Document:

Exhibit 10.4

 

 

Confidential Treatment Requested As To Certain Information Contained In
This Exhibit

 

 

NON-EXCLUSIVE LICENSE AGREEMENT

 

This Non-Exclusive License Agreement (“Agreement”) is
made and entered into this 10th day of March, 2004 (the “Effective Date”),
by and between AVANT Immunotherapeutics, Inc., a Delaware corporation with
offices located at 119 Fourth Avenue, Needham, Massachusetts 02494 (“AVANT”),
and AdProTech Ltd., a United Kingdom company with offices located at
Chesterford Research Park, Little Chesterford, Saffron Walden, Essex UK, CB10 1
XL (“LICENSEE”) (AVANT and LICENSEE sometimes hereinafter referred to as the
“parties”).

 

WITNESSETH

 

WHEREAS, AVANT owns or is the exclusive licensee of
the PATENT RIGHTS (as defined below); and

 

WHEREAS, LICENSEE desires to obtain a non-exclusive
license from AVANT in and under the PATENT RIGHTS; and

 

WHEREAS, AVANT is
willing to grant such a license to LICENSEE upon the terms and conditions set
forth below; and

 

NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein, the parties hereto agree as follows:

 

ARTICLE 1 - DEFINITIONS

 

For the purposes of this Agreement, the following
words and phrases shall have the following meanings:

 

1.1                                 “FIELD
OF USE” means the treatment of rheumatoid arthritis.

 

1.2                                   “LICENSED PROCESS” means any process or method, the performance of
which by LICENSEE would, but for the license granted to LICENSEE in ARTICLE 2
of this Agreement, infringe a VALID CLAIM for a process or method contained within
the PATENT RIGHTS.

 

1.3                                 “LICENSED
PRODUCT” means *** Confidential Treatment Requested as to this Information***,
the development, manufacture, use, sale, offer for sale, importation, or
distribution of which by LICENSEE (or a COLLABORATOR (as defined in Section
2.2) would, but for the license granted to LICENSEE in ARTICLE 2 of this
Agreement, infringe a VALID CLAIM of the PATENT RIGHTS.  For the avoidance of doubt, there shall only
be one Licensed Product at any point in time.

 

1.4                                  “NET
SALES” shall mean the amount billed or invoiced by LICENSEE for the sale or
provision of LICENSED PRODUCTS less:

 

(a)                                  customary, standard and reasonable trade, cash and/or quantity
discounts allowed;

 

1

 

(b)                                 sales, tariff duties, use and other taxes (including Value Added
Tax) directly imposed with reference to particular sales, and in the case of
export orders, any import duties or similar applicable governmental levies;

 

(c)                                  special packaging, transportation and insurance prepaid or allowed;

 

(d)                                 amounts allowed or credited or customary, standard and reasonable
retroactive price reductions on returns or for defects; and

 

(e)                                  customary, standard and reasonable compulsory payments and rebates
accrued, paid or deducted pursuant to agreements (including, but not limited
to, managed care agreements) or governmental regulations

 

1.5                                 “PATENT
RIGHTS” means (a) the patent applications and patents identified in Exhibit
A attached hereto and any patents that issue on said applications and (b)
any divisions, continuations, continuations-in-part, extensions, reissues or
re-examinations of any of the patents identified in Exhibit A.

 

1.6                                 “TERM”
has the meaning set forth in Section 9.1.

 

1.7                                 “TERRITORY”
means the entire world.

 

1.8                                 “VALID
CLAIM” means a claim of any issued and unexpired patent within the PATENT
RIGHTS which has not lapsed, become abandoned or been held revoked, invalid, or
unenforceable by a decision of a court or administrative or government
authority or agency of competent jurisdiction from which no appeal can be or
has been taken within the time allowed for such appeal, and which has not been
admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise, or a pending claim of any pending application within the PATENT
RIGHTS that has not been cancelled or finally rejected without possibility of
appeal or further action before the patent authority reviewing such claim.

 

Additional terms may be defined throughout this
Agreement.

 

ARTICLE 2 - LICENSE GRANT

 

2.1                                 License
Grant.

 

(a)                                  AVANT
hereby grants to LICENSEE, and LICENSEE hereby accepts, subject to the terms
and conditions hereof, a royalty-bearing, non-exclusive license (without the
right to sublicense, except as provided in Section 2.2) in the TERRITORY in the
FIELD OF USE and under the PATENT RIGHTS to (a) research, develop, make, have
made, use, sell, have sold, offer for sale, have offered for sale,  import,
and export LICENSED PRODUCTS; and (b) research, develop, use, and practice
LICENSED PROCESSES only for the purposes of manufacturing or having
manufactured the LICENSED PRODUCTS.

 

(b)                                 AVANT
hereby grants to LICENSEE, and LICENSEE hereby accepts, subject to the terms
and conditions hereof, a royalty-free, non-exclusive license (without the right
to sublicense) in the TERRITORY to conduct preclinical research and/or
pre-Phase II clinical trials (or the equivalent of pre-Phase II clinical trials
in the U.S. or other countries) involving the use of LICENSED PRODUCTS in
indications outside of the FIELD OF USE. 
For purposes of this Agreement, “Phase II clinical trial” shall have the
generally accepted meaning in the industry, including as set forth in the U.S.
Government Code of Federal Regulation, Title 21, Volume 5, revised as of April
1, 2003, which states in pertinent part 

 

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“Phase II
includes the controlled clinical studies conducted to evaluate the
effectiveness of the drug for a particular indication in patients with the
disease or condition under study and to determine the common short-term side
effects and risks associated with the drug.”

 

2.2                                 Sublicenses.  LICENSEE shall have the
right to grant sublicenses of the rights set forth in Section 2.1(a) above only
to third parties with which LICENSEE has a written agreement under which
LICENSEE and such third party have agreed to (a) collaborate on the research
and development of LICENSED PRODUCTS and/or (b) market, promote and/or sell
(whether solely by such third party or jointly by such third party and
LICENSEE) LICENSED PRODUCTS (each such sublicensee, whether under sub-clause
(a) or sub-clause (b) of this Section 2.2, a “COLLABORATOR” and each such
written agreement, a “COLLABORATION AGREEMENT”).

 

ARTICLE 3– LICENSEE
OBLIGATIONS RELATING TO COMMERCIALIZATION

 

3.1                                 LICENSEE
shall use its commercially reasonable efforts to bring the LICENSED PRODUCTS to
market in the FIELD OF USE through an active and diligent program for
exploitation of the PATENT RIGHTS and to continue active, diligent marketing
efforts for one or more indications of the LICENSED PRODUCTS in the FIELD OF
USE throughout the Term of this Agreement.

 

3.2                                 LICENSEE
shall maintain complete and accurate records of LICENSED PRODUCTS that are
made, used, or sold by LICENSEE under this Agreement.  Not later than January 15th of each year following the
Effective Date, LICENSEE shall furnish AVANT with a summary report on the
progress of its efforts during the prior year to develop and commercialise
LICENSED PRODUCTS including without limitation research and development
efforts, efforts to obtain regulatory approval, marketing efforts (including
LICENSED PRODUCTS made, used, or sold) and sales figures.

 

3.3                                 In
the event that AVANT reasonably determines that LICENSEE has not fulfilled its
obligations under this ARTICLE 3, AVANT shall furnish LICENSEE with written
notice of such determination.  Within
sixty (60) days after receipt of such notice, LICENSEE shall either (i) fulfil
the relevant obligation or (ii) negotiate with AVANT a mutually acceptable
schedule of revised obligations; failing which AVANT shall have the right,
immediately upon written notice to LICENSEE, to terminate this Agreement.

 

ARTICLE 4 - CONSIDERATION

 

4.1                                 License
Fees.  In
partial consideration of the license granted by AVANT to LICENSEE in ARTICLE 2
of this Agreement, LICENSEE agrees to pay to AVANT (i) an “Initial License Fee”
(as described in Exhibit B) within three (3) business days of the
Effective Date and (ii) “Annual License Fees” (as described in Exhibit B)
within thirty (30) days after each anniversary of the Effective Date.

 

4.2                                 Milestone
Payments. 
In partial consideration of the license granted by AVANT to LICENSEE in
ARTICLE 2 of this Agreement, LICENSEE agrees to pay to AVANT each of the
milestone payments identified in Exhibit C attached hereto within thirty
(30) days after the achievement of the relevant milestone.

 

4.3                                 Royalties.

 

(a)                                  In partial consideration of the license granted by AVANT to LICENSEE
in ARTICLE 2 of this Agreement, LICENSEE agrees to pay to AVANT a royalty equal
to *** Confidential

 

3

 

Treatment
Requested as to this Information*** of the NET SALES.  Royalties will be calculated based upon the point at which each
LICENSED PRODUCT is provided to an end customer of LICENSEE, such end customer
not being an individual patient. 
Notwithstanding the foregoing to the contrary, in the case of the
distribution of LICENSED PRODUCTS by a COLLABORATOR which is not an affiliate
of LICENSEE, royalties attributable to sales by the applicable COLLABORATOR
shall not exceed *** Confidential Treatment Requested as to this Information***
of the amounts received by LICENSEE under the applicable COLLABORATION
AGREEMENT.

 

(b)                                 The obligation of LICENSEE to pay royalties hereunder shall continue
on a country-by-country basis only for as long as the researching, developing,
making, using, selling, offering for sale, importing or exporting of LICENSED
PRODUCTS would, but for the license granted to LICENSEE in Article 2 of this
Agreement, infringe any VALID CLAIM within the PATENT RIGHTS applicable to the
relevant country.

 

4.4                                 Payments
in U.S. Currency. 
All payments due under this Agreement shall be paid in cash to AVANT and
all payments shall be made in United States currency.  Conversion of foreign currency to U.S. dollars shall be made at
the conversion rate reported in The Wall Street Journal on the last
working day of the calendar quarter to which the payment relates.

 

4.5                                 Taxes.  All payments due hereunder
shall be paid in full without deduction of taxes or other fees which may be
imposed by any government and which shall be paid by LICENSEE; provided,
however, that any withholding tax required to be withheld by LICENSEE on
royalty payments under the laws of any country in the TERRITORY on behalf of
AVANT will be timely paid by LICENSEE to the appropriate governmental
authority, and LICENSEE will furnish AVANT with proof of payment of such
tax.  Any such tax actually withheld may
be deducted from royalty payments due to AVANT under this Agreement.  If at any time legal restrictions prevent
the prompt remittance of part or all of any payments owed by LICENSEE to AVANT
hereunder with respect to any country in the TERRITORY, payment shall be made
through any lawful means or methods that may be available, and as LICENSEE
shall reasonably determine is appropriate. 
The parties agree to co-operate in all commercially reasonably respects
and in accordance with applicable law necessary to take advantage of such
double taxation agreements as may be available.

 

4.6                                 Overdue
Payments. 
Any payments to be made by LICENSEE hereunder that are not paid on or
before the date such payments are due under this Agreement shall bear interest,
to the extent permitted by law, at two percentage points above the Prime Rate
of interest as reported in The Wall Street Journal on the date payment
is due, with interest calculated based on the number of days that payment is
delinquent.

 

ARTICLE 5 - REPORTS AND
RECORDS

 

5.1                                 Records.  LICENSEE shall keep full, timely,
true and accurate books of account containing all particulars that may be
necessary for the purpose of showing the amounts payable to AVANT hereunder and
to enable the reports provided under Section 5.2 to be verified.  Said books of account shall be kept at
LICENSEE’s principal place of business. 
Said books and the supporting data shall be open upon reasonable advance
notice (but not less than five (5) business days notice and no more frequently
than once per calendar year) for three (3) years following the end of the
calendar year to which they pertain, to the inspection of AVANT’s agents for
the purpose of verifying LICENSEE’s royalty statement.  If any such audit determines an error in any
royalty payment, LICENSEE shall pay to AVANT, within thirty (30) days of the
discovery of the error, (a) all deficiencies in royalty payments, (b) interest
on such deficiencies from the date such royalty payment was due until the date
paid at the rate set

 

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forth in
Section 4.6 above, and (c) if such error is in excess of five percent (5%) of
any royalty payment, the cost of the audit. 
In all other cases, the costs of the audit shall be paid for by AVANT.

 

5.2                                 Reports.  After the first commercial
sale of a LICENSED PRODUCT, LICENSEE, within forty-five (45) days after March
31, June 30, September 30 and December 31 of each year, shall deliver to AVANT
a true and accurate report, giving such particulars of the business conducted
by LICENSEE and its permitted sublicensees during the preceding three-month
period under this Agreement as shall be pertinent to a royalty accounting
hereunder. Without limiting the generality of the foregoing, these reports
shall include at least the following:

 

(a)                                  the number of LICENSED PRODUCTS manufactured and sold by LICENSEE
and any COLLABORATOR;

 

(b)                                 total billings and the amounts actually received for LICENSED
PRODUCTS sold by LICENSEE and any COLLABORATOR;

 

(c)                                  the deductions applicable as provided in Section 1.4; and

 

(d)                                 the names and addresses of all parties making LICENSED PRODUCTS on
behalf of LICENSEE.

 

5.3                                 Payment.  With each such report
submitted, LICENSEE shall pay to AVANT the royalties due and payable for such
three-month period.  If no royalties
shall be due, LICENSEE shall so report.

 

ARTICLE 6 - PATENT
PROSECUTION

 

The filing, prosecution, issuance, extension, and
maintenance of all patents and applications in PATENT RIGHTS shall be the sole
responsibility, but not the obligation, of AVANT.  AVANT will make all decisions and take all actions with respect
to further filing, prosecution, issuance, extension, and maintenance of PATENT
RIGHTS without any obligation to consult or notify LICENSEE.  LICENSEE agrees to cooperate fully with
AVANT, as reasonably requested by AVANT and at AVANT’s expense, in the
preparation, filing, prosecution, and maintenance of the patent applications
and patents included in the PATENT RIGHTS.

 

ARTICLE 7- PROSECUTION OF
INFRINGERS AND DEFENSE OF PATENT RIGHTS

 

The parties agree to notify each other in writing of
any actual or threatened infringement by a third party of PATENT RIGHTS or of
any claim of invalidity, unenforceability, or non-infringement of the PATENT
RIGHTS.  AVANT shall have the sole
responsibility, but not the obligation, to prosecute or defend such claims, as
applicable. LICENSEE shall if requested provide reasonable assistance to AVANT,
at AVANT’s expense, in connection with the prosecution or defense of such
claims.

 

ARTICLE 8 -
INDEMNIFICATION

 

8.1                                 LICENSEE
shall at all times during the term of this Agreement and thereafter, indemnify,
defend and hold harmless AVANT and its directors, officers, employees and
affiliates (collectively, the “Indemnified Parties”) against all liabilities of
any kind whatsoever, including legal expenses and reasonable attorneys’ fees
incurred or imposed upon any of the Indemnified Parties in connection with or
as a consequence of any third party claims, suits, actions, demands or
judgments arising out of the death

 

5

 

of or injury
to any person or persons or out of any damage to property resulting from the
development, production, manufacture, sale, use, performance, rendering,
consumption or advertisement of the LICENSED PRODUCT(s) by or on behalf of LICENSEE
or a sub-licensee thereof or arising from any obligation, act or omission
performed or failed to be performed by LICENSEE under this Agreement, or from a
breach of any representation or warranty of LICENSEE hereunder, excepting only
claims that the PATENT RIGHTS or the exercise thereof infringe third party
intellectual property or claims that result from any breach by AVANT of this
Agreement or from the gross negligence or wilful misconduct of AVANT.

 

8.2                                 Any
indemnification obligations set forth in this Agreement shall be subject to the
following conditions: (i) the Indemnified Party shall notify LICENSEE in
writing promptly upon learning of any claim or suit for which indemnification
is sought; (ii) LICENSEE shall have control of the defense or settlement, provided
that the Indemnified Party shall have the right (but not the obligation) to
participate in such defense or settlement with counsel at its selection and at
its sole expense; and (iii) the Indemnified Party shall reasonably cooperate
with the defense, at LICENSEE’s expense.

 

ARTICLE 9 - TERMINATION

 

9.1                                 Term.  The term of this Agreement
(“TERM”) shall commence on the Effective Date and continue until the expiration
of the last VALID CLAIM within the PATENT RIGHTS to expire, unless sooner terminated
as provided in this ARTICLE 9.

 

9.2                                 Termination
for Breach. 
If either Party commits a material breach of a material term of this
Agreement (including any failure to make any payment due under this Agreement),
the other Party shall have the right to terminate this Agreement effective on
thirty (30) days prior written notice to the party in breach, unless such
breach is cured prior to the expiration of such thirty (30) day period.

 

9.3                                 Termination
Upon Termination of Licensed Product Development If
for any reason LICENSEE publicly announces the termination of or the intention
to terminate its clinical or commercial development of LICENSED PRODUCT, or
privately communicates the same to AVANT, AVANT shall have the right to
terminate this Agreement on thirty (30) days written notice, unless LICENSEE
resumes and notifies AVANT of its resumption of such clinical or commercial
development of LICENSED PRODUCT within that period; provided, however, that, in
the case of a termination of this Agreement under this Section 9.3, for as long
as Licensee continues to pay AVANT royalties under Article 4 hereof, all
provisions of this Agreement shall survive only with respect to each
COLLABORATION AGREEMENT in effect as of the effective date of the termination
of this Agreement.  This Section 9.3 is
in addition to, and not in lieu of, Section 9.5.

 

9.4                                 Phase
Out Period. 
Notwithstanding anything herein to the contrary, in the event that this
Agreement is terminated by AVANT pursuant to Section 9.2, LICENSEE shall retain
a license to rights granted in ARTICLE 2 to the extent reasonably necessary to
sell any LICENSED PRODUCTS existing or under production and to perform LICENSED
PROCESSES for the sole purpose of manufacturing such LICENSED PRODUCTS that are
in process, subject to the terms of this Agreement (including without
limitation the obligation to pay royalties under ARTICLE 4), provided that
LICENSEE shall complete and sell all such work-in-progress and inventory within
six (6) months after the effective date of termination.

 

9.5                                 Survival.  Nothing herein shall be
construed to release either party from any obligation that accrued prior to
expiration or any termination of this Agreement.  Upon expiration or termination of this Agreement, all rights and
obligations of the parties under this Agreement shall cease except for: (a)

 

6

 

LICENSEE’s
obligation to make any payment of any fees or royalties accrued on or prior to
the date of expiration or termination (or, in the case of royalties owed with
respect to LICENSED PRODUCTS sold under Section 9.4, royalties which accrue on
or prior to the last day of the six (6) month period referenced in such
section), and the provisions of the following Articles and Sections: 1, 5, 8,
9.4 (except that the Section 9.4 shall only survive a termination of this
Agreement and not the expiration), 9.5, 10, 11, 12, 13, 14.1, 14.9, 14.15 and
14.16.

 

ARTICLE 10 -
CONFIDENTIALITY AND NON-DISCLOSURE

 

10.1                           Confidential
Information. 
“Confidential Information” shall mean any technical, business,
financial, customer or other information disclosed by one Party (“the
Discloser”) to the other party (“the Recipient”) pursuant to this Agreement
which is marked “Confidential” or “Proprietary,” or which, under all of the
given circumstances, ought reasonably to be treated as confidential information
of the Discloser.  Such information may
be disclosed in oral, visual or written form (including magnetic, optical or
other media).  Except as expressly
provided in Section 10.3 below, Confidential Information specifically includes
without limitation business plans and business practices, the terms of this
Agreement, scientific knowledge, research and development or know-how,
processes, inventions, techniques, formulae, products and product plans,
business operations, customer requirements, designs, sketches, photographs,
drawings, specifications, reports, studies, findings, data, plans or other
records, biological materials, software, margins, payment terms and sales forecasts,
volumes and activities, designs, computer code, technical information, costs,
pricing, financing, business opportunities, personnel, and information of the
Discloser relating to the LICENSED PRODUCTS or LICENSED PROCESSES whether or
not such information is marked, identified or confirmed.

 

10.2                           Use of
Confidential Information; Non-Disclosure.  The Recipient acknowledges that it will have
access to Confidential Information. 
During the term of this Agreement, and thereafter, the Recipient agrees
that it will not (i) use any Confidential Information in any way, for its own
account or the account of any third party, except for the exercise of its
rights and performance of its obligations under this Agreement, or (ii)
disclose any Confidential Information to any party, other than furnishing
Confidential Information to its employees, agents, contractors, advisors,
directors and affiliates who are required to have access to the Confidential
Information in connection with the exercise of its rights and performance of
its obligations under this Agreement. 
The Recipient agrees that it will not allow any unauthorized person
access to Confidential Information, and that the Recipient will take all action
reasonably necessary to protect the confidentiality of such Confidential
Information, including implementing and enforcing procedures to minimize the
possibility of unauthorized use or copying of Confidential Information.  In the event that the Recipient is required
by law to make any disclosure of any Confidential Information, by subpoena,
judicial or administrative order or otherwise, the Recipient shall first give
written notice of such requirement to the Discloser, and shall permit the
Discloser to intervene in any relevant proceedings to protect its interests in
the Confidential Information, and provide full cooperation and assistance to
the Discloser in seeking to obtain such protection.

 

10.3                           Exceptions.  Information will not be
deemed Confidential Information hereunder if such information: (a) is known to
the Recipient prior to receipt from the Discloser directly or indirectly from a
source other than one having an obligation of confidentiality to the Discloser;
(b) becomes known (independently of disclosure by the Discloser) to the
Recipient directly or indirectly from a source other than one having an
obligation of confidentiality to the Discloser; (c) becomes publicly known or
otherwise ceases to be secret or confidential, except through a breach of this
Agreement by the Recipient; or (d) is independently developed by the Recipient.

 

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10.4                           Injunctive
Relief.  The
Recipient acknowledges and agrees that any breach of the confidentiality
obligations imposed by this ARTICLE 10 will constitute immediate and irreparable
harm to the Discloser and/or its successors and assigns, which cannot
adequately and fully be compensated by money damages and will warrant, in
addition to all other rights and remedies afforded by law, injunctive relief,
specific performance, and/or other equitable relief.  The Discloser’s rights and remedies hereunder are cumulative and
not exclusive.  The Discloser shall also
be entitled to receive from the Recipient the costs of enforcing this ARTICLE
10, including reasonable attorneys’ fees and expenses of litigation.

 

10.5                           Termination.  Upon termination or
expiration of this Agreement, or upon the Discloser’s request at any time, the
Recipient shall promptly return to the Discloser all copies of Confidential
Information received from the Discloser, and shall return or destroy, and
document the destruction of, all summaries, abstracts, extracts, or other
documents which contain any Confidential Information in any form.

 

ARTICLE 11 - PAYMENTS,
NOTICES, AND OTHER COMMUNICATIONS

 

Any payment, notice or other communication pursuant to
this Agreement shall be in writing and sent by certified first class mail,
postage prepaid, return receipt requested, or by nationally recognized
overnight carrier addressed to the parties at the following addresses or such
other addresses as such party furnishes to the other party in accordance with
this paragraph.  Such notices, payments,
or other communications shall be effective upon confirmation of receipt.

 

In the case of AVANT:

 

AVANT Immunotherapeutics, Inc. 

119 Fourth Avenue

Needham, Massachusetts 02494

Attention:  President and CEO

 

With a copy (other than copies of payments) to:

 

Goodwin Procter LLP

Exchange Place

53 State Street

Boston, Massachusetts 02109

Attention: Ettore A. Santucci, P.C.

 

In the case of LICENSEE:

 

AdProTech Ltd. 

Chesterford Research Park

Little Chesterford

Saffron Walden, Essex UK

CB10 1 XL

Attention: President and C.E.O.

 

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ARTICLE 12-
REPRESENTATIONS AND WARRANTIES; DISCLAIMER

 

12.1                           AVANT’s
Representations and Warranties.  AVANT represents and warrants that it owns
or is the exclusive licensee of the PATENT RIGHTS (excepting the limited rights
retained by the US Government as a result of partial federal funding of the
subject matter of those rights), that it has the full legal right and power to
grant the licenses granted hereunder, that this Agreement constitutes the
binding legal obligation of AVANT, enforceable in accordance with its terms and
that the execution and performance of this Agreement by AVANT will not violate,
contravene or conflict with any other agreement to which AVANT is a party or by
which it is bound or with any law, rule or regulation applicable to AVANT.  Except as described herein the limited
rights retained by the US government shall not in any way impact upon the
rights granted to LICENSEE.

 

12.2                           AVANT
represents that to the best of AVANT’s knowledge, the manufacture, sale,
transfer, distribution and intended use of the LICENSED PRODUCTS or the
practice of LICENSED PROCESSES in accordance with the rights granted hereunder
does not and will not infringe the patent or other intellectual property rights
of any third parties.

 

12.3                           LICENSEE’s
Representations and Warranties.  LICENSEE represents and warrants that it has
full corporate power and authority to enter into this Agreement, that this
Agreement constitutes the binding legal obligation of LICENSEE and that
execution and performance of this Agreement by LICENSEE will not violate,
contravene or conflict with any other agreement to which LICENSEE is a party or
by which it is bound or with any law, rule or regulation applicable to
LICENSEE.

 

12.4                           Disclaimer.  EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT AND TO THE EXTENT PERMISSIBLE BY LAW,
NEITHER PARTY, ITS DIRECTORS, OFFICERS, EMPLOYEES, OR AFFILIATES MAKE ANY
REPRESENTATIONS NOR EXTEND ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, VALIDITY OF PATENT RIGHTS, ISSUED OR PENDING, AND THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE.  EXCEPT AS EXPRESSLY SET FORTH IN SECTION
12.2 HEREIN, NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENATION MADE
OR WARRANTY GIVEN BY AVANT THAT THE PRACTICE BY LICENSEE OF THE LICENSE GRANTED
HEREUNDER SHALL NOT INFRINGE THE PATENT RIGHTS OF ANY THIRD PARTY.

 

ARTICLE 13 - LIMITATION OF
LIABILITY

 

EXCEPT TO THE EXTENT THAT LIABILITY ARISES FROM: (I) A BREACH BY
LICENSEE OF THE LICENSE PROVISIONS SET FORTH IN ARTICLE 2 HEREOF, (II) A BREACH
BY EITHER PARTY OF ITS CONFIDENTIALITY OBLIGATIONS SET FORTH IN ARTICLE 10
HEREOF OR (III) A PARTY’S INDEMNITY OBLIGATIONS SPECIFIED IN ARTICLE 8 HEREOF,
IN NO EVENT SHALL EITHER PARTY OR ITS DIRECTORS, OFFICERS, EMPLOYEES OR
AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND,
INCLUDING ECONOMIC DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF
WHETHER IT SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL
KNOW OF THE POSSIBILITY OF SUCH DAMAGES.

 

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ARTICLE 14 - MISCELLANEOUS
PROVISIONS

 

14.1                           ***
Confidential Treatment Requested as to this Information***

 

14.2                           Negotiation
Covenant. 
AVANT agrees to enter into good faith negotiations with LICENSEE, at
LICENSEE’s request, with respect to the terms of possible future non-exclusive
licenses under the PATENT RIGHTS for LICENSEE to sell other products and/or in
other fields of use.  AVANT may withhold
consent to such future request by LICENSEE if the requested license or any term
or condition thereof is not commercially reasonable based upon the then-current
market conditions. The parties agree and acknowledge, however, that the
successful conclusion of such negotiations is not a condition precedent or
condition subsequent to the execution, delivery or performance of this
Agreement.  Furthermore, until and
unless AVANT and LICENSEE enter into any such definitive non-exclusive license,
LICENSEE’s rights shall be limited to the express rights, and subject to the
express limitations and conditions, set forth in this Agreement.

 

14.3                           Compliance with Laws.  To the extent that any invention claimed in
the PATENT RIGHTS has been partially funded by the United States Government,
and only to the extent required by applicable laws and regulations, LICENSEE
agrees that any LICENSED PRODUCTS used or sold in the United States will be
manufactured substantially in the United States or its territories.  Current law provides that if a domestic
manufacturer is not commercially feasible under the circumstances, AVANT agrees
to exercise commercially reasonable efforts to obtain a waiver of this
requirement from the relevant federal agency on behalf of LICENSEE and, upon
LICENSEE’S request, shall cooperate with LICENSEE in seeking such a waiver.

 

14.4                           Prohibition on Liens.  LICENSEE shall not create or incur or cause
to be incurred or to exist any lien, encumbrance, pledge, charge, restriction
or other security interest of any kind upon the PATENT RIGHTS.

 

14.5                           Announcements.  Neither party shall originate any publicity, news release or
other public announcement, written or oral, relating to this Agreement or the
existence of an arrangement between the parties (“Announcements”), without the
prior written approval of the other party, which approval shall not be
unreasonably withheld or delayed, except as otherwise required by law.  The foregoing notwithstanding, AVANT and
LICENSEE shall have the right to make such Announcements without the consent of
the other party in any prospectus, offering memorandum, or other document or
filing required by applicable securities laws or other applicable law or
regulation, provided that such party shall have given the other party, as
applicable, at least five (5) business days prior written notice of the
proposed text for the purpose of giving the other party the opportunity to
comment on such text.

 

14.6                           No Implied Licenses.  No implied licenses are granted pursuant to
the terms of this Agreement.  No
licensed rights shall be created by implication or estoppel.

 

14.7                           Relationship of the Parties.  Nothing in this Agreement shall be construed
to place the parties hereto in an agency, employment, franchise, joint venture,
or partnership relationship.  Neither
party will have the authority to obligate or bind the other in any manner, and
nothing herein contained shall give rise or is intended to give rise to any
rights of any kind to any third parties. 
Neither party will represent to the contrary, either expressly,
implicitly or otherwise.

 

14.8                           Marking Requirement.  To the extent commercially feasible, and
consistent with prevailing business practices and applicable law, all LICENSED
PRODUCTS sold pursuant to this Agreement will be marked with the number of each
issued patent that applies to such LICENSED PRODUCTS.

 

10

 

14.9                           Governing Law; Consent to Jurisdiction.  ALL DISPUTES, CLAIMS OR CONTROVERSIES
ARISING OUT OF THIS AGREEMENT, OR THE NEGOTIATION, VALIDITY OR PERFORMANCE OF
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
WITHOUT REGARD TO ITS RULES OF CONFLICT OF LAWS.  Each of the parties hereto irrevocably and unconditionally
consents to the exclusive jurisdiction of J.A.M.S./Endispute, Inc. to resolve
all disputes, claims or controversies arising out of or relating to this
Agreement or any other agreement executed and delivered pursuant to this
Agreement or the negotiation, validity or performance hereof and thereof or the
transactions contemplated hereby and thereby and further consents to the
jurisdiction of the courts of Massachusetts for the purposes of enforcing the
arbitration provisions of Section 14.10 of this Agreement.  Each party further irrevocably waives any
objection to proceeding before J.A.M.S./Endispute, Inc. has been brought in an
inconvenient forum.  Each of the parties
hereto hereby consents to services of process by registered mail at the address
to which notices are to be given.  Each
of the parties hereto agrees that its or his submission to jurisdiction and its
or his consent to service of process by mail is made for the express benefit of
the other parties hereto.

 

14.10                     Arbitration. 
If any dispute arises between the parties relating to or arising out of
this Agreement, appropriate representatives of the parties shall first use commercially reasonable efforts to negotiate
in good faith a resolution of the dispute as expeditiously as is reasonably possible.
If the dispute is not resolved within thirty (30) days after the date that a
party referred the matter to the other party via written notice invoking the
relief contained within this section, the dispute shall be referred to binding
arbitration under the rules of the J.A.M.S. / Endispute with such arbitration
to be held in Boston, Massachusetts. 
This Section 14.10 applies equally to requests for temporary,
preliminary or permanent injunctive relief, except that in the case of
temporary or preliminary injunctive relief any party may proceed in court
without prior arbitration for the limited purpose of avoiding immediate and
irreparable harm.

 

14.11                     Complete Agreement.  This Agreement, including the exhibits
hereto, constitutes the entire agreement between the parties.  It supersedes and replaces all prior or
contemporaneous understandings or agreements, written or oral, regarding such
subject matter, and prevails over any conflicting terms or conditions contained
on printed forms submitted with purchase orders, sales acknowledgments or
quotations.  This Agreement may not be
modified or waived, in whole or part, except in a writing signed by an officer
or duly authorized representative of both parties.

 

14.12                     Severability.  In the event that any provision of this Agreement is found to be
unenforceable, such provision will be reformed only to the extent necessary to
make it enforceable, and the remainder will continue in effect, to the extent
consistent with the intent of the parties as of the Effective Date.

 

14.13                     No Waiver.  The failure of either party to assert a right hereunder or to
insist upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.

 

14.14                     Assignment.  This Agreement may not be assigned by LICENSEE without the prior
written consent of AVANT, which consent shall be granted or denied in AVANT’s
sole discretion.  Notwithstanding the
foregoing to the contrary, LICENSEE may assign this Agreement without the
written consent of AVANT to (a) a corporation or other business entity
succeeding to all or substantially all the assets and business of LICENSEE by
merger or purchase or (b) a corporation or other business entity acquiring
directly or indirectly all of the issued and outstanding share capital of
LICENSEE, provided in

 

11

 

both cases
that such corporation or other business entity shall expressly assume all of
LICENSEE’s obligations under this Agreement by a writing delivered to
AVANT.  Any attempted assignment,
delegation or transfer by LICENSEE in violation hereof shall be null and void.  Subject to the foregoing, this Agreement
shall be binding on the parties and their successors and assigns.

 

14.15                     Construction.  This Agreement has been prepared jointly and no rule of strict
construction shall be applied against either party.  In this Agreement, the singular shall include the plural and vice
versa and the word “including” shall be deemed to be followed by the phrase
“without limitation.”  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.

 

14.16                     Counterparts.  This Agreement may be executed in two or more counterparts, each
of which will be deemed an original, but all of which will constitute but one
and the same instrument.

 

 

 

IN
WITNESS WHEREOF, the parties have duly executed this Agreement on the Effective
Date.

 

 

 

	
  AVANT IMMUNOTHERAPEUTICS, INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Una S. Ryan, Ph.D.

  	
   

  
	
   

  
	
  Name:

  	
  Una S. Ryan, Ph.D.

  
	
   

  
	
  Title:

  	
  President and C.E.O.

  
	
   

  
	
   

  
	
  ADPROTECH LTD.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Kieran P. Murphy

  	
   

  
	
   

  
	
  Name:

  	
  Kieran P. Murphy

  
	
   

  
	
  Title:

  	
  C.E.O.

  
							

 

12

 

EXHIBIT A

PATENT RIGHTS 

(Reference
Section 1.5)

 

 

*** Confidential Treatment Requested as to this Information***

 

13

 

EXHIBIT B

License Fees 

(Reference
Section 4.1)

 

 

	
  License
  Fee

  	
   

  	
  Amount

  
	
   

  	
   

  	
   

  
	
  Initial License Fee

  	
   

  	
  USD
  $1,000,000

  

 

Annual License
Fee    *** Confidential Treatment Requested as to this
Information***

 

14

 

EXHIBIT C

Milestone Payments

(Reference Section 4.2)

 

	
  Milestone

  	
   

  	
  Amount Due

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

*** Confidential Treatment Requested as to this Information***

15Exhibit 10.9

 

ASSET PURCHASE AGREEMENT

 

THIS
ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of
January 13, 2004, is made by and among SPARHAWK LABORATORIES, INC., a Missouri
corporation (“Sparhawk” or “Buyer”), POLYDEX PHARMACEUTICALS LIMITED, a Bahamian
corporation (“Polydex”), CHEMDEX, INC., a Kansas corporation
(“Chemdex”), and VETERINARY LABORATORIES, INC., a Kansas corporation (“Vet
Labs”).  Polydex, Chemdex and Vet Labs
are collectively referred to herein as “Sellers.”

 

RECITALS

 

A.                                   Sparhawk
and Vet Labs are the only general partners or other equity holders of that
certain Kansas general partnership known as the Veterinary Laboratories, Inc. –
Sparhawk Laboratories, Inc. Joint Venture (the “Joint Venture”).

 

B.                                     Sparhawk,
Polydex, Chemdex, Vet Labs and two shareholder of Sparhawk, E. Bert Hughes
(“Hughes”) and John Bascom (“Bascom”), are parties to that certain litigation
in the County of Johnson, State of Kansas, Case No. 02CV07426, captioned Sparhawk
Laboratories, Inc. v. Veterinary Laboratories, Inc., et al., (the
“Joint Venture Litigation”).

 

C.                                     Sparhawk,
Hughes, Bascom and Sellers now desire to resolve and settle their differences
without resorting to time-consuming and costly litigation through the sale of
substantially all of the assets of Vet Labs, including, but not limited to, its
ownership interest in the Joint Venture, to Sparhawk, on the terms and
conditions set forth herein.

 

D.                                    Vet
Labs is a wholly-owned subsidiary of Chemdex, and Chemdex is a wholly-owned
subsidiary of Polydex, and each of Chemdex and Polydex will derive significant
benefit from the consummation of the transactions contemplated hereby.

 

AGREEMENT

 

ACCORDINGLY,
in consideration of the premises, the mutual covenants and agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I — PURCHASE
OF ASSETS

 

Section 1.1.                                   Sale
of Assets.

 

(a)                                  Subject
to the terms and conditions of this Agreement, at the Closing (as hereinafter
defined), Vet Labs shall sell, assign, convey, transfer and deliver to the
Buyer, and the Buyer shall purchase and acquire from Vet Labs, free and clear
of all liens, claims and encumbrances, except for liens, claims and
encumbrances (i) created to secure the current indebtedness of the Joint
Venture to Commerce Bank, N.A., or (ii) arising out of the business or
operations of the Joint Venture (collectively, the “Permitted

 

1

 

Liens”), all of Vet Labs’
right, title, and interest in and to all of Vet Labs’ real and personal
property and assets, tangible and intangible, of every kind and description,
wherever located, which are owned by Vet Labs as of November 6, 2003 or
acquired thereafter, other than the Excluded Assets (as defined below),
including, without limitation, the following:

 

(1)                                  all
of Vet Labs’ ownership interest as a general partner in the Joint Venture
(including, but not limited to, all of Vet Labs’ indirect ownership interest in
the assets of the Joint Venture);

 

(2)                                  all
accounts receivable of Vet Labs;

 

(3)                                  all
inventories;

 

(4)                                  all
equipment and other tangible personal property, including without limitation
those items described in Schedule 1.1(a)(4) hereto;

 

(5)                                  all
contracts;

 

(6)                                  all
transferable NADAs, ANADAs, JINADs that are owned directly by Vet Labs, all
transferable NADAs, ANADAs and JINADs that are sponsored by Vet Labs on behalf
of the Joint Venture and all other transferable governmental authorizations,
approvals and licenses and pending applications, approvals and licenses,
including without limitation those listed in Schedule 1.1(a)(6) hereto
as transferable (the “Governmental Authorizations”); excluding, however,
those authorizations, approvals and licenses that, by law, cannot be assigned
or transferred by Vet Labs, which are listed in Schedule 1-1(a)(6)
hereto as nontransferable (the “Nontransferable Licenses”);

 

(7)                                  that
certain real property owned by Vet Labs located in the County of Johnson, State
of Kansas, commonly known as 12340 Santa Fe Trail Drive, Lenexa, KS 66215 (the
“Real Estate”), the legal description of which is set forth in Schedule
1.1(a)(7) hereto.

 

(8)                                  all
data and records related to the operations of Vet Labs and the Joint Venture,
including client and customer lists and records, referral sources, research and
development reports and records, production reports and records, service and
warranty records, equipment logs, operating guides and manuals, financial and
accounting records, creative materials, advertising materials, promotional
materials, studies, reports, correspondence and other similar documents and
records and, copies of all personnel records;

 

2

 

(9)                                  all
intangible rights and property of Vet Labs, including trademarks, patents, and
other intellectual property rights, the trademark and tradenames “Veterinary
Laboratories, Inc.” and “Vet Labs”, and the local telephone number
“913-888-7500” (including all associated rollover numbers), the toll free
telephone number “800-255-6368”, the facsimile telephone number “913-888-6741”,
and the internet domain name registration for “Sparhawk-VetLabs.com”;

 

(10)                            all
insurance benefits (net of any deductibles and co-payments) that are assignable
to the Buyer, including rights and proceeds, arising from or relating to the
Assets or the Assumed Liabilities (as defined below) prior to the Closing Date
(as defined below);

 

(11)                            all
warranty and other claims of Vet Labs against third parties relating to the Assets,
whether choate or inchoate, known or unknown, contingent or noncontingent; and

 

(12)                            all
rights of Vet Labs relating to deposits and prepaid expenses, claims for
refunds and rights to offset in respect thereof.

 

All of
the property and assets to be transferred to Buyer hereunder are herein
referred to collectively as the “Assets.” 
Except for the NADAs, ANADAs and JINADs that are sponsored by Vet Labs,
on behalf of the Joint Venture, which are being transferred from Vet Labs to
Sparhawk, the defined term “Assets” shall be deemed to refer to assets directly
owned by Vet Labs, not the assets owned by the Joint Venture.  One half of the assets of the Joint Venture,
which are indirectly owned by Vet Labs by virtue of its ownership of a general
partner interest in the Joint Venture, will be effectively transferred to Buyer
through the sale of Vet Labs’ interest in the Joint Venture, as described in
item 1 above.

 

(b)                                 The
Assets being purchased by Sparhawk do not include:

 

(1)                                  the
rights of Vet Labs pursuant to or under this Agreement and the other agreements
Vet Labs is required to deliver to the Buyer pursuant to the terms hereof;

 

(2)                                  any
rights of Vet Labs in connection with the Polydex website;

 

(3)                                  any
refunds or claims for refunds of Vet Labs with respect to any federal, state or
local income and other taxes, and all tax returns and related work papers,
records and documents of Vet Labs related thereto;

 

(4)                                  except
as provided in Section 1(a)(9) above, all telephone numbers, telecopy numbers
and e-mail addresses of Vet Labs;

 

3

 

(5)                                  minute
books, stock books and shareholder records of Vet Labs; and

 

(6)                                  the
Nontransferable Licenses.

 

all of
which are being retained by Vet Labs (collectively, the “Excluded Assets”).

 

(c)                                  Notwithstanding
anything to the contrary herein, in no event shall Sparhawk acquire ownership
of any real property, tangible personal property or intangible personal
property or intellectual property of, or assume any liability or obligation of,
Chemdex or Polydex.

 

Section 1.2.                                   Assumption
of Liabilities.

 

(a)                                  Subject
to the terms and conditions of this Agreement, on the Closing Date, Vet Labs
shall assign and Buyer shall assume and agree to pay, perform or otherwise
discharge, in accordance with their respective terms and subject to the
respective conditions thereof, (i) all obligations and liabilities with respect
to the indebtedness of the Joint Venture to Commerce Bank, N.A. secured by the
Permitted Liens, (ii) all obligations and liabilities in connection with or
arising out of the use or ownership of the Assets by the Joint Venture, the
Buyer or any successor to the business of the Joint Venture following the
Closing Date, and (iii) all obligations and liabilities arising out of the business
or operations of the Joint Venture (collectively, the “Assumed Liabilities”),
and no others.  Other than the Assumed
Liabilities, the Buyer assumes no obligations and liabilities of Vet Labs,
whether related to the Assets or otherwise.

 

(b)                                 ALL
OBLIGATIONS AND LIABILITIES OF VET LABS, WHETHER ACCRUED OR CONTINGENT, OR DUE
OR NOT DUE, WHICH ARE NOT SPECIFICALLY ASSUMED HEREIN, SHALL BE AND REMAIN THE
SOLE OBLIGATIONS AND LIABILITIES OF VET LABS, AND BUYER SHALL HAVE ABSOLUTELY
NO OBLIGATION OR LIABILITY WITH RESPECT THERETO.

 

Section 1.3.                                   Purchase
Price.

 

(a)                                  The
purchase price for the Assets and the Non-competition Agreement (the “Purchase
Price”) shall be an amount equal to $5,500,000.00, which shall be payable to
Vet Labs on the Closing Date by wire transfer of immediately available funds to
an account designated by Vet Labs prior thereto.

 

(b)                                 The
Purchase Price shall be allocated among the Assets and the Non-competition
Agreement as set forth on Schedule 1.3(b)
hereto.

 

4

 

Section 1.4.                                   Supply
Contract.  At the Closing, Sparhawk
and Chemdex shall execute and deliver a ten-year exclusive supply contract,
substantially in the form attached hereto as Exhibit A (the “Supply
Contract”).

 

Section 1.5.                                   Non-competition
Agreement.  At the Closing, Polydex,
Chemdex and Vet Labs shall enter into a 5-year non-competition agreement with
Sparhawk, substantially in the form attached hereto as Exhibit B (the
“Non-competition Agreement”).

 

Section 1.6.                                   Settlement
Agreement and Joint Venture Litigation.

 

(a)                                  At
the Closing, Sellers and Buyer shall execute and deliver, and Sparhawk shall
cause Hughes and Bascom to execute and deliver, a Settlement Agreement
substantially in the form attached hereto as Exhibit C (the “Settlement
Agreement”).

 

(b)                                 On
the Closing Date, the parties hereto shall dismiss, and Sparhawk shall cause
Hughes and Bascom to dismiss, all claims they asserted in the Joint Venture
Litigation with prejudice pursuant to a Motion of Approval of Settlement and Stipulation
of Dismissal With Prejudice substantially in the form attached hereto as Exhibit
D (the “Motion to Dismiss”), and each party to bear its own costs related
thereto.

 

(c)                                  On
the Closing Date, Sellers and Buyer shall obtain any required approval of the
Settlement Agreement by the court appointed receiver, each party to bear its
own fees and costs related thereto; provided, however, all fees
incurred for the receiver’s services in the Joint Venture Litigation shall be
borne by the Joint Venture.

 

Section 1.7.                                   Additional
Affirmative Undertakings and Covenants.

 

(a)                                  Polydex,
Chemdex and Vet Labs shall use all reasonable commercial efforts to obtain all
third party consents, approvals and agreements necessary to effectuate the
assignment, transfer or sale of any of the Assets, and to consummate the
transactions contemplated by this Agreement, and Sparhawk and its employees
shall cooperate with and assist Seller in obtaining such consents.  Each of the Sellers and Buyer shall pay
their own legal fees and expenses incurred in obtaining such consents.

 

(b)                                 Contemporaneous
with the Closing Date, Vet Labs shall change its corporate name and make all
necessary and proper filings evidencing such change.

 

Section 1.8.                                   Acknowledgement
Regarding Transfer of Joint Venture Interest.  Sellers acknowledge and agree that the sale of Vet Labs’
partnership interest in the Joint Venture to Sparhawk transfers all of Vet
Labs’ right, title and interest in the Joint Venture and all claims related
thereto.

 

Section 1.9.                                   Personal
Property Taxes.  All personal
property taxes assessed against or in respect of the Assets purchased by the
Buyer for calendar year 2004 (the “Taxable Period”) shall be prorated between
Vet Labs and Buyer as of the Closing Date. 
The Buyer shall pay all of the property taxes on the Assets for the
Taxable Period when

 

5

 

due.  Following the Buyer’s
payment of such property taxes, the Buyer shall then forward copies of the
property tax assessments for the Taxable Period to Vet Labs, which amount Vet
Labs shall promptly reimburse Buyer for the pro rata amounts due thereunder.

 

Section 1.10.                             Real
Estate Property Taxes; Prorations. 
The Joint Venture shall pay on behalf of Vet Labs all general real
estate taxes levied and assessed against the Real Estate, and all installments
of special assessments for the years prior to the calendar year of
Closing.  Buyer shall assume and pay all
such taxes and installments of special assessment accruing or payable after the
Closing.  Notwithstanding the foregoing,
Buyer shall be liable for any expenses or interest with respect to the Real
Estate in connection with or arising out of the indebtedness of the Joint
Venture to Commerce Bank, N.A.

 

Section 1.11.                             Title
Insurance.  Vet Labs shall deliver
and pay for an owner’s ALTA title insurance policy (the “Title Policy”)
insuring marketable fee simple title in Buyer in the amount allocated to the
Real Estate pursuant to Section 1.3(b) hereof, subject only to the Permitted
Exceptions defined below.  Vet Labs
shall, as promptly as practicable after the date of this Agreement, cause to be
furnished to Buyer a current commitment to issue the policy (the “Title
Commitment”), issued through Chicago Title Insurance Company (the “Title
Company”), and copies of all recorded documents listed in the Title Commitment
as exceptions to title, other than such documents in connection with or arising
out of the indebtedness of the Joint Venture to Commerce Bank, N.A.  Buyer shall have ten (10) days after receipt
of the Title Commitment and copies of all such recorded documents (the “Review
Period”) in which to notify Vet Labs in writing of any objections Buyer has to
any matters shown or referred to in the Title Commitment.  Any matters which are set forth in the Title
Commitment and to which Buyer does not object within the Review Period shall be
deemed to be permitted exceptions to the status of Vet Labs’ title (the
“Permitted Exceptions”); provided, however, that on or prior to the Closing
Date, Vet Labs shall pay off the indebtedness to, and obtain a release of lien
from, Continental Grain Company; provided,
further, that if Vet Labs fails to do
so, Buyer may deduct from the Purchase Price the pay-off amount owed to
Continental Grain Company and, in such event, shall promptly pay over such
amount directly to Continental Grain Company to obtain a release of its lien on
the Real Estate.  With regard to other
items to which Buyer reasonably objects within the Review Period, Vet Labs
shall have until Closing to correct such other matters to Buyer’s reasonable
satisfaction.  If Vet Labs fails to
correct such other matters to Buyer’s reasonable satisfaction on or prior to
the date of Closing, Buyer shall have the right to terminate this Agreement by
written notice given to the Sellers on or prior to the Closing Date, in which
event no party shall have any further liability under this Agreement.

 

Section 1.12.                             Survey.  Vet Labs, at its sole cost and expense,
shall provide to Buyer as promptly as practicable after the date of this
Agreement, a current survey of the Real Estate and all buildings and
improvements thereon, prepared and certified to Buyer and, if applicable,
Buyer’s lender by a surveyor licensed in the State of Kansas.  Such survey shall contain a legal
description of the Real Estate and identify the boundaries of the Real Estate,
the dimensions thereof, the location and dimensions of any improvements on the
Real Estate, the location and dimensions of all recorded easements on the Real
Estate, the location and dimensions of all easements, rights-of-way, driveways,
roads,

 

6

 

power lines, fences and encroachments on the Real Estate which are
observable from a visual inspection of the Real Estate, and shall otherwise be
sufficient to permit the Title Company to issue the Title Policy without
standard survey exceptions.  If upon
receipt of the certificate of survey, Buyer has any objection to a matter shown
therein which affects or could affect the Real Estate or Buyer’s use of the
Real Estate, Buyer shall promptly notify Vet Labs of said objection(s) in
writing and Vet Labs shall have until Closing to correct such matters to
Buyer’s reasonable satisfaction.  If Vet
Labs fails to correct such matters to Buyer’s reasonable satisfaction on or
prior to the date of Closing, Buyer shall have the right to terminate this
Agreement by written notice given to Seller on or prior to the date of Closing,
in which event no party shall have any further liability under this Agreement.

 

ARTICLE II — CLOSING

 

Section 2.1.                                   Closing.  The closing of the transactions provided for
hereunder (the “Closing”) shall take place at 10:00 a.m. at the offices of
Stinson Morrison Hecker LLP as soon as possible after the date hereof, but no
later than January 30, 2004 (the “Closing Date”), or on such other date, time
and place as may be mutually agreed to by the parties hereto.

 

Section 2.2.                                   Termination. 
This Agreement may be terminated at any time before the Closing (a) by
the mutual consent of the Buyer and the Sellers, or (b) by either Buyer, on the
one hand, or the Sellers, on the other hand, by written notice to the other
party, if the Closing has not occurred by January 30, 2004, by reason of the
failure of any condition precedent to such terminating party’s obligation under
Article V hereof, unless the failure results primarily from such terminating
party’s material breach of any representation, warranty, covenant or agreement
contained in this Agreement.  Each
party’s right of termination under this Section 2.2 is in addition to any other
rights it may have under this Agreement, and the exercise of such right of
termination will not be an election of remedies.  If this Agreement is terminated pursuant to this Section 2.2, all
obligations of the parties under this Agreement will terminate, except that the
obligations of the parties in this Section 2.2 and VII will survive, provided, however,
that, if this Agreement is terminated because of a breach of this Agreement by
the nonterminating party or because one or more of the conditions to the
terminating party’s obligations under this Agreement is not satisfied as a
result of the nonterminating party’s failure to comply with its obligations
under this Agreement, the terminating party’s right to pursue all legal
remedies will survive such termination unimpaired.

 

Section 2.3.                                   Conveyance
Documents.  On the Closing Date,
Polydex, Chemdex and Vet Labs shall execute and deliver to Sparhawk such bills
of sale, general warranty deed, assignments and other conveyance documents as
Sparhawk shall reasonably request to sell, assign, transfer and convey the
Assets to Sparhawk, free and clear of all liens, claims and encumbrances,
excepting for the Permitted Liens and, with respect to the Real Estate, the Permitted
Exceptions, and Buyer shall execute such assumption agreements as Vet Labs
shall reasonably request in order to assume the Assumed Liabilities.

 

7

 

Section
2.4.                                   Payment
and Execution of Closing Documents.

 

(a)                                  On
the Closing Date:

 

(1)                                  Sparhawk
shall deliver the Purchase Price to Vet Labs by wire transfer of immediately
available funds;

 

(2)                                  Polydex,
Chemdex, Vet Labs and Sparhawk shall execute and deliver the Non-competition
Agreement and the Settlement Agreement;

 

(3)                                  Chemdex
and Sparhawk shall execute and deliver the Supply Contract;

 

(4)                                  The
parties hereto shall cause, and Sparhawk shall cause Hughes and Bascom to
cause, their respective counsel to execute and file the Motion to Dismiss,

 

(5)                                  Vet
Labs shall deliver a General Warranty Deed properly executed and conveying the
Real Estate free and clear of all liens, encumbrances, easements, restrictions,
leases, reservations and burdens whatsoever, except as for the Permitted
Exceptions, shall execute and deliver an affidavit in form satisfactory to the
Title Company to permit the Title Company to delete any mechanic’s lien
exceptions from the Title Policy, and shall execute and deliver to Buyer a
Non-Foreign Person Affidavit; and

 

(6)                                  Vet
Labs shall pay the title premium for the Title Policy and shall provide the
Title Company all other documentation required to permit the Title Company to
issue to Buyer, and shall cause the Title Company to issue to Buyer, the Title
Policy following Closing and recording of the deed to Buyer.

 

(b)                                 Both
Sellers and Buyer agree to execute and deliver such other documents on the
Closing Date as may be reasonably required to consummate the transaction
contemplated hereby.

 

ARTICLE III —
REPRESENTATIONS AND WARRANTIES

 

Section 3.1.                                   Representations
and Warranties of Sellers.  Polydex,
Vet Labs and Chemdex hereby jointly and severally represent and warrant to
Buyer that as of the date hereof and as of the Closing Date:

 

(a)                                  Polydex
is a limited company organized and existing in good standing under the laws of
the Commonwealth of the Bahamas.  Each
of Chemdex and Vet Labs is a corporation duly organized, validly existing and
in good standing under the laws

 

8

 

of the State of Kansas.  Each of
Polydex, Chemdex and Vet Labs have the company power to execute and deliver
this Agreement and to carry out the transactions contemplated hereby.  The execution, delivery and performance by
Polydex, Chemdex and Vet Labs of this Agreement and the consummation of the
transactions contemplated hereby will not violate, nor constitute a breach or
default under (i) the Articles of Association, Articles of Incorporation or
other similar charter documents of Polydex, Chemdex and Vet Labs, or (ii) other
than as set forth on the attached Schedule 3.1(a), and other than in
connection with or arising under the Permitted Liens, or, with respect to the
Real Estate or the Permitted Exceptions, any provision of any mortgage, lien,
lease, agreement, instrument, order, judgment, law, statute, regulation,
ordinance, decree or other restriction of any kind or character to which any of
Polydex, Chemdex or Vet Labs is subject. 
This Agreement has been duly authorized, executed and delivered by each
of Polydex, Chemdex and Vet Labs, and is valid, binding and enforceable against
each of them in accordance with its terms (except to the extent that such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors’ rights generally, and
is subject to general principles of equity).

 

(b)                                 Vet
Labs has good and marketable title to all the Assets, including without
limitation, those listed on Schedules 1.1(a)(4), 1.1(a)(5) and 1.1(a)(6)
hereto.  Assuming proper post-closing
notification filings are made by the Buyer with respect to the Governmental
Authorizations, all such Assets will be transferred to the Buyer at the Closing
free and clear of all liens, claims, encumbrances and restrictions, excepting
for the Permitted Liens and, with respect to the Real Estate, the Permitted
Exceptions.  Chemdex has no
interest in the Joint Venture other than through its ownership of the equity
securities of Vet Labs.  Polydex has no
interest in the Joint Venture other than through its ownership of the equity
securities of Chemdex.

 

(c)                                  Other
than as set forth on the attached Schedule 3.1(c), other than the
Permitted Liens and, with respect to the Real Estate, the Permitted Exceptions,
no mortgage, lien, encumbrance, or other security interest exists with respect
to any Asset other than those Assets owned by Vet Labs due to its ownership of
an ownership interest in the Joint Venture, including, but not limited to, any
blanket lien given to secure any indebtedness owed by Polydex, Chemdex, Vet
Labs or any other entity under common control with Vet Labs.

 

(d)                                 Except
as set forth on the attached Schedule 3.1(d), Vet Labs has the legal
right to transfer to Sparhawk the Governmental Authorizations, and no prior
notice, application or approval to or from any governmental entity is required
to transfer the Governmental Authorizations to Sparhawk.

 

(e)                                  Except
for the Joint Venture Litigation, there is
no litigation at law, in equity or
in proceedings before any commission or other administrative authority, or any
governmental investigation, pending or, to the knowledge of Sellers, threatened
against or affecting the Assets or Vet Labs’ interests in the Assets, other
than such threatened litigation,

 

9

 

proceedings or investigations, if any, known to Sparhawk, the Joint
Venture, Hughes or Bascom which have not been communicated to Sellers.

 

(f)                                    Since October 31, 2003, Vet Labs has not
transferred, sold or assigned any of its real or personal property.

 

(g)                                 To Sellers’ knowledge:

 

(1)                                  there
are no rezoning or condemnation proceedings pending or threatened affecting all
or any part of the Real Estate, other than any such pending or threatened
proceedings, if any, known to Sparhawk, the Joint Venture, Hughes or Bascom
which have not been communicated in writing to Sellers;

 

(2)                                  all
improvements located on, and the use presently being made of, the Real Estate
comply in all material respects with applicable zoning and building codes,
ordinances and regulations and all applicable fire, environmental, occupational
safety and health standards and similar standards established by applicable
laws as presently in effect, other than any noncompliance with any such codes,
ordinances, regulations, standards or laws, if any, known to Sparhawk, the
Joint Venture, Hughes or Bascom which have not been communicated in writing to
Sellers.

 

(3)                                  there
are no actual or threatened real estate tax increases or special assessments
affecting the Real Estate, other than any such increases or assessments, if
any, known to Sparhawk, the Joint Venture, Hughes or Bascom which have not been
communicated in writing to Sellers; and

 

(4)                                  there are no unrecorded or undisclosed
legal or equitable interest in the Real Estate claimed by any other person,
other than any such interest, if any, known to Sparhawk, the Joint Venture,
Hughes or Bascom which has not been communicated in writing to Sellers.

 

(h)                                 Except for the Permitted Exceptions and as set
forth on the attached Schedule 3.1(h), there are no agreements or understandings between Sellers and any other
party or parties which do or will materially affect the use, ownership,
operation or management of the Assets or the Real Estate.

 

(i)                                     All
contracts, leases, licenses and other agreements with respect to the Assets  are legally binding, in full force and
effect, and there has not been any material default thereunder.  The copies of such documents which have been
previously delivered to the Buyer are accurate and complete.

 

(j)                                     Sellers
have paid all federal, state, local and foreign income and other taxes that
were due and payable by any Seller prior to the date of this Agreement.

 

10

 

(k)                                  Other
than pursuant to that certain Phase I Environmental Site Assessment, dated
November 25, 2003, performed by GeoSystems/Kleinfelder, a copy of which has
previously been provided to Buyer, Vet Labs has not received any notice,
whether written or oral, from any person that Vet Labs or the Real Estate is the
subject of (i) any investigation or proceeding pertaining to the presence of or
the release of threatened release of any Hazardous Material in violation of
applicable Environmental Laws, (ii) any claim arising from, based on or
relating to any environmental condition at or involving the Real Estate, or the
compliance or noncompliance of the Real Estate with any Environmental Laws,
other than, in each case, such notice, if any, received by Sparhawk, the Joint
Venture, Hughes or Bascom and not communicated in writing to Vet Labs.  For purposes of this Agreement:

 

(1)                                  “Environmental
Laws” shall mean any presently effective federal, state and local law,
regulation or ordinance and any amendments thereto, permits, directives, and
other requirements of governmental authorities relating to the environment
public health, safety (including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601
to 9675), or to any Hazardous Material.

 

(2)                                  “Hazardous
Material” shall mean any substance or material regulated under any
Environmental Laws, including without limitation any “hazardous substance,”
“solid waste,” “hazardous waste,” “petroleum” or “petroleum product,” and any
other substance or material whose presence could be detrimental in any material
respect to property, health or the environment.

 

(l)                                     Since
October 31, 2003, Sellers have not incurred or created any obligations or
liabilities of the Joint Venture, or created any lien, claim or encumbrance on
the assets of the Joint Venture, which are not recorded in the books and
records and reflected in the financial statements of the Joint Venture.

 

(m)                               No
representation or warranty made by Sellers in this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained therein not misleading.

 

All of Seller’s representations and warranties
contained in this Agreement shall be true as of the Closing Date, shall survive
the Closing Date and shall not be merged with the title conveyed to Buyer or
any document executed in connection with this transaction.

 

Section 3.2.                                   Representations
and Warranties of the Buyer.

 

(a)                                  The
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Missouri. 
The Buyer has the corporate power to execute and deliver this Agreement
and to carry out the transactions contemplated

 

11

 

hereby.  The execution, delivery
and performance by the Buyer of this Agreement and the consummation of the
transactions contemplated hereby will not violate, nor constitute a breach or
default under the Articles of Incorporation or Bylaws of the Buyer or any
provision of any mortgage, lien, lease, agreement, instrument, order, judgment,
law, statute, regulation, ordinance, decree or other restriction of any kind or
character to which the Buyer is subject. 
This Agreement has been duly authorized, executed and delivered by the
Buyer and is valid, binding and enforceable against Buyer in accordance with
its terms (except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors’ rights generally, and is subject to general principles
of equity).

 

(b)                                 Buyer
is currently negotiating with Commerce Bank, N.A. for at least $1,900,000 of
financing to be secured by the Real Estate and at least $1,300,000 of financing
to be guaranteed by the SBA and secured by the other assets of Buyer
(collectively, the “Bank Financing”). 
Buyer is currently negotiating with two other financing sources for at
least $2,500,000 of combined subordinated debt and equity financing (the
“Equity Funding”).  Based upon the
verbal commitment of intent from the lender and investors, Buyer reasonably
believes that on the Closing Date, it will have adequate funding to pay the
Purchase Price and consummate the purchase of the Assets.

 

(c)                                  No
representation or warranty made by Buyer in this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements contained therein not misleading.

 

All of Buyer’s representations, warranties and
agreements contained in this Agreement shall remain true as of the Closing
Date, shall survive the Closing Date and shall not be merged with the title
conveyed to Buyer or any document executed in connection with this transaction.

 

ARTICLE IV — COVENANTS

 

Section 4.1.                                   Covenants
of Polydex, Chemdex and Vet Labs. 
From and after the date hereof until the Closing Date, unless prior
written consent of the Buyer shall be obtained, Polydex, Chemdex, and Vet Labs
covenant and agree to:

 

(a)                                  use
all reasonable commercial efforts to obtain all consents from any third parties
required to consummate the transactions contemplated by this Agreement;

 

(b)                                 not
take any action which would (i) materially adversely affect the ability of any
party to obtain any consents required for the transactions contemplated hereby,
or (ii) materially adversely affect the ability of any party to perform its
covenants and agreements under this Agreement; and

 

(c)                                  forebear
from taking any further action in regard to the Joint Venture Litigation.

 

12

 

Section 4.2.                                   Covenant
of Vet Labs.  From and after the
date hereof until the Closing Date, unless prior written consent of the Buyer
shall be obtained, Vet Labs covenants and agrees to perform its obligations
under all contracts, leases and other agreements.

 

Section 4.3.                                   Covenants
of Sparhawk.  From and after the
date hereof until the Closing Date, unless prior written consent of the Sellers
shall be obtained, Sparhawk agrees to:

 

(a)                                  perform
its obligations under all contracts, leases and other agreements;

 

(b)                                 use
all reasonable commercial efforts to obtain all consents from any third parties
required to consummate the transactions contemplated by this Agreement;

 

(c)                                  not
take any action which would (i) materially adversely affect the ability of any
party to obtain any consents required for the transactions contemplated hereby,
or (ii) materially adversely affect the ability of any party to perform its
covenants and agreements under this Agreement; and

 

(d)                                 forebear
from taking any further action in regard to the Joint Venture Litigation.

 

13

 

Section
4.4.                                   Covenants
Pending Closing.  From the date
hereof until the Closing Date, Sellers shall advise Buyer of any material
changes known to Sellers to information provided and representations and
warranties made to Buyer pursuant to the terms and conditions of this Agreement.

 

Section
4.5.                                   Further
Assurances.  After the Closing Date,
Buyer and Sellers shall execute and deliver or cause to be executed and
delivered such further documents, instruments and agreements, and shall take
such other acts and actions as may be reasonably requested to effectuate the
transfer of Assets to the Buyer, and the consummation of the transactions
contemplated by this Agreement, including, without limitation, notices to
governmental authorities of the transfer of the Governmental Authorizations.

 

Section
4.6.                                   Vet
Labs Corporate Address.  During the
six-month period following the Closing Date, Sparhawk shall permit Vet Labs to
use the Real Estate as its corporate address and shall forward all mail for any
of the Sellers received at the Real Estate to Polydex.

 

Section
4.7.                                   No
Sale to Phoenix Scientific, Inc. 
Buyer represents, warrants, covenants and agrees with Sellers that for a
period of two (2) years following the Closing Date, Buyer will not:

 

(1)                                  sell
or transfer, directly or indirectly, all or substantially all of the business
of the Joint Venture as currently conducted, however effected, whether by sale
of assets, sale of stock or equity interests, merger, consolidation or other
similar transaction; or

 

(2)                                  sell
or transfer, directly or indirectly of a majority of the outstanding stock or
equity interests in Sparhawk;

 

in each such case, to
Phoenix Scientific, Inc., a Delaware corporation, or any subsidiary,
shareholder or affiliate thereof. 
Sparhawk acknowledges and agrees that this is a material representation
and covenant, that Sellers have relied upon this representation and covenant in
entering into this Agreement and in setting the Purchase Price, and that in the
event of a breach of this representation and covenant, Sparhawk would be liable
to Sellers for damages resulting from such breach.

 

ARTICLE V — CONDITIONS
PRECEDENT

 

Section 5.1.                                   Conditions
Precedent to the Buyer’s Obligation. 
Each and every obligation of the Buyer to be performed in connection
with the Closing on the Closing Date shall be subject to the satisfaction of
the following conditions, unless waived in writing by the Buyer:

 

(a)                                  Representations
and Warranties and Compliance with Covenants.  The representations and warranties made by Sellers in this
Agreement shall be true on and

 

14

 

as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date.  Sellers shall have performed and
complied with all of their obligations under this Agreement which are to be
performed or complied with by them prior to or on the Closing Date.

 

(b)                                 Required
Notices and Consents.  The notices,
applications and approvals to or from any governmental authority required by
law to be given or obtained prior to the transfer of the Governmental
Authorizations by Vet Labs to Sparhawk, as set forth on Schedule 3.1(d)
hereto, shall have been given or obtained by Vet Labs by the Closing Date.

 

(c)                                  Instrument
of Transfer.  Vet Labs shall have
delivered or caused to be delivered to the Buyer such other assignments and
other instruments of transfer and conveyance as the Buyer shall deem to be
reasonably necessary or desirable to vest in the Buyer all right, title and
interest in and to the Assets, free and clear of liens, taxes, charges, claims,
encumbrances and restrictions, excepting only the Permitted Liens and, with
respect to the Real Estate, the Permitted Exceptions.

 

(d)                                 Financing.  Buyer shall have obtained the Bank Financing
and the Equity Funding.

 

Section 5.2.                                   Conditions
Precedent to Seller’s Obligations. 
Each and every obligation of Sellers to be performed on the Closing Date
shall be subject to the satisfaction of the following conditions, unless waived
in writing by Sellers:

 

(a)                                  Representations
and Warranties and Compliance with Covenants.  The representations and warranties made by Buyer in this
Agreement shall be true on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given on and as of
the Closing Date.  Buyer shall have
performed and complied with all of its obligations under this Agreement which
are to be performed or complied with by it prior to or on the Closing Date.

 

(b)                                 Required
Notices and Consents.  The notices,
applications and approvals to or from any governmental authority required by
law to be given or obtained prior to the transfer of the Governmental
Authorizations by Vet Labs to Sparhawk, as set forth on Schedule 3.1(d)
hereto, shall have been given or obtained by Vet Labs by the Closing Date.

 

(c)                                  Payment.  The Buyer shall have tendered the Purchase
Price.

 

ARTICLE VI —
INDEMNIFICATION

 

Section 6.1.                                   Indemnification of the Buyer.  Polydex, Chemdex and Vet Labs, jointly and
severally, hereby agree to defend, indemnify and hold harmless the Buyer, the
Joint Venture, their affiliates, and their respective shareholders, partners,
directors,

 

15

 

officers, employees, agents, representatives, successors and assigns
(collectively, the “Buyer Indemnitees”) from and against any and all losses,
claims, damages, costs, fines, penalties, obligations, payments, liabilities,
costs and expenses, including reasonable attorneys’ fees and expenses
(collectively, “Damages”):

 

(a)                                  resulting
from or arising out of the inaccuracy of any representation or warranty, or the
breach of any covenant or agreement, of Sellers contained in this Agreement;

 

(b)                                 resulting
from or arising out of any and all actions, suits, arbitrations, inquiries,
proceedings or investigations brought against any Buyer Indemnitee by any third
party which relates to or arises from any act or omission of Sellers or
Sellers’ shareholders, directors, officers, employees, agents or
representatives, that occurred or failed to occur prior to the Closing Date; provided,
however, that Vet Labs mere status as a partner in the Joint Venture,
standing alone, shall not constitute an act or omission of a Seller;

 

(c)                                  resulting
from or arising out of the failure of Seller to pay any past taxes assessed on
the Assets or any inaccuracy in the amount of taxes assessed on the Assets for
the Taxable Period; or

 

(d)                                 relating
to any liability or obligation of Vet Labs that was not assumed by Sparhawk.

 

Section 6.2.                                   Indemnification
of Sellers.  The Buyer hereby agrees
to defend, indemnify and hold harmless Sellers and their respective
shareholders, directors, officers, employees, agents, representatives,
successors and assigns (collectively, the “Seller Indemnitees”) from and
against any and all Damages:

 

(a)                                  resulting
from or arising out of the inaccuracy of any representation or warranty, or the
breach of any covenant or agreement, of Buyer contained in this Agreement;

 

(b)                                 resulting
from or arising out of any and all actions, suits, arbitrations, inquiries,
proceedings or investigations brought against any Seller Indemnitee by any
third party which relates to or arises from any act or omission of Buyer or
Buyer’s shareholders, directors, officers, employees, agents or
representatives, that occurred or failed to occur prior to the Closing Date;

 

(c)                                  relating
to any Assumed Liability; or

 

(d)                                 relating
to the ownership or use of the Assets, or the conduct of the business or
operations of Sparhawk or the Joint Venture, after the Closing.

 

16

 

Section 6.3.                                   Indemnification
Procedures.  All claims for
indemnification by a party under Article VI hereof (the party claiming
indemnification and the party against whom such claims are asserted being
hereinafter called the “Indemnified Party” and the “Indemnifying Party,”
respectively) shall be asserted and resolved as follows:

 

(a)                                  In
the event that any claim or demand for Damages which an Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against or sought
to be collected from such Indemnified Party by a third party, such Indemnified
Party shall with reasonable promptness give notice (the “Claim Notice”) to the
Indemnifying Party of such claim or demand, specifying the nature of and
specific basis for such claim or demand and the amount or the estimated amount
thereof to the extent then feasible (which estimate shall not be conclusive of
the final amount of such claim and demand). 
The Indemnifying Party shall not be obligated to indemnify the
Indemnified Party under this Agreement with respect to any such claim or demand
if the Indemnified Party fails to notify the Indemnifying Party thereof in
accordance with the provisions of this Agreement, and as a result of such
failure, the Indemnifying Party’s ability to defend against the claim or demand
is materially prejudiced.  The
Indemnifying Party shall have ten (10) days from the delivery or mailing of the
Claim Notice (the “Notice Period”) to notify the Indemnified Party (i) whether
or not it disputes the liability of the Indemnifying Party to the Indemnified
Party hereunder with respect to such claim or demand, and (ii) whether or not
it desires, at the cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such claim or demand; provided, however,
that any Indemnified Party is hereby authorized, but is not obligated, prior to
and during the Notice Period, to file any motion, answer or other pleading that
it shall deem necessary or appropriate to protect its interests or those of the
Indemnifying Party.  If the Indemnifying
Party notifies the Indemnified Party within the Notice Period that it desires
to defend the Indemnified Party against such claim or demand, the Indemnifying
Party shall, subject to the last sentence of this paragraph, have the right to
control the defense against the claim by all appropriate proceedings and any settlement
negotiations.  If the Indemnified Party
desires to participate in, but not control, any such defense or settlement it
may do so at its sole cost and expense. 
If the Indemnifying Party fails to respond to the Indemnified Party
within the Notice Period or after electing to defend fails to commence or
diligently pursue such defense, then the Indemnified Party shall have the
right, but not the obligation, to undertake or continue the defense of and to
compromise or settle (exercising reasonable business judgment) the claim or
other matter, all on behalf, for the account and at the risk of the
Indemnifying Party.  Notwithstanding the
foregoing, each party shall have the same right to participate in at its own
expense and at its own risk, without either party having the right of control,
any proceeding if (x) the claim, if successful, would set a precedent that
would materially interfere with, or have a material adverse effect on, the
business or financial condition of the Indemnified Party, or (y) the claim
seeks any injunction or equitable relief against the Indemnified Party.

 

(b)                                 If
requested by the Indemnifying Party, the Indemnified Party agrees, at the
Indemnifying Party’s expense, to cooperate with the Indemnifying Party and its
counsel in contesting any claim or demand which the Indemnifying Party elects
to contest, or, if appropriate and related to the claim in question, in making
any counterclaim

 

17

 

against the person asserting the third party claim or demand, or any
cross-complaint against any person. 
Except as provided above, no claim as to which indemnification is sought
under this Agreement may be settled without the consent of the Indemnifying
Party.

 

(c)                                  If
any Indemnified Party should have a claim against the Indemnifying Party
hereunder which does not involve a claim or demand being asserted against or
sought to be collected from it by a third party, the Indemnified Party shall
promptly send a Claim Notice with respect to such claim to the Indemnifying
Party, which Claim Notice shall describe in reasonable detail the nature of
such non-third-party claim, an estimate of the amount of damages attributable
to such non-third party claim, and the basis of the Indemnified Party’s request
for indemnification under this Agreement. 
If the Indemnifying Party disputes such claim, such dispute shall be
resolved by litigation in an appropriate court of competent jurisdiction.

 

(d)                                 In
connection with the matters for which indemnification is sought hereunder with
respect to any third-party claim, upon execution of reasonable and customary
confidentiality agreements, (i) Buyer agrees to give Sellers and their
representatives reasonable access during regular business hours and upon five
(5) days prior written notice to Buyer to the books, records and employees of
Buyer to the extent such reasonably relate to the matters to which the Claim
Notice relates and (ii) Sellers agree to give Buyer and its representatives
reasonable access during regular business hours and upon five (5) days prior
written notice to Sellers to the books, records and employees of Sellers to the
extent such reasonably relate to the matters to which the Claim Notice relates.

 

Section 6.4.                                   Certain
Limitations on Indemnification.

 

(a)                                  All
of the representations and warranties of the parties hereto contained in or
arising out of this Agreement or otherwise in connection herewith shall survive
the Closing hereunder and shall continue in full force and effect thereafter
until the second anniversary of the Closing Date, except that the
representations and warranties contained in the last sentence of Section 3.1(a)
and the first sentence of Section 3.1(b) shall survive indefinitely.  Unless a specified period is set forth in
this Agreement (in which event such specified period will control), all
agreements and covenants contained in this Agreement will survive the Closing
and remain in effect indefinitely. 
Notwithstanding anything herein to the contrary, indemnification for any
claim for which a Claim Notice has been timely given prior to the expiration of
the representation and warranty upon which such claim is based as provided
herein shall not expire, and such claim for indemnification may be pursued,
until the final resolution of such claim in accordance with the provisions of
this Article VI.

 

(b)                                 Notwithstanding
anything to the contrary set forth in this Agreement, the Sellers shall not be
liable hereunder to the Buyer Indemnitees unless and until the Damages incurred
by all Buyer Indemnitees, in the aggregate, exceed $10,000, provided, however,
that in the event such $10,000 amount is reached, the Sellers shall indemnify
the applicable Buyer Indemnitee in accordance with this Agreement for all

 

18

 

Damages incurred by such Buyer Indemnitee fully for such Damages,
including any amounts applied against such $10,000 threshold.  Notwithstanding anything to the contrary set
forth in this Agreement, the Sellers shall not be liable hereunder to the Buyer
Indemnitees for Damages to the extent that the amount of Damages paid to Buyer
Indemnitees hereunder exceeds the Purchase Price.

 

(c)                                  For
purposes of determining the amount of any Damages hereunder, such amount shall
be reduced by the amount of any insurance proceeds (“Insurance Proceeds”)
actually received by the indemnified party in respect of such Damages prior to
receipt of the applicable indemnification payment.

 

(d)                                 Other
than with respect to fraud or willful misrepresentation, the indemnification
provisions and procedures contained in this Article VI shall constitute the
sole and exclusive recourse and remedy of the parties with respect to any
monetary Damages resulting from, arising out of or in connection with any
matters subject to indemnification under this Article VI.  Accordingly, other than with respect to
claims alleging fraud or willful misrepresentation, no claim for any monetary
Damages arising under this Agreement shall be made by any of the Buyer Indemnitees
except pursuant to the provisions of this Article VI, including, without
limitation, Sections 6.4(a) and (b) to the extent applicable.

 

ARTICLE VII —
MISCELLANEOUS

 

Section 7.1.                                   Notice.  Any notices given under this Agreement shall
be deemed to be effectively given (i) when delivered personally, (ii) one
business day after date of delivery to the overnight courier service if sent by
overnight courier, or (iii) three business days after the date of mailing if
sent by postage prepaid, certified or registered United States mail, if, in any
such case addressed,

 

	
   

  	
  in the case of Sellers,
  as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Polydex Pharmaceuticals
  Limited

  
	
   

  	
   

  	
  Chemdex, Inc.

  
	
   

  	
   

  	
  Veterinary
  Laboratories, Inc.

  
	
   

  	
   

  	
  421 Comstock Road

  
	
   

  	
   

  	
  Toronto, Ontario,
  Canada M1L 2H5

  
	
   

  	
   

  	
  Attention:  President

  
	
   

  	
   

  	
  Facsimile:  (416) 755-0334

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mark D. Guidubaldi

  
	
   

  	
   

  	
  Katten Muchin Zavis
  Rosenman

  
	
   

  	
   

  	
  525 West Monroe Street

  
	
   

  	
   

  	
  Chicago, Illinois
  60661-3693

  
	
   

  	
   

  	
  Facsimile:  (312) 902-1061

  

 

19

 

	
   

  	
  If to Buyer:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  E. Bert Hughes

  
	
   

  	
   

  	
  Sparhawk Laboratories
  Inc.

  
	
   

  	
   

  	
  12340 Santa Fe Trail
  Drive

  
	
   

  	
   

  	
  Lenexa, KS 66215

  
	
   

  	
   

  	
  Facsimile:  (913) 681-8099

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mike W. Lochmann

  
	
   

  	
   

  	
  Stinson Morrison Hecker
  LLP

  
	
   

  	
   

  	
  2600 Grand Boulevard

  
	
   

  	
   

  	
  Kansas City,
  Missouri  64108-4606

  
	
   

  	
   

  	
  Facsimile:  (816) 474-4208

  
	
   

  	
   

  	
   

  
	
   

  	
  or to such other
  address as any party may provide to the other in writing.

  

 

Section 7.2.                                   Entire
Agreement and Amendment.  This
Agreement and the Exhibits attached hereto supersede all prior negotiations
between the parties hereto and contains the entire understanding between them
with respect to the transactions contemplated hereunder.  This Agreement may be modified only by a
writing signed by the party against whom enforcement of the change is sought.

 

Section 7.3.                                   Legal
Fees.  If any action or proceeding
is brought for the enforcement or interpretation of this Agreement or because
of an alleged dispute, breach, default or misrepresentation in connection with
this Agreement, the successful or prevailing party in a court of law shall be
entitled to recover from the losing party reasonable attorneys’ fees and all
other costs and expenses incurred in such action or proceeding, in addition to
any other relief to which it may be entitled.

 

Section 7.4.                                   Commissions.  Buyer, on the one hand, and Sellers, on the
other hand, hereby represent to the other that no brokerage fees or commissions
are due in connection with the transaction contemplated herein as a result of
their respective actions or commitments, and each party agrees to indemnify and
hold the other harmless from and against any claim, expense, or cost (including
reasonable attorneys’ fees) resulting from any claim for such fee or commission
arising as a result of such party’s actions or commitments.

 

Section 7.5.                                   Successors
and Assigns and Counterparts.  This
Agreement shall not be assigned by any party without the prior written consent
of each of the other parties.  This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their successors and assigns and may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.

 

20

 

Section 7.6.                                   Governing
Law.  This Agreement shall be
governed, construed and interpreted under and pursuant to the laws of the State
of Kansas applicable to agreements made and to be performed entirely within
such State.

 

Section 7.7.                                   Schedules
and Exhibits.  All of the Exhibits
and Schedules attached hereto are incorporated herein and made a part of this
Agreement by reference thereto.

 

21

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.

 

	
   

  	
  SPARHAWK
  LABORATORIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ E. Bert Hughes

  	
   

  
	
   

  	
   

  	
  Name:

  	
  E. Bert Hughes

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  POLYDEX
  PHARMACEUTICALS LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George G. Usher

  	
   

  
	
   

  	
   

  	
  Name:

  	
  George G. Usher

  
	
   

  	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CHEMDEX,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George G. Usher

  	
   

  
	
   

  	
   

  	
  Name:

  	
  George G. Usher

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  VETERINARY
  LABORATORIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George G. Usher

  	
   

  
	
   

  	
   

  	
  Name:

  	
  George G. Usher

  
	
   

  	
   

  	
  Title:

  	
  President

  
						

 

22

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