible preferred stock must be declared and paid before any dividends on common stock may be declared or paid.

Series B Convertible Preferred Stock—As of December 31, 2003, the Company had outstanding 192,618 shares of Series B convertible preferred stock. The rights, preferences and privileges of the holders of Series B convertible preferred stock are as follows:

•

Each share of Series B convertible preferred stock is convertible into 10 shares of common stock, adjusted for dilution as defined. The holders of the Series B convertible preferred stock will be entitled to a weighted-average antidilution adjustment to the conversion price in the event that the Company issues equity securities for an effective purchase price of less than $7.79 per share (on an as-if-converted-to-common stock basis) in an equity financing. Shares will automatically be converted on the date of an underwritten public offering in which the gross proceeds are at least $15 million. The Series B convertible preferred stock offering was determined not to contain a beneficial conversion feature on the offering commitment date. However, during the years ended December 31, 2002 and 2003, the conversion price was adjusted downward to $7.11 per share as of December 12, 2002 and $6.70 per share as of approximately December 31, 2003, resulting in a beneficial conversion charge to common stockholders of approximately $1,421,000 and $1,017,000, respectively. These charges have been reflected by the Company as both a reduction and increase in additional paid-in capital during the respective periods. Although the charges have

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	no net effect on stockholders’ equity, they increase the net loss applicable to the common stockholders and net loss per share. If the conversion price is adjusted downward at a future date a beneficial conversion charge would be recorded by the Company as a reduction in retained earnings or, in the absence of retained earnings, additional paid-in capital, and an increase in additional paid-in capital. In the period of the charge, if any, net income applicable to common stockholders and net income per share would be reduced.
•	Each share of Series B convertible preferred stock has the same voting rights as the common stock into which it is convertible.
•	Dividends may be declared at the discretion of the board of directors. Dividends are not cumulative but must be simultaneously declared and paid with dividends declared and paid on common stock.

Series C Convertible Preferred Stock—In December 2003, the Company issued stock subscriptions receivable in the aggregate amount of $50,000,000 for 980,392 shares of Series C convertible preferred stock. All of the 980,392 shares of Series C convertible preferred stock were issued in the first quarter of 2004. Approximately $31,847,000 of the $50,000,000 in stock subscriptions were collected in December 2003. The remaining stock subscription receivable of approximately $18,153,000 as of December 31, 2003 was collected during the first quarter of 2004. The rights, preferences and privileges of the holders of Series C convertible preferred stock are as follows:

•	Each share of Series C is convertible into 10 shares of common stock, adjusted for dilution as defined. Shares will automatically be converted on the date of a public offering of common stock meeting certain criteria. The holders of the Series C convertible preferred stock will be entitled to a weighted-average antidilution adjustment to the conversion price in the event that the Company issues equity securities for an effective purchase price of less than $5.10 per share (on an as-if-converted-to-common stock basis) in an equity financing. In addition, if, on or before May 1, 2005, the Company issues equity securities in one or more financings and the consideration to the Company in such financings, in the aggregate, is $60,000,000 or greater, then the conversion price of the Series C convertible preferred stock will automatically adjust to an adjusted price equal to 80% of the volume weighted-average sale price per share of all of the securities issued in such financing(s) (on an as-if-converted-to-common stock basis) if such adjusted price is less than the then-effective conversion price of the Series C convertible preferred stock. The conversion price will also be subject to proportional adjustment for stock splits, stock dividends and the like. The Series C convertible preferred stock offering was determined not to contain a beneficial conversion feature on the offering commitment date, however, if the conversion price is adjusted downward at a future date a beneficial conversion charge would be recorded by the Company as a reduction in retained earnings or, in the absence of retained earnings, additional paid-in capital, and an increase in additional paid in-capital. In the period of the charge, if any, net income applicable common stockholders and net income per share would be reduced.
•	Each share of Series C has the same voting rights as the common stock into which it is convertible.
•	Dividends may be declared at the discretion of the board of directors. Dividends are not cumulative but must be simultaneously declared and paid with dividends declared and paid on common stock.

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10.	Stock option plans

The Company’s 2001 Stock Awards Plan (the “Plan”) provides for the granting of stock options to directors, employees and consultants. The Company has reserved 5,000,000 shares of common stock for issuance under the Plan. During 2002, the Board approved the issuance of 10,000 shares of common stock to an employee. These shares, which were valued at $84,000 and recorded as compensation expense in 2002, reduced the number of shares available for issuance under the Plan. As of December 31, 2003, 3,979,098 options were outstanding under the Plan. The Company has two other stock award plans: the 1991 Stock Option Plan (the “1991 Plan”) and the 1999 Stock Plan (the “1999 Plan”). Both of these plans provide for the granting of stock options to directors, employees and consultants. As of December 31, 2003, 379,501 options were outstanding under the 1991 Plan and 916,291 options were outstanding under the 1999 Plan. There are no additional shares available for issuance under the 1991 Plan and the 1999 Plan at December 31, 2003.

Prior to the merger of CTL and AlleCure into the Company, CTL had granted options to purchase shares of its common stock under its 2000 Stock Option and Stock Plan (the “CTL Plan”). Similarly, AlleCure had granted options to purchase shares of its common stock under its 2000 Stock Option and Stock Plan (the “AlleCure Plan”). Pursuant to the plans of reorganization and agreements of merger between the Company and each of CTL and AlleCure, the Company has assumed the obligation to issue shares of the Company’s common stock, at the exchange ratio agreed to in the merger agreement, upon the exercise of options granted under the CTL Plan and the AlleCure Plan. After the merger date, no further options were granted under either the CTL Plan or AlleCure Plan. As of December 31, 2003 there were an aggregate of 382,982 options outstanding under these plans. The assumption of options issued by CTL and AlleCure by the Company in connection with the merger resulted in a new measurement date. On this date, the outstanding options had an intrinsic value of approximately $2,528,000. Approximately $632,000 of the $2,528,000 related to vested options and was therefore recorded immediately as compensation expense. The remaining amount of the $2,528,000 related to unvested options and is being amortized to stock-based compensation expense over the remaining vesting period. During the years ended December 31, 2001, 2002, 2003, and the cumulative period from February 14, 1991 (date of inception) to December 31, 2003, $632,038, $632,038, $274,532, and $1,538,608, respectively, was recognized as stock-based compensation expense related to these options. As of December 31, 2003, assuming no options are cancelled or expired in future periods, the remaining intrinsic value to be amortized is approximately $222,000.

The Company’s Board of Directors approved certain option grants outside of the Company’s 2001 Stock Awards Plan. During the year ended December 31, 2002, an employee who is also a majority stockholder was granted 722,917 options at an exercise price of $8.41 per share. The options vest annually over four years. These options were outstanding at December 31, 2003 and are included in the table below.

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The following table summarizes information about stock options outstanding:

			Year ended December 31,
			2001								2002								2003
							Weighted								Weighted								Weighted
							average								average								average
							exercise								exercise								exercise
			Options				price				Options				price				Options				price
Options outstanding at the beginning of the year				1,897,766				$2.41				2,325,803				$3.51				5,713,808				$5.84
	Granted			522,517				7.76				3,668,025				7.37				4,994,657				3.12
	Exercised			(4,648	)			2.83				(53,314	)			1.83
	Canceled			(89,832	)			5.04				(226,706	)			6.86				(4,327,676	)			6.19
Options outstanding at the end of the year				2,325,803				$3.51				5,713,808				$5.84				6,380,789				$3.48
Options exercisable at the end of the year				1,934,698				$3.02				1,910,812				$3.36				2,185,887				$3.32

The weighted-average exercise prices and weighted-average fair values of options granted are as follows:

		Year ended December 31,
		2001								2002								2003
		Weighted								Weighted								Weighted
		average				Weighted				average				Weighted				average				Weighted
		exercise				average				exercise				average				exercise				average
		price				fair value				price				fair value				price				fair value
Option Price equal to estimated fair value			$7.78				$6.38				$8.41				$7.14				—				—
Option Price greater than estimated fair value			$8.41				$6.74				—				—				—				—
Option Price less than estimated fair value			$4.41				$6.74				$4.25				$4.37				$3.12				$3.85

The following table summarizes information about stock options outstanding at December 31, 2003.

						Weighted-
						average
						remaining				Weighted-								Weighted-
		Options				contractual				average				Options				average
Grant price range		outstanding				life (years)				exercise price				exercisable				exercise price
$0.110–$2.65			4,909,701				5.66				$2.43				1,436,378				$1.90
$3.30–$4.25			432,494				3.43				$4.07				365,521				$4.07
$4.33–$5.19			11,408				7.35				$4.85				7,556				$4.73
$7.04–$8.41			1,027,186				7.45				$8.24				376,432				$7.99
			6,380,789				5.80				$3.48				2,185,887				$3.32

For employee options, the difference between the estimated fair value of the underlying stock and the option exercise price is recognized as compensation expense over the vesting period in accordance with

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APB Opinion No. 25. For non-employee options, the Company recognizes stock-based compensation expense for the estimated fair value of the options, determined using the Black-Scholes option-pricing model, in accordance with EITF No. 96-18 and FIN 28. During the year ended December 31, 2001, non-employee stock-based compensation expense of approximately $75,000 was recognized for outstanding non-employee options. During the year ended December 31, 2002, previously recorded non-employee stock-based compensation expense of approximately $14,000 was reversed because of a decline in the estimated fair value of the Company’s common stock underlying the non-employee options. As of December 31, 2003, non-employee options to purchase 110,510 shares of the Company’s common stock at a weighted-average exercise price of $2.13 per share were outstanding and are reflected in the tables above. The in-substance stock options disclosed in Note 6, which resulted from the issuance of stock to certain individuals, are excluded from the tables above.

In January 2003, pursuant to a post-employment agreement with a former CTL executive, options to purchase 90,950 shares of common stock for $7.04 per share remain fully exercisable through January 2006. The change in option terms resulted in a new measurement date. Since the stock option was modified in connection with the former executive’s post-employment activities to be provided through September 2003, stock-based compensation expense was recorded in 2003 in the amount of approximately $255,000, which was estimated using the Black-Scholes options pricing model.

In October 2003, pursuant to a settlement agreement with MannKind’s former Chief Executive Officer, options to purchase 250,000 shares of common stock were immediately vested and remain fully exercisable through April 2005. The change in option terms resulted in a new measurement date. On the date of the agreement, the outstanding options had an intrinsic value of approximately $153,000 that was recorded immediately as compensation expense.

In November 2003, pursuant to a settlement agreement with a former employee, options to purchase 15,000 shares of common stock were immediately vested and remain fully exercisable through May 2004. The change in option terms resulted in a new measurement date. On the date of the agreement, the outstanding options had an intrinsic value of approximately $25,000 that was recorded immediately as compensation expense.

During the year ended December 31, 2003, the Company extended the exercise period for certain employee options to purchase 524,566 shares of common stock at an exercise price of $2.08 per share. Also, in February 2003, pursuant to a settlement agreement with a former executive, the Company agreed that options to purchase 373,660 shares of common stock would remain exercisable at least until April 2006 (see Note 12). The Company recorded compensation expense of approximately $2,502,000 in the year ended December 31, 2003 associated with all of these options.

On October 7, 2003, the Company’s board of directors approved a re-pricing program for certain outstanding options to purchase shares of the Company’s common stock granted under each of its stock plans. Under the re-pricing program, each holder of outstanding options granted under the stock plans who was an employee of the Company on November 5, 2003 could elect to exchange up to all of their outstanding options with an exercise price greater than $2.65 for re-priced stock options with an exercise price of $2.65 per share and a term of four years. The option re-pricing became effective on November 5, 2003. Vesting restarted immediately with 50% vesting in November 2004 and the remaining 50% vesting in November 2005. Employees who voluntarily resign in the 12-month period beginning November 5, 2003 will forfeit their re-priced options. Employees who are involuntarily terminated in the 12-month period beginning November 5, 2003 will vest 50% upon termination. In accordance with the terms of the re-pricing program, on November 5, 2003 the Company canceled 2,344,717 outstanding stock options with a weighted average exercise price of $6.61 per share and

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issued, in exchange for the canceled options, 2,344,717 new options with an exercise price of $2.65 per share. Compensation cost for all options re-priced under the re-pricing program will be re-measured, using the intrinsic value method proscribed by APB No. 25, on a quarterly basis until the options are exercised, canceled or expire. Compensation cost for these options are recognized in accordance with the method prescribed by FIN 28. Since the amount of compensation cost attributable to the re-priced options is dependent on the fair value of the Company’s common stock underlying the options on the future re-measurement dates, the amount of stock-based compensation recognized in any given future period cannot be predicted and may have a material impact on the Company’s results of operations. For the year ended December 31, 2003, the Company recorded $595,000 in stock-based compensation expense related to the re-pricing program.

Total stock-based compensation expense recognized in the accompanying statements of operations is as follows (in thousands):

		Year ended December 31,
		2001				2002				2003
Employee related			$1,445				$366				$4,224
Consultant related			120				(14	)			277
Total			$1,565				$352				$4,501

Total stock-based compensation expense recognized in the accompanying statements of operations is included in the following categories (in thousands):

		Year ended December 31,
		2001				2002				2003
Research and development			$562				$602				$961
General and administrative			1,003				(250	)			3,540
Total			$1,565				$352				$4,501

11.	Warrants

Warrants were issued during the years ended December 31, 1995 and 1996 to purchase shares of common stock. As of December 31, 2003, warrants to purchase 130,126 shares of common stock were outstanding and exercisable at a weighted average exercise price of $16.89 per share. The outstanding warrants range in price from $16.60 to $21.79 per share and expire at various dates through 2007.

On March 30, 2001, CTL issued a warrant to its majority stockholder in conjunction with the purchase of the Company’s common stock. Pursuant to the plan of reorganization and agreement of merger between the Company and CTL, the Company assumed an obligation to issue 355,273 shares of its common stock upon the exercise of this warrant. The exercise price of the warrant, as adjusted by the merger, is $7.04 per share of common stock. The warrants remained outstanding as of December 31, 2002 and expired unexercised on March 31, 2003.

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12.	Commitments and contingencies

Operating Leases—The Company leases certain facilities and equipment under various operating leases, which expire at various dates through December 31, 2005. Future minimum rental payments, required under operating leases, are as follows at December 31, 2003 (in thousands):

Year ending December 31,
	2004			$	596
	2005				61
	2006				36
		Total minimum lease payments		$	693

Rent expense under all operating leases for the years ended December 31, 2001, 2002 and 2003, was approximately $849,000, $851,000 and $1,241,195, respectively.

Capital Leases—The Company’s capital leases were not material for the years ended December 31, 2001, 2002 and 2003.

Litigation—The Company is subject to various claims and legal actions that arise in the ordinary course of business. In the opinion of management, the ultimate resolution of such matters will not have a material adverse impact on the Company’s financial position or results of operations.

Guarantees and Indemnifications—The Company, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The Company may terminate the indemnification agreements with its officers and directors upon 90 days written notice, but termination will not affect claims for indemnification relating to events occurring prior to the effective date of termination. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that may enable it to recover a portion of any future amounts paid. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of December 31, 2003.

Severance Agreements—In February 2003, pursuant to a settlement agreement, the Company is obligated to pay a former executive approximately $1,049,000 over three years, comprised of approximately $775,000 in deferred compensation (see Note 8) from prior years and the remainder comprised of other severance-related items. As of December 31, 2003 the Company has paid approximately $451,000 of this amount. An additional $271,000 is due in April 2004, $43,000 is due in September 2004 and the remaining $284,000 is due in April 2005. The settlement agreement further provides that the options held by the former executive to purchase up to 139,755 shares of the Company’s common stock remain fully exercisable through April 2007, and options to purchase up to 373,660 shares of the Company’s common stock remain fully exercisable until at least April 2006. The change in option terms resulted in a new measurement date. On the date of the agreement, the outstanding options had an intrinsic value of approximately $1,091,000, which was immediately expensed as part of the $2,502,000 charge more fully described in Note 10.

In February 2003, pursuant to a settlement agreement, the Company became obligated to pay a former employee his base salary at the rate of approximately $22,000 per month through December 2003,

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and a lump sum payment of $67,000 in February 2005, which is included in accrued expenses in the accompanying balance sheet at December 31, 2003.

In October 2003, under the terms of a severance agreement with its former Chief Executive Officer, the Company paid a severance payment of $165,000 and agreed to pay his base salary at the rate of approximately $28,000 per month through April 2005. The agreement also provides for accelerated vesting of an option held by the former executive permitting him to purchase up to 250,000 shares of the Company’s common stock until April 7, 2005 (see Note 10).

13.	Employee benefit plans

During 1999, CTL established a 401(k) Savings Retirement Plan (the “CTL Retirement Plan”) for CTL. The CTL Retirement Plan covered substantially all full-time employees who met the CTL Retirement Plan’s eligibility requirements and provides for employee elective contributions with a Company-match provision. For the year ended December 31, 2001, the Company contributed $60,000 to the CTL Retirement Plan.

During 2000, AlleCure established a 401(k) Savings Retirement Plan (the “AlleCure Retirement Plan”) for AlleCure. The AlleCure Retirement Plan covered substantially all full-time employees who met the AlleCure Retirement Plan’s eligibility requirements and provided for employee elective contributions with a Company-match provision. For the year ended December 31, 2001, the Company contributed $29,000 to the AlleCure Retirement Plan.

During the year ended December 31, 2002, PDC established a 401(k) Savings Retirement Plan (the “PDC Retirement Plan”) for PDC. Immediately after its establishment, the PDC Retirement Plan, CTL Retirement Plan and AlleCure Retirement Plan were converted to the 401(k) Savings Retirement Plan (the “MannKind Retirement Plan”) for the Company. For the years ended December 31, 2003 and 2002, the Company contributed $235,000 and $224,000, respectively, to the MannKind Retirement Plan.

14.	Income taxes

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. A valuation allowance is established when uncertainty exists as to whether all or a portion of the net deferred tax assets will be

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realized. Components of the net deferred tax asset as of December 31, 2002 and 2003, are approximately as follows (in thousands):

			2002				2003
Deferred Tax Assets:
	Net operating loss carryforwards			$44,962				$66,921
	Research and development credits			3,357				3,494
	Accrued expenses			2,066				7,592
	Start-up costs deduction			12				—
	Non-qualified stock option expense			532				2,442
	Depreciation			(232	)			(416	)
	Total gross deferred tax assets			50,697				80,033
	Valuation allowance			(50,697	)			(80,033	)
Net deferred tax assets				$—				$—

The Company’s effective income tax rate differs from the statutory federal income tax rate as follows for the years ended December 31, 2002 and 2003:

		December 31,
		2002				2003
Federal tax benefit rate			34.0	%			34.0	%
State tax benefit, net of federal benefit			—				—
Permanent items			(24.9	)			(0.1	)
Other			—				1.6
Valuation allowance			(9.1	)			(35.5	)
Effective income tax rate			0.0	%			0.0	%

As required by SFAS No. 109, management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Management has concluded, in accordance with the applicable accounting standards, that it is more likely than not that the Company may not realize the benefit of its deferred tax assets. Accordingly, the deferred tax assets have been fully reserved. Management reevaluates the positive and negative evidence on an annual basis. During the years ended December 31, 2002 and 2003, the change in the valuation allowance was $24,216,000 and $29,336,000, respectively, for income taxes.

At December 31, 2003, the Company had federal and state net operating loss carryforwards of approximately $172,507,000 and $97,008,000 available, respectively, to reduce future taxable income and which will expire at various dates beginning in 2013 through 2023. At December 31, 2003, the Company had research and development credits of $3,494,000 that expire at various dates through 2017. Ownership changes, as defined in the Internal Revenue Code, including those resulting from the issuance of common stock in connection with the Company’s planned initial public offering, may limit the amount of net operating loss and tax credit carryforwards that can be utilized to offset future taxable income or tax liability. The amount of the limitation is determined in accordance with Section 382 of the Internal Revenue Code. Approximately $16,579,000 of the federal and state net operating loss carryforwards is estimated to be limited under Internal Revenue Code Section 382.

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15.	Related party transactions

The Company issued 5,319,703 shares of its common stock to related parties during the year ended December 31, 2002 for proceeds of approximately $27,450,000. The Company issued 9,050,502 shares of its common stock to its majority stockholder during the year ended December 31, 2001 for proceeds of approximately $76,000,000. In connection with certain of these issuances, the board of directors approved the issuance of a warrant to purchase 355,273 shares of the Company’s common stock at $7.04 per share, which expired unexercised on March 31, 2003.

During the years ended December 31, 2001, 2002 and 2003, the Company paid $426,000, $406,000, and $497,000, respectively, to certain universities to conduct sponsored research programs, including clinical research. Certain stockholders of the Company are employees of these universities and oversee the sponsored research programs.

One stockholder was paid $242,000 and $48,000 for consulting services during the years ended December 31, 2002 and 2001, respectively.

In December 2001, the Company’s majority stockholder entered into an agreement with an executive of CTL that permitted the executive to require the majority stockholder to purchase shares of the Company’s stock held by the executive, for a fixed price of approximately $2,949,000 (see Note 6).

From September 2001 to December 2002, the Company leased property located in Sylmar, California from Sylmar Biomedical Park LLC, a company controlled by the Company’s majority stockholder. During the years ended December 31, 2002 and 2003 and for the period from February 14, 1991 (date of inception) to December 31, 2003, approximately $39,000, $20,000 and $59,000, respectively, was expensed to general and administrative in the accompanying statements of operations in connection with the property leased from Sylmar Biomedical Park LLC.

During the year ended December 31, 2002, while he was one of the Company’s directors, MannKind’s former Chief Executive Officer provided the Company with consulting services relating to its research and development programs. The Company paid the executive approximately $124,000 for his services.

In connection with certain meetings of the Company’s board of directors and on other occasions when the Company’s business necessitated air travel for the Company’s majority stockholder and other Company employees, the Company utilized the majority stockholder’s private aircraft and the Company paid the charter company that manages the aircraft on behalf of the Company’s majority stockholder approximately $441,000 and $321,000, respectively, for the years ended December 31, 2002 and 2003.

In 2004, the Company engaged one of its directors to provide consulting services related to seeking potential partners in the development and commercialization of the Company’s technology. As of March 31, 2004, the Company paid approximately $37,000 for consulting services rendered.

The Company has entered into indemnification agreements with each of its directors and executive officers, in addition to the indemnification provided for in its amended and restated certificate of incorporation and amended and restated bylaws (see Note 12—Guarantees and indemnifications).

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16.	Selected quarterly financial data (unaudited)

		Quarter ended
		Mar 31				Jun 30				Sep 30				Dec 31
		(in thousands, except per share data)
2002
Net loss			$(9,985	)			$(12,262	)			$(15,560	)			$(168,458	)
Net loss attributable to common stockholders			$(10,046	)			$(12,913	)			$(15,790	)			$(169,188	)
Basic and diluted net loss per share			$(0.27	)			$(0.35	)			$(0.37	)			$(3.83	)
Weighted average common shares used to compute net loss per share			36,914				37,474				42,971				44,197

		Mar 31				Jun 30				Sep 30				Dec 31
		(in thousands, except per share data)
2003
Net loss			$(20,336	)			$(13,109	)			$(13,870	)			$(18,564	)
Net loss attributable to common stockholders			$(20,396	)			$(14,046	)			$(14,078	)			$(18,629	)
Basic and diluted net loss per share			$(0.41	)			$(0.26	)			$(0.24	)			$(0.31	)
Weighted average common shares used to compute net loss per share			49,398				53,281				59,091				59,924

17.	Subsequent events

On March 23, 2004, the following actions were approved by the stockholders:

	An amendment and restatement of the Company’s 2001 Stock Awards Plan as the 2004 Equity Incentive Plan, which would become effective upon the closing of the IPO.
	The adoption of the 2004 Employee Stock Purchase Plan, which would become effective upon the closing of the IPO.
	The adoption of the 2004 Non-Employee Directors’ Stock Option Plan, which would become effective upon the closing of the IPO.

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Part II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.     Other expenses of issuance and distribution.

The following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by the Registrant in connection with the sale of the common stock being registered. All the amounts shown are estimates except for the SEC registration fee, the NASD filing fee and The Nasdaq National Market listing fee.

			Amount
			to be
Description			paid
SEC registration fee				$10,928
NASD filing fee				9,125
Nasdaq Stock Market Listing Application fee				*
Blue sky qualification fees and expenses				*
Printing and engraving expenses				*
Legal fees and expenses				*
Accounting fees and expenses				*
Transfer agent and registrar fees				*
Miscellaneous				*
	Total			$*

*	To be supplied by amendment.

Item 14.     Indemnification of directors and officers.

We were incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law, or DGCL, generally provides that a Delaware corporation may indemnify any person who is, or is threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may also indemnify any person who is, or is threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful

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on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses which such officer or director has actually and reasonably incurred. The Registrant’s amended and restated certificate of incorporation and amended and restated bylaws provide for the indemnification of directors and officers of the Registrant to the fullest extent permitted under the DGCL.

Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability:

•	for any transaction from which the director derives an improper personal benefit;
•	for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
•	for improper payment of dividends or redemptions of shares; or
•	for any breach of a director’s duty of loyalty to the corporation or its stockholders.

The Registrant’s amended and restated certificate of incorporation and amended and restated bylaws include such a provision. Expenses incurred by any officer or director in defending any such action, suit or proceeding in advance of its final disposition shall be paid by the Registrant upon delivery to the Registrant of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Registrant.

As permitted by Delaware law, the Registrant has entered into indemnity agreements with each of its directors and executive officers that require the Registrant to indemnify such persons against any and all expenses (including attorneys’ fees), witness fees, damages, judgments, fines, settlements and other amounts incurred (including expenses of a derivative action) in connection with any action, suit or proceeding, whether actual or threatened, to which any such person may be made a party by reason of the fact that such person is or was a director, an officer or an employee of the Registrant or any of its affiliated enterprises, provided that such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Registrant and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.

At present, there is no pending litigation or proceeding involving a director, officer or key employee of the Registrant as to which indemnification is being sought, nor is the Registrant aware of any threatened litigation that may result in claims for indemnification by any officer or director of the Registrant.

The Registrant has an insurance policy covering its officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act of 1933, as amended, or otherwise.

In connection with this offering, the Registrant entered into an underwriting agreement which provides that the underwriters are obligated, under some circumstances, to indemnify the Registrant’s directors, officers and controlling persons against specified liabilities, including liabilities under the Securities Act.

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Reference is made to the following documents filed as exhibits to this Registration Statement regarding relevant indemnification provisions described above and elsewhere herein:

Exhibit document		Number
Form of Underwriting Agreement			1.1
Amended and Restated Certificate of Incorporation			3.1
Amended and Restated Bylaws			3.3
Form of Indemnity Agreement			10.1

Item 15.     Recent Sales of Unregistered Securities.

The following list sets forth information regarding all securities sold by us since January 2001. All share amounts have been retroactively adjusted to give effect to a one-for-          reverse stock split of our common stock to be effected before the completion of this offering.

(1)	In June and August 2001 we issued and sold an aggregate of 4,055,728 shares of our common stock to the Alfred E. Mann Living Trust for aggregate consideration of $34 million.
(2)	In December 2001 we issued an aggregate of 267,354 shares of our Series A preferred stock to the Alfred E. Mann Living Trust and McLean Watson Advisory Inc. in exchange for all of the outstanding shares of Series A preferred stock of CTL ImmunoTherapies Corp. in connection with the merger of our wholly-owned subsidiary CTL Merging Corp. with and into CTL ImmunoTherapies Corp. Upon the closing of this offering, these shares will be converted into                      shares of our common stock.
(3)	In December 2001 we issued an aggregate of 192,618 shares of our Series B preferred stock to the Alfred E. Mann Living Trust in exchange for all of the outstanding shares of Series A preferred stock of AlleCure Corp. in connection with the merger of our wholly-owned subsidiary AlleCure Acquisition, Inc. with and into AlleCure Corp. Upon the closing of this offering, these shares will be converted into           shares of our common stock.
(4)	In December 2001, in connection with our acquisition of CTL, we issued 7,514,785 shares of our common stock and 267,354 shares of our Series A preferred stock to former stockholders of CTL. Upon the closing of this offering, these shares of Series A preferred stock will be converted into                      shares of our common stock.
(5)	In December 2001, in connection with our acquisition of AlleCure, we issued 11,091,825 shares of our common stock and 192,618 shares of our Series B preferred stock to former stockholders of AlleCure. Upon the closing of this offering, these shares of Series B preferred stock will be converted into                      shares of our common stock.
(6)	In May 2002 we issued and sold an aggregate of 701,546 shares of our common stock to ten accredited investors for aggregate consideration of $5.9 million.
(7)	In June through December 2002 we issued and sold an aggregate of 11,765,300 shares of our common stock to 93 accredited investors for aggregate consideration of $58 million.
(8)	In May 2003 we issued and sold an aggregate of 8,514,945 shares of our common stock to Biomed Partners and Biomed Partners II for aggregate consideration of $40 million.
(9)	In August 2003 we issued and sold an aggregate of 1,964,638 shares of our common stock to Biomed Partners and Biomed Partners II for aggregate consideration of $10 million.

(10)	In January to March 2004 we issued and sold an aggregate of 980,392 shares of our Series C preferred stock to 38 accredited investors for aggregate consideration of $50 million. Upon the

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	closing of this offering, these shares will be converted into                      shares of our common stock.
(11)	Since January 2001, we have granted options under our MannKind 2004 Equity Incentive Plan to purchase                      shares of common stock (net of expirations and cancellations) to employees, directors and consultants, having exercise prices ranging from $          to $           per share. Of these, options to purchase                      shares of common stock have been exercised for aggregate consideration of $          , at exercise prices ranging from $          to $           per share.

The offers, sales, and issuances of the securities described in paragraphs (1) through (10) were deemed to be exempt from registration under the Securities Act in reliance on Rule 506 of Regulation D in that the issuance of securities to the accredited investors did not involve a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor under Rule 501 of Regulation D.

The offers, sales and issuances of the securities described in paragraph (11) were deemed to be exempt from registration under the Securities Act in reliance on Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of such securities were our employees, directors or bona fide consultants and received the securities under our equity incentive plans. Appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions had adequate access, through employment, business or other relationships, to information about us.

Item 16.     Exhibits and Financial Statement Schedules.

(a)     Exhibits.

Exhibit
number				Description of document
	1.1			Form of Underwriting Agreement.
	3.1			Registrant’s Restated Certificate of Incorporation, as currently in effect.
	3.2			Registrant’s Certificate of Designation, Preferences and Rights of Series A Preferred Stock, as currently in effect.
	3.3			Registrant’s Certificate of Designation, Preferences and Rights of Series B Preferred Stock, as currently in effect.
	3.4			Registrant’s Certificate of Designation, Preferences and Rights of Series C Preferred Stock, as currently in effect.
	3.5			Form of Registrant’s Amended and Restated Certificate of Incorporation, to be effective upon completion of the offering.
	3.6			Amended and Restated By-Laws, as currently in effect.
	3.7			Form of Registrant’s Amended and Restated Bylaws, to be effective upon completion of the offering.
	4.1†			Form of Common Stock Certificate.
	4.2			Registration Rights Agreement made and entered into as of October 15, 1998 by and among CTL ImmunoTherapies Corp., Medical Research Group, LLC, McLean Watson Advisory Inc. and Alfred E. Mann, as amended.
	5.1†			Opinion of Cooley Godward LLP.
	10.1+			Form of Indemnity Agreement entered into between the Registrant and its directors and officers.
	10.2+			2004 Equity Incentive Plan and Form of Stock Option Agreement thereunder.

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Exhibit
number				Description of document
	10.3+			2004 Non-Employee Directors’ Stock Option Plan and Form of Stock Option Agreement thereunder.
	10.4+			2004 Employee Stock Purchase Plan and Form of Offering Document thereunder.
	10.5+			Executive Severance Agreement, dated August 1, 2003, between the Registrant and Wendell Cheatham.
	10.6+			Executive Severance Agreement, dated August 1, 2003, between the Registrant and Hakan Edstrom.
	10.7+			Executive Severance Agreement, dated August 1, 2003, between the Registrant and David Thomson.
	10.8+			Executive Severance Agreement, dated August 1, 2003, between the Registrant and Dick Anderson.
	10.9+			Executive Severance Agreement, dated August 1, 2003, between the Registrant and Dan Burns.
	10.10+			Change of Control Agreement, dated August 1, 2003, between the Registrant and Wendell Cheatham.
	10.11+			Change of Control Agreement, dated August 1, 2003, between the Registrant and Hakan Edstrom.
	10.12+			Change of Control Agreement, dated August 1, 2003, between the Registrant and David Thomson.
	10.13+			Change of Control Agreement, dated August 1, 2003, between the Registrant and Dick Anderson.
	10.14+			Change of Control Agreement, dated August 1, 2003, between the Registrant and Dan Burns.
	10.15*			Supply Agreement made on January 1, 2000 by and between Diosynth B.V. and Pharmaceutical Discovery Corporation.
	21.1			Subsidiary of the Registrant.
	23.1			Consent of Deloitte & Touche LLP, Independent Auditors.
	23.2			Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
	24.1			Power of Attorney. Reference is made to the signature page.

†	To be filed by amendment.

+	Indicates management contract or compensatory plan.
*	Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

(b)     Financial Statement Schedules.

All schedules are omitted because they are not required, are not applicable or the information is included in the financial statements or notes thereto.

Item 17.     Undertakings.

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the

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event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1)	For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)	For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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Signatures

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Valencia, State of California, on the 30th day of April, 2004.

	MANNKIND CORPORATION

	By:	/s/ ALFRED E. MANN

	Alfred E. Mann
	Chief Executive Officer and Chairman
	KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Hakan S. Edstrom, Richard L. Anderson and David Thomson, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments to this Registration Statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney may be signed in several counterparts.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature		Title		Date
/s/ ALFRED E. MANN Alfred E. Mann		Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)		April 30, 2004
/s/ HAKAN S. EDSTROM Hakan S. Edstrom		President, Chief Operating Officer and Director		April 30, 2004
/s/ RICHARD L. ANDERSON Richard L. Anderson		Corporate Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)		April 30, 2004
/s/ KATHLEEN CONNELL, PH.D. Kathleen Connell, Ph.D.		Director		April 30, 2004

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Signature		Title		Date
/s/ RONALD CONSIGLIO Ronald Consiglio		Director		April 30, 2004
/s/ LLEW KELTNER M.D., PH.D. Llew Keltner M.D., Ph.D.		Director		April 30, 2004
/s/ MICHAEL FRIEDMAN, M.D. Michael Friedman, M.D.		Director		April 30, 2004

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Exhibit Index

Exhibit
number				Description of document
	1.1			Form of Underwriting Agreement.
	3.1			Registrant’s Restated Certificate of Incorporation, as currently in effect.
	3.2			Registrant’s Certificate of Designation, Preferences and Rights of Series A Preferred Stock, as currently in effect.
	3.3			Registrant’s Certificate of Designation, Preferences and Rights of Series B Preferred Stock, as currently in effect.
	3.4			Registrant’s Certificate of Designation, Preferences and Rights of Series C Preferred Stock, as currently in effect.
	3.5			Form of Registrant’s Amended and Restated Certificate of Incorporation, to be effective upon completion of the offering.
	3.6			Amended and Restated By-Laws, as currently in effect.
	3.7			Form of Registrant’s Amended and Restated Bylaws, to be effective upon completion of the offering.
	4.1†			Form of Common Stock Certificate.
	4.2			Registration Rights Agreement made and entered into as of October 15, 1998 by and among CTL ImmunoTherapies Corp., Medical Research Group, LLC, McLean Watson Advisory Inc. and Alfred E. Mann, as amended.
	5.1†			Opinion of Cooley Godward LLP.
	10.1+			Form of Indemnity Agreement entered into between the Registrant and its directors and officers.
	10.2+			2004 Equity Incentive Plan and Form of Stock Option Agreement thereunder.
	10.3+			2004 Non-Employee Directors’ Stock Option Plan and Form of Stock Option Agreement thereunder.
	10.4+			2004 Employee Stock Purchase Plan and Form of Offering Document thereunder.
	10.5+			Executive Severance Agreement, dated August 1, 2003, between the Registrant and Wendell Cheatham.
	10.6+			Executive Severance Agreement, dated August 1, 2003, between the Registrant and Hakan Edstrom.
	10.7+			Executive Severance Agreement, dated August 1, 2003, between the Registrant and David Thomson.
	10.8+			Executive Severance Agreement, dated August 1, 2003, between the Registrant and Dick Anderson.
	10.9+			Executive Severance Agreement, dated August 1, 2003, between the Registrant and Dan Burns.
	10.10+			Change of Control Agreement, dated August 1, 2003, between the Registrant and Wendell Cheatham.
	10.11+			Change of Control Agreement, dated August 1, 2003, between the Registrant and Hakan Edstrom.
	10.12+			Change of Control Agreement, dated August 1, 2003, between the Registrant and David Thomson.
	10.13+			Change of Control Agreement, dated August 1, 2003, between the Registrant and Dick Anderson.
	10.14+			Change of Control Agreement, dated August 1, 2003, between the Registrant and Dan Burns
	10.15*			Supply Agreement made on January 1, 2000 by and between Diosynth B.V. and Pharmaceutical Discovery Corporation.
	21.1			Subsidiary of the Registrant.

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Exhibit
number				Description of document
	23.1			Consent of Deloitte & Touche LLP, Independent Auditors.
	23.2			Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
	24.1			Power of Attorney. Reference is made to the signature page.

	†		To be filed by amendment.
	+		Indicates management contract or compensatory plan.
	*		Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

                                                                     EXHIBIT 1.1

                              MannKind Corporation

                              _____________ Shares

                                  Common Stock

                           ($0.01 par value per Share)

                             Underwriting Agreement

_________, 2004

                                                                     EXHIBIT 1.1

                             UNDERWRITING AGREEMENT

                                                           _______________, 2004

UBS Securities LLC
Piper Jaffray & Co.
Wachovia Capital Markets, LLC
Jefferies & Company, Inc.
Harris Nesbitt Corp.
   as Managing Underwriters

c/o UBS Securities LLC
299 Park Avenue
New York, New York 10171-0026

Ladies and Gentlemen:

         MannKind Corporation, a Delaware corporation (the "Company"), proposes
to issue and sell to the underwriters named in Schedule A annexed hereto (the
"Underwriters"), for whom you are acting as representatives, an aggregate of
_________ shares (the "Firm Shares") of Common Stock, $0.01 par value per share
(the "Common Stock"), of the Company. In addition, solely for the purpose of
covering over-allotments, the Company proposes to grant to the Underwriters the
option to purchase from the Company up to an additional __________ shares of
Common Stock (the "Additional Shares"). The Firm Shares and the Additional
Shares are hereinafter collectively sometimes referred to as the "Shares." The
Shares are described in the Prospectus which is referred to below.

         The Company hereby acknowledges that, in connection with the proposed
offering of the Shares, it has requested UBS Financial Services Inc.
("UBS-FinSvc") to administer a directed share program (the "Directed Share
Program") under which up to ___________ Firm Shares, or __% of the Firm Shares
to be purchased by the Underwriters (the "Reserved Shares"), shall be reserved
for sale by UBS-FinSvc at the initial public offering price to the Company's
officers, directors, employees and consultants and other persons having a
relationship with the Company as designated by the Company (the "Directed Share
Participants") as part of the distribution of the Shares by the Underwriters,
subject to the terms of this Agreement, the applicable rules, regulations and
interpretations of the National Association of Securities Dealers, Inc. ("NASD")
and all other applicable laws, rules and regulations. The number of Shares
available for sale to the general public will be reduced to the extent that
Directed Share Participants purchase Reserved Shares. The Underwriters may offer
any Reserved Shares not purchased by Directed Share Participants to the general
public on the same basis as the other Shares being issued and sold hereunder.
Without limiting the generality of the foregoing, any Reserved Shares not orally
confirmed for purchase by any Directed Share Participants by the end of the
business day immediately following the date hereof shall be deemed not to be
purchased by Directed Share Participants and may be offered by the Underwriters
to the general public on the same basis as the other Shares being issued and
sold hereunder. The Company has supplied UBS-FinSvc with the names, addresses
and telephone numbers of the individuals or other entities which the Company has
designated to be participants

in the Directed Share Program. It is understood that any number of those so
designated to participate in the Directed Share Program may decline to do so.

         The Company has filed, in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively, the "Act"), with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (File No. 333-________),
including a prospectus, relating to the Shares. The Company has furnished to
you, for use by the Underwriters and by dealers, copies of one or more
preliminary prospectuses (each such preliminary prospectus being herein called a
"Preliminary Prospectus") relating to the Shares. Except where the context
otherwise requires, the registration statement, as amended when it became or
becomes effective, including all documents filed as a part thereof, and
including any information contained in a prospectus subsequently filed with the
Commission pursuant to Rule 424(b) under the Act and deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act and also including any registration statement filed pursuant to Rule
462(b) under the Act, is herein called the "Registration Statement," and the
prospectus in the form filed by the Company with the Commission pursuant to Rule
424(b) under the Act on or before the second business day after the date hereof
(or such earlier time as may be required under the Act), or, if no such filing
is required, the form of final prospectus included in the Registration Statement
at the time it became effective, is herein called the "Prospectus." As used
herein, "business day" shall mean a day on which the New York Stock Exchange is
open for trading.

         The Company and the Underwriters agree as follows:

         1. Sale and Purchase. Upon the basis of the representations and
warranties and subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to the respective Underwriters and each of the
Underwriters, severally and not jointly, agrees to purchase from the Company the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule A attached hereto, subject to adjustment in accordance with Section 8
hereof, in each case at a purchase price of $____ per Share. The Company is
advised by you that the Underwriters intend (i) to make a public offering of
their respective portions of the Firm Shares as soon after the effective date of
the Registration Statement as in your judgment is advisable and (ii) initially
to offer the Firm Shares upon the terms set forth in the Prospectus. You may
from time to time increase or decrease the public offering price after the
initial public offering to such extent as you may determine.

         In addition, the Company hereby grants to the several Underwriters the
option to purchase, and upon the basis of the representations and warranties and
subject to the terms and conditions herein set forth, the Underwriters shall
have the right to purchase, severally and not jointly, from the Company, ratably
in accordance with the number of Firm Shares to be purchased by each of them,
all or a portion of the Additional Shares as may be necessary to cover
over-allotments made in connection with the offering of the Firm Shares, at the
same purchase price per share to be paid by the Underwriters to the Company for
the Firm Shares. This option may be exercised by UBS Securities LLC ("UBS") on
behalf of the several Underwriters at any time and from time to time on or
before the thirtieth day following the date of the Prospectus, by written notice
to the Company. Such notice shall set forth the aggregate number of Additional
Shares as to which the option is being exercised and the date and time



                                     - 2 -

when the Additional Shares are to be delivered (such date and time being herein
referred to as the "additional time of purchase"); provided, however, that the
additional time of purchase shall not be earlier than the time of purchase (as
defined below) nor earlier than the second business day after the date on which
the option shall have been exercised nor later than the tenth business day after
the date on which the option shall have been exercised. The number of Additional
Shares to be sold to each Underwriter shall be the number which bears the same
proportion to the aggregate number of Additional Shares being purchased as the
number of Firm Shares set forth opposite the name of such Underwriter on
Schedule A hereto bears to the total number of Firm Shares (subject, in each
case, to such adjustment as you may determine to eliminate fractional shares),
subject to adjustment in accordance with Section 8 hereof.

         2. Payment and Delivery. Payment of the purchase price for the Firm
Shares shall be made to the Company by Federal Funds wire transfer against
delivery of the certificates for the Firm Shares to you through the facilities
of The Depository Trust Company ("DTC") for the respective accounts of the
Underwriters. Such payment and delivery shall be made at 10:00 A.M., New York
City time, on _________, 2004 (unless another time shall be agreed to by you and
the Company or unless postponed in accordance with the provisions of Section 8
hereof). The time at which such payment and delivery are to be made is
hereinafter sometimes called "the time of purchase." Electronic transfer of the
Firm Shares shall be made to you at the time of purchase in such names and in
such denominations as you shall specify.

         Payment of the purchase price for the Additional Shares shall be made
at the additional time of purchase in the same manner and at the same office as
the payment for the Firm Shares. Electronic transfer of the Additional Shares
shall be made to you at the additional time of purchase in such names and in
such denominations as you shall specify.

         Deliveries of the documents described in Section 6 hereof with respect
to the purchase of the Shares shall be made at the offices of Dewey Ballantine
LLP at 1301 Avenue of the Americas, New York, New York 10019, at 9:00 A.M., New
York City time, on the date of the closing of the purchase of the Firm Shares or
the Additional Shares, as the case may be.

         3. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters that:

                  (a) the Registration Statement has been declared effective
         under the Act; no stop order of the Commission preventing or suspending
         the use of any Preliminary Prospectus or the effectiveness of the
         Registration Statement has been issued and no proceedings for such
         purpose have been instituted or, to the Company's knowledge after due
         inquiry, are contemplated by the Commission; each Preliminary
         Prospectus, at the time of filing thereof, complied with the
         requirements of the Act, and the last Preliminary Prospectus
         distributed in connection with the offering of the Shares did not, as
         of its date, and does not contain an untrue statement of a material
         fact or omit to state a material fact required to be stated therein or
         necessary to make the statements therein, in light of the circumstances
         under which they were made, not misleading; the Registration Statement
         complied when it became effective, complies and, at the time of
         purchase, any additional time of purchase and any time at which any
         sales with respect to which the Prospectus is delivered, will comply
         with the requirements of the Act, and the



                                     - 3 -

         Prospectus will comply, as of its date and at the time of purchase and
         any additional times of purchase, with the requirements of the Act, and
         any statutes, regulations, contracts or other documents that are
         required to be described in the Registration Statement or the
         Prospectus or to be filed as exhibits to the Registration Statement
         have been and will be so described or filed; the conditions to the use
         of Form S-1 have been satisfied; the Registration Statement did not
         when it became effective, does not and, at the time of purchase, any
         additional time of purchase and any time at which any sales with
         respect to which the Prospectus is delivered, will not contain an
         untrue statement of a material fact or omit to state a material fact
         required to be stated therein or necessary to make the statements
         therein not misleading, and the Prospectus will not, as of its date and
         at the time of purchase, any additional time of purchase and any time
         at which any sales with respect to which the Prospectus is delivered,
         contain an untrue statement of a material fact or omit to state a
         material fact required to be stated therein or necessary to make the
         statements therein, in light of the circumstances under which they were
         made, not misleading; provided, however, that the Company makes no
         warranty or representation with respect to any statement contained in
         the last Preliminary Prospectus, the Registration Statement or the
         Prospectus in reliance upon and in conformity with information
         concerning an Underwriter and furnished in writing by or on behalf of
         such Underwriter through you to the Company expressly for use in the
         last Preliminary Prospectus, the Registration Statement or the
         Prospectus; and the Company has not distributed and will not distribute
         any "prospectus" (within the meaning of the Act) or offering material
         in connection with the offering or sale of the Shares other than the
         Registration Statement, the then most recent Preliminary Prospectus and
         the Prospectus;

                  (b) as of the date of this Agreement, the Company has an
         authorized and outstanding capitalization as set forth in the section
         of the Registration Statement and the Prospectus entitled
         "Capitalization" and "Description of capital stock," and, as of the
         time of purchase and the additional time of purchase, as the case may
         be, the Company shall have an authorized and outstanding capitalization
         as set forth in the section of the Registration Statement and the
         Prospectus entitled "Capitalization" and "Description of capital
         stock," (subject, in each case, to the issuance of shares of Common
         Stock upon exercise of stock options and warrants disclosed as
         outstanding in the Registration Statement and the Prospectus and the
         grant of options under existing stock option plans described in the
         Registration Statement and the Prospectus); all of the issued and
         outstanding shares of capital stock, including the Common Stock, of the
         Company have been duly authorized and validly issued and are fully paid
         and non-assessable, have been issued in compliance with all federal and
         state securities laws and were not issued in violation of any
         preemptive right, resale right, right of first refusal or similar
         right; prior to the time of purchase, all outstanding shares of the
         Company's Series A Preferred Stock, $0.01 par value per share, and
         Series B Preferred Stock, $0.01 par value per share, and Series C
         Preferred Stock, $0.01 par value per share, shall convert into the
         number of shares of Common Stock, and shall convert in the manner, set
         forth in the Registration Statement and the Prospectus; and, as of the
         date of this Agreement, the Company has effected and completed a
         1-for-__ reverse stock split of the Common Stock in the manner set
         forth in the Registration Statement and the Prospectus;

                  (c) the Company has been duly incorporated and is validly
         existing as



                                     - 4 -

         a corporation in good standing under the laws of the State of Delaware,
         with full corporate power and authority to own, lease and operate its
         properties and conduct its business as described in the Registration
         Statement and the Prospectus, to execute and deliver this Agreement and
         to issue, sell and deliver the Shares as contemplated herein;

                  (d) the Company is duly qualified to do business as a foreign
         corporation and is in good standing in each jurisdiction where the
         ownership or leasing of its properties or the conduct of its business
         requires such qualification, except where the failure to be so
         qualified and in good standing would not, individually or in the
         aggregate, have a material adverse effect on the business, properties,
         financial condition, results of operation or prospects of the Company
         and the Subsidiary (as hereinafter defined) taken as a whole (a
         "Material Adverse Effect");

                  (e) the Company has no subsidiaries (as defined under the Act)
         other than Pharmaceutical Discovery Corporation (the "Subsidiary"); the
         Company owns all of the issued and outstanding capital stock of the
         Subsidiary; other than the capital stock of the Subsidiary, the Company
         does not own, directly or indirectly, any shares of stock or any other
         equity or long-term debt securities of any corporation or have any
         equity interest in any firm, partnership, joint venture, association or
         other entity; complete and correct copies of the certificates of
         incorporation and the bylaws of the Company and the Subsidiary and all
         amendments thereto have been delivered to you, and, except as set forth
         in the exhibits to the Registration Statement, no changes therein will
         be made on or after the date hereof or on or before the time of
         purchase or, if later, the additional time of purchase; the Subsidiary
         has been duly incorporated and is validly existing as a corporation in
         good standing under the laws of the jurisdiction of its incorporation,
         with full corporate power and authority to own, lease and operate its
         properties and to conduct its business as described in the Registration
         Statement and the Prospectus; the Subsidiary is duly qualified to do
         business as a foreign corporation and is in good standing in each
         jurisdiction where the ownership or leasing of its properties or the
         conduct of its business requires such qualification, except where the
         failure to be so qualified and in good standing would not, individually
         or in the aggregate, have a Material Adverse Effect; all of the
         outstanding shares of capital stock of the Subsidiary have been duly
         authorized and validly issued, are fully paid and non-assessable and
         are owned by the Company subject to no security interest, other
         encumbrance or adverse claims; no options, warrants or other rights to
         purchase, agreements or other obligations to issue or other rights to
         convert any obligation into shares of capital stock or ownership
         interests in the Subsidiary are outstanding; and the Company has no
         "significant subsidiary," as that term is defined in Rule 1-02(w) of
         Regulation S-X under the Act, and the Subsidiary would not constitute a
         "significant subsidiary" of the Company;

                  (f) the Shares have been duly and validly authorized and, when
         issued and delivered against payment therefor as provided herein, will
         be duly and validly issued, fully paid and non-assessable and free of
         statutory and contractual preemptive rights, resale rights, rights of
         first refusal and similar rights;

                  (g) the capital stock of the Company, including the Shares,
         conforms to the description thereof contained in the Registration
         Statement and the Prospectus, and



                                     - 5 -

         the certificates for the Shares are in due and proper form and the
         holders of the Shares will not be subject to personal liability by
         reason of being such holders;

                  (h) this Agreement has been duly authorized, executed and
         delivered by the Company;

                  (i) neither the Company nor the Subsidiary is in breach or
         violation of or in default under (nor has any event occurred which with
         notice, lapse of time or both would result in any breach or violation
         of, constitute a default under or give the holder of any indebtedness
         (or a person acting on such holder's behalf) the right to require the
         repurchase, redemption or repayment of all or a part of such
         indebtedness under) its respective charter or bylaws, or any indenture,
         mortgage, deed of trust, bank loan or credit agreement or other
         evidence of indebtedness, or any license, lease, contract or other
         agreement or instrument to which the Company or the Subsidiary is a
         party or by which any of them or any of their properties may be bound
         or affected, and the execution, delivery and performance of this
         Agreement, the issuance and sale of the Shares and the consummation of
         the transactions contemplated hereby will not conflict with, result in
         any breach or violation of or constitute a default under (nor
         constitute any event which with notice, lapse of time or both would
         result in any breach or violation of or constitute a default under) the
         charter or bylaws of the Company or the Subsidiary, or any indenture,
         mortgage, deed of trust, bank loan or credit agreement or other
         evidence of indebtedness, or any license, lease, contract or other
         agreement or instrument to which the Company or the Subsidiary is a
         party or by which any of them or any of their respective properties may
         be bound or affected, or any federal, state, local or foreign law,
         regulation or rule or any decree, judgment or order applicable to the
         Company or the Subsidiary;

                  (j) no approval, authorization, consent or order of or filing
         with any federal, state, local or foreign governmental or regulatory
         commission, board, body, authority or agency, or of or with the
         National Association of Securities Dealers Automated Quotation National
         Market System ("NASDAQ"), or approval of the shareholders of the
         Company, is required in connection with the issuance and sale of the
         Shares or the consummation by the Company of the transactions
         contemplated hereby other than registration of the Shares under the
         Act, which has been effected, and any necessary qualification under the
         securities or blue sky laws of the various jurisdictions in which the
         Shares are being offered by the Underwriters or under the rules and
         regulations of the National Association of Securities Dealers, Inc.
         ("NASD");

                  (k) except as expressly set forth in the Registration
         Statement and the Prospectus, (i) no person has the right, contractual
         or otherwise, to cause the Company to issue or sell to it any shares of
         Common Stock or shares of any other capital stock or other equity
         interests of the Company, (ii) no person has any preemptive rights,
         resale rights, rights of first refusal or other rights to purchase any
         shares of Common Stock or shares of any other capital stock of or other
         equity interests in the Company and (iii) no person has the right to
         act as an underwriter or as a financial advisor to the Company in
         connection with the offer and sale of the Shares, in the case of each
         of the foregoing clauses (i), (ii) and (iii), whether as a result of
         the filing or effectiveness of the Registration Statement or the sale
         of the Shares as contemplated thereby or otherwise; no



                                     - 6 -

         person has the right, contractual or otherwise, to cause the Company to
         register under the Act any shares of Common Stock or shares of any
         other capital stock of or other equity interests in the Company, or to
         include any such shares or interests in the Registration Statement or
         the offering contemplated thereby, whether as a result of the filing or
         effectiveness of the Registration Statement or the sale of the Shares
         as contemplated thereby or otherwise;

                  (l) each of the Company and the Subsidiary has all necessary
         licenses, authorizations, consents and approvals and has made all
         necessary filings required under any federal, state, local or foreign
         law, regulation or rule, and has obtained all necessary licenses,
         authorizations, consents and approvals from other persons, in order to
         conduct its respective business; neither the Company nor the Subsidiary
         is in violation of, or in default under, or has received notice of any
         proceedings relating to revocation or modification of, any such
         license, authorization, consent or approval or any federal, state,
         local or foreign law, regulation or rule or any decree, order or
         judgment applicable to the Company or the Subsidiary, except where such
         violation, default, revocation or modification would not, individually
         or in the aggregate, have a Material Adverse Effect;

                  (m) all legal or governmental proceedings, affiliate
         transactions, off-balance sheet transactions (including, without
         limitation, transactions related to, and the existence of, "variable
         interest entities" within the meaning of Financial Accounting Standards
         Board Interpretation No. 46), contracts, licenses, agreements, leases
         or documents of a character required to be described in the
         Registration Statement or the Prospectus or to be filed as an exhibit
         to the Registration Statement have been so described or filed as
         required;

                  (n) there are no actions, suits, claims, investigations or
         proceedings pending or threatened or contemplated to which the Company
         or the Subsidiary or any of their respective directors or officers is
         or would be a party or of which any of their respective properties is
         or would be subject at law or in equity, before or by any federal,
         state, local or foreign governmental or regulatory commission, board,
         body, authority or agency, except any such action, suit, claim,
         investigation or proceeding which would not result in a judgment,
         decree or order having, individually or in the aggregate, a Material
         Adverse Effect or preventing consummation of the transactions
         contemplated hereby;

                  (o) each of Deloitte & Touche LLP and BDO Seidman, LLP, whose
         report on the consolidated financial statements of the Company and the
         Subsidiary is included the Registration Statement and the Prospectus,
         are independent public accountants as required by the Act and by Rule
         3600T of the Public Company Accounting Oversight Board;

                  (p) the financial statements included in the Registration
         Statement and the Prospectus, together with the related notes and
         schedules, present fairly the consolidated financial position of the
         Company and the Subsidiary as of the dates indicated and the
         consolidated results of operations and cash flows of the Company and
         the Subsidiary for the periods specified and have been prepared in
         compliance with the requirements of the Act and in conformity with
         generally accepted accounting principles



                                     - 7 -

         applied on a consistent basis during the periods involved; any pro
         forma financial statements or data included in the Registration
         Statement and the Prospectus comply with the requirements of Regulation
         S-X of the Act, including, without limitation, Article 11 thereof, and
         the assumptions used in the preparation of such pro forma financial
         statements and data are reasonable, the pro forma adjustments used
         therein are appropriate to give effect to the transactions or
         circumstances described therein and the pro forma adjustments have been
         properly applied to the historical amounts in the compilation of those
         statements and data; the other financial and statistical data set forth
         in the Registration Statement and the Prospectus are accurately
         presented and prepared on a basis consistent with the financial
         statements and books and records of the Company; there are no financial
         statements (historical or pro forma) that are required to be included
         in the Registration Statement and the Prospectus (including, without
         limitation, as required by Rules 3-12 or 3-05 or Article 11 of
         Regulation S-X under the Act) that are not included as required; the
         Company and the Subsidiary do not have any material liabilities or
         obligations, direct or contingent (including any off-balance sheet
         obligations or any "variable interest entities" within the meaning of
         Financial Accounting Standards Board Interpretation No. 46), not
         disclosed in the Registration Statement and the Prospectus; and all
         disclosures contained in the Registration Statement or the Prospectus
         regarding "non-GAAP financial measures" (as such term is defined by the
         rules and regulations of the Commission) comply with Regulation G of
         the Securities Exchange Act of 1934, as amended, and the rules and
         regulations thereunder (collectively, the "Exchange Act") and Item 10
         of Regulation S-K under the Act, to the extent applicable;

                  (q) subsequent to the respective dates as of which information
         is given in the Registration Statement and the Prospectus, there has
         not been (i) any material adverse change, or any development involving
         a prospective material adverse change, in the business, properties,
         management, financial condition or results of operations of the Company
         and the Subsidiary taken as a whole, (ii) any transaction which is
         material to the Company and the Subsidiary taken as a whole, (iii) any
         obligation, direct or contingent (including any off-balance sheet
         obligations), incurred by the Company or the Subsidiary, which is
         material to the Company and the Subsidiary taken as a whole, (iv) any
         change in the capital stock or outstanding indebtedness of the Company
         or the Subsidiary or (v) any dividend or distribution of any kind
         declared, paid or made on the capital stock of the Company;

                  (r) the Company has obtained for the benefit of the
         Underwriters the agreement (a "Lock-Up Agreement"), in the form set
         forth as Exhibit A hereto, of each of its directors and officers and
         each holder of shares of Common Stock or any security convertible into
         or exercisable or exchangeable for Common Stock or any warrant or other
         right to purchase Common Stock or any such security;

                  (s) the Company is not and, after giving effect to the
         offering and sale of the Shares, will not be an "investment company" or
         an entity "controlled" by an "investment company," as such terms are
         defined in the Investment Company Act of 1940, as amended (the
         "Investment Company Act");

                  (t) the Company is not and, after giving effect to the
         offering and sale



                                     - 8 -

         of the Shares, will not be a "holding company" or a "subsidiary
         company" of a "holding company" or an "affiliate" of a "holding
         company" or of a "subsidiary company," as such terms are defined in the
         Public Utility Holding Company Act of 1935, as amended (the "Public
         Utility Holding Company Act");

                  (u) the Company and the Subsidiary have good and marketable
         title to all property (real and personal) described the Registration
         Statement or in the Prospectus as being owned by each of them, free and
         clear of all liens, claims, security interests or other encumbrances;
         all the property described in the Registration Statement and the
         Prospectus as being held under lease by the Company or a Subsidiary is
         held thereby under valid, subsisting and enforceable leases;

                  (v) the Company and the Subsidiary own, or have obtained valid
         and enforceable licenses for, or other rights to use, the inventions,
         patent applications, patents, trademarks (both registered and
         unregistered), tradenames, service names, copyrights, trade secrets and
         other proprietary information described in the Registration Statement
         or the Prospectus as being owned or licensed by them or which are
         necessary for the conduct of their respective businesses, except where
         the failure to own, license or have such rights would not, individually
         or in the aggregate, have a Material Adverse Effect (collectively,
         "Intellectual Property"); (i) there are no third parties who have or,
         to the Company's knowledge after due inquiry, will be able to establish
         rights to any Intellectual Property, except for the ownership rights of
         the owners of the Intellectual Property which is licensed to the
         Company; (ii) there is no infringement by third parties of any
         Intellectual Property; (iii) there is no pending or threatened action,
         suit, proceeding or claim by others challenging the Company's rights in
         or to any Intellectual Property, and the Company is unaware of any
         facts which could form a reasonable basis for any such action, suit,
         proceeding or claim; (iv) there is no pending or threatened action,
         suit, proceeding or claim by others challenging the validity or scope
         of any Intellectual Property, and the Company is unaware of any facts
         which could form a reasonable basis for any such action, suit,
         proceeding or claim; (v) there is no pending or threatened action,
         suit, proceeding or claim by others that the Company or the Subsidiary
         infringes or otherwise violates any patent, trademark, tradename,
         service name, copyright, trade secret or other proprietary rights of
         others, and the Company is unaware of any facts which could form a
         reasonable basis for any such action, suit, proceeding or claim; (vi)
         there is no patent or patent application that contains claims that
         interfere with the issued or pending claims of any of the Intellectual
         Property; and (vii) there is no prior art that may render any patent
         application owned by the Company or the Subsidiary of the Intellectual
         Property unpatentable that has not been disclosed to the U.S. Patent
         and Trademark Office;

                  (w) neither the Company nor the Subsidiary is engaged in any
         unfair labor practice; except for matters which would not, individually
         or in the aggregate, have a Material Adverse Effect, (i) there is (A)
         no unfair labor practice complaint pending or, to the Company's
         knowledge after due inquiry, threatened against the Company or the
         Subsidiary before the National Labor Relations Board, and no grievance
         or arbitration proceeding arising out of or under collective bargaining
         agreements is pending or threatened, (B) no strike, labor dispute,
         slowdown or stoppage pending or, to the



                                     - 9 -

         Company's knowledge after due inquiry, threatened against the Company
         or the Subsidiary and (C) no union representation dispute currently
         existing concerning the employees of the Company or the Subsidiary, and
         (ii) to the Company's knowledge after due inquiry, (A) no union
         organizing activities are currently taking place concerning the
         employees of the Company or the Subsidiary and (B) there has been no
         violation of any federal, state, local or foreign law relating to
         discrimination in the hiring, promotion or pay of employees, any
         applicable wage or hour laws or any provision of the Employee
         Retirement Income Security Act of 1974 ("ERISA") or the rules and
         regulations promulgated thereunder concerning the employees of the
         Company or the Subsidiary;

                  (x) the Company and the Subsidiary and their properties,
         assets and operations are in compliance with, and hold all permits,
         authorizations and approvals required under, Environmental Laws (as
         defined below), except to the extent that failure to so comply or to
         hold such permits, authorizations or approvals would not, individually
         or in the aggregate, have a Material Adverse Effect; there are no past,
         present or, to the Company's knowledge after due inquiry, reasonably
         anticipated future events, conditions, circumstances, activities,
         practices, actions, omissions or plans that could reasonably be
         expected to give rise to any material costs or liabilities to the
         Company or the Subsidiary under, or to interfere with or prevent
         compliance by the Company or the Subsidiary with, Environmental Laws;
         except as would not, individually or in the aggregate, have a Material
         Adverse Effect, neither the Company nor the Subsidiary (i) is the
         subject of any investigation, (ii) has received any notice or claim,
         (iii) is a party to or affected by any pending or threatened action,
         suit or proceeding, (iv) is bound by any judgment, decree or order or
         (v) has entered into any agreement, in each case relating to any
         alleged violation of any Environmental Law or any actual or alleged
         release or threatened release or cleanup at any location of any
         Hazardous Materials (as defined below) (as used herein, "Environmental
         Law" means any federal, state, local or foreign law, statute,
         ordinance, rule, regulation, order, decree, judgment, injunction,
         permit, license, authorization or other binding requirement, or common
         law, relating to health, safety or the protection, cleanup or
         restoration of the environment or natural resources, including those
         relating to the distribution, processing, generation, treatment,
         storage, disposal, transportation, other handling or release or
         threatened release of Hazardous Materials, and "Hazardous Materials"
         means any material (including, without limitation, pollutants,
         contaminants, hazardous or toxic substances or wastes) that is
         regulated by or may give rise to liability under any Environmental
         Law);

                  (y) in the ordinary course of its business, each of the
         Company and the Subsidiary conducts a periodic review of the effect of
         the Environmental Laws on its business, operations and properties, in
         the course of which it identifies and evaluates associated costs and
         liabilities (including, without limitation, any capital or operating
         expenditures required for cleanup, closure of properties or compliance
         with the Environmental Laws or any permit, license or approval, any
         related constraints on operating activities and any potential
         liabilities to third parties);

                  (z) all tax returns required to be filed by the Company and
         the Subsidiary have been filed, and all taxes and other assessments of
         a similar nature (whether imposed directly or through withholding)
         including any interest, additions to tax



                                     - 10 -

         or penalties applicable thereto due or claimed to be due from such
         entities have been paid, other than those being contested in good faith
         and for which adequate reserves have been provided;

                  (aa) each of the Company and the Subsidiary maintains
         insurance covering its properties, operations, personnel and businesses
         as the Company deems adequate; such insurance insures against such
         losses and risks to an extent which is adequate in accordance with
         customary industry practice to protect the Company and the Subsidiary
         and their businesses; all such insurance is fully in force on the date
         hereof and will be fully in force at the time of purchase and any
         additional time of purchase;

                  (bb) neither the Company nor the Subsidiary has sustained
         since the date of the last audited financial statements included in the
         Registration Statement and the Prospectus any loss or interference with
         its respective business from fire, explosion, flood or other calamity,
         whether or not covered by insurance, or from any labor dispute or court
         or governmental action, order or decree;

                  (cc) the Company has not sent or received any communication
         regarding termination of, or intent not to renew, any of the contracts
         or agreements referred to or described in, or filed as an exhibit to,
         the Registration Statement, and no such termination or non-renewal has
         been threatened by the Company or, to the Company's knowledge after due
         inquiry, any other party to any such contract or agreement;

                  (dd) each of the Company and the Subsidiary maintains a system
         of internal accounting controls sufficient to provide reasonable
         assurance that (i) transactions are executed in accordance with
         management's general or specific authorization; (ii) transactions are
         recorded as necessary to permit preparation of financial statements in
         conformity with generally accepted accounting principles and to
         maintain accountability for assets; (iii) access to assets is permitted
         only in accordance with management's general or specific authorization;
         and (iv) the recorded accountability for assets is compared with
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences;

                  (ee) the Company has established and maintains and evaluates
         "disclosure controls and procedures" (as such term is defined in Rule
         13a-15 and 15d-15 under the Exchange Act) and "internal control over
         financial reporting" (as such term is defined in Rule 13a-15 and 15d-15
         under the Exchange Act); such disclosure controls and procedures are
         designed to ensure that material information relating to the Company,
         including its consolidated subsidiaries, is made known to the Company's
         Chief Executive Officer and its Chief Financial Officer by others
         within those entities, and such disclosure controls and procedures are
         effective to perform the functions for which they were established; the
         Company's auditors and the Audit Committee of the Board of Directors of
         the Company have been advised of: (i) any significant deficiencies in
         the design or operation of internal controls which could adversely
         affect the Company's ability to record, process, summarize, and report
         financial data; and (ii) any fraud, whether or not material, that
         involves management or other employees who have a role in the



                                     - 11 -

         Company's internal controls; any material weaknesses in internal
         controls have been identified for the Company's auditors; and since the
         date of the most recent evaluation of such disclosure controls and
         procedures, there have been no significant changes in internal controls
         or in other factors that could significantly affect internal controls,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses;

                  (ff) the Company has provided you true, correct and complete
         copies of all documentation pertaining to any extension of credit in
         the form of a personal loan made, directly or indirectly, by the
         Company or the Subsidiary to any director or executive officer of the
         Company, or to any family member or affiliate of any director or
         executive officer of the Company; and on or after July 30, 2002, the
         Company has not, directly or indirectly, including through the
         Subsidiary: (i) extended credit, arranged to extend credit, or renewed
         any extension of credit, in the form of a personal loan, to or for any
         director or executive officer of the Company, or to or for any family
         member or affiliate of any director or executive officer of the
         Company; or (ii) made any material modification, including any renewal
         thereof, to any term of any personal loan to any director or executive
         officer of the Company, or any family member or affiliate of any
         director or executive officer, which loan was outstanding on July 30,
         2002;

                  (gg) all statistical or market-related data included in the
         Registration Statement or the Prospectus are based on or derived from
         sources that the Company believes to be reliable and accurate, and the
         Company has obtained the written consent to the use of such data from
         such sources to the extent required;

                  (hh) neither the Company nor the Subsidiary nor, to the
         Company's knowledge after due inquiry, any employee or agent of the
         Company or the Subsidiary has made any payment of funds of the Company
         or the Subsidiary or received or retained any funds in violation of any
         law, rule or regulation, which payment, receipt or retention of funds
         is of a character required to be disclosed in the Registration
         Statement or the Prospectus;

                  (ii) the preclinical tests and clinical trials that are
         described in, or the results of which are referred to in, the
         Registration Statement or the Prospectus were and, if still pending,
         are being conducted in accordance with protocols filed with the
         appropriate regulatory authorities for each such test or trial, as the
         case may be; the description of the results of such tests and trials
         contained in the Registration Statement or the Prospectus are accurate
         and complete, and the Company has no knowledge of any other studies or
         tests the results of which are inconsistent with, or otherwise call
         into question, the results described or referred to in the Registration
         Statement or the Prospectus; the Company has not received any notices
         or other correspondence from the Food and Drug Administration of the
         U.S. Department of Health and Human Services or any committee thereof
         or from any other governmental agency requiring the termination,
         suspension or modification of any clinical trials that are described or
         referred to in the Registration Statement or the Prospectus;

                  (jj) except pursuant to this Agreement, neither the Company
         nor the


                                     - 12 -

         Subsidiary has incurred any liability for any finder's or broker's fee
         or agent's commission in connection with the execution and delivery of
         this Agreement or the consummation of the transactions contemplated
         hereby or by the Prospectus;

                  (kk) neither the Company nor the Subsidiary nor any of their
         respective directors, officers, affiliates or controlling persons has
         taken, directly or indirectly, any action designed, or which has
         constituted or might reasonably be expected to cause or result in,
         under the Exchange Act or otherwise, the stabilization or manipulation
         of the price of any security of the Company to facilitate the sale or
         resale of the Shares;

                  (ll) to the Company's knowledge after due inquiry, there are
         no affiliations or associations between any member of the NASD and any
         of the Company's officers, directors or securityholders, except as set
         forth in the Registration Statement and the Prospectus;

                  (mm) the Registration Statement, the Prospectus and any
         Preliminary Prospectus comply, and any further amendments or
         supplements thereto will comply, with any applicable laws or
         regulations of any foreign jurisdiction in which the Prospectus or any
         preliminary prospectus is distributed in connection with the Directed
         Share Program; and no approval, authorization, consent or order of or
         filing with any governmental or regulatory commission, board, body,
         authority or agency, other than those heretofore obtained, is required
         in connection with the offering of the Reserved Shares in any
         jurisdiction where the Reserved Shares are being offered; and

                  (nn) the Company has not offered, or caused the Underwriters
         to offer, Shares to any person pursuant to the Directed Share Program
         with the intent to influence unlawfully (i) a customer or supplier of
         the Company or the Subsidiary to alter the customer's or supplier's
         level or type of business with the Company or the Subsidiary or (ii) a
         trade journalist or publication to write or publish favorable
         information about the Company or the Subsidiary or any of their
         respective products or services.

                     In addition, any certificate signed by any officer of the
Company or the Subsidiary and delivered to the Underwriters or counsel for the
Underwriters in connection with the offering of the Shares shall be deemed to be
a representation and warranty by the Company or the Subsidiary, as the case may
be, as to matters covered thereby, to each Underwriter.

         4. Certain Covenants of the Company. The Company hereby agrees:

                  (a) to furnish such information as may be required and
         otherwise to cooperate in qualifying the Shares for offering and sale
         under the securities or blue sky laws of such states or other
         jurisdictions as you may designate and to maintain such qualifications
         in effect so long as you may request for the distribution of the
         Shares; provided, however, that the Company shall not be required to
         qualify as a foreign corporation or to consent to the service of
         process under the laws of any such jurisdiction (except service of
         process with respect to the offering and sale of the Shares); and to
         promptly advise you of the receipt by the Company of any notification
         with respect to the suspension of the qualification of the Shares for
         offer or sale in any jurisdiction or the



                                     - 13 -

         initiation or threatening of any proceeding for such purpose;

                  (b) to make available to the Underwriters in New York City, as
         soon as practicable after the Registration Statement becomes effective,
         and thereafter from time to time to furnish to the Underwriters, as
         many copies of the Prospectus (or of the Prospectus as amended or
         supplemented if the Company shall have made any amendments or
         supplements thereto after the effective date of the Registration
         Statement) as the Underwriters may request for the purposes
         contemplated by the Act; in case any Underwriter is required to deliver
         a prospectus after the nine-month period referred to in Section
         10(a)(3) of the Act in connection with the sale of the Shares, the
         Company will prepare, at its expense, promptly upon request such
         amendment or amendments to the Registration Statement and the
         Prospectus as may be necessary to permit compliance with the
         requirements of Section 10(a)(3) of the Act;

                  (c) if, at the time this Agreement is executed and delivered,
         it is necessary for the Registration Statement or any post-effective
         amendment thereto to be declared effective before the Shares maybe
         sold, the Company will endeavor to cause the Registration Statement or
         such post-effective amendment to become effective as soon as possible,
         and the Company will advise you promptly and, if requested by you, will
         confirm such advice in writing, (i) when the Registration Statement and
         any such post-effective amendment thereto has become effective, and
         (ii) if Rule 430A under the Act is used, when the Prospectus is filed
         with the Commission pursuant to Rule 424(b) under the Act (which the
         Company agrees to file in a timely manner under such Rule);

                  (d) to advise you promptly, confirming such advice in writing,
         of any request by the Commission for amendments or supplements to the
         Registration Statement or the Prospectus or for additional information
         with respect thereto, or of notice of institution of proceedings for,
         or the entry of a stop order, suspending the effectiveness of the
         Registration Statement and, if the Commission should enter a stop order
         suspending the effectiveness of the Registration Statement, to use its
         best efforts to obtain the lifting or removal of such order as soon as
         possible; to advise you promptly of any proposal to amend or supplement
         the Registration Statement or the Prospectus and to provide you and
         Underwriters' counsel copies of any such documents for review and
         comment a reasonable amount of time prior to any proposed filing and to
         file no such amendment or supplement to which you shall object in
         writing;

                  (e) to file promptly all reports and any definitive proxy or
         information statement required to be filed by the Company with the
         Commission in order to comply with the Exchange Act subsequent to the
         date of the Prospectus and for so long as the delivery of a prospectus
         is required in connection with the offering or sale of the Shares; and
         to provide you with a copy of such reports and statements and other
         documents to be filed by the Company pursuant to Section 13, 14 or
         15(d) of the Exchange Act during such period a reasonable amount of
         time prior to any proposed filing, and to promptly notify you of such
         filing;

                  (f) if necessary or appropriate, to file a registration
         statement pursuant to Rule 462(b) under the Act and pay the applicable
         fees in accordance with the Act;


                                     - 14 -

                  (g) to advise the Underwriters promptly of the happening of
         any event within the time during which a prospectus relating to the
         Shares is required to be delivered under the Act which could require
         the making of any change in the Prospectus then being used so that the
         Prospectus would not include an untrue statement of material fact or
         omit to state a material fact necessary to make the statements therein,
         in the light of the circumstances under which they are made, not
         misleading, and, during such time, subject to Section 4(d) hereof, to
         prepare and furnish, at the Company's expense, to the Underwriters
         promptly such amendments or supplements to such Prospectus as may be
         necessary to reflect any such change;

                  (h) to make generally available to its security holders, and
         to deliver to you, an earnings statement of the Company (which will
         satisfy the provisions of Section 11(a) of the Act) covering a period
         of twelve months beginning after the effective date of the Registration
         Statement (as defined in Rule 158(c) under the Act) as soon as is
         reasonably practicable after the termination of such twelve-month
         period but in any case not later than ___________;

                  (i) to furnish to its stockholders as soon as practicable
         after the end of each fiscal year an annual report (including a
         consolidated balance sheet and statements of income, shareholders'
         equity and cash flow of the Company and the Subsidiary for such fiscal
         year, accompanied by a copy of the certificate or report thereon of
         nationally recognized independent certified public accountants duly
         registered with the Public Company Oversight Accounting Board);

                  (j) to furnish to you five copies of the Registration
         Statement, as initially filed with the Commission, and of all
         amendments thereto (including all exhibits thereto) and sufficient
         copies of the foregoing (other than exhibits) for distribution of a
         copy to each of the other Underwriters;

                  (k) to furnish to you promptly and, upon request, to each of
         the other Underwriters for a period of five years from the date of this
         Agreement (i) copies of any reports, proxy statements, or other
         communications which the Company shall send to its stockholders or
         shall from time to time publish or publicly disseminate, (ii) copies of
         all annual, quarterly and current reports filed with the Commission on
         Forms 10-K, 10-Q or 8-K, or such other similar forms as may be
         designated by the Commission, (iii) copies of documents or reports
         filed with any national securities exchange on which any class of
         securities of the Company is listed and (iv) such other information as
         you may reasonably request regarding the Company or the Subsidiary;

                  (l) to furnish to you as early as practicable prior to the
         time of purchase and any additional time of purchase, as the case may
         be, but not later than two business days prior thereto, a copy of the
         latest available unaudited interim and monthly consolidated financial
         statements, if any, of the Company and the Subsidiary which have been
         read by the Company's independent certified public accountants, as
         stated in their letter to be furnished pursuant to Section 6(e) hereof;

                  (m) to apply the net proceeds from the sale of the Shares in
         the manner



                                     - 15 -

         set forth under the caption "Use of proceeds" in the Prospectus;

                  (n) to pay all costs, expenses, fees and taxes in connection
         with (i) the preparation and filing of the Registration Statement, each
         Preliminary Prospectus, the Prospectus and any amendments or
         supplements thereto, and the printing and furnishing of copies of each
         thereof to the Underwriters and to dealers (including costs of mailing
         and shipment), (ii) the registration, issue, sale and delivery of the
         Shares including any stock or transfer taxes and stamp or similar
         duties payable upon the sale, issuance or delivery of the Shares to the
         Underwriters, (iii) the producing, word processing and/or printing of
         this Agreement, any Agreement Among Underwriters, any dealer
         agreements, any Powers of Attorney and any closing documents (including
         compilations thereof) and the reproduction and/or printing and
         furnishing of copies of each thereof to the Underwriters and (except
         closing documents) to dealers (including costs of mailing and
         shipment), (iv) the qualification of the Shares for offering and sale
         under state or foreign laws and the determination of their eligibility
         for investment under state or foreign law as aforesaid (including the
         legal fees and filing fees and other disbursements of counsel for the
         Underwriters) and the printing and furnishing of copies of any blue sky
         surveys or legal investment surveys to the Underwriters and to dealers,
         (v) any listing of the Shares on any securities exchange or
         qualification of the Shares for quotation on the NASDAQ and any
         registration thereof under the Exchange Act, (vi) any filing for review
         of the public offering of the Shares by the NASD, including the legal
         fees and filing fees and other disbursements of counsel to the
         Underwriters, (vii) the fees and disbursements of any transfer agent or
         registrar for the Shares, (viii) the costs and expenses of the Company
         relating to presentations or meetings undertaken in connection with the
         marketing of the offering and sale of the Shares to prospective
         investors and the Underwriters' sales forces, including, without
         limitation, expenses associated with the production of road show slides
         and graphics, fees and expenses of any consultants engaged in
         connection with the road show presentations, travel, lodging and other
         expenses incurred by the officers of the Company and any such
         consultants, and the cost of any aircraft chartered in connection with
         the road show, (ix) the offer and sale of the Reserved Shares,
         including all costs and expenses of UBS-FinSvc and the Underwriters,
         including the fees and disbursement of counsel for the Underwriters,
         and (x) the performance of the Company's other obligations hereunder;

                  (o) not to sell, offer to sell, contract or agree to sell,
         hypothecate, pledge, grant any option to purchase or otherwise dispose
         of or agree to dispose of, directly or indirectly, any Common Stock or
         securities convertible into or exchangeable or exercisable for Common
         Stock or warrants or other rights to purchase Common Stock or any other
         securities of the Company that are substantially similar to Common
         Stock, or file or cause to be declared effective a registration
         statement under the Act relating to the offer and sale of any shares of
         Common Stock or securities convertible into or exercisable or
         exchangeable for Common Stock or warrants or other rights to purchase
         Common Stock or any other securities of the Company that are
         substantially similar to Common Stock for a period of 180 days after
         the date hereof (the "Lock-Up Period"), without the prior written
         consent of UBS, except for (i) the registration of the Shares and the
         sales to the Underwriters pursuant to this Agreement, (ii) issuances of
         Common Stock upon the exercise of options or warrants disclosed as
         outstanding in the Registration



                                     - 16 -

         Statement and the Prospectus, and (iii) the issuance of employee stock
         options not exercisable during the Lock-Up Period pursuant to stock
         option plans described in the Registration Statement and the
         Prospectus;

                  (p) prior to the time of purchase or the additional time of
         purchase, as the case may be, to issue no press release or other
         communication directly or indirectly and hold no press conferences with
         respect to the Company or the Subsidiary, the financial condition,
         results of operations, business, properties, assets, or liabilities of
         the Company or the Subsidiary, or the offering of the Shares, without
         your prior consent;

                  (q) to use its best efforts to cause the Common Stock to be
         listed for quotation on the NASDAQ and to maintain such listing;

                  (r) to maintain a transfer agent and, if necessary under the
         jurisdiction of incorporation of the Company, a registrar for the
         Common Stock; and

                  (s) to ensure that the Reserved Shares will be restricted from
         sale, transfer, assignment, pledge or hypothecation to such extent as
         may be required by the NASD and its rules for a period of three (3)
         months following the date of effectiveness of the Registration
         Statement (or such longer period of time as may be required by the NASD
         and its rules); provided, that UBS-FinSvc will notify the Company as to
         which Directed Share Participants whose Reserved Shares are to be so
         restricted; to direct the transfer agent to place stop transfer
         restrictions upon such Reserved Shares for such period or time; and to
         comply with all applicable securities and other applicable laws, rules
         and regulations in each jurisdiction in which the Reserved Shares are
         offered in connection with the Directed Share Program.

         5. Reimbursement of Underwriters' Expenses. If the Shares are not
delivered for any reason other than the termination of this Agreement pursuant
to the fifth paragraph of Section 8 hereof or the default by one or more of the
Underwriters in its or their respective obligations hereunder, the Company
shall, in addition to paying the amounts described in Section 4(n) hereof,
reimburse the Underwriters for all of their out-of-pocket expenses, including
the fees and disbursements of their counsel.

         6. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters hereunder are subject to the accuracy of the representations
and warranties on the part of the Company on the date hereof, at the time of
purchase and, if applicable, at the additional time of purchase, the performance
by the Company of its obligations hereunder and to the following additional
conditions precedent:

                  (a) The Company shall furnish to you at the time of purchase
         and, if applicable, at the additional time of purchase, an opinion of
         Cooley Godward LLP, counsel for the Company, addressed to the
         Underwriters, and dated the time of purchase or the additional time of
         purchase, as the case may be, with executed copies for each of the
         other Underwriters, and in form and substance satisfactory to Dewey
         Ballantine LLP, counsel for the Underwriters, in the form set forth in
         Exhibit B hereto.

                  (b) The Company shall furnish to you at the time of purchase
         and, if


                                     - 17 -

         applicable, at the additional time of purchase, an opinion of Cooley
         Godward LLP, special counsel for the Company with respect to patents
         and proprietary rights, addressed to the Underwriters, and dated the
         time of purchase or the additional time of purchase, as the case may
         be, with executed copies for each of the other Underwriters, and in
         form and substance satisfactory to Dewey Ballantine LLP, counsel for
         the Underwriters, in the form set forth in Exhibit C hereto.

                  (c) The Company shall furnish to you at the time of purchase
         and, if applicable, at the additional time of purchase, an opinion of
         Stradling Yocca Carlson & Rauth, special counsel for the Company with
         respect to patents and proprietary rights, addressed to the
         Underwriters, and dated the time of purchase or the additional time of
         purchase, as the case may be, with executed copies for each of the
         other Underwriters, and in form and substance satisfactory to Dewey
         Ballantine LLP, counsel for the Underwriters, in the form set forth in
         Exhibit D hereto.

                  (d) The Company shall furnish to you at the time of purchase
         and, if applicable, at the additional time of purchase, an opinion of
         Hogan & Hartson L.L.P., special counsel for the Company with respect to
         patents and proprietary rights, addressed to the Underwriters, and
         dated the time of purchase or the additional time of purchase, as the
         case may be, with executed copies for each of the other Underwriters,
         and in form and substance satisfactory to Dewey Ballantine LLP, counsel
         for the Underwriters, in the form set forth in Exhibit E hereto.

                  (e) You shall have received from each of Deloitte & Touche LLP
         and BDO Seidman, LLP letters dated, respectively, the date of this
         Agreement, the time of purchase and, if applicable, the additional time
         of purchase, and addressed to the Underwriters (with executed copies
         for each of the Underwriters) in the forms heretofore approved by UBS.

                  (f) You shall have received at the time of purchase and, if
         applicable, at the additional time of purchase, the favorable opinion
         of Dewey Ballantine LLP, counsel for the Underwriters, dated the time
         of purchase or the additional time of purchase, as the case may be, in
         form and substance reasonably satisfactory to UBS.

                  (g) No Prospectus or amendment or supplement to the
         Registration Statement or the Prospectus shall have been filed to which
         you object in writing.

                  (h) The Registration Statement shall become effective not
         later than 5:30 P.M., New York City time, on the date of this Agreement
         and, if Rule 430A under the Act is used, the Prospectus shall have been
         filed with the Commission pursuant to Rule 424(b) under the Act at or
         before 5:30 P.M., New York City time, on the second full business day
         after the date of this Agreement and any registration statement
         pursuant to Rule 462(b) under the Act required in connection with the
         offering and sale of the Shares shall have been filed and become
         effective no later than 10:00 P.M., New York City time, on the date of
         this Agreement.

                  (i) Prior to the time of purchase, and, if applicable, the
         additional time



                                     - 18 -

         of purchase, (i) no stop order with respect to the effectiveness of the
         Registration Statement shall have been issued under the Act or
         proceedings initiated under Section 8(d) or 8(e) of the Act; (ii) the
         Registration Statement and all amendments thereto shall not contain an
         untrue statement of a material fact or omit to state a material fact
         required to be stated therein or necessary to make the statements
         therein not misleading; and (iii) the Prospectus and all amendments or
         supplements thereto shall not contain an untrue statement of a material
         fact or omit to state a material fact required to be stated therein or
         necessary to make the statements therein, in the light of the
         circumstances under which they are made, not misleading.

                  (j) Between the time of execution of this Agreement and the
         time of purchase or the additional time of purchase, as the case may
         be, (A) no material adverse change or any development involving a
         prospective material adverse change in the business, properties,
         management, financial condition or results of operations of the Company
         and the Subsidiary taken as a whole shall occur or become known and (B)
         no transaction which is material and adverse to the Company has been
         entered into by the Company or the Subsidiary.

                  (k) The Company will, at the time of purchase and, if
         applicable, at the additional time of purchase, deliver to you a
         certificate of its Chief Executive Officer and its Chief Financial
         Officer in the form attached as Exhibit F hereto.

                  (l) You shall have received signed Lock-up Agreements referred
         to in Section 3(r) hereof.

                  (m) The Company shall have furnished to you such other
         documents and certificates as to the accuracy and completeness of any
         statement in the Registration Statement and the Prospectus as of the
         time of purchase and, if applicable, the additional time of purchase,
         as you may reasonably request.

                  (n) The Shares shall have been approved for quotation on the
         NASDAQ, subject only to notice of issuance at or prior to the time of
         purchase or the additional time of purchase, as the case may be.

         7. Effective Date of Agreement; Termination. This Agreement shall
become effective (i) if Rule 430A under the Act is not used, when you shall have
received notification of the effectiveness of the Registration Statement, or
(ii) if Rule 430A under the Act is used, when the parties hereto have executed
and delivered this Agreement.

         The obligations of the several Underwriters hereunder shall be subject
to termination in the absolute discretion of UBS or any group of Underwriters
(which may include UBS) which has agreed to purchase in the aggregate at least
50% of the Firm Shares, if (x) since the time of execution of this Agreement or
the earlier respective dates as of which information is given in the
Registration Statement and the Prospectus, there has been any material adverse
change or any development involving a prospective material adverse change in the
business, properties, management, financial condition or results of operations
of the Company and the Subsidiary taken as a whole, which would, in UBS's
judgment or in the judgment of such group



                                     - 19 -

of Underwriters, make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares on the terms and in the manner
contemplated in the Registration Statement and the Prospectus, or (y) since of
execution of this Agreement, there shall have occurred: (i) a suspension or
material limitation in trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on NASDAQ; (iii) a
general moratorium on commercial banking activities declared by either federal
or New York State authorities or a material disruption in commercial banking or
securities settlement or clearance services in the United States; (iv) an
outbreak or escalation of hostilities or acts of terrorism involving the United
States or a declaration by the United States of a national emergency or war; or
(v) any other calamity or crisis or any change in financial, political or
economic conditions in the United States or elsewhere, if the effect of any such
event specified in clause (iv) or (v) in UBS's judgment or in the judgment of
such group of Underwriters makes it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares on the terms and in the manner
contemplated in the Registration Statement and the Prospectus, or (z) since the
time of execution of this Agreement, there shall have occurred any downgrading,
or any notice or announcement shall have been given or made of (i) any intended
or potential downgrading or (ii) any watch, review or possible change that does
not indicate an affirmation or improvement in the rating accorded any securities
of or guaranteed by the Company or the Subsidiary by any "nationally recognized
statistical rating organization," as that term is defined in Rule 436(g)(2)
under the Act.

         If UBS or any group of Underwriters elects to terminate this Agreement
as provided in this Section 7, the Company and each other Underwriter shall be
notified promptly in writing.

         If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted under
this Agreement, or if such sale is not carried out because the Company shall be
unable to comply with any of the terms of this Agreement, the Company shall not
be under any obligation or liability under this Agreement (except to the extent
provided in Sections 4(n), 5 and 9 hereof), and the Underwriters shall be under
no obligation or liability to the Company under this Agreement (except to the
extent provided in Section 9 hereof) or to one another hereunder.

         8. Increase in Underwriters' Commitments. Subject to Sections 6 and 7
hereof, if any Underwriter shall default in its obligation to take up and pay
for the Firm Shares to be purchased by it hereunder (otherwise than for a
failure of a condition set forth in Section 6 hereof or a reason sufficient to
justify the termination of this Agreement under the provisions of Section 7
hereof) and if the number of Firm Shares which all Underwriters so defaulting
shall have agreed but failed to take up and pay for does not exceed 10% of the
total number of Firm Shares, the non-defaulting Underwriters shall take up and
pay for (in addition to the aggregate number of Firm Shares they are obligated
to purchase pursuant to Section 1 hereof) the number of Firm Shares agreed to be
purchased by all such defaulting Underwriters, as hereinafter provided. Such
Shares shall be taken up and paid for by such non-defaulting Underwriters in
such amount or amounts as you may designate with the consent of each Underwriter
so designated or, in the event no such designation is made, such Shares shall be
taken up and paid for by all non-defaulting Underwriters pro rata in proportion
to the aggregate number of Firm



                                     - 20 -

Shares set forth opposite the names of such non-defaulting Underwriters in
Schedule A.

         Without relieving any defaulting Underwriter from its obligations
hereunder, the Company agrees with the non-defaulting Underwriters that it will
not sell any Firm Shares hereunder unless all of the Firm Shares are purchased
by the Underwriters (or by substituted Underwriters selected by you with the
approval of the Company or selected by the Company with your approval).

         If a new Underwriter or Underwriters are substituted by the
Underwriters or by the Company for a defaulting Underwriter or Underwriters in
accordance with the foregoing provision, the Company or you shall have the right
to postpone the time of purchase for a period not exceeding five business days
in order that any necessary changes in the Registration Statement and the
Prospectus and other documents may be effected.

         The term "Underwriter" as used in this Agreement shall refer to and
include any Underwriter substituted under this Section 8 with like effect as if
such substituted Underwriter had originally been named in Schedule A hereto.

         If the aggregate number of Firm Shares which the defaulting Underwriter
or Underwriters agreed to purchase exceeds 10% of the total number of Firm
Shares which all Underwriters agreed to purchase hereunder, and if neither the
non-defaulting Underwriters nor the Company shall make arrangements within the
five business day period stated above for the purchase of all the Firm Shares
which the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall terminate without further act or deed and without any
liability on the part of the Company to any non-defaulting Underwriter and
without any liability on the part of any non-defaulting Underwriter to the
Company. Nothing in this paragraph, and no action taken hereunder, shall relieve
any defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.

         9. Indemnity and Contribution.

                  (a) The Company agrees to indemnify, defend and hold harmless
         each Underwriter, its partners, directors and officers, and any person
         who controls any Underwriter within the meaning of Section 15 of the
         Act or Section 20 of the Exchange Act, and the successors and assigns
         of all of the foregoing persons, from and against any loss, damage,
         expense, liability or claim (including the reasonable cost of
         investigation) which, jointly or severally, any such Underwriter or any
         such person may incur under the Act, the Exchange Act, the common law
         or otherwise, insofar as such loss, damage, expense, liability or claim
         arises out of or is based upon (i) any untrue statement or alleged
         untrue statement of a material fact contained in the Registration
         Statement (or in the Registration Statement as amended by any
         post-effective amendment thereof by the Company) or in a Prospectus
         (the term Prospectus for the purpose of this Section 9 being deemed to
         include any Preliminary Prospectus, the Prospectus and the Prospectus
         as amended or supplemented by the Company), or arises out of or is
         based upon any omission or alleged omission to state a material fact
         required to be stated in either such Registration Statement or such
         Prospectus or necessary to make the statements made therein not
         misleading, except insofar as any such loss, damage, expense, liability
         or



                                     - 21 -

         claim arises out of or is based upon any untrue statement or alleged
         untrue statement of a material fact contained in, and in conformity
         with information concerning such Underwriter furnished in writing by or
         on behalf of such Underwriter through you to the Company expressly for
         use in, such Registration Statement or such Prospectus or arises out of
         or is based upon any omission or alleged omission to state a material
         fact in connection with such information required to be stated in such
         Registration Statement or such Prospectus or necessary to make such
         information not misleading, (ii) any untrue statement or alleged untrue
         statement made by the Company in Section 3 hereof or the failure by the
         Company to perform when and as required any agreement or covenant
         contained herein, (iii) any untrue statement or alleged untrue
         statement of any material fact contained in any audio or visual
         materials provided by the Company or based upon written information
         furnished by or on behalf of the Company including, without limitation,
         slides, videos, films or tape recordings used in connection with the
         marketing of the Shares, or (iv) the Directed Share Program, provided
         that the Company shall not be responsible under this clause (iv) for
         any loss, damage, expense, liability or claim that is finally
         judicially determined to have resulted from the gross negligence or
         willful misconduct of the Underwriters in conducting the Directed Share
         Program.

                  If any action, suit or proceeding (each, a "Proceeding") is
         brought against an Underwriter or any such person in respect of which
         indemnity may be sought against the Company pursuant to the foregoing
         paragraph, such Underwriter or such person shall promptly notify the
         Company in writing of the institution of such Proceeding and the
         Company shall assume the defense of such Proceeding, including the
         employment of counsel reasonably satisfactory to such indemnified party
         and payment of all fees and expenses; provided, however, that the
         omission to so notify the Company shall not relieve the Company from
         any liability which the Company may have to any Underwriter or any such
         person or otherwise. Such Underwriter or such person shall have the
         right to employ its or their own counsel in any such case, but the fees
         and expenses of such counsel shall be at the expense of such
         Underwriter or of such person unless the employment of such counsel
         shall have been authorized in writing by the Company in connection with
         the defense of such Proceeding or the Company shall not have, within a
         reasonable period of time in light of the circumstances, employed
         counsel to have charge of the defense of such Proceeding or such
         indemnified party or parties shall have reasonably concluded that there
         may be defenses available to it or them which are different from,
         additional to or in conflict with those available to the Company (in
         which case the Company shall not have the right to direct the defense
         of such Proceeding on behalf of the indemnified party or parties), in
         any of which events such fees and expenses shall be borne by the
         Company and paid as incurred (it being understood, however, that the
         Company shall not be liable for the expenses of more than one separate
         counsel (in addition to any local counsel) in any one Proceeding or
         series of related Proceedings in the same jurisdiction representing the
         indemnified parties who are parties to such Proceeding). The Company
         shall not be liable for any settlement of any Proceeding effected
         without its written consent but, if settled with the written consent of
         the Company, the Company agrees to indemnify and hold harmless any
         Underwriter and any such person from and against any loss or liability
         by reason of such settlement. Notwithstanding the foregoing sentence,
         if at any time an indemnified party shall have requested an
         indemnifying party to reimburse the indemnified party for fees and
         expenses



                                     - 22 -

         of counsel as contemplated by the second sentence of this paragraph,
         then the indemnifying party agrees that it shall be liable for any
         settlement of any Proceeding effected without its written consent if
         (i) such settlement is entered into more than 60 business days after
         receipt by such indemnifying party of the aforesaid request, (ii) such
         indemnifying party shall not have fully reimbursed the indemnified
         party in accordance with such request prior to the date of such
         settlement and (iii) such indemnified party shall have given the
         indemnifying party at least 30 days' prior notice of its intention to
         settle. No indemnifying party shall, without the prior written consent
         of the indemnified party, effect any settlement of any pending or
         threatened Proceeding in respect of which any indemnified party is or
         could have been a party and indemnity could have been sought hereunder
         by such indemnified party, unless such settlement includes an
         unconditional release of such indemnified party from all liability on
         claims that are the subject matter of such Proceeding and does not
         include an admission of fault, culpability or a failure to act, by or
         on behalf of such indemnified party.

                  The Company agrees to indemnify, defend and hold harmless
         UBS-FinSvc and its partners, directors and officers, and any person who
         controls UBS-FinSvc within the meaning of Section 15 of the Act or
         Section 20 of the Exchange Act, and the successors and assigns of all
         of the foregoing persons, from and against any loss, damage, expense,
         liability or claim (including the reasonable cost of investigation)
         which, jointly or severally, UBS-FinSvc or any such person may incur
         under the Act, the Exchange Act, the common law or otherwise, insofar
         as such loss, damage, expense, liability or claim (1) arises out of or
         is based upon (a) any of the matters referred to in clauses (i) through
         (iii) of the first paragraph of this Section 9(a), or (b) any untrue
         statement or alleged untrue statement of a material fact contained in
         any material prepared by or with the consent of the Company for
         distribution to Directed Share Participants in connection with the
         Directed Share Program or caused by any omission or alleged omission to
         state therein a material fact required to be stated therein or
         necessary to make the statements therein not misleading; (2) caused by
         the failure of any Directed Share Participant to pay for and accept
         delivery of Reserved Shares that the Directed Share Participant has
         agreed to purchase; or (3) otherwise arises out of or is based upon the
         Directed Share Program, provided that the Company shall not be
         responsible under this clause (3) for any loss, damage, expense,
         liability or claim that is finally judicially determined to have
         resulted from the gross negligence or willful misconduct of UBS-FinSvc
         in conducting the Directed Share Program. The second paragraph of this
         Section 9(a) shall apply equally to any Proceeding brought against
         UBS-FinSvc or any such person in respect of which indemnity may be
         sought against the Company pursuant to the foregoing sentence, except
         that the Company shall be liable for the expenses of one separate
         counsel (in addition to any local counsel) for UBS-FinSvc and any such
         person, separate and in addition to counsel for the Underwriters, in
         any such Proceeding.

                  (b) Each Underwriter severally agrees to indemnify, defend and
         hold harmless the Company, its directors and officers, and any person
         who controls the Company within the meaning of Section 15 of the Act or
         Section 20 of the Exchange Act, and the successors and assigns of all
         of the foregoing persons, from and against any loss, damage, expense,
         liability or claim (including the reasonable cost of investigation)
         which, jointly or severally, the Company or any such person may incur
         under the Act, the



                                     - 23 -

         Exchange Act, the common law or otherwise, insofar as such loss,
         damage, expense, liability or claim arises out of or is based upon any
         untrue statement or alleged untrue statement of a material fact
         contained in, and in conformity with information concerning such
         Underwriter furnished in writing by or on behalf of such Underwriter
         through you to the Company expressly for use in, the Registration
         Statement (or in the Registration Statement as amended by any
         post-effective amendment thereof by the Company) or in a Prospectus, or
         arises out of or is based upon any omission or alleged omission to
         state a material fact in connection with such information required to
         be stated in such Registration Statement or such Prospectus or
         necessary to make such information not misleading.

                  If any Proceeding is brought against the Company or any such
         person in respect of which indemnity may be sought against any
         Underwriter pursuant to the foregoing paragraph, the Company or such
         person shall promptly notify such Underwriter in writing of the
         institution of such Proceeding and such Underwriter shall assume the
         defense of such Proceeding, including the employment of counsel
         reasonably satisfactory to such indemnified party and payment of all
         fees and expenses; provided, however, that the omission to so notify
         such Underwriter shall not relieve such Underwriter from any liability
         which such Underwriter may have to the Company or any such person or
         otherwise. The Company or such person shall have the right to employ
         its own counsel in any such case, but the fees and expenses of such
         counsel shall be at the expense of the Company or such person unless
         the employment of such counsel shall have been authorized in writing by
         such Underwriter in connection with the defense of such Proceeding or
         such Underwriter shall not have, within a reasonable period of time in
         light of the circumstances, employed counsel to defend such Proceeding
         or such indemnified party or parties shall have reasonably concluded
         that there may be defenses available to it or them which are different
         from or additional to or in conflict with those available to such
         Underwriter (in which case such Underwriter shall not have the right to
         direct the defense of such Proceeding on behalf of the indemnified
         party or parties, but such Underwriter may employ counsel and
         participate in the defense thereof but the fees and expenses of such
         counsel shall be at the expense of such Underwriter), in any of which
         events such fees and expenses shall be borne by such Underwriter and
         paid as incurred (it being understood, however, that such Underwriter
         shall not be liable for the expenses of more than one separate counsel
         (in addition to any local counsel) in any one Proceeding or series of
         related Proceedings in the same jurisdiction representing the
         indemnified parties who are parties to such Proceeding). No Underwriter
         shall be liable for any settlement of any such Proceeding effected
         without the written consent of such Underwriter but, if settled with
         the written consent of such Underwriter, such Underwriter agrees to
         indemnify and hold harmless the Company and any such person from and
         against any loss or liability by reason of such settlement.
         Notwithstanding the foregoing sentence, if at any time an indemnified
         party shall have requested an indemnifying party to reimburse the
         indemnified party for fees and expenses of counsel as contemplated by
         the second sentence of this paragraph, then the indemnifying party
         agrees that it shall be liable for any settlement of any Proceeding
         effected without its written consent if (i) such settlement is entered
         into more than 60 business days after receipt by such indemnifying
         party of the aforesaid request, (ii) such indemnifying party shall not
         have reimbursed the indemnified party in accordance with such request
         prior to



                                     - 24 -

         the date of such settlement and (iii) such indemnified party shall have
         given the indemnifying party at least 30 days' prior notice of its
         intention to settle. No indemnifying party shall, without the prior
         written consent of the indemnified party, effect any settlement of any
         pending or threatened Proceeding in respect of which any indemnified
         party is or could have been a party and indemnity could have been
         sought hereunder by such indemnified party, unless such settlement
         includes an unconditional release of such indemnified party from all
         liability on claims that are the subject matter of such Proceeding.

                  (c) If the indemnification provided for in this Section 9 is
         unavailable to an indemnified party under subsections (a) and (b) of
         this Section 9 or insufficient to hold an indemnified party harmless in
         respect of any losses, damages, expenses, liabilities or claims
         referred to therein, then each applicable indemnifying party shall
         contribute to the amount paid or payable by such indemnified party as a
         result of such losses, damages, expenses, liabilities or claims (i) in
         such proportion as is appropriate to reflect the relative benefits
         received by the Company on the one hand and the Underwriters on the
         other hand from the offering of the Shares or (ii) if the allocation
         provided by clause (i) above is not permitted by applicable law, in
         such proportion as is appropriate to reflect not only the relative
         benefits referred to in clause (i) above but also the relative fault of
         the Company on the one hand and of the Underwriters on the other in
         connection with the statements or omissions which resulted in such
         losses, damages, expenses, liabilities or claims, as well as any other
         relevant equitable considerations. The relative benefits received by
         the Company on the one hand and the Underwriters on the other shall be
         deemed to be in the same respective proportions as the total proceeds
         from the offering (net of underwriting discounts and commissions but
         before deducting expenses) received by the Company, and the total
         underwriting discounts and commissions received by the Underwriters,
         bear to the aggregate public offering price of the Shares. The relative
         fault of the Company on the one hand and of the Underwriters on the
         other shall be determined by reference to, among other things, whether
         the untrue statement or alleged untrue statement of a material fact or
         omission or alleged omission relates to information supplied by the
         Company or by the Underwriters and the parties' relative intent,
         knowledge, access to information and opportunity to correct or prevent
         such statement or omission. The amount paid or payable by a party as a
         result of the losses, damages, expenses, liabilities and claims
         referred to in this subsection shall be deemed to include any legal or
         other fees or expenses reasonably incurred by such party in connection
         with investigating, preparing to defend or defending any Proceeding.

                  (d) The Company and the Underwriters agree that it would not
         be just and equitable if contribution pursuant to this Section 9 were
         determined by pro rata allocation (even if the Underwriters were
         treated as one entity for such purpose) or by any other method of
         allocation that does not take account of the equitable considerations
         referred to in subsection (c) above. Notwithstanding the provisions of
         this Section 9, no Underwriter shall be required to contribute any
         amount in excess of the amount by which the total price at which the
         Shares underwritten by such Underwriter and distributed to the public
         were offered to the public exceeds the amount of any damage which such
         Underwriter has otherwise been required to pay by reason of such untrue
         statement or alleged untrue statement or omission or alleged omission.
         No person guilty of fraudulent



                                     - 25 -

         misrepresentation (within the meaning of Section 11(f) of the Act)
         shall be entitled to contribution from any person who was not guilty of
         such fraudulent misrepresentation. The Underwriters' obligations to
         contribute pursuant to this Section 9 are several in proportion to
         their respective underwriting commitments and not joint.

                  (e) The indemnity and contribution agreements contained in
         this Section 9 and the covenants, warranties and representations of the
         Company contained in this Agreement shall remain in full force and
         effect regardless of any investigation made by or on behalf of any
         Underwriter, its partners, directors or officers or any person
         (including each partner, officer or director of such person) who
         controls any Underwriter within the meaning of Section 15 of the Act or
         Section 20 of the Exchange Act, or by or on behalf of the Company, its
         directors or officers or any person who controls the Company within the
         meaning of Section 15 of the Act or Section 20 of the Exchange Act, and
         shall survive any termination of this Agreement or the issuance and
         delivery of the Shares. The Company and each Underwriter agree promptly
         to notify each other of the commencement of any Proceeding against it
         and, in the case of the Company, against any of the Company's officers
         or directors in connection with the issuance and sale of the Shares, or
         in connection with the Registration Statement or the Prospectus.

         10. Information Furnished by the Underwriters. The statements set forth
in the ____ and ____ paragraphs under the caption "Underwriting" in the
Prospectus, insofar as such statements relate to (i) amount of selling
concession and reallowance and (ii) over-allotment and stabilization, constitute
the only information furnished by or on behalf of the Underwriters as such
information is referred to in Sections 3 and 9 hereof.

         11. Notices. Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if to
the Underwriters, shall be sufficient in all respects if delivered or sent to
UBS Securities LLC, 299 Park Avenue, New York, NY 10171-0026, Attention:
Syndicate Department and, if to the Company, shall be sufficient in all respects
if delivered or sent to the Company at the offices of the Company at 28903 North
Avenue Paine, Valencia, CA 91355, Attention: ________.

         12. Governing Law; Construction. This Agreement and any claim,
counterclaim or dispute of any kind or nature whatsoever arising out of or in
any way relating to this Agreement ("Claim"), directly or indirectly, shall be
governed by, and construed in accordance with, the laws of the State of New
York. The section headings in this Agreement have been inserted as a matter of
convenience of reference and are not a part of this Agreement.

         13. Submission to Jurisdiction. Except as set forth below, no Claim may
be commenced, prosecuted or continued in any court other than the courts of the
State of New York located in the City and County of New York or in the United
States District Court for the Southern District of New York, which courts shall
have jurisdiction over the adjudication of such matters, and the Company
consents to the jurisdiction of such courts and personal service with respect
thereto. The Company hereby consents to personal jurisdiction, service and venue
in any court in which any Claim arising out of or in any way relating to this
Agreement is brought by any third party against UBS or any indemnified party.
Each of UBS and the Company (on its behalf and, to the extent permitted by
applicable law, on behalf of its stockholders and affiliates)



                                     - 26 -

waives all right to trial by jury in any action, proceeding or counterclaim
(whether based upon contract, tort or otherwise) in any way arising out of or
relating to this Agreement. The Company agrees that a final judgment in any such
action, proceeding or counterclaim brought in any such court shall be conclusive
and binding upon the Company and may be enforced in any other courts to the
jurisdiction of which the Company is or may be subject, by suit upon such
judgment.

         14. Parties at Interest. The Agreement herein set forth has been and is
made solely for the benefit of the Underwriters and the Company and to the
extent provided in Section 9 hereof the controlling persons, partners, directors
and officers referred to in such Section, and their respective successors,
assigns, heirs, personal representatives and executors and administrators. No
other person, partnership, association or corporation (including a purchaser, as
such purchaser, from any of the Underwriters) shall acquire or have any right
under or by virtue of this Agreement.

         15. Counterparts. This Agreement may be signed by the parties in one or
more counterparts which together shall constitute one and the same agreement
among the parties.

         16. Successors and Assigns. This Agreement shall be binding upon the
Underwriters and the Company and their successors and assigns and any successor
or assign of any substantial portion of the Company's and any of the
Underwriters' respective businesses and/or assets.

         17. Miscellaneous. UBS, an indirect, wholly owned subsidiary of UBS AG,
is not a bank and is separate from any affiliated bank, including any U.S.
branch or agency of UBS AG. Because UBS is a separately incorporated entity, it
is solely responsible for its own contractual obligations and commitments,
including obligations with respect to sales and purchases of securities.
Securities sold, offered or recommended by UBS are not deposits, are not insured
by the Federal Deposit Insurance Corporation, are not guaranteed by a branch or
agency, and are not otherwise an obligation or responsibility of a branch or
agency.

  [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]




                                     - 27 -


            If the foregoing correctly sets forth the understanding between the
Company and the several Underwriters, please so indicate in the space provided
below for that purpose, whereupon this agreement and your acceptance shall
constitute a binding agreement between the Company and the Underwriters,
severally.

                                    Very truly yours,

                                    MannKind Corporation

                                    By:
                                        ---------------------------------------
                                        Name:
                                        Title:

Accepted and agreed to as of the
date first above written, on
behalf of themselves and the
other several Underwriters named
in Schedule A

UBS Securities LLC
Piper Jaffray & Co.
Wachovia Capital Markets, LLC
Jefferies & Company, Inc.
Harris Nesbitt Corp.
  as Managing Underwriters

By: UBS Securities LLC

By:
    ----------------------------
    Name:
    Title:

By:
    ----------------------------
    Name:
    Title:

                                   SCHEDULE A



                                                                      Number of
Underwriter                                                          Firm Shares
- -----------                                                          -----------
                                                                  
UBS SECURITIES LLC..............................................         [____]
PIPER JAFFRAY & CO..............................................         [____]
WACHOVIA CAPITAL MARKETS, LLC...................................         [____]
JEFFERIES & COMPANY, INC........................................         [____]
HARRIS NESBITT GERARD INC. ......................................        [____]


                                                                     -----------
   Total........................................................         [____]
                                                                     ===========


                                    EXHIBIT A

                              MannKind Corporation

                                  Common Stock

                                ($0.01 Par Value)

                                                                          , 2004

UBS Securities LLC
Piper Jaffray & Co.
Wachovia Capital Markets, LLC
Jefferies & Company, Inc.
Harris Nesbitt Corp.
  As Managing Underwriters

c/o UBS Securities LLC
   299 Park Avenue
   New York, New York 10171

Ladies and Gentlemen:

            This Lock-Up Letter Agreement is being delivered to you in
connection with the proposed Underwriting Agreement (the "Underwriting
Agreement") to be entered into by MannKind Corporation (the "Company") and you,
as Representatives of the several Underwriters named therein, with respect to
the public offering (the "Offering") of common stock, par value $0.01 per share,
of the Company (the "Common Stock").

            In order to induce you to enter into the Underwriting Agreement, the
undersigned agrees that for a period from the date hereof until the expiration
of 180 days after the date of the final prospectus relating to the Offering (the
"Lock-Up Period") the undersigned will not, without the prior written consent of
UBS Securities LLC, (i) sell, offer to sell, contract or agree to sell,
hypothecate, pledge, grant any option to purchase or otherwise dispose of or
agree to dispose of, directly or indirectly, or file (or participate in the
filing of) a registration statement with the Securities and Exchange Commission
(the "Commission") in respect of, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the meaning
of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission promulgated thereunder with respect to, any
Common Stock of the Company or any securities convertible into or exercisable or
exchangeable for Common Stock, or warrants or other rights to purchase Common
Stock, (ii) enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of Common
Stock or any securities convertible into or exercisable or exchangeable


                                       2

for Common Stock, or warrants or other rights to purchase Common Stock, whether
any such transaction is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, or (iii) publicly announce an intention to
effect any transaction specified in clause (i) or (ii). The foregoing sentence
shall not apply to (a) the registration of or sale to the Underwriters of any
Common Stock pursuant to the Offering and the Underwriting Agreement, (b) bona
fide gifts, provided the recipient thereof agrees in writing with the
Underwriters to be bound by the terms of this Lock-Up Agreement and confirms
that he, she or it has been in compliance with the terms of this Lock-Up
Agreement or (c) dispositions to any trust for the direct or indirect benefit of
the undersigned and/or the immediate family of the undersigned, provided that
such trust agrees in writing with the Underwriters to be bound by the terms of
this Lock-Up Agreement and confirms that it has been in compliance with the
terms of this Lock-Up Agreement. For purposes of this Lock-Up Agreement,
"immediate family" shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin.

            If (1) during the period that begins on the date that is 15 calendar
days plus 3 business days before the last day of the Lock-Up Period and ends on
the last day of the Lock-Up Period, the Company issues an earnings release or
material news or a material event relating to the Company occurs or (2) prior to
the expiration of the Lock-Up Period, the Company announces that it will release
earnings results during the 16-day period beginning on the last day of the
Lock-Up Period, the restrictions imposed by this Lock-Up Agreement shall
continue to apply until the expiration of the date that is 15 calendar days plus
3 business days after the date on which the issuance of the earnings release or
the material news or material event occurs; provided, however, this paragraph
will not apply if, within 3 days of the termination of the Lock-Up Period, the
Company delivers to UBS Securities LLC a certificate, signed by the Chief
Financial Officer or Chief Executive Officer of the Company, certifying on
behalf of the Company that the Company's shares of Common Stock are "actively
traded securities," as defined in Regulation M, 17 CFR 242.101(c)(1) and such
notice is delivered in accordance with Section 11 of the Underwriting Agreement.

            In addition, the undersigned hereby waives any rights the
undersigned may have to require registration of Common Stock in connection with
the filing of a registration statement relating to the Offering. The undersigned
further agrees that, during the Lock-Up Period, the undersigned will not,
without the prior written consent of UBS Securities LLC, make any demand for, or
exercise any right with respect to, the registration of Common Stock of the
Company or any securities convertible into or exercisable or exchangeable for
Common Stock, or warrants or other rights to purchase Common Stock.

                                      * * *


                                       3

            If (i) the Company notifies you in writing that it does not intend
to proceed with the Offering, (ii) the registration statement filed with the
Securities and Exchange Commission with respect to the Offering is withdrawn or
(iii) for any reason the Underwriting Agreement shall be terminated prior to the
time of purchase (as defined in the Underwriting Agreement), this Lock-Up
Agreement shall be terminated and the undersigned shall be released from its
obligations hereunder.

                                      Yours very truly,



                                      -----------------------------------
                                      Name:


                                       4

                                    EXHIBIT B

                          OPINION OF COOLEY GODWARD LLP

1.    The Company has been duly incorporated and is validly existing as a
      corporation in good standing under the laws of the State of Delaware, with
      full corporate power and authority to own, lease and operate its
      properties and conduct its business as described in the Registration
      Statement and the Prospectus, to execute and deliver this Agreement and to
      issue, sell and deliver the Shares as contemplated herein.

2.    The Subsidiary has been duly incorporated and is validly existing as a
      corporation in good standing under the laws of its jurisdiction of
      incorporation, with full corporate power and authority to own, lease and
      operate its properties and to conduct its business as described in the
      Registration Statement and the Prospectus.

3.    The Company and the Subsidiary are duly qualified to do business as a
      foreign corporation and are in good standing in each jurisdiction where
      the ownership or leasing of their properties or the conduct of their
      business requires such qualification, except where the failure to be so
      qualified and in good standing would not, individually or in the
      aggregate, have a Material Adverse Effect.

4.    This Agreement has been duly authorized, executed and delivered by the
      Company.

5.    The Shares have been duly authorized and validly issued and are fully paid
      and non-assessable.

6.    The Company has an authorized and outstanding capitalization as set forth
      in the Registration Statement and the Prospectus; all of the issued and
      outstanding shares of capital stock of the Company have been duly
      authorized and validly issued, are fully paid and non-assessable and are
      free of statutory preemptive rights and, to such counsel's knowledge,
      contractual preemptive rights, resale rights, rights of first refusal and
      similar rights; the Shares are free of statutory preemptive rights and, to
      such counsel's knowledge, contractual preemptive rights, resale rights,
      rights of first refusal and similar rights; the certificates for the
      Shares are in due and proper form, and the holders of the Shares will not
      be subject to personal liability by reason of being such holders; all
      outstanding shares of the Company's Series A Preferred Stock, $0.01 par
      value per share, and Series B Preferred Stock, $0.01 par value per share,
      and Series C Preferred Stock, $0.01 par value per share, have converted
      into the number of shares of Common Stock, and in the manner, set forth in
      the Registration Statement and the Prospectus in compliance with
      applicable law; and the Company has effected and completed a 1-for-__
      reverse stock split of the Common Stock in the manner set forth in the
      Registration Statement and the Prospectus in compliance with applicable
      law.

7.    All of the outstanding shares of capital stock of the Subsidiary have been
      duly authorized and validly issued, are fully paid and non-assessable and,
      except as otherwise stated in the Registration Statement and the
      Prospectus, are owned by the Company, in each case subject to no security
      interest, other encumbrance or adverse claim; and to such counsel's
      knowledge, no options, warrants or other rights to purchase, agreements or
      other


                                      B-1

      obligations to issue or other rights to convert any obligation into shares
      of capital stock or ownership interests in the Subsidiary are outstanding.

8.    The capital stock of the Company, including the Shares, conforms to the
      description thereof contained in the Registration Statement and the
      Prospectus.

9.    The Registration Statement and the Prospectus (except as to the financial
      statements and schedules and other financial data contained therein, as to
      which such counsel need express no opinion) comply as to form with the
      requirements of the Act; and (B) the conditions to the use of Form S-1
      have been satisfied.

10.   The Registration Statement has become effective under the Act and, to such
      counsel's knowledge, no stop order proceedings with respect thereto are
      pending or threatened under the Act, and any required filing of the
      Prospectus and any supplement thereto pursuant to Rule 424 under the Act
      has been made in the manner and within the time period required by such
      Rule 424.

11.   No approval, authorization, consent or order of or filing with any
      federal, state or local governmental or regulatory commission, board,
      body, authority or agency, or of or with the NASDAQ, or approval of the
      shareholders of the Company, is required in connection with the issuance
      and sale of the Shares or with the consummation by the Company of the
      transactions contemplated hereby other than registration of the Shares
      under the Act (except such counsel need express no opinion as to any
      necessary qualification under the state securities or blue sky laws of the
      various jurisdictions in which the Shares are being offered by the
      Underwriters).

12.   The execution, delivery and performance of this Agreement by the Company,
      the issuance and sale of the Shares by the Company and the consummation by
      the Company of the transactions contemplated hereby do not and will not
      conflict with, result in any breach or violation of or constitute a
      default under (nor constitute any event which with notice, lapse of time
      or both would result in any breach or violation of or constitute a default
      under) the charter or bylaws of the Company or the Subsidiary, or any
      indenture, mortgage, deed of trust, bank loan or credit agreement or other
      evidence of indebtedness, or any license, lease, contract or other
      agreement or instrument to which the Company or the Subsidiary is a party
      or by which any of them or any of their respective properties may be bound
      or affected, or any federal, state, local or foreign law, regulation or
      rule or any decree, judgment or order applicable to the Company or the
      Subsidiary.

13.   To such counsel's knowledge, neither the Company nor the Subsidiary is in
      breach or violation of or in default under (nor has any event occurred
      which with notice, lapse of time, or both would result in any breach or
      violation of, or constitute a default under or give the holder of any
      indebtedness (or a person acting on such holder's behalf) the right to
      require the repurchase, redemption or repayment of all or a part of such
      indebtedness under) its respective charter or bylaws, or any indenture,
      mortgage, deed of trust, bank loan or credit agreement or other evidence
      of indebtedness, or any license, lease, contract or other agreement or
      instrument to which the Company or the Subsidiary is a party or by which
      any of them or any of their respective properties may be bound or
      affected, or any


                                      B-2

      federal, state, local or foreign law, regulation or rule or any decree,
      judgment or order applicable to the Company or the Subsidiary.

14.   To such counsel's knowledge, there are no affiliate transactions,
      off-balance sheet transactions, contracts, licenses, agreements, leases or
      documents of a character which are required to be described in the
      Registration Statement or the Prospectus or to be filed as an exhibit to
      the Registration Statement which have not been so described or filed.

15.   To such counsel's knowledge, there are no actions, suits, claims,
      investigations or proceedings pending, threatened or contemplated to which
      the Company or the Subsidiary or any of their respective directors or
      officers is or would be a party or to which any of their respective
      properties is or would be subject at law or in equity, before or by any
      federal, state, local or foreign governmental or regulatory commission,
      board, body, authority or agency which are required to be described in the
      Registration Statement or the Prospectus but are not so described.

16.   The Company is not and, after giving effect to the offering and sale of
      the Shares, will not be an "investment company" or an entity "controlled"
      by an "investment company," as such terms are defined in the Investment
      Company Act.

17.   The Company is not and, after giving effect to the offering and sale of
      the Shares, will not be a "holding company" or a "subsidiary company" of a
      "holding company" or an "affiliate" of a "holding company" or of a
      "subsidiary company," as such terms are defined in the Public Utility
      Holding Company Act.

18.   The information in the Registration Statement and the Prospectus under the
      headings "Management," "Description of capital stock" and "_______,"
      insofar as such statements constitute a summary of documents or matters of
      law, and those statements in the Registration Statement or the Prospectus
      that are descriptions of contracts, agreements or other legal documents or
      of legal proceedings, or refer to statements of law or legal conclusions,
      at the time such Registration Statement became effective, as of the date
      of the Prospectus and at the time of purchase or the additional time of
      purchase, as the case may be, are accurate and complete and present fairly
      the information required to be shown.

19.   No person has the right, pursuant to the terms of any contract, agreement
      or other instrument described in or filed as an exhibit to the
      Registration Statement or otherwise known to such counsel, to cause the
      Company to register under the Act any shares of Common Stock or shares of
      any other capital stock or other equity interest in the Company or to
      include any such shares or interest in the Registration Statement or the
      offering contemplated thereby, whether as a result of the filing or
      effectiveness of the Registration Statement or the sale of the Shares as
      contemplated thereby or otherwise.

20.   Such counsel has participated in conferences with officers and other
      representatives of the Company, representatives of the independent public
      accountants of the Company and representatives of the Underwriters at
      which the contents of the Registration Statement and the Prospectus were
      discussed and, although such counsel is not passing upon and


                                      B-3

      does not assume responsibility for the accuracy, completeness or fairness
      of the statements contained in the Registration Statement or the
      Prospectus (except as and to the extent stated in subparagraphs 6, 8 and
      18 above), on the basis of the foregoing nothing has come to the attention
      of such counsel that causes such counsel to believe that the Registration
      Statement or any amendment thereto at the time such Registration Statement
      or amendment became effective contained an untrue statement of a material
      fact or omitted to state a material fact required to be stated therein or
      necessary to make the statements therein not misleading, or that the
      Prospectus or any supplement thereto at the date of such Prospectus or
      such supplement, and at the time of purchase or the additional time of
      purchase, as the case may be, contained an untrue statement of a material
      fact or omitted to state a material fact required to be stated therein or
      necessary to make the statements therein, in light of the circumstances
      under which they were made, not misleading (it being understood that such
      counsel need express no opinion with respect to the financial statements
      and schedules and other financial data included in the Registration
      Statement or the Prospectus).


                                      B-4

                                    EXHIBIT C

                          OPINION OF COOLEY GODWARD LLP

1.    Such counsel serves as special counsel to the Company with respect to
      patents and proprietary rights.

2.    To such counsel's knowledge, the statements in the Registration Statement
      and the Prospectus relating to patents and proprietary rights
      (collectively, the "Intellectual Property Information"), at the time such
      Registration Statement became effective, as of the date of the Prospectus
      and at the time of purchase or the additional time of purchase, as the
      case may be, are accurate and complete statements or summaries of the
      matters therein set forth and present fairly the information therein set
      forth; nothing has come to such counsel's attention that causes such
      counsel to believe that the Intellectual Property Information in the
      Registration Statement at the time such Registration Statement became
      effective contained an untrue statement of a material fact or omitted to
      state a material fact required to be stated therein or necessary to make
      the statements therein not misleading, or that the Prospectus or any
      supplement thereto, at the date of such Prospectus or such supplement and
      at the time of purchase or the additional time of purchase, as the case
      may be, contained an untrue statement of material fact or omitted to state
      a material fact required to be stated therein or necessary to make the
      statements therein, in light of the circumstances under which they were
      made, not misleading.

3.    To such counsel's knowledge, (i) there are no legal or governmental
      proceedings pending relating to patent rights, trade secrets, trademarks,
      service marks or other proprietary information or materials of the
      Company, and (ii) no such proceedings are threatened or contemplated by
      governmental authorities or others.

4.    Such counsel does not know of any contracts or other documents, relating
      to the Company's patents, trade secrets, trademarks, service marks or
      other proprietary information or materials, of a character required to be
      described in the Registration Statement or the Prospectus or to be filed
      as an exhibit to the Registration Statement which have not been so
      described or filed.

5.    To such counsel's knowledge, (i) the Company is not infringing or
      otherwise violating any patents, trade secrets, trademarks, service marks
      or other proprietary information or materials of others, and (ii) there
      are no infringements by others of any of the Company's patents, trade
      secrets, trademarks, service marks or other proprietary information or
      materials which in such counsel's judgment could affect materially the use
      thereof by the Company.

6.    Such counsel has no knowledge of any facts which would preclude the
      Company from having valid license rights or clear title to the patents
      referenced in the Registration Statement and the Prospectus; except as
      described in the Registration Statement and the Prospectus, such counsel
      has no knowledge that the Company lacks or will be unable to obtain any
      rights or licenses to use all patents and other material intangible
      property and assets necessary to conduct the business now conducted or
      proposed to be conducted by


                                      C-1

      the Company as described in the Registration Statement and the Prospectus;
      such counsel is unaware of any facts which form a basis for a finding of
      unenforceability or invalidity of any of the Company's patents and other
      material intellectual property and assets.

7.    Such counsel is not aware of any material fact with respect to the patent
      applications of the Company presently on file that (i) would preclude the
      issuance of patents with respect to such applications, or (ii) would lead
      such counsel to conclude that such patents, when issued, would not be
      valid and enforceable in accordance with applicable regulations.


                                      C-2

                                    EXHIBIT D

                   OPINION OF STRADLING YOCCA CARLSON & RAUTH

1.    Such counsel serves as special counsel to the Company with respect to
      patents and proprietary rights.

2.    To such counsel's knowledge, the statements in the Registration Statement
      and the Prospectus relating to patents and proprietary rights
      (collectively, the "Intellectual Property Information"), at the time such
      Registration Statement became effective, as of the date of the Prospectus
      and at the time of purchase or the additional time of purchase, as the
      case may be, are accurate and complete statements or summaries of the
      matters therein set forth and present fairly the information therein set
      forth; nothing has come to such counsel's attention that causes such
      counsel to believe that the Intellectual Property Information in the
      Registration Statement at the time such Registration Statement became
      effective contained an untrue statement of a material fact or omitted to
      state a material fact required to be stated therein or necessary to make
      the statements therein not misleading, or that the Prospectus or any
      supplement thereto, at the date of such Prospectus or such supplement and
      at the time of purchase or the additional time of purchase, as the case
      may be, contained an untrue statement of material fact or omitted to state
      a material fact required to be stated therein or necessary to make the
      statements therein, in light of the circumstances under which they were
      made, not misleading.

3.    To such counsel's knowledge, (i) there are no legal or governmental
      proceedings pending relating to patent rights, trade secrets, trademarks,
      service marks or other proprietary information or materials of the
      Company, and (ii) no such proceedings are threatened or contemplated by
      governmental authorities or others.

4.    Such counsel does not know of any contracts or other documents, relating
      to the Company's patents, trade secrets, trademarks, service marks or
      other proprietary information or materials, of a character required to be
      described in the Registration Statement or the Prospectus or to be filed
      as an exhibit to the Registration Statement which have not been so
      described or filed.

5.    To such counsel's knowledge, (i) the Company is not infringing or
      otherwise violating any patents, trade secrets, trademarks, service marks
      or other proprietary information or materials of others, and (ii) there
      are no infringements by others of any of the Company's patents, trade
      secrets, trademarks, service marks or other proprietary information or
      materials which in such counsel's judgment could affect materially the use
      thereof by the Company.

6.    Such counsel has no knowledge of any facts which would preclude the
      Company from having valid license rights or clear title to the patents
      referenced in the Registration Statement and the Prospectus; except as
      described in the Registration Statement and the Prospectus, such counsel
      has no knowledge that the Company lacks or will be unable to obtain any
      rights or licenses to use all patents and other material intangible
      property and assets necessary to conduct the business now conducted or
      proposed to be conducted by


                                      D-1

      the Company as described in the Registration Statement and the Prospectus;
      such counsel is unaware of any facts which form a basis for a finding of
      unenforceability or invalidity of any of the Company's patents and other
      material intellectual property and assets.

7.    Such counsel is not aware of any material fact with respect to the patent
      applications of the Company presently on file that (i) would preclude the
      issuance of patents with respect to such applications, or (ii) would lead
      such counsel to conclude that such patents, when issued, would not be
      valid and enforceable in accordance with applicable regulations.


                                      D-2

                                    EXHIBIT E

                        OPINION OF HOGAN & HARTSON L.L.P.

1.    The statements (collectively, the "Regulatory Information") in the
      Registration Statement and the Prospectus regarding (a) healthcare
      regulatory matters or (b) the receipt by the Company or the Subsidiary of
      governmental approvals or clearances, and the applications for, or the
      submissions with the Food and Drug Administration regarding, such
      approvals or clearances, insofar as such statement constitute summaries of
      legal documents or legal proceedings or refer to statements of law or
      legal conclusions, at the time such Registration Statement became
      effective, as of the date of the Prospectus and at the time of purchase or
      the additional time of purchase, as the case may be, are accurate and
      complete and present fairly the information therein set forth.

2.    Nothing has come to the attention of such counsel that causes such counsel
      to believe that the Regulatory Information included in the Registration
      Statement at the time such Registration Statement became effective
      contained an untrue statement of a material fact or omitted to state a
      material fact required to be stated therein or necessary to make the
      statements therein not misleading, or that the Regulatory Information, at
      the date of the Prospectus or any supplement thereto and at the time of
      purchase or the additional time of purchase, as the case may be, contained
      an untrue statement of material fact or omitted to state a material fact
      required to be stated therein or necessary to make the statements therein,
      in light of the circumstances under which they were made, not misleading.


                                      E-1

                                    EXHIBIT F

                              OFFICERS' CERTIFICATE

1.    I have reviewed the Registration Statement and the Prospectus.

2.    The representations and warranties of the Company as set forth in this
      Agreement are true and correct as of the time of purchase and, if
      applicable, the additional time of purchase.

3.    The Company has performed all of its obligations under this Agreement as
      are to be performed at or before the time of purchase and at or before the
      additional time of purchase, as the case may be.

4.    The conditions set forth in paragraphs (i) and (j) of Section 6 of this
      Agreement have been met.

5.    The financial statements and other financial information included in the
      Registration Statement and the Prospectus fairly present the financial
      condition, results of operations and cash flows of the Company as of, and
      for, the periods presented in the Registration Statement.


                                      F-1

                                                                     EXHIBIT 3.1

                      RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                      PHARMACEUTICAL DISCOVERY CORPORATION

         The undersigned, Per Fog, in accordance with the provisions of Sections
242 and 245 of the General Corporation Law of the State of Delaware, hereby
certifies that:

         1.       He is the duly elected and acting President of Pharmaceutical
Discovery Corporation, a Delaware corporation (the "Corporation").

         2.       The Corporation was originally incorporated under the name
Pharmaceutical Discovery Corporation on February 14, 1991.

         3.       This Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of the Corporation and was duly adopted in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law of the State of Delaware.

         4.       The text of the Restated Certificate of Incorporation, as
heretofore amended or supplemented, is hereby restated and further amended to
read in its entirety as follows:

                                  ARTICLE FIRST

         The name of this corporation is MannKind Corporation (the
"Corporation").

                                 ARTICLE SECOND

         The address of the Corporation's registered office in the State of
Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, County
of New Castle 19808, and the name of its registered agent at that address is
Corporation Service Company.

                                  ARTICLE THIRD

         The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.

                                 ARTICLE FOURTH

         The total number of shares that the Corporation may issue is
105,000,000, of which 100,000,000 shall be shares of Common Stock, $0.01 par
value per share, and 5,000,000 shall be shares of Preferred Stock, $0.01 par
value per share.

         The Preferred Stock authorized by this Certificate of Incorporation may
be issued from time to time in one or more series as the Board of Directors, by
resolution or resolutions, may from time to time determine, each of said series
to be distinctively designated. The voting powers, preferences and relative,
participating, optional and other special rights, and the



qualifications, limitations or restrictions thereof, if any, of each such series
may differ from those of any and all other series of Preferred Stock at any time
outstanding, and the Board of Directors is hereby expressly granted authority to
fix and alter, by resolution or resolutions, the designation, number, voting
powers, preferences and relative, participating, optional and other special
rights, and the qualifications, limitations and restrictions thereof, of each
such series, including, but without limiting the generality of the foregoing,
the following:

                  (a)      The distinctive designation of, and the number of
         shares of Preferred Stock that shall constitute, such series, which
         number (except as otherwise provided by the Board of Directors in the
         resolution establishing such series) may be increased or decreased (but
         not below the number of shares of such series then outstanding) from
         time to time by like actions of the Board of Directors;

                  (b)      The rights in respect of dividends, if any, of such
         series of Preferred Stock, the extent of the preference or relation, if
         any, of such dividends to the dividends payable on any other class or
         classes of any other series of the same or other class or classes of
         capital stock of the Corporation, and whether such dividends shall be
         cumulative or noncumulative;

                  (c)      The right, if any, of the holders of such series of
         Preferred Stock to convert the same into, or exchange the same for,
         shares of any other class or classes or of any other series of the same
         or any other class or classes of capital stock of the Corporation and
         the terms and conditions of such conversion or exchange, including,
         without limitation, whether or not the number of shares of such other
         class or series into which shares of such series may be converted or
         exchanged shall be adjusted in the event of any stock split, stock
         dividend, subdivision, combination, reclassification or other
         transaction or series of transactions affecting the class or series
         into which such series of Preferred Stock may be converted or
         exchanged;

                  (d)      Whether or not shares of such series of Preferred
         Stock shall be subject to redemption, and the redemption price or
         prices and the time or times at which, the terms and conditions on
         which, shares of such series of Preferred Stock may be redeemed;

                  (e)      The rights, if any, of the holders of such series of
         Preferred Stock upon the voluntary or involuntary liquidation,
         dissolution or winding up of the Corporation or in the event of any
         merger or consolidation of or sale of assets by the Corporation;

                  (f)      The terms of any sinking fund or redemption or
         purchase account, if any, to be provided for shares of such series of
         Preferred Stock;

                  (g)      The voting powers, if any, of the holders of any
         series of Preferred Stock generally or with respect to any particular
         matter, which may be less than, equal to or greater than one vote per
         share, and which may, without limiting the generality of the foregoing,
         include the right, voting as a series by itself or together with the
         holders of any other series of Preferred Stock or all series of
         Preferred Stock as a class, or together with the holders of any other
         class of the capital stock of the Corporation to elect one or more
         directors of the Corporation (which, without limiting the generality of
         the foregoing, may

                                       2



         include a specified number or portion of the then-existing number of
         authorized directorships of the Corporation, or a specified number or
         portion of directorships in addition to the then-existing number of
         authorized directorships of the Corporation), generally or under such
         specific circumstances and on such conditions, as shall be provided in
         the resolution or resolutions of the Board of Directors adopted
         pursuant hereto; and

                  (h)      Such other powers, preferences and relative,
         participating, optional and other special rights, and the
         qualifications, limitations and restrictions thereof, as the Board of
         Directors shall determine.

         Each outstanding share of Common Stock, $0.01 par value per share, of
the Corporation (the "Pre-Split Common Stock") shall, automatically and without
any action on the part of the holder and effective upon the filing of this
Restated Certificate of Incorporation with the Secretary of State of Delaware
(the "Effective Time"), be reclassified and become and thereafter continue to be
..240958 of a share of Common Stock of this Corporation, $0.01 par value per
share (the "Post-Split Common Stock"), provided that the shares of Pre-Split
Common Stock issued in the name of any holder as of such time shall be converted
only into a whole number of shares at the rate of .240958 of a share for each
share theretofore outstanding and any fractional shares thus resulting shall be
treated in the manner specified below. Each holder of record of outstanding
shares of this Corporation's Pre-Split Common Stock, at the close of business on
said date, shall be entitled to receive, upon surrender of his, her or its stock
certificate or certificates, a new certificate representing the number of shares
of Post-Split Common Stock of which he, she or it is the owner after giving
effect to the provisions of this Article Fourth. Each Stockholder who has an
aggregate number of shares of Pre-Split Common Stock registered in his, her or
its name as of the Effective Time so that he, she or it would otherwise, after
giving effect to all such shares so registered, be entitled to receive a
fraction of a share of the Post-Split Common Stock as a result of the reverse
stock split will be entitled to receive from the Corporation cash equal to the
fair market value of the fractional share in accordance with Section 155 of the
General Corporation Law of the State of Delaware.

         IN WITNESS WHEREOF, this Corporation has caused this certificate to be
signed by Per Fog, its President, this 12th day of December, 2001.

                                                     /s/ Per B. Fog
                                                     ---------------------------
                                                     Per Fog, President

                                       3

                                                                     EXHIBIT 3.2

               CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
                                       OF
                            SERIES A PREFERRED STOCK
                                       OF
                              MANNKIND CORPORATION

             Pursuant to Section 151 of the General Corporation Law
                            of the State of Delaware

         MANNKIND CORPORATION, a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Certificate of Incorporation, and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, its Board of
Directors has adopted the following resolution creating a series of its
Preferred Stock designated as Series A Preferred Stock:

         RESOLVED, that a series of the class of authorized Preferred Stock of
the Corporation be hereby created, and that the designation and amount thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:

SECTION 1. SERIES AND DESIGNATION

         The shares of the series shall be designated as "Series A Preferred
Stock" (the "Series A Shares") and the number of shares constituting such
series shall be 267,213, par value $0.01 per share.

SECTION 2. DIVIDENDS

                  (a)      The holders of outstanding Series A Shares shall be
entitled to receive in any full fiscal year of the Corporation, when and as
declared by the Board of Directors, out of any assets at the time legally
available therefor, cumulative preferential cash dividends at the rate of 5.l2%
per annum based on U.S.$16.22 per Series A Share, before any cash dividend is
paid on the shares of the Corporation's Series B Preferred Stock, par value
$0.01 per share (the "Series B Shares"), and the Corporation's Common Stock,
par value $0.01 per share (the "Common Shares"), and any shares ranking junior
to the Series A Shares. Said U.S.$16.22 per share shall be subject to
appropriate and proportionate adjustment (as determined by the Board of
Directors of the Corporation) upon the occurrence of any of the events described
in Section 4(d) hereof. Such dividend or distribution may be payable annually or
otherwise, as the Board of Directors may from time to time determine. Such
dividends shall commence to accrue on each Series A Share from the date of
initial issuance thereof whether or not declared by the Board of Directors and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends and shall continue to accrue
thereon until the date all preferential amounts contemplated by Section 3 are
paid in full. So long as any Series A Shares are outstanding the Corporation
shall not declare, pay or set aside for payment any dividends or make any other
distribution with respect to the Series B Shares, the Common Shares or any other
shares ranking junior to or on a parity with the Series A Shares except at a
time when all preferential dividends under this Section 2 shall have been paid
in full. Dividends, if paid or if



declared and set apart for payment, must be paid or declared and set apart for
payment on all Series A Shares contemporaneously.

                  (b)      In the event the Corporation, after payment of the
dividends payable to the holders of the Series A Shares pursuant to Section
2(a), shall pay in the same fiscal year cash dividends or any dividend payable
in securities of other persons, evidences of indebtedness issued by the
Corporation or other persons or assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness to the
holders of Series B Shares or Common Shares, then once the holders of the Series
B Shares, the Common Shares, and any other class or series of shares entitled,
to participate therein, shall have first received, an amount per share equal to
the dividends paid to the holders of the Series A Shares pursuant to Section
2(a) in the same fiscal year, the holders of the Series A Shares shall be
entitled to a proportionate share of any such dividends as though the holders of
the Series A Shares were the holders of the number of Common Shares of the
Corporation into which their respective shares of Series A Shares are
convertible as of the record date fixed for the determination of the holders of
Common Shares of the Corporation entitled to receive such distribution.

SECTION 3. LIQUIDATION RIGHTS

         In the event of any voluntary or involuntary liquidation. dissolution
or winding up of the affairs of the Corporation, the holders of each Series A
Share shall be entitled to receive, on a parity with the holders of the Series B
Shares and prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common Shares of the
Corporation or any shares ranking junior to the Series A Shares, an amount equal
to (i) U.S.$l6.22 per share for each Series A Share then held by them plus (ii)
all accrued and unpaid dividends thereon, (whether or not declared); from and
including the issue date to the date of such liquidation, dissolution or winding
up (such cumulative amount to be compounded annually at the rate provided in
Section 2(a) and computed on the basis of a 360-day year of 30 - day months and,
for any period less than a month, the actual number of days elapsed in such
month), excluding any dividends actually declared and paid and any cumulative
amount paid with respect thereto. Said U.S.$16.22 per share shall be subject to
appropriate and proportionate adjustment (as determined by the Board of
Directors of the Corporation) upon the occurrence of any of the events described
in Section 2(d) hereof.

         All of the preferential amount to be paid to the holders of the Series
A Shares under this Section 3 and to the holders of the Series B Shares shall be
paid or set apart for payment before the payment or setting apart for payment of
any amount for, or the distribution of any assets of the Corporation to, the
holders of the Common Shares or any shares ranking junior to the Series A Shares
in connection with such liquidation, dissolution or winding up. After the
payment or the setting apart for payment to the holders of the Series A Shares,
the Series B Shares and any other class or series of shares senior to the Common
Shares with respect to the payment of dividends of the preferential amounts so
payable to them, the holders of shares of Common Shares and any other class or
series of shares entitled to participate therein shall be entitled to receive
out of assets of the Corporation available for distribution, an amount per share
equal to the above preferential amount per share paid to the holders of the
Series A Shares. Thereafter, any assets shall be distributed ratably to the
holders of the Corporation's Common Shares, and to the holders of the Series A
Shares or any other class or series of shares entitled to

                                       2



participate therein, each Series A Share being treated as the number of Common
Shares into which it could then be converted for such purpose.

         If the assets or surplus funds to be distributed to the holders of the
Series A Shares and the Series B Shares and any other class or series ranking on
a parity with the Series A Shares with respect to the payment of dividends is
insufficient to permit the payment to such holders of their full preferential
amount, the assets and surplus funds legally available for distribution shall be
distributed ratably among the holders of the Series A Shares, the Series B
Shares and such other class or series ranking on a parity with the Series A
Shares in proportion to the full preferential amount each such holder is
otherwise entitled to receive.

         For purpose of this Section 3, in the event of (A) any acquisition of
the Corporation by means of a merger or consolidation in which all of the
outstanding shares of the Corporation are exchanged for securities and/or other
consideration issued, or caused to be issued, by the acquiring Corporation or
its subsidiary (other than a mere reincorporation or comparable transaction),
(B) any issuance or series of issuances within any six-month period pursuant to
an agreement to which the Corporation is a party (other than a registered public
offering pursuant to which the Series A Shares are automatically converted into
Common Shares) of voting securities constituting greater than fifty percent
(50%) of the Corporation's voting securities outstanding immediately prior to
the first such issuance (assuming conversion of the Series A Shares to Common
Shares as of the date of such first issuance) or (C) a sale of all or
substantially all of the assets of the Corporation, unless waived by the
holders, the mandatory redemption provisions contained in Section 5(b) hereof
shall apply and the holders of Series A Shares shall be entitled to receive,
upon the consummation of the transaction involving the Corporation, in cash or
securities, the amounts as specified in Section 5(b).

         Whenever the distribution provided for in this Section 3 shall be
payable in property other than cash, the value of such distribution shall be the
fair market value of such property, as determined in good faith by the Board of
Directors.

SECTION 4. CONVERSION

         The holders of the Series A Shares shall have conversion rights as
follows (the "Conversion Rights"):

                  (a)      Right to Convert. Each Series A Share shall be
convertible, without the payment of any additional consideration by the holder
thereof, and at the option of the holder thereof, at anytime after the date of
issuance of such share, at the registered office of the Corporation, into such
number of fully paid and non-assessable Common Shares as is determined by
dividing U.S.$16.22 by the Conversion Price, determined as hereinafter provided,
in effect at the time of conversion. The Conversion Price at which Common Shares
shall be deliverable upon conversion without (he payment of any additional
consideration by the holder thereof (the "Conversion Price") shall be the lowest
of:

                           (i)      U.S.$1.622

                           (ii)     the lowest per share price at which any
         Common Shares or any other shares of capital stock of the Corporation
         are issued after the date of issuance of the

                                       3



         first shares of Series A Preferred Stock (the "Date of Initial
         Issuance") and prior to or concurrently with such conversion (other
         than any described in (iii) below or pursuant to the exercise of
         Employee Stock Options or options outstanding on the Date of Initial
         Issuance), and

                           (iii)    if options or other securities or rights
         convertible or exchangeable into or exercisable to purchase Common
         Shares or any other shares of capital stock of the Corporation (other
         than Employee Options) are issued after the Date of Initial Issuance
         and prior to or concurrently with such conversion of the Series A
         Shares, the lowest for any such issuance of the sum of (a) the
         consideration paid for any such options, securities or other rights
         divided by the number of Common Shares or other shares issuable
         pursuant thereto, plus (b) any additional per share consideration
         payable upon such conversion, exchange or exercise (excluding the
         surrender or loss of rights with respect to the securities referred to
         in (a)).

"Employee Stock Options" means options granted to employees of the Corporation
or its subsidiaries pursuant to a stock option plan approved by the Board of
Directors of the Corporation and providing for the granting of options to
purchase of not to exceed 2,202,000 Common Shares. Each person who converts
Series A Shares shall nonetheless be entitled to all dividends which have
accrued on the shares converted and have been declared by the Board of Directors
of the Corporation but not paid.

                  (b)      Automatic Conversion. Each Series A Share shall
automatically be converted into Common Shares at the then effective Conversion
Price upon the closing of an initial public offering of Common Shares in which
the aggregate net proceeds (gross proceeds less underwriting discounts and
commissions and offering expenses) equal or exceed $20,000,000, the price of the
Common Shares paid in such offering reflects a pre-offering valuation of the
Corporation of at least $30,000,000 and the Common Shares are listed or approved
for listing upon notice of issuance on the New York or American Stock Exchange
or approved for quotation on the Nasdaq National Market or listed or approved
for listing on the Montreal or Toronto Stock Exchange. In the event of such
offering, the person(s) entitled to receive the Common Shares issuable upon such
conversion of the Series A Shares shall not be deemed to have convened such
Series A Shares until immediately prior to the closing of such offering. Each
person who holds of record Series A Shares immediately prior to such automatic
conversion shall be entitled to all dividends which have accrued to the time of
the automatic conversion and shall have been declared by the Board of Directors
but not paid on the Series A Shares pursuant to Section 2 hereof. Such dividends
shall be paid to all such holders within thirty (30) days of the automatic
conversion.

                  (c)      Mechanics of Conversion. No fractional Common Shares
shall be issued upon conversion of the Series A Shares. In lieu of any
fractional shares in which the holder would otherwise be entitled, the
Corporation shall pay equal to such fraction multiplied by the then fair value
of one Common Share (as determined by the Board of Directors of the
Corporation). Before any holder of Series A Share shall be entitled to convert
the same into Common Shares under Section 4(a) or receive certificates for the
Common Shares issued upon conversion under Section 4(b), such holder shall
surrender the certificate or certificates therefor, duly endorsed, at the
registered office of the Corporation and shall give written notice to the

                                       4



Corporation at such office that he elects to convert the same and the number of
shares he wishes to so convert (unless the provisions of Section 4(b) shall
apply, in which case notice shall not be required) and shall state therein his
name, or the name or names of his nominees in which he wishes the certificate or
certificates for Common Shares to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series A Shares or to his nominee or nominees, a certificate or certificates for
the number of Common Shares to which he shall be entitled as aforesaid, together
with cash in lieu of any fraction of a share. Such conversion under Section 4(a)
shall be deemed to have been made immediately prior to the closing of business
on the date of such surrender of the certificate representing the Series A
Shares to be converted, and such conversion under Section 4(b) shall be deemed
to have been made immediately prior to the closing of the public offering
referred to therein. The person or persons entitled to receive the Common Shares
issuable upon conversion shall be treated for all purposes as the record holder
or holders of such Common Shares on such date and, in the case of an automatic
conversion pursuant to Section 4(b), the certificates for the Series A Shares so
converted shall be deemed to evidence the number of Common Shares into which
they have been converted. If less than all of the Series A Shares represented by
the certificate(s) accompanying the notice are to be converted, the holder shall
be entitled to receive, at the expense of the Corporation, a new certificate
representing the Series A Shares not so converted.

                  (d)      Further Adjustment to Conversion Price. In the event
of any stock dividend, stock subdivision or redivision or change in the Common
shares at any time while Series A Shares are outstanding into a greater number
of Common Share, the Corporation shall deliver upon any conversion of the Series
A Shares such additional number of Common Shares as would have resulted from
such stock, dividend, subdivision, redivision or change if the conversion had
occurred prior to the date of such subdivision, redivision or change and an
appropriate and proportionate adjustment shall be made in the conversion price
determined pursuant to Sections 4(a)(i), (ii) and (iii). In the event of any
reverse stock split, consolidation or change of the Common Shares into a lesser
number of shares, the Corporation shall deliver upon any conversion of the
Series A Shares such lesser number of Common Shares as would have resulted from
such reverse stock split, consolidation or change if the conversion had occurred
prior to the adjustment of such reverse stock split, consolidation or change and
an appropriate and proportionate adjustment shall be made in the conversion
price determined pursuant to Sections 4(a)(i), (ii) and (iii). If the
outstanding Common Shares are converted into a different series or class of
capital stock or the right to receive money or property or securities (whether
as a result of a recapitalization, merger, consolidation or otherwise), an
appropriate and proportionate adjustment shall be made in the nature and amount
of consideration to be received by the holders of the Series A Shares upon
conversion of such Shares.

                  (e)      Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant to this Section
4, the Corporation, at its expense, promptly shall compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Shares, a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Series A Shares, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price at the time in effect, and (iii) the

                                       5



number of Common Shares and the amount, if any, of other property which at the
time would be received upon the conversion of Series A shares.

                  (f)      Notices of Record Date. In the event of any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the Corporation shall mail to each
holder of Series A Shares, at least ten (10) days prior to the date specified
herein, a notice specifying the date on which any such record is to be taken for
the purpose of such dividend or distribution.

                  (g)      Common Shares Reserved. The Corporation shall reserve
and keep available out of its authorized but unissued Common Shares, such number
of Common Shares as shall, from time to time, be sufficient for conversion of
the Series A Shares.

SECTION 5. REDEMPTION

                  (a)      Optional Redemption. At any time and from time to
time after September 30, 2002, each holder of the Series A Shares shall have the
right, unless postponed or waived as provided below, to compel the Corporation
to redeem out of funds legally available therefor any or all of such holder's
Series A Shares for an amount equal to (i) U.S.$16.22 per share, plus (ii) an
amount equal to the cumulative amount of dividends which have accrued (whether
or not declared) from and including the issue date to the date of redemption,
excluding any dividends actually declared and paid prior to such date on each
Series A Share to be redeemed; provided that such redeeming holder shall have
given written notice thereof to the Corporation at least thirty (30) days prior
to the requested date of redemption. Such notice shall state the number of
shares of Series A Shares to be redeemed.

                  On or after the date of redemption as specified in such
notice, the holder requesting redemption shall surrender his certificates for
the number of shares to be redeemed as stated in the notice to the Corporation
and the Corporation shall deliver payment therefor pursuant to this Section 5.
If less than all of the shares represented by such certificates are redeemed, a
new certificate shall be issued for the unredeemed shares.

                  (b)      Mandatory Redemption. In the event of the
consummation of a transaction specified in Section 3(A), (B) or (C) hereof,
unless waived as provided below, the Corporation shall redeem all outstanding
Series A Shares at the Corporation's expense upon consummation of any such
transaction and shall pay or cause to be paid, out of assets legally available
therefor, an amount determined as of such consummation date as described in the
next sentence, whether or not any such transaction actually involves a
liquidation, dissolution or winding up of the Corporation.

                  For purposes of determining the amount payable in accordance
with the foregoing, the following shall apply:

                           (x)      Upon consummation of a transaction specified
         in Section 3(A) or (C), the holders of the Series A Shares shall be
         entitled to receive, out of assets legally available therefor, a
         redemption payment equal to the sum of the amounts described in

                                       6




         Sections 3(i) and (ii), plus an amount, if any, representing what such
         holders would have been entitled to receive, assuming a total
         liquidation of the Corporation, in a ratable distribution of remaining
         assets valued at the consideration paid in the transaction specified in
         Section 3(A) or (C) (after an assumed payment to the holders of Common
         Shares in an amount per share equal to the aggregate preferential
         amount paid per share to the holders of the Series A Shares as
         described in Sections 3(i) and (ii)), as described in the second
         paragraph of Section 3 and determined in good faith by the Board of
         Directors of the Corporation; and

                           (y)      Upon consummation of the transaction
         specified in Section 3(B), the holders of the Series A Shares shall be
         entitled to receive, out of assets legally available therefor, a
         redemption payment equal to the sum of the amounts in Sections 3(i) and
         (ii).

                  In the event of a transaction described in (A) or (C) of
Section 3, such amount shall be paid in the form of securities or other
consideration (and in the same proportion of such different forms of
consideration) received in the transaction or (at the option of the Corporation)
in cash equivalent value (as determined by the Board of Directors of the
Corporation). In the event of a transaction described in (B) of Section 3, such
amount shall be paid in cash.

                  No such redemption shall occur, however, in the event of a
transaction described in Section 3(A) above if the terms of the transaction
provide for the holders of the Series A Shares to receive in the transaction a
consideration at least equal in value to what they would have received in such a
redemption (as determined by the Board of Directors of the Corporation). The
Corporation shall give notice of a transaction specified in Section 3 (A), (B)
or (C) by mail, postage prepaid, at least ten (10) days prior to the date of
consummation of such transaction to the holders of record of the Series A
Shares. Such notice shall be addressed to each holder at the address at it
appears on the stock transfer books of the Corporation and shall specify the
scheduled date of consummation of such transaction. Each holder of Series A
Shares may waive the performance by the Corporation of its obligations under
this Section 3(b) by written notice to the Corporation given at least two (2)
days prior to the scheduled date of consummation of the transaction, and in the
event of such a waiver, no such mandatory redemption shall occur as to the
Series A Shares held by the holder making the waiver.

SECTION 6. VOTING RIGHTS

                  (a)      Each share of Series A Shares shall be entitled to
notice of any shareholders' meeting and to vote with the Common Shares of the
Corporation upon any matter submitted to the shareholders for a vote. Each
holder of Series A Shares shall be entitled to one vote per share for each
Common Share into which it is convertible

                  (b)      In addition to any other rights provided by law, so
long as any Series A Shares shall be outstanding, the Corporation shall not,
without first obtaining the affirmative vote of the holders of not less than
two-thirds of the outstanding Series A Shares:

                           (1)      Take any action (including, without
         limitation, any repeal, amendment or modification to the Corporation's
         Certificate of Incorporation or Bylaws)

                                       7


         which alters or changes any of the rights, privileges and preferences
         of the Series A Shares materially and adversely (including, without
         limitation, any changes in the size of the Board of Directors); or

                           (2)      Take any action which increase the number of
         authorized Series A Shares other than as required by this Article IV;
         or

                           (3)      Take any action which creates any new class
         or series of shares, or reclassifies any class or series into shares
         having any preference or priority as to dividends or assets upon
         liquidation superior to, or on a parity with, any such preference or
         priority of the Series A Shares; or

                           (4)      Redeem or repurchase shares of the
         Corporation's capital stock, other than shares repurchased by the
         Corporation (a) pursuant to Section 5 above, or (b) pursuant to
         agreements with the Corporation existing as of the effective date of
         this amendment.

         IN WITNESS WHEREOF, MannKind Corporation has caused this Certificate of
Designation, Preferences and Rights of Series A Preferred Stock to be signed
this 12th day of December 2001.

                                              MANNKIND CORPORATION

                                              By: /s/ Per B. Fog
                                                  ------------------------------
                                                  Per B. Fog, President

                                        8

                                                                     EXHIBIT 3.3

               CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
                                       OF
                            SERIES B PREFERRED STOCK
                                       OF
                              MANNKIND CORPORATION

             Pursuant to Section 151 of the General Corporation Law
                            of the State of Delaware

         MANNKIND CORPORATION, a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Certificate of Incorporation, and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, its Board of
Directors has adopted the following resolution creating a series of its
preferred Stock designated as Series B Preferred Stock;

         RESOLVED, that a series of the class of authorized Preferred Stock of
the Corporation be hereby created, and that the designation and amount thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of each such series, and the qualifications,
limitations or restrictions thereof are as follows:

         Section 1. Designation and Amount. The shares of one such series shall
be designated as "Series B Preferred Stock" (the "Series B Preferred Stock") and
the number of shares constituting such series shall be 192,618, par value $0.01
per share.

         Section 2. Dividends. No dividend shall be declared or paid, during any
fiscal year, on the Common Stock, par value $0.01 per share, of the Corporation
(the "Common Stock") (other than dividends payable solely on the Common Stock in
Common Stock of the Corporation or rights to acquire Common Stock for no
consideration in respect of which an adjustment is made under Section 5(c)),
unless there is simultaneously declared and paid to the holder or holders of
each share of the Series B Preferred Stock an identical dividend determined as
if each holder of Series B Preferred Stock had converted such holder's shares of
Series B Preferred Stock into Common Stock.

         Section 3. Preference.

         (a)      In the event of any liquidation, dissolution, or winding-up of
the Corporation, (i) holders of shares of Series B Preferred Stock shall be
entitled to receive, out of the assets of the Corporation legally available
therefor, on a parity with the holders of the Series A Preferred Stock, par
value $0.01 per share, of the Corporation (the "Series A Preferred Stock") and
prior and in preference to the holders of Common Stock an amount (the "Series B
Liquidation Preference") equal to the sum of (i) $77.875 per share of Series B
Preferred Stock (subject to proportionate adjustment in the event of any stock
dividend, stock split, combination, reorganization, recapitalization,
reclassification, or other similar event), plus (ii) all accrued or declared but
unpaid dividends thereon, if any. If, upon any liquidation, dissolution, or
winding-up, whether voluntary or involuntary, the assets thus distributed among
the holders of Series B Preferred Stock shall be insufficient to permit payment
to such holders of the full Series B Liquidation Preference amounts to which
they are entitled, then the entire assets of the



Corporation to be distributed shall be distributed ratably among the holders of
Series A Preferred Stock and Series B Preferred Stock in proportion to the
respective unpaid balances owing to them in respect of such preferential
amounts. At the option of the holders of at least a majority of the then
outstanding shares of Series B Preferred Stock, a consolidation or merger of the
Corporation with or into any other corporation or corporations (except the
merger of a wholly owned subsidiary of the Corporation into the Corporation) or
a sale of all or substantially all of the assets of the Corporation, shall be
deemed to be a liquidation, dissolution, or winding-up within the meaning of
this Section 3.

         (b)      After payment or setting apart for payment of the Series B
Liquidation Preference and the preference of any other series of preferred
stock, the remaining assets and funds of the Corporation shall be distributed
ratably among the holders of Common Stock in proportion to the amount of Common
Stock owned by each such holder.

         Section 4. Voting Rights. The holders of the Series B Preferred Stock
shall have the voting rights set forth in this Section 4.

         (a)      Each share of Series B Preferred Stock shall entitle the
holder thereof to one vote for each share of Common Stock into which it is then
convertible (whether or not it is then immediately convertible) on all matters
submitted to a vote of the Corporation's stockholders.

         (b)      Except as otherwise provided by law, the holders of the Series
B Preferred Stock and the holders of Common Stock shall vote together as one
class on all matters submitted to a vote of the Corporation's stockholders.

         Section 5. Conversion Rights.

         (a)      Automatic Conversion. Each share of Series B Preferred Stock
shall automatically be converted into full shares of Common Stock at the then
effective Conversion Price upon the closing of a firm commitment underwritten
public offering covering the Corporation's Common Stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended, where the
gross proceeds to the Corporation and the holders of the Series B Preferred
Stock are at least $15,000,000. The term "Conversion Price" as used herein shall
mean the price per share at which the Series B Preferred Stock is convertible
into Common Stock which initially shall be equal to $7.7875 per share and shall
be adjusted as provided herein. The term "Sale Price" shall mean the price per
share at which the Series A Convertible Preferred Stock of AlleCure Corp. was
originally issued, as adjusted in the merger of AlleCure Acquisition, Inc., a
wholly-owned subsidiary of the Corporation, into AlleCure Corp., equal in the
case of all shares of the Series B Preferred Stock to $77.875. Each share of
Preferred Stock shall be convertible into that number of full shares of Common
Stock which results from dividing the applicable Sale Price by the applicable
Conversion Price in effect at the time of conversion.

         (b)      Conversion Procedure. Upon the closing of a public offering
described in Section 5(a), the holders of Series B Preferred Stock shall
surrender the certificate or certificates therefor, duly endorsed in blank or
accompanied by proper instruments of transfer, at the office of the Corporation
or of any transfer agent for the shares of the Series B Preferred Stock. The

                                       2



Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of shares of the Preferred Stock, or to such holder's
nominee or nominees, certificates for the number of full shares of Common Stock
to which such holder shall be entitled. Such conversion shall be deemed to have
been made as of the date of the closing of the public offering referred to
above, regardless of the date of surrender of the shares of the Preferred Stock
to be converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on the date the
conversion shall be deemed to have been made. Any declared but unpaid dividends
due on the shares of Series B Preferred Stock to be converted shall be paid by
the Corporation to the holders thereof on the date such shares are surrendered
for conversion.

         (c)      Anti-Dilution of Preferred Stock. In order to prevent dilution
of the conversion rights granted in this Section 5, the Conversion Price shall
be subject to adjustment from time to time as provided in this Section 5(c).

                  (i)      Subdivision or Combination of Stock. If the
Corporation shall subdivide its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and conversely, if the
outstanding shares of Common Stock of the Corporation shall be combined into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased, in each case so that the
holders of shares of the Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock which such
holders would have owned or been entitled to receive after the happening of
either of such events if such shares of the Series B Preferred Stock had been
converted immediately prior to the happening of such event on the day upon which
such subdivision or combination, as the case may be, becomes effective.

                  (ii)     Stock Dividends. If the Corporation shall declare and
pay to the holders of Common Stock a dividend or other distribution payable in
shares of Common Stock, the Conversion Price in effect immediately prior thereto
shall be adjusted so that the holders of shares of the Series B Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock which such holders would have owned or been entitled to
receive after the declaration and payment of such dividend or other distribution
if such shares of the Series B Preferred Stock had been converted immediately
prior to the record date for the determination of shareholders entitled to
receive such dividend or other distribution.

                  (iii)    Issuance of Common Stock. Subject to the provisions
of subparagraph (vi) of this Section 5(c), if the Corporation shall issue or
sell shares of Common Stock at a price per share below the applicable Conversion
Price, as the same may have been adjusted pursuant to this Section 5(c), the
Conversion Price of the Series B Preferred Stock shall be adjusted so that it
shall equal the price (calculated to the nearest cent) determined by multiplying
the Conversion Price of the Series B Preferred Stock in effect immediately prior
to the date of issuance of such shares of Common Stock by a fraction, the
numerator of which shall be the sum of (i) the number of shares of Common Stock
outstanding immediately prior to such issuance plus (ii) the number of shares of
Common Stock which the aggregate consideration to be received by the Corporation
for the total number of shares of Common Stock to be so issued

                                       3


would purchase at the Conversion Price of such class in effect immediately prior
to the date of issuance of such shares of Common Stock, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of additional shares of Common Stock to
be so issued.

                  (iv)     Issuance of Convertible Securities or Warrants.
Subject to the provisions of subparagraph (vi) of Section 5(c), if the
Corporation shall (a) issue or sell securities which are convertible into or
exchangeable for shares of Common Stock ("Convertible Securities"), or (b) issue
or sell any warrants or other rights entitling the holders thereof to subscribe
for or purchase shares of Common Stock or Convertible Securities at a price per
share (taking into account the consideration, if any, received by the
Corporation for such Convertible Securities, warrants or other rights) below the
applicable Conversion Price, as the same may have been adjusted pursuant to this
Section 5(c), the Conversion Price of the Series B Preferred Stock shall be
adjusted so that it shall equal the price determined by multiplying the
Conversion Price of the Series B Preferred Stock in effect immediately prior to
the date of issuance of such Convertible Securities or such warrants or other
rights by a fraction the numerator of which shall be the sum of (i) the number
of shares of Common Stock outstanding on the date of issuance of such
Convertible Securities or such warrants or other rights plus (ii) the number of
shares of Common Stock which the aggregate offering price (as calculated
pursuant to the last sentence of this subparagraph) of the total number of
shares of Common Stock offered pursuant to such Convertible Securities or such
warrants or other rights would purchase at the Conversion Price in effect
immediately prior to the date of issuance of such Convertible Securities or such
warrants or other rights, and the denominator of which shall be the number of
shares of Common Stock outstanding on the date of issuance of such Convertible
Securities or such warrants or other rights plus the number of additional shares
of Common Stock offered for subscription or purchase pursuant to such
Convertible Securities or such warrants or other rights. No adjustment of the
Conversion Price shall be made upon the actual issuance of shares of Common
Stock pursuant to such Convertible Securities or such warrants or other rights
except as otherwise provided in Section 5(c)(v). The "aggregate offering price,"
as used above in this Section 5(c)(iv), shall equal the sum of the consideration
paid to the Corporation for such Convertible Securities or such warrants or
other rights plus the minimum consideration receivable by the Corporation for
the issuance of additional shares of Common Stock pursuant to such Convertible
Securities, warrants or other rights.

                  (v)      Additional Adjustments to Conversion Prices Rules of
Interpretation

                           (A)      Change in Exercise Price or Conversion Rate.
         If the purchase or conversion price provided for in any Convertible
         Securities or warrants or other rights, the additional consideration,
         if any, payable upon the conversion or exchange of any Convertible
         Securities or warrants or other rights, or the rate at which any
         Convertible Securities or warrants or other rights are convertible into
         or exchangeable for shares of Common Stock shall change at any time
         (other than under provisions designed to protect against dilution), the
         Conversion Price in effect at the time of such change shall forthwith
         be adjusted to the Conversion Price which would have been in effect at
         such time had such Convertible Securities or warrants or other rights
         then outstanding provided for such changed purchase price, additional
         consideration or conversion rate, as the

                                       4


         case may be, at the time initially issued, granted or sold. If the
         purchase price provided for in any Convertible Securities or warrants
         or other rights or the rate at which any Convertible Securities or
         warrants or other rights are convertible into or exchangeable for
         shares of Common Stock shall be reduced at any time under provisions
         designed to protect against dilution, then in case of delivery of
         shares of Common Stock upon the exercise of or upon conversion or
         exchange of such Convertible Securities or such warrants or other
         rights, the Conversion Price then in effect hereunder shall be adjusted
         to the amount which would have been obtained had such Convertible
         Securities or other such warrants or other rights never been issued as
         to such Common Stock and had an adjustment of the Conversion Price been
         made upon the issuance of such shares of Common Stock to be so
         delivered.

                           (B)      Treatment of Expired Options and Unexercised
         Convertible Securities. On the expiration of any option granted by the
         Corporation in respect of its Common Stock or the termination of any
         right to convert or exchange any Convertible Securities, the Conversion
         Price then in effect hereunder shall be increased to the Conversion
         Price which would have been in effect at the time of such expiration or
         termination had such option or Convertible Securities never been
         issued.

                           (C)      Internal Transaction. In case any
         Convertible Securities, warrants or other rights issued, sold or
         granted by the Corporation in respect of its Common Stock shall be
         issued in connection with the issue or sale of other securities of the
         Corporation, together comprising one integral transaction in which no
         specified consideration is allocated to such Convertible Securities,
         warrants or other rights by the parties thereto, such Convertible
         Securities, warrants or other rights shall be deemed to have been
         issued without consideration; provided, however, that the Corporation's
         Board of Directors at the time of any such issuance of Convertible
         Securities shall determine whether to allocate specified consideration
         to the Convertible Securities.

                           (D)      Consideration for Stock. In case any shares
         of Common Stock, Convertible Securities, warrants or other rights shall
         be issued or sold or deemed to have been issued or sold for cash, the
         consideration received therefor shall be deemed to be the amount
         received by the Corporation therefor. In case any shares of Common
         Stock, Convertible Securities, warrants or other rights shall be issued
         or sold for a consideration other than cash, the amount of the
         consideration other than cash received by the Corporation shall be the
         fair value of such consideration as determined reasonably and in good
         faith by a majority of the Board.

                           (E)      Treasury Shares. The number of shares of
         Common Stock outstanding at any given time shall not include shares
         owned or held by or for the account of the Corporation, and the
         disposition of any shares so owned or held shall be considered an issue
         or sale of Common Stock for the purposes of Section 5(c)(iii).

                                       5


                           (F)      Record Date. For purposes of this Section
         5(c), if the Corporation shall take a record of the holders of its
         Common Stock for the purpose of entitling them (i) to receive a
         dividend or other distribution payable in Common Stock, Convertible
         Securities, warrants or other rights, or (ii) to subscribe for or
         purchase the same, then such record date shall be deemed to be the date
         of the issue or sale of the shares of Common Stock deemed to have been
         issued or sold upon the declaration of such dividend or the making of
         such other distribution or the date of the granting of such right or
         subscription or purchase, as the case may be.

                  (vi)     Exclusion of Certain Issuances. The Corporation shall
be permitted to issue or grant rights to acquire Additional Shares of Common
Stock (as defined in the next sentence) and to issue such shares of Common Stock
upon the exercise of such rights without giving rise to an adjustment under the
provisions of this Section 5(c). The term "Additional Shares of Common Stock" as
used herein shall mean: (a) shares of Common Stock issued upon conversion of the
Series A or Series B Preferred Stock; (b) shares of Common Stock (or rights to
acquire Common Stock) issued pursuant to stock option plans, stock purchase
plans, stock bonus plans or other forms of stock incentive plans for officers,
employees, consultants or directors of the Corporation, provided that each such
plan and issuance or grant has been approved by the Corporation's Board of
Directors by unanimous vote of all members; and (c) shares of Common Stock
issued as a dividend or distribution on the Series B Preferred Stock.

                  (vii)    Reorganization, Reclassification, Consolidation,
Merger or Sale. If any capital reorganization or reclassification of the capital
stock of the Corporation, or consolidation or merger of the Corporation with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the holders of the Series B Preferred
Stock shall thereafter have the right to acquire and receive upon conversion of
the Series B Preferred Stock such shares of stock, securities or assets as would
have been issuable or payable (as part of the reorganization, reclassification,
consolidation, merger or sale) with respect to or in exchange for such number of
outstanding shares of the Corporation's Common Stock as would have been received
upon conversion of the Preferred Stock immediately before such reorganization,
reclassification, consolidation, merger or sale. In any such case appropriate
provision shall be made with respect to the rights and interests of the holders
of the Preferred Stock to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Conversion Price and of the number
of shares acquirable and receivable upon the conversion of the Preferred stock)
shall thereafter be applicable as nearly as possible, in relation to any shares
of stock, securities or assets thereafter deliverable upon the conversion of the
Preferred Stock (including an immediate adjustment of the Conversion Price under
Section 5(c)(i) if the value for the Common Stock, as reflected by the terms of
such consolidation, merger or sale is less than the Conversion Price in effect
immediately prior to such consolidation, merger or sale). The Corporation will
not effect any such consolidation, merger or sale unless prior to the
consummation thereof the successor corporation (if other than the Corporation)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume by written instrument mailed or delivered to the holders of
the Preferred Stock at the last address of each such holder appearing on the
books of

                                       6


the Corporation the obligation to deliver to each such holder such shares of
stock, securities or assets to which, in accordance with the foregoing
provisions, such holder may be entitled.

         (d)      Fractional Shares. No fractional share shall be issued upon
the conversion of any share or shares of Series B Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series B Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Corporation's Board of Directors).

         IN WITNESS WHEREOF, MannKind Corporation has caused this Certificate of
Designation, Preferences and Rights of Series B Preferred Stock to be signed
this 12th day of December 2001.

                                                     MANNKIND CORPORATION

                                                     By: /s/ Per B. Fog
                                                        ------------------------
                                                         Per B. Fog, President

                                       7

                                                                     EXHIBIT 3.4

               CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
                                       OF
                            SERIES C PREFERRED STOCK
                                       OF
                              MANNKIND CORPORATION

             Pursuant to Section 151 of the General Corporation Law
                            of the State of Delaware

         MANNKIND CORPORATION, a Delaware corporation (the "CORPORATION" or the
"COMPANY"), hereby certifies that:

         ONE: The original name of this Corporation was Pharmaceutical Discovery
Corporation and the date of filing of the original Certificate of Incorporation
of this Corporation with the Secretary of State of the State of Delaware was
February 14, 1991. The Restated Certificate of Incorporation of this Corporation
(the "RESTATED CERTIFICATE") was filed with the Secretary of State of the State
of Delaware on December 12, 2001.

         TWO: Pursuant to the authority contained in Article IV of the Restated
Certificate, and in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the Company
has adopted the following resolution creating a series of its Preferred Stock
designated as the Series C Preferred Stock:

         RESOLVED, that a series of the class of authorized Preferred Stock of
the Corporation be hereby created, and that the designation and amount thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:

         1.       DESIGNATION AND AMOUNT. The shares of the series shall be
designated as "Series C Preferred Stock" (the "SERIES C PREFERRED"), and the
number of shares constituting such series shall be [686,275], par value $0.01
per share.

         2.       DIVIDEND RIGHTS.

                  (a)      Holders of Series C Preferred shall not be entitled
to receive dividends unless and until such dividends are declared by the Board
of Directors (the "BOARD") out of funds that are legally available therefor. No
dividend shall be declared or paid, during any fiscal year, on the Company's
Common Stock (other than dividends payable solely on the Company's Common Stock
in Common Stock or rights to acquire Common Stock for no consideration in
respect of which an adjustment is made under Section 6(f)), unless there is
simultaneously declared and paid to the holder or holders of each share of
Series C Preferred an identical dividend determined as if each holder of Series
C Preferred had converted such holder's shares of Series C Preferred into Common
Stock. Such dividends, if any, paid on the Series C Preferred shall be
non-cumulative.

                                       1.



                  (b)      The "ORIGINAL ISSUE PRICE" of the Series C Preferred
shall be $51.00.

                  (c)      So long as any shares of Series C Preferred are
outstanding, the Company shall not pay or declare any dividend, whether in cash
or property, or make any other distribution on the Series A Preferred, Series B
Preferred or Common Stock, or purchase, redeem or otherwise acquire for value
any shares of Common Stock until all dividends as set forth in Section 1(a)
above on the Series C Preferred shall have been paid or declared and set apart,
except for:

                           (i)      acquisitions of Common Stock by the Company
pursuant to agreements which permit the Company to repurchase such shares at
cost (or the lesser of cost or fair market value) upon termination of services
to the Company; or

                           (ii)     acquisitions of Common Stock in exercise of
the Company's right of first refusal, if any, to repurchase such shares.

                  (d)      In the event dividends are paid on any share of
Series A Preferred, Series B Preferred or Common Stock, the Company shall pay an
additional dividend on all outstanding shares of Series C Preferred in a per
share amount equal (on an as-if-converted to Common Stock basis) to the amount
paid or set aside for each share of Series A Preferred, Series B Preferred or
Common Stock, as the case may be.

                  (e)      The provisions of Sections 2(c) and 2(d) shall not
apply to a dividend payable in Common Stock, or any repurchase of any
outstanding securities of the Company that is approved by (i) the Board and (ii)
the Series C Preferred, which approval may be evidenced by the written or oral
approval of the person serving as the representative of the Series C Preferred.

                  (f)      The holders of the Series C Preferred expressly waive
their rights, if any, as described in California Code Sections 502, 503 and 506
as they relate to repurchases of shares of Common Stock upon termination of
employment or service as a consultant or director.

         3.       VOTING RIGHTS.

                  (a)      GENERAL RIGHTS. Each holder of shares of the Series C
Preferred shall be entitled to the number of votes equal to the number of shares
of Common Stock into which such shares of Series C Preferred could be converted
(pursuant to Section 4 hereof) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written consent
and shall have voting rights and powers equal to the voting rights and powers of
the Common Stock and shall be entitled to notice of any stockholders' meeting in
accordance with the bylaws of the Company. Except as otherwise provided herein
or as required by law, the Series C Preferred shall vote together with the
Common Stock at any annual or special meeting of the stockholders and not as a
separate class, and may act by written consent in the same manner as the Common
Stock.

                                       2.



         4.       LIQUIDATION RIGHTS.

                  (a)      Upon any liquidation, dissolution, or winding up of
the Company, whether voluntary or involuntary (a "LIQUIDATION EVENT"), before
any distribution or payment shall be made to the holders of any Series A
Preferred, Series B Preferred or Common Stock, subject to the right of any other
series of Preferred Stock that may from time to time come into existence, the
holders of Series C Preferred shall be entitled to be paid out of the assets of
the Company legally available for distribution, or the consideration received in
such transaction, for each share of Series C Preferred held by them, an amount
per share of Series C Preferred equal to the Original Issue Price plus all
declared and unpaid dividends on the Series C Preferred (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares after the filing date hereof). If, upon any such
liquidation, dissolution, or winding up, the assets of the Company (or the
consideration received in such transaction) shall be insufficient to make
payment in full to all holders of Series C Preferred of the liquidation
preference set forth in this Section 4(a), then such assets (or consideration)
shall be distributed among the holders of Series C Preferred at the time
outstanding, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.

                  (b)      After the payment of the full liquidation preference
of the Series C Preferred as set forth in Section 4(a) above, the holders of the
Series C Preferred shall be entitled to participate ratably (on an as-converted
to common stock basis) together with the holders of the Common Stock in any
distribution or payment made by the Company to the holders of the Common Stock.

         5.       ASSET TRANSFER OR ACQUISITION RIGHTS

                  (a)      In the event that the Company is a party to an
Acquisition or Asset Transfer (as hereinafter defined), then upon the closing of
such Acquisition or Asset Transfer each holder of Series C Preferred shall be
entitled to receive for each share of Series C Preferred then held, out of the
proceeds of such Acquisition or Asset Transfer, the greater of (i) the amount of
cash, securities or other property to which such holder would be entitled to
receive in a liquidation pursuant to Section 4 hereof or (ii) the amount of
cash, securities or other property to which such holder would be entitled to
receive in a liquidation pursuant to Section 4 hereof if such holder had
converted such shares of Series C Preferred into Common Stock immediately prior
to such Acquisition or Asset Transfer.

                  (b)      For the purposes of this Section 5: (i) "ACQUISITION"
shall mean any consolidation or merger of the Company with or into any other
corporation or other entity or person, or any other corporate reorganization, in
which the stockholders of the Company immediately prior to such consolidation,
merger or reorganization, own less than 50% of the voting power of the surviving
entity immediately after such consolidation, merger or reorganization; or (B)
any transaction or series of related transactions to which the Company is a
party in which in excess of fifty percent (50%) of the Company's voting power is
transferred, provided that an Acquisition shall not include (x) any
consolidation or merger effected exclusively to change the domicile of the
Company, or (y) any transaction or series of transactions principally for bona
fide equity financing purposes in which cash is received by the

                                       3.



Company or indebtedness of the Company is cancelled or converted or a
combination thereof; and (ii) "ASSET TRANSFER" shall mean a sale, lease or other
disposition of all or substantially all of the assets of the Company.

                  (c)      In any Acquisition or Asset Transfer, if the
consideration to be received is securities of a corporation or other property
other than cash, its value will be deemed its fair market value as determined in
good faith by the Board on the date such determination is made.

         6.       CONVERSION RIGHTS.

                  The holders of the Series C Preferred shall have the following
rights with respect to the conversion of the Series C Preferred into shares of
Common Stock (the "CONVERSION RIGHTS"):

                  (a)      OPTIONAL CONVERSION. Subject to and in compliance
with the provisions of this Section 6, any shares of Series C Preferred may, at
the option of the holder, be converted at any time into fully-paid and
nonassessable shares of Common Stock. The number of shares of Common Stock to
which a holder of Series C Preferred shall be entitled upon conversion shall be
the product obtained by multiplying the "SERIES C PREFERRED CONVERSION RATE"
then in effect (determined as provided in Section 6(b)) by the number of shares
of Series C Preferred being converted.

                  (b)      SERIES C PREFERRED CONVERSION RATE. The conversion
rate in effect at any time for conversion of the Series C Preferred (the "SERIES
C PREFERRED CONVERSION RATE") shall be the quotient obtained by dividing the
Original Issue Price of the Series C Preferred by the "SERIES C PREFERRED
CONVERSION PRICE," calculated as provided in Section 6(c).

                  (c)      SERIES C PREFERRED CONVERSION PRICE. The conversion
price for the Series C Preferred shall initially be $5.10 (the "SERIES C
PREFERRED CONVERSION PRICE"). Such initial Series C Preferred Conversion Price
shall be adjusted from time to time in accordance with this Section 6. All
references to the Series C Preferred Conversion Price herein shall mean the
Series C Preferred Conversion Price as so adjusted.

                  (d)      MECHANICS OF CONVERSION. Each holder of Series C
Preferred who desires to convert the same into shares of Common Stock pursuant
to this Section 6 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or any transfer agent for the Series C
Preferred, and shall give written notice to the Company at such office that such
holder elects to convert the same. Such notice shall state the number of shares
of Series C Preferred being converted. Thereupon, the Company shall promptly
issue and deliver at such office to such holder a certificate or certificates
for the number of shares of Common Stock to which such holder is entitled and
shall promptly pay (i) in cash or, to the extent sufficient funds are not then
legally available therefor, in Common Stock (at the Common Stock's fair market
value determined by the Board as of the date of such conversion), any declared
and unpaid dividends on the shares of Series C Preferred being converted and
(ii) in cash (at the Common Stock's fair market value determined by the Board as
of the date of

                                       4.



conversion) the value of any fractional share of Common Stock otherwise issuable
to any holder of Series C Preferred. Such conversion shall be deemed to have
been made at the close of business on the date of such surrender of the
certificates representing the shares of Series C Preferred to be converted, and
the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date.

                  (e)      ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If at
any time or from time to time after the date that the first share of Series C
Preferred is issued (the "ORIGINAL ISSUE DATE") the Company effects a
subdivision of the outstanding Common Stock without a corresponding subdivision
of the Series C Preferred, the Series C Preferred Conversion Price in effect
immediately before that subdivision shall be proportionately decreased.
Conversely, if at any time or from time to time after the Original Issue Date
the Company combines the outstanding shares of Common Stock into a smaller
number of shares without a corresponding combination of the Series C Preferred,
the Series C Preferred Conversion Price in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
Section 6(e) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

                  (f)      ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND
DISTRIBUTIONS. If at any time or from time to time after the Original Issue Date
the Company pays to holders of Common Stock a dividend or other distribution in
additional shares of Common Stock without a corresponding dividend or other
distribution to holders of Preferred Stock, the Series C Preferred Conversion
Price that is then in effect shall be decreased as of the time of such issuance,
as provided below:

                           (i)      The Series C Preferred Conversion Price
shall be adjusted by multiplying the Series C Preferred Conversion Price then in
effect by a fraction equal to:

                                    (A)      the numerator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance, and

                                    (B)      the denominator of which is the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance plus the number of shares of Common Stock issuable
in payment of such dividend or distribution;

                           (ii)     If the Company fixes a record date to
determine which holders of Common Stock are entitled to receive such dividend or
other distribution, the Series C Preferred Conversion Price shall be fixed as of
the close of business on such record date and the number of shares of Common
Stock shall be calculated immediately prior to the close of business on such
record date; and

                           (iii)    If such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series C Preferred Conversion Price shall be recomputed
accordingly as of the close of business on such record date

                                       5.



and thereafter the Series C Preferred Conversion Price shall be adjusted
pursuant to this Section 6(f) to reflect the actual payment of such dividend or
distribution.

                  (g)      ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE,
SUBSTITUTION, REORGANIZATION, MERGER OR CONSOLIDATION. If at any time or from
time to time after the Original Issue Date, the Common Stock issuable upon the
conversion of the Series C Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by recapitalization,
reclassification, merger, consolidation or otherwise (other than an Acquisition
or Asset Transfer as defined in Section 5 or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 6), in any such event each holder
of Series C Preferred shall then have the right to convert such stock into the
kind and amount of stock and other securities and property receivable upon such
recapitalization, reclassification, merger, consolidation or other change by
holders of the maximum number of shares of Common Stock into which such shares
of Series C Preferred could have been converted immediately prior to such
recapitalization, reclassification, merger, consolidation or change, all subject
to further adjustment as provided herein or with respect to such other
securities or property by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 6
with respect to the rights of the holders of Series C Preferred after the
capital reorganization to the end that the provisions of this Section 5
(including adjustment of the Series C Preferred Conversion Price then in effect
and the number of shares issuable upon conversion of the Series C Preferred)
shall be applicable after that event and be as nearly equivalent as practicable.

                  (h)      SALE OF SHARES BELOW SERIES C PREFERRED CONVERSION
PRICE.

                           (i)      If at any time or from time to time after
the Original Issue Date, the Company issues or sells, or is deemed by the
express provisions of this Section 6(h) to have issued or sold, Additional
Shares of Common Stock (as defined below), other than as provided in Section
6(f) or 6(g) above, for an Effective Price (as defined below) less than the then
effective Series C Preferred Conversion Price (a "QUALIFYING DILUTIVE
ISSUANCE"), then and in each such case, the then existing Series C Preferred
Conversion Price shall be reduced, as of the opening of business on the date of
such issue or sale, to a price determined by multiplying the Series C Preferred
Conversion Price in effect immediately prior to such issuance or sale by a
fraction equal to:

                                    (a)      the numerator of which shall be (A)
the number of shares of Common Stock deemed outstanding (as determined below)
immediately prior to such issue or sale, plus (B) the number of shares of Common
Stock which the Aggregate Consideration (as defined below) received by the
Company for the total number of Additional Shares of Common Stock so issued
would purchase at such then-existing Series C Preferred Conversion Price, and

                                    (b)      the denominator of which shall be
the number of shares of Common Stock deemed outstanding (as determined below)
immediately prior to such issue or sale plus the total number of Additional
Shares of Common Stock so issued.

                                       6.



         For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the sum of (A)
the number of shares of Common Stock outstanding, (B) the number of shares of
Common Stock into which the then outstanding shares of Preferred Stock could be
converted if fully converted on the day immediately preceding the given date,
and (C) the number of shares of Common Stock which could be obtained through the
exercise or conversion of all other rights, options and convertible securities
outstanding on the day immediately preceding the given date.

                           (ii)     In addition to the foregoing, in the event
that (A) the Company issues Additional Shares of Common Stock in an equity
financing occurring on or prior to May 1, 2005 and (B) the sum of the Aggregate
Consideration (as defined below) to the Company from such financing (the
"TRIGGERING FINANCING"), together with the Aggregate Consideration to the
Company from all equity financings occurring after the Original Issue Date and
prior to the Triggering Financing (collectively with the Triggering Financing,
the "QUALIFYING FINANCINGS"), is equal to or greater than $60,000,000, then
immediately upon the closing of the Triggering Financing, the then effective
Series C Preferred Conversion Price shall be automatically reduced to a price
(the "ADJUSTMENT PRICE") equal to eighty percent (80%) of the Effective Price of
all of the Additional Shares of Common Stock issued in such Qualifying
Financings if such Adjustment Price is less than the then effective Series C
Preferred Conversion Price. This paragraph (ii) shall terminate upon the earlier
of April 1, 2005 and the closing of the Triggering Financing, if any. For
purposes of determining whether an adjustment to the Series C Preferred
Conversion Price shall occur pursuant to this paragraph (ii), the Series C
Preferred Conversion Price shall not be adjusted pursuant to paragraph (i) above
in connection with any of the Qualifying Financings prior to such determination,
and if any adjustment is made pursuant to this paragraph (ii) then no
adjustments shall be made pursuant to paragraph (i) with respect to any of the
issuances constituting part of the Qualifying Financings.

                           (iii)    No adjustment shall be made to the Series C
Preferred Conversion Price in an amount less than one cent per share. Any
adjustment otherwise required by this Section 6(h) that is not required to be
made due to the preceding sentence shall be included in any subsequent
adjustment to the Series C Preferred Conversion Price.

                           (iv)     For the purpose of making any adjustment
required under this Section 6(h), the aggregate consideration received by the
Company for any issue or sale of securities (the "AGGREGATE CONSIDERATION")
shall be defined as: (A) to the extent it consists of cash, be computed at the
net amount of cash received by the Company after deduction of any underwriting
or similar commissions, compensation or concessions paid or allowed by the
Company in connection with such issue or sale but without deduction of any
expenses payable by the Company, (B) to the extent it consists of property other
than cash, be computed at the fair value of that property as determined in good
faith by the Board, and (C) if Additional Shares of Common Stock, Convertible
Securities (as defined below) or rights or options to purchase either Additional
Shares of Common Stock or Convertible Securities are issued or sold together
with other stock or securities or other assets of the Company for a
consideration which covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by the Board to be
allocable to such Additional Shares of Common Stock, Convertible Securities or
rights or options.

                                       7.



                           (v)      For the purpose of the adjustment required
under this Section 6(h), if the Company issues or sells (x) Preferred Stock or
other stock, options, warrants, purchase rights or other securities convertible
into, Additional Shares of Common Stock (such convertible stock or securities
being herein referred to as "CONVERTIBLE SECURITIES") or (y) rights or options
for the purchase of Additional Shares of Common Stock or Convertible Securities
and if the Effective Price of such Additional Shares of Common Stock is less
than the Series C Preferred Conversion Price, in each case the Company shall be
deemed to have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional Shares of Common Stock
issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such rights or options or Convertible Securities plus:

                                    (A)      in the case of such rights or
options, the minimum amounts of consideration, if any, payable to the Company
upon the exercise of such rights or options; and

                                    (B)      in the case of Convertible
Securities, the minimum amounts of consideration, if any, payable to the Company
upon the conversion thereof (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities); provided that if the
minimum amounts of such consideration cannot be ascertained, but are a function
of antidilution or similar protective clauses, the Company shall be deemed to
have received the minimum amounts of consideration without reference to such
clauses.

                                    (C)      If the minimum amount of
consideration payable to the Company upon the exercise or conversion of rights,
options or Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events other than by reason of antidilution
adjustments, the Effective Price shall be recalculated using the figure to which
such minimum amount of consideration is reduced; provided further, that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the Company upon the exercise or
conversion of such rights, options or Convertible Securities.

                                    (D)      No further adjustment of the Series
C Preferred Conversion Price, as adjusted upon the issuance of such rights,
options or Convertible Securities, shall be made as a result of the actual
issuance of Additional Shares of Common Stock or the exercise of any such rights
or options or the conversion of any such Convertible Securities. If any such
rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the Series C
Preferred Conversion Price as adjusted upon the issuance of such rights, options
or Convertible Securities shall be readjusted to the Series C Preferred
Conversion Price which would have been in effect had an adjustment been made on
the basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the

                                       8.



Company upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether or not
exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted, plus the consideration, if any,
actually received by the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of such
Convertible Securities, provided that such readjustment shall not apply to prior
conversions of Series C Preferred.

                           (vi)     For the purpose of making any adjustment to
the Series C Preferred Conversion Price required under this Section 6(h),
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common Stock issued
by the Company or deemed to be issued pursuant to this Section 6(h) (including
shares of Common Stock subsequently reacquired or retired by the Company), other
than:

                                    (A)      shares of Common Stock issued upon
conversion of the Series C Preferred;

                                    (B)      shares of Common Stock or
Convertible Securities issued after the Original Issue Date to employees,
officers or directors of, or consultants or advisors to the Company or any
subsidiary pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board;

                                    (C)      shares of Common Stock issued
pursuant to the exercise of Convertible Securities outstanding as of the
Original Issue Date;

                                    (D)      shares of Common Stock or
Convertible Securities issued for consideration other than cash pursuant to a
merger, consolidation, acquisition, strategic alliance or similar business
combination approved by the Board;

                                    (E)      shares of Common Stock or
Convertible Securities issued pursuant to any equipment loan or leasing
arrangement, real property leasing arrangement or debt financing from a bank or
similar financial institution approved by the Board;

                                    (F)      shares of Common Stock of
Convertible Securities issued to third-party service providers in exchange for
or as partial consideration for services rendered to the Company;

                                    (G)      shares of Common Stock or
Convertible Securities issued to any charitable organization described in
Section 170(c) of the Internal Revenue Code; and

                                    (H)      any Common Stock or Convertible
Securities issued in connection with strategic transactions involving the
Company and other entities, including (i) joint ventures, manufacturing,
marketing or distribution arrangements or (ii) technology transfer or
development arrangements; provided that the issuance of shares therein has been
approved by the Company's Board.

                                       9.



         References to Common Stock in the subsections of this clause (vi) above
shall mean all shares of Common Stock issued by the Company or deemed to be
issued pursuant to this Section 6(h). The "EFFECTIVE PRICE" of Additional Shares
of Common Stock shall mean the quotient determined by dividing the total number
of Additional Shares of Common Stock issued or sold, or deemed to have been
issued or sold by the Company under this Section 6(h), into the Aggregate
Consideration received, or deemed to have been received by the Company, for such
Additional Shares of Common Stock.

                           (vii)    In the event that the Company issues or
sells, or is deemed to have issued or sold, Additional Shares of Common Stock in
a Qualifying Dilutive Issuance (the "FIRST DILUTIVE ISSUANCE"), then in the
event that the Company issues or sells, or is deemed to have issued or sold,
Additional Shares of Common Stock in a Qualifying Dilutive Issuance other than
the First Dilutive Issuance pursuant to the same instruments as the First
Dilutive Issuance (a "SUBSEQUENT DILUTIVE ISSUANCE"), then and in each such case
upon a Subsequent Dilutive Issuance the Series C Preferred Conversion Price
shall be reduced to the Series C Preferred Conversion Price that would have been
in effect had the First Dilutive Issuance and each Subsequent Dilutive Issuance
all occurred on the closing date of the First Dilutive Issuance.

                  (i)      CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Series C Preferred Conversion Price for the
number of shares of Common Stock or other securities issuable upon conversion of
the Series C Preferred, if the Series C Preferred is then convertible pursuant
to this Section 6, the Company, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series C
Preferred at the holder's address as shown in the Company's books. The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) the consideration received or deemed to be received by the
Company for any Additional Shares of Common Stock issued or sold or deemed to
have been issued or sold, (ii) the Series C Preferred Conversion Price at the
time in effect, (iii) the number of Additional Shares of Common Stock and (iv)
the type and amount, if any, of other property which at the time would be
received upon conversion of the Series C Preferred.

                  (j)      NOTICES OF RECORD DATE. Upon (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 5) or other
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other corporation, or any Asset Transfer (as defined in Section
5), or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Series C Preferred at
least ten (10) days prior to the record date specified therein (or such shorter
period approved by the holders of a majority of the outstanding Series C
Preferred) a notice specifying (A) the date on which any such record is to be
taken for the purpose of such dividend or distribution and a description of such
dividend or distribution, (B) the date on which any such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up is expected to

                                      10.



become effective, and (C) the date, if any, that is to be fixed as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.

                  (k)      AUTOMATIC CONVERSION.

                           (i)      Each share of Series C Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series C Preferred Conversion Price, (A) at any time upon the
affirmative election of the holders of at a majority of the outstanding shares
of the Series C Preferred, or (B) immediately upon the closing of a firmly
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Company in which the gross cash proceeds to
the Company (before underwriting discounts, commissions and fees) are at least
$60,000,000. Upon such automatic conversion, any declared and unpaid dividends
shall be paid in accordance with the provisions of Section 6(d).

                           (ii)     Upon the occurrence of either of the events
specified in Section 6(l)(i) above, the outstanding shares of Series C Preferred
shall be converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent; provided, however, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificates evidencing
such shares of Series C Preferred are either delivered to the Company or its
transfer agent as provided below, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates. Upon the
occurrence of such automatic conversion of the Series C Preferred, the holders
of Series C Preferred shall surrender the certificates representing such shares
at the office of the Company or any transfer agent for the Series C Preferred.
Thereupon, there shall be issued and delivered to such holder promptly at such
office and in its name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Common Stock into
which the shares of Series C Preferred surrendered were convertible on the date
on which such automatic conversion occurred, and any declared and unpaid
dividends shall be paid in accordance with the provisions of Section 6(d).

                  (l)      FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued upon conversion of Series C Preferred. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series C Preferred by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Company shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board)
on the date of conversion.

                                      11.



                  (m)      RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series C Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series C Preferred. If at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series C Preferred,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.

                  (n)      NOTICES. Any notice required by the provisions of
this Section 6 shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified, (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next business day, (iii) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (iv) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with verification of receipt.
All notices shall be addressed to each holder of record at the address of such
holder appearing on the books of the Company.

                  (o)      PAYMENT OF TAXES. The Company will pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series C Preferred, excluding any tax or other charge
imposed in connection with any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which the shares of Series C
Preferred so converted were registered.

         7.       NO REISSUANCE OF SERIES C PREFERRED.

         No shares or shares of Series C Preferred acquired by the Company by
reason of redemption, purchase, conversion or otherwise shall be reissued.

    IN WITNESS WHEREOF, MANNKIND CORPORATION has caused this Certificate of
Designation, Preferences and Rights of Series C Preferred Stock to be signed
this 15th day of January, 2004.

                                            MANNKIND CORPORATION

                                            /s/ David Thomson
                                            -----------------------------
                                                Vice President and
                                                Associate General Counsel

                                      12.


                          CERTIFICATE OF CORRECTION OF
              CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
                           SERIES C PREFERRED STOCK OF
                              MANNKIND CORPORATION
                  FILED IN THE OFFICE OF THE SECRETARY OF STATE
                         OF DELAWARE ON JANUARY 15, 2004

         MannKind Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,

         DOES HEREBY CERTIFY:

         1.       The name of the corporation is MannKind Corporation.

         2.       That a Certificate of Designation, Preferences and Rights of
Series C Preferred Stock was filed by the Secretary of State of the State of
Delaware on January 15, 2004 and that said Certificate requires correction as
permitted by Section 103 of the General Corporation Law of the State of
Delaware.

         3.       The inaccuracy or defect of said Certificate was contained in
numbered paragraph 1, which reads in its entirety as follows:

                  "1.      DESIGNATION AND AMOUNT. The shares of the series
                  shall be designated as "Series C Preferred Stock" (the "SERIES
                  C PREFERRED"), and the number of shares constituting such
                  series shall be [686,275], par value $0.01 per share."

         4.       The inaccuracy or defect of said numbered paragraph 1 is to be
corrected as follows:

                  "1.      DESIGNATION AND AMOUNT. The shares of the series
                  shall be designated as "Series C Preferred Stock" (the "SERIES
                  C PREFERRED"), and the number of shares constituting such
                  series shall be 980,393, par value $0.01 per share."

         IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by David Thomson, its Vice President and Associate General Counsel, this
7th day of April, 2004.

                                          MannKind Corporation

                                          By: /s/ David Thomson
                                              David Thomson
                                              Vice President and
                                               Associate General Counsel

                                                                     Exhibit 3.5

                              AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION

                                       OF

                              MANNKIND CORPORATION

         The undersigned, Alfred E. Mann, in accordance with the provisions of
Sections 242 and 245 of the Delaware General Corporation Law ("DGCL") hereby
certifies that:

         FIRST: He is the duly elected and acting Chairman of the Board and
Chief Executive Officer of MannKind Corporation, a Delaware corporation (the
"CORPORATION").

         SECOND: The original name of this Corporation was Pharmaceutical
Discovery Corporation and the date of filing of the original Certificate of
Incorporation of this Corporation with the Secretary of State of the State of
Delaware was February 14, 1991.

         THIRD: This Amended and Restated Certificate of Incorporation (the
"AMENDED AND RESTATED CERTIFICATE") has been duly approved and adopted by the
Board of Directors of the Corporation (the "BOARD") in accordance with the
applicable provisions of Sections 242 and 245 of the DGCL.

         FOURTH: This Amended and Restated Certificate has been duly approved
and adopted by the stockholders of the Corporation in accordance with the
applicable provisions of Sections 228, 242 and 245 of the DGCL.

         FIFTH: The text of the Restated Certificate of Incorporation, as
heretofore amended or supplemented, is hereby amended and restated in its
entirety to read as follows:

                                       I.

         The name of this corporation is MannKind Corporation (the
"CORPORATION").

                                       II.

         The address of the registered office of the corporation in the State of
Delaware is 2711 Centerville Road, Suite 400, City of Wilmington, County of New
Castle, 19808 and the name of the registered agent of the Corporation in the
State of Delaware at such address is the Corporation Service Company.

                                      III.

         The purpose of this Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the DGCL.

                                       IV.

                                       1.


         A.       This Corporation is authorized to issue two classes of stock
to be designated, respectively, "COMMON STOCK" and "PREFERRED STOCK." The total
number of shares which the Corporation is authorized to issue is [one hundred
million (100,000,000)] shares. Ninety million (90,000,000) shares shall be
Common Stock, each having a par value of one cent ($.01). Ten million
(10,000,000) shares shall be Preferred Stock, each having a par value of one
cent ($.01).

         B.       The Preferred Stock may be issued from time to time in one or
more series. The Board is hereby expressly authorized to provide for the issue
of all or any of the remaining shares of the Preferred Stock in one or more
series, and to fix the number of shares and to determine or alter for each such
series, such voting powers, full or limited, or no voting powers, and such
designation, preferences, and relative, participating, optional, or other rights
and such qualifications, limitations, or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the Board
providing for the issuance of such shares and as may be permitted by the DGCL.
The Board is also expressly authorized to increase or decrease the number of
shares of any series subsequent to the issuance of shares of that series, but
not below the number of shares of such series then outstanding. In case the
number of shares of any series shall be decreased in accordance with the
foregoing sentence, the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally fixing
the number of shares of such series. The number of authorized shares of
Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the Common Stock, without a vote of the holders of the Preferred
Stock, or of any series thereof, unless a vote of any such holders is required
pursuant to the terms of any certificate of designation filed with respect to
any series of Preferred Stock.

         C.       Each outstanding share of Common Stock shall entitle the
holder thereof to one vote on each matter properly submitted to the stockholders
of the Corporation for their vote; provided, however, that, except as otherwise
required by law, holders of Common Stock shall not be entitled to vote on any
amendment to this Certificate of Incorporation (including any certificate of
designation filed with respect to any series of Preferred Stock) that relates
solely to the terms of one or more outstanding series of Preferred Stock if the
holders of such affected series are entitled, either separately or together as a
class with the holders of one or more other such series, to vote thereon by law
or pursuant to this Certificate of Incorporation (including any certificate of
designation filed with respect to any series of Preferred Stock).

                                       V.

         For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:

         A.       BOARD OF DIRECTORS

                  1.       The management of the business and the conduct of the
affairs of the Corporation shall be vested in the Board. The number of directors
which shall constitute the

                                       2.


Board shall be fixed exclusively by resolutions adopted by a majority of the
authorized number of directors constituting the Board.

                  2.       Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. At the first annual meeting of stockholders
following the initial classification of the Board of Directors, the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following such initial classification, the term of office of the
Class II directors shall expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting of stockholders following
such initial classification, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting.

                  3.       Notwithstanding the foregoing provisions of this
section, each director shall serve until his successor is duly elected and
qualified or until his death, resignation or removal. No decrease in the number
of directors constituting the Board shall shorten the term of any incumbent
director.

                  4.       Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors, shall, unless the Board
determines by resolution that any such vacancies or newly created directorships
shall be filled by the stockholders, except as otherwise provided by law, be
filled only by the affirmative vote of a majority of the directors then in
office, even though less than a quorum of the Board, and not by the
stockholders. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the director for which
the vacancy was created or occurred and until such director's successor shall
have been elected and qualified.

                  5.       The directors of the Corporation need not be elected
by written ballot unless the Bylaws so provide.

         B.       BYLAW AMENDMENTS. The Board is expressly empowered to adopt,
amend or repeal the Bylaws of the Corporation. The stockholders shall also have
power to adopt, amend or repeal the Bylaws of the Corporation; provided,
however, that, in addition to any vote of the holders of any class or series of
stock of the Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the voting power of all of the then-outstanding
shares of the capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
adopt, amend or repeal any provision of the Bylaws of the Corporation.

         C.       STOCKHOLDER ACTION. No action shall be taken by the
stockholders of the Corporation except at an annual or special meeting of
stockholders called in accordance with the

                                       3.


Bylaws. No action shall be taken by the stockholders by written consent or
electronic transmission.

         D.       ADVANCE NOTICE. Advance notice of stockholder nominations for
the election of directors and of business to be brought by stockholders before
any meeting of the stockholders of the Corporation shall be given in the manner
provided in the Bylaws of the Corporation.

                                       VI.

         A.       The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law. If the DGCL is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated to the fullest extent permitted by the DGCL, as so amended.

         B.       Any repeal or modification of this Article VI shall be
prospective and shall not affect the rights under this Article VI in effect at
the time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.

                                      VII.

         A.       The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, except as provided in paragraph
B. of this Article VII, and all rights conferred upon the stockholders herein
are granted subject to this reservation.

         B.       Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Corporation required by law or by this
Certificate of Incorporation or any certificate of designation filed with
respect to a series of Preferred Stock, the affirmative vote of the holders of
at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all
of the then-outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required to alter, amend or repeal Articles V, VI, and VII.

                                       4.


         IN WITNESS WHEREOF, MANNKIND CORPORATION has caused this Amended and
Restated Certificate of Incorporation to be signed on this __ day of __________,
200_ by the undersigned who affirms that the statements made herein are true and
correct.

                                        ________________________________________
                                        ALFRED E. MANN
                                        Chairman of the Board and Chief
                                        Executive Officer

                                       5.

                                                                     EXHIBIT 3.6

                              AMENDED AND RESTATED
                                     BY-LAWS
                                       OF
                      PHARMACEUTICAL DISCOVERY CORPORATION

                                    ARTICLE I
                                  STOCKHOLDERS

         SECTION 1. Annual Meeting. The annual meeting of the stockholders of
the Corporation shall be held on such date, at such time and at such place
within or without the State of Delaware as may be designated by the Board of
Directors, for the purpose of electing Directors and for the transaction of such
other business as may be properly brought before the meeting.

         SECTION 2. Special Meetings. A special meeting of the stockholders of
the Corporation may be called at any time by the Board of Directors, the
Chairman of the Board or the President and shall be called by the Chairman of
the Board, the President or the Secretary at the request in writing of
stockholders holding together at least twenty-five percent of the number of
shares of stock outstanding and entitled to vote at such meeting. Any special
meeting of the stockholders shall be held on such date, at such time and at such
place within or without the State of Delaware as the Board of Directors or the
officer calling the meeting may designate. At a special



meeting of the stockholders, no business shall be transacted and no corporate
action shall be taken other than that stated in the notice of the meeting unless
all of the stockholders are present in person or by proxy, in which case any and
all business may be transacted at the meeting even though the meeting is held
without notice.

         SECTION 3. Notice of Meetings. Except as otherwise provided in these
By-Laws or by law, a written notice of each meeting of the stockholders shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of the Corporation entitled to vote at such
meeting at his address as it appears on the records of the Corporation. The
notice shall state the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.

         SECTION 4. Quorum. At any meeting of the stockholders, the holders of a
majority in number of the total outstanding shares of stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number of shares shall be required by law, by the
Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote


                                      -2-



separately as a class, the holders of a majority in number of the total
outstanding shares of such class, present in person or represented by proxy,
shall constitute a quorum for purposes of such class vote unless the
representation of a larger number of shares of such class shall be required by
law, by the Certificate of Incorporation or by these By-Laws.

         SECTION 5. Adjourned Meetings. Whether or not a quorum shall be present
in person or represented at any meeting of the stockholders, the holders of a
majority in number of the shares of stock of the Corporation present in person
or represented by proxy and entitled to vote at such meeting may adjourn from
time to time; provided, however, that if the holders of any class of stock of
the Corporation are entitled to vote separately as a class upon any matter at
such meeting, any adjournment of the meeting in respect of action by such class
upon such matter shall be determined by the holders of a majority of the shares
of such class present in person or represented by proxy and entitled to vote at
such meeting. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the stockholders, or the holders of any class of stock entitled to vote
separately as a class, as the case may be, may transact any business which might
have been transacted by them at the original meeting. If the adjournment is for
more than thirty


                                      -3-



days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the adjourned meeting.

         SECTION 6. Organization. The Chairman of the Board or, in his absence,
the President shall call all meetings of the stockholders to order, and shall
act as Chairman of such meetings. In the absence of the Chairman of the Board
and the President, the holders of a majority in number of the shares of stock of
the Corporation present in person or represented by proxy and entitled to vote
at such meeting shall elect a Chairman.

         The Secretary of the Corporation shall act as Secretary of all meetings
of the stockholders; but in the absence of the Secretary, the Chairman may
appoint any person to act as Secretary of the meeting. It shall be the duty of
the Secretary to prepare and make, at least ten days before every meeting of
stockholders, a complete list of stockholders entitled to vote at such meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held, for the ten days next
preceding the meeting, to the examination of any stockholder,


                                      -4-



for any purpose germane to the meeting, during ordinary business hours, and
shall be produced and kept at the time and place of the meeting during the whole
time thereof and subject to the inspection of any stockholder who may be
present.

         SECTION 7. Voting. Except as otherwise provided in the Certificate of
Incorporation or by law, each stockholder shall be entitled to one vote for each
share of the capital stock of the Corporation registered in the name of such
stockholder upon the books of the Corporation. Each stockholder entitled to vote
at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. When
directed by the presiding officer or upon the demand of any stockholder, the
vote upon any matter before a meeting of stockholders shall be by ballot. Except
as otherwise provided by law or by the Certificate of Incorporation, Directors
shall be elected by a plurality of the votes cast at a meeting of stockholders
by the stockholders entitled to vote in the election and, whenever any corporate
action, other than the election of Directors is to be taken, it shall be
authorized by a majority of the votes cast at a meeting of stockholders by the
stockholders entitled to vote thereon.


                                      -5-



         Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes.

         SECTION 8. Inspectors. When required by law or directed by the
presiding officer or upon the demand of any stockholder entitled to vote, but
not otherwise, the polls shall be opened and closed, the proxies and ballots
shall be received and taken in charge, and all questions touching the
qualification of voters, the validity of proxies and the acceptance or rejection
of votes shall be decided at any meeting of the stockholders by two or more
Inspectors who may be appointed by the Board of Directors before the meeting, or
if not so appointed, shall be appointed by the presiding officer at the meeting.
If any person so appointed fails to appear or act, the vacancy may be filled by
appointment in like manner.

         SECTION 9. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided in the Certificate of Incorporation, any action required to
be taken or which may be taken at any annual or special meeting of the
stockholders of the Corporation, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of


                                      -6-



outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
any such corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
As provided in the Certificate of Incorporation, commencing at such time as the
Corporation becomes a Reporting Corporation under Section 12 or 15 of the
Securities Exchange Act of 1934, as amended, any action adopted by the
stockholders by written consent pursuant to this provision, shall require the
unanimous written consent of all stockholders entitled to vote thereon.

                                   ARTICLE II
                               Board of Directors

         SECTION 1. Number and Term of Office. The business and affairs of the
Corporation shall be managed by or under the direction of a Board of Directors,
who need not be stockholders of the Corporation. The number of Directors shall
initially be 5, provided such number may be increased or decreased as determined
by the affirmative vote of two-thirds of the then existing Board of Directors.
The Directors shall, except as hereinafter otherwise provided for filling
vacancies, be elected at the annual meeting of stockholders, and shall


                                      -7-



hold office until their respective successors are elected and qualified or until
their earlier resignation or removal. The number of Directors may be altered
from time to time by amendment of these By-Laws.

         SECTION 2. Removal, Vacancies and Additional Directors. The
stockholders may, at any special meeting the notice of which shall state that it
is called for that purpose, remove, with or without cause, any Director and fill
the vacancy; provided that whenever any Director shall have been elected by the
holders of any class of stock of the Corporation voting separately as a class
under the provisions of the Certificate of Incorporation, such Director may be
removed and the vacancy filled only by the holders of that class of stock voting
separately as a class. Vacancies caused by any such removal and not filled by
the stockholders at the meeting at which such removal shall have been made, or
any vacancy caused by the death or resignation of any Director or for any other
reason, and any newly created directorship resulting from any increase in the
authorized number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office, although less than a quorum, and any
Director so elected to fill any such vacancy or newly created directorship shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal.

         When one or more Directors shall resign effective at a future date, a
majority of the Directors then in office,


                                      -8-



including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each Director so chosen shall hold office as herein
provided in connection with the filling of other vacancies.

         SECTION 3. Place of Meeting. The Board of Directors may hold its
meetings in such place or places in the State of Delaware or outside the State
of Delaware as the Board from time to time shall determine.

         SECTION 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as the Board from time to time by
resolution shall determine. No notice shall be required for any regular meeting
of the Board of Directors; but a copy of every resolution fixing or changing the
time or place of regular meetings shall be mailed to every Director at least
five days before the first meeting held in pursuance thereof.

         SECTION 5. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by direction of the Chairman of the Board, the
President or by any two of the Directors then in office.

         Notice of the day, hour and place of holding of each special meeting
shall be given by delivery of the same at least two full days before the meeting
or by causing the same to be transmitted by telegraph, cable or wireless at
least one full day before the meeting to each Director. Unless otherwise


                                      -9-



indicated in the notice thereof, any and all business other than an amendment of
these By-Laws may be transacted at any special meeting, and an amendment of
these By-Laws may be acted upon if the notice of the meeting shall have stated
that the amendment of these By-Laws is one of the purposes of the meeting. At
any meeting at which every Director shall be present, even though without any
notice, any business may be transacted, including the amendment of these
By-Laws.

         SECTION 6. Quorum. Subject to the provisions of Section 2 of this
Article II with respect to the filling of existing vacancies, a majority of the
members of the Board of Directors in office (but in no case less than one-third
of the total number of Directors nor less than two Directors) shall constitute a
quorum for the transaction of business and, except as otherwise provided herein,
in the Certificate of Incorporation, or as required by law, the vote of the
majority of the Directors present at any meeting of the Board of Directors at
which a quorum is present shall be the act of the Board of Directors. If at any
meeting of the Board there is less than a quorum present, a majority of those
present may adjourn the meeting from time to time.

         Any resolution to be adopted by the Board of Directors pursuant to
Section 242(b)(1) of the General Corporation Law of the State of Delaware
("GCL") (Amendment of Certificate of Incorporation After Receipt of Payment for
Stock; Nonstock Corporation), Section 251(b)(2) of the GCL (Merger or


                                      -10-



Consolidation of Domestic Corporation), Section 254 of the GCL (Merger or
Consolidation of Domestic Corporation and Joint-stock or other Association),
Section 271(a) of the GCL (Sale, Lease or Exchange of Assets; Consideration;
Procedure) or Section 275(a) of the GCL (Dissolution; Procedure) shall require
the affirmative vote of two-thirds of the Board of Directors.

         Any contract or agreement to incur indebtedness for borrowed money,
including, without limitation, any guaranty shall require the affirmative vote
of two-thirds of the Board of Directors.

         Any contract or transaction involving an interested Director shall be
approved in accordance with Section 144 of the GCL (Interested Directors;
Quorum); provided, however, such approval shall require the affirmative vote of
two-thirds of the Board of Directors.

         The Board of Directors shall have the authority to fix the compensation
of the Directors of the Corporation; provided, however, any such action shall
require the affirmative vote of two-thirds of the Board of Directors.

         SECTION 7. Organization. The Chairman of the Board or, in his absence,
the President shall preside at all meetings of the Board of Directors. In the
absence of the Chairman of the Board and the President, a Chairman shall be
elected from the Directors present. The Secretary of the Corporation shall act
as Secretary of all meetings of the Directors; but in the


                                      -11-



absence of the Secretary, the Chairman may appoint any person to act as
Secretary of the meeting.

         SECTION 8. Committees. The Board of Directors may, by resolution passed
by the affirmative vote of two-thirds of the whole Board, designate one or more
committees, each committee to consist of one or more of the Directors of the
Corporation. The Board may designate one or more Directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided by resolution passed by the affirmative vote
of two thirds of the whole Board, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and the
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority to act with respect to any action which requires either by
law, the Certificate of Incorporation or these By-Laws the affirmative vote of
two-thirds of the Board of Directors, including, without limitation, the
amending of the Certificate of Incorporation, the adoption of an


                                      -12-



agreement of merger, consolidation or joint venture, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, fixing the
compensation of any Director, electing of fixing the compensation of any
officer, approving any contract or agreement to incur indebtedness for borrowed
money (including a guaranty thereof), approving any contact with an interested
Director, or amending these By-Laws; and unless such resolution, these By-Laws,
or the Certificate of Incorporation expressly so provide, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.

         SECTION 9. Conference Telephone Meetings. The members of the Board of
Directors or any committee designated by the Board, may participate in a meeting
of the Board or such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.

         SECTION 10. Consent of Directors or Committee in Lieu of Meeting. Any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the


                                      -13-


Board or committee, as the case may be, consent thereto in writing and the
writing or writings are filed with the minutes of proceedings of the Board or
committee, as the case may be .

                                   ARTICLE III
                                    Officers

         SECTION 1. Officers. The officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents, a Secretary and
a Treasurer, and such additional officers, if any, as shall be elected by the
affirmative vote of two-thirds of the Board of Directors pursuant to the
provisions of Section 7 of this Article III. The Chairman of the Board, the
President, one or more Vice Presidents, the Secretary and the Treasurer shall be
elected by the affirmative vote of two-thirds of the Board of Directors at its
first meeting after each annual meeting of the stockholders. The failure to hold
such election shall not of itself terminate the term of office of any officer.
All officers shall hold office at the pleasure of the Board of Directors. Any
officer may resign at any time upon written notice to the Corporation. Officers
may, but need not, be Directors. Any number of offices may be held by the same
person.

         All officers, agents and employees shall be subject to removal, with or
without cause, at any time by the affirmative vote of two-thirds of the Board of
Directors. The removal of


                                      -14-


an officer without cause shall be without prejudice to his contract rights, if
any. The election or appointment of an officer shall not of itself create
contract rights. All agents and employees other than officers elected by the
Board of Directors shall also be subject to removal, with or without cause, at
any time by the officers appointing them.

         Any vacancy caused by the death of any officer, his resignation, his
removal, or otherwise, may be filled by the affirmative vote of two-thirds of
the Board of Directors, and any officer so elected shall hold office at the
pleasure of the Board of Directors.

         In addition to the powers and duties of the officers of the Corporation
as set forth in these By-Laws, the officers shall have such authority and shall
perform such duties as from time to time may be determined by the Board of
Directors.

         SECTION 2. Powers and Duties of the Chairman of the Board. The Chairman
of the Board shall be the chief executive officer of the Corporation and,
subject to the control of the Board of Directors, shall have general charge and
control of all its business and affairs and shall perform all duties incident to
the office of the Chairman of the Board. He shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors and shall have such
other powers and perform such other duties as may from time to time be assigned
to him by these By-Laws or by the Board of Directors.


                                      -15-


         SECTION 3. Powers and Duties of the President. The President shall be
the chief operating officer of the Corporation and, subject to the control of
the Board of Directors and the Chairman of the Board, shall have general charge
and control of all its operations and shall perform all duties incident to the
office of President. In the absence of the Chairman of the Board, he shall
preside at all meetings of the stockholders and at all meetings of the Board of
Directors and shall have such other powers and perform such other duties as may
from time to time be assigned to him by these By-Laws or by the Board of
Directors or the Chairman of the Board.

         SECTION 4. Powers and Duties of the Vice Presidents. Each Vice
President shall perform all duties incident to the office of Vice President and
shall have such other powers and perform such other duties as may from time to
time be assigned to him by these By-Laws or by the Board of Directors, the
Chairman of the Board or the President.

         SECTION 5. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Board of Directors and the minutes of all
meetings of the stockholders in books provided for that purpose; he shall attend
to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors or the President shall
authorize and direct; he shall have charge of the stock


                                      -16-


certificate books, transfer books and stock ledgers and such, other books and
papers as the Board of Directors or the President shall direct, all of which
shall at all reasonable times be open to the examination of any Director, upon
application, at the office of the Corporation during business hours; and he
shall perform all duties incident to the office of Secretary and shall also have
such other powers and shall perform such other duties as may from time to time
be assigned to him by these By-Laws or the Board of Directors, the Chairman of
the Board or the President.

         SECTION 6. Powers and Duties of the Treasurer. The Treasurer shall have
custody of, and when proper shall pay out, disburse or otherwise dispose of, all
funds and securities of the Corporation which may have come into his hands; he
may endorse on behalf of the Corporation for collection checks, notes and other
obligations and shall deposit the same to the credit of the Corporation in such
bank or banks or depositary or depositaries as the Board of Directors may
designate; he shall sign all receipts and vouchers for payments made to the
Corporation; he shall enter or cause to be entered regularly in the books of the
Corporation kept for the purpose full and accurate accounts of all moneys
received or paid or otherwise disposed of by him and whenever required by the
Board of Directors or the President shall render statements of such accounts; he
shall, at all reasonable times, exhibit his books and accounts to any Director
of the Corporation upon


                                      -17-


application at the office of the Corporation during business hours; and he shall
perform all duties incident to the office of Treasurer and shall also have such
other powers and shall perform such other duties as may from time to time be
assigned to him by these By-Laws or by the Board of Directors, the Chairman of
the Board or the President.

         SECTION 7. Additional Officers. The Board of Directors may from time to
time elect such other officers (who may but need not be Directors), including a
Controller, Assistant Treasurers, Assistant Secretaries and Assistant
Controllers, as the Board may deem advisable and such officers shall have such
authority and shall perform such duties as may from time to time be assigned to
them by the Board of Directors, the Chairman of the Board or the President.

         The Board of Directors may from time to time by resolution delegate to
any Assistant Treasurer or Assistant Treasurers any of the powers or duties
herein assigned to the Treasurer; and may similarly delegate to any Assistant
Secretary or Assistant Secretaries any of the powers or duties herein assigned
to the Secretary.

         SECTION 8. Giving of Bond by Officers. All officers of the Corporation,
if required to do so by the Board of Directors, shall furnish bonds to the
Corporation for the faithful performance of their duties, in such penalties and
with such conditions and security as the Board shall require.


                                      -18-


         SECTION 9. Voting Upon Stocks. Unless otherwise ordered by the Board of
Directors, the Chairman of the Board, the President or any Vice President shall
have full power and authority on behalf of the Corporation to attend and to act
and to vote, or in the name of the Corporation to execute proxies to vote, at
any meetings of stockholders of any corporation in which the Corporation may
hold stock, and at any such meetings shall possess and may exercise, in person
or by proxy, any and all rights, powers and privileges incident to the ownership
of such stock. The Board of Directors may from time to time, by resolution,
confer like powers upon any other person or persons.

         SECTION 10. Compensation of Officers. The officers of the Corporation
shall be entitled to receive such compensation for their services as shall from
time to time be determined by the affirmative vote of two-thirds of the Board of
Directors.

                                   ARTICLE IV
                             Stock-Seal-Fiscal Year

         SECTION 1. Certificates For Shares of Stock. The certificates for
shares of stock of the Corporation shall be in such form, not inconsistent with
the Certificate of Incorporation, as shall be approved by the Board of
Directors. All certificates shall be signed by the Chairman of the Board, the
President or a Vice President and by the Secretary or an


                                      -19-



Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall not be
valid unless so signed.

         In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.

         All certificates for shares of stock shall be consecutively numbered as
the same are issued. The name of the person owning the shares represented
thereby with the number of such shares and the date of issue thereof shall be
entered on the books of the Corporation.

         Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and cancelled.

         SECTION 2. Lost, Stolen or Destroyed Certificates. Whenever a person
owning a certificate for shares of stock of the Corporation alleges that it has
been lost, stolen or destroyed, he shall file in the office of the Corporation
an affidavit setting forth, to the best of his knowledge and


                                      -20-


belief, the time, place and circumstances of the loss, theft or destruction,
and, if required by the Board of Directors, a bond of indemnity or other
indemnification sufficient in the opinion of the Board of Directors to indemnify
the Corporation and its agents against any claim that may be made against it or
them on account of the alleged loss, theft or destruction of any such
certificate or the issuance of a new certificate in replacement therefor.
Thereupon the Corporation may cause to be issued to such person a new
certificate in replacement for the certificate alleged to have been lost, stolen
or destroyed. Upon the stub of every new certificate so issued shall be noted
the fact of such issue and the number, date and the name of the registered owner
of the lost, stolen or destroyed certificate in lieu of which the new
certificate is issued.

         SECTION 3. Transfer of Shares. Shares of stock of the Corporation shall
be transferred on the books of the Corporation by the holder thereof, in person
or by his attorney duly authorized in writing, upon surrender and cancellation
of certificates for the number of shares of stock to be transferred, except as
provided in the preceding section.

         SECTION 4. Regulations. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates for shares of stock of the
Corporation.


                                      -21-


         SECTION 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, as the case may be, the Board of Directors may-fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action.

         If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is expressed; and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A


                                      -22-


determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.

         SECTION 6. Dividends. The Board of Directors shall have power to
declare and pay dividends upon shares of stock of the Corporation, but only out
of funds available for the payment of dividends as provided by law.

         Any dividends declared upon the stock of the Corporation shall be
payable on such date or dates as the Board of Directors shall determine. If the
date fixed for the payment of any dividend shall in any year fall upon a legal
holiday, then the dividend payable on such date shall be paid on the next day
not a legal holiday.

         SECTION 7. Corporate Seal. The Board of Directors shall provide a
suitable seal, containing the name of the Corporation, which seal shall be kept
in the custody of the Secretary. A duplicate of the seal may be kept and be used
by any officer of the Corporation designated by the Board or the President.

         SECTION 8. Fiscal Year. The fiscal year of the Corporation shall be
such fiscal year as the Board of Directors from time to time by resolution shall
determine.

                                      -23-


                                    ARTICLE V

                            Miscellaneous Provisions

         SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money shall
be signed and, if so required by the Board of Directors, countersigned by such
officers of the Corporation and/or other persons as the Board of Directors from
time to time shall designate.

         Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to the Corporation may be endorsed
for deposit to the credit of the Corporation with a duly authorized depositary
by the Treasurer, or otherwise as the Board of Directors may from time to time,
by resolution, determine.

         SECTION 2. Loans. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the affirmative
vote of two-thirds of the Board of Directors. When authorized so to do, any
officer or agent of the Corporation may effect loans and advances for the
Corporation from any bank, trust company or other institution or from any firm,
corporation or individual, and for such loans and advances may make, execute and
deliver promissory notes, bonds or other evidences of indebtedness of the
Corporation. When authorized so to do, any officer or agent of the Corporation
may pledge, hypothecate or transfer, as security


                                      -24-


for the payment of any and all loans, advances, indebtedness and liabilities of
the Corporation, any and all stocks, securities and other personal property at
any time held by the Corporation, and to that end may endorse, assign and
deliver the same. Such authority may be general or confined to specific
instances.

         SECTION 3. Waivers of Notice. Whenever any notice whatever is required
to be given by law, by the Certificate of Incorporation or by these By-Laws to
any person or persons, a waiver thereof in writing, signed by the person or
persons entitled to the notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.

         SECTION 4. Offices Outside of Delaware. Except as otherwise required by
the laws of the State of Delaware, the Corporation may have an office or offices
and keep its books, documents and papers outside of the State of Delaware at
such place or places as from time to time may be determined by the Board of
Directors or the President.

         SECTION 5. Indemnification of Directors, Officers and Employees. The
Corporation shall indemnify to the full extent authorized by law any person made
or threatened to be made a party to an action, suit or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that he,
his testator or intestate is or was a director, officer, employee or agent of
the Corporation or is or was serving, at the request of the Corporation, as a
director,


                                      -25-


officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise.

                                   ARTICLE VI

                                   Amendments

         These By-Laws and any amendment thereof may be altered, amended or
repealed, or new By-Laws may be adopted, by the Board of Directors at any
regular or special meeting by the affirmative vote of two-thirds of all of the
members of the Board, provided in the case of any special meeting at which all
of the members of the Board are not present, that the notice of such meeting
shall have stated that the amendment of these By-Laws was one of the purposes of
the meeting; but these By-Laws and any amendment thereof, including the By-Laws
adopted by the Board of Directors, may be altered, amended or repealed and other
By-Laws may be adopted by the holders of a majority of the total outstanding
stock of the Corporation entitled to vote at any annual meeting or at any
special meeting, provided, in the case of any special meeting, that notice of
such proposed alteration, amendment, repeal or adoption is included in the
notice of the meeting.


                                      -26-

                                                                     EXHIBIT 3.7

                              AMENDED AND RESTATED

                                     BYLAWS

                                       OF

                              MANNKIND CORPORATION
                            (A DELAWARE CORPORATION)


                              AMENDED AND RESTATED

                                     BYLAWS

                                       OF

                              MANNKIND CORPORATION

                            (A DELAWARE CORPORATION)

                                   ARTICLE I

                                     OFFICES

      SECTION 1. REGISTERED OFFICE. The registered office of MannKind
Corporation (the "CORPORATION") in the State of Delaware shall be in the City of
Wilmington, County of New Castle.

      SECTION 2. OTHER OFFICES. The Corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.

                                   ARTICLE II

                                 CORPORATE SEAL

      SECTION 3. CORPORATE SEAL. The Board of Directors may adopt a corporate
seal. The corporate seal shall consist of a die bearing the name of the
Corporation and the inscription, "Corporate Seal-Delaware." Said seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.

                                  ARTICLE III

                             STOCKHOLDERS' MEETINGS

      SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
Corporation may be held at such place, either within or without the State of
Delaware, as may be determined from time to time by the Board of Directors. The
Board of Directors may, in its sole discretion, determine that the meeting shall
not be held at any place, but may instead be held solely by means of remote
communication as provided under the Delaware General Corporation Law ("DGCL").



                                       1.

      SECTION 5. ANNUAL MEETINGS.

            (A) The annual meeting of the stockholders of the Corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. Nominations of persons for election
to the Board of Directors of the Corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders:
(i) pursuant to the Corporation's notice of meeting of stockholders; (ii) by or
at the direction of the Board of Directors; or (iii) by any stockholder of the
Corporation who was a stockholder of record at the time of giving the
stockholder's notice provided for in the following paragraph, who is entitled to
vote at the meeting and who complied with the notice procedures set forth in
Section 5.

            (B) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation, (ii) such other business must be a proper matter for
stockholder action under DGCL, (iii) if the stockholder, or the beneficial owner
on whose behalf any such proposal or nomination is made, has provided the
Corporation with a Solicitation Notice (as defined in clause (iii) of the last
sentence of this Section 5(b)), such stockholder or beneficial owner must, in
the case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the Corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the Corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as





                                       2.

amended (the "1934 ACT") and Rule 14a-4(d) thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (B) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (C) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner, (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner, and (iii) whether either such stockholder or beneficial owner
intends to deliver a proxy statement and form of proxy to holders of, in the
case of the proposal, at least the percentage of the Corporation's voting shares
required under applicable law to carry the proposal or, in the case of a
nomination or nominations, a sufficient number of holders of the Corporation's
voting shares to elect such nominee or nominees (an affirmative statement of
such intent, a "SOLICITATION NOTICE").

            (C) Notwithstanding anything in the third sentence of Section 5(b)
of these Bylaws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 5 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the Corporation.

            (D) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.

            (E) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the 1934 Act.



                                       3.

            (F) For purposes of this Section 5, "PUBLIC ANNOUNCEMENT" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.

      SECTION 6. SPECIAL MEETINGS.

            (A) Special meetings of the stockholders of the Corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption). At any time or times that the Corporation is subject to
Section 2115(b) of the California General Corporation Law ("CGCL"), stockholders
holding five percent (5%) or more of the outstanding shares shall have the right
to call a special meeting of stockholders only as set forth in Section 18(b)
herein.

            (B) If a special meeting is properly called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by certified or registered mail, return receipt
requested, to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the Corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. Nothing contained in this paragraph (b)
shall be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.

            (C) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the Corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the Corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no





                                       4.

event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.

      SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law,
notice, given in writing or by electronic transmission, of each meeting of
stockholders shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting to each stockholder entitled to vote at such
meeting, such notice to specify the place, if any, date and hour, in the case of
special meetings, the purpose or purposes of the meeting, and the means of
remote communications, if any, by which stockholders and proxy holders may be
deemed to be present in person and vote at any such meeting. If mailed, notice
is given when deposited in the United States mail, postage prepaid, directed to
the stockholder at such stockholder's address as it appears on the records of
the Corporation. Notice of the time, place, if any, and purpose of any meeting
of stockholders may be waived in writing, signed by the person entitled to
notice thereof, or by electronic transmission by such person, either before or
after such meeting, and will be waived by any stockholder by his attendance
thereat in person, by remote communication, if applicable, or by proxy, except
when the stockholder attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Any stockholder so waiving notice of
such meeting shall be bound by the proceedings of any such meeting in all
respects as if due notice thereof had been given.

      SECTION 8. QUORUM. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person, by remote communication, if applicable, or by proxy
duly authorized, of the holders of a majority of the outstanding shares of stock
entitled to vote shall constitute a quorum for the transaction of business. In
the absence of a quorum, any meeting of stockholders may be adjourned, from time
to time, either by the chairman of the meeting or by vote of the holders of a
majority of the shares represented thereat, but no other business shall be
transacted at such meeting. The stockholders present at a duly called or
convened meeting, at which a quorum is present, may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by
statute or by applicable stock exchange or Nasdaq rules, or by the Certificate
of Incorporation or these Bylaws, in all matters other than the election of
directors, the affirmative vote of the majority of shares present in person, by
remote communication, if applicable, or represented by proxy at the meeting and
entitled to vote generally on the subject matter shall be the act of the
stockholders. Except as otherwise provided by statute, the Certificate of
Incorporation or these Bylaws, directors shall be elected by a plurality of the
votes of the shares present in person, by remote communication, if applicable,
or represented by proxy at the meeting and entitled to vote generally on the
election of directors. Where a separate vote by a class or classes or series is
required, except where otherwise provided by the statute or by the Certificate
of Incorporation or these Bylaws, a majority of the outstanding shares of such
class or classes or series, present in person, by remote communication, if
applicable, or represented by proxy duly authorized, shall constitute a quorum
entitled to take action with respect to that vote on that matter. Except where
otherwise provided by statute or by the Certificate of Incorporation or these
Bylaws, the affirmative vote of the majority (plurality, in the case of the
election of directors) of shares of such class or classes or series present in
person, by remote communication, if applicable, or represented by proxy at the
meeting shall be the act of such class or classes or series.



                                       5.

      SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
present in person, by remote communication, if applicable, or represented by
proxy at the meeting. When a meeting is adjourned to another time or place, if
any, notice need not be given of the adjourned meeting if the time and place, if
any, thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the Corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.

      SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the Corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person, by remote communication, if applicable, or by an agent or agents
authorized by a proxy granted in accordance with Delaware law. An agent so
appointed need not be a stockholder. No proxy shall be voted after three (3)
years from its date of creation unless the proxy provides for a longer period.

      SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.

      SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, (a) on a reasonably
accessible electronic network, provided that the information required to gain
access to such list is provided with the notice of the meeting, or (b) during
ordinary business hours, at the principal place of business of the Corporation.
In the event that the Corporation determines to make the list available on an
electronic network, the Corporation may take reasonable steps to ensure that
such information is available only to stockholders of the Corporation. The list
shall be open to examination of any stockholder during the time of the meeting
as provided by law.



                                       6.

      SECTION 13. ACTION WITHOUT MEETING.

            (A) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, or by electronic
transmission setting forth the action so taken, shall be signed by the holders
of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.

            (B) Every written consent or electronic transmission shall bear the
date of signature of each stockholder who signs the consent, and no written
consent or electronic transmission shall be effective to take the corporate
action referred to therein unless, within sixty (60) days of the earliest dated
consent delivered to the Corporation in the manner herein required, written
consents or electronic transmissions signed by a sufficient number of
stockholders to take action are delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.

            (C) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing or by electronic transmission and
who, if the action had been taken at a meeting, would have been entitled to
notice of the meeting if the record date for such meeting had been the date that
written consents signed by a sufficient number of stockholders to take action
were delivered to the Corporation as provided in Section 228(c) of the DGCL. If
the action which is consented to is such as would have required the filing of a
certificate under any section of the DGCL if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written consent has been given in accordance with
Section 228 of the DGCL.

            (D) A telegram, cablegram or other electronic transmission consent
to an action to be taken and transmitted by a stockholder or proxyholder, or by
a person or persons authorized to act for a stockholder or proxyholder, shall be
deemed to be written, signed and dated for the purposes of this section,
provided that any such telegram, cablegram or other electronic transmission sets
forth or is delivered with information from which the Corporation can determine
(i) that the telegram, cablegram or other electronic transmission was
transmitted by the stockholder or proxyholder or by a person or persons
authorized to act for the stockholder or proxyholder and (ii) the date on which
such stockholder or proxyholder or authorized person or persons transmitted such
telegram, cablegram or electronic transmission. The date on which such telegram,
cablegram or electronic transmission is transmitted shall be deemed to be the
date on which such consent was signed. No consent given by telegram, cablegram
or other electronic transmission shall be deemed to have been delivered until
such consent is reproduced in paper form and until such paper form shall be
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the



                                       7.

Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be made by hand or by certified or registered mail, return receipt
requested. Notwithstanding the foregoing limitations on delivery, consents given
by telegram, cablegram or other electronic transmission may be otherwise
delivered to the principal place of business of the Corporation or to an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded if, to the extent and in the manner
provided by resolution of the board of directors of the Corporation. Any copy,
facsimile or other reliable reproduction of a consent in writing may be
substituted or used in lieu of the original writing for any and all purposes for
which the original writing could be used, provided that such copy, facsimile or
other reproduction shall be a complete reproduction of the entire original in
writing.

            (E) Notwithstanding the foregoing, no such action by written consent
or by electronic transmission may be taken following the closing of the initial
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 ACT"), covering the offer and sale
of Common Stock of the Corporation to the public (the "INITIAL PUBLIC
OFFERING").

      SECTION 14. ORGANIZATION.

            (A) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.

            (B) The Board of Directors of the Corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the Corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.

                                   ARTICLE IV

                                    DIRECTORS



                                       8.

      SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of directors
of the Corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.

      SECTION 16. POWERS. The powers of the Corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.

      SECTION 17. CLASSES OF DIRECTORS.

            (A) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the Initial Public Offering, the directors shall be divided into
three classes designated as Class I, Class II and Class III, respectively. At
the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the Initial Public Offering, the term
of office of the Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual meeting of
stockholders following the Initial Public Offering, the term of office of the
Class III directors shall expire and Class III directors shall be elected for a
full term of three years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting.

            (B) During such time or times that the Corporation is subject to
Section 2115(b) of the CGCL, Section 17(a) of these Bylaws shall not apply and
all directors shall be elected at each annual meeting of stockholders to hold
office until the next annual meeting.

            (C) No stockholder entitled to vote at an election for directors may
cumulate votes to which such stockholder is entitled, unless, at the time of the
election, the Corporation is subject to Section 2115(b) of the CGCL. During such
time or times that the Corporation is subject to Section 2115(b) of the CGCL,
every stockholder entitled to vote at an election for directors may cumulate
such stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
such stockholder's shares are otherwise entitled, or distribute the
stockholder's votes on the same principle among as many candidates as such
stockholder thinks fit. No stockholder, however, shall be entitled to so
cumulate such stockholder's votes unless (i) the names of such candidate or
candidates have been placed in nomination prior to the voting and (ii) the
stockholder has given notice at the meeting, prior to the voting, of such
stockholder's intention to cumulate such stockholder's votes. If any stockholder
has given proper notice to cumulate votes, all stockholders may cumulate their
votes for any candidates who have been properly placed in nomination. Under
cumulative voting, the candidates receiving the highest number of votes, up to
the number of directors to be elected, are elected.



                                       9.

      Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
earlier death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.

      SECTION 18. VACANCIES.

            (A) Unless otherwise provided in the Certificate of Incorporation
and subject to the rights of the holders of any series of Preferred Stock, any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Section 18 in the case of the
death, removal or resignation of any director.

            (B) At any time or times that the Corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy, the directors then in
office who have been elected by stockholders shall constitute less than a
majority of the directors then in office, then

              (1) Any holder or holders of an aggregate of five percent (5%) or
more of the total number of shares at the time outstanding having the right to
vote for those directors may call a special meeting of stockholders; or

              (2) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.

      SECTION 19. RESIGNATION. Any director may resign at any time by delivering
his or her notice in writing or by electronic transmission to the Secretary,
such resignation to specify whether it will be effective at a particular time,
upon receipt by the Secretary or at the pleasure of the Board of Directors. If
no such specification is made, it shall be deemed effective at the pleasure of
the Board of Directors. When one or more directors shall resign from the Board
of Directors, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each Director so chosen shall hold
office for the unexpired portion of the term of the Director whose place shall
be vacated and until his successor shall have been duly elected and qualified.

      SECTION 20. REMOVAL.

            (A) During such time or times that the Corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed





                                      10.

from office at any time without cause by the affirmative vote of the holders of
at least a majority of the outstanding shares entitled to vote on such removal;
provided, however, that unless the entire Board is removed, no individual
director may be removed when the votes cast against such director's removal, or
not consenting in writing to such removal, would be sufficient to elect that
director if voted cumulatively at an election which the same total number of
votes were cast (or, if such action is taken by written consent, all shares
entitled to vote were voted) and the entire number of directors authorized at
the time of such director's most recent election were then being elected.

            (B) At any time or times that the Corporation is not subject to
Section 2115(b) of the CGCL, and subject to any limitations imposed by law,
Section 20(a) above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.

      SECTION 21. MEETINGS.

            (A) REGULAR MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, regular meetings of the Board of Directors may be held at any
time or date and at any place within or without the State of Delaware which has
been designated by the Board of Directors and publicized among all directors,
either orally or in writing, by telephone, including a voice-messaging system or
other system designed to record and communicate messages, facsimile, telegraph
or telex, or by electronic mail or other electronic means. No further notice
shall be required for regular meetings of the Board of Directors.

            (B) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or a majority of the authorized number of
directors.

            (C) MEETINGS BY ELECTRONIC COMMUNICATIONS EQUIPMENT. Any member of
the Board of Directors, or of any committee thereof, may participate in a
meeting by means of conference telephone or other communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in a meeting by such means shall constitute presence in person at
such meeting.

            (D) NOTICE OF SPECIAL MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting. If notice
is sent by U.S. mail, it shall be sent by first class mail, charges prepaid, at
least three (3) days before the date of the meeting. Notice of any meeting may
be waived in writing, or by electronic transmission, at any time before or after
the meeting and will be waived by any director by attendance thereat, except
when the director attends the meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.



                                      11.

            (E) WAIVER OF NOTICE. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present who did not receive notice shall
sign a written waiver of notice or shall waive notice by electronic
transmission. All such waivers shall be filed with the corporate records or made
a part of the minutes of the meeting.

      SECTION 22. QUORUM AND VOTING.

            (A) Unless the Certificate of Incorporation requires a greater
number, a quorum of the Board of Directors shall consist of a majority of the
exact number of directors fixed from time to time by the Board of Directors in
accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.

            (B) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.

      SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing or by electronic
transmission, and such writing or writings or transmission or transmissions are
filed with the minutes of proceedings of the Board of Directors or committee.
Such filing shall be in paper form if the minutes are maintained in paper form
and shall be in electronic form if the minutes are maintained in electronic
form.

      SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.

      SECTION 25. COMMITTEES.

            (A) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the





                                      12.

Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to (i) approving or
adopting, or recommending to the stockholders, any action or matter expressly
required by the DGCL to be submitted to stockholders for approval, or (ii)
adopting, amending or repealing any bylaw of the Corporation.

            (B) OTHER COMMITTEES. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.

            (C) TERM. The Board of Directors, subject to any requirements of any
outstanding series of Preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.

            (D) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon notice to the members of such committee of the time and place of
such special meeting given in the manner provided for the giving of notice to
members of the Board of Directors of the time and place of special meetings of
the Board of Directors. Notice of any special meeting of any committee may be
waived in writing at any time before or after the meeting and will be waived by
any director by attendance thereat, except when the director attends such
special meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Unless otherwise provided by the Board of Directors in the
resolutions authorizing the creation of the committee, a majority of the
authorized number of members of any such committee shall constitute a quorum for
the transaction of business, and the act of a majority of those present at any
meeting at which a quorum is present shall be the act of such committee.



                                      13.

      SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.

                                   ARTICLE V

                                    OFFICERS

      SECTION 27. OFFICERS DESIGNATED. The officers of the Corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the Corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the Corporation shall be fixed by or in the manner designated by the Board of
Directors.

      SECTION 28. TENURE AND DUTIES OF OFFICERS.

            (A) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.

            (B) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to the office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no Chief Executive Officer or
President, then the Chairman of the Board of Directors shall also serve as the
Chief Executive Officer of the Corporation and shall have the powers and duties
prescribed in paragraph (d) of this Section 28.

            (C) DUTIES OF THE LEAD DIRECTOR. In the event the Chairman of the
Board of Directors is an employee of the Corporation, then the Board of
Directors, in its sole discretion, may appoint a Lead Director to perform such
duties commonly incident to the office of the Chairman of the Board of Directors
and shall also perform such other duties and have such other powers, as the
Board of Directors shall designate from time to time.



                                      14.

            (D) DUTIES OF CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall preside at all meetings of the stockholders and at all meetings of the
Board of Directors, unless the Chairman of the Board of Directors has been
appointed and is present. The Chief Executive Officer shall, subject to the
control of the Board of Directors, have general supervision, direction and
control of the business and officers of the Corporation and shall be responsible
for overall strategic planning and the development of strategic relationships,
for corporate financing, for providing management oversight of the President.
The Chief Executive Officer shall perform other duties commonly incident to the
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time.

            (E) DUTIES OF PRESIDENT. Subject to the supervisory powers of the
Chief Executive Officer, the President shall be responsible for the day-to-day
management of the Corporation, and for providing support to the Chief Executive
Officer in the execution of his or her duties. In the absence or disability of
the Chief Executive Officer, the President, if any, shall also perform all the
duties of the Chief Executive Officer, and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the Chief Executive
Officer. The President shall have the general powers and duties of management
usually vested in the president of a corporation with a chief executive officer,
and shall have such other powers and perform such other duties as from time to
time may be prescribed by the Board of Directors, these bylaws, the Chief
Executive Officer or the Chairman of the Board.

            (F) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.

            (G) DUTIES OF SECRETARY. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the Corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties provided for in
these Bylaws and other duties commonly incident to the office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to the office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.

            (H) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the Corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the Corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the Corporation. The Chief Financial Officer shall perform other duties commonly
incident to the office and shall also perform such other duties and have such
other powers as the Board of





                                      15.

Directors or the President shall designate from time to time. The President may
direct the Treasurer or any Assistant Treasurer, or the Controller or any
Assistant Controller, to assume and perform the duties of the Chief Financial
Officer in the absence or disability of the Chief Financial Officer, and each
Treasurer and Assistant Treasurer and each Controller and Assistant Controller
shall perform other duties commonly incident to the office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.

      SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.

      SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
notice in writing or by electronic transmission to the Board of Directors or to
the President or to the Secretary. Any such resignation shall be effective when
received by the person or persons to whom such notice is given, unless a later
time is specified therein, in which event the resignation shall become effective
at such later time. Unless otherwise specified in such notice, the acceptance of
any such resignation shall not be necessary to make it effective. Any
resignation shall be without prejudice to the rights, if any, of the Corporation
under any contract with the resigning officer.

      SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.

                                   ARTICLE VI

    EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
                                   CORPORATION

      SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the Corporation
any corporate instrument or document, or to sign on behalf of the Corporation
the corporate name without limitation, or to enter into contracts on behalf of
the Corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the Corporation.

      All checks and drafts drawn on banks or other depositaries on funds to the
credit of the Corporation or in special accounts of the Corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.

      Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the Corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.



                                      16.

      SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the Corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.

                                  ARTICLE VII

                                 SHARES OF STOCK

      SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the Corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the Corporation shall be entitled to have a certificate signed by or in the name
of the Corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the Corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the Corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the Corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
Corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.

      SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The Corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or the owner's
legal representative, to agree to indemnify the Corporation in such manner as it
shall require or to give the Corporation a surety bond in such form and amount
as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.



                                      17.

      SECTION 36. TRANSFERS.

            (A) Transfers of record of shares of stock of the Corporation shall
be made only upon its books by the holders thereof, in person or by attorney
duly authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.

            (B) The Corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the Corporation to restrict the transfer of shares of stock of the Corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the DGCL.

      SECTION 37. FIXING RECORD DATES.

            (A) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.

            (B) Prior to the Initial Public Offering, in order that the
Corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to





                                      18.

consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the resolution
taking such prior action.

            (C) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.

      SECTION 38. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.

                                  ARTICLE VIII

                       OTHER SECURITIES OF THE CORPORATION

      SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the Corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the Corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the Corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the Corporation.





                                      19.

                                   ARTICLE IX

                                    DIVIDENDS

      SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the Corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law.

      SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.

                                   ARTICLE X

                                   FISCAL YEAR

      SECTION 42. FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.

                                   ARTICLE XI

                                 INDEMNIFICATION

      SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.

            (A) DIRECTORS AND EXECUTIVE OFFICERS. The Corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "EXECUTIVE OFFICERS" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the Corporation may modify the
extent of such indemnification by individual contracts with its directors and
executive officers; and, provided, further, that the Corporation shall not be
required to indemnify any director or executive officer in connection with any
proceeding (or part thereof) initiated by such person unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the Corporation, (iii) such
indemnification is provided by the Corporation, in its sole discretion, pursuant
to the powers vested in the Corporation under the DGCL or any other applicable
law or (iv) such indemnification is required to be made under subsection (d).

            (B) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The Corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the DGCL or any other applicable law. The Board of Directors shall
have the power to delegate the





                                      20.

determination of whether indemnification shall be given to any such person to
such officers or other persons as the Board of Directors shall determine.

            (C) EXPENSES. The Corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the Corporation, or is or was serving at the request of the
Corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
provided, however, that if the DGCL requires, an advancement of expenses
incurred by a director or executive officer in his or her capacity as a director
or executive officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "UNDERTAKING"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"FINAL ADJUDICATION") that such indemnitee is not entitled to be indemnified for
such expenses under this Section 43 or otherwise.

      Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the Corporation to
an executive officer of the Corporation (except by reason of the fact that such
executive officer is or was a director of the Corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by a majority vote of directors who were not parties to the
proceeding, even if not a quorum, or (ii) by a committee of such directors
designated by a majority vote of such directors, even though less than a quorum,
or (iii) if there are no such directors, or such directors so direct, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate clearly
and convincingly that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
Corporation.

            (D) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
Corporation and the director or executive officer. Any right to indemnification
or advances granted by this Section 43 to a director or executive officer shall
be enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting the claim. In connection with any claim for indemnification, the
Corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
DGCL or any other applicable law for the Corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the Corporation (except in any action, suit or proceeding,





                                      21.

whether civil, criminal, administrative or investigative, by reason of the fact
that such executive officer is or was a director of the Corporation) for
advances, the Corporation shall be entitled to raise a defense as to any such
action clear and convincing evidence that such person acted in bad faith or in a
manner that such person did not believe to be in or not opposed to the best
interests of the Corporation, or with respect to any criminal action or
proceeding that such person acted without reasonable cause to believe that his
conduct was lawful. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the DGCL or any other applicable law, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct.

            (E) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any applicable statute, provision of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The Corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the DGCL, or by any other applicable law.

            (F) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director or executive
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.

            (G) INSURANCE. To the fullest extent permitted by the DGCL or any
other applicable law, the Corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 43.

            (H) AMENDMENTS. Any repeal or modification of this Section 43 shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the Corporation.

            (I) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Section 43 that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the Corporation shall indemnify each director and
executive officer to the full extent under any other applicable law.

            (J) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:



                                      22.

              (1) The term "PROCEEDING" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.

              (2) The term "EXPENSES" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.

              (3) The term the "CORPORATION" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Section 43 with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.

              (4) References to a "DIRECTOR," "EXECUTIVE OFFICER," "OFFICER,"
"employee," or "AGENT" of the Corporation shall include, without limitation,
situations where such person is serving at the request of the Corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.

              (5) References to "OTHER ENTERPRISES" shall include employee
benefit plans; references to "FINES" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "SERVING AT
THE REQUEST OF THE CORPORATION" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "NOT OPPOSED TO THE BEST INTERESTS OF THE
CORPORATION" as referred to in this Section 43.

                                  ARTICLE XII

                                     NOTICES

      SECTION 44. NOTICES.

            (A) NOTICE TO STOCKHOLDERS. Written notice to stockholders of
stockholder meetings shall be given as provided in Section 7 herein. Without
limiting the manner by which notice may otherwise be given effectively to
stockholders under any agreement or contract with such stockholder, and except
as otherwise required by law, written notice to stockholders for





                                      23.

purposes other than stockholder meetings may be sent by U.S. mail or nationally
recognized overnight courier, or by facsimile, telegraph or telex or by
electronic mail or other electronic means.

            (B) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), as otherwise
provided in these Bylaws, or by overnight delivery service, facsimile, telex or
telegram, except that such notice other than one which is delivered personally
shall be sent to such address as such director shall have filed in writing with
the Secretary, or, in the absence of such filing, to the last known post office
address of such director.

            (C) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the Corporation or its transfer agent
appointed with respect to the class of stock affected, or other agent,
specifying the name and address or the names and addresses of the stockholder or
stockholders, or director or directors, to whom any such notice or notices was
or were given, and the time and method of giving the same, shall in the absence
of fraud, be prima facie evidence of the facts therein contained.

            (D) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all recipients of notice, but
one permissible method may be employed in respect of any one or more, and any
other permissible method or methods may be employed in respect of any other or
others.

            (E) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the Corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the Corporation is
such as to require the filing of a certificate under any provision of the DGCL,
the certificate shall state, if such is the fact and if notice is required, that
notice was given to all persons entitled to receive notice except such persons
with whom communication is unlawful.

            (F) NOTICE TO STOCKHOLDERS SHARING AN ADDRESS. Except as otherwise
prohibited under DGCL, any notice given under the provisions of DGCL, the
Certificate of Incorporation or the Bylaws shall be effective if given by a
single written notice to stockholders who share an address if consented to by
the stockholders at that address to whom such notice is given. Such consent
shall have been deemed to have been given if such stockholder fails to object in
writing to the Corporation within 60 days of having been given notice by the
Corporation of its intention to send the single notice. Any consent shall be
revocable by the stockholder by written notice to the Corporation.



                                      24.

                                  ARTICLE XIII

                                   AMENDMENTS

      SECTION 45. The Board of Directors is expressly empowered to adopt, amend
or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of
the Bylaws of the Corporation by the Board of Directors shall require the
approval of a majority of the Board of directors. The stockholders shall also
have power to adopt, amend or repeal the Bylaws of the Corporation; provided,
however, that, in addition to any vote of the holders of any class or series of
stock of the Corporation required by law or by the Certificate of Incorporation,
the affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then-outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to adopt, amend
or repeal any provision of the Bylaws of the Corporation.

                                  ARTICLE XIV

                                LOANS TO OFFICERS

      SECTION 46. LOANS TO OFFICERS. Except as otherwise prohibited by
applicable law, the Corporation may lend money to, or guarantee any obligation
of, or otherwise assist any officer or other employee of the Corporation or of
its subsidiaries, including any officer or employee who is a Director of the
Corporation or its subsidiaries, whenever, in the judgment of the Board of
Directors, such loan, guarantee or assistance may reasonably be expected to
benefit the Corporation. The loan, guarantee or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in these Bylaws shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of the Corporation at common law
or under any statute.




                                      25.

                                TABLE OF CONTENTS



                                                                          PAGE
                                                                       
ARTICLE I      OFFICES...................................................   1

      Section 1.  Registered Office......................................   1

      Section 2.  Other Offices..........................................   1

ARTICLE II     CORPORATE SEAL............................................   1

      Section 3.  Corporate Seal.........................................   1

ARTICLE III    STOCKHOLDERS' MEETINGS....................................   1

      Section 4.  Place Of Meetings......................................   1

      Section 5.  Annual Meetings........................................   2

      Section 6.  Special Meetings.......................................   4

      Section 7.  Notice Of Meetings.....................................   5

      Section 8.  Quorum.................................................   5

      Section 9.  Adjournment And Notice Of Adjourned Meetings...........   6

      Section 10. Voting Rights..........................................   6

      Section 11. Joint Owners Of Stock..................................   6

      Section 12. List Of Stockholders...................................   6

      Section 13. Action Without Meeting.................................   7

      Section 14. Organization...........................................   8

ARTICLE IV     DIRECTORS.................................................   9

      Section 15. Number And Term Of Office..............................   9

      Section 16. Powers.................................................   9

      Section 17. Classes of Directors...................................   9

      Section 18. Vacancies..............................................  10

      Section 19. Resignation............................................  10

      Section 20. Removal................................................  11

      Section 21. Meetings...............................................  11

      Section 22. Quorum And Voting......................................  12

      Section 23. Action Without Meeting.................................  12

      Section 24. Fees And Compensation..................................  12

      Section 25. Committees.............................................  13

      Section 26. Organization...........................................  14




                                       i.

                                TABLE OF CONTENTS
                                   (CONTINUED)



                                                                       
ARTICLE V      OFFICERS..................................................  14

      Section 27. Officers Designated....................................  14

      Section 28. Tenure And Duties Of Officers..........................  14

      Section 29. Delegation Of Authority................................  15

      Section 30. Resignations...........................................  16

      Section 31. Removal................................................  16

ARTICLE VI     EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF
               SECURITIES OWNED BY THE CORPORATION.......................  16

      Section 32. Execution Of Corporate Instruments.....................  16

      Section 33. Voting Of Securities Owned By The Corporation..........  16

ARTICLE VII    SHARES OF STOCK...........................................  17

      Section 34. Form And Execution Of Certificates.....................  17

      Section 35. Lost Certificates......................................  17

      Section 36. Transfers..............................................  17

      Section 37. Fixing Record Dates....................................  18

      Section 38. Registered Stockholders................................  19

ARTICLE VIII   OTHER SECURITIES OF THE CORPORATION.......................  19

      Section 39. Execution Of Other Securities..........................  19

ARTICLE IX     DIVIDENDS.................................................  19

      Section 40. Declaration Of Dividends...............................  19

      Section 41. Dividend Reserve.......................................  20

ARTICLE X      FISCAL YEAR...............................................  20

      Section 42. Fiscal Year............................................  20

ARTICLE XI     INDEMNIFICATION...........................................  20

      Section 43. Indemnification Of Directors, Executive Officers,
                  Other Officers, Employees And Other Agents.............  20

ARTICLE XII    NOTICES...................................................  23

      Section 44. Notices................................................  23

ARTICLE XIII   AMENDMENTS................................................  24

      Section 45. The Board of Directors is expressly empowered to
                  adopt, amend or repeal the Bylaws of the
                  Corporation............................................  24




                                       ii.



                                                                       
ARTICLE XIV    LOANS TO OFFICERS.........................................  25

      Section 46. Loans To Officers......................................  25



                                      iii.










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                                       1.

                                                                     EXHIBIT 4.2

                         REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement (this "Agreement") is made and
entered into as of the 15th day of October, 1998, by and among CTL
ImmunoTherapies Corp., an Ontario corporation (the "Company"), Medical Research
Group, LLC, a limited liability company, McLean Watson Advisory Inc., an Ontario
corporation, and Alfred E. Mann (said parties other than the Company being
referred to collectively as the "Purchasers").

                                    RECITALS

         A.       The Company and the Purchasers have entered into a Line of
Credit Agreement concurrently with the execution and delivery of this Agreement
(the "Credit Agreement") pursuant to which the Purchasers have agreed to make
available to the Company a line of credit aggregating $3 million. The
indebtedness under the Credit Agreement is convertible into Series A Preferred
Shares ("Preferred Shares") and, under certain circumstances, into Class A
Voting Common Shares of the Company ("Common Shares"). The Preferred Shares are
themselves convertible into Common Shares.

         B.       The parties now desire to enter into this Agreement to
provide, with respect to the Common Shares issuable upon conversion of the
indebtedness under the Credit Agreement and/or upon conversion of the Preferred
Shares, certain rights with respect to registration under the U. S. Securities
Act of 1933 or qualification under the analogous provisions of Canadian Law, all
on the terms and subject to the conditions set forth in this Agreement.

                                       1.


                                    AGREEMENT

         NOW, THEREFORE, based on the preceding facts, and in consideration of
the mutual covenants set forth below, the parties to this Agreement agree as
follows:

         1.       DEFINITIONS. For the purposes of this Agreement, the following
words shall have the meanings set forth below:

                  "Canadian Law" means the statutes, regulations and policy
statements relating to the public distribution of securities in each of the
provinces of Canada in force from time to time;

                  "Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.

                  "Common Shares" shall have the meaning set forth in Paragraph
A of the Recitals.

                  "Company's Notice" shall have the meaning set forth in Section
2 hereof.

                  "Control Block" shall have the meaning specified under
Canadian Law.

                  "Credit Agreement" shall have the meaning set forth in
Paragraph A of the Recitals.

                  "Initial Public Offering" means the first sale of Common
Shares to the public which is effected pursuant to a registration statement
filed with and declared effective by the U.S. Securities and Exchange Commission
under the Securities Act of 1933 or pursuant to the qualifications of the Common
Shares under the analogous procedures under Canadian Law.

                  "Initiating Holders" means the holders of Registrable
Securities initially requesting registration of Registrable Securities pursuant
to Section 2 of this Agreement or, if Exhibit A is applicable, Section 1
thereof.

                  "Prospective Sellers" shall have the meaning set forth in
Section 7(a)(ii) hereof.

                  "Credit Agreement" shall have the meaning set forth in
Paragraph A of the Recitals.

                  "Piggyback Notice" shall have the meaning set forth in Section
4 hereof.

                  "Preferred Shares" shall have the meaning set forth in
Paragraph A of the Recitals and shall include shares issued with respect to any
such shares.

                  "Qualified Shares" shall have the meaning set forth in Section
1 of Exhibit A.

                  The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the

                                       2.


effectiveness of such registration statement.

                  "Registrable Securities" means (i) any Common Shares issued or
issuable upon conversion of the Preferred Shares, (ii) any Common Shares issued
or issuable with respect to the Common Shares referred in clause (i) of this
paragraph by reason of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of Common Shares outstanding
which are Registrable Securities and the number of Common Shares issuable
pursuant to then exercisable or convertible securities (including without
limitation the Promissory Notes delivered pursuant to the Credit Agreement and
the Preferred Shares) which are exercisable for or convertible into Registrable
Securities.

                  "Requesting Holders" shall have the meaning set forth in
Section 2 of this Agreement.

                  "Securities Act" means the Securities Act of 1933, as amended.

         Other Terms. Unless the context otherwise requires, all capitalized
terms not defined in this Agreement shall have the respective meanings accorded
to them in the Credit Agreement.

         2.       REQUIRED REGISTRATIONS.

                  (a)      DEMAND REGISTRATION. If, at any time after the
Company has completed an Initial Public Offering, Initiating Holders holding at
least a majority of the Registrable Securities then outstanding propose to
dispose of Common Shares having an aggregate price to the public (net of any
underwriters' discounts and commissions) of at least U.S.$5,000,000, then such
holders may request the Company in writing to effect such registration, stating
the form of registration statement under the Securities Act to be used, the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of such shares. If the Company's Initial Public Offering
occurred primarily in Canada under Canadian Law, then, in lieu of registration
under the U. S. Securities Act, the Common Shares shall be qualified under the
analogous provisions of Canadian Law in accordance with Exhibit A hereto. In
such event, all references herein to "register", "registered" and "registration"
shall refer to the qualification of securities for sale to the public in all
provinces of Canada by filing a prospectus in accordance with Canadian Law
mutatis mutandis.

                  (b)      Upon receipt of the request of the Initiating Holders
pursuant to Section 2(a) above, the Company shall give prompt written notice
thereof to all other holders of Registrable Securities. Subject to the
provisions of this Subsection (b) and Section 3 below, the Company shall use its
best efforts promptly to effect the registration under the Securities Act of all
shares of Registrable Securities specified in the requests of the Initiating
Holders and the requests (stating the number of shares of Registrable Securities
to be disposed of and the intended method of disposition of such shares) of
other holders of shares of Registrable Securities ("Requesting Holders") given
within 30 days after receipt of such notice from the Company.

         3.       LIMITATIONS ON REQUIRED REGISTRATIONS.

                                       3.


                  (a)      The Company shall not be required to prepare and file
more than two (2) registration statements, which actually become or are declared
effective at the request of holders of Registrable Securities pursuant to
Section 2(a) hereof.

                  (b)      Only Common Shares may be included in a registration,
and, whenever a registration requested by the holders of Registrable Securities
is for a firmly underwritten offering, if the underwriters determine, in their
sole discretion, that the number of Common Shares so included which are to be
sold by the holders of Registrable Securities is limited due to market
conditions, the holders (including both the Initiating Holders and the
Requesting Holders) of Registrable Securities proposing to sell their shares in
such underwriting and registration shall share pro rata in the available portion
of the registration in question, such sharing to be based upon the number of
shares of Registrable Securities then held by such holders, respectively. If any
holder of Registrable Securities disapproves of the terms of the underwriting,
such holder may elect to withdraw therefrom by written notice to the Company,
the underwriter and the Initiating Holders. The Registrable Securities so
withdrawn shall also be withdrawn from registration; provided, however, that, if
by the withdrawal of such Registrable Securities a greater number of shares of
Registrable Securities held by other holders of Registrable Securities may be
included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all holders of Registrable
Securities who have included Registrable Securities in the registration the
right to include additional Registrable Securities in the same proportion used
in determining the limitation imposed by the provisions of this Section 3(b).

                  (c)      The Company shall not be required to prepare and file
a registration statement pursuant to Section 2 hereof which would become
effective within 180 days following the effective date of a registration
statement filed by the Company with the Commission pertaining to an underwritten
public offering of securities for cash for the account of the Company or if the
Initiating Holders' request for registration is received by the Company
subsequent to such time as the Company in good faith gives written notice to the
holders of Registrable Securities that the Company is commencing to prepare a
Company-initiated registration statement and the Company is actively employing
in good faith all reasonable efforts to cause such registration statement to
become effective.

                  (d)      The Company shall be entitled to postpone for a
reasonable period of time (but not exceeding 60 days) the filing of any
registration statement (or prospectus, as the case may be) otherwise required to
be prepared and filed by it hereunder if the Company determines, in its
reasonable judgment, that such registration and offering would have a material
and adverse impact on any financing, acquisition, reorganization or other
material transaction involving the Company or would require premature
disclosures thereof and the Company promptly gives the Initiating Holders and
Requesting Holders written notice of such determination, containing a general
statement of the reasons for such postponement and an approximation of the
anticipated delay.

         4.       COMPANY REGISTRATION. If (but without any obligation to do so)
the Company at any time proposes to register any of its securities for sale for
its own account or for the account of any other person (other than a
registration relating either to the sale of securities to employees of the
Company pursuant to a stock option, stock purchase or similar plan or a Rule 145

                                       4.


transaction, or a registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of Registrable Securities), it shall each such time
give written notice (the "Company's Notice"), at its expense, to all holders of
Registrable Securities of its intention to do so at least 15 days prior to the
filing of a registration statement with respect to such registration with the
Commission. If any holder of Registrable Securities desires to dispose of all or
part of such stock, it may request registration thereof in connection with the
Company's registration by delivering to the Company, within ten (10) days after
receipt of the Company's Notice, written notice of such request (the "Piggyback
Notice") stating the number of shares of Registrable Securities to be disposed
of and the intended method of disposition of such shares by such holder or
holders. The Company shall use its best efforts to cause all shares of
Registrable Securities specified in the Piggyback Notice to be registered under
the Securities Act so as to permit the sale or other disposition (in accordance
with the intended methods thereof as aforesaid) by such holder or holders of the
shares so registered, subject, however, to the limitations set forth in Section
5 hereof.

         5.       LIMITATIONS ON COMPANY REGISTRATION.

                  (a)      If the registration of which the Company gives notice
pursuant to Section 4 above is for the purpose of permitting a disposition of
securities by the Company pursuant to a firm commitment underwritten offering,
the notice shall so state, and the Company shall have the right to limit the
aggregate size of the offering or the number of shares to be included therein by
stockholders of the Company if requested to do so in good faith by the Board of
Directors of the Company and only securities which are to be included in the
underwriting may be included in the registration.

                  (b)      Whenever the number of shares which may be registered
pursuant to Section 4 is limited by the provisions of Section 5(a) above, the
Company shall have priority as to sales over the holders of Registrable
Securities and each holder hereby agrees that it shall withdraw its securities
from such registration to the extent necessary to allow the Company to include
all the shares which the Company desires to sell for its own account to be
included within such registration. The holders of Registrable Securities given
rights by Section 4 above shall share pro rata (as a single class) in the
available portion of the registration in question, such sharing to be based upon
the number of shares of such stock then held by each of such holders,
respectively.

         6.       DESIGNATION OF UNDERWRITER. In the case of any registration
initiated by the holders of Registrable Securities pursuant to the provisions of
Section 2 hereof which is proposed to be effected pursuant to a firm commitment
underwriting, the Company shall have the right to designate the managing
underwriter (which underwriter shall be reasonably acceptable to the holders of
a majority of the Registrable Securities participating in the transaction), and
all holders of Registrable Securities participating in the registration shall
sell their shares only pursuant to such underwriting.

         7.       REGISTRATION PROCEDURES.

                  (a)      Subject to Section 7(b), if and when the Company is
required by the provisions of this Agreement to use its best efforts to effect
the registration of shares of

                                       5.


Registrable Securities, the Company shall:

                           (i)      prepare and file with the Commission a
registration statement with respect to such shares and use its best efforts to
cause such registration statement to become and remain effective for up to 120
days as provided herein;

                           (ii)     prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectuses
used in connection therewith as may be necessary to keep such registration
statement effective and current and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all shares
covered by such registration statement, including such amendments and
supplements as may be necessary to reflect the intended method of disposition
from time to time of the holder or holders of such shares who have requested
that any of their shares be sold or otherwise disposed of in connection with the
registration (the "Prospective Sellers");

                           (iii)    furnish to each Prospective Seller such
number of copies of each prospectus, including preliminary prospectuses, in
conformity with the requirements of the Securities Act, and such other
documents, as the Prospective Seller may reasonably request in order to
facilitate the public sale or other disposition of the shares owned by it;

                           (iv)     use its best efforts to register or qualify
the shares covered by such registration statement under such other securities or
blue sky or other applicable laws of such jurisdictions as each Prospective
Seller shall reasonably request to enable such seller to consummate the public
sale or other disposition of the shares owned by such seller; provided that, the
Company shall not be required in connection therewith to qualify to do business
or to file a general consent to service of process in any such jurisdiction;

                           (v)      cause all such shares to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;

                           (vi)     provide a transfer agent and registrar for
all such shares not later than the effective date of such registration
statement;

                           (vii)    enter into such customary agreements
(including an underwriting agreement) and take all such other customary actions
as the holders of a majority of the shares being sold reasonably request in
order to expedite or facilitate the disposition of such shares; and

                           (viii)   make available for inspection by any
Prospective Seller, any underwriter participating in any disposition pursuant to
such registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with the preparation of such registration statement; and

                           (ix)     furnish to the Initiating and Requesting
Holders and the underwriters, if any, (i) an opinion of counsel for the Company
and (ii) a "comfort" letter signed by the auditors who have certified the
Company's financial statements included in such

                                       6.


registration statement, each covering substantially the same matters with
respect to such registration statement as are customarily covered in opinions of
issuer's counsel and in accountants comfort letters delivered to the
underwriters in underwritten public offerings of Securities A.

                  (b)      If any registration is required by the provisions of
this Agreement to be made under Canadian Law, the Company shall comply with the
provisions of Exhibit A.

                  (c)      Each Prospective Seller of such shares shall furnish
to the Company such information as the Company may reasonably require from the
Prospective Seller for inclusion in the registration statement (and the
prospectus included therein).

                  (d)      The Prospective Sellers shall not (until further
notice) effect sales of the shares covered by the registration statement after
receipt of written notice from the Company to suspend sales to permit the
Company to correct or update a registration statement or prospectus.

         8.       EXPENSES OF REGISTRATION.

                  (a)      All registration and filing fees, printing expenses,
expenses of compliance with blue sky laws, fees and disbursements of counsel for
the Company and expenses of any audits other professional opinions incidental to
or required by any registration pursuant to Sections 2 or 4 hereof
("Registration Expenses") shall be borne by the Company; provided, however, that
the Company shall be required to bear the Registration Expenses for a maximum of
three (3), or, if the Initial Public Offering was completed under Canadian Law,
the Company shall be required to bear the Registration Expenses for a maximum of
three prospectuses filed under Canadian Law.

                  (b)      Notwithstanding the foregoing, the Company shall not
be required to pay for any expenses of any registration proceeding begun
pursuant to Section 2(a) if the registration request is subsequently withdrawn
at the request of the holders of a majority of the Registrable Securities to be
registered (in which case all participating holders shall bear such expenses);
provided, however, that if at the time of such withdrawal the holders have
learned of a material adverse change in the condition, business or prospects of
the Company from that known to the Initiating Holders at the time of their
request, then the holders shall not be required to pay any of such expenses.

         9.       INDEMNIFICATION.

                  (a)      To the extent permitted by law, in the event of any
registration or qualification of any of its securities under the Securities Act
or Canadian Law, as applicable, pursuant to this Agreement, the Company shall
indemnify and hold harmless each holder requesting or joining in a registration
or qualification of such securities, each underwriter (as defined in the
Securities Act or Canadian Law, as applicable) and each controlling person of
any holder or underwriter, if any, (within the meaning of the Securities Act) or
Canadian Law, as applicable, and each person or company who signs any prospectus
or amendment thereto in accordance with Canadian Law against any losses, claims,
damages or liabilities, joint or several (or actions in respect thereof), to
which such holder, underwriter, controlling person or signatory may be subject
under the Securities Act or Canadian Law, as applicable, under any other statute

                                       7.


or at common law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement (or alleged untrue statement) of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus filed under
Canadian Law or contained in any filed registration statement, or any summary
prospectus issued in connection with any securities being registered, or any
amendment or supplement thereto, or any other document, or (ii) any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading or (iii) any
violation by the Company of the Securities Act, Canadian Law or any Blue Sky
law, or any rule or regulation promulgated under the Securities Act, Canadian
Law or any Blue Sky law, or any other law, applicable to the Company in
connection with any such registration, qualification or compliance ((i), (ii)
and (iii) are each referred to hereafter as a "Violation"), and shall reimburse
each such holder, underwriter, controlling person or signatory for any legal or
other expenses reasonably incurred by such holder, underwriter, controlling
person or signatory in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable to any holder, underwriter, controlling person or signatory in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any such untrue statement or omission made in such
registration statement, preliminary prospectus, summary prospectus, prospectus,
or amendment or supplement thereto, or any other document, in reliance upon and
in conformity with written information furnished to the Company by such holder,
underwriter, controlling person or signatory, respectively, specifically for use
therein.

                  (b)      To the extent permitted by law, in the event of any
registration of any of its securities under the Securities Act or Canadian Law,
as applicable, pursuant to this Agreement, each holder requesting or joining in
a registration of such securities shall indemnify and hold harmless the Company,
each underwriter (as defined in the Securities Act or Canadian Law, as
applicable) and each controlling person of the Company or underwriter, if any,
(within the meaning of the Securities Act) or Canadian Law, as applicable, and
each person or company who signs any prospectus or amendment thereto in
accordance with Canadian Law against any losses, claims, damages or liabilities,
joint or several (or actions in respect thereof), to which the Company,
underwriter, controlling person or signatory may be subject under the Securities
Act or Canadian Law, under any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon written information
furnished by the holder expressly for use in connection with such registration,
and shall reimburse the Company, underwriter, controlling person or signatory
for any legal or other expenses reasonably incurred by the Company, underwriter,
controlling person or signatory in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
holder shall not be liable to the Company, underwriter, controlling person or
signatory in any such case to the extent that any such loss, claim, damage or
liability exceeds the gross proceeds from the offering received by such holder
from the underwriters. The indemnity provided for herein shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Company, underwriter, controlling person or signatory.

                  (c)      If the indemnification provided for in Section 9(a)
or 9(b) above is

                                       8.


unavailable to an indemnified party in respect of any losses, claims, damages or
liabilities referred to therein, then the indemnifying party in lieu of
indemnifying such indemnified party thereunder shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party, or by the indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

                           The parties agree that it would not be just and
equitable if contribution pursuant to this Section 9(c) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities or actions in respect thereof referred
to in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9(c), no holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities sold by it exceeds the amount of
any damages which such holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

                  (d)      Promptly after receipt by an indemnified party under
Section 9(a) or 9(b) above of notice of the commencement of any action, such
indemnified party shall notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such Sections or to the extent that it has not been
prejudiced as a proximate result of such failure. In case any such action shall
be brought against any indemnified party, and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses (in which case the
indemnifying party shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties). Upon the permitted assumption by
the indemnifying party of the defense of such action, and approval by the
indemnified party of counsel, the indemnifying party shall not be liable to such
indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless

                                       9.


(i) the indemnified party shall have employed separate counsel in connection
with the assertion of legal defenses in accordance with the proviso to the next
preceding sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time, (iii) the indemnifying party and its counsel do not actively
and vigorously pursue the defense of such action or (iv) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.

         10.      RIGHTS WHICH MAY BE GRANTED TO OTHER PERSONS. The Company
shall not grant any person registration rights which shall in any way whatsoever
impair the priority of the registration rights granted to the Purchasers in this
Agreement.

         11.      RULE 144 REQUIREMENTS. Immediately after the date on which a
registration statement filed by the Company under the Securities Act becomes
effective, the Company shall undertake to make and keep publicly available, and
available to the holders of Registrable Securities, such information as is
necessary to enable the holders of Registrable Securities to make sales of such
stock pursuant to Rule 144 of the Commission under the Securities Act. The
Company shall furnish to any such holder, upon request, a written statement
executed by the Company as to the steps it has taken to comply with the current
public information requirements of Rule 144.

         12.      STAND-STILL PERIOD. If the Company files a registration
statement in connection with any offering to which this Agreement applies, the
holders of the Preferred Shares and any in accordance with the Securities Act
(or prospectus under Canadian Law) Common Shares issued upon conversion of the
Preferred Shares and/or conversion of the indebtedness under the Credit
Agreement shall not effect any sale or distribution of any shares (except
pursuant to such registration statement) of the capital stock of the Company,
whether now owned or hereafter acquired, during the period requested by the
underwriters commencing with the effective date of such registration statement
or prospectus and ending on the close of business on a date which is not more
than one hundred and eighty (180) days thereafter or such time as the
registration statement or prospectus is withdrawn, whichever is earlier. In
order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of such holders until
the end of such period.

         13.      ASSIGNMENT. The rights to cause the Company to register
Registrable Securities pursuant to this Agreement may be assigned (but only with
all related obligations) by the Purchasers to a transferee or assignee (other
than a competitor of the Company) of such securities who, after such assignment
or transfer, holds at least 100,000 Common Shares issued or issuable upon
conversion of Preferred Shares or conversion of the indebtedness under the
Credit Agreement (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other recapitalizations), provided the Company is,
within a reasonable time after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned.

         14.      MISCELLANEOUS.

                  (a)      SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein,

                                      10.


the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors of the parties but neither party will
have the right to assign its rights under this Agreement to any other person or
entity without the prior written consent of the other party, which consent can
be withheld for any reason or without reason. Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

                  (b)      JOINT AND SEVERAL OBLIGATIONS OF PURCHASERS. The
obligations of the Purchasers under this Agreement are several and not joint.

                  (c)      GOVERNING LAW. This Agreement shall be governed by
and construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.

                  (d)      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.

                  (e)      TITLES AND SUBTITLES. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

                  (f)      NOTICES. Unless otherwise provided herein, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given upon personal delivery to the party to be notified
or three (3) days after deposit in the United States mail, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.

                  (g)      SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

                  (h)      ENTIRE AGREEMENT. This Agreement and the other
agreements referred to herein constitute the entire understanding and agreement
between the parties with regard to the specific subject matter hereof and no
party shall be liable or bound by any representation, warranty, covenant or
agreement except as specifically set forth herein. Any previous agreement
(whether written, oral or implied) among the parties relative to the specific
subject matter hereof is superseded by this Agreement.

                  (i)      AMENDMENTS AND WAIVERS. Neither this Agreement nor
any term hereof may be changed, waived, discharged or terminated orally or in
writing, except that any term of this Agreement may be amended and the
observance of any such term may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Company and the holders of at least a majority of the Registrable
Securities then in existence; provided, however, that no such amendment or
waiver shall affect

                                      11.


the provisions of this Section, no such waiver shall extend to or affect any
other obligation not expressly waived.

                  (j)      SPECIFIC PERFORMANCE. The parties hereto agree that
the capital stock of the Company cannot be purchased or sold in the open market
and that, for these reasons, among others, the parties will be irreparably
damaged in the event that this Agreement is not specifically enforceable.
Accordingly, in the event of any controversy concerning the capital stock which
is the subject of this Agreement, or any right or obligation to register such
securities, such right or obligation shall be enforceable in a court of equity
by specific performance. The rights granted in this Section shall be cumulative
and not exclusive, and shall be in addition to any and all other rights which
the parties hereto may have hereunder, at law or in equity.

                                      12.


         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above-written.

"COMPANY"                              CTL IMMUNOTHERAPIES CORP.,
                                       an Ontario corporation

                                       By: /s/ John Simard
                                           -------------------------------------
                                           John Simard,
                                           Chief Executive Officer

                                       By: /s/ Edwin Nordholm
                                           -------------------------------------
                                           Edwin Nordholm,
                                           President and Chief Operating Officer

                                       Address: One First Canadian Place
                                                Suite 5100
                                                One First Canadian Place
                                                Toronto, Ontario  M5X1A4

"PURCHASERS"

MEDICAL RESEARCH GROUP, LLC, a
Delaware limited liability company

By:  AEM MINIMED CORP., its Manager

By: /s/ Alfred E. Mann
    --------------------------------      By: /s/ Alfred E. Mann
    Alfred E. Mann,                           ----------------------------------
    President                                     ALFRED E. MANN

Address: 12744 San Fernando Road          Address: 12744 San Fernando Road
         Sylmar, CA  91342                         Sylmar, CA  91342

                                          MCLEAN WATSON ADVISORY, INC.,
                                          a Delaware limited partnership

                                          By: /s/ Edwin Nordholm
                                              ----------------------------------
                                              Edwin Nordholm,
                                              President

                                          By: /s/ London Owen
                                              ----------------------------------
                                              London Owen,
                                              Chairman

                          [SIGNATURE PAGE TO AGREEMENT]



                                    EXHIBIT A

         This Exhibit A applies to the qualification for sale to the public of
Registrable Securities in accordance with Canadian Law pursuant to the
Registration Rights Agreement which is attached.

         1.       PROSPECTUS CLEARANCE.

                  In the event of a request made pursuant to Section 2(a) of the
Registration Rights Agreement to which this Exhibit A applies, the Company shall
promptly do all things necessary to qualify the Registrable Securities specified
in the notice of the Initiating Holders and the Requesting Holders (the
"Qualified Shares") for distribution or distribution to the public in all
provinces of Canada. In order to comply with its obligations under this Section
1, the Company shall as expeditiously as practicable:

                  (a)      prepare and file under the applicable laws of each of
the provinces of Canada, a preliminary prospectus (in English and French
languages, as appropriate) and such other documents as may be required pursuant
to all applicable laws and policy statements to qualify the Qualified Shares for
distribution or distribution to the public;

                  (b)      as soon as possible after any comments of appropriate
securities commissions and regulatory authorities on the preliminary prospectus
are satisfied and in any event, no later than sixty (60) days thereafter,
prepare and file under the applicable laws of each of the provinces of Canada a
final prospectus (in the English and French languages, as appropriate) and take
all other steps and proceedings as may be required in order to fully qualify the
Qualified Shares for distribution or distribution to the public, as those terms
are defined in applicable securities legislation, in each of the provinces of
Canada by persons qualified pursuant to the relevant provisions of applicable
securities legislation to distribute or distribute such Qualified Shares to the
public;

                  (c)      use its best efforts to obtain receipt and clearance
therefore without delay, keeping the Initiating Holders and the Requesting
Holders advised as to the initiation, progress and completion of the
qualification procedure;

                  (d)      prepare and file with the appropriate securities
commissions such information, reports and amendments and supplements to the
prospectus as may be necessary to keep it in good standing as a reporting issuer
under Canadian Law;

                  (e)      furnish to the Initiating and Requesting Holders such
number of copies of any prospectus, including a preliminary prospectus, prepared
in conformity with the requirements of the applicable securities legislation,
and such other documents as any such Holder may reasonably request, in order to
facilitate the public distribution or other disposition of the Qualified Shares;

                  (f)      furnish to the Initiating and Requesting Holders and
the underwriters, if any, (i) an opinion of counsel for the Company, and (ii) a
"comfort" letter signed by the auditors who have certified the Company's
financial statements included in such prospectus, each covering substantially
the same matters with respect to such prospectus as are customarily covered in

                                      A-1.


opinions of issuer's counsel and in accountant's comfort letters delivered to
the underwriters in underwritten public offerings of securities;

                  (g)      provide and cause to be maintained a transfer agent
and registrar for its common shares from and after a date not later than the
effective date of the (final) prospectus;

                  (h)      use its best efforts to list its common shares on
either the Toronto or Montreal stock exchanges;

                  (i)      enter into customary agreements (including if the
method of distribution is by means of an underwriting, an underwriting agreement
in customary form) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Qualified Shares.

                                      A-2.


                   AMENDMENT TO REGISTRATION RIGHTS AGREEMENT

         This Amendment to Registration Rights Agreement (this "Amendment")
amends the Registration Rights Agreement dated as of October 15, 1998 entered
into by the parties to this Amendment (the "Registration Rights Agreement").

         Since the date of the Registration Rights Agreement, Medical Research
Group, Inc. ("MRG"), successor to the business and assets of Medical Research
Group, LLC, has assigned to Alfred E. Mann ("Mann") all of its rights arising
under and pursuant to the Credit Agreement entered into as of October 15, 1998,
as amended by the Amendment and Supplement to Line of Credit Agreement also
dated as of October 15, 1998 (collectively the "Credit Agreement") and the
related Promissory Note and General Security Agreement entered into pursuant to
the Credit Agreement. The purpose of this Amendment is to amend the Registration
Rights Agreement to reflect the assignment of the rights of MRG to Mann and the
assumption of the obligations of MRG by Mann under the Registration Rights
Agreement.

         The Registration Rights Agreement is hereby amended as follows:

         (a)      All references to the "Purchasers" shall be deemed to refer to
Mann and McLean Watson and not to include MRG.

         (b)      All references to the Credit Agreement shall be deemed to
refer to the Credit Agreement as amended by the Amendment to Loan Documents
dated as of March ___, 2000 among the parties to this Amendment.

         (c)      MRG shall have no further rights or obligations under the
Registration Rights Agreement, and this Amendment shall serve as a novation of
the Registration Rights Agreement among CTL, Mann and McLean Watson.

         Except as amended by this Amendment the Registration Rights Agreement
shall remain in full force and effect.

CTL IMMUNOTHERAPIES CORP.                   MCLEAN WATSON ADVISORY, INC.

By:            /s/ John Simard              By:          /s/ Louden Owen
    ------------------------------------        --------------------------------
    John Simard, Chief Executive Officer             Louden Owen, Chairman

MEDICAL RESEARCH GROUP, INC.

By:          /s/ Ronald J. Lebel                         /s/ Alfred E. Mann
    ------------------------------------        --------------------------------
          Ronald J. Lebel, President                       Alfred E. Mann

                                       1.

                                                                    EXHIBIT 10.1

                               INDEMNITY AGREEMENT

         THIS INDEMNITY AGREEMENT (this "AGREEMENT") is made and entered into
this __ day of ________, _____ by and between MANNKIND CORPORATION, a Delaware
corporation (the "COMPANY"), and __________ ("AGENT").

                                    RECITALS

         WHEREAS, Agent performs a valuable service to the Company in Agent's
capacity as [enter position] of the Company;

         WHEREAS, the stockholders of the Company have adopted bylaws (the
"BYLAWS") providing for the indemnification of the directors, officers,
employees and other agents of the COMPANY, including persons serving at the
request of the Company in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "CODE");

         WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Company and its agents, officers, employees and other
agents with respect to indemnification of such persons; and

         WHEREAS, in order to induce Agent to continue to serve as [enter
position] of the Company, the Company has determined and agreed to enter into
this Agreement with Agent;

         NOW, THEREFORE, in consideration of Agent's continued service as [enter
position] after the date hereof, the parties hereto agree as follows:

                                    AGREEMENT

         1.       SERVICES TO THE COMPANY. Agent will serve, at the will of the
Company or under separate contract, if any such contract exists, as [enter
position] of the Company or as a director, executive officer or other fiduciary
of an affiliate of the Company (including any employee benefit plan of the
Company) faithfully and to the best of his ability so long as he is duly elected
and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Company or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Company or any affiliate shall have no obligation
under this Agreement to continue Agent in any such position.

         2.       INDEMNITY OF AGENT. The Company hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but only to the extent that such amendment permits the Company to provide
broader indemnification rights than the Bylaws or the Code permitted prior to
adoption of such amendment).

                                       1.



         3.       ADDITIONAL INDEMNITY. In addition to and not in limitation of
the indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Company hereby further agrees to
hold harmless and indemnify Agent:

                  (a)      against any and all expenses (including attorneys'
fees), witness fees, damages, judgments, fines and amounts paid in settlement
and any other amounts that Agent becomes legally obligated to pay because of any
claim or claims made against or by him in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative (including an action by or in the
right of the Company) to which Agent is, was or at any time becomes a party, or
is threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Company, or is
or was serving or at any time serves at the request of the Company as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and

                  (b)      otherwise to the fullest extent as may be provided to
Agent by the Company under the non-exclusivity provisions of the Code and
Section 43 of the Bylaws.

         4.       LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Company:

                  (a)      on account of any claim against Agent solely for an
accounting of profits made from the purchase or sale by Agent of securities of
the Company pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or similar provisions of any federal, state or
local statutory law;

                  (b)      on account of Agent's conduct that is established by
a final judgment as knowingly fraudulent or deliberately dishonest or that
constituted willful misconduct;

                  (c)      on account of Agent's conduct that is established by
a final judgment as constituting a breach of Agent's duty of loyalty to the
Company or resulting in any personal profit or advantage to which Agent was not
legally entitled;

                  (d)      for which payment is actually made to Agent under a
valid and collectible insurance policy or under a valid and enforceable
indemnity clause, bylaw or agreement, except in respect of any excess beyond
payment under such insurance, clause, bylaw or agreement;

                  (e)      if indemnification is not lawful (and, in this
respect, both the Company and Agent have been advised that the Securities and
Exchange Commission believes that indemnification for liabilities arising under
the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or

                  (f)      in connection with any proceeding (or part thereof)
initiated by Agent, or any proceeding by Agent against the Company or its
directors, officers, employees or other agents, unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the Company, (iii) such indemnification

                                       2.



is provided by the Company, in its sole discretion, pursuant to the powers
vested in the Company under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.

         5.       CONTINUATION OF INDEMNITY. All agreements and obligations of
the Company contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Company (or is or was serving
at the request of the Company as a director, officer, employee or other agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise) and shall continue thereafter so long as Agent shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal, arbitrational, administrative or
investigative, by reason of the fact that Agent was serving in the capacity
referred to herein.

         6.       PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Company for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Company shall indemnify Agent for the portion thereof to which
Agent is entitled.

         7.       NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30)
days after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Company under this Agreement, notify the Company of the commencement thereof;
but the omission so to notify the Company will not relieve it from any liability
which it may have to Agent otherwise than under this Agreement. With respect to
any such action, suit or proceeding as to which Agent notifies the Company of
the commencement thereof:

                  (a)      the Company will be entitled to participate therein
at its own expense;

                  (b)      except as otherwise provided below, the Company may,
at its option and jointly with any other indemnifying party similarly notified
and electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Company to Agent of its
election to assume the defense thereof, the Company will not be liable to Agent
under this Agreement for any legal or other expenses subsequently incurred by
Agent in connection with the defense thereof except for reasonable costs of
investigation or otherwise as provided below. Agent shall have the right to
employ separate counsel in such action, suit or proceeding but the fees and
expenses of such counsel incurred after notice from the Company of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Company, (ii)
Agent shall have reasonably concluded, and so notified the Company, that there
is an actual conflict of interest between the Company and Agent in the conduct
of the defense of such action or (iii) the Company shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of Agent's separate counsel shall be at the expense of the
Company. The Company shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of the Company or as to which Agent
shall have made the conclusion provided for in clause (ii) above; and

                                       3.



                  (c)      the Company shall not be liable to indemnify Agent
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Company shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.

         8.       EXPENSES. The Company shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.

         9.       ENFORCEMENT. Any right to indemnification or advances granted
by this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. Agent, in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Company) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Company (including its Board of Directors or
its stockholders) to have made a determination prior to the commencement of such
enforcement action that indemnification of Agent is proper in the circumstances,
nor an actual determination by the Company (including its Board of Directors or
its stockholders) that such indemnification is improper shall be a defense to
the action or create a presumption that Agent is not entitled to indemnification
under this Agreement or otherwise.

         10.      SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Agent, who shall execute all documents required and shall do all
acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.

         11.      NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by
this Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Company's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.

         12.      SURVIVAL OF RIGHTS.

                  (a)      The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Company or to serve at the request of the Company as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.

                                       4.



                  (b)      The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place.

         13. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Company shall nevertheless indemnify Agent to
the fullest extent provided by the Bylaws, the Code or any other applicable law.

         14.      GOVERNING LAW. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Delaware.

         15.      AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.

         16.      IDENTICAL COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.

         17.      HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.

         18.      NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) upon delivery if delivered by hand to the party to whom such
communication was directed or (ii) upon the third business day after the date on
which such communication was mailed if mailed by certified or registered mail
with postage prepaid:

                  (a)      If to Agent, at the address indicated on the
signature page hereof.

                  (b)      If to the Company, to:

                           MANNKIND CORPORATION
                           28903 North Avenue Paine
                           Valencia, California 91355

or to such other address as may have been furnished to Agent by the Company.

                                       5.



         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.

                                        MANNKIND CORPORATION

                                        By: ____________________________________

                                        Title: _________________________________

                                        AGENT

                                        ________________________________________

                                        Address:

                                        ________________________________________

                                        ________________________________________

                                                                    EXHIBIT 10.2

                              MANNKIND CORPORATION
                           2004 EQUITY INCENTIVE PLAN

      ORIGINALLY ADOPTED AS THE 2001 STOCK AWARDS PLAN ON OCTOBER 7, 2001
             ORIGINALLY APPROVED BY STOCKHOLDERS ON OCTOBER 7, 2001
                     AMENDED AND RESTATED ON MARCH 23, 2004
                   APPROVED BY STOCKHOLDERS ON MARCH 23, 2004
                        TERMINATION DATE: MARCH 22, 2014

1. PURPOSES.

      (A) AMENDMENT AND RESTATEMENT. The Plan amends and restates the MannKind
Corporation 2001 Stock Awards Plan adopted October 7, 2001 (the "PRIOR PLAN").
All outstanding awards granted under the Prior Plan shall remain subject to the
terms of the Prior Plan. All options granted subsequent to the effective date of
this Plan shall be subject to the terms of this Plan.

      (B) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive Stock
Awards are Employees, Directors and Consultants.

      (C) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) Restricted Stock Awards, (iv) Stock Appreciation Rights, (v)
Phantom Stock Awards and (vi) Other Stock Awards.

      (D) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.

2. DEFINITIONS.

      (A) "AFFILIATE" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

      (B) "BOARD" means the Board of Directors of the Company.

      (C) "CAPITALIZATION ADJUSTMENT" has the meaning ascribed to that term in
Section 11(a).

                                       1.

      (D) "CAUSE" means, with respect to a Participant, the occurrence of any of
the following: (i) such Participant's conviction of any felony or any crime
involving fraud or dishonesty which, in the Board's sole discretion, materially
affects the business of the Company; (ii) such Participant's participation
(whether by affirmative act or omission) in a fraud, act of dishonesty or other
act of misconduct against the Company and/or its Affiliates which, in the
Board's sole discretion, materially affects the business of the Company; (iii)
conduct by such Participant which, based upon a good faith and reasonable
factual investigation by the Company (or, if such Participant is an Officer, by
the Board), demonstrates such Participant's gross unfitness to serve; (iv) such
Participant's violation of any statutory or fiduciary duty, or duty of loyalty,
owed to the Company and/or its Affiliates; (v) such Participant's breach of any
material term of any material contract between such Participant and the Company
and/or its Affiliates; and (vi) such Participant's repeated violation of any
material Company policy. Notwithstanding the foregoing, such Participant's
Disability shall not constitute Cause as set forth herein. The determination
that a termination is for Cause shall be by the Committee in its sole and
exclusive judgment and discretion.

      (E) "CHANGE IN CONTROL" means the occurrence, in a single transaction or
in a series of related transactions, of any one or more of the following events:

            (I) any Exchange Act Person becomes the Owner, directly or
indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company's then outstanding securities
other than by virtue of a merger, consolidation or similar transaction.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
(A) on account of an Exchange Act Person as described in Section 2(s) (E)
transferring in a single act or series of related acts more than fifty percent
(50%) of the combined voting power of the Company's then outstanding securities
(1) by gift, (2) for estate planning purposes or (3) to any entity controlled
directly or indirectly by such Exchange Act Person, (B) on account of the
acquisition of securities of the Company by an investor, any affiliate thereof
or any other Exchange Act Person from the Company in a transaction or series of
related transactions the primary purpose of which is to obtain financing for the
Company through the issuance of equity securities or (C) solely because the
level of Ownership held by any Exchange Act Person (the "SUBJECT PERSON")
exceeds the designated percentage threshold of the outstanding voting securities
as a result of a repurchase or other acquisition of voting securities by the
Company reducing the number of shares outstanding, provided that if a Change in
Control would occur (but for the operation of this sentence) as a result of the
acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred,
increases the percentage of the then outstanding voting securities Owned by the
Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;

            (II) there is consummated a merger, consolidation or similar
transaction involving (directly or indirectly) the Company and, immediately
after the consummation of such merger, consolidation or similar transaction, the
stockholders of the Company immediately prior thereto do not Own, directly or
indirectly, either (A) outstanding voting securities representing more than
fifty percent (50%) of the combined outstanding voting power of the surviving
Entity in such merger, consolidation or similar transaction or (B) more than
fifty percent (50%) of the

                                       2.

combined outstanding voting power of the parent of the surviving Entity in such
merger, consolidation or similar transaction, in each case in substantially the
same proportions as their Ownership of the outstanding voting securities of the
Company immediately prior to such transaction;

            (III) there is consummated a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its Subsidiaries, other than a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the
combined voting power of the voting securities of which are Owned by
stockholders of the Company in substantially the same proportions as their
Ownership of the outstanding voting securities of the Company immediately prior
to such sale, lease, license or other disposition; or

            (IV) individuals who, on the date this Plan is adopted by the Board,
are members of the Board (the "INCUMBENT BOARD") cease for any reason to
constitute at least a majority of the members of the Board; provided, however,
that if the appointment or election (or nomination for election) of any new
Board member was approved or recommended by a majority vote of the members of
the Incumbent Board then still in office, such new member shall, for purposes of
this Plan, be considered as a member of the Incumbent Board.

      Notwithstanding the foregoing or any other provision of this Plan, the
definition of Change in Control (or any analogous term) in an individual written
agreement between the Company or any Affiliate and the Participant shall
supersede the foregoing definition with respect to Stock Awards subject to such
agreement (it being understood, however, that if no definition of Change in
Control or any analogous term is set forth in such an individual written
agreement, the foregoing definition shall apply).

      (F) "CODE" means the Internal Revenue Code of 1986, as amended.

      (G) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with Section 3(c).

      (H) "COMMON STOCK" means the common stock of the Company.

      (I) "COMPANY" means MannKind Corporation, a Delaware corporation.

      (J) "CONSULTANT" means any person, including an advisor, who (i) is
engaged by the Company or an Affiliate to render consulting or advisory services
and is compensated for such services or (ii) is serving as a member of the Board
of Directors of an Affiliate and is compensated for such services. However,
service solely as a Director, or payment of a fee for such services, shall not
cause a Director to be considered a "Consultant" for purposes of the Plan.

      (K) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. A change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the
Participant's service with the Company or an Affiliate, shall not terminate a
Participant's Continuous Service. For

                                       3.

example, a change in status from an Employee of the Company to a Consultant of
an Affiliate or to a Director shall not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
Notwithstanding the foregoing, a leave of absence shall be treated as Continuous
Service for purposes of vesting in a Stock Award only to such extent as may be
provided in the Company's leave of absence policy or in the written terms of the
Participant's leave of absence.

      (L) "CORPORATE TRANSACTION" means the occurrence, in a single transaction
or in a series of related transactions, of any one or more of the following
events:

            (I) a sale or other disposition of all or substantially all, as
determined by the Board in its discretion, of the consolidated assets of the
Company and its Subsidiaries;

            (II) a sale or other disposition of at least ninety percent (90%) of
the outstanding securities of the Company;

            (III) a merger, consolidation or similar transaction following which
the Company is not the surviving corporation; or

            (IV) a merger, consolidation or similar transaction following which
the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or similar
transaction are converted or exchanged by virtue of the merger, consolidation or
similar transaction into other property, whether in the form of securities, cash
or otherwise.

      (M) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.

      (N) "DIRECTOR" means a member of the Board.

      (O) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

      (P) "EMPLOYEE" means any person employed by the Company or an Affiliate.
However, service solely as a Director, or payment of a fee for such services,
shall not cause a Director to be considered an "Employee" for purposes of the
Plan.

      (Q) "ENTITY" means a corporation, partnership or other entity.

      (R) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

      (S) "EXCHANGE ACT PERSON" means any natural person, Entity or "group"
(within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that
"Exchange Act Person" shall not include (A) the Company or any Subsidiary of the
Company, (B) any employee benefit

                                       4.

plan of the Company or any Subsidiary of the Company or any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any Subsidiary of the Company, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities, (D) an Entity Owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their Ownership of stock of the Company; or (E) any natural
person, Entity or "group" (within the meaning of Section 13(d) or 14(d) of the
Exchange Act) that, as of the effective date of the Plan as set forth in Section
14, is the Owner, directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power of the
Company's then outstanding securities.

      (T) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:

            (I) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.

            (II) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.

      (U) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

      (V) "IPO DATE" means the effective date of the initial public offering of
the Common Stock.

      (W) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or an Affiliate, does not receive
compensation, either directly or indirectly, from the Company or an Affiliate
for services rendered as a consultant or in any capacity other than as a
Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("REGULATION S-K")), does not possess an interest in any other transaction for
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.

      (X) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.

      (Y) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

                                       5.

      (Z) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option to purchase shares of Common Stock granted pursuant to the Plan.

      (AA) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan. (BB)
"OPTIONHOLDER" means a person to whom an Option is granted pursuant to the Plan
or, if applicable, such other person who holds an outstanding Option.

      (CC) "OTHER STOCK AWARD" means an award based in whole or in part by
reference to the Common Stock which is granted pursuant to the terms and
conditions of Section 7(d).

      (DD) "OTHER STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of an Other Stock Award evidencing the terms and conditions
of an Other Stock Award grant. Each Other Stock Award Agreement shall be subject
to the terms and conditions of the Plan.

      (EE) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" who receives
compensation for prior services (other than benefits under a tax-qualified
retirement plan) during the taxable year, has not been an officer of the Company
or an "affiliated corporation", and does not receive remuneration from the
Company or an "affiliated corporation," either directly or indirectly, in any
capacity other than as a Director or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.

      (FF) "OWN," "OWNED," "OWNER," "OWNERSHIP" A person or Entity shall be
deemed to "Own," to have "Owned," to be the "Owner" of, or to have acquired
"Ownership" of securities if such person or Entity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, has
or shares voting power, which includes the power to vote or to direct the
voting, with respect to such securities.

      (GG) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

      (HH) "PHANTOM STOCK AWARD" means a right to receive shares of Common Stock
which is granted pursuant to the terms and conditions of Section 7(b).

      (II) "PHANTOM STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Phantom Stock Award evidencing the terms and
conditions of a Phantom Stock Award grant. Each Phantom Stock Award Agreement
shall be subject to the terms and conditions of the Plan.

      (JJ) "PLAN" means this MannKind Corporation 2003 Equity Incentive Plan.

      (KK) "RESTRICTED STOCK AWARD" means an award of shares of Common Stock
which is granted pursuant to the terms and conditions of Section 7(a).

                                       6.

      (LL) "RESTRICTED STOCK AWARD AGREEMENT" means a written agreement between
the Company and a holder of a Restricted Stock Award evidencing the terms and
conditions of a Restricted Stock Award grant. Each Restricted Stock Award
Agreement shall be subject to the terms and conditions of the Plan.

      (MM) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.

      (NN) "SECURITIES ACT" means the Securities Act of 1933, as amended.

      (OO) "STOCK APPRECIATION RIGHT" means a right to receive the appreciation
of Common Stock that is granted pursuant to the terms and conditions of Section
7(c).

      (PP) "STOCK APPRECIATION RIGHT AGREEMENT" means a written agreement
between the Company and a holder of a Stock Appreciation Right evidencing the
terms and conditions of a Stock Appreciation Right grant. Each Stock
Appreciation Right Agreement shall be subject to the terms and conditions of the
Plan.

      (QQ) "STOCK AWARD" means any right granted under the Plan, including an
Option, a Restricted Stock Award, a Stock Appreciation Right, a Phantom Stock
Award or any Other Stock Award.

      (RR) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award Participant evidencing the terms and conditions of
a Stock Award grant. Each Stock Award Agreement shall be subject to the terms
and conditions of the Plan.

      (SS) "SUBSIDIARY" means, with respect to the Company, (i) any corporation
of which more than fifty percent (50%) of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, Owned
by the Company, and (ii) any partnership in which the Company has a direct or
indirect interest (whether in the form of voting or participation in profits or
capital contribution) of more than fifty percent (50%).

      (TT) "TEN PERCENT STOCKHOLDER" means a person who Owns (or is deemed to
Own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.

3. ADMINISTRATION.

      (A) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
Section 3(c).

      (B) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

                                       7.

            (I) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.

            (II) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

            (III) To effect, at any time and from time to time, with the consent
of any adversely affected Optionholder, (1) the reduction of the exercise price
of any outstanding Option under the Plan, (2) the cancellation of any
outstanding Option under the Plan and the grant in substitution therefor of (A)
a new Option under the Plan or another equity plan of the Company covering the
same or a different number of shares of Common Stock, (B) a Restricted Stock
Award (including a stock bonus), (C) a Stock Appreciation Right, (D) a Phantom
Stock Award (E) an Other Stock Award, (F) cash and/or (G) other valuable
consideration (as determined by the Board, in its sole discretion), or (3) any
other action that is treated as a repricing under generally accepted accounting
principles.

            (IV) To amend the Plan or a Stock Award as provided in Section 12.

            (V) To terminate or suspend the Plan as provided in Section 13.

            (VI) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company and that are not in conflict with the provisions of the Plan.

            (VII) To adopt such procedures and sub-plans as are necessary or
appropriate to permit participation in the Plan by Employees who are foreign
nationals or employed outside the United States.

      (C) DELEGATION TO COMMITTEE.

            (I) GENERAL. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and the term
"COMMITTEE" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

                                       8.

            (II) SECTION 162(M) AND RULE 16B-3 COMPLIANCE. In the discretion of
the Board, the Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. In addition, the Board or
the Committee, in its sole discretion, may (1) delegate to a committee of one or
more members of the Board who need not be Outside Directors the authority to
grant Stock Awards to eligible persons who are either (a) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or (b) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code,
and/or (2) delegate to a committee of one or more members of the Board who need
not be Non-Employee Directors the authority to grant Stock Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act.

      (D) DELEGATION TO AN OFFICER. The Board may delegate to one or more
Officers of the Company the authority to do one or both of the following (i)
designate Officers and Employees of the Company or any of its Subsidiaries to be
recipients of Stock Awards and (ii) determine the number of shares of Common
Stock to be subject to such Stock Awards granted to such Officers and Employees
of the Company; provided, however, that the Board resolutions regarding such
delegation shall specify the total number of shares of Common Stock that may be
subject to the Stock Awards granted by such Officer and that such Officer may
not grant a Stock Award to himself or herself. Notwithstanding anything to the
contrary in this Section 3(d), the Board may not delegate to an Officer
authority to determine the Fair Market Value of the Common Stock pursuant to
Section 2(t)(ii) above.

      (E) EFFECT OF BOARD'S DECISION. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.

4. SHARES SUBJECT TO THE PLAN.

      (A) SHARE RESERVE. Subject to the provisions of Section 11(a) relating to
Capitalization Adjustments, the shares of Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate four million
(4,000,000) shares of Common Stock.

      (B) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, or if any shares of Common Stock issued to a Participant
pursuant to a Stock Award are forfeited to or repurchased by the Company,
including, but not limited to, any repurchase or forfeiture caused by the
failure to meet a contingency or condition required for the vesting of such
shares, then the shares of Common Stock not issued under such Stock Award, or
forfeited to or repurchased by the Company, shall revert to and again become
available for issuance under the Plan. If any shares subject to a Stock Award
are not delivered to a Participant because such shares are withheld for the
payment of taxes or the Stock Award is exercised through a reduction of shares
subject to the Stock Award (i.e., "net exercised"), the number of shares that
are not delivered to the Participant shall remain available for issuance under
the Plan. If the exercise price of any Stock Award is satisfied by tendering
shares of Common Stock held by the Participant (either by actual delivery or
attestation), then the number of shares so tendered shall remain available for
issuance under the Plan. Notwithstanding anything to the contrary in this

                                       9.

Section 4(b), subject to the provisions of Section 11(a) relating to
Capitalization Adjustments the aggregate maximum number of shares of Common
Stock that may be issued as Incentive Stock Options shall be four million
(4,000,000) shares of Common Stock.

      (C) SOURCE OF SHARES. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.

5. ELIGIBILITY.

      (A) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.

      (B) TEN PERCENT STOCKHOLDERS. A Ten Percent Stockholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Common
Stock on the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.

      (C) SECTION 162(M) LIMITATION ON ANNUAL GRANTS. Subject to the provisions
of Section 11(a) relating to Capitalization Adjustments, at such time as the
Company may be subject to the applicable provisions of Section 162(m) of the
Code, no Employee shall be eligible to be granted Options or Stock Appreciation
Rights covering more than [_____________(____)] shares of Common Stock during
any calendar year.

      (D) CONSULTANTS. A Consultant shall not be eligible for the grant of a
Stock Award if, at the time of grant, a Form S-8 Registration Statement under
the Securities Act ("FORM S-8") is not available to register either the offer or
the sale of the Company's securities to such Consultant because of the nature of
the services that the Consultant is providing to the Company, because the
Consultant is not a natural person, or because of any other rule governing the
use of Form S-8.

6. OPTION PROVISIONS.

      Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
shall be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:

      (A) TERM. The Board shall determine the term of an Option; provided
however that, subject to the provisions of Section 5(b) regarding Ten Percent
Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date on which it was granted.

      (B) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the provisions
of Section 5(b) regarding Ten Percent Stockholders, the exercise price of each
Incentive Stock

                                      10.

Option shall be not less than one hundred percent (100%) of the Fair Market
Value of the Common Stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, an Incentive Stock Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.

      (C) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The Board, in its
discretion, shall determine the exercise price of each Nonstatutory Stock
Option.

      (D) CONSIDERATION. The purchase price of Common Stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable law, either (i)
in cash at the time the Option is exercised or (ii) at the discretion of the
Board at the time of the grant of the Option (or subsequently in the case of a
Nonstatutory Stock Option) (1) by delivery to the Company (either by actual
delivery or attestation) of other Common Stock at the time the Option is
exercised, (2) according to a deferred payment or other similar arrangement with
the Optionholder, (3) by a "net exercise" of the Option (as further described
below), (4) pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board that, prior to the issuance of Common Stock, results
in either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company from
the sales proceeds or (5) in any other form of legal consideration that may be
acceptable to the Board. Unless otherwise specifically provided in the Option,
the purchase price of Common Stock acquired pursuant to an Option that is paid
by delivery to the Company of other Common Stock acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common Stock of
the Company that have been held for more than six (6) months (or such longer or
shorter period of time required to avoid a charge to earnings for financial
accounting purposes). At any time that the Company is incorporated in Delaware,
payment of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.

      In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid (1) the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement and (2) the treatment of the Option as a
variable award for financial accounting purposes.

      In the case of a "net exercise" of an Option, the Company will not require
a payment of the exercise price of the Option from the Participant but will
reduce the number of shares of Common Stock issued upon the exercise by the
largest number of whole shares that has a Fair Market Value that does not exceed
the aggregate exercise price. With respect to any remaining balance of the
aggregate exercise price, the Company shall accept a cash payment from the
Participant. Shares of Common Stock will no longer be outstanding under an
Option (and will therefore not thereafter be exercisable) following the exercise
of such Option to the extent of (i) shares used to pay the exercise price of an
Option under the "net exercise", (ii) shares actually delivered to the
Participant as a result of such exercise and (iii) shares withheld for purposes
of tax withholding.

                                      11.

      (E) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form provided by or otherwise
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.

      (F) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
provided by or otherwise satisfactory to the Company, designate a third party
who, in the event of the death of the Optionholder, shall thereafter be entitled
to exercise the Option.

      (G) VESTING GENERALLY. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this Section 6(g) are subject to any Option provisions governing
the minimum number of shares of Common Stock as to which an Option may be
exercised.

      (H) TERMINATION OF CONTINUOUS SERVICE. In the event that an Optionholder's
Continuous Service terminates (for reasons other than Cause or upon the
Optionholder's death or Disability), the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such Option
as of the date of termination) but only within such period of time ending on the
earlier of (i) the date three (3) months following the termination of the
Optionholder's Continuous Service (or such longer or shorter period specified in
the Option Agreement or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination of Continuous Service, the
Optionholder does not exercise his or her Option within the time specified
herein or in the Option Agreement (as applicable), the Option shall terminate.

      (I) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (for reasons other than Cause or upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the Option
Agreement or (ii) the expiration of a period of three (3) months after the
termination of the Optionholder's Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.

      (J) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his

                                      12.

or her Option (to the extent that the Optionholder was entitled to exercise such
Option as of the date of termination), but only within such period of time
ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option Agreement
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination of Continuous Service, the Optionholder does
not exercise his or her Option within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.

      (K) DEATH OF OPTIONHOLDER. In the event that (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to Section 6(e) or 6(f), but only
within the period ending on the earlier of (1) the date eighteen (18) months
following the date of death (or such longer or shorter period specified in the
Option Agreement or (2) the expiration of the term of such Option as set forth
in the Option Agreement. If, after the Optionholder's death, the Option is not
exercised within the time specified herein or in the Option Agreement (as
applicable), the Option shall terminate.

      (L) RETIREMENT. Notwithstanding the foregoing, if at the time of
termination of an Optionholder's Continuous Service for any reason other than
Cause, the Optionholder is at least fifty five (55) years old, then the
Optionholder (or such person or person(s) as may be entitled to exercise such
Option pursuant to Section 6(k) in the event of the Optionholder's death) may
exercise his or her Option (to the extent that the Optionholder was entitled to
exercise such Option as of the date of termination) within such period of time
ending on the earlier of (i) the date twenty four (24) months following such
termination or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Option is not exercised within the
time specified herein, the Option shall terminate.

      (M) TERMINATION FOR CAUSE. In the event an Optionholder's Continuous
Service is terminated for Cause, the Option shall terminate upon the termination
date of such Optionholder's Continuous Service and the Optionholder shall be
prohibited from exercising his or her Option from and after the time of such
termination of Continuous Service.

      (N) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate. The Company shall not be required to exercise its
repurchase option until at least six (6) months (or such longer or shorter
period of time required to avoid a charge to earnings for financial accounting
purposes) have elapsed following exercise of the Option unless the Board
otherwise specifically provides in the Option.

                                      13.

7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

      (A) RESTRICTED STOCK AWARDS. Each Restricted Stock Award Agreement shall
be in such form and shall contain such terms and conditions as the Board shall
deem appropriate. At the Board's election, shares of Common Stock may be (i)
held in book entry form subject to the Company's instructions until any
restrictions relating to the Restricted Stock Award lapse; or (ii) evidenced by
a certificate, which certificate shall be held in such form and manner as
determined by the Board. The terms and conditions of Restricted Stock Award
Agreements may change from time to time, and the terms and conditions of
separate Restricted Stock Award Agreements need not be identical, provided,
however, that each Restricted Stock Award Agreement shall include (through
incorporation of the provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

            (I) PURCHASE PRICE. At the time of the grant of a Restricted Stock
Award, the Board will determine the price to be paid by the Participant for each
share subject to the Restricted Stock Award. To the extent required by
applicable law, the price to be paid by the Participant for each share of the
Restricted Stock Award will not be less than the par value of a share of Common
Stock. A Restricted Stock Award may be awarded as a stock bonus (i.e., with no
cash purchase price to be paid) to the extent permissible under applicable law.

            (II) CONSIDERATION. At the time of the grant of a Restricted Stock
Award, the Board will determine the consideration permissible for the payment of
the purchase price of the Restricted Stock Award. The purchase price of Common
Stock acquired pursuant to the Restricted Stock Award shall be paid in one of
the following ways: (i) in cash at the time of purchase; (ii) at the discretion
of the Board, according to a deferred payment or other similar arrangement with
the Participant; (iii) by services previously rendered to the Company in the
case of a stock bonus; or (iv) in any other form of legal consideration that may
be acceptable to the Board and permissible under the Delaware Corporation Law.

            (III) VESTING. Shares of Common Stock acquired under a Restricted
Stock Award may, but need not, be (i) subject to a share repurchase right or
option in favor of the Company or (ii) subject to a forfeiture right in favor of
the Company, each in accordance with a vesting schedule to be determined by the
Board.

            (IV) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event
that a Participant's Continuous Service terminates, the Company shall have the
right, but not the obligation, to repurchase, otherwise reacquire or receive by
a forfeiture right, any or all of the shares of Common Stock held by the
Participant that have not vested as of the date of termination under the terms
of the Restricted Stock Award Agreement. At the Board's election, the repurchase
right may be at the least of: (i) the Fair Market Value on the relevant date;
(ii) the Participant's original cost; or (iii) if the Participant paid the
purchase price for the shares of Common Stock with services rendered, then for
no consideration. The Company shall not be required to exercise its repurchase
option until at least six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes) have
elapsed following the purchase of the restricted stock unless otherwise
determined by the Board or provided in the Restricted Stock Award Agreement.

                                      14.

            (V) TRANSFERABILITY. Rights to purchase or receive shares of Common
Stock granted under a Restricted Stock Award shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
Restricted Stock Award Agreement, as the Board shall determine in its
discretion, and so long as Common Stock awarded under the Restricted Stock Award
remains subject to the terms of the Restricted Stock Award Agreement.

      (B) PHANTOM STOCK. Each Phantom Stock Award Agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of Phantom Stock Award Agreements may
change from time to time, and the terms and conditions of separate Phantom Stock
Award Agreements need not be identical, provided, however, that each Phantom
Stock Award Agreement shall include (through incorporation of the provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:

            (I) CONSIDERATION. At the time of grant of a Phantom Stock Award,
the Board will determine the consideration, if any, to be paid by the
Participant upon delivery of each share of Common Stock subject to the Phantom
Stock Award. To the extent required by applicable law, the consideration to be
paid by the Participant for each share of Common Stock subject to a Phantom
Stock Award will not be less than the par value of a share of Common Stock. Such
consideration may be paid in any form permitted under applicable law.

            (II) VESTING. At the time of the grant of a Phantom Stock Award, the
Board may impose such restrictions or conditions to the vesting of the Phantom
Stock Award as it, in its absolute discretion, deems appropriate.

            (III) PAYMENT. A Phantom Stock Award may be settled by the delivery
of shares of Common Stock, their cash equivalent, any combination thereof or in
any other form of consideration as determined by the Board and contained in the
Phantom Stock Award Agreement.

            (IV) ADDITIONAL RESTRICTIONS. At the time of the grant of a Phantom
Stock Award, the Board, as it deems appropriate, may impose such restrictions or
conditions that delay the delivery of the shares of Common Stock (or their cash
equivalent) subject to a Phantom Stock Award after the vesting of such Phantom
Stock Award.

            (V) DIVIDEND EQUIVALENTS. Dividend equivalents may be credited in
respect of shares of Common Stock covered by a Phantom Stock Award, as
determined by the Board and contained in the Phantom Stock Award Agreement. At
the discretion of the Board, such dividend equivalents may be converted into
additional shares of Common Stock covered by the Phantom Stock Award in such
manner as determined by the Board. Any additional shares covered by the Phantom
Stock Award credited by reason of such dividend equivalents will be subject to
all the terms and conditions of the underlying Phantom Stock Award Agreement to
which they relate.

            (VI) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Except as
otherwise provided in the applicable Phantom Stock Award Agreement, such portion
of the Phantom Stock

                                      15.

Award that has not vested will be forfeited upon the Participant's termination
of Continuous Service for any reason.

      (C) STOCK APPRECIATION RIGHTS. Each Stock Appreciation Right Agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of Stock Appreciation Right
Agreements may change from time to time, and the terms and conditions of
separate Stock Appreciation Right Agreements need not be identical, provided,
however, that each Stock Appreciation Right Agreement shall include (through
incorporation of the provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

            (I) STRIKE PRICE AND CALCULATION OF APPRECIATION. Each Stock
Appreciation Right will be denominated in share of Common Stock equivalents. The
appreciation distribution payable on the exercise of a Stock Appreciation Right
will be not greater than an amount equal to the excess of (A) the aggregate Fair
Market Value (on the date of the exercise of the Stock Appreciation Right) of a
number of shares of Common Stock equal to the number of share of Common Stock
equivalents in which the Participant is vested under such Stock Appreciation
Right, and with respect to which the Participant is exercising the Stock
Appreciation Right on such date, over (B) an amount (the strike price) that will
be determined by the Board at the time of grant of the Stock Appreciation Right.

            (II) VESTING. At the time of the grant of a Stock Appreciation
Right, the Board may impose such restrictions or conditions to the vesting of
such Stock Appreciation Right as it, in its absolute discretion, deems
appropriate.

            (III) EXERCISE. To exercise any outstanding Stock Appreciation
Right, the Participant must provide written notice of exercise to the Company in
compliance with the provisions of the Stock Appreciation Right Agreement
evidencing such Stock Appreciation Right.

            (IV) PAYMENT. The appreciation distribution in respect to a Stock
Appreciation Right may be paid in Common Stock, in cash, in any combination
thereof or in any other form of consideration as determined by the Board and
contained in the Stock Appreciation Right Agreement evidencing such Stock
Appreciation Right.

            (V) TERMINATION OF CONTINUOUS SERVICE. In the event that a
Participant's Continuous Service terminates, the Participant may exercise his or
her Stock Appreciation Right (to the extent that the Participant was entitled to
exercise such Stock Appreciation Right as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Participant's Continuous Service (or
such longer or shorter period specified in the Stock Appreciation Right
Agreement) or (ii) the expiration of the term of the Stock Appreciation Right as
set forth in the Stock Appreciation Right Agreement. If, after termination, the
Participant does not exercise his or her Stock Appreciation Right within the
time specified herein or in the Stock Appreciation Right Agreement (as
applicable), the Stock Appreciation Right shall terminate.

                                      16.

      (D) OTHER STOCK AWARDS. Other forms of Stock Awards valued in whole or in
part by reference to, or otherwise based on, Common Stock may be granted either
alone or in addition to Stock Awards provided for under Section 6 and the
preceding provisions of this Section 7. Subject to the provisions of the Plan,
the Board shall have sole and complete authority to determine the persons to
whom and the time or times at which such Other Stock Awards will be granted, the
number of shares of Common Stock (or the cash equivalent thereof) to be granted
pursuant to such Other Stock Awards and all other terms and conditions of such
Other Stock Awards.

8. COVENANTS OF THE COMPANY.

      (A) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

      (B) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.

9. USE OF PROCEEDS FROM STOCK.

      Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.

10. MISCELLANEOUS.

      (A) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.

      (B) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

      (C) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the

                                      17.

employment of an Employee with or without notice and with or without cause, (ii)
the service of a Consultant pursuant to the terms of such Consultant's agreement
with the Company or an Affiliate or (iii) the service of a Director pursuant to
the Bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.

      (D) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof that exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options, notwithstanding
any contrary provision of the applicable Option Agreement(s).

      (E) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.

      (F) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Company may in its sole discretion, satisfy any
federal, state or local tax withholding obligation relating to a Stock Award by
any of the following means (in addition to the Company's right to withhold from
any compensation paid to the Participant by the Company) or by a combination of
such means: (i) causing the Participant to tender a cash payment; (ii)
withholding shares of Common Stock from the shares of Common Stock issued or
otherwise issuable to the Participant in connection with the Stock Award; or
(iii) by such other method as may be set forth in the Stock Award Agreement.

11. ADJUSTMENTS UPON CHANGES IN STOCK.

      (A) CAPITALIZATION ADJUSTMENTS. If any change is made in, or other event
occurs with respect to, the Common Stock subject to the Plan or subject to any
Stock Award without the

                                      18.

receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company (each a
"CAPITALIZATION ADJUSTMENT"), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
Sections 4(a) and 4(b) and the maximum number of securities subject to award to
any person pursuant to Section 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of Common Stock subject to such outstanding Stock Awards. The Board shall
make such adjustments, and its determination shall be final, binding and
conclusive. (Notwithstanding the foregoing, the conversion of any convertible
securities of the Company shall not be treated as a transaction "without receipt
of consideration" by the Company.)

      (B) DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Company, then all outstanding Stock Awards shall terminate
immediately prior to the completion of such dissolution or liquidation.

      (C) CORPORATE TRANSACTION. In the event of a Corporate Transaction, any
surviving corporation or acquiring corporation may assume or continue any or all
Stock Awards outstanding under the Plan or may substitute similar stock awards
for Stock Awards outstanding under the Plan (including, but not limited to,
awards to acquire the same consideration paid to the stockholders of the
Company, as the case may be, pursuant to the Corporate Transaction), and any
reacquisition or repurchase rights held by the Company in respect of Common
Stock issued pursuant to Stock Awards may be assigned by the Company to the
successor of the Company (or the successor's parent company), if any, in
connection with such Corporate Transaction. In the event that any surviving
corporation or acquiring corporation does not assume or continue all such
outstanding Stock Awards or substitute similar stock awards for all such
outstanding Stock Awards, then with respect to Stock Awards that have been not
assumed, continued or substituted and that are held by Participants whose
Continuous Service has not terminated prior to the effective time of the
Corporate Transaction, the vesting of such Stock Awards (and, if applicable, the
time at which such Stock Awards may be exercised) shall (contingent upon the
effectiveness of the Corporate Transaction) be accelerated in full to a date
prior to the effective time of such Corporate Transaction as the Board shall
determine (or, if the Board shall not determine such a date, to the date that is
five (5) days prior to the effective time of the Corporate Transaction), and
such Stock Awards shall terminate if not exercised (if applicable) at or prior
to such effective time, and any reacquisition or repurchase rights held by the
Company with respect to such Stock Awards shall (contingent upon the
effectiveness of the Corporate Transaction) lapse. With respect to any other
Stock Awards outstanding under the Plan that have not been assumed, continued or
substituted, the vesting of such Stock Awards (and, if applicable, the time at
which such Stock Award may be exercised) shall not be accelerated, unless
otherwise provided in a written agreement between the Company or any Affiliate
and the holder of such Stock Award, and such Stock Awards shall terminate if not
exercised (if applicable) prior to the effective time of the Corporate
Transaction.

      (D) CHANGE IN CONTROL. A Stock Award may be subject to additional
acceleration of vesting and exercisability upon or after a Change in Control as
may be provided in the Stock Award Agreement for such Stock Award or as may be
provided in any other written agreement

                                      19.

between the Company or any Affiliate and the Participant, but in the absence of
such provision, no such acceleration shall occur.

12. AMENDMENT OF THE PLAN AND STOCK AWARDS.

      (A) AMENDMENT OF PLAN. Subject to the limitations, if any, of applicable
law, the Board at any time, and from time to time, may amend the Plan. However,
except as provided in Section 11(a) relating to Capitalization Adjustments, no
amendment shall be effective unless approved by the stockholders of the Company
to the extent stockholder approval is necessary to satisfy applicable law.

      (B) STOCKHOLDER APPROVAL. The Board, in its sole discretion, may submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to Covered Employees.

      (C) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.

      (D) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

      (E) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards, including, but not
limited to, amendments to provide terms more favorable than previously provided
in the agreement evidencing a Stock Award, subject to any specified limits in
the Plan that are not subject to Board discretion; provided, however, that the
rights under any Stock Award shall not be impaired by any such amendment unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

13. TERMINATION OR SUSPENSION OF THE PLAN.

      (A) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

      (B) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.

                                      20.

14. EFFECTIVE DATE OF PLAN.

      The Plan shall become effective on the IPO Date, but no Stock Award shall
be exercised (or, in the case of a stock bonus, shall be granted) unless and
until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.

15. CHOICE OF LAW.

      The laws of the State of California shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.

                                      21.

                                                                    EXHIBIT 10.3

                              MANNKIND CORPORATION

                 2004 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                             ADOPTED MARCH 23, 2004
                     APPROVED BY STOCKHOLDERS MARCH 23, 2004
                      EFFECTIVE DATE: _______________, 2004

1.    PURPOSES.

      (A) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive Options
are the Non-Employee Directors of the Company.

      (B) AVAILABLE OPTIONS. The purpose of the Plan is to provide a means by
which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.

      (C) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of its current Non-Employee Directors, to secure and retain the
services of new Non-Employee Directors and to provide incentives for such
persons to exert maximum efforts for the success of the Company and its
Affiliates.

2.    DEFINITIONS.

      (A) "AFFILIATE" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

      (B) "ANNUAL GRANT" means an Option granted annually to all Non-Employee
Directors who meet the specified criteria pursuant to Section 6(b).

      (C) "ANNUAL MEETING" means the annual meeting of the stockholders of the
Company.

      (D) "BOARD" means the Board of Directors of the Company.

      (E) "CAPITALIZATION ADJUSTMENT" has the meaning ascribed to that term in
Section 11(a).

      (F) "CODE" means the Internal Revenue Code of 1986, as amended.

      (G) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with Section 3(c).


                                       1.


      (H) "COMMITTEE GRANT" means an Option granted annually to all Non-Employee
Directors who meet the specified criteria pursuant to Section 6(c).

      (I) "COMMON STOCK" means the common stock of the Company.

      (J) "COMPANY" means MannKind Corporation, a Delaware corporation.

      (K) "CONSULTANT" means any person, including an advisor, who (i) is
engaged by the Company or an Affiliate to render consulting or advisory service
and is compensated for such service or (ii) is serving as a member of the Board
of Directors of an Affiliate and is compensated for such service. However,
service solely as a Director, or payment of a fee for such service, shall not
cause a Director to be considered a "Consultant" for purposes of the Plan.

      (L) "CONTINUOUS SERVICE" means that the Optionholder's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Optionholder's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder's Continuous Service. For example, a change in status from a
Non-Employee Director of the Company to a Consultant of an Affiliate or an
Employee of the Company will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
Notwithstanding the foregoing, a leave of absence shall be treated as Continuous
Service for purposes of vesting in an Option only to such extent as may be
provided in the Company's leave of absence policy or in the written terms of the
Optionholders's leave of absence.

      (M) "CORPORATE TRANSACTION" means the occurrence, in a single transaction
or in a series of related transactions, of any one or more of the following
events:

            (I) a sale or other disposition of all or substantially all, as
determined by the Board in its discretion, of the consolidated assets of the
Company and its Subsidiaries;

            (II) a sale or other disposition of at least ninety percent (90%) of
the outstanding securities of the Company;

            (III) a merger, consolidation or similar transaction following which
the Company is not the surviving corporation; or

            (IV) a merger, consolidation or similar transaction following which
the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or similar
transaction are converted or exchanged by virtue of the merger, consolidation or
similar transaction into other property, whether in the form of securities, cash
or otherwise.

      (N) "DIRECTOR" means a member of the Board of Directors of the Company.


                                       2.


      (O) "DISABILITY" means the inability of a person, in the opinion of a
qualified physician acceptable to the Company, to perform the major duties of
that person's position with the Company or an Affiliate of the Company because
of the sickness or injury of the person.

      (P) "EMPLOYEE" means any person employed by the Company or an Affiliate.
However, service solely as a Director, or payment of a fee for such service,
shall not cause a Director to be considered an "Employee" for purposes of the
Plan.

      (Q) "ENTITY" means a corporation, partnership or other entity.

      (R) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

      (S) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:

            (I) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.

            (II) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.

      (T) "INITIAL GRANT" means an Option granted to a Non-Employee Director who
meets the specified criteria pursuant to Section 6(a).

      (U) "IPO DATE" means the effective date of the initial public offering of
the Common Stock.

      (V) "NON-EMPLOYEE DIRECTOR" means a Director who is not an Employee.

      (W) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

      (X) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

      (Y) "OPTION" means a Nonstatutory Stock Option granted pursuant to the
Plan.

      (Z) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.


                                       3.


      (AA) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.

      (BB) "OWN," "OWNED," "OWNER," "OWNERSHIP" A person or Entity shall be
deemed to "Own," to have "Owned," to be the "Owner" of, or to have acquired
"Ownership" of securities if such person or Entity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, has
or shares voting power, which includes the power to vote or to direct the
voting, with respect to such securities.

      (CC) "PLAN" means this MannKind Corporation 2003 Non-Employee Directors'
Stock Option Plan.

      (DD) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.

      (EE) "SECURITIES ACT" means the Securities Act of 1933, as amended.

      (FF) "SUBSIDIARY" means, with respect to the Company, (i) any corporation
of which more than fifty percent (50%) of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, Owned
by the Company, and (ii) any partnership in which the Company has a direct or
indirect interest (whether in the form of voting or participation in profits or
capital contribution) of more than fifty percent (50%).

3.    ADMINISTRATION.

      (A) ADMINISTRATION BY BOARD. The Plan shall be administered by the Board
unless and until the Board delegates administration of the Plan to a Committee,
as provided in Section 3(c).

      (B) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

            (I) To determine the provisions of each Option to the extent not
specified in the Plan.

            (II) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

            (III) To effect, at any time and from time to time, with the consent
of any adversely affected Optionholder, (1) the reduction of the exercise price
of any outstanding Option under the Plan, (2) the cancellation of any
outstanding Option under the Plan and the grant in substitution therefor of (A)
a new Option under the Plan or another equity plan of the


                                       4.

 Company covering the same or a different number of shares of Common Stock, (B)
cash and/or (C) other valuable consideration (as determined by the Board, in its
sole discretion), or (3) any other action that is treated as a repricing under
generally accepted accounting principles.

            (IV) To amend the Plan or an Option as provided in Section 12.

            (V) To terminate or suspend the Plan as provided in Section 13.

            (VI) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company and that are not in conflict with the provisions of the Plan.

      (C) DELEGATION TO COMMITTEE. The Board may delegate administration of the
Plan to a Committee or Committees of one or more members of the Board, and the
term "COMMITTEE" shall apply to any person or persons to whom such authority has
been delegated. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.

      (D) EFFECT OF BOARD'S DECISION. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.

4.    SHARES SUBJECT TO THE PLAN.

      (A) SHARE RESERVE. Subject to the provisions of Section 11(a) relating to
Capitalization Adjustments, the shares of Common Stock that may be issued
pursuant to Options shall not exceed in the aggregate eight hundred thousand
(800,000) shares of Common Stock.

      (B) REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the shares of Common Stock not acquired under such Option
shall revert to and again become available for issuance under the Plan. If any
shares subject to an Option are not delivered to an Optionholder because such
shares are withheld for the payment of taxes or the Option is exercised through
a reduction of shares subject to the Option (i.e., "net exercised"), the number
of shares that are not delivered to the Optionholder as a result thereof shall
remain available for issuance under the Plan. If the exercise price of an Option
is satisfied by tendering shares of Common Stock held by the Optionholder
(either by actual delivery or attestation), then the number of shares so
tendered shall remain available for issuance under the Plan.

      (C) SOURCE OF SHARES. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.


                                       5.


5.    ELIGIBILITY.

      The Options, as set forth in Section 6, automatically shall be granted
under the Plan to all Non-Employee Directors who meet the criteria specified in
Section 6.

6.    NON-DISCRETIONARY GRANTS.

      (A) INITIAL GRANTS. Without any further action of the Board, each person
who is serving as a Non-Employee Director on the IPO Date automatically shall,
on the IPO Date, be granted an Initial Grant to purchase thirty thousand
(30,000) shares of Common Stock on the terms and conditions set forth herein.
Additionally, without any further action of the Board, each person who after the
IPO Date is elected or appointed for the first time to be a Non-Employee
Director automatically shall, upon the date of his or her initial election or
appointment to be a Non-Employee Director, be granted an Initial Grant to
purchase thirty thousand (30,000) shares of Common Stock on the terms and
conditions set forth herein.

      (B) ANNUAL GRANTS. Without any further action of the Board, on the date of
each Annual Meeting, commencing with the Annual Meeting in 2005, each person who
is then a Non-Employee Director automatically shall be granted an Annual Grant
to purchase ten thousand (10,000) shares of Common Stock on the terms and
conditions set forth herein; provided, however, that if the person has not been
serving as a Non-Employee Director for the entire period since the preceding
Annual Meeting, then the number of shares subject to such Annual Grant shall be
reduced pro rata for each full quarter prior to the date of grant during which
such person did not serve as a Non- Employee Director.

7.    OPTION PROVISIONS.

      Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate. Each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:

      (A) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date on which it was granted.

      (B) EXERCISE PRICE. The exercise price of each Option shall be one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted.

      (C) CONSIDERATION. The purchase price of Common Stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable law, either (i)
in cash at the time the


                                       6.


Option is exercised or (ii) at the discretion of the Board either at the time of
the grant of the Option or subsequent thereto (1) by delivery to the Company of
other Common Stock at the time the Option is exercised, (2) by a "net exercise"
of the Option (as further described below), (3) pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board that, prior to
the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds or (4) in any other form
of legal consideration that may be acceptable to the Board. Unless otherwise
specifically provided in the Option, the purchase price of Common Stock acquired
pursuant to an Option that is paid by delivery to the Company of other Common
Stock acquired, directly or indirectly from the Company, shall be paid only by
shares of the Common Stock of the Company that have been held for more than six
(6) months (or such longer or shorter period of time required to avoid a charge
to earnings for financial accounting purposes).

      In the case of a "net exercise" of an Option, the Company will not require
a payment of the exercise price of the Option from the Participant but will
reduce the number of shares of Common Stock issued upon the exercise by the
largest number of whole shares that has a Fair Market Value that does not exceed
the aggregate exercise price. With respect to any remaining balance of the
aggregate exercise price, The Company shall accept a cash payment from the
Participant. Shares of Common Stock will no longer be outstanding under an
Option (and will therefore not thereafter be exercisable) following the exercise
of such Option to the extent of (i) shares used to pay the exercise price of an
Option under a "net exercise", (ii) shares actually delivered to the Participant
as a result of such exercise and (iii) shares withheld for purposes of tax
withholding.

      (D) TRANSFERABILITY. An Option is transferable by will or by the laws of
descent and distribution. An Option also may be transferable upon written
consent of the Company if, at the time of transfer, a Form S-8 registration
statement under the Securities Act is available for the exercise of the Option
and the subsequent resale of the underlying securities. In addition, an
Optionholder may, by delivering written notice to the Company, in a form
provided by or otherwise satisfactory to the Company, designate a third party
who, in the event of the death of the Optionholder, shall thereafter be entitled
to exercise the Option.

      (E) VESTING. Options shall vest in full immediately upon grant.

      (F) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates for any reason, the Optionholder may exercise his
or her Option (to the extent that the Optionholder was entitled to exercise it
as of the date of termination) but only within such period of time ending on the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.

8.    SECURITIES LAW COMPLIANCE.

      The Company shall seek to obtain from each regulatory commission or agency
having jurisdiction over the Plan such authority as may be required to grant
Options and to issue and sell shares of Common Stock upon exercise of the
Options; provided, however, that this undertaking


                                       7.


shall not require the Company to register under the Securities Act the Plan, any
Option or any Common Stock issued or issuable pursuant to any such Option. If,
after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of Common Stock under the Plan,
the Company shall be relieved from any liability for failure to issue and sell
Common Stock upon exercise of such Options unless and until such authority is
obtained.

9.    USE OF PROCEEDS FROM STOCK.

      Proceeds from the sale of Common Stock pursuant to Options shall
constitute general funds of the Company.

10.   MISCELLANEOUS.

      (A) STOCKHOLDER RIGHTS. No Optionholder shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Option unless and until such Optionholder has
satisfied all requirements for exercise of the Option pursuant to its terms.

      (B) NO SERVICE RIGHTS. Nothing in the Plan or any instrument executed or
Option granted pursuant thereto shall confer upon any Optionholder any right to
continue to serve the Company as a Non-Employee Director or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.

      (C) INVESTMENT ASSURANCES. The Company may require an Optionholder, as a
condition of exercising or acquiring Common Stock under any Option, (i) to give
written assurances satisfactory to the Company as to the Optionholder's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option; and (ii) to give
written assurances satisfactory to the Company stating that the Optionholder is
acquiring the Common Stock subject to the Option for the Optionholder's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Option
has been registered under a then currently effective registration statement
under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.


                                       8.


      (D) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of an
Option Agreement, the Company may in its sole discretion, satisfy any federal
state or local tax withholding obligation relating to an Option by any of the
following means (in addition to the Company's right to withhold from any
compensation paid to the Participant by the Company) or by a combination of such
means: (i) causing the Optionholder to tender a cash payment; (ii) withholding
shares of Common Stock from the shares of Common Stock issued or otherwise
issuable to the Optionholder in connection with the Option; or (iii) via such
other method as may be set forth in the Option Agreement.

11.   ADJUSTMENTS UPON CHANGES IN COMMON STOCK.

      (A) CAPITALIZATION ADJUSTMENTS. If any change is made in, or other event
occurs with respect to, the Common Stock subject to the Plan, or subject to any
Option, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company (each a "CAPITALIZATION ADJUSTMENT"), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject both to the
Plan pursuant to Section 4 and to the nondiscretionary Options specified in
Section 6, and the outstanding Options will be appropriately adjusted in the
class(es) and number of securities and price per share of Common Stock subject
to such outstanding Options. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (Notwithstanding the
foregoing, the conversion of any convertible securities of the Company shall not
be treated as a transaction "without receipt of consideration" by the Company.)

      (B) DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Company, then all outstanding Options shall terminate
immediately prior to the completion of such dissolution or liquidation.

      (C) CORPORATE TRANSACTION. In the event of a Corporate Transaction, any
surviving corporation or acquiring corporation may assume or continue any or all
Options outstanding under the Plan or may substitute similar stock options for
Options outstanding under the Plan (including, but not limited to, options to
acquire the same consideration paid to the stockholders of the Company, as the
case may be, pursuant to the Corporate Transaction). In the event that any
surviving corporation or acquiring corporation does not assume or continue all
such outstanding Options or substitute similar stock options for all such
outstanding Options, then with respect to Options that have been not assumed,
continued or substituted, the Options shall terminate if not exercised (if
applicable) at or prior to the effective time of such Corporate Transaction.

12.   AMENDMENT OF THE PLAN AND OPTIONS.

      (A) AMENDMENT OF PLAN. Subject to the limitations, if any, of applicable
law, the Board, at any time and from time to time, may amend the Plan. However,
except as provided in Section 11(a) relating to Capitalization Adjustments, no
amendment shall be effective unless


                                       9.


approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of applicable law.

      (B) STOCKHOLDER APPROVAL. The Board, in its sole discretion, may submit
any other amendment to the Plan for stockholder approval.

      (C) NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.

      (D) AMENDMENT OF OPTIONS. The Board, at any time, and from time to time,
may amend the terms of any one or more Options, including, but not limited to,
amendments to provide terms more favorable than previously provided in the
agreement evidencing an Option, subject to any specified limits in the Plan that
are not subject to Board discretion; provided, however, that the rights under
any Option shall not be impaired by any such amendment unless (i) the Company
requests the consent of the Optionholder and (ii) the Optionholder consents in
writing.

13.   TERMINATION OR SUSPENSION OF THE PLAN.

      (A) PLAN TERM. The Board may suspend or terminate the Plan at any time. No
Options may be granted under the Plan while the Plan is suspended or after it is
terminated.

      (B) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Option granted while the Plan is in
effect except with the written consent of the Optionholder.

14.   EFFECTIVE DATE OF PLAN.

      The Plan shall become effective on the IPO Date, but no Option shall be
exercised unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.

15.   CHOICE OF LAW.

      The law of the state of California shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.


                                      10.

                                                                    EXHIBIT 10.4

                              MANNKIND CORPORATION

                        2004 EMPLOYEE STOCK PURCHASE PLAN

                                OFFERING DOCUMENT

                ADOPTED BY THE BOARD OF DIRECTORS, MARCH 23, 2004

      In this document, capitalized terms not otherwise defined shall have the
same definitions of such terms as in the MannKind Corporation, 2003 Employee
Stock Purchase Plan.

1.    GRANT; OFFERING DATE.

      (a) The Board hereby authorizes a series of Offerings pursuant to the
terms of this Offering document.

      (b) The first Offering hereunder (the "Initial Offering") shall begin on
the date the Company's Common Stock is first offered to the public under a
registration statement declared effective under the Securities Act (the "IPO
Date") and shall end on [THE DATE APPROXIMATELY 6 MONTHS FOLLOWING IPO DATE],
unless terminated earlier as provided below. After the Initial Offering, an
additional new Offering shall begin on the day after the Purchase Date of the
immediately preceding Offering. The first day of an Offering is that Offering's
"Offering Date." Except as provided below, each Offering shall be approximately
six (6) months in duration, with one (1) Purchase Period which, except for the
Purchase Period of the Initial Offering (which may be longer or shorter than six
(6) months) shall be approximately six (6) months in length. Except as provided
below, a Purchase Date is the last day of a Purchase Period or of an Offering,
as the case may be. The Initial Offering shall consist of one (1) Purchase
Period with the Purchase Period of the Initial Offering ending on [THE DATE
APPROXIMATELY 6 MONTHS FOLLOWING IPO DATE].

      (c) Notwithstanding the foregoing: (i) if any Offering Date falls on a day
that is not a Trading Day, then such Offering Date shall instead fall on the
next subsequent Trading Day, and (ii) if any Purchase Date falls on a day that
is not a Trading Day, then such Purchase Date shall instead fall on the
immediately preceding Trading Day.

      (d) Prior to the commencement of any Offering, the Board may change any or
all terms of such Offering and any subsequent Offerings. The granting of
Purchase Rights pursuant to each Offering hereunder shall occur on each
respective Offering Date unless prior to such date (i) the Board determines that
such Offering shall not occur, or (ii) no shares of Common Stock remain
available for issuance under the Plan in connection with the Offering.

      (e) If the Company's accountants advise the Company that the accounting
treatment of purchases under the Plan will change or has changed in a manner
that the Company determines is detrimental to its best interests, then the
Company may, in its discretion, take any or all of the following actions: (i)
terminate each ongoing Offering as of the next Purchase Date (after the purchase
of stock on such Purchase Date) under such Offering; (ii) set a new Purchase

Date for each ongoing Offering and terminate each such Offering after the
purchase of stock on such Purchase Date; (iii) amend the Plan and each ongoing
Offering to reduce or eliminate an accounting treatment that is detrimental to
the Company's best interests and (iv) terminate each ongoing Offering and refund
any money previously contributed by the participants.

2.    ELIGIBLE EMPLOYEES.

      (a) Each Eligible Employee who, on the date that is ten (10) days prior to
the Offering Date of an Offering hereunder, is (i) an employee of the Company;
(ii) an employee of a Subsidiary incorporated in the United States; or (iii) an
employee of a Subsidiary that is not incorporated in the United States, provided
that the Board or Committee has designated the employees of such Subsidiary as
eligible to participate in the Offering, shall be granted a Purchase Right on
the Offering Date of such Offering.

      (b) Notwithstanding the foregoing, the following Employees shall not be
Eligible Employees or be granted Purchase Rights under an Offering:

            (i) part-time or seasonal Employees whose customary employment is
twenty (20) hours per week or less or five (5) months per calendar year or less;

            (ii) five percent (5%) stockholders (including ownership through
unexercised and/or unvested stock options) as described in Section 6(c) of the
Plan; or

            (iii) Employees in jurisdictions outside of the United States if, as
of the Offering Date of the Offering, the grant of such Purchase Rights would
not be in compliance with the applicable laws of any jurisdiction in which the
Employee resides or is employed.

      (c) Notwithstanding the foregoing, each person who first becomes an
Eligible Employee during an ongoing Offering shall not be able to participate in
such Offering.

3.    PURCHASE RIGHTS.

      (a) Subject to the limitations set forth herein and in the Plan, a
Participant's Purchase Right shall permit the purchase of the number of shares
of Common Stock purchasable with up to twenty percent (20%) of such
Participant's Earnings paid during the period of such Offering beginning
immediately after such Participant first commences participation; provided,
however, that no Participant may have more than twenty percent (20%) of such
Participant's Earnings applied to purchase shares of Common Stock under all
ongoing Offerings under the Plan and all other plans of the Company and Related
Corporations that are intended to qualify as Employee Stock Purchase Plans.

      (b) For Offerings hereunder, "Earnings" means the base compensation paid
to a Participant, including all salary and wages (including amounts elected to
be deferred by the Participant, that would otherwise have been paid, under any
cash or deferred arrangement or other deferred compensation program established
by the Company or a Related Corporation); but excluding overtime pay,
commissions, bonuses, and all other remuneration paid directly to such
Participant, profit sharing, the cost of employee benefits paid for by the
Company or a Related Corporation, education or tuition reimbursements, imputed
income arising under any Company


                                       2

or Related Corporation group insurance or benefit program, traveling expenses,
business and moving expense reimbursements, income received in connection with
stock options, contributions made by the Company or a Related Corporation under
any employee benefit plan, and similar items of compensation.

      (c) Notwithstanding the foregoing, the maximum number of shares of Common
Stock that a Participant may purchase on any Purchase Date in an Offering shall
be such number of shares as has a Fair Market Value (determined as of the
Offering Date for such Offering) equal to (x) $25,000 multiplied by the number
of calendar years in which the Purchase Right under such Offering has been
outstanding at any time, minus (y) the Fair Market Value of any other shares of
Common Stock (determined as of the relevant Offering Date with respect to such
shares) that, for purposes of the limitation of Section 423(b)(8) of the Code,
are attributed to any of such calendar years in which the Purchase Right is
outstanding. The amount in clause (y) of the previous sentence shall be
determined in accordance with regulations applicable under Section 423(b)(8) of
the Code based on (i) the number of shares previously purchased with respect to
such calendar years pursuant to such Offering or any other Offering under the
Plan, or pursuant to any other Company or Related Corporation plans intended to
qualify as Employee Stock Purchase Plans, and (ii) the number of shares subject
to other Purchase Rights outstanding on the Offering Date for such Offering
pursuant to the Plan or any other such Company or Related Corporation Employee
Stock Purchase Plan.

      (d) The maximum aggregate number of shares of Common Stock available to be
purchased by all Participants under an Offering shall be the number of shares of
Common Stock remaining available under the Plan on the Offering Date. If the
aggregate purchase of shares of Common Stock upon exercise of Purchase Rights
granted under the Offering would exceed the maximum aggregate number of shares
available, the Board shall make a pro rata allocation of the shares available in
a uniform and equitable manner.

      (e) Notwithstanding the foregoing, the maximum number of shares of Common
Stock that an Eligible Employee may purchase on any Purchase Date during any
Offering shall not exceed 10,000 shares.

4.    PURCHASE PRICE.

      The purchase price of shares of Common Stock under an Offering shall be
the lesser of: (i) eighty-five percent (85%) of the Fair Market Value of such
shares of Common Stock on the applicable Offering Date, or (ii) eighty-five
percent (85%) of the Fair Market Value of such shares of Common Stock on the
applicable Purchase Date, in each case rounded up to the nearest whole cent per
share. For the Initial Offering, the Fair Market Value of the shares of Common
Stock at the time when the Offering commences shall be the price per share at
which shares are first sold to the public in the Company's initial public
offering as specified in the final prospectus for that initial public offering.

5.    PARTICIPATION.

      (a) An Eligible Employee may elect to participate in an Offering on the
Offering Date. An Eligible Employee shall elect his or her payroll deduction
percentage on such


                                       3

enrollment form as the Company provides. The completed enrollment form must be
delivered to the Company prior to the date participation is to be effective,
unless a later time for filing the enrollment form is set by the Company for all
Eligible Employees with respect to a given Offering. Payroll deduction
percentages must be expressed in whole percentages of Earnings, with a minimum
percentage of one percent (1%) and a maximum percentage of twenty percent (20%).
Except as provided in paragraph (e) below with respect to the Initial Offering,
Contributions may be made only by way of payroll deductions.

      (b) A Participant may change (increase or decrease) his or her
participation level once during a Purchase Period. In addition, a Participant
may decrease to zero percent (0%) his or her participation level only once
during a Purchase Period. Any such increase or decrease in participation level
shall be made by delivering a notice to the Company or a designated Subsidiary
in such form as the Company provides prior to the ten (10) day period (or such
shorter period of time as determined by the Company and communicated to
Participants) immediately preceding the next Purchase Date of the Purchase
Period for which it is to be effective.

      (c) A Participant may withdraw from an Offering and receive a refund of
his or her Contributions (reduced to the extent, if any, such Contributions have
been used to acquire shares of Common Stock for the Participant on any prior
Purchase Date) without interest, at any time prior to the end of the Offering,
excluding only each ten (10) day period immediately preceding a Purchase Date
(or such shorter period of time determined by the Company and communicated to
Participants), by delivering a withdrawal notice to the Company or a designated
Subsidiary in such form as the Company provides. A Participant who has withdrawn
from an Offering shall not again participate in such Offering, but may
participate in subsequent Offerings under the Plan in accordance with the terms
of the Plan and the terms of such subsequent Offerings.

      (d) Notwithstanding the foregoing or any other provision of this Offering
document or of the Plan to the contrary, neither the enrollment of any Eligible
Employee in the Plan nor any forms relating to participation in the Plan shall
be given effect until such time as a registration statement covering the
registration of the shares under the Plan that are subject to the Offering has
been filed by the Company and has become effective.

      (e) Notwithstanding the foregoing or any other provision of this Offering
document or of the Plan to the contrary, with respect to the Initial Offering
only, each Eligible Employee who is employed on the IPO Date automatically shall
be enrolled in the Initial Offering, with a Purchase Right to purchase up to the
number of shares of Common Stock that are purchasable with twenty percent (20%)
of the Eligible Employee's Earnings, subject to the limitations set forth in
Section 3(c)-(e) above. Following the filing of an effective registration
statement pursuant to a Form S-8, such Eligible Employee shall be provided a
certain period of time, as determined by the Company in its sole discretion,
within which to elect to authorize payroll deductions for the purchase of shares
during the Initial Offering (which may be for a percentage that is less than
twenty percent (20%) of the Eligible Employee's Earnings). If such Eligible
Employee elects not to authorize such payroll deductions, the Eligible Employee
instead may purchase shares of Common Stock under the Plan by delivering a
single cash payment for the purchase of such shares to the Company or a
designated Subsidiary prior to the ten (10) day period (or such shorter period
of time as determined by the Company and communicated to


                                       4

Participants) immediately preceding the Purchase Date under the Initial
Offering. If an Eligible Employee neither elects to authorize payroll deductions
nor chooses to make a cash payment in accordance with the foregoing sentence,
then the Eligible Employee shall not purchase any shares of Common Stock during
the Initial Offering. After the end of the Initial Offering, in order to
participate in any subsequent Offerings, an Eligible Employee must enroll and
authorize payroll deductions prior to the commencement of the Offering, in
accordance with paragraph (a) above; provided, however, that once an Eligible
Employee enrolls in an Offering and authorizes payroll deductions (including in
connection with the Initial Offering), the Eligible Employee automatically shall
be enrolled for all subsequent Offerings until he or she elects to withdraw from
an Offering pursuant to paragraph (c) above or terminates his or her
participation in the Plan.

6.    PURCHASES.

      Subject to the limitations contained herein, on each Purchase Date, each
Participant's Contributions (without any increase for interest) shall be applied
to the purchase of whole shares, up to the maximum number of shares permitted
under the Plan and the Offering.

7.    NOTICES AND AGREEMENTS.

      Any notices or agreements provided for in an Offering or the Plan shall be
given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering, shall be deemed effectively given
upon receipt or, in the case of notices and agreements delivered by the Company,
five (5) days after deposit in the United States mail, postage prepaid.

8.    EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL.

      The Purchase Rights granted under an Offering are subject to the approval
of the Plan by the stockholders of the Company as required for the Plan to
obtain treatment as an Employee Stock Purchase Plan.

9.    OFFERING SUBJECT TO PLAN.

      Each Offering is subject to all the provisions of the Plan, and the
provisions of the Plan are hereby made a part of the Offering. The Offering is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of an Offering and those of the
Plan (including interpretations, amendments, rules and regulations which may
from time to time be promulgated and adopted pursuant to the Plan), the
provisions of the Plan shall control.


                                       5

                                                                    EXHIBIT 10.4

                              MANNKIND CORPORATION

                        2004 EMPLOYEE STOCK PURCHASE PLAN

                ADOPTED BY THE BOARD OF DIRECTORS MARCH 23, 2004

                     APPROVED BY STOCKHOLDERS MARCH 23, 2004

1.    PURPOSE.

      (a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Related Corporations may be given an
opportunity to purchase shares of the Common Stock of the Company.

      (b) The Company, by means of the Plan, seeks to retain the services of
such Employees, to secure and retain the services of new Employees and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Related Corporations.

      (c) The Company intends that the Purchase Rights be considered options
issued under an Employee Stock Purchase Plan.

2.    DEFINITIONS.

      As used in the Plan and any Offering, unless otherwise specified, the
following terms have the meanings set forth below:

      (a) "BOARD" means the Board of Directors of the Company.

      (b) "CODE" means the Internal Revenue Code of 1986, as amended.

      (c) "COMMITTEE" means a committee appointed by the Board in accordance
with Section 3(c) of the Plan.

      (d) "COMMON STOCK" means the common stock of the Company.

      (e) "COMPANY" means MannKind Corporation, a Delaware corporation.

      (f) "CONTRIBUTIONS" means the payroll deductions and other additional
payments that a Participant contributes to fund the exercise of a Purchase
Right. A Participant may make payments not through payroll deductions only if
specifically provided for in the Offering, and then only if the Participant has
not already had the maximum permitted amount withheld through payroll deductions
during the Offering.


                                       1

      (g) "CORPORATE TRANSACTION" means the occurrence, in a single transaction
or in a series of related transactions, of any one or more of the following
events:

            (i) a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company;

            (ii) a sale or other disposition of at least ninety percent (90%)
of the outstanding securities of the Company;

            (iii) a merger, consolidation or similar transaction following which
the Company is not the surviving corporation; or

            (iv) a merger, consolidation or similar transaction following which
the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or similar
transaction are converted or exchanged by virtue of the merger, consolidation or
similar transaction into other property, whether in the form of securities, cash
or otherwise.

      (h) "DIRECTOR" means a member of the Board.

      (i) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering, provided
that such Employee also meets the requirements for eligibility to participate
set forth in the Plan.

      (j) "EMPLOYEE" means any person, including Officers and Directors, who is
employed for purposes of Section 423(b)(4) of the Code by the Company or a
Related Corporation. Neither service as a Director nor payment of a director's
fee shall be sufficient to make an individual an Employee of the Company or a
Related Corporation.

      (k) "EMPLOYEE STOCK PURCHASE PLAN" means a plan that grants Purchase
Rights intended to be options issued under an "employee stock purchase plan," as
that term is defined in Section 423(b) of the Code.

      (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

      (m) "FAIR MARKET VALUE" means the value of a security, as determined in
good faith by the Board. If the security is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of the security, unless otherwise determined by the Board,
shall be the closing sales price (rounded up where necessary to the nearest
whole cent) for such security (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the relevant security of the Company) on the Trading Day
prior to the relevant determination date, as reported in The Wall Street Journal
or such other source as the Board deems reliable.


                                       2

      (n) "OFFERING" means the grant of Purchase Rights to purchase shares of
Common Stock under the Plan to Eligible Employees.

      (o) "OFFERING DATE" means a date selected by the Board for an Offering to
commence.

      (p) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

      (q) "PARTICIPANT" means an Eligible Employee who holds an outstanding
Purchase Right granted pursuant to the Plan.

      (r) "PLAN" means this MannKind Corporation 2003 Employee Stock Purchase
Plan.

      (s) "PURCHASE DATE" means one or more dates during an Offering established
by the Board on which Purchase Rights shall be exercised and as of which
purchases of shares of Common Stock shall be carried out in accordance with such
Offering.

      (t) "PURCHASE PERIOD" means a period of time specified within an Offering
beginning on the Offering Date or on the next day following a Purchase Date
within an Offering and ending on a Purchase Date. An Offering may consist of one
or more Purchase Periods.

      (u) "PURCHASE RIGHT" means an option to purchase shares of Common Stock
granted pursuant to the Plan.

      (v) "RELATED CORPORATION" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

      (w) "SECURITIES ACT" means the Securities Act of 1933, as amended.

      (x) "TRADING DAY" means any day on which the exchange(s) or market(s) on
which shares of Common Stock are listed, whether it be an established stock
exchange, the Nasdaq National Market, the Nasdaq SmallCap Market or otherwise,
is open for trading.

3.    ADMINISTRATION.

      (a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in Section 3(c). Whether or
not the Board has delegated administration, the Board shall have the final power
to determine all questions of policy and expediency that may arise in the
administration of the Plan.

      (b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:


                                       3

            (i) To determine when and how Purchase Rights to purchase shares of
Common Stock shall be granted and the provisions of each Offering of such
Purchase Rights (which need not be identical).

            (ii) To designate from time to time which Related Corporations of
the Company shall be eligible to participate in the Plan.

            (iii) To construe and interpret the Plan and Purchase Rights, and to
establish, amend and revoke rules and regulations for the administration of the
Plan. The Board, in the exercise of this power, may correct any defect, omission
or inconsistency in the Plan, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.

            (iv) To amend the Plan as provided in Section 15.

            (v) Generally, to exercise such powers and to perform such acts as
it deems necessary or expedient to promote the best interests of the Company and
its Related Corporations and to carry out the intent that the Plan be treated as
an Employee Stock Purchase Plan.

            (vi) To adopt such procedures and sub-plans as are necessary or
appropriate to permit participation in the Plan by Employees who are foreign
nationals or employed outside the United States.

      (c) The Board may delegate administration of the Plan to a Committee of
the Board composed of one (1) or more members of the Board. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan. If administration is delegated to a Committee, references to the Board
in this Plan and in the Offering document shall thereafter be deemed to be to
the Board or the Committee, as the case may be.

      (d) All determinations, interpretations and constructions made by the
Board in good faith shall not be subject to review by any person and shall be
final, binding and conclusive on all persons.

4.    SHARES OF COMMON STOCK SUBJECT TO THE PLAN.

      Subject to the provisions of Section 14(a) relating to adjustments upon
changes in Common Stock, the stock that may be sold pursuant to Purchase Rights
granted under the Plan (the "RESERVED SHARES"), shall not exceed in the
aggregate two million (2,000,000) shares of the Common Stock. As of each January
1, beginning with January 1, 2005, and continuing through and including January
1, 2014 (each such January 1, a "CALCULATION DATE"), the number of Reserved
Shares will be increased automatically by the lesser of (i) one percent (1%) of
the total number of shares of Common Stock outstanding on such Calculation Date
or (ii)


                                       4

100,000 shares of Common Stock; provided, however, that in no
event will such annual increase cause the total number of shares of Common Stock
remaining available for issuance under the Plan to exceed ten percent (10%) of
the number of outstanding shares of capital stock of the Company at the end of
the prior fiscal year. Notwithstanding the foregoing, the Board may act, prior
to the first day of any fiscal year of the Company, to increase the share
reserve by such number of shares of Common Stock as the Board shall determine,
which number shall be less than each of (i) and (ii).

5.    GRANT OF PURCHASE RIGHTS; OFFERING.

      (a) The Board may from time to time grant or provide for the grant of
Purchase Rights to purchase shares of Common Stock under the Plan to Eligible
Employees in an Offering (consisting of one or more Purchase Periods) on an
Offering Date or Offering Dates selected by the Board. Each Offering shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate, which shall comply with the requirement of Section 423(b)(5) of the
Code that all Employees granted Purchase Rights shall have the same rights and
privileges. The terms and conditions of an Offering shall be incorporated by
reference into the Plan and treated as part of the Plan. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
document comprising the Offering or otherwise) the period during which the
Offering shall be effective, which period shall not exceed twenty-seven (27)
months beginning with the Offering Date, and the substance of the provisions
contained in Sections 6 through 9, inclusive.

      (b) If a Participant has more than one Purchase Right outstanding under
the Plan, unless he or she otherwise indicates in agreements or notices
delivered hereunder: (i) each agreement or notice delivered by that Participant
shall be deemed to apply to all of his or her Purchase Rights under the Plan,
and (ii) a Purchase Right with a lower exercise price (or an earlier-granted
Purchase Right, if different Purchase Rights have identical exercise prices)
shall be exercised to the fullest possible extent before a Purchase Right with a
higher exercise price (or a later-granted Purchase Right if different Purchase
Rights have identical exercise prices) shall be exercised.

6.    ELIGIBILITY.

      (a) Purchase Rights may be granted only to Employees of the Company or, as
the Board may designate as provided in Section 3(b), to Employees of a Related
Corporation. Except as provided in Section 6(b), an Employee shall not be
eligible to be granted Purchase Rights under the Plan unless, on the Offering
Date, such Employee has been in the employ of the Company or the Related
Corporation, as the case may be, for such continuous period preceding such
Offering Date as the Board may require, but in no event shall the required
period of continuous employment be greater than two (2) years. In addition, the
Board may provide that no Employee shall be eligible to be granted Purchase
Rights under the Plan unless, on the Offering Date, such Employee's customary
employment with the Company or the Related Corporation is more than twenty (20)
hours per week and/or more than five (5) months per calendar year.


                                       5

      (b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee shall, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Purchase Right under
that Offering, which Purchase Right shall thereafter be deemed to be a part of
that Offering. Such Purchase Right shall have the same characteristics as any
Purchase Rights originally granted under that Offering, as described herein,
except that:

            (i) the date on which such Purchase Right is granted shall be the
"Offering Date" of such Purchase Right for all purposes, including determination
of the exercise price of such Purchase Right;

            (ii) the period of the Offering with respect to such Purchase Right
shall begin on its Offering Date and end coincident with the end of such
Offering; and

            (iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she shall not receive any Purchase Right under that Offering.

      (c) No Employee shall be eligible for the grant of any Purchase Rights
under the Plan if, immediately after any such Purchase Rights are granted, such
Employee owns stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any Related
Corporation. For purposes of this Section 6(c), the rules of Section 424(d) of
the Code shall apply in determining the stock ownership of any Employee, and
stock which such Employee may purchase under all outstanding Purchase Rights and
options shall be treated as stock owned by such Employee.

      (d) As specified by Section 423(b)(8) of the Code, an Eligible Employee
may be granted Purchase Rights under the Plan only if such Purchase Rights,
together with any other rights granted under all Employee Stock Purchase Plans
of the Company and any Related Corporations, do not permit such Eligible
Employee's rights to purchase stock of the Company or any Related Corporation to
accrue at a rate which exceeds twenty five thousand dollars ($25,000) of Fair
Market Value of such stock (determined at the time such rights are granted, and
which, with respect to the Plan, shall be determined as of their respective
Offering Dates) for each calendar year in which such rights are outstanding at
any time.

      (e) Officers of the Company and any designated Related Corporation, if
they are otherwise Eligible Employees, shall be eligible to participate in
Offerings under the Plan. Notwithstanding the foregoing, the Board may provide
in an Offering that Employees who are highly compensated Employees within the
meaning of Section 423(b)(4)(D) of the Code shall not be eligible to
participate.

7.    PURCHASE RIGHTS; PURCHASE PRICE.

      (a) On each Offering Date, each Eligible Employee, pursuant to an Offering
made under the Plan, shall be granted a Purchase Right to purchase up to that
number of shares of


                                       6

Common Stock purchasable either with a percentage or with a maximum dollar
amount, as designated by the Board, but in either case not exceeding fifteen
percent (15%), of such Employee's Earnings (as defined by the Board in each
Offering) during the period that begins on the Offering Date (or such later date
as the Board determines for a particular Offering) and ends on the date stated
in the Offering, which date shall be no later than the end of the Offering.

      (b) The Board shall establish one (1) or more Purchase Dates during an
Offering as of which Purchase Rights granted pursuant to that Offering shall be
exercised and purchases of shares of Common Stock shall be carried out in
accordance with such Offering.

      (c) In connection with each Offering made under the Plan, the Board may
specify a maximum number of shares of Common Stock that may be purchased by any
Participant on any Purchase Date during such Offering. In connection with each
Offering made under the Plan, the Board may specify a maximum aggregate number
of shares of Common Stock that may be purchased by all Participants pursuant to
such Offering. In addition, in connection with each Offering that contains more
than one Purchase Date, the Board may specify a maximum aggregate number of
shares of Common Stock that may be purchased by all Participants on any Purchase
Date under the Offering. If the aggregate purchase of shares of Common Stock
issuable upon exercise of Purchase Rights granted under the Offering would
exceed any such maximum aggregate number, then, in the absence of any Board
action otherwise, a pro rata allocation of the shares of Common Stock available
shall be made in as nearly a uniform manner as shall be practicable and
equitable.

      (d) The purchase price of shares of Common Stock acquired pursuant to
Purchase Rights shall be not less than the lesser of:

            (i) an amount equal to eighty-five percent (85%) of the Fair Market
Value of the shares of Common Stock on the Offering Date; or

            (ii) an amount equal to eighty-five percent (85%) of the Fair Market
Value of the shares of Common Stock on the applicable Purchase Date.

8.    PARTICIPATION; WITHDRAWAL; TERMINATION.

      (a) A Participant may elect to authorize payroll deductions pursuant to an
Offering under the Plan by completing and delivering to the Company, within the
time specified in the Offering, an enrollment form (in such form as the Company
may provide). Each such enrollment form shall authorize an amount of
Contributions expressed as a percentage of the submitting Participant's Earnings
(as defined in each Offering) during the Offering (not to exceed the maximum
percentage specified by the Board). Each Participant's Contributions shall
remain the property of the Participant at all times prior to the purchase of
Common Stock, but such Contributions may be commingled with the assets of the
Company and used for general corporate purposes except where applicable law
requires that Contributions be deposited with an independent third party. To the
extent provided in the Offering, a


                                       7

Participant may begin making Contributions after the beginning of the Offering.
To the extent provided in the Offering, a Participant may thereafter reduce
(including to zero) or increase his or her Contributions. To the extent
specifically provided in the Offering, in addition to making Contributions by
payroll deductions, a Participant may make Contributions through the payment by
cash or check prior to each Purchase Date of the Offering.

      (b) During an Offering, a Participant may cease making Contributions and
withdraw from the Offering by delivering to the Company a notice of withdrawal
in such form as the Company may provide. Such withdrawal may be elected at any
time prior to the end of the Offering, except as provided otherwise in the
Offering. Upon such withdrawal from the Offering by a Participant, the Company
shall distribute to such Participant all of his or her accumulated Contributions
(reduced to the extent, if any, such Contributions have been used to acquire
shares of Common Stock for the Participant) under the Offering, and such
Participant's Purchase Right in that Offering shall thereupon terminate. A
Participant's withdrawal from an Offering shall have no effect upon such
Participant's eligibility to participate in any other Offerings under the Plan,
but such Participant shall be required to deliver a new enrollment form in order
to participate in subsequent Offerings.

      (c) Purchase Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon a Participant ceasing to be an Employee for any
reason or for no reason (subject to any post-employment participation period
required by law) or other lack of eligibility. The Company shall distribute to
such terminated or otherwise ineligible Employee all of his or her accumulated
Contributions (reduced to the extent, if any, such Contributions have been used
to acquire shares of Common Stock for the terminated or otherwise ineligible
Employee) under the Offering.

      (d) Purchase Rights shall not be transferable by a Participant otherwise
than by will, the laws of descent and distribution, or a beneficiary designation
as provided in Section 13. During a Participant's lifetime, Purchase Rights
shall be exercisable only by such Participant.

      (e) Unless otherwise specified in an Offering, the Company shall have no
obligation to pay interest on Contributions.

9.    EXERCISE.

      (a) On each Purchase Date during an Offering, each Participant's
accumulated Contributions shall be applied to the purchase of shares of Common
Stock up to the maximum number of shares of Common Stock permitted pursuant to
the terms of the Plan and the applicable Offering, at the purchase price
specified in the Offering. No fractional shares shall be issued upon the
exercise of Purchase Rights unless specifically provided for in the Offering.

      (b) If any amount of accumulated Contributions remains in a Participant's
account after the purchase of shares of Common Stock and such remaining amount
is less than the amount required to purchase one share of Common Stock on the
final Purchase Date of an Offering, then such remaining amount shall be held in
such Participant's account for the purchase of shares of Common Stock under the
next Offering under the Plan, unless such


                                       8

Participant withdraws from such next Offering, as provided in Section 8(b), or
is not eligible to participate in such Offering, as provided in Section 6, in
which case such amount shall be distributed to such Participant after the final
Purchase Date, without interest. If the amount of Contributions remaining in a
Participant's account after the purchase of shares of Common Stock is at least
equal to the amount required to purchase one (1) whole share of Common Stock on
the final Purchase Date of the Offering, then such remaining amount shall be
distributed in full to such Participant at the end of the Offering.

      (c) No Purchase Rights may be exercised to any extent unless the shares of
Common Stock to be issued upon such exercise under the Plan are covered by an
effective registration statement pursuant to the Securities Act and the Plan is
in material compliance with all laws applicable to the Plan. If on a Purchase
Date during any Offering hereunder the shares of Common Stock are not so
registered or the Plan is not in such compliance, no Purchase Rights or any
Offering shall be exercised on such Purchase Date, and the Purchase Date shall
be delayed until the shares of Common Stock are subject to such an effective
registration statement and the Plan is in such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If, on the Purchase Date under any Offering hereunder, as delayed to the
maximum extent permissible, the shares of Common Stock are not registered and
the Plan is not in such compliance, no Purchase Rights or any Offering shall be
exercised and all Contributions accumulated during the Offering (reduced to the
extent, if any, such Contributions have been used to acquire shares of Common
Stock) shall be distributed to the Participants.

10.   COVENANTS OF THE COMPANY.

      The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of Common Stock upon
exercise of the Purchase Rights. If, after commercially reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority that counsel for the Company deems necessary for the lawful issuance
and sale of shares of Common Stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell shares of Common Stock upon
exercise of such Purchase Rights unless and until such authority is obtained.

11.   USE OF PROCEEDS FROM SHARES OF COMMON STOCK.

      Proceeds from the sale of shares of Common Stock pursuant to Purchase
Rights shall constitute general funds of the Company.

12.   RIGHTS AS A STOCKHOLDER.

      A Participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, shares of Common Stock subject to
Purchase Rights unless and until the Participant's shares of Common Stock
acquired upon exercise of Purchase Rights are recorded in the books of the
Company (or its transfer agent).


                                       9

13.   DESIGNATION OF BENEFICIARY.

      (a) A Participant may file a written designation of a beneficiary who is
to receive any shares of Common Stock and/or cash, if any, from the
Participant's account under the Plan in the event of such Participant's death
subsequent to the end of an Offering but prior to delivery to the Participant of
such shares of Common Stock or cash. In addition, a Participant may file a
written designation of a beneficiary who is to receive any cash from the
Participant's account under the Plan in the event of such Participant's death
during an Offering. Any such designation shall be on a form provided by or
otherwise acceptable to the Company.

      (b) The Participant may change such designation of beneficiary at any time
by written notice to the Company. In the event of the death of a Participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such Participant's death, the Company shall deliver such shares
of Common Stock and/or cash to the executor or administrator of the estate of
the Participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its sole discretion, may deliver
such shares of Common Stock and/or cash to the spouse or to any one or more
dependents or relatives of the Participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.

14.   ADJUSTMENTS UPON CHANGES IN SECURITIES; CORPORATE TRANSACTIONS.

      (a) If any change is made in the shares of Common Stock, subject to the
Plan, or subject to any Purchase Right, without the receipt of consideration by
the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan shall be appropriately adjusted in the
type(s), class(es) and maximum number of shares of Common Stock subject to the
Plan pursuant to Section 4(a), and the outstanding Purchase Rights shall be
appropriately adjusted in the type(s), class(es), number of shares and purchase
limits of such outstanding Purchase Rights. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive.
(Notwithstanding the foregoing, the conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")

      (b) In the event of a Corporate Transaction, then: (i) any surviving or
acquiring corporation may continue or assume Purchase Rights outstanding under
the Plan or may substitute similar rights (including a right to acquire the same
consideration paid to stockholders in the Corporate Transaction) for those
outstanding under the Plan, or (ii) if any surviving or acquiring corporation
does not continue or assume such Purchase Rights or does not substitute similar
rights for Purchase Rights outstanding under the Plan, then, the Participants'
accumulated Contributions shall be used to purchase shares of Common Stock
within ten (10) business days prior to the Corporate Transaction under the
ongoing Offering, and the Participants' Purchase Rights under the ongoing
Offering shall terminate immediately after such purchase.


                                       10

15.   AMENDMENT OF THE PLAN.

      (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 14 relating to adjustments upon changes
in securities and except as to amendments solely to benefit the administration
of the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Related Corporation, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary for the Plan to satisfy the requirements of Section 423 of the Code
or other applicable laws or regulations.

      (b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
or to bring the Plan and/or Purchase Rights into compliance therewith.

      (c) The rights and obligations under any Purchase Rights granted before
amendment of the Plan shall not be impaired by any amendment of the Plan except:
(i) with the consent of the person to whom such Purchase Rights were granted, or
(ii) as necessary to comply with any laws or governmental regulations
(including, without limitation, the provisions of the Code and the regulations
promulgated thereunder relating to Employee Stock Purchase Plans).

16.   TERMINATION OR SUSPENSION OF THE PLAN.

      (a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the shares of Common Stock reserved for issuance under the Plan, as increased
and/or adjusted from time to time, have been issued under the terms of the Plan.
No Purchase Rights may be granted under the Plan while the Plan is suspended or
after it is terminated.

      (b) Any benefits, privileges, entitlements and obligations under any
Purchase Rights while the Plan is in effect shall not be impaired by suspension
or termination of the Plan except (i) as expressly provided in the Plan or with
the consent of the person to whom such Purchase Rights were granted, (ii) as
necessary to comply with any laws, regulations, or listing requirements, or
(iii) as necessary to ensure that the Plan and/or Purchase Rights comply with
the requirements of Section 423 of the Code.

17.   EFFECTIVE DATE OF PLAN.

            The Plan shall become effective as determined by the Board, but no
Purchase Rights shall be exercised unless and until the Plan has been approved
by the stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted by the Board.


                                       11

18.   MISCELLANEOUS PROVISIONS.

      (a) The Plan and Offering do not constitute an employment contract.
Nothing in the Plan or in the Offering shall in any way alter the at will nature
of a Participant's employment or be deemed to create in any way whatsoever any
obligation on the part of any Participant to continue in the employ of the
Company or a Related Corporation, or on the part of the Company or a Related
Corporation to continue the employment of a Participant.

      (b) The provisions of the Plan shall be governed by the laws of the State
of California without resort to that state's conflicts of laws rules.


                                       12

                                                                    Exhibit 10.5

                              MANNKIND CORPORATION

                          EXECUTIVE SEVERANCE AGREEMENT

This Executive Severance Agreement (this "Agreement"), dated and effective as of
August 1, 2003 is between MannKind Corporation, a Delaware corporation (the
"Company"), and Wendell Cheatham (the "Executive").

WHEREAS the board of directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the fact that the Executive does not have any form of traditional employment
contract or other assurance of job security;

AND WHEREAS the Board believes it is imperative to diminish any distraction of
the Executive arising from the personal uncertainty and insecurity that arises
in the absence of any assurance of job security by providing the Executive with
reasonable compensation and benefit arrangements in the event of termination of
the Executive's employment by the Company under certain defined circumstances.

NOW THEREFORE, in order to accomplish these objectives, the Board has caused the
Company to enter into this agreement.

                                    1. TERM

The term of this Agreement (the "Term") shall be for a period of two (2) years
from the date of this Agreement as first appearing; provided, however, that the
Term shall automatically renew for additional one (1) year periods, unless
notice of nonrenewal is given by either party to the other party at least ninety
(90) days prior to the end of the initial Term or any renewal Term, at the end
of which this Agreement shall terminate without further action by either the
Company of the Executive.

                                 2. EMPLOYMENT

The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or by any affiliated or
successor company is "at will" and may be terminated by either the Executive or
the Company or its affiliated companies at any time with or without cause,
subject to the termination payments prescribed herein.

                            3. ATTENTION AND EFFORT

During any period of time that the Executive remains in the employ of the
Company, and excluding any periods of paid time-off to which the Executive is
entitled, the Executive will devote all his productive time, ability, attention,
and effort to the business and affairs of the

                                       1.


Company and the discharge of the responsibilities assigned to him hereunder, and
will seek to perform faithfully and efficiently such responsibilities. It shall
not be a violation of this Agreement for the Executive to (a) serve on
corporate, civic or charitable boards or committees, (b) deliver lectures,
fulfill speaking engagements or teach at educational institutions, (c) manage
personal investments, or (d) engage in activities permitted by the policies of
the Company or as specifically permitted by the Company, so long as such
activities do not significantly interfere with the full time performance of the
Executive's responsibilities in accordance with this Agreement. It is expressly
understood and agreed that to the extent any such activities have been conducted
by the Executive prior to the Term, the continued conduct of such activities (or
the conduct of activities similar in nature and scope thereto) during the Term
shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.

                                 4. TERMINATION

During the Term, employment of the Executive may be terminated as follows, but,
in any case, the nondisclosure provisions set forth in Section 7 hereof shall
survive the termination of this Agreement and the termination of the Executive's
employment with the Company:

4.1 BY THE COMPANY OR THE EXECUTIVE

At any time during the Term, the Company may terminate the employment of the
Executive with or without Cause (as defined below), and the Executive may
terminate his employment for Good Reason (as defined below) or for any reason,
upon giving Notice of Termination (as defined below).

4.2 AUTOMATIC TERMINATION

This Agreement and the Executive's employment shall terminate automatically upon
the death or Disability of the Executive. The term "Disability" as used herein
shall mean the Executive's inability (with such accommodation as may be required
by law and which places no undue burden on the Company), to perform the
Executive's essential duties for a period or periods aggregating twelve (12)
weeks in any three hundred sixty-five (365) day period as a result of physical
or mental illness, loss of legal capacity or any other cause.

4.3 NOTICE OF TERMINATION

Any termination by the Company or by the Executive during the Term shall be
communicated by Notice of Termination to the other party given in accordance
with Section 8 hereof. The term "Notice of Termination" shall mean a written
notice that (a) indicates the specific termination provision in this Agreement
relied upon, and (b) to the extent applicable, sets forth briefly the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance that
contributed to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.

                                       2.


4.4 DATE OF TERMINATION

"Date of Termination" means (a) if the Executive's employment is terminated by
reason of death, the date of death, (b) if the Executive's employment is
terminated by reason of Disability, immediately upon a determination by the
Company of the Executive's Disability, and (c) in all other cases, upon the
giving of the Notice of Termination. Notwithstanding the foregoing, the party
giving the notice in the case of (c) above will have the right, but not the
obligation, to have the termination be effective upon the expiration of any
period specified in the Notice of Termination. In that event the Executive's
employment and performance of services will continue during the specified period
unless the other party (the Company in the event of a termination by the
Executive or the Executive in the event of a termination by the Company)
thereafter elects to terminate the employment of the Executive pursuant to
Section 2 and that termination is as of an earlier date. Notwithstanding the
foregoing, the Company may, upon notice to the Executive and without reducing
the Executive's compensation during such period, excuse the Executive from any
or all of his duties during such period.

                            5. TERMINATION PAYMENTS

In the event of termination of the Executive's employment during the Term, all
compensation and benefits shall terminate, except as specifically provided in
this Section 5.

5.1 TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY THE EXECUTIVE FOR GOOD
    REASON

If during the Term the Company terminates the Executive's employment other than
for Cause or the Executive terminates his employment for Good Reason, the
Executive shall be entitled to:

         (a)      Payment of the following accrued obligations (the "Accrued
                  Obligations"):

                  (i)      the Executive's then current annual base salary
                           through the Date of Termination to the extent not
                           theretofore paid; and

                  (ii)     if the performance criteria for earning the annual
                           bonus for the full fiscal year of termination have
                           been fully satisfied at the time of termination
                           (excluding any requirement that the Executive be
                           employed by the Company at the end of the fiscal
                           year), the product of (x) the amount of the annual
                           bonus for that year and (y) a fraction the numerator
                           of which is the number of days in the current fiscal
                           year through the Date of Termination and the
                           denominator of which is three hundred sixty-five
                           (365);

                  (iii)    if the performance criteria for earning the annual
                           bonus for the full fiscal year of termination have
                           not been fully satisfied and the Board of Directors
                           of the Company determines that all such criteria
                           could not have been satisfied if the Executive
                           remained employed for the full fiscal year, no amount
                           for the annual bonus; and

                                       3.


                  (iv)     if neither (ii) nor (iii) apply, the product of (x)
                           the Three-Year Average Annual Bonus and (y) a
                           fraction the numerator of which is the number of days
                           in the current fiscal year through the Date of
                           Termination and the denominator of which is three
                           hundred sixty-five (365). "Three-Year Average Annual
                           Bonus" shall mean the average of bonuses paid or
                           payable to the Executive by the Company for each of
                           the three fiscal years immediately preceding the year
                           of termination (including the annualized amount of
                           any such bonus paid or payable for any partial year,
                           but not stock options or stock awards, which became
                           fully vested and any deferred compensation earned
                           during any of those years and excluding any sign-on
                           or other one-time-only bonus). If the Executive has
                           not been an executive officer of the Company during
                           the entire three-year period referred to above or was
                           not offered a bonus during any of those years, then
                           the Three-Year Average Annual Bonus shall be
                           calculated for such shorter time that he or she was
                           an executive officer of the Company and had been
                           offered a bonus; and

                  (v)      any compensation previously deferred by the Executive
                           (together with accrued interest or earnings thereon,
                           if any) and any accrued paid time-off that would be
                           payable under the Company's standard policy, in each
                           case to the extent not theretofore paid.

         (b)      For eighteen (18) months after the Date of Termination or
                  until the Executive qualifies for comparable medical and
                  dental insurance benefits from another employer, whichever
                  occurs first, and subject to the satisfactory execution by the
                  Executive (including the expiration of any revocation period)
                  of an agreement substantially in the form of Exhibit A hereof,
                  the Company shall pay the Executive's premiums for

                  (i)      health insurance benefit continuation for the
                           Executive and his family members, if applicable, that
                           the Company provides to the Executive under the
                           provisions of the federal Consolidated Omnibus Budget
                           Reconciliation Act of 1985, as amended ("COBRA"), to
                           the extent that the Company would have paid such
                           premiums had the Executive remained employed by the
                           Company (such continued payment is hereinafter
                           referred to as "COBRA Continuation"); and

                  (ii)     additional health coverage (such as Exec-U-Care),
                           life, accidental death and disability and other
                           insurance programs for the Executive and his family
                           members, if applicable, to the extent such programs
                           existed on the Date of Termination.

         (c)      Continuation of the Executive's then current annual base
                  salary for the fiscal year in which the Date of Termination
                  occurs for a period of eighteen (18) months after the Date of
                  Termination, subject to payment and potential reduction as set
                  forth in Section 5.5 hereof and further subject to the
                  satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A hereof.

                                       4.


         (d)      An amount equal to the Three-Year Average Annual Bonus,
                  subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

         (e)      The provision of any agreement evidencing any outstanding,
                  vested stock option causing such vested option to terminate
                  within a specified period of time after the termination of
                  employment shall be extended until eighteen (18) months after
                  the Date of Termination except that nothing herein shall
                  extend any such vested option beyond its original term or
                  shall affect its termination for any reason other than
                  termination of employment. The provisions of this clause (e)
                  are subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

5.2 TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON

If during the Term the Executive's employment shall be terminated by the Company
for Cause or by the Executive for other than Good Reason, this Agreement shall
terminate without further obligation on the part of the Company to the
Executive, other than the Company's obligation to pay the Executive the amounts
in Section 5.1(a) (i) and (v).

5.3 EXPIRATION OF TERM

In the event the Executive's employment is not terminated prior to expiration of
the Term and notice of non-renewal is given pursuant to Section 1, this
Agreement shall terminate without further obligation on the part of the Company
to the Executive.

5.4 TERMINATION BECAUSE OF DEATH OR DISABILITY

Upon the Executive's death or Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Executive or his legal representatives under this Agreement, other than the
Company's obligation, if any, to pay the Executive the benefits in Section
5.1(a) to (e).

5.5 PAYMENT SCHEDULE AND OFFSET FOR OTHER EARNINGS

All payments, or any portion thereof, payable pursuant to Section 5.1, shall be
made to the Executive within ten (10) working days of the Date of Termination
except that

         (a)      any amount payable to the Executive pursuant to Section
                  5.1(a)(ii), (iii) or (iv) or Section 5.1(d) shall be paid to
                  Executive when his or her bonus would have been paid if he or
                  she were still employed; and

         (b)      any payments payable to the Executive pursuant to Section
                  5.1(c) hereof shall be made to the Executive in the form of
                  salary continuation payable at normal payroll intervals during
                  the eighteen (18) month severance period on the dates when the
                  Executive would have received his or her payments of salary if
                  he or she were still employed and in the amounts he or she
                  would have received, subject to offset during the final six
                  (6) months of such severance period for other earnings
                  received by the Executive as follows:

                                       5.


                  (i)      The Executive shall have an affirmative duty to seek
                           other employment or otherwise mitigate lost earnings
                           during the final fifteen (15) months of the eighteen
                           (18) month severance period;

                  (ii)     The Executive shall disclose to the Company any
                           earnings received (or that the Executive had the
                           right to receive) from employment or consulting
                           during the final fifteen (15) months of the eighteen
                           (18) month severance period, and the source(s) of
                           such earnings;

                  (iii)    The disclosures of earnings shall be made by
                           Executive within two (2) weeks of any period of time
                           in which Executive received payment from Company and
                           also received earnings from another source (or had a
                           right to receive earnings);

                  (iv)     The Company, in each payroll period that a severance
                           payment is due, shall have the right to offset on a
                           dollar-for-dollar basis all such earnings that the
                           Executive received or had the right to receive during
                           that payroll period.

5.6 CAUSE

For purposes of this Agreement, termination of the Executive's employment shall
be for "Cause" if it is for any of the following:

         (a)      A refusal to carry out any material lawful duties of the
                  Executive or any directions or instructions of the Board or
                  senior management of the Company reasonably consistent with
                  those duties;

         (b)      Failure to perform satisfactorily any lawful duties of the
                  Executive or any directions or instructions of the Board or
                  senior management reasonably consistent with those duties;
                  provided, however, that the Executive has been given notice
                  and has failed to correct any such failure within (10) days
                  thereafter (unless any such correction by its nature cannot be
                  done in 10 days, in which event the Executive will have a
                  reasonable time to correct failures), and provided further
                  that the Company shall have no obligation to give notice and
                  the Executive will have no such opportunity to correct more
                  than two times in any twelve calendar month period;

         (c)      Violation by the Executive of a local, state or federal law
                  involving the commission of a crime, other than minor traffic
                  violations, or any other criminal act involving moral
                  turpitude;

         (d)      The Executive's gross negligence, willful misconduct or breach
                  of his or her duty to the Company involving self-dealing or
                  personal profit;

         (e)      Current abuse by the Executive of alcohol or controlled
                  substances; deception, fraud, misrepresentation or dishonesty
                  by the Executive; or any incident materially compromising the
                  Executive's reputation or ability to represent the Company
                  with investors, customers or the public;

                                       6.


         (f)      Any other material violation of any provision of this
                  Agreement by the Executive not described in (a) or (b) above,
                  subject to the same notice and opportunity to correct
                  provisions as are set forth in (b) above; or

         (g)      The Executive reaching a mandatory retirement age established
                  by the Company.

5.7 GOOD REASON

For purposes of this Agreement, "Good Reason" means:

         (a)      Reduction of the Executive's annual base salary to a level
                  below the level in effect on the date of this Agreement,
                  regardless of any change in the Executive's duties or
                  responsibilities;

         (b)      Any material diminution in Executive's position, authority,
                  duties or responsibilities or any other action by the Company
                  that results in a material diminution in such position,
                  authority, duties or responsibilities, excluding for this
                  purpose an isolated and inadvertent action not taken in bad
                  faith and that is remedied by the Company within ten (10) days
                  after receipt of notice thereof is provided to the Company by
                  the Executive;

         (c)      The Company's requiring the Executive to be based at any
                  office or location more than fifty (50) miles from the
                  location of the Executive's assigned worksite prior to the
                  Date of Termination and the Executive's residence at any such
                  time such requirement is imposed;

         (d)      Any non-renewal by the Company of this Agreement; provided,
                  however, that the Executive may only utilize this paragraph
                  (d) during the 30-day period immediately following his receipt
                  of the notice of non-renewal given by the Company pursuant to
                  Section 1 hereof;

         (e)      Any failure by the Company to comply with and satisfy Section
                  9 hereof; provided, however, that the Company's successor has
                  received at least ten (10) days' prior written notice from the
                  Company or the Executive of the requirements of Section 9
                  hereof; or

         (f)      Any other material violation of any provision of this
                  Agreement by the Company.

Notwithstanding the foregoing, no basis for a termination for Good Reason will
be deemed to exist unless the Executive notifies the Company in writing of any
event in (a) through (f) above and the Company or its successor fails to cure
any such event within thirty (30) days after receipt of the notice.

5.8 WITHHOLDING TAXES

Any payments provided for in this Agreement shall be paid net of any applicable
withholding required under federal, state or local law.

                                       7.


5.9 WARN ACT

Notwithstanding the provisions of Section 5.1 through 5.5, in the event the
Executive is entitled, by operation of any act or law, to unemployment
compensation benefits or benefits under the Work Adjustment and Retraining Act
of 1988 (known as the "WARN Act") in connection with the termination of his or
her employment in addition to those required to be paid to him or her under this
Agreement, then to the extent permitted by applicable law governing severance
payments or notice of termination of employment, the Company shall be entitled
to offset against the amount payable hereunder the amounts of any such mandated
payments.

                       6. REPRESENTATIONS AND WARRANTIES

In order to induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that neither the execution nor the
performance of this Agreement by the Executive will violate or conflict in any
way with any other agreement by which the Executive may be bound.

             7. NONDISCLOSURE; RETURN OF MATERIALS; NONSOLICITATION

7.1 NONDISCLOSURE

Except as required by his employment with the Company, the Executive will not,
at any time during the term of employment with the Company, or at any time
thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Executive understands that the Company will be relying on this
covenant in continuing the Executive's employment, paying him compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.

7.2 RETURN OF MATERIALS

All documents, records, notebooks, notes, memoranda, drawings, computer files or
other documents made or compiled by the Executive at any time while employed by
the Company, or in his possession, including any and all copies thereof, shall
be the property of the Company and shall be held by the Executive in trust and
solely for the benefit of the Company, and shall be delivered to the Company by
the Executive upon termination of employment or at any other time upon request
by the Company.

7.3 NONSOLICITATION

During the period that Executive is receiving the payments described in Section
5.1(c) he or she will not actively solicit any employees of the Company or its
Affiliates to accept employment from any other person or entity. "Affiliate" is
defined as any entity controlling, controlled by or under common control with
the Company within the meaning of Rule 405 of the Securities and Exchange
Commission under the Securities Act of 1933.

                                       8.


                               8. FORM OF NOTICE

Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally or by
registered or certified mail, return receipt requested, at the address set forth
below or at such other address as may hereafter be designated by notice given in
compliance with the terms hereof:

If to the Executive:                           6218 Black Cherry Circle
                                               Columbia, MD  21045

If to the Company:                             MannKind Corporation
                                               Attn: President
                                               28903 North Avenue Paine
                                               Valencia, CA 91355

or such other address as shall be provided in accordance with the terms hereof.
Except as set forth in Section 4.4 hereof, if notice is mailed, such notice
shall be effective upon mailing. Notices sent in any other manner specified
above shall be effective upon receipt.

                                 9. ASSIGNMENT

This Agreement is personal to the Executive and shall not be assignable by the
Executive.

The Company shall assign to and require any successor (whether by purchase of
assets, merger or consolidation) to all or substantially all the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement, the
"Company" shall mean MannKind Corporation and any affiliated company or
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by contract, operation of law or otherwise; and as long
as such successor assumes and agrees to perform this Agreement, the termination
of the Executive's employment by one such entity and the immediate hiring and
continuation of the Executive's employment by the succeeding entity shall not be
deemed to constitute a termination or trigger any severance obligation under
this Agreement. All the terms and provisions of this Agreement shall be binding
upon and insure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.

                                  10. WAIVERS

No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.

                                       9.


                           11. AMENDMENTS IN WRITING

No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, or consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the President
or Chief Executive Officer of the Company and the Executive, and each such
amendment, modification, waiver, termination or discharge shall be effective
only in the specific instance and for the specific purpose for which given. No
provision of this Agreement shall be varied, contradicted or explained by any
oral agreement, course of dealing or performance or any other matter not set
forth in an agreement in writing and signed by the Company and the Executive.

                               12. APPLICABLE LAW

This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of California without regard to any rules
governing conflicts of laws.

                        13. ARBITRATION; ATTORNEYS' FEES

Except in connection with enforcing Section 7 hereof, for which legal and
equitable remedies may be sought in a court of law, any dispute arising under
this Agreement shall be subject to arbitration. The arbitration proceeding shall
be conducted in accordance with the Employment Arbitration Rules of the American
Arbitration Association (the "AAA Rules") then in effect, conducted by one (1)
arbitrator either mutually agreed upon or selected in accordance with the AAA
Rules. The arbitration shall be conducted in Los Angeles County, California,
under the jurisdiction of the Los Angeles office of the American Arbitration
Association. The arbitrator shall have authority only to interpret and apply the
provisions of this Agreement, and shall have no authority to add to, subtract
from or otherwise modify the terms of this Agreement. Any demand for arbitration
must be made within sixty (60) days of the event(s) giving rise to the claim
that this Agreement has been breached. The arbitrator's decision shall be final
and binding, and each party agrees to be bound by the arbitrator's award,
subject only to an appeal therefrom in accordance with the laws of the State of
California. Either party may obtain judgment upon the arbitrator's award in the
Superior Court of Los Angeles County, California.

If it becomes necessary to pursue or defend any legal proceeding, whether in
arbitration or court, in order to resolve a dispute arising under this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover costs and attorneys' fees.

                                14. SEVERABILITY

If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full

                                      10.


extent permitted by law: (a) all other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed in order
to carry out the intent of the parties hereto as nearly as may be possible, (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.

               15. COORDINATION WITH CHANGE OF CONTROL AGREEMENT

The Company and the Executive are contemporaneously with this Agreement entering
into a Change of Control Agreement (the "Change of Control Agreement"), which
agreement provides for certain forms of severance and benefit payments in the
event of termination of Executive's employment under certain defined
circumstances. This Agreement is in addition to the Change of Control Agreement,
providing certain assurances to the Executive in circumstances that the Change
of Control Agreement does not cover, and in no way supersedes or nullifies the
Change of Control Agreement. Nevertheless, it is possible that a termination of
employment by the Company or by the Executive may fall within the scope of both
agreements. In such event, payments made to the Executive under Section 5.1
hereof shall be coordinated with payments made to the Executive under Section
8.1 of the Change of Control Agreement as follows:

         (a)      Accrued Obligations under this Agreement shall be paid first,
                  in which case the obligations under Section 8.1(a) of the
                  Change of Control Agreement need not be paid;

         (b)      COBRA Continuation under this Agreement shall be provided
                  first, in which case the obligations under Section 8.1(b) of
                  the Change of Control Agreement need not be provided; and

         (c)      The severance payments required under Sections 8.1(c) and
                  8.1(d) of the Change of Control Agreement shall be paid first,
                  in which case any severance payment required under Sections
                  5.1(c) and 5.1(d) hereof need not be provided.

                         16. EXCESS PARACHUTE PAYMENTS

If any portion of the payments or benefits under this Agreement, taken together
with any other agreement or benefit plan of the Company (including stock
options), would be characterized as an "excess parachute payment" to the
Executive under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the payments and benefits shall be reduced to the extent necessary
to avoid the imposition of any tax that would otherwise be owed under Section
4999 of the Code. Such reductions shall first be made to the bonus payments
referred to in Section 5.1(a)(ii), (iii) or (iv), whichever is applicable, then
to the salary continuation payments referred to in Section 5.1(c) and then to
the salary payments under Section 5.1(a)(i). The determination of whether and
the extent to which payments and benefits are to be reduced pursuant to this
Section 16 shall be made in writing by tax accountants and/or tax lawyers
selected by the Company and reasonably acceptable to the Executive.

                                      11.


                              17. ENTIRE AGREEMENT

Except as described in Section 15 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior or contemporaneous oral or written communications,
understandings, or agreements between the Company and the Executive with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the agreement relating to proprietary information and inventions
between the Executive and the Company shall continue in full force and effect.

                                18. COUNTERPARTS

This Agreement may be executed in counterparts, each of which counterpart shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties have executed and entered into this Agreement
effective on the date first set forth above.

MANNKIND CORPORATION                             EXECUTIVE

By: /s/ Michael Page                             /s/ Wendell Cheatham
    -----------------------------------          -------------------------------
Its: Vice Chairman & CEO                         Wendell Cheatham

                                      12.


                                    EXHIBIT A
                    GENERAL RELEASE AND SETTLEMENT AGREEMENT

The parties to this General Release and Settlement Agreement ("Release") between
________________________________ ("Employee") and MannKind Corporation ("the
Company") state that:

The parties desire to terminate their employment relationship. Both parties
desire to fully and finally resolve all differences and disputes without further
costs;

THEREFORE, the parties agree:

1.    In consideration of the payments to Employee as provided in the Executive
      Severance Agreement between the Employee and the Company dated August 1,
      2003, Employee does forever release and discharge the Company and all its
      parent, subsidiary and affiliated entities and all their past, present and
      future directors, officers, agents, employees, or representatives from all
      claims, damages, liabilities, and demands of whatever kind and character
      up to the date she/he signs below ("disputes"), including, but not limited
      to, arising out of or in any way related to any of the circumstances of
      Employee's employment or termination of employment with the Company.

      Employee releases all disputes relating to or arising out of any state,
      municipal, or federal statute, ordinance, regulation, order, contract,
      tort, or common law, including, but not limited to, the Age Discrimination
      in Employment Act. The parties intend that the disputes released herein be
      construed as broadly as possible.

2.    This Release also extends to all disputes by Employee against the Company
      whether known or unknown, suspected or unsuspected, past or present, and
      whether or not they arise out of or are attributable to the circumstances
      of Employee's employment or termination of employment with the Company.
      Specifically, Employee hereby expressly waives any and all rights under
      Section 1542 of the California Civil Code, which reads in full as follows:

           SECTION 1542. GENERAL RELEASE. A GENERAL RELEASE DOES NOT EXTEND TO
           CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
           FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
           MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

3.    Employee further understands and agrees that neither the payment nor the
      execution of this Release, or any part of it, shall constitute or be
      construed as an admission of any alleged liability or wrongdoing
      whatsoever by the Company. The Company expressly denies it has committed
      any alleged liability or wrongdoing.

4.    All films, files, books, computer files, correspondence, lists, equipment,
      manuals, other written and graphic records and the like and all copies
      thereof, affecting or relating to the business of Company which Employee
      shall have prepared, used, constructed, observed, possessed or controlled,
      shall be and remain the Company's sole property. Employee agrees to
      deliver promptly to the Company all such property relating to the Company,
      which are or have been in his possession or under his control. Employee
      also agrees to continue to abide by his confidentiality of information and
      inventions agreement with the Company.

                                      13.


5.    Employee agrees not to seek reemployment with the Company or any of its
      affiliates.

6.    This Release shall be governed by the substantive law of the State of
      California. In the event of any dispute concerning the interpretation of
      this Release or in any way related to Employee's employment or termination
      of employment, the dispute shall be resolved by arbitration within the
      County of Los Angeles, California, in accordance with the then existing
      rules for employment dispute arbitration of the American Arbitration
      Association, and judgment upon any arbitration award may be entered by any
      state or federal court having jurisdiction thereof. The parties intend
      this arbitration provision to be valid and construed as broadly as
      possible. The prevailing party in such arbitration shall recover its
      reasonable costs and attorneys' fees.

7.    If any provision of this General Release and Settlement Agreement is
      determined to be invalid or unenforceable, all of the other provisions
      shall remain valid and enforceable notwithstanding, unless the provision
      found to be unenforceable is of such material effect that this Release
      cannot be performed in accordance with the intent of the parties in the
      absence thereof.

8.    No promise or agreement other than that expressed herein has been made.
      This General Release and Settlement Agreement constitutes a single
      integrated contract expressing the entire agreement of the parties hereto.
      There are no other agreements, written or oral, express or implied,
      between the parties concerning the subject matter hereof, except the
      provisions set forth in this Release. This Release supersedes all previous
      agreements and understandings, whether written or oral. This Release can
      be amended, modified or terminated only by a writing executed by both
      Employee and the President of the Company.

9.    In compliance with the Olders Workers Benefit Protection Act, Employee has
      been given twenty-one (21) days to review this Release before signing it.
      Employee also understands that he may revoke this General Release and
      Settlement Agreement within seven (7) days after it has been signed and
      that it is not enforceable or effective until the seven (7) day revocation
      period has expired. Additionally, employee has been advised in this
      writing to consult with an attorney before executing this General Release
      and Settlement Agreement.

10.   THE EMPLOYEE STATES THAT HE/SHE IS IN GOOD HEALTH AND FULLY COMPETENT TO
      MANAGE HIS/HER BUSINESS AFFAIRS, THAT HE/SHE HAS CAREFULLY READ THIS
      GENERAL RELEASE AND SETTLEMENT AGREEMENT, THAT HE/SHE FULLY UNDERSTANDS
      ITS FINAL AND BINDING EFFECT, THAT THE ONLY PROMISES MADE TO HIM/HER TO
      SIGN THIS RELEASE ARE THOSE STATED AND CONTAINED IN THIS RELEASE, AND THAT
      HE/SHE IS SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY.

AGREED AND ACCEPTED this _______ day of __________, _______:

MANNKIND CORPORATION                          EXECUTIVE

By: __________________________________        __________________________________
Its: _________________________________

                                      14.

                                                                    Exhibit 10.6

                              MANNKIND CORPORATION

                          EXECUTIVE SEVERANCE AGREEMENT

This Executive Severance Agreement (this "Agreement"), dated and effective as of
August 1, 2003 is between MannKind Corporation, a Delaware corporation (the
"Company"), and Hakan Edstrom (the "Executive").

WHEREAS the board of directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the fact that the Executive does not have any form of traditional employment
contract or other assurance of job security;

AND WHEREAS the Board believes it is imperative to diminish any distraction of
the Executive arising from the personal uncertainty and insecurity that arises
in the absence of any assurance of job security by providing the Executive with
reasonable compensation and benefit arrangements in the event of termination of
the Executive's employment by the Company under certain defined circumstances.

NOW THEREFORE, in order to accomplish these objectives, the Board has caused the
Company to enter into this agreement.

                                    1. TERM

The term of this Agreement (the "Term") shall be for a period of two (2) years
from the date of this Agreement as first appearing; provided, however, that the
Term shall automatically renew for additional one (1) year periods, unless
notice of nonrenewal is given by either party to the other party at least ninety
(90) days prior to the end of the initial Term or any renewal Term, at the end
of which this Agreement shall terminate without further action by either the
Company of the Executive.

                                 2. EMPLOYMENT

The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or by any affiliated or
successor company is "at will" and may be terminated by either the Executive or
the Company or its affiliated companies at any time with or without cause,
subject to the termination payments prescribed herein.

                            3. ATTENTION AND EFFORT

During any period of time that the Executive remains in the employ of the
Company, and excluding any periods of paid time-off to which the Executive is
entitled, the Executive will devote all his productive time, ability, attention,
and effort to the business and affairs of the Company and the discharge of the
responsibilities assigned to him hereunder, and will seek to

                                       1



perform faithfully and efficiently such responsibilities. It shall not be a
violation of this Agreement for the Executive to (a) serve on corporate, civic
or charitable boards or committees, (b) deliver lectures, fulfill speaking
engagements or teach at educational institutions, (c) manage personal
investments, or (d) engage in activities permitted by the policies of the
Company or as specifically permitted by the Company, so long as such activities
do not significantly interfere with the full time performance of the Executive's
responsibilities in accordance with this Agreement. It is expressly understood
and agreed that to the extent any such activities have been conducted by the
Executive prior to the Term, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) during the Term shall
not thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.

                                 4. TERMINATION

During the Term, employment of the Executive may be terminated as follows, but,
in any case, the nondisclosure provisions set forth in Section 7 hereof shall
survive the termination of this Agreement and the termination of the Executive's
employment with the Company:

4.1      BY THE COMPANY OR THE EXECUTIVE

At any time during the Term, the Company may terminate the employment of the
Executive with or without Cause (as defined below), and the Executive may
terminate his employment for Good Reason (as defined below) or for any reason,
upon giving Notice of Termination (as defined below).

4.2      AUTOMATIC TERMINATION

This Agreement and the Executive's employment shall terminate automatically upon
the death or Disability of the Executive. The term "Disability" as used herein
shall mean the Executive's inability (with such accommodation as may be required
by law and which places no undue burden on the Company), to perform the
Executive's essential duties for a period or periods aggregating twelve (12)
weeks in any three hundred sixty-five (365) day period as a result of physical
or mental illness, loss of legal capacity or any other cause.

4.3      NOTICE OF TERMINATION

Any termination by the Company or by the Executive during the Term shall be
communicated by Notice of Termination to the other party given in accordance
with Section 8 hereof. The term "Notice of Termination" shall mean a written
notice that (a) indicates the specific termination provision in this Agreement
relied upon, and (b) to the extent applicable, sets forth briefly the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance that
contributed to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.

4.4      DATE OF TERMINATION

"Date of Termination" means (a) if the Executive's employment is terminated by
reason of death, the date of death, (b) if the Executive's employment is
terminated by reason of Disability, immediately upon a determination by the
Company of the Executive's Disability, and (c) in all

                                       2



other cases, upon the giving of the Notice of Termination. Notwithstanding the
foregoing, the party giving the notice in the case of (c) above will have the
right, but not the obligation, to have the termination be effective upon the
expiration of any period specified in the Notice of Termination. In that event
the Executive's employment and performance of services will continue during the
specified period unless the other party (the Company in the event of a
termination by the Executive or the Executive in the event of a termination by
the Company) thereafter elects to terminate the employment of the Executive
pursuant to Section 2 and that termination is as of an earlier date.
Notwithstanding the foregoing, the Company may, upon notice to the Executive and
without reducing the Executive's compensation during such period, excuse the
Executive from any or all of his duties during such period.

                            5. TERMINATION PAYMENTS

In the event of termination of the Executive's employment during the Term, all
compensation and benefits shall terminate, except as specifically provided in
this Section 5.

5.1      TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY THE EXECUTIVE FOR
         GOOD REASON

If during the Term the Company terminates the Executive's employment other than
for Cause or the Executive terminates his employment for Good Reason, the
Executive shall be entitled to:

         (a)      Payment of the following accrued obligations (the "Accrued
                  Obligations"):

                  (i)      the Executive's then current annual base salary
                           through the Date of Termination to the extent not
                           theretofore paid; and

                  (ii)     if the performance criteria for earning the annual
                           bonus for the full fiscal year of termination have
                           been fully satisfied at the time of termination
                           (excluding any requirement that the Executive be
                           employed by the Company at the end of the fiscal
                           year), the product of (x) the amount of the annual
                           bonus for that year and (y) a fraction the numerator
                           of which is the number of days in the current fiscal
                           year through the Date of Termination and the
                           denominator of which is three hundred sixty-five
                           (365);

                  (iii)    if the performance criteria for earning the annual
                           bonus for the full fiscal year of termination have
                           not been fully satisfied and the Board of Directors
                           of the Company determines that all such criteria
                           could not have been satisfied if the Executive
                           remained employed for the full fiscal year, no amount
                           for the annual bonus; and

                  (iv)     if neither (ii) nor (iii) apply, the product of (x)
                           the Three-Year Average Annual Bonus and (y) a
                           fraction the numerator of which is the number of days
                           in the current fiscal year through the Date of
                           Termination and the denominator of which is three
                           hundred sixty-five (365). "Three-Year Average Annual
                           Bonus" shall mean the average of bonuses paid or
                           payable to the Executive by the Company for each of
                           the three fiscal years immediately preceding the year
                           of termination (including the annualized amount of
                           any such bonus paid or payable for any partial year,
                           but not stock options or stock awards, which became
                           fully vested and any deferred compensation earned
                           during any of

                                       3



                           those years and excluding any sign-on or other
                           one-time-only bonus). If the Executive has not been
                           an executive officer of the Company during the entire
                           three-year period referred to above or was not
                           offered a bonus during any of those years, then the
                           Three-Year Average Annual Bonus shall be calculated
                           for such shorter time that he or she was an executive
                           officer of the Company and had been offered a bonus;
                           and

                  (v)      any compensation previously deferred by the Executive
                           (together with accrued interest or earnings thereon,
                           if any) and any accrued paid time-off that would be
                           payable under the Company's standard policy, in each
                           case to the extent not theretofore paid.

         (b)      For eighteen (18) months after the Date of Termination or
                  until the Executive qualifies for comparable medical and
                  dental insurance benefits from another employer, whichever
                  occurs first, and subject to the satisfactory execution by the
                  Executive (including the expiration of any revocation period)
                  of an agreement substantially in the form of Exhibit A hereof,
                  the Company shall pay the Executive's premiums for

                  (i)      health insurance benefit continuation for the
                           Executive and his family members, if applicable, that
                           the Company provides to the Executive under the
                           provisions of the federal Consolidated Omnibus Budget
                           Reconciliation Act of 1985, as amended ("COBRA"), to
                           the extent that the Company would have paid such
                           premiums had the Executive remained employed by the
                           Company (such continued payment is hereinafter
                           referred to as "COBRA Continuation"); and

                  (ii)     additional health coverage (such as Exec-U-Care),
                           life, accidental death and disability and other
                           insurance programs for the Executive and his family
                           members, if applicable, to the extent such programs
                           existed on the Date of Termination.

         (c)      Continuation of the Executive's then current annual base
                  salary for the fiscal year in which the Date of Termination
                  occurs for a period of eighteen (18) months after the Date of
                  Termination, subject to payment and potential reduction as set
                  forth in Section 5.5 hereof and further subject to the
                  satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A hereof.

         (d)      An amount equal to the Three-Year Average Annual Bonus,
                  subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

         (e)      The provision of any agreement evidencing any outstanding,
                  vested stock option causing such vested option to terminate
                  within a specified period of time after the termination of
                  employment shall be extended until eighteen (18) months after
                  the Date of Termination except that nothing herein shall
                  extend any such vested option beyond its original term or
                  shall affect its termination for any reason other than
                  termination of employment. The provisions of this clause (e)
                  are subject to the

                                       4



                  satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A hereof.

5.2      TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON

If during the Term the Executive's employment shall be terminated by the Company
for Cause or by the Executive for other than Good Reason, this Agreement shall
terminate without further obligation on the part of the Company to the
Executive, other than the Company's obligation to pay the Executive the amounts
in Section 5.1(a) (i) and (v).

5.3      EXPIRATION OF TERM

In the event the Executive's employment is not terminated prior to expiration of
the Term and notice of non-renewal is given pursuant to Section 1, this
Agreement shall terminate without further obligation on the part of the Company
to the Executive.

5.4      TERMINATION BECAUSE OF DEATH OR DISABILITY

Upon the Executive's death or Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Executive or his legal representatives under this Agreement, other than the
Company's obligation, if any, to pay the Executive the benefits in Section
5.1(a) to (e).

5.5      PAYMENT SCHEDULE AND OFFSET FOR OTHER EARNINGS

All payments, or any portion thereof, payable pursuant to Section 5.1, shall be
made to the Executive within ten (10) working days of the Date of Termination
except that

         (a)      any amount payable to the Executive pursuant to Section
                  5.1(a)(ii), (iii) or (iv) or Section 5.1(d) shall be paid to
                  Executive when his or her bonus would have been paid if he or
                  she were still employed; and

         (b)      any payments payable to the Executive pursuant to Section
                  5.1(c) hereof shall be made to the Executive in the form of
                  salary continuation payable at normal payroll intervals during
                  the eighteen (18) month severance period on the dates when the
                  Executive would have received his or her payments of salary if
                  he or she were still employed and in the amounts he or she
                  would have received, subject to offset during the final six
                  (6) months of such severance period for other earnings
                  received by the Executive as follows:

                  (i)      The Executive shall have an affirmative duty to seek
                           other employment or otherwise mitigate lost earnings
                           during the final fifteen (15) months of the eighteen
                           (18) month severance period;

                  (ii)     The Executive shall disclose to the Company any
                           earnings received (or that the Executive had the
                           right to receive) from employment or consulting
                           during the final fifteen (15) months of the eighteen
                           (18) month severance period, and the source(s) of
                           such earnings;

                  (iii)    The disclosures of earnings shall be made by
                           Executive within two (2) weeks of any period of time
                           in which Executive received payment from Company and
                           also received earnings from another source (or had a
                           right to receive earnings);

                                       5



                  (iv)     The Company, in each payroll period that a severance
                           payment is due, shall have the right to offset on a
                           dollar-for-dollar basis all such earnings that the
                           Executive received or had the right to receive during
                           that payroll period.

5.6      CAUSE

For purposes of this Agreement, termination of the Executive's employment shall
be for "Cause" if it is for any of the following:

         (a)      A refusal to carry out any material lawful duties of the
                  Executive or any directions or instructions of the Board or
                  senior management of the Company reasonably consistent with
                  those duties;

         (b)      Failure to perform satisfactorily any lawful duties of the
                  Executive or any directions or instructions of the Board or
                  senior management reasonably consistent with those duties;
                  provided, however, that the Executive has been given notice
                  and has failed to correct any such failure within (10) days
                  thereafter (unless any such correction by its nature cannot be
                  done in 10 days, in which event the Executive will have a
                  reasonable time to correct failures), and provided further
                  that the Company shall have no obligation to give notice and
                  the Executive will have no such opportunity to correct more
                  than two times in any twelve calendar month period;

         (c)      Violation by the Executive of a local, state or federal law
                  involving the commission of a crime, other than minor traffic
                  violations, or any other criminal act involving moral
                  turpitude;

         (d)      The Executive's gross negligence, willful misconduct or breach
                  of his or her duty to the Company involving self-dealing or
                  personal profit;

         (e)      Current abuse by the Executive of alcohol or controlled
                  substances; deception, fraud, misrepresentation or dishonesty
                  by the Executive; or any incident materially compromising the
                  Executive's reputation or ability to represent the Company
                  with investors, customers or the public;

         (f)      Any other material violation of any provision of this
                  Agreement by the Executive not described in (a) or (b) above,
                  subject to the same notice and opportunity to correct
                  provisions as are set forth in (b) above; or

         (g)      The Executive reaching a mandatory retirement age established
                  by the Company.

5.7      GOOD REASON

For purposes of this Agreement, "Good Reason" means:

         (a)      Reduction of the Executive's annual base salary to a level
                  below the level in effect on the date of this Agreement,
                  regardless of any change in the Executive's duties or
                  responsibilities;

         (b)      Any material diminution in Executive's position, authority,
                  duties or responsibilities or any other action by the Company
                  that results in a material diminution in such position,
                  authority, duties or responsibilities, excluding for this
                  purpose an isolated and inadvertent action not taken in bad
                  faith and that is remedied by the Company within ten (10) days
                  after receipt of notice thereof is provided to the Company by
                  the Executive;

                                       6



         (c)      The Company's requiring the Executive to be based at any
                  office or location more than fifty (50) miles from the
                  location of the Executive's assigned worksite prior to the
                  Date of Termination and the Executive's residence at any such
                  time such requirement is imposed;

         (d)      Any non-renewal by the Company of this Agreement; provided,
                  however, that the Executive may only utilize this paragraph
                  (d) during the 30-day period immediately following his receipt
                  of the notice of non-renewal given by the Company pursuant to
                  Section 1 hereof;

         (e)      Any failure by the Company to comply with and satisfy Section
                  9 hereof; provided, however, that the Company's successor has
                  received at least ten (10) days' prior written notice from the
                  Company or the Executive of the requirements of Section 9
                  hereof; or

         (f)      Any other material violation of any provision of this
                  Agreement by the Company.

Notwithstanding the foregoing, no basis for a termination for Good Reason will
be deemed to exist unless the Executive notifies the Company in writing of any
event in (a) through (f) above and the Company or its successor fails to cure
any such event within thirty (30) days after receipt of the notice.

5.8      WITHHOLDING TAXES

Any payments provided for in this Agreement shall be paid net of any applicable
withholding required under federal, state or local law.

5.9      WARN ACT

Notwithstanding the provisions of Section 5.1 through 5.5, in the event the
Executive is entitled, by operation of any act or law, to unemployment
compensation benefits or benefits under the Work Adjustment and Retraining Act
of 1988 (known as the "WARN Act") in connection with the termination of his or
her employment in addition to those required to be paid to him or her under this
Agreement, then to the extent permitted by applicable law governing severance
payments or notice of termination of employment, the Company shall be entitled
to offset against the amount payable hereunder the amounts of any such mandated
payments.

                       6. REPRESENTATIONS AND WARRANTIES

In order to induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that neither the execution nor the
performance of this Agreement by the Executive will violate or conflict in any
way with any other agreement by which the Executive may be bound.

             7. NONDISCLOSURE; RETURN OF MATERIALS; NONSOLICITATION

7.1      NONDISCLOSURE

Except as required by his employment with the Company, the Executive will not,
at any time during the term of employment with the Company, or at any time
thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to

                                       7



any confidential, proprietary or trade secret information without the prior
written consent of the Company. The Executive understands that the Company will
be relying on this covenant in continuing the Executive's employment, paying him
compensation, granting him any promotions or raises, or entrusting him with any
information that helps the Company compete with others.

7.2      RETURN OF MATERIALS

All documents, records, notebooks, notes, memoranda, drawings, computer files or
other documents made or compiled by the Executive at any time while employed by
the Company, or in his possession, including any and all copies thereof, shall
be the property of the Company and shall be held by the Executive in trust and
solely for the benefit of the Company, and shall be delivered to the Company by
the Executive upon termination of employment or at any other time upon request
by the Company.

7.3      NONSOLICITATION

During the period that Executive is receiving the payments described in Section
5.1(c) he or she will not actively solicit any employees of the Company or its
Affiliates to accept employment from any other person or entity. "Affiliate" is
defined as any entity controlling, controlled by or under common control with
the Company within the meaning of Rule 405 of the Securities and Exchange
Commission under the Securities Act of 1933.

                               8. FORM OF NOTICE

Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally or by
registered or certified mail, return receipt requested, at the address set forth
below or at such other address as may hereafter be designated by notice given in
compliance with the terms hereof:

If to the Executive:        23312 Happy Valley Drive
                            Newhall, CA 91321

If to the Company:          MannKind Corporation
                            Attn:  President
                            28903 North Avenue Paine
                            Valencia, CA 91355

or such other address as shall be provided in accordance with the terms hereof.
Except as set forth in Section 4.4 hereof, if notice is mailed, such notice
shall be effective upon mailing. Notices sent in any other manner specified
above shall be effective upon receipt.

                                 9. ASSIGNMENT

This Agreement is personal to the Executive and shall not be assignable by the
Executive.

The Company shall assign to and require any successor (whether by purchase of
assets, merger or consolidation) to all or substantially all the business and/or
assets of the Company to assume

                                       8



expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, the "Company" shall mean MannKind
Corporation and any affiliated company or successor to its business and/or
assets as aforesaid that assumes and agrees to perform this Agreement by
contract, operation of law or otherwise; and as long as such successor assumes
and agrees to perform this Agreement, the termination of the Executive's
employment by one such entity and the immediate hiring and continuation of the
Executive's employment by the succeeding entity shall not be deemed to
constitute a termination or trigger any severance obligation under this
Agreement. All the terms and provisions of this Agreement shall be binding upon
and insure to the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.

                                  10. WAIVERS

No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.

                           11. AMENDMENTS IN WRITING

No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, or consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the President
or Chief Executive Officer of the Company and the Executive, and each such
amendment, modification, waiver, termination or discharge shall be effective
only in the specific instance and for the specific purpose for which given. No
provision of this Agreement shall be varied, contradicted or explained by any
oral agreement, course of dealing or performance or any other matter not set
forth in an agreement in writing and signed by the Company and the Executive.

                               12. APPLICABLE LAW

This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of California without regard to any rules
governing conflicts of laws.

                        13. ARBITRATION; ATTORNEYS' FEES

Except in connection with enforcing Section 7 hereof, for which legal and
equitable remedies may be sought in a court of law, any dispute arising under
this Agreement shall be subject to arbitration. The arbitration proceeding shall
be conducted in accordance with the Employment

                                       9



Arbitration Rules of the American Arbitration Association (the "AAA Rules") then
in effect, conducted by one (1) arbitrator either mutually agreed upon or
selected in accordance with the AAA Rules. The arbitration shall be conducted in
Los Angeles County, California, under the jurisdiction of the Los Angeles office
of the American Arbitration Association. The arbitrator shall have authority
only to interpret and apply the provisions of this Agreement, and shall have no
authority to add to, subtract from or otherwise modify the terms of this
Agreement. Any demand for arbitration must be made within sixty (60) days of the
event(s) giving rise to the claim that this Agreement has been breached. The
arbitrator's decision shall be final and binding, and each party agrees to be
bound by the arbitrator's award, subject only to an appeal therefrom in
accordance with the laws of the State of California. Either party may obtain
judgment upon the arbitrator's award in the Superior Court of Los Angeles
County, California.

If it becomes necessary to pursue or defend any legal proceeding, whether in
arbitration or court, in order to resolve a dispute arising under this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover costs and attorneys' fees.

                                14. SEVERABILITY

If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law: (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.

               15. COORDINATION WITH CHANGE OF CONTROL AGREEMENT

The Company and the Executive are contemporaneously with this Agreement entering
into a Change of Control Agreement (the "Change of Control Agreement"), which
agreement provides for certain forms of severance and benefit payments in the
event of termination of Executive's employment under certain defined
circumstances. This Agreement is in addition to the Change of Control Agreement,
providing certain assurances to the Executive in circumstances that the Change
of Control Agreement does not cover, and in no way supersedes or nullifies the
Change of Control Agreement. Nevertheless, it is possible that a termination of
employment by the Company or by the Executive may fall within the scope of both
agreements. In such event, payments made to the Executive under Section 5.1
hereof shall be coordinated with payments made to the Executive under Section
8.1 of the Change of Control Agreement as follows:

         (a)      Accrued Obligations under this Agreement shall be paid first,
                  in which case the obligations under Section 8.1(a) of the
                  Change of Control Agreement need not be paid;

         (b)      COBRA Continuation under this Agreement shall be provided
                  first, in which case the obligations under Section 8.1(b) of
                  the Change of Control Agreement need not be provided; and

                                       10



         (c)      The severance payments required under Sections 8.1(c) and
                  8.1(d) of the Change of Control Agreement shall be paid first,
                  in which case any severance payment required under Sections
                  5.1(c) and 5.1(d) hereof need not be provided.

                         16. EXCESS PARACHUTE PAYMENTS

If any portion of the payments or benefits under this Agreement, taken together
with any other agreement or benefit plan of the Company (including stock
options), would be characterized as an "excess parachute payment" to the
Executive under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the payments and benefits shall be reduced to the extent necessary
to avoid the imposition of any tax that would otherwise be owed under Section
4999 of the Code. Such reductions shall first be made to the bonus payments
referred to in Section 5.1(a)(ii), (iii) or (iv), whichever is applicable, then
to the salary continuation payments referred to in Section 5.1(c) and then to
the salary payments under Section 5.1(a)(i). The determination of whether and
the extent to which payments and benefits are to be reduced pursuant to this
Section 16 shall be made in writing by tax accountants and/or tax lawyers
selected by the Company and reasonably acceptable to the Executive.

                              17. ENTIRE AGREEMENT

Except as described in Section 15 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior or contemporaneous oral or written communications,
understandings, or agreements between the Company and the Executive with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the agreement relating to proprietary information and inventions
between the Executive and the Company shall continue in full force and effect.

                                18. COUNTERPARTS

This Agreement may be executed in counterparts, each of which counterpart shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties have executed and entered into this Agreement
effective on the date first set forth above.

MANNKIND CORPORATION                                     EXECUTIVE

By:  /s/ Michael Page                                    /s/ Hakan Edstrom
     --------------------                                -----------------------
Its:  Vice Chairman & CEO                                Hakan Edstrom

                                       11



                                    EXHIBIT A
                    GENERAL RELEASE AND SETTLEMENT AGREEMENT

The parties to this General Release and Settlement Agreement ("Release") between
________________________________ ("Employee") and MannKind Corporation ("the
Company") state that:

The parties desire to terminate their employment relationship. Both parties
desire to fully and finally resolve all differences and disputes without further
costs;

THEREFORE, the parties agree:

1.   In consideration of the payments to Employee as provided in the Executive
     Severance Agreement between the Employee and the Company dated August 1,
     2003, Employee does forever release and discharge the Company and all its
     parent, subsidiary and affiliated entities and all their past, present and
     future directors, officers, agents, employees, or representatives from all
     claims, damages, liabilities, and demands of whatever kind and character up
     to the date she/he signs below ("disputes"), including, but not limited to,
     arising out of or in any way related to any of the circumstances of
     Employee's employment or termination of employment with the Company.

     Employee releases all disputes relating to or arising out of any state,
     municipal, or federal statute, ordinance, regulation, order, contract,
     tort, or common law, including, but not limited to, the Age Discrimination
     in Employment Act. The parties intend that the disputes released herein be
     construed as broadly as possible.

2.   This Release also extends to all disputes by Employee against the Company
     whether known or unknown, suspected or unsuspected, past or present, and
     whether or not they arise out of or are attributable to the circumstances
     of Employee's employment or termination of employment with the Company.
     Specifically, Employee hereby expressly waives any and all rights under
     Section 1542 of the California Civil Code, which reads in full as follows:

     SECTION 1542. GENERAL RELEASE. A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
     WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
     TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
     AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

3.   Employee further understands and agrees that neither the payment nor the
     execution of this Release, or any part of it, shall constitute or be
     construed as an admission of any alleged liability or wrongdoing whatsoever
     by the Company. The Company expressly denies it has committed any alleged
     liability or wrongdoing.

4.   All films, files, books, computer files, correspondence, lists, equipment,
     manuals, other written and graphic records and the like and all copies
     thereof, affecting or relating to the business of Company which Employee
     shall have prepared, used, constructed, observed, possessed or controlled,
     shall be and remain the Company's sole property. Employee agrees to deliver
     promptly to the Company all such property relating to the Company, which
     are or have been in his possession or under his control. Employee also
     agrees to continue to abide by his confidentiality of information and
     inventions agreement with the Company.

5.   Employee agrees not to seek reemployment with the Company or any of its
     affiliates.

                                       12



6.   This Release shall be governed by the substantive law of the State of
     California. In the event of any dispute concerning the interpretation of
     this Release or in any way related to Employee's employment or termination
     of employment, the dispute shall be resolved by arbitration within the
     County of Los Angeles, California, in accordance with the then existing
     rules for employment dispute arbitration of the American Arbitration
     Association, and judgment upon any arbitration award may be entered by any
     state or federal court having jurisdiction thereof. The parties intend this
     arbitration provision to be valid and construed as broadly as possible. The
     prevailing party in such arbitration shall recover its reasonable costs and
     attorneys' fees.

7.   If any provision of this General Release and Settlement Agreement is
     determined to be invalid or unenforceable, all of the other provisions
     shall remain valid and enforceable notwithstanding, unless the provision
     found to be unenforceable is of such material effect that this Release
     cannot be performed in accordance with the intent of the parties in the
     absence thereof.

8.   No promise or agreement other than that expressed herein has been made.
     This General Release and Settlement Agreement constitutes a single
     integrated contract expressing the entire agreement of the parties hereto.
     There are no other agreements, written or oral, express or implied, between
     the parties concerning the subject matter hereof, except the provisions set
     forth in this Release. This Release supersedes all previous agreements and
     understandings, whether written or oral. This Release can be amended,
     modified or terminated only by a writing executed by both Employee and the
     President of the Company.

9.   In compliance with the Olders Workers Benefit Protection Act, Employee has
     been given twenty-one (21) days to review this Release before signing it.
     Employee also understands that he may revoke this General Release and
     Settlement Agreement within seven (7) days after it has been signed and
     that it is not enforceable or effective until the seven (7) day revocation
     period has expired. Additionally, employee has been advised in this writing
     to consult with an attorney before executing this General Release and
     Settlement Agreement.

10.  THE EMPLOYEE STATES THAT HE/SHE IS IN GOOD HEALTH AND FULLY COMPETENT TO
     MANAGE HIS/HER BUSINESS AFFAIRS, THAT HE/SHE HAS CAREFULLY READ THIS
     GENERAL RELEASE AND SETTLEMENT AGREEMENT, THAT HE/SHE FULLY UNDERSTANDS ITS
     FINAL AND BINDING EFFECT, THAT THE ONLY PROMISES MADE TO HIM/HER TO SIGN
     THIS RELEASE ARE THOSE STATED AND CONTAINED IN THIS RELEASE, AND THAT
     HE/SHE IS SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY.

AGREED AND ACCEPTED this _______ day of __________, _______:

MANNKIND CORPORATION                                     EXECUTIVE

By:___________________________                           ______________________

Its:___________________________

                                       13

                                                                    Exhibit 10.7

                              MANNKIND CORPORATION

                          EXECUTIVE SEVERANCE AGREEMENT

This Executive Severance Agreement (this "Agreement"), dated and effective as of
August 1, 2003 is between MannKind Corporation, a Delaware corporation (the
"Company"), and David Thomson (the "Executive").

WHEREAS the board of directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the fact that the Executive does not have any form of traditional employment
contract or other assurance of job security;

AND WHEREAS the Board believes it is imperative to diminish any distraction of
the Executive arising from the personal uncertainty and insecurity that arises
in the absence of any assurance of job security by providing the Executive with
reasonable compensation and benefit arrangements in the event of termination of
the Executive's employment by the Company under certain defined circumstances.

NOW THEREFORE, in order to accomplish these objectives, the Board has caused the
Company to enter into this agreement.

                                    1. TERM

The term of this Agreement (the "Term") shall be for a period of two (2) years
from the date of this Agreement as first appearing; provided, however, that the
Term shall automatically renew for additional one (1) year periods, unless
notice of nonrenewal is given by either party to the other party at least ninety
(90) days prior to the end of the initial Term or any renewal Term, at the end
of which this Agreement shall terminate without further action by either the
Company of the Executive.

                                 2. EMPLOYMENT

The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or by any affiliated or
successor company is "at will" and may be terminated by either the Executive or
the Company or its affiliated companies at any time with or without cause,
subject to the termination payments prescribed herein.

                            3. ATTENTION AND EFFORT

During any period of time that the Executive remains in the employ of the
Company, and excluding any periods of paid time-off to which the Executive is
entitled, the Executive will devote all his productive time, ability, attention,
and effort to the business and affairs of the

                                       1.


Company and the discharge of the responsibilities assigned to him hereunder, and
will seek to perform faithfully and efficiently such responsibilities. It shall
not be a violation of this Agreement for the Executive to (a) serve on
corporate, civic or charitable boards or committees, (b) deliver lectures,
fulfill speaking engagements or teach at educational institutions, (c) manage
personal investments, or (d) engage in activities permitted by the policies of
the Company or as specifically permitted by the Company, so long as such
activities do not significantly interfere with the full time performance of the
Executive's responsibilities in accordance with this Agreement. It is expressly
understood and agreed that to the extent any such activities have been conducted
by the Executive prior to the Term, the continued conduct of such activities (or
the conduct of activities similar in nature and scope thereto) during the Term
shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.

                                 4. TERMINATION

During the Term, employment of the Executive may be terminated as follows, but,
in any case, the nondisclosure provisions set forth in Section 7 hereof shall
survive the termination of this Agreement and the termination of the Executive's
employment with the Company:

4.1 BY THE COMPANY OR THE EXECUTIVE

At any time during the Term, the Company may terminate the employment of the
Executive with or without Cause (as defined below), and the Executive may
terminate his employment for Good Reason (as defined below) or for any reason,
upon giving Notice of Termination (as defined below).

4.2 AUTOMATIC TERMINATION

This Agreement and the Executive's employment shall terminate automatically upon
the death or Disability of the Executive. The term "Disability" as used herein
shall mean the Executive's inability (with such accommodation as may be required
by law and which places no undue burden on the Company), to perform the
Executive's essential duties for a period or periods aggregating twelve (12)
weeks in any three hundred sixty-five (365) day period as a result of physical
or mental illness, loss of legal capacity or any other cause.

4.3 NOTICE OF TERMINATION

Any termination by the Company or by the Executive during the Term shall be
communicated by Notice of Termination to the other party given in accordance
with Section 8 hereof. The term "Notice of Termination" shall mean a written
notice that (a) indicates the specific termination provision in this Agreement
relied upon, and (b) to the extent applicable, sets forth briefly the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance that
contributed to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.

                                       2.


4.4 DATE OF TERMINATION

"Date of Termination" means (a) if the Executive's employment is terminated by
reason of death, the date of death, (b) if the Executive's employment is
terminated by reason of Disability, immediately upon a determination by the
Company of the Executive's Disability, and (c) in all other cases, upon the
giving of the Notice of Termination. Notwithstanding the foregoing, the party
giving the notice in the case of (c) above will have the right, but not the
obligation, to have the termination be effective upon the expiration of any
period specified in the Notice of Termination. In that event the Executive's
employment and performance of services will continue during the specified period
unless the other party (the Company in the event of a termination by the
Executive or the Executive in the event of a termination by the Company)
thereafter elects to terminate the employment of the Executive pursuant to
Section 2 and that termination is as of an earlier date. Notwithstanding the
foregoing, the Company may, upon notice to the Executive and without reducing
the Executive's compensation during such period, excuse the Executive from any
or all of his duties during such period.

                            5. TERMINATION PAYMENTS

In the event of termination of the Executive's employment during the Term, all
compensation and benefits shall terminate, except as specifically provided in
this Section 5.

5.1 TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY THE EXECUTIVE FOR GOOD
    REASON

If during the Term the Company terminates the Executive's employment other than
for Cause or the Executive terminates his employment for Good Reason, the
Executive shall be entitled to:

         (a)      Payment of the following accrued obligations (the "Accrued
                  Obligations"):

                  (i)      the Executive's then current annual base salary
                           through the Date of Termination to the extent not
                           theretofore paid; and

                  (ii)     if the performance criteria for earning the annual
                           bonus for the full fiscal year of termination have
                           been fully satisfied at the time of termination
                           (excluding any requirement that the Executive be
                           employed by the Company at the end of the fiscal
                           year), the product of (x) the amount of the annual
                           bonus for that year and (y) a fraction the numerator
                           of which is the number of days in the current fiscal
                           year through the Date of Termination and the
                           denominator of which is three hundred sixty-five
                           (365);

                  (iii)    if the performance criteria for earning the annual
                           bonus for the full fiscal year of termination have
                           not been fully satisfied and the Board of Directors
                           of the Company determines that all such criteria
                           could not have been satisfied if the Executive
                           remained employed for the full fiscal year, no amount
                           for the annual bonus; and

                                       3.


                  (iv)     if neither (ii) nor (iii) apply, the product of (x)
                           the Three-Year Average Annual Bonus and (y) a
                           fraction the numerator of which is the number of days
                           in the current fiscal year through the Date of
                           Termination and the denominator of which is three
                           hundred sixty-five (365). "Three-Year Average Annual
                           Bonus" shall mean the average of bonuses paid or
                           payable to the Executive by the Company for each of
                           the three fiscal years immediately preceding the year
                           of termination (including the annualized amount of
                           any such bonus paid or payable for any partial year,
                           but not stock options or stock awards, which became
                           fully vested and any deferred compensation earned
                           during any of those years and excluding any sign-on
                           or other one-time-only bonus). If the Executive has
                           not been an executive officer of the Company during
                           the entire three-year period referred to above or was
                           not offered a bonus during any of those years, then
                           the Three-Year Average Annual Bonus shall be
                           calculated for such shorter time that he or she was
                           an executive officer of the Company and had been
                           offered a bonus; and

                  (v)      any compensation previously deferred by the Executive
                           (together with accrued interest or earnings thereon,
                           if any) and any accrued paid time-off that would be
                           payable under the Company's standard policy, in each
                           case to the extent not theretofore paid.

         (b)      For eighteen (18) months after the Date of Termination or
                  until the Executive qualifies for comparable medical and
                  dental insurance benefits from another employer, whichever
                  occurs first, and subject to the satisfactory execution by the
                  Executive (including the expiration of any revocation period)
                  of an agreement substantially in the form of Exhibit A hereof,
                  the Company shall pay the Executive's premiums for

                  (i)      health insurance benefit continuation for the
                           Executive and his family members, if applicable, that
                           the Company provides to the Executive under the
                           provisions of the federal Consolidated Omnibus Budget
                           Reconciliation Act of 1985, as amended ("COBRA"), to
                           the extent that the Company would have paid such
                           premiums had the Executive remained employed by the
                           Company (such continued payment is hereinafter
                           referred to as "COBRA Continuation"); and

                  (ii)     additional health coverage (such as Exec-U-Care),
                           life, accidental death and disability and other
                           insurance programs for the Executive and his family
                           members, if applicable, to the extent such programs
                           existed on the Date of Termination.

         (c)      Continuation of the Executive's then current annual base
                  salary for the fiscal year in which the Date of Termination
                  occurs for a period of eighteen (18) months after the Date of
                  Termination, subject to payment and potential reduction as set
                  forth in Section 5.5 hereof and further subject to the
                  satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A hereof.

                                       4.


         (d)      An amount equal to the Three-Year Average Annual Bonus,
                  subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

         (e)      The provision of any agreement evidencing any outstanding,
                  vested stock option causing such vested option to terminate
                  within a specified period of time after the termination of
                  employment shall be extended until eighteen (18) months after
                  the Date of Termination except that nothing herein shall
                  extend any such vested option beyond its original term or
                  shall affect its termination for any reason other than
                  termination of employment. The provisions of this clause (e)
                  are subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

5.2 TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON

If during the Term the Executive's employment shall be terminated by the Company
for Cause or by the Executive for other than Good Reason, this Agreement shall
terminate without further obligation on the part of the Company to the
Executive, other than the Company's obligation to pay the Executive the amounts
in Section 5.1(a) (i) and (v).

5.3 EXPIRATION OF TERM

In the event the Executive's employment is not terminated prior to expiration of
the Term and notice of non-renewal is given pursuant to Section 1, this
Agreement shall terminate without further obligation on the part of the Company
to the Executive.

5.4 TERMINATION BECAUSE OF DEATH OR DISABILITY

Upon the Executive's death or Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Executive or his legal representatives under this Agreement, other than the
Company's obligation, if any, to pay the Executive the benefits in Section
5.1(a) to (e).

5.5 PAYMENT SCHEDULE AND OFFSET FOR OTHER EARNINGS

All payments, or any portion thereof, payable pursuant to Section 5.1, shall be
made to the Executive within ten (10) working days of the Date of Termination
except that

         (a)      any amount payable to the Executive pursuant to Section
                  5.1(a)(ii), (iii) or (iv) or Section 5.1(d) shall be paid to
                  Executive when his or her bonus would have been paid if he or
                  she were still employed; and

         (b)      any payments payable to the Executive pursuant to Section
                  5.1(c) hereof shall be made to the Executive in the form of
                  salary continuation payable at normal payroll intervals during
                  the eighteen (18) month severance period on the dates when the
                  Executive would have received his or her payments of salary if
                  he or she were still employed and in the amounts he or she
                  would have received, subject to offset during the final six
                  (6) months of such severance period for other earnings
                  received by the Executive as follows:

                                       5.


                  (i)      The Executive shall have an affirmative duty to seek
                           other employment or otherwise mitigate lost earnings
                           during the final fifteen (15) months of the eighteen
                           (18) month severance period;

                  (ii)     The Executive shall disclose to the Company any
                           earnings received (or that the Executive had the
                           right to receive) from employment or consulting
                           during the final fifteen (15) months of the eighteen
                           (18) month severance period, and the source(s) of
                           such earnings;

                  (iii)    The disclosures of earnings shall be made by
                           Executive within two (2) weeks of any period of time
                           in which Executive received payment from Company and
                           also received earnings from another source (or had a
                           right to receive earnings);

                  (iv)     The Company, in each payroll period that a severance
                           payment is due, shall have the right to offset on a
                           dollar-for-dollar basis all such earnings that the
                           Executive received or had the right to receive during
                           that payroll period.

5.6 CAUSE

For purposes of this Agreement, termination of the Executive's employment shall
be for "Cause" if it is for any of the following:

         (a)      A refusal to carry out any material lawful duties of the
                  Executive or any directions or instructions of the Board or
                  senior management of the Company reasonably consistent with
                  those duties;

         (b)      Failure to perform satisfactorily any lawful duties of the
                  Executive or any directions or instructions of the Board or
                  senior management reasonably consistent with those duties;
                  provided, however, that the Executive has been given notice
                  and has failed to correct any such failure within (10) days
                  thereafter (unless any such correction by its nature cannot be
                  done in 10 days, in which event the Executive will have a
                  reasonable time to correct failures), and provided further
                  that the Company shall have no obligation to give notice and
                  the Executive will have no such opportunity to correct more
                  than two times in any twelve calendar month period;

         (c)      Violation by the Executive of a local, state or federal law
                  involving the commission of a crime, other than minor traffic
                  violations, or any other criminal act involving moral
                  turpitude;

         (d)      The Executive's gross negligence, willful misconduct or breach
                  of his or her duty to the Company involving self-dealing or
                  personal profit;

         (e)      Current abuse by the Executive of alcohol or controlled
                  substances; deception, fraud, misrepresentation or dishonesty
                  by the Executive; or any incident materially compromising the
                  Executive's reputation or ability to represent the Company
                  with investors, customers or the public;

                                       6.


         (f)      Any other material violation of any provision of this
                  Agreement by the Executive not described in (a) or (b) above,
                  subject to the same notice and opportunity to correct
                  provisions as are set forth in (b) above; or

         (g)      The Executive reaching a mandatory retirement age established
                  by the Company.

5.7 GOOD REASON

For purposes of this Agreement, "Good Reason" means:

         (a)      Reduction of the Executive's annual base salary to a level
                  below the level in effect on the date of this Agreement,
                  regardless of any change in the Executive's duties or
                  responsibilities;

         (b)      Any material diminution in Executive's position, authority,
                  duties or responsibilities or any other action by the Company
                  that results in a material diminution in such position,
                  authority, duties or responsibilities, excluding for this
                  purpose an isolated and inadvertent action not taken in bad
                  faith and that is remedied by the Company within ten (10) days
                  after receipt of notice thereof is provided to the Company by
                  the Executive;

         (c)      The Company's requiring the Executive to be based at any
                  office or location more than fifty (50) miles from the
                  location of the Executive's assigned worksite prior to the
                  Date of Termination and the Executive's residence at any such
                  time such requirement is imposed;

         (d)      Any non-renewal by the Company of this Agreement; provided,
                  however, that the Executive may only utilize this paragraph
                  (d) during the 30-day period immediately following his receipt
                  of the notice of non-renewal given by the Company pursuant to
                  Section 1 hereof;

         (e)      Any failure by the Company to comply with and satisfy Section
                  9 hereof; provided, however, that the Company's successor has
                  received at least ten (10) days' prior written notice from the
                  Company or the Executive of the requirements of Section 9
                  hereof; or

         (f)      Any other material violation of any provision of this
                  Agreement by the Company.

Notwithstanding the foregoing, no basis for a termination for Good Reason will
be deemed to exist unless the Executive notifies the Company in writing of any
event in (a) through (f) above and the Company or its successor fails to cure
any such event within thirty (30) days after receipt of the notice.

5.8 WITHHOLDING TAXES

Any payments provided for in this Agreement shall be paid net of any applicable
withholding required under federal, state or local law.

                                       7.


5.9 WARN ACT

Notwithstanding the provisions of Section 5.1 through 5.5, in the event the
Executive is entitled, by operation of any act or law, to unemployment
compensation benefits or benefits under the Work Adjustment and Retraining Act
of 1988 (known as the "WARN Act") in connection with the termination of his or
her employment in addition to those required to be paid to him or her under this
Agreement, then to the extent permitted by applicable law governing severance
payments or notice of termination of employment, the Company shall be entitled
to offset against the amount payable hereunder the amounts of any such mandated
payments.

                       6. REPRESENTATIONS AND WARRANTIES

In order to induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that neither the execution nor the
performance of this Agreement by the Executive will violate or conflict in any
way with any other agreement by which the Executive may be bound.

             7. NONDISCLOSURE; RETURN OF MATERIALS; NONSOLICITATION

7.1 NONDISCLOSURE

Except as required by his employment with the Company, the Executive will not,
at any time during the term of employment with the Company, or at any time
thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Executive understands that the Company will be relying on this
covenant in continuing the Executive's employment, paying him compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.

7.2 RETURN OF MATERIALS

All documents, records, notebooks, notes, memoranda, drawings, computer files or
other documents made or compiled by the Executive at any time while employed by
the Company, or in his possession, including any and all copies thereof, shall
be the property of the Company and shall be held by the Executive in trust and
solely for the benefit of the Company, and shall be delivered to the Company by
the Executive upon termination of employment or at any other time upon request
by the Company.

7.3 NONSOLICITATION

During the period that Executive is receiving the payments described in Section
5.1(c) he or she will not actively solicit any employees of the Company or its
Affiliates to accept employment from any other person or entity. "Affiliate" is
defined as any entity controlling, controlled by or under common control with
the Company within the meaning of Rule 405 of the Securities and Exchange
Commission under the Securities Act of 1933.

                                       8.


                               8. FORM OF NOTICE

Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally or by
registered or certified mail, return receipt requested, at the address set forth
below or at such other address as may hereafter be designated by notice given in
compliance with the terms hereof:

If to the Executive:            11202 Canton Drive
                                Studio City, CA 91604

If to the Company:              MannKind Corporation
                                Attn: President
                                28903 North Avenue Paine
                                Valencia, CA 91355

or such other address as shall be provided in accordance with the terms hereof.
Except as set forth in Section 4.4 hereof, if notice is mailed, such notice
shall be effective upon mailing. Notices sent in any other manner specified
above shall be effective upon receipt.

                                 9. ASSIGNMENT

This Agreement is personal to the Executive and shall not be assignable by the
Executive.

The Company shall assign to and require any successor (whether by purchase of
assets, merger or consolidation) to all or substantially all the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement, the
"Company" shall mean MannKind Corporation and any affiliated company or
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by contract, operation of law or otherwise; and as long
as such successor assumes and agrees to perform this Agreement, the termination
of the Executive's employment by one such entity and the immediate hiring and
continuation of the Executive's employment by the succeeding entity shall not be
deemed to constitute a termination or trigger any severance obligation under
this Agreement. All the terms and provisions of this Agreement shall be binding
upon and insure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.

                                  10. WAIVERS

No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.

                                       9.


                           11. AMENDMENTS IN WRITING

No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, or consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the President
or Chief Executive Officer of the Company and the Executive, and each such
amendment, modification, waiver, termination or discharge shall be effective
only in the specific instance and for the specific purpose for which given. No
provision of this Agreement shall be varied, contradicted or explained by any
oral agreement, course of dealing or performance or any other matter not set
forth in an agreement in writing and signed by the Company and the Executive.

                               12. APPLICABLE LAW

This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of California without regard to any rules
governing conflicts of laws.

                        13. ARBITRATION; ATTORNEYS' FEES

Except in connection with enforcing Section 7 hereof, for which legal and
equitable remedies may be sought in a court of law, any dispute arising under
this Agreement shall be subject to arbitration. The arbitration proceeding shall
be conducted in accordance with the Employment Arbitration Rules of the American
Arbitration Association (the "AAA Rules") then in effect, conducted by one (1)
arbitrator either mutually agreed upon or selected in accordance with the AAA
Rules. The arbitration shall be conducted in Los Angeles County, California,
under the jurisdiction of the Los Angeles office of the American Arbitration
Association. The arbitrator shall have authority only to interpret and apply the
provisions of this Agreement, and shall have no authority to add to, subtract
from or otherwise modify the terms of this Agreement. Any demand for arbitration
must be made within sixty (60) days of the event(s) giving rise to the claim
that this Agreement has been breached. The arbitrator's decision shall be final
and binding, and each party agrees to be bound by the arbitrator's award,
subject only to an appeal therefrom in accordance with the laws of the State of
California. Either party may obtain judgment upon the arbitrator's award in the
Superior Court of Los Angeles County, California.

If it becomes necessary to pursue or defend any legal proceeding, whether in
arbitration or court, in order to resolve a dispute arising under this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover costs and attorneys' fees.

                                14. SEVERABILITY

If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full

                                      10.


extent permitted by law: (a) all other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed in order
to carry out the intent of the parties hereto as nearly as may be possible, (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.

               15. COORDINATION WITH CHANGE OF CONTROL AGREEMENT

The Company and the Executive are contemporaneously with this Agreement entering
into a Change of Control Agreement (the "Change of Control Agreement"), which
agreement provides for certain forms of severance and benefit payments in the
event of termination of Executive's employment under certain defined
circumstances. This Agreement is in addition to the Change of Control Agreement,
providing certain assurances to the Executive in circumstances that the Change
of Control Agreement does not cover, and in no way supersedes or nullifies the
Change of Control Agreement. Nevertheless, it is possible that a termination of
employment by the Company or by the Executive may fall within the scope of both
agreements. In such event, payments made to the Executive under Section 5.1
hereof shall be coordinated with payments made to the Executive under Section
8.1 of the Change of Control Agreement as follows:

         (a)      Accrued Obligations under this Agreement shall be paid first,
                  in which case the obligations under Section 8.1(a) of the
                  Change of Control Agreement need not be paid;

         (b)      COBRA Continuation under this Agreement shall be provided
                  first, in which case the obligations under Section 8.1(b) of
                  the Change of Control Agreement need not be provided; and

         (c)      The severance payments required under Sections 8.1(c) and
                  8.1(d) of the Change of Control Agreement shall be paid first,
                  in which case any severance payment required under Sections
                  5.1(c) and 5.1(d) hereof need not be provided.

                         16. EXCESS PARACHUTE PAYMENTS

If any portion of the payments or benefits under this Agreement, taken together
with any other agreement or benefit plan of the Company (including stock
options), would be characterized as an "excess parachute payment" to the
Executive under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the payments and benefits shall be reduced to the extent necessary
to avoid the imposition of any tax that would otherwise be owed under Section
4999 of the Code. Such reductions shall first be made to the bonus payments
referred to in Section 5.1(a)(ii), (iii) or (iv), whichever is applicable, then
to the salary continuation payments referred to in Section 5.1(c) and then to
the salary payments under Section 5.1(a)(i). The determination of whether and
the extent to which payments and benefits are to be reduced pursuant to this
Section 16 shall be made in writing by tax accountants and/or tax lawyers
selected by the Company and reasonably acceptable to the Executive.

                                      11.


                              17. ENTIRE AGREEMENT

Except as described in Section 15 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior or contemporaneous oral or written communications,
understandings, or agreements between the Company and the Executive with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the agreement relating to proprietary information and inventions
between the Executive and the Company shall continue in full force and effect.

                                18. COUNTERPARTS

This Agreement may be executed in counterparts, each of which counterpart shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties have executed and entered into this Agreement
effective on the date first set forth above.

MANNKIND CORPORATION                           EXECUTIVE

By: /s/ Michael Page                           /s/ David Thomson
    ---------------------------------          ---------------------------------
Its: Vice Chairman & CEO                       David Thomson

                                      12.


                                    EXHIBIT A
                    GENERAL RELEASE AND SETTLEMENT AGREEMENT

The parties to this General Release and Settlement Agreement ("Release") between
________________________________ ("Employee") and MannKind Corporation ("the
Company") state that:

The parties desire to terminate their employment relationship. Both parties
desire to fully and finally resolve all differences and disputes without further
costs;

THEREFORE, the parties agree:

1.    In consideration of the payments to Employee as provided in the Executive
      Severance Agreement between the Employee and the Company dated August 1,
      2003, Employee does forever release and discharge the Company and all its
      parent, subsidiary and affiliated entities and all their past, present and
      future directors, officers, agents, employees, or representatives from all
      claims, damages, liabilities, and demands of whatever kind and character
      up to the date she/he signs below ("disputes"), including, but not limited
      to, arising out of or in any way related to any of the circumstances of
      Employee's employment or termination of employment with the Company.

      Employee releases all disputes relating to or arising out of any state,
      municipal, or federal statute, ordinance, regulation, order, contract,
      tort, or common law, including, but not limited to, the Age Discrimination
      in Employment Act. The parties intend that the disputes released herein be
      construed as broadly as possible.

2.    This Release also extends to all disputes by Employee against the Company
      whether known or unknown, suspected or unsuspected, past or present, and
      whether or not they arise out of or are attributable to the circumstances
      of Employee's employment or termination of employment with the Company.
      Specifically, Employee hereby expressly waives any and all rights under
      Section 1542 of the California Civil Code, which reads in full as follows:

           SECTION 1542. GENERAL RELEASE. A GENERAL RELEASE DOES NOT EXTEND TO
           CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
           FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
           MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

3.    Employee further understands and agrees that neither the payment nor the
      execution of this Release, or any part of it, shall constitute or be
      construed as an admission of any alleged liability or wrongdoing
      whatsoever by the Company. The Company expressly denies it has committed
      any alleged liability or wrongdoing.

4.    All films, files, books, computer files, correspondence, lists, equipment,
      manuals, other written and graphic records and the like and all copies
      thereof, affecting or relating to the business of Company which Employee
      shall have prepared, used, constructed, observed, possessed or controlled,
      shall be and remain the Company's sole property. Employee agrees to
      deliver promptly to the Company all such property relating to the Company,
      which are or

                                      13.


      have been in his possession or under his control. Employee also agrees to
      continue to abide by his confidentiality of information and inventions
      agreement with the Company.

5.    Employee agrees not to seek reemployment with the Company or any of its
      affiliates.

6.    This Release shall be governed by the substantive law of the State of
      California. In the event of any dispute concerning the interpretation of
      this Release or in any way related to Employee's employment or termination
      of employment, the dispute shall be resolved by arbitration within the
      County of Los Angeles, California, in accordance with the then existing
      rules for employment dispute arbitration of the American Arbitration
      Association, and judgment upon any arbitration award may be entered by any
      state or federal court having jurisdiction thereof. The parties intend
      this arbitration provision to be valid and construed as broadly as
      possible. The prevailing party in such arbitration shall recover its
      reasonable costs and attorneys' fees.

7.    If any provision of this General Release and Settlement Agreement is
      determined to be invalid or unenforceable, all of the other provisions
      shall remain valid and enforceable notwithstanding, unless the provision
      found to be unenforceable is of such material effect that this Release
      cannot be performed in accordance with the intent of the parties in the
      absence thereof.

8.    No promise or agreement other than that expressed herein has been made.
      This General Release and Settlement Agreement constitutes a single
      integrated contract expressing the entire agreement of the parties hereto.
      There are no other agreements, written or oral, express or implied,
      between the parties concerning the subject matter hereof, except the
      provisions set forth in this Release. This Release supersedes all previous
      agreements and understandings, whether written or oral. This Release can
      be amended, modified or terminated only by a writing executed by both
      Employee and the President of the Company.

9.    In compliance with the Olders Workers Benefit Protection Act, Employee has
      been given twenty-one (21) days to review this Release before signing it.
      Employee also understands that he may revoke this General Release and
      Settlement Agreement within seven (7) days after it has been signed and
      that it is not enforceable or effective until the seven (7) day revocation
      period has expired. Additionally, employee has been advised in this
      writing to consult with an attorney before executing this General Release
      and Settlement Agreement.

10.   THE EMPLOYEE STATES THAT HE/SHE IS IN GOOD HEALTH AND FULLY COMPETENT TO
      MANAGE HIS/HER BUSINESS AFFAIRS, THAT HE/SHE HAS CAREFULLY READ THIS
      GENERAL RELEASE AND SETTLEMENT AGREEMENT, THAT HE/SHE FULLY UNDERSTANDS
      ITS FINAL AND BINDING EFFECT, THAT THE ONLY PROMISES MADE TO HIM/HER TO
      SIGN THIS RELEASE ARE THOSE

                                      14.


      STATED AND CONTAINED IN THIS RELEASE, AND THAT HE/SHE IS SIGNING THIS
      AGREEMENT KNOWINGLY AND VOLUNTARILY.

AGREED AND ACCEPTED this _______ day of __________, _______:

MANNKIND CORPORATION                       EXECUTIVE

By: _______________________________        _____________________________________
Its:_______________________________

                                      15.

                                                                    Exhibit 10.8

                              MANNKIND CORPORATION

                          EXECUTIVE SEVERANCE AGREEMENT

This Executive Severance Agreement (this "Agreement"), dated and effective as of
August 1, 2003 is between MannKind Corporation, a Delaware corporation (the
"Company"), and Dick Anderson (the "Executive").

WHEREAS the board of directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the fact that the Executive does not have any form of traditional employment
contract or other assurance of job security;

AND WHEREAS the Board believes it is imperative to diminish any distraction of
the Executive arising from the personal uncertainty and insecurity that arises
in the absence of any assurance of job security by providing the Executive with
reasonable compensation and benefit arrangements in the event of termination of
the Executive's employment by the Company under certain defined circumstances.

NOW THEREFORE, in order to accomplish these objectives, the Board has caused the
Company to enter into this agreement.

                                    1. TERM

The term of this Agreement (the "Term") shall be for a period of two (2) years
from the date of this Agreement as first appearing; provided, however, that the
Term shall automatically renew for additional one (1) year periods, unless
notice of nonrenewal is given by either party to the other party at least ninety
(90) days prior to the end of the initial Term or any renewal Term, at the end
of which this Agreement shall terminate without further action by either the
Company of the Executive.

                                 2. EMPLOYMENT

The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or by any affiliated or
successor company is "at will" and may be terminated by either the Executive or
the Company or its affiliated companies at any time with or without cause,
subject to the termination payments prescribed herein.

                            3. ATTENTION AND EFFORT

During any period of time that the Executive remains in the employ of the
Company, and excluding any periods of paid time-off to which the Executive is
entitled, the Executive will devote all his productive time, ability, attention,
and effort to the business and affairs of the

                                       1.


Company and the discharge of the responsibilities assigned to him hereunder, and
will seek to perform faithfully and efficiently such responsibilities. It shall
not be a violation of this Agreement for the Executive to (a) serve on
corporate, civic or charitable boards or committees, (b) deliver lectures,
fulfill speaking engagements or teach at educational institutions, (c) manage
personal investments, or (d) engage in activities permitted by the policies of
the Company or as specifically permitted by the Company, so long as such
activities do not significantly interfere with the full time performance of the
Executive's responsibilities in accordance with this Agreement. It is expressly
understood and agreed that to the extent any such activities have been conducted
by the Executive prior to the Term, the continued conduct of such activities (or
the conduct of activities similar in nature and scope thereto) during the Term
shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.

                                 4. TERMINATION

During the Term, employment of the Executive may be terminated as follows, but,
in any case, the nondisclosure provisions set forth in Section 7 hereof shall
survive the termination of this Agreement and the termination of the Executive's
employment with the Company:

4.1 BY THE COMPANY OR THE EXECUTIVE

At any time during the Term, the Company may terminate the employment of the
Executive with or without Cause (as defined below), and the Executive may
terminate his employment for Good Reason (as defined below) or for any reason,
upon giving Notice of Termination (as defined below).

4.2 AUTOMATIC TERMINATION

This Agreement and the Executive's employment shall terminate automatically upon
the death or Disability of the Executive. The term "Disability" as used herein
shall mean the Executive's inability (with such accommodation as may be required
by law and which places no undue burden on the Company), to perform the
Executive's essential duties for a period or periods aggregating twelve (12)
weeks in any three hundred sixty-five (365) day period as a result of physical
or mental illness, loss of legal capacity or any other cause.

4.3 NOTICE OF TERMINATION

Any termination by the Company or by the Executive during the Term shall be
communicated by Notice of Termination to the other party given in accordance
with Section 8 hereof. The term "Notice of Termination" shall mean a written
notice that (a) indicates the specific termination provision in this Agreement
relied upon, and (b) to the extent applicable, sets forth briefly the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance that
contributed to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.

                                       2.


4.4 DATE OF TERMINATION

"Date of Termination" means (a) if the Executive's employment is terminated by
reason of death, the date of death, (b) if the Executive's employment is
terminated by reason of Disability, immediately upon a determination by the
Company of the Executive's Disability, and (c) in all other cases, upon the
giving of the Notice of Termination. Notwithstanding the foregoing, the party
giving the notice in the case of (c) above will have the right, but not the
obligation, to have the termination be effective upon the expiration of any
period specified in the Notice of Termination. In that event the Executive's
employment and performance of services will continue during the specified period
unless the other party (the Company in the event of a termination by the
Executive or the Executive in the event of a termination by the Company)
thereafter elects to terminate the employment of the Executive pursuant to
Section 2 and that termination is as of an earlier date. Notwithstanding the
foregoing, the Company may, upon notice to the Executive and without reducing
the Executive's compensation during such period, excuse the Executive from any
or all of his duties during such period.

                            5. TERMINATION PAYMENTS

In the event of termination of the Executive's employment during the Term, all
compensation and benefits shall terminate, except as specifically provided in
this Section 5.

5.1 TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY THE EXECUTIVE FOR GOOD
    REASON

If during the Term the Company terminates the Executive's employment other than
for Cause or the Executive terminates his employment for Good Reason, the
Executive shall be entitled to:

         (a)      Payment of the following accrued obligations (the "Accrued
                  Obligations"):

                  (i)      the Executive's then current annual base salary
                           through the Date of Termination to the extent not
                           theretofore paid; and

                  (ii)     if the performance criteria for earning the annual
                           bonus for the full fiscal year of termination have
                           been fully satisfied at the time of termination
                           (excluding any requirement that the Executive be
                           employed by the Company at the end of the fiscal
                           year), the product of (x) the amount of the annual
                           bonus for that year and (y) a fraction the numerator
                           of which is the number of days in the current fiscal
                           year through the Date of Termination and the
                           denominator of which is three hundred sixty-five
                           (365);

                  (iii)    if the performance criteria for earning the annual
                           bonus for the full fiscal year of termination have
                           not been fully satisfied and the Board of Directors
                           of the Company determines that all such criteria
                           could not have been satisfied if the Executive
                           remained employed for the full fiscal year, no amount
                           for the annual bonus; and

                                       3.


                  (iv)     if neither (ii) nor (iii) apply, the product of (x)
                           the Three-Year Average Annual Bonus and (y) a
                           fraction the numerator of which is the number of days
                           in the current fiscal year through the Date of
                           Termination and the denominator of which is three
                           hundred sixty-five (365). "Three-Year Average Annual
                           Bonus" shall mean the average of bonuses paid or
                           payable to the Executive by the Company for each of
                           the three fiscal years immediately preceding the year
                           of termination (including the annualized amount of
                           any such bonus paid or payable for any partial year,
                           but not stock options or stock awards, which became
                           fully vested and any deferred compensation earned
                           during any of those years and excluding any sign-on
                           or other one-time-only bonus). If the Executive has
                           not been an executive officer of the Company during
                           the entire three-year period referred to above or was
                           not offered a bonus during any of those years, then
                           the Three-Year Average Annual Bonus shall be
                           calculated for such shorter time that he or she was
                           an executive officer of the Company and had been
                           offered a bonus; and

                  (v)      any compensation previously deferred by the Executive
                           (together with accrued interest or earnings thereon,
                           if any) and any accrued paid time-off that would be
                           payable under the Company's standard policy, in each
                           case to the extent not theretofore paid.

         (b)      For eighteen (18) months after the Date of Termination or
                  until the Executive qualifies for comparable medical and
                  dental insurance benefits from another employer, whichever
                  occurs first, and subject to the satisfactory execution by the
                  Executive (including the expiration of any revocation period)
                  of an agreement substantially in the form of Exhibit A hereof,
                  the Company shall pay the Executive's premiums for

                  (i)      health insurance benefit continuation for the
                           Executive and his family members, if applicable, that
                           the Company provides to the Executive under the
                           provisions of the federal Consolidated Omnibus Budget
                           Reconciliation Act of 1985, as amended ("COBRA"), to
                           the extent that the Company would have paid such
                           premiums had the Executive remained employed by the
                           Company (such continued payment is hereinafter
                           referred to as "COBRA Continuation"); and

                  (ii)     additional health coverage (such as Exec-U-Care),
                           life, accidental death and disability and other
                           insurance programs for the Executive and his family
                           members, if applicable, to the extent such programs
                           existed on the Date of Termination.

         (c)      Continuation of the Executive's then current annual base
                  salary for the fiscal year in which the Date of Termination
                  occurs for a period of eighteen (18) months after the Date of
                  Termination, subject to payment and potential reduction as set
                  forth in Section 5.5 hereof and further subject to the
                  satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A hereof.

                                       4.


         (d)      An amount equal to the Three-Year Average Annual Bonus,
                  subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

         (e)      The provision of any agreement evidencing any outstanding,
                  vested stock option causing such vested option to terminate
                  within a specified period of time after the termination of
                  employment shall be extended until eighteen (18) months after
                  the Date of Termination except that nothing herein shall
                  extend any such vested option beyond its original term or
                  shall affect its termination for any reason other than
                  termination of employment. The provisions of this clause (e)
                  are subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

5.2 TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON

If during the Term the Executive's employment shall be terminated by the Company
for Cause or by the Executive for other than Good Reason, this Agreement shall
terminate without further obligation on the part of the Company to the
Executive, other than the Company's obligation to pay the Executive the amounts
in Section 5.1(a) (i) and (v).

5.3 EXPIRATION OF TERM

In the event the Executive's employment is not terminated prior to expiration of
the Term and notice of non-renewal is given pursuant to Section 1, this
Agreement shall terminate without further obligation on the part of the Company
to the Executive.

5.4 TERMINATION BECAUSE OF DEATH OR DISABILITY

Upon the Executive's death or Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Executive or his legal representatives under this Agreement, other than the
Company's obligation, if any, to pay the Executive the benefits in Section
5.1(a) to (e).

5.5 PAYMENT SCHEDULE AND OFFSET FOR OTHER EARNINGS

All payments, or any portion thereof, payable pursuant to Section 5.1, shall be
made to the Executive within ten (10) working days of the Date of Termination
except that

         (a)      any amount payable to the Executive pursuant to Section
                  5.1(a)(ii), (iii) or (iv) or Section 5.1(d) shall be paid to
                  Executive when his or her bonus would have been paid if he or
                  she were still employed; and

         (b)      any payments payable to the Executive pursuant to Section
                  5.1(c) hereof shall be made to the Executive in the form of
                  salary continuation payable at normal payroll intervals during
                  the eighteen (18) month severance period on the dates when the
                  Executive would have received his or her payments of salary if
                  he or she were still employed and in the amounts he or she
                  would have received, subject to offset during the final six
                  (6) months of such severance period for other earnings
                  received by the Executive as follows:

                                       5.


                  (i)      The Executive shall have an affirmative duty to seek
                           other employment or otherwise mitigate lost earnings
                           during the final fifteen (15) months of the eighteen
                           (18) month severance period;

                  (ii)     The Executive shall disclose to the Company any
                           earnings received (or that the Executive had the
                           right to receive) from employment or consulting
                           during the final fifteen (15) months of the eighteen
                           (18) month severance period, and the source(s) of
                           such earnings;

                  (iii)    The disclosures of earnings shall be made by
                           Executive within two (2) weeks of any period of time
                           in which Executive received payment from Company and
                           also received earnings from another source (or had a
                           right to receive earnings);

                  (iv)     The Company, in each payroll period that a severance
                           payment is due, shall have the right to offset on a
                           dollar-for-dollar basis all such earnings that the
                           Executive received or had the right to receive during
                           that payroll period.

5.6 CAUSE

For purposes of this Agreement, termination of the Executive's employment shall
be for "Cause" if it is for any of the following:

         (a)      A refusal to carry out any material lawful duties of the
                  Executive or any directions or instructions of the Board or
                  senior management of the Company reasonably consistent with
                  those duties;

         (b)      Failure to perform satisfactorily any lawful duties of the
                  Executive or any directions or instructions of the Board or
                  senior management reasonably consistent with those duties;
                  provided, however, that the Executive has been given notice
                  and has failed to correct any such failure within (10) days
                  thereafter (unless any such correction by its nature cannot be
                  done in 10 days, in which event the Executive will have a
                  reasonable time to correct failures), and provided further
                  that the Company shall have no obligation to give notice and
                  the Executive will have no such opportunity to correct more
                  than two times in any twelve calendar month period;

         (c)      Violation by the Executive of a local, state or federal law
                  involving the commission of a crime, other than minor traffic
                  violations, or any other criminal act involving moral
                  turpitude;

         (d)      The Executive's gross negligence, willful misconduct or breach
                  of his or her duty to the Company involving self-dealing or
                  personal profit;

         (e)      Current abuse by the Executive of alcohol or controlled
                  substances; deception, fraud, misrepresentation or dishonesty
                  by the Executive; or any incident materially compromising the
                  Executive's reputation or ability to represent the Company
                  with investors, customers or the public;

                                       6.


         (f)      Any other material violation of any provision of this
                  Agreement by the Executive not described in (a) or (b) above,
                  subject to the same notice and opportunity to correct
                  provisions as are set forth in (b) above; or

         (g)      The Executive reaching a mandatory retirement age established
                  by the Company.

5.7 GOOD REASON

For purposes of this Agreement, "Good Reason" means:

         (a)      Reduction of the Executive's annual base salary to a level
                  below the level in effect on the date of this Agreement,
                  regardless of any change in the Executive's duties or
                  responsibilities;

         (b)      Any material diminution in Executive's position, authority,
                  duties or responsibilities or any other action by the Company
                  that results in a material diminution in such position,
                  authority, duties or responsibilities, excluding for this
                  purpose an isolated and inadvertent action not taken in bad
                  faith and that is remedied by the Company within ten (10) days
                  after receipt of notice thereof is provided to the Company by
                  the Executive;

         (c)      The Company's requiring the Executive to be based at any
                  office or location more than fifty (50) miles from the
                  location of the Executive's assigned worksite prior to the
                  Date of Termination and the Executive's residence at any such
                  time such requirement is imposed;

         (d)      Any non-renewal by the Company of this Agreement; provided,
                  however, that the Executive may only utilize this paragraph
                  (d) during the 30-day period immediately following his receipt
                  of the notice of non-renewal given by the Company pursuant to
                  Section 1 hereof;

         (e)      Any failure by the Company to comply with and satisfy Section
                  9 hereof; provided, however, that the Company's successor has
                  received at least ten (10) days' prior written notice from the
                  Company or the Executive of the requirements of Section 9
                  hereof; or

         (f)      Any other material violation of any provision of this
                  Agreement by the Company.

Notwithstanding the foregoing, no basis for a termination for Good Reason will
be deemed to exist unless the Executive notifies the Company in writing of any
event in (a) through (f) above and the Company or its successor fails to cure
any such event within thirty (30) days after receipt of the notice.

5.8 WITHHOLDING TAXES

Any payments provided for in this Agreement shall be paid net of any applicable
withholding required under federal, state or local law.

                                       7.


5.9 WARN ACT

Notwithstanding the provisions of Section 5.1 through 5.5, in the event the
Executive is entitled, by operation of any act or law, to unemployment
compensation benefits or benefits under the Work Adjustment and Retraining Act
of 1988 (known as the "WARN Act") in connection with the termination of his or
her employment in addition to those required to be paid to him or her under this
Agreement, then to the extent permitted by applicable law governing severance
payments or notice of termination of employment, the Company shall be entitled
to offset against the amount payable hereunder the amounts of any such mandated
payments.

                       6. REPRESENTATIONS AND WARRANTIES

In order to induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that neither the execution nor the
performance of this Agreement by the Executive will violate or conflict in any
way with any other agreement by which the Executive may be bound.

             7. NONDISCLOSURE; RETURN OF MATERIALS; NONSOLICITATION

7.1 NONDISCLOSURE

Except as required by his employment with the Company, the Executive will not,
at any time during the term of employment with the Company, or at any time
thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Executive understands that the Company will be relying on this
covenant in continuing the Executive's employment, paying him compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.

7.2 RETURN OF MATERIALS

All documents, records, notebooks, notes, memoranda, drawings, computer files or
other documents made or compiled by the Executive at any time while employed by
the Company, or in his possession, including any and all copies thereof, shall
be the property of the Company and shall be held by the Executive in trust and
solely for the benefit of the Company, and shall be delivered to the Company by
the Executive upon termination of employment or at any other time upon request
by the Company.

7.3 NONSOLICITATION

During the period that Executive is receiving the payments described in Section
5.1(c) he or she will not actively solicit any employees of the Company or its
Affiliates to accept employment from any other person or entity. "Affiliate" is
defined as any entity controlling, controlled by or under common control with
the Company within the meaning of Rule 405 of the Securities and Exchange
Commission under the Securities Act of 1933.

                                       8.


                               8. FORM OF NOTICE

Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally or by
registered or certified mail, return receipt requested, at the address set forth
below or at such other address as may hereafter be designated by notice given in
compliance with the terms hereof:

If to the Executive:          28429 Horseshoe Circle
                              Santa Clarita, CA 91390

If to the Company:            MannKind Corporation
                              Attn: President
                              28903 North Avenue Paine
                              Valencia, CA 91355

or such other address as shall be provided in accordance with the terms hereof.
Except as set forth in Section 4.4 hereof, if notice is mailed, such notice
shall be effective upon mailing. Notices sent in any other manner specified
above shall be effective upon receipt.

                                 9. ASSIGNMENT

This Agreement is personal to the Executive and shall not be assignable by the
Executive.

The Company shall assign to and require any successor (whether by purchase of
assets, merger or consolidation) to all or substantially all the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement, the
"Company" shall mean MannKind Corporation and any affiliated company or
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by contract, operation of law or otherwise; and as long
as such successor assumes and agrees to perform this Agreement, the termination
of the Executive's employment by one such entity and the immediate hiring and
continuation of the Executive's employment by the succeeding entity shall not be
deemed to constitute a termination or trigger any severance obligation under
this Agreement. All the terms and provisions of this Agreement shall be binding
upon and insure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.

                                  10. WAIVERS

No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.

                                       9.


                           11. AMENDMENTS IN WRITING

No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, or consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the President
or Chief Executive Officer of the Company and the Executive, and each such
amendment, modification, waiver, termination or discharge shall be effective
only in the specific instance and for the specific purpose for which given. No
provision of this Agreement shall be varied, contradicted or explained by any
oral agreement, course of dealing or performance or any other matter not set
forth in an agreement in writing and signed by the Company and the Executive.

                               12. APPLICABLE LAW

This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of California without regard to any rules
governing conflicts of laws.

                        13. ARBITRATION; ATTORNEYS' FEES

Except in connection with enforcing Section 7 hereof, for which legal and
equitable remedies may be sought in a court of law, any dispute arising under
this Agreement shall be subject to arbitration. The arbitration proceeding shall
be conducted in accordance with the Employment Arbitration Rules of the American
Arbitration Association (the "AAA Rules") then in effect, conducted by one (1)
arbitrator either mutually agreed upon or selected in accordance with the AAA
Rules. The arbitration shall be conducted in Los Angeles County, California,
under the jurisdiction of the Los Angeles office of the American Arbitration
Association. The arbitrator shall have authority only to interpret and apply the
provisions of this Agreement, and shall have no authority to add to, subtract
from or otherwise modify the terms of this Agreement. Any demand for arbitration
must be made within sixty (60) days of the event(s) giving rise to the claim
that this Agreement has been breached. The arbitrator's decision shall be final
and binding, and each party agrees to be bound by the arbitrator's award,
subject only to an appeal therefrom in accordance with the laws of the State of
California. Either party may obtain judgment upon the arbitrator's award in the
Superior Court of Los Angeles County, California.

If it becomes necessary to pursue or defend any legal proceeding, whether in
arbitration or court, in order to resolve a dispute arising under this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover costs and attorneys' fees.

                                14. SEVERABILITY

If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full

                                      10.


extent permitted by law: (a) all other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed in order
to carry out the intent of the parties hereto as nearly as may be possible, (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.

               15. COORDINATION WITH CHANGE OF CONTROL AGREEMENT

The Company and the Executive are contemporaneously with this Agreement entering
into a Change of Control Agreement (the "Change of Control Agreement"), which
agreement provides for certain forms of severance and benefit payments in the
event of termination of Executive's employment under certain defined
circumstances. This Agreement is in addition to the Change of Control Agreement,
providing certain assurances to the Executive in circumstances that the Change
of Control Agreement does not cover, and in no way supersedes or nullifies the
Change of Control Agreement. Nevertheless, it is possible that a termination of
employment by the Company or by the Executive may fall within the scope of both
agreements. In such event, payments made to the Executive under Section 5.1
hereof shall be coordinated with payments made to the Executive under Section
8.1 of the Change of Control Agreement as follows:

         (a)      Accrued Obligations under this Agreement shall be paid first,
                  in which case the obligations under Section 8.1(a) of the
                  Change of Control Agreement need not be paid;

         (b)      COBRA Continuation under this Agreement shall be provided
                  first, in which case the obligations under Section 8.1(b) of
                  the Change of Control Agreement need not be provided; and

         (c)      The severance payments required under Sections 8.1(c) and
                  8.1(d) of the Change of Control Agreement shall be paid first,
                  in which case any severance payment required under Sections
                  5.1(c) and 5.1(d) hereof need not be provided.

                         16. EXCESS PARACHUTE PAYMENTS

If any portion of the payments or benefits under this Agreement, taken together
with any other agreement or benefit plan of the Company (including stock
options), would be characterized as an "excess parachute payment" to the
Executive under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the payments and benefits shall be reduced to the extent necessary
to avoid the imposition of any tax that would otherwise be owed under Section
4999 of the Code. Such reductions shall first be made to the bonus payments
referred to in Section 5.1(a)(ii), (iii) or (iv), whichever is applicable, then
to the salary continuation payments referred to in Section 5.1(c) and then to
the salary payments under Section 5.1(a)(i). The determination of whether and
the extent to which payments and benefits are to be reduced pursuant to this
Section 16 shall be made in writing by tax accountants and/or tax lawyers
selected by the Company and reasonably acceptable to the Executive.

                                      11.


                              17. ENTIRE AGREEMENT

Except as described in Section 15 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior or contemporaneous oral or written communications,
understandings, or agreements between the Company and the Executive with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the agreement relating to proprietary information and inventions
between the Executive and the Company shall continue in full force and effect.

                                18. COUNTERPARTS

This Agreement may be executed in counterparts, each of which counterpart shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties have executed and entered into this Agreement
effective on the date first set forth above.

MANNKIND CORPORATION                            EXECUTIVE

By: /s/ Michael Page                            /s/ Richard L. Anderson
    ----------------------------------          --------------------------------
Its: Vice Chairman & CEO                        Dick Anderson

                                      12.


                                    EXHIBIT A
                    GENERAL RELEASE AND SETTLEMENT AGREEMENT

The parties to this General Release and Settlement Agreement ("Release") between
________________________________ ("Employee") and MannKind Corporation ("the
Company") state that:

The parties desire to terminate their employment relationship. Both parties
desire to fully and finally resolve all differences and disputes without further
costs;

THEREFORE, the parties agree:

1.    In consideration of the payments to Employee as provided in the Executive
      Severance Agreement between the Employee and the Company dated August 1,
      2003, Employee does forever release and discharge the Company and all its
      parent, subsidiary and affiliated entities and all their past, present and
      future directors, officers, agents, employees, or representatives from all
      claims, damages, liabilities, and demands of whatever kind and character
      up to the date she/he signs below ("disputes"), including, but not limited
      to, arising out of or in any way related to any of the circumstances of
      Employee's employment or termination of employment with the Company.

      Employee releases all disputes relating to or arising out of any state,
      municipal, or federal statute, ordinance, regulation, order, contract,
      tort, or common law, including, but not limited to, the Age Discrimination
      in Employment Act. The parties intend that the disputes released herein be
      construed as broadly as possible.

2.    This Release also extends to all disputes by Employee against the Company
      whether known or unknown, suspected or unsuspected, past or present, and
      whether or not they arise out of or are attributable to the circumstances
      of Employee's employment or termination of employment with the Company.
      Specifically, Employee hereby expressly waives any and all rights under
      Section 1542 of the California Civil Code, which reads in full as follows:

           SECTION 1542. GENERAL RELEASE. A GENERAL RELEASE DOES NOT EXTEND TO
           CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
           FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
           MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

3.    Employee further understands and agrees that neither the payment nor the
      execution of this Release, or any part of it, shall constitute or be
      construed as an admission of any alleged liability or wrongdoing
      whatsoever by the Company. The Company expressly denies it has committed
      any alleged liability or wrongdoing.

4.    All films, files, books, computer files, correspondence, lists, equipment,
      manuals, other written and graphic records and the like and all copies
      thereof, affecting or relating to the business of Company which Employee
      shall have prepared, used, constructed, observed, possessed or controlled,
      shall be and remain the Company's sole property. Employee agrees to
      deliver promptly to the Company all such property relating to the Company,
      which are or have been in his possession or under his control. Employee
      also agrees to continue to abide by his confidentiality of information and
      inventions agreement with the Company.

                                      13.


5.    Employee agrees not to seek reemployment with the Company or any of its
      affiliates.

6.    This Release shall be governed by the substantive law of the State of
      California. In the event of any dispute concerning the interpretation of
      this Release or in any way related to Employee's employment or termination
      of employment, the dispute shall be resolved by arbitration within the
      County of Los Angeles, California, in accordance with the then existing
      rules for employment dispute arbitration of the American Arbitration
      Association, and judgment upon any arbitration award may be entered by any
      state or federal court having jurisdiction thereof. The parties intend
      this arbitration provision to be valid and construed as broadly as
      possible. The prevailing party in such arbitration shall recover its
      reasonable costs and attorneys' fees.

7.    If any provision of this General Release and Settlement Agreement is
      determined to be invalid or unenforceable, all of the other provisions
      shall remain valid and enforceable notwithstanding, unless the provision
      found to be unenforceable is of such material effect that this Release
      cannot be performed in accordance with the intent of the parties in the
      absence thereof.

8.    No promise or agreement other than that expressed herein has been made.
      This General Release and Settlement Agreement constitutes a single
      integrated contract expressing the entire agreement of the parties hereto.
      There are no other agreements, written or oral, express or implied,
      between the parties concerning the subject matter hereof, except the
      provisions set forth in this Release. This Release supersedes all previous
      agreements and understandings, whether written or oral. This Release can
      be amended, modified or terminated only by a writing executed by both
      Employee and the President of the Company.

9.    In compliance with the Olders Workers Benefit Protection Act, Employee has
      been given twenty-one (21) days to review this Release before signing it.
      Employee also understands that he may revoke this General Release and
      Settlement Agreement within seven (7) days after it has been signed and
      that it is not enforceable or effective until the seven (7) day revocation
      period has expired. Additionally, employee has been advised in this
      writing to consult with an attorney before executing this General Release
      and Settlement Agreement.

10.   THE EMPLOYEE STATES THAT HE/SHE IS IN GOOD HEALTH AND FULLY COMPETENT TO
      MANAGE HIS/HER BUSINESS AFFAIRS, THAT HE/SHE HAS CAREFULLY READ THIS
      GENERAL RELEASE AND SETTLEMENT AGREEMENT, THAT HE/SHE FULLY UNDERSTANDS
      ITS FINAL AND BINDING EFFECT, THAT THE ONLY PROMISES MADE TO HIM/HER TO
      SIGN THIS RELEASE ARE THOSE STATED AND CONTAINED IN THIS RELEASE, AND THAT
      HE/SHE IS SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY.

AGREED AND ACCEPTED this _______ day of __________, _______:

MANNKIND CORPORATION                            EXECUTIVE

By:_________________________________            ________________________________
Its: _______________________________

                                      14.

                                                                    Exhibit 10.9

                              MANNKIND CORPORATION

                          EXECUTIVE SEVERANCE AGREEMENT

This Executive Severance Agreement (this "Agreement"), dated and effective as of
August 1, 2003 is between MannKind Corporation, a Delaware corporation (the
"Company"), and Dan Burns (the "Executive").

WHEREAS the board of directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the fact that the Executive does not have any form of traditional employment
contract or other assurance of job security;

AND WHEREAS the Board believes it is imperative to diminish any distraction of
the Executive arising from the personal uncertainty and insecurity that arises
in the absence of any assurance of job security by providing the Executive with
reasonable compensation and benefit arrangements in the event of termination of
the Executive's employment by the Company under certain defined circumstances.

NOW THEREFORE, in order to accomplish these objectives, the Board has caused the
Company to enter into this agreement.

                                    1. TERM

The term of this Agreement (the "Term") shall be for a period of two (2) years
from the date of this Agreement as first appearing; provided, however, that the
Term shall automatically renew for additional one (1) year periods, unless
notice of nonrenewal is given by either party to the other party at least ninety
(90) days prior to the end of the initial Term or any renewal Term, at the end
of which this Agreement shall terminate without further action by either the
Company of the Executive.

                                 2. EMPLOYMENT

The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or by any affiliated or
successor company is "at will" and may be terminated by either the Executive or
the Company or its affiliated companies at any time with or without cause,
subject to the termination payments prescribed herein.

                            3. ATTENTION AND EFFORT

During any period of time that the Executive remains in the employ of the
Company, and excluding any periods of paid time-off to which the Executive is
entitled, the Executive will devote all his productive time, ability, attention,
and effort to the business and affairs of the

                                       1.



Company and the discharge of the responsibilities assigned to him hereunder, and
will seek to perform faithfully and efficiently such responsibilities. It shall
not be a violation of this Agreement for the Executive to (a) serve on
corporate, civic or charitable boards or committees, (b) deliver lectures,
fulfill speaking engagements or teach at educational institutions, (c) manage
personal investments, or (d) engage in activities permitted by the policies of
the Company or as specifically permitted by the Company, so long as such
activities do not significantly interfere with the full time performance of the
Executive's responsibilities in accordance with this Agreement. It is expressly
understood and agreed that to the extent any such activities have been conducted
by the Executive prior to the Term, the continued conduct of such activities (or
the conduct of activities similar in nature and scope thereto) during the Term
shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.

                                 4. TERMINATION

During the Term, employment of the Executive may be terminated as follows, but,
in any case, the nondisclosure provisions set forth in Section 7 hereof shall
survive the termination of this Agreement and the termination of the Executive's
employment with the Company:

4.1 BY THE COMPANY OR THE EXECUTIVE

At any time during the Term, the Company may terminate the employment of the
Executive with or without Cause (as defined below), and the Executive may
terminate his employment for Good Reason (as defined below) or for any reason,
upon giving Notice of Termination (as defined below).

4.2 AUTOMATIC TERMINATION

This Agreement and the Executive's employment shall terminate automatically upon
the death or Disability of the Executive. The term "Disability" as used herein
shall mean the Executive's inability (with such accommodation as may be required
by law and which places no undue burden on the Company), to perform the
Executive's essential duties for a period or periods aggregating twelve (12)
weeks in any three hundred sixty-five (365) day period as a result of physical
or mental illness, loss of legal capacity or any other cause.

4.3 NOTICE OF TERMINATION

Any termination by the Company or by the Executive during the Term shall be
communicated by Notice of Termination to the other party given in accordance
with Section 8 hereof. The term "Notice of Termination" shall mean a written
notice that (a) indicates the specific termination provision in this Agreement
relied upon, and (b) to the extent applicable, sets forth briefly the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance that
contributed to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.

                                       2.


4.4 DATE OF TERMINATION

"Date of Termination" means (a) if the Executive's employment is terminated by
reason of death, the date of death, (b) if the Executive's employment is
terminated by reason of Disability, immediately upon a determination by the
Company of the Executive's Disability, and (c) in all other cases, upon the
giving of the Notice of Termination. Notwithstanding the foregoing, the party
giving the notice in the case of (c) above will have the right, but not the
obligation, to have the termination be effective upon the expiration of any
period specified in the Notice of Termination. In that event the Executive's
employment and performance of services will continue during the specified period
unless the other party (the Company in the event of a termination by the
Executive or the Executive in the event of a termination by the Company)
thereafter elects to terminate the employment of the Executive pursuant to
Section 2 and that termination is as of an earlier date. Notwithstanding the
foregoing, the Company may, upon notice to the Executive and without reducing
the Executive's compensation during such period, excuse the Executive from any
or all of his duties during such period.

                            5. TERMINATION PAYMENTS

In the event of termination of the Executive's employment during the Term, all
compensation and benefits shall terminate, except as specifically provided in
this Section 5.

5.1      TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY THE EXECUTIVE FOR
         GOOD REASON

If during the Term the Company terminates the Executive's employment other than
for Cause or the Executive terminates his employment for Good Reason, the
Executive shall be entitled to:

         (a)      Payment of the following accrued obligations (the "Accrued
                  Obligations"):

                  (i)      the Executive's then current annual base salary
                           through the Date of Termination to the extent not
                           theretofore paid; and

                  (ii)     if the performance criteria for earning the annual
                           bonus for the full fiscal year of termination have
                           been fully satisfied at the time of termination
                           (excluding any requirement that the Executive be
                           employed by the Company at the end of the fiscal
                           year), the product of (x) the amount of the annual
                           bonus for that year and (y) a fraction the numerator
                           of which is the number of days in the current fiscal
                           year through the Date of Termination and the
                           denominator of which is three hundred sixty-five
                           (365);

                  (iii)    if the performance criteria for earning the annual
                           bonus for the full fiscal year of termination have
                           not been fully satisfied and the Board of Directors
                           of the Company determines that all such criteria
                           could not have been satisfied if the Executive
                           remained employed for the full fiscal year, no amount
                           for the annual bonus; and

                                       3.


                  (iv)     if neither (ii) nor (iii) apply, the product of (x)
                           the Three-Year Average Annual Bonus and (y) a
                           fraction the numerator of which is the number of days
                           in the current fiscal year through the Date of
                           Termination and the denominator of which is three
                           hundred sixty-five (365). "Three-Year Average Annual
                           Bonus" shall mean the average of bonuses paid or
                           payable to the Executive by the Company for each of
                           the three fiscal years immediately preceding the year
                           of termination (including the annualized amount of
                           any such bonus paid or payable for any partial year,
                           but not stock options or stock awards, which became
                           fully vested and any deferred compensation earned
                           during any of those years and excluding any sign-on
                           or other one-time-only bonus). If the Executive has
                           not been an executive officer of the Company during
                           the entire three-year period referred to above or was
                           not offered a bonus during any of those years, then
                           the Three-Year Average Annual Bonus shall be
                           calculated for such shorter time that he or she was
                           an executive officer of the Company and had been
                           offered a bonus; and

                  (v)      any compensation previously deferred by the Executive
                           (together with accrued interest or earnings thereon,
                           if any) and any accrued paid time-off that would be
                           payable under the Company's standard policy, in each
                           case to the extent not theretofore paid.

         (b)      For eighteen (18) months after the Date of Termination or
                  until the Executive qualifies for comparable medical and
                  dental insurance benefits from another employer, whichever
                  occurs first, and subject to the satisfactory execution by the
                  Executive (including the expiration of any revocation period)
                  of an agreement substantially in the form of Exhibit A hereof,
                  the Company shall pay the Executive's premiums for

                  (i)      health insurance benefit continuation for the
                           Executive and his family members, if applicable, that
                           the Company provides to the Executive under the
                           provisions of the federal Consolidated Omnibus Budget
                           Reconciliation Act of 1985, as amended ("COBRA"), to
                           the extent that the Company would have paid such
                           premiums had the Executive remained employed by the
                           Company (such continued payment is hereinafter
                           referred to as "COBRA Continuation"); and

                  (ii)     additional health coverage (such as Exec-U-Care),
                           life, accidental death and disability and other
                           insurance programs for the Executive and his family
                           members, if applicable, to the extent such programs
                           existed on the Date of Termination.

         (c)      Continuation of the Executive's then current annual base
                  salary for the fiscal year in which the Date of Termination
                  occurs for a period of eighteen (18) months after the Date of
                  Termination, subject to payment and potential reduction as set
                  forth in Section 5.5 hereof and further subject to the
                  satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A hereof.

                                       4.


         (d)      An amount equal to the Three-Year Average Annual Bonus,
                  subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

         (e)      The provision of any agreement evidencing any outstanding,
                  vested stock option causing such vested option to terminate
                  within a specified period of time after the termination of
                  employment shall be extended until eighteen (18) months after
                  the Date of Termination except that nothing herein shall
                  extend any such vested option beyond its original term or
                  shall affect its termination for any reason other than
                  termination of employment. The provisions of this clause (e)
                  are subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

5.2 TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON

If during the Term the Executive's employment shall be terminated by the Company
for Cause or by the Executive for other than Good Reason, this Agreement shall
terminate without further obligation on the part of the Company to the
Executive, other than the Company's obligation to pay the Executive the amounts
in Section 5.1(a) (i) and (v).

5.3 EXPIRATION OF TERM

In the event the Executive's employment is not terminated prior to expiration of
the Term and notice of non-renewal is given pursuant to Section 1, this
Agreement shall terminate without further obligation on the part of the Company
to the Executive.

5.4 TERMINATION BECAUSE OF DEATH OR DISABILITY

Upon the Executive's death or Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Executive or his legal representatives under this Agreement, other than the
Company's obligation, if any, to pay the Executive the benefits in Section
5.1(a) to (e).

5.5 PAYMENT SCHEDULE AND OFFSET FOR OTHER EARNINGS

All payments, or any portion thereof, payable pursuant to Section 5.1, shall be
made to the Executive within ten (10) working days of the Date of Termination
except that

         (a)      any amount payable to the Executive pursuant to Section
                  5.1(a)(ii), (iii) or (iv) or Section 5.1(d) shall be paid to
                  Executive when his or her bonus would have been paid if he or
                  she were still employed; and

         (b)      any payments payable to the Executive pursuant to Section
                  5.1(c) hereof shall be made to the Executive in the form of
                  salary continuation payable at normal payroll intervals during
                  the eighteen (18) month severance period on the dates when the
                  Executive would have received his or her payments of salary if
                  he or she were still employed and in the amounts he or she
                  would have received, subject to offset during the final six
                  (6) months of such severance period for other earnings
                  received by the Executive as follows:

                                       5.


                  (i)      The Executive shall have an affirmative duty to seek
                           other employment or otherwise mitigate lost earnings
                           during the final fifteen (15) months of the eighteen
                           (18) month severance period;

                  (ii)     The Executive shall disclose to the Company any
                           earnings received (or that the Executive had the
                           right to receive) from employment or consulting
                           during the final fifteen (15) months of the eighteen
                           (18) month severance period, and the source(s) of
                           such earnings;

                  (iii)    The disclosures of earnings shall be made by
                           Executive within two (2) weeks of any period of time
                           in which Executive received payment from Company and
                           also received earnings from another source (or had a
                           right to receive earnings);

                  (iv)     The Company, in each payroll period that a severance
                           payment is due, shall have the right to offset on a
                           dollar-for-dollar basis all such earnings that the
                           Executive received or had the right to receive during
                           that payroll period.

5.6 CAUSE

For purposes of this Agreement, termination of the Executive's employment shall
be for "Cause" if it is for any of the following:

         (a)      A refusal to carry out any material lawful duties of the
                  Executive or any directions or instructions of the Board or
                  senior management of the Company reasonably consistent with
                  those duties;

         (b)      Failure to perform satisfactorily any lawful duties of the
                  Executive or any directions or instructions of the Board or
                  senior management reasonably consistent with those duties;
                  provided, however, that the Executive has been given notice
                  and has failed to correct any such failure within (10) days
                  thereafter (unless any such correction by its nature cannot be
                  done in 10 days, in which event the Executive will have a
                  reasonable time to correct failures), and provided further
                  that the Company shall have no obligation to give notice and
                  the Executive will have no such opportunity to correct more
                  than two times in any twelve calendar month period;

         (c)      Violation by the Executive of a local, state or federal law
                  involving the commission of a crime, other than minor traffic
                  violations, or any other criminal act involving moral
                  turpitude;

         (d)      The Executive's gross negligence, willful misconduct or breach
                  of his or her duty to the Company involving self-dealing or
                  personal profit;

         (e)      Current abuse by the Executive of alcohol or controlled
                  substances; deception, fraud, misrepresentation or dishonesty
                  by the Executive; or any incident materially compromising the
                  Executive's reputation or ability to represent the Company
                  with investors, customers or the public;

                                       6.


         (f)      Any other material violation of any provision of this
                  Agreement by the Executive not described in (a) or (b) above,
                  subject to the same notice and opportunity to correct
                  provisions as are set forth in (b) above; or

         (g)      The Executive reaching a mandatory retirement age established
                  by the Company.

5.7 GOOD REASON

For purposes of this Agreement, "Good Reason" means:

         (a)      Reduction of the Executive's annual base salary to a level
                  below the level in effect on the date of this Agreement,
                  regardless of any change in the Executive's duties or
                  responsibilities;

         (b)      Any material diminution in Executive's position, authority,
                  duties or responsibilities or any other action by the Company
                  that results in a material diminution in such position,
                  authority, duties or responsibilities, excluding for this
                  purpose an isolated and inadvertent action not taken in bad
                  faith and that is remedied by the Company within ten (10) days
                  after receipt of notice thereof is provided to the Company by
                  the Executive;

         (c)      The Company's requiring the Executive to be based at any
                  office or location more than fifty (50) miles from the
                  location of the Executive's assigned worksite prior to the
                  Date of Termination and the Executive's residence at any such
                  time such requirement is imposed;

         (d)      Any non-renewal by the Company of this Agreement; provided,
                  however, that the Executive may only utilize this paragraph
                  (d) during the 30-day period immediately following his receipt
                  of the notice of non-renewal given by the Company pursuant to
                  Section 1 hereof;

         (e)      Any failure by the Company to comply with and satisfy Section
                  9 hereof; provided, however, that the Company's successor has
                  received at least ten (10) days' prior written notice from the
                  Company or the Executive of the requirements of Section 9
                  hereof; or

         (f)      Any other material violation of any provision of this
                  Agreement by the Company.

Notwithstanding the foregoing, no basis for a termination for Good Reason will
be deemed to exist unless the Executive notifies the Company in writing of any
event in (a) through (f) above and the Company or its successor fails to cure
any such event within thirty (30) days after receipt of the notice.

5.8 WITHHOLDING TAXES

Any payments provided for in this Agreement shall be paid net of any applicable
withholding required under federal, state or local law.

                                       7.


5.9 WARN ACT

Notwithstanding the provisions of Section 5.1 through 5.5, in the event the
Executive is entitled, by operation of any act or law, to unemployment
compensation benefits or benefits under the Work Adjustment and Retraining Act
of 1988 (known as the "WARN Act") in connection with the termination of his or
her employment in addition to those required to be paid to him or her under this
Agreement, then to the extent permitted by applicable law governing severance
payments or notice of termination of employment, the Company shall be entitled
to offset against the amount payable hereunder the amounts of any such mandated
payments.

                       6. REPRESENTATIONS AND WARRANTIES

In order to induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that neither the execution nor the
performance of this Agreement by the Executive will violate or conflict in any
way with any other agreement by which the Executive may be bound.

             7. NONDISCLOSURE; RETURN OF MATERIALS; NONSOLICITATION

7.1 NONDISCLOSURE

Except as required by his employment with the Company, the Executive will not,
at any time during the term of employment with the Company, or at any time
thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Executive understands that the Company will be relying on this
covenant in continuing the Executive's employment, paying him compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.

7.2 RETURN OF MATERIALS

All documents, records, notebooks, notes, memoranda, drawings, computer files or
other documents made or compiled by the Executive at any time while employed by
the Company, or in his possession, including any and all copies thereof, shall
be the property of the Company and shall be held by the Executive in trust and
solely for the benefit of the Company, and shall be delivered to the Company by
the Executive upon termination of employment or at any other time upon request
by the Company.

7.3 NONSOLICITATION

During the period that Executive is receiving the payments described in Section
5.1(c) he or she will not actively solicit any employees of the Company or its
Affiliates to accept employment from any other person or entity. "Affiliate" is
defined as any entity controlling, controlled by or under common control with
the Company within the meaning of Rule 405 of the Securities and Exchange
Commission under the Securities Act of 1933.

                                       8.


                               8. FORM OF NOTICE

Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally or by
registered or certified mail, return receipt requested, at the address set forth
below or at such other address as may hereafter be designated by notice given in
compliance with the terms hereof:

If to the Executive:                           63 Colfax Road
                                               Skillman, NJ  08558

If to the Company:                             MannKind Corporation
                                               Attn: President
                                               28903 North Avenue Paine
                                               Valencia, CA 91355

or such other address as shall be provided in accordance with the terms hereof.
Except as set forth in Section 4.4 hereof, if notice is mailed, such notice
shall be effective upon mailing. Notices sent in any other manner specified
above shall be effective upon receipt.

                                 9. ASSIGNMENT

This Agreement is personal to the Executive and shall not be assignable by the
Executive.

The Company shall assign to and require any successor (whether by purchase of
assets, merger or consolidation) to all or substantially all the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement, the
"Company" shall mean MannKind Corporation and any affiliated company or
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by contract, operation of law or otherwise; and as long
as such successor assumes and agrees to perform this Agreement, the termination
of the Executive's employment by one such entity and the immediate hiring and
continuation of the Executive's employment by the succeeding entity shall not be
deemed to constitute a termination or trigger any severance obligation under
this Agreement. All the terms and provisions of this Agreement shall be binding
upon and insure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.

                                  10. WAIVERS

No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.

                                       9.


                           11. AMENDMENTS IN WRITING

No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, or consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the President
or Chief Executive Officer of the Company and the Executive, and each such
amendment, modification, waiver, termination or discharge shall be effective
only in the specific instance and for the specific purpose for which given. No
provision of this Agreement shall be varied, contradicted or explained by any
oral agreement, course of dealing or performance or any other matter not set
forth in an agreement in writing and signed by the Company and the Executive.

                               12. APPLICABLE LAW

This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of California without regard to any rules
governing conflicts of laws.

                        13. ARBITRATION; ATTORNEYS' FEES

Except in connection with enforcing Section 7 hereof, for which legal and
equitable remedies may be sought in a court of law, any dispute arising under
this Agreement shall be subject to arbitration. The arbitration proceeding shall
be conducted in accordance with the Employment Arbitration Rules of the American
Arbitration Association (the "AAA Rules") then in effect, conducted by one (1)
arbitrator either mutually agreed upon or selected in accordance with the AAA
Rules. The arbitration shall be conducted in Los Angeles County, California,
under the jurisdiction of the Los Angeles office of the American Arbitration
Association. The arbitrator shall have authority only to interpret and apply the
provisions of this Agreement, and shall have no authority to add to, subtract
from or otherwise modify the terms of this Agreement. Any demand for arbitration
must be made within sixty (60) days of the event(s) giving rise to the claim
that this Agreement has been breached. The arbitrator's decision shall be final
and binding, and each party agrees to be bound by the arbitrator's award,
subject only to an appeal therefrom in accordance with the laws of the State of
California. Either party may obtain judgment upon the arbitrator's award in the
Superior Court of Los Angeles County, California.

If it becomes necessary to pursue or defend any legal proceeding, whether in
arbitration or court, in order to resolve a dispute arising under this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover costs and attorneys' fees.

                                14. SEVERABILITY

If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full

                                      10.


extent permitted by law: (a) all other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed in order
to carry out the intent of the parties hereto as nearly as may be possible, (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.

               15. COORDINATION WITH CHANGE OF CONTROL AGREEMENT

The Company and the Executive are contemporaneously with this Agreement entering
into a Change of Control Agreement (the "Change of Control Agreement"), which
agreement provides for certain forms of severance and benefit payments in the
event of termination of Executive's employment under certain defined
circumstances. This Agreement is in addition to the Change of Control Agreement,
providing certain assurances to the Executive in circumstances that the Change
of Control Agreement does not cover, and in no way supersedes or nullifies the
Change of Control Agreement. Nevertheless, it is possible that a termination of
employment by the Company or by the Executive may fall within the scope of both
agreements. In such event, payments made to the Executive under Section 5.1
hereof shall be coordinated with payments made to the Executive under Section
8.1 of the Change of Control Agreement as follows:

         (a)      Accrued Obligations under this Agreement shall be paid first,
                  in which case the obligations under Section 8.1(a) of the
                  Change of Control Agreement need not be paid;

         (b)      COBRA Continuation under this Agreement shall be provided
                  first, in which case the obligations under Section 8.1(b) of
                  the Change of Control Agreement need not be provided; and

         (c)      The severance payments required under Sections 8.1(c) and
                  8.1(d) of the Change of Control Agreement shall be paid first,
                  in which case any severance payment required under Sections
                  5.1(c) and 5.1(d) hereof need not be provided.

                         16. EXCESS PARACHUTE PAYMENTS

If any portion of the payments or benefits under this Agreement, taken together
with any other agreement or benefit plan of the Company (including stock
options), would be characterized as an "excess parachute payment" to the
Executive under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the payments and benefits shall be reduced to the extent necessary
to avoid the imposition of any tax that would otherwise be owed under Section
4999 of the Code. Such reductions shall first be made to the bonus payments
referred to in Section 5.1(a)(ii), (iii) or (iv), whichever is applicable, then
to the salary continuation payments referred to in Section 5.1(c) and then to
the salary payments under Section 5.1(a)(i). The determination of whether and
the extent to which payments and benefits are to be reduced pursuant to this
Section 16 shall be made in writing by tax accountants and/or tax lawyers
selected by the Company and reasonably acceptable to the Executive.

                                      11.


                              17. ENTIRE AGREEMENT

Except as described in Section 15 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior or contemporaneous oral or written communications,
understandings, or agreements between the Company and the Executive with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the agreement relating to proprietary information and inventions
between the Executive and the Company shall continue in full force and effect.

                                18. COUNTERPARTS

This Agreement may be executed in counterparts, each of which counterpart shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties have executed and entered into this Agreement
effective on the date first set forth above.

MANNKIND CORPORATION                          EXECUTIVE

By: /s/ Michael Page                          /s/ Dan Burns
    -----------------------------             ---------------------------------
Its: Vice Chairman & CEO                      Dan Burns

                                      12.


                                    EXHIBIT A
                    GENERAL RELEASE AND SETTLEMENT AGREEMENT

The parties to this General Release and Settlement Agreement ("Release") between
________________________________ ("Employee") and MannKind Corporation ("the
Company") state that:

The parties desire to terminate their employment relationship. Both parties
desire to fully and finally resolve all differences and disputes without further
costs;

THEREFORE, the parties agree:

1.       In consideration of the payments to Employee as provided in the
         Executive Severance Agreement between the Employee and the Company
         dated August 1, 2003, Employee does forever release and discharge the
         Company and all its parent, subsidiary and affiliated entities and all
         their past, present and future directors, officers, agents, employees,
         or representatives from all claims, damages, liabilities, and demands
         of whatever kind and character up to the date she/he signs below
         ("disputes"), including, but not limited to, arising out of or in any
         way related to any of the circumstances of Employee's employment or
         termination of employment with the Company.

         Employee releases all disputes relating to or arising out of any state,
         municipal, or federal statute, ordinance, regulation, order, contract,
         tort, or common law, including, but not limited to, the Age
         Discrimination in Employment Act. The parties intend that the disputes
         released herein be construed as broadly as possible.

2.       This Release also extends to all disputes by Employee against the
         Company whether known or unknown, suspected or unsuspected, past or
         present, and whether or not they arise out of or are attributable to
         the circumstances of Employee's employment or termination of employment
         with the Company. Specifically, Employee hereby expressly waives any
         and all rights under Section 1542 of the California Civil Code, which
         reads in full as follows:

                  SECTION 1542. GENERAL RELEASE. A GENERAL RELEASE DOES NOT
                  EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
                  TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
                  WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
                  SETTLEMENT WITH THE DEBTOR.

3.       Employee further understands and agrees that neither the payment nor
         the execution of this Release, or any part of it, shall constitute or
         be construed as an admission of any alleged liability or wrongdoing
         whatsoever by the Company. The Company expressly denies it has
         committed any alleged liability or wrongdoing.

4.       All films, files, books, computer files, correspondence, lists,
         equipment, manuals, other written and graphic records and the like and
         all copies thereof, affecting or relating to the business of Company
         which Employee shall have prepared, used, constructed, observed,
         possessed or controlled, shall be and remain the Company's sole
         property. Employee agrees to deliver promptly to the Company all such
         property relating to the Company, which are or have been in his
         possession or under his control. Employee also agrees to continue to
         abide by his confidentiality of information and inventions agreement
         with the Company.

                                      13.


5.       Employee agrees not to seek reemployment with the Company or any of its
         affiliates.

6.       This Release shall be governed by the substantive law of the State of
         California. In the event of any dispute concerning the interpretation
         of this Release or in any way related to Employee's employment or
         termination of employment, the dispute shall be resolved by arbitration
         within the County of Los Angeles, California, in accordance with the
         then existing rules for employment dispute arbitration of the American
         Arbitration Association, and judgment upon any arbitration award may be
         entered by any state or federal court having jurisdiction thereof. The
         parties intend this arbitration provision to be valid and construed as
         broadly as possible. The prevailing party in such arbitration shall
         recover its reasonable costs and attorneys' fees.

7.       If any provision of this General Release and Settlement Agreement is
         determined to be invalid or unenforceable, all of the other provisions
         shall remain valid and enforceable notwithstanding, unless the
         provision found to be unenforceable is of such material effect that
         this Release cannot be performed in accordance with the intent of the
         parties in the absence thereof.

8.       No promise or agreement other than that expressed herein has been made.
         This General Release and Settlement Agreement constitutes a single
         integrated contract expressing the entire agreement of the parties
         hereto. There are no other agreements, written or oral, express or
         implied, between the parties concerning the subject matter hereof,
         except the provisions set forth in this Release. This Release
         supersedes all previous agreements and understandings, whether written
         or oral. This Release can be amended, modified or terminated only by a
         writing executed by both Employee and the President of the Company.

9.       In compliance with the Olders Workers Benefit Protection Act, Employee
         has been given twenty-one (21) days to review this Release before
         signing it. Employee also understands that he may revoke this General
         Release and Settlement Agreement within seven (7) days after it has
         been signed and that it is not enforceable or effective until the seven
         (7) day revocation period has expired. Additionally, employee has been
         advised in this writing to consult with an attorney before executing
         this General Release and Settlement Agreement.

10.      THE EMPLOYEE STATES THAT HE/SHE IS IN GOOD HEALTH AND FULLY COMPETENT
         TO MANAGE HIS/HER BUSINESS AFFAIRS, THAT HE/SHE HAS CAREFULLY READ THIS
         GENERAL RELEASE AND SETTLEMENT AGREEMENT, THAT HE/SHE FULLY UNDERSTANDS
         ITS FINAL AND BINDING EFFECT, THAT THE ONLY PROMISES MADE TO HIM/HER TO
         SIGN THIS RELEASE ARE THOSE STATED AND CONTAINED IN THIS RELEASE, AND
         THAT HE/SHE IS SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY.

AGREED AND ACCEPTED this _______ day of __________, _______:

MANNKIND CORPORATION                        EXECUTIVE

By:  _____________________________          ____________________________________
Its: _____________________________

                                      14.

                                                                   Exhibit 10.10

                              MANNKIND CORPORATION

                           CHANGE OF CONTROL AGREEMENT

This Change of Control Agreement (this "Agreement"), dated and effective as of
August 1, 2003, is between MannKind Corporation, a Delaware corporation (the
"Company"), and Wendell Cheatham (the "Executive").

WHEREAS the board of directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined in
Section 1 hereof) of the Company.

AND WHEREAS the Board believes it is imperative to diminish the inevitable
distraction of the Executive arising from the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with reasonable compensation and benefit arrangements upon a Change of
Control.

NOW THEREFORE, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.

                                 1. DEFINITIONS

For purposes of this Agreement, the following terms shall have the respective
meanings:

         (a)      "Accrued Obligations" shall have the meaning set forth in
                  Section 8.1;

         (b)      "Change of Control" shall have the Definition set forth in
                  Appendix A hereto, which is hereby incorporated by reference;

         (c)      "Change of Control Date" shall mean the first date on which a
                  Change of Control occurs;

         (d)      "Change of Control Period" shall mean the two (2) year period
                  commencing on the Change of Control Date and ending on the
                  second anniversary of such date;

         (e)      "Incumbent Directors" includes only those persons who are:

                  (i)      serving as directors of the Company on the date of
                           this Agreement or,

                  (ii)     elected by a majority of the directors who then
                           constitute Incumbent Directors or selected by a
                           majority of such directors to be nominated for
                           election by the stockholders and are elected.

                                       1.


                  In no event, however, shall any director whose election to
                  office occurs as a result of an actual or threatened election
                  contest with respect to the election or removal of directors
                  or other actual or threatened solicitation of proxies or
                  consents on behalf of a person or entity other than the Board
                  be an Incumbent Director

         (f)      "Person", "Acquisition", "Beneficial Ownership" and "Group."
                  The term "person" shall have the meaning set forth in the
                  Securities Exchange Act of 1934 and the terms "beneficial
                  ownership," "acquisition," and "group" shall have the meanings
                  set forth in Rules 13d-3 and 13d-5 of the Rules of the
                  Security and Exchange Commission adopted under the Securities
                  Exchange Act of 1934 except that shares which a person or
                  group has the right to acquire shall not be deemed
                  beneficially owned until the right is exercised and the shares
                  are so acquired.

         (g)      "Three-Year Average Annual Bonus" shall have the meaning set
                  forth in Section 5.2.

                                    2. TERM

The term of this Agreement ("Term") shall be for a period of two (2) years from
the date of this Agreement as first appearing; provided, however, that the Term
shall automatically renew for additional one (1) year periods, unless notice of
non-renewal is given by either party to the other party at least ninety (90)
days prior to the initial Term or any renewal Term. If such notice is given,
this Agreement shall terminate at the end of the Term or the then current
renewal Term without further action by either the Company or the Executive.
Notwithstanding the foregoing, if a Change of Control occurs during the Term,
the Term shall automatically extend for the duration of the Change of Control
Period and shall automatically terminate at the end of the Change of Control
Period.

                                 3. EMPLOYMENT

3.1 CHANGE OF CONTROL PERIOD

During the Change of Control Period, the Company hereby agrees to continue the
Executive in its employ or in the employ of its affiliated companies, and the
Executive hereby agrees to remain in the employ of the Company or its affiliated
companies, in accordance with the terms and provisions of this Agreement;
provided, however, that either the Company or the Executive may terminate the
employment relationship during the Change of Control Period subject to the terms
of this Agreement.

3.2 POSITION AND DUTIES

During the Change of Control Period, the Executive's position, authority, duties
and responsibilities shall be at least commensurate in all material respects
with the most significant of those held immediately preceding the Change of
Control Date.

                                       2.


3.3 LOCATION

During the Change of Control Period, the Executive's services shall be performed
at the location of the Executive's assigned worksite as of the Change of Control
Date.

3.4 EMPLOYMENT AT WILL

The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or its affiliated
companies is "at will" and may be terminated by either the Executive or the
Company or its affiliated companies at any time with or without cause. Moreover,
if prior to the Change of Control Date, the Executive's employment with the
Company or its affiliated companies terminates for any reason, then the
Executive shall have no further rights under this Agreement; provided, however,
that the Company may not avoid liability for any termination payments that would
have been required during the Change of Control Period pursuant to Section 8
hereof by terminating the Executive prior to the Change of Control Period where
such termination is carried out in anticipation of a Change of Control and the
principal motivating purpose is to avoid liability for such termination
payments.

                            4. ATTENTION AND EFFORT

During the Change of Control Period, and excluding any periods of paid time-off
to which the Executive is entitled, the Executive will devote all of his
productive time, ability, attention and effort to the business and affairs of
the Company and the discharge of the responsibilities assigned to him hereunder,
and will use his reasonable best efforts to perform faithfully and efficiently
such responsibilities. It shall not be a violation of this Agreement for the
Executive to (a) serve on corporate, civic or charitable boards or committees,
(b) deliver lectures, fulfill speaking engagements or teach at educational
institutions, (c) manage personal investments, or (d) engage in activities
permitted by the policies of the Company or as specifically permitted by the
Company, so long as such activities do not significantly interfere with the full
time performance of the Executive's responsibilities in accordance with this
Agreement. It is expressly understood and agreed that to the extent any such
activities have been conducted by the Executive prior to the Change of Control
Period, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) during the Change of Control Period shall
not thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.

                                5. COMPENSATION

As long as the Executive remains employed by the Company during the Change of
Control Period, the Company agrees to pay or cause to be paid to the Executive,
and the Executive agrees to accept in exchange for the services rendered
hereunder by him, the following compensation:

                                       3.


5.1 SALARY

The Executive shall receive an annual base salary (the "Annual Base Salary"), at
least equal to the annual salary established by the Board or the Compensation
Committee of the Board (the "Compensation Committee") or the Chief Executive
Officer for the fiscal year in which the Change of Control Date occurs. The
Annual Base Salary shall be paid in substantially equal installments and at the
same intervals as the salaries of other executives of the Company are paid. The
Board or the Compensation Committee or the Chief Executive Officer shall review
the Annual Base Salary at least annually and shall determine in good faith and
consistent with any generally applicable Company policy any increases for future
years.

5.2 BONUS

In addition to the Annual Base Salary, the Executive shall be offered the
opportunity to earn, for each fiscal year ending during the Change of Control
Period, an annual bonus (the "Annual Bonus") payable, if the performance
criteria for the bonus are satisfied, in cash in an amount at least equal to the
Three-Year Average Annual Bonus. The performance criteria shall be set so that,
in the good faith judgment of the Board of Directors of the Company or a
committee thereof, the Executive has approximately the same probability of
earning at least the same amount as the Annual Bonus as his or her Three-Year
Average Annual Bonus. "Three-Year Average Annual Bonus" shall mean the average
of bonuses paid or payable to the Executive by the Company for each of the three
fiscal years immediately preceding the year in which the Change of Control
occurs (including the annualized amount of any such bonus paid or payable for
any partial year, but not stock options or stock awards, which became fully
vested and any deferred compensation earned during any of those years and
excluding any sign-on or other one-time-only bonus). If the Executive has not
been an executive officer of the Company during the entire three year period
referred to above or was not offered a bonus during any of those years, then the
Three-Year Average Annual Bonus shall be calculated for such shorter time that
he or she was an executive officer of the Company and had been offered a bonus.
If the Executive had been offered an opportunity to earn a bonus for the year in
which the Change of Control occurs and not in anticipation of the Change of
Control, the Three-Year Average Annual Bonus shall exceed the maximum he or she
could have earned under that bonus arrangement if all performance criteria were
satisfied. Each Annual Bonus, if earned, shall be paid no later than ninety (90)
days after the end of the fiscal year for which the Annual Bonus is awarded,
unless the Executive and the Company agree to defer the receipt of the Annual
Bonus.

                                  6. BENEFITS

6.1 INCENTIVE, RETIREMENT AND WELFARE BENEFIT PLANS; VACATION

During the Change of Control Period, the Executive shall be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in such fringe benefit programs as shall be generally made
available to other comparable executives of the Company and its affiliated
companies from time to time during the Change of Control Period by action of the
Board (or any person or committee appointed by the Board to determine fringe
benefit programs and other emoluments), including, without limitation, paid
vacations; any stock purchase, savings or

                                       4.


retirement plan, practice, policy or program; and all welfare benefit plans,
practices, policies or programs (including, without limitation, medical,
prescription, dental, disability, salary continuance, executive life, group life
accidental death and travel accident insurance plans or programs) to the extent
such fringe benefits are made available to other comparable executives of the
Company.

6.2 EXPENSES

During the Change of Control Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable employment expenses incurred by him in
accordance with the policies, practice and procedures of the Company and its
affiliated companies in effect for the executives of the Company and its
affiliated companies during the Change of Control Period.

                                 7. TERMINATION

During the Change of Control Period, employment of the Executive may be
terminated as follows, but, in any case, the nondisclosure provisions set forth
in Section 10 hereof shall survive the termination of this Agreement and the
termination of the Executive's employment with the Company:

7.1 BY THE COMPANY OR THE EXECUTIVE

At any time during the Change of Control Period, the Company may terminate the
employment of the Executive with or without Cause (as defined below), and the
Executive may terminate his employment for Good Reason (as defined below) or for
any reason, upon giving the Notice of Termination (as defined below).

7.2 AUTOMATIC TERMINATION

This Agreement and the Executive's employment during the Change of Control
Period shall terminate automatically upon the death or Disability of the
Executive. The term "Disability" as used herein shall mean the Executive's
inability (with such accommodation as may be required by law and which places no
undue burden on the Company) to perform the duties set forth in Section 3.2
hereof for a period or periods aggregating twelve (12) weeks in any three
hundred sixty-five (365) day period as result of physical or mental illness,
loss of legal capacity or any other cause. The Executive and the Company hereby
acknowledge that the duties specified in Section 3.2 hereof are essential to the
Executive's position and that the Executive's ability to perform those duties is
the essence of this Agreement.

7.3 NOTICE OF TERMINATION

Any termination by the Company or by the Executive during the Change of Control
Period shall be communicated by Notice of Termination to the other party given
in accordance with Section 11 hereof. The term "Notice of Termination" shall
mean a written notice that (a) indicates the specific termination provision in
this Agreement relied upon and (b) to the extent applicable, sets forth briefly
the facts and circumstances claimed to provide the basis for termination of the
Executive's employment under the provision so indicated. The failure by the
Executive or the

                                       5.


Company to set forth in the Notice of Termination any fact or circumstance that
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder to preclude the Executive or the Company
from asserting such fact or circumstance in connection with any enforcement of
the Executive's or the Company's rights hereunder.

7.4 DATE OF TERMINATION

During the Change of Control Period, "Date of Termination" means (a) if the
Executive's employment is terminated by reason of death, the date of death, (b)
if the Executive's employment is terminated by reason of Disability, immediately
upon a determination by the Company of the Executive's Disability, and (c) in
all other cases, upon the giving of the Notice of Termination. Notwithstanding
the foregoing, the party giving the notice in the case of (c) above will have
the right, but not the obligation, to have the termination of employment be
effective upon the expiration of any period specified in the Notice of
Termination. In that event, the Executive's employment and performance of
services will continue during such specified period unless the other party (the
Company in the event of a termination by the Executive or the Executive in the
case of a termination by the Company) elects thereafter to terminate the
employment of the Executive pursuant to Section 3.4 and that termination is
effective as of an earlier date. Notwithstanding the foregoing, the Company may,
upon notice to the Executive and without reducing the Executive's compensation
during such period, excuse the Executive from any or all of his duties during
such period.

                            8. TERMINATION PAYMENTS

In the event of termination of the Executive's employment during the Change of
Control Period, all compensation and benefits set forth in this Agreement shall
terminate except as specifically provided in this Section 8.

8.1 TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY THE EXECUTIVE FOR GOOD
    REASON

If during the Change of Control Period the Company terminates the Executive's
employment other than for Cause or the Executive terminates his employment for
Good Reason, the Executive shall be entitled to:

         (a)      Payment of the following accrued obligations (the "Accrued
                  Obligations"):

                  (i)      the Annual Base Salary through the Date of
                           Termination to the extent not theretofore paid;

                  (ii)     if the performance criteria for earning the Annual
                           Bonus for the full fiscal year of termination have
                           been fully satisfied at the time of termination
                           (excluding any requirement that the Executive be
                           employed by the Company at the end of the fiscal
                           year), the product of (x) the amount of the Annual
                           Bonus for that year and (y) a fraction the numerator
                           of which is the number of days in the current fiscal
                           year through the Date of Termination and the
                           denominator of which is three hundred sixty-five
                           (365);

                                       6.


                  (iii)    if the performance criteria for earning the Annual
                           Bonus for the full fiscal year of termination have
                           not been fully satisfied and the Board of Directors
                           of the Company determines that all such criteria
                           could not have been satisfied if the Executive
                           remained employed for the full fiscal year, no amount
                           for the Annual Bonus; and

                  (iv)     if neither (ii) nor (iii) apply, the product of (x)
                           the Three-Year Average Annual Bonus and (y) a
                           fraction the numerator of which is the number of days
                           in the current fiscal year through the Date of
                           Termination and the denominator of which is three
                           hundred sixty-five (365); and

                  (v)      any compensation previously deferred by the Executive
                           (together with accrued interest or earnings thereon,
                           if any) and any accrued paid time-off that would be
                           payable under the Company's standard policy, in each
                           case to the extent not theretofore paid.

         (b)      For eighteen (18) months after the Date of Termination or
                  until the Executive qualifies for comparable medical and
                  dental insurance benefits from another employer, whichever
                  occurs first, and subject to the satisfactory execution by the
                  Executive (including the expiration of any revocation period)
                  of an agreement substantially in the form of Exhibit A hereof,
                  the Company shall pay the Executive's premiums for

                  (i)      health insurance benefit continuation for the
                           Executive and his family members, if applicable,
                           which the Company provides to the Executive under the
                           provisions of the federal Consolidated Omnibus Budget
                           Reconciliation Act of 1985, as amended ("COBRA"), to
                           the extent that the Company would have paid such
                           premium had the Executive remained employed by the
                           Company (such continued payment is hereinafter
                           referred to as "COBRA Continuation"); and

                  (ii)     additional health coverage (such as Exec-U-Care),
                           life, accidental death and disability and other
                           insurance programs for the Executive and his family
                           members, if applicable, to the extent such programs
                           existed on the Change of Control Date.

         (c)      Continuation of the payment of the Annual Base Salary for the
                  fiscal year in which the Date of Termination occurs for a
                  period of eighteen (18) months after the Date of Termination,
                  subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

         (d)      An amount equal to one and one-half times the Three-Year
                  Average Annual Bonus, subject to the satisfactory execution by
                  the Executive (including the expiration of any revocation
                  period) of an agreement substantially in the form of Exhibit A
                  hereof.

         (e)      Immediate vesting of all outstanding stock options previously
                  granted to the Executive by the Company, subject to the
                  satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A hereof.

                                       7.


         (f)      The provision in any agreement evidencing any outstanding
                  stock option causing the option to terminate upon the
                  expiration of three months (or any other period relating to
                  termination of employment) after termination of employment
                  shall be of no force or effect, except that nothing herein
                  shall extend any such option beyond its original term or shall
                  affect its termination for any reason other than termination
                  of employment. The provisions of this clause (f) are subject
                  to the satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A.

8.2 TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON

If during the Change of Control Period the Executive's employment shall be
terminated by the Company for Cause or by the Executive for other than Good
Reason, this Agreement shall terminate without further obligation on the part of
the Company to the Executive, other than the Company's obligation to pay the
Executive the amounts in Section 8.1(a)(i) and (v).

8.3 EXPIRATION OF TERM

In the event the Executive's employment is not terminated prior to expiration of
the Term and notice of nonrenewal is given pursuant to Section 2, this Agreement
shall terminate without further obligation on the part of the Company to the
Executive upon the expiration of the Term.

8.4 TERMINATION BECAUSE OF DEATH OR DISABILITY

Upon the Executive's death or Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Executive or his legal representatives under this Agreement other than the
Company's obligation, if any, to pay the Executive the amounts specified in
Section 8.1(a) to (e).

8.5 PAYMENT SCHEDULE

All payments of Accrued Obligations, or any portion thereof payable pursuant to
this Section 8, shall be made to the Executive within ten (10) working days of
the Date of Termination except that

         (a)      any amount payable to the Executive pursuant to Section
                  8.1(a)(ii), (iii) or (iv) or Section 8.1(d) shall be paid to
                  Executive when his or her bonus would have been paid if he or
                  she were still employed; and

         (b)      any payments payable to the Executive pursuant to Section
                  8.1(c) hereof shall be made to the Executive in the form of
                  salary continuation payable at normal payroll intervals during
                  the eighteen (18) month severance period on the dates when the
                  Executive would have received his or her payments of salary if
                  he or she were still employed and in the amounts he or she
                  would have received.

                                       8.


8.6 CAUSE

For purposes of this Agreement, termination of Executive's employment shall be
for "Cause" if it is for any of the following:

         (a)      A refusal of the Executive to carry out any material lawful
                  duties of the Executive or any directions or instructions of
                  the Board or senior management of the Company which are
                  reasonably consistent with those duties;

         (b)      Failure to perform satisfactorily any lawful duties of the
                  Executive that are consistent with those duties hereof or any
                  directions or instructions of the Board or senior management
                  that are consistent with those duties, provided, however, that
                  the Executive has been given notice and has failed to correct
                  any such failure within ten (10) days thereafter (unless any
                  such correction by its nature cannot be done in 10 days, in
                  which event the Executive will have a reasonable time to
                  correct the failure) and provided further that the Company
                  shall have no such obligation to give notice and the Executive
                  shall have no such opportunity to correct failures more than
                  two times in any twelve calendar month period;

         (c)      Violation by the Executive of a local, state or federal law
                  involving the commission of a crime, other than minor traffic
                  violations, or any other criminal act involving moral
                  turpitude;

         (d)      The Executive's gross negligence, willful misconduct, or
                  breach of his or her duty to the Company involving
                  self-dealing or personal profit;

         (e)      Current abuse by the Executive of alcohol or controlled
                  substances; deception, fraud, misrepresentation or dishonesty
                  by the Executive; or any incident materially compromising the
                  Executive's reputation or ability to represent the Company
                  with investors, customers or the public;

         (f)      Any other material violation of any provision of this
                  Agreement by the Executive not described in (a) or (b) above,
                  subject to the same notice and opportunity-to-correct
                  provisions as are set forth in (b) above or

         (g)      The Executive reaching a mandatory retirement age established
                  by the Company before the Change in Control and not in
                  anticipation thereof.

8.7 GOOD REASON

For purposes of this Agreement, "Good Reason" means:

         (a)      Any failure by the Company to comply with any of the
                  provisions of Section 5 or Section 6 hereof, other than
                  isolated and inadvertent failure not taken in bad faith and
                  that is remedied by the Company promptly after receipt of
                  notice thereof given by the Executive;

                                       9.


         (b)      Any material diminution in Executive's position, authority,
                  duties or responsibilities as contemplated by Section 3.2
                  hereof or any other action by the Company that results in a
                  material diminution in such position, authority, duties or
                  responsibilities;

         (c)      The Company's requiring the Executive to be based at any
                  office or location that is more than fifty (50) miles from the
                  location of the Executive's assigned worksite immediately
                  prior to the Change of Control Date and Executive's residence
                  at the time any such requirement is imposed;

         (d)      Any non-renewal by the Company of this Agreement; provided,
                  however, that the Executive may only utilize this paragraph
                  (d) during the 30-day period immediately following his receipt
                  of the notice of non-renewal given by the Company pursuant to
                  Section 2 hereof;

         (e)      Any failure by the Company to comply with and satisfy Section
                  12 hereof; provided, however, that the Company's successor has
                  received at least ten (10) days' prior written notice from the
                  Company or the Executive of the requirements of Section 12
                  hereof; or

         (f)      Any other material violation of any provision of this
                  Agreement by the Company.

Notwithstanding the foregoing, no basis for a termination for Good Reason will
be deemed to exist unless Executive notifies the Company in writing of any event
in (a) through (f) above and the Company or its successor fails to cure any such
event within 30 days after receipt of the notice.

8.8 WITHHOLDING TAXES

Any payments provided for in this Agreement shall be paid net of any applicable
withholding required under federal, state or local law.

8.9 WARN ACT

Notwithstanding the provisions of Sections 8.1 through 8.5, in the event the
Executive is entitled, by operation of any act or law, to unemployment
compensation benefits or benefits under the Worker Adjustment and Retraining Act
of 1988 (known as the "WARN Act" in connection with the termination of his or
her employment in addition to those required to be paid to him or her under this
Agreement, then to the extent permitted by applicable law governing severance
payments or notice of termination of employment, the Company shall be entitled
to offset against the amounts payable hereunder the amounts of any such mandated
payments.

8.10 TERMINATION BEFORE CHANGE OF CONTROL

In the case of termination of employment prior to the Change of Control Date as
contemplated by Section 3.4, the Date of Termination shall be deemed to be the
Change of Control Date, except that, if any of the benefits referred to in
Section 8.1 have been paid or provided for all or any portion of the period
between the Date of Termination and the Change of Control Date, the amount of
benefits which would otherwise be paid or provided shall be reduced by the
amount of the benefits paid or provided for the period prior to the Change of
Control Date.

                                      10.


                       9. REPRESENTATIONS AND WARRANTIES

In order to induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that neither the execution nor the
performance of this Agreement by the Executive will violate or conflict in any
way with any other agreement by which the Executive may be bound.

            10. NONDISCLOSURE; RETURN OF MATERIALS; NONSOLICITATION

10.1 NONDISCLOSURE

Except as required by his employment with the Company, the Executive will not,
at any time during the term of employment by the Company, or at any time
thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Executive understands that the Company will be relying on this
Agreement in continuing the Executive's employment, paying him compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.

10.2 RETURN OF MATERIALS

All documents, records, notebooks, notes, memoranda, drawings, computer files or
other documents made or compiled by the Executive at any time, or in his
possession, including any and all copies thereof, shall be the property of the
Company and shall be held by the Executive in trust and solely for the benefit
of the Company, and shall be delivered to the Company by the Executive upon
termination of employment or at any other time upon request by the Company.

10.3 NONSOLICITATION

During the period that Executive is receiving payments described in Section
8.1(c), he or she will not actively solicit any employees of the Company or its
Affiliates to accept employment from any other person or entity. "Affiliate" is
defined as any entity controlling, controlled by or under common control with,
the Company within the meaning of Rule 405 of the Security and Exchange
Commission under the Securities Act of 1933.

                               11. FORM OF NOTICE

Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally or by
registered or certified mail, return receipt requested, at the address set forth
below or at such other address as may hereafter lie designated by notice given
in compliance with the terms hereof:

If to the Executive:        6218 Black Cherry Circle
                            Columbia, MD  21045

                                      11.


If to the Company:          MannKind Corporation
                            ATTN: President
                            28903 North Avenue Paine
                            Valencia, CA 91355

or such other address as shall be provided in accordance with the terms hereof.
Except as set forth in Section 7.4 hereof, if notice is mailed, such notice
shall be effective upon mailing. Notices sent in any other manner specified
above shall be effective upon receipt.

                                 12. ASSIGNMENT

This Agreement is personal to the Executive and shall not be assignable by the
Executive.

The Company shall assign to and require any successor (whether by purchase of
assets, merger or consolidation) to all or substantially all the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean MannKind Corporation and any successor to its business
and/or assets as aforesaid that assumes and agrees to perform this Agreement by
operation of law, or otherwise. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns.

                                  13. WAIVERS

No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.

                           14. AMENDMENTS IN WRITING

No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, or consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the President
or Chief Executive Officer of the Company and the Executive, and each such
amendment, modification, waiver, termination or discharge shall be effective
only in the specific instance and for the specific purpose for which given. No
provision of this Agreement shall be varied, contradicted or explained by any
oral agreement, course of dealing or performance or any other matter not set
forth in an agreement in writing and signed by the Company and the Executive.

                                      12.


                               15. APPLICABLE LAW

This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of California, without regard to any
rules governing conflicts of laws.

                        16. ARBITRATION; ATTORNEYS' FEES

Except in connection with enforcing Section 10 hereof, for which legal and
equitable remedies may be sought in a court of law, any dispute arising under
this Agreement shall be subject to arbitration. The arbitration proceeding shall
be conducted in accordance with the Employment Arbitration Rules of the American
Arbitration Association (the "AAA Rules") then in effect, conducted by one
arbitrator either mutually agreed upon or selected in accordance with the AAA
Rules. The arbitration shall be conducted in Los Angeles County, California,
under the jurisdiction of the Los Angeles office of the American Arbitration
Association. The arbitrator shall have authority only to interpret and apply the
provisions of this Agreement, and shall have no authority to add to, subtract
from or otherwise modify the terms of this Agreement. Any demand for arbitration
must be made within sixty (60) days of the event(s) giving rise to the claim
that this Agreement has been breached. The arbitrator's decision shall be final
and binding, and each party agrees to be bound to by the arbitrator's award,
subject only to an appeal therefrom in accordance with the laws of the State of
California. Either party may obtain judgment upon the arbitrator's award in the
Superior Court of Los Angeles County, California.

If it becomes necessary to pursue or defend any legal proceeding, whether in
arbitration or court, in order to resolve all disputes arising under this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover its reasonable costs and attorneys' fees.

                                17. SEVERABILITY

If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.

                   18. COORDINATION WITH SEVERANCE AGREEMENT

The agreement regarding the Executive's employment with the Company that the
parties are entering into contemporaneously with this Agreement provides for
certain forms of severance and benefit payments in the event of termination of
the Executive's employment under certain conditions (the "Severance Agreement").
This Agreement is in addition to the Severance

                                      13.


Agreement and in no way supersedes or nullifies the that agreement.
Nevertheless, it is possible for termination of employment to fall within the
scope of both agreements. In such event, payments made to the Executive under
Section 8.1 hereof shall be coordinated with payments made to the Executive
under the Severance Agreement as follows:

         (a)      the obligations under Section 5.1(a) of the Severance
                  Agreement shall be paid first, in which case the Accrued
                  Obligations under this Agreement need not be paid;

         (b)      COBRA Contribution under this Agreement need not be provided
                  to the extent COBRA continuation is provided under the
                  Severance Agreement; and

         (c)      the severance payments required under Sections 8.1(c) and
                  8.1(d) hereof shall be paid first, in which case any severance
                  payments required under Sections 5.1(c) and 5.1(d) of the
                  Severance Agreement need not be provided.

                        19. EXCESS PARACHUTE LIMITATION

If any portion of the payments or benefits for the Executive under this
Agreement, taken together with any other agreement or benefit plan of the
Company (including stock options), would be characterized as an "excess
parachute payment" to the Executive under Section 280G of the Internal Revenue
Code of 1986, amended (the "Code"), the payments and benefits shall be reduced
to the extent necessary to avoid the imposition of any tax that would otherwise
be owed under Section 4999 of the Code. Such reductions shall first be made to
the bonus payments referred to in Section 8.1(d) and Section 8.1(a)(ii), (iii)
or (iv), whichever is applicable, then to the salary payments referred to in
Section 8.1(c), then to the salary payments under Section 8.1(a)(i) and finally
to the number of shares subject to options that are accelerated pursuant to
Section 8.1(e) in the reverse order of grant of those options. The determination
of whether and the extent to which payments and benefits are to be reduced
pursuant to this Section 19 shall be made in writing by tax accountants and/or
tax lawyers selected by the Company and reasonably acceptable to the Executive.

                              20. ENTIRE AGREEMENT

Except as described in Section 18 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior or contemporaneous oral or written communications,
understandings or agreements between the Company and the Executive with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the agreement relating to proprietary information and inventions
between the Company and the Executive shall continue in full force and effect.

                                21. COUNTERPARTS

This Agreement may be executed in counterparts, each of which counterpart shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

                                      14.


IN WITNESS WHEREOF, the parties have executed and entered into this Agreement
effective on the date first set forth above.

MANNKIND CORPORATION                            EXECUTIVE

By: /s/ Michael Page                            /s/ Wendell Cheatham
    ----------------------------------          --------------------------------
Its: Vice Chairman & CEO                        Wendell Cheatham

                                      15.


                                   APPENDIX A

For purposes of this Agreement, a "Change of Control" shall be deemed to have
occurred, if any one of the following events occurs:

         (a)      the acquisition by any person or group of beneficial ownership
                  of more than 50% of the outstanding shares of Common Stock of
                  the Company, or, if there are then outstanding any other
                  voting securities of the Company, such acquisition of more
                  than 50% of the combined voting power of the then outstanding
                  voting securities of the Company entitled to vote generally in
                  the election of directors, except for any of the following
                  acquisitions of beneficial ownership of Common Stock or other
                  voting securities of the Company:

                  (i)      by the Company or any Employee benefit plan (or
                           related trust) sponsored or maintained by the Company
                           or any entity controlled by the Company;

                  (ii)     by Alfred E. Mann; or

                  (iii)    by any person or entity during Mr. Mann's lifetime if
                           the shares acquired were beneficially owned by Mr.
                           Mann immediately prior to their acquisition and the
                           acquisition is a transfer to a trust, partnership,
                           corporation or other entity in which Mr. Mann owns a
                           majority of the beneficial interests;

         (b)      the Company sells all or substantially all of its assets (or
                  consummates any transaction having a similar effect) or the
                  Company merges or consolidates with another entity or
                  completes a reorganization unless the holders of the voting
                  securities of the Company outstanding immediately prior to the
                  transaction own immediately after the transaction in
                  approximately the same proportions 50% or more of the combined
                  voting power of the voting securities of the entity purchasing
                  the assets or surviving the merger or consolidation or the
                  voting securities of its parent company, or, in the case of a
                  reorganization, 50% or more of the combined voting power of
                  the voting securities of the Company;

                  Notwithstanding the foregoing, any purchase or redemption of
                  outstanding shares of Common Stock or other voting securities
                  by the Company resulting in an increase in the percentage of
                  outstanding shares or other voting securities beneficially
                  owned by any person or group shall be deemed to constitute a
                  reorganization; however, no increase in the percentage of
                  outstanding shares or other voting securities beneficially
                  owned by Alfred E. Mann or any person or entities referred to
                  in (a)(i) or (iii) above resulting from any redemption of
                  shares or other voting securities by the Company shall result
                  in a Change of Control;

         (c)      the Company is liquidated; or

         (d)      the Board (if the Company continues to own its business) or
                  the board of directors or comparable governing body of any
                  successor owner of its business (as a result of a

                                      16.


                  transaction which is not itself a Change of Control) consists
                  of a majority of directors or members who are not Incumbent
                  Directors.

For purposes of this Agreement, (A) "voting securities" means securities whose
holders are entitled to vote in the election of all or a majority of the
authorized number of directors at the time the determination of "voting
securities" status is being made and (B) 50% or more of the combined voting
power shall refer to the voting power to elect a majority of the authorized
number of directors determined at that time. "Voting securities" shall not
include preferred stock or other securities whose holders are entitled to vote
in the election of all or a majority of the authorized number of directors upon
the occurrence of some event or circumstance which has not occurred and such
rights to vote are not in effect at the time of the determination of "voting
securities" status. Preferred stock and other securities whose holders are then
entitled to vote for less than a majority of the authorized number of directors,
shall not be considered "voting securities."

                                      17.


                                    EXHIBIT A
                    GENERAL RELEASE AND SETTLEMENT AGREEMENT

The parties to this General Release and Settlement Agreement ("Release") between
________________________________ ("Employee") and MannKind Corporation ("the
Company") state that:

The parties desire to terminate their employment relationship. Both parties
desire to fully and finally resolve all differences and disputes without further
costs;

THEREFORE, the parties agree:

1.    In consideration of the payments to Employee as provided in the Change of
      Control Agreement between the Employee and the Company dated August 1,
      2003, Employee does forever release and discharge the Company and all its
      parent, subsidiary and affiliated entities and all their past, present and
      future directors, officers, agents, employees, or representatives from all
      claims, damages, liabilities, and demands of whatever kind and character
      up to the date she/he signs below ("disputes"), including, but not limited
      to, arising out of or in any way related to any of the circumstances of
      Employee's employment or termination of employment with the Company.

      Employee releases all disputes relating to or arising out of any state,
      municipal, or federal statute, ordinance, regulation, order, contract,
      tort, or common law, including, but not limited to, the Age Discrimination
      in Employment Act. The parties intend that the disputes released herein be
      construed as broadly as possible.

2.    This Release also extends to all disputes by Employee against the Company
      whether known or unknown, suspected or unsuspected, past or present, and
      whether or not they arise out of or are attributable to the circumstances
      of Employee's employment or termination of employment with the Company.
      Specifically, Employee hereby expressly waives any and all rights under
      Section 1542 of the California Civil Code, which reads in full as follows:

           SECTION 1542. GENERAL RELEASE. A GENERAL RELEASE DOES NOT EXTEND TO
           CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
           FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
           MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

3.    Employee further understands and agrees that neither the payment nor the
      execution of this Release, or any part of it, shall constitute or be
      construed as an admission of any alleged liability or wrongdoing
      whatsoever by the Company. The Company expressly denies it has committed
      any alleged liability or wrongdoing.

4.    All films, files, books, computer files, correspondence, lists, equipment,
      manuals, other written and graphic records and the like and all copies
      thereof, affecting or relating to the business of Company which Employee
      shall have prepared, used, constructed, observed, possessed or controlled,
      shall be and remain the Company's sole property. Employee agrees to
      deliver promptly to the Company all such property relating to the Company,
      which are or have been in his possession or under his control. Employee
      also agrees to continue to abide by his confidentiality of information and
      inventions agreement with the Company.

                                      18.


5.    Employee agrees not to seek reemployment with the Company or any of its
      affiliates.

6.    This Release shall be governed by the substantive law of the State of
      California. In the event of any dispute concerning the interpretation of
      this Release or in any way related to Employee's employment or termination
      of employment, the dispute shall be resolved by arbitration within the
      County of Los Angeles, California, in accordance with the then existing
      rules for employment dispute arbitration of the American Arbitration
      Association, and judgment upon any arbitration award may be entered by any
      state or federal court having jurisdiction thereof. The parties intend
      this arbitration provision to be valid and construed as broadly as
      possible. The prevailing party in such arbitration shall recover its
      reasonable costs and attorneys' fees.

7.    If any provision of this General Release and Settlement Agreement is
      determined to be invalid or unenforceable, all of the other provisions
      shall remain valid and enforceable notwithstanding, unless the provision
      found to be unenforceable is of such material effect that this Release
      cannot be performed in accordance with the intent of the parties in the
      absence thereof.

8.    No promise or agreement other than that expressed herein has been made.
      This General Release and Settlement Agreement constitutes a single
      integrated contract expressing the entire agreement of the parties hereto.
      There are no other agreements, written or oral, express or implied,
      between the parties concerning the subject matter hereof, except the
      provisions set forth in this Release. This Release supersedes all previous
      agreements and understandings, whether written or oral. This Release can
      be amended, modified or terminated only by a writing executed by both
      Employee and the President of the Company.

9.    In compliance with the Olders Workers Benefit Protection Act, Employee has
      been given twenty-one (21) days to review this Release before signing it.
      Employee also understands that he may revoke this General Release and
      Settlement Agreement within seven (7) days after it has been signed and
      that it is not enforceable or effective until the seven (7) day revocation
      period has expired. Additionally, employee has been advised in this
      writing to consult with an attorney before executing this General Release
      and Settlement Agreement.

10.   THE EMPLOYEE STATES THAT HE/SHE IS IN GOOD HEALTH AND FULLY COMPETENT TO
      MANAGE HIS/HER BUSINESS AFFAIRS, THAT HE/SHE HAS CAREFULLY READ THIS
      GENERAL RELEASE AND SETTLEMENT AGREEMENT, THAT HE/SHE FULLY UNDERSTANDS
      ITS FINAL AND BINDING EFFECT, THAT THE ONLY PROMISES MADE TO HIM/HER TO
      SIGN THIS RELEASE ARE THOSE STATED AND CONTAINED IN THIS RELEASE, AND THAT
      HE/SHE IS SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY.

AGREED AND ACCEPTED this _______ day of __________, _______:

MANNKIND CORPORATION                            EXECUTIVE

By: ______________________________              ________________________________
Its: _____________________________

                                      19.

                                                                   EXHIBIT 10.11

                              MANNKIND CORPORATION

                           CHANGE OF CONTROL AGREEMENT

This Change of Control Agreement (this "Agreement"), dated and effective as of
August 1, 2003, is between MannKind Corporation, a Delaware corporation (the
"Company"), and Hakan Edstrom (the "Executive").

WHEREAS the board of directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined in
Section 1 hereof) of the Company.

AND WHEREAS the Board believes it is imperative to diminish the inevitable
distraction of the Executive arising from the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with reasonable compensation and benefit arrangements upon a Change of
Control.

NOW THEREFORE, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.

1.                                                      DEFINITIONS

For purposes of this Agreement, the following terms shall have the respective
meanings:

         (a)      "Accrued Obligations" shall have the meaning set forth in
                  Section 8.1;

         (b)      "Change of Control" shall have the Definition set forth in
                  Appendix A hereto, which is hereby incorporated by reference;

         (c)      Change of Control Date" shall mean the first date on which a
                  Change of Control occurs;

         (d)      "Change of Control Period" shall mean the two (2) year period
                  commencing on the Change of Control Date and ending on the
                  second anniversary of such date;

         (e)      "Incumbent Directors" includes only those persons who are:

                  (i)      serving as directors of the Company on the date of
                           this Agreement or,

                  (ii)     elected by a majority of the directors who then
                           constitute Incumbent Directors or selected by a
                           majority of such directors to be nominated for
                           election by the stockholders and are elected.

                  In no event, however, shall any director whose election to
                  office occurs as a result of an actual or threatened election
                  contest with respect to the election or removal of directors
                  or other actual or threatened solicitation of proxies or
                  consents on behalf of a person or entity other than the Board
                  be an Incumbent Director

                                       1



         (f)      "Person", "Acquisition", "Beneficial Ownership" and "Group."
                  The term "person" shall have the meaning set forth in the
                  Securities Exchange Act of 1934 and the terms "beneficial
                  ownership," "acquisition," and "group" shall have the meanings
                  set forth in Rules 13d-3 and 13d-5 of the Rules of the
                  Security and Exchange Commission adopted under the Securities
                  Exchange Act of 1934 except that shares which a person or
                  group has the right to acquire shall not be deemed
                  beneficially owned until the right is exercised and the shares
                  are so acquired.

         (g)      "Three-Year Average Annual Bonus" shall have the meaning set
                  forth in Section 5.2.

                                    2. TERM

The term of this Agreement ("Term") shall be for a period of two (2) years from
the date of this Agreement as first appearing; provided, however, that the Term
shall automatically renew for additional one (1) year periods, unless notice of
non-renewal is given by either party to the other party at least ninety (90)
days prior to the initial Term or any renewal Term. If such notice is given,
this Agreement shall terminate at the end of the Term or the then current
renewal Term without further action by either the Company or the Executive.
Notwithstanding the foregoing, if a Change of Control occurs during the Term,
the Term shall automatically extend for the duration of the Change of Control
Period and shall automatically terminate at the end of the Change of Control
Period.

                                 3. EMPLOYMENT

3.1      CHANGE OF CONTROL PERIOD

During the Change of Control Period, the Company hereby agrees to continue the
Executive in its employ or in the employ of its affiliated companies, and the
Executive hereby agrees to remain in the employ of the Company or its affiliated
companies, in accordance with the terms and provisions of this Agreement;
provided, however, that either the Company or the Executive may terminate the
employment relationship during the Change of Control Period subject to the terms
of this Agreement.

3.2      POSITION AND DUTIES

During the Change of Control Period, the Executive's position, authority, duties
and responsibilities shall be at least commensurate in all material respects
with the most significant of those held immediately preceding the Change of
Control Date.

3.3      LOCATION

During the Change of Control Period, the Executive's services shall be performed
at the location of the Executive's assigned worksite as of the Change of Control
Date.

3.4      EMPLOYMENT AT WILL

The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or its affiliated
companies is "at will" and may be terminated by either the Executive or the
Company or its affiliated companies at any time with or without

                                       2



cause. Moreover, if prior to the Change of Control Date, the Executive's
employment with the Company or its affiliated companies terminates for any
reason, then the Executive shall have no further rights under this Agreement;
provided, however, that the Company may not avoid liability for any termination
payments that would have been required during the Change of Control Period
pursuant to Section 8 hereof by terminating the Executive prior to the Change of
Control Period where such termination is carried out in anticipation of a Change
of Control and the principal motivating purpose is to avoid liability for such
termination payments.

                            4. ATTENTION AND EFFORT

During the Change of Control Period, and excluding any periods of paid time-off
to which the Executive is entitled, the Executive will devote all of his
productive time, ability, attention and effort to the business and affairs of
the Company and the discharge of the responsibilities assigned to him hereunder,
and will use his reasonable best efforts to perform faithfully and efficiently
such responsibilities. It shall not be a violation of this Agreement for the
Executive to (a) serve on corporate, civic or charitable boards or committees,
(b) deliver lectures, fulfill speaking engagements or teach at educational
institutions, (c) manage personal investments, or (d) engage in activities
permitted by the policies of the Company or as specifically permitted by the
Company, so long as such activities do not significantly interfere with the full
time performance of the Executive's responsibilities in accordance with this
Agreement. It is expressly understood and agreed that to the extent any such
activities have been conducted by the Executive prior to the Change of Control
Period, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) during the Change of Control Period shall
not thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.

                                5. COMPENSATION

As long as the Executive remains employed by the Company during the Change of
Control Period, the Company agrees to pay or cause to be paid to the Executive,
and the Executive agrees to accept in exchange for the services rendered
hereunder by him, the following compensation:

5.1      SALARY

The Executive shall receive an annual base salary (the "Annual Base Salary"), at
least equal to the annual salary established by the Board or the Compensation
Committee of the Board (the "Compensation Committee") or the Chief Executive
Officer for the fiscal year in which the Change of Control Date occurs. The
Annual Base Salary shall be paid in substantially equal installments and at the
same intervals as the salaries of other executives of the Company are paid. The
Board or the Compensation Committee or the Chief Executive Officer shall review
the Annual Base Salary at least annually and shall determine in good faith and
consistent with any generally applicable Company policy any increases for future
years.

5.2      BONUS

In addition to the Annual Base Salary, the Executive shall be offered the
opportunity to earn, for each fiscal year ending during the Change of Control
Period, an annual bonus (the "Annual

                                       3



Bonus") payable, if the performance criteria for the bonus are satisfied, in
cash in an amount at least equal to the Three-Year Average Annual Bonus. The
performance criteria shall be set so that, in the good faith judgment of the
Board of Directors of the Company or a committee thereof, the Executive has
approximately the same probability of earning at least the same amount as the
Annual Bonus as his or her Three-Year Average Annual Bonus. "Three-Year Average
Annual Bonus" shall mean the average of bonuses paid or payable to the Executive
by the Company for each of the three fiscal years immediately preceding the year
in which the Change of Control occurs (including the annualized amount of any
such bonus paid or payable for any partial year, but not stock options or stock
awards, which became fully vested and any deferred compensation earned during
any of those years and excluding any sign-on or other one-time-only bonus). If
the Executive has not been an executive officer of the Company during the entire
three year period referred to above or was not offered a bonus during any of
those years, then the Three-Year Average Annual Bonus shall be calculated for
such shorter time that he or she was an executive officer of the Company and had
been offered a bonus. If the Executive had been offered an opportunity to earn a
bonus for the year in which the Change of Control occurs and not in anticipation
of the Change of Control, the Three-Year Average Annual Bonus shall exceed the
maximum he or she could have earned under that bonus arrangement if all
performance criteria were satisfied. Each Annual Bonus, if earned, shall be paid
no later than ninety (90) days after the end of the fiscal year for which the
Annual Bonus is awarded, unless the Executive and the Company agree to defer the
receipt of the Annual Bonus.

                                  6. BENEFITS

6.1      INCENTIVE, RETIREMENT AND WELFARE BENEFIT PLANS; VACATION

During the Change of Control Period, the Executive shall be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in such fringe benefit programs as shall be generally made
available to other comparable executives of the Company and its affiliated
companies from time to time during the Change of Control Period by action of the
Board (or any person or committee appointed by the Board to determine fringe
benefit programs and other emoluments), including, without limitation, paid
vacations; any stock purchase, savings or retirement plan, practice, policy or
program; and all welfare benefit plans, practices, policies or programs
(including, without limitation, medical, prescription, dental, disability,
salary continuance, executive life, group life accidental death and travel
accident insurance plans or programs) to the extent such fringe benefits are
made available to other comparable executives of the Company.

6.2      EXPENSES

During the Change of Control Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable employment expenses incurred by him in
accordance with the policies, practice and procedures of the Company and its
affiliated companies in effect for the executives of the Company and its
affiliated companies during the Change of Control Period.

                                       4



                                 7. TERMINATION

During the Change of Control Period, employment of the Executive may be
terminated as follows, but, in any case, the nondisclosure provisions set forth
in Section 10 hereof shall survive the termination of this Agreement and the
termination of the Executive's employment with the Company:

7.1      BY THE COMPANY OR THE EXECUTIVE

At any time during the Change of Control Period, the Company may terminate the
employment of the Executive with or without Cause (as defined below), and the
Executive may terminate his employment for Good Reason (as defined below) or for
any reason, upon giving the Notice of Termination (as defined below).

7.2      AUTOMATIC TERMINATION

This Agreement and the Executive's employment during the Change of Control
Period shall terminate automatically upon the death or Disability of the
Executive. The term "Disability" as used herein shall mean the Executive's
inability (with such accommodation as may be required by law and which places no
undue burden on the Company) to perform the duties set forth in Section 3.2
hereof for a period or periods aggregating twelve (12) weeks in any three
hundred sixty-five (365) day period as result of physical or mental illness,
loss of legal capacity or any other cause. The Executive and the Company hereby
acknowledge that the duties specified in Section 3.2 hereof are essential to the
Executive's position and that the Executive's ability to perform those duties is
the essence of this Agreement.

7.3      NOTICE OF TERMINATION

Any termination by the Company or by the Executive during the Change of Control
Period shall be communicated by Notice of Termination to the other party given
in accordance with Section 11 hereof. The term "Notice of Termination" shall
mean a written notice that (a) indicates the specific termination provision in
this Agreement relied upon and (b) to the extent applicable, sets forth briefly
the facts and circumstances claimed to provide the basis for termination of the
Executive's employment under the provision so indicated. The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder to preclude the
Executive or the Company from asserting such fact or circumstance in connection
with any enforcement of the Executive's or the Company's rights hereunder.

7.4      DATE OF TERMINATION

During the Change of Control Period, "Date of Termination" means (a) if the
Executive's employment is terminated by reason of death, the date of death, (b)
if the Executive's employment is terminated by reason of Disability, immediately
upon a determination by the Company of the Executive's Disability, and (c) in
all other cases, upon the giving of the Notice of Termination. Notwithstanding
the foregoing, the party giving the notice in the case of (c) above will have
the right, but not the obligation, to have the termination of employment be
effective upon the expiration of any period specified in the Notice of
Termination. In that event, the Executive's employment and performance of
services will continue during such specified period unless the other party (the
Company in the event of a termination by the Executive or the

                                       5



Executive in the case of a termination by the Company) elects thereafter to
terminate the employment of the Executive pursuant to Section 3.4 and that
termination is effective as of an earlier date. Notwithstanding the foregoing,
the Company may, upon notice to the Executive and without reducing the
Executive's compensation during such period, excuse the Executive from any or
all of his duties during such period.

                            8. TERMINATION PAYMENTS

In the event of termination of the Executive's employment during the Change of
Control Period, all compensation and benefits set forth in this Agreement shall
terminate except as specifically provided in this Section 8.

8.1      TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY THE EXECUTIVE FOR
         GOOD REASON

If during the Change of Control Period the Company terminates the Executive's
employment other than for Cause or the Executive terminates his employment for
Good Reason, the Executive shall be entitled to:

         (a)      Payment of the following accrued obligations (the "Accrued
                  Obligations"):

                  (i)      the Annual Base Salary through the Date of
                           Termination to the extent not theretofore paid;

                  (ii)     if the performance criteria for earning the Annual
                           Bonus for the full fiscal year of termination have
                           been fully satisfied at the time of termination
                           (excluding any requirement that the Executive be
                           employed by the Company at the end of the fiscal
                           year), the product of (x) the amount of the Annual
                           Bonus for that year and (y) a fraction the numerator
                           of which is the number of days in the current fiscal
                           year through the Date of Termination and the
                           denominator of which is three hundred sixty-five
                           (365);

                  (iii)    if the performance criteria for earning the Annual
                           Bonus for the full fiscal year of termination have
                           not been fully satisfied and the Board of Directors
                           of the Company determines that all such criteria
                           could not have been satisfied if the Executive
                           remained employed for the full fiscal year, no amount
                           for the Annual Bonus; and

                  (iv)     if neither (ii) nor (iii) apply, the product of (x)
                           the Three-Year Average Annual Bonus and (y) a
                           fraction the numerator of which is the number of days
                           in the current fiscal year through the Date of
                           Termination and the denominator of which is three
                           hundred sixty-five (365); and

                  (v)      any compensation previously deferred by the Executive
                           (together with accrued interest or earnings thereon,
                           if any) and any accrued paid time-off that would be
                           payable under the Company's standard policy, in each
                           case to the extent not theretofore paid.

         (b)      For eighteen (18) months after the Date of Termination or
                  until the Executive qualifies for comparable medical and
                  dental insurance benefits from another employer, whichever
                  occurs first, and subject to the satisfactory execution by the

                                       6



                  Executive (including the expiration of any revocation period)
                  of an agreement substantially in the form of Exhibit A hereof,
                  the Company shall pay the Executive's premiums for

                  (i)      health insurance benefit continuation for the
                           Executive and his family members, if applicable,
                           which the Company provides to the Executive under the
                           provisions of the federal Consolidated Omnibus Budget
                           Reconciliation Act of 1985, as amended ("COBRA"), to
                           the extent that the Company would have paid such
                           premium had the Executive remained employed by the
                           Company (such continued payment is hereinafter
                           referred to as "COBRA Continuation"); and

                  (ii)     additional health coverage (such as Exec-U-Care),
                           life, accidental death and disability and other
                           insurance programs for the Executive and his family
                           members, if applicable, to the extent such programs
                           existed on the Change of Control Date.

         (c)      Continuation of the payment of the Annual Base Salary for the
                  fiscal year in which the Date of Termination occurs for a
                  period of eighteen (18) months after the Date of Termination,
                  subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

         (d)      An amount equal to one and one-half times the Three-Year
                  Average Annual Bonus, subject to the satisfactory execution by
                  the Executive (including the expiration of any revocation
                  period) of an agreement substantially in the form of Exhibit A
                  hereof.

         (e)      Immediate vesting of all outstanding stock options previously
                  granted to the Executive by the Company, subject to the
                  satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A hereof.

         (f)      The provision in any agreement evidencing any outstanding
                  stock option causing the option to terminate upon the
                  expiration of three months (or any other period relating to
                  termination of employment) after termination of employment
                  shall be of no force or effect, except that nothing herein
                  shall extend any such option beyond its original term or shall
                  affect its termination for any reason other than termination
                  of employment. The provisions of this clause (f) are subject
                  to the satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A.

8.2      TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON

If during the Change of Control Period the Executive's employment shall be
terminated by the Company for Cause or by the Executive for other than Good
Reason, this Agreement shall terminate without further obligation on the part of
the Company to the Executive, other than the Company's obligation to pay the
Executive the amounts in Section 8.1(a)(i) and (v).

                                       7



8.3      EXPIRATION OF TERM

In the event the Executive's employment is not terminated prior to expiration of
the Term and notice of nonrenewal is given pursuant to Section 2, this Agreement
shall terminate without further obligation on the part of the Company to the
Executive upon the expiration of the Term.

8.4      TERMINATION BECAUSE OF DEATH OR DISABILITY

Upon the Executive's death or Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Executive or his legal representatives under this Agreement other than the
Company's obligation, if any, to pay the Executive the amounts specified in
Section 8.1(a) to (e).

8.5      PAYMENT SCHEDULE

All payments of Accrued Obligations, or any portion thereof payable pursuant to
this Section 8, shall be made to the Executive within ten (10) working days of
the Date of Termination except that

         (a)      any amount payable to the Executive pursuant to Section
                  8.1(a)(ii), (iii) or (iv) or Section 8.1(d) shall be paid to
                  Executive when his or her bonus would have been paid if he or
                  she were still employed; and

         (b)      any payments payable to the Executive pursuant to Section
                  8.1(c) hereof shall be made to the Executive in the form of
                  salary continuation payable at normal payroll intervals during
                  the eighteen (18) month severance period on the dates when the
                  Executive would have received his or her payments of salary if
                  he or she were still employed and in the amounts he or she
                  would have received.

8.6      CAUSE

For purposes of this Agreement, termination of Executive's employment shall be
for "Cause" if it is for any of the following:

         (a)      A refusal of the Executive to carry out any material lawful
                  duties of the Executive or any directions or instructions of
                  the Board or senior management of the Company which are
                  reasonably consistent with those duties;

         (b)      Failure to perform satisfactorily any lawful duties of the
                  Executive that are consistent with those duties hereof or any
                  directions or instructions of the Board or senior management
                  that are consistent with those duties, provided, however, that
                  the Executive has been given notice and has failed to correct
                  any such failure within ten (10) days thereafter (unless any
                  such correction by its nature cannot be done in 10 days, in
                  which event the Executive will have a reasonable time to
                  correct the failure) and provided further that the Company
                  shall have no such obligation to give notice and the Executive
                  shall have no such opportunity to correct failures more than
                  two times in any twelve calendar month period;

         (c)      Violation by the Executive of a local, state or federal law
                  involving the commission of a crime, other than minor traffic
                  violations, or any other criminal act involving moral
                  turpitude;

                                       8



         (d)      The Executive's gross negligence, willful misconduct, or
                  breach of his or her duty to the Company involving
                  self-dealing or personal profit;

         (e)      Current abuse by the Executive of alcohol or controlled
                  substances; deception, fraud, misrepresentation or dishonesty
                  by the Executive; or any incident materially compromising the
                  Executive's reputation or ability to represent the Company
                  with investors, customers or the public;

         (f)      Any other material violation of any provision of this
                  Agreement by the Executive not described in (a) or (b) above,
                  subject to the same notice and opportunity-to-correct
                  provisions as are set forth in (b) above or

         (g)      The Executive reaching a mandatory retirement age established
                  by the Company before the Change in Control and not in
                  anticipation thereof.

8.7      GOOD REASON

For purposes of this Agreement, "Good Reason" means:

         (a)      Any failure by the Company to comply with any of the
                  provisions of Section 5 or Section 6 hereof, other than
                  isolated and inadvertent failure not taken in bad faith and
                  that is remedied by the Company promptly after receipt of
                  notice thereof given by the Executive;

         (b)      Any material diminution in Executive's position, authority,
                  duties or responsibilities as contemplated by Section 3.2
                  hereof or any other action by the Company that results in a
                  material diminution in such position, authority, duties or
                  responsibilities;

         (c)      The Company's requiring the Executive to be based at any
                  office or location that is more than fifty (50) miles from the
                  location of the Executive's assigned worksite immediately
                  prior to the Change of Control Date and Executive's residence
                  at the time any such requirement is imposed;

         (d)      Any non-renewal by the Company of this Agreement; provided,
                  however, that the Executive may only utilize this paragraph
                  (d) during the 30-day period immediately following his receipt
                  of the notice of non-renewal given by the Company pursuant to
                  Section 2 hereof;

         (e)      Any failure by the Company to comply with and satisfy Section
                  12 hereof; provided, however, that the Company's successor has
                  received at least ten (10) days' prior written notice from the
                  Company or the Executive of the requirements of Section 12
                  hereof; or

         (f)      Any other material violation of any provision of this
                  Agreement by the Company.

Notwithstanding the foregoing, no basis for a termination for Good Reason will
be deemed to exist unless Executive notifies the Company in writing of any event
in (a) through (f) above and the Company or its successor fails to cure any such
event within 30 days after receipt of the notice.

8.8      WITHHOLDING TAXES

Any payments provided for in this Agreement shall be paid net of any applicable
withholding required under federal, state or local law.

                                       9



8.9      WARN ACT

Notwithstanding the provisions of Sections 8.1 through 8.5, in the event the
Executive is entitled, by operation of any act or law, to unemployment
compensation benefits or benefits under the Worker Adjustment and Retraining Act
of 1988 (known as the "WARN Act" in connection with the termination of his or
her employment in addition to those required to be paid to him or her under this
Agreement, then to the extent permitted by applicable law governing severance
payments or notice of termination of employment, the Company shall be entitled
to offset against the amounts payable hereunder the amounts of any such mandated
payments.

8.10     TERMINATION BEFORE CHANGE OF CONTROL

In the case of termination of employment prior to the Change of Control Date as
contemplated by Section 3.4, the Date of Termination shall be deemed to be the
Change of Control Date, except that, if any of the benefits referred to in
Section 8.1 have been paid or provided for all or any portion of the period
between the Date of Termination and the Change of Control Date, the amount of
benefits which would otherwise be paid or provided shall be reduced by the
amount of the benefits paid or provided for the period prior to the Change of
Control Date.

                       9. REPRESENTATIONS AND WARRANTIES

In order to induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that neither the execution nor the
performance of this Agreement by the Executive will violate or conflict in any
way with any other agreement by which the Executive may be bound.

            10. NONDISCLOSURE; RETURN OF MATERIALS; NONSOLICITATION

10.1     NONDISCLOSURE

Except as required by his employment with the Company, the Executive will not,
at any time during the term of employment by the Company, or at any time
thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Executive understands that the Company will be relying on this
Agreement in continuing the Executive's employment, paying him compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.

10.2     RETURN OF MATERIALS

All documents, records, notebooks, notes, memoranda, drawings, computer files or
other documents made or compiled by the Executive at any time, or in his
possession, including any and all copies thereof, shall be the property of the
Company and shall be held by the Executive in trust and solely for the benefit
of the Company, and shall be delivered to the Company by the Executive upon
termination of employment or at any other time upon request by the Company.

10.3     NONSOLICITATION

During the period that Executive is receiving payments described in Section
8.1(c), he or she will not actively solicit any employees of the Company or its
Affiliates to accept employment from

                                       10



any other person or entity. "Affiliate" is defined as any entity controlling,
controlled by or under common control with, the Company within the meaning of
Rule 405 of the Security and Exchange Commission under the Securities Act of
1933.

                               11. FORM OF NOTICE

Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally or by
registered or certified mail, return receipt requested, at the address set forth
below or at such other address as may hereafter lie designated by notice given
in compliance with the terms hereof:

    If to the Executive:                  23312 Happy Valley Drive
                                          Newhall, CA 91321

    If to the Company:                    MannKind Corporation
                                          ATTN:  President
                                          28903 North Avenue Paine
                                          Valencia, CA 91355

or such other address as shall be provided in accordance with the terms hereof.
Except as set forth in Section 7.4 hereof, if notice is mailed, such notice
shall be effective upon mailing. Notices sent in any other manner specified
above shall be effective upon receipt.

                                 12. ASSIGNMENT

This Agreement is personal to the Executive and shall not be assignable by the
Executive.

The Company shall assign to and require any successor (whether by purchase of
assets, merger or consolidation) to all or substantially all the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean MannKind Corporation and any successor to its business
and/or assets as aforesaid that assumes and agrees to perform this Agreement by
operation of law, or otherwise. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns.

                                  13. WAIVERS

No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.

                                       11



                           14. AMENDMENTS IN WRITING

No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, or consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the President
or Chief Executive Officer of the Company and the Executive, and each such
amendment, modification, waiver, termination or discharge shall be effective
only in the specific instance and for the specific purpose for which given. No
provision of this Agreement shall be varied, contradicted or explained by any
oral agreement, course of dealing or performance or any other matter not set
forth in an agreement in writing and signed by the Company and the Executive.

                               15. APPLICABLE LAW

This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of California, without regard to any
rules governing conflicts of laws.

                        16. ARBITRATION; ATTORNEYS' FEES

Except in connection with enforcing Section 10 hereof, for which legal and
equitable remedies may be sought in a court of law, any dispute arising under
this Agreement shall be subject to arbitration. The arbitration proceeding shall
be conducted in accordance with the Employment Arbitration Rules of the American
Arbitration Association (the "AAA Rules") then in effect, conducted by one
arbitrator either mutually agreed upon or selected in accordance with the AAA
Rules. The arbitration shall be conducted in Los Angeles County, California,
under the jurisdiction of the Los Angeles office of the American Arbitration
Association. The arbitrator shall have authority only to interpret and apply the
provisions of this Agreement, and shall have no authority to add to, subtract
from or otherwise modify the terms of this Agreement. Any demand for arbitration
must be made within sixty (60) days of the event(s) giving rise to the claim
that this Agreement has been breached. The arbitrator's decision shall be final
and binding, and each party agrees to be bound to by the arbitrator's award,
subject only to an appeal therefrom in accordance with the laws of the State of
California. Either party may obtain judgment upon the arbitrator's award in the
Superior Court of Los Angeles County, California.

If it becomes necessary to pursue or defend any legal proceeding, whether in
arbitration or court, in order to resolve all disputes arising under this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover its reasonable costs and attorneys' fees.

                                17. SEVERABILITY

If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full

                                       12



extent permitted by law, (a) all other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed in order
to carry out the intent of the parties hereto as nearly as may be possible, (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.

                   18. COORDINATION WITH SEVERANCE AGREEMENT

The agreement regarding the Executive's employment with the Company that the
parties are entering into contemporaneously with this Agreement provides for
certain forms of severance and benefit payments in the event of termination of
the Executive's employment under certain conditions (the "Severance Agreement").
This Agreement is in addition to the Severance Agreement and in no way
supersedes or nullifies the that agreement. Nevertheless, it is possible for
termination of employment to fall within the scope of both agreements. In such
event, payments made to the Executive under Section 8.1 hereof shall be
coordinated with payments made to the Executive under the Severance Agreement as
follows:

         (a)      the obligations under Section 5.1(a) of the Severance
                  Agreement shall be paid first, in which case the Accrued
                  Obligations under this Agreement need not be paid;

         (b)      COBRA Contribution under this Agreement need not be provided
                  to the extent COBRA continuation is provided under the
                  Severance Agreement; and

         (c)      the severance payments required under Sections 8.1(c) and
                  8.1(d) hereof shall be paid first, in which case any severance
                  payments required under Sections 5.1(c) and 5.1(d) of the
                  Severance Agreement need not be provided.

                        19. EXCESS PARACHUTE LIMITATION

If any portion of the payments or benefits for the Executive under this
Agreement, taken together with any other agreement or benefit plan of the
Company (including stock options), would be characterized as an "excess
parachute payment" to the Executive under Section 280G of the Internal Revenue
Code of 1986, amended (the "Code"), the payments and benefits shall be reduced
to the extent necessary to avoid the imposition of any tax that would otherwise
be owed under Section 4999 of the Code. Such reductions shall first be made to
the bonus payments referred to in Section 8.1(d) and Section 8.1(a)(ii), (iii)
or (iv), whichever is applicable, then to the salary payments referred to in
Section 8.1(c), then to the salary payments under Section 8.1(a)(i) and finally
to the number of shares subject to options that are accelerated pursuant to
Section 8.1(e) in the reverse order of grant of those options. The determination
of whether and the extent to which payments and benefits are to be reduced
pursuant to this Section 19 shall be made in writing by tax accountants and/or
tax lawyers selected by the Company and reasonably acceptable to the Executive.

                                       13



                              20. ENTIRE AGREEMENT

Except as described in Section 18 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior or contemporaneous oral or written communications,
understandings or agreements between the Company and the Executive with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the agreement relating to proprietary information and inventions
between the Company and the Executive shall continue in full force and effect.

                                21. COUNTERPARTS

This Agreement may be executed in counterparts, each of which counterpart shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties have executed and entered into this Agreement
effective on the date first set forth above.

MANNKIND CORPORATION                                     EXECUTIVE

By: /s/ Michael Page                                     /s/ Hakan Edstrom
    ---------------------                                ----------------------
Its:  Vice Chairman & CEO                                Hakan Edstrom

                                       14



                                   APPENDIX A

For purposes of this Agreement, a "Change of Control" shall be deemed to have
occurred, if any one of the following events occurs:

         (a)      the acquisition by any person or group of beneficial ownership
                  of more than 50% of the outstanding shares of Common Stock of
                  the Company, or, if there are then outstanding any other
                  voting securities of the Company, such acquisition of more
                  than 50% of the combined voting power of the then outstanding
                  voting securities of the Company entitled to vote generally in
                  the election of directors, except for any of the following
                  acquisitions of beneficial ownership of Common Stock or other
                  voting securities of the Company:

                  (i)      by the Company or any Employee benefit plan (or
                           related trust) sponsored or maintained by the Company
                           or any entity controlled by the Company;

                  (ii)     by Alfred E. Mann; or

                  (iii)    by any person or entity during Mr. Mann's lifetime if
                           the shares acquired were beneficially owned by Mr.
                           Mann immediately prior to their acquisition and the
                           acquisition is a transfer to a trust, partnership,
                           corporation or other entity in which Mr. Mann owns a
                           majority of the beneficial interests;

         (b)      the Company sells all or substantially all of its assets (or
                  consummates any transaction having a similar effect) or the
                  Company merges or consolidates with another entity or
                  completes a reorganization unless the holders of the voting
                  securities of the Company outstanding immediately prior to the
                  transaction own immediately after the transaction in
                  approximately the same proportions 50% or more of the combined
                  voting power of the voting securities of the entity purchasing
                  the assets or surviving the merger or consolidation or the
                  voting securities of its parent company, or, in the case of a
                  reorganization, 50% or more of the combined voting power of
                  the voting securities of the Company;

                  Notwithstanding the foregoing, any purchase or redemption of
                  outstanding shares of Common Stock or other voting securities
                  by the Company resulting in an increase in the percentage of
                  outstanding shares or other voting securities beneficially
                  owned by any person or group shall be deemed to constitute a
                  reorganization; however, no increase in the percentage of
                  outstanding shares or other voting securities beneficially
                  owned by Alfred E. Mann or any person or entities referred to
                  in (a)(i) or (iii) above resulting from any redemption of
                  shares or other voting securities by the Company shall result
                  in a Change of Control;

         (c)      the Company is liquidated; or

         (d)      the Board (if the Company continues to own its business) or
                  the board of directors or comparable governing body of any
                  successor owner of its business (as a result of a transaction
                  which is not itself a Change of Control) consists of a
                  majority of directors or members who are not Incumbent
                  Directors.

For purposes of this Agreement, (A) "voting securities" means securities whose
holders are entitled to vote in the election of all or a majority of the
authorized number of directors at the

                                       15



time the determination of 'voting securities" status is being made and (B) 50%
or more of the combined voting power shall refer to the voting power to elect a
majority of the authorized number of directors determined at that time. "Voting
securities" shall not include preferred stock or other securities whose holders
are entitled to vote in the election of all or a majority of the authorized
number of directors upon the occurrence of some event or circumstance which has
not occurred and such rights to vote are not in effect at the time of the
determination of "voting securities" status. Preferred stock and other
securities whose holders are then entitled to vote for less than a majority of
the authorized number of directors, shall not be considered "voting securities."

                                       16



                                    EXHIBIT A
                    GENERAL RELEASE AND SETTLEMENT AGREEMENT

The parties to this General Release and Settlement Agreement ("Release") between
________________________________ ("Employee") and MannKind Corporation ("the
Company") state that:

The parties desire to terminate their employment relationship. Both parties
desire to fully and finally resolve all differences and disputes without further
costs;

THEREFORE, the parties agree:

1.   In consideration of the payments to Employee as provided in the Change of
     Control Agreement between the Employee and the Company dated August 1,
     2003, Employee does forever release and discharge the Company and all its
     parent, subsidiary and affiliated entities and all their past, present and
     future directors, officers, agents, employees, or representatives from all
     claims, damages, liabilities, and demands of whatever kind and character up
     to the date she/he signs below ("disputes"), including, but not limited to,
     arising out of or in any way related to any of the circumstances of
     Employee's employment or termination of employment with the Company.

     Employee releases all disputes relating to or arising out of any state,
     municipal, or federal statute, ordinance, regulation, order, contract,
     tort, or common law, including, but not limited to, the Age Discrimination
     in Employment Act. The parties intend that the disputes released herein be
     construed as broadly as possible.

2.   This Release also extends to all disputes by Employee against the Company
     whether known or unknown, suspected or unsuspected, past or present, and
     whether or not they arise out of or are attributable to the circumstances
     of Employee's employment or termination of employment with the Company.
     Specifically, Employee hereby expressly waives any and all rights under
     Section 1542 of the California Civil Code, which reads in full as follows:

         SECTION 1542. GENERAL RELEASE. A GENERAL RELEASE DOES NOT EXTEND TO
         CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
         FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
         HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

3.   Employee further understands and agrees that neither the payment nor the
     execution of this Release, or any part of it, shall constitute or be
     construed as an admission of any alleged liability or wrongdoing whatsoever
     by the Company. The Company expressly denies it has committed any alleged
     liability or wrongdoing.

4.   All films, files, books, computer files, correspondence, lists, equipment,
     manuals, other written and graphic records and the like and all copies
     thereof, affecting or relating to the business of Company which Employee
     shall have prepared, used, constructed, observed, possessed or controlled,
     shall be and remain the Company's sole property. Employee agrees to deliver
     promptly to the Company all such property relating to the Company, which
     are or have been in his possession or under his control. Employee also
     agrees to continue to abide by his confidentiality of information and
     inventions agreement with the Company.

5.   Employee agrees not to seek reemployment with the Company or any of its
     affiliates.

                                       17



6.   This Release shall be governed by the substantive law of the State of
     California. In the event of any dispute concerning the interpretation of
     this Release or in any way related to Employee's employment or termination
     of employment, the dispute shall be resolved by arbitration within the
     County of Los Angeles, California, in accordance with the then existing
     rules for employment dispute arbitration of the American Arbitration
     Association, and judgment upon any arbitration award may be entered by any
     state or federal court having jurisdiction thereof. The parties intend this
     arbitration provision to be valid and construed as broadly as possible. The
     prevailing party in such arbitration shall recover its reasonable costs and
     attorneys' fees.

7.   If any provision of this General Release and Settlement Agreement is
     determined to be invalid or unenforceable, all of the other provisions
     shall remain valid and enforceable notwithstanding, unless the provision
     found to be unenforceable is of such material effect that this Release
     cannot be performed in accordance with the intent of the parties in the
     absence thereof.

8.   No promise or agreement other than that expressed herein has been made.
     This General Release and Settlement Agreement constitutes a single
     integrated contract expressing the entire agreement of the parties hereto.
     There are no other agreements, written or oral, express or implied, between
     the parties concerning the subject matter hereof, except the provisions set
     forth in this Release. This Release supersedes all previous agreements and
     understandings, whether written or oral. This Release can be amended,
     modified or terminated only by a writing executed by both Employee and the
     President of the Company.

9.   In compliance with the Olders Workers Benefit Protection Act, Employee has
     been given twenty-one (21) days to review this Release before signing it.
     Employee also understands that he may revoke this General Release and
     Settlement Agreement within seven (7) days after it has been signed and
     that it is not enforceable or effective until the seven (7) day revocation
     period has expired. Additionally, employee has been advised in this writing
     to consult with an attorney before executing this General Release and
     Settlement Agreement.

10.  THE EMPLOYEE STATES THAT HE/SHE IS IN GOOD HEALTH AND FULLY COMPETENT TO
     MANAGE HIS/HER BUSINESS AFFAIRS, THAT HE/SHE HAS CAREFULLY READ THIS
     GENERAL RELEASE AND SETTLEMENT AGREEMENT, THAT HE/SHE FULLY UNDERSTANDS ITS
     FINAL AND BINDING EFFECT, THAT THE ONLY PROMISES MADE TO HIM/HER TO SIGN
     THIS RELEASE ARE THOSE STATED AND CONTAINED IN THIS RELEASE, AND THAT
     HE/SHE IS SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY.

AGREED AND ACCEPTED this _______ day of __________, _______:

MANNKIND CORPORATION                           EXECUTIVE

By:___________________________                  _______________________________

Its:___________________________

                                       18

                                                                   Exhibit 10.12

                              MANNKIND CORPORATION

                           CHANGE OF CONTROL AGREEMENT

This Change of Control Agreement (this "Agreement"), dated and effective as of
August 1, 2003, is between MannKind Corporation, a Delaware corporation (the
"Company"), and David Thomson (the "Executive").

WHEREAS the board of directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined in
Section 1 hereof) of the Company.

AND WHEREAS the Board believes it is imperative to diminish the inevitable
distraction of the Executive arising from the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with reasonable compensation and benefit arrangements upon a Change of
Control.

NOW THEREFORE, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.

                                 1. DEFINITIONS

For purposes of this Agreement, the following terms shall have the respective
meanings:

         (a)      "Accrued Obligations" shall have the meaning set forth in
                  Section 8.1;

         (b)      "Change of Control" shall have the Definition set forth in
                  Appendix A hereto, which is hereby incorporated by reference;

         (c)      Change of Control Date" shall mean the first date on which a
                  Change of Control occurs;

         (d)      "Change of Control Period" shall mean the two (2) year period
                  commencing on the Change of Control Date and ending on the
                  second anniversary of such date;

         (e)      "Incumbent Directors" includes only those persons who are:

                  (i)      serving as directors of the Company on the date of
                           this Agreement or,

                  (ii)     elected by a majority of the directors who then
                           constitute Incumbent Directors or selected by a
                           majority of such directors to be nominated for
                           election by the stockholders and are elected.

                  In no event, however, shall any director whose election to
                  office occurs as a result of an actual or threatened election
                  contest with respect to the election or removal of directors
                  or other actual or threatened solicitation of proxies or
                  consents on behalf of a person or entity other than the Board
                  be an Incumbent Director

                                       1



         (f)      "Person", "Acquisition", "Beneficial Ownership" and "Group."
                  The term "person" shall have the meaning set forth in the
                  Securities Exchange Act of 1934 and the terms "beneficial
                  ownership," "acquisition," and "group" shall have the meanings
                  set forth in Rules 13d-3 and 13d-5 of the Rules of the
                  Security and Exchange Commission adopted under the Securities
                  Exchange Act of 1934 except that shares which a person or
                  group has the right to acquire shall not be deemed
                  beneficially owned until the right is exercised and the shares
                  are so acquired.

         (g)      "Three-Year Average Annual Bonus" shall have the meaning set
                  forth in Section 5.2.

                                    2. TERM

The term of this Agreement ("Term") shall be for a period of two (2) years from
the date of this Agreement as first appearing; provided, however, that the Term
shall automatically renew for additional one (1) year periods, unless notice of
non-renewal is given by either party to the other party at least ninety (90)
days prior to the initial Term or any renewal Term. If such notice is given,
this Agreement shall terminate at the end of the Term or the then current
renewal Term without further action by either the Company or the Executive.
Notwithstanding the foregoing, if a Change of Control occurs during the Term,
the Term shall automatically extend for the duration of the Change of Control
Period and shall automatically terminate at the end of the Change of Control
Period.

                                 3. EMPLOYMENT

3.1      CHANGE OF CONTROL PERIOD

During the Change of Control Period, the Company hereby agrees to continue the
Executive in its employ or in the employ of its affiliated companies, and the
Executive hereby agrees to remain in the employ of the Company or its affiliated
companies, in accordance with the terms and provisions of this Agreement;
provided, however, that either the Company or the Executive may terminate the
employment relationship during the Change of Control Period subject to the terms
of this Agreement.

3.2      POSITION AND DUTIES

During the Change of Control Period, the Executive's position, authority, duties
and responsibilities shall be at least commensurate in all material respects
with the most significant of those held immediately preceding the Change of
Control Date.

3.3      LOCATION

During the Change of Control Period, the Executive's services shall be performed
at the location of the Executive's assigned worksite as of the Change of Control
Date.

3.4      EMPLOYMENT AT WILL

The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or its affiliated
companies is "at will" and may be terminated by either the Executive or the
Company or its affiliated companies at any time with or without

                                       2



cause. Moreover, if prior to the Change of Control Date, the Executive's
employment with the Company or its affiliated companies terminates for any
reason, then the Executive shall have no further rights under this Agreement;
provided, however, that the Company may not avoid liability for any termination
payments that would have been required during the Change of Control Period
pursuant to Section 8 hereof by terminating the Executive prior to the Change of
Control Period where such termination is carried out in anticipation of a Change
of Control and the principal motivating purpose is to avoid liability for such
termination payments.

                            4. ATTENTION AND EFFORT

During the Change of Control Period, and excluding any periods of paid time-off
to which the Executive is entitled, the Executive will devote all of his
productive time, ability, attention and effort to the business and affairs of
the Company and the discharge of the responsibilities assigned to him hereunder,
and will use his reasonable best efforts to perform faithfully and efficiently
such responsibilities. It shall not be a violation of this Agreement for the
Executive to (a) serve on corporate, civic or charitable boards or committees,
(b) deliver lectures, fulfill speaking engagements or teach at educational
institutions, (c) manage personal investments, or (d) engage in activities
permitted by the policies of the Company or as specifically permitted by the
Company, so long as such activities do not significantly interfere with the full
time performance of the Executive's responsibilities in accordance with this
Agreement. It is expressly understood and agreed that to the extent any such
activities have been conducted by the Executive prior to the Change of Control
Period, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) during the Change of Control Period shall
not thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.

                                5. COMPENSATION

As long as the Executive remains employed by the Company during the Change of
Control Period, the Company agrees to pay or cause to be paid to the Executive,
and the Executive agrees to accept in exchange for the services rendered
hereunder by him, the following compensation:

5.1      SALARY

The Executive shall receive an annual base salary (the "Annual Base Salary"), at
least equal to the annual salary established by the Board or the Compensation
Committee of the Board (the "Compensation Committee") or the Chief Executive
Officer for the fiscal year in which the Change of Control Date occurs. The
Annual Base Salary shall be paid in substantially equal installments and at the
same intervals as the salaries of other executives of the Company are paid. The
Board or the Compensation Committee or the Chief Executive Officer shall review
the Annual Base Salary at least annually and shall determine in good faith and
consistent with any generally applicable Company policy any increases for future
years.

5.2      BONUS

In addition to the Annual Base Salary, the Executive shall be offered the
opportunity to earn, for each fiscal year ending during the Change of Control
Period, an annual bonus (the "Annual

                                       3



Bonus") payable, if the performance criteria for the bonus are satisfied, in
cash in an amount at least equal to the Three-Year Average Annual Bonus. The
performance criteria shall be set so that, in the good faith judgment of the
Board of Directors of the Company or a committee thereof, the Executive has
approximately the same probability of earning at least the same amount as the
Annual Bonus as his or her Three-Year Average Annual Bonus. "Three-Year Average
Annual Bonus" shall mean the average of bonuses paid or payable to the Executive
by the Company for each of the three fiscal years immediately preceding the year
in which the Change of Control occurs (including the annualized amount of any
such bonus paid or payable for any partial year, but not stock options or stock
awards, which became fully vested and any deferred compensation earned during
any of those years and excluding any sign-on or other one-time-only bonus). If
the Executive has not been an executive officer of the Company during the entire
three year period referred to above or was not offered a bonus during any of
those years, then the Three-Year Average Annual Bonus shall be calculated for
such shorter time that he or she was an executive officer of the Company and had
been offered a bonus. If the Executive had been offered an opportunity to earn a
bonus for the year in which the Change of Control occurs and not in anticipation
of the Change of Control, the Three-Year Average Annual Bonus shall exceed the
maximum he or she could have earned under that bonus arrangement if all
performance criteria were satisfied. Each Annual Bonus, if earned, shall be paid
no later than ninety (90) days after the end of the fiscal year for which the
Annual Bonus is awarded, unless the Executive and the Company agree to defer the
receipt of the Annual Bonus.

                                  6. BENEFITS

6.1      INCENTIVE, RETIREMENT AND WELFARE BENEFIT PLANS; VACATION

During the Change of Control Period, the Executive shall be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in such fringe benefit programs as shall be generally made
available to other comparable executives of the Company and its affiliated
companies from time to time during the Change of Control Period by action of the
Board (or any person or committee appointed by the Board to determine fringe
benefit programs and other emoluments), including, without limitation, paid
vacations; any stock purchase, savings or retirement plan, practice, policy or
program; and all welfare benefit plans, practices, policies or programs
(including, without limitation, medical, prescription, dental, disability,
salary continuance, executive life, group life accidental death and travel
accident insurance plans or programs) to the extent such fringe benefits are
made available to other comparable executives of the Company.

6.2      EXPENSES

During the Change of Control Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable employment expenses incurred by him in
accordance with the policies, practice and procedures of the Company and its
affiliated companies in effect for the executives of the Company and its
affiliated companies during the Change of Control Period.

                                       4



                                 7. TERMINATION

During the Change of Control Period, employment of the Executive may be
terminated as follows, but, in any case, the nondisclosure provisions set forth
in Section 10 hereof shall survive the termination of this Agreement and the
termination of the Executive's employment with the Company:

7.1      BY THE COMPANY OR THE EXECUTIVE

At any time during the Change of Control Period, the Company may terminate the
employment of the Executive with or without Cause (as defined below), and the
Executive may terminate his employment for Good Reason (as defined below) or for
any reason, upon giving the Notice of Termination (as defined below).

7.2      AUTOMATIC TERMINATION

This Agreement and the Executive's employment during the Change of Control
Period shall terminate automatically upon the death or Disability of the
Executive. The term "Disability" as used herein shall mean the Executive's
inability (with such accommodation as may be required by law and which places no
undue burden on the Company) to perform the duties set forth in Section 3.2
hereof for a period or periods aggregating twelve (12) weeks in any three
hundred sixty-five (365) day period as result of physical or mental illness,
loss of legal capacity or any other cause. The Executive and the Company hereby
acknowledge that the duties specified in Section 3.2 hereof are essential to the
Executive's position and that the Executive's ability to perform those duties is
the essence of this Agreement.

7.3      NOTICE OF TERMINATION

Any termination by the Company or by the Executive during the Change of Control
Period shall be communicated by Notice of Termination to the other party given
in accordance with Section 11 hereof. The term "Notice of Termination" shall
mean a written notice that (a) indicates the specific termination provision in
this Agreement relied upon and (b) to the extent applicable, sets forth briefly
the facts and circumstances claimed to provide the basis for termination of the
Executive's employment under the provision so indicated. The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder to preclude the
Executive or the Company from asserting such fact or circumstance in connection
with any enforcement of the Executive's or the Company's rights hereunder.

7.4      DATE OF TERMINATION

During the Change of Control Period, "Date of Termination" means (a) if the
Executive's employment is terminated by reason of death, the date of death, (b)
if the Executive's employment is terminated by reason of Disability, immediately
upon a determination by the Company of the Executive's Disability, and (c) in
all other cases, upon the giving of the Notice of Termination. Notwithstanding
the foregoing, the party giving the notice in the case of (c) above will have
the right, but not the obligation, to have the termination of employment be
effective upon the expiration of any period specified in the Notice of
Termination. In that event, the Executive's employment and performance of
services will continue during such specified period unless the other party (the
Company in the event of a termination by the Executive or the

                                       5



Executive in the case of a termination by the Company) elects thereafter to
terminate the employment of the Executive pursuant to Section 3.4 and that
termination is effective as of an earlier date. Notwithstanding the foregoing,
the Company may, upon notice to the Executive and without reducing the
Executive's compensation during such period, excuse the Executive from any or
all of his duties during such period.

                            8. TERMINATION PAYMENTS

In the event of termination of the Executive's employment during the Change of
Control Period, all compensation and benefits set forth in this Agreement shall
terminate except as specifically provided in this Section 8.

8.1      TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY THE EXECUTIVE FOR
         GOOD REASON

If during the Change of Control Period the Company terminates the Executive's
employment other than for Cause or the Executive terminates his employment for
Good Reason, the Executive shall be entitled to:

         (a)      Payment of the following accrued obligations (the "Accrued
                  Obligations"):

                  (i)      the Annual Base Salary through the Date of
                           Termination to the extent not theretofore paid;

                  (ii)     if the performance criteria for earning the Annual
                           Bonus for the full fiscal year of termination have
                           been fully satisfied at the time of termination
                           (excluding any requirement that the Executive be
                           employed by the Company at the end of the fiscal
                           year), the product of (x) the amount of the Annual
                           Bonus for that year and (y) a fraction the numerator
                           of which is the number of days in the current fiscal
                           year through the Date of Termination and the
                           denominator of which is three hundred sixty-five
                           (365);

                  (iii)    if the performance criteria for earning the Annual
                           Bonus for the full fiscal year of termination have
                           not been fully satisfied and the Board of Directors
                           of the Company determines that all such criteria
                           could not have been satisfied if the Executive
                           remained employed for the full fiscal year, no amount
                           for the Annual Bonus; and

                  (iv)     if neither (ii) nor (iii) apply, the product of (x)
                           the Three-Year Average Annual Bonus and (y) a
                           fraction the numerator of which is the number of days
                           in the current fiscal year through the Date of
                           Termination and the denominator of which is three
                           hundred sixty-five (365); and

                  (v)      any compensation previously deferred by the Executive
                           (together with accrued interest or earnings thereon,
                           if any) and any accrued paid time-off that would be
                           payable under the Company's standard policy, in each
                           case to the extent not theretofore paid.

         (b)      For eighteen (18) months after the Date of Termination or
                  until the Executive qualifies for comparable medical and
                  dental insurance benefits from another employer, whichever
                  occurs first, and subject to the satisfactory execution by the

                                       6



                  Executive (including the expiration of any revocation period)
                  of an agreement substantially in the form of Exhibit A hereof,
                  the Company shall pay the Executive's premiums for

                  (i)      health insurance benefit continuation for the
                           Executive and his family members, if applicable,
                           which the Company provides to the Executive under the
                           provisions of the federal Consolidated Omnibus Budget
                           Reconciliation Act of 1985, as amended ("COBRA"), to
                           the extent that the Company would have paid such
                           premium had the Executive remained employed by the
                           Company (such continued payment is hereinafter
                           referred to as "COBRA Continuation"); and

                  (ii)     additional health coverage (such as Exec-U-Care),
                           life, accidental death and disability and other
                           insurance programs for the Executive and his family
                           members, if applicable, to the extent such programs
                           existed on the Change of Control Date.

         (c)      Continuation of the payment of the Annual Base Salary for the
                  fiscal year in which the Date of Termination occurs for a
                  period of eighteen (18) months after the Date of Termination,
                  subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

         (d)      An amount equal to one and one-half times the Three-Year
                  Average Annual Bonus, subject to the satisfactory execution by
                  the Executive (including the expiration of any revocation
                  period) of an agreement substantially in the form of Exhibit A
                  hereof.

         (e)      Immediate vesting of all outstanding stock options previously
                  granted to the Executive by the Company, subject to the
                  satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A hereof.

         (f)      The provision in any agreement evidencing any outstanding
                  stock option causing the option to terminate upon the
                  expiration of three months (or any other period relating to
                  termination of employment) after termination of employment
                  shall be of no force or effect, except that nothing herein
                  shall extend any such option beyond its original term or shall
                  affect its termination for any reason other than termination
                  of employment. The provisions of this clause (f) are subject
                  to the satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A.

8.2      TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON

If during the Change of Control Period the Executive's employment shall be
terminated by the Company for Cause or by the Executive for other than Good
Reason, this Agreement shall terminate without further obligation on the part of
the Company to the Executive, other than the Company's obligation to pay the
Executive the amounts in Section 8.1(a)(i) and (v).

                                       7



8.3      EXPIRATION OF TERM

In the event the Executive's employment is not terminated prior to expiration of
the Term and notice of nonrenewal is given pursuant to Section 2, this Agreement
shall terminate without further obligation on the part of the Company to the
Executive upon the expiration of the Term.

8.4      TERMINATION BECAUSE OF DEATH OR DISABILITY

Upon the Executive's death or Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Executive or his legal representatives under this Agreement other than the
Company's obligation, if any, to pay the Executive the amounts specified in
Section 8.1(a) to (e).

8.5      PAYMENT SCHEDULE

All payments of Accrued Obligations, or any portion thereof payable pursuant to
this Section 8, shall be made to the Executive within ten (10) working days of
the Date of Termination except that

         (a)      any amount payable to the Executive pursuant to Section
                  8.1(a)(ii), (iii) or (iv) or Section 8.1(d) shall be paid to
                  Executive when his or her bonus would have been paid if he or
                  she were still employed; and

         (b)      any payments payable to the Executive pursuant to Section
                  8.1(c) hereof shall be made to the Executive in the form of
                  salary continuation payable at normal payroll intervals during
                  the eighteen (18) month severance period on the dates when the
                  Executive would have received his or her payments of salary if
                  he or she were still employed and in the amounts he or she
                  would have received.

8.6      CAUSE

For purposes of this Agreement, termination of Executive's employment shall be
for "Cause" if it is for any of the following:

         (a)      A refusal of the Executive to carry out any material lawful
                  duties of the Executive or any directions or instructions of
                  the Board or senior management of the Company which are
                  reasonably consistent with those duties;

         (b)      Failure to perform satisfactorily any lawful duties of the
                  Executive that are consistent with those duties hereof or any
                  directions or instructions of the Board or senior management
                  that are consistent with those duties, provided, however, that
                  the Executive has been given notice and has failed to correct
                  any such failure within ten (10) days thereafter (unless any
                  such correction by its nature cannot be done in 10 days, in
                  which event the Executive will have a reasonable time to
                  correct the failure) and provided further that the Company
                  shall have no such obligation to give notice and the Executive
                  shall have no such opportunity to correct failures more than
                  two times in any twelve calendar month period;

         (c)      Violation by the Executive of a local, state or federal law
                  involving the commission of a crime, other than minor traffic
                  violations, or any other criminal act involving moral
                  turpitude;

                                       8



         (d)      The Executive's gross negligence, willful misconduct, or
                  breach of his or her duty to the Company involving
                  self-dealing or personal profit;

         (e)      Current abuse by the Executive of alcohol or controlled
                  substances; deception, fraud, misrepresentation or dishonesty
                  by the Executive; or any incident materially compromising the
                  Executive's reputation or ability to represent the Company
                  with investors, customers or the public;

         (f)      Any other material violation of any provision of this
                  Agreement by the Executive not described in (a) or (b) above,
                  subject to the same notice and opportunity-to-correct
                  provisions as are set forth in (b) above or

         (g)      The Executive reaching a mandatory retirement age established
                  by the Company before the Change in Control and not in
                  anticipation thereof.

8.7      GOOD REASON

For purposes of this Agreement, "Good Reason" means:

         (a)      Any failure by the Company to comply with any of the
                  provisions of Section 5 or Section 6 hereof, other than
                  isolated and inadvertent failure not taken in bad faith and
                  that is remedied by the Company promptly after receipt of
                  notice thereof given by the Executive;

         (b)      Any material diminution in Executive's position, authority,
                  duties or responsibilities as contemplated by Section 3.2
                  hereof or any other action by the Company that results in a
                  material diminution in such position, authority, duties or
                  responsibilities;

         (c)      The Company's requiring the Executive to be based at any
                  office or location that is more than fifty (50) miles from the
                  location of the Executive's assigned worksite immediately
                  prior to the Change of Control Date and Executive's residence
                  at the time any such requirement is imposed;

         (d)      Any non-renewal by the Company of this Agreement; provided,
                  however, that the Executive may only utilize this paragraph
                  (d) during the 30-day period immediately following his receipt
                  of the notice of non-renewal given by the Company pursuant to
                  Section 2 hereof;

         (e)      Any failure by the Company to comply with and satisfy Section
                  12 hereof; provided, however, that the Company's successor has
                  received at least ten (10) days' prior written notice from the
                  Company or the Executive of the requirements of Section 12
                  hereof; or

         (f)      Any other material violation of any provision of this
                  Agreement by the Company.

Notwithstanding the foregoing, no basis for a termination for Good Reason will
be deemed to exist unless Executive notifies the Company in writing of any event
in (a) through (f) above and the Company or its successor fails to cure any such
event within 30 days after receipt of the notice.

8.8      WITHHOLDING TAXES

Any payments provided for in this Agreement shall be paid net of any applicable
withholding required under federal, state or local law.

                                       9



8.9      WARN ACT

Notwithstanding the provisions of Sections 8.1 through 8.5, in the event the
Executive is entitled, by operation of any act or law, to unemployment
compensation benefits or benefits under the Worker Adjustment and Retraining Act
of 1988 (known as the "WARN Act" in connection with the termination of his or
her employment in addition to those required to be paid to him or her under this
Agreement, then to the extent permitted by applicable law governing severance
payments or notice of termination of employment, the Company shall be entitled
to offset against the amounts payable hereunder the amounts of any such mandated
payments.

8.10     TERMINATION BEFORE CHANGE OF CONTROL

In the case of termination of employment prior to the Change of Control Date as
contemplated by Section 3.4, the Date of Termination shall be deemed to be the
Change of Control Date, except that, if any of the benefits referred to in
Section 8.1 have been paid or provided for all or any portion of the period
between the Date of Termination and the Change of Control Date, the amount of
benefits which would otherwise be paid or provided shall be reduced by the
amount of the benefits paid or provided for the period prior to the Change of
Control Date.

                       9. REPRESENTATIONS AND WARRANTIES

In order to induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that neither the execution nor the
performance of this Agreement by the Executive will violate or conflict in any
way with any other agreement by which the Executive may be bound.

            10. NONDISCLOSURE; RETURN OF MATERIALS; NONSOLICITATION

10.1     NONDISCLOSURE

Except as required by his employment with the Company, the Executive will not,
at any time during the term of employment by the Company, or at any time
thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Executive understands that the Company will be relying on this
Agreement in continuing the Executive's employment, paying him compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.

10.2     RETURN OF MATERIALS

All documents, records, notebooks, notes, memoranda, drawings, computer files or
other documents made or compiled by the Executive at any time, or in his
possession, including any and all copies thereof, shall be the property of the
Company and shall be held by the Executive in trust and solely for the benefit
of the Company, and shall be delivered to the Company by the Executive upon
termination of employment or at any other time upon request by the Company.

10.3     NONSOLICITATION

During the period that Executive is receiving payments described in Section
8.1(c), he or she will not actively solicit any employees of the Company or its
Affiliates to accept employment from

                                       10



any other person or entity. "Affiliate" is defined as any entity controlling,
controlled by or under common control with, the Company within the meaning of
Rule 405 of the Security and Exchange Commission under the Securities Act of
1933.

                               11. FORM OF NOTICE

Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally or by
registered or certified mail, return receipt requested, at the address set forth
below or at such other address as may hereafter lie designated by notice given
in compliance with the terms hereof:

    If to the Executive:                11202 Canton Drive
                                        Studio City, CA 91604

    If to the Company:                  MannKind Corporation
                                        ATTN:  President
                                        28903 North Avenue Paine
                                        Valencia, CA 91355

or such other address as shall be provided in accordance with the terms hereof.
Except as set forth in Section 7.4 hereof, if notice is mailed, such notice
shall be effective upon mailing. Notices sent in any other manner specified
above shall be effective upon receipt.

                                 12. ASSIGNMENT

This Agreement is personal to the Executive and shall not be assignable by the
Executive.

The Company shall assign to and require any successor (whether by purchase of
assets, merger or consolidation) to all or substantially all the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean MannKind Corporation and any successor to its business
and/or assets as aforesaid that assumes and agrees to perform this Agreement by
operation of law, or otherwise. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns.

                                  13. WAIVERS

No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.

                                       11



                           14. AMENDMENTS IN WRITING

No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, or consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the President
or Chief Executive Officer of the Company and the Executive, and each such
amendment, modification, waiver, termination or discharge shall be effective
only in the specific instance and for the specific purpose for which given. No
provision of this Agreement shall be varied, contradicted or explained by any
oral agreement, course of dealing or performance or any other matter not set
forth in an agreement in writing and signed by the Company and the Executive.

                               15. APPLICABLE LAW

This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of California, without regard to any
rules governing conflicts of laws.

                        16. ARBITRATION; ATTORNEYS' FEES

Except in connection with enforcing Section 10 hereof, for which legal and
equitable remedies may be sought in a court of law, any dispute arising under
this Agreement shall be subject to arbitration. The arbitration proceeding shall
be conducted in accordance with the Employment Arbitration Rules of the American
Arbitration Association (the "AAA Rules") then in effect, conducted by one
arbitrator either mutually agreed upon or selected in accordance with the AAA
Rules. The arbitration shall be conducted in Los Angeles County, California,
under the jurisdiction of the Los Angeles office of the American Arbitration
Association. The arbitrator shall have authority only to interpret and apply the
provisions of this Agreement, and shall have no authority to add to, subtract
from or otherwise modify the terms of this Agreement. Any demand for arbitration
must be made within sixty (60) days of the event(s) giving rise to the claim
that this Agreement has been breached. The arbitrator's decision shall be final
and binding, and each party agrees to be bound to by the arbitrator's award,
subject only to an appeal therefrom in accordance with the laws of the State of
California. Either party may obtain judgment upon the arbitrator's award in the
Superior Court of Los Angeles County, California.

If it becomes necessary to pursue or defend any legal proceeding, whether in
arbitration or court, in order to resolve all disputes arising under this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover its reasonable costs and attorneys' fees.

                                17. SEVERABILITY

If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full

                                       12



extent permitted by law, (a) all other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed in order
to carry out the intent of the parties hereto as nearly as may be possible, (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.

                   18. COORDINATION WITH SEVERANCE AGREEMENT

The agreement regarding the Executive's employment with the Company that the
parties are entering into contemporaneously with this Agreement provides for
certain forms of severance and benefit payments in the event of termination of
the Executive's employment under certain conditions (the "Severance Agreement").
This Agreement is in addition to the Severance Agreement and in no way
supersedes or nullifies the that agreement. Nevertheless, it is possible for
termination of employment to fall within the scope of both agreements. In such
event, payments made to the Executive under Section 8.1 hereof shall be
coordinated with payments made to the Executive under the Severance Agreement as
follows:

         (a)      the obligations under Section 5.1(a) of the Severance
                  Agreement shall be paid first, in which case the Accrued
                  Obligations under this Agreement need not be paid;

         (b)      COBRA Contribution under this Agreement need not be provided
                  to the extent COBRA continuation is provided under the
                  Severance Agreement; and

         (c)      the severance payments required under Sections 8.1(c) and
                  8.1(d) hereof shall be paid first, in which case any severance
                  payments required under Sections 5.1(c) and 5.1(d) of the
                  Severance Agreement need not be provided.

                        19. EXCESS PARACHUTE LIMITATION

If any portion of the payments or benefits for the Executive under this
Agreement, taken together with any other agreement or benefit plan of the
Company (including stock options), would be characterized as an "excess
parachute payment" to the Executive under Section 280G of the Internal Revenue
Code of 1986, amended (the "Code"), the payments and benefits shall be reduced
to the extent necessary to avoid the imposition of any tax that would otherwise
be owed under Section 4999 of the Code. Such reductions shall first be made to
the bonus payments referred to in Section 8.1(d) and Section 8.1(a)(ii), (iii)
or (iv), whichever is applicable, then to the salary payments referred to in
Section 8.1(c), then to the salary payments under Section 8.1(a)(i) and finally
to the number of shares subject to options that are accelerated pursuant to
Section 8.1(e) in the reverse order of grant of those options. The determination
of whether and the extent to which payments and benefits are to be reduced
pursuant to this Section 19 shall be made in writing by tax accountants and/or
tax lawyers selected by the Company and reasonably acceptable to the Executive.

                                       13



                              20. ENTIRE AGREEMENT

Except as described in Section 18 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior or contemporaneous oral or written communications,
understandings or agreements between the Company and the Executive with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the agreement relating to proprietary information and inventions
between the Company and the Executive shall continue in full force and effect.

                                21. COUNTERPARTS

This Agreement may be executed in counterparts, each of which counterpart shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties have executed and entered into this Agreement
effective on the date first set forth above.

MANNKIND CORPORATION                                     EXECUTIVE

By: /s/ Michael Page                                    /s/ David Thomson
    --------------------                                -----------------------
Its: Vice Chairman & CEO                                David Thomson

                                       14



                                   APPENDIX A

For purposes of this Agreement, a "Change of Control" shall be deemed to have
occurred, if any one of the following events occurs:

         (a)      the acquisition by any person or group of beneficial ownership
                  of more than 50% of the outstanding shares of Common Stock of
                  the Company, or, if there are then outstanding any other
                  voting securities of the Company, such acquisition of more
                  than 50% of the combined voting power of the then outstanding
                  voting securities of the Company entitled to vote generally in
                  the election of directors, except for any of the following
                  acquisitions of beneficial ownership of Common Stock or other
                  voting securities of the Company:

                  (i)      by the Company or any Employee benefit plan (or
                           related trust) sponsored or maintained by the Company
                           or any entity controlled by the Company;

                  (ii)     by Alfred E. Mann; or

                  (iii)    by any person or entity during Mr. Mann's lifetime if
                           the shares acquired were beneficially owned by Mr.
                           Mann immediately prior to their acquisition and the
                           acquisition is a transfer to a trust, partnership,
                           corporation or other entity in which Mr. Mann owns a
                           majority of the beneficial interests;

         (b)      the Company sells all or substantially all of its assets (or
                  consummates any transaction having a similar effect) or the
                  Company merges or consolidates with another entity or
                  completes a reorganization unless the holders of the voting
                  securities of the Company outstanding immediately prior to the
                  transaction own immediately after the transaction in
                  approximately the same proportions 50% or more of the combined
                  voting power of the voting securities of the entity purchasing
                  the assets or surviving the merger or consolidation or the
                  voting securities of its parent company, or, in the case of a
                  reorganization, 50% or more of the combined voting power of
                  the voting securities of the Company;

                  Notwithstanding the foregoing, any purchase or redemption of
                  outstanding shares of Common Stock or other voting securities
                  by the Company resulting in an increase in the percentage of
                  outstanding shares or other voting securities beneficially
                  owned by any person or group shall be deemed to constitute a
                  reorganization; however, no increase in the percentage of
                  outstanding shares or other voting securities beneficially
                  owned by Alfred E. Mann or any person or entities referred to
                  in (a)(i) or (iii) above resulting from any redemption of
                  shares or other voting securities by the Company shall result
                  in a Change of Control;

         (c)      the Company is liquidated; or

         (d)      the Board (if the Company continues to own its business) or
                  the board of directors or comparable governing body of any
                  successor owner of its business (as a result of a transaction
                  which is not itself a Change of Control) consists of a
                  majority of directors or members who are not Incumbent
                  Directors.

For purposes of this Agreement, (A) "voting securities" means securities whose
holders are entitled to vote in the election of all or a majority of the
authorized number of directors at the

                                       15



time the determination of 'voting securities" status is being made and (B) 50%
or more of the combined voting power shall refer to the voting power to elect a
majority of the authorized number of directors determined at that time. "Voting
securities" shall not include preferred stock or other securities whose holders
are entitled to vote in the election of all or a majority of the authorized
number of directors upon the occurrence of some event or circumstance which has
not occurred and such rights to vote are not in effect at the time of the
determination of "voting securities" status. Preferred stock and other
securities whose holders are then entitled to vote for less than a majority of
the authorized number of directors, shall not be considered "voting securities."

                                       16



                                    EXHIBIT A
                    GENERAL RELEASE AND SETTLEMENT AGREEMENT

The parties to this General Release and Settlement Agreement ("Release") between
________________________________ ("Employee") and MannKind Corporation ("the
Company") state that:

The parties desire to terminate their employment relationship. Both parties
desire to fully and finally resolve all differences and disputes without further
costs;

THEREFORE, the parties agree:

1.   In consideration of the payments to Employee as provided in the Change of
     Control Agreement between the Employee and the Company dated August 1,
     2003, Employee does forever release and discharge the Company and all its
     parent, subsidiary and affiliated entities and all their past, present and
     future directors, officers, agents, employees, or representatives from all
     claims, damages, liabilities, and demands of whatever kind and character up
     to the date she/he signs below ("disputes"), including, but not limited to,
     arising out of or in any way related to any of the circumstances of
     Employee's employment or termination of employment with the Company.

     Employee releases all disputes relating to or arising out of any state,
     municipal, or federal statute, ordinance, regulation, order, contract,
     tort, or common law, including, but not limited to, the Age Discrimination
     in Employment Act. The parties intend that the disputes released herein be
     construed as broadly as possible.

2.   This Release also extends to all disputes by Employee against the Company
     whether known or unknown, suspected or unsuspected, past or present, and
     whether or not they arise out of or are attributable to the circumstances
     of Employee's employment or termination of employment with the Company.
     Specifically, Employee hereby expressly waives any and all rights under
     Section 1542 of the California Civil Code, which reads in full as follows:

         SECTION 1542. GENERAL RELEASE. A GENERAL RELEASE DOES NOT EXTEND TO
         CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
         FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
         HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

3.   Employee further understands and agrees that neither the payment nor the
     execution of this Release, or any part of it, shall constitute or be
     construed as an admission of any alleged liability or wrongdoing whatsoever
     by the Company. The Company expressly denies it has committed any alleged
     liability or wrongdoing.

4.   All films, files, books, computer files, correspondence, lists, equipment,
     manuals, other written and graphic records and the like and all copies
     thereof, affecting or relating to the business of Company which Employee
     shall have prepared, used, constructed, observed, possessed or controlled,
     shall be and remain the Company's sole property. Employee agrees to deliver
     promptly to the Company all such property relating to the Company, which
     are or have been in his possession or under his control. Employee also
     agrees to continue to abide by his confidentiality of information and
     inventions agreement with the Company.

5.   Employee agrees not to seek reemployment with the Company or any of its
     affiliates.

                                       17



6.   This Release shall be governed by the substantive law of the State of
     California. In the event of any dispute concerning the interpretation of
     this Release or in any way related to Employee's employment or termination
     of employment, the dispute shall be resolved by arbitration within the
     County of Los Angeles, California, in accordance with the then existing
     rules for employment dispute arbitration of the American Arbitration
     Association, and judgment upon any arbitration award may be entered by any
     state or federal court having jurisdiction thereof. The parties intend this
     arbitration provision to be valid and construed as broadly as possible. The
     prevailing party in such arbitration shall recover its reasonable costs and
     attorneys' fees.

7.   If any provision of this General Release and Settlement Agreement is
     determined to be invalid or unenforceable, all of the other provisions
     shall remain valid and enforceable notwithstanding, unless the provision
     found to be unenforceable is of such material effect that this Release
     cannot be performed in accordance with the intent of the parties in the
     absence thereof.

8.   No promise or agreement other than that expressed herein has been made.
     This General Release and Settlement Agreement constitutes a single
     integrated contract expressing the entire agreement of the parties hereto.
     There are no other agreements, written or oral, express or implied, between
     the parties concerning the subject matter hereof, except the provisions set
     forth in this Release. This Release supersedes all previous agreements and
     understandings, whether written or oral. This Release can be amended,
     modified or terminated only by a writing executed by both Employee and the
     President of the Company.

9.   In compliance with the Olders Workers Benefit Protection Act, Employee has
     been given twenty-one (21) days to review this Release before signing it.
     Employee also understands that he may revoke this General Release and
     Settlement Agreement within seven (7) days after it has been signed and
     that it is not enforceable or effective until the seven (7) day revocation
     period has expired. Additionally, employee has been advised in this writing
     to consult with an attorney before executing this General Release and
     Settlement Agreement.

10.  THE EMPLOYEE STATES THAT HE/SHE IS IN GOOD HEALTH AND FULLY COMPETENT TO
     MANAGE HIS/HER BUSINESS AFFAIRS, THAT HE/SHE HAS CAREFULLY READ THIS
     GENERAL RELEASE AND SETTLEMENT AGREEMENT, THAT HE/SHE FULLY UNDERSTANDS ITS
     FINAL AND BINDING EFFECT, THAT THE ONLY PROMISES MADE TO HIM/HER TO SIGN
     THIS RELEASE ARE THOSE STATED AND CONTAINED IN THIS RELEASE, AND THAT
     HE/SHE IS SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY.

AGREED AND ACCEPTED this _______ day of __________, _______:

MANNKIND CORPORATION                             EXECUTIVE

By:___________________________                   _______________________________

Its:___________________________

                                       18

                                                                   Exhibit 10.13

                              MANNKIND CORPORATION

                           CHANGE OF CONTROL AGREEMENT

This Change of Control Agreement (this "Agreement"), dated and effective as of
August 1, 2003, is between MannKind Corporation, a Delaware corporation (the
"Company"), and Dick Anderson (the "Executive").

WHEREAS the board of directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined in
Section 1 hereof) of the Company.

AND WHEREAS the Board believes it is imperative to diminish the inevitable
distraction of the Executive arising from the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with reasonable compensation and benefit arrangements upon a Change of
Control.

NOW THEREFORE, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.

                                 1. DEFINITIONS

For purposes of this Agreement, the following terms shall have the respective
meanings:

         (a)      "Accrued Obligations" shall have the meaning set forth in
                  Section 8.1;

         (b)      "Change of Control" shall have the Definition set forth in
                  Appendix A hereto, which is hereby incorporated by reference;

         (c)      Change of Control Date" shall mean the first date on which a
                  Change of Control occurs;

         (d)      "Change of Control Period" shall mean the two (2) year period
                  commencing on the Change of Control Date and ending on the
                  second anniversary of such date;

         (e)      "Incumbent Directors" includes only those persons who are:

                  (i)      serving as directors of the Company on the date of
                           this Agreement or,

                  (ii)     elected by a majority of the directors who then
                           constitute Incumbent Directors or selected by a
                           majority of such directors to be nominated for
                           election by the stockholders and are elected.

                  In no event, however, shall any director whose election to
                  office occurs as a result of an actual or threatened election
                  contest with respect to the election or removal of directors
                  or other actual or threatened solicitation of proxies or
                  consents on behalf of a person or entity other than the Board
                  be an Incumbent Director

                                       1



         (f)      "Person", "Acquisition", "Beneficial Ownership" and "Group."
                  The term "person" shall have the meaning set forth in the
                  Securities Exchange Act of 1934 and the terms "beneficial
                  ownership," "acquisition," and "group" shall have the meanings
                  set forth in Rules 13d-3 and 13d-5 of the Rules of the
                  Security and Exchange Commission adopted under the Securities
                  Exchange Act of 1934 except that shares which a person or
                  group has the right to acquire shall not be deemed
                  beneficially owned until the right is exercised and the shares
                  are so acquired.

         (g)      "Three-Year Average Annual Bonus" shall have the meaning set
                  forth in Section 5.2.

                                    2. TERM

The term of this Agreement ("Term") shall be for a period of two (2) years from
the date of this Agreement as first appearing; provided, however, that the Term
shall automatically renew for additional one (1) year periods, unless notice of
non-renewal is given by either party to the other party at least ninety (90)
days prior to the initial Term or any renewal Term. If such notice is given,
this Agreement shall terminate at the end of the Term or the then current
renewal Term without further action by either the Company or the Executive.
Notwithstanding the foregoing, if a Change of Control occurs during the Term,
the Term shall automatically extend for the duration of the Change of Control
Period and shall automatically terminate at the end of the Change of Control
Period.

                                 3. EMPLOYMENT

3.1      CHANGE OF CONTROL PERIOD

During the Change of Control Period, the Company hereby agrees to continue the
Executive in its employ or in the employ of its affiliated companies, and the
Executive hereby agrees to remain in the employ of the Company or its affiliated
companies, in accordance with the terms and provisions of this Agreement;
provided, however, that either the Company or the Executive may terminate the
employment relationship during the Change of Control Period subject to the terms
of this Agreement.

3.2      POSITION AND DUTIES

During the Change of Control Period, the Executive's position, authority, duties
and responsibilities shall be at least commensurate in all material respects
with the most significant of those held immediately preceding the Change of
Control Date.

3.3      LOCATION

During the Change of Control Period, the Executive's services shall be performed
at the location of the Executive's assigned worksite as of the Change of Control
Date.

3.4      EMPLOYMENT AT WILL

The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or its affiliated
companies is "at will" and may be terminated by either the Executive or the
Company or its affiliated companies at any time with or without

                                       2



cause. Moreover, if prior to the Change of Control Date, the Executive's
employment with the Company or its affiliated companies terminates for any
reason, then the Executive shall have no further rights under this Agreement;
provided, however, that the Company may not avoid liability for any termination
payments that would have been required during the Change of Control Period
pursuant to Section 8 hereof by terminating the Executive prior to the Change of
Control Period where such termination is carried out in anticipation of a Change
of Control and the principal motivating purpose is to avoid liability for such
termination payments.

                            4. ATTENTION AND EFFORT

During the Change of Control Period, and excluding any periods of paid time-off
to which the Executive is entitled, the Executive will devote all of his
productive time, ability, attention and effort to the business and affairs of
the Company and the discharge of the responsibilities assigned to him hereunder,
and will use his reasonable best efforts to perform faithfully and efficiently
such responsibilities. It shall not be a violation of this Agreement for the
Executive to (a) serve on corporate, civic or charitable boards or committees,
(b) deliver lectures, fulfill speaking engagements or teach at educational
institutions, (c) manage personal investments, or (d) engage in activities
permitted by the policies of the Company or as specifically permitted by the
Company, so long as such activities do not significantly interfere with the full
time performance of the Executive's responsibilities in accordance with this
Agreement. It is expressly understood and agreed that to the extent any such
activities have been conducted by the Executive prior to the Change of Control
Period, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) during the Change of Control Period shall
not thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.

                                5. COMPENSATION

As long as the Executive remains employed by the Company during the Change of
Control Period, the Company agrees to pay or cause to be paid to the Executive,
and the Executive agrees to accept in exchange for the services rendered
hereunder by him, the following compensation:

5.1      SALARY

The Executive shall receive an annual base salary (the "Annual Base Salary"), at
least equal to the annual salary established by the Board or the Compensation
Committee of the Board (the "Compensation Committee") or the Chief Executive
Officer for the fiscal year in which the Change of Control Date occurs. The
Annual Base Salary shall be paid in substantially equal installments and at the
same intervals as the salaries of other executives of the Company are paid. The
Board or the Compensation Committee or the Chief Executive Officer shall review
the Annual Base Salary at least annually and shall determine in good faith and
consistent with any generally applicable Company policy any increases for future
years.

5.2      BONUS

In addition to the Annual Base Salary, the Executive shall be offered the
opportunity to earn, for each fiscal year ending during the Change of Control
Period, an annual bonus (the "Annual

                                       3



Bonus") payable, if the performance criteria for the bonus are satisfied, in
cash in an amount at least equal to the Three-Year Average Annual Bonus. The
performance criteria shall be set so that, in the good faith judgment of the
Board of Directors of the Company or a committee thereof, the Executive has
approximately the same probability of earning at least the same amount as the
Annual Bonus as his or her Three-Year Average Annual Bonus. "Three-Year Average
Annual Bonus" shall mean the average of bonuses paid or payable to the Executive
by the Company for each of the three fiscal years immediately preceding the year
in which the Change of Control occurs (including the annualized amount of any
such bonus paid or payable for any partial year, but not stock options or stock
awards, which became fully vested and any deferred compensation earned during
any of those years and excluding any sign-on or other one-time-only bonus). If
the Executive has not been an executive officer of the Company during the entire
three year period referred to above or was not offered a bonus during any of
those years, then the Three-Year Average Annual Bonus shall be calculated for
such shorter time that he or she was an executive officer of the Company and had
been offered a bonus. If the Executive had been offered an opportunity to earn a
bonus for the year in which the Change of Control occurs and not in anticipation
of the Change of Control, the Three-Year Average Annual Bonus shall exceed the
maximum he or she could have earned under that bonus arrangement if all
performance criteria were satisfied. Each Annual Bonus, if earned, shall be paid
no later than ninety (90) days after the end of the fiscal year for which the
Annual Bonus is awarded, unless the Executive and the Company agree to defer the
receipt of the Annual Bonus.

                                  6. BENEFITS

6.1      INCENTIVE, RETIREMENT AND WELFARE BENEFIT PLANS; VACATION

During the Change of Control Period, the Executive shall be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in such fringe benefit programs as shall be generally made
available to other comparable executives of the Company and its affiliated
companies from time to time during the Change of Control Period by action of the
Board (or any person or committee appointed by the Board to determine fringe
benefit programs and other emoluments), including, without limitation, paid
vacations; any stock purchase, savings or retirement plan, practice, policy or
program; and all welfare benefit plans, practices, policies or programs
(including, without limitation, medical, prescription, dental, disability,
salary continuance, executive life, group life accidental death and travel
accident insurance plans or programs) to the extent such fringe benefits are
made available to other comparable executives of the Company.

6.2      EXPENSES

During the Change of Control Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable employment expenses incurred by him in
accordance with the policies, practice and procedures of the Company and its
affiliated companies in effect for the executives of the Company and its
affiliated companies during the Change of Control Period.

                                       4



                                 7. TERMINATION

During the Change of Control Period, employment of the Executive may be
terminated as follows, but, in any case, the nondisclosure provisions set forth
in Section 10 hereof shall survive the termination of this Agreement and the
termination of the Executive's employment with the Company:

7.1      BY THE COMPANY OR THE EXECUTIVE

At any time during the Change of Control Period, the Company may terminate the
employment of the Executive with or without Cause (as defined below), and the
Executive may terminate his employment for Good Reason (as defined below) or for
any reason, upon giving the Notice of Termination (as defined below).

7.2      AUTOMATIC TERMINATION

This Agreement and the Executive's employment during the Change of Control
Period shall terminate automatically upon the death or Disability of the
Executive. The term "Disability" as used herein shall mean the Executive's
inability (with such accommodation as may be required by law and which places no
undue burden on the Company) to perform the duties set forth in Section 3.2
hereof for a period or periods aggregating twelve (12) weeks in any three
hundred sixty-five (365) day period as result of physical or mental illness,
loss of legal capacity or any other cause. The Executive and the Company hereby
acknowledge that the duties specified in Section 3.2 hereof are essential to the
Executive's position and that the Executive's ability to perform those duties is
the essence of this Agreement.

7.3      NOTICE OF TERMINATION

Any termination by the Company or by the Executive during the Change of Control
Period shall be communicated by Notice of Termination to the other party given
in accordance with Section 11 hereof. The term "Notice of Termination" shall
mean a written notice that (a) indicates the specific termination provision in
this Agreement relied upon and (b) to the extent applicable, sets forth briefly
the facts and circumstances claimed to provide the basis for termination of the
Executive's employment under the provision so indicated. The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder to preclude the
Executive or the Company from asserting such fact or circumstance in connection
with any enforcement of the Executive's or the Company's rights hereunder.

7.4      DATE OF TERMINATION

During the Change of Control Period, "Date of Termination" means (a) if the
Executive's employment is terminated by reason of death, the date of death, (b)
if the Executive's employment is terminated by reason of Disability, immediately
upon a determination by the Company of the Executive's Disability, and (c) in
all other cases, upon the giving of the Notice of Termination. Notwithstanding
the foregoing, the party giving the notice in the case of (c) above will have
the right, but not the obligation, to have the termination of employment be
effective upon the expiration of any period specified in the Notice of
Termination. In that event, the Executive's employment and performance of
services will continue during such specified period unless the other party (the
Company in the event of a termination by the Executive or the

                                       5



Executive in the case of a termination by the Company) elects thereafter to
terminate the employment of the Executive pursuant to Section 3.4 and that
termination is effective as of an earlier date. Notwithstanding the foregoing,
the Company may, upon notice to the Executive and without reducing the
Executive's compensation during such period, excuse the Executive from any or
all of his duties during such period.

                            8. TERMINATION PAYMENTS

In the event of termination of the Executive's employment during the Change of
Control Period, all compensation and benefits set forth in this Agreement shall
terminate except as specifically provided in this Section 8.

8.1      TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY THE EXECUTIVE FOR
         GOOD REASON

If during the Change of Control Period the Company terminates the Executive's
employment other than for Cause or the Executive terminates his employment for
Good Reason, the Executive shall be entitled to:

         (a)      Payment of the following accrued obligations (the "Accrued
                  Obligations"):

                  (i)      the Annual Base Salary through the Date of
                           Termination to the extent not theretofore paid;

                  (ii)     if the performance criteria for earning the Annual
                           Bonus for the full fiscal year of termination have
                           been fully satisfied at the time of termination
                           (excluding any requirement that the Executive be
                           employed by the Company at the end of the fiscal
                           year), the product of (x) the amount of the Annual
                           Bonus for that year and (y) a fraction the numerator
                           of which is the number of days in the current fiscal
                           year through the Date of Termination and the
                           denominator of which is three hundred sixty-five
                           (365);

                  (iii)    if the performance criteria for earning the Annual
                           Bonus for the full fiscal year of termination have
                           not been fully satisfied and the Board of Directors
                           of the Company determines that all such criteria
                           could not have been satisfied if the Executive
                           remained employed for the full fiscal year, no amount
                           for the Annual Bonus; and

                  (iv)     if neither (ii) nor (iii) apply, the product of (x)
                           the Three-Year Average Annual Bonus and (y) a
                           fraction the numerator of which is the number of days
                           in the current fiscal year through the Date of
                           Termination and the denominator of which is three
                           hundred sixty-five (365); and

                  (v)      any compensation previously deferred by the Executive
                           (together with accrued interest or earnings thereon,
                           if any) and any accrued paid time-off that would be
                           payable under the Company's standard policy, in each
                           case to the extent not theretofore paid.

         (b)      For eighteen (18) months after the Date of Termination or
                  until the Executive qualifies for comparable medical and
                  dental insurance benefits from another employer, whichever
                  occurs first, and subject to the satisfactory execution by the

                                       6



                  Executive (including the expiration of any revocation period)
                  of an agreement substantially in the form of Exhibit A hereof,
                  the Company shall pay the Executive's premiums for

                  (i)      health insurance benefit continuation for the
                           Executive and his family members, if applicable,
                           which the Company provides to the Executive under the
                           provisions of the federal Consolidated Omnibus Budget
                           Reconciliation Act of 1985, as amended ("COBRA"), to
                           the extent that the Company would have paid such
                           premium had the Executive remained employed by the
                           Company (such continued payment is hereinafter
                           referred to as "COBRA Continuation"); and

                  (ii)     additional health coverage (such as Exec-U-Care),
                           life, accidental death and disability and other
                           insurance programs for the Executive and his family
                           members, if applicable, to the extent such programs
                           existed on the Change of Control Date.

         (c)      Continuation of the payment of the Annual Base Salary for the
                  fiscal year in which the Date of Termination occurs for a
                  period of eighteen (18) months after the Date of Termination,
                  subject to the satisfactory execution by the Executive
                  (including the expiration of any revocation period) of an
                  agreement substantially in the form of Exhibit A hereof.

         (d)      An amount equal to one and one-half times the Three-Year
                  Average Annual Bonus, subject to the satisfactory execution by
                  the Executive (including the expiration of any revocation
                  period) of an agreement substantially in the form of Exhibit A
                  hereof.

         (e)      Immediate vesting of all outstanding stock options previously
                  granted to the Executive by the Company, subject to the
                  satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A hereof.

         (f)      The provision in any agreement evidencing any outstanding
                  stock option causing the option to terminate upon the
                  expiration of three months (or any other period relating to
                  termination of employment) after termination of employment
                  shall be of no force or effect, except that nothing herein
                  shall extend any such option beyond its original term or shall
                  affect its termination for any reason other than termination
                  of employment. The provisions of this clause (f) are subject
                  to the satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A.

8.2      TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON

If during the Change of Control Period the Executive's employment shall be
terminated by the Company for Cause or by the Executive for other than Good
Reason, this Agreement shall terminate without further obligation on the part of
the Company to the Executive, other than the Company's obligation to pay the
Executive the amounts in Section 8.1(a)(i) and (v).

                                       7



8.3      EXPIRATION OF TERM

In the event the Executive's employment is not terminated prior to expiration of
the Term and notice of nonrenewal is given pursuant to Section 2, this Agreement
shall terminate without further obligation on the part of the Company to the
Executive upon the expiration of the Term.

8.4      TERMINATION BECAUSE OF DEATH OR DISABILITY

Upon the Executive's death or Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Executive or his legal representatives under this Agreement other than the
Company's obligation, if any, to pay the Executive the amounts specified in
Section 8.1(a) to (e).

8.5      PAYMENT SCHEDULE

All payments of Accrued Obligations, or any portion thereof payable pursuant to
this Section 8, shall be made to the Executive within ten (10) working days of
the Date of Termination except that

         (a)      any amount payable to the Executive pursuant to Section
                  8.1(a)(ii), (iii) or (iv) or Section 8.1(d) shall be paid to
                  Executive when his or her bonus would have been paid if he or
                  she were still employed; and

         (b)      any payments payable to the Executive pursuant to Section
                  8.1(c) hereof shall be made to the Executive in the form of
                  salary continuation payable at normal payroll intervals during
                  the eighteen (18) month severance period on the dates when the
                  Executive would have received his or her payments of salary if
                  he or she were still employed and in the amounts he or she
                  would have received.

8.6      CAUSE

For purposes of this Agreement, termination of Executive's employment shall be
for "Cause" if it is for any of the following:

         (a)      A refusal of the Executive to carry out any material lawful
                  duties of the Executive or any directions or instructions of
                  the Board or senior management of the Company which are
                  reasonably consistent with those duties;

         (b)      Failure to perform satisfactorily any lawful duties of the
                  Executive that are consistent with those duties hereof or any
                  directions or instructions of the Board or senior management
                  that are consistent with those duties, provided, however, that
                  the Executive has been given notice and has failed to correct
                  any such failure within ten (10) days thereafter (unless any
                  such correction by its nature cannot be done in 10 days, in
                  which event the Executive will have a reasonable time to
                  correct the failure) and provided further that the Company
                  shall have no such obligation to give notice and the Executive
                  shall have no such opportunity to correct failures more than
                  two times in any twelve calendar month period;

         (c)      Violation by the Executive of a local, state or federal law
                  involving the commission of a crime, other than minor traffic
                  violations, or any other criminal act involving moral
                  turpitude;

                                       8



         (d)      The Executive's gross negligence, willful misconduct, or
                  breach of his or her duty to the Company involving
                  self-dealing or personal profit;

         (e)      Current abuse by the Executive of alcohol or controlled
                  substances; deception, fraud, misrepresentation or dishonesty
                  by the Executive; or any incident materially compromising the
                  Executive's reputation or ability to represent the Company
                  with investors, customers or the public;

         (f)      Any other material violation of any provision of this
                  Agreement by the Executive not described in (a) or (b) above,
                  subject to the same notice and opportunity-to-correct
                  provisions as are set forth in (b) above or

         (g)      The Executive reaching a mandatory retirement age established
                  by the Company before the Change in Control and not in
                  anticipation thereof.

8.7      GOOD REASON

For purposes of this Agreement, "Good Reason" means:

         (a)      Any failure by the Company to comply with any of the
                  provisions of Section 5 or Section 6 hereof, other than
                  isolated and inadvertent failure not taken in bad faith and
                  that is remedied by the Company promptly after receipt of
                  notice thereof given by the Executive;

         (b)      Any material diminution in Executive's position, authority,
                  duties or responsibilities as contemplated by Section 3.2
                  hereof or any other action by the Company that results in a
                  material diminution in such position, authority, duties or
                  responsibilities;

         (c)      The Company's requiring the Executive to be based at any
                  office or location that is more than fifty (50) miles from the
                  location of the Executive's assigned worksite immediately
                  prior to the Change of Control Date and Executive's residence
                  at the time any such requirement is imposed;

         (d)      Any non-renewal by the Company of this Agreement; provided,
                  however, that the Executive may only utilize this paragraph
                  (d) during the 30-day period immediately following his receipt
                  of the notice of non-renewal given by the Company pursuant to
                  Section 2 hereof;

         (e)      Any failure by the Company to comply with and satisfy Section
                  12 hereof; provided, however, that the Company's successor has
                  received at least ten (10) days' prior written notice from the
                  Company or the Executive of the requirements of Section 12
                  hereof; or

         (f)      Any other material violation of any provision of this
                  Agreement by the Company.

Notwithstanding the foregoing, no basis for a termination for Good Reason will
be deemed to exist unless Executive notifies the Company in writing of any event
in (a) through (f) above and the Company or its successor fails to cure any such
event within 30 days after receipt of the notice.

8.8      WITHHOLDING TAXES

Any payments provided for in this Agreement shall be paid net of any applicable
withholding required under federal, state or local law.

                                       9



8.9      WARN ACT

Notwithstanding the provisions of Sections 8.1 through 8.5, in the event the
Executive is entitled, by operation of any act or law, to unemployment
compensation benefits or benefits under the Worker Adjustment and Retraining Act
of 1988 (known as the "WARN Act" in connection with the termination of his or
her employment in addition to those required to be paid to him or her under this
Agreement, then to the extent permitted by applicable law governing severance
payments or notice of termination of employment, the Company shall be entitled
to offset against the amounts payable hereunder the amounts of any such mandated
payments.

8.10     TERMINATION BEFORE CHANGE OF CONTROL

In the case of termination of employment prior to the Change of Control Date as
contemplated by Section 3.4, the Date of Termination shall be deemed to be the
Change of Control Date, except that, if any of the benefits referred to in
Section 8.1 have been paid or provided for all or any portion of the period
between the Date of Termination and the Change of Control Date, the amount of
benefits which would otherwise be paid or provided shall be reduced by the
amount of the benefits paid or provided for the period prior to the Change of
Control Date.

                       9. REPRESENTATIONS AND WARRANTIES

In order to induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that neither the execution nor the
performance of this Agreement by the Executive will violate or conflict in any
way with any other agreement by which the Executive may be bound.

            10. NONDISCLOSURE; RETURN OF MATERIALS; NONSOLICITATION

10.1     NONDISCLOSURE

Except as required by his employment with the Company, the Executive will not,
at any time during the term of employment by the Company, or at any time
thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Executive understands that the Company will be relying on this
Agreement in continuing the Executive's employment, paying him compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.

10.2     RETURN OF MATERIALS

All documents, records, notebooks, notes, memoranda, drawings, computer files or
other documents made or compiled by the Executive at any time, or in his
possession, including any and all copies thereof, shall be the property of the
Company and shall be held by the Executive in trust and solely for the benefit
of the Company, and shall be delivered to the Company by the Executive upon
termination of employment or at any other time upon request by the Company.

10.3     NONSOLICITATION

During the period that Executive is receiving payments described in Section
8.1(c), he or she will not actively solicit any employees of the Company or its
Affiliates to accept employment from

                                       10



any other person or entity. "Affiliate" is defined as any entity controlling,
controlled by or under common control with, the Company within the meaning of
Rule 405 of the Security and Exchange Commission under the Securities Act of
1933.

                               11. FORM OF NOTICE

Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally or by
registered or certified mail, return receipt requested, at the address set forth
below or at such other address as may hereafter lie designated by notice given
in compliance with the terms hereof:

    If to the Executive:                  28429 Horseshoe Circle
                                          Santa Clarita, CA 91390

    If to the Company:                    MannKind Corporation
                                          ATTN:  President
                                          28903 North Avenue Paine
                                          Valencia, CA 91355

or such other address as shall be provided in accordance with the terms hereof.
Except as set forth in Section 7.4 hereof, if notice is mailed, such notice
shall be effective upon mailing. Notices sent in any other manner specified
above shall be effective upon receipt.

                                 12. ASSIGNMENT

This Agreement is personal to the Executive and shall not be assignable by the
Executive.

The Company shall assign to and require any successor (whether by purchase of
assets, merger or consolidation) to all or substantially all the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean MannKind Corporation and any successor to its business
and/or assets as aforesaid that assumes and agrees to perform this Agreement by
operation of law, or otherwise. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns.

                                  13. WAIVERS

No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.

                                       11



                           14. AMENDMENTS IN WRITING

No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, or consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the President
or Chief Executive Officer of the Company and the Executive, and each such
amendment, modification, waiver, termination or discharge shall be effective
only in the specific instance and for the specific purpose for which given. No
provision of this Agreement shall be varied, contradicted or explained by any
oral agreement, course of dealing or performance or any other matter not set
forth in an agreement in writing and signed by the Company and the Executive.

                               15. APPLICABLE LAW

This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of California, without regard to any
rules governing conflicts of laws.

                        16. ARBITRATION; ATTORNEYS' FEES

Except in connection with enforcing Section 10 hereof, for which legal and
equitable remedies may be sought in a court of law, any dispute arising under
this Agreement shall be subject to arbitration. The arbitration proceeding shall
be conducted in accordance with the Employment Arbitration Rules of the American
Arbitration Association (the "AAA Rules") then in effect, conducted by one
arbitrator either mutually agreed upon or selected in accordance with the AAA
Rules. The arbitration shall be conducted in Los Angeles County, California,
under the jurisdiction of the Los Angeles office of the American Arbitration
Association. The arbitrator shall have authority only to interpret and apply the
provisions of this Agreement, and shall have no authority to add to, subtract
from or otherwise modify the terms of this Agreement. Any demand for arbitration
must be made within sixty (60) days of the event(s) giving rise to the claim
that this Agreement has been breached. The arbitrator's decision shall be final
and binding, and each party agrees to be bound to by the arbitrator's award,
subject only to an appeal therefrom in accordance with the laws of the State of
California. Either party may obtain judgment upon the arbitrator's award in the
Superior Court of Los Angeles County, California.

If it becomes necessary to pursue or defend any legal proceeding, whether in
arbitration or court, in order to resolve all disputes arising under this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover its reasonable costs and attorneys' fees.

                                17. SEVERABILITY

If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full

                                       12



extent permitted by law, (a) all other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed in order
to carry out the intent of the parties hereto as nearly as may be possible, (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.

                   18. COORDINATION WITH SEVERANCE AGREEMENT

The agreement regarding the Executive's employment with the Company that the
parties are entering into contemporaneously with this Agreement provides for
certain forms of severance and benefit payments in the event of termination of
the Executive's employment under certain conditions (the "Severance Agreement").
This Agreement is in addition to the Severance Agreement and in no way
supersedes or nullifies the that agreement. Nevertheless, it is possible for
termination of employment to fall within the scope of both agreements. In such
event, payments made to the Executive under Section 8.1 hereof shall be
coordinated with payments made to the Executive under the Severance Agreement as
follows:

         (a)      the obligations under Section 5.1(a) of the Severance
                  Agreement shall be paid first, in which case the Accrued
                  Obligations under this Agreement need not be paid;

         (b)      COBRA Contribution under this Agreement need not be provided
                  to the extent COBRA continuation is provided under the
                  Severance Agreement; and

         (c)      the severance payments required under Sections 8.1(c) and
                  8.1(d) hereof shall be paid first, in which case any severance
                  payments required under Sections 5.1(c) and 5.1(d) of the
                  Severance Agreement need not be provided.

                        19. EXCESS PARACHUTE LIMITATION

If any portion of the payments or benefits for the Executive under this
Agreement, taken together with any other agreement or benefit plan of the
Company (including stock options), would be characterized as an "excess
parachute payment" to the Executive under Section 280G of the Internal Revenue
Code of 1986, amended (the "Code"), the payments and benefits shall be reduced
to the extent necessary to avoid the imposition of any tax that would otherwise
be owed under Section 4999 of the Code. Such reductions shall first be made to
the bonus payments referred to in Section 8.1(d) and Section 8.1(a)(ii), (iii)
or (iv), whichever is applicable, then to the salary payments referred to in
Section 8.1(c), then to the salary payments under Section 8.1(a)(i) and finally
to the number of shares subject to options that are accelerated pursuant to
Section 8.1(e) in the reverse order of grant of those options. The determination
of whether and the extent to which payments and benefits are to be reduced
pursuant to this Section 19 shall be made in writing by tax accountants and/or
tax lawyers selected by the Company and reasonably acceptable to the Executive.

                                       13



                              20. ENTIRE AGREEMENT

Except as described in Section 18 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior or contemporaneous oral or written communications,
understandings or agreements between the Company and the Executive with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the agreement relating to proprietary information and inventions
between the Company and the Executive shall continue in full force and effect.

                                21. COUNTERPARTS

This Agreement may be executed in counterparts, each of which counterpart shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties have executed and entered into this Agreement
effective on the date first set forth above.

MANNKIND CORPORATION                                     EXECUTIVE

By: /s/ Michael Page                                    /s/ Richard L. Anderson
    ---------------------                               -----------------------
Its: Vice Chairman & CEO                                Dick Anderson

                                       14



                                   APPENDIX A

For purposes of this Agreement, a "Change of Control" shall be deemed to have
occurred, if any one of the following events occurs:

         (a)      the acquisition by any person or group of beneficial ownership
                  of more than 50% of the outstanding shares of Common Stock of
                  the Company, or, if there are then outstanding any other
                  voting securities of the Company, such acquisition of more
                  than 50% of the combined voting power of the then outstanding
                  voting securities of the Company entitled to vote generally in
                  the election of directors, except for any of the following
                  acquisitions of beneficial ownership of Common Stock or other
                  voting securities of the Company:

                  (i)      by the Company or any Employee benefit plan (or
                           related trust) sponsored or maintained by the Company
                           or any entity controlled by the Company;

                  (ii)     by Alfred E. Mann; or

                  (iii)    by any person or entity during Mr. Mann's lifetime if
                           the shares acquired were beneficially owned by Mr.
                           Mann immediately prior to their acquisition and the
                           acquisition is a transfer to a trust, partnership,
                           corporation or other entity in which Mr. Mann owns a
                           majority of the beneficial interests;

         (b)      the Company sells all or substantially all of its assets (or
                  consummates any transaction having a similar effect) or the
                  Company merges or consolidates with another entity or
                  completes a reorganization unless the holders of the voting
                  securities of the Company outstanding immediately prior to the
                  transaction own immediately after the transaction in
                  approximately the same proportions 50% or more of the combined
                  voting power of the voting securities of the entity purchasing
                  the assets or surviving the merger or consolidation or the
                  voting securities of its parent company, or, in the case of a
                  reorganization, 50% or more of the combined voting power of
                  the voting securities of the Company;

                  Notwithstanding the foregoing, any purchase or redemption of
                  outstanding shares of Common Stock or other voting securities
                  by the Company resulting in an increase in the percentage of
                  outstanding shares or other voting securities beneficially
                  owned by any person or group shall be deemed to constitute a
                  reorganization; however, no increase in the percentage of
                  outstanding shares or other voting securities beneficially
                  owned by Alfred E. Mann or any person or entities referred to
                  in (a)(i) or (iii) above resulting from any redemption of
                  shares or other voting securities by the Company shall result
                  in a Change of Control;

         (c)      the Company is liquidated; or

         (d)      the Board (if the Company continues to own its business) or
                  the board of directors or comparable governing body of any
                  successor owner of its business (as a result of a transaction
                  which is not itself a Change of Control) consists of a
                  majority of directors or members who are not Incumbent
                  Directors.

For purposes of this Agreement, (A) "voting securities" means securities whose
holders are entitled to vote in the election of all or a majority of the
authorized number of directors at the

                                       15



time the determination of 'voting securities" status is being made and (B) 50%
or more of the combined voting power shall refer to the voting power to elect a
majority of the authorized number of directors determined at that time. "Voting
securities" shall not include preferred stock or other securities whose holders
are entitled to vote in the election of all or a majority of the authorized
number of directors upon the occurrence of some event or circumstance which has
not occurred and such rights to vote are not in effect at the time of the
determination of "voting securities" status. Preferred stock and other
securities whose holders are then entitled to vote for less than a majority of
the authorized number of directors, shall not be considered "voting securities."

                                       16



                                    EXHIBIT A
                    GENERAL RELEASE AND SETTLEMENT AGREEMENT

The parties to this General Release and Settlement Agreement ("Release") between
________________________________ ("Employee") and MannKind Corporation ("the
Company") state that:

The parties desire to terminate their employment relationship. Both parties
desire to fully and finally resolve all differences and disputes without further
costs;

THEREFORE, the parties agree:

1.   In consideration of the payments to Employee as provided in the Change of
     Control Agreement between the Employee and the Company dated August 1,
     2003, Employee does forever release and discharge the Company and all its
     parent, subsidiary and affiliated entities and all their past, present and
     future directors, officers, agents, employees, or representatives from all
     claims, damages, liabilities, and demands of whatever kind and character up
     to the date she/he signs below ("disputes"), including, but not limited to,
     arising out of or in any way related to any of the circumstances of
     Employee's employment or termination of employment with the Company.

     Employee releases all disputes relating to or arising out of any state,
     municipal, or federal statute, ordinance, regulation, order, contract,
     tort, or common law, including, but not limited to, the Age Discrimination
     in Employment Act. The parties intend that the disputes released herein be
     construed as broadly as possible.

2.   This Release also extends to all disputes by Employee against the Company
     whether known or unknown, suspected or unsuspected, past or present, and
     whether or not they arise out of or are attributable to the circumstances
     of Employee's employment or termination of employment with the Company.
     Specifically, Employee hereby expressly waives any and all rights under
     Section 1542 of the California Civil Code, which reads in full as follows:

         SECTION 1542. GENERAL RELEASE. A GENERAL RELEASE DOES NOT EXTEND TO
         CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
         FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
         HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

3.   Employee further understands and agrees that neither the payment nor the
     execution of this Release, or any part of it, shall constitute or be
     construed as an admission of any alleged liability or wrongdoing whatsoever
     by the Company. The Company expressly denies it has committed any alleged
     liability or wrongdoing.

4.   All films, files, books, computer files, correspondence, lists, equipment,
     manuals, other written and graphic records and the like and all copies
     thereof, affecting or relating to the business of Company which Employee
     shall have prepared, used, constructed, observed, possessed or controlled,
     shall be and remain the Company's sole property. Employee agrees to deliver
     promptly to the Company all such property relating to the Company, which
     are or have been in his possession or under his control. Employee also
     agrees to continue to abide by his confidentiality of information and
     inventions agreement with the Company.

5.   Employee agrees not to seek reemployment with the Company or any of its
     affiliates.

                                       17



6.   This Release shall be governed by the substantive law of the State of
     California. In the event of any dispute concerning the interpretation of
     this Release or in any way related to Employee's employment or termination
     of employment, the dispute shall be resolved by arbitration within the
     County of Los Angeles, California, in accordance with the then existing
     rules for employment dispute arbitration of the American Arbitration
     Association, and judgment upon any arbitration award may be entered by any
     state or federal court having jurisdiction thereof. The parties intend this
     arbitration provision to be valid and construed as broadly as possible. The
     prevailing party in such arbitration shall recover its reasonable costs and
     attorneys' fees.

7.   If any provision of this General Release and Settlement Agreement is
     determined to be invalid or unenforceable, all of the other provisions
     shall remain valid and enforceable notwithstanding, unless the provision
     found to be unenforceable is of such material effect that this Release
     cannot be performed in accordance with the intent of the parties in the
     absence thereof.

8.   No promise or agreement other than that expressed herein has been made.
     This General Release and Settlement Agreement constitutes a single
     integrated contract expressing the entire agreement of the parties hereto.
     There are no other agreements, written or oral, express or implied, between
     the parties concerning the subject matter hereof, except the provisions set
     forth in this Release. This Release supersedes all previous agreements and
     understandings, whether written or oral. This Release can be amended,
     modified or terminated only by a writing executed by both Employee and the
     President of the Company.

9.   In compliance with the Olders Workers Benefit Protection Act, Employee has
     been given twenty-one (21) days to review this Release before signing it.
     Employee also understands that he may revoke this General Release and
     Settlement Agreement within seven (7) days after it has been signed and
     that it is not enforceable or effective until the seven (7) day revocation
     period has expired. Additionally, employee has been advised in this writing
     to consult with an attorney before executing this General Release and
     Settlement Agreement.

10.  THE EMPLOYEE STATES THAT HE/SHE IS IN GOOD HEALTH AND FULLY COMPETENT TO
     MANAGE HIS/HER BUSINESS AFFAIRS, THAT HE/SHE HAS CAREFULLY READ THIS
     GENERAL RELEASE AND SETTLEMENT AGREEMENT, THAT HE/SHE FULLY UNDERSTANDS ITS
     FINAL AND BINDING EFFECT, THAT THE ONLY PROMISES MADE TO HIM/HER TO SIGN
     THIS RELEASE ARE THOSE STATED AND CONTAINED IN THIS RELEASE, AND THAT
     HE/SHE IS SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY.

AGREED AND ACCEPTED this _______ day of __________, _______:

MANNKIND CORPORATION                            EXECUTIVE

By:___________________________                  _______________________________

Its:___________________________

                                       18

                                                                   Exhibit 10.14

                              MANNKIND CORPORATION

                           CHANGE OF CONTROL AGREEMENT

This Change of Control Agreement (this "Agreement"), dated and effective as of
August 1, 2003, is between MannKind Corporation, a Delaware corporation (the
"Company"), and Dan Burns (the "Executive").

WHEREAS the board of directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined in
Section 1 hereof) of the Company.

AND WHEREAS the Board believes it is imperative to diminish the inevitable
distraction of the Executive arising from the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with reasonable compensation and benefit arrangements upon a Change of
Control.

NOW THEREFORE, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.

                                 1. DEFINITIONS

For purposes of this Agreement, the following terms shall have the respective
meanings:

         (a)      "Accrued Obligations" shall have the meaning set forth in
                  Section 8.1;

         (b)      "Change of Control" shall have the Definition set forth in
                  Appendix A hereto, which is hereby incorporated by reference;

         (c)      "Change of Control Date" shall mean the first date on which a
                  Change of Control occurs;

         (d)      "Change of Control Period" shall mean the two (2) year period
                  commencing on the Change of Control Date and ending on the
                  second anniversary of such date;

         (e)      "Incumbent Directors" includes only those persons who are:

                  (i)      serving as directors of the Company on the date of
                           this Agreement or,

                  (ii)     elected by a majority of the directors who then
                           constitute Incumbent Directors or selected by a
                           majority of such directors to be nominated for
                           election by the stockholders and are elected.

                                       1.


                  In no event, however, shall any director whose election to
                  office occurs as a result of an actual or threatened election
                  contest with respect to the election or removal of directors
                  or other actual or threatened solicitation of proxies or
                  consents on behalf of a person or entity other than the Board
                  be an Incumbent Director

         (f)      "Person", "Acquisition", "Beneficial Ownership" and "Group."
                  The term "person" shall have the meaning set forth in the
                  Securities Exchange Act of 1934 and the terms "beneficial
                  ownership," "acquisition," and "group" shall have the meanings
                  set forth in Rules 13d-3 and 13d-5 of the Rules of the
                  Security and Exchange Commission adopted under the Securities
                  Exchange Act of 1934 except that shares which a person or
                  group has the right to acquire shall not be deemed
                  beneficially owned until the right is exercised and the shares
                  are so acquired.

         (g)      "Three-Year Average Annual Bonus" shall have the meaning set
                  forth in Section 5.2.

                                    2. TERM

The term of this Agreement ("Term") shall be for a period of two (2) years from
the date of this Agreement as first appearing; provided, however, that the Term
shall automatically renew for additional one (1) year periods, unless notice of
non-renewal is given by either party to the other party at least ninety (90)
days prior to the initial Term or any renewal Term. If such notice is given,
this Agreement shall terminate at the end of the Term or the then current
renewal Term without further action by either the Company or the Executive.
Notwithstanding the foregoing, if a Change of Control occurs during the Term,
the Term shall automatically extend for the duration of the Change of Control
Period and shall automatically terminate at the end of the Change of Control
Period.

                                 3. EMPLOYMENT

3.1 CHANGE OF CONTROL PERIOD

During the Change of Control Period, the Company hereby agrees to continue the
Executive in its employ or in the employ of its affiliated companies, and the
Executive hereby agrees to remain in the employ of the Company or its affiliated
companies, in accordance with the terms and provisions of this Agreement;
provided, however, that either the Company or the Executive may terminate the
employment relationship during the Change of Control Period subject to the terms
of this Agreement.

3.2 POSITION AND DUTIES

During the Change of Control Period, the Executive's position, authority, duties
and responsibilities shall be at least commensurate in all material respects
with the most significant of those held immediately preceding the Change of
Control Date.

                                       2.


3.3 LOCATION

During the Change of Control Period, the Executive's services shall be performed
at the location of the Executive's assigned worksite as of the Change of Control
Date.

3.4 EMPLOYMENT AT WILL

The Executive and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or its affiliated
companies is "at will" and may be terminated by either the Executive or the
Company or its affiliated companies at any time with or without cause. Moreover,
if prior to the Change of Control Date, the Executive's employment with the
Company or its affiliated companies terminates for any reason, then the
Executive shall have no further rights under this Agreement; provided, however,
that the Company may not avoid liability for any termination payments that would
have been required during the Change of Control Period pursuant to Section 8
hereof by terminating the Executive prior to the Change of Control Period where
such termination is carried out in anticipation of a Change of Control and the
principal motivating purpose is to avoid liability for such termination
payments.

                            4. ATTENTION AND EFFORT

During the Change of Control Period, and excluding any periods of paid time-off
to which the Executive is entitled, the Executive will devote all of his
productive time, ability, attention and effort to the business and affairs of
the Company and the discharge of the responsibilities assigned to him hereunder,
and will use his reasonable best efforts to perform faithfully and efficiently
such responsibilities. It shall not be a violation of this Agreement for the
Executive to (a) serve on corporate, civic or charitable boards or committees,
(b) deliver lectures, fulfill speaking engagements or teach at educational
institutions, (c) manage personal investments, or (d) engage in activities
permitted by the policies of the Company or as specifically permitted by the
Company, so long as such activities do not significantly interfere with the full
time performance of the Executive's responsibilities in accordance with this
Agreement. It is expressly understood and agreed that to the extent any such
activities have been conducted by the Executive prior to the Change of Control
Period, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) during the Change of Control Period shall
not thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.

                                5. COMPENSATION

As long as the Executive remains employed by the Company during the Change of
Control Period, the Company agrees to pay or cause to be paid to the Executive,
and the Executive agrees to accept in exchange for the services rendered
hereunder by him, the following compensation:

                                       3.


5.1 SALARY

The Executive shall receive an annual base salary (the "Annual Base Salary"), at
least equal to the annual salary established by the Board or the Compensation
Committee of the Board (the "Compensation Committee") or the Chief Executive
Officer for the fiscal year in which the Change of Control Date occurs. The
Annual Base Salary shall be paid in substantially equal installments and at the
same intervals as the salaries of other executives of the Company are paid. The
Board or the Compensation Committee or the Chief Executive Officer shall review
the Annual Base Salary at least annually and shall determine in good faith and
consistent with any generally applicable Company policy any increases for future
years.

5.2 BONUS

In addition to the Annual Base Salary, the Executive shall be offered the
opportunity to earn, for each fiscal year ending during the Change of Control
Period, an annual bonus (the "Annual Bonus") payable, if the performance
criteria for the bonus are satisfied, in cash in an amount at least equal to the
Three-Year Average Annual Bonus. The performance criteria shall be set so that,
in the good faith judgment of the Board of Directors of the Company or a
committee thereof, the Executive has approximately the same probability of
earning at least the same amount as the Annual Bonus as his or her Three-Year
Average Annual Bonus. "Three-Year Average Annual Bonus" shall mean the average
of bonuses paid or payable to the Executive by the Company for each of the three
fiscal years immediately preceding the year in which the Change of Control
occurs (including the annualized amount of any such bonus paid or payable for
any partial year, but not stock options or stock awards, which became fully
vested and any deferred compensation earned during any of those years and
excluding any sign-on or other one-time-only bonus). If the Executive has not
been an executive officer of the Company during the entire three year period
referred to above or was not offered a bonus during any of those years, then the
Three-Year Average Annual Bonus shall be calculated for such shorter time that
he or she was an executive officer of the Company and had been offered a bonus.
If the Executive had been offered an opportunity to earn a bonus for the year in
which the Change of Control occurs and not in anticipation of the Change of
Control, the Three-Year Average Annual Bonus shall exceed the maximum he or she
could have earned under that bonus arrangement if all performance criteria were
satisfied. Each Annual Bonus, if earned, shall be paid no later than ninety (90)
days after the end of the fiscal year for which the Annual Bonus is awarded,
unless the Executive and the Company agree to defer the receipt of the Annual
Bonus.

                                  6. BENEFITS

6.1 INCENTIVE, RETIREMENT AND WELFARE BENEFIT PLANS; VACATION

During the Change of Control Period, the Executive shall be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in such fringe benefit programs as shall be generally made
available to other comparable executives of the Company and its affiliated
companies from time to time during the Change of Control Period by action of the
Board (or any person or committee appointed by the Board to determine fringe
benefit programs and other emoluments), including, without limitation, paid
vacations; any stock purchase, savings or

                                       4.


retirement plan, practice, policy or program; and all welfare benefit plans,
practices, policies or programs (including, without limitation, medical,
prescription, dental, disability, salary continuance, executive life, group life
accidental death and travel accident insurance plans or programs) to the extent
such fringe benefits are made available to other comparable executives of the
Company.

6.2 EXPENSES

During the Change of Control Period, the Executive shall be entitled to receive
prompt reimbursement for all reasonable employment expenses incurred by him in
accordance with the policies, practice and procedures of the Company and its
affiliated companies in effect for the executives of the Company and its
affiliated companies during the Change of Control Period.

                                 7. TERMINATION

During the Change of Control Period, employment of the Executive may be
terminated as follows, but, in any case, the nondisclosure provisions set forth
in Section 10 hereof shall survive the termination of this Agreement and the
termination of the Executive's employment with the Company:

7.1 BY THE COMPANY OR THE EXECUTIVE

At any time during the Change of Control Period, the Company may terminate the
employment of the Executive with or without Cause (as defined below), and the
Executive may terminate his employment for Good Reason (as defined below) or for
any reason, upon giving the Notice of Termination (as defined below).

7.2 AUTOMATIC TERMINATION

This Agreement and the Executive's employment during the Change of Control
Period shall terminate automatically upon the death or Disability of the
Executive. The term "Disability" as used herein shall mean the Executive's
inability (with such accommodation as may be required by law and which places no
undue burden on the Company) to perform the duties set forth in Section 3.2
hereof for a period or periods aggregating twelve (12) weeks in any three
hundred sixty-five (365) day period as result of physical or mental illness,
loss of legal capacity or any other cause. The Executive and the Company hereby
acknowledge that the duties specified in Section 3.2 hereof are essential to the
Executive's position and that the Executive's ability to perform those duties is
the essence of this Agreement.

7.3 NOTICE OF TERMINATION

Any termination by the Company or by the Executive during the Change of Control
Period shall be communicated by Notice of Termination to the other party given
in accordance with Section 11 hereof. The term "Notice of Termination" shall
mean a written notice that (a) indicates the specific termination provision in
this Agreement relied upon and (b) to the extent applicable, sets forth briefly
the facts and circumstances claimed to provide the basis for termination of the
Executive's employment under the provision so indicated. The failure by the
Executive or the

                                       5.


Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder to preclude the
Executive or the Company from asserting such fact or circumstance in connection
with any enforcement of the Executive's or the Company's rights hereunder.

7.4 DATE OF TERMINATION

During the Change of Control Period, "Date of Termination" means (a) if the
Executive's employment is terminated by reason of death, the date of death, (b)
if the Executive's employment is terminated by reason of Disability, immediately
upon a determination by the Company of the Executive's Disability, and (c) in
all other cases, upon the giving of the Notice of Termination. Notwithstanding
the foregoing, the party giving the notice in the case of (c) above will have
the right, but not the obligation, to have the termination of employment be
effective upon the expiration of any period specified in the Notice of
Termination. In that event, the Executive's employment and performance of
services will continue during such specified period unless the other party (the
Company in the event of a termination by the Executive or the Executive in the
case of a termination by the Company) elects thereafter to terminate the
employment of the Executive pursuant to Section 3.4 and that termination is
effective as of an earlier date. Notwithstanding the foregoing, the Company may,
upon notice to the Executive and without reducing the Executive's compensation
during such period, excuse the Executive from any or all of his duties during
such period.

                            8. TERMINATION PAYMENTS

In the event of termination of the Executive's employment during the Change of
Control Period, all compensation and benefits set forth in this Agreement shall
terminate except as specifically provided in this Section 8.

8.1 TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY THE EXECUTIVE FOR GOOD
    REASON

If during the Change of Control Period the Company terminates the Executive's
employment other than for Cause or the Executive terminates his employment for
Good Reason, the Executive shall be entitled to:

         (a)      Payment of the following accrued obligations (the "Accrued
                  Obligations"):

                  (i)      the Annual Base Salary through the Date of
                           Termination to the extent not theretofore paid;

                  (ii)     if the performance criteria for earning the Annual
                           Bonus for the full fiscal year of termination have
                           been fully satisfied at the time of termination
                           (excluding any requirement that the Executive be
                           employed by the Company at the end of the fiscal
                           year), the product of (x) the amount of the Annual
                           Bonus for that year and (y) a fraction the numerator
                           of which is the number of days in the current fiscal
                           year through the Date of Termination and the
                           denominator of which is three hundred sixty-five
                           (365);

                                       6.


                  (iii)    if the performance criteria for earning the Annual
                           Bonus for the full fiscal year of termination have
                           not been fully satisfied and the Board of Directors
                           of the Company determines that all such criteria
                           could not have been satisfied if the Executive
                           remained employed for the full fiscal year, no amount
                           for the Annual Bonus; and

                  (iv)     if neither (ii) nor (iii) apply, the product of (x)
                           the Three-Year Average Annual Bonus and (y) a
                           fraction the numerator of which is the number of days
                           in the current fiscal year through the Date of
                           Termination and the denominator of which is three
                           hundred sixty-five (365); and

                  (v)      any compensation previously deferred by the Executive
                           (together with accrued interest or earnings thereon,
                           if any) and any accrued paid time-off that would be
                           payable under the Company's standard policy, in each
                           case to the extent not theretofore paid.

         (b)      For eighteen (18) months after the Date of Termination or
                  until the Executive qualifies for comparable medical and
                  dental insurance benefits from another employer, whichever
                  occurs first, and subject to the satisfactory execution by the
                  Executive (including the expiration of any revocation period)
                  of an agreement substantially in the form of Exhibit A hereof,
                  the Company shall pay the Executive's premiums for

                  (i)      health insurance benefit continuation for the
                           Executive and his family members, if applicable,
                           which the Company provides to the Executive under the
                           provisions of the federal Consolidated Omnibus Budget
                           Reconciliation Act of 1985, as amended ("COBRA"), to
                           the extent that the Company would have paid such
                           premium had the Executive remained employed by the
                           Company (such continued payment is hereinafter
                           referred to as "COBRA Continuation"); and

                  (ii)     additional health coverage (such as Exec-U-Care),
                           life, accidental death and disability and other
                           insurance programs for the Executive and his family
                           members, if applicable, to the extent such programs
                           existed on the Change of Control Date.

         (c)      Continuation of the payment of the Annual Base Salary for the
                  fiscal year in which the Date of Termination occurs for a
                  period of twenty-four (24) months after the Date of
                  Termination, subject to the satisfactory execution by the
                  Executive (including the expiration of any revocation period)
                  of an agreement substantially in the form of Exhibit A hereof.

         (d)      An amount equal to one and one-half times the Three-Year
                  Average Annual Bonus, subject to the satisfactory execution by
                  the Executive (including the expiration of any revocation
                  period) of an agreement substantially in the form of Exhibit A
                  hereof.

         (e)      Immediate vesting of all outstanding stock options previously
                  granted to the Executive by the Company, subject to the
                  satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A hereof.

                                       7.


         (f)      The provision in any agreement evidencing any outstanding
                  stock option causing the option to terminate upon the
                  expiration of three months (or any other period relating to
                  termination of employment) after termination of employment
                  shall be of no force or effect, except that nothing herein
                  shall extend any such option beyond its original term or shall
                  affect its termination for any reason other than termination
                  of employment. The provisions of this clause (f) are subject
                  to the satisfactory execution by the Executive (including the
                  expiration of any revocation period) of an agreement
                  substantially in the form of Exhibit A.

8.2 TERMINATION FOR CAUSE OR OTHER THAN FOR GOOD REASON

If during the Change of Control Period the Executive's employment shall be
terminated by the Company for Cause or by the Executive for other than Good
Reason, this Agreement shall terminate without further obligation on the part of
the Company to the Executive, other than the Company's obligation to pay the
Executive the amounts in Section 8.1(a)(i) and (v).

8.3 EXPIRATION OF TERM

In the event the Executive's employment is not terminated prior to expiration of
the Term and notice of nonrenewal is given pursuant to Section 2, this Agreement
shall terminate without further obligation on the part of the Company to the
Executive upon the expiration of the Term.

8.4 TERMINATION BECAUSE OF DEATH OR DISABILITY

Upon the Executive's death or Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Executive or his legal representatives under this Agreement other than the
Company's obligation, if any, to pay the Executive the amounts specified in
Section 8.1(a) to (e).

8.5 PAYMENT SCHEDULE

All payments of Accrued Obligations, or any portion thereof payable pursuant to
this Section 8, shall be made to the Executive within ten (10) working days of
the Date of Termination except that

         (a)      any amount payable to the Executive pursuant to Section
                  8.1(a)(ii), (iii) or (iv) or Section 8.1(d) shall be paid to
                  Executive when his or her bonus would have been paid if he or
                  she were still employed; and

         (b)      any payments payable to the Executive pursuant to Section
                  8.1(c) hereof shall be made to the Executive in the form of
                  salary continuation payable at normal payroll intervals during
                  the eighteen (18) month severance period on the dates when the
                  Executive would have received his or her payments of salary if
                  he or she were still employed and in the amounts he or she
                  would have received.

                                       8.


8.6 CAUSE

For purposes of this Agreement, termination of Executive's employment shall be
for "Cause" if it is for any of the following:

         (a)      A refusal of the Executive to carry out any material lawful
                  duties of the Executive or any directions or instructions of
                  the Board or senior management of the Company which are
                  reasonably consistent with those duties;

         (b)      Failure to perform satisfactorily any lawful duties of the
                  Executive that are consistent with those duties hereof or any
                  directions or instructions of the Board or senior management
                  that are consistent with those duties, provided, however, that
                  the Executive has been given notice and has failed to correct
                  any such failure within ten (10) days thereafter (unless any
                  such correction by its nature cannot be done in 10 days, in
                  which event the Executive will have a reasonable time to
                  correct the failure) and provided further that the Company
                  shall have no such obligation to give notice and the Executive
                  shall have no such opportunity to correct failures more than
                  two times in any twelve calendar month period;

         (c)      Violation by the Executive of a local, state or federal law
                  involving the commission of a crime, other than minor traffic
                  violations, or any other criminal act involving moral
                  turpitude;

         (d)      The Executive's gross negligence, willful misconduct, or
                  breach of his or her duty to the Company involving
                  self-dealing or personal profit;

         (e)      Current abuse by the Executive of alcohol or controlled
                  substances; deception, fraud, misrepresentation or dishonesty
                  by the Executive; or any incident materially compromising the
                  Executive's reputation or ability to represent the Company
                  with investors, customers or the public;

         (f)      Any other material violation of any provision of this
                  Agreement by the Executive not described in (a) or (b) above,
                  subject to the same notice and opportunity-to-correct
                  provisions as are set forth in (b) above or

         (g)      The Executive reaching a mandatory retirement age established
                  by the Company before the Change in Control and not in
                  anticipation thereof.

8.7 GOOD REASON

For purposes of this Agreement, "Good Reason" means:

         (a)      Any failure by the Company to comply with any of the
                  provisions of Section 5 or Section 6 hereof, other than
                  isolated and inadvertent failure not taken in bad faith and
                  that is remedied by the Company promptly after receipt of
                  notice thereof given by the Executive;

                                       9.


         (b)      Any material diminution in Executive's position, authority,
                  duties or responsibilities as contemplated by Section 3.2
                  hereof or any other action by the Company that results in a
                  material diminution in such position, authority, duties or
                  responsibilities;

         (c)      The Company's requiring the Executive to be based at any
                  office or location that is more than fifty (50) miles from the
                  location of the Executive's assigned worksite immediately
                  prior to the Change of Control Date and Executive's residence
                  at the time any such requirement is imposed;

         (d)      Any non-renewal by the Company of this Agreement; provided,
                  however, that the Executive may only utilize this paragraph
                  (d) during the 30-day period immediately following his receipt
                  of the notice of non-renewal given by the Company pursuant to
                  Section 2 hereof;

         (e)      Any failure by the Company to comply with and satisfy Section
                  12 hereof; provided, however, that the Company's successor has
                  received at least ten (10) days' prior written notice from the
                  Company or the Executive of the requirements of Section 12
                  hereof; or

         (f)      Any other material violation of any provision of this
                  Agreement by the Company.

Notwithstanding the foregoing, no basis for a termination for Good Reason will
be deemed to exist unless Executive notifies the Company in writing of any event
in (a) through (f) above and the Company or its successor fails to cure any such
event within 30 days after receipt of the notice.

8.8 WITHHOLDING TAXES

Any payments provided for in this Agreement shall be paid net of any applicable
withholding required under federal, state or local law.

8.9 WARN ACT

Notwithstanding the provisions of Sections 8.1 through 8.5, in the event the
Executive is entitled, by operation of any act or law, to unemployment
compensation benefits or benefits under the Worker Adjustment and Retraining Act
of 1988 (known as the "WARN Act" in connection with the termination of his or
her employment in addition to those required to be paid to him or her under this
Agreement, then to the extent permitted by applicable law governing severance
payments or notice of termination of employment, the Company shall be entitled
to offset against the amounts payable hereunder the amounts of any such mandated
payments.

8.10 TERMINATION BEFORE CHANGE OF CONTROL

In the case of termination of employment prior to the Change of Control Date as
contemplated by Section 3.4, the Date of Termination shall be deemed to be the
Change of Control Date, except that, if any of the benefits referred to in
Section 8.1 have been paid or provided for all or any portion of the period
between the Date of Termination and the Change of Control Date, the amount of
benefits which would otherwise be paid or provided shall be reduced by the
amount of the benefits paid or provided for the period prior to the Change of
Control Date.

                                      10.


                       9. REPRESENTATIONS AND WARRANTIES

In order to induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that neither the execution nor the
performance of this Agreement by the Executive will violate or conflict in any
way with any other agreement by which the Executive may be bound.

            10. NONDISCLOSURE; RETURN OF MATERIALS; NONSOLICITATION

10.1 NONDISCLOSURE

Except as required by his employment with the Company, the Executive will not,
at any time during the term of employment by the Company, or at any time
thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Executive understands that the Company will be relying on this
Agreement in continuing the Executive's employment, paying him compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.

10.2 RETURN OF MATERIALS

All documents, records, notebooks, notes, memoranda, drawings, computer files or
other documents made or compiled by the Executive at any time, or in his
possession, including any and all copies thereof, shall be the property of the
Company and shall be held by the Executive in trust and solely for the benefit
of the Company, and shall be delivered to the Company by the Executive upon
termination of employment or at any other time upon request by the Company.

10.3 NONSOLICITATION

During the period that Executive is receiving payments described in Section
8.1(c), he or she will not actively solicit any employees of the Company or its
Affiliates to accept employment from any other person or entity. "Affiliate" is
defined as any entity controlling, controlled by or under common control with,
the Company within the meaning of Rule 405 of the Security and Exchange
Commission under the Securities Act of 1933.

                                      11.


                               11. FORM OF NOTICE

Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally or by
registered or certified mail, return receipt requested, at the address set forth
below or at such other address as may hereafter lie designated by notice given
in compliance with the terms hereof:

If to the Executive:             63 Colfax Road
                                 Skillman, NJ  08558

If to the Company:               MannKind Corporation
                                 ATTN: President
                                 28903 North Avenue Paine
                                 Valencia, CA 91355

or such other address as shall be provided in accordance with the terms hereof.
Except as set forth in Section 7.4 hereof, if notice is mailed, such notice
shall be effective upon mailing. Notices sent in any other manner specified
above shall be effective upon receipt.

                                 12. ASSIGNMENT

This Agreement is personal to the Executive and shall not be assignable by the
Executive.

The Company shall assign to and require any successor (whether by purchase of
assets, merger or consolidation) to all or substantially all the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean MannKind Corporation and any successor to its business
and/or assets as aforesaid that assumes and agrees to perform this Agreement by
operation of law, or otherwise. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns.

                                  13. WAIVERS

No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.

                                      12.


                           14. AMENDMENTS IN WRITING

No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, or consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the President
or Chief Executive Officer of the Company and the Executive, and each such
amendment, modification, waiver, termination or discharge shall be effective
only in the specific instance and for the specific purpose for which given. No
provision of this Agreement shall be varied, contradicted or explained by any
oral agreement, course of dealing or performance or any other matter not set
forth in an agreement in writing and signed by the Company and the Executive.

                               15. APPLICABLE LAW

This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of California, without regard to any
rules governing conflicts of laws.

                        16. ARBITRATION; ATTORNEYS' FEES

Except in connection with enforcing Section 10 hereof, for which legal and
equitable remedies may be sought in a court of law, any dispute arising under
this Agreement shall be subject to arbitration. The arbitration proceeding shall
be conducted in accordance with the Employment Arbitration Rules of the American
Arbitration Association (the "AAA Rules") then in effect, conducted by one
arbitrator either mutually agreed upon or selected in accordance with the AAA
Rules. The arbitration shall be conducted in Los Angeles County, California,
under the jurisdiction of the Los Angeles office of the American Arbitration
Association. The arbitrator shall have authority only to interpret and apply the
provisions of this Agreement, and shall have no authority to add to, subtract
from or otherwise modify the terms of this Agreement. Any demand for arbitration
must be made within sixty (60) days of the event(s) giving rise to the claim
that this Agreement has been breached. The arbitrator's decision shall be final
and binding, and each party agrees to be bound to by the arbitrator's award,
subject only to an appeal therefrom in accordance with the laws of the State of
California. Either party may obtain judgment upon the arbitrator's award in the
Superior Court of Los Angeles County, California.

If it becomes necessary to pursue or defend any legal proceeding, whether in
arbitration or court, in order to resolve all disputes arising under this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover its reasonable costs and attorneys' fees.

                                17. SEVERABILITY

If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full

                                      13.


extent permitted by law, (a) all other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed in order
to carry out the intent of the parties hereto as nearly as may be possible, (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.

                   18. COORDINATION WITH SEVERANCE AGREEMENT

The agreement regarding the Executive's employment with the Company that the
parties are entering into contemporaneously with this Agreement provides for
certain forms of severance and benefit payments in the event of termination of
the Executive's employment under certain conditions (the "Severance Agreement").
This Agreement is in addition to the Severance Agreement and in no way
supersedes or nullifies the that agreement. Nevertheless, it is possible for
termination of employment to fall within the scope of both agreements. In such
event, payments made to the Executive under Section 8.1 hereof shall be
coordinated with payments made to the Executive under the Severance Agreement as
follows:

         (a)      the obligations under Section 5.1(a) of the Severance
                  Agreement shall be paid first, in which case the Accrued
                  Obligations under this Agreement need not be paid;

         (b)      COBRA Contribution under this Agreement need not be provided
                  to the extent COBRA continuation is provided under the
                  Severance Agreement; and

         (c)      the severance payments required under Sections 8.1(c) and
                  8.1(d) hereof shall be paid first, in which case any severance
                  payments required under Sections 5.1(c) and 5.1(d) of the
                  Severance Agreement need not be provided.

                        19. EXCESS PARACHUTE LIMITATION

If any portion of the payments or benefits for the Executive under this
Agreement, taken together with any other agreement or benefit plan of the
Company (including stock options), would be characterized as an "excess
parachute payment" to the Executive under Section 280G of the Internal Revenue
Code of 1986, amended (the "Code"), the payments and benefits shall be reduced
to the extent necessary to avoid the imposition of any tax that would otherwise
be owed under Section 4999 of the Code. Such reductions shall first be made to
the bonus payments referred to in Section 8.1(d) and Section 8.1(a)(ii), (iii)
or (iv), whichever is applicable, then to the salary payments referred to in
Section 8.1(c), then to the salary payments under Section 8.1(a)(i) and finally
to the number of shares subject to options that are accelerated pursuant to
Section 8.1(e) in the reverse order of grant of those options. The determination
of whether and the extent to which payments and benefits are to be reduced
pursuant to this Section 19 shall be made in writing by tax accountants and/or
tax lawyers selected by the Company and reasonably acceptable to the Executive.

                                      14.


                              20. ENTIRE AGREEMENT

Except as described in Section 18 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior or contemporaneous oral or written communications,
understandings or agreements between the Company and the Executive with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the agreement relating to proprietary information and inventions
between the Company and the Executive shall continue in full force and effect.

                                21. COUNTERPARTS

This Agreement may be executed in counterparts, each of which counterpart shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties have executed and entered into this Agreement
effective on the date first set forth above.

MANNKIND CORPORATION                                EXECUTIVE

By: /s/ Michael Page                                /s/ Dan Burns
    --------------------------------------          ----------------------------
Its: Vice Chairman & CEO                            Dan Burns

                                      15.


                                   APPENDIX A

For purposes of this Agreement, a "Change of Control" shall be deemed to have
occurred, if any one of the following events occurs:

         (a)      the acquisition by any person or group of beneficial ownership
                  of more than 50% of the outstanding shares of Common Stock of
                  the Company, or, if there are then outstanding any other
                  voting securities of the Company, such acquisition of more
                  than 50% of the combined voting power of the then outstanding
                  voting securities of the Company entitled to vote generally in
                  the election of directors, except for any of the following
                  acquisitions of beneficial ownership of Common Stock or other
                  voting securities of the Company:

                  (i)      by the Company or any Employee benefit plan (or
                           related trust) sponsored or maintained by the Company
                           or any entity controlled by the Company;

                  (ii)     by Alfred E. Mann; or

                  (iii)    by any person or entity during Mr. Mann's lifetime if
                           the shares acquired were beneficially owned by Mr.
                           Mann immediately prior to their acquisition and the
                           acquisition is a transfer to a trust, partnership,
                           corporation or other entity in which Mr. Mann owns a
                           majority of the beneficial interests;

         (b)      the Company sells all or substantially all of its assets (or
                  consummates any transaction having a similar effect) or the
                  Company merges or consolidates with another entity or
                  completes a reorganization unless the holders of the voting
                  securities of the Company outstanding immediately prior to the
                  transaction own immediately after the transaction in
                  approximately the same proportions 50% or more of the combined
                  voting power of the voting securities of the entity purchasing
                  the assets or surviving the merger or consolidation or the
                  voting securities of its parent company, or, in the case of a
                  reorganization, 50% or more of the combined voting power of
                  the voting securities of the Company;

                  Notwithstanding the foregoing, any purchase or redemption of
                  outstanding shares of Common Stock or other voting securities
                  by the Company resulting in an increase in the percentage of
                  outstanding shares or other voting securities beneficially
                  owned by any person or group shall be deemed to constitute a
                  reorganization; however, no increase in the percentage of
                  outstanding shares or other voting securities beneficially
                  owned by Alfred E. Mann or any person or entities referred to
                  in (a)(i) or (iii) above resulting from any redemption of
                  shares or other voting securities by the Company shall result
                  in a Change of Control;

         (c)      the Company is liquidated; or

         (d)      the Board (if the Company continues to own its business) or
                  the board of directors or comparable governing body of any
                  successor owner of its business (as a result of a

                                      16.


                  transaction which is not itself a Change of Control) consists
                  of a majority of directors or members who are not Incumbent
                  Directors.

For purposes of this Agreement, (A) "voting securities" means securities whose
holders are entitled to vote in the election of all or a majority of the
authorized number of directors at the time the determination of `voting
securities" status is being made and (B) 50% or more of the combined voting
power shall refer to the voting power to elect a majority of the authorized
number of directors determined at that time. "Voting securities" shall not
include preferred stock or other securities whose holders are entitled to vote
in the election of all or a majority of the authorized number of directors upon
the occurrence of some event or circumstance which has not occurred and such
rights to vote are not in effect at the time of the determination of "voting
securities" status. Preferred stock and other securities whose holders are then
entitled to vote for less than a majority of the authorized number of directors,
shall not be considered "voting securities."

                                      17.


                                    EXHIBIT A
                    GENERAL RELEASE AND SETTLEMENT AGREEMENT

The parties to this General Release and Settlement Agreement ("Release") between
________________________________ ("Employee") and MannKind Corporation ("the
Company") state that:

The parties desire to terminate their employment relationship. Both parties
desire to fully and finally resolve all differences and disputes without further
costs;

THEREFORE, the parties agree:

1.    In consideration of the payments to Employee as provided in the Change of
      Control Agreement between the Employee and the Company dated August 1,
      2003, Employee does forever release and discharge the Company and all its
      parent, subsidiary and affiliated entities and all their past, present and
      future directors, officers, agents, employees, or representatives from all
      claims, damages, liabilities, and demands of whatever kind and character
      up to the date she/he signs below ("disputes"), including, but not limited
      to, arising out of or in any way related to any of the circumstances of
      Employee's employment or termination of employment with the Company.

      Employee releases all disputes relating to or arising out of any state,
      municipal, or federal statute, ordinance, regulation, order, contract,
      tort, or common law, including, but not limited to, the Age Discrimination
      in Employment Act. The parties intend that the disputes released herein be
      construed as broadly as possible.

2.    This Release also extends to all disputes by Employee against the Company
      whether known or unknown, suspected or unsuspected, past or present, and
      whether or not they arise out of or are attributable to the circumstances
      of Employee's employment or termination of employment with the Company.
      Specifically, Employee hereby expressly waives any and all rights under
      Section 1542 of the California Civil Code, which reads in full as follows:

           SECTION 1542. GENERAL RELEASE. A GENERAL RELEASE DOES NOT EXTEND TO
           CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
           FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
           MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

3.    Employee further understands and agrees that neither the payment nor the
      execution of this Release, or any part of it, shall constitute or be
      construed as an admission of any alleged liability or wrongdoing
      whatsoever by the Company. The Company expressly denies it has committed
      any alleged liability or wrongdoing.

4.    All films, files, books, computer files, correspondence, lists, equipment,
      manuals, other written and graphic records and the like and all copies
      thereof, affecting or relating to the business of Company which Employee
      shall have prepared, used, constructed, observed, possessed or controlled,
      shall be and remain the Company's sole property. Employee agrees to
      deliver promptly to the Company all such property relating to the Company,
      which are or

                                      18.


      have been in his possession or under his control. Employee also agrees to
      continue to abide by his confidentiality of information and inventions
      agreement with the Company.

5.    Employee agrees not to seek reemployment with the Company or any of its
      affiliates.

6.    This Release shall be governed by the substantive law of the State of
      California. In the event of any dispute concerning the interpretation of
      this Release or in any way related to Employee's employment or termination
      of employment, the dispute shall be resolved by arbitration within the
      County of Los Angeles, California, in accordance with the then existing
      rules for employment dispute arbitration of the American Arbitration
      Association, and judgment upon any arbitration award may be entered by any
      state or federal court having jurisdiction thereof. The parties intend
      this arbitration provision to be valid and construed as broadly as
      possible. The prevailing party in such arbitration shall recover its
      reasonable costs and attorneys' fees.

7.    If any provision of this General Release and Settlement Agreement is
      determined to be invalid or unenforceable, all of the other provisions
      shall remain valid and enforceable notwithstanding, unless the provision
      found to be unenforceable is of such material effect that this Release
      cannot be performed in accordance with the intent of the parties in the
      absence thereof.

8.    No promise or agreement other than that expressed herein has been made.
      This General Release and Settlement Agreement constitutes a single
      integrated contract expressing the entire agreement of the parties hereto.
      There are no other agreements, written or oral, express or implied,
      between the parties concerning the subject matter hereof, except the
      provisions set forth in this Release. This Release supersedes all previous
      agreements and understandings, whether written or oral. This Release can
      be amended, modified or terminated only by a writing executed by both
      Employee and the President of the Company.

9.    In compliance with the Olders Workers Benefit Protection Act, Employee has
      been given twenty-one (21) days to review this Release before signing it.
      Employee also understands that he may revoke this General Release and
      Settlement Agreement within seven (7) days after it has been signed and
      that it is not enforceable or effective until the seven (7) day revocation
      period has expired. Additionally, employee has been advised in this
      writing to consult with an attorney before executing this General Release
      and Settlement Agreement.

10.   THE EMPLOYEE STATES THAT HE/SHE IS IN GOOD HEALTH AND FULLY COMPETENT TO
      MANAGE HIS/HER BUSINESS AFFAIRS, THAT HE/SHE HAS CAREFULLY READ THIS
      GENERAL RELEASE AND SETTLEMENT AGREEMENT, THAT HE/SHE FULLY UNDERSTANDS
      ITS FINAL AND BINDING EFFECT, THAT THE ONLY PROMISES MADE TO HIM/HER TO
      SIGN THIS RELEASE ARE THOSE

                                      19.


      STATED AND CONTAINED IN THIS RELEASE, AND THAT HE/SHE IS SIGNING THIS
      AGREEMENT KNOWINGLY AND VOLUNTARILY.

AGREED AND ACCEPTED this _______ day of __________, _______:

MANNKIND CORPORATION                        EXECUTIVE

By: __________________________________      ____________________________________
Its: _________________________________

                                      20.

                                           *** TEXT OMITTED AND FILED SEPARATELY
                                                CONFIDENTIAL TREATMENT REQUESTED
                                           UNDER 17 C.F.R. SECTIONS 200.80(b)(4)
                                                                     AND 230.406

                                                                   Exhibit 10.15


                                SUPPLY AGREEMENT

THIS AGREEMENT is made this 1st day of January, 2000 by and between

DIOSYNTH B.V., having its registered office at Kloosterstraat 6, 5349 AB Oss,
the Netherlands (hereinafter referred to as "Diosynth"),

and

PHARMACEUTICAL DISCOVERY CORPORATION, having its offices at 33 West Main Street,
Elmsford, NY 10523, USA, hereinafter referred to as "PDC").

WHEREAS

- -     Diosynth is engaged in the development, manufacture and sale of, amongst
      other, recombinant human Insulin;

- -     PDC is engaged in the development of its proprietary formulation of
      insulin and upon successful development wishes to commercialize or have
      commercialized such formulation;

- -     PDC wishes to purchase from Diosynth recombinant human insulin to be used
      in its formulation and Diosynth is willing to sell and supply the
      recombinant human insulin to PDC on the terms and conditions as set forth
      herein.

NOW THEREFORE, parties hereto agree as follows:

ARTICLE 1.SUPPLY

1.1   Diosynth agrees to supply PDC and PDC herewith agrees to purchase from
      Diosynth recombinant human insulin as further specified in Appendix A
      attached to this Agreement (hereinafter referred to as "Product").

1.2   During the development of the insulin formulation by PDC, Diosynth will
      supply PDC with the Product in such quantities as PDC shall order
      estimated not to exceed the following:

      [...***...]
      [...***...]
      [...***...]
      [...***...]
      [...***...]
      [...***...]
      [...***...]

1.3   In case the insulin formulation is developed successfully and in the event
      PDC wishes to sell its insulin formulation on a commercial basis, Diosynth
      will supply PDC with the Product in such quantities as PDC shall order.

      It is foreseen that PDC will indicate the following quantities as its
      estimated commercial needs for the Product.

      [...***...]
      [...***...]
      [...***...]
      [...***...]


                                              * CONFIDENTIAL TREATMENT REQUESTED
                                       1

ARTICLE 2. ORDERS AND DELIVERY

2.1   Within fifteen (15) days from the beginning of each calendar quarter, PDC
      shall furnish to Diosynth a rolling forecast of its requirements of the
      Product, together with the delivery dates, during the next four (4)
      calendar quarters whereby the required quantities for the first quarter
      shall be a firm purchase order for the supply of the Product and shall not
      deviate more than twenty (20) percent from the preceding forecast provided
      to Diosynth.

2.2   Diosynth will deliver the Product to PDC within the date stipulated in the
      firm purchase order. Diosynth will use its best commercial efforts to
      deliver as soon as possible any quantities in excess of the purchase order
      as determined in Article 2.1.

2.3   Delivery of each batch of Product shall be effectuated FOB PDC's
      manufacturing facility (INCOTERMS 2000).

2.4   Each shipment of the Product shall be accompanied by relevant certificates
      of analysis and an invoice.

ARTICLE 3. PRODUCT QUALITY

3.1   Diosynth warrants that the Product delivered under this Agreement to PDC
      shall conform to the specifications set forth In Appendix A and shall be
      manufactured according to applicable regulations of Good Manufacturing
      Practices.

3.2   Within at most thirty (30) days of delivery of batches of the Product, PDC
      shall inform Diosynth of any nonconformity of the delivered batches with
      the specifications as set forth in Appendix A hereto. If Diosynth agrees
      with PDC's opinion, PDC shall dispose of the defective delivery as
      Dlosynth shall direct and at Diosynth's expense and Diosynth shall replace
      such delivery free of charge as soon as practical thereafter. If PDC falls
      to notify Diosynth of its faulty manufacture within thirty (30) days from
      the date of delivery of any quantity of Product, this delivery shall be
      deemed to conform to the specifications for the purpose of this Article 4.

      If the parties fail to agree on whether a delivery is defective or on the
      responsibility therefor, the matter shall be finally determined by an
      independent expert to be nominated by agreement between the parties. The
      expert's opinion shall be binding upon the parties and his fees and
      expenses shall be borne by the party against which the expert's opinion is
      given. If the expert's opinion is not wholly in favor of one party, the
      parties shall share the costs equally.

ARTICLE 4. USE

      PDC shall use the Product only in compliance with regulatory approvals
      and, in the absence of regulatory approvals, only in connection with
      research and the development of the insulin formulation.

ARTICLE 5. REGULATORY ISSUES

5.1   Diosynth agrees to file, at no costs to PDC and not later then December
      31, 2001, a US Drug Master File and any similar filing required in Canada
      and the European Union covering the manufacture of the Product.

5.2   Diosynth will cooperate with PDC and, without limitation, further support
      PDC with all other possible and reasonable regulatory information during
      the term of this agreement.


                                       2


ARTICLE 6. INDEMNIFICATION

6.1   PDC shall indemnify and hold Diosynth harmless against all claims made
      and/or suits brought against Diosynth by third parties in respect of any
      personal loss, damage or injury arising or resulting result from the use
      of the Product or the formulation developed and sold by PDC, except in
      case that any such personal loss, damage or injury arises or results from
      the faulty manufacture by Diosynth.

6.2   Diosynth shall indemnify and hold PDC harmless against all claims made
      and/or suits brought against PDC by third parties in respect of any
      personal loss, damage or injury arising or resulting or alleged to
      directly arise or result from the appropriate use of the Product in so far
      as in any particular case such personal loss, damage or injury is
      attributable to faulty manufacture by Diosynth.

6.3   In no event shall either party be liable for any consequential damages,
      costs, and losses whatsoever endured by the other.

ARTICLE 7. PRICE AND PAYMENT

7.1   For the quantities to be supplied by Diosynth in 2000, PDC shall pay the
      purchase price of [...***...], whereas for supply of the quantities in
      2001 and 2002 the purchase price will be [...***...].

7.2   Diosynth is willing to accept a purchase price of [...***...] as the
      commercial market price in the year 2000. In this respect "commercial
      market price" is considered to be the price for quantities as described in
      Article 1.3. This commercial market price in the year 2000 will be used as
      a basis for the determination of the commercial market price in subsequent
      years. To that end, on or before September 30 of each calendar year,
      parties will in good faith determine the commercial market price for the
      product for the following calendar year. In any case the purchase price
      will not increase, on a year by year basis, with more than the increase of
      the labor cost index in the Netherlands, as published by the C.B.S.
      (Centraal Bureau voor de Statistiek"). In addition, the price to PDC will
      not be higher than to any other customer as long as the quality and the
      quantity of the Product to that other customer is substantially comparable
      with the quantity and quality of the Product supplied to PDC.

7.3   Payment of the Product delivered shall be made by PDC within thirty (30)
      days of the date of invoice or receipt of the Product, whichever shall
      last occur.

ARTICLE 8. INFORMATION, SECRECY AND NON-USE

8.1   Upon signature of this Agreement and during the term thereof, Diosynth
      shall provide PDC with all information and documentation about the Product
      necessary for the development of the insulin formulation.

8.2   Each party shall keep strictly confidential and not use, except for the
      purpose and during the course of this Agreement, nor disclose, except to
      governmental authorities for registration purposes, any information which
      it receives from the other and which is marked confidential. Each party
      shall impose such confidentiality obligation on its employees.

8.3   This confidentiality obligation does not apply to any part of the
      confidential information which

      -     at present is publicly known or thereafter becomes publicly known
            through no fault of the receiving party,
      -     is already known by the receiving party on the date of disclosure,
            provided such prior knowledge can be adequately substantiated by
            documentation;
      -     properly and lawfully becomes available to the receiving party from
            a third party.

8.4   For the purpose of the development of the formulation PDC shall be
      entitled to disclose information to third parties provided that these
      third parties shall be bound by substantially the same secrecy obligations
      as contained herein.

                                             *  CONFIDENTIAL TREATMENT REQUESTED

                                       3


ARTICLE 9. TERM AND TERMINATION

9.1   This Agreement shall become effective as of January 1st, 2000 and shall
      continue to be in force until terminated as provided herein.

9.2   Notwithstanding the preceding paragraph, this Agreement may be terminated
      forthwith by registered or certified mail:

      a)    By both parties for any reason or no reason with a two year written
            notice; or
      b)    by either party in the event the other party shall substantially
            breach any of its obligations under this Agreement and shall fail to
            remedy such breach within sixty (60) days from receipt of written
            notice or such breach by the party not in default; or
      c)    by either party in the event of the other party's liquidation,
            bankruptcy or state of insolvency; or
      d)    by PDC, with 30 days written notice if a controlling regulatory
            authority either fails to approve or withdraws approval of the
            insulin formulation. In the event that the product is withdrawn by
            regulatory decree in a portion, but not all of the market, then PDC
            shall have the right to reduce the minimum quantities with 30 days
            written notice.

9.3   [...***...]

ARTICLE 10. FORCE MAJEURE

Neither party shall be responsible for failure or delay in performance of any of
its obligations under the Agreement due to force majeure such as war,
insurrection, strikes, lockouts, acts of God, governmental action, or any other
contingency beyond its reasonable control.

ARTICLE 11. HARDSHIP

Should it appear that at any time during the lifetime of this Agreement and for
any reason, the terms of this Agreement are not workable from an economical
point of view, the parties to this Agreement at the request of the party
concerned shall meet within two (2) months from the date of that request and
expend their best efforts to re-establish the terms of this Agreement in a
mutually satisfactory way.

ARTICLE 12. MISCELLANEOUS

12.1  This Agreement shall be governed by and construed in accordance with the
      laws of England applicable to agreements executed and to be performed
      therein.

12.2  All disputes arising in connection with the present Agreement, which
      cannot be settled amicably, shall be finally settled by the competent
      court of London, England. The prevailing party shall be entitled to
      recover its legal fees and expenses.

12.3  No amendment and/or modification of this Agreement shall be valid unless
      it is laid down in writing and signed by both parties.

12.4  All appendices attached hereto shall form an integral part of this
      Agreement. Parties may from time to time update these Appendices if so
      required.

                                             *  CONFIDENTIAL TREATMENT REQUESTED

                                       4

AS AGREED UPON and signed in duplicate

Oss,                                       Elmsford,

Diosynth B.V.                              Pharmaceutical Discovery Corporation


/s/  A. Sanders                            /s/  Solomon S. Steiner
- -------------------------------------      -------------------------------------
A. Sanders                                 Solomon S. Steiner, PhD
Managing Director                          CEO and Chairman



/s/  P. van Straelen                       /s/  Per Fog
- -------------------------------------      -------------------------------------
P. van Straelen                            Per B. Fog
Sales & Marketing Manager                  President & CFO


                                       5

                                   APPENDIX A

                         Specifications of the Product

The product complies with the specifications as described in USP 24.


                                       6

                                                                               .
                                                                               .
                                                                               .

                                                                    EXHIBIT 21.1

Subsidiaries of MannKind Corporation



NAME:                                   JURISDICTION OF FORMATION:
- ------------------------------------    --------------------------
                                     
Pharmaceutical Discovery Corp.          Connecticut

                                                                    Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of MannKind Corporation on
Form S-1 of our report dated April 29, 2004, appearing in the Prospectus, which
is part of this Registration Statement.

We also consent to the reference to us under the headings "Summary Financial
Data," "Selected Financial Data" and "Experts" in such Prospectus.

DELOITTE & TOUCHE LLP
Los Angeles, California
April 29, 2004