SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): July 23, 1999
NAPRO BIOTHERAPEUTICS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-243201 84-1187753
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification #)
6304 Spine Road, Unit A
Boulder, Colorado 80301
(Address of Principal Executive Office)
(303) 530-3891
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
Strategic Partnership With Abbott Laboratories
On July 23, 1999, NaPro entered into Development, License and Supply Agreement
(the "Development Agreement") with Abbott Laboratories ("Abbott"). The
Development Agreement is a 20-year collaborative agreement with Abbott to
develop and commercialize one or more formulations of paclitaxel for the
treatment of a variety of cancer indications. The exclusive agreement covers the
United States and Canada.
NaPro will be responsible for supply of bulk drug and will jointly conduct
clinical trials with Abbott. Abbott will be responsible for the finishing,
regulatory filings, marketing and sale of the finished drug product. NaPro has
licensed to Abbott its paclitaxel-related patents. Most primary decisions
related to the development program will be made by a joint NaPro-Abbott
Development Committee. Under the Development Agreement, NaPro and Abbott have
begun recruiting sites and investigators for the next phase of pivotal studies.
Clinical studies to be pursued by NaPro and Abbott will investigate several
different cancers in a variety of populations.
NaPro has and will receive funding from Abbott in the form of development and
marketing milestone payments, a secured loan and an equity investment. On July
26, 1999, NaPro received $5 million, consisting of an initial $1 million fee, $2
million from the purchase by Abbott of NaPro common stock at $5.00 per share,
and a $2 million draw-down on a secured loan. In addition to payments at
closing, NaPro expects to receive up to $7 million in the remainder of 1999
consisting of another $1 million in fees, an additional $2 million equity
investment (both of which are subject to certain operating milestones) and
additional advances under the loan commitment of up to $4 million.
Contingent upon NaPro's successful achievement of all development milestones and
including all payments expected in 1999, NaPro could receive up to $48 million
consisting of $38 million in development fees and $10 million for the purchase
of 2 million shares of NaPro common stock. In addition, NaPro also will have
access to up to $20 million under a secured loan arrangement with Abbott. The
loan bears a primary interest rate of 6.5% and is due in full on the earlier of:
(i) the second anniversary of the first sale of finished product by Abbott to a
wholesaler or end-user customer following approval of finished product by the
U.S. Food and Drug Administration; (ii) the termination of the Development
Agreement; or (iii) January 1, 2007. The loan is limited to a borrowing base of
collateralized assets, recomputed monthly.
Contingent upon achieving certain commercial sales thresholds over several
years, NaPro may receive additional milestone payments from Abbott of up to $57
million. No assurance can be given that regulatory approval or sales thresholds
will be achieved.
Under terms of the Agreement, Abbott will purchase bulk drug from NaPro. Once
the paclitaxel product is approved and commercialized, Abbott will pay a
percentage of its net paclitaxel sales to NaPro, less Abbott's payments to NaPro
for purchase of bulk drug.
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The Development Agreement and the stock purchase and loan agreements with Abbott
are filed as exhibits to this Report.
Revised Management's Discussion and Analysis of Financial
Condition and Results of Operations
On or about October 5, 1999 NaPro will mail its annual report to its
stockholders. In connection with the Development Agreement and the other
agreements with Abbott, NaPro believed it appropriate to revise the disclosure
regarding NaPro's financial condition and results of operations from that
reported previously in its Annual Report on Form 10-K. Accordingly, we include
the following revised disclosure as it appears in NaPro's annual report to
stockholders.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the results of
operations of NaPro. This discussion should be read in conjunction with the
Financial Statements and Notes included elsewhere in this Report [NaPro's 1998
Annual Report to stockholders]. It has been updated from that contained in its
Annual Report on Form 10-K to include reference to NaPro's transaction with
Abbott, to reflect implications of such transaction and to update certain other
matters. Special Note: Certain statements set forth below constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). See "Special Note Regarding
Forward Looking Statements".
General
NaPro is a natural product pharmaceutical company which is focusing primarily on
the development, manufacture and commercialization of paclitaxel, a
naturally-occurring anticancer agent found in certain species of yew (Taxus)
trees.
NaPro has devoted its efforts primarily to the development and implementation of
its proprietary extraction, isolation and purification (EIP(TM)) technology and
the development of its proprietary semi-synthetic method for producing NaPro
paclitaxel. To advance the development and commercialization of NaPro
paclitaxel, NaPro entered into 20-year, exclusive agreements with F.H. Faulding
& Co., Ltd. ("Faulding") and IVAX Corporation (including its subsidiaries,
"IVAX") for the clinical development, sales, marketing and distribution of NaPro
paclitaxel. NaPro and IVAX entered into an agreement on March 20, 1998, (the
"Termination Agreement") terminating their development and marketing
relationship.
On July 23, 1999 NaPro entered into a 20-year collaborative agreement (the
"Abbott Agreement") with Abbott Laboratories ("Abbott") to develop and
commercialize one or more formulations of paclitaxel for the treatment of a
variety of cancer indications. The exclusive agreement covers the United States
and Canada.
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NaPro will be responsible for supply of bulk drug and will jointly conduct
clinical trials with Abbott. Abbott will be responsible for the finishing,
regulatory filings, marketing and sale of the finished drug product. NaPro has
licensed to Abbott its paclitaxel-related patents. Most primary decisions
related to the development program will be made by a joint NaPro-Abbott
Development Committee. Under the Abbott Agreement NaPro-Abbott have begun
recruiting sites and investigators for the next phase of pivotal studies.
Clinical studies to be pursued by NaPro-Abbott will investigate several
different cancers in a variety of populations.
NaPro has and will receive funding from Abbott in the form of development and
marketing milestone payments, a secured loan and an equity investment. On July
26, 1999 NaPro received $5 million, consisting of an initial $1 million fee, $2
million from the purchase by Abbott of NaPro common stock at $5.00 per share,
and a $2 million drawdown on a secured loan. In addition to payments at closing,
NaPro may receive up to $7 million in the remainder of 1999 consisting of
another $1 million in fees, an additional $2 million equity investment (both of
which are subject to certain operating milestones) and additional advances under
the loan commitment of up to $4 million.
Contingent upon NaPro's successful achievement of all development milestones and
including all payments expected in 1999, NaPro could receive up to $48 million
consisting of $38 million in development fees and $10 million for the purchase
of 2 million shares of NaPro common stock. In addition, NaPro also will have
access to up to $20 million under a secured loan arrangement with Abbott. The
loan bears a primary interest rate of 6.5% and is due in full on the earlier of:
(i) the second anniversary of the first sale of finished product by Abbott to a
wholesaler or end-user customer following approval of finished product by the
U.S. Food and Drug Administration ("FDA"); (ii) the termination of the Abbott
Agreement; or (iii) January 1, 2007. The loan is limited to a borrowing base of
collateralized assets, recomputed monthly.
Contingent upon achieving certain commercial sales thresholds over several
years, NaPro may receive additional milestone payments from Abbott of up to $57
million dollars. No assurance can be given that regulatory approval or sales
thresholds will be achieved.
Under terms of the Abbott Agreement, Abbott will purchase bulk drug from NaPro.
Once the paclitaxel product is approved and commercialized, Abbott will pay a
percentage of its net paclitaxel sales to NaPro, less Abbott's payments to NaPro
for purchase of bulk drug.
NaPro is in discussions with a number of international pharmaceutical companies
to assist NaPro in developing and marketing NaPro paclitaxel in various parts of
the world. NaPro is currently dependent for revenue exclusively on sales of
NaPro paclitaxel and on royalties and payments related to licensed technology.
NaPro has initiated and is co-managing with Abbott clinical studies exploring
the use of its patented formulation of paclitaxel using its patented method of
administration. NaPro anticipates that information gained in such studies will
be useful in the filing of a New Drug Application with the FDA for NaPro
paclitaxel. The cost of such studies is increasing and will be significant.
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Through June 30, 1999, NaPro's production of paclitaxel was limited primarily to
research and pilot-scale production, and much of NaPro's product sales and
production were for use in clinical trials and for research and development
purposes. Accordingly, NaPro has generated only limited revenue from such
activities and has incurred significant losses, including operating losses of
approximately $13.4 million, $13.8 million and $7.1 million for the years ended
December 31, 1998, 1997 and 1996, respectively. For the six months ended June
30, 1999, NaPro recorded an operating loss of approximately $4.2 million. The
accumulated deficit at June 30, 1999 was $47.1 million. NaPro expects that it
will continue to have a high level of operating expense and will be required to
make significant up-front expenditures in connection with its clinical trials,
biomass procurement, product development, and other research and development
activities. NaPro anticipates that losses will continue until such time, if
ever, as NaPro is able to generate sufficient revenue to support its operations.
NaPro believes that its ability to generate revenue depends primarily on its
ability to obtain regulatory approval in the U.S. or another major market for
the commercial sale of NaPro paclitaxel, on NaPro's ability to obtain partners,
on NaPro's ability to obtain regulatory approval for its manufacturing
facilities and on NaPro's ability to construct manufacturing facilities that
produce quantities of NaPro paclitaxel sufficient to supply NaPro's strategic
partners' requirements for commercial sales. Moreover, NaPro's future growth and
profitability will depend on the success of its strategic partners in fostering
acceptance in the oncological market for NaPro paclitaxel as a preferred dosing
regimen of taxane chemotherapy to be used alone or in combination with other
chemotherapeutic agents.
In January 1995, Faulding received approval to market NaPro paclitaxel
commercially in Australia under the trade name ANZATAX(TM). Faulding's
effectiveness in marketing NaPro paclitaxel in Australia and other markets will
continue to have a significant affect on NaPro's operations.
In February 1997, Bristol-Myers Squibb Company ("Bristol") submitted a
Supplemental New Drug Application with orphan drug designation for paclitaxel
for the treatment of Kaposi's sarcoma ("KS") before the filing by IVAX of a New
Drug Application ("NDA") for the same indication. The Bristol application was
approved by the FDA in August 1997. Under the Orphan Drug Act of 1983, this
approval resulted in IVAX/NaPro being denied marketing approval for the KS
indication for seven years.
In February 1998, due to the delay in receiving marketing approval for NaPro
paclitaxel, NaPro underwent a restructuring to decrease overall cost. As part of
the restructuring NaPro temporarily closed its British Columbia manufacturing
facility and suspended construction of its commercial scale manufacturing
facility in Boulder, Colorado. Completion of the Boulder facility will require
additional financing, which NaPro intends to seek at such time, if ever, as
NaPro anticipates sufficient product demand to warrant completion of the
facility.
In March 1998, NaPro and IVAX entered into the Termination Agreement. The
termination of the IVAX Agreement leaves NaPro free to seek regulatory approvals
and market NaPro paclitaxel under the Abbott Agreement and to seek an
international partner or partners with
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which to pursue regulatory approvals and marketing of NaPro paclitaxel outside
the territory contractually allocated to Faulding. There can be no assurance
that NaPro will be able to secure such approvals or form new long-term
relationships for the approval, marketing, and distribution of NaPro paclitaxel
in these areas, or that NaPro, Abbott or international partners, if found, will
be able to effectively market NaPro paclitaxel.
Results of Operations
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Sales. 1998 sales were $5 million, up $1.2 million from 1997. Sales to IVAX for
1998 were $2.7 million, up $400,000 from 1997. Sales to IVAX, as a result of the
Termination Agreement, are expected to end in the third 1999 quarter. Future
product sales in territory outside that covered by NaPro's agreement with
Faulding (the "Faulding Agreement") may be dependent upon the ability of NaPro
to secure new agreements supporting the development and marketing of NaPro's
paclitaxel within that territory. Sales other than to IVAX for 1998 were $2.2
million, up $700,000 from 1997. The increase was due primarily to the timing of
product shipments and to inventory fluctuations of NaPro's strategic partners.
Sales may vary significantly depending on a number of factors, including the
timing and size of any clinical trials, NaPro's obtaining one or more partners
to replace IVAX, changes in demand, the level of inventory carried and changes
in approved markets. This variability will continue until stable commercial
demand has been established for the product in one of NaPro's principal markets.
Research, Development and Cost of Products Sold. Research and development
expense and cost of products sold for 1998 was $10 million, down by $1.8 million
from 1997. The decrease resulted primarily from the benefits of the February
1998 restructuring, a decrease in the level of process development and research,
and lower production cost. NaPro's production process is not distinct from its
research and development processes. Accordingly, the cost of products sold is
included within NaPro's research and development expense.
General and Administrative Expense. General and administrative expense for 1998
was $6.5 million, up $500,000 from 1997. The increase is attributable primarily
to increases of $700,000 in legal expense related to European litigation and
$200,000 of consulting expense primarily related to the Termination Agreement,
partially offset by a reduction in recruiting and relocation expense.
Interest Income. Interest income for 1998 was $600,000, up $100,000 from 1997.
The increase is attributable to overall higher interest rates realized on
interest bearing investments. See "Liquidity and Capital Resources".
Interest and Other Expense. Interest and other expense for 1998 was $900,000,
down $1.3 million from 1997. The decrease is primarily attributable to the
non-recurrence of the $1.1 million 1997 expense related to the amortization of
original issue discount on the senior convertible debt, to decreased interest on
the senior convertible debt and to decreased borrowing on equipment financing.
See "Liquidity and Capital Resources".
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Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Sales. Sales for 1997 were $3.8 million, up $300,000 from 1996. Sales to IVAX
for 1997 were $2.3 million, up $1.7 million from 1996. Sales other than to IVAX
for 1997 were $1.5 million, down $1.3 million from 1996. The increase in total
sales was due primarily to the timing of product shipments and to inventory
fluctuations of NaPro's strategic partners.
Research, Development and Cost of Products Sold. Research and development
expense and cost of products sold for 1997 was $11.8 million, up $4.9 million
from 1996. The increase resulted primarily from expansion of NaPro's development
and research operations in anticipation of possible approval of the NDA filed by
IVAX with the FDA.
General and Administrative Expense. General and administrative expense for 1997
was $5.9 million, an increase of $2.2 million from 1996. The increase is
attributable primarily to increases of $1.1 million in administrative and
support staff, $500,000 in legal cost, $100,000 of occupancy cost, and $400,000
in consulting and outside service expense.
Interest Income. Interest income for 1997 was $500,000, a decrease of $200,000
from 1996. The decrease is attributable to smaller free cash balances available
for investment. See "Liquidity and Capital Resources".
Interest and Other Expense. Interest and other expense for 1997 was $2.2
million, up $1.8 million from 1996. Approximately $1.1 million of the 1997
expense related to the amortization of original issue discount, a non-recurring
charge, on the senior convertible debt. The remainder of the increase is
attributable to interest on the senior convertible debt and increased borrowing
on equipment financing. See "Liquidity and Capital Resources".
Liquidity and Capital Resources
NaPro's capital requirements have been and will continue to be significant. As
of December 31, 1998, NaPro had a working capital balance of $7.1 million. This
compared to a negative working capital balance of ($2.5) million as of December
31, 1997, and reflects the 1997 classification as a current liability of $8.1
million of NaPro's senior convertible notes, which are due in 2000 but which
were redeemable by the holders during the early part of 1998 under certain
conditions. Through December 31, 1998, the funding of NaPro's capital
requirements has been dependent primarily on the net proceeds of public
offerings of its common stock of approximately $21.1 million, on private
placements of its equity securities of approximately $27.8 million, on the
exercise of warrants and options of $5.7 million, on net borrowings of $12
million, and on loans and advances from its stockholders and strategic partners.
NaPro's existing capital and projected 1999 sales are expected to provide
adequate capital to fund its necessary operations and capital expenditures in
1999. Pharmaceutical development is, however, a costly and time consuming
process. NaPro is actively pursuing partners to assist in the development and
marketing of its products, and may seek other forms of long-term financing
should such financing become available on acceptable terms.
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In June 1997 NaPro privately placed $10.3 million of senior convertible notes.
The notes mature in June 2000 and bear an interest rate of 5%. Interest on the
notes is payable in cash or in common stock at NaPro's option. The notes are
convertible into common stock at a 10% discount from the lowest market price of
the common stock during specified periods prior to the conversion. If not
converted, upon maturity, the notes will be exchanged for 13.75% 5-year
debentures. In 1998 NaPro issued 2,833,587 shares of common stock in conversion
of $2.9 million principal of the notes, and 296,019 shares of common stock in
payment of $295,000 interest on the notes. In 1998 NaPro redeemed $647,000 in
note principal and paid $53,000 premium and interest in connection with the
redemption. In January 1999 NaPro redeemed $633,000 in note principal and paid
$162,000 premium and interest in connection with the redemption. In the period
after December 31, 1998 through August 6, 1999 NaPro issued 3,597,159 shares of
common stock in conversion of $5 million principal of the notes, and 19,234
shares of common stock in payment of $27,000 interest on the notes.
In December 1997, NaPro privately placed 5,000 shares of Series C Senior
Convertible Preferred Stock (the "C Preferred") for an aggregate issuance price
of $5 million. The C Preferred accrues dividends at 5% per year payable in
common stock or cash at NaPro's option. The C Preferred is convertible into
common stock at a 5% discount from the market price during specified periods
prior to the conversion date. In December 2000, NaPro may force the conversion
of any remaining shares at the conversion price in effect as of December 8,
2000. In 1998 NaPro issued 986,666 shares of common stock in conversion of
$897,000 of the C Preferred and 186,656 shares of common stock in payment of
$183,000 of dividends on the C Preferred. In the period after December 31, 1998
through August 6, 1999 NaPro issued 1,252,558 shares of common stock in
conversion of $2.1 million of the C Preferred and 6,193 shares of common stock
in payment of $10,000 of dividends on the C Preferred.
In January and March, 1998 and January and March, 1999, NaPro entered into
amendments (the "Amendments") with the C Preferred investor and the holders of
the senior convertible notes (together the "Investors"). The parties agreed to:
(a) limit the number of shares which could be converted in the event the stock
price is below $4.00 per share to no more than 450,000 shares per month through
May 14, 1999 and (b) partially remove the ability of the Investors to force
NaPro to redeem any portion of the securities for cash. In the event there is an
unconverted amount of securities on May 15, 1999, such amount will be
convertible under the original terms of the agreements. At any time, NaPro, at
its option, may redeem all or part of the securities, with 5 days written
notice, for amounts ranging from 130% to 140% of the outstanding principal and
accrued dividends and interest.
On August 2, 1999 NaPro redeemed for cash $2 million of shares of its C
Preferred at a cost of $2.8 million including redemption premiums and
outstanding accrued but unpaid dividends. Through that date all but $91,000 of
the shares of the C Preferred outstanding at December 31, 1998 had been either
redeemed or converted into common stock. Through August 2, 1999, all of NaPro's
convertible debt outstanding at December 31, 1998 had been redeemed (in January
1999) or was converted into common stock. Funding for the redemption of NaPro's
convertible debt and the C Preferred was provided by NaPro's current cash and
cash received from Abbott.
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In June 1993, NaPro entered into an initial 20 year exclusive agreement with
IVAX to develop and market paclitaxel in the United States, Europe, and other
parts of the world (the "IVAX Agreement"). NaPro and IVAX terminated the IVAX
Agreement on March 20, 1998. Under terms of the termination agreement, IVAX
received a royalty-free, limited, non-exclusive license to one of NaPro's
patents (the "Patent") in the United States, Europe and certain other world
markets. As consideration for this licence, NaPro received $4.1 million,
1,126,398 shares of NaPro common stock held by IVAX were returned to NaPro, and
an additional $2 million was placed in escrow to be released in installments
corresponding to delivery of NaPro's paclitaxel to IVAX. As a result of
deliveries of NaPro's paclitaxel to IVAX, $700,000 of this escrow amount had
been released to NaPro through December 31, 1998, and $1 million of the
remaining $1.3 million had been released as of August 27, 1999. In addition,
during 1998 IVAX made the following payments to NaPro: $3.8 million upon
issuance of the Patent in the United States, and $2.6 million upon issuance of
the Patent in the European Union.
In the normal course of its business, NaPro investigates, evaluates, and
discusses strategic relationship, joint venture, acquisition, and other business
combination opportunities. These opportunities could include, in the future,
strategic relationships to develop new classes of compounds NaPro has been
investigating, such as a new class of mitotic spindle poisons, a new class of
protein synthesis inhibitors, and a natural product that inhibits an enzyme
critical for the reproduction of cancer cells. Developing these opportunities or
others could require the expenditure of funds to secure licenses and for other
purposes. The amount and timing of future expenditures will depend upon numerous
factors, including the establishment of additional strategic relationships, the
progress of NaPro's research and development programs, the magnitude and scope
of these activities, the cost of preparing, filing, prosecuting, maintaining and
enforcing patent claims and other intellectual property rights, competing
technological and marketing developments, changes in or terminations of existing
strategic relationships and the cost of manufacturing scale-up. In the event of
any such relationships or transactions, NaPro may consider using available cash,
issuing equity securities or increasing its indebtedness.
Working Capital and Cash Flow. Cash and cash equivalents decreased $900,000 to
$7.2 million for the year ended December 31, 1998 from $8.1 million at December
31, 1997. Net cash provided by 1998 operations of $2.1 million was offset by
investing activity of $1.6 million and by financing activity of $1.4 million.
Inventory remained at $4.3 million at December 31, 1998 from December 31, 1997.
The amount of work-in-progress inventory and finished goods inventory is
dependent on a number of factors, including the shipping requirements of NaPro's
strategic partners and NaPro's production planning for meeting those needs.
Inventory balances may vary significantly during product development and launch
periods.
Capital Expenditures. NaPro expended $500,000 during 1998 for capital projects.
These expenditures primarily included plantation cost, work on manufacturing
facilities in Boulder, and improvements to NaPro's laboratories.
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Since the FDA's determination that NaPro's paclitaxel could not be marketed in
the U.S. for Kaposi's Sarcoma during Bristol's period of exclusivity under the
Orphan Drug Act, NaPro has significantly reduced the scope of its operations and
has reduced or delayed capital expenditures. NaPro is seeking a new strategic
partner or partners to replace IVAX. The nature of NaPro's relationship with its
strategic partners may significantly change its planned capital expenditures.
The amount and timing of future capital expenditures will depend upon numerous
factors, including the establishment of additional strategic relationships, the
progress of NaPro's research and development programs, the magnitude and scope
of these activities, the cost of preparing, filing, prosecuting, maintaining and
enforcing patent claims and other intellectual property rights, competing
technological and marketing developments, changes in or terminations of existing
strategic relationships and the cost of manufacturing scaleup. NaPro may seek
additional long-term financing to fund capital expenditures should such
financing become available on terms acceptable to NaPro.
Net Operating Loss Carryforwards. As of December 31, 1998, NaPro had net
operating loss carryforwards for income tax purposes of approximately $34
million to offset future taxable income. Under Section 382 of the Internal
Revenue Code of 1986, as amended, the utilization of net operating loss
carryforwards is limited after an ownership change, as defined in such Section
382, to an annual amount equal to the value of the loss corporation's
outstanding stock immediately before the date of the ownership change multiplied
by the federal long-term tax-exempt rate in effect during the month the
ownership change occurred. Such an ownership change occurred in September 1993.
As a result, NaPro will be subject to an annual limitation on the use of its net
operating losses incurred prior to that date. This limitation only affects net
operating losses incurred up to the ownership change and does not reduce the
total amount of net operating loss which may be taken, but rather limits the
amount which may be used during a particular year. Therefore, in the event NaPro
achieves profitability, such limitation would have the effect of increasing
NaPro's tax liability and reducing the net income and available cash resources
of NaPro if the taxable income during a year exceeded the allowable loss carried
forward to that year.
Year 2000 Issue. Until recently many computer programs used only the last two
digits to refer to a year. Such programs do not properly recognize a year that
begins with "20" instead of the familiar "19". If not corrected, many computer
applications could fail or create erroneous results.
This matter is commonly referred to as the Year 2000 issue or Y2K.
Two years ago NaPro implemented an assessment of its systems and other assets
which could be subject to Y2K. NaPro has completed the assessment of its primary
systems and has brought all of the systems into Y2K compliance.
NaPro is assessing its secondary systems and other assets, including
microprocessor-controlled equipment, and expects to complete that assessment no
later than October 1999. The potential for significant interruption from
secondary systems exists, although NaPro believes that the likelihood of
interruption caused by Y2K failures in secondary systems is small.
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In addition to its internal systems NaPro is evaluating potential impact on
NaPro of Y2K issues with its vendors and customers. NaPro cannot directly
control Y2K compliance by its vendors and customers. NaPro is communicating with
its key vendors and customers regarding this matter. NaPro knows of no vendor or
customer that has Y2K issues that have a potential of interrupting NaPro in a
manner that could significantly adversely affect NaPro's operations. However,
NaPro uses a number of vendors that NaPro believes to be the best or the only
qualified source of a particular good or service. Sales to NaPro's customers
potentially could be interrupted by customers' Y2K issues. Should a significant
customer incur Y2K problems with its testing, release or other systems, NaPro's
sales could be materially affected. NaPro will continue to monitor the level of
Y2K compliance with respect to its key vendors and customers and will further
develop contingency plans to cover the failure of a key vendor, including
identification and qualification of alternative suppliers. Management believes
that exposure to vendor or customer Y2K issues creates no material risk to
NaPro. However, no assurance can be given with certainty that Y2K issues with
vendors or customers will not significantly affect NaPro.
NaPro's Y2K effort has caused no significant deferral of other information
technology projects.
NaPro's Y2K contingency plan includes completion of the evaluation and
remediation process discussed above, including communication with its key
vendors and customers regarding potential for Y2K issues; identification of the
best alternative vendor for sensitive goods and services; coordination and
planning with such alternative vendors.
Management believes that Y2K issues related to both internal and external
systems will have no material effect on NaPro's business, results of operations
or financial condition, and that NaPro's Y2K risk is not material. However, no
such assurance can be given with certainty. The cost of addressing Y2K has not
been material; management believes that the cost of completing Y2K compliance
will not be material.
Special Note Regarding Forward-looking Statements
Certain statements in this Report constitute "forward-looking statements" within
the meaning of the federal securities laws, including the Private Securities
Reform Act of 1995. In addition, NaPro or persons acting on its behalf sometimes
make forward-looking statements in other written and oral communications.
Forward-looking statements can be identified by the use of words such as
"believes", "intends", "may", "should", "anticipates, "expected" or comparable
terminology or by discussions of strategies or trends. Such forward-looking
statements may also include, among other things: statements concerning NaPro's
plans, objectives and future economic prospects, such as matters relative to
seeking and obtaining additional strategic partners; the availability of patent
and other protection for its intellectual property; the completion of clinical
trials and regulatory filings; the prospects for and timing of regulatory
approvals; the need for and availability of additional capital; the amount and
timing of capital expenditures; the timing of product introductions and revenue;
the availability of raw materials; prospects for future operations; and other
statements of expectations, beliefs, future plans and
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strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of NaPro, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, adverse
economic and general business conditions; competition from Bristol and other
existing and new producers of paclitaxel and other drugs; technological advances
in cancer treatment and drug development; the ability to obtain rights to
technology; the ability to obtain and enforce patents; the ability to obtain raw
materials and commercialize manufacturing processes; the effectiveness of NaPro
paclitaxel and other pharmaceuticals developed by NaPro in treating disease; the
results of clinical studies; the results of research and development activities;
the business abilities and judgment of NaPro's management and other personnel;
the availability of qualified personnel generally; changes in and compliance
with governmental regulations; the effect of capital market conditions and other
factors on capital availability for NaPro and other biopharmaceutical companies;
the ability of Abbott and Faulding to perform their obligations under their
existing agreements with NaPro; the effect on NaPro's revenue, cash flow and
earnings from foreign exchange rate fluctuations; the ability of NaPro to
establish relationships with capable strategic partners to develop and market
NaPro paclitaxel in the territories not covered by the Abbott and Faulding
agreements; any Y2K issues of NaPro, its customers or vendors; and other factors
described or referenced in this Report.
Quantitative and Qualitative Disclosures about Market Risk
Following the final delivery of product to IVAX in August 1999 under the
Termination Agreement, sales of NaPro paclitaxel to Faulding will constitute
substantially all of NaPro's revenue until NaPro begins making sales to Abbott
under the Abbott Agreement. Faulding purchases NaPro paclitaxel at a price which
varies in proportion to the price at which Faulding sells the product.
Faulding's sales are made in the currencies of each of the countries in which it
sells NaPro paclitaxel. As a result, NaPro's revenue from sales is affected by
fluctuations in the value of these various foreign currencies relative to the
U.S. dollar. Faulding's largest single market is Australia, accounting for
approximately 39% of Faulding's commercial sales during the year ended March
1999. If changes in foreign currency markets cause a decrease in the price per
gram NaPro receives from Faulding, there could be a material adverse effect on
NaPro's earnings and cash flow. For example, during the year ended March 1999,
NaPro's revenue attributable to sales of NaPro paclitaxel to be resold
commercially by Faulding totaled $2.2 million. Had there been negative pressure
on the relevant exchange rates such that the price had been reduced by 20%,
NaPro's revenue for the year ended March 1999 would have been reduced by
approximately $400,000 and NaPro would have experienced materially reduced cash
flow. While sales to Faulding will continue to have a significant impact on
NaPro's revenue in the near term, NaPro's future revenue and success will be
dependent upon obtaining regulatory approvals and on Abbott's success in
marketing NaPro paclitaxel, of which there can be no assurance.
12
<PAGE>
NaPro's fixed rate indebtedness was represented by its senior convertible debt.
All of the debt had either been converted, repurchased or redeemed by July 26,
1999. On July 26, 1999, NaPro borrowed $2 million from Abbott under a credit
facility under which, subject to certain conditions, it may borrow up to $20
million. As this loan bears interest at a fixed rate of 6.5%, NaPro's
indebtedness under this loan will not be sensitive to market rate fluctuations.
NaPro currently does not use derivative financial instruments to manage its
interest rate risk and has no cash flow exposure due to general interest rate
changes for its fixed interest rate debt.
Certain statements set forth in this discussion constitute "forward-looking
statements" within the meaning of the Reform Act. See "Special Note Regarding
Forward-looking Statements".
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
99.1 Development, License and Supply Agreement, dated as of July 23, 1999,
by and between NaPro and Abbott.
99.2 Stock Purchase Agreement, dated as of July 23, 1999, by and between
NaPro and Abbott.
99.3 Loan and Security Agreement, dated as of July 23, 1999, by and between
NaPro and Abbott.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
NAPRO BIOTHERAPEUTICS, INC.
DATE: October 4, 1999 By: /s/ Gordon H. Link, Jr.
-----------------------
Name: Gordon H. Link, Jr.
Title: Chief Financial Officer
14
CONFIDENTIAL
DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT
BY AND BETWEEN
NAPRO BIOTHERAPEUTICS, INC.
AND
ABBOTT LABORATORIES
JULY 23, 1999
<PAGE>
CONFIDENTIAL
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1
DEFINITIONS AND REFERENCES..................................................................................2
1.1 Definitions...............................................................................2
1.2 References...............................................................................17
ARTICLE 2
LICENSE GRANT..............................................................................................17
2.1 NaPro Grant..............................................................................17
2.2 Abbott Grant.............................................................................18
2.3 Additional Licenses......................................................................18
2.3.1 Related to NaPro.........................................................................18
2.3.2 Related to Abbott Formulated Product.....................................................19
2.3.3 Other than Related to NaPro or Abbott Formulated Product.................................19
ARTICLE 3
MILESTONE PAYMENTS AND OTHER FUNDING.......................................................................19
3.1 Milestone Payments.......................................................................19
3.2 Single Payment Obligation................................................................23
3.3 Other Funding............................................................................23
3.4 Use of Certain Milestone Payments........................................................23
ARTICLE 4
ADDITIONAL FINISHED PRODUCT PAYMENTS ......................................................................24
4.1 Additional Consideration.................................................................24
4.2 Abbott Formulated Product in Lieu of or in Addition to NaPro Formulated Product..........25
4.3 Reduction in Applicable Percentages Due to Competitive Paclitaxel Product................26
4.4 Adjustments to Additional Consideration..................................................27
4.5 Increase or Decrease in Additional Consideration for Additional Licenses.................27
4.6 Net Sales Reports and Payments...........................................................27
4.7 Currency.................................................................................28
4.8 Sales Between Abbott and Affiliates......................................................28
4.9 Loan Agreement Offset....................................................................28
ARTICLE 5
PAYMENT, RECORD KEEPING AND AUDIT RIGHTS...................................................................29
5.1 Method of Payment........................................................................29
5.2 Record Keeping and Audit Rights..........................................................29
5.2.1 Audit of Net Sales.......................................................................30
5.2.2 Audit of Development Costs...............................................................30
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ARTICLE 6
RESEARCH AND DEVELOPMENT PROGRAM...........................................................................31
6.1 Research and Development.................................................................31
6.1.1 Responsibilities.........................................................................31
6.1.1.1 NaPro Responsibilities...................................................................31
6.1.1.2 Abbott Responsibilities..................................................................31
6.1.1.3 Joint Responsibilities...................................................................32
6.1.2 Development Plan.........................................................................32
6.1.3 Formulation..............................................................................32
6.2 Development Plan Funding.................................................................33
6.2.1 Up to Twenty Million Dollars.............................................................33
6.2.2 Above Twenty Million Dollars.............................................................33
6.2.3 Performance..............................................................................34
6.3 Development Costs Quarterly Budgets and Reports..........................................35
6.4 Development Committee....................................................................35
6.5 Finished Product Packaging...............................................................37
6.6 Pro-Drug Development.....................................................................38
ARTICLE 7
CLINICAL AND REGULATORY MATTERS............................................................................39
7.1 Pre-Clinical/Clinical Data...............................................................39
7.2 Regulatory Submission and Maintenance....................................................39
7.3 Bulk Drug DMF............................................................................39
7.4 Regulatory Approval Ownership............................................................40
ARTICLE 8
BULK DRUG MANUFACTURE, PURCHASE AND SUPPLY.................................................................40
8.1 Requirements and Exclusivity.............................................................40
8.1.1 Purchase and Sale........................................................................40
8.1.2 Limitations on NaPro Sale................................................................40
8.1.3 NaPro Enforcement of Limitations.........................................................41
8.1.4 Limitations on Abbott Resale.............................................................41
8.2 Pricing..................................................................................41
8.2.1 Development Use..........................................................................41
8.2.2 Primary Standard Product.................................................................42
8.2.3 Commercial Use...........................................................................42
8.2.4 Restoration or Replacement of Bulk Drug.................................................42
8.3 Shipping, Invoice and Payment............................................................43
8.4 Quality and Inspection of Bulk Drug......................................................43
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8.4.1 Bulk Drug Warranties.....................................................................43
8.4.2 Bulk Drug Inspection.....................................................................44
8.4.3 NaPro Response to Bulk Drug Inspection...................................................45
8.4.4 Bulk Drug Storage........................................................................45
8.5 NaPro Manufacturing Facility.............................................................45
8.5.1 Inspection by Abbott.....................................................................45
8.5.2 Inspection by Regulatory Authorities.....................................................46
8.5.3 Inspection of F. H. Faulding Facility....................................................46
8.5.4 Required Manufacturing Changes...........................................................47
8.5.5 Other Manufacturing Changes..............................................................47
8.5.6 Changes Requiring Regulatory Approval....................................................48
8.6 Abbott's and the Stand-By Manufacturing Source's Facilities..............................49
8.6.1 Inspection by Regulatory Authorities.....................................................49
8.6.2 Inspection by NaPro......................................................................50
8.6.3 Abbott Required Manufacturing Changes....................................................50
8.6.4 Abbott Manufacturing Changes.............................................................51
8.7 Abbott Stand-By Manufacture of Bulk Drug.................................................51
8.7.1 Qualification of Stand-By Manufacturing Facility.........................................51
8.7.2 Stand-By Manufacturing Election..........................................................52
8.7.3 Transition of Manufacturing Back to NaPro................................................53
8.7.4 Continued Supply Obligations.............................................................54
8.8 Forecasts and Orders of Bulk Drug for Commercial Use.....................................54
8.8.1 Pre-Launch Forecast and Quarterly Forecasts..............................................54
8.8.2 Updated Forecasts........................................................................54
8.8.3 NaPro Supply Constraints.................................................................54
8.8.4 Orders...................................................................................55
8.8.5 Required Inventory.......................................................................55
8.9 Supply Allocation........................................................................55
ARTICLE 9
FINISHED PRODUCT MANUFACTURE, MARKETING AND SALE...........................................................56
9.1 Abbott Manufacture and Labeling of Finished Product......................................56
9.2 Marketing Committee......................................................................57
9.3 Abbott Marketing and Sales Efforts.......................................................57
9.4 NaPro Assistance with Technical Marketing................................................58
9.5 Co-Promotion of Finished Product.........................................................59
9.6 Trademarks...............................................................................60
9.7 Manufacturing of Other Formulated Products...............................................60
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ARTICLE 10
PROPRIETARY RIGHTS; PATENT ENFORCEMENT AND INFRINGEMENT....................................................60
10.1 Patent Rights............................................................................60
10.2 Program Invention........................................................................61
10.2.1 Invention Disclosure.....................................................................61
10.2.2 Ownership................................................................................61
10.2.3 Prosecution and Maintenance..............................................................61
10.2.4 Trade Secrets............................................................................62
10.2.5 Cooperation..............................................................................62
10.3 No Other Technology Rights...............................................................62
10.4 Rights to Third Party Technology.........................................................62
10.5 Notice of Patent Infringement............................................................63
10.6 Patent Enforcement.......................................................................63
10.7 Defense of Assertions of Patent Infringement ............................................63
ARTICLE 11
RIGHTS TO REFERENCE AND USE PACLITAXEL
DATA AND EXPAND THE FIELD AND/OR TERRITORY.................................................................63
11.1 Abbott Exclusive Option Period for Other Territories and Expansion of the Field..........63
11.2 Abbott Right of First Refusal for Development Opportunities..............................64
11.3 Development Opportunities that Include Paclitaxel Data...................................64
11.4 Development Opportunities that Do Not Include Paclitaxel Data............................68
11.5 Abbott Initiation of Negotiations........................................................69
11.6 Certain Obligations Regarding Use of Paclitaxel Data and Joint Patent Rights.............69
11.7 Exclusive Enumeration of Rights..........................................................70
11.8 Certificate of Free Sale.................................................................70
ARTICLE 12
REPRESENTATIONS AND WARRANTIES.............................................................................71
12.1 Reciprocal...............................................................................71
12.1.1 Corporate Status.........................................................................71
12.1.2 Authority................................................................................71
12.1.3 No Conflicts.............................................................................71
12.1.4 No Approvals.............................................................................71
12.1.5 Enforceability...........................................................................71
12.1.6 Compliance with Laws.....................................................................72
12.1.7 Data.....................................................................................72
12.1.8 Year 2000 Warranties.....................................................................72
12.2 NaPro Representations and Warranties.....................................................72
12.3 NaPro Representations Regarding Data.....................................................74
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12.4 NaPro Representations Regarding IVAX.....................................................74
12.5 NaPro Representations Regarding Bryn Mawr................................................74
12.6 NaPro Representations Regarding F.H. Faulding............................................75
12.7 Future Necessary Licenses................................................................75
12.8 Abbott Representations and Warranties....................................................75
ARTICLE 13
INDEMNIFICATION AND INSURANCE..............................................................................76
13.1 Indemnities..............................................................................76
13.1.1 NaPro Indemnity..........................................................................76
13.1.2 Abbott Indemnity.........................................................................77
13.1.3 Indemnification Sharing..................................................................77
13.1.4 Procedures...............................................................................77
13.1.5 Defense..................................................................................78
13.1.6 Indemnifiable Loss Recovery..............................................................79
13.2 Insurance................................................................................79
13.3 Limitations of Damages...................................................................80
ARTICLE 14
PRODUCT RECALL AND ADVERSE EVENTS..........................................................................80
14.1 Recall Notification and Implementation...................................................80
14.2 Recall Costs and Expenses................................................................80
14.3 Adverse Events...........................................................................80
14.4 Complaint Handling.......................................................................81
ARTICLE 15
TERM AND TERMINATION.......................................................................................82
15.1 Term and Termination.....................................................................82
15.2 Termination by Abbott Without Cause......................................................82
15.3 Termination by Either Party for Cause....................................................83
15.3.1 Bankruptcy...............................................................................83
15.3.2 Material Breach..........................................................................83
15.4 [SECTION NOT USED].......................................................................84
15.5 Termination by Abbott for Cause..........................................................84
15.5.1 Related to Finished Product..............................................................84
15.5.2 Related to Patent Invalidation...........................................................85
15.5.3 Related to Breach of Representation or Warranty..........................................85
15.6 Consequences of Termination..............................................................86
15.6.1 Expiration of Term.......................................................................86
15.6.2 Termination by Abbott Without Cause......................................................86
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15.6.3 Termination by NaPro for Cause...........................................................87
15.6.4 Termination by Abbott for Cause..........................................................87
15.6.5 [SECTION NOT USED].......................................................................87
15.6.6 Termination by Abbott for Cause Related to Finished Product..............................87
15.6.7 Termination by Abbott for Cause Related to a Breach of Representation or
Warranty.................................................................................88
15.6.8 NaPro Sale of Finished Product Post-Termination..........................................88
15.6.9 Joint Patent Rights and Joint Program Inventions.........................................88
15.7 Survival of Certain Provisions...........................................................89
15.8 Effect of Termination on Milestone Payments..............................................91
ARTICLE 16
ALTERNATIVE DISPUTE RESOLUTION.............................................................................91
16.1 Attempted Amicable Resolution............................................................91
16.2 Alternate Dispute Resolution.............................................................92
16.3 ADR Ruling...............................................................................92
16.4 ADR Remedies.............................................................................93
16.5 Effect on Time Periods in this Agreement.................................................93
16.6 Exclusivity..............................................................................93
16.7 Express Remedies.........................................................................93
ARTICLE 17
CONFIDENTIALITY AND PUBLICITY..............................................................................94
17.1 Transfer of Information..................................................................94
17.2 Restricted Disclosure....................................................................95
17.3 Precautions..............................................................................96
17.4 Duration of Confidentiality Obligation...................................................96
17.5 Publicity and Announcements..............................................................97
ARTICLE 18
MISCELLANEOUS PROVISIONS...................................................................................97
18.1 Force Majeure............................................................................97
18.2 Severability.............................................................................98
18.3 Assignment/Third Parties.................................................................98
18.4 Relationship of Parties..................................................................99
18.5 Waiver...................................................................................99
18.6 Contract Modification....................................................................99
18.7 Notices..................................................................................99
18.8 Entire Agreement........................................................................100
18.9 Compliance with Laws....................................................................101
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18.10 Interpretation..........................................................................101
18.11 Governing Law...........................................................................101
18.12 Counterparts............................................................................101
</TABLE>
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CONFIDENTIAL
LIST OF EXHIBITS
EXHIBIT A-1
ABBOTT FORMULATED PRODUCT
EXHIBIT A-2
NAPRO FORMULATED PRODUCT
EXHIBIT A-3
NAPRO ORAL FORMULATED PRODUCT
EXHIBIT B-1
PACLITAXEL
EXHIBIT C-1
BULK DRUG SPECIFICATIONS
EXHIBIT C-2
FINISHED PRODUCT SPECIFICATIONS
EXHIBIT D-1
DEVELOPMENT PLAN
EXHIBIT D-2
DEVELOPMENT COSTS
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CONFIDENTIAL
EXHIBIT E-1
NAPRO PATENTS
EXHIBIT E-2
ABBOTT PATENT RIGHTS
EXHIBIT E-3
JOINT PATENT RIGHTS
EXHIBIT F-1
OTHER CUSTOMERS
EXHIBIT F-2
"UNAVAILABLE" COUNTRIES PURSUANT TO ARTICLE 11
EXHIBIT F-3
IVAX AGREEMENT
EXHIBIT G
ALTERNATE DISPUTE RESOLUTION
[ALL EXHIBITS HAVE BEEN INTENTIONALLY OMITTED. NAPRO
BIOTHERAPEUTICS, INC. WILL FURNISH SUPPLEMENTALLY A COPY OF ANY
OMITTED EXHIBIT TO THE COMMISSION UPON REQUEST]
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CONFIDENTIAL
DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT
THIS DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT (together with the
exhibits attached to this Development, License and Supply Agreement and
incorporated herein by reference, the "Agreement") is made as of this 23rd day
of July, 1999 ("Effective Date"), between NaPro BioTherapeutics, Inc., a
corporation organized under the laws of the State of Delaware with its principal
place of business at 6304 Spine Road, Unit A, Boulder, Colorado 80301 ("NaPro"),
and Abbott Laboratories, a corporation organized under the laws of the State of
Illinois, with its principal place of business at 100 Abbott Park Road, Abbott
Park, Illinois 60064 ("Abbott").
RECITALS
WHEREAS, NaPro is a manufacturer and developer of Paclitaxel (as
hereinafter defined) products;
WHEREAS, Abbott wishes to market and sell formulated Paclitaxel for the
treatment of cancer in the Territory (as hereinafter defined);
WHEREAS, Abbott wishes to purchase bulk Paclitaxel from NaPro and work
with NaPro to develop and obtain necessary regulatory approvals for formulated
Paclitaxel;
WHEREAS, Abbott wishes, in conjunction with NaPro, to develop a range
of formulations of Paclitaxel which may include its own formulation, as well as
the formulation(s) developed by NaPro and, therefore, wishes to obtain a license
to any patents owned by NaPro covering any such formulation(s) or use of
Paclitaxel;
WHEREAS, after extensive negotiations during which the parties
considered various transaction structures and payment mechanisms, Abbott and
NaPro have both come to a mutually agreeable business arrangement which includes
all elements of the transactions set forth in this Agreement;
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CONFIDENTIAL
WHEREAS, the parties are, simultaneously with this Agreement also
entering into that certain Stock Purchase Agreement dated July 23, 1999 ("Stock
Purchase Agreement") and that certain Loan and Security Agreement dated July 23,
1999 ("Loan Agreement") to support the general working capital and operational
needs of NaPro;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and in the Stock Purchase Agreement and the Loan Agreement, the parties
hereby agree as follows:
ARTICLE 1
DEFINITIONS AND REFERENCES
1.1 Definitions. Unless otherwise provided in this Agreement, the
following terms when used with initial capital letters shall have the meanings
set forth below:
"Abbott Formulated Product" shall mean Paclitaxel formulated
for use in Finished Product and encompassed by a Valid Claim of an Abbott Patent
Right, as described in Exhibit A-1, as may be modified by Abbott from time to
time.
"Abbott Know-How" shall mean proprietary, nonpatented
information, data, trade secrets and technology relating specifically to
Paclitaxel in the Field which are used for the benefit of the Development
Program and/or Commercial Use during the Term and which are owned or controlled
by Abbott, with the right to license, or licensed to Abbott, with the right to
sublicense, during the Term, but excluding Joint Program Inventions.
"Abbott Patent Rights" shall mean all patent applications and
patents listed in Exhibit E-2 and all patents and patent applications owned by
Abbott relating specifically to Paclitaxel (other than Joint Patent Rights),
with the right to license, or licensed by Abbott from one or more Third Parties
with the right to sublicense, in the Field in the Territory, which are invented
during and used for the benefit of the Development Program in developing,
commercializing, manufacturing, using or selling Finished Product in the Field
in the Territory. Abbott Patent Rights shall include all provisionals,
divisions,
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continuations, continuations-in-part, registrations, renewals, extensions,
supplemental protection certificates, reexaminations, and reissues of the above
patent applications and patents.
"Abbott Technology" shall mean Abbott Know-How, Abbott Patent
Rights, Abbott's interest in Joint Patent Rights and Joint Program Inventions,
and Abbott's interest in Third Party Technology.
"Act" shall mean the Federal Food, Drug and Cosmetic Act,
including all rules and regulations promulgated thereunder, as amended from time
to time.
"Additional Consideration" shall have the meaning set forth in
Sections 4.1 through 4.3.
"ADR" or "Alternative Dispute Resolution" shall have the
meaning set forth in Article 16.
"Affiliate" shall mean a Person that directly, or indirectly
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with, the Person specified. With respect to Abbott, the term
"Affiliate" shall specifically exclude TAP Holdings Inc., TAP Finance Inc. and
TAP Pharmaceuticals Inc.
"ANDA" shall mean Abbreviated New Drug Application, as such
term is defined in the Act.
"Application for Regulatory Approval" shall mean a submission
made to the FDA (whether such application be in the form of an NDA, ANDA, sNDA
or other similar application) or the appropriate regulatory body equivalent to
the FDA in a country other than the United States in the Territory, seeking
approval to market and sell a Finished Product in either the United States or
such other country, respectively.
"Applicable Percentages" shall have the meanings variously
ascribed thereto in Sections 4.1, 4.2, and 4.3.
"Approval Date" shall mean the date on which the FDA or the
appropriate regulatory body equivalent to the FDA in a country in the Territory
other than the United
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States in the Territory grants all approvals that are required for sale of the
Finished Product for Commercial Use.
"Average Selling Price" shall mean the Net Sales of any given
Finished Product for a Sales Year (or for the Base Period, when used in
reference to a "Competitive Paclitaxel Product") divided by the total number of
units of that Finished Product shipped (excluding non-revenue units, such as
samples) and invoiced by Abbott, its Affiliates or distributors to End-User
Customers for that Sales Year (or Base Period, as the case may be).
[THIS PORTION HAS BEEN REDACTED.]
"Base Period" shall have the meaning set forth in the
definition of "Competitive Paclitaxel Product."
[THIS PORTION HAS BEEN REDACTED.]
"Bryn Mawr Agreement" shall mean that certain License
Agreement by and between NaPro and Bryn Mawr College dated November 3, 1993.
"Bulk Drug" shall mean Paclitaxel as specified in Exhibit C-1,
manufactured according to GMP and Bulk Drug Specifications.
"Bulk Drug Forecast" shall have the meaning set forth in
Section 8.8.2.
"Bulk Drug Specifications" shall mean the specifications for the
manufacture of the Bulk Drug set forth in Exhibit C-1, as such specifications
may be amended from time to time either: (a) by mutual written agreement of the
Parties; (b) in response to directives issued by a relevant governmental
authority in connection with an Application for Regulatory Approval or marketing
of the Finished Product in a particular jurisdiction; or (c) if applicable,
based upon the decision of the Development Committee to pursue the Abbott
Formulated Product or the NaPro Oral Formulated Product in addition to or in
lieu of the NaPro Formulated Product.
"Business Day" shall mean any day of the week other than a
Saturday, Sunday or any other day on which commercial banks in the City of
Chicago are authorized to close.
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"Calendar Quarter" shall mean the three (3) month period
beginning on each January 1, April 1, July 1 and October 1 during the Term.
"Certificate of Analysis" shall have the meaning set forth in
Section 8.3.
"Claims" shall mean all claims, demands, actions, causes of
action and judgments of any kind; including, but not limited to, those arising
out of or related to personal injury or death or patent infringement.
"Commercial Use" shall mean use of a Finished Product on or
after the Approval Date in a particular country in the Territory in the Field
for purposes other than research and development.
"Competitive Paclitaxel Product" shall mean a product
containing Paclitaxel for use in the Territory in the Field, the commencement of
commercial sales of which results in either: [THIS PORTION HAS BEEN REDACTED.]
subsequent to the introduction of such product containing Paclitaxel when
compared to the Average Selling Price or Finished Product Sales Volume for the
period of twelve (12) months immediately preceding the commencement of
commercial sales of such product containing Paclitaxel (the first day of such
twelve (12) month period being the date which is twelve (12) months prior to the
commencement of commercial sales and the last day being the date of first
commercial sale, of the Competitive Paclitaxel Product) ("Base Period");
provided, however, that a Competitive Paclitaxel Product shall not include a
product containing Paclitaxel that is either: [THIS PORTION HAS BEEN REDACTED.]
In the event that commencement of commercial sale of a Competitive Paclitaxel
Product occurs prior to twelve (12) months following First Commercial Sale, the
Base Period shall mean the time period between First Commercial Sale and the
commencement of commercial sale of the Competitive Paclitaxel Product.
"Confidential Information" shall have the meaning set forth in
Article 17.
"Control" and the correlative terms "Controlling" and
"Controlled" shall mean, in the case of any Person, the possession of the power
to direct or cause the direction
5
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CONFIDENTIAL
of the management and policies of such Person through the ownership or control
of voting securities or contractual agreement giving right to such ownership or
control.
"Development Committee" shall mean a committee comprised of
three (3) representatives from each of Abbott and NaPro which shall plan,
oversee, manage and direct the activities of the Parties under the Development
Plan.
"Development Costs" shall mean the costs for research and
development activities including, but not limited to, formulation, stability
runs and testing, pre-clinical and manufacturing start-up (scale-up) activities,
development of packaging, clinical studies, regulatory filing and other studies
intended to expand the product label for the Finished Product (including, but
not limited to, phase IIIb and phase IV studies) as further described in Exhibit
D-2. "Development Costs" shall include, without limitation, costs for services
provided by Abbott, NaPro or Third Parties, as provided in Section 6.2.3,
incurred by both NaPro and Abbott in connection with the research and
development activities set forth in the Development Plan.
"Development Plan" shall mean the plan and schedule of
research, development pre-clinical, clinical and regulatory activities in the
Field for the Territory to be performed by or on behalf of one or both of the
Parties and the desired and targeted outcomes of the activities with respect to
the Bulk Drug and Finished Product, all as set forth in Exhibit D-1.
"Development Program" shall mean the research, development and
other activities in the Field for the Territory for development, manufacturing
and Regulatory Approval of one or more Finished Products as described in the
Development Plan.
"Development Use" shall mean use of the Bulk Drug for
development purposes in a particular country in the Territory including, but not
limited to, formulation, stability testing and batch runs, and pre-clinical and
clinical studies.
"Dollars or $" shall mean United States dollars.
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"Drug Master File" or "DMF" shall mean a Drug Master File, as
such term is defined in the Act.
"Effective Date" shall have the meaning set forth on page 1 of
this Agreement.
"End-User Customer" shall mean a Third Party who purchases the
Finished Product for administration to a patient without any intermediary
between the Third Party and the patient; provided, however, that the patient is
the End-User Customer if Abbott or an Affiliate of Abbott provides the Finished
Product to the patient.
"Exclusive Option Period" shall have the meaning set forth in
Section 11.1 "Expanded Field Rights" shall have the meaning
set forth in Section 11.1.2. "FDA" shall mean the United
States Food and Drug Administration or any
successor body thereto.
"F.H. Faulding" shall mean F. H. Faulding & Co., Ltd., with
which NaPro has entered into the Faulding Agreement.
"F.H. Faulding Formulation" shall mean the Paclitaxel product
formulated and marketed by F. H. Faulding pursuant to the Faulding Agreement.
"Faulding Agreement" shall mean that certain Amended and
Restated Master Agreement, as amended, by and between F.H. Faulding and NaPro,
dated January 19, 1994 for the development, supply and licensing of products
containing Paclitaxel.
"F.O.B." shall mean such delivery term as defined in the
Uniform Commercial Code as adopted by the State of Illinois in effect as of the
Effective Date.
"Field" shall mean the use of Paclitaxel for human
antineoplastic uses as an intravenous, injectable or orally administered
product, excluding Pro-Drug.
"Finished Product" shall mean Paclitaxel formulated for use in
the Field, which shall mean NaPro Formulated Product, Abbott Formulated Product,
NaPro Oral Formulated Product, or any other formulation of Paclitaxel mutually
agreed upon in writing by the Parties.
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"Finished Product Sales Volume" shall mean the number of units
of a certain Finished Product sold in a Sales Year (or for the Base Period), and
invoiced by Abbott, its Affiliates or distributors to End-User Customers for
that Sales Year (or Base Period, as the case may be).
"Finished Product Specifications" shall mean the
specifications for the manufacture of a Finished Product, which specifications
shall be established by mutual agreement of the Parties pursuant to and as a
result of the Development Plan, as such specifications may be amended from time
to time, either: (a) by mutual written agreement of the Parties; or (b) in
response to directives issued by a relevant governmental authority in connection
with the registration or marketing of the Finished Product in a particular
jurisdiction. As of the Effective Date, Preliminary Finished Product
Specifications are attached as Exhibit C-2, which Preliminary Finished Product
Specifications shall be replaced by the Finished Product Specifications, once
established pursuant to the Development Plan.
"First Commercial Sale" shall mean the date of the first sale
following Regulatory Approval of Finished Product in the United States by
Abbott, its Affiliates or distributors to a wholesaler or any End-User Customer,
excluding any sales or transfers of Finished Product: (a) by Abbott to its
Affiliates or distributors; (b) by Abbott's Affiliates to distributors; or (c)
to any Party or Third Party in connection with pre-clinical evaluation, clinical
trials or regulatory or safety testing.
"GMP" shall mean current good manufacturing practices as
required by the Act and any other regulations of any governmental authority in
any country whose approval is required to manufacture and sell the Product in
the Territory.
[THIS PORTION HAS BEEN REDACTED.]
"IND" shall mean an Investigational New Drug Application, as
defined in the Act, and any equivalent applications filed outside the United
States in the Territory in
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relation to the Finished Product in order that the Finished Product may be used
for investigational clinical use with human subjects.
"Indemnifiable Losses" shall mean any and all Losses and any
and all Claims by any Third Party.
"Indemnifying Party" shall mean any Person required to provide
indemnification under this Agreement.
"Indemnitee" shall mean any Person entitled to seek
indemnification under this Agreement.
"Indemnity Payment" shall mean any amount of Indemnifiable
Losses required to be paid pursuant to this Agreement.
"Initial Forecast" shall have the meaning set forth in Section
8.8.1.
"IVAX Agreement" shall mean that certain Termination
Agreement between NaPro and Baker Norton Pharmaceuticals, Inc. (a division of
IVAX Corporation) dated as of March 20, 1998 (which terminated and replaced the
Original IVAX Agreement), a complete and unredacted copy of which has been
provided to Abbott prior to the Effective Date and a full and complete copy of
which has been attached hereto as Exhibit F-3.
"Joint Patent Rights" shall mean all patent applications and
patents in the Territory during the Term which claim Joint Program Inventions.
Joint Patent Rights shall include all provisional, divisions, continuations,
continuations-in-part, registrations, renewals, extensions, supplemental
protection certificates, re-examinations, and reissues of the above patent
applications and patents. The Joint Patent Rights shall be listed on Exhibit E-3
from time to time during the Term by the Parties in a manner that complies with
Section 18.6.
"Joint Program Invention" shall mean a Program Invention by
two or more individuals, at least one of which is an employee, agent or
subcontractor of each Party working on the Development Program at the time of
the invention.
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"Loan Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"License" shall have the meaning set forth in Section 2.1.
"Loss" shall mean all loss, damage, cost and expense,
including without limitation the costs and expenses of any and all actions,
suits, proceedings, demands, assessments, judgments, settlements, and
compromises relating thereto; those arising out of or related to personal injury
or death or patent infringement, and including reasonable attorneys' fees and
out-of-pocket expenses in connection therewith.
"Marketing Committee" shall mean the committee comprised of
three (3) representatives from Abbott and two (2) representatives from NaPro,
which shall provide recommendations on Abbott's marketing activities for the
Finished Product.
"Material Manufacturing Change"shall mean a change proposed by
NaPro to either its manufacturing facilities or processes used in connection
with the manufacturing of Bulk Drug that could, if implemented as proposed,
either: (a) adversely affect the uninterrupted supply of Bulk Drug from NaPro to
Abbott; (b) affect Abbott's manufacturing of Finished Product; or (c) adversely
affect Abbott's ability to market and sell Finished Product.
[THIS PORTION HAS BEEN REDACTED]
"NDA" shall mean a New Drug Application, as such term is
defined in the Act.
"NaPro Formulated Product" shall mean Bulk Drug in Cremophor
EL, stabilized with citric acid, as specified in Exhibit A-2, as such
formulation may be amended by the Development Committee from time to time to
incorporate improvements or other modifications.
"NaPro Know-How" shall mean proprietary, nonpatented
information, data, trade secrets and technology (including, without limitation,
Pre-Clinical and Clinical Data) which are useful in the Development Program
and/or Commercial Use during the Term and
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which are owned or controlled by NaPro and NaPro's Affiliates (including joint
ownership rights with any Third Party), with the right to license, or licensed
to NaPro, with the right to sublicense, but excluding Joint Program Inventions.
"NaPro Oral Formulated Product" shall mean Paclitaxel
formulated as specified in Exhibit A-3, as amended by the Development Committee
from time to time to incorporate improvements or other modifications.
"NaPro Patents" shall mean all patents and patent applications
owned by NaPro or licensed to NaPro with the right to license in the Field in
the Territory listed on Exhibit E-1.
"NaPro Patent Rights" shall mean: (a) the NaPro Patents; and
(b) all patent applications and patents which are owned by NaPro and NaPro's
Affiliates (including joint ownership with any Third Party, but not including
Joint Patent Rights) with the right to license, or licensed by NaPro and NaPro's
Affiliates from one or more Third Parties with the right to sublicense in the
Field in the Territory. NaPro Patent Rights shall include all provisionals,
divisions, continuations, continuations-in-part, registrations, renewals,
extensions, supplemental protection certificates, re-examinations, and reissues
of the above patent applications and patents.
"NaPro Technology" shall mean NaPro Know-How, NaPro Patent
Rights, NaPro's interest in Joint Patent Rights and Joint Program Inventions,
and NaPro's and its Affiliates' interest in Third Party Technology.
"Net Sales" shall mean the gross Dollar amount of sales for
the Finished Product in the Territory by Abbott, its Affiliates or distributors
to End-User Customers and invoiced by Abbott, its Affiliates or distributors in
a Sales Year, less deductions for the following charges or expenses directly
attributable to sales of Finished Product:
(a) allowances, adjustments and refunds separately and actually credited
or paid, including credit or replacement product for rejected,
damaged, outdated, returned, withdrawn and recalled Finished Product;
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(b) trade discounts, cash discounts, rebates or other discounts and
wholesaler chargebacks actually credited, paid or granted, whether or
not such discounts or rebates or chargebacks are paid directly to the
End-User Customer;
(c) non-cash consideration offered as a discount or other product
incentive at fair market value, including, but not limited to free
Finished Product;
(d) transportation charges and Third Party handling charges (including,
but not limited to, insurance, postage and freight costs);
(e) sales taxes, value added, excise taxes and duties, and other similar
charges related to the sale or use of the Finished Product invoiced to
End-User Customers (but not including income taxes assessed against
the income derived from the sale of the Finished Product);
(f) management or administrative fees paid to End-User Customers or
purchasing groups by Abbott;
(g) commissions paid to Third Party distributors or sales agents
(excluding commissions to individual sales representatives employed by
Abbott or otherwise acting as an agent for Abbott) in connection with
the sale of the Finished Product; and
(h) any statutory or contractual rebates paid to any governmental entity
including, but not limited to, rebates paid pursuant to the
Medicaid/Medicare rebate legislation; provided, however, Net Sales
shall not include sales to Affiliates or NaPro of samples and supplies
for clinical studies and studies of the Finished Product conducted in
connection with the Applications for Regulatory Approval and
maintenance thereof and customer evaluation pursuant to this
Agreement. No later than twenty-five (25) Business Days following the
end of every Calendar Quarter, Abbott shall provide summary
documentation supporting any of the deductions to Net Sales set forth
above during the previous Calendar Quarter. Any sales or transfers
among Abbott or Abbott Affiliates shall not be included in the
definition of Net Sales.
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In the event the invoice includes products other than the Finished
Product, then, if possible, such charges and expenses shall be allocated
directly to the product or products to which they relate, including the Finished
Product. In the event any charges or expenses cannot be attributed to a specific
product, including the Finished Product, then such charges and expenses shall be
allocated on a pro-rata basis, based on the Dollar value of such products,
including the Finished Product.
In the event that the Parties desire to package the Finished Product in
a kit with other products or components, the Parties shall negotiate financial
terms of such arrangement, including the manner in which Net Sales shall be
calculated in good faith.
For any Sales Year which is less than a full calendar year, Net Sales
in that Short Sales Year shall be annualized to arrive at a twelve (12) month
equivalent; any payments, however, due for such Short Sales Year shall be based
on actual Net Sales and not an annualized amount.
[THIS PORTION HAS BEEN REDACTED.]
"Original IVAX Agreement" means the Agreement between NaPro
and Baker Norton Pharmaceuticals, Inc. dated as of June 7, 1993, as amended,
which was terminated by the IVAX Agreement, a complete and unredacted copy of
which has been provided to Abbott prior to the Effective Date.
"Other Territory Rights" shall have the meaning set forth in
Section 11.1.1.
[THIS PORTION HAS BEEN REDACTED.]
"Paclitaxel" shall mean the chemical entity of the formula set
forth in Exhibit B-1.
"Paclitaxel Data" shall mean all data and information
contained within any Application for Regulatory Approval, any Regulatory
Approval and all Pre-Clinical Data and Clinical Data. However, solely for
purposes of and as used in Article 11, the term "Paclitaxel Data" shall exclude
that data and information obtained prior to the Effective Date by either Party
or F. H. Faulding.
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"Party" or "Parties" shall mean either Abbott or NaPro, or
both.
"Person" shall mean an individual, partnership, corporation,
joint venture, unincorporated association, or other entity, or a government or
department or agency thereof.
"Phase III Studies" shall mean a program of expanded,
controlled or uncontrolled clinical studies which are performed after
preliminary evidence suggests the drug is effective and are intended to gather
the additional information regarding the effectiveness and safety required to
evaluate the overall benefit-risk relationship of the drug and to provide an
adequate basis for NDA approval and/or other equivalent Applications for
Regulatory Approval.
[THIS PORTION HAS BEEN REDACTED.]
"Pre-Bulk Drug" shall mean a stable intermediate compound
which can be used in the manufacture of the Bulk Drug.
"Pre-Clinical and Clinical Data" shall mean all data in any
form (including, but not limited to case reports, raw data, etc.) regarding the
use of Paclitaxel in the Field (including, but not limited to in vitro and in
vivo studies) developed by, or acquired or obtained (with rights to use or
reference) by either of the Parties or other agents, including, but not limited
to, F.H. Faulding or any of its agents, or which is developed during the course
of the Development Program.
"Preliminary Finished Product Specifications" shall mean those
specifications listed in Exhibit C-2 as of the Effective Date.
"Primary Standard Product" shall mean high purity Paclitaxel
in accordance with the Specifications set forth in Exhibit B-2, for use as a
reference standard.
[THIS PORTION HAS BEEN REDACTED.]
"Pro-Drug" shall mean any drug that changes structure such
that the active ingredient after administration into a patient is Paclitaxel as
evidenced by a mutually agreed upon test or standard.
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"Program Invention" shall mean all inventions, innovations,
ideas, or discoveries which arise during the Term and are used for the benefit
of the Development Program which are first conceived and reduced to practice
during the Development Program or in the period of four (4) months following the
conclusion of the Development Program by one or more individuals who are
employees, agents, contractors or subcontractors of one of the Parties.
"Protected Term" shall mean, solely with respect to a Stand-By
Manufacturing Source, a period of time equal to: (a) five (5) years after the
date of termination of this Agreement, if this Agreement is terminated before
the first anniversary of the Effective Date; (b) four (4) years after the date
of termination of this Agreement, if this Agreement is terminated on or after
the first, but before the second, anniversary of the Effective Date; (c) three
(3) years after the date of termination, if this Agreement is terminated on or
after the second, but before the third, anniversary of the Effective Date; (d)
two (2) years after the date of termination of this Agreement, if this Agreement
is terminated on or after the third, but before the fourth, anniversary of the
Effective Date; (e) one (1) year after the date of termination of this
Agreement, if this Agreement is terminated on or after the fourth, but before
the fifth, anniversary of the Effective Date; or (f) the earlier of seventeen
(17) years or the Term of this Agreement, if this Agreement is terminated on or
after the fifth anniversary of the Effective Date.
"Q4 Day Schedule" shall mean the method of drug administration
covered by U.S. Patent No. 5696153.
[THIS PORTION HAS BEEN REDACTED.]
[THIS PORTION HAS BEEN REDACTED.]
"Regulatory Approval" shall mean the approval by the
regulatory authority(s) required in a particular country in the Territory in
relation to the Finished Product in order that the Finished Product can be
marketed and sold for Commercial Use in that country pursuant to the terms of
this Agreement.
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"sNDA" shall mean a Supplemental New Drug Application, as
defined in the Act.
"Sales Year" shall mean: (a) in the case of the first Sales
Year, the period of time from the Approval Date through and including December
31 of the calendar year in which the Approval Date falls (a "Short Sales Year"),
and (b) in the case of each subsequent year, each twelve (12) month period
beginning on January 1 and ending on December 31 or the termination date of this
Agreement, during the Term. In order to accommodate accounting and sales
reporting practices of Abbott's International Division, the term "Sales Year"
may be modified to include a different twelve (12) month period solely with
respect to sales within the Territory outside the United States.
"Short Sales Year" shall have the meaning set forth in the
definition of "Sales Year" in this Section 1.1.
"Stand-by Manufacturing Source" shall mean either Abbott or a
Third Party chosen by Abbott to provide supplies of Bulk Drug, as described in
Section 8.7.
"Stock Purchase Agreement" shall have the meaning set forth in
the recitals to this Agreement.
"Term" shall have the meaning set forth in Section 15.1.
"Termination Fee" shall have the meaning set forth in Section
15.6.2.
"Territory" shall mean the following countries: the United
States (and its territories and possessions, Puerto Rico and the U.S. Virgin
Islands) and Canada.
"Third Party" shall mean a Person other than a Party or an
Affiliate of a Party.
"Third Party Claim" shall mean any Claim or Loss made or
brought or asserted by any Third Party.
"Third Party Technology" shall mean all patents, patent
applications, inventions, innovations, ideas and discoveries relating to
Finished Product in the Field:
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(a) to which a Party obtains rights from a Third Party; (b) specifically relate
to the Development Program; and (c) is obtained for Commercial Use.
"Unavailable Territories" shall have the meaning set forth in
Section 11.1.1.
"United States" shall mean the fifty (50) states and the
District of Columbia.
"Valid Claim" shall mean one (1) or more claims of an issued
and unexpired patent which neither has been held unenforceable, unpatentable or
invalid by a decision of a court or governmental agency or competent
jurisdiction, that is either unappealable or unappealed within the time allowed
for appeal, nor has been admitted by the holder of the patent to be invalid or
unenforceable through reissue, disclaimer, abandonment or otherwise.
1.2 References. References to Articles, Sections and Exhibits are
references to the Articles, Sections and Exhibits of this Agreement unless
otherwise stated.
ARTICLE 2
LICENSE GRANT
2.1 NaPro Grant. Subject to the provisions of this Section 2.1, NaPro
hereby grants to Abbott and its Affiliates an exclusive license under the NaPro
Technology to research and develop, make, have made, import, use, offer to sell
and sell Finished Product in the Field in the Territory ("License"). Other than:
(a) the license granted to IVAX pursuant to the terms of the IVAX Agreement; (b)
as required solely for NaPro's performance of its obligations under this
Agreement; and (c) as otherwise explicitly granted to NaPro herein, such License
shall be exclusive to Abbott, even to the exclusion of NaPro, and NaPro shall
grant no further licenses to NaPro Technology to any Third Party in the Field in
the Territory. In the event that Abbott determines to manufacture the Finished
Product in a country outside the Territory (solely for marketing, sale and use
of Finished Product inside the Territory) NaPro shall grant to Abbott a license
to the NaPro Technology (for which NaPro has the right to grant such license)
solely for purposes of Abbott's manufacture of the Finished Product in such
country. Except as specifically provided for in
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Section 10.8, NaPro will not enter into any agreement with a Third Party that is
inconsistent with the provisions of this Section 2.1.
2.2 Abbott Grant. Abbott hereby grants to NaPro a non-exclusive license
(without the right to sublicense without Abbott's prior written consent) during
the Term to the Abbott Technology in the Field in the Territory solely to the
extent necessary for NaPro to perform NaPro's duties and responsibilities under
the terms of the Development Program; provided, however, that during the Term,
Abbott will not grant any license to Abbott Technology for the manufacture, use,
sale, or marketing of Finished Product to any Third Party other than: (a) in
furtherance of the Development Program; or (b) in connection with the marketing
of Finished product pursuant to this Agreement.
2.3 Additional Licenses.
2.3.1 Related to NaPro. Except as provided in Section 2.3.2,
in the event that a license to any Third Party Technology is required in order
to: (a) manufacture Bulk Drug by NaPro and its Affiliates; (b) sell Bulk Drug by
NaPro and its Affiliates; (c) use Bulk Drug by NaPro and its Affiliates; (d)
manufacture NaPro Formulated Product by NaPro and its Affiliates; (e)
manufacture NaPro Formulated Product as disclosed in U.S. Patent No. 5,733,888
by or on behalf of Abbott; (f) make, use and sell Primary Standard Product; or
(g) use (including, but not limited to, in connection with the Development
Program), market or sell the NaPro Formulated Product for use related to the Q4
Day Schedule (in each such case without infringement of such Third Party
Technology), then NaPro shall use reasonable commercial efforts to secure
promptly such license(s) to such Third Party Technology at NaPro's sole cost and
expense (including, but not limited to, any up-front license fees, milestones
and any royalties) and the cost and expense of such license shall not result in
a change in Additional Consideration. Notwithstanding the foregoing, NaPro shall
not be required to secure any license for the benefit of Abbott or a Stand-By
Manufacturing Source that NaPro itself would not be required to secure in order
to comply
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with this Section 2.3.1. For any license that NaPro itself is required to
secure, NaPro shall obtain the right to sublicense to Abbott and any Stand-By
Manufacturing Source.
2.3.2 Related to Abbott Formulated Product. Except as provided
in Section 2.3.1, in the event that a license to any Third Party Technology is
required in order to: (a) manufacture Abbott Formulated Product in the
Territory; or (b) market or sell the Abbott Formulated Product for use related
to the Q4 Day Schedule (without infringement of such Third Party Technology in
the Territory), then Abbott shall use reasonable commercial efforts to secure
promptly such license(s) to such Third Party Technology at Abbott's sole cost
and expense (including, but not limited to, any up-front license fees,
milestones and any royalties).
2.3.3 Other than Related to NaPro or Abbott Formulated
Product. In the event that a license to any Third Party Technology is required
in order to manufacture, use (including, but not limited to in connection with
the Development Program), market or sell any Finished Product other than the
NaPro Formulated Product or the Abbott Formulated Product, (in each such case,
without infringement of such Third Party Technology) then the Parties jointly
through the Development Committee shall determine the strategy to pursue and
obtain such license in the Territory. Neither Party shall commit to license such
Third Party Technology without the prior written agreement of the other Party.
Unless otherwise agreed to by the Parties in writing, Abbott and NaPro shall
each share equally in, and each shall be responsible for, fifty percent (50%) of
the total cost and expense to secure and maintain such license(s) including, but
not limited to, any up front license fees, milestones and royalties.
ARTICLE 3
MILESTONE PAYMENTS AND OTHER FUNDING
3.1 Milestone Payments. In addition to payments for Bulk Drug as set
forth in Article 8, Abbott shall make the following one time milestone payments
to NaPro, upon the following events:
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3.1.1 One Million Dollars ($1,000,000) on the Effective Date;
3.1.2 Except as otherwise may be provided in this Section 3.1,
[THIS
PORTION HAS BEEN REDACTED.];
3.1.3 Except as otherwise may be provided in this Section 3.1,
[THIS PORTION HAS BEEN REDACTED.];
3.1.4 Approval/First Commercial Sale Milestones. Regulatory
Approval and/or First Commercial Sale shall trigger milestone payments set forth
in either 3.1.4.1 or 3.1.4.2, but not both.
3.1.4.1 If the first indication for a Finished
Product receiving Regulatory Approval [THIS PORTION HAS BEEN REDACTED.] within
five (5) Business Days following the date of First Commercial Sale for a
Finished Product;
3.1.4.1.1 if the second indication for a
Finished Product receiving Regulatory Approval [THIS PORTION HAS BEEN REDACTED.]
within thirty (30) Business Days following the date of Regulatory Approval in
the United States of that second indication; and
3.1.4.1.2 except as provided in 3.1.8, no
additional milestones for any additional indications or Regulatory Approvals.
3.1.4.2 If the first indication for a Finished
Product receiving Regulatory Approval [THIS PORTION HAS BEEN REDACTED.] within
five (5) Business Days following the date of First Commercial Sale for a
Finished Product; then, if the second
indication for the Finished Product receiving Regulatory Approval is either:
3.1.4.2.1 [THIS PORTION HAS BEEN REDACTED.] the
Regulatory Approval of which triggered payment of the [THIS PORTION HAS BEEN
REDACTED.] milestone set forth in the first sentence of Section 3.1.4.2, [THIS
PORTION HAS BEEN REDACTED.] within thirty (30) Business Days following the date
of Regulatory Approval in the United States of that second indication and if the
third
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indication for the Finished Product receiving Regulatory Approval [THIS PORTION
HAS BEEN REDACTED.] within thirty (30) Business Days following the date of
Regulatory Approval in the United States of that third indication and, except as
provided in Section 3.1.8, no additional milestones for any additional
indications or Regulatory Approvals; or
3.1.4.2.2 [THIS PORTION HAS BEEN REDACTED.]
within thirty (30) Business Days following the date of Regulatory Approval in
the United States of that second indication and, except as provided in Section
3.1.8, no additional milestones for any additional indications or Regulatory
Approvals.
3.1.4.3 For avoidance of doubt, in no event shall an
amount in excess of [THIS PORTION HAS BEEN REDACTED.] be payable by Abbott to
NaPro pursuant to this Section 3.1.4.
3.1.5 [THIS PORTION HAS BEEN REDACTED.] within thirty (30)
Business Days after the end of the first Sales Year for which Net Sales of
Finished Product exceeds [THIS PORTION HAS BEEN REDACTED.]
3.1.6 [THIS PORTION HAS BEEN REDACTED.] within thirty (30)
Business Days after the end of the first Sales Year for which Net Sales of
Finished Product exceeds [THIS PORTION HAS BEEN REDACTED.]
3.1.7 [THIS PORTION HAS BEEN REDACTED.] within thirty (30)
Business Days after the end of the first Sales Year for which Net Sales of
Finished Product exceeds [THIS PORTION HAS BEEN REDACTED.]
3.1.8 The amounts set forth in this Section 3.1.8 within
thirty (30) Business Days after the first to occur of either: (a) 3.1.8.1 (Net
Sales threshold); or (b) 3.1.8.2 [THIS PORTION HAS BEEN REDACTED.] but not both,
as set forth in either 3.1.8.1 or 3.1.8.2, respectively:
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3.1.8.1 [THIS PORTION HAS BEEN REDACTED.] following
the end of the first Sales Year for which Net Sales of Finished Product exceeds
[THIS PORTION HAS BEEN REDACTED.] or
3.1.8.2 in the event that Abbott directs (such
direction shall be made solely by the President of the Hospital Products
Division the Development Committee in writing to pursue studies evaluating [THIS
PORTION HAS BEEN REDACTED.] an amount paid as follows:
3.1.8.2.1 [THIS PORTION HAS BEEN REDACTED.]
following the date of the First Commercial Sale [THIS PORTION HAS BEEN
REDACTED.]
3.1.8.2.2 [THIS PORTION HAS BEEN REDACTED.]
following the end of the first Sales Year which Net Sales of Finished Product
exceeds [THIS PORTION HAS BEEN REDACTED.]
3.1.8.3 For the avoidance of doubt, in the event
that the milestone in Section 3.1.8.1 is earned, then the milestone in Section
3.1.8.2 may not be earned by NaPro and shall not be paid by Abbott.
All payments made pursuant to this Section 3.1 will be made upon written
verification from NaPro to Abbott as set forth in Section 18.7 that the
milestones have occurred. However, the payment referred to in Section 3.1.2
shall be made upon written verification from the Development Committee to Abbott
that the requirements of the milestone set forth in Section 3.1.2 have been met.
The Development Committee shall either: (a) direct Abbott to make such payment;
or (b) advise Abbott and NaPro that such payment shall not be made, within ten
(10) Business Days following the Development Committee's receipt of all
information (including FDA approval of the Development Program) necessary to
determine to proceed with the Development Plan. The Development Committee must
authorize the payment if the Development Committee determines to proceed with
the Development
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Program. Any disagreement or dispute regarding the milestone payment pursuant
to Section 3.1.2 shall be resolved pursuant to the provisions set forth in
Section 6.4.
3.2 Single Payment Obligation. Each milestone payment set forth in
Section 3.1 shall not be made more than once with respect to the Finished
Product(s), regardless of the formulation(s) developed (e.g., the NaPro
Formulated Product, Abbott Formulated Product or NaPro Oral Formulated Product)
the number of Applications for Regulatory Approval in the Territory, clinical
trials or Regulatory Approvals that may be undertaken or granted with respect to
the Finished Product(s), including, without limitation, such activities with
multiple product forms or formulations of any Finished Product(s), combinations
with different and/or additional active or inactive ingredients, additional
indications, different delivery modalities and/or various dosage strengths. For
the avoidance of doubt, in the event that the Abbott Formulated Product or NaPro
Oral Formulated Product is pursued either in lieu of or in addition to the NaPro
Formulated Product, any milestone set forth in Section 3.1 shall be paid only
once during the Term and shall not be paid again.
3.3 Other Funding. Abbott has also agreed to provide funding for
NaPro's general working capital and operational needs under: (a) the Loan
Agreement pursuant to which Abbott shall lend NaPro up to Twenty Million Dollars
($20,000,000) with the borrowing base and terms for draws and security set forth
therein; and (b) the Stock Purchase Agreement pursuant to which Abbott shall
purchase up to two million (2,000,000) shares of Common Stock of NaPro as
provided in and pursuant to the terms of the Stock Purchase Agreement.
3.4 Use of Certain Milestone Payments. NaPro and Abbott agree that the
funds from milestone payments set forth in both Sections 3.1.1 and 3.1.2 shall
be used solely for purposes of the Development Program.
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ARTICLE 4
ADDITIONAL FINISHED PRODUCT PAYMENTS
4.1 Additional Consideration. In further consideration of the supply of
Bulk Drug to Abbott hereunder, Abbott shall pay to NaPro additional
consideration equal to a portion of Abbott=s Net Sales in every Sales Year
during the Term as follows:
4.1.1 [THIS PORTION HAS BEEN REDACTED.] of Net Sales of all
Finished Product other than Abbott Formulated Product in an amount up to but not
including [THIS PORTION HAS BEEN REDACTED.] in a single Sales Year;
4.1.2 [THIS PORTION HAS BEEN REDACTED.] of Net Sales of all
Finished Product other than Abbott Formulated Product in an amount from [THIS
PORTION HAS BEEN REDACTED.] in a single Sales Year; and
4.1.3 [THIS PORTION HAS BEEN REDACTED.] of Net Sales of all
Finished Product other than Abbott Formulated Product in an amount of [THIS
PORTION HAS BEEN REDACTED.]
LESS (in all cases set forth in Section 4.1) the cost of Bulk
Drug for Commercial Use paid by Abbott pursuant to Section 8.2, 8.3 or Section
8.7 (the difference being the "Additional Consideration"). For clarification
purposes in calculating, the cost of Bulk Drug shall be subtracted after the
Applicable Percentage is applied to Net Sales.
Notwithstanding the foregoing, in the event there is a Competitive Paclitaxel
Product being marketed and/or sold in any country in the Territory, with respect
to that country in which the Competitive Paclitaxel Product is being marketed
and/or sold, each of the percentage amounts specified in Sections 4.1.1 through
4.1.3, inclusive ("Applicable Percentages") shall be reduced as set forth in
Section 4.3. In the event that the calculation of a stated percentage of Net
Sales less the cost of Bulk Drug results in a negative number, such that no
Additional Consideration would be due by Abbott to NaPro, the negative number
shall be carried forward to the next (one or more) Sales Years as a credit
against the next payments
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of Additional Consideration otherwise owed by Abbott to NaPro until such credit
has been fully applied or until there are no more Net Sales pursuant to this
Agreement.
4.2 Abbott Formulated Product in Lieu of or in Addition to NaPro
Formulated Product. Notwithstanding the provisions in Section 4.1, in the event
that the Abbott Formulated Product is marketed and sold in lieu of or in
addition to the NaPro Formulated Product, Abbott shall pay to NaPro Additional
Consideration equal to a portion of Abbott's Net Sales in every Sales Year
during the Term as follows:
4.2.1 [THIS PORTION HAS BEEN REDACTED.] of Net Sales of Abbott
Formulated Product in an amount up to but not including [THIS PORTION HAS BEEN
REDACTED.] in a single Sales Year;
4.2.2 [THIS PORTION HAS BEEN REDACTED.] of Net Sales of Abbott
Formulated Product in an amount from [THIS PORTION HAS BEEN REDACTED.] in a
single Sales Year;
4.2.3 [THIS PORTION HAS BEEN REDACTED.] of Net Sales of Abbott
Formulated Product in an amount of [THIS PORTION HAS BEEN REDACTED.] or more in
a single Sales Year;
LESS (in all cases set forth in Section 4.2) the cost of Bulk
Drug for Commercial Use paid by Abbott pursuant to Section 8.2 or Section 8.7
(the difference being the "Additional Consideration"). For clarification
purposes in calculating, the cost of Bulk Drug shall be subtracted after the
Applicable Percentage is applied to Net Sales.
Notwithstanding the foregoing, in the event there is a Competitive Paclitaxel
Product being marketed and/or sold in any country in the Territory, with respect
to the country in which the Competitive Paclitaxel Product is being marketed
and/or sold, each of the percentage amounts specified in Sections 4.2.1 through
4.2.3, inclusive ("Applicable Percentages") shall be reduced as set forth in
Section 4.3. In the event that the calculation of a stated percentage of Net
Sales less the cost of Bulk Drug results in a negative number, such that no
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Additional Consideration would be due by Abbott to NaPro, the negative number
shall be carried forward to the next (one or more) Sales Years as a credit
against the next payments of Additional Consideration otherwise owed by Abbott
to NaPro until such credit has been fully applied or until there are no Net
Sales pursuant to this Agreement.
4.3 Reduction in Applicable Percentages Due to Competitive Paclitaxel
Product. Notwithstanding Section 4.1 and Section 4.2, with respect to the sale
of a particular Finished Product in any country in the Territory in which a
Competitive Paclitaxel Product (of same or similar formulation or mode of
delivery) is also marketed and/or sold:
4.3.1 If the Average Selling Price or Finished Product Sales
Volume has been reduced by as much as [THIS PORTION HAS BEEN REDACTED.] lower
than it was for the Base Period but less than [THIS PORTION HAS BEEN REDACTED.]
lower than it was for the Base Period, then the Applicable Percentages shall be
as follows:
4.3.1.1 in the case of Section 4.1.1, [THIS PORTION
HAS BEEN REDACTED.]
4.3.1.2 in the case of Section 4.1.2, [THIS PORTION
HAS BEEN REDACTED.]
4.3.1.3 in the case of Section 4.1.3, [THIS PORTION
HAS BEEN REDACTED.]
4.3.1.4 in the case of Section 4.2.1, [THIS PORTION
HAS BEEN REDACTED.]
4.3.1.5 in the case of Section 4.2.2, [THIS PORTION
HAS BEEN REDACTED.]
4.3.1.6 in the case of Section 4.2.3, [THIS PORTION
HAS BEEN REDACTED.]
4.3.2 If the Average Selling Price or Finished Product Sales
Volume has been reduced by [THIS PORTION HAS BEEN REDACTED.] or more than it was
for the
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Base Period then Abbott and NaPro shall meet to renegotiate and revise in good
faith the rate applied to Net Sales to be used in the calculation of Additional
Consideration and the Applicable Percentages to share available profit on a
basis equivalent to that set forth in Sections 4.1 through 4.3 and profit
distribution as originally contemplated by the Parties in this Article 4.
In any Sales Year following the reduction of the Applicable Percentages
required by the foregoing clauses 4.3.1 and 4.3.2, and regardless of whether a
Competitive Paclitaxel Product is being sold in such following Sales Year, when
and if the Average Selling Price is less than [THIS PORTION HAS BEEN REDACTED.]
lower than it was for the Base Period with respect to which the Applicable
Percentage was reduced for not less than two (2) Consecutive Calendar Quarters,
then the Applicable Percentage shall be restored to the amounts specified in
Sections 4.1.1 through 4.1.3 and/or 4.2.1 through 4.2.3, as applicable. Any
increases and decreases in the Applicable Percentages required by this Section
4.3 shall take effect thirty (30) days after the Average Selling Price has
either increased or decreased and the Applicable Percentage adjusted
accordingly.
4.4 Adjustments to Additional Consideration. In addition to adjustments
due to a Competitive Paclitaxel Product, as set forth in Section 4.1 through
4.3, the amount of Additional Consideration payable with respect to each
Calendar Quarter as determined by Sections 4.1 through 4.3 shall be further
decreased (but not to less than zero) by any excess cost to manufacture Bulk
Drug by Abbott's Stand-by Manufacturing Source as set forth in Section 8.7.2.
Such reduction for excess cost to manufacture Bulk Drug shall be applied after
the reduction for the cost of Bulk Drug specified in Section 4.1 or 4.2.
4.5 Increase or Decrease in Additional Consideration for Additional
Licenses. In the event that a license to any Third Party Technology is required
as set forth in Section 2.3.1, 2.3.2 or 2.3.3 there shall be no change in
Additional Consideration.
4.6 Net Sales Reports and Payments. Commencing with the first
Calendar Quarter in which Abbott makes the First Commercial Sale in the
Territory, Abbott shall
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provide NaPro with a written report of Net Sales on a country-by-country basis:
(a) within forty-five (45) days after the last day of March, June, September and
December and the related computation of Additional Consideration accruing on Net
Sales in the United States during the three (3) preceding calendar months; and
(b) within seventy-five (75) days after the last day of February, May, August
and November and the related computation of Additional Consideration accruing on
Net Sales in the Territory in countries other than 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 NaPro the total
amount shown to be due thereon. The periods set forth in (b) above shall be
modified to accommodate sales reporting practices of Abbott's International
Division.
4.7 Currency. Abbott shall make all payments to NaPro pursuant to this
Agreement in Dollars. Additional Consideration 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 Dollars. The rates of exchange
for converting the currencies involved to Dollars as quoted by The Wall Street
Journal, Midwest Edition, as Foreign Exchange Rates based on the average of the
market rate at the last Business Day of the prior Calendar Quarter and the last
Business Day of the current Calendar Quarter in which the Additional
Consideration was earned shall be used by Abbott to determine such conversion
rates.
4.8 Sales Between Abbott and Affiliates. No Additional Consideration
shall be payable to NaPro on sales between Abbott and its Affiliates or on sales
between Abbott or its Affiliates and distributors.
4.9 Loan Agreement Offset. In the event of an Event of Default (as
defined in the Loan Agreement) by NaPro (that is not subject to a bone fide
dispute by NaPro as permitted pursuant to the Loan Agreement) on any payments
due to Abbott pursuant to the terms of the Loan Agreement by a period of time in
excess of thirty (30) days, in addition to any and all rights Abbott may have
under the Loan Agreement Abbott may, at Abbott's
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option, offset any payment due NaPro for milestone or Additional Consideration
against payments due by NaPro to Abbott pursuant to the Loan Agreement
(including principal, interest and any applicable penalties). Any withholding or
offset of payments for milestones or Additional Consideration by Abbott pursuant
to this Section 4.9 shall not constitute a breach, Material Breach or any other
default by Abbott under this Agreement or waiver of NaPro's obligations under
the Stock Purchase Agreement or the Loan Agreement.
ARTICLE 5
PAYMENT, RECORD KEEPING AND AUDIT RIGHTS
5.1 Method of Payment. All payments by either Party to the other Party
under this Agreement (including, but not limited to, Abbott's milestone payments
under Article 3, research and development payments under Article 6, and
Additional Consideration payments under Article 4) shall (except as expressly
permitted by this Agreement) 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 or other withholding permitted pursuant to this
Agreement, the paying Party shall provide the receiving Party with the best
available evidence of the taxes or other amount withheld as well as any relevant
certificates, documents or other evidence required for national, state or local
tax credit and reporting purposes. Abbott may offset payments for milestones or
Additional Consideration owing to NaPro against any amounts owed by NaPro to
Abbott which are past due except for those amounts disputed in good faith by
NaPro. Payments hereunder shall not be creditable against any other amounts
payable by the other Party under this Agreement, except as otherwise expressly
stated in this Agreement. Payments shall be made by either wire transfer or
electronic funds transfer to an account designated by the receiving Party in
advance and in writing.
5.2 Record Keeping and Audit Rights. Each Party shall keep or
cause to be kept accurate records relating to Net Sales, Additional
Consideration, Development Program
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expenses 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.
5.2.1 Audit of Net Sales. For the purposes of verifying Net
Sales and other payments due to NaPro under this Agreement, Abbott shall on an
annual basis prior to May 31 of each Sales Year provide its report of payments
of Additional Consideration due by Abbott to NaPro to the auditors for NaPro
including a report on sales of Finished Product by Finished Product in each of
the countries within the Territory as well as information on all applicable
selling prices in each of the countries within the Territory, and other records
pertinent to the loss, corruption, contamination, or destruction of Finished
Product. NaPro, at its expense (except as provided below), shall have the right
to hire an independent accountant, upon reasonable notice and during normal
business hours but not more than once per Sales Year, to review Abbott's books
and records relating to Net Sales or other payments of Additional Consideration
or milestones made pursuant to this Agreement. If there is an underpayment
disclosed during such audit, Abbott shall promptly pay NaPro the amount of such
underpayment. If there is an overpayment disclosed during such audit, NaPro
shall promptly reimburse Abbott for the amount of such overpayment. Should any
underpayment equaling or exceeding five percent (5%) of the Additional
Consideration payments due over any twelve (12) month period be detected, then
the cost of such audit shall be borne by Abbott and any such underpayment shall
be promptly paid.
5.2.2 Audit of Development Costs. Each Party shall have the
right, not more than once per Sales Year, to hire an independent accountant and
that accountant may, upon reasonable notice and during normal business hours,
review the other Party's books and records relating to Development Costs
pursuant to this Agreement. If there is an underpayment disclosed during such
audit, the Party underpaying shall promptly pay the other Party the amount of
such underpayment. If there is an overpayment disclosed during such audit, the
Party that overpaid shall be promptly reimbursed by the other Party for the
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amount of such overpayment. Should any underpayment or overcharge equaling or
exceeding five percent (5%) of the payments due over any twelve (12) month
period be detected, then the cost of such audit shall be borne by the Party
owing monies and any such underpayment or overcharge shall be promptly
rectified.
ARTICLE 6
RESEARCH AND DEVELOPMENT PROGRAM
6.1 Research and Development. Each Party shall use its commercially
reasonable efforts to develop one or more Finished Product(s) and obtain
Regulatory Approval for one or more Finished Product(s) for sale and Commercial
Use within the Territory in the Field for the indications described in the
Development Plan or other indications agreed upon by the Development Committee.
6.1.1 Responsibilities. The general responsibilities of the
Parties (which may be modified by the Development Committee to achieve the most
efficient execution of the Development Program) are set forth in this Section
6.1.1.
6.1.1.1 NaPro Responsibilities. In general, NaPro
shall be responsible for the following: (a) submission and maintenance of the
Bulk Drug DMF and Bulk Drug supply for the Development Program; (b) procuring,
as necessary, clinical supplies of finished Paclitaxel product in the form of
NaPro Formulated Product, or other formulation as determined by the Development
Committee, suitable for use in clinical studies in order to obtain Regulatory
Approval; and (c) providing clinical supplies of Finished Product using NaPro's
formulation until Abbott is approved as a manufacturer and/or receives
Regulatory Approval, as necessary.
6.1.1.2 Abbott Responsibilities. In general, Abbott
shall be responsible for the following: (a) finishing the Bulk Drug into a
finished dosage form for patient administration as a Finished Product for
Commercial Use; (b) reviewing, preparing, with input from NaPro, and filing the
Applications for Regulatory Approval as holder of the NDA or equivalent; and (e)
maintaining the Application for Regulatory Approval.
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6.1.1.3 Joint Responsibilities. NaPro and Abbott
shall jointly be responsible for the following: (a) conducting clinical research
and clinical studies and trials for the Finished Product(s) in accordance with
the Development Plan under supervision of the Development Committee; (b)
preparing clinical and pre-clinical documentation necessary for submitting
Application(s) for Regulatory Approval in accordance with the Development Plan
under supervision of the Development Committee, including but not limited to
pre-clinical and toxicology data; (c) administering the Development Program
subject to the supervision and direction of the Development Committee.
6.1.2 Development Plan. The Parties shall pursue the
activities and the development and Regulatory Approval of Finished Product(s) in
accordance with the Development Plan, which more specifically sets forth the
responsibilities of each Party. The Parties understand and agree that many
deviations from or changes to the Development Plan will result from: (a) study
outcomes; (b) information received from the FDA or applicable regulatory
authorities in countries other than the United States within the Territory from
time to time; or (c) action by the Development Committee. Development Plan
activities are targeted to expedite Regulatory Approval from the FDA or
applicable regulatory authority within the United States and shall not in any
way be compromised or delayed to facilitate registrations outside the United
States. Any non-material deviation from or change to the Development Plan shall
require the prior written agreement of both Parties through action at the
Development Committee level. Any material deviation from or change to the
Development Plan shall require the prior written agreement of either the
President of the Hospital Products Division or Divisional Vice President of
Pharmaceutical and Clinical Development of the Hospital Products Division of
Abbott and the CEO of NaPro. A "material deviation" shall include, but not be
limited to, a deviation causing delay in the development schedule for more than
three (3) months or increases in Development Costs by more than One Hundred
Thousand Dollars ($100,000.00) in any Calendar Quarter.
6.1.3 Formulation. [THIS PORTION HAS BEEN REDACTED.]
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6.2 Development Plan Funding. The research and development activities
set forth in the Development Plan shall be funded by the Parties as set forth in
this Section 6.2. All costs of the Development Program (whether such costs be
incurred by Abbott or NaPro) shall be aggregated and shall be paid to either
Abbott or NaPro (or a Third Party) as appropriate. The Abbott full time
equivalent (FTE) rate schedule and the NaPro full time equivalent (FTE) rate
schedule shall be attached as Exhibit D-2 which rates for both Abbott and NaPro
shall be commensurate with the type of work performed. The full time equivalent
(FTE) rates shall be subject to adjustment based on general inflationary
factors.
6.2.1 Up to Twenty Million Dollars. NaPro shall fund the first
Twenty Million Dollars ($20,000,000) of Development Costs associated with
performance of the activities set forth in the Development Plan including, but
not limited to, clinical and pre- clinical activities in support of the
Application for Regulatory Approval to commercialize a Finished Product. The
Twenty Million Dollars ($20,000,000) shall be applied to research and
development activities set forth in the Development Plan, and Development Costs
associated with such research and development activities, beginning on and
following the Effective Date.
6.2.2 Above Twenty Million Dollars. In the event that funds in
excess of the Twenty Million Dollars ($20,000,000) set forth in Section 6.2.1
are necessary to continue and complete the Development Plan in order to obtain
Regulatory Approval and commercialize a Finished Product, the Development
Committee shall meet to discuss the further activities necessary and the budget
to complete the Development Plan activities to commercialize a Finished Product.
The Development Committee shall establish the budget for funding of the
Development Plan activities beyond Twenty Million Dollars ($20,000,000), and
Abbott and NaPro shall share equally (fifty percent (50%) by each Party) the
Development Costs identified pursuant to this Section 6.2.2. In the event that
NaPro determines in good faith that it is unable to fund further Development
Costs due to severe financial distress or bankruptcy, NaPro may request that
Abbott pay NaPro's fifty percent
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(50%) share of the Development Costs as set forth in this Section 6.2.2. Abbott
may, in Abbott's sole discretion, fund all or a portion of NaPro's fifty percent
(50%) share of Development Costs as set forth in this Section 6.2.2. For any of
NaPro's share of the Development Costs that Abbott assumes, Abbott shall receive
a credit against Additional Consideration payments due by Abbott to NaPro as set
forth in Article 4 in an amount equal to the total which Abbott provides for
NaPro's share of the Development Costs, plus interest at the prime rate of
interest as published by the Wall Street Journal, Midwest Edition, on the date
of the payment of the Development Costs by Abbott, accrued over and until such
time as the amount paid with such interest shall have been fully credited
against Additional Consideration payments. Notwithstanding the foregoing, in the
event that Development Plan expenses pursuant to this Section 6.2.2 shall exceed
[THIS PORTION HAS BEEN REDACTED.] for which each Abbott and NaPro shall be
responsible for [THIS PORTION HAS BEEN REDACTED.] prior to incurring any further
Development Plan expenses, the Development Committee shall obtain the prior
written approval of the President of the Abbott Hospital Products Division and
the Chief Executive Officer of NaPro.
6.2.3 Performance. All activities to be performed pursuant to
the Development Plan which are indicated to be "Abbott responsibilities" or
"NaPro responsibilities" or "joint responsibilities" under the Development Plan
shall be performed by the respective Party on a FTE for the benefit of the
Development Program. The invoices shall be paid: (a) by NaPro out of the funds
identified and provided pursuant to Sections 6.2.1 and 6.2.2; or (b) by Abbott
out of the funds identified and provided pursuant to Sections 6.2.2, within
thirty (30) days following receipt of the invoice. Furthermore, each Party, in
its discretion, may request the other Party to provide services or activities
for the requesting Party which the requesting Party's responsibility in the
Development Plan. Subject to mutual written agreement of the Parties, the
requested Party shall provide such services at a FTE rate set forth for the
requested Party in the Development Plan. In such
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case, the Party providing the service shall record services performed and shall
provide an itemized accounting and invoice the Development Program for such
services. Either Party may also engage Third Parties, approved by the
Development Committee, to perform services or activities pursuant to the
Development Plan at negotiated rates approved by the Development Committee.
Development Costs and permitted charges are set forth on Exhibit D-2.
6.3 Development Costs Quarterly Budgets and Reports. The Development
Committee shall establish quarterly budgets for Development Costs on a Calendar
Quarter basis not less than thirty (30) days prior to the first day of each
Calendar Quarter. Within thirty (30) days following the last day of each
Calendar Quarter, each Party shall provide to the other Party a written report,
including an itemized accounting and invoice, of all Development Costs incurred
by it during the Calendar Quarter. The Development Committee shall have the
right to review the report submitted by either Party and verify the purpose and
amounts of the Development Costs. Approved invoices shall be paid net thirty
(30) days in accordance with Section 5.1.
6.4 Development Committee. The Development Committee shall develop and
review a program for compliance with the requirements to obtain Regulatory
Approval and commercialize Finished Products in countries in the Territory and
monitor such program. The Development Committee will meet no less frequently
than once each Calendar Quarter to review clinical studies underway and to
discuss and consider clinical studies covering, among other things, additional
cancer indications and/or improvements to formulation and performance of
Finished Product. Each Party may appoint substitutes for its committee members
and each Party shall be permitted to send additional observers to committee
meetings to discuss other strategic issues, to include, but not be limited to,
regulatory, intellectual property, licensing and litigation matters. The site
for such Development Committee meetings shall alternate between the NaPro and
Abbott facilities, or be held at such other locations as may be mutually agreed.
Travel by the three (3) Development
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Committee members (or their designees) from each of Abbott and NaPro shall be
considered a reimbursable expense of the Development Program pursuant to
Sections 6.2.1 or 6.2.2, as applicable. Travel by attendees of the Development
Committee meetings other than the three (3) Development Committee members (or
their designees) from each Party shall not be considered a reimbursable expense
of the Development Program pursuant to Sections 6.2.1 or 6.2.2, as applicable.
Decisions required or permitted under this Agreement to be made by the
Development Committee, shall be with each member of the Development Committee
having one (1) vote and the affirmative vote of a simple majority of the members
being required to constitute action by the Development Committee. In the event
of an absence of a member, another member representing the same Party as the
absent member may cast a vote on behalf of the absent member. In the event that
the members of the Development Committee cannot agree on a matter, the matter
shall be submitted: (a) first, to the Divisional Vice President of
Pharmaceutical and Clinical Development of the Abbott Laboratories Hospital
Products Division or in the case of matters specifically applicable to Canada,
his or her equivalent in Abbott International and the Chief Executive Officer of
NaPro for resolution and if no resolution is reached, then (b) second, to the
President of the Abbott Hospital Products Division or his or her designee or in
the case of matters specifically applicable to Canada, his or her equivalent in
Abbott International and the CEO of NaPro, or his or her designee, for
determination. If a determination is not made through either (a) or (b) above,
the matter shall be resolved in accordance with the ADR procedures set forth in
Exhibit G. In the event that one Party desires to pursue additional
indication(s) (other than as described in the Development Plan) for the Finished
Product and the Development Committee cannot make a determination by majority
vote to pursue such additional indication, then the Party proposing the new
indication may pursue and fund the research and development required for such
new indication at its own expense; provided, however, with respect to such new
indication, the data and right of reference for any Application for Regulatory
Approval for any uses outside the Field or outside the Territory
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(either within or outside the Field) that arise during the research and
development for such new indication(s), shall be exclusively that Party's and
the provisions and rights set forth in Article 11 for that indication or data
shall not apply. Notwithstanding anything to the contrary, in the event that
NaPro funds and pursues the additional indication (other than as described in
the Development Plan) in the Territory in the Field on its own, Abbott shall
have the right to market and sell the Finished Product for such indication and
for Finished Product manufactured and sold by Abbott, Abbott shall pay NaPro
milestones earned pursuant to Article 3, if applicable, and Additional
Consideration pursuant to Article 4.
6.5 Finished Product Packaging. All packaging matters (including label,
outer packaging, package insert and any other aspects of Finished Product
packaging for commercial supply) for Finished Products shall be determined by
Abbott. Abbott shall use its reasonable commercial efforts to obtain approval
from the FDA or other regulatory authorities (in countries within the Territory
outside the United States) for NaPro's name to appear on the package insert as
the manufacturer of the Bulk Drug. In the event that the FDA or other regulatory
authority does not grant approval for the identification of NaPro as the
manufacturer of the Bulk Drug on the Finished Product package insert, Abbott
shall have no obligation to identify NaPro as the manufacturer of the Bulk Drug
or pursue the matter further. In the event that the FDA or other regulatory
authority approves the identification of NaPro as the manufacturer of Bulk Drug,
NaPro shall grant to Abbott the royalty-free right to use and print NaPro's name
and if desired by Abbott, corporate logo and trademark on the package insert. In
the event that Abbott has need to purchase Bulk Drug from a Stand-By
Manufacturing Source, and Abbott is required to change the package insert or
such other packaging which identifies NaPro as the Bulk Drug manufacturer, NaPro
shall pay all costs incurred by Abbott to change the package insert for Finished
Product containing Bulk Drug manufactured by the Stand-By Manufacturing Source.
All costs (excluding marketing related costs) incurred by Abbott in the
development of packaging and labeling materials for
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the Finished Product shall be Development Costs reimbursable out of Development
Plan Funds.
6.6 Pro-Drug Development. In the event that NaPro elects to pursue the
development of an identified NaPro owned or in-licensed Pro-Drug ("NaPro
Pro-Drug"), NaPro shall provide to Abbott (under an appropriate confidentiality
agreement) a development plan and substantive data, including proof of principle
(which may or may not include human data), for that NaPro Pro-Drug in order to
allow Abbott to adequately evaluate the opportunity to collaborate with NaPro on
the NaPro Pro-Drug and include the NaPro Pro-Drug in the Development Program.
NaPro shall allow Abbott not less than ninety (90) Business Days to evaluate the
opportunity. During such ninety (90) day period, NaPro shall not discuss the
NaPro Pro-Drug opportunity with any Third Party. If Abbott is interested in
working with NaPro on the NaPro Pro-Drug and including the NaPro Pro-Drug in the
Development Program, Abbott shall so notify NaPro in a writing executed by the
President of Abbott's Hospital Products Division and the NaPro Pro-Drug shall be
included within Development Program and the definition of "Finished Product"
under this Agreement shall include any Pro-Drug, whether developed by Abbott or
NaPro. Abbott shall not be obligated to pay any milestone payments (except
payments that would be due under Sections 3.1.2 through 3.1.8 which have not
previously been paid as described in Section 3.2) or other fees in connection
with the NaPro Pro-Drug, other than through sharing expenses for the research
and development in connection with the development and Regulatory Approval of
the NaPro Pro-Drug as a Finished Product as contemplated by Section 6.2. In the
event that Abbott does not elect to include NaPro Pro-Drug in the Development
Program and within the definition of "Finished Product", NaPro may develop the
NaPro Pro-Drug on its own and Abbott shall not have rights to that certain NaPro
Pro- Drug Product in the Territory.
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ARTICLE 7
CLINICAL AND REGULATORY MATTERS
7.1 Pre-Clinical/Clinical Data. NaPro shall supply to Abbott all
Pre-Clinical and Clinical Data and any other data and information necessary (as
determined by the Development Committee) for Abbott to compile, prepare and file
all necessary Applications for Regulatory Approval to obtain Regulatory Approval
and to commercialize the Finished Products in the Territory. The rights to use
all such Pre-Clinical and Clinical Data provided by NaPro in the Territory in
the Field shall be jointly owned by NaPro and Abbott.
7.2 Regulatory Submission and Maintenance. Abbott shall be responsible
with input from NaPro, for compiling, preparing and filing all necessary
Application(s) for Regulatory Approval for the Finished Product(s) in the
Territory. NaPro shall, upon request of Abbott, use its best efforts to provide
additional information to complete the Application(s) for Regulatory Approval.
The filing fees for the Application(s) for Regulatory Approval and fees for
maintaining the Regulatory Approval shall be treated as a Development Cost. The
IND(s) shall be transferred to Abbott in sufficient time to support all
Application(s) for Regulatory Approval in accordance with the Development Plan.
Abbott shall be the sponsor and holder/owner of each Application for Regulatory
Approval except as provided in Sections 6.1.2.
7.3 Bulk Drug DMF. NaPro shall have sole ownership of its DMF related
to the manufacture and control of Bulk Drug submitted in support of any
Application for Regulatory Approval. Abbott shall have the right to reference
the data and information in the DMF for the Bulk Drug for purposes of filing an
Application(s) for Regulatory Approval in the Territory in the Field and
qualifying a Stand-By Manufacturing Source for the Bulk Drug, as described in
Section 8.7. The DMF for the Stand-By Manufacturing Source shall be owned by
Abbott or the Third Party with which Abbott contracts as the Stand-By
Manufacturing Source.
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7.4 Regulatory Approval Ownership. Abbott shall own the Regulatory
Approvals. NaPro shall not have the right to access the Regulatory Approval
without Abbott's prior written consent, except as provided in Section 6.4 and
Article 11.
ARTICLE 8
BULK DRUG MANUFACTURE, PURCHASE AND SUPPLY
8.1 Requirements and Exclusivity
8.1.1 Purchase and Sale. Pursuant to the terms and subject to
the conditions of this Agreement: (a) NaPro and NaPro's Affiliates shall sell
exclusively to Abbott and Abbott's Affiliates [THIS PORTION HAS BEEN REDACTED.]
Paclitaxel for manufacture and sale of Finished Product in the Territory in the
Field; (b) Abbott and Abbott's Affiliates shall purchase exclusively from NaPro
and NaPro's Affiliates (except as permitted by Section 8.7), Paclitaxel for
manufacture and sale of Finished Product in the Territory in the Field; (c)
NaPro and NaPro's Affiliates shall sell and deliver all of Abbott's and Abbott's
Affiliates requirements of Paclitaxel for manufacture or formulation into
Finished Product for use in the Territory in the Field; and (d) Abbott and
Abbott's Affiliates shall purchase and take delivery of all their requirements
of Paclitaxel exclusively from NaPro and NaPro's Affiliates for Abbott's and
Abbott's Affiliates' sale of Finished Product for use in the Territory in the
Field.
8.1.2 Limitations on NaPro Sale. Neither NaPro nor any of its
Affiliates shall manufacture, market, sell or distribute Paclitaxel in the
Territory for use in the Field, except to Abbott as provided in this Agreement.
Except as required by the IVAX Agreement as described in Section 8.1.1, NaPro
shall not sell or otherwise transfer Paclitaxel to any Third Party, either
inside or outside the Territory for use, manufacturing, sale or distribution by
such Third Party in any form, whether in bulk or any form of Finished Product,
in the Territory in the Field.
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8.1.3 NaPro Enforcement of Limitations. NaPro shall: (a)
prohibit its customers outside the Territory with whom NaPro has supply
agreements for Bulk Drug as permitted pursuant to Section 8.1.2 or other product
containing Paclitaxel from selling any product containing Paclitaxel in the
Territory in the Field, and (b) take all reasonable steps necessary to prevent
any product containing Paclitaxel sold in the Territory for use outside the
Field from being used in the Field. In order for Abbott to monitor such
activities and compliance with the terms of this Section 8.1, NaPro shall notify
Abbott in writing of the name of such Third Parties to which NaPro supplies
Paclitaxel, along with the use of the product and the field of use or other
rights with respect to Paclitaxel within thirty (30) days following the
effectiveness of a license or supply arrangement. If such arrangement exists
prior to the Effective Date, such licensees or customers are listed in Exhibit
F-1. The obligations of NaPro pursuant to clause (b) of this Section 8.1.3 may
require NaPro to take action to compel its customers or distributors to comply
with their contractual obligations to NaPro by terminating supplies of
Paclitaxel, if necessary, and/or altering packaging or formulation to discourage
or, if necessary, to preclude use of Paclitaxel in the Field in the Territory.
8.1.4 Limitations on Abbott Resale. Neither Abbott nor any of
its Affiliates shall resell any Bulk Drug sold to it by NaPro, except to any
party which Abbott enters into an agreement with to perform one or more aspects
of the manufacturing, finishing or packaging processes for the Finished Product.
Neither Abbott nor any of its Affiliates shall sell any Finished Product for
sale or resale outside the Territory or for use outside the Field.
8.2 Pricing. The purchase price that Abbott shall pay for Bulk Drug
supplied by NaPro to Abbott shall be as set forth in this Section 8.2.
8.2.1 Development Use. The F.O.B. Boulder (or other NaPro
facility approved by Abbott) price that NaPro shall charge the Development
Program for Bulk Drug, for Development Use shall be [THIS PORTION HAS BEEN
REDACTED.] of Bulk
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Drug. Notwithstanding the foregoing, so as to not financially overburden the
Development Program or unnecessarily deplete Development Program funds, in the
event that NaPro's cost for Bulk Drug is reduced below [THIS PORTION HAS BEEN
REDACTED.] , then the cost of Bulk Drug for Development Use shall be reduced to
NaPro's cost, but in no event to less than [THIS PORTION HAS BEEN REDACTED.] per
gram.
8.2.2 Primary Standard Product. The F.O.B. Boulder (or other
NaPro facility approved by Abbott) price that: (a) NaPro shall charge Abbott
(or, as appropriate, the Development Program); and (b) Abbott (or, as
appropriate, the Development Program) shall pay NaPro for Primary Standard
Product shall be [THIS PORTION HAS BEEN REDACTED.] of Primary Standard Product .
8.2.3 Commercial Use. The F.O.B. Boulder (or other NaPro
Facility approved by Abbott) price that NaPro shall charge and Abbott shall pay
for Bulk Drug, for Commercial Use shall be [THIS PORTION HAS BEEN REDACTED.] of
Bulk Drug.
8.2.4 Restoration or Replacement of Bulk Drug. In the event
that Bulk Drug that met Bulk Drug Specifications at the time of delivery to
Abbott has become corrupted, contaminated or damaged, at Abbott's request, NaPro
shall provide to Abbott a written estimate of the cost to restore the Bulk Drug
to Bulk Drug Specifications (subject to all applicable regulatory requirements
including the ability to make such restoration pursuant to the Bulk Drug DMF).
Abbott shall have the option to direct NaPro to use its reasonable best efforts
to restore the corrupted or contaminated Bulk Drug to meet Bulk Drug
Specifications (subject to all applicable regulatory requirements), or replace
the corrupted, contaminated or damaged Bulk Drug to meet Bulk Drug
Specifications at Abbott's expense within ninety (90) days of Abbott's notice to
NaPro that the Bulk Drug has become corrupted, contaminated or damaged. The
F.O.B. Boulder (or other NaPro facility) price of any replacement Bulk Drug
which is to be replaced at Abbott's expense shall be [THIS PORTION HAS BEEN
REDACTED.].
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8.3 Shipping, Invoice and Payment. NaPro shall deliver the Bulk Drug to
Abbott's designated facility F.O.B. NaPro's manufacturing facility. NaPro shall
cooperate with Abbott to ship the Bulk Drug from NaPro's facility to Abbott's
designated facility at Abbott's expense and pursuant to instructions provided by
Abbott. Risk of loss to the Bulk Drug shall pass upon delivery to Abbott's
common carrier at NaPro's facility. NaPro shall invoice Abbott for Bulk Drug
upon delivery of Bulk Drug to Abbott in the amount specified in Section 8.2.
Payment for Bulk Drug shall be due within forty-five (45) days from the date the
Bulk Drug passes Abbott internal Bulk Drug quality inspection, as set forth in
Section 8.4, but in no event shall such payment be due prior to the date which
is sixty (60) days following the date on which Abbott received delivery of the
Bulk Drug. Payments shall be made by either wire transfer or electronic funds
transfer of immediately available funds to an account specified by NaPro in
advance and in writing. NaPro shall include with each delivery of Bulk Drug to
Abbott a Certificate of Analysis in a mutually agreed upon format in which NaPro
certifies that the Bulk Drug in such delivery has been analyzed and meets the
applicable Bulk Drug Specifications, GMP and other manufacturing requirements
(each, a "Certificate of Analysis"). Such Certificate of Analysis shall also set
forth the batch numbers of the Bulk Drug, the date of manufacture, the date on
which the shelf-life for such Bulk Drug expires and the Bulk Drug batch-to-batch
test data.
8.4 Quality and Inspection of Bulk Drug
8.4.1 Bulk Drug Warranties. NaPro warrants and represents that
each shipment of Bulk Drug shall: (a) meet the Bulk Drug Specifications and
comply with the applicable Certificate of Analysis at the time of delivery to
Abbott and until the end of the specified shelf life for the Bulk Drug, unless
corrupted, damaged, mishandled, improperly stored or destroyed by Abbott or a
Third Party; (b) be manufactured in accordance with GMP and any other applicable
laws and regulations in the Territory; (c) be manufactured in accordance with
the approved NDA, the Bulk Drug DMF and any applicable Regulatory Approvals; (d)
be transferred to Abbott free and clear of any security interests, liens and
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encumbrances; and (e) be manufactured to the best of NaPro's knowledge, so as to
not infringe any Third Party Technology. EXCEPT AS EXPRESSLY STATED IN THIS
AGREEMENT, NAPRO MAKES NO OTHER REPRESENTATION, EXPRESS OR IMPLIED, SOLELY WITH
REGARD TO THE BULK DRUG, INCLUDING ANY REPRESENTATIONS OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT. EXCEPT AS PROVIDED
ELSEWHERE IN THIS ARTICLE 8 OR IN ARTICLE 13 OR SECTION 15.3.2.2 OR SECTION
15.6.4, THE REMEDY PROVIDED IN THIS ARTICLE 8 REPRESENTS ABBOTT'S EXCLUSIVE
REMEDY FOR ANY DEFECT IN THE BULK DRUG. IN NO EVENT SHALL NAPRO BE LIABLE TO
ABBOTT FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY DEFECT IN THE
BULK DRUG.
8.4.2 Bulk Drug Inspection. Abbott shall inspect and analyze
the first ten (10) manufacturing lots (and any lots thereafter as Abbott may
specify) of Bulk Drug supplied by NaPro within fifteen (15) days following
receipt thereof, unless certain tests require longer periods of time, in which
case Abbott shall endeavor to inspect the Bulk Drug as soon as practicable. If,
after inspection of such lots, Abbott reasonably believes the Bulk Drug in such
lot does not comply with NaPro's representations and warranties therefor under
Section 8.4.1, Abbott shall notify NaPro in writing as soon as practicable, but
no later than sixty (60) days, after Abbott's receipt of any such goods. If
Abbott does not so notify NaPro, Abbott shall be deemed to have waived all
claims against NaPro for said quantity delivered, except for any infringement of
Third Party Technology or latent defects that could not have been reasonably
discovered upon such inspection. Any claims by Abbott regarding Bulk Drug
delivered shall specify in reasonable detail the nature and basis for the claim
and cite relevant NaPro lot numbers or other information to enable specific
identification of the Bulk Drug involved. Abbott shall not be required to accept
Bulk Drug having a shelf-life of less than [THIS PORTION HAS BEEN REDACTED.] of
the original shelf-life following
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the date of shipment from NaPro, unless mutually agreed upon by the Parties in
writing prior to shipment.
8.4.3 NaPro Response to Bulk Drug Inspection. NaPro shall
respond to all claims made by Abbott under Section 8.4.2 on a case-by-case
basis. NaPro shall have the right to first inspect any Bulk Drug involved before
being required to take any action with respect thereto. NaPro shall review any
such claim of non-conformity made by Abbott as soon as practicable, but no later
than ten (10) Business Days following receipt. NaPro shall conduct any required
testing of the goods involved as soon as practicable, but no later than
forty-five (45) days, after receipt thereof or earlier if the FDA or any
corresponding regulatory authority in the Territory requires an earlier response
from NaPro. If such review and testing by NaPro (or testing by an independent
laboratory as set forth below) confirms that a claimed quantity does not meet
the Bulk Drug Specifications, then, at NaPro's expense, Abbott shall dispose of
or return such quantity of Bulk Drug involved as NaPro shall direct in writing
and NaPro shall replace such quantity with Bulk Drug conforming to the Bulk Drug
Specifications as soon as practicable, but no later than sixty (60) days, after
testing is completed. If the Parties fail to agree as to whether a delivered
quantity meets the Bulk Drug Specifications, then the Parties shall have the
batch in dispute analyzed by a mutually agreed upon independent testing
laboratory. Such laboratory's determination shall be deemed final as to any
dispute over the Bulk Drug Specifications and the non-prevailing Party shall
bear the costs of such independent laboratory's testing.
8.4.4 Bulk Drug Storage. Each Party shall properly store Bulk
Drug under conditions that will not adversely affect the quality or normal shelf
life thereof.
8.5 NaPro Manufacturing Facility
8.5.1 Inspection by Abbott. Abbott reserves the right to
conduct such inspections of NaPro's Bulk Drug manufacturing facilities and
related books and records as Abbott deems reasonably necessary to ensure
compliance with GMP at any time during normal business hours upon reasonable
prior written notice (stating the purpose and scope of
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the inspection requested). Such inspections shall not occur more frequently than
once per Calendar Quarter absent Abbott's good faith belief that it has a
compelling reason to do so. The books and records subject to inspection include,
but are not limited to, batch records, manufacturing procedures and guidelines,
and all quality assurance/quality control documentation.
8.5.2 Inspection by Regulatory Authorities. NaPro shall allow
representatives of the FDA and any other regulatory agency or authority with
jurisdiction over the manufacture, marketing and/or distribution of the Finished
Product to tour and inspect all facilities utilized by NaPro in the manufacture,
testing, packaging, storage, and shipment of Bulk Drug sold under this
Agreement. NaPro shall cooperate with such representatives in every reasonable
manner. NaPro shall notify Abbott immediately whenever NaPro receives notice of
a pending inspection of its manufacturing facilities by any regulatory agency.
NaPro shall also provide Abbott with a copy of any FDA Form 483 notices of
adverse findings, regulatory letters or similar notifications it receives from
any other governmental authority setting forth adverse findings or
non-compliance with any applicable laws, regulations or standards relating to
the items supplied by it hereunder within five (5) Business Days of its own
receipt thereof. NaPro shall also provide Abbott with a copy of NaPro's proposed
written response to such governmental authority before submission and shall
consider in good faith any changes thereto which Abbott may reasonably request.
8.5.3 Inspection of F. H. Faulding Facility. In the event that
product manufactured or finished by F.H. Faulding is used in the Development
Program, NaPro shall cause F.H. Faulding to allow Abbott (or if F.H. Faulding
will not allow Abbott, then to allow Abbott to appoint a consultant) as an
authorized representative of NaPro to inspect the F.H. Faulding manufacturing
facility in the same manner as Abbott may inspect the NaPro facility as set
forth in this Section 8.5.
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8.5.4 Required Manufacturing Changes. In the event that: (a)
the FDA (or other appropriate regulatory authority for countries outside of the
United States) or other federal, state or local governmental agency requires
changes to NaPro's manufacturing facility or manufacturing process of the Bulk
Drug; or (b) changes are required to NaPro's manufacturing facility or
manufacturing process of the Bulk Drug to comply with applicable laws and
regulations (together with the matters referred to in clause (a), the "Required
Changes"), NaPro shall promptly notify Abbott of any such Required Changes. In
consultation with Abbott and with Abbott's prior written approval, which
approval shall not be unreasonably withheld or delayed, NaPro shall make all
such Required Changes by the date specified by the FDA or other regulatory
authority and, if no such date is specified, no later than sixty (60) days after
the date of notice of the Required Change. NaPro shall consult with Abbott in
connection with Required Changes to coordinate changes with: (i) the other
aspects of the Development Program; (ii) the Regulatory Approval; and (iii) the
finishing of the Finished Product or marketing of the Finished Product so as to
avoid any business interruptions. In the event that NaPro fails to make the
Required Changes by the time specified in this Section 8.5.4, Abbott shall have
the right to acquire Bulk Drug from a Stand-By Manufacturing Source. All costs
of any Required Changes (including, but not limited to FDA and other regulatory
authority approval costs described in Section 8.5.6 and manufacturing and
stability runs) shall be the sole responsibility of NaPro.
8.5.5 Other Manufacturing Changes
8.5.5.1 NaPro shall not make any Material
Manufacturing Change to any of its manufacturing facilities or processes used in
connection with the manufacturing of Bulk Drug without the prior written consent
of Abbott as provided in this Section 8.5.5. In the event NaPro wishes to make a
Material Manufacturing Change, NaPro shall notify Abbott in writing. Within
fifteen (15) Business Days following Abbott's receipt of NaPro's notice of
proposed Material Manufacturing Change, Abbott shall notify NaPro either: (a)
that it consents to the Material Change; or (b) that it cannot consent to the
Material
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Manufacturing Change because it poses operational, quality, regulatory or other
difficulties for Abbott. If Abbott responds to NaPro that the Material Change
poses operational, quality, regulatory or other difficulties, then Abbott and
NaPro shall consult in good faith to resolve any such difficulties within thirty
(30) days after Abbott has so responded to NaPro. Notwithstanding the foregoing,
NaPro may propose a Material Manufacturing Change not more than one (1) time in
any twelve (12) month period.
8.5.5.2 In the event that the Development Committee
desires to make changes to the manufacturing process for the Bulk Drug in order
to promote quality control, quality assurance, and/or achieve greater efficiency
or cost savings in the manufacture of the Bulk Drug as it relates either to the
Bulk Drug itself or to the manufacture of the Bulk Drug into Finished Product
("Other Manufacturing Changes"), then NaPro and Abbott shall review such Other
Manufacturing Changes in good faith and work together to determine the benefits
and implementation of such changes.
8.5.5.3. NaPro shall be responsible for obtaining
any and all approvals from the FDA or applicable regulatory authority required
for either Material Manufacturing Changes or Other Manufacturing Changes. NaPro
shall be solely responsible for the cost of any Material Manufacturing Changes
contemplated by Section 8.5.5.1 including, but not limited to, manufacturing
runs and stability runs for Finished Product that may be effected. Abbott and
NaPro shall negotiate and mutually agree upon the allocation of responsibility
for the costs for any Other Manufacturing Change contemplated by Section
8.5.5.2; provided, however, (a) if the Other Manufacturing Change primarily
benefits NaPro by achieving greater efficiency or cost savings for Bulk Drug,
NaPro shall be responsible for the cost, and (b) if the Other Manufacturing
Change primarily benefits Abbott by achieving greater efficiency or cost savings
for Finished Product, Abbott shall be responsible for the cost.
8.5.6 Changes Requiring Regulatory Approval. NaPro shall
not make any changes to NaPro's manufacturing facility or processes for the
manufacture of Bulk Drug
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which require prior approval from the FDA (or other appropriate regulatory
authority for countries outside of the United States) without receiving such
prior approval from the FDA or such regulatory authority and from Abbott, which
approval shall not be unreasonably withheld or delayed by Abbott. NaPro shall
consult with Abbott in connection with these manufacturing changes to coordinate
changes with the other aspects of the Development Program. NaPro shall implement
any changes in NaPro's manufacturing operations for Bulk Drug that are required
to comply with applicable laws and regulations as soon as practicable or as
directed by the FDA or other Regulatory Authority. In the event that a Required
Manufacturing Change requires approval by the FDA or other applicable regulatory
authority, the responsibility for the costs of obtaining the Regulatory Approval
and the costs for the manufacturing and stability batches are set forth in
Section 8.5.4. In the event that an Other Manufacturing Change requires
Regulatory Approval by the FDA or other applicable regulatory authority, the
responsibility for the costs of obtaining the Regulatory Approval and the costs
for the manufacturing and stability batches shall be governed by Section
8.5.5.3.
8.6 Abbott's and the Stand-By Manufacturing Source's Facilities
8.6.1 Inspection by Regulatory Authorities. NaPro reserves
the right to conduct such inspections of Abbott's final finishing manufacturing
facility and the Stand-By Manufacturing Source's manufacturing facility and
related books and records as NaPro deems reasonably necessary, to ensure
compliance with GMP, at any time during normal business hours upon reasonable
prior written notice (stating the purpose and scope of the inspection
requested). Such inspections shall not occur more frequently than once per
Calendar Quarter absent NaPro's good faith belief that it has a compelling
reason to do so. The books and records subject to inspection include, but are
not limited to, batch records, manufacturing procedures and guidelines, and all
quality assurance/quality control documentation.
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8.6.2 Inspection by NaPro. Abbott shall, and shall cause the
Stand-By Manufacturing Source to, allow representatives of the FDA and any other
regulatory agency or authority with jurisdiction over the manufacture, marketing
and distribution of Bulk Drug or Finished Product to tour and inspect all
facilities utilized by Abbott or the Stand-By Manufacture Source in the
manufacture, testing, packaging, storage, and shipment of Bulk Drug or Finished
Product. Abbott shall, and shall cause the Stand-By Manufacturing source to,
cooperate with such representatives in every reasonable manner. Abbott shall,
and shall cause the Stand-By Manufacturing Source to, notify NaPro immediately
whenever Abbott or the Stand-By Manufacturing Source receives notice of a
pending inspection of its manufacturing facilities by any regulatory agency.
Abbott shall also provide NaPro with a copy of any FDA Form 483 notices of
adverse findings, regulatory letters or similar notifications it or the Stand-By
Manufacturing Source receives from any other governmental authority setting
forth adverse findings or non-compliance with any applicable laws, regulations
or standards relating to the items supplied by it hereunder within ten (10)
Business Days of its own receipt thereof. Abbott shall also provide NaPro with a
copy of Abbott's or the Stand-By Manufacturing Source's proposed written
response to such governmental authority before submission and shall consider in
good faith any changes thereto that NaPro may reasonably request.
8.6.3 Abbott Required Manufacturing Changes. In the event
that: (a) the FDA (or other appropriate regulatory authority for countries
outside of the United States) or other federal, state or local governmental
agency requires changes to Abbott's manufacturing facility or manufacturing
process of Finished Product; or (b) changes are required to Abbott's
manufacturing facility or manufacturing process of Finished Product to comply
with applicable laws and regulations (together with the matters referred to in
clause (a), the "Abbott Required Changes"), Abbott shall promptly notify NaPro
of any such Abbott Required Changes. Abbott shall make all such Abbott Required
Changes by the date specified by the FDA or other regulatory authority. Abbott
shall consult with NaPro in
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connection with Abbott Required Changes to coordinate changes with: (i) the
other aspects of the Development Program; (ii) the Regulatory Approval; and
(iii) the finishing of the Finished Product or marketing of the Finished Product
so as to avoid any business interruptions. All costs of any Abbott Required
Changes (including, but not limited to FDA and other regulatory authority
approval costs and manufacturing and stability runs) shall be the sole
responsibility of Abbott.
8.6.4 Abbott Manufacturing Changes. Abbott shall not make any
changes to Abbott's manufacturing facility or processes for the manufacture of
Finished Product which require prior approval from the FDA (or other appropriate
regulatory authority for countries outside of the United States) without
receiving such prior approval from the FDA or such regulatory authority. Abbott
shall consult with NaPro in connection with these manufacturing changes to
coordinate changes with the other aspects of the Development Program. Abbott
shall implement at its sole expense any changes in Abbott's manufacturing
operations for Finished Product that are required to comply with applicable laws
and regulations as soon as practicable or as directed by the FDA or other
Regulatory Authority.
8.7 Abbott Stand-By Manufacture of Bulk Drug
8.7.1 Qualification of Stand-By Manufacturing Facility. At any
time following the Effective Date and at Abbott's expense, Abbott shall have the
right to qualify an Abbott facility or a facility owned or operated by one or
more Third Parties as a Stand-By Manufacturing Source for Bulk Drug. Any Third
Party used by Abbott to manufacture Bulk Drug pursuant to this Section 8.7 shall
be subject to prior written approval by NaPro, such approval not to be
unreasonably withheld or delayed. If, and only if, NaPro provides to the
Stand-by Manufacturing Source: (a) analytical methods and procedures for
analyzing Bulk Drug; or (b) other NaPro Confidential Information (other than
Bulk Drug Specifications) in support of the filing with the FDA or other
applicable regulatory authority, then the Stand-By Manufacturing Source shall be
required to enter in to a contract with Abbott that requires such Third Party to
supply Paclitaxel exclusively to Abbott and to
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no other Person in the Territory for a period of time not less than the
Protected Term. Upon Abbott's reasonable request, NaPro shall assist Abbott in
the qualification process by reviewing and testing samples of Bulk Drug provided
by the Stand-By Manufacturing Source, at the expense of Abbott. NaPro shall
cooperate with and assist Abbott in qualifying the Stand-By Manufacturing Source
to manufacture Bulk Drug by providing such Third Party with Bulk Drug
Specifications, analytical methods and procedures for analyzing Bulk Drug,
support for the filing of any necessary data with the FDA or other applicable
regulatory authority to pre-qualify the Stand-By Manufacturing Source. Such Bulk
Drug Specifications, analytical methods and other NaPro Technology provided to
the Third Party shall be treated as Confidential Information, and such Third
Party shall be required to enter into a confidentiality agreement with NaPro and
Abbott as a condition to NaPro providing such information to the Third Party.
NaPro shall grant to the Stand-By Manufacturing Source a non-exclusive license
to issued NaPro Patents, required for the Stand-By Manufacturing Source's
manufacture of Bulk Drug for Abbott pursuant to this Agreement, other than those
NaPro Patents relating to semi-synthetic Paclitaxel manufacture, and such
license shall be limited solely to the Stand-By Manufacturing Source's
manufacture of Bulk Drug for Abbott pursuant to this Agreement. NaPro may, but
shall not be required to, provide such Third Party with any other information
that discloses NaPro Technology.
8.7.2 Stand-By Manufacturing Election. In the event that, at
any time during the Term (including, but not limited to, a force majeure event
as described in Section 18.1, a violation of any law, rule, regulation or court
order, including, but not limited to, an injunction or other limitation related
to the manufacture, use or sale of Bulk Drug), NaPro is unable to: (a) provide
Bulk Drug that meets the Bulk Drug Specifications; or (b) deliver to Abbott such
quantities of Bulk Drug within thirty (30) days from the delivery date set forth
in Abbott's purchase order for any reason, then Abbott may, at its option, elect
to have the qualified Stand-By Manufacturing Source manufacture Bulk Drug for
use in the Finished Product in the Territory. NaPro shall promptly notify Abbott
in writing of any
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circumstances rendering it unable to provide Bulk Drug and the estimated
duration of such circumstances. Abbott shall discontinue its use of a Stand-By
Manufacturing Source only as and when provided in Section 8.7.3. In the event
that Abbott's actual cost to secure Bulk Drug from a Stand-By Manufacturing
Source exceeds the price set forth in Sections 8.2.1 or 8.2.3, either Abbott or
NaPro shall be responsible for the excess cost as follows:
8.7.2.1 if Abbott used a Stand-By Manufacturing
Source because NaPro failed to supply Bulk Drug which meets the Bulk Drug
Specifications and any other requirements set forth in this Agreement, such
excess cost for the Bulk Drug from the Stand-By Manufacturing Source shall be
credited against the Additional Consideration; or
8.7.2.2 if Abbott used a Stand-By Manufacturing
Source because NaPro was not able to supply Abbott's requirements of Bulk Drug
and such requirements did not exceed [THIS PORTION HAS BEEN REDACTED.] of Bulk
Drug Forecast, such excess cost, for amounts not to exceed [THIS PORTION HAS
BEEN REDACTED.] of the Bulk Drug Forecast, for the Bulk Drug from the Stand-By
Manufacturing Source shall be credited against Additional Consideration;
8.7.2.3 if Abbott used a Stand-By Manufacturing
Source because NaPro was not able to supply Abbott's requirements of Bulk Drug
and such requirements exceeded [THIS PORTION HAS BEEN REDACTED.] of Bulk Drug
Forecast, such excess cost for the Bulk Drug from the Stand-By Manufacturing
Source shall be at Abbott's expense and shall not be credited against Additional
Consideration; or
8.7.2.4 if Abbott used a Stand-By Manufacturing
Source because NaPro was unable to supply to Abbott Bulk Drug which in the
manufacture or sale thereof did not infringe any Third Party Technology, such
excess cost for Bulk Drug from the Stand-By Manufacturing Source shall be
credited against the Additional Consideration.
8.7.3 Transition of Manufacturing Back to NaPro. Abbott may
purchase Bulk Drug from the Stand-By Manufacturing Source until such time as
NaPro demonstrates to Abbott's reasonable satisfaction that it is able to
manufacture Abbott's required quantities
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(subject to the terms of Section 8.8.1) without interruption as provided in the
next sentence. NaPro shall provide to Abbott written notice indicating NaPro's
proposal for transition of manufacturing from the Stand-By Manufacturing Source
back to NaPro. Subject to Abbott's commitments to the Stand-By Manufacturing
Source, Abbott shall transition its supply of Bulk Drug back to NaPro, as soon
as practicable, taking into consideration Abbott's contractual arrangements with
the Stand-By Manufacturing Source, but in any event not later than [THIS PORTION
HAS BEEN REDACTED.] after NaPro has made the demonstration to Abbott set forth
in this Section 8.7.3.
8.7.4 Continued Supply Obligations. Notwithstanding Abbott's
identification, qualification, and/or use of a Stand-by Manufacturing Source,
NaPro shall not be relieved of its supply obligations under Article 8 and Abbott
shall not be relieved of its obligation to pay NaPro the Additional
Consideration (subject to the crediting of Bulk Drug costs against Additional
Consideration as permitted by this Section 8.7 and Section 4). In the event that
Abbott utilizes a Stand-By Manufacturing Source due to a NaPro supply constraint
(as opposed to NaPro's failure to provide Bulk Drug that meets the Bulk Drug
Specifications, or a complete inability of NaPro to supply), then Abbott shall
purchase from NaPro, pursuant to the terms of this Agreement, Bulk Drug which
NaPro is capable of supplying.
8.8 Forecasts and Orders of Bulk Drug for Commercial Use
8.8.1 Pre-Launch Forecast and Quarterly Forecasts. [THIS
PORTION HAS BEEN REDACTED.] At NaPro's option, [THIS PORTION HAS BEEN REDACTED.]
8.8.2 Updated Forecasts. [THIS PORTION HAS BEEN REDACTED.]
8.8.3 NaPro Supply Constraints. In the event that NaPro
believes that it may be unable to supply all of Abbott's requirements for Bulk
Drug, then NaPro shall promptly provide Abbott with notice and NaPro and Abbott
shall promptly meet to discuss Abbott's Bulk Drug requirements and NaPro's
supply capabilities, including the possibility
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of utilizing a Stand-By Manufacturing Source. At such meeting, NaPro shall
provide to Abbott NaPro's good faith estimate of the amount of Bulk Drug which
NaPro is capable of supplying for the then current Bulk Drug Forecast period.
8.8.4 Orders. From time to time during the Term, Abbott shall
submit to NaPro purchase orders for quantities of Bulk Drug for research and
development and for Commercial Use and, subject to limitations set forth in
Section 8.8.1, NaPro shall fill all purchase orders for Bulk Drug received from
Abbott and Abbott shall accept delivery of such ordered quantities of Bulk Drug.
Orders shall be entered on Abbott purchase orders. Issued purchase orders shall
include the quantity of Bulk Drug ordered and the date on which the Bulk Drug
shall be delivered to Abbott. All terms and conditions of the Abbott purchase
order shall apply, except that if the terms and conditions of the purchase order
are in conflict with this Agreement, then this Agreement shall control unless
otherwise agreed by the Parties in writing.
8.8.5 Required Inventory. [THIS PORTION HAS BEEN REDACTED.]
8.9 Supply Allocation. If NaPro is unable, for any reason beyond its
reasonable control (including but not limited to a force majeure event as
described in Section 18.1 or an unanticipated increase in demand) to supply Bulk
Drug to Abbott under this Agreement and to Third Parties under then existing
contractual obligations outside the Territory, then NaPro shall establish an
allocation procedure with respect to the total available supply of Bulk Drug
which will provide the following allocation to Abbott:
8.9.1 First, an amount of Bulk Drug sufficient to satisfy any
warranty obligation to replace any nonconforming Bulk Drug due to Abbott at the
time of such allocation; provided, however, that if the total available supply
is insufficient to satisfy such obligation to Abbott plus all of NaPro's similar
warranty obligations to other purchasers or users, then this allocation shall be
made pro rata among all purchasers or users including Abbott (the pro rata share
of each purchaser or user to be determined by multiplying the total
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available supply of Bulk Drug by a fraction, the numerator of which shall be the
amount of Bulk Drug required to satisfy the warranty obligation to such
purchaser or user and the denominator of which shall be the amount of Bulk Drug
required to satisfy the warranty obligation to all purchasers or users,
including Abbott); and
8.9.2 Next, a fraction of the remaining supply (if any) of
Bulk Drug, as applicable, the numerator of which fraction shall be the
quantities of Bulk Drug which Abbott has forecasted pursuant to the Bulk Drug
Forecast for the next four (4) Calendar Quarters, and the denominator of which
shall be the quantities of Bulk Drug which is forecasted by all purchasers or
users (including Abbott) during such four (4) Calendar Quarters, as determined
by such parties' latest firm orders and forecasts submitted to NaPro for such
Calendar Quarters.
8.9.3 The Parties shall use commercially reasonable efforts to
avoid any circumstances which would require allocation under this Section 8.9
and to eliminate such circumstances as soon as reasonably possible if they
arise.
8.9.4 Notwithstanding the provisions of this Section 8.9,
Abbott shall be NaPro's preferred customer for Commercial Use along with F. H.
Faulding. In the event of shortage of Bulk Drug for any reason, Abbott and F.H.
Faulding shall receive priority and preference for supply of Bulk Drug over any
purchaser not under written contract to purchase Bulk Drug from NaPro as of the
Effective Date. Notwithstanding the foregoing, the supply of Bulk Drug for
development purposes in the Development Program shall have priority and
preference over any other proposed disposition of Bulk Drug by NaPro.
ARTICLE 9
FINISHED PRODUCT MANUFACTURE, MARKETING AND SALE
9.1 Abbott Manufacture and Labeling of Finished Product. Abbott shall
manufacture or have manufactured the Finished Product in accordance with the
Finished Product Specifications and applicable GMP for the Finished Product.
Abbott shall package
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and label the Finished Product in a form and manner suitable for commercial sale
in the Territory. 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 or any Party or Third Party as provided
for in this Agreement in connection with the Commercial Use of the Finished
Product.
9.2 Marketing Committee. The Marketing Committee shall provide
recommendations to Abbott on marketing strategies, marketing/promotional
programs and publications, technical marketing, and other marketing activities
which Abbott may consider or use in marketing, selling and distributing the
Finished Product. Abbott shall determine and establish all marketing,
promotional and sales strategies and determine the marketing, promotional and
sales activities which are likely to optimize Finished Product sales. Abbott
shall discuss the strategies and activities with the Marketing Committee. During
the twelve (12) month period preceding the anticipated date of First Commercial
Sale, the Marketing Committee shall meet once per calendar quarter. Following
the date of First Commercial Sale, the Marketing Committee shall meet once per
year.
9.3 Abbott Marketing and Sales Efforts. Abbott and Abbott's Affiliates
shall use commercially reasonable efforts to market, sell and distribute the
Finished Product in the Territory. Abbott shall commence marketing and selling
the Finished Product within a reasonable time following the Approval Date.
Notwithstanding the foregoing, failure on the part of NaPro to supply quantities
of Bulk Drug ordered by Abbott which conforms with the Bulk Drug Specifications
in a timely manner pursuant to the orders for Bulk Drug shall not constitute a
failure on the part of Abbott to use commercially reasonable efforts as required
pursuant to this Section 9.3. Abbott and is Affiliates and distributors shall be
solely responsible for establishing price and other financial terms for the sale
of Finished Products to End-User Customers. Notwithstanding the foregoing, for
countries or areas in the Territory outside the United States, in the event that
Abbott, in its sole discretion, determines that the Finished Product either
lacks commercial viability, or its commercial
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opportunity is compromised due to the existence of one or more Competitive
Paclitaxel Products, or if it is determined by Abbott not to take steps toward
filing and decides not to file, Abbott shall not be obligated to launch, market
or sell Finished Product in such countries or areas in the Territory outside the
United States. In the event that Abbott does not diligently pursue Regulatory
Approval or launch, market and sell the Finished Product in any such country or
area outside the United States [THIS PORTION HAS BEEN REDACTED.] Abbott shall
offer the opportunity for such country or area to NaPro for rights to
manufacture, market and supply the Finished Product. Notwithstanding the
foregoing, in the event that any legal, regulatory or other event including, but
not limited to an injunction, were to prevent the Regulatory Approval, launch,
marketing or sale of the Finished Product, [THIS PORTION HAS BEEN REDACTED.]
shall be extended for an equivalent period of time as such legal, regulatory or
other event delayed the Regulatory Approval, launch, marketing or sale of the
Finished Product. Notwithstanding the foregoing, if Abbott has offered the
opportunity to NaPro, Abbott shall not have breached the terms of this Article 9
or any other terms of this Agreement, whether or not NaPro launches, markets or
sells the Finished Product in such country or area within the Territory. NaPro's
acceptance of such offer shall be deemed a termination of this Agreement as to
the country or area in question, and the definition of the term "Territory"
shall be deemed thereby to have been amended to exclude that country or area.
NaPro's rights to develop products containing Paclitaxel for manufacture, use
and sale in that country or area shall include the right to use and reference
Paclitaxel Data in the Field only in that country or area without any of the
limitations imposed by Article 11 of this Agreement. Subject to Section 9.7,
Abbott shall have no obligation to manufacture Finished Product for such country
or area.
9.4 NaPro Assistance with Technical Marketing. Abbott shall establish
the strategy for technical marketing of the Finished Product. NaPro may assist
Abbott with technical marketing of the Finished Product at NaPro's cost and
expense beginning not
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earlier than the number of months determined by the Marketing Committee
following the First Commercial Sale of the Finished Product in the United
States. Such technical marketing performed by NaPro may include participation
(in conjunction with an Abbott representative) in symposia, conventions, and
trade shows, in the oncology market. Representatives of NaPro involved in
technical marketing shall be appropriately trained as experts in the Field
(defined as medical or technical personnel with specific knowledge and training
in oncology practice). NaPro shall limit the number of NaPro representatives
involved in technical marketing activities to five (5) employees of NaPro, so as
to allow proper coordination with Abbott. If NaPro participates in the technical
marketing, NaPro and Abbott shall work together to coordinate the technical
marketing for the Finished Product so as to present a uniform marketing program
to End-User Customers. All materials and technical marketing programs must be
approved prior to use by the Marketing Committee.
9.5 Co-Promotion of Finished Product. In the event that Abbott is in
Material Breach of Abbott's obligation under Section 9.3 and such Material
Breach has not been cured by Abbott within ninety (90) days following the
written decision of the neutral in an ADR proceeding brought under Exhibit G,
NaPro may, at its option, itself establish a sales force to co-promote the
Finished Product along with Abbott at NaPro's sole expense. Subject to NaPro's
assistance with technical marketing, Abbott shall remain responsible for all
Finished Product marketing and sales. Any co-promotion activities by NaPro must
be approved by Abbott and shall comply with: (a) the marketing strategies
employed by Abbott; and (b) applicable regulations of the FDA and or other
regulatory authorities. All publications or promotional materials used by NaPro
in its co-promotion activities must be approved by the Marketing Committee in
advance of any dissemination. The percentage of Net Sales on which Additional
Consideration pursuant to Sections 4.1 through 4.3 are made shall not be
adjusted in the event that NaPro co-promotes the Finished Product.
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Furthermore, NaPro may challenge Abbott's failure to comply with the terms of
this Article 9 only one (1) time per Sales Year.
9.6 Trademarks. In the event that Abbott desires to pursue trademark
protection for the Finished Product, Abbott shall, at its sole discretion,
select and protect such trademark. Any such trademark or trademark application
shall be owned exclusively by Abbott, and NaPro shall have no rights to such
trademark(s) during the Term or thereafter, except as provided in Sections
15.6.2 or 15.6.3 as otherwise expressly agreed to in writing by Abbott.
9.7 Manufacturing of Other Formulated Products. From time to time
during the Term, NaPro may request Abbott to consider manufacturing formulated
products containing Paclitaxel for sale by NaPro or other persons outside the
Field or outside the Territory. Upon such request by NaPro, Abbott shall
negotiate in good faith with NaPro with respect to such request.
ARTICLE 10
PROPRIETARY RIGHTS; PATENT ENFORCEMENT AND INFRINGEMENT
10.1 Patent Rights
10.1.1 NaPro shall, through counsel of its own choosing and at
its own expense, take all reasonable steps to prosecute and maintain NaPro
Patent Rights in the Territory or in certain countries outside the Territory
pursuant to the last sentence of Section 2.1. NaPro shall: (a) provide Abbott
with copies of all documents related to prosecution of NaPro Patent Rights; and
(b) permit Abbott to communicate directly with the attorney responsible for
NaPro Patent Rights. Notwithstanding the foregoing, NaPro shall not be obligated
either: (a) to prosecute any NaPro Patent Rights outside of the Territory solely
to permit Abbott to manufacture Finished product outside of the Territory; or
(b) to consult with Abbott with respect to any NaPro Patent Rights outside of
the Territory.
10.1.2 Abbott shall, through counsel of its own choosing and
at its own expense, take all reasonable steps to prosecute and maintain Abbott
Patent Rights in the
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Territory. Abbott shall: (a) provide NaPro with copies of all documents related
to prosecution of Abbott Patent Rights and (b) permit NaPro to communicate
directly with the attorney responsible for Abbott Patent Rights.
10.2 Program Invention
10.2.1 Invention Disclosure. Program Inventions and Third
Party Technology (except inventions directed to the manufacture of Bulk Drug)
shall be promptly disclosed by the originating Party to the other Party.
10.2.2 Ownership. Ownership of all Program Inventions shall be
vested, respectively, in the Party that invents and jointly by the Parties if
jointly invented with the inventorship of all such Program Inventions determined
according to United States patent law. In the event the Parties cannot agree on
the determination of inventorship of a Program Invention, the Parties shall
jointly select and retain independent patent counsel to determine inventorship.
The determination shall be binding on both parties and each party shall pay one-
half of any costs associated with such determination.
10.2.3 Prosecution and Maintenance
(a) With respect to any Program Inventions owned solely by
one of the Parties, that Party shall be responsible for and control all
decisions and all costs and expenses related to whether and where to file for
patent protection, as well as for the preparation, filing (foreign and/or
domestic), prosecution, issuance and maintenance of patent applications and/or
patents resulting from such Program Inventions. The responsible Party for such
expenses shall inform the other Party at regular intervals, or on written
request, about the status of all patent applications or patents for which it is
responsible under this Section 10.2.3(a).
(b) With respect to any Joint Patent Rights and any
counterparts outside the Territory, the parties shall select independent patent
counsel, mutually acceptable to both Parties, for the preparation, filing
(foreign and/or domestic), prosecution, issuance and maintenance of patent
applications and/or patents covering such Joint Patent
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Rights. The parties shall mutually agree and instruct such patent counsel as to
the patent applications and/or patents covering such Joint Patent Rights. If the
Parties cannot agree, the issue shall be reviewed by the Development Committee
whose decision shall be final. Abbott shall be responsible for all costs and
expenses incurred under this Section 10.2.3(b) within the Territory. NaPro shall
be responsible for all costs and expenses incurred under this Section 10.2.3(b)
outside the Territory.
10.2.4 Trade Secrets. Should NaPro or Abbott elect not to
file, continue prosecution, or permit issuance of a patent application on a
Program Invention that is solely owned by either Party, the other Party shall
have no right to assume responsibility for an application for patent on such
invention.
10.2.5 Cooperation. Each Party shall cooperate with and make
available to the other Party or its authorized attorneys, agents,
representatives, employees or consultants all reasonable assistance necessary or
appropriate to enable the other Party to prepare, file, prosecute and maintain
patent applications and/or resulting patents claiming any Program Invention(s)
or Joint Program Invention(s). Each Party shall provide such cooperation as well
as sign or cause to have signed all documents relating to said patent
applications and/or patents at no charge to the other Party.
10.3 No Other Technology Rights. Except as otherwise specifically
provided in this Agreement, under no circumstances shall a Party hereto or its
sublicensee(s), as a result of this Agreement, obtain any ownership interest or
other right in any pending patent application(s), license(s) or product(s),
including items owned, controlled or developed by, the other Party, or
transferred by the other Party to such Party at any time pursuant to this
Agreement. Each Party covenants that it shall not use or practice any of the
other Party's technology licensed under this Agreement for any purpose except as
expressly permitted in this Agreement.
10.4 Rights to Third Party Technology. [THIS PORTION HAS BEEN
REDACTED.]
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10.5 Notice of Patent Infringement. Each Party shall promptly notify
the other Party of: (a) any possible infringement of a NaPro Patent Right or
Joint Patent Right; or (b) Third Party assertion of infringement by one or both
Parties of a Third Party patent right. Such notice shall be in writing and shall
set forth the details of the known facts relating to such activities.
10.6 Patent Enforcement
[THIS PORTION HAS BEEN REDACTED.]
10.7 Defense of Assertions of Patent Infringement
[THIS PORTION HAS BEEN REDACTED.]
ARTICLE 11
RIGHTS TO REFERENCE AND USE PACLITAXEL
DATA AND EXPAND THE FIELD AND/OR TERRITORY
11.1 Abbott Exclusive Option Period for Other Territories and Expansion
of the Field. For a period of time beginning on the Effective Date and ending
two hundred seventy (270) days after the Effective Date (the "Exclusive Option
Period"), Abbott shall have the right to negotiate exclusively with NaPro and
NaPro shall negotiate exclusively with Abbott with respect to:
11.1.1 a license or similar arrangement covering the NaPro
Technology and/or grant of rights to develop, register, market or sell Finished
Product in any country outside the Territory ("Other Territory Rights") except
for: (a) Other Territory Rights granted by NaPro to F.H. Faulding prior to the
Effective Date; and (b) Other Territory Rights as to which NaPro is in
significant contract negotiations with a Third Party and/or has entered into a
contract with a Third Party as of the Effective Date, both of which groups of
Other Territory Rights are listed in Exhibit F-2 (collectively referred to as
the "Unavailable Territories"); and
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11.1.2 within the Territory, expanding the Field to include
any other methods of delivery or forms of Paclitaxel and uses not contemplated
as of the Effective Date by this Agreement ("Expanded Field Rights").
11.2 Abbott Right of First Refusal for Development Opportunities. From
time to time following the Effective Date, in the event that: (a) one or more of
the Unavailable Territories shall become available either because (i) the Other
Territory Rights of F.H. Faulding shall cease to be exclusive or (ii) any of the
negotiations referred to in Section 11.1.1(b) (with respect to the Third Party
with which NaPro is in negotiations with or has granted other Territory Rights
to as of the Effective Date) shall terminate within two (2) years following the
Effective Date without NaPro having entered into a license or similar
arrangement granting Other Territory Rights and/or Expanded Field Rights, or
once a license or similar arrangement is entered into covering Other Territory
Rights and/or Expanded Field Rights and such arrangement later ceases to be
exclusive; or (b) the Exclusive Option Period has ended and NaPro desires to
solicit or consider offers from any Third Party with respect to the Other
Territory Rights and/or Expanded Field Rights in any particular country; then
NaPro shall give Abbott written notice of its intent to undertake development,
marketing or sale of products containing Paclitaxel in the previously
Unavailable Territory or to grant Other Territory Rights and/or Expanded Field
Rights in any particular country (each a "Development Opportunity" and
collectively the "Development Opportunities").
Upon the giving of such notice of a Development Opportunity: (x) NaPro
and Abbott shall have the rights and obligations specified in Section 11.3 if
the Development Opportunity would include the use of, or right of reference to,
Paclitaxel Data; and (y) NaPro and Abbott shall have the rights and obligations
specified in Section 11.4 if the Development Opportunity would not include the
use of, or right of reference to, Paclitaxel Data.
11.3 Development Opportunities that Include Paclitaxel Data
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11.3.1 Within thirty (30) days after the date Abbott receives
a written notice pursuant to Section 11.2, Abbott shall notify NaPro in writing
of Abbott's interest in the Development Opportunity. If Abbott does not deliver
a written notice as contemplated by the preceding sentence, then Abbott shall
have no further rights under this Section 11.3 with respect to the Development
Opportunity.
11.3.2 In the event that Abbott delivers to NaPro the written
notice contemplated by the first sentence of Section 11.3.1, NaPro shall
negotiate with Abbott exclusively and in good faith for a period of not less
than ninety (90) days after Abbott delivers to NaPro such written notice. The
ninety (90) day period contemplated by this Section 11.3.2 may be extended by
mutual written agreement of the Parties; provided, however, the failure by
either Party to agree to extend the negotiation period shall not be evidence of
any failure to negotiate in good faith. If the Parties do not reach a written
agreement covering such Development Opportunity during such ninety (90) day
period or longer period if mutually agreed, then NaPro shall have the
opportunity to solicit offers from Third Parties for the Development
Opportunity.
11.3.3 In the event that: (a) the ninety (90) day negotiation
period as described in 11.3.2 ends and the Parties do not execute a definitive
agreement covering the Development Opportunity; (b) during the ninety (90) day
negotiation period, Abbott offered in writing economic terms which were rejected
by NaPro ("Abbott's Economic Terms"); and (c) during the Term, NaPro
subsequently solicits and receives a bona fide Third Party offer with respect to
such Development Opportunity; then NaPro shall be free enter into an agreement
with that Third Party regarding the Development Opportunity if the written
economic terms (taken in the aggregate) and as determined by a mutually
acceptable Third Party independent consultant/appraiser knowledgeable in the
area) offered by the Third Party ( "Third Party's Economic Terms") are more
favorable to NaPro (taken in the aggregate and as determined by a mutually
acceptable Third Party independent consultant/appraiser knowledgeable in the
area) than Abbott's Economic Terms (taken in the
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aggregate), upon which event Abbott shall have no further rights with respect to
such Development Opportunity. If, on the other hand, Abbott's Economic Terms
(taken in the aggregate) are more favorable to NaPro than the Third Party's
Economic Terms (taken in the aggregate), then Abbott shall have the right for a
period of thirty (30) days to determine whether to accept the Third Party's
Economic Terms as the basis for an arrangement with NaPro with respect to the
Development Opportunity. All determinations as to whether a Third Party's
Economic Terms are more or less favorable than Abbott's Economic Terms shall be
made as provided in Section 11.3.3.1. If at the end of such thirty (30) day
period (or longer if mutually agreed upon by the Parties) Abbott and NaPro have
not executed a definitive agreement after good faith negotiations substantially
on the Third Party's Economic Terms, then Abbott shall have no further rights
with respect to such Development Opportunity. The thirty (30) day period
contemplated by this Section 11.3.3 may be extended by mutual written agreement
by the Parties; provided, however, the failure by either Party to agree to
extend the negotiation period shall not be evidence of any failure to negotiate
in good faith.
11.3.3.1 NaPro shall notify Abbott in writing of
NaPro's reasonable determination as to whether the Third Party's Economic Terms
(taken in the aggregate) are more or less favorable to NaPro than Abbott's
Economic Terms (taken in the aggregate) not later than: (a) ten (10) Business
Days following the date that NaPro received the formal written offer from the
Third Party containing the Third Party's Economic Terms; or (b) thirty (30)
Business Days prior to the time that NaPro enters into a definitive agreement
with the Third Party regarding the Development Opportunity, outlining the basis
for its determination. If Abbott agrees with NaPro's determination, then the
determination shall be final and binding on the Parties. If Abbott does not
agree with NaPro's determination, then Abbott shall notify NaPro in writing not
later than the close of business on the tenth (10th) Business Day following
NaPro's delivery of the notice specified in the first sentence of this Section
11.3.3.1. If Abbott has not given NaPro the notice contemplated by the preceding
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sentence within the time required, then NaPro's determination shall be final and
binding on the Parties. If Abbott desires more information regarding or does not
agree with NaPro's determination, the Parties shall attempt to resolve in good
faith their difference of opinion on the question of whether the Third Party's
Economic Terms (taken in the aggregate) are more or less favorable to NaPro than
Abbott's Economic Terms (taken in the aggregate), for a period of ten (10)
Business Days after Abbott delivers the notice contemplated by the preceding
sentence. If at the end of such ten (10) Business Day period, the Parties still
have a difference of opinion, the Parties shall select a mutually acceptable
Third Party independent appraiser knowledgeable in the area to determine whether
the Third Party's Economic Terms (taken in the aggregate) are more or less
favorable to NaPro than Abbott's Economic Terms (taken in the aggregate). If the
Parties are unable to agree on such an appraiser within ten (10) Business Days
after the end of the ten (10) Business Day period described in the preceding
sentence, then the question of whether the Third Party's Economic Terms (taken
in the aggregate) are more or less favorable to NaPro than Abbott's Economic
Terms (taken in the aggregate) shall be determined by a panel of three Third
Party independent appraisers knowledgeable in the area, one of whom shall be
selected in good faith by NaPro, another of whom shall be selected in good faith
by Abbott, and the third of whom shall be selected by such other two appraisers
or, if such appraisers shall be unable to agree upon a third appraiser within
ten (10) Business Days of the selection date of the second of such two
appraisers, by the Center for Public Resources; provided, that if either party
fails to select its appraiser within ten (10) Business Days after the expiration
of the time period for selecting a single appraiser, then the question of
whether a Third Party's Economic Terms (taken in the aggregate) are more or less
favorable to NaPro than Abbott's Economic Terms (taken in the aggregate) shall
be determined solely by the appraiser selected by the other party. The appraiser
or appraisers appointed pursuant to the foregoing procedure shall be instructed
to determine whether the Third Party's Economic Terms (taken in the aggregate)
are more or less favorable to NaPro than Abbott's Economic Terms (taken
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in the aggregate) within fifteen (15) Business Days after the final appointment
of all appraisers, and such determination shall be final and binding upon the
Parties. The procedure described in this Section 11.3.3.1 is the exclusive means
to resolve any dispute as to whether a Third Party's Economic Terms (taken in
the aggregate) are more or less favorable to NaPro than Abbott's Economic Terms
(taken in the aggregate), and neither Party shall have recourse to the
procedures contemplated by Section 16 or any legal process for purposes of
resolving any such dispute.
11.3.4 Upon completion of the procedures contemplated by
Section 11.3.3, if NaPro has entered into an agreement covering such Development
Opportunity with a Third Party, then the Territory covered by such Development
Opportunity shall be deemed an Unavailable Territory for purposes of this
Agreement and added to Exhibit F-2 in the manner contemplated by Section 18.6.
11.3.5 Notwithstanding the foregoing provisions of this
Section 11.3, if the Development Opportunity concerns Expanded Field Rights,
then the right to refer to and use the Paclitaxel Data in connection with the
Development Opportunity shall be limited to the Expanded Field Rights and shall
not encroach the Field.
11.4 Development Opportunities that Do Not Include Paclitaxel Data
11.4.1 Within thirty (30) days after the date Abbott receives
a written notice
pursuant to Section 11.2, Abbott shall notify NaPro in writing of Abbott's
interest in the Development Opportunity. If Abbott does not deliver a written
notice as contemplated by the preceding sentence, then Abbott shall have no
further rights under this Section 11.4 with respect to the Development
Opportunity.
11.4.2 In the event that Abbott delivers to NaPro the written
notice contemplated by the first sentence of Section 11.4.1, NaPro shall
negotiate with Abbott exclusively and in good faith for a period of not less
than ninety (90) days after Abbott delivers to NaPro such written notice. If the
Parties do not reach a written agreement covering such Development Opportunity
during such ninety (90) day period, then Abbott
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shall have no further rights under this Section 11.4 with respect to such
Development Opportunity. The ninety (90) day period contemplated by this Section
11.4.2 may be extended by mutual written agreement of the Parties; provided,
however, the failure by either Party to agree to extend the negotiation period
shall not be evidence of any failure to negotiate in good faith.
11.4.3 In the event that: (a) the ninety (90) day negotiation
period as described in 11.4.2 ends and the Parties do not execute a definitive
agreement covering the Development Opportunity; and (b) during the Term, NaPro
subsequently solicits and receives a bona fide Third Party offer with respect to
such Development Opportunity; then NaPro shall be free enter into an agreement
with that Third Party regarding the Development Opportunity.
11.4.4 Upon completion of the procedures contemplated by
Section 11.4.3, if NaPro has entered into an agreement covering such Development
Opportunity with a Third Party, then the territory covered by such Development
Opportunity shall be deemed an Unavailable Territory for purposes of this
Agreement and added to Exhibit F-2 in the manner contemplated by Section 18.6.
11.4.5 NaPro shall not use or have the right to reference any
Paclitaxel Data in connection with any Development Opportunity entered into with
a Third Party under this Section 11.4.
11.5 Abbott Initiation of Negotiations. If Abbott should have an
interest in and desire to negotiate for any Other Territory Rights and/or
Expanded Field Rights, Abbott will give written notice to NaPro and if NaPro is
interested in discussing an arrangement, such discussions will commence pursuant
to Sections 11.3 or 11.4, as applicable.
11.6 Certain Obligations Regarding Use of Paclitaxel Data and Joint
Patent Rights.
11.6.1 Notwithstanding anything in this Article 11 to the
contrary, during the Term in the Field in the Territory, NaPro shall not: (a)
use, reference or have any rights to
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use or reference any Paclitaxel Data; (b) develop, manufacture or sell a
Competitive Paclitaxel Product either itself or with or through a Third Party by
licensing NaPro Technology to a Third Party or a NaPro Affiliate; or (c)
develop, manufacture, market or sell a Competitive Paclitaxel Product either
itself or with or through a Third Party which uses or references or infringes a
Valid Claim of any Joint Program Inventions or Joint Patent Rights.
11.6.2 In the Unavailable Territories in which NaPro or a
NaPro Affiliate is either marketing or selling a product containing Paclitaxel
in the Field or has a definitive written agreement with a Third Party with
respect to the marketing or sale of a product containing Paclitaxel in the
Field, then during the Term Abbott will not: (a) market or sell any products
containing Paclitaxel in the Field where a Valid Claim of a Joint Patent Right
would be infringed by the marketing or sale of such product; or (b) practice, or
grant any sublicense with respect to, Joint Patent Rights in the Field.
11.7 Exclusive Enumeration of Rights. Except as set forth in this
Article 11: (a) Abbott shall not have any rights to use or reference Paclitaxel
Data outside the Field or outside the Territory; (b) Abbott shall have the
exclusive right (exclusive even as to NaPro) to reference and to use the
Paclitaxel Data in the Field in the Territory; and (c) NaPro shall have the
exclusive right to reference and to use Paclitaxel Data (exclusive even as to
Abbott) either outside the Field or outside the Territory. Notwithstanding the
foregoing, NaPro's exclusive rights to reference and to use the Paclitaxel Data
either outside the Field or outside the Territory shall apply only after such
time as any Development Opportunity w
ith respect to the Paclitaxel Data has been
offered to Abbott and Abbott has had the opportunity to negotiate with NaPro
with respect to the Development Opportunity pursuant to the terms of Section
11.3.
11.8 Certificate of Free Sale. Upon the request of NaPro from time to
time, Abbott shall provide a certificate of free sale or other documentation
necessary to permit NaPro to utilize any Regulatory Approval in both the
Unavailable Territories and the other countries outside the Territory in which
Abbott had the right to pursue a Development
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Opportunity but did not enter into a definitive agreement with NaPro to pursue
the Development Opportunity pursuant to this Article 11.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES
12.1 Reciprocal. Each Party hereby represents and warrants to the other
Party the following:
12.1.1 Corporate Status. It is a corporation duly organized
and validly existing under the laws of its state or other jurisdiction of
incorporation or formation.
12.1.2 Authority. It has the power and authority to execute
and deliver this Agreement, and to perform its obligations hereunder.
12.1.3 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: (a) any loan agreement,
guaranty, financing agreement, agreement affecting a product or other agreement
or instrument binding or affecting it or its property; (b) the provisions of its
charter documents or by-laws; or (c) any order, writ, injunction or decree of
any court or governmental authority entered against it or by which any of its
property is bound.
12.1.4 No Approvals. Except for the DMF, Application(s) for
Regulatory Approval or Regulatory Approvals for Bulk Drug and Finished 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.
12.1.5 Enforceability. This Agreement has been duly
authorized, executed and delivered, and constitutes its legal, valid and binding
obligation enforceable against it in
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accordance with its terms subject to laws governing 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 regardless of whether such remedies are pursued at law or in
equity.
12.1.6 Compliance with Laws. It shall comply with all
applicable laws and regulations relating to its activities under this Agreement.
12.1.7 Data. The Parties represent and warrant that to the
best of their knowledge the Pre-Clinical and Clinical Data is true and accurate,
and that each Party has the right to share the Pre-Clinical and Clinical Data
with the other Party.
12.1.8 Year 2000 Warranties. Each Party makes the following
warranties with respect to Year 2000 compliance:
12.1.8.1 NaPro warrants that all software used by it
in the
manufacture of Bulk Drug and in its business relationship with Abbott will, on
and following January 1, 2000, have no lesser functionality with respect to
dates prior to January 1, 2000 than previously with respect to dates prior to
January 1, 2000.
12.1.8.2 Abbott warrants that all software used by
it in its business relationship with NaPro will, on and following January 1,
2000, have no lesser functionality with respect to records containing dates
before or after January 1, 2000.
12.2 NaPro Representations and Warranties. NaPro represents and
warrants the following:
12.2.1 The NaPro Patents have not knowingly been obtained
through any activity, omission or representation that would limit or destroy the
validity of the NaPro Patents and to the best of NaPro's knowledge, the existing
NaPro Patents are valid and enforceable.
12.2.2 To the best of NaPro's knowledge, there are no actions,
threatened or pending, before any court relating to the NaPro Patents.
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12.2.3 Exhibit E-1 lists all patents issued and patent
applications in the Territory filed on or before the Effective Date of this
Agreement within the scope of the NaPro Patents. All of the inventors named in
the patents and patent applications listed in Exhibit E-1 have assigned, or are
under an obligation to assign, to NaPro all of their right, title and interest
in the inventions claimed.
12.2.4 Except for the rights granted to IVAX under the IVAX
Agreements, NaPro has not authorized others to practice NaPro Technology in the
Territory in the Field.
12.2.5 Except for the rights granted to IVAX under the IVAX
Agreement, NaPro owns and possesses all right, title and interest in and to the
NaPro Patents and no Third Party has acquired, owns or possesses any right,
title or interest in or to the NaPro Patents in the Territory in the Field.
12.2.6 Except for: (a) the rights granted to IVAX under the
IVAX Agreement; and (b) the obligations of NaPro under [THIS PORTION HAS BEEN
REDACTED.] NaPro has no agreement with any Third Party which (i) gives any
rights to such Third Party, or (ii) imposes obligations upon NaPro or gives any
rights to NaPro which, in either case, would adversely affect the rights of
Abbott or the obligations of NaPro under this Agreement.
12.2.7 The IVAX Agreement is the only agreement with any Third
Party that grants any rights to any NaPro Technology in the Territory in the
Field.
12.2.8 NaPro shall not take any action with respect to the
IVAX Agreement that would alter, expand or extend the scope of any license
granted thereunder.
12.2.9 NaPro has not and will not provide to IVAX any rights
to any intellectual property developed or in-licensed during the course of the
Development Program and NaPro has no outstanding agreements with IVAX or any
IVAX Affiliate that either grant any rights to NaPro Technology or impose
obligations upon NaPro with respect to Paclitaxel in the Territory other than
the IVAX Agreement.
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12.2.10 NaPro has provided Abbott with a true and correct copy
of the IVAX Agreement (including all exhibits thereto), which is attached to
this Agreement as Exhibit F-3. NaPro has not and will not extend, enlarge, or
otherwise modify the IVAX Agreement, and the IVAX Agreement is currently in
effect according to its written terms.
[THIS PORTION HAS BEEN REDACTED.] NaPro's obligation to supply IVAX with
Paclitaxel will be complete and NaPro shall not supply any further quantities of
Bulk Drug to IVAX.
12.3 NaPro Representations Regarding Data. NaPro represents, warrants
and covenants that, with respect to Pre-Clinical and Clinical Data and other
information that NaPro may share with F.H. Faulding or with any other Third
Party with which NaPro enters into an arrangement for the development and rights
to market and sell Finished Product in European countries pursuant to Article
11, NaPro shall have in place with F.H. Faulding or such Third Party, a written
agreement sufficient to protect the confidential nature of all information and
data derived pursuant to the Development Program shared with F.H.
Faulding or such Third Party.
12.4 NaPro Representations Regarding IVAX. NaPro represents and
warrants that it has no obligation to share with IVAX the Pre-Clinical and
Clinical Data developed during the course of the Development Program and
covenants that it will not share with IVAX the Pre-Clinical and Clinical Data
developed during the course of the Development Program.
12.5 NaPro Representations Regarding Bryn Mawr. NaPro represents,
warrants and covenants that it: (a) is not in breach of the Bryn Mawr Agreement;
(b) shall maintain the Bryn Mawr Agreement and shall comply with and fulfill all
of its obligations thereunder; (c) shall not modify the terms of the Bryn Mawr
Agreement in any way that may adversely affect NaPro's obligations under this
Agreement or any of Abbott's rights under this Agreement; (d) shall be
responsible for and shall pay all amounts owing under the Bryn Mawr Agreement
both under the license or any sublicense necessary for either NaPro or the
Stand-By Manufacturing Source to manufacture the Bulk Drug; and (e) will obtain
any consents from Bryn Mawr that may be necessary to sublicense all rights to
the technology granted to NaPro under this Agreement whether to Abbott or
Abbott's designated Stand-By
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Manufacturing Source. Notwithstanding anything contained in this Section 12.5,
NaPro shall not have any obligation to provide to a Stand-By Manufacturing
Source Confidential Information or technical support for the semi-synthetic
manufacture of Bulk Drug.
12.6 NaPro Representations Regarding F.H. Faulding. NaPro has the right
to: (a) use the F.H. Faulding Formulation in connection with the Development
Program and other activities contemplated by this Agreement; (b) share with
Abbott the data and other information derived pursuant NaPro's relationship with
F.H. Faulding, and (c) shall not modify the Faulding Agreement in any way that
may adversely affect Abbott's rights under this Agreement.
12.7 Future Necessary Licenses. With regard to any technology that
NaPro may obtain rights to in the future necessary for the manufacture,
marketing, sale and distribution of Finished Product(s), NaPro shall provide a
license to Abbott to such technology sufficient to permit Abbott to exercise its
rights and discharge its obligations under this Agreement and, in the event that
such technology is obtained from a Third Party, NaPro shall represent, warrant
and covenant that it: (a) shall maintain and comply with any terms of any
agreement with any Third Party regarding such technology; (b) shall not enter
into an agreement with the terms that would adversely affect NaPro's obligations
under this Agreement or any of Abbott's rights under this Agreement; and (c)
shall obtain the necessary approvals to license such technology to Abbott and
its Affiliates. Unless otherwise agreed to in writing by Abbott, the costs and
expenses associated with such technology obtained in the future shall be
NaPro's.
12.8 Abbott Representations and Warranties. Abbott represents and
warrants the following:
12.8.1 Abbott and/or its Affiliates owns and possesses all
right, title and interest in and to the Abbott Formulated Product and, no Third
Party has acquired, owns or possesses any right, title or interest in or to the
Abbott Formulation in the Territory in the Field.
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12.8.2 Neither Abbott nor any of its Affiliates has granted to
any Third Party any rights in or to the Abbott Technology or the Abbott
Formulated Product in the Territory in the Field.
12.8.3 Exhibit E-2 lists all patents issued and patent
applications in the Territory filed on or before the Effective Date of this
Agreement within the scope of the Abbott Patents and hence subject to this
Agreement and all of the inventors named in the patents and patent applications
listed in Exhibit E-2 have assigned, or are under an obligation to assign, to
Abbott all of their right, title an interest in the inventions claimed.
12.8.4 Abbott has no agreement with any Third Party which
either gives any rights to such Third Party or imposes obligations upon Abbott
or gives any rights to Abbott which, in either case, would adversely affect the
rights of NaPro or the obligations of Abbott under this Agreement.
ARTICLE 13
INDEMNIFICATION AND INSURANCE
13.1 Indemnities
13.1.1 NaPro Indemnity. NaPro shall indemnify, defend, and
hold harmless Abbott and its Affiliates and their respective directors,
officers, partners, employees, agents, and representatives (the "Abbott
Indemnified Parties") from and against any and all Indemnifiable Losses to the
extent relating to, resulting from, or arising out of Third Party Claims for:
(a) the failure of the Bulk Drug supplied by NaPro or its Affiliates to meet the
Bulk Drug Warranties as required by Section 8.4.1; (b) NaPro's breach of the
representations and warranties set forth in Article 12 or Section 8.4.1 (c)
NaPro's negligence, willful misconduct or breach of this Agreement; (d) NaPro's
activities in connection with any promotion or technical marketing of the
Finished Product in accordance with Sections 9.4 or 9.5, if applicable,
including, but not limited to misrepresentation of the Finished Product or
representation of the Finished Product other than in accordance with the
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Finished Product Label; (e) fifty percent (50%) of any other Third Party Claims
for product liability for which NaPro is not solely responsible for pursuant to
Section 13.1.1(a) through (d), excluding product liability relating to Bulk Drug
manufactured and supplied by a StandBy Manufacturing Source or Abbott is not
solely responsible for pursuant to Section 13.1.2(a) through (d).
13.1.2 Abbott Indemnity. Abbott shall indemnify, defend, and
hold harmless NaPro and its Affiliates and their respective directors, officers,
partners, employees, agents, and representatives (the "NaPro Indemnified
Parties") from and against any and all Indemnifiable Losses to the extent
relating to, resulting from, or arising out of Third Party Claims for: (a)
failure of the Finished Product to meet the Finished Product Specifications and
applicable GMP for the Finished Product; (b) Abbott's breach of any
representations and warranties set forth in Article 12; (c) Abbott's negligence,
willful misconduct or breach of this Agreement; (d) Abbott's marketing and sale
of the Finished Product in a manner which misrepresents the Finished Product or
represents the Finished Product other than in accordance with the Finished
Product Label; and (e) fifty percent (50%) of any other Third Party Claims for
product liability for which NaPro is not solely responsible for pursuant to
Section 13.1.1(a) through (d) or Abbott is not responsible for pursuant to
Section 13.1.2(a) through (d).
13.1.3 Indemnification Sharing. The Parties understand and
agree that the development, design, clinical activities, Regulatory Approval and
labeling of the Finished Product is a joint effort by the Parties under the
Development Program. Abbott and NaPro shall each be responsible for fifty
percent (50%) of any Third Party Claims for product liability for which neither
NaPro nor Abbott are solely responsible as set forth in Section 13.1.1(a)
through (d) (in the case of NaPro) and Section 13.1.2(a) through (d) (in the
case of Abbott.)
13.1.4 Procedures. If any Indemnitee receives notice of
assertion or commencement of any Third Party Claim against such Indemnitee with
respect to which an
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Indemnifying Party is obligated to provide indemnification under this Agreement,
the Indemnitee will give such Indemnifying Party reasonably prompt written
notice thereof, but in any event not later than ten (10) Business Days after
receipt of such notice of such Third Party Claim. Such notice will describe the
Third Party Claim in reasonable detail, will include copies of all material
written evidence thereof, and will indicate the estimated amount, if reasonably
practicable, of the Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have the right to participate in, or, by
giving written notice to the Indemnitee, to assume, the defense of any Third
Party Claim at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel (reasonably satisfactory to the Indemnitee), and the
Indemnitee will cooperate in good faith in such defense.
13.1.5 Defense. If, within ten (10) Business Days after giving
notice of a Third Party Claim to an Indemnifying Party pursuant to Section
13.1.3, an Indemnitee receives written notice from the Indemnifying Party that
the Indemnifying Party has elected to assume the defense of such Third Party
Claim as provided in the last sentence of Section 13.1.3, the Indemnifying Party
will not be liable for any legal expenses subsequently incurred by the
Indemnitee in connection with the defense thereof; provided, however, that if
the Indemnifying Party fails to take reasonable steps necessary to defend
diligently such Third Party Claim within ten (10) Business Days after receiving
written notice from the Indemnitee that the Indemnitee believes the Indemnifying
Party has failed to take such steps or if the Indemnifying Party has not
undertaken fully to indemnify the Indemnitee in respect of all Indemnifiable
Losses relating to the matter, the Indemnitee may assume its own defense, and
the Indemnifying Party will be liable for all reasonable costs or expenses paid
or incurred in connection therewith. Without the prior written consent of the
Indemnitee, the Indemnifying Party will not enter into any settlement of any
Third Party Claim which would lead to liability or create any obligation on the
part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder.
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13.1.6 Indemnifiable Loss Recovery. If the amount of any
Indemnifiable Loss, at any time subsequent to the making of an Indemnity
Payment, is reduced by recovery, settlement, or otherwise under or pursuant to
any insurance coverage, or pursuant to any claim, recovery, settlement, or
payment by or against any other Person, the amount of such reduction, less any
costs, expenses, premiums or taxes incurred in connection therewith will
promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any
Indemnity Payment the Indemnifying Party will, to the extent of such Indemnity
Payment, be subrogated to all rights of the Indemnitee against any Person that
is not an Affiliate of the Indemnitee in respect of the Indemnifiable Loss to
which the Indemnity Payment related; provided, however, that: (a) the
Indemnifying Party shall then be in compliance with its obligations under this
Agreement in respect of such Indemnifiable Loss; and (b) until the Indemnitee
recovers fully payment of its Indemnifiable Loss, any and all claims of the
Indemnifying Party against any such Person on account of said Indemnity Payment
will be subrogated and subordinated in right of payment to the Indemnitee's
rights against such Person. Without limiting the generality or effect of any
other provision hereof, each such Indemnitee and Indemnifying Party will duly
execute upon request all instruments reasonably necessary to evidence and
perfect the above-described subrogation and subordination rights.
13.2 Insurance. Beginning on the Effective Date and until the date
which is one day prior to the date of First Commercial Sale, NaPro shall
maintain product liability insurance with an A.M. Best Company rating of at
least A+ with a minimum annual amount of: (a) Five Million Dollars ($5,000,000)
per occurrence; and (b) Ten Million Dollars ($10,000,000) in the aggregate.
Beginning on the date of First Commercial Sale and for a period of five (5)
years after termination of this Agreement, NaPro shall maintain product
liability insurance with a A.M. Best Company rating of at least A+ with minimum
annual amounts of: (x) Ten Million Dollars ($10,000,000) per occurrence; and (y)
Forty Million Dollars ($40,000,000) in the aggregate. Upon Abbott's request,
NaPro shall deliver to
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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. Abbott shall be named as an additional insured party
under any such insurance policies.
13.3 Limitations of Damages. Neither Party shall be liable to the other
Party for any incidental or consequential damages arising out of the terms of
this Agreement.
ARTICLE 14
PRODUCT RECALL AND ADVERSE EVENTS
14.1 Recall Notification and Implementation. Each Party shall promptly
notify the other Party in writing of any facts relating to the advisability of
the recall, destruction or withholding from the market of Bulk Drug or Finished
Product anywhere in the Territory (collectively, "Recall"). If at any time: (a)
any governmental or regulatory authority in the Territory issues a request,
directive or order for a Recall; (b) a court of competent jurisdiction orders a
Recall in the Territory; or (c) Abbott determines, following consultation with
NaPro (except in emergency situations in which there is insufficient time for
such consultation), that a Recall in the Territory is necessary or advisable,
Abbott shall take all appropriate corrective actions to effect the Recall and
NaPro shall provide Abbott with such cooperation in connection with the Recall
as Abbott may reasonably request.
14.2 Recall Costs and Expenses. Abbott shall bear the costs and
expenses of any Recall in the Territory to the extent such Recall is the result
of any fault or omission attributable to Abbott or its Affiliates, and NaPro
shall bear all costs and expenses of any Recall in the Territory to the extent
such Recall is the result of any fault or omission attributable to NaPro or its
Affiliates.
14.3 Adverse Events. During the term, each Party shall promptly inform
the other Party of any information it receives or develops regarding the safety
of Bulk Drug or Finished Product or any product containing Bulk Drug anywhere in
the world and shall promptly report to the other Party any information regarding
serious adverse reactions or
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side effects related to the use of the Bulk Drug or Finished Product. To allow
the Parties to comply with the adverse drug experience reporting requirements
for Bulk Drug or Finished Product to the FDA and its counterpart regulatory
agencies in the Territory NaPro shall notify Abbott in writing of any "adverse
drug experience" that is considered "serious" as defined in FDA regulations (21
CFR 314.80) or the comparable regulations of other regulatory agencies in the
Territory, regardless of source, so that Abbott will receive such notice within
three (3) Business Days of NaPro's first having "obtained or otherwise received
such" "adverse drug experience" from "any source", as those terms are defined in
FDA regulations (21 CFR 314.80). Such information shall be communicated by NaPro
to Abbott at the following address:
To Abbott: Abbott Laboratories
Hospital Products Division
Attn: Divisional Vice President of
Pharmaceutical and Clinical Development
Dept. 970, Bldg. AP30
200 Abbott Park Road
Abbott Park, Illinois, U.S.A. 60064
Telephone: (847) 937-8190
Facsimile: (847) 938-6590
14.4 Complaint Handling. Abbott shall be responsible for addressing and
resolving customer complaints regarding the Finished Product distributed by
Abbott in the Territory, and for answering and responding to any customer
questions with respect to the Finished Product in the Territory; provided,
however, that NaPro shall reasonably cooperate with Abbott to resolve complaints
related to Bulk Drug. Any serious adverse event report or medical complaint
received by Abbott or NaPro from any country in the Territory relating to the
Finished Product shall be promptly investigated by Abbott. NaPro shall notify
Abbott three (3) Business Days after becoming aware of an adverse event or
medical complaint, and provide to Abbott contact information to allow Abbott to
act on the matter with customers
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within the Territory. Abbott shall promptly report to the FDA or applicable
regulatory authority any such report that involves an event that is serious (as
those terms are defined by then applicable FDA or applicable regulatory
authority regulations), but in any event within fifteen (15) calendar days of
receipt (term definition and reporting requirements to be modified to meet then
applicable regulations). Abbott shall prepare adverse event periodic reports in
accordance with FDA or applicable regulatory authority regulations. Abbott shall
be responsible for submission of periodic reports to the FDA or applicable
regulatory authority. Adverse event reports required to be made to regulatory
agencies in other countries shall be handled solely by NaPro, with Abbott
providing necessary supportive information.
ARTICLE 15
TERM AND TERMINATION
15.1 Term and Termination. The term of this Agreement ("Term") shall
commence on the Effective Date and shall continue, unless terminated earlier
pursuant to this Article 15, until the earlier to occur of: (a) the date of
expiration of the last to expire of the NaPro Patent Rights containing a Valid
Claim that would be infringed by the manufacture, use (involving methods of
administration), marketing or sale of a Finished Product in the Territory; or
(b) twenty (20) years following the Effective Date. The consequences of
termination, whether by expiration of the Term or by earlier termination
pursuant to this Article 15, shall be as set forth in Section 15.6. For the
purposes of this Section 15.1, the term "date of expiration" shall mean the date
on which the NaPro Patent Rights containing a Valid Claim expire following their
full term (including any extension) as granted by the United States Patent and
Trademark Office or the equivalent patent authority in other countries in the
Territory (with respect to non-U.S. patents) and shall not include pre-mature
invalidation as contemplated in Section 15.5.2.
15.2 Termination by Abbott Without Cause. Abbott may terminate
this Agreement at any time without cause upon twelve (12) months prior written
notice to
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NaPro. Abbott shall be responsible for payment of any milestone payments set
forth in Section 3.1, that have been earned prior to the date of Abbott's notice
of termination.
15.3 Termination by Either Party 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 upon thirty (30) days' written notice to the
other Party in any of the following events:
15.3.1 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.
15.3.2 Material Breach. If the other Party commits a Material
Breach of this Agreement and the Party alleged to be in breach fails to either:
(a) cure such Material Breach; or (b) commence dispute resolution proceedings
under Article 16 contesting whether a Material 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 Material Breach. "Material Breach"
as used herein shall mean:
15.3.2.1 with respect to Abbott, a willful failure
by Abbott to pay any: (a) milestone payments pursuant to Section 3.1; (b)
Additional Consideration payments pursuant to Article 4; (c) Development Plan
funding payments that Abbott is obligated to make pursuant to Section 6.2; (d)
or Bulk Drug supply payments pursuant to Sections 8.2 and 8.3 (except to the
extent of any good faith payment dispute submitted to Alternate Dispute
Resolution pursuant to Article 16); or
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15.3.2.2 with respect to NaPro, a willful failure to
perform any material obligations of NaPro under Article 6 and/or the Development
Plan, and/or under Article 8.
15.3.3 Notwithstanding anything to the contrary herein, NaPro
may challenge Abbott's failure to comply with its obligations pursuant to
Section 9.3 as a potential Material Breach of the terms of this Agreement only
one (1) time per Sales Year.
15.4 [SECTION NOT USED]
15.5 Termination by Abbott for Cause.
15.5.1 Related to Finished Product. If at any time during the
Term: (a) the Development Committee determines that obtaining or maintaining a
Regulatory Approval is not feasible due to any one (1) or more of the following:
(i) documented adverse reactions or other safety issues with the Finished
Product, (ii) the Finished Product's lack of efficacy or limited efficacy, or
(iii) registration is not allowed or approved because of orphan drug status of a
product containing Paclitaxel owned, marketed or sold by a Third Party; (b) the
Finished Product is withdrawn or recalled from the market in any country in the
Territory due to safety issues or adverse events which lead Abbott to conclude
that such safety issues or adverse events could not be alleviated using
commercially reasonable efforts to allow re-entry into the market; (c) the
Finished Product is withdrawn or recalled from the market in any country in the
Territory due to efficacy issues which lead the Development Committee to
conclude that such efficacy issues could not be alleviated using commercially
reasonable efforts to allow re-entry into the market; (d) Regulatory Approval
for at least one Finished Product is not received on or before [THIS PORTION HAS
BEEN REDACTED.] ; or (e) Abbott withdraws any Application of Regulatory Approval
for a Finished Product due to documented adverse reactions or other safety
issues which lead Abbott (in consultation with the Development Committee) to
conclude that such adverse reactions and safety issues could not be alleviated
using commercially reasonable efforts and that re-submission of another
Application for Regulatory Approval would not be reasonably feasible, then
Abbott
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may, at its option, terminate this Agreement upon thirty (30) days' prior
written notice to NaPro. Abbott may, at its option, exercise its right of
termination under this Section 15.5.1 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. Upon such termination, the definition of
the term "Territory" shall be deemed thereby to have been amended to exclude
that country or area, and NaPro shall have the right to develop products
containing Paclitaxel for manufacture, use and sale in that country or area and
the right to use and reference Paclitaxel Data without any of the limitations
imposed upon NaPro by Article 11 of this Agreement.
15.5.2 Related to Patent Invalidation. In the event that one
(1) or more claims of an issued and unexpired NaPro Patent (in the case of the
NaPro Formulated Product) or Abbott Patent (in the case of the Abbott Formulated
Product) or a patent included in Joint Patent Rights or any patent in-licensed
from a Third Party as contemplated in Section 2.3 has been held unenforceable,
unpatentable or invalid by a decision of a court or governmental agency of
competent jurisdiction that is unappealable or unappealed within the time
allowed for appeal, or has been admitted by NaPro (in the case of a NaPro
Patent) or Abbott (in the case of an Abbott Patent) to be invalid or
unenforceable through reissue, disclaimer, abandonment or otherwise, and the
result of such invalidation(s) is that the manufacture, sale or Commercial Use
of no Finished Product(s) in accordance with the actual or anticipated NDA
approval is covered by any Valid Claim of a NaPro Patent (in the case of the
NaPro Formulated Product) or Abbott Patent (in the case of the Abbott Formulated
Product) or a patent included in Joint Patent Rights or any patent in-licensed
from a Third Party as contemplated in Section 2.3, then Abbott may, at its
option, terminate this Agreement upon thirty (30) days' prior written notice to
NaPro.
15.5.3 Related to Breach of Representation or Warranty. In the
event that NaPro breaches a representation or warranty made by NaPro in Article
12, which breach has a material adverse effect on the Development Program or the
development, marketing, or
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sale of Finished Product, Abbott may terminate this Agreement upon thirty (30)
days prior written notice to NaPro.
15.6 Consequences of Termination. In the event of expiration or early
termination of this Agreement pursuant to this Article 15, the Parties shall
have the following rights and obligations:
15.6.1 Expiration of Term. Upon expiration of the Term: (a)
the License shall be fully-paid up and irrevocable; (b) Abbott shall be entitled
to retain all Paclitaxel Data within the Territory and shall have the exclusive
right (exclusive even as to NaPro) to use all Paclitaxel Data within the
Territory, within the Field; and (c) subject to any arrangements negotiated by
the Parties pursuant to Article 11, NaPro shall be entitled to retain all
Paclitaxel Data outside the Territory or outside the Field and use all
Paclitaxel Data outside the Territory or outside the Field. Subject to any
arrangements negotiated by the Parties pursuant to Article 11, Abbott shall not
be entitled to use or reference any Paclitaxel Data outside the Territory or
outside the Field. NaPro shall not be entitled to use or reference any
Paclitaxel Data within the Territory, within the Field.
15.6.2 Termination by Abbott Without Cause. If Abbott
terminates the Agreement without cause pursuant to Section 15.2: (a) the License
shall automatically terminate upon the effective date of termination; (b) Abbott
shall transfer and/or return to NaPro all Regulatory Approvals and copies of all
Paclitaxel Data, and Abbott shall have no right to use such Paclitaxel Data; (c)
Abbott shall pay for and NaPro shall deliver to Abbott any Bulk Drug scheduled
to be delivered within the six (6) months following the date of the notice of
termination at a cost of [THIS PORTION HAS BEEN REDACTED.] of Bulk Drug; (d)
NaPro may, at its option, repurchase from Abbott at Abbott's cost, any remaining
inventory of Bulk Drug or Finished Product on the effective date of termination;
(e) upon NaPro's request, the Parties shall reasonably cooperate to effectuate
the transfer or assignment of End-User Customer contracts for Finished Product
from Abbott to NaPro; (f) Abbott shall grant to NaPro a co-exclusive license to
use the trademarks referred to in
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Section 9.6 for a transition period not to exceed two (2) years from the date of
termination; and (g) Abbott shall pay NaPro a termination fee determined in
accordance with the calculation mutually agreed upon by the Parties
("Termination Fee") upon the effective date of termination, which Termination
Fee may be offset, at Abbott's option, either against any remaining indebtedness
of NaPro under the Loan Agreement or any other financial obligation of NaPro,
including any amounts otherwise due Abbott as a credit against Additional
Consideration. The Termination Fee is limited to the [THIS PORTION HAS BEEN
REDACTED.] The Termination Fee shall be mutually agreed upon between the
Parties, but in no event shall [THIS PORTION HAS BEEN REDACTED.]
Notwithstanding the foregoing, Abbott shall not pay a Termination Fee in the
event that the date of termination is after the date which is two (2) years
after the date of First Commercial Sale.
15.6.3 Termination by NaPro for Cause. In the event NaPro
terminates this Agreement for cause pursuant to Section 15.3, then: (a) the
provisions of Section 15.6.2(a)-(f) shall be applicable; and (b) NaPro may
either, at its option, require Abbott to pay a Termination Fee as referenced in
Section 15.6.2(g) or seek and, if successful, collect damages from Abbott in an
ADR proceeding pursuant to Article 16. Notwithstanding the foregoing, Abbott
shall not pay a Termination Fee in the event that the date of termination is
after the date which is two (2) years after the date of First Commercial Sale.
15.6.4 Termination by Abbott for Cause. In the event Abbott
terminates this Agreement for cause pursuant to Section 15.3, then: (a) the
provisions of Section 15.6.1(a)-(c), shall be applicable and (b) Abbott may seek
and, if successful, collect damages from NaPro in an ADR proceeding pursuant to
Article 16.
15.6.5 [SECTION NOT USED]
15.6.6 Termination by Abbott for Cause Related to Finished
Product. In the event of termination of this Agreement by Abbott for cause
related to the Finished Product pursuant to Section 15.5.1 or 15.5.2, then: (a)
the provisions of Section 15.6.2(a),
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(b), (d) and (e) shall be applicable; and (b) the due date(s) for any remaining
payments due to Abbott by NaPro under the Loan Agreement shall be extended by
twelve (12) months, provided that interest shall continue to accrue during such
twelve (12)-month period in accordance with the terms of the Loan Agreement.
15.6.7 Termination by Abbott for Cause Related to a Breach of
Representation or Warranty. In the event of termination of this Agreement by
Abbott for cause related to the breach of a representation and warranty made by
NaPro in Article 12 pursuant to Section 15.5.3, then: (a) the License shall
automatically terminate upon the effective date of termination; (b) Abbott shall
transfer and/or return to NaPro all Regulatory Approval and copies of all
Paclitaxel Data; provided, however, that Abbott shall have the right to retain
copies of the Paclitaxel Data and use such Paclitaxel Data; (c) Abbott shall not
be obligated to pay for any Bulk Drug scheduled to be delivered after the date
of termination; and (d) NaPro may, at its option, repurchase from Abbott, at
Abbott's cost, any remaining inventory of Bulk Drug on the effective date of
termination. In addition to termination of this Agreement pursuant to Section
15.5.3 and the consequences of termination of this Agreement pursuant to this
Section 15.6.7, Abbott shall have all other remedies available to it for breach
of contract and may seek and, if successful, collect damages from NaPro in an
ADR proceeding pursuant to Article 16.
15.6.8 NaPro Sale of Finished Product Post-Termination. In the
event that NaPro continues to sell Finished Product following termination of the
Agreement, NaPro shall indemnify and hold harmless Abbott for any and all Third
Party Claims of whatever nature and however arising, except with respect to any
Finished Product Manufactured by Abbott prior to termination and sold by NaPro
following termination (if applicable) as set forth in Section 13.1.2(a).
15.6.9 Joint Patent Rights and Joint Program Inventions. In
the event of termination of this Agreement for whatever reason, both Parties
shall have the right to practice or grant sublicenses under the Joint Patent
Rights and Joint Program Inventions
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anywhere in the Territory or outside the Territory either inside or outside the
Field. Notwithstanding the foregoing, (except in the event of termination of
this Agreement by Abbott pursuant to Section 15.3.2.2), then for a period of
five (5) years following the date of termination, Abbott shall not practice or
grant sublicenses under the Joint Patent Rights or Joint Program Inventions in
the Unavailable Territories in the Field where NaPro has an existing agreement
with a Third Party relating to the Joint Patent Rights or Joint Program
Inventions at the time of termination of this Agreement; subject, however, to
Abbott's right to continue to practice, or maintain sublicenses to, Joint Patent
Rights or Joint Program Inventions which are in effect at the date of
termination.
15.7 Survival of Certain Provisions. Expiration or early termination of
this Agreement pursuant to this Article 15 shall not relieve either Party of its
obligations incurred prior to expiration or termination, including, but not
limited to obligations to make payments which were earned and accrued prior to
expiration or termination and obligations for indemnification which arose out or
actions which occurred prior to termination. The following sections shall
survive expiration or termination of this Agreement by any means and for any
reason following such expiration or termination for such period of time as
stated in this Agreement or as indicated in this Section 15.7:
<TABLE>
<CAPTION>
<S> <C>
Article 1 Definitions;
Section 5.2 Record Keeping and Audit Rights (records to be
maintained not less than three (3) years post
expiration or termination.);
Section 8.4.1 Bulk Drug Warranties;
Section 8.7.1 Qualification of Stand-By Manufacturing Facility;
Section 10.3 Ownership;
Section 10.5(b) Prosecution and Maintenance (provided, however, that after
termination, (i) outside counsel of NaPro and
Abbott shall jointly make any determination that
the Development Committee was required to make
pursuant to the third full sentence of
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Section 10.5(b), and (ii) in lieu of the
requirements of the last sentence of Section
10.5(b), Abbott and NaPro shall each be responsible
for 50% of all costs and expenses incurred under
Section 10.5 within the Territory, and NaPro shall
be responsible for all costs and expenses incurred
under Section 10.5 outside the Territory);
Section 10.7 Cooperation;
Section 10.9 Patent Enforcement;
Section 10.10 Defense of Certain Claims;
Section 10.11 Expense for Defense;
Section 10.12 Settlement (if litigation is pending at termination date);
Section 12 Representations and Warranties (provided, however, that the
provisions of Section 12 shall survive for (i) only
three (3) years following termination with respect
to Indemnifiable Losses asserted with respect to
Third Party Claims; and (ii) only two (2) years
with respect to Claims asserted by the Parties
against each other that do not involve the
assertion of a Third Party Claim);
Section 13 Indemnification (survival for three (3) years) (in the event that
NaPro continues to sell the Finished Product in the event of
termination, NaPro shall indemnify Abbott for 100% of all Claims
and Losses arising out of continued sale of the Finished Product);
Section 15.6 Consequences of Termination;
Article 16 Alternative Dispute Resolution;
Section 17 Confidentiality and Publicity (provided, however, that the rights to
disclose or use Confidential Information shall be commensurate
with each Party's rights to use Paclitaxel Data following
termination);
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Section 18.2 Severability;
Section 18.5 Waiver;
Section 18.7 Notices;
Section 18.8 Entire Agreement;
Section 18.10 Interpretation; and
Section 18.11 Governing Law.
</TABLE>
15.8 Effect of Termination on Milestone Payments. Abbott shall not be
responsible for any milestone payments pursuant to Section 3.1 which are earned
after the date of Abbott's notice of termination to NaPro under any provision
under this Article 15.
ARTICLE 16
ALTERNATIVE 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 mechanism:
16.1 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 or pursuant to which there is a dispute and shall
briefly state the initiating Party's claims. 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 16.1, to the following corporate officers of the
Parties for resolution:
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For Abbott:
President, Hospital Products Division (or his or her designee)
For NaPro:
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.
16.2 Alternate Dispute Resolution. 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 16.1
shall be finally settled by binding Alternate Dispute Resolution in accordance
with the procedures set forth in Exhibit G ("ADR"); provided, however, that an
assertion by NaPro that Abbott is in Material Breach of Abbott's obligations
pursuant to Section 9.3 shall not be more than one (1) time in any Sales Year.
Judgment upon any award rendered by the neutral in such proceedings may be
issued and enforced by any court having competent jurisdiction.
16.3 ADR Ruling. The neutral in any ADR proceeding under Section 16.2
relating to an alleged breach of the Agreement by either Party shall determine
and advise the Parties in writing:
16.3.1 whether either Party has committed a breach of any of
its obligations under this Agreement; and
16.3.2 if either Party has committed a breach;
16.3.2.1 whether such breach is a Material Breach or
a breach other
than a Material Breach; and
16.3.2.1 the appropriate remedy for any such breach
pursuant to Section 16.4.
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16.4 ADR Remedies. The neutral in any ADR proceeding under Section 16.2
shall have the authority to award the non-breaching Party the following relief
and any other relief as set forth in Article 15:
16.4.1 For a 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, in the Territory or on a country-by-country basis);
and
16.4.2 For a breach other than a Material Breach, an award of
damages and/or equitable relief, but not termination of this Agreement in whole
or in part or any licenses granted to the breaching Party under this Agreement.
16.5 Effect on Time Periods in this Agreement. If there is a dispute
regarding the exercise of any right, or the performance of any obligation, under
this Agreement, and this Agreement provides that such right may or must be
exercised, or that such performance must be rendered, by a specified date or
within a specified period of time, then the applicable date shall be extended,
and the applicable time period shall be tolled, without prejudice to either
Party pending the outcome of the ADR proceeding.
16.6 Exclusivity. The ADR process contemplated by this Article 16 shall
be the exclusive means for either Party to this Agreement to seek resolution of
any dispute or adjudication of alleged breach arising out of, relating to, or
connected with this Agreement, except that either Party may bring an action
before a competent court for the adoption of provisional or protective measures
or equitable relief. The pendency of a matter referred to ADR shall not excuse
any Party for performance under this Agreement, it being understood that such
performance is without prejudice to the Party's position in the dispute
resolution process.
16.7 Express Remedies. If this Agreement provides for an express remedy
in the event of a breach or an express outcome upon the occurrence of certain
events, the neutral in the ADR proceeding shall not have the authority to award
a different remedy or mandate a
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different outcome, unless both Parties agree. The preceding sentence shall not
limit the neutral's ability to award a remedy or mandate an outcome that is in
addition to the express remedy or outcome provided in this Agreement.
ARTICLE 17
CONFIDENTIALITY AND PUBLICITY
17.1 Transfer of Information. Each Party has provided to the other
information relating to Paclitaxel in connection with negotiation of this
Agreement and each Party will in the future provide information in relation to
this Agreement which the disclosing Party considers to be confidential
(collectively, "Confidential Information"). "Confidential Information" shall
include, but is not limited to, the terms and provisions of this Agreement, Bulk
Drug Forecast, Finished Product, sales forecasts, Bulk Drug Specifications,
Development Plan, Finished Product Specifications, NaPro Technology, Abbott
Technology, Pre-Clinical and Clinical Data and information related to NaPro
Formulated Product, Abbott Formulated Product and NaPro Oral Formulated Product.
"Confidential Information" shall not include any information which:
17.1.1 Is now, or hereafter becomes, through no act or failure
to act on the part of the receiving Party, generally known or available to the
public;
17.1.2 Is known to the receiving Party at the time of
disclosure as evidenced by the receiving Party's written records;
17.1.3 Is hereafter furnished to the receiving Party by a
Third Party, as a matter of right and without restriction on disclosure;
17.1.4 Is developed independently by or for the receiving
Party without reference to Confidential Information, as evidenced by the
receiving Party's competent written records;
17.1.5 Is legally required to be disclosed by the receiving
Party, provided that the receiving Party gives the other Party prompt notice of
such legal requirement such
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that such other Party shall have the opportunity to apply for confidential
treatment of such Confidential Information; or
17.1.6 Is disclosed with the written approval of the
disclosing Party.
17.2 Restricted Disclosure. The Parties will restrict
dissemination of Confidential Information received from the other Party to only
those of its employees and agents with a need to know such information, except
that:
17.2.1 In the case of Abbott, NaPro Confidential Information
may be provided to regulatory authorities in connection with any application for
an IND, or Application(s) for Regulatory Approval for the Finished Product(s).
17.2.2 In the case of NaPro, Abbott Confidential Information
may be provided to: (a) regulatory authorities in connection with any
application for an IND or an equivalent application in countries in the
Territory other than the United States; (b) Application(s) for Regulatory
Approval for the Finished Product(s); or (c) to any other Person with which
NaPro has an agreement relating to the Application for Regulatory Approval and
sale of the Finished Product, solely in the Unavailable Territories for the
purpose of obtaining an IND or Application for Regulatory Approval for the
Finished Product, subject to suitable confidentiality undertakings.
17.2.3 In the case of Abbott, NaPro Confidential Information
may be used and provided to Third Parties to the extent reasonably necessary for
Abbott to perform its obligations and/or exercise its rights under this
Agreement, including but not limited to, performing research and development
activities pursuant to the Development Plan and in connection with the sale of
Finished Product in the Field in the Territory during the Term; provided,
however, that as a pre-condition to any disclosure by Abbott to such Third
Parties, Abbott shall procure from such Third Parties for the joint benefit of
Abbott and NaPro a written agreement to be bound to confidentiality obligations
no less strict than those imposed by this Article 17. Abbott shall supply NaPro
with a copy of each such written agreement within a reasonable period of time
after its execution by Abbott and such Third
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Party. Without NaPro's prior written consent and subject to the provisions in
Section 8.7.1, Abbott shall under no circumstances disclose any NaPro
Confidential Information to any Third Party which, itself or through an
Affiliate, manufactures or sells products containing Paclitaxel.
17.2.4 Following expiration or termination of this Agreement
and for a period of seven (7) years thereafter, neither Party shall utilize the
Confidential Information of the other Party and neither Party shall provide
Confidential Information to any Third Party, except as specifically stated in
this Agreement. Each Party shall, within twenty (20) Business Days following
expiration or termination of this Agreement, return to the other Party or
destroy all of the other Party's documents (whether in written or electronic (to
the extent ordinarily accessible) or other tangible format) containing
Confidential Information which are in that Party's or its agents' possession,
and destroy all documents (whether in written or electronic (to the extent
ordinarily accessible) or other tangible format) created by a Party or its
agents which incorporate the other Party's Confidential Information, however
only to the extent of the Confidential Information or the other Party. One (1)
copy of such documents containing Confidential Information so returned or
destroyed may be retained by each Party as part of its permanent records solely
for purposes of maintaining a record of Confidential Information returned or
destroyed. Upon completion of the obligations contained herein, each Party shall
provide the other a written document, signed by an officer of such Party,
certifying compliance with the provisions of this Section 17.2.4.
17.3 Precautions. Each Party shall maintain Confidential Information
received from the other Party as confidential, and protect the same from misuse,
espionage, loss or theft and shall not disclose the Confidential Information to
others except as provided in Section 17.2.
17.4 Duration of Confidentiality Obligation. Unless otherwise stated in
this Article 17, the confidentiality obligations of the Parties hereunder shall
remain in effect during the Term and for seven (7) years after expiration or
termination of the Term.
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17.5 Publicity and Announcements. The Parties agree that, upon
execution of this Agreement, a press release approved by both parties will be
issued. Except as specifically set forth in this Section 17.5, neither Party (an
"Originating Party") shall: (a) originate any publicity, news release or other
public announcement, written or oral, whether to the public press, stockholders
or otherwise, relating to this Agreement, matters relevant to this Agreement,
amendments hereto or performance by the Parties hereunder or the Bulk Drug or
Finished Product; or (b) use the name of the other Party in any publicity, news
release or other public announcement, except (i) with the prior written consent,
review and approval of the other Party (a "Reviewing Party") in which case the
Originating Party shall forward the proposed public announcement to the
Receiving Party (which, in the case of Abbott, shall be its Manager of Public
Affairs, Hospital Products Division, and in the case of NaPro, shall be its
General Counsel) not less than three (3) Business Days prior to its use or
publication, or (ii) as required by written state or federal securities law or
regulation in the written opinion of legal counsel to the Originating Party, in
which case the Originating Party will give to the Reviewing Party at least one
(1) full twenty-four (24) hour Business Day prior written notice of such
proposed legally required disclosure to review, comment and propose
modifications. In the event that the Reviewing Party fails to respond within the
three (3) Business Days in the case of (i), or the twenty-four (24) hour period
in the case of (ii), the Originating Party shall be free to issue such release
without comment from the Reviewing Party.
ARTICLE 18
MISCELLANEOUS PROVISIONS
18.1 Force Majeure. Except as set forth in Section 8.7.2, in the event
that either Party's performance of its obligations under this Agreement shall be
prevented by any cause beyond its reasonable control, including without
limitation acts of God, acts of government, shortage of material, accident,
fire, delay or destruction of means of transport or other disaster, provided
that the affected Party shall have used its reasonable best efforts to avoid
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or remove the cause of such nonperformance and to minimize the duration and
negative affect of such nonperformance, then such affected Party's performance
shall be excused and the time for performance shall be extended for the period
of delay or inability to perform due to such occurrence. The affected Party
shall continue performance under this Agreement using its best efforts as soon
as such cause is removed.
18.2 Severability. In the event that any provision of this Agreement
shall be held to be unenforceable, invalid or in contravention of applicable
law, such provision shall be of no effect, the remaining portions of this
Agreement shall continue in full force and effect, and the parties shall
negotiate in good faith to replace such provision with a provision which effects
to the extent possible the original intent of such provision.
18.3 Assignment/Third Parties. Neither Party shall assign any rights or
obligations under this Agreement to Third Parties without the prior written
consent of other Party. Notwithstanding the foregoing, (a) Abbott may assign
this Agreement or any of its rights or obligations under this Agreement to one
or more of its Affiliates (provided that Abbott guarantees the performance of
such assigned rights or obligations by the Affiliate and such Affiliate shall
become a party to this Agreement) without NaPro's prior written consent, (b)
Abbott may engage a Third Party to assist Abbott in marketing, sales and
distribution activities for the Finished Product, provided that Abbott continues
to market and sell the Finished Product as well, (c) Abbott may perform any one
or more of its obligations (other than marketing, sales and distribution
activities, which is addressed in Subsection (b)) set forth in this Agreement by
appointing Third Parties to perform some or all of Abbott's obligations
hereunder on Abbott's behalf and in Abbott's name, provided that NaPro has given
Abbott its prior written consent to each such appointment, which consent shall
not be unreasonably withheld or delayed, (d) either Party may assign this
Agreement and all of its rights and obligations under this Agreement to any
successor (whether by merger, sale of assets, or otherwise) to all of the
respective Party's business related to this Agreement, and (e) subject to
approval of the Development Committee, NaPro may engage one or more
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Third Parties to assist NaPro or Abbott in conducting research and development
activities under the Development Program.
18.4 Relationship of Parties. Nothing contained in this Agreement shall
be construed so as to operate or to place any Party hereto in the relationship
of employee or agent or joint venturer or legal representative of the other
Party. It is hereby expressly agreed and acknowledged that each of the parties
hereto is an independent contracting Party which does not have the authority or
power for or on behalf of the other Party hereto to enter into any contract to
incur debts, to accept money, to assume any obligations or to make any
warranties or representations whatsoever.
18.5 Waiver. The waiver by either Party of a breach or a default of any
provision of this Agreement by the other Party shall not be construed as a
waiver of any succeeding breach of the same or any other provisions, nor shall
any delay or omission on the part of either Party to exercise or avail itself of
any right, power or privilege that it has, or may have hereunder, operate as a
waiver of any right, power or privilege by such Party.
18.6 Contract Modification. Any modification, alteration, change or
variation in any provision of this Agreement shall be only made in a writing
that refers to this Agreement executed by both parties.
18.7 Notices. Notices by one Party to the other shall be in writing
and, unless otherwise provided in this Agreement, will be deemed to have been
duly given when delivered in person or when dispatched by registered mail or
reputable overnight air delivery service (receipt provided) or by a telecopy, a
copy of which is dispatched by reputable overnight delivery service, as follows:
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If to NaPro:
NaPro BioTherapeutics, Inc.
6304 Spine Road, Unit A
Boulder, Colorado 80301
Attention: Chief Executive Officer
Fax: (303) 530-1296
with a copy to:
Bartlit Beck Herman Palenchar & Scott
511 Sixteenth Street, Suite 700
Denver, CO 80202
Attention: James L. Palenchar
Fax: (303) 592-3140
If to Abbott:
Abbott Laboratories
Hospital Products Division
200 Abbott Park Road, Bldg. AP-30
Abbott Park, Illinois 60064
Attention: President, Hospital Products Division
Fax: (847) 937-2927
with a copy to:
Abbott Laboratories
Domestic Legal Operations
100 Abbott Park Road, Dept. 322, Bldg. AP6D
Abbott Park, Illinois 60064
Attention: Divisional Vice President
Fax: (847) 938-1206
18.8 Entire Agreement. This Agreement, together with the Stock Purchase
Agreement and the Loan Agreement, constitutes the entire agreement of the
parties (and into which all prior negotiations, commitments, representations and
undertakings with respect to the subject matter are merged) and there are no
other undertakings, warranties or agreements between the parties relating to the
subject matter of this Agreement. This Agreement is not
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based upon any representations as to profit or worth nor has any representation
been made (whether by this Agreement or otherwise) to induce either NaPro or
Abbott to accept and execute this Agreement.
18.9 Compliance with Laws. Each Party shall comply with, and cause
their Affiliates to comply with, all applicable laws, rules, regulations and
treaties in each country in which each such Party shall manufacture, store,
market, sell and/or distribute either the Bulk Drug or Finished Product with
respect to their conduct of each of their respective rights and obligations
under this Agreement.
18.10 Interpretation. Headings and captions in this Agreement are for
ease of reference only and shall not be used to interpret this Agreement. The
language of this Agreement shall be deemed to be the language mutually chosen by
the parties and no rule of strict construction shall be applied against either
Party hereto.
18.11 Governing Law. This Agreement shall be construed in accordance
with and governed by the internal laws of the State of Illinois, excluding such
state's rules relating to conflicts of laws, and its form, execution, validity,
construction and effect shall be determined in accordance with such internal
laws.
18.12 Counterparts. This Agreement may be executed in two (2)
counterparts, each of which shall be an original, but which together shall form
one agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Development,
License and Supply Agreement to be executed by their duly authorized
representatives as of the Effective Date.
ABBOTT LABORATORIES NAPRO BIOTHERAPEUTICS, INC.
By: /s/ Richard A. Gonzalez By: /s/ Sterling K. Ainsworth
Print Name: Richard A. Gonzalez Print Name: Sterling K. Ainsworth
Title: President Title: President/CEO
102
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
NAPRO BIOTHERAPEUTICS, INC.
AND
ABBOTT LABORATORIES
JULY 23, 1999
<PAGE>
EXECUTION COPY
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
RECITALS..................................................................................................1
TERMS AND CONDITIONS......................................................................................1
1. Definitions..............................................................................1
2. Purchase and Sale........................................................................4
(a) Purchase and Sale of the Initial Shares..........................................4
(b) Purchase and Sale of the Additional Shares.......................................4
(c) Conditions to Obligations of Abbott to Purchase Additional Shares................5
(d) Conditions to Obligations of NaPro for the Additional Shares.....................7
(e) Certain Adjustments..............................................................7
3. Representations and Warranties of NaPro..................................................8
(a) Authority of NaPro...............................................................8
(b) Validity.........................................................................9
(c) Capitalization...................................................................10
(d) SEC Filings......................................................................11
(e) Absence of Certain Changes.......................................................13
(f) ERISA............................................................................13
(g) Proprietary Rights...............................................................13
(h) Litigation.......................................................................13
(i) Investment Company...............................................................14
4. Representations and Warranties of Abbott.................................................14
(a) Authority of Abbott..............................................................14
(b) Validity.........................................................................14
(c) Resale...........................................................................15
(d) Receipt of Information...........................................................15
5. Registration Rights......................................................................15
(a) Demand Registration Rights.......................................................16
(b) Conditions to Demand Registration................................................16
(c) Piggyback Registration...........................................................17
(d) Expenses.........................................................................19
(e) Indemnification..................................................................19
(f) Provisions Applicable to all Registrations.......................................21
6. Certain Limitations......................................................................28
7. Holdback.................................................................................29
8. SEC Filings; Public Information..........................................................30
9. [Reserved]...............................................................................30
10. Listing of Shares........................................................................30
11. Press Releases...........................................................................31
12. Alternative Dispute Resolution...........................................................31
(a) Contract Breach/Cure.............................................................31
(b) Disputes, etc....................................................................32
i
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(c) Exclusive Remedy.................................................................32
(d) Judicial Review..................................................................32
13. Miscellaneous............................................................................32
(a) Survival.........................................................................32
(b) Parties and Interest.............................................................33
(c) Entire Transaction...............................................................33
(d) Assignment.......................................................................33
(e) Counterparts.....................................................................33
(f) Headings.........................................................................33
(g) Notices..........................................................................33
(h) Governing Law....................................................................35
(i) Amendments and Waivers...........................................................35
(j) Severability.....................................................................35
(k) Expenses.........................................................................35
(l) Construction.....................................................................36
(m) Restrictions on Transfer.........................................................36
(n) Legends..........................................................................37
(o) Specific Performance.............................................................38
(p) Incorporation of Schedules.......................................................38
</TABLE>
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
July 23, 1999, by and between NaPro BioTherapeutics, Inc., a Delaware
corporation ("NaPro"), and Abbott Laboratories, an Illinois corporation
("Abbott"). Each of NaPro and Abbott are referred to in this Agreement as a
"Party" and collectively, the "Parties."
RECITALS
WHEREAS, NaPro and Abbott are simultaneously with this Agreement
entering into a Development, License and Supply Agreement dated as of July 23,
1999 (the "Development Agreement") pursuant to which, among other things, (i)
Abbott will purchase bulk Paclitaxel from NaPro, (ii) Abbott and NaPro shall
work together to develop and obtain necessary regulatory approvals for one or
more formulations of Paclitaxel, (iii) Abbott will obtain a license to certain
technology owned by NaPro covering formulation or use of Paclitaxel, and (iv)
Abbott may manufacture and will sell finished Paclitaxel products(s);
WHEREAS, NaPro and Abbott are simultaneously with this Agreement
entering into a Loan and Security Agreement dated as of July 23, 1999 (the "Loan
Agreement") in part to finance the process of developing formulations of
Paclitaxel;
WHEREAS, Abbott wishes to subscribe for and purchase, and NaPro wishes
to issue and sell, certain shares of the voting Common Stock, par value $.0075
per share (the "Common Stock"), of NaPro identified in Section 2, on the terms
and subject to the conditions of this Agreement.
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NOW, THEREFORE, in consideration of the premises and the respective
promises made in this Agreement, and in consideration of the representations,
warranties, and covenants contained in this Agreement, the Parties agree as
follows:
TERMS AND CONDITIONS
1. Definitions.
"Abbott" shall have the meaning set forth in the preamble to this
Agreement.
"Affiliate" shall mean with respect to a Person, any other person
Controlling, Controlled by or under common Control with such Person. With
respect to Abbott, the term "Affiliate" shall specifically exclude TAP Holdings
Inc., TAP Finance Inc. and TAP Pharmaceuticals Inc.
"Additional Closing Dates" shall mean each of the First Additional
Closing Date and the Second Additional Closing Date.
"Additional Shares" shall mean each of the First Additional Shares and
the Second Additional Shares.
"Application for Regulatory Approval" shall have the meaning given it
in the Development Agreement.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of Chicago are authorized by law to close.
"Change in Control" shall mean a merger of NaPro with or into, or the
sale of all or substantially all of the assets of NaPro to, any company the
equity market capitalization of which is at least fifteen billion dollars
($15,000,000,000) and that is engaged primarily in the manufacture, distribution
or sale of pharmaceutical or health care products.
"Common Stock" shall have the meaning set forth in the Recitals to this
Agreement.
"Control" and the correlative terms "Controlling" and "Controlled"
shall mean the power, whether or not exercised, directly or indirectly to direct
the management and policies of a Person whether by contract, through the
ownership of voting securities or otherwise.
"Development Agreement" shall have the meaning set forth in the
Recitals to this Agreement.
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"Development Committee' shall have the meaning given it in the
Development Agreement.
"Development Program" shall have the meaning given it in the
Development Agreement.
"FDA" shall have the meaning given it in the Development Agreement.
"Finished Product" shall have the meaning given it in the Development
Agreement.
"First Additional Closing Date" shall have the meaning given in Section
2(b)(iii).
"First Additional Shares" shall have the meaning set forth in Section
2(b)(i).
"Initial Shares" shall have the meaning set forth in Section 2(a)(i).
"Knowledge" means actual knowledge after reasonable inquiry and
investigation.
"NaPro" shall have the meaning set forth in the preamble to this
Agreement.
"NDA" shall have the meaning given it in the Development Agreement.
"Paclitaxel" shall have the meaning given it in the Development
Agreement.
"Person" means an individual, partnership, trust, corporation, joint
venture, limited liability company, association, government bureau or agency or
other entity of whatever kind or nature.
"Primary Offering" shall have the meaning given it in Section 5(b).
"Registrable Securities" means shares of Common Stock, other than the
Registrable Shares, that are subject to registration rights under written
agreements with NaPro.
"Registrable Shares" means (i) such of the Shares as have been issued
at any time, (ii) any other securities received on account of such of the Shares
as have been issued at any time in any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, and (iii) any other
shares of Common Stock acquired pursuant to the terms of this Agreement and any
other securities received on account of such shares in any stock split, stock
dividend, recapitalization, merger, consolidation or similar event; provided,
however, that such securities will cease to be Registrable Shares when they (i)
have been distributed to the public pursuant to an offering registered under the
Securities Act, (ii) have been sold in compliance with an exemption under the
Securities Act, (iii) may, in the opinion of counsel to NaPro addressed to
Abbott and NaPro, reasonably satisfactory to Abbott and its counsel, be offered
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and sold by Abbott 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 Rule 144, or (iv)
shall have ceased to be outstanding.
"SEC" shall have the meaning given it in Section 4(d).
"Second Additional Closing Date" shall have the meaning set forth in
Section 2(b)(iii).
"Second Additional Shares" shall have the meaning set forth in Section
2(b)(ii).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Shares" means all of the Initial Shares, the First Additional Shares
and the Second Additional Shares outstanding at any time.
References to Sections and Schedules are references to the Sections and
Schedules of this Agreement unless otherwise stated.
2. Purchase and Sale.
(a) Purchase and Sale of the Initial Shares.
(i) Against delivery of the purchase price therefor,
NaPro hereby sells and issues to Abbott, and Abbott hereby subscribes for and
purchases, 400,000 shares of Common Stock (the "Initial Shares"). The purchase
price for the Initial Shares shall be $5.00 per share of Common Stock or
$2,000,000 in the aggregate.
(ii) Abbott hereby delivers to NaPro the payment
described in Section 2(a)(i) by wire transfer of immediately available funds,
and (ii) NaPro hereby delivers to Abbott the duly executed and authenticated
stock certificates, representing all of the Initial Shares to be purchased by
Abbott pursuant to Section 2(a)(i). The certificates representing the Initial
Shares shall bear the legend set forth in Section 13(n).
(b) Purchase and Sale of the Additional Shares.
(i) [THIS PORTION HAS BEEN REDACTED] NaPro shall
sell to Abbott, and Abbott shall purchase from NaPro, 400,000 shares of Common
Stock (the "First
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Additional Shares") at a purchase price of $5.00 per share of Common
Stock or $2,000,000 in the aggregate.
(ii) [THIS PORTION HAS BEEN REDACTED] NaPro
shall sell to
Abbott, and Abbott shall purchase from NaPro, 1,200,000 Shares (the
"Second Additional Shares") at a purchase price of $5.00 per share of
Common Stock or $6,000,000 in the aggregate.
(iii) Abbott and NaPro shall agree on a mutually
acceptable Business Day within the times specified in Section 2(b)(i)
and 2(b)(ii) on which thc sale and purchase of the First Additional
Shares (the "First Additional Closing Date") and the sale and purchase
of the Second Additional Shares (the "Second Additional Closing Date")
shall take place. At least forty eight (48) hours prior to each
Additional Closing Date, NaPro shall deliver to Abbott written wire
transfer instructions for the payment of the purchase price for the
Additional Shares to be sold and purchased pursuant to the terms of
this Section 2(b), which instructions shall include NaPro's bank name
and address, ABA routing number and NaPro's account number.
(c) Conditions to Obligations of Abbott to Purchase Additional
Shares. The obligations of Abbott to purchase each of the Additional Shares are
subject to the satisfaction on or prior to each Additional Closing Date of all
of the following conditions, unless waived by Abbott:
(i) Representations and Warranties. The
representations and warranties of NaPro set forth in this Agreement shall be
true and correct as of the date of this Agreement and as if made at and as of
each Additional Closing Date, except for such changes as are disclosed in
NaPro's filings with the SEC after the date of this Agreement, and Abbott shall
have received a certificate or certificates signed by a responsible officer of
NaPro to such effect.
(ii) Performance of Obligations. NaPro shall have
performed all obligations required to be performed by it under this Agreement
prior to each Additional Closing Date, and Abbott shall have received a
certificate signed by a responsible officer of NaPro to such effect.
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(iii) Other Documents. NaPro shall have delivered to
Abbott (i) a copy of the Certificate of Incorporation of NaPro, as in effect on
the each Additional Closing Date, certified by the Secretary of State of the
State of Delaware, if amended since the date of this Agreement, (ii) a
certificate of the Secretary of State of the State of Delaware, as of the most
recent practicable date, as to the good standing of NaPro, and (iii) a
certificate of the Secretary of NaPro dated as of the applicable Additional
Closing Date, certifying as to the Board Resolutions authorizing the execution
and delivery of this Agreement and the other transactions contemplated hereby,
and that such resolutions have not been amended or repealed and are in full
force and effect as of such Additional Closing Date.
(iv) Development Agreement. The Development
Agreement shall be in full force and effect, and no notice of termination shall
have been given thereunder.
(v) Regulatory Approvals, etc. Any required
regulatory approvals and/or associated waiting periods applicable to the sale
and purchase of the Additional Shares shall have been obtained and/or expired.
(vi) Certificates for the Additional Shares. NaPro
shall have delivered to Abbott valid certificates for the First Additional
Shares or the Second Additional Shares, as the case may be, registered in
Abbott's name.
(vii) Change in Control. There shall not have
occurred or be pending any Change in Control other than a Change in Control to
which Abbott has consented in writing. A Change in Control shall be considered
"pending" for purposes of this Section 2(c)(vii) upon the execution of a
definitive agreement to consummate a Change in Control transaction conditioned
only on stockholder approval.
(d) Conditions to Obligations of NaPro for the Additional
Shares. The obligations of NaPro to consummate the transactions contemplated
hereby in connection with each of the Additional Shares are subject to the
satisfaction on or prior to each Additional Closing Date of all of the following
conditions, unless waived by NaPro:
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(i) 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 each Additional Closing Date and NaPro shall have
received a certificate or certificates signed by a responsible officer of Abbott
to such effect.
(ii) 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 each Additional Closing Date and
NaPro shall have received a certificate or certificates signed by a responsible
officer of Abbott to such effect.
(iii) Regulatory Approvals, etc. Any required
regulatory approvals and/or associated waiting periods applicable to the sale
and purchase of the Additional Shares shall have been obtained and/or expired.
(iv) Payment. Abbott shall have delivered to NaPro
the applicable purchase price for the First Additional Shares or the Second
Additional Shares, as the case may be.
(e) Certain Adjustments. If NaPro at any time effects a
subdivision or combination of the outstanding Common Stock, the purchase price
for the Additional Shares shall be decreased, in the case of a subdivision, or
increased, in the case of a combination, in the same proportions as the Common
Stock is subdivided or combined, in each case effective automatically upon, and
simultaneously with, the effectiveness of the subdivision or combination which
gives rise to the adjustment. If NaPro at any time pays a dividend, or makes any
other distribution, to holders of Common Stock payable in shares of Common
Stock, or fixes a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock, the purchase price for the Additional Shares shall be adjusted by
multiplying it by a fraction:
(i) the numerator of which shall be the total number
of shares of Common Stock outstanding immediately prior to such
dividend or distribution; and
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(ii) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such dividend or
distribution (plus, if NaPro paid cash instead of fractional shares otherwise
issuable in such dividend or distribution, the number of additional shares which
would have been outstanding had NaPro issued fractional shares instead of cash);
in each case effective automatically as of the date NaPro shall take a record of
the holders of its Common Stock for the purpose of receiving such dividend or
distribution (or if no such record is taken, as of the effectiveness of such
dividend or distribution). Whenever the purchase price for the Additional Shares
shall be adjusted, NaPro shall make a certificate signed by a corporate officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
and the purchase price for the Additional Shares after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by first
class mail postage prepaid) to Abbott promptly after each adjustment.
3. Representations and Warranties of NaPro. NaPro represents and
warrants to Abbott that, as of the date of this Agreement:
(a) Authority of NaPro. NaPro is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
and each of NaPro's subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its state or county of
incorporation. NaPro and each of its subsidiaries 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 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
or advisable, except where the failure to be so licensed or qualified would not
have a material adverse effect on NaPro and its subsidiaries taken as a whole.
NaPro has the corporate power and authority to execute and deliver this
Agreement, and to perform its obligations under this Agreement, including the
issuance, sale and delivery of the Shares. All
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corporate action required to be taken by NaPro to authorize the execution,
delivery and performance of this Agreement, including (i) the issuance, sale and
delivery of the Shares and (ii) the approval of any transaction or series of
transactions authorized or permitted under Section 2 of this Agreement in which
Abbott may become an "interested stockholder" (as defined in Section 203 of the
Delaware General Corporation Law) which transaction or series of transactions do
not violate the terms of this Agreement, has been duly taken.
(b) Validity. This Agreement has been duly executed and
delivered by NaPro and constitutes the valid and legally binding obligation of
NaPro, enforceable against NaPro in accordance with its terms and conditions.
The execution and delivery of this Agreement and consummation of the
transactions contemplated by this Agreement by NaPro is not prohibited by, does
not violate, conflict with, or require consent under any provision of, and does
not result in a default under, and does not and will not permit the acceleration
of any obligation under (in each case, with or without the giving of notice or
the passage of time, or both): (i) the charter or bylaws of NaPro; (ii) any
material contract, agreement, mortgage, indenture, lease, license or other
instrument, permit or franchise to which NaPro or its subsidiaries is a party or
by which NaPro is bound or applicable to NaPro or its properties; (iii) any
order, writ, injunction, decree or judgment of any court or governmental agency
applicable to NaPro or its subsidiaries or their properties; or (iv) any law,
rule or regulation applicable to NaPro or its subsidiaries, except in the case
of clauses (ii), (iii) and (iv) for such violations, conflicts, consents,
defaults or accelerations that would not affect the enforceability of this
Agreement in accordance with its terms or otherwise have a material adverse
effect on the purchase or sale of the Shares. Assuming the truth of the
representations and warranties set forth in Section 4 of this Agreement, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with any court, administrative agency or
commission or other governmental authority or other Person is or will be
required by, or with respect to, NaPro in connection with the execution and
delivery of this Agreement, the issuance, offer and sale of the Shares or the
consummation by NaPro of the transactions
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contemplated by this Agreement, except for the filing of notices as may be
required under applicable federal and state securities laws and the laws of any
foreign country which notices have been or will be timely filed by NaPro.
(c) Capitalization.
(i) As of the close of business on July 22, 1999, the
authorized capital stock of NaPro consists of (A) 30,000,000 shares of
voting Common Stock, par value $.0075 per share, of which 21,458,681
shares are issued and outstanding and 539,867 shares are held in
treasury, (B) 1,000,000 shares of non-voting Common Stock, par value
$.0075 per share (each share of which is convertible on disposition
into voting Common Stock), of which 395,000 shares are issued and
outstanding, and (C) 2,000,000 shares of preferred stock, par value
$.001 per share, of which 2,807 shares are issued and outstanding.
(ii) All of the issued and outstanding shares of
capital stock of NaPro have been duly authorized and validly issued,
are fully paid and nonassessable, and were issued either pursuant to an
effective registration statement under applicable state and federal
securities laws or an applicable exemption from such registration
requirements.
(iii) The sale of the Shares is not subject to any
preemptive rights or rights of first refusal that have not been waived
and, when issued, sold and delivered as contemplated by this Agreement,
the Shares will be validly issued, fully paid and non-assessable
provided, however, that the Shares may be subject to restrictions on
transfer under state and/or federal securities laws as set forth in
this Agreement or as otherwise required by such laws at the time a
transfer is proposed.
(iv) Except as set forth on Schedule 3(c): (A) there
are no outstanding or authorized convertible or exchangeable securities
of NaPro, options, warrants, rights, contracts, calls, puts, rights to
subscribe, conversion rights, or agreements or commitments pursuant to
which any Person has any rights to acquire from NaPro, and NaPro does
not have any obligations, contingent or otherwise, to repurchase,
redeem or otherwise acquire, any shares of
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capital stock or voting securities of NaPro; (B) there are no
outstanding or authorized stock appreciation, phantom stock or similar
rights of NaPro; (C) there are no existing rights to require NaPro to
register any of its securities under the Securities Act; and (D) there
are no voting trusts, proxies or any other agreements or understandings
to which NaPro is a party or of which it has Knowledge with respect to
the voting of the capital stock or voting securities of NaPro.
(v) Except as set forth on Schedule 3(c), all of the
issued and outstanding shares of capital stock of each subsidiary of
NaPro have been duly authorized and validly issued, are fully paid and
non-assessable, and are owned by NaPro free and clear of any lien or
encumbrance. None of the capital stock of any such subsidiary was
issued in violation of the preemptive or similar rights of any other
Person. Except as set forth in Schedule 3(c), there are no outstanding
options, warrants or similar rights to acquire capital stock of any
subsidiary of NaPro.
(d) SEC Filings.
(i) NaPro has timely filed all forms, reports and
documents required to be filed by it with the Securities and Exchange
Commission ("SEC") since January 1, 1995, and NaPro has heretofore made
available to Abbott, in the form filed with the SEC (including any
exhibits thereto): (A) the Annual Reports on Form 10-K of NaPro for the
fiscal years ended December 31, 1995, December 31, 1996, and December
31, 1997, and December 31, 1998 (the "1998 Annual Report"); (B) all
proxy and information statements relating to meetings of stockholders
of NaPro (whether annual or special) held since January 1, 1995; and
(C) all other reports and registration statements (including all
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed
by NaPro with the SEC since January 1, 1995 (including all amendments
to each of the foregoing, the forms, reports and other documents
referred to in clauses (A) through (C) being referred to in this
Agreement, collectively, as the "NaPro Disclosure Documents"). The
NaPro Disclosure Documents: (x) were prepared in accordance
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with the Securities Act or the Securities Exchange Act, as the case may
be, and the rules and regulations thereunder; and (y) did not at the
time they were filed with the SEC contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not
misleading.
(ii) Each of the consolidated financial statements
(including any notes thereto) contained in the Annual Reports on Form
10-K of NaPro for the fiscal years ended December 31, 1995, December
31, 1996, December 31, 1997, and December 31, 1998, was prepared in
accordance with U.S. generally accepted accounting principles and all
applicable rules of the SEC and fairly presents in all material
respects the consolidated financial position, results of operations and
cash flows of each of NaPro and its consolidated subsidiaries as at the
respective dates thereof and for the respective periods indicated
therein, subject, in the case of unaudited statements, to normal
year-end adjustments. As of March 31, 1999, except as (A) set forth in
the 1998 Annual Report or the Quarterly Report on Form 10-Q of NaPro
for the quarter ended March 31,1999 (the "March 1999 Quarterly
Report"); or (B) disclosed in Schedule 3(e), neither NaPro nor any of
its consolidated subsidiaries had any material liabilities or
obligations, secured or unsecured (whether accrued, absolute,
contingent or otherwise). For purposes of the preceding sentence, a
"material liability or obligation" is one that exceeds 5% of NaPro's
consolidated assets as of December 31, 1998.
(e) Absence of Certain Changes. Since March 31, 1999, and
except as: (i) set forth in the 1998 Annual Report or the March 1999 Quarterly
Report; (ii) disclosed in Schedule 3(e); or (iii) as otherwise contemplated by
the Loan Agreement, there has not been to NaPro's Knowledge, any event,
occurrence or development of a state of circumstances or facts which has had or
reasonably would be expected to have a material adverse effect on the business,
assets, operations, prospects or condition (financial or otherwise) of NaPro and
its subsidiaries, taken as a whole.
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(f) ERISA. Except as disclosed in the NaPro Disclosure
Documents or in Schedule 3(f), NaPro does not have any: (i) employee benefit
plans, multi-employer plans and employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (as defined in
section 3(2) or section 3(3) of ERISA); (ii) 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; or (iii) employment,
consulting, termination or severance agreements.
(g) Proprietary Rights. Except as disclosed in the NaPro
Disclosure Documents or in Schedule 3(g), to NaPro's Knowledge it owns, or
possesses adequate rights to use, all material patents, patent rights,
inventions, trade secrets, know-how, proprietary techniques, including processes
and substances, trademarks or service marks, trade names and copyrights either
described or referred to in the NaPro Disclosure Documents as being owned or
used by NaPro or which are necessary for the conduct of its business as
presently conducted, and NaPro has not been notified in writing of any claim by
any Person to the contrary or any challenge by any Person to the rights of NaPro
or any of its subsidiaries with respect to the foregoing.
(h) Litigation. Except as described in the NaPro Disclosure
Documents or in Schedule 3(h): (i) there is no material claim, dispute, action,
proceeding, notice, order, suit, appeal or investigation, at law or in equity,
pending against NaPro or any of subsidiaries, or involving their respective
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 NaPro); (ii) NaPro has no
Knowledge of facts which, if known to its stockholders, customers, governmental
authorities or competitors, NaPro believes would result in any such claim,
dispute, action, proceeding, notice, order, suit, appeal or investigation that
would have a material adverse effect on the assets, financial condition, cash
flow or results of operations of NaPro and subsidiaries taken as a whole; and
(iii) NaPro is not subject to any material order, writ, injunction or decree or
any court, agency,
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authority, arbitration panel or other tribunal, not is it in default with
respect to any such order writ, injunction or decree.
(i) Investment Company. NaPro is not, and upon completion of
the transactions contemplated by this Agreement and the Loan Agreement will not
be, an "investment company" or a company controlled by an investment company
within the meaning or the Investment Company Act of 1940.
4. Representations and Warranties of Abbott. Abbott represents and
warrants to NaPro that, as of the date of this Agreement:
(a) Authority of Abbott. Abbott is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Illinois. Abbott has the corporate power and authority to execute and deliver
this Agreement, and to perform its obligations under this Agreement. All
corporate action required to be taken by Abbott to authorize the execution,
delivery and performance of this Agreement has been duly taken.
(b) Validity. This Agreement constitutes the valid and legally
binding obligation of Abbott, enforceable against Abbott in accordance its terms
and conditions. The execution and delivery of this Agreement and consummation of
the transactions contemplated by this Agreement by Abbott is not prohibited by,
does not violate, conflict with, or require consent under any provision of, and
does not result in a default under (i) the charter or bylaws of Abbott; (ii) any
material contract, agreement or other instrument to which Abbott is a party or
by which Abbott is bound; (iii) any order, writ, injunction, decree or judgment
of any court or governmental agency applicable to Abbott; or (iv) any law, rule
or regulation applicable to Abbott.
(c) Resale. Abbott is acquiring the Shares under this
Agreement for its own account solely for the purpose of investment and not with
a view to, or for offer or sale in connection with, any distribution thereof in
violation of the Securities Act. Abbott has such knowledge and experience in
financial and business matters as to be capable of evaluating the risks and
merits of an investment in the Shares and is able to bear the economic risk of
such investment. Abbott acknowledges and agrees that
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none of the Shares has been registered under the Securities Act and that such
Shares may be sold or disposed of in the absence of such registration only
pursuant to an exemption from such registration and in accordance with the terms
of this Agreement and the Securities Act and that NaPro's transfer agent is
authorized to place stop transfer instructions on the NaPro's stock transfer
records and may refuse to transfer any Shares not transferred in compliance with
this Agreement or the Securities Act or in compliance with the restrictions on
transfer set forth in Section 13(m) and 13(n).
(d) Receipt of Information. Abbott has experience in
evaluating and investing in companies in the same industry as NaPro and is able
to assess the relative merits and risks of an investment in NaPro and to sustain
a total loss on such investment. Abbott further represents that it has had an
opportunity to ask questions and receive answers from NaPro regarding the terms
and conditions of the offering of the Shares and the business, properties,
prospects and financial condition of NaPro and its subsidiaries and to obtain
additional information it considers necessary or appropriate for deciding
whether to purchase the Shares. The foregoing, however, does not limit or modify
the representations and warranties of NaPro in Section 3 of this Agreement or
the right of Abbott to rely thereon.
5. Registration Rights.
(a) Demand Registration Rights. Upon the earlier of: (i) the
date of the filing by NaPro of an NDA for a Finished Product with the FDA; and
(ii) two (2) years after the date of this Agreement, upon the written request of
Abbott, NaPro, to the extent permitted by law and subject to the terms of this
Agreement, shall register any Registrable Shares held by Abbott that Abbott
requests to be registered pursuant to an effective registration statement under
the Securities Act (a "Registration"); provided, however, that any such request
shall be for at least 50% of the Registrable Shares held by Abbott (a
Registration pursuant to this Section 5(a) is referred to in this Agreement as a
"Demand Registration"). Abbott's request for a Demand Registration shall specify
the number of Registrable Shares requested to be registered and whether such
Shares are Initial Shares, First Additional Shares or Second Additional Shares
or a combination thereof. Within ten (10) Business Days after receipt of any
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such request, NaPro will give written notice of such requested Registration to
holders of Registrable Securities and will include in such Registration all
Registrable Securities with respect to which NaPro has received written requests
for inclusion therein within ten (10) Business Days after the receipt of NaPro's
notice; provided, however, that if the Demand Registration relates to an
underwritten offering and the managing underwriter shall advise NaPro or Abbott
that, in its judgment, the number of shares proposed to be included in such
offering should be limited, then NaPro shall promptly so advise each holder of
Registrable Securities, and such Registrable Securities shall be excluded from
the Demand Registration and offering prior to excluding any Registrable Shares
held by Abbott. If the offering to be covered by the Demand Registration is an
underwritten offering, Abbott shall have the right to select one legal counsel
and an investment banker or bankers and manager or managers to administer the
offering, which counsel, investment banker or bankers or manager or managers
shall be reasonably satisfactory to NaPro.
(b) Conditions to Demand Registration. NaPro may delay any
Demand Registration requested pursuant to Section 5(a): (i) for a single period
of time not exceeding ninety (90) days (which cannot be extended), if NaPro's
Board of Directors shall determine in good faith that any such Registration
would adversely affect a material financing, acquisition, disposition of assets
or stock, merger or other comparable transaction or would require NaPro to make
public disclosure of information the public disclosure of which would have a
material adverse effect on NaPro, and a certificate to that effect shall be
signed on behalf of NaPro's Board of Directors and delivered to Abbott; or (ii)
if NaPro determines to initiate a registered primary public offering of its
securities in a registered public offering (a "Primary Offering"), in which case
NaPro shall so notify Abbott within ten (10) Business Days of receiving Abbott's
request for a Demand Registration and the delay of the Demand Registration may
not exceed ninety (90) days from the date notice of NaPro's determination to
initiate the Primary Offering is given to Abbott; provided, however, that in the
event the Primary Offering is declared effective by the SEC within such ninety
(90)-day period, the permitted delay may be extended, but in no event shall the
delay exceed one hundred twenty (120) days from the date the Primary Offering is
declared effective.
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NaPro may exercise its right to delay a Demand Registration pursuant to clause
(ii) of this Section 5(b) only once. If a Demand Registration is delayed
pursuant to clause (ii) of this Section 5(b), then pursuant to Section 5(c)
Abbott may request inclusion in the Primary Offering of all the Registrable
Shares that were included in its request for the Demand Registration. If: (i)
Abbott requests that such Registrable Shares be so included in the Primary
Offering; and (ii) the number of Registrable Shares sold by Abbott in connection
with the Primary Offering is 75% or more of the number of Registrable Shares
sought by Abbott to be included, then Abbott shall be deemed to have used a
Demand Registration. For the avoidance of doubt, however, if the number of
Registrable Shares sold by Abbott in connection with the Primary Offering is
less than 75% of the number of Registrable Shares sought by Abbott to be
included, then Abbott shall not be deemed to have used a Demand Registration.
(c) Piggyback Registration. If at any time, and from time to
time, NaPro proposes to register any of its Common Stock or other securities
under the Securities Act (other than pursuant to Section 5(a)), NaPro shall
promptly give notice to Abbott of its intention to do so. Upon the written
request of Abbott, given within fifteen (15) Business Days after receipt of any
such notice from NaPro, NaPro shall in each instance use its best efforts to
cause the number of Shares requested by Abbott to be registered under the
Securities Act and registered or qualified under any state securities law
provided, however, that the obligation to give such notice and to use such best
efforts shall not apply to any registration (a) on: Form S-8 (or any successor
form); (b) in connection with dividend reinvestment plans or rights offering, or
(c) for the purpose of offering registered securities to another business entity
or the shareholders of such entity in connection with the acquisition of assets
or capital stock of such entity or in connection with a merger, consolidation,
combination or similar transaction with such entity (the Registration pursuant
to this Section 5(c) is referred to in this Agreement as a "Piggyback
Registration"). In the event the managing underwriter of an underwritten
offering or, in the case of any offering that is not underwritten, a recognized
investment banking firm shall advise NaPro in writing (and NaPro shall in each
case so advise Abbott and each holder of Registrable Securities requesting
registration of such
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advice in writing) that, market factors (including, without limitation, the
aggregate number of shares requested to be registered, the general condition of
the market, and the status of the persons proposing to sell securities pursuant
to the registration) require a limitation of the number of shares to be
underwritten, then NaPro will include in such registration, to the extent of the
number and type of securities which NaPro is so advised can be sold in (or
during the time of) such offering first, all securities of NaPro proposed by
NaPro to be sold for its own account, or, in the case of a secondary offering
made pursuant to demand registration rights granted to any Person other than
Abbott, all securities of NaPro that such Person proposes to sell; second, all
Registrable Securities that are entitled to piggyback registration rights under
agreements with NaPro in existence on the date of this Agreement, which
agreements provide, as of the date hereof, that such piggyback registration
rights shall have priority over the piggyback registration rights granted to
Abbott under this Agreement third, such Registrable Shares requested to be
included in such registration pursuant to this Agreement and Registrable
Securities that are entitled to piggyback registration rights under agreements
with NaPro in existence on the date of this Agreement, which agreements provide,
as of the date of this Agreement, that such piggyback registration rights shall
rank equally with the registration rights granted to Abbott under this
Agreement, allocated pro rata based on the number of shares of Common Stock
owned by such holders; and fourth, all other securities of NaPro that are not
covered by one of the foregoing clauses.
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(d) Expenses. NaPro shall pay all expenses in connection with
the first Demand Registration and each Piggyback Registration and Primary
Offering (which, for purposes of this Section 5(d) and Section 5(e) shall
include any qualifications, notifications and exemptions) other than
underwriting discounts and commissions attributable to the Registrable Shares
and the fees and expenses of Abbott's counsel, and Abbott shall pay all expenses
in connection with all other Demand Registrations (which, for purposes of this
Section 5(d) and Section 5(e) shall include any qualifications, notifications
and exemptions). Notwithstanding the preceding sentence, if: (i) Abbott had
requested a Demand Registration; (ii) that Demand Registration was delayed
pursuant to Section 5(b)(ii); (iii) Abbott exercised its rights under Section
5(c) to have the Registrable Shares covered by the delayed Demand Registration
in the Primary Offering; (iv) as a result of the number of Registrable Shares
sold in connection with the Primary Offering Abbott was deemed not to have used
a Demand Registration; and (v) the number of Registrable Shares sold by Abbott
in connection with the Primary Offering was more than 50% of the Registrable
Shares sought by Abbott to have included, then NaPro shall no longer be
obligated to pay expenses in connection with a subsequent Demand Registration.
(e) Indemnification. In connection with any Registration under
Sections 5(a) or 5(c), NaPro shall indemnify Abbott, its directors, officers,
employees and agents, and each Person, if any, who controls Abbott within the
meaning of the Securities Act or the Securities Exchange Act, against all
losses, claims, damages, liabilities and expenses (including reasonable fees and
disbursements of counsel, and costs of investigation) arising out of: (i) any
untrue, or alleged untrue, statement of a material fact contained in any
registration statement or prospectus or notification or offering circular (and
as amended or supplemented if NaPro shall have furnished any amendments or
supplements) or any preliminary prospectus; (ii) any omission, or alleged
omission, to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading; or (iii) any violation or alleged violation
by NaPro of the Securities Act, the Securities Exchange Act, any state blue sky
or securities laws or any rule or regulation thereunder;
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except insofar as such losses, claims, damages, liabilities or expenses arise
out of any untrue statement or alleged untrue statement or omissions based upon
information furnished in writing to NaPro by Abbott or, in the case of an
underwritten offering by the underwriter for Abbott, expressly for use in such
registration statement or prospectus, and NaPro and each officer, director and
controlling person of NaPro shall be indemnified by Abbott for all such losses,
claims, damages, liabilities and expenses arising out of any untrue, or alleged
untrue, statement or omission, or alleged omission, to the extent (and only to
the extent) such untrue or alleged untrue statement or omission, or alleged
omission, is included by NaPro in such registration statement or prospectus in
reliance upon and in conformity with information furnished in writing to NaPro
by Abbott expressly for any such use provided that Abbott's indemnification
obligations shall be several and not joint and several with any other Person.
Promptly upon receipt by an indemnified party of notice of the
commencement of any action against such indemnified party in respect of which
indemnity or reimbursement may be sought against any indemnifying party under
this Section 5(e), the indemnified party shall notify the indemnifying party in
writing of the commencement of such action, but the failure so to notify the
indemnifying party shall not relieve it of any liability which it may have to
any indemnified party otherwise than under this Section 5(e). In case notice of
commencement of any such action shall be given to the indemnifying party as
above provided, the indemnifying party shall be entitled to participate in and,
to the extent it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and satisfactory to such indemnified party. The indemnified party
shall have the right to employ separate counsel in any such action and
participate in the defense of such action, but the fees and expenses of such
counsel (other than reasonable costs of investigation) shall be paid by the
indemnified party unless the indemnifying party either agrees to pay the same or
fails to assume the defense of such action with counsel satisfactory to the
indemnified party or unless, in the reasonable judgement of such indemnified
party, a conflict of interest may exist between such indemnified party and
indemnifying party. No indemnifying party who has assumed the defense of an
action pursuant to this Section 5(e) shall be liable for any settlement entered
into without
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its consent, which consent shall not be unreasonably withheld. If the
indemnification provided for in this Section 5(e) is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect to
any loss, liability, claim, damage or expense referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other hand in connection with the
statements or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The relevant
fault of the indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The provisions hereof shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any director, officer, employee, agent or
controlling person thereof, and shall survive the transfer of securities and the
termination of this Agreement.
(f) Provisions Applicable to all Registrations.
(i) NaPro shall prepare and file a registration
statement under the Securities Act and use its best efforts to cause
such registration statement to become effective as soon as practicable
following receipt of Abbott's request for a Demand Registration.
Notwithstanding the foregoing, if NaPro shall fail to cause such
registration statement to become effective within one hundred twenty
(120) calendar days following the initial filing of the registration
statement with the SEC, NaPro's failure shall not be deemed a breach of
this Section 5(f), provided that NaPro used its best efforts during
such one hundred twenty-day (120) period.
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(ii) NaPro shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
registration statement and the prospectus used in connection with the
registration statement as may be necessary to keep the registration
statement effective at all times until the earlier of nine (9) months
after the initial effective date of the registration statement or until
Abbott shall have given written notice that it has completed the
distribution of the Registrable Shares thereunder (the "Registration
Period"), and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by the registration statement until such time as all
of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set
forth in the registration statement. Notwithstanding the foregoing, if
for any reason NaPro advises Abbott that Abbott's use of the Demand
Registration to sell Shares should be suspended and Abbott complies
with such advice, then the Registration Period shall be extended by the
aggregate number of days of such suspension.
(iii) NaPro shall furnish to Abbott (and Abbott's
legal counsel designated pursuant to Section 5(f)(vii)): (A) promptly
after the registration statement is prepared and publicly distributed
and filed with the SEC, one copy of the registration statement and any
amendment thereto, each preliminary prospectus and prospectus and each
amendment and supplement thereto; and (B) such number of copies of a
prospectus (including a preliminary prospectus) and all amendments and
supplements thereto and such other documents as Abbott may reasonably
request in order to facilitate the disposition of the Registrable
Shares covered by the registration statement and owned by such Abbott.
NaPro shall immediately notify Abbott by facsimile of the effectiveness
of the registration statement or any post-effective amendment.
(iv) NaPro shall use its best efforts to: (A)
register and qualify the Registrable Shares covered by the registration
statement under such other securities or "blue sky" laws of such
jurisdictions in the United States as Abbott reasonably requests; (B)
prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements
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to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period; (C)
take such other actions as may be reasonably necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period; and (D) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale
in such jurisdictions provided, however, that NaPro shall not be
required in connection therewith or as a condition thereto to: (x)
qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 5(f)(iv); (y) subject
itself to general taxation in any such jurisdiction; or (z) file a
general consent to service of process in any such jurisdiction or
otherwise take any action that would subject it to the general
jurisdiction of the courts of any jurisdiction in which it would not
otherwise be so subject.
(v) As promptly as practicable after becoming aware
of such event, NaPro shall notify Abbott of the happening of any event
of which NaPro has Knowledge as a result of which the prospectus
included in the registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and, at NaPro's expense, NaPro shall promptly prepare a
supplement to the prospectus or amendment to the registration statement
to correct such untrue statement or omission and use its best efforts
to cause any such amendment to become effective under the Securities
Act, and deliver such number of copies of such supplement or amendment
to Abbott as such Abbott may reasonably request.
(vi) NaPro shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of the
registration statement and any similar order of suspension by any state
securities commission or similar Person, and, if such an order is
issued or suspension imposed, to obtain the withdrawal of such order or
suspension at the earliest
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possible moment and to notify Abbott (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of
such order or suspension and the resolution thereof.
(vii) NaPro shall permit a single firm of legal
counsel designated by Abbott to review the registration statement and
all amendments and supplements thereto (as well as all requests for
acceleration of effectiveness thereof) a reasonable period of time
prior to their filing with the SEC, and shall not file any document in
a form to which such counsel reasonably objects and will not request
acceleration of the registration statement without prior notice to such
counsel. The sections of the registration statement covering
information with respect to Abbott, Abbott's beneficial ownership of
securities of NaPro or Abbott's intended method of disposition of
Registrable Securities shall conform to the information provided to
NaPro by Abbott.
(viii) NaPro shall otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC, and make
generally available to its security holders as soon as reasonably
practical, an earnings statement (in form complying with the provisions
of Section 11(a) of the Securities Act and Rule 158 under the
Securities Act) covering a period of at least twelve (12) months
beginning with the first day of NaPro's first full calendar quarter
following the date the registration statement is declared effective by
the SEC (the "Effective Date").
(ix) NaPro shall make available for inspection, at
the offices where normally kept and during reasonable business hours,
by: (A) Abbott; (B) any underwriter participating in any disposition
pursuant to the registration statement; (C) any firm of legal counsel
and any firm of accountants or other agents retained by Abbott; and (D)
one firm of legal counsel retained by all such underwriters
(collectively, the "Inspectors"), all pertinent financial and other
records, corporate documents and properties of NaPro (collectively, the
"Records"), as shall be reasonably requested by such person as being
necessary in the reasonable opinion of such person to conduct a
reasonable investigation within the meaning of the Securities Act in
connection with such registration statement, and cause NaPro's
officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence;
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provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to Abbott (subject to the
limitations set forth in the last sentence of this subsection) or
agents of NaPro) of any Record designated by NaPro in writing as
confidential (the "Confidential Records"), unless: (x) the disclosure
of such Confidential Records is necessary in connection with the
Inspectors' or Abbott' assertion of any claims or actions or with their
establishment of any defense in any pending administrative or judicial
action or proceeding; (y) the release of such Confidential Records is
ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction; or (z) the information in
such Confidential Records has been made generally available to the
public other than by disclosure in violation of this or any other
agreement. Abbott agrees that it shall, and shall cause each of its
Inspectors to, upon learning that disclosure of such Confidential
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give notice of such request to
NaPro and allow NaPro, at NaPro's expense, to undertake appropriate
action to prevent disclosure of the Confidential Records.
Notwithstanding the foregoing, NaPro may designate any such Records as
being reviewable only by the Inspectors, and not disclosable to Abbott
if NaPro reasonably believes that such Records are of a competitively
sensitive nature, and disclosure to Abbott in accordance with this
provision would be materially harmful to NaPro's competitive position.
(x) NaPro shall hold in confidence and not make any
disclosure of information concerning Abbott provided to NaPro pursuant
to this Section 5 unless: (A) disclosure of such information is
necessary in connection with NaPro's assertion of any claims or actions
or with its establishment of any defense in any pending administrative
or judicial action or proceeding; (B) disclosure of such information is
necessary to comply with federal or state securities laws; (C) the
disclosure of such information is necessary to avoid or correct a
misstatement or omission of material fact in the registration statement
that directly relates to
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Abbott; (D) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction; or (E) such information has been made generally available
to the public other than by disclosure in violation of this Agreement
or any other agreement. NaPro agrees that it shall, upon learning that
disclosure of such information concerning Abbott is sought in or by a
court or governmental body of competent jurisdiction or through other
means, give notice of such request to Abbott and allow Abbott, at
Abbott' expense, to undertake appropriate action to prevent disclosure
of the information deemed confidential.
(xi) NaPro shall: (A) cause all the Registrable
Shares covered by the registration statement to be listed on each
national securities exchange on which securities of the same class or
series issued by NaPro are then listed, if any; or (B) secure the
designation and quotation of all the Registrable Shares covered by the
registration statement on the Nasdaq National Market.
(xii) NaPro shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable Shares not
later than the Effective Date.
(xiii) NaPro shall enter into such customary
agreements (including, in the case of an underwritten offering,
underwriting agreements in customary form as are reasonably
satisfactory to NaPro with customary representations, warranties and
covenants and indemnification and contribution obligations) and take
all such other appropriate actions as Abbott or the underwriters, if
any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Shares. Abbott shall be a party to such
underwriting agreement and may, at its option, require that NaPro make
to and for the benefit of Abbott the representations, warranties and
covenants of NaPro and NaPro may, at its option, require that Abbott
make to and for the benefit of NaPro, the representations, warranties
and covenants of Abbott, in each case, which are being made to and for
the benefit of such underwriters.
(xiv) NaPro shall use its best efforts to obtain an
opinion from NaPro's counsel and a "cold comfort" letter from NaPro's
independent public accountants in customary
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form and covering such matters as are customarily covered by such
opinions and "cold comfort" letters delivered to underwriters in
underwritten public offerings, which opinion and letter shall be
reasonably satisfactory to the underwriter, if any, and to Abbott, and
furnish to Abbott and to each underwriter, if any, a copy of such
opinion and letter addressed to Abbott and each underwriter.
(xv) NaPro shall cooperate with Abbott and the
managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends
representing the Registrable Shares to be sold, and cause such
Registrable Shares to be issued in such denominations and registered in
such names in accordance with the underwriting agreement prior to any
sale of Registrable Shares to the underwriters or, if not an
underwritten offering, in accordance with the instructions of Abbott at
least three business days prior to any sale of Registrable Shares and
instruct any transfer agent and registrar of Registrable Shares to
release any stop transfer orders in respect thereof.
(xvi) NaPro shall take all other reasonable actions
necessary to expedite and facilitate disposition by Abbott of
Registrable Shares pursuant to the registration statement.
(xvii) If any such registration statement or
comparable statement under "blue sky" laws refers to Abbott by name or
otherwise as the holder of any securities of NaPro, then Abbott shall
have the right to require: (i) the insertion therein of language, in
form and substance satisfactory to Abbott and NaPro, to the effect that
the holding by Abbott of such securities is not to be construed as a
recommendation by Abbott of the investment quality of NaPro's
securities covered thereby and that such holding does not imply that
Abbott will assist in meeting any future financial requirements of
NaPro; or (ii) in the event that such reference to Abbott by name or
otherwise is not in the judgment of NaPro, as advised by counsel,
required by the Securities Act or any similar federal statute or any
state "blue sky" or securities law then in force, the deletion of the
reference to Abbott.
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6. Certain Limitations. NaPro shall be obligated to effect Demand
Registrations as follows:
(i) no more than two (2) Demand
Registrations with respect to the Initial Shares, any of which
two (2) Demand Registrations that has not been exercised shall
lapse as of the First Additional Closing Date; and
(ii) no more than two (2) Demand
Registrations with respect to the aggregate of the Initial
Shares and the First Additional Shares after the First
Additional Closing Date, any of which two (2) Demand
Registrations that has not been exercised shall lapse as of
the Second Closing Date; and
(iii) no more than two (2) Demand
Registrations with respect to the Shares as of the Second
Additional Closing Date. NaPro shall be obligated to effect no
more than three (3) Piggyback Registrations with
respect to all of the Shares. A Registration will not count as one of
the permitted Registrations under this paragraph 6 until it has become
effective. If a Registration has remained effective for the
Registration Period, such Registration shall be deemed to have been
effected regardless of whether any of the Shares are ultimately sold
pursuant to the Registration. A Registration that does not become
effective after NaPro has filed a registration statement with respect
thereto solely by reason of Abbott's refusal to proceed (other than any
refusal to proceed based upon: (i) the advice of its counsel that the
registration statement, or the prospectus contained therein, or other
documents incorporated by reference therein, contain or contains an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
or (ii) a material adverse change in the condition (financial or other)
of NaPro after such registration statement has been filed) shall be
deemed to have been effected by NaPro. The Demand Registration and
Piggyback Registration rights of Abbott shall be assignable by Abbott
only to wholly owned subsidiaries of Abbott to which Abbott has
transferred all of its Shares.
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7. Holdback. (a) If requested by the managing underwriter or
underwriters in an underwritten offering, or by the initial purchaser or
representative of the initial purchasers in an offering under Rule 144A under
the 1933 Act (a "Rule 144A Offering"), by NaPro of its equity securities (or
rights to acquire such equity securities or securities convertible into or
exchangeable for such equity securities), each holder of Registrable Shares
agrees not to effect any public sale or distribution of any Registrable Shares
of NaPro during the period commencing on the Effective Date of such underwritten
offering or, in the case of a Rule 144A Offering, the date of the definitive
offering memorandum for the Rule 144A Offering (or beginning up to ten (10)
Business Days prior to such date if requested by the managing underwriter or
underwriters in an underwritten offering or by the initial purchaser or
representative of the initial purchasers in a Rule 144A Offering) and continuing
until ninety (90) days following either: (i) the Effective Date of such
underwritten offering or, in the case of a Rule 144A Offering, the date of the
definitive offering memorandum for the Rule 144A Offering; or (ii) such earlier
date, if applicable, except for any Registrable Shares that are part of such
underwritten offering or Rule 144A Offering, as the case may be, or, unless
otherwise permitted by such managing underwriter or underwriters in the case of
an underwritten offering or by the initial purchaser or the representative of
the initial purchasers in a Rule 144A Offering.
(b) If requested by the managing underwriter or underwriters
in an underwritten offering of Registrable Shares, NaPro agrees: (i) not to
effect any public sale or distribution or its Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock during the
period commencing on the Effective Date of such underwritten offering (or
beginning up to ten (10) Business Days prior to such date if requested by the
managing underwriter or underwriters) and continuing until ninety (90) days
following either: (A) the Effective Date of such underwritten offering; or (B)
such earlier date, if applicable, except for: (x) securities that are part of
such underwritten offering; (y) securities to be registered on Form S-4 or Form
S-8 or any successor forms; and (z) as otherwise permitted by such managing
underwriter or underwriters; and (ii) to use commercially
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reasonable efforts to cause each future holder of its privately placed Common
Stock or securities convertible into or exchangeable or exercisable for Common
Stock issued by NaPro after the date of this Agreement to agree not to publicly
sell or distribute such securities during the period referred to in clause (i)
of this Section 7(b).
8. SEC Filings; Public Information. So long as necessary to permit
Abbott to sell Shares in accordance with Rule 144 under the Securities Act,
NaPro shall use reasonable best efforts to file on a timely basis all reports
required to be filed pursuant to the Securities Exchange Act, and in the event
NaPro is not required to file such reports, NaPro shall make available public
information required pursuant to Rule 144(c) to facilitate any sale by Abbott
pursuant to Rule 144.
9. [Reserved].
10. Listing of Shares.
(a) Not later than the first date that Abbott is permitted to
publicly sell Shares under the terms of this Agreement, NaPro shall (i) prepare
and file with The Nasdaq Stock Market, Inc. (or, if applicable, any national
securities exchange on which the Common Stock is then listed) an application for
listing of the Shares; and (ii) to take all commercially reasonable steps
necessary to cause all such shares to be approved for listing on the Nasdaq
National Market (or, if applicable, any national securities exchange on which
the Common Stock is then listed) as soon as practicable thereafter.
(b) Except in the event of a deregistration or delisting that
may result from a transaction affecting NaPro outside of the ordinary course of
its business, NaPro shall use commercially reasonable efforts to keep effective
the registration of the Common Stock under the Securities Exchange Act and
maintain the listing of the Common Stock on the Nasdaq National Market (or, if
applicable, any national securities exchange on which the Common Stock may
become listed).
11. Press Releases. The Parties agree that, upon execution of this
Agreement, a press release approved by both parties will be issued. Except as
specifically set forth in this Section 11, neither Party (an "Originating
Party") shall: (a) originate any publicity, news release or other public
announcement, written or oral, whether to the public press, stockholders or
otherwise, relating to this Agreement, matters
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relevant to this Agreement, amendments hereto or performance by the Parties
hereunder; or (b) use the name of the other Party in any publicity, news release
or other public announcement, except (i) with the prior written consent, review
and approval of the other Party (a "Reviewing Party") in which case the
Originating Party shall forward the proposed public announcement to the
Receiving Party (which, in the case of Abbott, shall be its Manager of Public
Affairs, Hospital Products Division, and in the case of NaPro, shall be its
General Counsel) not less than three (3) Business Days prior to its use or
publication; or (ii) as required by written state or federal securities law or
regulation in the written opinion of legal counsel to the Originating Party, in
which case the Originating Party will give to the Reviewing Party at least one
(1) full twenty-four (24) hour Business Day prior written notice of such
proposed legally required disclosure to review, comment and propose
modifications. In the event that the Reviewing Party fails to respond within the
three (3) Business Day or twenty-four (24) hour period, as the case may be, the
Originating Party shall be free to issue such release without comment from the
Reviewing Party.
12. Alternative Dispute Resolution.
(a) Contract Breach/Cure. Should either Party breach or be
alleged to have breached this Agreement, the other party may serve notice of
such breach, or alleged breach, in writing upon the breaching party. The Party
receiving such notice shall have ninety (90) days after receipt of the notice to
cure such breach or to demonstrate that no such breach or alleged breach exists.
In the event that any such breach or alleged breach remains unresolved after
such 90-day period, then the matter shall forthwith be referred to alternative
dispute resolution to be conducted in accordance with Exhibit G of the
Development Agreement.
(b) Disputes, etc. All disputes, other than a dispute arising
under paragraph (a) above, arising out of, relating to, or connected with this
Agreement, shall forthwith be referred to alternative dispute resolution to be
conducted in accordance with Exhibit G of the Development Agreement.
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(c) Exclusive Remedy. The alternative dispute resolution set
forth in Exhibit G of the Development Agreement shall be the exclusive means for
either Party to this Agreement to seek resolution of any dispute arising out of,
relating to, or connected with this Agreement, except that either Party may
bring an action before a competent court for the adoption of provisional or
protective measures or equitable relief. The pendency of matter referred to
alternative dispute resolution to be conducted in accordance with Exhibit G of
the Development Agreement shall not excuse any Party for performance under this
Agreement, it being understood that such performance is without prejudice to the
dispute resolution process.
(d) Judicial Review. Judgment on the arbitral award rendered
may be entered in any court having jurisdiction or application may be made to
such for a judicial acceptance of the award and an order of enforcement, as the
case may be.
13. Miscellaneous.
(a) Survival. The representations and warranties set forth in
this Agreement given in connection with the purchase and sale of the Initial
Shares shall survive the consummation of the purchase and sale of the Initial
Shares and terminate at the end of the twentieth (20th) month after the date of
this Agreement. The representations and warranties set forth in this Agreement
given in connection with the purchase and sale of the First Additional Shares
shall survive the consummation of the purchase and sale of the First Additional
Shares and terminate at the end of the twentieth (20th) month after the First
Additional Closing Date. The representations and warranties set forth in this
Agreement given in connection with the purchase and sale of the Second
Additional Shares shall survive the consummation of the purchase and sale of the
Second Additional Shares and terminate at the end of the twentieth (20th) month
after the Second Additional Closing Date. The covenants and agreements set forth
in this Agreement shall survive the consummation of this Agreement forever
unless terminated earlier in accordance with the terms of this Agreement.
(b) Parties and Interest. This Agreement shall bind and inure
to the benefit of the Parties named herein and their respective heirs,
successors and assigns.
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(c) Entire Transaction. This Agreement, the Development
Agreement and the Loan Agreement constitute the entire agreement between the
Parties with respect to the transactions contemplated by this Agreement and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter of this Agreements.
(d) Assignment. Neither Party may assign either this Agreement
or any of its rights, interests or obligations hereunder without the prior
written approval of the other Party, except as otherwise provided herein and
except that Abbott may assign its rights, interests and obligations hereunder to
any of its wholly-owned subsidiaries.
(e) Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to NaPro:
NaPro BioTherapeutics, Inc.
6304 Spine Road, Unit A
Boulder, CO 80301
Attn: General Counsel
Telecopy: (303) 530-1296
With copy to:
Bartlit Beck Herman Palenchar & Scott
511 Sixteenth Street, Suite 700
Denver, CO 80202
Attention: James L. Palenchar
Fax: (303) 592-3140
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If to Abbott:
Abbott Laboratories
Hospital Products Division
Dept. 960, Bldg. AP30
200 Abbott Park Road
Abbott Park, IL 60064-3500
Attn: President
Telecopy: (847) 938-6590
With copy to:
Abbott Laboratories
Domestic Legal Operations
Dept. 322, Bldg. AP6D
100 Abbott Park Road
Abbott Park, IL 60064
Attn: Divisional Vice President
Telecopy: (847) 938-1206
Either Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Either Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of Delaware.
(i) Amendments and Waivers. No amendment of any provisions of
this Agreement shall be valid unless the same shall be in a writing referring to
this Agreement signed by the Parties. Either Party may waive compliance by the
other Party with any provision of this Agreement, which waiver must be in
writing. No waiver by either Party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or
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EXECUTION COPY
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(k) Expenses. Except as otherwise provided in this Agreement,
each of the Parties shall bear its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(l) Construction. The language used in this Agreement will be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against either Party. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. Any reference to the "transactions contemplated
hereby," the "transactions contemplated by this Agreement," the "transactions
contemplated under this Agreement" or the "transactions contemplated pursuant to
this Agreement" shall be deemed to also refer to any other document, agreement
or certificate to be executed or delivered in connection with the consummation
of the transaction in question contemplated by this Agreement. The Parties
intend that each representation,
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warranty, and covenant contained herein shall have independent significance. If
either Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(m) Restrictions on Transfer. Notwithstanding anything to the
contrary set forth in this Agreement and provided the Development Agreement has
not been terminated, Abbott agrees that:
(i) Abbott shall not sell or otherwise dispose of the
Shares issued to it for a period of one (1) year from the date of such
issuance (as to the Initial Shares, the First Additional Shares and the
Second Additional Shares, each a "Restricted Period"). From and after
the end of each Restricted Period, sales or other dispositions of the
Shares by Abbott shall be limited to an amount not to exceed for each
365-day period one-half (1/2) of the Shares issued to Abbott for the
relevant Restricted Period (subject to adjustment for any stock split,
stock dividend, subdivision or combination of the Common Stock or any
other change in corporate structure affecting the Common Stock);
provided, however, that any Shares permitted to be sold, but not sold
during the first such 365-day period, shall be added to the number of
Shares permitted to be sold during the second such 365-day period;
(ii) Nothing contained in this Section 13(m) shall
limit the right of Abbott to transfer any of its Shares to a direct or
indirect wholly owned subsidiary of Abbott.
(iii) At the request of NaPro, Abbott shall supply
written representations to counsel to NaPro upon which such counsel
shall be entitled to rely in rendering the opinion referred to in
clause (iii) of the proviso contained in the definition of "Registrable
Shares." NaPro shall indemnify Abbott, its directors, officers,
employees and agents, and each Person, if any, who controls Abbott
within the meaning of the Securities Act or the Securities Exchange
Act, against all losses, claims, damages, liabilities and expenses
arising out of or relating to the offer and sale of Registrable Shares
in reliance on such opinion of counsel described in clause
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(iii) of the proviso contained in the definition of "Registrable
Shares," except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon the written representations by
Abbott to such counsel.
(n) Legends. Abbott agrees to the placement on certificates
representing the Shares purchased pursuant hereto, of a legend, substantially as
set forth below (except that such legend shall not be placed on any Shares that
have been registered under the Securities Act or if, in the opinion of counsel
(which opinion shall be in form and substance reasonably satisfactory to NaPro),
such legend is no longer required under the Securities Act):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
ANY APPLICABLE SECURITIES LAWS OF SUCH OTHER STATE OR JURISDICTION.
THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES
THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. THE TRANSFER OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE RESTRICTED BY
THE TERMS OF THAT CERTAIN STOCK PURCHASE AGREEMENT DATED AS OF JULY
23, 1999 BETWEEN NAPRO BIOTHERAPEUTICS AND ABBOTT LABORATORIES, THE
TERMS OF WHICH ARE AVAILABLE FROM NAPRO BIOTHERAPEUTICS, INC. UPON
REQUEST."
(o) Specific Performance. Each Party acknowledges and agrees
that the other Party may be damaged irreparably in the event of any of the
provisions of this Agreement are not performed in
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accordance with their specific terms or are otherwise breached. Accordingly,
each Party agrees that the other Party shall be entitled to seek an injunction
or injunctions to prevent breaches of the provisions of the Agreement and to
enforce specifically this Agreement and the terms and Agreement and the terms
and provisions hereof in any action instituted in any court of the United States
or any state thereof having jurisdiction over the Parties and the matter, in
addition to any other remedy to which they may be entitled, at law or in equity.
(p) Incorporation of Schedules. The Schedules identified in
this Agreement are incorporated herein by reference in their entirety and made a
part hereof.
[ALL SCHEDULES HAVE BEEN INTENTIONALLY OMITTED. NAPRO
BIOTHERAPEUTICS, INC. WILL FURNISH SUPPLEMENTALLY A COPY OF ANY
OMITTED SCHEDULE TO THE COMMISSION UPON REQUEST]
[Signature Page Follows.]
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EXECUTION COPY
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
ABBOTT LABORATORIES NAPRO BIOTHERAPEUTICS, INC.
By: /s/ Richard A. Gonzalez By: /s/ Sterling K. Ainsworth
Print Name: Richard A. Gonzalez Print Name: Sterling K. Ainsworth
Title: President Title: President/CEO
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LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
NAPRO BIOTHERAPEUTICS, INC.
AND
ABBOTT LABORATORIES
JULY 23, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Page
SECTION 1. AMOUNT AND TERMS.......................................................................3
1.1 Advances......................................................................3
1.2 Borrowing Request.............................................................3
1.3 Promissory Note...............................................................4
1.4 Interest......................................................................4
1.5 Payments; Optional Prepayments................................................4
1.6 Mandatory Prepayment..........................................................6
1.7 Form of Payments..............................................................6
1.8 Use of Proceeds...............................................................6
1.9 Notice Requirements...........................................................7
SECTION 2. SECURITY INTEREST AND COLLATERAL.......................................................7
2.1 Grant of Security Interest....................................................7
2.2 Rights of Abbott..............................................................8
2.3 Obligations of NaPro..........................................................8
2.4 NaPro Covenants Regarding Faulding Agreement.................................10
2.5 Perfection and Protection of Security Interest...............................11
2.6 Location of Collateral.......................................................12
2.7 Title to, Liens on, and Sale and Use of Collateral...........................13
2.8 Appraisals...................................................................14
2.9 Access and Examination; Confidentiality......................................14
2.10 Accounts.....................................................................15
2.11 Collection of Accounts; Payments.............................................15
2.12 Equipment....................................................................17
2.13 Right to Cure................................................................18
2.14 Power of Attorney............................................................18
SECTION 3. CONDITIONS PRECEDENT..................................................................20
3.1 Conditions to Initial Advance................................................20
3.2 Conditions to Each Advance ..................................................21
SECTION 4. REPRESENTATIONS AND WARRANTIES........................................................21
4.1 Representations and Warranties of NaPro......................................21
4.2 Representations and Warranties of Abbott.....................................26
SECTION 5. COVENANTS.............................................................................28
5.1 Preservation of Corporate Existence, Etc.....................................28
5.2 Maintenance of Property......................................................28
5.3 Payment of Obligations.......................................................28
5.4 Compliance with Laws.........................................................29
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SECTION 6. EVENTS OF DEFAULT.....................................................................29
6.1 Events of Default............................................................29
6.2 Consequences of Demand and Events of Default.................................31
SECTION 7. GENERAL PROVISIONS....................................................................33
7.1 Definitions..................................................................33
7.2 Dispute Resolution...........................................................40
7.4 Indemnification..............................................................43
7.5 Amendment and Waiver.........................................................44
7.6 Delay not a Waiver; Cumulative Remedies.....................................44
7.7 Notices......................................................................44
7.8 Survival of Representations and Warranties...................................45
7.9 Descriptive Headings.........................................................45
7.10 Term of Agreement............................................................46
7.11 Successors and Assigns.......................................................46
7.12 Governing Law................................................................46
7.13 No Third Party Rights........................................................46
7.14 Complete Agreement...........................................................46
7.15 Execution in Counterparts....................................................47
</TABLE>
SCHEDULE 1 Locations of Collateral as of Closing Date, Specified
Liens and Permitted Liens
EXHIBITS
Exhibit A Promissory Note
Exhibit B Form of Borrowing Request
Exhibit C Form of Borrowing Base Certificate
Exhibit D Faulding Agreement
Exhibit E Original Collateral Appraisal
[ALL SCHEDULES AND EXHIBITS HAVE BEEN INTENTIONALLY OMITTED.
NAPRO BIOTHERAPEUTICS, INC. WILL FURNISH SUPPLEMENTALLY A COPY
OF ANY OMITTED SCHEDULE OR EXHIBIT TO THE COMMISSION UPON
REQUEST]
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (which, together with the
Schedules and Exhibits attached to this Loan and Security Agreement and
incorporated herein by reference, the "Agreement") effective as of July 26, 1999
(the "Effective Date"), between NaPro BioTherapeutics, Inc., a Delaware
corporation ("NaPro"), and Abbott Laboratories, an Illinois corporation
("Abbott"). "NaPro" and "Abbott" are each a "Party" and, collectively, the
"Parties."
RECITALS
WHEREAS, NaPro and Abbott are simultaneously with this Agreement
entering into a Development, License and Supply Agreement dated as of July 26,
1999 (the "Development Agreement") pursuant to which, among other things, (i)
Abbott will purchase bulk Paclitaxel from NaPro, (ii) Abbott and NaPro shall
work together to develop and obtain necessary regulatory approvals for one or
more formulations of Paclitaxel, (iii) Abbott will obtain a license to certain
technology owned by NaPro covering formulation or use of Paclitaxel and (iv)
Abbott may manufacture finished Paclitaxel product(s) and will sell finished
Paclitaxel product(s);
WHEREAS, NaPro and Abbott are simultaneously with this Agreement
entering into a Stock Purchase Agreement dated as of July 26, 1999 (the "Stock
Purchase Agreement") providing for an equity investment by Abbott in NaPro;
WHEREAS, Abbott wishes to loan to NaPro, and NaPro wishes to borrow
from Abbott, funds to finance general business and working capital needs on the
terms and subject to the conditions of this Agreement.
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NOW, THEREFORE, in consideration of the premises and the respective
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the parties agree as follows:
TERMS AND CONDITIONS
SECTION 1. AMOUNT AND TERMS.
1.1 Advances. Abbott hereby agrees, on the terms and subject
to the conditions of this Agreement: (a) to make an advance (the "Initial
Advance") to NaPro in the principal amount of $2,000,000 on the Effective Date;
and (b) to make advances (including the Initial Advance, the "Advances") to
NaPro at any time and from time to time during the period from the Effective
Date to the earlier of: (i) the First Commercial Sale of a Planned Indication or
(ii) the date of notice of termination pursuant to Article 15 of the Development
Agreement; provided that the aggregate principal amount of all such Advances at
any one time outstanding shall not exceed the lesser of: (i) the Commitment
Amount; or (ii) the Borrowing Base at such time (all such Advances together
being called, the "Loan").
1.2 Borrowing Request.
(a) Each Advance shall be made on notice, evidenced by a
Borrowing Request, given not later than 1:00 p.m. (Chicago time) on the fifth
Business Day prior to the date of the proposed Advance. Each such Borrowing
Request shall be completed in the form of Exhibit B, shall be sent by facsimile
and confirmed thereafter in writing, shall specify the requested: (i) date
Abbott should make the proceeds of such Advance
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available to NaPro pursuant to Section 1.2(b) (the "Drawdown Date"); and (ii)
amount of such Advance (which amount shall not exceed the then Available
Borrowing Base).
(b) On the Effective Date and each Drawdown Date thereafter,
Abbott shall make available the amount of the requested Advance by wire transfer
of immediately available funds as set forth in the Borrowing Request to such
address as is set forth in the Borrowing Request.
1.3 Promissory Note. The Loan shall be evidenced by a
promissory note of NaPro substantially in the form of Exhibit A to this
Agreement (the "Abbott Note").
1.4 Interest. NaPro shall pay interest at the rate of 6.5% per
annum on the unpaid principal amount of the Loan from the Drawdown Date of each
Advance thereunder, in each case until such principal amount shall be paid in
full; provided, however, that any amount of principal which is not paid when due
(whether upon demand (and the expiration of five (5) Business Days), by
acceleration or otherwise) shall bear interest, from the date on which such
amount is due until such amount is paid in full, payable on demand, at a rate of
11% per annum. NaPro shall pay interest on such outstanding principal amount
quarterly on March 31, June 30, September 30 and December 31 of each year (each,
an "Interest Payment Date") until the principal hereof is paid or made available
for payment.
1.5 Payments; Optional Prepayments. The entire principal
amount of the Abbott Note and all accrued and unpaid interest thereon shall be
due and payable in full on the earliest of the following dates (such earliest
date being the "Termination Date"):
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(a) the second anniversary following the First Commercial
Sale; provided, however, that the principal amount of the Loan shall be off-set
by fifty-percent (50%) of all Milestone Payments and Additional Consideration
due from Abbott to NaPro earned on and following the date of the First
Commercial Sale until such time as two-thirds of such principal amount of the
Loan shall have been paid and such two-thirds of the outstanding principal
amount of the Loan shall be due and payable in installments as all such monies
from Abbott to be applied as such an offset are due and payable;
(b) the termination date of the Development Agreement pursuant
to Article 15 thereof (except for termination pursuant to Section 15.5.1 or
15.5.2); or
(c) January 1, 2007, provided however, that if Abbott
terminates the Development Agreement pursuant to Section 15.5.1 or 15.5.2 of the
Development Agreement: (i) the due date specified in Section 1.5(a) shall be
extended to the third anniversary following the date of First Commercial Sale;
and (ii) the due date specified in this Section 1.5(c) shall be extended to June
1, 2007.
NaPro shall have the right, at any time and from time to time, upon not
less than ten (10) Business Days' prior notice to Abbott, in accordance with the
terms of the Abbott Note, to prepay all or any portion of the outstanding
principal amount of the Abbott Note in immediately available funds, without
premium or penalty, provided that NaPro has paid all interest on such Abbott
Note accrued through the date of prepayment. Amounts prepaid, whether pursuant
to a voluntary or mandatory prepayment, may not be reborrowed, except that any
amount prepaid as required under Section 1.6 may be reborrowed if all applicable
conditions precedent are met upon such reborrowing.
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1.6 Mandatory Prepayment. If at any time the outstanding
principal amount of the Loan shall exceed the Borrowing Base, NaPro shall within
five (5) Business Days following such event, prepay a principal amount of the
Loan equal to such excess. NaPro agrees that upon receipt of any Faulding
Revenue or the Proceeds of any other Collateral it will, if the Loan would
exceed the Borrowing Base after subtracting such Faulding Revenue or Proceeds
from the Borrowing Base or if the Loan is then due and owing, apply such
Faulding Revenue or other proceeds to the repayment of the Loan; provided,
however, that if NaPro disputes the fact that the outstanding principal amount
of the Loan exceeds the Borrowing Base, and invokes the procedures set forth in
Section 7.2, Abbott's rights shall be stayed subject to determination under
Section 7.2.
1.7 Form of Payments. All payments (including prepayments) on
account of principal and interest shall be made in United States dollars and by
wire transfer of immediately available funds. If any payment is scheduled to
become due and payable on a day which is not a Business Day, such payment shall
instead become due and payable on the immediately following Business Day and
such extension of time shall be included in the computation of interest under
this Agreement and the Abbott Note.
1.8 Use of Proceeds. The proceeds of Advances shall be used by
NaPro solely to fund general business and working capital needs.
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1.9 Notice Requirements. NaPro hereby covenants and
agrees to furnish to Abbott:
(a) as soon as possible and in any event within five (5)
Business Days after the occurrence of each Event of Default known to NaPro which
is continuing on the date of such statement, a statement of an authorized
financial officer of NaPro setting forth the details of such Event of Default
and the actions which NaPro has taken and proposes to take with respect thereto;
(b) promptly and in any event within five (5) Business Days
after the sending or filing thereof, copies of all proxy material, reports and
other information which NaPro sends to any of its security holders pursuant to
the Securities Exchange Act of 1934, and copies of all reports and registration
statements which NaPro or any subsidiary files with the Securities and Exchange
Commission, including but not limited to reports on Form 10-Q and Form 10-K;
(c) within fifteen (15) Business Days after the last day of
each month, a Borrowing Base Certificate as of such month end.
SECTION 2. SECURITY INTEREST AND COLLATERAL.
2.1 Grant of Security Interest. As consideration for Abbott
making each and all of the Advances, and to secure the prompt and complete
payment, performance and observance of the Obligations, NaPro hereby assigns and
grants to Abbott a continuing first-priority security interest in the following
property, whether now owned or hereafter acquired: (a) the Equipment; (b) the
Inventory; (c) the Accounts; (d) the Faulding Revenue; (e) the Yew Trees; and
(f) all Proceeds thereof (all of (a), (b), (c),
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(d), (e) and (f) collectively, the "Collateral"). NaPro hereby covenants and
agrees that Abbott may exercise in respect of the Collateral, solely upon
becoming entitled to such exercise pursuant to this Agreement and in addition to
other rights and remedies provided for in this Agreement or otherwise available
to it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code as in effect in the State of Illinois (the "U.C.C."),
whether or not the U.C.C. applies to the Collateral.
2.2 Rights of Abbott. Except as otherwise expressly provided
herein, Abbott shall not be permitted to exercise any of its rights to the
Collateral under this Agreement unless and until there shall have occurred and
be continuing an Event of Default and then only to the extent of the
Obligations. Upon the occurrence of an Event of Default, Abbott may deliver to
NaPro a written notice stating: (i) that an Event of Default has occurred and is
continuing; and (ii) that Abbott elects to exercise its rights to the
Collateral, which notice shall specify whether Abbott elects to exercise its
rights with respect to the Faulding Revenue (the "Collateral Exercise Notice").
If NaPro disputes the existence of an Event of Default, it shall within two (2)
Business Days of receipt of the Collateral Exercise Notice, so advise Abbott and
may invoke the procedures set forth in Section 7.2 to determine if an Event of
Default has occurred.
2.3 Obligations of NaPro.
(a) Faulding Revenue. NaPro hereby covenants and agrees to
notify Faulding in writing within thirty (30) days after the date hereof to pay
a lockbox account (the "Lock Box Account") with a bank (the "Lock Box Bank")
satisfactory to Abbott and NaPro pursuant to documentation satisfactory to
Abbott and NaPro amounts equal to the Faulding Revenue. Until the delivery of a
Collateral Exercise Notice to NaPro and the
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Lock Box Bank, the Lock Box Bank shall release funds in the Lock Box Account to
NaPro on a daily basis. After the delivery of a Collateral Exercise Notice, the
Lock Box Bank will release funds directly to Abbott to be applied to the
Obligations; provided, however, that if NaPro disputes the existence of any
Event of Default and invokes the procedures under Section 7.2, the Lock Box Bank
shall hold all monies in the Lock Box Account pending resolution of such
procedures. Any of the Faulding Revenue received by NaPro after delivery of a
Collateral Exercise Notice shall be held in trust by NaPro and NaPro shall
deliver to the Lock Box Bank in original form all money, checks, money orders,
notes or other means of or evidences of payment in respect of the Faulding
Revenue. When and if an Event of Default has been cured or is otherwise no
longer continuing, Abbott covenants and agrees that it will immediately execute
a joint notice with NaPro directing the Lock Box Bank to resume releasing funds
in the Lock Box Account to NaPro on a daily basis. The joint notice sent by the
Parties shall indicate the date as of which the release of funds to NaPro shall
resume and Abbott shall be entitled to receive the funds in the Lock Box Account
only up to such date.
(b) Other Collateral. NaPro hereby covenants and agrees that
upon receipt of a Collateral Exercise Notice that includes an election by Abbott
to exercise rights with respect to Equipment, Inventory or Yew Trees
constituting Collateral: (i) NaPro shall, at NaPro's expense and upon the
reasonable request of Abbott, within ten (10) Business Days of NaPro's receipt
of the Collateral Exercise Notice, (A) assemble all or part of the Equipment and
Inventory constituting the Collateral as reasonably directed by Abbott, and
NaPro shall make such Equipment and Inventory available to Abbott at a place and
time that is reasonably convenient to both Parties and (B) NaPro shall promptly
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notify each of the landlords on whose property the Yew Trees are growing of
Abbott's intent to exercise its rights to realize upon such Collateral; (ii)
NaPro shall permit Abbott upon reasonable advance notice of not less than ten
(10) Business Days to enter upon any premises of NaPro and take possession of
such Collateral; and (iii) NaPro shall permit Abbott, without notice except as
specified below, to sell such Collateral or any part thereof in one or more
parcels at public or private sale, at any of NaPro's offices or elsewhere, at
such time or times, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as Abbott may deem commercially
reasonable. NaPro agrees that, to the extent notice of sale shall be required by
law, at least ten (10) Business Days notice to NaPro of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. At any sale of such Collateral, if permitted
by law, Abbott may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) for the purchase of such Collateral or any portion
thereof for the account of Abbott. Abbott shall not be obligated to make any
sale of Collateral regardless of whether a notice of sale has been given.
Subject to Sections 7.2 and 7.3, NaPro shall not be liable for any deficiency.
Abbott may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Subject to Sections
7.2 and 7.3, Abbott shall be required to proceed against the Collateral and may
not proceed against NaPro directly.
If NaPro disputes the existence of an Event of Default and invokes the
procedures set forth in Section 7.2, Abbott's rights shall be stayed subject to
determination under Section 7.2.
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2.4 NaPro Covenants Regarding Faulding Agreement. NaPro
covenants that during the term of this Agreement, it shall use commercially
reasonable efforts to keep in full force and effect the Faulding Agreement in
accordance with the terms hereof as of the Effective Date. NaPro shall use
commercially reasonable efforts to enforce its rights under the Faulding
Agreement. In the event that a default exists under the Faulding Agreement by
either NaPro or Faulding, NaPro shall provide to Abbott prompt written notice of
such default, including the nature of the default and the actions to be taken by
the defaulting party to remedy the default. NaPro shall not amend any terms of
the Faulding Agreement or waive any of its rights thereunder without the prior
written consent of Abbott, which consent shall not be unreasonably withheld or
delayed.
2.5 Perfection and Protection of Security Interest.
(a) NaPro shall perform all steps requested by Abbott at any
time to perfect, maintain, protect and enforce Abbott's security interest,
including, without limitation: (i) executing and filing financing or
continuation statements, and amendments thereof, in form and substance
satisfactory to Abbott; (ii) delivering to Abbott the originals of all
instruments, documents and chattel paper, and all other Collateral of which
Abbott determines it should have physical possession in order to perfect and
protect Abbott's security interest therein, duly pledged, endorsed or assigned
to Abbott without restriction; (iii) delivering to Abbott warehouse receipts
covering any portion of the Collateral located in warehouses and for which
warehouse receipts are issued; (iv) when an Event of Default exists,
transferring Inventory to warehouses designated by Abbott; (v) placing notations
on NaPro's books of account to disclose Abbott's security interest; and (vi)
taking such other steps as are deemed necessary or desirable by Abbott
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to maintain and protect Abbott's security interest. To the extent permitted by
applicable law, Abbott may file, without NaPro's signature, one or more
financing statements disclosing Abbott's security interest. NaPro agrees that a
carbon, photographic, photostatic, electronic or other reproduction of a
financing statement is sufficient as a financing statement. All reasonable
out-of-pocket expenses of NaPro under this Section 2.5(a) prior to the existence
of an Event of Default shall be reimbursed by Abbott. All reasonable out-of
- -pocket expenses of Abbott under this Section 2.5 (a) after an Event of Default
has occurred and is continuing shall be reimbursed by NaPro.
(b) If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of NaPro's agents or processors, then
NaPro shall notify Abbott thereof. At Abbott's request, NaPro shall notify such
Person of Abbott's security interest in such Collateral and, upon Abbott's
request, NaPro shall instruct such Person to hold all such Collateral for
Abbott's account subject to Abbott's instructions and NaPro shall obtain such
documents relating thereto as Abbott shall request; provided, however, that if
the action of NaPro requested under this sentence is not required to perfect
Abbott's security interest, NaPro shall not be required to take such action
unless a Collateral Exercise Notice has been delivered. If at any time any
Collateral is located on any operating facility of NaPro which is not owned by
NaPro, then NaPro shall use commercially reasonable efforts to obtain within 30
days following (i) the Effective Date for those facilities in effect on the
Effective Date and (ii) the leasing of facilities after the date hereof, written
waivers of all present and future liens to which the owner or lessor of such
premises may be entitled to assert against the Collateral and consents with
respect to the liens of Abbott, all in form satisfactory to Abbott.
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2.6 Location of Collateral. NaPro represents and warrants to
Abbott that: (a) Schedule 1 is a correct and complete list of NaPro's chief
executive office, the location of its books and records, the locations of the
Collateral and the locations of all of its other places of business; and (b)
Schedule 1 correctly identifies any of such facilities and locations that are
not owned by NaPro and sets forth the names of the owners and lessors or
sublessors of and, the holders of any mortgages on, such facilities and
locations. NaPro covenants and agrees that it will not: (i) maintain any
Collateral at any location other than those locations listed for NaPro on
Schedule 1; (ii) otherwise change or add to any of such locations; or (iii)
change the location of its chief executive office from the location identified
in Schedule 1, unless it gives Abbott at least thirty (30) days' prior written
notice thereof and executes any and all financing statements and other documents
that Abbott requests in connection therewith or, if such new location would not
require any additional financing statements to be filed to maintain Abbott's
perfected security interest in all Collateral, five (5) days' prior written
notice thereof. Without limiting the foregoing, NaPro represents that all of its
Inventory (other than Inventory in transit) is, and covenants that all of its
Inventory will be, located, either: (a) on premises owned by NaPro; (b) on
premises leased by NaPro, provided that NaPro has used commercially reasonable
efforts to obtain an executed landlord waiver from the landlord of such premises
in form and substance satisfactory to Abbott; or (c) with any warehouseman,
bailee or any of NaPro's agents or processors, provided that Abbott has received
such documents relating thereto in form and substance satisfactory to Abbott as
Abbott shall request.
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2.7 Title to, Liens on, and Sale and Use of Collateral. NaPro
represents and warrants to and agrees with Abbott that: (a) NaPro owns and will
continue to own (or in the case of the Yew Trees in Canada will own or have
rights in such Yew Trees) all of the Collateral free and clear of all Liens
whatsoever, except for Permitted Liens and Specified Liens as set forth on
Schedule 1; (b) Abbott's security interest in the Collateral will not be subject
to any prior lien, except for Specified Liens; (c) NaPro will use, store and
maintain the Collateral with all reasonable care and will use such Collateral
for lawful purposes only; and (d) NaPro will not, without Abbott's prior written
approval, sell, or dispose of or permit the sale or disposition of any of the
Collateral except for sales of Inventory in the ordinary course of business,
sales of Equipment as permitted by Section 2.12 and harvesting trees in the
ordinary course of business and except that NaPro may use the Faulding Revenue
and the Proceeds in the ordinary course of business.
2.8 Appraisals. Whenever an Event of Default exists, and at
such other times not more frequently than once a year as Abbott requests, NaPro
shall, upon Abbott's request, provide Abbott with appraisals or updates thereof
of any or all of the Collateral (it being understood that: (a) the Inventory and
Equipment may be appraised separately at different times and that any such
appraisal of Inventory and Equipment shall together constitute one appraisal for
purposes of the limitation described above; and (b) the appraiser and the
preparation basis to be mutually satisfactory to Abbott and NaPro), such
appraisals and updates to include, without limitation, information required by
applicable law and regulation. NaPro and Abbott agree that an appraisal by the
same appraiser who prepared the Original Collateral Appraisal prepared in the
same manner as the Original Collateral Appraisal would be mutually satisfactory.
Abbott shall bear the
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cost of any appraisal before an Event of Default. NaPro shall bear the cost of
any appraisal after an Event of Default has occurred and is continuing.
2.9 Access and Examination; Confidentiality. Abbott may, at
all reasonable times during regular business hours with reasonable notice to
NaPro (and at any time when an Event of Default exists) have access to, examine,
audit, make extracts from or copies of and inspect any or all of NaPro's
records, files, and books of account and the Collateral, and discuss NaPro's
affairs with NaPro's officers and management. Abbott may, at any time when an
Event of Default exists, make copies of all of NaPro's books and records related
to the Collateral, or require NaPro to deliver such copies to Abbott. Any
out-of-pocket expenses of Abbott under this section prior to an Event of Default
shall be at Abbott's own expense and after an Event of Default has occurred and
is continuing shall be at NaPro's expense.
2.10 Accounts. (a) NaPro hereby represents and warrants to
Abbott, that: (i) each existing Account represents, and each future Account will
represent, a bona fide sale or lease and delivery of goods by NaPro, or
rendition of services by NaPro, in the ordinary course of NaPro's business; and
(ii) each existing Account is, and each future Account will be, for a liquidated
amount payable by the account debtor thereon on the terms set forth in the
invoice therefor, without any offset, deduction, defense, or counterclaim except
those known to NaPro and disclosed to Abbott pursuant to this Agreement.
(b) NaPro shall not accept any note or other instrument
(except a check or other instrument for the immediate payment of money) with
respect to any Account unless NaPro will deliver such instrument to Abbott,
endorsed by NaPro to Abbott in a
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manner satisfactory in form and substance to Abbott (which endorsement may be on
an allonge attached to the note) within ten (10) days of the execution and
delivery thereof.
2.11 Collection of Accounts; Payments. (a) Until Abbott
notifies NaPro to the contrary after the occurrence and during the continuance
of an Event of Default, NaPro shall make collection of all Accounts and other
Collateral. After such notice, NaPro shall receive all payments as Abbott's
trustee, and shall immediately deliver all payments in their original form duly
endorsed in blank into the Lock Box Account subject to documentation acceptable
to Abbott. NaPro shall, after such notice, instruct all account debtors to make
all payments directly to the address(es) established for such service. All items
sent to any such address shall be deposited in the Lock Box Account. If,
notwithstanding such instructions, after such notice, NaPro receives any
proceeds of Accounts, it shall receive such payment as Abbott's trustee, and
shall immediately deliver such payments to Abbott in their original form duly
endorsed in blank or deposit them into the Lock Box Account, as Abbott may
direct. All collections received in any such lock-box or the Lock Box Account or
directly by Abbott and all funds in the Lock Box Account or other account to
which such collections are deposited shall, after such notice, be credited to
repayment of the Loan. Abbott or Abbott's designee may, at any time after the
occurrence of an Event of Default, notify account debtors that the Accounts have
been assigned to Abbott and of Abbott's security interest therein, and may
collect them directly and charge the reasonable collection costs and expenses to
NaPro as a Loan, not subject to the limitations of Section 2.3(b). So long as an
Event of Default has occurred and is continuing, NaPro, at Abbot's request,
shall execute and deliver to Abbott such
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documents as NaPro shall require to grant Abbott access to any post office box
in which collections of Accounts are received.
(b) If sales of Inventory are made for cash after the
occurrence and during the continuance of an Event of Default, NaPro shall
immediately deliver to Abbott or deposit into the Lock Box Account the cash
which NaPro receives.
(c) All payments, including immediately available funds
received by Abbott at a bank designated by it, received by Abbott on account of
Accounts or as proceeds of other Collateral will be Abbott's sole property for
its benefit and will be credited to the Loans (conditional upon final
collection).
2.12 Equipment.
(a) NaPro represents and warrants to Abbott and agrees with
Abbott that all of the Equipment is and will be used or held for use in NaPro's
business, and is and will be fit for such purposes. NaPro shall keep and
maintain the Equipment in good operating condition and repair (ordinary wear and
tear excepted) and shall make all necessary replacements thereof.
(b) NaPro shall promptly inform Abbott of any material
additions to or deletions from the Equipment exceeding $50,000 with respect to
any single transaction. NaPro shall not, without Abbott's prior written consent,
permit any Equipment to become a fixture with respect to real property or to
become an accession with respect to other personal property with respect to
which real or personal property Abbott does not have a security interest.
(c) NaPro shall not, without Abbott's prior written consent,
sell, lease as a lessor, or otherwise dispose of any of its Equipment; provided,
however, that NaPro
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is permitted to sell, lease as a lessor, or otherwise dispose of any of its
Equipment in the ordinary course of business, provided, however, that if an
Event of Default has occurred and is continuing or if at the time of the
disposition, the then outstanding principal amount of the Loan exceeds the
Borrowing Base, NaPro shall not, without Abbott's prior written consent, sell,
lease as a lessor, or otherwise dispose of any of its Equipment, except that
NaPro may dispose of obsolete or unusable Equipment having an orderly
liquidation value no greater than $50,000 in the aggregate in any Fiscal Year,
without Abbott's consent.
2.13 Right to Cure. Abbott may, in its discretion, pay any
amount or do any act required of NaPro hereunder in order to preserve or protect
the Collateral or Abbott's security interest therein, and which NaPro fails to
pay or do, including, without limitation, payment of any judgment against NaPro,
any insurance premium, any warehouse charge, any finishing or processing charge,
any landlord's claim, and any other lien upon or with respect to the Collateral;
provided, that, Abbott shall give NaPro reasonable notice prior to any such
action or payment under this Agreement or under any agreement between Abbott and
an owner or lessor of real property leased by NaPro as lessee. All payments that
Abbott makes under this Section 2.13 and all out-of-pocket costs and expenses
that Abbott pays or incurs in connection with any action taken by it hereunder,
after the occurrence and during the continuation of an Event of Default and at
such other times as Abbott is authorized hereunder to pay or incur such costs or
expenses, shall be reimbursed by NaPro and such reimbursement shall not be
subject to the limitations set forth in Section 2.3(b).
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2.14 Power of Attorney. NaPro hereby appoints Abbott and
Abbott's designee as NaPro's attorney, with power: (a) to endorse NaPro's name
on any checks, notes, acceptances, money orders or other forms of payment or
security that come into Abbott's possession; (b) to sign NaPro's name on any
invoice, bill of lading, warehouse receipt or other document of title relating
to any Collateral, on financing statements and other public records and file
such financing statements by electronic means with or without a signature as
authorized or required by applicable law or filing procedures; and (c) to do all
things reasonably necessary to protect its interest in or exercise its rights
with respect to the Collateral. NaPro ratifies and approves all acts of such
attorney. Abbott shall exercise at least the same standard of care in exercising
its rights under this Section as it does in administering its own affairs. This
power, being coupled with an interest, is irrevocable until this Agreement has
been terminated. Abbott shall not exercise its rights under this Section unless
an Event of Default exists and Abbott has given NaPro at least two Business
Days' notice of such Event of Default. If NaPro disputes the existence of such
Event of Default, it may invoke the procedures under Section 7.2 and Abbott's
rights shall be stayed subject to determination under Section 7.2.
2.15 Insurance.
(a) NaPro shall maintain with financially sound and reputable
insurers rated at least A+ by A.M. Best Company, insurance against loss or
damage by fire with extended coverage; theft, burglary, pilferage and loss in
transit; public liability and third party property damage; larceny, embezzlement
or other criminal liability; business interruption; public liability and third
party property damage; and such other hazards or of such other types as is
customary for Persons engaged in the same or similar business, and
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under policies acceptable to Abbott. Without limiting the foregoing, NaPro shall
also maintain flood insurance, in the event of a designation of the area in
which any of the Equipment or Inventory is located as "flood prone" or a "flood
risk area," as defined by the Flood Disaster Protection Act of 1973, in an
amount to be reasonably determined by Abbott, and shall comply with the
additional requirements of the National Flood Insurance Program as set forth in
said Act.
(b) NaPro shall cause Abbott to be named in each such policy
as secured party or mortgagee and sole loss payee or additional insured, in a
manner acceptable to Abbott. Each policy of insurance shall contain a clause or
endorsement requiring the insurer to give not less than thirty (30) days' prior
written notice to Abbott in the event of cancellation of the policy for any
reason whatsoever and a clause or endorsement stating that the interest of
Abbott shall not be impaired or invalidated by any act or neglect of NaPro or
the owner of any premises or the occupation of any premises for purposes more
hazardous than are permitted by such policy. All premiums for such insurance
shall be paid by NaPro when due, and certificates of insurance and, if requested
by Abbott, photocopies of the policies, shall be delivered to Abbott. If NaPro
fails to procure such insurance or to pay the premiums therefor when due, Abbott
may do so and the obligation to reimburse Abbott for such insurance premiums
shall not be subject to the limitations set forth in Section 2.3(b). SECTION 3.
CONDITIONS PRECEDENT.
3.1 Conditions to Initial Advance. The obligation of Abbott to
make the initial Advance under the Loan shall be subject to the fulfillment of
the following conditions precedent in a manner reasonably satisfactory to
Abbott:
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(a) Abbott shall have received: (i) the executed Abbott Note;
(ii) a certified copy of the resolutions of the Board of Directors of NaPro
authorizing the execution, delivery and performance of this Agreement, the
Abbott Note and any other documents required hereunder, and the borrowing under
this Agreement; (iii) an incumbency certificate evidencing the signatures of
officers of NaPro executing this Agreement and any related documents; (iv)
opinions of counsel to NaPro in form satisfactory to Abbott; (v) such financing
statements and other instruments reasonably satisfactory in form and substance
to Abbott evidencing its first priority security interest in the Collateral and
due perfection thereof; (vi) a certificate of an officer of NaPro, dated as of
the date of the Advance, confirming the matters set forth in Section 3.1(b); and
(vii) lien searches confirming that no prior lien exists with respect to the
Collateral except as set forth in Schedule 1.
(b) The representations and warranties of NaPro contained in
this Agreement shall be true and correct; NaPro shall have complied with all of
the terms and conditions of this Agreement to be performed or observed by it; no
Event of Default shall be in existence or shall exist after giving effect to the
execution of this Agreement or the extension of the Loan.
(c) All corporate proceedings and all documents required to be
completed and executed by the provisions of, and all instruments to be executed
in connection with the transactions contemplated by, this Agreement shall be
reasonably satisfactory in form and substance to Abbott.
3.2 Conditions to Each Advance . In addition to the
conditions set forth in Section 3.1, the obligation of Abbott to make any
Advance shall be subject to:
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(i) the representations and warranties of NaPro contained in this Agreement
being true and correct; (ii) no Event of Default has occurred and is continuing
after giving effect to such Advance; and (iii) Abbott's receipt of a completed
Borrowing Request in the form of Exhibit B. The delivery of a Borrowing Request
by NaPro shall be deemed a representation as of the date of such delivery as to
the matters set forth in clauses (i) and (ii).
SECTION 4. REPRESENTATIONS AND WARRANTIES.
4.1 Representations and Warranties of NaPro. In order to
induce Abbott to enter into this Agreement and to make the Advance, NaPro
represents and warrants that:
(a) Authority of NaPro. NaPro is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
NaPro 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 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 or advisable, except where the failure to
be so licensed or qualified would not have a material adverse effect on NaPro
and its subsidiaries taken as a whole. NaPro has the corporate power and
authority to execute and deliver this Agreement, and to perform its obligations
under this Agreement. All corporate action required to be taken by NaPro to
authorize the execution, delivery and performance of this Agreement has been
duly taken.
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(b) Authorization; Enforceable Obligations This Agreement and
the Abbott Note have been duly authorized, executed and delivered by NaPro and
constitute the legal, valid and binding obligations of NaPro, enforceable
against NaPro in accordance with their respective terms (except to the extent
that enforcement may be limited by any applicable bankruptcy, reorganization,
moratorium or similar laws then in effect which may affect the enforceability of
creditors' rights generally, or by general equitable principles).
(c) No Legal Bar. The execution, delivery and performance of
this Agreement and the Abbott Note by NaPro: (i) are not and will not be in
violation of the charter or bylaws of NaPro; (ii) are not and will not be in
violation of or conflict with any law or governmental rule or regulation,
judgment, writ, order, injunction, award or decree of any court, arbitrator,
administrative agency or other governmental authority applicable to NaPro; (iii)
are not and will not conflict or be inconsistent with, or result in any breach
of, any of the terms, covenants, conditions or provisions of or constitute a
Event of Default under any indenture, mortgage, material contract, deed of
trust, debenture, material agreement or other material undertaking or material
instrument to which NaPro is a party or by which any of the Collateral may be
bound or affected; and (iv) do not and will not result in the creation or
imposition of any lien on any of the Collateral pursuant to the provisions of
any such indenture, mortgage, contract, deed of trust, debenture, agreement or
other undertaking or instrument.
(d) No Debt Restrictions. No note, bond, debenture, indenture,
mortgage, material contract, deed of trust, material agreement or other material
undertaking or material instrument to which NaPro is subject contains any
restriction on
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NaPro's incurring of indebtedness under this Agreement or the Abbott Note,
except such restrictions as have been waived in writing (copies of which shall
be furnished to Abbott).
(e) No Consents. No permit, consent, approval or authorization
of, or declaration to or filing with, any governmental authority is required in
connection with the execution, delivery and performance of this Agreement or the
Abbott Note by NaPro or in connection with any transaction contemplated by this
Agreement, which would materially interfere with performance hereunder if not
obtained.
(f) Regarding the Collateral. Except as set forth in Schedule
1, NaPro has good, free and clear title to the Collateral and has not previously
assigned or transferred the Collateral or any interest therein. The Collateral
is not subject to any security interest whatsoever, nor is it subject to the
lien of any other Person except as set forth in Schedule 1.
(g) Appraisal. All written information provided to Abbott by
NaPro in connection with the preparation of the Original Collateral Appraisal is
true and correct in all material respects. All oral responses by NaPro to
questions in the preparation of the Original Collateral Appraisal were true and
correct in all material respects, to the extent that such responses were made by
employees having responsibility with respect to the subject matter of the
questions. The Original Collateral Appraisal represents a true and accurate
description in all material respects of the assets of NaPro listed therein as of
the date of the Original Collateral Appraisal. NaPro has reviewed the Original
Collateral Appraisal and represents that it does not include any manifest error.
NaPro represents and warrants there has been no material adverse change in the
condition, existence or ownership of the Collateral from the date of the
Original Collateral Appraisal.
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(h) The Faulding Agreement. The Faulding Agreement is in full
force and effect and neither Faulding nor NaPro is in default thereunder. A
true, accurate and complete copy of the Faulding Agreement, as of the date of
this Agreement, is attached hereto as Exhibit D. All indebtedness of NaPro to
Faulding has been paid in full.
(i) SEC Filings.
(i) NaPro has timely filed all forms, reports and
documents required to be filed by it with the Securities and Exchange Commission
("SEC") since January 1, 1995, and NaPro has heretofore made available to the
Abbott, in the form filed with the SEC (including any exhibits thereto): (A) the
Annual Reports on Form 10-K of NaPro for the fiscal years ended December 31,
1995, December 31, 1996, December 31, 1997, December 31, 1998 (the "1998 Annual
Report"); (B) all proxy and information statements relating to meetings to
stockholders of NaPro (whether annual or special) held since January 1, 1995;
and (C) all other reports and registration statements (including all Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K) filed by NaPro with the
SEC since January 1, 1995 (including all amendments to each of the foregoing,
the forms, reports and other documents referred to in clauses (A) through (C)
being referred to in this Agreement, collectively, as the "NaPro Disclosure
Documents"). The NaPro Disclosure Documents (x) were prepared in accordance with
the Securities Act or the Securities Exchange Act, as the case may be, and the
rules and regulations thereunder, and (y) did not at the time they were filed
with the SEC contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
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(ii) Each of the consolidated financial statements
(including any notes thereto) contained in the Annual Reports on Form 10-K of
NaPro for the fiscal years ended December 31, 1995, December 31, 1996, December
31, 1997, and December 31, 1998, was prepared in accordance with U.S. generally
accepted accounting principles and all applicable rules of the SEC and fairly
presents in all material respects the consolidated financial position, results
of operations and cash flows of each of NaPro and its consolidated subsidiaries
as at the respective dates thereof and for the respective periods indicated
therein, subject, in the case of unaudited statements, to normal year-end
adjustments. As of December 31, 1998, except as set forth in the 1998 Annual
Report, neither NaPro nor any of its consolidated subsidiaries had any material
liabilities or obligations, secured or unsecured (whether accrued, absolute,
contingent or otherwise). For purposes of the preceding sentence, a "material
liability or obligation" is one that exceeds $1,150,000.
(iii) Absence of Certain Changes. Since March 31,
1999, and except as (A) set forth in the 1998 Annual Report or the March, 1999
Quarterly Report, (B) disclosed in Schedule 3(e) of the Stock Power Purchase
Agreement, or (C) as otherwise contemplated by this Agreement, there has not
been to NaPro's knowledge, any event, occurrence or development of a state of
circumstances or facts which has had or reasonably would be expected to have a
material adverse effect on the business, assets, operations, prospects or
condition (financial or otherwise) of NaPro and its subsidiaries, taken as a
whole.
(j) Validity and Priority of Security Interest. The provisions
of this Agreement create legal and valid security interests on all the
Collateral in favor of
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Abbott, and assuming such steps have been taken as are necessary to perfect such
security interests, such security interests constitute perfected and continuing
security interests on all the Collateral, having priority over all other liens
on the Collateral and enforceable against NaPro and all third parties, subject
to the liens and security interests set forth on Schedule 1.
(k) Corporate Name; Prior Transactions. NaPro has not, during
the past five (5) years, been known by or used any other corporate or fictitious
name, or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its property
outside of the ordinary course of business.
4.2 Representations and Warranties of Abbott. Abbott hereby
represents and warrants that:
(a) Existence. Power and Authority. Abbott is a corporation
duly incorporated and validly existing, in good standing, under the laws of
Illinois with the power, authority and legal right to make this Agreement and
perform its obligations hereunder.
(b) Authorization: Enforceable Obligations. This Agreement has
been duly authorized, executed and delivered by Abbott.
(c) No Legal Bar. The execution, delivery and performance of
this Agreement by Abbott: (i) are not and will not be in violation of the
charter or bylaws of Abbott; (ii) are not and will not be in violation of or
conflict with any law or governmental rule or regulation, judgment, writ, order,
injunction, award or decree of any court, arbitrator, administrative agency or
other governmental authority applicable to Abbott; and (iii) are not and will
not conflict or be inconsistent with, or result in any
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breach of, any of the terms, covenants, conditions or provisions of or
constitute a Event of Default under any indenture, mortgage, material contract,
deed of trust, debenture, material agreement or other material undertaking or
material instrument to which Abbott is a party or by which any of its assets may
be bound or affected.
(d) No Consents. No permit, current authorization or approval
of, or declaration or filing with, any governmental authority is required in
connection with the execution, delivery or performance by Abbott of this
Agreement or in connection with any transaction contemplated by this Agreement.
(e) Enforceable Obligations. This Agreement constitutes the
legal, valid and binding obligation of Abbott, enforceable against Abbott in
accordance with its terms (except to the extent that enforcement may be limited
by any applicable bankruptcy, reorganization, moratorium or similar laws now or
subsequently in effect, which may affect the enforceability of creditors' rights
generally, or by general equitable principles).
(f) Government Funds. No payment to NaPro hereunder will be
made with government funds.
SECTION 5. COVENANTS.
5.1 Preservation of Corporate Existence, Etc. NaPro
shall:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business;
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(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the nonpreservation of which could
reasonably be expected to have a material adverse effect on the business,
operations or properties of NaPro.
5.2 Maintenance of Property. NaPro shall maintain and preserve
all its property which is material to its business in good working order and
condition, ordinary wear and tear excepted.
5.3 Payment of Obligations. NaPro shall pay and discharge as
the same shall become due and payable all its obligations and liabilities,
including:
(a) all tax liabilities, assessments and governmental charges
or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with generally accepted accounting principles are being maintained by
NaPro;
(b) all lawful claims which, if unpaid, would by law become a
lien upon the Collateral; and
(c) all material indebtedness, as and when due and payable,
but subject to any subordination provisions contained in any instrument or
agreement evidencing such indebtedness.
5.4 Compliance with Laws. NaPro shall comply in all material
respects with all requirements of law of any governmental authority having
jurisdiction over it or its business (including the Federal Fair Labor Standards
Act), except such as may be contested in good faith or as to which a bona fide
dispute may exist.
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SECTION 6. EVENTS OF DEFAULT.
6.1 Events of Default. For the purposes of this Agreement, an
"Event of Default" will be deemed to have occurred if:
(a) NaPro fails to pay any amount due on the Abbott Note after
Abbott makes demand (and the expiration of five (5) Business Days) or after any
such payment otherwise becomes due and payable;
(b) NaPro breaches or otherwise fails to perform or observe
any other provision contained in this Agreement, the Abbott Note or any other
document delivered or executed pursuant to this Agreement, and such breach or
failure to perform shall continue for a period of twelve (12) Business Days
after notice thereof shall have been given to NaPro by Abbott;
(c) any representation, warranty or information contained in
this Agreement, or required to be furnished to Abbott pursuant to this
Agreement, or in any writing furnished by NaPro to Abbott pursuant to this
Agreement, is false or misleading on the date made or furnished;
(d) NaPro makes an assignment for the benefit of creditors or
admits in writing its inability to pay its debts generally as they become due;
or an order, judgment or decree is entered adjudicating NaPro bankrupt or
insolvent; or an order for relief with respect to NaPro is entered under the
United State Bankruptcy Code, or NaPro petitions or applies to any tribunal for
the appointment of a custodian, trustee, receiver or liquidator of NaPro or of
any substantial part of the assets of NaPro, or commences any proceedings
relating to NaPro under any bankruptcy, reorganization, arrangement,
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insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against NaPro and either: (i) NaPro by any act
indicates its approval thereof, consent thereto or acquiescence therein; or (ii)
such petition, application or proceeding is not dismissed within 75 days;
(e) NaPro: (A) fails to make any payment in respect of any
indebtedness or contingent obligation in an amount in excess of $1,150,000 when
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise); or (B) fails to perform or observe any other condition or
covenant, or any other event shall occur or condition exist, under any agreement
or instrument relating to any such indebtedness or contingent obligation, if the
effect of such failure, event or condition is to cause, or to permit the holder
or holders of such indebtedness or beneficiary or beneficiaries of such
indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such indebtedness to be declared to be
due and payable prior to its stated maturity, or such contingent obligation to
become payable or cash collateral in respect thereof to be demanded; or
(f) One or more non-interlocutory judgments, non-interlocutory
orders, decrees or arbitration awards is entered against NaPro involving in the
aggregate a liability (to the extent not covered by independent third-party
insurance as to which the insurer does not dispute coverage) as to any single or
related series of transactions, incidents or conditions, of $1,150,000 or more,
and the same shall remain unsatisfied, unvacated and unstayed pending appeal for
a period of thirty (30) days after the entry thereof.
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6.2 Consequences of Demand and Events of Default.
Notwithstanding any other provision in this Agreement, the Abbott Note or any
other document executed in connection with this Agreement, upon the occurrence
and continuation of an Event of Default, Abbott has the right at any time to
demand payment (which payment shall be due five (5) Business Days after such
demand) by NaPro of all principal, interest and other amounts due under the
Abbott Note or this Agreement and, if NaPro shall fail to pay such amount,
Abbott shall have the right to enforce payment of the Abbott Note or any part
thereof and to exercise any and all rights and remedies in connection with the
Collateral provided by the U.C.C., as well as other rights and remedies in
connection with the Collateral possessed by Abbott under this Agreement or
otherwise at law or equity. Upon the occurrence of any one or more of the Events
of Default and at any time thereafter that such Event of Default shall be
continuing, Abbott may, by notice to NaPro, declare any amounts payable on
account of and the entire unpaid principal amount of the Abbott Note and all
interest accrued and unpaid thereon to be immediately due and payable, whereupon
the Abbott Note and all such accrued and unpaid interest thereon shall become
immediately due and payable without presentment, demand, or protest or further
notice of any kind, all of which are hereby waived by NaPro. Upon the occurrence
and the continuation of any one or more Events of Default and the expiration of
five (5) Business Days after demand by Abbott for payment of the Abbott Note and
amounts owed under this Agreement, interest shall accrue at the applicable Event
of Default rate as provided in Section 1.4. Upon the occurrence of an Event of
Default on any payments due to Abbott pursuant to the terms of this Agreement by
a period of time in excess of thirty (30) days, in addition to any and all
rights Abbott may have under this Agreement
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Abbott may, at Abbott's option, offset any payment due NaPro for Milestone
Payments or Additional Consideration under the Development Agreement against
payments due by NaPro to Abbott pursuant to this Agreement (including principal,
interests and any applicable penalties). Any withholding or offset of payments
for Milestone Payments or Additional Consideration by Abbott pursuant to this
Section 6.2 shall not constitute a breach or any other default by Abbott under
this Agreement, the Stock Purchase Agreement or the Development Agreement or
waiver of NaPro's obligations under those agreements. Notwithholding the
foregoing, if NaPro disputes the existence of such Event of Default and invokes
the procedures set forth in Section 7.2, Abbott's rights shall be stayed subject
to determination under Section 7.2.
SECTION 7. GENERAL PROVISIONS.
7.1 Definitions. For purposes of this Agreement, the following
terms shall be defined as set forth below:
"Abbott Note" shall have the meaning set forth in Section 1.3.
"Accounts" shall mean all "accounts" (as defined in the
U.C.C.) which constitute Proceeds of Collateral.
"Additional Consideration" shall have the meaning given to it
in the Development Agreement.
"Adjusted Collateral Value" shall mean the sum of:
(w) the difference of (i) the value (based on actual
cost) of any additional Equipment acquired by NaPro after the date of
the Original Collateral Appraisal designated in writing by NaPro to
Abbott to be included as part of the
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Collateral or any Equipment on which a lien existing on the Effective
Date has been released and evidence thereof by written record has been
provided to Abbott, less (ii) the value (based on the same principles
of valuation used in the Original Collateral Appraisal) of any
Equipment sold by NaPro, together with any Equipment written-off by
NaPro as damaged, defective or obsolete, after the date of the Original
Collateral Appraisal; plus
(x) the difference of (i) the value (based on the same
principles of valuation used in the Original Collateral Appraisal) of
any Inventory acquired by NaPro, together with any increases in the
value of existing Inventory (as a result of further processing from raw
materials to work-in-progress, or work-in-progress to finished goods,
or otherwise) carried by NaPro, after the date of the Original
Collateral Appraisal, less (ii) the value (based on the same principles
of valuation used in the Original Collateral Appraisal) of any
Inventory sold by NaPro (determined in accordance with the first-in
first-out (i.e., "FIFO") method of inventory accounting), together with
any Inventory written-off by NaPro as damaged, defective or obsolete,
after the date of the Original Collateral Appraisal; plus
(y) the difference of (i) the value (based on the same
principles of valuation used in the Original Collateral Appraisal) of
any additional Yew Trees planted or acquired by NaPro, together with
any increase in the value of existing Yew Trees, after the date of the
Original Collateral Appraisal, less (ii) the value (based on the same
principles of valuation used in the Original Collateral
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Appraisal) of any Yew Trees harvested or sold by NaPro or destroyed or
damaged after the date of the Original Collateral Appraisal; plus
(z) the difference of (i) any increase in the projected
revenue under the Faulding Agreement, due to a sustainable increase in
average selling price or a sustainable substantially better than
anticipated market conditions for the sale of the product by Faulding,
less (ii) any decrease in the projected revenue under the Faulding
Agreement, due to a decrease in average selling price or negative
change in general market conditions, product recall or adverse event
report or other similar regulatory concerns such as safety or efficacy
concerns, or default of the Faulding Agreement, or any other change to
the terms of the Faulding Agreement or general market conditions for
the product under that agreement which could negatively impact the
projected revenues under the Faulding Agreement; provided, that any
determination under this clause (z) shall be determined annually based
upon forecasts or, if mutually agreed upon, quarterly and provided
further that no Faulding Revenue shall be included in the Adjusted
Collateral Value if the Faulding Agreement has been terminated or has
expired.
If any Collateral is subject to any lien, other than the lien hereunder to
Abbott, the amount of the obligation secured by such lien shall be deducted in
the calculation of Adjusted Collateral Value. If any Equipment shall be subject
to any lien to secure borrowed money, such equipment shall not be included in
the calculation of Adjusted Collateral Value. The Adjusted Collateral Value may
be increased or decreased from time to time based upon any appraisal after the
Original Collateral Appraisal pursuant to Section 2.8.
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No collateral located in Canada shall be included in the Adjusted Collateral
Value until steps satisfactory to Abbott have been taken to perfect Abbott's
security interest therein.
"Advance" shall have the meaning set forth in Section 1.1.
"Affiliate" shall have the meaning given it in the Development
Agreement.
"Available Borrowing Base" shall mean an amount equal to (x)
the Borrowing Base less (y) the amount of any Advances drawn under the Loan then
outstanding.
"Borrowing Base" shall mean an amount equal to (a) the
Original Collateral Value, plus (or minus) (b) the Adjusted Collateral Value, if
any, plus (c) Accounts plus (d) identifiable Proceeds.
"Borrowing Base Certificate" shall mean a certificate,
substantially in the form of Exhibit C, duly completed and executed by the chief
financial officer or chief accounting officer of NaPro.
"Borrowing Request" shall mean a request by NaPro for an
Advance in the form of Exhibit B.
"Business Day" shall have the meaning given it in the
Development Agreement.
"Collateral" shall have the meaning set forth in Section 2.1.
"Collateral Exercise Notice" shall have the meaning set forth
in Section 2.2.
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"Commitment Amount" shall mean: [THIS PORTION HAS BEEN
REDACTED] "Development Agreement" shall have the meaning set
forth in the Recitals to this Agreement.
"Development Committee" shall have the meaning given it in the
Development Agreement."
"Development Costs" shall have the meaning given it in the
Development Agreement.
"Development Plan" shall have the meaning given it in the
Development Agreement.
"Drawdown Date" shall have the meaning set forth in Section
1.2(a).
"Effective Date" shall have the meaning set forth in the
preamble to this Agreement.
"Equipment" shall mean all "equipment" (as defined in the
U.C.C.) included as Exhibit A on the Original Collateral Appraisal and owned by
NaPro on the Effective Date, including, without limitation, all machinery, motor
vehicles, trucks, trailers, vessels, aircraft and rolling stock and all parts
thereof (but excluding the Ford Escort Wagon and the Ford Ranger XLT pickup
listed on such Exhibit A), together with all equipment acquired by NaPro after
the Original Collateral Appraisal (whether before or after the Effective Date)
that NaPro designates in writing to Abbott shall be included as Equipment for
purposes of this Loan Agreement.
"Event of Default" shall have the meaning set forth in Section
6.1.
"Faulding" shall mean F.H. Faulding & Co., Ltd.
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"Faulding Agreement" shall mean that certain Amended and
Restated Master Agreement dated as of January 19, 1994 (a copy of which is
attached as Exhibit D), as amended (but only as permitted pursuant to Section
2.3 hereof), by and between NaPro and Faulding.
"Faulding Revenue" shall mean NaPro's right from time to time
to receive amounts under paragraph 5.6.2 of the Faulding Agreement in an amount
equal to 50% of such amounts when, as and if owing and paid by Faulding to
NaPro.
"FDA" shall have the meaning given it in the Development
Agreement.
"Finished Product" shall have the meaning given it in the
Development Agreement.
"First Commercial Sale" shall have the meaning given it in the
Development Agreement.
"Initial Advance" shall have the meaning set forth in Section
1.1.
"Inventory" shall mean all "inventory" (as defined in the
U.C.C.) now owned or hereafter acquired by NaPro, wherever located, including
finished goods, raw materials, work-in-progress and other materials and supplies
used or consumed in NaPro's business, including goods that are returned or
repossessed, but excluding inventory held for Faulding in locations outside the
United States.
"Lien" shall mean, with respect to any real or personal
property, any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such property other than Permitted Liens. For purposes
of this Agreement, NaPro shall be deemed to own subject to a Lien any property
which it has acquired or holds subject to
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the interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such property.
"Loan" shall have the meaning set forth in Section 1.1.
"Lock Box Account" shall have the meaning set forth in Section
2.3.
"Lock Box Bank" shall have the meaning set forth in Section
2.3.
"Milestone Payment" shall mean "milestone" as such term is
used in Article III of the Development Agreement.
"Obligations" shall mean all obligations, liabilities and
indebtedness of every nature of NaPro from time to time owed to Abbott under
this Agreement, the Abbott Note and all other instruments, documents, financing
statements and agreements executed by or on behalf of NaPro in connection with
the Loan, including the principal amount of all debts, claims and indebtedness,
accrued and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable.
"Original Collateral Appraisal" shall mean that certain
appraisal of the Collateral dated April 14, 1999, prepared by American Appraisal
Associates, attached hereto as Exhibit E.
"Original Collateral Value" shall mean the liquidation value (less the
amount of any obligation secured by any lien on the Collateral (other than a
lien for the benefit of Abbott)) of the Collateral as set forth in the Original
Collateral Appraisal, except for the Faulding Revenue which appraised value is
set forth on Exhibit F to the Original Collateral Appraisal.
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. "Paclitaxel" shall have the meaning given it in the
Development Agreement.
"Permitted Liens" shall have the meaning set forth in Schedule
6.1.
"Planned Indication" shall have the meaning given it in the
Development Agreement.
"Person" shall have the meaning given it in the Development
Agreement.
"Proceeds" shall include whatever is received upon the sale,
exchange, collection or other disposition of Collateral or Proceeds. Insurance
payable by reason of loss or damage to the Collateral is Proceeds, except to the
extent that it is payable to a person other than a party to the security
agreement.
"Regulatory Approval" shall have the meaning given it in the
Development Agreement.
"Specified Liens" means the liens and security interests
described in Schedule 1.
"Termination Date" shall have the meaning set forth in Section
1.5.
"U.C.C." shall have the meaning set forth in Section 2.1.
"Yew Trees" shall mean: (a) all Taxus trees NaPro now owns,
has the right to harvest or hereafter acquires, including without limitation all
Taxus Media Hicksii owned by NaPro as of the Effective Date and growing on the
parcels of land specified on Schedule 1; (b) all of the products and cuttings
from such Taxus trees, including without limitation those which are located as
of the Effective Date in or about the parcels of land specified on Schedule 1;
and (c) all substitutions, replacements and
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proceeds of the assets specified in clauses (a) and (b) above, and all additions
and accessions thereto, wherever located.
7.2 Dispute Resolution. All disputes solely arising out of,
relating to, or connected with this Agreement (including, but not limited to,
any breach, alleged breach, asserted Event of Default, or any Claim as defined
in Section 7.4) shall forthwith be referred to alternative dispute resolutions
("ADR") to be conducted in accordance with the provisions of Section 7.2(a)
hereof. All disputes arising out of, relating to, or connected with this
Agreement and with the Development Agreement shall forthwith be referred to ADR
to be conducted in accordance with Article 16 and Exhibit G of the Development
Agreement. Either of these ADR procedures shall be the exclusive means for
either Party to this Agreement to seek resolution of any dispute arising out of,
relating to, or connected with this Agreement. The pendency of any matter
referred to ADR to be conducted in accordance with Section 7.2(a) hereof or in
accordance with Article 16 and Exhibit G of the Development Agreement, as the
case may be, shall not excuse any Party from performance under this Agreement,
it being understood that such performance is without prejudice to the dispute
resolution process.
(a) The Parties agree that within thirty days following the
first Advance, they will agree upon a mutually acceptable list of five neutrals
to preside in the resolutions of any disputes under this Section 7.2(a) (each, a
"Neutral"). (All references to days in this Section 7.2(a) are to calendar
days.) In the event of a dispute to which this Section 7.2(a) applies, either
Party may send prior written notice to the other Party of such dispute,
specifying the nature of the dispute. The Parties shall use reasonable efforts
to resolve the dispute. If the Parties have not resolved the dispute within
three days, a
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Party seeking resolution under this Section 7.2(a) may send written notice (an
"ADR Notice") to the other Party of the issues to be resolved by ADR and of a
date for an ADR hearing, which date shall be no earlier than ten (10) days
following the receipt of such notice by the other Party. The Party who sends an
ADR Notice shall contact the Neutrals to schedule one of them, whomever may be
available, to preside at the scheduled ADR hearing. From the date that NaPro
receives such an ADR Notice from Abbott until the ruling following the ADR
hearing is rendered, NaPro shall not sell or otherwise dispose of any
Collateral, other than sales of Inventory in the ordinary course of business.
Within three (3) days following receipt of an ADR Notice, the receiving Party
may send written notice to the sending Party of additional issues to be resolved
within the ADR resolution process. No later than three (3) days prior to the
hearing date, the Parties shall exchange and submit to the Neutral: (i) a copy
of all exhibits on which such Party intends to rely in any oral or written
presentation to the Neutral; (ii) a list of any witnesses such Party intends to
call at the ADR hearing, and a short summary of the anticipated testimony of
each witness; (iii) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other remedy for each issue (which
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); (iv) a brief
in support of such Party's proposed rulings and remedies, provided that the
brief shall not exceed twenty (20) pages (which page limit shall apply
regardless of the number of issues raised in the ADR proceedings). Except as
expressly set forth in the prior sentence, no discovery shall be required or
permitted by any means, including depositions, interrogatories, requests for
admissions, or production of documents. The ADR hearing shall be conducted on
one (1) day. Each Party shall
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have three (3) hours of hearing time to present its case. Otherwise, the hearing
shall be governed by the rules set forth in paragraph 5(b) through 5(e) of
Exhibit H to the Development Agreement. Within three (3) 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, regardless of the number of issues raised in the ADR
proceeding. The Neutral shall rule on each disputed issue within six (6) 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. The
provisions of paragraphs 8, 9 and 10 of Exhibit G to the Development Agreement
shall apply to resolution under this Section 7.2(a).
7.3 Costs and Expenses. NaPro shall pay or reimburse Abbott
within five Business Days after demand for all costs and expenses incurred by
Abbott (including any attorneys' cost or expenses, which attorneys may be
employees of Abbott) in connection with the enforcement, attempted enforcement,
or preservation of any rights or remedies under this Agreement during the
existence of an Event of Default or after acceleration of the Loans (including
in connection with any "workout" or restructuring regarding the Loans, and
including in any insolvency proceeding or appellate proceeding).
7.4 Indemnification. To the extent not prohibited by
applicable law, NaPro shall indemnify, defend and hold Abbott and each of its
officers, directors,
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employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including any attorneys' costs or expenses, which attorneys may be employees of
Abbott) (a "Claim") of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Loans) be imposed on, incurred
by or asserted against any such Indemnified Person arising by: (i) the breach by
NaPro of any of its covenants or agreements under this Agreement (other than the
agreement to pay principal and interest on the Loans; or (ii) arising from any
representation made by NaPro hereunder or in any statement or document delivered
or connection herewith being untrue or incorrect in any material respect,
including with respect to any investigation, litigation or proceeding (including
any insolvency proceeding or appellate proceeding) (any of the foregoing being a
"Breach") related to or arising out of this Agreement or the Loans or the use of
the proceeds thereof, whether or not any Indemnified Person is a party thereto.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 7.3 shall not apply to: (i) any Claim to the
extent that the relief sought with respect to such Claim is for payment by NaPro
of amounts due under the Loan; (ii) a Claim arising out of or based upon a
Breach which occurs in reliance upon and in conformity with information
furnished in writing to NaPro by such Indemnified Person; (iii) amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of NaPro, which consent however, shall not be unreasonably withheld; or
(iv) claims aggregating after the date hereof an amount not exceeding $1,500.
The agreements in this Section shall survive payment of the Loans and
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shall not be limited pursuant to Section 2.3(b) or any other "nonrecourse"
provision of this Agreement or the Abbott Note.
7.5 Amendment and Waiver. This Agreement may not be amended or
modified except by written agreement of NaPro and Abbott and no consent or
waiver hereunder shall be valid unless in a writing that refers to this
Agreement, signed by NaPro and Abbott.
7.6 Delay not a Waiver; Cumulative Remedies. No failure or
delay on the part of either Abbott or NaPro in exercising any right, power or
privilege under this Agreement or the Abbott Note shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege preclude
any other or further exercise or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement and the Abbott
Note are cumulative and not exclusive of any rights or remedies provided by law.
7.7 Notices. All notices, demands or other communications to
be given or delivered under or by reason of this Agreement shall be in writing
(including telecopy, telegraphic, telex or cable communications) and mailed,
telecopied, telegraphed, telexed, cabled or delivered:
If to NaPro, at:
NaPro BioTherapeutics, Inc.
6304 Spine Road, Unit A
Boulder, CO 80301
Attn: General Counsel
Fax: (303) 530-1296
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With a copy to:
Bartlit Beck Herman Palenchar & Scott
511 Sixteenth Street, Suite 700
Denver, CO 80202
Attn: James L. Palenchar
Fax: (303) 592-3140
If to Abbott at:
Abbott Laboratories
Hospital Products Division
200 Abbott Park Road, Bldg. AP-30
Abbott Park, IL 60064
Attn: President, Hospital Products Division
Fax: (847) 937-2927
with a copy to:
Abbott Laboratories
Domestic Legal Operations
100 Abbott Park Road
D-322, Bldg. AP6D
Abbott Park, IL 60064
Attn: Divisional Vice President
Fax: (847) 938-1206
or such other address or to the attention of such other person as the recipient
Party has specified by prior written notice to the sending Party. All such
notices and communications shall, when mailed, telecopied, telegraphed, telexed
or cabled, be effective when deposited in the mails, telecopy transmission is
completed, delivered to the telegraph company, confirmed by telex answer-back or
delivered to the cable company.
7.8 Survival of Representations and Warranties. All
representations and warranties made in this Agreement and the Abbott Note shall
survive the execution and delivery of this Agreement and the Abbott Note and the
making of the Loan.
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7.9 Descriptive Headings The captions of this Agreement are
for convenience of reference only and shall not define or limit the provisions
of this Agreement.
7.10 Term of Agreement. This Agreement shall continue until
the Abbott Note have been paid in full or discharged in accordance with the
terms of this Agreement and until all other liabilities and obligations of NaPro
under this Agreement shall have been fully satisfied.
7.11 Successors and Assigns. This Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the Parties, and their respective successors and assigns; provided, however,
that NaPro may not assign its rights or obligations under this Agreement without
the written consent of Abbott.
7.12 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS, EXCLUDING SUCH STATE'S RULES RELATING TO
CONFLICTS OF LAWS, AND ITS FORM, EXECUTION, VALIDITY,
CONSTRUCTION AND EFFECT SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH INTERNAL LAW.
7.13 No Third Party Rights. This Agreement is not intended to
and shall not be construed to create any rights in or confer any benefits on any
persons other than the Parties and their respective successors and assigns.
7.14 Complete Agreement. This Agreement, including the
documents and other writings referred to herein or delivered pursuant hereto,
the Development
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Agreement and the Stock Purchase Agreement constitute the entire agreement
between the Parties with respect to the transactions contemplated by this
Agreement and supersede any prior understandings, agreements, or representations
by or between the Parties, written or oral, that may have related in any way to
the subject matter of this Agreement.
7.15 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different Parties in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(signature page to follow)
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IN WITNESS WHEREOF, this Agreement has been duly executed as
of the day and year first above written.
ABBOTT LABORATORIES NAPRO BIOTHERAPEUTICS, INC.
By: /s/ Richard A. Gonzalez By: /s/ Sterling K. Ainsworth
Print Name: Richard A. Gonzalez Print Name: Sterling K. Ainsworth
Title: President Title: President/CEO
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