-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MvOIDBr6QFPhQX7vAJrSM8kDY3kb5gcdphZsbnxkYkVWm3DQEIEmOrk38wKKfWcp yCZDue4IA/6Mv2cc+UiQyQ== 0000899733-99-000116.txt : 19991018 0000899733-99-000116.hdr.sgml : 19991018 ACCESSION NUMBER: 0000899733-99-000116 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990723 ITEM INFORMATION: FILED AS OF DATE: 19991005 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAPRO BIOTHERAPEUTICS INC CENTRAL INDEX KEY: 0000891504 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] IRS NUMBER: 841187753 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-24320 FILM NUMBER: 99722842 BUSINESS ADDRESS: STREET 1: 6304 SPINE RD STREET 2: UNIT A CITY: BOULDER STATE: CO ZIP: 80301 BUSINESS PHONE: 3035303891 MAIL ADDRESS: STREET 1: 6304 SPINE RD STREET 2: UNIT A CITY: BOULDER STATE: CO ZIP: 80301 8-K 1 4/8/98 8-K 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) 1 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. 2 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. 3 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. 4 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 5 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". 6 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. 7 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. 8 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. 9 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. 10 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 11 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 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 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 EX-99.1 2 DEVELOPMENT AGREEMENT CONFIDENTIAL DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT BY AND BETWEEN NAPRO BIOTHERAPEUTICS, INC. AND ABBOTT LABORATORIES JULY 23, 1999 CONFIDENTIAL
TABLE OF CONTENTS 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 i CONFIDENTIAL 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 ii CONFIDENTIAL 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 iii CONFIDENTIAL 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 iv CONFIDENTIAL 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 v CONFIDENTIAL 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 vi CONFIDENTIAL 18.10 Interpretation..........................................................................101 18.11 Governing Law...........................................................................101 18.12 Counterparts............................................................................101
vii 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 viii 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] ix 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; 1 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, 2 CONFIDENTIAL 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 3 CONFIDENTIAL 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. 4 CONFIDENTIAL "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 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. 6 CONFIDENTIAL "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. 7 CONFIDENTIAL "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 8 CONFIDENTIAL 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. 9 CONFIDENTIAL "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 10 CONFIDENTIAL 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; 11 CONFIDENTIAL (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. 12 CONFIDENTIAL 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. 13 CONFIDENTIAL "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. 14 CONFIDENTIAL "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. 15 CONFIDENTIAL "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: 16 CONFIDENTIAL (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 17 CONFIDENTIAL 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 18 CONFIDENTIAL 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: 19 CONFIDENTIAL 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 20 CONFIDENTIAL 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: 21 CONFIDENTIAL 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 22 CONFIDENTIAL 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. 23 CONFIDENTIAL 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 24 CONFIDENTIAL 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 25 CONFIDENTIAL 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 26 CONFIDENTIAL 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 27 CONFIDENTIAL 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 28 CONFIDENTIAL 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 29 CONFIDENTIAL 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 30 CONFIDENTIAL 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. 31 CONFIDENTIAL 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.] 32 CONFIDENTIAL 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 33 CONFIDENTIAL (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 34 CONFIDENTIAL 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 35 CONFIDENTIAL 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 36 CONFIDENTIAL (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 37 CONFIDENTIAL 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. 38 CONFIDENTIAL 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. 39 CONFIDENTIAL 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. 40 CONFIDENTIAL 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 41 CONFIDENTIAL 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.]. 42 CONFIDENTIAL 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 43 CONFIDENTIAL 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 44 CONFIDENTIAL 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 45 CONFIDENTIAL 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. 46 CONFIDENTIAL 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 47 CONFIDENTIAL 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 48 CONFIDENTIAL 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. 49 CONFIDENTIAL 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 50 CONFIDENTIAL 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 51 CONFIDENTIAL 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 52 CONFIDENTIAL 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 53 CONFIDENTIAL (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 54 CONFIDENTIAL 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 55 CONFIDENTIAL 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 56 CONFIDENTIAL 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 57 CONFIDENTIAL 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 58 CONFIDENTIAL 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. 59 CONFIDENTIAL 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 60 CONFIDENTIAL 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 61 CONFIDENTIAL 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.] 62 CONFIDENTIAL 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 63 CONFIDENTIAL 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 64 CONFIDENTIAL 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 65 CONFIDENTIAL 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 66 CONFIDENTIAL 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 67 CONFIDENTIAL 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 68 CONFIDENTIAL 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 69 CONFIDENTIAL 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 70 CONFIDENTIAL 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 71 CONFIDENTIAL 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. 72 CONFIDENTIAL 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. 73 CONFIDENTIAL 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 74 CONFIDENTIAL 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. 75 CONFIDENTIAL 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 76 CONFIDENTIAL 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 77 CONFIDENTIAL 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. 78 CONFIDENTIAL 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 79 CONFIDENTIAL 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 80 CONFIDENTIAL 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 81 CONFIDENTIAL 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 82 CONFIDENTIAL 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 83 CONFIDENTIAL 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 84 CONFIDENTIAL 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 85 CONFIDENTIAL 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 86 CONFIDENTIAL 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), 87 CONFIDENTIAL (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 88 CONFIDENTIAL 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:
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 89 CONFIDENTIAL 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); 90 CONFIDENTIAL 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.
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: 91 CONFIDENTIAL 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. 92 CONFIDENTIAL 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 93 CONFIDENTIAL 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 94 CONFIDENTIAL 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 95 CONFIDENTIAL 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. 96 CONFIDENTIAL 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 97 CONFIDENTIAL 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 98 CONFIDENTIAL 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: 99 CONFIDENTIAL 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 100 CONFIDENTIAL 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] 101 CONFIDENTIAL 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 EX-99.2 3 STOCK PURCHASE AGREEMENT EXECUTION COPY STOCK PURCHASE AGREEMENT BY AND BETWEEN NAPRO BIOTHERAPEUTICS, INC. AND ABBOTT LABORATORIES JULY 23, 1999 EXECUTION COPY
TABLE OF CONTENTS Page 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 (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
ii EXECUTION COPY 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. 1 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. 2 EXECUTION COPY "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 3 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 4 EXECUTION COPY 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. 5 (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: 6 EXECUTION COPY (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 7 (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 8 EXECUTION COPY 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 9 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 10 EXECUTION COPY 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 11 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. 12 EXECUTION COPY (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, 13 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 14 EXECUTION COPY 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 15 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. 16 EXECUTION COPY 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 17 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. 18 EXECUTION COPY (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; 19 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 20 EXECUTION COPY 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. 21 (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 22 EXECUTION COPY 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 23 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; 24 EXECUTION COPY 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 25 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 26 EXECUTION COPY 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. 27 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. 28 EXECUTION COPY 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 29 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 30 EXECUTION COPY 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. 31 (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. 32 EXECUTION COPY (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 33 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 34 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, 35 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 36 EXECUTION COPY (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 37 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.] 38 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 39 EX-99.3 4 LOAN AND SECURITY AGREEMENT LOAN AND SECURITY AGREEMENT BY AND BETWEEN NAPRO BIOTHERAPEUTICS, INC. AND ABBOTT LABORATORIES JULY 23, 1999
TABLE OF CONTENTS 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 i 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
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] ii 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. 1 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 2 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"): 3 (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. 4 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. 5 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), 6 (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 7 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 8 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. 9 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 10 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. 11 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. 12 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 13 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 14 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 15 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 16 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). 17 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 18 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: 19 (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: 20 (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. 21 (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 22 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. 23 (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. 24 (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 25 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 26 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; 27 (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. 28 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, 29 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. 30 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 31 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 32 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 33 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. 34 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. 35 "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. 36 "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 37 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. 38 . "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 39 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 40 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 41 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, 42 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 43 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 44 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. 45 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 46 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) 47 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 48 -----END PRIVACY-ENHANCED MESSAGE-----