<PAGE>
OMB APPROVAL
OMB NUMBER: 3235-0145
EXPIRES: AUGUST 31, 1999
ESTIMATED AVERAGE BURDEN
HOURS PER RESPONSE: 14.90
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ___ )*
Aronex Pharmaceuticals, Inc.
--------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $0.001 per share
--------------------------------------------------------------
(Title of Class of Securities)
042666206
--------------------------------------------------------------
(CUSIP Number)
Jose M. de Lasa, 100 Abbott Park Road
Abbott Park, Illinois 60064-3500; Phone 847 937 8905
--------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 12, 1998
--------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ _ ].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies should be
sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED
IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY
VALID OMB CONTROL NUMBER.
<PAGE>
CUSIP No. 042666206
- --------------------------------------------------------------------------------
1. Names of Reporting Persons
I.R.S. Identification Nos. of Above Persons (entities only)
Abbott Laboratories
IRS Identification No. 36-0698440
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(See Instructions) (a) [___]
(b) [___]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds (See Instructions)
OO (see Item 3 below)
- --------------------------------------------------------------------------------
5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d)
or 2(e) [___]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Illinois
- --------------------------------------------------------------------------------
Number of 7. Sole Voting Power
Shares 837,989
Beneficially -------------------------------------------------------
Owned by 8. Shared Voting Power
Each 0
Reporting -------------------------------------------------------
Person With 9. Sole Dispositive Power
837,989
-------------------------------------------------------
10. Shared Dispositive Power
0
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
837,989
- --------------------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) [ ]
- --------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
5.13% (see Item 5 below)
- --------------------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO
- --------------------------------------------------------------------------------
ITEM 1. SECURITY AND ISSUER
Page 2 of 6 pages
<PAGE>
This statement relates to shares of the common stock, par value $0.001
per share (the "Common Stock"), of Aronex Pharmaceuticals, Inc., a Delaware
corporation (the "Issuer"), whose principal executive offices are located at
3400 Research Forest Drive, The Woodlands, Texas 77381-4223.
ITEM 2. IDENTITY AND BACKGROUND
(a) - (c), and (f) The person filing this statement is Abbott
Laboratories ("Abbott"), an Illinois corporation. Abbott's principal business
is the discovery, development, manufacture, and sale of a broad and diversified
line of health care products and services. Abbott's principal office is located
at 100 Abbott Park Road, Abbott Park, Illinois 60064-3500.
The names, citizenship, business addresses, present principal
occupation or employment and the name, and the principal business and address of
any corporation or other organization in which such employment is conducted of
the directors and executive officers of Abbott are as set forth in Exhibit 1
hereto and incorporated herein by this reference.
(d) and (e) Neither Abbott, nor to the best of its knowledge, any
person listed on Exhibit 1 has during the last five years (i) been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The aggregate purchase price of the 837,989 shares of Common Stock
(the "Shares") which is the subject of the Stock Purchase Agreement, dated as of
November 12, 1998, between the Issuer and Abbott is $3,000,000 (the "Purchase
Price"). See Item 6 below. The source of the funds is the general assets of
Abbott.
ITEM 4. PURPOSE OF THE ACQUISITION
The purpose of the transaction is for investment and to establish a long term
product development and marketing alliance between Abbott and the Issuer.
(a) - (j) At present, Abbott does not have any plans or proposals
which would relate to or result in transactions of the kind described in
paragraphs (a) through (j) of Item 4 of Schedule 13D of the Securities and
Exchange Commission. Abbott does, however, reserve the right to adopt such
plans or proposals subject to compliance with applicable regulatory
requirements. In addition, the Issuer has the right to require Abbott to
purchase additional shares
Page 3 of 6 pages
<PAGE>
of Common Stock if certain conditions are met. See Item 6.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Abbott may be deemed the beneficial owner of the Shares. This
represents approximately 5.13% of the outstanding shares of the Common Stock.
(b) Abbott will have sole power to vote or to direct the vote and the
sole power to dispose or to direct the disposition of the Shares.
(c) Except as described herein, there have been no transactions by
Abbott or the persons whose names are listed on Exhibit 1 in securities of the
Issuer during the past sixty days.
(d) No one other than Abbott is known to have the right to receive or
the power to direct the receipt of dividends from, or the proceeds from a sale
of the Shares.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
The summaries of certain terms of the following agreements do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all provisions of the agreements and reference is made to the full
text of such agreements which are filed as exhibits to this Statement and are
incorporated herein by reference.
A. STOCK PURCHASE AGREEMENT
Abbott purchased the Shares pursuant to the terms of the Stock Purchase
Agreement. In addition, the Stock Purchase Agreement permits the Issuer to
require Abbott to purchase additional shares of Common Stock (the "Additional
Shares") if certain conditions are satisfied within a specified time period for
an aggregate price not to exceed a stated amount. The Issuer is entitled to
exercise this right on only one occasion.
Abbott acquired certain registration rights under the Stock Purchase
Agreement. Subject to certain conditions, under Section 7.1, the Issuer must
notify the registered holder of the Shares and the Additional Shares
(collectively, the "Registrable Shares") of the registration of the Issuer's
securities (except a registration on Form S-4 or Form S-8) if the registration
form may be used for registration of the Registrable Shares. The Issuer will
include in such registration all Registrable Shares with respect to which the
Issuer receives a written request to include in the registration within 21 days
of the notice.
Subject to certain conditions, under Section 7.2, the registered holder of
the Registrable
Page 4 of 6 pages
<PAGE>
Shares may request at any time the registration of all or part of the
Registrable Shares on a Form S-3 or any similar short form, if available, so as
to permit the resale of the Shares. The Stock Purchase Agreement also sets
forth the desire of the Issuer and Abbott to enter into a license agreement.
B. LICENSE AGREEMENT
The License Agreement, between the Issuer and Abbott, is dated as of
November 12, 1998. Under the terms of the License Agreement, Abbott has certain
exclusive rights to manufacture, distribute, market and sell the Issuer's
injectable formulation of a compound for the treatment of systemic fungal
infections (the "Product"). Abbott has the right to sublicense its rights under
certain conditions. Subject to certain conditions, Abbott is obligated to make
certain milestone, research and development funding, and royalty payments to the
Issuer. Both the Issuer and Abbott undertake development and registration
activities for the Product in specified territories. Abbott will fund the
Issuer's research and development activities for the Product. The Issuer has
the right to co-promote the Product with Abbott in certain territories subject
to the conditions of Section 8 of the License Agreement.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 - Information Concerning Executive Officers and
Directors of Abbott Laboratories.
Exhibit 2 - Stock Purchase Agreement, dated as of
November 12, 1998.
Exhibit 3 - License Agreement, dated as of
November 12, 1998.
*********************************
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Abbott Laboratories
DATED: November 20, 1998 By: /s/ Gary P. Coughlan
-------------------------------
Gary P. Coughlan, Senior Vice President,
Finance and Chief Financial Officer
Page 5 of 6 pages
<PAGE>
EXHIBIT INDEX
PORTIONS OF EXHIBITS 2 AND 3 HAVE BEEN OMITTED (DESIGNATED BY AN
ASTERISK (*)) AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT DATED
NOVEMBER 20, 1998
Exhibit Number Description
- -------------- -----------
1 Information Concerning Executive Officers and
Directors of Abbott Laboratories.
2 Stock Purchase Agreement, dated as of
November 12, 1998.
3 License Agreement, dated as of
November 12, 1998.
Page 6 of 6 pages
<PAGE>
EXHIBIT 1
Information Concerning Executive Officers and
Directors of Abbott Laboratories
--------------------------------
The current corporate officers and directors of Abbott Laboratories are
listed below. The address of Abbott Laboratories is: Abbott Laboratories, 100
Abbott Park Road, Abbott Park, Illinois 60064-3500. Abbott Laboratories does
not consider all of its corporate officers to be executive officers as defined
by the Securities Exchange Act of 1934 or Releases thereunder. Unless otherwise
indicated, all positions set forth below opposite an individual's name refer to
positions within Abbott Laboratories, and the business address listed for each
individual not principally employed by Abbott Laboratories is also the address
of the corporation or other organization which principally employs that
individual.
<TABLE>
<CAPTION>
POSITION/PRESENT PRINCIPAL
OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS CITIZENSHIP
CORPORATE OFFICERS
- ------------------
<S> <C> <C>
Duane L. Burnham(1) Chairman of the Board and Chief U.S.A.
Executive Officer
Thomas R. Hodgson(1) President and Chief Operating Officer U.S.A.
Robert L. Parkinson(1) Executive Vice President U.S.A.
Miles D. White(1) Executive Vice President U.S.A.
Joy A. Amundson(1) Senior Vice President, Ross Products U.S.A.
Thomas D. Brown(1) Senior Vice President, Diagnostic U.S.A.
Operations
Gary P. Coughlan(1) Senior Vice President, Finance and U.S.A.
Chief Financial Officer
Jose M. de Lasa(1) Senior Vice President, Secretary and U.S.A.
General Counsel
William G. Dempsey(1) Senior Vice President, Chemical and U.S.A.
Agricultural Products
Richard A. Gonzalez(1) Senior Vice President, Hospital U.S.A.
Products
Arthur J. Higgins(1) Senior Vice President, Pharmaceutical United
Operations Kingdom
<PAGE>
CORPORATE OFFICERS
Continued
- ---------
Ellen M. Walvoord(1) Senior Vice President, Human Resources U.S.A.
Josef Wendler(1) Senior Vice President, International Germany
Operations
Catherine V. Babington(1) Vice President, Investor Relations and U.S.A.
Public Affairs
Patrick J. Balthrop Vice President, Diagnostic Commercial U.S.A.
Operations
Mark E. Barmak Vice President, Litigation and U.S.A.
Government Affairs
Christopher B. Begley Vice President, Abbott Health Systems U.S.A.
Douglas C. Bryant Vice President, Diagnostic Operations, U.S.A.
Asia and Pacific
Gary R. Byers(1) Vice President, Internal Audit U.S.A.
Thomas C. Chen Vice President, Pacific, Asia, and U.S.A.
Africa Operations
Kenneth W. Farmer(1) Vice President, Management Information U.S.A.
Services and Administration
Edward J. Fiorentino Vice President, Pharmaceutical U.S.A.
Products, Marketing, and Sales
Thomas C. Freyman(1) Vice President and Treasurer U.S.A.
David B. Goffredo Vice President, European Operations U.S.A.
Guillermo A. Herrera Vice President, Latin America and Colombia
Canada Operations
Jay B. Johnston Vice President, Diagnostic Assays and U.S.A.
Systems
James J. Koziarz, Ph.D. Vice President, Diagnostic Products U.S.A.
Research and Development
John F. Lussen(1) Vice President, Taxes U.S.A.
Edward L. Michael Vice President, Diagnostic Operations, U.S.A.
Europe, Africa, and Middle East
Theodore A. Olson(1) Vice President and Controller U.S.A.
<PAGE>
CORPORATE OFFICERS
Continued
- ---------
Andre G. Pernet, Ph.D. Vice President, Pharmaceutical U.S.A.
Products Research and Development
William H. Stadtlander Vice President, Ross Medical U.S.A.
Nutritional Products
Marcia A. Thomas(1) Vice President, Corporate Quality U.S.A.
Assurance and Regulatory Affairs
Steven J. Weger(1) Vice President, Corporate Planning and U.S.A.
Development
Susan M. Widner Vice President, Diagnostic Operations, U.S.A.
U.S. and Canada
Lance B. Wyatt(1) Vice President, Corporate Engineering U.S.A.
</TABLE>
<PAGE>
(1) Pursuant to Item 401 (b) of Regulation S-K Abbott has identified these
persons as "executive officers" within the meaning of Item 401 (b).
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION/PRESENT PRINCIPAL
OCCUPATION OR EMPLOYMENT
AND BUSINESS ADDRESS CITIZENSHIP
DIRECTORS
- ---------
<S> <C> <C>
K. Frank Austen, M.D. U.S.A.
Smith Building, Room 638
One Jimmy Fund Way
Boston, Massachusetts 02115
Duane L. Burnham Officer of Abbott U.S.A.
H. Laurance Fuller Chairman and Chief Executive Officer U.S.A.
Amoco Corporation
200 East Randolph Drive
Mail Code 3000
Chicago, Illinois 60601
Thomas R. Hodgson Officer of Abbott U.S.A.
David A. Jones Chairman of the Board U.S.A.
Humana Inc.
500 W. Main Street
Humana Building
Louisville, Kentucky 40202
The Rt. Hon. the Lord Physician, Politician, and United
Owen CH Businessman Kingdom
House of Lords
Westminster, London
SW1A OPW, England
<PAGE>
Robert L. Parkinson Officer of Abbott U.S.A.
Boone Powell, Jr. President and Chief Executive Officer U.S.A.
Baylor Health Care System and
Baylor University Medical Center,
3500 Gaston Avenue
Dallas, Texas 75246
<PAGE>
DIRECTORS - Continued
- ---------------------
Addison Barry Rand Executive Vice President U.S.A.
Xerox Corporation
800 Long Ridge Road
Stamford, Connecticut 06904-1600
Dr. W. Ann Reynolds President U.S.A.
The University of Alabama at
Birmingham
701 S. 20th Street
Birmingham, Alabama 35294-0110
Roy S. Roberts Vice President and Group Executive U.S.A.
North American Vehicle
Sales, Service and Marketing
General Motors Corporation
100 Renaissance Center
Mail Code 482-A30-D10
Detroit, Michigan 48243
William D. Smithburg Retired Chairman, President and Chief U.S.A.
Executive Officer
The Quaker Oats Company
676 N. Michigan Avenue
Suite 3860
Chicago, IL 60611
John R. Walter Chairman, Ashlin Management Corp. U.S.A.
100 South Wacker Drive
Suite 2100
Chicago, IL 60606
(telecommunications company)
William L. Weiss Chairman Emeritus, Ameritech U.S.A.
Corporation
One First National Plaza
Suite 2530C
Chicago, Illinois 60603-2006
(telecommunications company)
Miles D. White Officer of Abbott U.S.A.
</TABLE>
<PAGE>
EXHIBIT 2
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN ASTERISK (*))
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT DATED NOVEMBER 20, 1998
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BETWEEN
ABBOTT LABORATORIES
AND
ARONEX PHARMACEUTICALS, INC.
DATED AS OF NOVEMBER 12, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Purchase and Sale of Common Stock . . . . . . . . . . . . . . . . . . . 1
1.1 Initial Purchase . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Additional Purchase. . . . . . . . . . . . . . . . . . . . . . . 2
2. Interpretation of Agreement; Definitions. . . . . . . . . . . . . . . . 2
2.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . 6
2.3 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . 6
3. Representations and Warranties of the Company and its Subsidiaries. . . 6
3.1 Corporate Organization and Authority . . . . . . . . . . . . . . 6
3.2 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Equity Investments; Subsidiaries . . . . . . . . . . . . . . . . 7
3.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Securities and Exchange Commission Documents . . . . . . . . . . 8
3.7 Business Changes . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.9 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . .10
3.10 Title to Properties. . . . . . . . . . . . . . . . . . . . . . .10
3.11 Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . .10
3.12 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.13 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . .11
3.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.15 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . .12
3.16 Private Offering . . . . . . . . . . . . . . . . . . . . . . . .12
3.17 Employee Plans and Relations . . . . . . . . . . . . . . . . . .12
3.18 Environmental Matters. . . . . . . . . . . . . . . . . . . . . .13
3.19 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . .13
3.20 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . .13
4. Representations and Warranties of Abbott. . . . . . . . . . . . . . . .13
4.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . .14
4.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.3 Restricted Shares. . . . . . . . . . . . . . . . . . . . . . . .14
4.4 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.5 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . .15
5. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . .15
5.1 Rule 144 Reporting . . . . . . . . . . . . . . . . . . . . . . .15
5.2 Listing of Shares. . . . . . . . . . . . . . . . . . . . . . . .15
5.3 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . .16
6. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . .16
6.1 Conditions to Obligations of Abbott to Purchase the Initial
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
6.2 Conditions to Obligations of the Company for the Initial Shares.17
6.3 Conditions to Obligations of Abbott to Purchase the Additional
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
6.4 Conditions to Obligations of the Company for the Additional
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
7. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . .19
7.1 Piggyback Registration . . . . . . . . . . . . . . . . . . . . .19
7.2 Demand Registration. . . . . . . . . . . . . . . . . . . . . . .20
7.3 Payment of Expenses. . . . . . . . . . . . . . . . . . . . . . .20
7.4 Additional Covenants of the Company. . . . . . . . . . . . . . .20
7.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .22
7.6 Limitations on Registration Rights . . . . . . . . . . . . . . .23
8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
8.1 Indemnification by the Company . . . . . . . . . . . . . . . . .23
<PAGE>
8.2 Indemnification by Abbott. . . . . . . . . . . . . . . . . . . .24
8.3 Indemnification Procedure. . . . . . . . . . . . . . . . . . . .24
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
9.1 Powers and Rights Not Waived; Remedies Cumulative. . . . . . . .25
9.2 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . .26
9.4 Survival of Covenants and Representations. . . . . . . . . . . .26
9.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . .26
9.6 Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . .26
9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .27
9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . .27
9.9 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
9.10 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . .27
</TABLE>
EXHIBITS
Exhibit A -- License Agreement
Exhibit B -- Form of Opinion of Counsel
Exhibit C -- Dispute Resolution
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), entered into as of the 12th
day of November, 1998, by and between ABBOTT LABORATORIES, an Illinois
corporation ("Abbott"), and ARONEX PHARMACEUTICALS, INC., a Delaware corporation
(the "Company").
RECITALS
A. Abbott desires to purchase from the Company, and the Company
desires to sell to Abbott, shares of common stock, par value $0.001 per share,
of the Company (the "Common Stock"), all as more fully described below, on the
terms and conditions set forth herein.
B. The Company and Abbott desire to enter into a License Agreement
(the "License Agreement") in the form attached hereto as Exhibit A.
C. The Company and Abbott desire to make certain representations,
warranties, covenants and agreements in connection with the purchase and sale of
the Common Stock and desire to prescribe certain conditions precedent to such
purchase and sale.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and of the mutual
provisions, agreements and covenants contained herein, the Company and Abbott
hereby agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK.
1.1 INITIAL PURCHASE. Subject to the terms and conditions
hereof and on the basis of the representations, warranties, covenants and
agreements set forth herein, the Company agrees to sell to Abbott, and Abbott
agrees to purchase from the Company, on the Initial Closing Date (as defined
below), 837,989 shares of Common Stock (the "Initial Shares") for an aggregate
purchase price of $3,000,000.
The closing of the purchase and sale of the Initial Shares will occur at
Abbott's principal executive offices, against payment of the purchase price
therefor by wire transfer in immediately available funds, at 10:00 a.m., local
time, on November 30, 1998, or such later date as shall mutually be agreed upon
by the Company and Abbott (the "Initial Closing Date"). The Company shall
deliver to Abbott written wire transfer instructions for the payment of the
purchase price of the Initial Shares at least 48 hours prior to the Initial
Closing Date, which instructions shall include the Company's bank name and
address, ABA routing number and the Company's account number.
1.2 ADDITIONAL PURCHASE.
(a) At any time beginning *, the Company shall have
the right (the "Put Right") to require Abbott to purchase additional shares
of Common Stock (the "Additional Shares") for an aggregate purchase price of
up to *; provided, however, that the Put Right shall terminate if *. The
Company shall be entitled to exercise the Put Right on only one occasion.
(b) To exercise the Put Right, the Company shall
deliver to Abbott a written notice (the "Exercise Notice"), which shall be dated
as of the date the
<PAGE>
Exercise Notice is transmitted by facsimile transmission to Abbott (with a
confirmation copy sent by mail or personal delivery), and which shall set forth
(i) the number of shares of Common Stock to be sold to and purchased by Abbott
in connection with the exercise of the Put Right (the "Additional Shares"), (ii)
the aggregate purchase price for the Additional Shares (the "Additional Purchase
Price"), and (iii) the date on which the closing of the purchase and sale of the
Additional Shares shall take place (the "Additional Closing Date"), which shall
be the tenth Business Day after the date of the Exercise Notice or such other
date as shall be agreed to in writing by Abbott and the Company. The Company
shall deliver to Abbott written wire transfer instructions (setting forth the
information specified in Section 1.1 hereof) for the payment of the Additional
Purchase Price at least 48 hours prior to the Additional Closing Date.
(b) The number of Additional Shares to be sold to and
purchased by Abbott pursuant to the Put Right shall be determined by dividing
the Additional Purchase Price by the lesser of (i) * (as adjusted to reflect
any stock splits, reverse stock splits, stock dividends, subdivisions,
combinations or similar transactions the record date for which shall occur after
the date hereof), or (ii) the Fair Market Value on the date of the Exercise
Notice.
(c) Notwithstanding any other provision of this
agreement to the contrary, (i) the Company shall not be entitled to exercise the
Put Right at any time that the Fair Market Value of the Common Stock is less
than * (as adjusted to reflect any stock splits, reverse stock splits, stock
dividends, subdivisions, combinations or similar transactions the record date
for which shall occur after the date hereof), which is the Fair Market Value of
the Common Stock on the date hereof; and (ii) the number of Additional Shares
subject to the Put Right shall be reduced to the extent that the Initial Shares
and the Additional Shares shall, in the aggregate, equal or exceed * of the
outstanding Common Stock on the Additional Closing Date (after giving effect to
the exercise of the Put Right).
2. INTERPRETATION OF AGREEMENT; DEFINITIONS.
2.1 DEFINITIONS. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings,
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined:
"Additional Closing Date" shall have the meaning specified in Section
1.2 hereof.
"Additional Purchase Price" shall have the meaning specified in Section
1.2 hereof.
"Additional Shares" shall have the meaning specified in Section 1.2
hereof.
"Affiliate" shall mean any Person (other than a Subsidiary) (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds ten percent (10%) or more of any class of the Voting
Stock of the Company or (iii) ten percent (10%) or more of the Voting Stock (or
in the case of a Person which is not a corporation, ten percent (10%) or more of
the equity interest) of which is beneficially owned or held by the Company or a
Subsidiary. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Stock, by contract or otherwise.
"Agreement" shall mean this Stock Purchase Agreement.
"Board of Directors" shall mean either the board of directors of the
Company or any duly authorized committee thereof.
"Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of
<PAGE>
Directors and to be in full force and effect on the date of such certification.
"Business Day" shall mean any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banks located in Houston, Texas or
Chicago, Illinois are authorized or required by law to be closed.
"Change of Control" shall mean any change in control of the Company
which includes any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock), any acquisition
of at least a majority of the Voting Stock of the Company or any sale or
transfer of all or substantially all of the business or assets of the Company.
"Commission" shall mean the Securities and Exchange Commission or any
successor regulatory entity.
"Common Stock" shall mean the Common Stock, par value $0.001 per share,
of the Company.
"Company" shall mean Aronex Pharmaceuticals, Inc., a Delaware
corporation, and any Person that, in accordance with the terms of this
Agreement, succeeds to all or substantially all of the assets or the business of
Aronex Pharmaceuticals, Inc.
"Company Balance Sheet" shall have the meaning specified in Section 3.5
hereof.
"Company Balance Sheet Date" shall have the meaning specified in Section
3.5 hereof.
"Company Financial Statements" shall have the meaning specified in
Section 3.5 hereof.
"Company SEC Documents" shall have the meaning specified in Section 3.6
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exercise Notice" shall have the meaning specified in Section 1.2
hereof.
"Fair Market Value of the Common Stock" as of any day shall mean (i) the
average last sale price (or average closing bid and asked price if no sales were
reported) of the Common Stock on the Nasdaq National Market for the preceding 10
Business Days; or (ii) if the Common Stock is not included in the Nasdaq
National Market, the average closing price of the Common Stock on the principal
national securities exchange on which the Common Stock is listed for the
preceding 10 Business Days; or (iii) if the Common Stock is not listed on a
national securities exchange, the average of the high bid and the low asked
price of the Common Stock in the over-the-counter market as reported for the
preceding 10 Business Days; or (iv) if no such quotations are available, the
fair market value per share on such date as determined by an independent
investment banker or appraiser, nationally recognized to be an expert in making
such valuations, selected by mutual agreement of the Company and Abbott.
"FDA" shall mean the United States Food and Drug Administration or any
successor regulatory entity.
<PAGE>
"GAAP" shall mean generally accepted accounting principles in effect at
the applicable time in the United States.
"Governmental Entity" shall have the meaning specified in Section 3.4
hereof.
"Holder" shall mean the registered holder of the Shares.
"Initial Closing Date" shall have the meaning specified in Section 1.1
hereof.
"Initial Shares" shall have the meaning specified in Section 1.2 hereof.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or a Subsidiary shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale agreement,
capitalized lease or other arrangement pursuant to which title to the property
has been retained by or vested in some other Person for security purposes and
such retention or vesting shall constitute a Lien.
"NDA" shall mean an FDA New Drug Application with respect to the
Company's proprietary formulation of the compound nystatin, which as of the date
hereof is being developed under the name Nyotran-Registered Trademark-.
"NDA Acceptance Date" shall *.
"Permits" shall have the meaning specified in Section 3.9 hereof.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, and a government or
agency or political subdivision thereof.
"Preferred Stock" shall mean stock of the Company or a Subsidiary of any
class or series ranking prior to any other class or series of stock of the
Company or the Subsidiary with respect to the payment of dividends or the
distribution of assets upon the liquidation, dissolution or winding up of the
Company or the Subsidiary.
"Proprietary Rights" shall have the meaning specified in Section 3.13
hereof.
"Put Right" shall have the meaning specified in Section 1.2 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares" shall mean the Initial Shares and the Additional Shares.
"Subsidiary" shall mean a corporation, partnership or other entity at
least a majority of whose Voting Stock is owned directly or indirectly by the
Company.
"Voting Stock" shall mean securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
2.2 Accounting Principles. Where the character or amount of
any
<PAGE>
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
2.3 Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
3. Representations and Warranties of the Company and its
Subsidiaries. Except as otherwise described or set forth in the Company SEC
Documents, the Company and its Subsidiaries represent and warrant to Abbott as
of the date hereof, as of the Initial Closing Date and as of the Additional
Closing Date as follows:
3.1 Corporate Organization and Authority. The Company and
each of its Subsidiaries: (a) is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation; (b)
has all requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as presently proposed to be
conducted; and (c) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the nature of the business
transacted by it or the nature of the property owned or leased by it makes such
licensing or qualification necessary.
3.2 Capital Structure. The authorized capital stock of the
Company consists of 30,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock, par value $0.001 per share. As of the date hereof, 15,503,745
shares of Common Stock were issued and outstanding and no shares of the
Company's Preferred Stock were issued and outstanding. Except as described in
the Company SEC Documents, there are no outstanding options, warrants, rights or
other securities convertible into or exchangeable for shares of Common Stock,
other than stock options granted to employees and directors of the Company in
the ordinary course and consistent with past practice.
All of the outstanding Common Stock was issued in compliance with
applicable federal and state securities laws and regulations. All of the
outstanding shares of the Common Stock are, and when issued in accordance with
this Agreement the Shares will be, duly authorized, validly issued, fully paid
and nonassessable, free and clear of any Liens or encumbrances created by the
Company, and not subject to preemptive rights created by statute, the Company's
Certificate of Incorporation or Bylaws, or any agreement to which the Company is
a party or by which it is bound.
3.3 Equity Investments; Subsidiaries. The Company does not
own any equity stock or interest, directly or indirectly, in any corporation,
partnership, joint venture, firm or other entity other than (i) its
Subsidiaries, which are Triplex Pharmaceutical Corporation, a Delaware
corporation, Oncologix, Inc., a Delaware corporation and Aronex Europe Limited,
a company limited by shares organized under the laws of England, and (ii) a
minority interest in Targeted Genetics, Incorporated, a Delaware corporation.
The Company owns all of the outstanding capital stock of each of its
Subsidiaries, free and clear in each case of any Lien.
3.4 Authority. The Company has all requisite corporate power
and authority to enter into this Agreement and to execute, issue, sell and
deliver the Shares and, subject to satisfaction of the conditions set forth
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the certificates representing the Shares and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement
has been duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, enforceable in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency, reorganization or
other similar laws affecting the rights of creditors and the effect or
<PAGE>
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies. Provided the conditions set forth in Section 6
hereof are satisfied, the execution and delivery of this Agreement and the
certificates representing the Shares does not or will not, and the consummation
of the transactions contemplated hereby will not, conflict with, or result in
any violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation under (a) any provision of the Certificate of Incorporation or
Bylaws of the Company, or (b) any material agreement or instrument, permit,
franchise, license, judgment or order applicable to the Company or its
respective properties or assets.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority (a "Governmental Entity") or other Person, is
required by, or with respect to, the Company in connection with the execution
and delivery of this Agreement or the certificates representing the Shares or
the consummation by the Company of the transactions contemplated hereby, except
for such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country.
3.5 Financial Statements. The Company has furnished to
Abbott its audited consolidated statements of operations, statements of
stockholders' equity and statements of cash flows for the fiscal year ended
December 31, 1997 and the Company's audited consolidated balance sheet at
December 31, 1997; and the unaudited consolidated statement of operations and
statement of cash flows for the nine months ended September 30, 1998 and the
unaudited consolidated balance sheet at September 30, 1998. The balance sheet
at September 30, 1998 is hereinafter referred to as the "Company Balance Sheet,"
and all such financial statements are hereinafter referred to collectively as
the "Company Financial Statements." The Company Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis, except for any
change due to the adoption of an accounting principle established by the FASB,
AICPA, Commission or any other accounting standard setting board, during the
periods involved, and fairly present the consolidated financial position of the
Company and the results of its operations as of the date and for the periods
indicated thereon. At the date of the Company Balance Sheet (the "Company
Balance Sheet Date"), neither the Company nor its consolidated Subsidiaries had
any liabilities or obligations, secured or unsecured (whether accrued, absolute,
contingent or otherwise) required to be reflected on the Company Balance Sheet
or in the accompanying notes thereto that were not so reflected.
3.6 Securities and Exchange Commission Documents. The
Company has furnished to Abbott a true and complete copy of the Company's Proxy
Statement relating to the Company's 1998 annual meeting of shareholders, the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998, and the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 in the form delivered to Abbott on October 23,
1998 (the "Company SEC Documents"). As of their respective filing dates and, in
the case of the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, as of the date delivered to Abbott, the Company SEC
Documents comply in all material respects with the requirements of the Exchange
Act and none of the Company SEC Documents contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except to the extent
corrected by a subsequently filed Company SEC Document.
3.7 Business Changes. Since September 30, 1998, except as
otherwise contemplated by this Agreement or as described in the Company SEC
Documents, the Company has conducted its business only in the ordinary and usual
course and, without limiting the generality of the foregoing:
(a) There have been no changes in the condition
(financial or
<PAGE>
otherwise), business, net worth, assets, properties, employees, operations,
obligations or liabilities of the Company which, in the aggregate, have had or
may be reasonably expected to have a materially adverse effect on the condition,
business, net worth, assets, prospects, properties or operations of the Company.
(b) The Company has not issued, or authorized for
issuance, or entered into any commitment to issue, any equity security, bond,
note or other security of the Company other than stock options granted to
employees and directors of the Company in the ordinary course and consistent
with past practice.
(c) The Company has not incurred debt for borrowed
money, nor incurred any obligation or liability except in the ordinary and usual
course of business and in any event not in excess of $250,000 for any single
occurrence.
(d) The Company has not paid any obligation or
liability, or discharged, settled or satisfied any claim, lien or encumbrance,
except for current liabilities in the ordinary and usual course of business and
in any event not in excess of $250,000 for any single occurrence.
(e) The Company has not declared or made any dividend,
payment or other distribution on or with respect to any share of capital stock
of the Company.
(f) The Company has not purchased, redeemed or
otherwise acquired or committed itself to acquire, directly or indirectly, any
share or shares of capital stock of the Company.
(g) The Company has not mortgaged, pledged or
otherwise encumbered any of its assets or properties, other than leasehold
improvements and equipment acquired with purchase money financing or under a
capital lease, inventory sold in the normal course of business or accounts
receivable.
(h) The Company has not disposed of, or agreed to
dispose of, by sale, lease, license or otherwise, any asset or property,
tangible or intangible, except in the ordinary and usual course of business, and
in each case for a consideration believed to be at least equal to the fair value
of such asset or property and in any event not in excess of $250,000 for any
single item or $500,000 in the aggregate other than inventory sold or returned
in the normal course of business.
(i) The Company has not purchased or agreed to
purchase or otherwise acquire any securities of any corporation, partnership,
joint venture, firm or other entity; the Company has not made any expenditure or
commitment for the purchase, acquisition, construction or improvement of a
capital asset, except in the ordinary and usual course of business and in any
event not in excess of $250,000 for any single item or $500,000 in the
aggregate.
(j) The Company has not entered into any material
transaction or contract, or made any commitment to do the same, except in the
ordinary and usual course of business.
(k) The Company has not sold, assigned, transferred or
conveyed, or committed itself to sell, assign, transfer or convey, any material
Proprietary Rights (as defined in Section 3.13 hereof).
(1) The Company has not adopted or amended any
material bonus, incentive, profit-sharing, stock option, stock purchase,
pension, retirement, deferred-compensation, severance, life insurance, medical
or other benefit plan, agreement, trust, fund or arrangement for the benefit of
employees of any kind whatsoever, nor entered into or amended any material
agreement relating to employment, services as an independent contractor or
consultant, or severance or termination pay, nor agreed to do any of the
foregoing.
(m) The Company has not effected or agreed to effect
any change in its officers or key employees.
<PAGE>
(n) The Company has not effected or committed itself
to effect any amendment or modification in its Certificate of Incorporation or
Bylaws.
(o) The Company has not modified its accounting
principles in any material respect, except for those changes required by the
adoption of an accounting principle promulgated by the FASB, the AICPA, the
Commission or any other accounting standards setting bodies.
3.8 Litigation. There is no material claim, dispute, action,
proceeding, notice, order, suit, appeal or investigation, at law or in equity,
pending against the Company, or involving any of its assets or properties,
before any court, agency, authority, arbitration panel or other tribunal (other
than those, if any, with respect to which service of process or similar notice
has not yet been made on the Company), and none have been threatened. The
Company is aware of no facts which, if known to stockholders, customers,
governmental authorities or other Persons, would result in any such claim,
dispute, action, proceeding, suit or appeal or investigation which would have a
material adverse effect on the condition (financial or otherwise), business, net
worth, assets, prospects, properties or operations of the Company. The Company
is not subject to any order, writ, injunction or decree of any court, agency,
authority, arbitration panel or other tribunal, nor is it in default with
respect to any order, writ, injunction or decree.
3.9 Compliance with Law. All material licenses, franchises,
permits, clearances, consents, certificates and other evidences of authority of
the Company which are necessary to the conduct of the Company's business
("Permits") are in full force and effect and the Company is not in violation of
any Permit in any material respect. Except for possible exceptions, the curing
or non-curing of which would not have a material adverse effect on the condition
(financial or otherwise), business, net worth, assets, prospects, properties or
operations of the Company, the business of the Company has been conducted in
accordance with all applicable laws, regulations, orders and other requirements
of governmental authorities.
3.10 Title to Properties. The Company and each of its
Subsidiaries has good title to all material items of property it purports to
own, except for items of property sold or otherwise disposed of in the ordinary
course of business.
3.11 Licenses, etc. The Company and each of its Subsidiaries
owns or possesses all material trade names, service marks, licenses,
governmental approvals, and rights with respect to the foregoing necessary for
the present conduct of its business, without any known conflict with the rights
of others.
3.12 No Default.
(a) Each of the Company's material agreements or
contracts is a legal, binding and enforceable obligation by or against the
Company, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar federal or state laws affecting the
rights of creditors and the effect or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity).
To the Company's knowledge, no party with whom the Company has an agreement or
contract is in default thereunder or has breached any term or provision thereof
which is material to the conduct of the Company's business.
(b) The Company has performed, or is now performing,
the obligations of, and the Company is not in material default (or would by the
lapse of time and/or the giving of notice be in material default) in respect of,
any contract, agreement or commitment binding upon it or its assets or
properties and material to the conduct of its business. No third party has
raised any claim, dispute or controversy with respect to any material contract
of the Company, whether fully performed or currently being performed, nor has
the Company received written notice or warning of alleged nonperformance, delay
in delivery or other noncompliance by the Company with
<PAGE>
respect to its obligations under any such contract, nor to the Company's
knowledge are there any facts (other than contractual provisions allowing
parties to terminate such contract without cause) which exist indicating that
any such contract may be totally or partially terminated or suspended by the
other parties thereto.
3.13 Proprietary Rights.
(a) The Company has entered into agreements with each
officer, employee or consultant of the Company necessary to provide the Company
with title and ownership to all material patents, patent applications, trade
secrets and inventions developed or used by the Company in its business, and all
of such agreements are valid, enforceable and legally binding, subject to the
effect of applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the rights of creditors or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity).
(b) The Company owns or possesses licenses or other
rights to use all material patents, patent applications, trademarks, trademark
applications, trade secrets, service marks, trade names, copyrights, inventions,
drawings, designs, customer lists, proprietary know-how or information, or other
rights with respect thereto (collectively referred to as "Proprietary Rights"),
used in the business of the Company, and the same are sufficient to conduct the
Company's business as it has been and is now being conducted.
(c) To the Company's knowledge, the operations of the
Company do not violate or infringe, and no one has asserted to the Company that
such operations violate or infringe, on any Proprietary Rights, owned, possessed
or used by any third party. There are no claims, disputes, actions,
proceedings, suits or appeals pending against the Company with respect to any
Proprietary Rights (other than those, if any, with respect to which service of
process or similar notice may not yet have been made on the Company), and none
has been threatened against the Company. To the knowledge of the Company, there
are no facts which would reasonably serve as a basis for any claim that the
Company does not have the right to use, free of any rights or claims of others,
all Proprietary Rights in the development, manufacture, use, sale or other
disposition of any or all products or services presently being used, furnished
or sold in the conduct of the business of the Company as it has been and is now
being conducted.
(d) To the Company's knowledge, no employee of the
Company is in violation of any term of any employment contract, proprietary
information and inventions agreement, non-competition agreement, or any other
contract or agreement relating to the relationship of any such employee with the
Company or any previous employer.
3.14 Taxes. All tax returns required to be filed by the
Company or its Subsidiaries in any jurisdiction have been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or its
Subsidiaries or upon any of their respective properties, income or franchises,
which are shown to be due and payable in such returns have been paid. For all
taxable years ending on or before December 31, 1997, the federal income tax
liability of the Company and its Subsidiaries has been satisfied. The Company
does not know of any proposed additional tax assessment against it for which
adequate reserves have not been made on its balance sheet, and no material
controversy in respect of additional federal or state income taxes due since
such date is pending or, to the knowledge of the Company, threatened. The
reserves for taxes on the books of the Company and each of its Subsidiaries are
adequate in all material respects for all open years, and for its current fiscal
period.
3.15 Use of Proceeds. The net proceeds from the sale of the
Shares will be used to make an infusion of capital into the Company and for
other corporate purposes.
<PAGE>
3.16 Private Offering. The offering and sale of the Shares is
and will be exempt from the registration requirements of the Securities Act and
applicable state securities and blue sky laws. Neither the Company nor any
agent on its behalf has made or will make any offers to sell or solicited or
will solicit any offers to buy the Shares to any Person so as to bring the offer
or sale thereof within the registration requirements of the Securities Act.
3.17 Employee Plans and Relations.
(a) Except as disclosed in the Company SEC Documents,
the Company does not have any: (i) employee benefit plans, multi-employer plans
and employee benefit plans (as defined in section 3(2) or section 3(3) of
ERISA); (ii) material bonus, deferred compensation, incentive, restricted stock,
stock purchase, stock option, stock appreciation right, phantom stock,
debenture, supplemental pension, profit-sharing, royalty pool, commission or
similar plans or arrangements; (iii) material employment, consulting,
termination or severance agreements; or (iv) other material plans, programs,
agreements, procedures, policies, commitments, understandings or other
arrangements relating to employee benefits, executive compensation, fringe
benefits, severance pay, terms of employment or services as a director, officer,
employee or independent contractor.
(b) The Company has not been and is not a party to, or
subject to, or affected by, any collective bargaining agreement or other labor
contract. The Company has complied in all material respects with all laws,
rules and regulations relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and health
and plant closing.
3.18 Environmental Matters. The Company is, and at all times
during the period prior to the date hereof the Company has been, in material
compliance with all applicable local, state and federal statutes, orders, rules,
ordinances and regulations relating to pollution or protection of the
environment, including, without limitation, laws relating to zoning and land use
and to emissions, discharges, releases or threatened releases of pollutants,
contaminants, hazardous or toxic materials or wastes into or on land, ambient
air, surface water, ground water, personal property or structures (including the
protection, cleanup, removal, remediation or damage thereof), or otherwise
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, discharge or handling of pollutants, contaminants or
hazardous or toxic substances, materials or wastes.
3.19 Brokers or Finders. The Company has not dealt with any
broker or finder in connection with the transactions contemplated by this
Agreement. The Company has not incurred, and shall not incur, directly or
indirectly, any liability for any brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.20 Full Disclosure. Neither the Company Financial
Statements referred to in Section 3.6 hereof, nor this Agreement or any other
written statements furnished by the Company to Abbott in connection with the
negotiation of the sale of the Shares, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein, taken as a whole, not misleading. There is no fact
peculiar to the Company or the Subsidiaries which the Company has not disclosed
to Abbott in writing which materially adversely affects nor, so far as the
Company can now reasonably foresee, will materially adversely affect, the
properties, business, profits or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole.
4. Representations and Warranties of Abbott. Except as contemplated
by this Agreement, Abbott represents and warrants to the Company as of the date
hereof as follows:
4.1 CORPORATE ORGANIZATION. Abbott is a corporation duly
<PAGE>
incorporated, validly existing and in good standing under the laws of Illinois.
Abbott is duly qualified to do business and is in good standing in its state of
incorporation and in each other jurisdiction in which it owns or leases property
or conducts business, except where the failure to be so qualified would not have
a material adverse effect on the business of Abbott. Abbott has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and possesses all licenses, franchises, rights
and privileges material to the conduct of its business.
4.2 Authority. Abbott has all requisite corporate power and
authority to enter into this Agreement and, subject to satisfaction of the
conditions set forth herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Abbott. This Agreement has been duly executed
and delivered by Abbott and constitutes the valid and binding obligation of
Abbott enforceable in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency, reorganization or other similar federal or
state laws affecting the rights of creditors and the effect or availability of
rules of law governing specific performance, injunctive relief or other
equitable remedies. Provided the conditions set forth in Section 6 are
satisfied, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation under (a) any provision of the Articles of
Incorporation or Bylaws of Abbott, or (b) any material agreement or instrument,
permit, license, judgment, order, statute, law, ordinance, rule or regulation
applicable to Abbott or its properties or assets, other than any such conflicts,
violations, defaults, terminations, cancellations or accelerations which
individually or in the aggregate would not have a material adverse effect on
Abbott.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or other Person is required
by or with respect to Abbott in connection with the execution and delivery of
this Agreement by Abbott or the consummation by Abbott of the transactions
contemplated hereby.
4.3 Restricted Shares. Abbott represents and agrees, and in
entering into this Agreement the Company understands, that (a) Abbott is
acquiring the Shares for Abbott's own account, and for the purpose of investment
and not with a view to the distribution thereof, and that Abbott has no present
intention of selling, negotiating or otherwise disposing of the Shares, it being
understood, however, that the disposition of Abbott's property shall at all
times be and remain within its control, and (b) the Shares have not been
registered under Section 5 of the Securities Act and that Abbott will only
re-offer or resell the Shares purchased by Abbott under this Agreement pursuant
to an effective registration statement under the Securities Act or in accordance
with an available exemption from the requirements of Section 5 of the Securities
Act.
4.4 NO CONFLICT. The execution and delivery of this
Agreement by Abbott and the performance of Abbott's obligations hereunder, (a)
are not in violation or breach of, and will not conflict with or constitute a
default under, any of the terms of the Articles of Incorporation or Bylaws of
Abbott or any of its Subsidiaries, or any material contract, agreement or
commitment binding upon Abbott or any of its assets or properties; (b) will not
result in the creation or imposition of any Lien, encumbrance, equity or
restriction in favor of any third party upon any of the assets or properties of
Abbott; and (c) will not conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over Abbott or any of its assets or
properties.
4.5 Brokers or Finders. Abbott has not dealt with any broker
or finder in connection with the transactions contemplated by this Agreement.
Abbott has not incurred, and shall not incur, directly or indirectly, any
liability for any brokerage or finders' fees or agents commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
<PAGE>
5. Covenants of the Company. From and after the Initial Closing
Date and continuing so long as any Shares remain outstanding, the Company
covenants and agrees with Abbott that:
5.1 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the restricted Common Stock to the public without registration, as long
as a public market exists for the Common Stock, the Company shall use its best
efforts to:
(a) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act;
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act;
(c) So long as a Holder owns any restricted Common
Stock, furnish to the Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, and of
the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
5.2 Listing of Shares.
(a) The Company shall (i) promptly following the
Initial Closing Date prepare and file with The Nasdaq Stock Market, Inc. (as
well as any national securities exchange on which the Common Stock is then
listed) an application for listing of the Initial Shares and, concurrently with
the delivery of the Exercise Notice, prepare and file with The Nasdaq Stock
Market, Inc. (as well as any national securities exchange on which the Common
Stock is then listed) an application for listing of the Additional Shares, and
(ii) take all reasonable steps necessary to cause all Shares to be approved for
listing on the Nasdaq National Market (as well as any national securities
exchange on which the Common Stock is then listed) as soon as practicable
thereafter.
(b) The Company shall use its best efforts to keep
effective the registration of the Common Stock under the Exchange Act and
maintain the listing of the Common Stock on the Nasdaq National Market or a
national securities exchange.
5.3 Press Releases. Any press release or other public
announcement concerning this Agreement or the transactions contemplated hereby
shall be mutually satisfactory to the Company and Abbott, except that the
Company may issue such press releases or make such public statements as it
reasonably believes to be required by law or the rules of The Nasdaq Stock
Market.
6. Conditions Precedent.
6.1 Conditions to Obligations of Abbott to Purchase the
Initial Shares. The obligations of Abbott to consummate this Agreement and
purchase the Initial Shares are subject to the satisfaction on or prior to the
Initial Closing Date of all of the following conditions, unless waived by
Abbott:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and as if made at and as of the Initial Closing Date, and Abbott shall have
received a certificate or certificates signed by the Chief Executive Officer of
the Company to such effect.
<PAGE>
(b) PERFORMANCE OF OBLIGATIONS. The Company shall
have performed all obligations required to be performed by it under this
Agreement prior to the Initial Closing Date, and Abbott shall have received a
certificate signed by the Chief Executive Officer of the Company to such effect.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been
no changes in the condition (financial or otherwise), business, prospects,
employees, operations, obligations or liabilities of the Company which, in the
aggregate, have had or may be reasonably expected to have a materially adverse
effect on the financial condition, business, or operations of the Company on a
consolidated basis.
(d) LICENSE AGREEMENT. The Company and Abbott shall
have entered into a License Agreement in the form attached hereto as Exhibit A.
(e) OTHER DOCUMENTS. The Company shall have delivered
to Abbott (i) a copy of the Certificate of Incorporation of the Company, as in
effect on the Initial Closing Date, certified by the Secretary of State of the
State of Delaware, (ii) a certificate of the Secretary of State of the State of
Delaware and of the State of Texas, as of the most recent practicable date, as
to the good standing of the Company, (iii) a certificate of the Secretary of the
Company dated as of the Initial Closing Date, certifying as to (A) the Board
Resolutions authorizing the execution and delivery of this Agreement, the
Licencing Agreement and the other transactions contemplated hereby (with a copy
attached), (B) the Bylaws of the Company as in effect on the Initial Closing
Date (with a copy attached), and (C) the incumbency of the officers executing
the Agreement and the License Agreement; and (iv) a copy of the Company
Financial Statements, certified by the Chief Executive Officer or the Chief
Financial Officer of the Company.
(f) OPINION OF COUNSEL. The Company shall have
delivered an opinion of its counsel substantially in the form of Exhibit B.
(g) CERTIFICATES FOR INITIAL SHARES. The Company
shall have delivered to Abbott valid certificates for the Initial Shares,
registered in Abbott's name.
6.2 Conditions to Obligations of the Company for the Initial
Shares. The obligations of the Company to consummate the transactions
contemplated hereby are subject to the satisfaction on or prior to the Initial
Closing Date of all of the following conditions, unless waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Abbott set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as if made at and as of the Initial Closing Date.
(b) PERFORMANCE OF OBLIGATIONS OF ABBOTT. Abbott
shall have performed in all material respects all obligations required to be
performed by it under this Agreement prior to the Initial Closing Date.
(c) LICENSE AGREEMENT. The Company and Abbott shall
have entered into a License Agreement in the form attached hereto as Exhibit A.
(d) PAYMENT. Abbott shall have tendered to the
Company $3,000,000 in payment for the Initial Shares.
6.3 Conditions to Obligations of Abbott to Purchase the
Additional Shares. The obligations of Abbott to purchase the Additional Shares
are subject to the satisfaction on or prior to the Additional Closing Date of
all of the following conditions, unless waived by Abbott:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in
<PAGE>
all material respects as of the date of this Agreement and as if made at and as
of the Additional Closing Date, except for such changes as are disclosed in the
Company's filings with the Commission after the date of this Agreement, and
Abbott shall have received a certificate or certificates signed by the Chief
Executive Officer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall
have performed all obligations required to be performed by it under this
Agreement prior to the Additional Closing Date, and Abbott shall have received a
certificate signed by the Chief Executive Officer of the Company to such effect.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been
no changes in the condition (financial or otherwise), business, prospects,
employees, operations, obligations or liabilities of the Company which, in the
aggregate, have had or may be reasonably expected to have a materially adverse
effect on the financial condition, business or operations of the Company on a
consolidated basis, except for any such changes that have been publicly
disclosed for a period of at least 15 Business Days prior to the Additional
Closing Date. For purposes of this Section 6.3(c), a change shall not be deemed
to have been publicly disclosed unless it shall have been disclosed in a press
release issued by the Company and transmitted for immediate release to at least
five of the following news sources: the Associated Press; Business Wire; Dow
Jones & Company, Inc.; Moody's Investors Service, Inc.; PR Newswire; Reuters
Economic Services; Standard & Poor's Corporation; and United Press
International.
(d) OTHER DOCUMENTS. The Company shall have delivered
to Abbott (i) a copy of the Certificate of Incorporation of the Company, as in
effect on the Additional Closing Date, certified by the Secretary of State of
the State of Delaware, (ii) a certificate of the Secretary of State of the State
of Delaware and of the State of Texas, as of the most recent practicable date,
as to the good standing of the Company, and (iii) a certificate of the Secretary
of the Company dated as of the Additional Closing Date, certifying as to the
Board Resolutions authorizing the execution and delivery of this Agreement and
the other transactions contemplated hereby.
(e) REGISTRATION AND LISTING OF COMMON STOCK. The
Common Stock shall be registered under the Exchange Act and listed on the Nasdaq
National Market or a national securities exchange.
(f) CHANGE OF CONTROL. There shall not have occurred
or be pending a Change of Control other than a Change of Control to which Abbott
has consented in writing, which consent shall not be unreasonably withheld or
delayed. Without limiting the foregoing, Abbott's refusal to consent to a
Change of Control shall not be deemed to be unreasonable where the Change of
Control involves a Person that is a competitor of Abbott
(g) OPINION OF COUNSEL. The Company shall have
delivered an opinion of its counsel substantially in the form of Exhibit B.
(h) CERTIFICATES FOR THE ADDITIONAL SHARES. The
Company shall have delivered to Abbott valid certificates for the Additional
Shares, registered in Abbott's name.
(i) License Agreement. The Company shall have
complied in all material respects with terms and conditions of the License
Agreement, and the License Agreement shall be in full force and effect and no
notice of termination shall have been given thereunder.
6.4 Conditions to Obligations of the Company for the
Additional Shares. The obligations of the Company to consummate the
transactions contemplated hereby in connection with the Additional Shares are
subject to the satisfaction on or prior to the Additional Closing Date of all of
the following conditions, unless waived by the Company:
<PAGE>
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Abbott set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as if made at and as of the Additional Closing Date.
(b) PERFORMANCE OF OBLIGATIONS OF ABBOTT. Abbott
shall have performed in all material respects all obligations required to be
performed by it under this Agreement prior to the Additional Closing Date.
(c) PAYMENT. Abbott shall have tendered to the
Company the Additional Purchase Price in payment for the Additional Shares.
7. Registration Rights. The Holder shall have registration rights
as provided in this Section 7 with respect to the Shares (the "Registrable
Shares").
7.1 Piggyback Registration.
(a) Whenever securities of the Company are to be
registered under the Securities Act, other than pursuant to a registration
statement on Form S-4 or Form S-8, and the registration form to be used may be
used for the registration of the Registrable Shares (a "Piggyback
Registration"), the Company will give prompt written notice to the Holder of its
intention to effect such a registration and will include in such registration
all Registrable Shares with respect to which the Company has received written
requests for inclusion therein within 21 days after the Company's notice has
been given.
(b) If a Piggyback Registration relates to an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such offering will have an adverse effect on the offering (including the
price at which the shares of Common Stock can be sold), the Company will include
in such registration (i) first, the securities the Company proposes to sell for
its own account, if any, and (ii) second, the Registrable Shares requested to be
included in such registration and the securities requested to be included
therein by any other holders of the Company's securities that have been granted
piggyback registration rights prior to the date of this Agreement and which are
applicable to such registration (all such Registrable Shares and other
securities being collectively referred to as the "Secondary Shares") which in
the opinion of such underwriters can be sold in such offering without creating
such an adverse effect, allocated pro rata among the holders of such Secondary
Shares on the basis of the number of Secondary Shares owned or deemed to be
owned by such holders.
7.2 Demand Registration.
(a) The Holder may request at any time the
registration under the Securities Act of all or part of their Registrable Shares
on Form S-3 or any similar short-form registration ("Short-Form Registration"),
if available, so as to permit the resale thereof (a "Demand Registration"). The
Holder will be entitled to request one Short-Form Registration for the Initial
Shares and one Short-Form Registration for the Additional Shares. The Company
will use its best efforts to make the Short-Form Registration available for the
sale of Registrable Shares. If the Company is unable to make the Short-Form
Registration available for the sale of the Registrable Shares within 90 days of
the Holder's request, the Company shall cause the registration of the
Registrable Shares on Form S-1 or S-2 or any similar long-form registration so
as to permit the resale thereof. The Company shall keep such registration
effective for at least 12 months or for such shorter period of time as is
necessary for the distribution of the Registrable Shares thereunder to be
completed in accordance with the Holder's intended method of distribution.
(b) The Company may postpone for a reasonable period
not to exceed 90 days the filing or the effectiveness of a registration
statement for a Demand Registration if the Board of Directors determines
reasonably and in good faith that such
<PAGE>
filing would require disclosure of a material fact that would have a material
adverse effect on the Company or any plan by the Company or any of its
Subsidiaries to engage in any acquisition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or other material
transaction.
7.3 Payment of Expenses. The Company will pay all
registration expenses incurred in connection with the filing of the registration
statements provided for in this Section 7, including all registration and filing
fees, fees and expenses of compliance with federal, state and foreign securities
laws, printing expenses, and fees and disbursements of counsel for the Company
and its independent certified public accountants, underwriters, and other
Persons retained by the Company, but excluding discounts and commission
attributable to the Registrable Shares. The Holder will be responsible for the
fees and expenses of its own counsel.
7.4 Additional Covenants of the Company. The Company agrees
to use its reasonable best efforts to effect the registration of the Registrable
Shares in accordance with the intended method of disposition thereof, and
pursuant thereto, the Company agrees to:
(a) prepare and file with the Commission such
amendments and supplements to any registration statement filed pursuant hereof
and the prospectus used in connection therewith as may be necessary to keep any
such registration statement effective and available for resale of the
Registrable Shares, and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by any such registration
statement during such effective period in accordance with the intended methods
of disposition by the Holder set forth in any such registration statement;
(b) furnish to the Holder such number of copies of any
registration statement filed pursuant to this Section 7, each amendment and
supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as the Holder
may reasonably request in order to facilitate the disposition of the Registrable
Shares;
(c) use its reasonable best efforts to register or
qualify the Registrable Shares under such other securities or blue sky laws of
such states of the United States as the Holder reasonably requests and of any
and all other things which may be reasonably necessary or advisable to enable
the Holder to consummate the disposition in such jurisdictions of the
Registrable Shares owned by the Holder; provided, however, that the Company will
not be required (A) to qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 7.4,
(B) to subject itself to taxation in any such jurisdiction or (C) to consent to
general service of process in any such jurisdiction;
(d) notify the Holder, at any time when a prospectus
relating to any registration statement filed pursuant to this Section 7 is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits to state any material
fact necessary to make the statements therein not misleading, and, at the
request of the Holder, the Company will promptly prepare (and, when completed,
give notice to each seller of Registrable Shares) a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus will not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading; provided, however, that upon such notification by the
Company, the Holder will not offer or sell Registrable Shares until the Company
has notified the Holder that it has prepared a supplement or amendment to such
prospectus and delivered copies of such supplement or amendment to each such
seller;
(e) in the event of the issuance of any stop order
suspending the effectiveness or any registration statement filed pursuant to
this Section 7, or of any order suspending or preventing the use of any related
prospectus or suspending the
<PAGE>
qualification of any Registrable Shares included in such registration statement
for sale in any jurisdiction, the Company will use its reasonable best efforts
promptly to obtain the withdrawal of such order;
(f) in the event of any underwritten public offering
in which Registrable Shares are to be offered and sold, enter into and perform
its obligations under an underwriting agreement, in usual and customary form,
with the underwriters of such offering; and
(g) use its best efforts to furnish, on the date that
such Registrable Shares are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 7 and, in the case of the letter of
the independent public accountants referred to in clause (ii) below, on the
effective date of the registration statement, if such Registrable Shares are
being sold through underwriters, or, if such Registrable Shares are not being
sold through underwriters, on the effective date of the registration statement,
(i) an opinion, dated such date, of counsel to the Company, in form and
substance as is customarily given to the underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holder, and (ii) a
letter, dated such date, from the Company's independent public accountants in
form and substance as is customarily given to the underwriters in an
underwritten public offering, addressed to the underwriters, if any, and to the
Holder.
7.5 Indemnification.
(a) The Company agrees to indemnify the Holder, its
officers and directors and each Person who controls the Holder (within the
meaning of the Securities Act) against all losses, claims, damages and
liabilities caused by any untrue or alleged untrue statement of material fact
contained in any registration statement filed pursuant to this Section 7,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are (A) caused by or contained in any information
furnished in writing to the Company by the Holder for use therein, (B) caused by
the Holders' failure to deliver a copy of any such registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished the Holder with a sufficient number of companies of the same, or (C)
caused by the Holder's sale of Registrable Shares in violation of the proviso to
Section 7.4(d) hereof.
(b) In connection with any registration statement
filed pursuant to this Section 7, the Holder will furnish to the Company in
writing such information and affidavits as the Company reasonable requests for
use in connection with any registration statement or prospectus and will
indemnify the Company, its directors and officers and each Person who controls
the Company (within the meaning of the Securities Act) against any losses,
claims, damages and liabilities resulting from any untrue or alleged untrue
statement of material fact contained in any such registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that such untrue or alleged untrue statement or omission or
alleged omission is attributable to the information furnished by the Holder to
the Company in writing expressly for use in such registration statement or
prospectus or supplement thereto.
(c) Any Person entitled to indemnification hereunder
will (A) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (B) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
<PAGE>
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim. Subject to the foregoing terms and provisions of this Section 7.5(c),
each indemnifying party hereunder will reimburse the person entitled to
indemnification hereunder for all legal and other expenses reasonably incurred
in connection with investigating and defending the action or claim for which
such indemnified party seeks indemnification, as such expenses are incurred.
(d) The indemnification provided for under this
Section 7.5 will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and will survive the transfer of
securities.
7.6 Limitations on Registration Rights. The Company shall
not be obligated to register the Registrable Shares under the Securities Act (or
deliver any notice with respect to a Piggyback Registration) if, in an opinion
of counsel to the Company addressed to the Holder and the Company, reasonably
satisfactory to the Holder and its counsel, the Registrable Shares may be
offered and sold by the Holder without registration under the Securities Act
pursuant to Rule 144(k) and that following such offer and sale, such Registrable
Shares shall not be "restricted securities" within the meaning of the Securities
Act and the rules thereunder. The Company shall defend and indemnify the Holder
and its respective Affiliates, directors, officers, employees and shareholders
and their respective successors and assigns against and hold each of them
harmless from any and all losses, liabilities, claims, suits, proceedings,
demands, judgments. damages, expenses and costs, including, without limitation,
reasonable counsel fees, costs and expenses incurred in the investigation,
defense or settlement of any claims, arising out of or relating the offer and
sale of Registrable Shares in reliance on such opinion of counsel.
8. Indemnification.
8.1 Indemnification by the Company.
(a) The Company agrees to defend and indemnify Abbott,
its Subsidiaries and their respective Affiliates, directors, officers, employees
and shareholders, and their respective successors and assigns (collectively, the
"Abbott Indemnitees"), against and hold each of them harmless from any and all
losses, liabilities, taxes, claims, suits, proceedings, demands, judgments.
damages, expenses and costs, including, without limitation, reasonable counsel
fees, costs and expenses incurred in the investigation, defense or settlement of
any claims covered by this indemnity (in this Section 8 collectively, the
"Indemnifiable Damages") which any such indemnified person may suffer or incur
by reason of the inaccuracy or breach of any of the representations, warranties
and covenants of the Company contained in this Agreement or any documents,
certificate or agreement delivered pursuant hereto; provided, however, that the
total indemnity shall not exceed the consideration received by the Company.
Nothing herein shall limit in any way Abbott's remedies in the event of breach
by the Company of any of its covenants or agreements hereunder which are not
also a representation or warranty or for willful fraud or intentionally
deceptive material misrepresentation or omission by the Company in connection
herewith or with the transactions contemplated hereby.
(b) No Abbott Indemnitee shall be entitled to recovery
under the indemnities set forth herein unless and until the Indemnifiable
Damages of all Abbott Indemnitees exceed $25,000, at which point such indemnity
shall apply to all Indemnifiable Damages.
(c) No claim for indemnification may be brought by an
Abbott Indemnitee under this Section 8.1 more than 18 months (540 days)
following the later of the Initial Closing Date or, if the Put Right has been
exercised, the Additional Closing
<PAGE>
Date.
8.2 INDEMNIFICATION BY ABBOTT. After the Initial Closing
Date, Abbott shall indemnify and hold harmless the Company and its officers and
directors from and against:
(a) any damage, deficiency, losses or costs incurred
by the Company resulting from any material misrepresentation or breach of
warranty or any non-fulfillment of any covenant or agreement on the part of
Abbott under this Agreement; and
(b) any claim, action, suit, proceeding, demand,
judgment, assessment, cost and expense, including reasonable counsel fees,
incident to the foregoing; provided that the total indemnity shall not exceed
the purchase price paid by Abbott for the Shares pursuant to this Agreement.
No claim for indemnification may be brought under this Section 8.2 more
than 18 months (540 days) following the later of the Initial Closing Date or, if
the Put Right has been exercised, the Additional Closing Date.
8.3 Indemnification Procedure. A party seeking
indemnification (the "Indemnitee") shall use its commercially reasonable best
efforts to minimize any liabilities, damages, deficiencies, claims, judgments,
assessments, costs and expenses in respect of which indemnity may be sought
under this Agreement. The Indemnitee shall give prompt written notice to the
party from whom indemnification is sought (the "Indemnitor") of the assertion of
a claim for indemnification; provided, however, that the Indemnitee's failure to
notify the Indemnitor shall not excuse the Indemnitor's obligation to indemnify
the Indemnitee except to the extent that such failure prejudices the
Indemnitor's defense of any such claim. No such notice of assertion of a claim
shall satisfy the requirements of this Section 8.3 unless it describes in
reasonable detail and in good faith the facts and circumstances upon which the
asserted claim for indemnification is based. If any action or proceeding shall
be brought in connection with any liability or claim to be indemnified
hereunder, the Indemnitee shall provide the Indemnitor 20 calendar days to
decide whether to defend such liability or claim. During such period, the
Indemnitee shall take all necessary steps to protect the interests of itself and
the Indemnitor, including the filing of any necessary responsive pleadings, the
seeking of emergency relief or other action necessary to maintain the status
quo, subject to reimbursement from the Indemnitor of its expenses in doing so.
The Indemnitor shall (with, if necessary, reservation of rights) defend such
action or proceeding at its expense, using counsel selected by the insurance
company insuring against any such claim and undertaking to defend such claim, or
by other counsel selected by it and approved by the Indemnitee, which approval
shall not be unreasonably withheld or delayed. The Indemnitor shall keep the
Indemnitee fully apprised at all times of the status of the defense and shall
consult with the Indemnitee prior to the settlement of any indemnified matter.
The Indemnitee agrees to use its reasonable best efforts to cooperate with the
Indemnitor in connection with its defense of indemnifiable claims. In the event
the Indemnitee has a claim or claims against any third party growing out of or
connected with the indemnified matter, then upon receipt of indemnification, the
Indemnitee shall fully assign to the Indemnitor the entire claim or claims to
the extent of the indemnification actually paid by the Indemnitor and the
Indemnitor shall thereupon be subrogated with respect to such claim or claims of
the Indemnitee.
9. MISCELLANEOUS.
9.1 Powers and Rights Not Waived; Remedies Cumulative.
No delay or failure on the part of Abbott in the exercise of any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
the same preclude any other or further exercise thereof, or the exercise of any
other power or right, and the rights and remedies of Abbott are cumulative to,
and are not exclusive of, any rights or remedies Abbott would otherwise have.
<PAGE>
9.2 NOTICE. Except as otherwise expressly provided herein,
any notice, consent or document required or permitted hereunder shall be given
in writing and it or any certificates or other documents delivered hereunder
shall be deemed effectively given or delivered (as the case may be) upon
personal delivery (professional courier permissible) or upon facsimile
transmission (with receipt confirmed by telephone), or on the third Business Day
after being sent by United States certified or registered mail (postage prepaid,
return receipt requested). Such certificates, documents or notice may be
personally delivered to an authorized representative of the Company or Abbott
(as the case may be) at any address where such authorized representative is
present and otherwise shall be sent to the following address:
If to the Company: Aronex Pharmaceuticals, Inc.
8707 Technology Forest Place
The Woodlands, TX 77381-1191
Attention: Chief Executive Officer
Telecopy No.: (281) 367-1676
With a copy to: Andrews & Kurth L.L.P.
2170 Buckthorne Place, Suite 150
The Woodlands, TX 77380
Attention: Jeffrey L. Wade
Telecopy No.: (713) 220-4815
If to Abbott: Abbott Laboratories
D-960, AP30
200 Abbott Park Road
Abbott Park, IL 60064-3500
Attention: President, Hospital Products
Division
Telecopy No.: (847) 937-0805
With a copy to: Abbott Laboratories
Legal Division
D-322, AP6D
100 Abbott Park Road
Abbott Park, IL 60064-3500
Attn: Divisional Vice President,
Domestic Legal Operations
Telecopy No.: (847) 938-1206
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Company and its successors and assigns and
shall be binding upon and inure to the benefit of Abbott and its successors and
assigns; provided, however, that the Company shall not assign this Agreement or
any of its rights, duties or obligations hereunder without the prior written
consent of Abbott, which consent shall not be unreasonably withheld.
9.4 SURVIVAL OF COVENANTS AND REPRESENTATIONS. All
covenants, representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Initial Closing Date or the Additional Closing Date, shall survive the closing
and the delivery of this Agreement and the Shares.
9.5 SEVERABILITY. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter
<PAGE>
declared invalid or unenforceable.
9.6 WAIVER OF CONDITIONS. If on the Initial Closing Date or
the Additional Closing Date, either party hereto fails to fulfill each of the
conditions specified in Section 6 hereof, the other party may thereupon elect to
be relieved of all further obligations under this Agreement. Without limiting
the foregoing, if the conditions specified in Section 6 have not been fulfilled,
the other party may waive compliance by such party with any such condition to
such extent as such party may in its sole discretion determine. Nothing in this
Section 9.6 shall operate to relieve either party of any obligations hereunder
or to waive any of the other party's rights against such party.
9.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
9.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with Delaware law, without regard to the conflict of
laws provisions thereof.
9.9 CAPTIONS. The descriptive headings of the various
sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
9.10 Dispute Resolution. Disputes between the parties
relating to this Agreement shall be resolved by binding Alternative Dispute
Resolution as provided in Exhibit C hereto.
IN WITNESS WHEREOF, the Company and Abbott by their duly authorized
officers, have each caused this Agreement to be executed as of the date first
written above.
ABBOTT LABORATORIES
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ARONEX PHARMACEUTICALS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE>
EXHIBIT A
EXHIBIT A TO THE STOCK PURCHASE AGREEMENT IS SUBMITTED AS THE ATTACHED EXHIBIT 3
TO THE SCHEDULE 13D.
<PAGE>
EXHIBIT B
FORM OF OPINION OF COUNSEL
1. The Company (a) is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation,
(b) has all requisite power and authority to own and operate its
properties and to carry on its business as now conducted, and (c) is
duly licensed or qualified and is in good standing as a foreign
corporation in each jurisdiction wherein the nature of the business
transacted by it or the nature of the property owned or leased by it
makes such licensing or qualification necessary.
2. The Company has all requisite corporate power and authority to enter
into the Agreement and the License Agreement and to execute, issue, sell
and deliver the Shares and, subject to satisfaction of the conditions
set forth therein, to consummate the transactions contemplated thereby.
The execution and delivery of the Agreement, the License Agreement and
the certificates representing the Shares and the consummation of the
transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of the Company. The Agreement
and the License Agreement have been duly executed and delivered by the
Company and constitute the valid and binding obligation of the Company,
enforceable in accordance with their terms, subject to (a) the effect of
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the rights of creditors, (b) the effect or availability of
rules of law governing specific performance, injunctive relief or other
equitable remedies, and (c) considerations of public policy, including,
without limitation, public policy that may limit rights to indemnity or
contribution for liabilities arising under federal and state securities
laws and regulations thereunder.
3. To our knowledge, no consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or
other Person is required by, or with respect to, the Company in
connection with the execution and delivery of the Agreement, the License
Agreement or the certificates representing the Shares or the
consummation by the Company of the transactions contemplated thereby,
except for such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under
applicable federal and state securities laws and the laws of any foreign
country.
4. The execution and delivery of the Agreement, the License Agreement and
the certificates representing the Shares does not or will not, and the
consummation of the transactions contemplated thereby will not, conflict
with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation under (a)
any provision of the Certificate of Incorporation or Bylaws of the
Company, or (b) any material agreement or instrument, permit, franchise,
license, judgment or order applicable to the Company or its properties
or assets that is listed as an exhibit to the Company SEC Documents.
5. The total number of shares of capital stock the Company is authorized to
issue is 35,000,000 shares, consisting of 30,000,000 shares of Common
Stock and 5,000,000 shares of Preferred Stock.
6. Except as described in the Company SEC Documents, to our knowledge there
are no outstanding options, warrants, rights or other securities
convertible into or exchangeable for shares of capital stock of the
Company or any Subsidiary, other than options to purchase shares of
Common Stock reserved for issuance under the Company's stock option
plans described in the Company SEC Documents.
7. The Shares have been duly authorized and, when issued in accordance with
the
<PAGE>
Agreement, will be validly issued, fully paid and non-assessable, and
the issuance of the Shares is not subject to any preemptive or similar
rights created by statute, the Company's Certificate of Incorporation or
Bylaws or, to our knowledge, any agreement to which the Company is a
party or by which it is bound.
8. The offering and sale of the Shares in accordance with the terms of the
Agreement is exempt from the registration requirements of the Securities
Act.
9. The Company is not an "investment company" or a person "controlled" by
an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
<PAGE>
EXHIBIT C
ALTERNATIVE DISPUTE RESOLUTION
The parties recognize that a bona fide dispute as to certain matters may
arise from time to time during the term of this Agreement which relates to
either party's rights and/or obligations. To have such a dispute resolved by
this Alternative Dispute Resolution ("ADR") provision, a party first must send
written notice of the dispute to the other party for attempted resolution by
good faith negotiations between their respective representatives of the affected
subsidiaries, divisions, or business units within twenty-eight (28) days after
such notice is received (all references to "days" in this ADR provision are to
calendar days).
If the matter has not been resolved within twenty-eight (28) days of he
notice of dispute, or if the parties fail to meet within such twenty-eight (28)
days, either party may initiate an ADR proceeding as provided herein. The
parties shall have the right to be represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice
to the other party of the issues to be resolved by ADR. Within fourteen (14)
days after its receipt of such notice, the other party may, by written notice to
the party initiating the ADR, add additional issues to be resolved within the
same ADR.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to preside in the
resolution of any disputes in this ADR proceeding. If the parties are unable to
agree on a mutually acceptable neutral within such period, the parties shall
request the President of the Center for Public Resources ("CPR"), 366 Madison
Avenue, New York, New York 10017 to select a neutral pursuant to the following
procedures:
(a) The CPR shall submit to the parties a list of not less
than five (5) candidates within fourteen (14) days after receipt of the request
from the parties, along with a CURRICULUM VITAE for each candidate. No
candidate shall be an employee, director, or shareholder of either party or any
of their subsidiaries or affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her impartiality.
(c) Each party shall number the candidates in order of
preference (with the number one (1) signifying the greatest preference) and
shall deliver the list to the CPR within seven (7) days following receipt of the
list of candidates. If a party believes a conflict of interest exists regarding
any of the candidates that party shall provide a written explanation of the
conflict to the CPR along with its list showing its order of preference for the
candidates. Any party failing to return a list of preferences on time shall be
deemed to have no order of preference.
(d) If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR immediately shall
designate as the neutral the candidate for whom the parties collectively have
indicated the greatest preference. If a tie should result between two
candidates, the CPR may designate either candidate. If the parties collectively
have identified three (3) or more candidates deemed to have conflicts, the CPR
shall review the explanations regarding conflicts and, in its sole discretion,
may either (i) immediately designate as the neutral the candidate for whom the
parties collectively have indicated the greatest preference, or (ii) issue a new
list of not less than five (5) candidates, in which case the procedures set for
in subparagraphs 2(a) - 2(d) above shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six
(56) days after selection, the neutral shall hold a hearing to resolve each of
the issues identified by the parties. The ADR proceeding shall take place at a
location agreed upon by the parties. If the parties cannot agree, the neutral
shall designate a location other than the principal place of business of
<PAGE>
either party or any of their subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) a copy of all exhibits on which such party intends to
rely in any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony of each witness;
(c) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other remedy for each issue. The
proposed rulings and remedies shall not contain any recitation of the facts or
any legal arguments and shall not exceed one (1) page per issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty (20) pages. This page
limitation shall apply regardless of the number of issues raised in the ADR
proceeding.
Except as expressly set forth in subparagraphs 4(a) - 4(d) above, no
discovery shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
5. The hearing shall be conducted on two (2) consecutive days and
shall be governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine whether each party has
had the five (5) hours to which it is entitled.
(b) Each party shall be entitled, but not required, to make
an opening statement, to present regular and rebuttal testimony, documents or
other evidence, to cross-examine witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately after their direct
testimony, and cross-examination time shall be charged against the party
conducting the cross-examination.
(c) The party initiating the ADR shall begin the hearing and,
if it chooses to make an opening statement, shall address not only issues it has
raised but also any issues raised by the responding party. The responding
party, if it chooses to make an opening statement, also shall address all issues
raised in the ADR. Thereafter, the presentation of regular and rebuttal
testimony and documents, other evidence, and closing arguments shall proceed in
the same sequence.
(d) Witnesses shall be excluded from the hearing until
closing arguments.
(e) Neither affidavits nor settlement negotiations shall be
admissible under any circumstances. As to all other matters, the neutral shall
have sole discretion regarding the admissibility of any evidence.
6. Within seven (7) days following completion of the hearing, each
party may submit to the other party and the neutral a post-hearing brief in
support of its proposed rulings and remedies, provided that such brief shall not
contain or discuss any new evidence and shall not exceed ten (10) pages. This
page limitation shall apply regardless of the number of issues raised in the ADR
proceeding.
7. The neutral shall rule on each disputed issue within fourteen
(14) days following completion of the hearing. Such ruling shall adopt in its
entirety the proposed ruling and remedy of one of the parties on each disputed
issue but may adopt one party's proposed rulings and remedies on some issues and
the other party's proposed rulings and remedies on other issues. The neutral
shall not issue any written opinion or otherwise explain the basis of the
ruling.
<PAGE>
8. The neutral shall be paid a reasonable fee plus expenses. These
fees and expenses, along with the reasonable legal fees and expenses of the
prevailing party (including all expert witness fees and expenses), the fees and
expenses of a court reporter, and any expenses for a hearing room, shall be paid
as follows:
(a) If the neutral rules in favor of one party on all
disputed issues in the ADR, the losing party shall pay 100% of such fees and
expenses.
(b) If the neutral rules in favor of one party on some issues
and the other party on other issues, the neutral shall issue with the rulings a
written determination as to how such fees and expenses shall be allocated
between the parties. The neutral shall allocate fees and expenses in a way that
bears a reasonable relationship to the outcome of the ADR, with the party
prevailing on more issues, or on issues of greater value or gravity, recovering
a relatively larger share of its legal fees and expenses.
9. The rulings of the neutral and the allocation of fees and
expenses shall be binding, non-reviewable, and non-appealable, and may be
entered as a final judgment in any court having jurisdiction.
10. Except as provided in paragraph 9 of this Exhibit D or as
required by law, the existence of the dispute, any settlement negotiations, the
ADR hearing, any submissions (including exhibits, testimony, proposed rulings,
and briefs), and the rulings shall be deemed Confidential Information. The
neutral shall have the authority to impose sanctions for unauthorized disclosure
of Confidential Information.
<PAGE>
EXHIBIT 3
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN ASTERISK (*))
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT DATED NOVEMBER 20, 1998.
LICENSE AGREEMENT
BETWEEN
ABBOTT LABORATORIES
AND
ARONEX PHARMACEUTICALS, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Annual Net Sales". . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 "API Intellectual Property Rights". . . . . . . . . . . . . . . . . . . 2
1.4 "API Know-How". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "API Patents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "API Patent Applications" . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 "API Patent Rights" . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 "API Trademarks". . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 "Calendar Quarter". . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 "Calendar Year" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 "EMEA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 "Empiric Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 "Factory Cost". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 "First Commercial Sale" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 "Generic Competition" . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 "LBU Countries" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 "Major Subterritories". . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 "Net Sales" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 "Party" (and "Parties") . . . . . . . . . . . . . . . . . . . . . . . . 5
1.20 "Product" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.21 "Regulatory Approval" . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.22 "Term". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.23 "Territory" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 "Unaffiliated Sublicensee". . . . . . . . . . . . . . . . . . . . . . . 5
1.25 "U.S. FDA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.26 "U.S. FD&C Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.27 "U.S. NDA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.28 "U.S. Product Development Plan" . . . . . . . . . . . . . . . . . . . . 6
1.29 "Valid Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. GRANT AND SCOPE OF RIGHTS GRANTED . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Exclusive License . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Sublicensing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 No Implied Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Extension of the Territory to Spain and Portugal. . . . . . . . . . . . 7
3. MILESTONE AND RESEARCH & DEVELOPMENT FUNDING PAYMENTS . . . . . . . . . . . . . . 7
3.1 Milestone Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Effective Date. . . . . . . . . . . . . . . . . . . . . . . . 7
(b) United States Regulatory Approval . . . . . . . . . . . . . . 7
3.2 Research & Development Funding Payments . . . . . . . . . . . . . . . . 7
3.3 Non-Refundability . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.4 Reimbursement of Payment Reductions . . . . . . . . . . . . . . . . . .10
3.6 Equity Investment . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4. ROYALTY RATES AND PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.1 Royalty Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
(a) * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(b) * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(c) * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(d) * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(e) * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.2 Lump Sum Royalty Payments . . . . . . . . . . . . . . . . . . . . . . .13
4.3 Royalty Reports and Payments. . . . . . . . . . . . . . . . . . . . . .14
4.4 Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.5 No Royalties Payable Between Affiliates . . . . . . . . . . . . . . . .15
4.6 No Multiple Royalties . . . . . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
5. PAYMENT, RECORD KEEPING AND AUDIT RIGHTS. . . . . . . . . . . . . . . . . . . . . .15
5.1 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . .15
5.2 Record Keeping and Audit Rights . . . . . . . . . . . . . . . . . . . .15
6. PRODUCT DEVELOPMENT AND REGISTRATIONS . . . . . . . . . . . . . . . . . . . . . . .16
6.1 Development and Registration Activities . . . . . . . . . . . . . . . .16
(a) United States . . . . . . . . . . . . . . . . . . . . . . . .16
(b) European Union. . . . . . . . . . . . . . . . . . . . . . . .16
(c) Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
(d) Other Countries . . . . . . . . . . . . . . . . . . . . . . .17
(e) Mutual Assistance . . . . . . . . . . . . . . . . . . . . . .18
6.2 Development Costs . . . . . . . . . . . . . . . . . . . . . . . . . . .18
6.3 Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
(a) Material Changes. . . . . . . . . . . . . . . . . . . . . . .18
(b) Other Changes . . . . . . . . . . . . . . . . . . . . . . . .18
6.4 Reciprocal Access to Documentation and Data . . . . . . . . . . . . . .18
7. ABBOTT PRODUCT MARKETING AND SALES ACTIVITIES . . . . . . . . . . . . . . . . . . .19
7.1 Commercially Reasonable Efforts . . . . . . . . . . . . . . . . . . . .19
7.2 Marketing Costs and Expenses. . . . . . . . . . . . . . . . . . . . . .19
8. API CO-PROMOTION ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
8.1 Co-Promotion Territory. . . . . . . . . . . . . . . . . . . . . . . . .19
8.2 Allocation of Sales Representatives . . . . . . . . . . . . . . . . . .19
8.3 Co-Promotion Period . . . . . . . . . . . . . . . . . . . . . . . . . .19
8.4 Compensation to API . . . . . . . . . . . . . . . . . . . . . . . . . .20
8.5 Scope of Co-Promotion Collaboration . . . . . . . . . . . . . . . . . .20
9. CONFIDENTIALITY AND PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . .20
9.1 Confidentiality Obligation. . . . . . . . . . . . . . . . . . . . . . .20
9.2 Permitted Disclosures . . . . . . . . . . . . . . . . . . . . . . . . .20
9.3 Confidential Information. . . . . . . . . . . . . . . . . . . . . . . .21
(a) Publicly Available Information. . . . . . . . . . . . . . . .21
(b) Previously Known Information. . . . . . . . . . . . . . . . .21
(c) Subsequently Received Information . . . . . . . . . . . . . .21
(d) Independently Developed Information . . . . . . . . . . . . .21
(e) Legally Required Disclosures of Information . . . . . . . . .21
9.4 Duration of Confidentiality Obligation. . . . . . . . . . . . . . . . .22
9.5 Publicity and Announcements . . . . . . . . . . . . . . . . . . . . . .22
10. TRADEMARKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
10.1 Assignment of API Trademarks. . . . . . . . . . . . . . . . . . . . . .22
10.2 Alternate Trademarks. . . . . . . . . . . . . . . . . . . . . . . . . .23
11. PATENT OWNERSHIP AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . .23
11.1 Patent Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
11.2 Joint Inventions. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
11.3 API Patent Warranties . . . . . . . . . . . . . . . . . . . . . . . . .23
12. PATENT PROSECUTION AND INTELLECTUAL PROPERTY INFRINGEMENT . . . . . . . . . . . . .24
12.1 Patent Filing and Prosecution . . . . . . . . . . . . . . . . . . . . .24
12.2 Notification of Infringement. . . . . . . . . . . . . . . . . . . . . .24
12.3 Infringement of Third Party Rights. . . . . . . . . . . . . . . . . . .24
12.4 Infringement Indemnification. . . . . . . . . . . . . . . . . . . . . .25
12.5 Termination for Infringement. . . . . . . . . . . . . . . . . . . . . .26
12.6 Third Party Infringement of API Intellectual Property Rights. . . . . .26
(a) API Enforcement . . . . . . . . . . . . . . . . . . . . . . .26
(b) Abbott Enforcement. . . . . . . . . . . . . . . . . . . . . .26
12.7 Allocation of Recoveries. . . . . . . . . . . . . . . . . . . . . . . .27
12.8 Mutual Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . .27
<PAGE>
12.9 Labeling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
12.10 Notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
13. INDEMNIFICATION AND INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .28
13.1 Reciprocal Indemnification Provisions . . . . . . . . . . . . . . . . .28
(a) API Indemnification . . . . . . . . . . . . . . . . . . . . .28
(b) Abbott Indemnification. . . . . . . . . . . . . . . . . . . .28
13.2 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . .28
13.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
14. ADVERSE DRUG EXPERIENCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
15. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . .30
(a) Corporate Status. . . . . . . . . . . . . . . . . . . . . . .30
(b) Authority . . . . . . . . . . . . . . . . . . . . . . . . . .31
(c) No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . .31
(d) No Approvals. . . . . . . . . . . . . . . . . . . . . . . . .31
(e) Enforceability. . . . . . . . . . . . . . . . . . . . . . . .31
(f) Compliance With Laws. . . . . . . . . . . . . . . . . . . . .31
(g) Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . .31
16. TERM AND EARLY TERMINATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . .32
16.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
16.2 Termination for Cause . . . . . . . . . . . . . . . . . . . . . . . . .32
(a) Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . .32
(b) Material Breach . . . . . . . . . . . . . . . . . . . . . . .32
16.3 Termination by Mutual Agreement . . . . . . . . . . . . . . . . . . . .32
16.4 Termination by Abbott . . . . . . . . . . . . . . . . . . . . . . . . .32
(a) Safety or Efficacy. . . . . . . . . . . . . . . . . . . . . .32
(b) Limited Commercial Viability. . . . . . . . . . . . . . . . .33
17. CONSEQUENCES OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
17.1 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . .33
17.2 License Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
17.3 Fully Paid-Up License . . . . . . . . . . . . . . . . . . . . . . . . .34
17.4 Mutual Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
17.5 Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . .34
18. GOVERNING LAW AND DISPUTE RESOLUTION. . . . . . . . . . . . . . . . . . . . . . . .34
18.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
18.2 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . .34
(a) Attempted Amicable Resolution . . . . . . . . . . . . . . . .35
(b) ADR Procedure . . . . . . . . . . . . . . . . . . . . . . . .35
(c) ADR Ruling. . . . . . . . . . . . . . . . . . . . . . . . . .35
(d) Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . .36
(e) Dispute Resolution for Section 7.1. . . . . . . . . . . . . .36
18.3 Effect of Commencing Dispute Resolution . . . . . . . . . . . . . . . .37
19. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
19.1 Manner of Giving Notices. . . . . . . . . . . . . . . . . . . . . . . .37
19.2 Addresses for Notices . . . . . . . . . . . . . . . . . . . . . . . . .38
20. INTEGRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
21. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
22. LIMITATION OF DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
23. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
<PAGE>
24. RELATIONSHIP OF PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
25. SEVERABILITY OF CLAUSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
26. NON-WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
27. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
28. EXECUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
</TABLE>
<PAGE>
LICENSE AGREEMENT
This License Agreement ("Agreement") is made and entered into as of the
___ day of November, 1998 ("Effective Date"), by and between ARONEX
PHARMACEUTICALS, INC., a Delaware corporation having its principal office at
8707 Technology Forest Place, the Woodlands, Texas 77381-1191 ("API"), and
ABBOTT LABORATORIES, an Illinois corporation having its principal office at 100
Abbott Park Road, Abbott Park, Illinois, 60064-3500 ("Abbott").
WHEREAS, API has developed a new, proprietary injectable formulation
of the compound nystatin presently being developed under the name Nyotran
- -Registered Trademark- for treatment of systemic fungal infections; and
WHEREAS, Abbott and API desire to enter into this Agreement under which
Abbott shall acquire the exclusive world-wide rights to manufacture, distribute,
market and sell the above-referenced product.
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and intending to be legally bound, the parties hereto agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall be defined as
set forth below. Additional terms used in specific Sections of this Agreement
shall be defined in such Sections.
1.1 "AFFILIATE" shall mean any business entity controlled by a Party
(as defined below), or which controls a Party, or which is under common control
with a Party. "Control" herein means the direct or indirect ownership of at
least fifty percent (50%) of the authorized issued voting shares in such entity,
or such other relationship as in fact legally results in effective control over
the management, business and affairs of such entity or Party, as the case may
be. For purposes of this Agreement, Abbott Affiliates shall also include Abbott
Laboratories Nigeria Limited.
1.2 "ANNUAL NET SALES" shall mean Net Sales (as defined below) in any
Calendar Year.
1.3 "API INTELLECTUAL PROPERTY RIGHTS" shall mean API Patents (as
defined below) and API Know-How (as defined below).
1.4 "API KNOW-HOW" shall mean all non-patented and unpublished
non-clinical, pre-clinical and clinical documentation, information, and data
relating to the Product owned or controlled by API and its Affiliates as of the
Effective Date or at any time during the Term (as defined below), including but
not limited to all registration materials for the Product (as defined below)
developed, acquired or compiled by API and its Affiliates as of the Effective
Date or at any time during the Term, and all documentation, information and data
relating to the formulation, manufacture and/or quality control of the Product
as API and its Affiliates have available as of the Effective Date or at any time
during the Term.
<PAGE>
1.5 "API PATENTS" shall mean all issued patents owned by or licensed
to API and its Affiliates in the Territory as of the Effective Date and other
patents owned by or licensed to API and its Affiliates in the Territory issued
at any time during the Term which have claims covering the manufacture, sale or
use of the Product or its active ingredient (including any divisions,
continuations, continuations-in-part, reexaminations, reissues, additions,
renewals and extensions thereof). API Patents in existence as of the Effective
Date are set forth in Part I of Exhibit A and such Exhibit shall be amended by
API from time to time during the Term to include API Patents issued after the
Effective Date.
1.6 "API PATENT APPLICATIONS" shall mean patent applications owned by
or licensed to API and its Affiliates in the Territory pending as of the
Effective Date and patent applications owned by or licensed to API and its
Affiliates in the Territory filed at any time during the Term which have claims
covering the manufacture, sale or use of the Product or its active ingredient
(including any divisions, continuations, continuations-in-part, reexaminations,
reissues, additions, renewals and extensions thereof). API Patent Applications
in existence as of the Effective Date are set forth in Part II of Exhibit A and
such Exhibit shall be amended by API from time to time during the Term to
include API Patent Applications filed after the Effective Date.
1.7 "API PATENT RIGHTS" shall mean API Patents and API Patent
Applications.
1.8 "API TRADEMARKS" shall mean Nyotran -Registered Trademark-,
NystatinLF-Registered Trademark- and any other mutually agreed upon
trademark owned by API used with the Product.
1.9 "CALENDAR QUARTER" shall mean each of the three (3) month periods
beginning on January 1, April 1, July 1 and October 1 of each Calendar Year (as
defined below) during the Term.
1.10 "CALENDAR YEAR" shall mean any consecutive twelve (12) month
period from January 1 to December 31 during the Term.
1.11 "EMEA" shall mean the European Medicines Evaluation Agency or any
successor agency thereto.
1.12 "EMPIRIC CLAIM" shall mean Regulatory Approval (as defined below)
for the Product with an approved claim for empirical therapy for presumed fungal
infection in febrile, neutropenic patients.
1.13 "FACTORY COST" shall mean Abbott's cost of manufacturing the
Product calculated in accordance with the attached Exhibit B.
1.14 "FIRST COMMERCIAL SALE" shall mean the first sale of the Product
by Abbott, any Abbott Affiliate or Unaffiliated Sublicensee (as defined below)
to any end-user customer, excluding any sales or transfers of the Product to any
party in connection with clinical trials or regulatory or safety testing.
1.15 "GENERIC COMPETITION" shall mean competition from another
supplier of nystatin liposome for injection in a country in the Territory in
which no Valid Claim exists such that Abbott or an Abbott Affiliate or
Unaffiliated Sublicensee is forced to lower the price of the Product by * (*)
or more in such country, where such discount is in addition to the reasonable
and customary discounts offered to customers in such country.
1.16 "LBU COUNTRIES" shall mean the following countries in Europe,
individually or collectively, as applicable: France, Germany, the United
Kingdom, Italy
<PAGE>
and Spain.
1.17 "MAJOR SUBTERRITORIES" shall mean the following countries or
areas of the Territory, individually or collectively, as applicable: the United
States, the LBU Countries and Japan.
1.18 "NET SALES" shall mean the gross sales of the Product in the
Territory actually billed and collected by Abbott, its Affiliates, or
Unaffiliated Sublicensees from any national or local governments, hospitals,
drug wholesalers or brokers, and other third party customers which are not
Abbott Affiliates or Unaffiliated Sublicensees (such as surgicenters and other
institutions, the primary business of which is providing medical care), less
reasonable and customary: (a) credits and allowances or adjustments actually
granted to such customers on account of retroactive price reductions,
governmental or other rebates, and rejections, recalls or returns of the Product
previously sold; (b) any trade and cash discounts, rebates, charge-backs granted
to customers in the case of sales to drug wholesalers or brokers where there are
no direct shipments by Abbott, its Affiliates or Unaffiliated Sublicensees to
such customers, and management fees paid during the relevant time period to
group purchasing organizations and relating specifically to the Product (which
discounts, rebates, charge-backs and fees shall be in the same proportion of the
invoice price as that borne by other products sold by Abbott or an Abbott
Affiliate or Unaffiliated Sublicensee to customers such that the portion of such
discounts, rebates, chargebacks and fees allocated to the Product does not
exceed the portion allocated to any other such product as a percentage of the
invoice price of the Product and such other product), and (c) any sales or other
taxes imposed upon the sale of the Product to the extent included in the gross
sales price, as adjusted (as applicable) for any credits, allowances, rebates
and chargebacks.
1.19 "PARTY" (and "PARTIES") shall mean either API or Abbott (or
both), as the context requires.
1.20 "PRODUCT" shall mean API's proprietary formulation of the
compound nystatin, presently being developed under the name
Nyotran -Registered Trademark-.
1.21 "REGULATORY APPROVAL" shall mean all governmental approvals
required to market and sell the Product in any given country in the Territory
(as defined below), including but not limited to, product registrations, medical
approvals, price, reimbursement and marketing approvals.
1.22 "TERM" shall mean the period commencing on the Effective Date and
continuing until the later of (a) ten (10) years after the date of Regulatory
Approval in the United States and (b) the date of expiration or invalidation of
the last to expire or be invalidated of the API Patents containing a Valid Claim
(as defined below), subject to earlier termination as provided herein.
1.23 "TERRITORY" shall mean all countries and territories of the
world; provided that the Territory shall include Spain and Portugal only if, and
to the extent that, in accordance with Section 2.4, Abbott and/or API enter into
one or more agreements with Grupo Ferrer Internacional, S.A. ("Ferrer")
modifying, replacing or terminating that certain Supply and Distribution
Agreement dated May 2, 1997 between API and Ferrer (the "Ferrer Agreement") to
permit the inclusion of such countries within the Territory without any breach
or violation of the rights of Ferrer.
1.24 "UNAFFILIATED SUBLICENSEE" shall mean any sublicensee of Abbott
under
<PAGE>
this Agreement other than an Abbott Affiliate.
1.25 "U.S. FDA" shall mean the United States Food and Drug
Administration and any successor regulatory agency.
1.26 "U.S. FD&C ACT" shall mean the United States Food, Drug and
Cosmetic Act, including any amendments thereto and all regulations promulgated
thereunder.
1.27 "U.S. NDA" shall mean a New Drug Application filed with the U.S.
FDA.
1.28 "U.S. PRODUCT DEVELOPMENT PLAN" shall mean the Plan attached
hereto as Exhibit C setting forth API's Product development and registration
activities in the United States, as the same may be amended from time to time
during the Term in accordance with Section 6.3.
1.29 "VALID CLAIM" shall mean one (1) or more claim of an issued and
unexpired API Patent which neither has been held unenforceable, unpatentable or
invalid by a decision of a court or governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal, nor
has been admitted by the holder of the API Patent to be invalid or unenforceable
through reissue, disclaimer, abandonment or otherwise.
2. GRANT AND SCOPE OF RIGHTS GRANTED
2.1 EXCLUSIVE LICENSE. API hereby grants to Abbott an exclusive
license (or sublicense, as applicable) under API Intellectual Property Rights to
make, have made, use, import, offer for sale and sell the Product in the
Territory, which license shall be exclusive even as to API and its Affiliates,
except as provided in Section 6 and 8. The Parties acknowledge and agree that
the foregoing license shall apply to API Intellectual Property Rights developed
or acquired (whether by license, assignment or otherwise) by API after the
Effective Date only to the extent API has the right to grant such license to
Abbott. Notwithstanding the foregoing sentence, API, in developing or acquiring
such API Intellectual Property Rights, shall use its reasonable best efforts to
ensure that Abbott's rights under this Agreement extend thereto.
2.2 SUBLICENSING. Abbott shall have the right to sublicense its
rights under this Agreement in the Territory to any Abbott Affiliates, provided
that Abbott guarantees the performance of any Abbott Affiliates to which such
rights are sublicensed. Abbott shall also have the right to sublicense its
rights under this Agreement to Unaffiliated Sublicensees, provided that such
sublicensing of Abbott's rights shall not relieve Abbott of any obligations
hereunder, and provided further that Abbott has obtained API's prior written
consent for any sublicense of its rights in Japan, which consent shall not be
unreasonably withheld or delayed.
2.3 NO IMPLIED LICENSES. Any rights not expressly granted by either
Party to the other Party in this Agreement are expressly reserved by the Party
owning or controlling such rights and, accordingly, no licenses other than those
specified herein shall be deemed granted by this Agreement by implication,
estoppel or otherwise.
2.4 EXTENSION OF THE TERRITORY TO SPAIN AND PORTUGAL. Abbott and API
shall use their respective reasonable best efforts to enter into one or more
agreements with Ferrer as soon as practical after the Effective Date (with
discussions with Ferrer to be initiated within ninety (90) days after the
Effective Date) modifying, replacing or terminating the Ferrer Agreement to
permit the inclusion of Spain and Portugal within the Territory without any
breach or violation of the rights of Ferrer.
<PAGE>
3. MILESTONE AND RESEARCH & DEVELOPMENT FUNDING PAYMENTS
3.1 MILESTONE PAYMENTS. In consideration of API's entering into this
Agreement and the rights and licenses granted to Abbott hereunder, during the
Term Abbott shall pay API milestone payments according to the following payment
schedule:
(a) EFFECTIVE DATE - Within ten (10) business days after the
Effective Date, Abbott shall pay API * (*);
(b) * - Within twenty (20) business days after * Abbott
shall pay API * (*).
3.2 RESEARCH & DEVELOPMENT FUNDING PAYMENTS. In further
consideration of API's entering into this Agreement and performing continued
research and development activities for the Product, during the Term Abbott
shall make research and development funding payments to API in accordance with
the following schedule, contingent on completion of the research and development
tasks referenced below:
<TABLE>
<CAPTION>
R&D Funding Payment Payment Date
------------------- ------------
<S> <C>
(a) * *
(b) * *
(c) * *
(d) * *
<PAGE>
(e) * *
(f) * *
(g) * *
(h) * *
(i) * *
</TABLE>
3.3 NON-REFUNDABILITY. All milestone payments and research and
development funding payments Abbott makes to API pursuant to Section 3.1 or
3.2 shall be non-refundable once paid. However, if this Agreement is
terminated for any reason prior to a given milestone or research and
development funding payment becoming due or if the events specified for a
given milestone or research and
<PAGE>
development funding payment do not occur, then Abbott shall have no
obligation to make such milestone or research and development funding
payment; provided, however, that if API terminates this Agreement due to
Abbott's Material Breach pursuant to Section 16.2(b), the foregoing shall not
relieve Abbott of liability for damages, if any, that API may recover from
Abbott in an ADR proceeding pursuant to Section 18.2(b).
3.4 REIMBURSEMENT OF PAYMENT REDUCTIONS. The Parties acknowledge
their mutual goal to * on or before *. If Abbott * on or before *. *.
3.5 NOTICE OF ACHIEVEMENT OF MILESTONES; PAYMENT. API shall deliver
written notice to Abbott of API's achievement of the milestone referenced in
Section 3.1(b) and of API's satisfaction of the condition(s) to the research and
development funding payments referenced in Section 3.2. Abbott shall pay such
milestone payment and research and development payments within thirty (30)
calendar days of the delivery of the notice relating thereto.
3.6 EQUITY INVESTMENT. The Parties further acknowledge that
Abbott is making an equity investment in API in the aggregate amount of up to
* (*) under a Stock Purchase Agreement bearing even date herewith.
4. ROYALTY RATES AND PAYMENTS
4.1 ROYALTY RATES. In further consideration of the rights and
licenses granted to Abbott hereunder in API Intellectual Property Rights during
the Term Abbott shall pay API royalties on Abbott's, its Affiliates' and
Unaffiliated Sublicensees' Annual Net Sales at the following aggregate total
royalty rates:
(a) UP TO * IN ANNUAL NET SALES - If Annual Net Sales are
less than or equal to * (*), the aggregate total royalty payable to API shall
be * (*) of all Annual Net Sales.
(b) OVER * UP TO * IN ANNUAL NET SALES - If Annual Net Sales
exceed * (*) but are less than or equal to * (*), the aggregate total royalty
payable to API shall be * (*) of all Annual Net Sales.
(c) OVER * UP TO * IN ANNUAL NET SALES - If Annual Net Sales
exceed * (*) but are less than or equal to * (*), the aggregate total royalty
payable to API shall be
<PAGE>
* (*) of all Annual Net Sales.
(d) OVER * UP TO * IN ANNUAL NET SALES - If Annual Net Sales
exceed * (*) but are less than or equal to * (*), the aggregate total royalty
payable to API shall be * (*) of all Annual Net Sales.
(e) OVER * IN ANNUAL NET SALES - If Annual Net Sales exceed
* (*), the aggregate total royalty payable to API shall be * (*) of all
Annual Net Sales.
If Generic Competition exists in any country of the Territory in which
no Valid Claim exists, royalties payable by Abbott for Net Sales in such
country shall be reduced by * (*) during the period in which Generic
Competition exists.
The aggregate total royalty payable to API shall be determined by
total Annual Net Sales during each applicable Calendar Year. On or before
December 1 of each Calendar Year during the Term, the Parties shall mutually
agree on an Annual Net Sales forecast ("Net Sales Forecast") for the
following Calendar Year and Abbott shall pay estimated royalties based on the
Net Sales Forecasts. If the Factory Cost for a Calendar Year exceeds * (*)
of the Net Average Selling Price (as defined below) of the Product for such
Calendar Year, the portion of the Factory Cost above * (*) shall be prorated
to the Parties in an amount equal to the proration of royalty payments to Net
Sales. On or before December 1 of each Calendar Year during the Term, the
Parties shall mutually agree on a Net Average Selling Price forecast ("ASP
Forecast") and Factory Cost estimate ("Factory Cost Estimate") for the
following Calendar Year and, if applicable, adjust royalties based on the ASP
Forecast and Factory Cost Estimate. The Parties shall reconcile actual
royalties payable for each Calendar Year on or before April 1 of the
following Calendar Year. As used in this Section, "Net Average Selling
Price" shall mean Net Sales divided by Net Units and "Net Units" shall mean
units of the Product actually sold, less returns in accordance with Section
1.17.
The Annual Net Sales thresholds set forth in subsections (a)
through (e) of this Section 4.1 shall be proportionately reduced: (i) in the
Calendar Year in which the First Commercial Sale occurs, by multiplying such
Annual Net Sales thresholds by a fraction, (A) the numerator of which shall be
the number of days remaining in such Calendar Year as of the First Commercial
Sale and (B) the denominator of which shall be 365; and (ii) in the Calendar
Year in which the Term expires, by multiplying such Annual Net Sales thresholds
by a fraction, (X) the numerator of which shall be the number of days in such
Calendar Year prior to the expiration of the Term and (Y) the denominator of
which shall be 365.
4.2 LUMP SUM ROYALTY PAYMENTS. In addition to the royalty payments
pursuant to Section 4.1 and research and development funding payments pursuant
to Sections 3.1 and 3.2, Abbott shall make lump sum royalty payments to API if
any or all of the following Net Sales thresholds are attained during the time
periods referenced below:
<TABLE>
<CAPTION>
Net Sales Applicable Time Period
Payment Amount Level ----------------------
-------------- -----
<S> <C> <C>
(a) * * *
(b) * * *
<PAGE>
(c) * * *
(d) * * *
</TABLE>
Each lump sum royalty payment referenced above shall be payable only
once during the Term within ten (10) business days after the end of the
applicable time period and shall be payable only if the applicable Net Sales
level is attained during the applicable time period.
4.3 ROYALTY REPORTS AND PAYMENTS. Commencing with the first Calendar
Quarter in which Abbott, its Affiliates or Unaffiliated Sublicensees make the
First Commercial Sale of the Product in the Territory, Abbott shall provide API
with a written report of Net Sales on a country-by-country basis within
forty-five (45) days after the last day of March, June, September and December
for royalties accruing on Net Sales in the United States during the three (3)
preceding calendar months and within seventy-five (75) days after the last day
of February, May, August and November for royalties accruing on Net Sales in the
Territory outside of the United States during the three (3) preceding calendar
months. Concurrently with the submission of each such written report, Abbott
shall pay or cause to be paid to API the total amount of royalties shown to be
due thereon.
4.4 CURRENCY. Abbott shall make all royalty payments to API pursuant
to Section 4.2 in U.S. Dollars. Royalty payments earned shall be first
determined by Abbott in the currency of the country where the Net Sales were
made and then converted by Abbott directly to its equivalent in U.S. Dollars.
The rates of exchange for converting the currencies involved to U.S. Dollars as
quoted by the WALL STREET JOURNAL, Midwest Edition, as Foreign Exchange Rates
quoted in New York as market rate (bid) on the last business day of the
quarterly period in which the royalty payments were earned shall be used by
Abbott to determine such conversion rates.
4.5 NO ROYALTIES PAYABLE BETWEEN AFFILIATES. No royalties shall be
payable to API on sales between Abbott, its Affiliates or Unaffiliated
Sublicensees, or between Abbott Affiliates and Unaffiliated Sublicensees.
4.6 NO MULTIPLE ROYALTIES. No multiple royalties shall be payable
because the Product, its manufacture, use or sale is or shall be covered by
multiple API Patents.
5. PAYMENT, RECORD KEEPING AND AUDIT RIGHTS
5.1 METHOD OF PAYMENT. All payments by either Party to the other
Party hereunder (including, but not limited to, Abbott's milestone and
research and development payments under Sections 3.1 and 3.2 and royalty
payments under Sections 4.1 and 4.2) shall be made without deduction of any
withholdings for any purposes other than taxes, if applicable, to the extent
required by law. In the event of any tax withholding, the paying Party will
provide the receiving Party with the best available evidence of the taxes
withheld as well as any relevant certificates or documents required for
national, state or local tax credit and reporting purposes. Payments
hereunder shall not be creditable against any other amounts payable by the
other Party under this Agreement, except as otherwise expressly stated
herein. Payments may be made by check or wire transfer to an account
designated by the receiving Party.
5.2 RECORD KEEPING AND AUDIT RIGHTS. Each Party shall keep or cause
to
<PAGE>
be kept accurate records relating to Net Sales, royalties, and any other costs
and expenses subject to payment or reimbursement by either Party to the other
Party in sufficient detail to enable the amounts payable hereunder to be
determined. Upon the written request of either Party (but not more frequently
than once in any calendar year), the requesting Party may retain an independent
certified public accountant, subject to approval by the other Party (which
approval shall not be unreasonably withheld), to review such records to verify
the accuracy of the payments made or payable hereunder. Such accountant shall
be required to execute a confidentiality agreement in a form reasonably
acceptable to the audited Party and shall report to the auditing Party only the
amount of any underpayment or overcharge. Within ten (10) business days after
completion of such review, the Parties shall reconcile any underpayment or
overcharge. The auditing Party shall pay the cost of any review of records
conducted at its request under this Section. However, if the review establishes
underpayment or overcharge by the audited Party of over five percent (5%) during
the period of the review, the audited Party shall promptly reimburse the
auditing Party for the fees and expenses of the accountant. Such audit rights
may be exercised by the Parties only with respect to records for the current
calendar year and the preceding two (2) calendar years.
6. PRODUCT DEVELOPMENT AND REGISTRATIONS
6.1 DEVELOPMENT AND REGISTRATION ACTIVITIES.
(a) UNITED STATES. In accordance with the U.S. Product
Development Plan attached hereto as Exhibit C, API shall undertake
development and registration activities for the Product in the United States,
including but not limited to conducting or sponsoring, and completing or
having completed, all clinical studies and other activities required for
Regulatory Approval in the United States. API shall use its commercially
reasonable efforts to pursue such development and registration activities
under the U.S. Product Development Plan with the objective of filing a U.S.
NDA for the Product with an Empiric Claim with the U.S. FDA on or before *.
Unless otherwise agreed by the Parties, API shall file the U.S. NDA for the
Product and any other applications for Regulatory Approval in the United
States in its own name, and, promptly after receipt of Regulatory Approval in
the United States, API shall assign the U.S. NDA for the Product and any
other Regulatory Approvals in the United States to Abbott.
(b) EUROPEAN UNION. Abbott shall undertake development
and registration activities for the Product in European Union member
countries, provided that API shall provide Abbott with all such
documentation, data, clinical trial data and other scientific information
developed by API in connection with the U.S. NDA for the Product as may be
necessary for completing the registration package for submission to the EMEA
or a reference European Union member state for a mutual recognition
procedure. Abbott shall use its commercially reasonable efforts to file the
registration package with the EMEA or a reference European Union member state
for a mutual recognition procedure or other appropriate regulatory
authorities within the European Union *. If additional clinical trials are
required for registration by the appropriate European Union regulatory
authorities, then API and Abbott will jointly agree to a revised registration
filing schedule, taking into account the time required for such clinical
trials. API shall have the right to consult with
<PAGE>
Abbott concerning Abbott's regulatory dossier prior to submission to the EMEA or
a reference EMEA member state. Upon API's request, Abbott shall give API a
reasonable opportunity to review and comment on the documentation included
within such regulatory dossier.
(c) JAPAN. *, Abbott will provide API with a plan for the
development and registration of the Product in Japan. Following submission
of such a plan, Abbott shall use its commercially reasonable efforts to
undertake development and registration activities for the Product in Japan in
accordance with such plan. If Abbott elects not to develop the Product in
Japan, Abbott shall notify API in writing within *, following which time the
Territory shall exclude Japan and rights to the Product in Japan will revert
to API. If Abbott makes such election and notifies API in accordance with
the preceding sentence, Abbott shall have no obligations or liabilities to
API with respect to development and registration activities in Japan.
(d) OTHER COUNTRIES. *, Abbott will provide API with a
plan for the development and registration of the Product in countries and
territories outside of the United States, Japan and European Union member
countries. Following submission of such a plan, Abbott shall use its
commercially reasonable efforts to undertake development and registration
activities for the Product in such countries and territories in accordance
with the plan.
(e) MUTUAL ASSISTANCE. The Parties shall use their
commercially reasonable efforts to assist each other with their respective
development and registration activities under Sections 6.1(a), (b), (c) and (d).
6.2 DEVELOPMENT COSTS. Abbott shall fund API's research and
development activities for the Product during the Term in accordance with the
payment amounts and schedule set forth in Section 3.2, provided that the Parties
shall renegotiate the payment amounts and schedule of payments in good faith in
the event of any material changes to the U.S. Product Development Plan, as
described below. Abbott shall be responsible for its own research and
development costs for the Product during the Term.
6.3 MODIFICATIONS.
(a) MATERIAL CHANGES - API may not make any material changes
to the U.S. Product Development Plan unless Abbott has given its written consent
thereto, which consent shall not be unreasonably withheld or delayed. As used
in this Section, "material changes" shall mean any changes having a material
effect on the U.S. Product Development Plan timetable for United States
regulatory filings or on the Product claims referenced in the U.S. Product
Development Plan.
(b) OTHER CHANGES - API may make any changes to the U.S.
Product Development Plan other than material changes as API deems necessary or
appropriate, provided Abbott has been given a reasonable opportunity to review
and consult with API as to any such changes.
6.4 RECIPROCAL ACCESS TO DOCUMENTATION AND DATA. During the Term
each Party shall provide the other Party, within a reasonable time, with
reasonable access to all clinical documentation, information and data resulting
from the Party's Product research and development activities which either Party
may reasonably request,
<PAGE>
including but not limited to, case report forms, monitoring documents, patient
informed consents, institutional review board approvals, medical and statistical
study reports for individual studies, clinical data summaries, and expert
reports. Upon either Party's request, the other Party shall provide the
requesting Party with copies of such documentation and data, provided that, upon
the providing Party's request, the requesting Party shall reimburse the
providing Party for the cost of making such copies.
7. ABBOTT PRODUCT MARKETING AND SALES ACTIVITIES
7.1 COMMERCIALLY REASONABLE EFFORTS. Abbott shall use commercially
reasonable efforts to promote and sell the Product throughout the Territory in
all countries in which (a) Regulatory Approval has been obtained and (b) a Valid
Claim exists.
7.2 MARKETING COSTS AND EXPENSES. Except as otherwise provided
herein or as otherwise mutually agreed by the Parties, Abbott shall bear all
costs and expenses connected with its marketing and sales activities for the
Product and its performance under this Agreement.
8. API CO-PROMOTION ACTIVITIES
8.1 CO-PROMOTION TERRITORY. API shall have the right to co-promote
the Product with Abbott and its Affiliates in the United States and Canada in
accordance with the terms of this Section 8.
8.2 ALLOCATION OF SALES REPRESENTATIVES. API shall have the right
to allocate up to * (*) API professional sales representatives to assist
Abbott and its Affiliates in detailing the Product to physicians, hospitals
and others in the United States and Canada as directed by Abbott in
accordance with Abbott's United States and Canada marketing plan(s) for the
Product.
8.3 CO-PROMOTION PERIOD. The initial period of API's co-promotion
shall be two (2) years commencing with the date of launch of the Product in the
United States and shall be renewed for consecutive one (1) year periods, unless
terminated by either Party upon no less than twelve (12) months prior written
notice to the other Party effective at the earliest upon the end of the initial
two (2) year period.
8.4 COMPENSATION TO API. During the period of co-promotion,
Abbott will pay to API, on a quarterly basis, an amount up to * (*) of API's
fully-burdened cost of each API professional sales representative, which
costs shall be determined in accordance with the scope of co-promotion
collaboration and API normal accounting policies, both of which shall be
consistent in all material respects with industry custom and practice for
retaining contract sales resources. The aggregate amount payable by Abbott
to API under this Section 8.4 shall not exceed * (*) per Calendar Year.
8.5 SCOPE OF CO-PROMOTION COLLABORATION. The Parties shall agree
upon coordinated performance benchmarks for the API professional sales
representatives which shall be consistent/complimentary with those of the Abbott
sales force and the Abbott United States and Canada marketing plan(s) for the
Product. Abbott shall provide reasonable Product sales training for up to
twenty (20) API professional sales representatives and shall design and provide
all Product sales literature and materials. API shall have the right to provide
supplemental training and Product sales literature and materials to the API
professional sales representatives with Abbott's prior written
<PAGE>
consent, which consent shall not be unreasonably withheld.
9. CONFIDENTIALITY AND PUBLICITY
9.1 CONFIDENTIALITY OBLIGATION. Each Party shall hold the other
Party's Confidential Information (as defined below) of which it becomes informed
in connection with this Agreement in strictest confidence and shall not disclose
such Confidential Information to third parties or otherwise use it, except to
the extent such use or
disclosure is expressly permitted by the terms of this Agreement or is
reasonably necessary for the performance of this Agreement.
9.2 PERMITTED DISCLOSURES. Permitted disclosures of Confidential
Information hereunder include, but are not limited to: (a) disclosures to
regulatory agencies to the extent required for Regulatory Approval, including
but not limited to, Product registrations and applications in the Territory, and
(b) disclosures to the Parties' Affiliates, employees, agents and independent
contractors (including clinical investigators, consultants and contract research
organizations) who have a bona fide "need to know", and Unaffiliated
Sublicensees (in the case of Abbott), provided that for disclosures to parties
other than Affiliates under Section 9.2(b) the disclosing Party shall obligate
the recipients to maintain the confidentiality of Confidential Information under
terms substantially similar to those contained in this Section 9.
9.3 CONFIDENTIAL INFORMATION. "Confidential Information" includes,
but is not limited to, any information relating to the terms of this Agreement,
the Product, API Know-How, the U.S. Product Development Plan, clinical and
non-clinical studies involving the Product, and all sales and marketing plans
for the Product, as well as information concerning all other products and the
business affairs, manufacturing processes and other activities of the disclosing
Party. However, Confidential Information shall not include any information:
(a) PUBLICLY AVAILABLE INFORMATION - Which at the time of
disclosure is or later comes into public domain by publication or otherwise
through no fault of the receiving Party;
(b) PREVIOUSLY KNOWN INFORMATION - Which can be demonstrated
by documentation or other competent proof to have been in the receiving Party's
possession prior to disclosure hereunder;
(c) SUBSEQUENTLY RECEIVED INFORMATION - Which is subsequently
received by the receiving Party from a third party who is not bound by any
confidentiality undertaking to the disclosing Party or to any of its Affiliates
with respect to said information;
(d) INDEPENDENTLY DEVELOPED INFORMATION - Which is
independently developed by or for the receiving Party without reference to the
disclosing Party's Confidential Information; or
(e) LEGALLY REQUIRED DISCLOSURES OF INFORMATION - Which is
legally required to be disclosed pursuant to any statute or regulation or any
judicial or administrative order, provided that the receiving Party promptly
notifies the disclosing Party of such required disclosure in order to provide an
opportunity to seek a protective order or
<PAGE>
other similar order with respect to such Confidential Information and thereafter
the receiving Party discloses to the requesting entity only the minimum
Confidential Information required to be disclosed in order to comply with the
request, whether or not a protective order or other similar order is obtained by
the disclosing Party.
9.4 DURATION OF CONFIDENTIALITY OBLIGATION. The confidentiality
obligations of the Parties hereunder shall remain in effect during the Term and
for seven (7) years thereafter.
9.5 PUBLICITY AND ANNOUNCEMENTS. Unless agreed upon in writing by
the Parties, neither Party shall originate any publicity, news release or other
public announcement, written or oral, whether to the public press, stockholders
or otherwise, relating to this Agreement, any amendment hereto, performance by
the Parties hereunder, or the Product, except for such announcement as in the
opinion of legal counsel to the Party making such announcement is legally
required, in which event such Party shall give the other Party a reasonable
opportunity to review the form and content of the announcement before such
legally required disclosure is made.
10. TRADEMARKS
10.1 ASSIGNMENT OF API TRADEMARKS. API hereby assigns to Abbott all
of API's right, title and interest in and to the API Trademarks Nyotran7 and
NystatinLF7, including the trademark applications and registrations set forth in
the attached Exhibit E. API shall execute such documents and take such further
actions as Abbott may reasonably request to effectuate such assignment,
including the execution of a Trademark Assignment document in the form of the
attached Exhibit F. Following such assignment, Abbott shall be responsible for
filing and maintaining the API Trademarks at Abbott's sole expense, provided
that API shall be responsible for any costs of filing and maintaining such API
Trademarks incurred prior to the effective date of the assignment.
10.2 ALTERNATE TRADEMARKS. If Abbott does not wish to use an API
Trademark for the Product in any country of the Territory or if Abbott is
legally prevented from using any API Trademark originally registered in any
country in the Territory due to trademark infringement litigation or otherwise,
Abbott may use one or more alternate trademarks selected by Abbott for use in
such country ("Alternate Trademarks"). Abbott shall own the Alternate
Trademarks and shall be responsible for filing and maintaining the Alternate
Trademarks at Abbott's sole expense.
11. PATENT OWNERSHIP AND WARRANTIES
11.1 PATENT OWNERSHIP. Subject to the license rights granted to
Abbott hereunder, API retains its ownership rights and/or licenses in all of all
API Patent Rights and shall be responsible for filing, prosecuting, maintaining
and defending API Patent Rights pursuant to Section 12.1.
11.2 JOINT INVENTIONS. For all inventions (if any), made jointly by
the Parties according to the named inventors therefor, the Parties shall apply
for patent protection therefor upon the written request of either Party. Patent
protection for such invention(s) shall be applied for jointly in the name of the
Parties as co-assignees and co-owners of such invention(s) and all patent
application preparation, filing, maintenance and prosecution responsibilities
and costs thereof in the Territory shall be shared equally by the Parties. If
one of the Parties does not wish to share equally in the patent application and
related costs and expenses in any country of the Territory, then the other Party
may seek, obtain and maintain such patent(s) solely in its own name and at
<PAGE>
its sole expense and shall have sole and exclusive rights to use the inventions
covered by such patent(s) without payment of any royalties or compensation to
the non-paying Party.
11.3 API PATENT WARRANTIES. API warrants and represents that: (a)
Exhibit A sets forth all of the API Patent Rights as of the Effective Date; (b)
API has not granted any licenses or other rights to any third party inconsistent
with the licenses and other rights granted to Abbott hereunder; (c) with respect
to any API Patent Rights in existence as of the Effective Date that are being
sublicensed to Abbott hereunder, the terms of this Agreement are not in conflict
with or in violation of any agreements to which API is a party; and (d) to the
best of its knowledge as of the Effective Date based upon API's reasonably
diligent investigation, the API Patent Rights are valid and enforceable and
there are no existing valid third party patents or other proprietary rights in
the Territory that might be infringed by the manufacture, marketing, sale or use
of the Product in the Territory by Abbott, its Affiliates and Unaffiliated
Sublicensees.
12. PATENT PROSECUTION AND INTELLECTUAL PROPERTY INFRINGEMENT
12.1 PATENT FILING AND PROSECUTION. During the Term, except as
otherwise provided in Section 12.6(b), API shall, at its sole expense, file,
prosecute, maintain, and defend API Patent Rights in the Territory and API shall
control all API Patent Rights filings and actions. API shall use commercially
reasonable efforts to obtain API Patent extensions in any countries in the
Territory in which such extensions are available.
12.2 NOTIFICATION OF INFRINGEMENT. The Parties shall promptly inform
each other of any information that comes to their attention involving actual or
apparent infringements or misappropriations of API Intellectual Property Rights,
by any third party, or claims of alleged infringement made by any third party in
the Territory against API, API Affiliates, Abbott, Abbott Affiliates, or any
Unaffiliated Sublicensees resulting from the manufacture, sale, or use of the
Product.
12.3 INFRINGEMENT OF THIRD PARTY RIGHTS. Abbott shall have the
right to direct or defend, in its own name and at its own expense, any legal
or other action or proceeding, including any settlement or negotiation, with
respect to any alleged infringement of a third party patent or other
proprietary right as a result of Abbott, its Affiliates or Unaffiliated
Sublicensees making, having made, using, importing, offering for sale or
selling the Product in the Territory. During the pendency of any such
proceeding or any appeal thereof, Abbott shall have a right to reduce
royalties otherwise payable to API in an amount equal to * (*) of Abbott's
out-of-pocket litigation expenses in the quarter in which such royalties are
payable; provided, however, that in no event shall Abbott have a right to
reduce royalty payments by more than * (*) in any quarter. In the event that
* (*) of Abbott's out-of-pocket litigation expenses exceeds * (*) of the
royalties otherwise payable to API in such quarter, Abbott shall have the
right to offset such unpaid amounts against future royalties payable to API,
but in no event shall Abbott have a right to reduce royalty payments by more
than * (*) in any quarter. In the event that a final judgment is entered
against Abbott pursuant to which Abbott is required to pay to a third party
any monetary damages and/or attorneys' fees, Abbott shall have a right to
reduce royalties otherwise payable to API in an amount equal to * (*) of such
judgment in the quarter in which such royalties are payable;
<PAGE>
provided, however, that in no event shall Abbott have a right to reduce
royalty payments by more than * (*) in any quarter. In the event that * (*)
of such judgment exceeds * (*) of the royalties otherwise payable to API in
such quarter, Abbott shall have the right to offset such unpaid amounts
against future royalties payable to API, but in no event shall Abbott have a
right to reduce royalty payments by more than * (*) in any quarter. In the
event that such final judgment entered against Abbott includes an order that
precludes Abbott from manufacturing, marketing, and/or selling the Product in
any country or countries in the Territory, API shall pay to Abbott * (*) of
such final judgment within ninety (90) days after entry of such judgment or
upon completion of such appeal, whichever is later.
12.4 INFRINGEMENT INDEMNIFICATION. In the event that it is
necessary to obtain a license under any third party proprietary right in
order to continue commercialization of the Product in any country in the
Territory, Abbott and API shall use commercially reasonable efforts to obtain
such a license naming Abbott as the licensee. Abbott shall have the right to
reduce royalty payments to API by * (*) of all licensing fees and royalties
payable by Abbott to the third party licensor, such reductions to be taken in
the quarter in which such licensing fees and royalties are paid by Abbott to
the third party; provided, however, that in no event shall Abbott have a
right to reduce royalty payments by more than * (*) in any quarter.
12.5 TERMINATION FOR INFRINGEMENT. Should Abbott be prevented by
reason of an adverse, non-appealable court or administrative proceeding, order
or judgment or arbitral award against it from making, using, or selling the
Product in any Major Subterritory, then, as to that part of the Territory so
affected, Abbott may terminate this Agreement upon written notice to API, and
the Parties shall make a final transition accounting and settlement in such
Major Subterritory for outstanding bona fide costs, payments, and expenses to
which each Party is entitled hereunder.
12.6 THIRD PARTY INFRINGEMENT OF API INTELLECTUAL PROPERTY RIGHTS.
(a) API ENFORCEMENT - API shall have the right, but not the
obligation, at its own expense, to commence appropriate measures to enforce the
API Intellectual Property Rights against third party infringements within thirty
(30) days after the date API becomes aware of such infringement (including, but
not limited to, notifying the infringing third party of such infringement and
demanding that such third party cease and desist from such infringement) and, if
such infringement does not cease, commence a legal proceeding to enforce the API
Intellectual Property Rights against third party infringements within sixty (60)
days of the date API becomes aware of such infringement.
(b) ABBOTT ENFORCEMENT - If within sixty (60) days after the
date API becomes aware of any alleged third party infringement, either directly
or by notice from Abbott, API fails to commence a legal proceeding pursuant to
Section 12.6(a), or if at any time API discontinues such proceeding, Abbott may,
at its sole option, commence, continue, or intervene, as the case may be, in
such proceeding. During the pendency of any such proceeding or any appeal
thereof, Abbott shall have the right to reduce royalties payable to API by the
lesser of (i) * (*) of Abbott's out-of-pocket litigation expenses in such legal
proceeding or (ii) * (*) of royalties payable in such country.
<PAGE>
12.7 ALLOCATION OF RECOVERIES. In any action brought by or against a
third party infringer by either Party, any monetary damages or judgments
obtained by either Party in connection with such action shall be allocated as
follows: (a) the Party prosecuting such action shall recover its unreimbursed,
out-of-pocket litigation expenses in such action; (b) to the extent that any
monies remain, API and Abbott shall divide such monies to compensate API for its
lost royalties and Abbott for its lost profits; and (c) to the extent that any
monies remain, API and Abbott shall share equally such remaining monies.
12.8 MUTUAL COOPERATION. In the event of any patent infringement
litigation in the Territory involving the Product and any API Intellectual
Property Rights, the non-prosecuting or non-defending Party shall render such
reasonable assistance as may be requested by the prosecuting or defending Party
in connection with such infringement actions. If API requests Abbott's
assistance in connection with such infringement claims or actions, API shall
reimburse Abbott for such direct, documented out-of-pocket expenses as are
reasonably incurred by Abbott during the course of its providing such requested
assistance. Before incurring such expenses, the Parties shall in good faith
agree in writing on the nature and extent of assistance to be rendered, and an
estimate of the total expenses, which expenses shall be monitored periodically.
12.9 LABELING. Abbott shall be responsible for all labeling, inserts,
promotional materials and any other materials which accompany, are distributed,
used or referred to in any way by Abbott, its Affiliates or Unaffiliated
Sublicensees in connection with the Product. Such materials shall conform to
all legal requirements in each country of the Territory in which the Product is
sold. Subject to applicable legal requirements and space limitations, all
Product labeling, inserts and promotional materials shall indicate that the
Product is sold by Abbott under license from API. Upon API's request, Abbott
shall provide API with copies of representative samples of materials which
Abbott, its Affiliates and Unaffiliated Sublicensees intend to use in connection
with the marketing, promotion and sale of the Product prior to their first use
thereof. Abbott shall manufacture, register, promote, market and sell the
Product in the Territory only for the indications for which relevant Regulatory
Approvals have been obtained.
12.10 NOTIFICATION. Abbott shall also be responsible for notifying,
reporting or registering this Agreement or the business relationship created
hereby with any government authorities in the Territory to the extent legally
required. API shall provide Abbott with such assistance as Abbott may
reasonably request in connection therewith.
13. INDEMNIFICATION AND INSURANCE
13.1 RECIPROCAL INDEMNIFICATION PROVISIONS.
(a) API INDEMNIFICATION - API shall defend, indemnify and
hold Abbott, its Affiliates, Unaffiliated Sublicensees, and the officers,
directors, employees and agents of each, harmless from and against any and all
liabilities, damages, claims, demands, costs, or expenses (including reasonable
attorneys' fees) claimed by any third party for any property or other economic
loss or damage or injury or death suffered by it to the extent the same is
determined to have been caused by API's negligence or wilful misconduct or any
material breach of this Agreement by API, subject to the conditions of
indemnification set forth in Section 13.2.
(b) ABBOTT INDEMNIFICATION - Abbott shall defend, indemnify
and hold API, and
<PAGE>
its Affiliates, and the officers, directors and employees and agents of each
harmless from and against any and all liabilities, damages, claims, demands
or costs, or expenses (including reasonable attorneys' fees) claimed by any
third party for any property or other economic loss or damage, injury or
death suffered by it to the extent the same is determined to have been caused
by Abbott's negligence or wilful misconduct or any material breach of this
Agreement by Abbott, subject to the conditions of indemnification set forth
in Section 13.2.
13.2 CONDITIONS OF INDEMNIFICATION. With respect to any
indemnification obligations of either Party to the other Party under this
Agreement, including but not limited to the indemnification obligations of
the Parties under Sections 13.1(a) and 13.1(b), the following conditions must
be met for such indemnification obligations to become applicable: (a) the
indemnified Party shall notify the indemnifying Party promptly in writing of
any claim which may give rise to an obligation on the part of the
indemnifying Party hereunder; (b) the indemnifying Party shall be allowed to
timely undertake the sole control of the defense of any such action and
claim, including all negotiations for the settlement, or compromise of such
claim or action at its sole expense; and (c) the indemnified Party shall
render reasonable assistance, information, co-operation and authority to
permit the indemnifying Party to defend such action, it being agreed that any
out-of-pocket expenses or other expenses incurred by the indemnified Party in
rendering the same shall be borne or reimbursed promptly by the indemnifying
Party.
13.3 INSURANCE. API shall at all times during the Term and for a
period of five (5) years thereafter maintain product liability insurance
covering the Product with minimum annual limits of $1,000,000 per occurrence and
$1,000,000 in the aggregate. Upon Abbott's request at any time during the Term
or in the five (5) year period thereafter, API shall deliver to Abbott a
certificate of insurance evidencing such insurance and stating that the policy
will not be canceled or modified without at least thirty (30) days prior written
notice to Abbott.
14. ADVERSE DRUG EXPERIENCES
During the relevant Reporting Period (as defined below), each Party
shall promptly inform the other Party of any information it obtains or develops
regarding the safety of the Product anywhere in the world and shall promptly
report to the other Party any information regarding serious adverse reactions or
side effects related to the use of the Product. To allow the Parties to comply
with the adverse drug experience reporting requirements for the Product to the
U.S. FDA and its counterpart regulatory agencies around the world, each Party
shall notify the other Party in writing of any "adverse drug experience" that is
considered "serious" as defined in U.S. FDA regulations (21 CFR 314.80) or the
comparable regulations of other regulatory agencies, regardless of source, so
that the other Party will receive such notice within three (3) business days of
a Party's first having "obtained or otherwise received" such "adverse drug
experience" from "any source", as those terms are defined in U.S. FDA
regulations (21 CFR 314.80). Such information shall be communicated by the
Parties to each other at the following addresses:
To Abbott: Abbott Laboratories
Hospital Products Division
<PAGE>
Attn: Vice President, Medical and Regulatory Affairs
Dept. 970, Bldg. AP30
200 Abbott Park Road
Abbott Park, Illinois, U.S.A. 60064-3500
Telephone: (847) 937-8190
Facsimile: (847) 938-6590
To API: API Pharmaceuticals, Inc.
Attn: Senior Vice President, Medical and
Regulatory Affairs
8707 Technology Forest Place
The Woodlands, Texas 77381-1191
Phone: (281) 367-1666
Facsimile: (281) 367-1676
Each Party shall provide the other with copies of all adverse drug experience
reports on the Product filed with the U.S. FDA or other regulatory agencies in
the Territory. As used in this Section 14, the "Reporting Period" shall mean
(a) the Term with respect to API's reporting obligation to Abbott and (b) the
period from the Effective Date until the effective date of API's assignment of
the U.S. NDA for the Product to Abbott with respect to Abbott's reporting
obligation to API.
15. REPRESENTATIONS AND WARRANTIES
Each Party hereby represents and warrants to the other Party as follows:
(a) CORPORATE STATUS - It is a corporation duly organized and
validly existing under the laws of its state or other jurisdiction of
incorporation or formation;
(b) AUTHORITY - It has the power and authority to execute and
deliver this Agreement, and to perform its obligations hereunder;
(c) NO CONFLICTS - The execution, delivery and performance by
it of this Agreement and its compliance with the terms and provisions hereof
does not and will not conflict with or result in a breach of any of the terms
and provisions of or constitute a default under (i) any loan agreement,
guaranty, financing agreement, agreement affecting a product or other agreement
or instrument binding or affecting it or its property; (ii) the provisions of
its charter documents or by-laws; or (iii) any order, writ, injunction or decree
of any court or governmental authority entered against it or by which any of its
property is bound;
(d) NO APPROVALS - Except for the regulatory filings and
approvals for the Product referenced herein, no authorization, consent or
approval of any governmental authority or third party is required for the
execution, delivery or performance by it of this Agreement, and the execution,
delivery or performance of this Agreement will not violate any law, rule or
regulation applicable to such Party;
(e) ENFORCEABILITY - This Agreement has been duly authorized,
executed and delivered and constitutes its legal, valid and binding obligation
enforceable against it in accordance with its terms subject, as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to the availability
of particular remedies under general equity principles;
(f) COMPLIANCE WITH LAWS - It shall comply with all
applicable laws and regulations relating to its activities under this Agreement;
and
(g) YEAR 2000 COMPLIANCE - All computer hardware and software
used
<PAGE>
by either Party in its business relationship with the other Party will have no
lesser functionality with respect to records containing dates before or after
January 1, 2000 than previously with respect to dates prior to January 1, 2000.
16. TERM AND EARLY TERMINATION RIGHTS
16.1 TERM. The Term shall be as stated in Section 1.21.
16.2 TERMINATION FOR CAUSE. Either Party shall have the right,
without prejudice to any other rights or remedies available to it, to terminate
this Agreement for cause by written notice to the other Party in any of the
following events:
(a) BANKRUPTCY - If the other Party becomes insolvent, is
adjudged bankrupt, applies for judicial or extra-judicial settlement with its
creditors, makes an assignment for the benefit of its creditors, voluntarily
files for bankruptcy or has a receiver or trustee (or the like) in bankruptcy
appointed by reason of its insolvency, or in the event an involuntary
bankruptcy action is filed against the other Party and not dismissed within
ninety (90) days, or if the other Party becomes the subject of liquidation or
dissolution proceedings or otherwise discontinues business.
(b) MATERIAL BREACH - If the other Party commits a Material
Breach of this Agreement (as defined in Section 18.2(c)) and the Party alleged
to be in breach fails to (i) cure such breach or (ii) commence dispute
resolution proceedings under Section 18.2 contesting whether a breach has
occurred and/or whether such breach is a Material Breach within sixty (60) days
after receipt of written notice from the Party asserting the breach.
16.3 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be
terminated at any time by written agreement of the Parties.
16.4 TERMINATION BY ABBOTT.
(a) SAFETY OR EFFICACY - If at any time during the Term: (i)
the Party with responsibility for filing an application for Regulatory Approval
hereunder ("Filing Party") decides not to file an application for Regulatory
Approval in any Major Subterritory or decides to withdraw such application due
to documented adverse reactions or other safety issues with the Product or the
Product's lack of efficacy or limited efficacy (collectively, "Safety or
Efficacy Issues"); (ii) the Filing Party's application(s) for Regulatory
Approval in any Major Subterritory is rejected due to Safety or Efficacy Issues;
(iii) the Filing Party's application(s) for Regulatory Approval in any Major
Subterritory is subsequently withdrawn because of Safety or Efficacy Issues;
(iv) the Product is withdrawn or recalled from the market in any Major
Subterritory because of Safety or Efficacy Issues; or (v) at any time during the
period from the Effective Date to the effective date of API's assignment of the
U.S. NDA for the Product to Abbott, Abbott reasonably believes documented Safety
or Efficacy Issues exist and Abbott has so notified API in writing, then Abbott
may, at its option, terminate this Agreement upon thirty (30) days prior written
notice to API. Abbott may, at its option, exercise its right of termination
under this Section 16.4(a) on a country-by-country basis, and, if Abbott does
so, Abbott's termination notice shall specify the country or countries of the
Territory affected.
(b) LIMITED COMMERCIAL VIABILITY - At any time during the
Term after the Filing Party has obtained Regulatory Approval in any country of
the Territory, Abbott shall have the right to terminate this Agreement upon one
hundred eighty (180) days
<PAGE>
prior written notice to API for reasons of the Product's limited commercial
viability and/or due to competition, limited customer acceptance, regulatory
limitations and/or market dynamics, as determined by Abbott.
17. CONSEQUENCES OF TERMINATION
17.1 EFFECT OF TERMINATION. Termination or expiration of this
Agreement through any means and for any reason shall not relieve the Parties of
any obligations accruing prior thereto and shall be without prejudice to the
rights and remedies of either Party with respect to any prior breach of any of
the provisions of this Agreement.
17.2 LICENSE RIGHTS. If Abbott terminates this Agreement pursuant to
Section 16.2(a) or Section 16.4 or if API terminates this Agreement pursuant to
Section 16.2, then: (a) Abbott's license rights in API Intellectual Property
Rights hereunder shall terminate, (b) Abbott shall assign to API all of its
right, title and interest in and to the API Trademarks, with API assuming
responsibility for filing and maintaining the API Trademarks as of the effective
date of the assignment, including all recordal and future costs associated
therewith; and (c) upon API's request, the Parties shall negotiate in good faith
for the assignment of any Alternate Trademarks from Abbott to API.
17.3 FULLY PAID-UP LICENSE. Upon expiration of the Term or earlier
termination of this Agreement for any reason other than by API pursuant to
Section 16.2 or by Abbott pursuant to Section 16.2(a) or Section 16.4 or by the
Parties jointly pursuant to Section 16.3, Abbott's license rights in API
Intellectual Property Rights hereunder shall become fully paid-up and
irrevocable.
17.4 MUTUAL AGREEMENT. If the Parties terminate this Agreement by
mutual written agreement pursuant to Section 16.3, the Parties shall specify the
consequences of such termination in such written agreement.
17.5 REGULATORY APPROVALS. Upon expiration of the Term, or upon
earlier termination of this Agreement other than by API pursuant to Section 16.2
or by Abbott pursuant to Section 16.2(a) or Section 16.4, Abbott's right to
manufacture, market, and sell the Product in the United States pursuant to the
U.S. NDA for the Product shall become fully paid-up and irrevocable, and, if API
has not previously done so, API shall promptly assign such U.S. NDA to Abbott.
Upon termination of this Agreement by API pursuant to Section 16.2 or by Abbott
pursuant to Section 16.2(a) or Section 16.4, Abbott shall grant to API a fully
paid-up, irrevocable right to manufacture, market, and sell the Product outside
the United States pursuant to Abbott's Regulatory Approvals for the Product, and
Abbott shall promptly assign such Regulatory Approvals to API.
18. GOVERNING LAW AND DISPUTE RESOLUTION
18.1 GOVERNING LAW. This Agreement, including the validity,
construction, interpretation and performance thereof, shall be governed entirely
by the laws of the State of Illinois, without regard to its conflict of laws
provisions. It is the specific intent and agreement of the Parties that the
United Nations Convention on the International Sale of Goods shall not apply to
this Agreement.
18.2 DISPUTE RESOLUTION. All disputes arising out of or in connection
with this Agreement (except those involving actions commenced by or involving
third parties and affecting or involving only one of the Parties) shall be
resolved with the following
<PAGE>
mechanism:
(a) ATTEMPTED AMICABLE RESOLUTION - The Parties shall
promptly give each other written notice of any disputes requiring resolution
hereunder, which written notice shall specify the Section(s) of this
Agreement the other Party is alleged to have breached and shall briefly state
the initiating Party's claims, and the Parties shall use reasonable efforts
to resolve any such disputes in an amicable manner.
Any disputes arising in connection with this Agreement
which cannot be resolved in an amicable manner by representatives of the Parties
shall be referred, not later than thirty (30) days after initiation of dispute
resolution proceedings under this Section 18.2, to the following corporate
officers of the Parties for resolution:
For Abbott:
President, Hospital Products Division (or his or her designee)
For Aronex:
Chairman and CEO (or his or her designee)
Such officers (or their designees) shall attempt to
resolve the dispute and shall communicate with each other by facsimile or
telephone or in personal meetings in an effort to resolve the dispute.
(b) ADR PROCEDURE - Any disputes arising in connection with
this Agreement which cannot be resolved by the Parties within forty-five (45)
days after initiation of dispute resolution proceedings under Section 18.2(a)
shall be finally settled by binding Alternate Dispute Resolution ("ADR") in
accordance with the procedures set forth in the attached Exhibit D.
(c) ADR RULING - The neutral in any ADR proceeding under
Section 24.2(b) shall determine and advise the Parties in writing:
(i) Whether either Party has committed a breach of any
of its obligations under this Agreement; and
(ii) If either Party has committed a breach,
(A) Whether such breach is a Material Breach
or a breach other than a Material Breach, and
(B) The appropriate remedy for any such breach
pursuant to Section 18.2(d).
As used herein "Material Breach" shall mean either a failure by
Abbott to pay any milestone payments pursuant to Section 3.1, any research and
development funding payments pursuant to Section 3.2, or any royalty payments
pursuant to Sections 4.1 or 4.2 within sixty (60) days after written notice from
API ("Material Payment Breach"), provided that Abbott may in good faith contest
whether a given payment is due or the amount due and pay the amount the neutral
determines to be due without being deemed to have committed a Material Payment
Breach, or any other breach which involves willful disregard of the other
Party's rights under this Agreement or which materially and adversely affects
the rights of the other Party in at least one (1) Major Subterritory ("Other
Material Breach").
(d) REMEDIES - The neutral in any proceeding under Section
18.2(b) shall have the authority to award the non-breaching Party the following
relief (except as otherwise provided in Section 18.2(e) and (f)):
(i) For a Material Payment Breach, an order to pay the
amount
<PAGE>
due and termination of this Agreement;
(ii) For any Other Material Breach, an award of damages
and/or equitable relief and/or termination of this Agreement in whole or in part
(including the termination of any licenses granted to the breaching Party,
whether in whole or in part, on a worldwide or country-by-country basis); and
(iii) For a breach other than a Material Breach, an
award of damages and/or equitable relief.
(e) DISPUTE RESOLUTION FOR SECTION 7.1 - API shall be
entitled to commence dispute resolution proceedings pursuant to Section 18.2 to
challenge Abbott's compliance with its commercially reasonable efforts
obligations in the Territory pursuant to Section 7.1 not more than once every
twelve (12) months for each respective country. The determination of whether
Abbott has used its commercially reasonable efforts in each respective country
shall be based on the totality of circumstances. If API successfully
establishes that Abbott has failed to use its commercially reasonable efforts,
(i) for the first such violation, the neutral shall have the authority to award
damages or equitable relief to API (but not termination of Abbott's license
rights) and (ii) for any subsequent violations in the same country, the neutral
shall have the authority to award damages, equitable relief or termination of
Abbott's license rights in the country where such breach occurs.
18.3 EFFECT OF COMMENCING DISPUTE RESOLUTION. If either Party in good
faith commences dispute resolution proceedings under Section 18.2, (a) any
applicable notice periods or cure periods hereunder (including but not limited
to the period referenced in Section 16.2(b)) shall be temporarily suspended
pending the outcome of such dispute resolution proceedings and (b) the
non-breaching Party may, at its option, pay any amounts payable to the other
Party that are in dispute into an interest-bearing escrow account pending the
outcome of such dispute resolution proceedings.
19. NOTICES
19.1 MANNER OF GIVING NOTICES. All notices required or permitted in
connection with this Agreement shall be writing and may be given by personal
delivery, prepaid registered or certified mail, or telecopier, addressed to the
Party to receive the same at its address set forth below, or to such other
address as it shall later designate by like notice to the other Party. Notice of
termination of this Agreement if given by telecopier shall be confirmed by
prepaid registered or certified mail dated and posted within twenty-four (24)
hours. The effective date of receipt of any notice if served by telecopier shall
be deemed the first business day in the city of destination following the
dispatch thereof and if given by letter only, it shall, unless earlier received,
be deemed effective not later than seven (7) days after the date of posting.
Notice by personal delivery shall be effective as of the date of such delivery.
19.2 ADDRESSES FOR NOTICES.
Notices to API shall be sent to:
Aronex Pharmaceuticals, Inc.
Attn: Chief Executive Officer
8707 Technology Forest Place
The Woodlands, Texas 77381-1191
Facsimile: (281) 367-1676
<PAGE>
With a copy to:
Andrews & Kurth, L.L.P.
Attn: Jeffrey L. Wade
2170 Buckthorne Place, Suite 150
The Woodlands, Texas 77380
Facsimile: (713) 238-7131
Notices to Abbott shall be sent to:
Abbott Laboratories
Hospital Products Division
Attn: President
Dept. 0960, Bldg. AP30
200 Abbott Park Road
Abbott Park, Illinois U.S.A. 60064-3500
Facsimile: (847) 937-0805
and
Abbott Laboratories
Abbott International
Attn: President
Dept. 06WP, Bldg. AP30
200 Abbott Park Road
Abbott Park, Illinois U.S.A. 60064-3500
Facsimile: (847) 938-8325
With a copy to:
Abbott Laboratories
Attn: Div. V.P. - Domestic Legal Operations
Legal Division, Dept. 322, Bldg. AP6D
100 Abbott Park Road
Abbott Park, Illinois U.S.A. 60064-3500
Facsimile: (847) 938-1206
20. INTEGRATION
This Agreement represents the entire Agreement between the Parties
relating to the subject matter hereof and supersedes all prior arrangements,
understandings, correspondence, notes, minutes and agreements between the
Parties (or their predecessors in interest) whether written or oral. No
supplement, modification or amendment of this Agreement shall be binding unless
executed by the Parties in writing and signed by the duly authorized
representatives of both Parties.
21. ASSIGNMENT
Neither Party may assign this Agreement or any of its rights hereunder,
nor delegate any of its duties or obligations hereunder, to any third party
without the prior written consent of the other Party; subject to Abbott's right
to grant sublicenses of its rights under this Agreement to an Abbott Affiliate
or Unaffiliated Sublicensee in accordance with Section 2.2. Neither Party shall
unreasonably withhold its consent to such contemplated assignment if such
contemplated assignment is in connection with the sale by either Party of all or
substantially all of its assets to a third party which is not a direct
competitor of the other Party in the hospital or pharmaceutical products area.
<PAGE>
22. LIMITATION OF DAMAGES
In no event shall either Party be liable to the other Party for any
indirect, incidental or consequential damages in connection with the performance
of this Agreement or any breach of this Agreement.
23. FORCE MAJEURE
Neither Party shall be held in breach of this Agreement for failure to
perform any of its obligations hereunder to the extent and for the time period
such performance is prevented in whole or in part by reason of any Force Majeure
event, including but not limited to industrial disputes, strikes, lockouts,
riots, mobs, fires, floods, and other natural disasters and Acts of God, wars
declared or undeclared, civil strife, embargo, delays in delivery or defects or
shortages of raw materials from suppliers, loss or breakdown of any production
equipment, losses or shortage of power, damage to or loss of goods in transit,
currency restrictions, or events caused by reason of laws, regulations or orders
by any government, governmental agency or instrumentality or by any other
supervening unforeseeable circumstances whatsoever beyond the control of the
Party so affected. The Party so affected shall (a) give prompt written notice
to the other Party of the nature and date of commencement of the Force Majeure
event and its expected duration and (b) use its commercially reasonable efforts
to avoid or remove the Force Majeure event as soon as possible to the extent it
is so able to do.
24. RELATIONSHIP OF PARTIES
The relationship of the Parties under this Agreement is that of
independent contractors. Nothing contained in this Agreement shall be construed
so as to constitute the Parties as partners, joint venturers or agents of the
other. Neither Party has any express or implied right or authority under this
Agreement to assume or create any obligations or make any warranties and
representations on behalf of or in the name of the other Party, or to bind the
other Party to any contract, agreement or undertaking with any third party, and
no conduct of the Parties pursuant to the terms of this Agreement shall be
deemed to establish such right or authority. Neither Party shall make any
representation to third parties that the relationship created hereby constitutes
a partnership, joint venture or agency relationship.
25. SEVERABILITY OF CLAUSES
In case one or more of the provisions contained in this Agreement shall,
for any reason, be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Agreement, but this Agreement shall be construed by limiting such
invalid, illegal or unenforceable provision, if such is not possible, by
deleting such provision from this Agreement.
26. NON-WAIVER
The failure by either Party at any time to enforce any of the terms or
provisions or conditions of this Agreement or exercise any right hereunder shall
not constitute a waiver of the same or affect that Party's rights thereafter to
enforce or exercise the same. No waiver of any of the provisions of this
Agreement shall be deemed binding
<PAGE>
unless executed in writing by the Party to be bound by it.
27. HEADINGS
The headings in this Agreement are for convenience of reference only and
shall not be used in the interpretation of any provisions hereof.
28. EXECUTION
This Agreement shall be executed by the Parties in two (2) original
counterparts, one (1) original counterpart being retained by each Party and
either of which shall be deemed sufficient to prove the existence and terms and
conditions hereof. This Agreement may be executed by the Parties by the
exchange of facsimile signature pages, with signed original counterparts of the
Agreement to be exchanged by the Parties promptly thereafter.
<PAGE>
IN WITNESS WHEREOF, the Parties' duly authorized representatives hereto
have executed this Agreement as of the Effective Date.
ARONEX PHARMACEUTICALS, INC. ABBOTT LABORATORIES
By: By:
-------------------------- --------------------------
Title: Title:
----------------------- -----------------------
Date: Date:
------------------------ ------------------------
<PAGE>
LIST OF EXHIBITS
EXHIBIT A API PATENTS
EXHIBIT B FACTORY COST
EXHIBIT C U.S. PRODUCT DEVELOPMENT PLAN
EXHIBIT D ALTERNATIVE DISPUTE RESOLUTION
EXHIBIT E API TRADEMARK APPLICATIONS AND REGISTRATIONS
EXHIBIT F FORM OF TRADEMARK ASSIGNMENT
<PAGE>
EXHIBIT A
API PATENT RIGHTS
Part I API Patents
1. US 4,812,312
Lopez-Berestein et al. "Liposome-Incorporated Nystatin"
Japan: 2703594 granted 10/3/97
EPO: 0348431 granted 8/5/92
Austria: E79028 "
Belgium: 0348431 "
Switzerland: 0348431 "
Germany: p3873528.8 "
France: 0348431 "
UK: 0348431 "
Italy: 0348431 "
Netherlands: 0348431 "
Sweden: 0348431 "
2. US 4,950,432
Reeta Mahte et al. "Polyene Microlide Pre-Liposomal Powders"
3. US 5,178,875
Lenk at al. "Liposomal-Polyene Preliposomal Powder and Method of Its
Preparation"
Australia: 663074 granted 2/6/96
EPO: 0567582 granted 5/17/95
Austria: E1 22559 "
Belgium: 0567582 "
Switzerland 0567582 "
Germany: 69202569 "
Denmark: 0567582 "
Spain: 0567582 "
France: 0567582 "
UK: 0567582 "
Greece: 0567582 "
Italy: 0567582 "
Luxembourg: 0567582 "
Monaco 0567582 "
Netherlands: 0567582 "
Sweden: 0348431 "
4. USSN: 08/535,885 (allowed, Issue Fee paid 7/31/98)
Lenk el al. "Liposomal-Polyene Preliposomal Powder and Method of Its
Preparation"
* *
1. *
*
2. *
*
<PAGE>
EXHIBIT B
FACTORY COST
DIRECT MATERIAL COST:
Direct material cost includes all raw material used in the manufacturing
process as contained in the bill of material to manufacture Product. Direct
material is identified by specific lot numbers. Items normally included are;
Raw drug.
Diluting material such as the alcohol.
Vial.
Vial stopper.
Vial seal
Inline solution filters and compounding filters.
Vial label
Single unit carton.
Shipper
Any other specialized packaging material.
DIRECT LABOR COST.
Includes the cost of employees directly involved in the manufacture of
the Product. Our direct labor employees are classified as Assistants, Operators,
Attendants, Technicians, Senior Production Operators, Productions Equipment
Specialists, and Group Leaders. The rate per hour includes the average base rate
for all direct employees plus a fringe rate that includes vacations, holidays,
insurance costs, pension, 401K, bonuses and legally mandated employer taxes.
Standard product cost uses an Industrial Engineering estimate of the hours to
perform each step of the production process. Additional procedures or employees
required to handle explosive material would be added as a direct labor
operation. Direct labor operations are normally considered to be:
Drug dispensing.
Drug mixing.
Preparation of the filling equipment.
Preparation of components such as washing vial stoppers.
Preparation of printed materials, primarily labels.
Filling of the vial.
Post filling light inspection.
Lyophilization
Labeling.
Packing.
VARIABLE OVERHEAD COST.
Includes the costs of operating the plant which change as the volume of
production in the plant changes. The major components of variable overhead are
related to the production operator and include their overtime, time spent for
training and plant meetings, and their uniforms and gowns. Any specialized
employee safety equipment such as used in an explosion proof environment would
be included in this category. Cost included in this category are assigned to
standard product cost as a rate per hour applied to direct labor hours
identified above.
FIXED OVERHEAD COSTS.
Includes the other costs associated with operating a manufacturing
plant. The key components are the cost of the quality assurance organization,
material planning, purchasing, receiving, and warehousing, plant maintenance,
utilities and engineering, the health and safety group, production
supervision, and fixed costs such as depreciation taxes, and insurance.
Investment in explosive proof equipment and changes to the facility required
to handle explosive material would be included in this category. These costs
are assigned to standard product cost based on fully utilized plant capacity.
The standard product cost development process occurs once per year in
the mid-summer time period. At that time, assumptions are made regarding
inflation rates for raw material and wages, productivity improvements, and plant
utilization levels.
<PAGE>
EXHIBIT C
U.S. PRODUCT DEVELOPMENT PLAN
API shall conduct all clinical studies required to obtain Regulatory
Approval in the United States, including but not limited to the studies
referenced below, with the objective of obtaining U.S. NDA approval for the
Product in injectable dosage form with an Empiric Claim on or before *.
<TABLE>
<CAPTION>
STUDY NO. STUDY TITLE BRIEF DESCRIPTION
<S> <C> <C>
AR-90-01-002 Pharmacokinetics of Nystatin(LF),"*, I.V. in Patients Phase 1, Single dose,
with Acquired Immunodeficiency Syndrome (AIDS)-Related dose-escalating up to 1
Complex ARC mg/kg
AR-91-35,606-004 A Phase I-ii Clinical Study of Nystatin-Trademark-, Phase I-II, Multiple
I.V. in Patients with HIV Infection dose, dose-escalating up
to 7 mg/kg
AR-41,356-93-002 Phase I Study to Determine the Maximum Tolerated Dose Phase I, Multiple dose,
of Liposomal Nystatin(LF)-trademark- in Patients with dose-escalating up to 8
Presumed or Proven Fungal infection Due to ASPERGILLUS mg/kg
or CANDIDA Species and Other Opportunistic Fungi
AR-92-41,356-005 A Multicenter Study to Evaluate the Safety and Phase II, Multiple dose
Efficacy of Various Doses of Nyotran-Registered at 2 or 4 mg/kg, in
Trademark- in Non-Neutropenic Patients with Candidemia patients with systemic
CANDIDA infections
AR-94-41,356-006 A Prospectively Randomized, Double-Blind, Comparative Phase III, Multiple dose
Multicenter Study to Evaluate Efficacy and Safety of blinded comparative
Nyotran-Registered Trademark- and Amphotericin B or study in patients with
Empiric Antifungal Treatment in Neutropenic Patients presumed fungal
infections, conducted in
US
AR-95-41,356-009 A Prospectively Randomized, Double-Blind, Comparative Phase III, Multiple dose
Multicenter Study to Evaluate Efficacy and Safety of blinded comparative
Nyotran-Registered Trademark- and Amphotericin B for study in patients with
Empiric Antifungal Treatment in Neutropenic Patients presumed fungal
infections, conducted in
Europe
AR-94-41,356-007 An Open-Label, Non-Comparative, Multicenter Study to Phase II, Multiple dose
Evaluate the Clinical Efficacy and Safety of Nyotran- salvage therapy trial in
Registered Trademark- (Liposomal Nystatin) in the aspergillosis conducted
Treatment of Patients with Proven or Probable primarily in Europe,
ASPERGILLUS Infection Who Are Failing Standard South Africa, and
Parenteral Antifungal Therapy Due to Lack of Response Australia
or Intolerance to Amphotericin B or Liposomal
Amphotericin
AR-96-41,356-008 An Open-Label, Non-Comparative, Multicenter Study to Phase II, Multiple dose
Evaluate the Clinical Efficacy and Safety of Nyotran- salvage therapy trial in
Registered Trademark- (Liposomal Nystatin) in the aspergillosis conducted
Treatment of Patients with Proven or Probable primarily in the US
ASPERGILLUS Infection Who Are Failing Standard
Parenteral Antifungal Therapy Due to Lack of Response
or Intolerance to Amphotericin B or Liposomal
Amphotericin
AR-97-41,356-013 A PhaseII/III Randomized, Multicenter Study to *
Determine the Optimal Dose of Nyotran-Registered
Trademark- (Liposomal Nystatin) for the Treatment of
Patients with Cryptococcal Meningitis by Comparing the
Safety and Efficacy of the 2 mg/kg/day, 3 mg/kg/day
and 4 mg/kg/day Doses of Nyotran-Registered Trademark-
and To Compare the Safety and Efficacy of the
Resulting Optimal Dose of Nyotran-Registered
Trademark- versus Fungizone-Registered Trademark-
(Amphotericin B) in Patients with Cryptococcal
Meningitis
* *
</TABLE>
<PAGE>
EXHIBIT D
ALTERNATIVE DISPUTE RESOLUTION
The parties recognize that a bona fide dispute as to certain matters may
arise from time to time during the term of this Agreement which relates to
either party's rights and/or obligations. To have such a dispute resolved by
this Alternative Dispute Resolution ("ADR") provision, a party first must send
written notice of the dispute to the other party for attempted resolution by
good faith negotiations between their respective representatives of the affected
subsidiaries, divisions, or business units within twenty-eight (28) days after
such notice is received (all references to "days" in this ADR provision are to
calendar days).
If the matter has not been resolved within twenty-eight (28) days of he
notice of dispute, or if the parties fail to meet within such twenty-eight (28)
days, either party may initiate an ADR proceeding as provided herein. The
parties shall have the right to be represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice
to the other party of the issues to be resolved by ADR. Within fourteen (14)
days after its receipt of such notice, the other party may, by written notice to
the party initiating the ADR, add additional issues to be resolved within the
same ADR.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to preside in the
resolution of any disputes in this ADR proceeding. If the parties are unable to
agree on a mutually acceptable neutral within such period, the parties shall
request the President of the Center for Public Resources ("CPR"), 366 Madison
Avenue, New York, New York 10017 to select a neutral pursuant to the following
procedures:
(a) The CPR shall submit to the parties a list of not less
than five (5) candidates within fourteen (14) days after receipt of the request
from the parties, along with a CURRICULUM VITAE for each candidate. No
candidate shall be an employee, director, or shareholder of either party or any
of their subsidiaries or affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her impartiality.
(c) Each party shall number the candidates in order of
preference (with the number one (1) signifying the greatest preference) and
shall deliver the list to the CPR within seven (7) days following receipt of the
list of candidates. If a party believes a conflict of interest exists regarding
any of the candidates that party shall provide a written explanation of the
conflict to the CPR along with its list showing its order of preference for the
candidates. Any party failing to return a list of preferences on time shall be
deemed to have no order of preference.
(d) If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR immediately shall
designate as the neutral the candidate for whom the parties collectively have
indicated the greatest preference. If a tie should result between two
candidates, the CPR may designate either candidate. If the parties collectively
have identified three (3) or more candidates deemed to have conflicts, the CPR
shall review the explanations regarding conflicts and, in its sole discretion,
may either (i) immediately designate as the neutral the candidate for whom the
parties collectively have indicated the greatest preference, or (ii) issue a new
list of not less than five (5) candidates, in which case the procedures set for
in subparagraphs 2(a) - 2(d) above shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six
(56) days after selection, the neutral shall hold a hearing to resolve each of
the issues identified by the parties. The ADR proceeding shall take place at a
location agreed upon by the parties. If the parties cannot agree, the neutral
shall designate a location other than the principal place of business of either
party or any of their subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) a copy of all exhibits on which such party intends to
rely in any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony of each witness;
<PAGE>
(c) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other remedy for each issue. The
proposed rulings and remedies shall not contain any recitation of the facts or
any legal arguments and shall not exceed one (1) page per issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty (20) pages. This page
limitation shall apply regardless of the number of issues raised in the ADR
proceeding.
Except as expressly set forth in subparagraphs 4(a) - 4(d) above, no
discovery shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
5. The hearing shall be conducted on two (2) consecutive days and
shall be governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine whether each party has
had the five (5) hours to which it is entitled.
(b) Each party shall be entitled, but not required, to make
an opening statement, to present regular and rebuttal testimony, documents or
other evidence, to cross-examine witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately after their direct
testimony, and cross-examination time shall be charged against the party
conducting the cross-examination.
(c) The party initiating the ADR shall begin the hearing and,
if it chooses to make an opening statement, shall address not only issues it has
raised but also any issues raised by the responding party. The responding
party, if it chooses to make an opening statement, also shall address all issues
raised in the ADR. Thereafter, the presentation of regular and rebuttal
testimony and documents, other evidence, and closing arguments shall proceed in
the same sequence.
(d) Witnesses shall be excluded from the hearing until
closing arguments.
(e) Neither affidavits nor settlement negotiations shall be
admissible under any circumstances. As to all other matters, the neutral shall
have sole discretion regarding the admissibility of any evidence.
6. Within seven (7) days following completion of the hearing, each
party may submit to the other party and the neutral a post-hearing brief in
support of its proposed rulings and remedies, provided that such brief shall not
contain or discuss any new evidence and shall not exceed ten (10) pages. This
page limitation shall apply regardless of the number of issues raised in the ADR
proceeding.
7. The neutral shall rule on each disputed issue within fourteen
(14) days following completion of the hearing. Such ruling shall adopt in its
entirety the proposed ruling and remedy of one of the parties on each disputed
issue but may adopt one party's proposed rulings and remedies on some issues and
the other party's proposed rulings and remedies on other issues. The neutral
shall not issue any written opinion or otherwise explain the basis of the
ruling.
8. The neutral shall be paid a reasonable fee plus expenses. These
fees and expenses, along with the reasonable legal fees and expenses of the
prevailing party (including all expert witness fees and expenses), the fees and
expenses of a court reporter, and any expenses for a hearing room, shall be paid
as follows:
(a) If the neutral rules in favor of one party on all
disputed issues in the ADR, the losing party shall pay 100% of such fees and
expenses.
(b) If the neutral rules in favor of one party on some issues
and the other party on other issues, the neutral shall issue with the rulings a
written determination as to how such fees and expenses shall be allocated
between the parties. The neutral shall allocate fees and expenses in a way that
bears a reasonable relationship to the outcome of the ADR, with the party
prevailing on more issues, or on issues of greater value or gravity, recovering
a relatively larger share of its legal fees and expenses.
9. The rulings of the neutral and the allocation of fees and
expenses shall be binding, non-reviewable, and non-appealable, and may be
entered as a final judgment in any court having jurisdiction.
<PAGE>
10. Except as provided in paragraph 9 of this Exhibit D or as
required by law, the existence of the dispute, any settlement negotiations, the
ADR hearing, any submissions (including exhibits, testimony, proposed rulings,
and briefs), and the rulings shall be deemed Confidential Information. The
neutral shall have the authority to impose sanctions for unauthorized disclosure
of Confidential Information.
<PAGE>
EXHIBIT E
API TRADEMARK APPLICATIONS AND REGISTRATIONS
API TRADEMARKS REGISTERED
<TABLE>
<CAPTION>
Case Number Mark Registration No. Next Renewal Date
- ----------- ---- ---------------- -----------------
<S> <C> <C> <C>
ARG-106
United States LF 1,785,153 08/03/03
ARG-701
United States Nyotran 2,173,459 07/04/08
</TABLE>
<PAGE>
EXHIBIT F
FORM OF TRADEMARK ASSIGNMENT
ASSIGNMENT
WHEREAS, Aronex Pharmaceuticals, Inc., a corporation existing under the
laws of the State of Delaware, having its principal place of business at 8707
Technology Forest Place, The Woodlands, Texas 77381-1191 is the owner of the
United States Trademark Registrations as depicted on Schedule 1 attached hereto;
and
WHEREAS, Abbott Laboratories, a corporation existing under the laws of
the State of Illinois, having its principal place of business at Abbott Park,
Illinois 60064 is desirous of acquiring all right, title and interest in and to
said Trademark Registrations, and
WHEREAS, Aronex Pharmaceuticals, Inc. is willing to assign any and all
of its right to the said Trademark Registrations,
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Aronex Pharmaceuticals, Inc. does hereby sell, transfer,
convey and assign to Abbott Laboratories any and all of its right, title and
interest in and to the trademarks and the Trademark Registrations associated
therewith, including the goodwill of the business symbolized by the trademark.
Dated this ______ day of ____________________, 1998.
Aronex Pharmaceuticals, Inc. Abbott Laboratories
By: By:
Title: Title:
<PAGE>
Schedule I
<TABLE>
<CAPTION>
Trademark Country Registration Number
<S> <C> <C>
LF United States 1,785,153
NYOTRAN United States 2,173,459
</TABLE>
