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EXHIBIT 10.34
FIRST AMENDMENT TO
INTERNATIONAL LICENSE AGREEMENT
BETWEEN
ABBOTT INTERNATIONAL, LTD. AND SONUS PHARMACEUTICALS, INC.
THIS FIRST AMENDMENT ("Amendment") dated January 31, 1999 ("Amendment
Effective Date"), by and between Abbott International, Ltd., a Delaware
corporation with principal offices at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ( "ABBOTT") and SONUS Pharmaceuticals, Inc., a Delaware
corporation with principal offices at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("SONUS").
RECITALS
WHEREAS, ABBOTT and SONUS have previously entered into an International
License Agreement dated October 1, 1996 ("International Agreement"), whereby
ABBOTT obtained certain exclusive marketing rights for certain territories
outside of the United States, subject to limited SONUS co-promotion rights, to
certain ultrasound contrast agents;
WHEREAS, ABBOTT and SONUS desire to amend the International Agreement as
set forth in this Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants set forth below, ABBOTT and SONUS mutually agree as follows:
1. Capitalized terms used in this Amendment and not otherwise defined in
this Amendment shall have the meanings set forth in the International
Agreement. Article 1 of the International Agreement is amended as
follows: (a) Article 1.10 is amended as follows:
"First Sale Date" means the earlier of: (i) the date of the
first sale of the Product in a given Major Country following the Approval
Date(as defined
[*] CONFIDENTIAL PORTIONS OMITTED AND
FILED SEPARATELY WITH COMMISSION
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below) in such Major Country by ABBOTT or an ABBOTT Affiliate or
sublicensee to a Third Party; or (ii) the date ninety (90) days
after the Approval Date in such Major Country."
(b) The following new definitions are added to Article 1:
"1.24" 'Approval Date' means the later to occur of the date of
Regulatory Approval by the European Medicines Evaluation Agency
("EMEA") of the Product for (i) the Cardiology Indication and
(ii) the Radiology Indication.
"1.25" 'Cardiology Indication' means the indication for the
Product [*]
"1.26" 'Radiology Indication' means the indication for the
Product [*]
2. The introduction of Article 2.1(A) of the International Agreement is
amended as follows:
"(A) SONUS shall be responsible for all activities required to
obtain Regulatory Approval, exclusive of price approval and
reimbursement approval, in Countries which as of the Effective
Date, are members of the European Community ('EC Countries).
These activities will include, but not be limited to, clinical
trials and the filing of an application for marketing approval
with the EMEA. SONUS will pursue these activities diligently and
will use its reasonable best efforts to obtain such Regulatory
Approval, exclusive of price approval and reimbursement approval,
as quickly as is feasible. ABBOTT shall be responsible for all
activities required to obtain price approval and reimbursement
approval in such EC Countries. ABBOTT will pursue such activities
diligently and will use its reasonable best efforts to obtain
such price approvals and reimbursement approvals as quickly as is
feasible."
3. Article 2.2(A) of the International Agreement is amended as follows:
"(A) If ABBOTT desires to participate financially in such
additional clinical research, and communicates its decision to
participate in accordance with Article 2.4 of the United States
Agreement, as amended, SONUS shall reimburse ABBOTT fifty percent
(50%) of such costs and expenses funded by ABBOTT ('Reimbursement
Amount') by either, at the option of SONUS:
(i) reimbursing ABBOTT in cash such Reimbursement Amount
with interest at the United States prime rate of interest
(as published in the Wall Street
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Journal Midwest Edition on the date on which ABBOTT funds
such reimbursement) within five (5) years of the date such
Reimbursement Amount is fully paid by ABBOTT; or
(ii) reducing the royalty rates payable by ABBOTT to SONUS
as provided in Article 6.1 at such dates and in such
amounts as is mutually agreed by the parties; or
(iii) in the event that the net tangible assets of SONUS
shall, at any time within five (5) years of the date such
Reimbursement Amount is fully paid by ABBOTT, fall below
an amount equal to the then current Nasdaq National Market
listing requirements for net tangible assets contained in
paragraph 4450(a)(3) of the NASD Manual, as such paragraph
may be amended from time to time, plus One Million Dollars
($1,000,000) reimbursing ABBOTT such Reimbursement Amount
with interest at the United States prime rate of interest
(as published in the Wall Street Journal Midwest Edition
on the date on which ABBOTT funds such reimbursement), by
issuing and delivering to ABBOTT within such five (5) year
period shares of Common Stock of SONUS having a fair
market value equal to such Reimbursement Amount plus such
interest pursuant to the terms and conditions of a
Securities Purchase Agreement substantially in the form
attached hereto as Exhibit 2.2(A), and which is
incorporated herein by reference; or
(iv) reimbursing ABBOTT partially in cash pursuant to
Article 2.2(A)(i) and the remainder in SONUS Common Stock
pursuant to Article 2.2(A)(iii). If the parties are unable
to agree on a reduction of the royalty rates pursuant to
Article 2.2(A)(ii) within thirty (30) days of the date on
which they began discussing such reduction, then the
parties shall utilize the ADR procedure pursuant to
Article 20 to determine the royalty rate reduction. Once
the ADR procedure has been initiated, and through the date
of the final ADR decision, ABBOTT may deduct 10% from its
royalty payments to SONUS. Promptly after the ADR
decision, ABBOTT shall pay SONUS the balance of royalty
payments due under the reduced royalty rate (if any), or
SONUS shall repay to ABBOTT the overpayment by ABBOTT (if
any). Any such amount due
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from one party to the other shall be due and payable (with
interest at the prime rate of interest as published in the
Wall Street Journal Midwest Edition on the date of the ADR
decision) within thirty (30) days of the owing party's
receipt of the ADR decision."
4. The second sentence of Article 3.2(A) of the International Agreement is
amended as follows:
"ABBOTT shall use its reasonable best efforts to optimize
sales, profitability, and market share of the Product in
the Territory in a manner consistent with the efforts
which it exerts to optimize sales, profitability, and
market share of its other products in the Territory."
5. Article 3.2(B)(i)(c)(1) of the International Agreement is amended as
follows:
"(1) ▇▇▇▇▇▇'▇ failure to make the minimum royalty payment
in a Major Country in the Territory was due to the fact
that the Approval Date did not occur within the time frame
contemplated by the parties as set forth in the Plan for
that Major Country. The Net Sales forecast shall be
adjusted as mutually agreed by the parties to reflect the
actual Approval Date and the actual indications approved,
and any material changes to the assumptions for the Net
Sales forecast, including without limitation any
additional indications which may be approved as
contemplated in Section 2.2. If the parties are unable to
agree on such adjustment within thirty (30) days of the
date on which they began discussing such adjustment, then
the parties will utilize the Dispute Resolution Procedure
under Article 20 to determine such adjustment."
6. Article 3.4(A) of the International Agreement is deleted and replaced
with the following:
(A) ABBOTT and SONUS have previously entered into a Development
and Supply Agreement dated May 6, 1993, as amended ("the Supply
Agreement") under which ABBOTT has agreed to manufacture the
Product for SONUS. SONUS may purchase Product under the Supply
Agreement to fulfill ▇▇▇▇▇▇'▇ purchase orders under Article 3.5.
All manufacturing of the Product by ABBOTT for sale in the
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Territory by ABBOTT shall be in accordance with the terms of the
Supply Agreement, as amended from tie to time, and the
specifications for the Product under the Supply Agreement."
7. Article 3.4 of the International Agreement is amended by adding the
following:
"(E) ABBOTT and SONUS agree that during the term of this
Agreement a certain portion of the Product will be packaged [*].
In the early years following the First Sale Date of the Product
packaged [*] in the E.U., a larger percentage of total Unit Sales
shall consist of [*], whereas in later years, ABBOTT shall move
toward selling a larger percentage of the total Unit Sales of
[*], in accordance with the following guidelines:
[*]
In the event that actual Unit Sales of [*] as a percentage of total Unit
Sales exceed the percentage thresholds set forth in this Subsection (E),
ABBOTT and SONUS agree to discuss an adjustment of the percentages or
modifications to [*] or a modification to the royalty rates under
Article 6, as appropriate." If the parties are unable to agree upon a
reasonable adjustment or modification within thirty (30) days of the
date on which they began discussing such adjustment or modifications,
then the parties shall use the ADR procedure pursuant to Article 20 to
determine such adjustment or modifications (if any).
8. Article 4 of the International Agreement shall be amended by adding the
following last sentence:
"ABBOTT agrees that, as of the Amendment Effective Date, SONUS
has fulfilled its obligations to ABBOTT relating to the
SONUS/Daiichi Agreement under this Article 4."
9. SONUS acknowledges that ABBOTT has exercised the options granted under
Article 5.1(C)(i) and Article 5.1(C)(ii), and that the licenses relating
respectively to such options have been granted to ABBOTT and are part
of, and subject to the terms and conditions of, the International
Agreement as modified by this Amendment.
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10. SONUS acknowledges that the amounts referred to in items 1,2 and 3 of
Appendix 5.2 and in items 1,2 and 3 of Appendix 5.3 of the International
Agreement, as modified by this Amendment, have been paid by ABBOTT to
SONUS in full prior to the Amendment Effective Date.
11. New Articles 5.4 and 5.5 are added to the International Agreement as
follows:
"5.4 Acceleration of Radiology Milestone Payments. As indicated
in Appendices 5.2 and 5.3 of the International Agreement, as
modified by this Amendment, certain of the milestone payments
have been conditioned upon the achievement of specific
milestones relating to specified indications for the Product.
Fifty percent (50%) of each such payment is to be earned based
on approval of the Cardiology Indication ('Cardiology Milestone
Payment') and the remaining fifty percent (50%) is to be earned
based on approval of the Radiology Indication or of a radiology
indication mutually agreed by the parties in writing hereafter
('Radiology Milestone Payment').
5.5 Prepayment of Radiology Milestone. Within one (1) year
following the Radiology Prepayment Date (as such term is defined
in Exhibit A to the Securities Purchase Agreement), SONUS shall
have the right to request that ABBOTT prepay any or all of such
Radiology Milestone Payments in consideration for the issuance
by SONUS to ABBOTT of shares of SONUS Common Stock pursuant to
and subject to the terms and conditions of the Securities
Purchase Agreement in the form attached hereto as Exhibit
2.2(A), the terms and conditions of which Securities Purchase
Agreement are incorporated herein by reference. Anything herein
or in the Securities Purchase Agreement notwithstanding, SONUS
shall not have the right to request that ABBOTT make any
prepayment of any Radiology Milestone Payment, (i) relating to
the U.S. NDA approval milestone unless and until SONUS has
received the first U.S. FDA approval of the Product in the Field
(as defined in the United States Agreement), and (ii) relating
to the first shipment date of Product for sale in Germany,
France, Italy, Spain, Canada or
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the United Kingdom milestone, unless and until the first
shipment of Product has occurred in any such country. If SONUS
does not request prepayment of the Radiology Milestone Payments
within such one (1) year period as provided in the Securities
Purchase Agreement, ABBOTT shall not be obligated to pay the
Radiology Milestone Payments until such time as SONUS obtains
EMEA approval of the Radiology Indication. In the event that
ABBOTT has prepaid any or all of the Radiology Milestone
Payments, SONUS shall repay thirty percent (30%) of the dollar
value of such prepaid amount ("Repayment Amount") to ABBOTT if
SONUS fails to achieve the Radiology Milestone on or before the
date which is [*] following the Amendment Effective Date. SONUS
shall pay to ABBOTT the Repayment Amount by either, at the
option of SONUS: (i) repaying ABBOTT the Repayment Amount in the
form of cash within ten (10) days following the date which is
[*] following the Amendment Effective Date; or (ii) issuing and
delivering to ABBOTT a number of shares of Common Stock of SONUS
equal to the Repayment Amount pursuant to the terms and
conditions of the Securities Purchase Agreement.
12. Article 6.1 of the International Agreement is amended as follows:
"Royalty Rate. The Royalty Rate applicable to calculate ▇▇▇▇▇▇'▇
Royalty payment, pursuant to Article 6.2 below, shall be based
upon the number of approved indications for the Product in
Germany, France, Italy, Spain and the United Kingdom, and upon
the level of ▇▇▇▇▇▇'▇ aggregate annual Net Sales in the
Territory, as set forth in Appendix 6.1 to this Amendment."
13. As of the Amendment Effective Date, SONUS has under development an
ultrasound diagnostic imaging product within the Field which SONUS has
designated as [*]. SONUS and ABBOTT acknowledge and agree that: (i) [*]
falls within the definition of "Product" (although all specific terms
and conditions with respect to [*] shall be set forth in a separate
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agreement between ABBOTT and SONUS), and (ii) ABBOTT has exclusive
rights to market and sell [*]. SONUS and ABBOTT shall exert all
reasonable efforts to negotiate in good faith, execute and deliver a
separate agreement with respect to [*].
14. Registration Rights. SONUS shall, prior to or on the Amendment Effective
Date, cause to be amended the Sonus Pharmaceuticals, Inc. Third Amended
and Restated Registration Rights Agreement dated May 15, 1996, as
amended ("Registration Rights Agreement"), to include the shares of
Common Stock issued by SONUS to ABBOTT and Common Stock issuable upon
exercise of the Warrants pursuant to the United States Agreement, as
amended, and the Securities Purchase Agreement, as "Registrable
Securities" as the term "Registrable Securities" is defined in the
Registration Rights Agreement.
15. Appendices. Appendices of the International Agreement are amended as set
forth in the corresponding Appendices attached to this Amendment.
16. Confidentiality. In the event that this Amendment is to be filed with
the Securities and Exchange Commission, ABBOTT and SONUS shall discuss
any request for confidential treatment of certain financial and other
terms of this Amendment and cooperate in the preparation and filing of
any confidential treatment requests submitted to the Securities and
Exchange Commission with respect to this Amendment.
17. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all
together shall constitute one and the same instrument.
18. Except as expressly modified by this Amendment, all terms and conditions
of the International Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to be executed by its duly authorized representative as of the day and year
first above written.
ABBOTT INTERNATIONAL, LTD. SONUS PHARMACEUTICALS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------- -----------------------------
Title: President, Hospital Products Title: President
Division
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APPENDIX 5.2
MILESTONE AND LICENSE FEES
PAYMENT SCHEDULE
1. Execution of Definitive Agreement US$ 1 million
2. Filing of NDA with EMEA US$ 1 million
within 15 days
3. Commencement of Phase III Myocardial Perfusion Studies*
within 30 days US$ 1 million
within 120 days 1 million
within 150 days 1 million
4. United States NDA Approval
within 15 days US$ 3 million***
5. European Community Marketing Authorization Granted
within 15 days US$ 2 million
within 105 days 1 million***
within 195 days 1 million***
6. First Shipment Date of Product for Sale**
within 15 days US$ 3 million***
within 105 days 1 million***
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7. Annual**** (One-Time) U.S. $20 Million Net Sales in the
Territory US$ 4 million
8. Annual**** (One-Time) U.S. $40 Million Net Sales in the
Territory US$ 2 million
Total License and Milestone Payments US$ 22 million
*"Commencement" means enrollment of first patient in a U.S. clinical study.
**To Germany, France, Italy, Spain, Canada or the United Kingdom.
***These milestone payments shall be earned based on approved indications. Of
the amount specified in item 4 above, fifty percent (50%) shall be earned based
on United States NDA approval by the FDA of the Cardiology Indication for the
Product, and fifty percent (50%) shall be earned based on United States NDA
approval by the FDA of the Radiology Indication or a radiology indication
mutually agreed by the parties hereafter for the Product. Of the amounts
specified in items 5 and 6 above, fifty percent (50%) shall be earned based on
approval by the EMEA of the Cardiology Indication for the Product, and fifty
percent (50%) shall be earned based on approval by the EMEA of the Radiology
Indication or of a radiology indication mutually agreed by the parties hereafter
for the Product.
****"Annual" means the then-applicable fiscal year of ABBOTT.
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APPENDIX 5.3
OFFSETTABLE MILESTONES, LICENSE AND OPTION FEES
PAYMENT SCHEDULE
1. Execution of Definitive Agreement
within 300 days US$ 700,000
2. Commencement of Phase III Myocardial Perfusion Studies*
within 30 days US$ 700,000
within 120 days 700,000
3. After Exercise by ABBOTT of Article 5.1 (C) Option
On December 15, 1997 US$ 1,400,000
On January 15, 1998 700,000
On April 15, 1998 700,000
4. European Community Marketing Authorization Granted
within 15 days US$ 700,000
within 105 days 700,000**
within 195 days 700,000**
within 265 days 700,000**
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5. Annual*** (One-Time) U.S. $20 Million Net Sales in the
Territory US$ 2,800,000
6. Annual*** (One-Time) U.S. $40 Million Net Sales in the
Territory US$ 2,100,000
Total Offsettable License and Milestone Payments US$ 12,600,000
* "Commencement" means enrollment of first patient in a U.S. clinical study.
** These milestone payments shall be earned based on approved indications. Fifty
percent (50%) shall be earned based on approval by the EMEA of the Cardiology
Indication for the Product, and fifty percent (50%) shall be earned based on
approval by the EMEA of the Radiology Indication or a radiology indication
mutually agreed by the parties hereafter for the Product.
*** "Annual" means the then-applicable fiscal year of ABBOTT.
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APPENDIX 6.1
ROYALTY RATES
Indications Aggregate Annual** Sales Royalty Rate
------------------------------- -------------------------- ----------------
Sales during the period that Up to $42 million 24% of Net Sales
there is only Cardiology
Indication approved in the E.U.*
Sales during the period that Greater than $42 million 28% of Net Sales
there is only Cardiology
Indication approved in the E.U.*
Sales during the period that Up to $90 million 28% of Net Sales
there are Cardiology and
Radiology Indications approved
in the E.U.*
Sales during the period that From $90 million to $125 32% of Net Sales
there are Cardiology and million
Radiology Indications approved
in the E.U.*
Sales during the period that Over $125 million 36% of Net Sales
there are Cardiology and
Radiology Indications approved
in the E.U.*
Sales during the period that Up to $90 million 32% of Net Sales
there are Cardiology, Radiology
and perfusion Indications
approved in the E.U.*
Sales during the period that From $90 million to $125 36% of Net Sales
there are Cardiology, Radiology million
and perfusion Indications
approved in the E.U.*
Sales during the period that From $125 million to $225 40% of Net Sales
there are Cardiology, Radiology million
and perfusion Indications
approved in the E.U.*
Sales during the period that Over $225 million 42% of Net Sales
there are Cardiology, Radiology
and perfusion Indications
approved in the E.U.*
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* "Approved in the E.U." means that EMEA marketing authorization has been
obtained for the specified indications in at least Germany, France, Italy, Spain
and the United Kingdom.
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