ARONEX PHARMACEUTICALS INC
LICENSE AGREEMENT -SUMITOMO PHARMACEUTICALS CO.LTD
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>h82774ex10-1.txt
<DESCRIPTION>LICENSE AGREEMENT -SUMITOMO PHARMACEUTICALS CO.LTD
<TEXT>

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Exhibit 10.1

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "*" and have been filed separately
with the Securities and Exchange Commission.



                                LICENSE AGREEMENT



This License Agreement is entered into as of December 12, 2000, by and between
API Pharmaceuticals, Inc. of 8707 Technology Forest Place, The Woodlands, Texas
77381-1191, U.S.A. ("API") and Sumitomo Pharmaceuticals Co., Ltd. of 2-8,
Doshomachi 2-Chome, Chuo-ku, Osaka 541-8510, Japan ("Sumitomo").

1.       Definitions.

         "Subject Patent" means (i) US Patent Application Serial No. 06/836,524,
         filed March 5, 1986 and any patents issued thereon, and (ii) any
         divisions, continuations, continuation-in-part, reissues, renewals and
         extensions thereof.

         "Products" means any products covered by any of the Subject Patent,
         except for any product which contains [ ** ] ("Sumitomo Product").

         "Net Sales" means the gross sales of all the Products covered by a
         valid claim of an issued Subject Patent sold by API to third parties in
         the Territory less (i) all quantity discounts and customary allowances
         actually granted to such third parties with respect to the sale of the
         Products, (ii) returns of the Products to API from its customer by
         reason of spoiled, damaged or outdated products and (iii)
         transportation and handling charges, taxes and duties applicable to
         sales of the Products.

         "Territory" means U.S.A. and its territories and protectorates.

2.       License. Sumitomo hereby grants to API under the Subject Patent except
         for the treatment of hepatoma (i) an exclusive license to make, have
         made, use, develop, import and sell [ ** ] ("API Product") (ii) an
         exclusive license but for Sumitomo to make, have made, use, develop,
         import and sell any other Products than API Product, in the Territory.

3.       Compensation.  In consideration of the license hereunder, API shall pay
         the following milestone payments and running royalties to Sumitomo by
         bank transfer to Sumitomo's designated account as set forth below.

         Milestone Payments

         o  US$500,000 within thirty (30) days of executing this Agreement;



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         o  [ ** ] within thirty (30) days of acceptance of filing the first
            regulatory application for sales regarding the first Product within
            the Territory;

         o  [ ** ] within thirty (30) days of obtaining the first regulatory
            approval for sales regarding the first Product within the Territory;

         o  [ ** ] within thirty (30) days of the earliest fiscal year end of
            API when cumulative Net Sales in the Territory reaches [ ** ];

         o  [ ** ] within thirty (30) days of obtaining regulatory approval for
            sales regarding each additional product among the Products within
            the Territory.

Running Royalty

         Within ninety (90) days of each fiscal year end of API:

         o  [ ** ] for the part of annual Net Sales up to [ ** ];

         o  [ ** ] for the part of annual Net Sales over [ ** ] up to [ ** ];

         o  [ ** ] for the part of annual Net Sales over [ ** ].

In the event that the Product is sold by API in combination with other active
ingredients, the applicable royalty payable by API shall be reduced
proportionately based upon the selling prices of each active ingredients
individually as compared to the selling price of the combined product.

4.       Taxes. Withholding taxes, if any, levied on any of the above payments
         may be deducted therefrom, and API shall furnish to Sumitomo the
         evidences of the payment of any such taxes for Sumitomo to obtain tax
         reduction from Japanese government.

5.       Royalty Report. API shall furnish to Sumitomo within ninety (90) days
         of its fiscal year a written report showing (i) the Net Sales of all
         Products sold by API and the running royalty on such Net Sales during
         the reporting period and (ii) withholding taxes set forth in the above
         paragraph 4.

6.       Records and Audit. API shall keep accurate records in sufficient detail
         to enable the running royalties payable hereunder to be determined for
         eight (8) years from the year in which such sales occurred. Upon
         reasonable prior notice, Sumitomo may, at Sumitomo's expense, and not
         more than once in each fiscal year, have a public accounting firm
         examine the records stipulated above during reasonable business hours.
         Said public accounting firm shall treat as confidential, and shall not
         disclose any information acquired through the audit.

7.       Patent Infringement by Third Party; Prosecution and Maintenance.

         (1)      In the event that a third party infringes or threatens to
                  infringe any of the Subject Patents except for those
                  concerning Sumitomo Product in the Territory, API may, after
                  full consultation with Sumitomo, take any suitable measures
                  including a legal action against such infringement and
                  Sumitomo shall give reasonable



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                  assistance (excluding financial assistance) to API. If API
                  commences litigation, it shall have the right to sue in
                  Sumitomo's name as attorney in fact for Sumitomo. API shall be
                  entitled to a credit against up to [ ** ]of the royalty
                  payments required under paragraph 3 for the amounts paid by it
                  in defending and enforcing the Subject Patent. Any recoveries
                  which API receives as damages or settlement as the result of
                  such measures shall be first credited to such royalty and the
                  remaining sum, if any, shall be [ ** ] by Sumitomo and API.

                  API shall keep Sumitomo reasonably informed as to such
                  infringement and measures, and shall not execute a settlement
                  or compromise on such infringement without prior consent of
                  Sumitomo, which consent shall not be unreasonably withheld or
                  delayed. Sumitomo has the right to participate in or take any
                  such measures at its own discretion and expense.

         (2)      Sumitomo shall be responsible for prosecution and maintenance
                  of the Subject Patent, at its expense, and shall keep API
                  informed thereof. In the event that API assumes the
                  prosecution and maintenance of the Subject Patent, it shall be
                  entitled to a [ ** ] against royalties due under paragraph 3
                  above.

8.       Product Liability. API shall indemnify and hold harmless Sumitomo
         (including its affiliates, employees, agents and representatives)
         against any and all claims, damages, liabilities, losses, costs and
         expenses of any kind or nature arising out of or in connection with
         third party claims or suits relating to the Products made, developed,
         manufactured, imported or sold by API.

9.       Term. This Agreement shall become effective on the date when API
         withdraws the pending case between the parties regarding Subject
         Patent, and shall remain in full force until the latest expiration date
         of the Subject Patent. Sumitomo may terminate this Agreement if API
         resumes such case or contests the validity of the Subject Patent in any
         other way.

10.      Termination. Either party may at any time immediately terminate this
         Agreement, by giving written notice to the other party, upon the
         happening of any of the following events:

         1) if the other party makes an assignment of substantially all of its
            assets for the benefit of creditors, is the subject of proceedings
            in voluntary or involuntary bankruptcy or reorganization instituted
            on behalf of or against such party, or has a receiver or trustee
            appointed for all or substantially all of its property;

         2) if the other party becomes insolvent, or is unable to pay its debts
            as and when they fall due;

         3) if default is made by the other party in performance or observance
            of any provision of this Agreement and such default is not rectified
            within thirty (30) days notice specifying the default.




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11.      Reimbursement. API shall reimburse Sumitomo such costs and expenses,
         including, but not limited to, lawyer's fee, as incurred by Sumitomo on
         and after the effective date hereof in connection with the pending case
         stipulated in the paragraph 9.

12.      Entire Agreement. This Agreement constitutes the whole and entire
         agreement between the parties with respect to the subject matter
         hereof, and replaces all previous representations, understandings or
         arrangements given or made by the parties with respect thereto, whether
         oral or in writing.

13.      Non-Assignment. Neither party may assign all or any of its rights under
         this Agreement without the prior written consent of the other party,
         which consent shall not be unreasonably withheld. Notwithstanding the
         foregoing, and except in the case described in paragraph 10(1) above,
         either party may assign this Agreement without such consent to a third
         party that succeeds to all or substantially all of the assigning
         party's business or assets relating to this Agreement, whether by sale,
         merger, operation of law or otherwise provided that such assignee or
         transferee agrees in writing to be bound by the terms and conditions of
         this Agreement.

14.      Governing Law. This Agreement shall be construed and enforced in
         accordance with the laws of [ ** ].

15.      Arbitration. Any dispute or controversy between the parties as to the
         interpretation, enforcement or termination of this Agreement, which
         cannot otherwise be settled by the parties, shall be finally settled by
         binding arbitration under the Rules of the International Chamber of
         Commerce to be held at the principal place of business of the party
         against whom any such action was initiated. Such arbitration proceeding
         shall be conducted, in English, by a panel of 3 arbitrators appointed
         in accordance with such rules. The costs of the arbitration, including
         administrative fees and fees of the arbitrators, shall be shared
         equally by the parties, unless otherwise determined by the arbitrators.
         Each party shall bear the cost of its own attorneys' fees and expert
         fees incurred in such proceedings.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
by their duly authorized representatives and each party keeps one each.

Accepted:                           Accepted:
API Pharmaceuticals, Inc.           Sumitomo Pharmaceuticals Co., Ltd.

By: /s/ GEOFFREY F. COX, PH.D.      By:  /s/ HIROSHI NOGUCHI, PH.D.
   ------------------------------       ---------------------------------------
         Geoffrey F. Cox, Ph.D.            Hiroshi Noguchi, Ph.D.
                                           Director, General Manager of Business
Title:   Chairman and CEO           Title: Development and Licensing Office
      ---------------------------          ------------------------------------


Date:     December 12, 2000         Date:         December 12, 2000
     ----------------------------          -------------------------------------




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