Exhibit 10.2


 


CONDITIONAL OPTION AGREEMENT

BETWEEN

AVANTI POLAR LIPIDS, INC.

AND

NEOPHARM, INC.


 


 


THIS CONDITIONAL OPTION AGREEMENT is
hereby made and entered into as of this the 26 day of January, 1999 (the
“Effective Date”) by and between AVANTI POLAR
LIPIDS, INC., an Alabama corporation having its principal place of
business at 700 Industrial Park Drive, Alabaster, Alabama 35007 (“Avanti”), and
NEOPHARM, INC., a Delaware
corporation, having a place of business at 100 Corporate North, Suite 215,
Bannockburn, Illinois 60015 (“Neopharm”).


 


WITNESSETH:


 


WHEREAS, Avanti is
engaged in the production of certain lipids and other biochemical products such
as synthetic cardiolipin for sale primarily to third parties engaged in
research and educational activities; and


 


WHEREAS, Neopharm is
engaged in the development of proprietary liposomal products for use in the
encapsulation of cancer drugs; and


 


WHEREAS, to date,
Neopharm has developed two such products, Liposomal Doxorubiein and Paclitaxel;
and


 


WHEREAS, synthetic
cardiolipin is a key ingredient in both products; and


 


WHEREAS, Neopharm
and Avanti entered into that certain Synthetic Cardiolipin Supply Agreement
(the “Supply Agreement”) dated May 26, 1998, setting forth the terms pursuant
to which Avanti will supply Neopharm with synthetic cardiolipin for use in
Liposomal Doxorubicin and Paclitaxel; and


 


WHEREAS, Section
5(e) of the Supply Agreement provides that in the event Avanti elects to
terminate the manufacture of synthetic cardiolipin, Neopharm has a right to
obtain a non-exclusive license from Avanti to allow Neopharm to continue the
manufacture of synthetic cardiolipin on an uninterrupted basis; and


 


WHEREAS, Avanti and
Neopharm wish to formalize the rights granted to Neopharm pursuant to Section
5(e) of the Supply Agreement by entering into this Conditional Option
Agreement.


 

















 


AGREEMENT


 


NOW, THEREFORE, for
good and valuable consideration, including, the mutual covenants and agreements
set forth herein, the receipt and sufficiency of which is hereby acknowledged,
Avanti and Neopharm, intending to be legally bound, hereby agree as follows:


 


ARTICLE I

DEFINITIONS


 


Section 1.1 “Avanti - GMP Production Process”
means those certain processes and procedures that
Avanti has developed and created for the production and manufacture of lipids
used by Avanti and which are in accordance with the “Good Manufacturing
Practices” conditions as described in the United States Code of Federal
Regulations and “Good Manufacturing Practices” regulations and the European
Community Guide to Good Manufacturing Practices, in all events adhering to the
U. S. GMP Regulations where conflict between the U. S. GMP Regulations and such
European Community regulations arise.


 


Section 1.2 “Avanti Intellectual Property”
means any and all innovations, patents, copyrights, trade secrets, patentable
ideas, copyrightable works, and all confidential technical, scientific or
business information, in whatever form or stage of completion, owned
exclusively by Avanti.


 


Section 1.3 “Field of Use”
means the commercialization of any anthrocyclines and taxanes described in a
Valid Claim of a Neopharm Patent for use as pharmaceuticals.


 


Section 1.4 “Neopharm Patent”
means one of the patents or patent applications listed on Exhibit A to this
Conditional Option Agreement.


 


Section 1.5 “Synthetic Cardiolipin
Intellectual Property” means that portion of the
Avanti Intellectual Property which relates either directly or indirectly to
that portion of the Avanti - GMP Production Process used to supply synthetic
cardiolipin to Neopharm pursuant to the terms of the Supply Agreement.


 


Section 1.6 “Valid Claim” means
a claim of a Neopharm Patent which has not been held invalid by a non-appealed
or unappealable decision by a court or other appropriate body of competent jurisdiction.


 


ARTICLE II

CONDITIONAL GRANT


 


Section 2.1 Conditional Option to
Non-Exclusive License.  In the event that, pursuant to Section 5(e) of the Supply
Agreement, Avanti elects to terminate the manufacture of synthetic cardiolipin,
Avanti hereby grants to Neopharm an option to obtain a non-exclusive license to
the


 


2

















 


Synthetic Cardiolipin
Intellectual Property to make, have made, use, and sell synthetic cardiolipin
in the Field of Use.


 


Section 2.2 Option.  This Conditional Option Agreement shall
commence on the Effective Date and shall expire on May 1, 2008, unless earlier
terminated in accordance with the terms and conditions of the Supply Agreement.  In the event that the Supply Agreement is
still in effect on May 1, 2008, this Conditional Option Agreement shall
thereafter automatically renew for additional terms of two (2) years each.
Notwithstanding any other provision of the Supply Agreement or this Conditional
Option Agreement, however, this Conditional Option Agreement shall terminate
automatically upon termination of the Supply Agreement.


 


Section 2.3 Option Exercise.  The option contemplated in this Agreement
shall become effective immediately upon Neopharm’s receipt of written
notification from Avanti of Avanti’s decision to terminate the manufacture of
synthetic cardiolipin for supply to Neopharm pursuant to the terms of the
Supply Agreement (the “Avanti Notice of Termination”).  Neopharm shall have ninety (90) days from
its receipt of the Avanti Notice of Termination to exercise the option
contemplated in this Agreement. 
Neopharm shall notify Avanti of its intent to exercise such option in
writing in accordance with the terms of Section 4.4 of this Conditional Option
Agreement.


 


ARTICLE III

LICENSE TERMS


 


Upon exercise
of the option, Avanti and Neopharm hereby agree to negotiate in good faith to
establish the terms of a non-exclusive license agreement granting Neopharm
non-exclusive rights to the Synthetic Cardiolipin Intellectual Property to
make, have made, use and sell synthetic cardiolipin in the Field of Use under
such terms and conditions as are customary in the trade.  Such non-exclusive license agreement shall
include, without limitation, the following provisions: a license fee, milestone
payments, royalty payments, right to grant sublicenses together with provisions
allocating the proceeds derived from any such sublicenses between Avanti and
Neopharm, a commitment by Neopharm and any sublicensee to exert their best
efforts to utilize synthetic cardiolipin in the Field of Use as rapidly as
practicable, the right of Avanti to terminate the non-exclusive license should
Neopharm or its sublicensee fail to meet specified due-diligence milestones,
and indemnity and insurance provisions.


 


ARTICLE IV

GENERAL TERMS AND CONDITIONS


 


Section 4.1 Assignability; Assumption.  This Conditional Option Agreement shall be
binding upon and shall inure to the benefit of the parties, their legal
representatives, successors and assigns. 
This Conditional Option Agreement and any rights granted hereunder may
not be assigned, transferred or conveyed by either party without the prior
written consent of the other; provided, however, that Neopharm may assign this
Conditional Option Agreement to Pharmacia and Upjohn, Inc. without Avanti’s
consent.  In the event that Avanti shall
sell all or substantially all of its assets


 


3

















 


relating to the manufacture of Synthetic Cardiolipin to another entity,
or in the event that Avanti shall merge (or otherwise combine) with or into
another entity and shall not be the surviving entity, Avanti agrees that it
shall impose as a condition to any such sale or combination that this
Conditional Option Agreement shall be a part of the assets which are
transferred and taken up by the purchaser of the assets or the obligations
imposed by this Conditional Option Agreement shall be specifically assumed by
any such surviving entity purchaser.


 


Section 4.2 Choice of Law; Amendment.  This Agreement
shall be governed by and construed in accordance with the laws of the State of
Alabama.  Any modifications, changes or
amendments to this Agreement shall be effective only if in writing and signed
by a duly authorized representative of each party.


 


Section 4.3 Entire Agreement.  This Agreement
constitutes the entire understanding of the parties relating to the grant by
Avanti to Neopharm of a conditional option to acquire a non-exclusive license
to the Synthetic Cardiolipin Intellectual Property to make, have made, use and
sell synthetic cardiolipin in the Field of Use.  Neither Avanti nor Neopharm have relied on and do not rely on any
representations or statements by the other party or such party’s agents,
whether verbal or written, with respect to the subject matter of this
Conditional Option Agreement.


 


Section 4.4 Notices.  Any notice,
communication or other information permitted or required to be given under this
Agreement shall be effective and deemed properly given upon sending with
confirmed written answer back, if sent by facsimile; upon delivery, return as
undeliverable, or refusal of delivery, if delivered by hand; or on the seventh
(7th) day after being placed in the United States Mail, addressed to a party at
the address set forth below or as hereinafter identified by a party, postage
prepaid, return receipt requested; in all events any such notice, communication
or information shall be sent to the parties addressed as follows:


 


	
  If to Avanti:

  	
   

  	
  Avanti Polar Lipids, Inc.

  
	
   

  	
   

  	
  700 Industrial Park Drive

  
	
   

  	
   

  	
  Alabaster, Alabama 35007

  
	
   

  	
   

  	
  Attention: Dr. Walter A. Shaw

  
	
   

  	
   

  	
  Facsimile: 205/663-0756

  
	
   

  	
   

  	
   

  
	
  If to Neopharm:

  	
   

  	
  Neopharm, Inc.

  
	
   

  	
   

  	
  100 Corporate North, Suite 215

  
	
   

  	
   

  	
  Bannockburn, Illinois 60015

  
	
   

  	
   

  	
  Attention: Mr. James M. Hussey

  
	
   

  	
   

  	
  Facsimile: (847) 295-8678

  



 


Any party may give notice of a change of address, facsimile number,
telephone number or other pertinent mailing or delivery information from time
to time, so long as such notice is given in accordance with this Section.


 


4

















 


Section 4.5 Captions.  The captions
contained in this Agreement are inserted only as a matter of convenience and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof.


 


Section 4.6 Severability.  The invalidity, in
whole or in part, of any covenant, promise, undertaking or any paragraph,
subsection, sentence, clause, phrase or word or any provision of this
Conditional Option Agreement shall not affect validity of the remaining portions
thereof.  Each party acknowledges and
agrees that the restrictions contained in this Conditional Option Agreement are
reasonable and valid in scope and in all other respects.  If any provision of this Conditional Option
Agreement or the application thereof by or to any party or circumstance shall
be determined to be invalid or unenforceable to any extent, the remainder of
this Conditional Option Agreement and the application of such provision to
other parties or circumstances shall not be affected thereby and shall be
enforced to the maximum permitted under applicable law.  Without limiting the generality of the
foregoing, if any court of competent jurisdiction determines that any part of
this Conditional Option Agreement is unenforceable because of the duration or
scope of any provision, or both, the parties agree that such duration or scope
shall be reduced to the extent determined to be reasonable by such court of
competent jurisdiction and, in its reduced form, such provisions shall then be
valid and enforceable.


 


IN WITNESS WHEREOF,
each Party has caused the due execution of this Agreement as of the Effective
Date.


 


	
  ATTEST:

  	
   

  	
   

  	
  Avanti Polar
  Lipids, Inc.,
an Alabama corporation,

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
    /s/ Stephen W. Burgess

  	
   

  	
   

  	
  By:

  	
    /s/ Walter A. Shaw

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Walter A. Shaw, Ph.D.

  
	
  Its:

  	
  Director, Research & Development

  	
   

  	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  	
  Neopharm, Inc.,
a Delaware corporation,

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
    /s/ Lewis Strauss

  	
   

  	
   

  	
  By:

  	
    /s/ James M. Hussey

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  James M. Hussey, R. Ph., M.B.A.

  
	
  Its:

  	
  CHIEF MEDICAL OFFICER

  	
   

  	
   

  	
  Its:

  	
  President

  
										



 


5

















 


EXHIBIT A


 


Neopharm Patents


 


United States Patent No.
5,560,923, Method of encapsulating
anthracycline in liposomes, issued October 1, 1996.


 


United States Patent No.
5,424,073, Liposome encapsulated taxol and a
method of using the same, issued June 13, 1995.


 


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