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EXHIBIT 10.41
DISTRIBUTION AND SUPPLY AGREEMENT
This Agreement is made as of this 20th day of November, 2000, by and
between Paladin Labs Inc., 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxx,
Xxxxxx X0X 0X0 ("Paladin") and VIVUS International, Ltd., a company organized
under the laws of Bermuda, with its principal offices at Xxxxxxxxx Xxxxx, Xxxxxx
Xxxxxx, Xxxxxxxx, Xxxxxxx. ("VIVUS").
RECITALS
WHEREAS, VIVUS has developed MUSE(R), a non-injectable product for the
treatment of erectile dysfunction consisting of a microsuppository of
alprostadil for local delivery to the male urethra; and
WHEREAS, Paladin is interested in obtaining a license relating to such
product; and VIVUS is interested in granting such license to Paladin; and
NOW, THEREFORE, in consideration of the mutual obligations and promises as
set forth herein, the parties do hereby agree as follows:
ARTICLE 1 - DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following respective meanings:
1.1 Affiliate means any corporation, firm, partnership or other entity,
whether de jure or de facto, that directly or indirectly owns, is
owned by or is under common ownership with a party to the extent of
in excess of fifty percent (50%) of the outstanding securities or
assets having the power to vote on or direct the affairs of the
entity.
1.2 Confidential Information means any information, data or business
plans relating to the Product or otherwise to the subject of this
Agreement, which a party discloses to the other party, except any
portion thereof which:
(i) is known to the receiving party at the time of disclosure and
documented by written records made prior to the date of this
Agreement;
(ii) is disclosed to the receiving party by a third person who has
a right to make such disclosure;
(iii) becomes patented, published or otherwise part of the public
domain through no fault of the receiving party; or
(iv) is independently developed by the receiving party as evidenced
by its written records.
1.3 Effective Date means the date of this Agreement first written above.
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1.4 First Commercial Sale means the first sale of Product (as defined
below) in the Territory by Paladin or any Paladin Affiliate or
sublicensee to any unaffiliated third party.
1.5 Patents means all patents and patent applications (including without
limitation, continuations, continuations-in-part, divisionals,
patents of addition, substitutions, extensions, reissues,
re-examinations, renewals, or SPCs), owned by or licensed (with the
right to sublicense) to VIVUS or VIVUS, INC. or its or their
Affiliates during the term of this Agreement, and generically or
specifically claiming a Product, a process for manufacturing a
Product, an intermediate used in such process, or a use of a
Product. With respect to such patents or applications that VIVUS or
VIVUS INC. or its or their Affiliates licenses or acquires or has
licensed or acquired from a third party, the same shall be included
within "Patents" hereunder to the extent that VIVUS or VIVUS INC. or
its or their Affiliates has the right to license or sublicense the
same hereunder. A list of current and applicable Patents is attached
as Exhibit 1.5.
1.6 Marketing Authorization means all governmental approvals and
authorizations necessary for the commercial marketing and sale of
the Product in the Territory, excluding any pricing approval and
pricing reimbursement.
1.7 Net Sales means the gross sales of the Product shipped by Paladin
and/or its Affiliates or sub licensee to third parties in the
Territory (as defined below) less deductions allowed to the final
buyer against invoiced amounts for:
a. trade discounts earned or granted;
b. cash discounts actually allowed;
c. transportation charges (including insurance costs), handling
charges, sales taxes, excise, turnover, inventory, value added
and similar taxes, duties and charges invoiced to customers;
d. retroactive price reductions imposed by government
authorities;
e. wholesaler charge backs earned or granted;
f. rebates and management fees earned by or granted to third
parties; and
g. actual bad debts incurred to a maximum of one-half of one
percent (.05%) of Net Sales in any Sales Year.
1.8 Product means (1) the product for the transurethral delivery of
alprostadil and which VIVUS and/or VIVUS INC. sells outside the
Territory, as of the Effective Date, under the trademark MUSE
("Product") and (2) any and all improvements to the Product which
are sold under the MUSE trademark outside the Territory.
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1.9 Regulatory Approval means all governmental approvals and
authorizations necessary for the commercial sale of the Product in a
country in the Territory, including but not limited to Marketing
Authorization, pricing approval and pricing reimbursement.
1.10 Sales Quarter means for the first Quarter, the period commencing on
the date of Paladin's First Commercial Sale and ending on the last
day of that calendar quarter; and for subsequent Sales Quarters, the
successive calendar quarters thereafter.
1.11 Sales Year means for the first Sales Year, the period commencing on
the date of Paladin's First Commercial Sale and ending on December
31st of that year; and for subsequent Sales Years, the successive
calendar years thereafter.
1.12 Specifications means the manufacturing release specifications and
stability specifications for the Product in the Territory.
1.13 SPC means a right based upon a Licensed Patent to exclude others
from making, using or selling a Product, such as a Supplementary
Protection Certificate.
1.14 Supply Price means the price as set forth in Article 4.2 below.
1.15 Trademark means the trademark MUSE. The MUSE(R) Trademark is
registered or has pending registration applications in the Territory
as of the Effective Date.
1.16 Territory means Canada.
ARTICLE 2 - GRANT OF RIGHTS
2.1 Appointment. VIVUS hereby grants to Paladin an exclusive license
(exclusive even as to VIVUS) to use and sell the Product in the
Territory. Paladin may sublicense any one or more of its Affiliates
at Paladin's sole discretion, and may sublicense third parties with
VIVUS's prior written consent, such consent not to be unreasonably
withheld. This exclusive license is granted to Paladin as to all
uses, forms, indications, packages and strengths for the Product.
ARTICLE 3 - LICENSE FEES
3.1 Subject to Articles 9.2 and 9.3, Paladin shall pay VIVUS the
following one-time, non-creditable and non-cumulative license fees
within thirty (30) days after the event specified:
a. (***), upon the first occasion on which Paladin achieves
annual Net Sales of the Product in a Sales Year of (***) in
the Territory; and
b. (***), upon the first occasion on which Paladin achieves
annual Net Sales of the Product in a Sales Year of (***) in
the Territory.
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ARTICLE 4 - PURCHASE AND SALE
4.1 Purchases and Sale of Product. Subject to the terms and conditions
of this Agreement, VIVUS shall sell Product exclusively to Paladin
in the Territory and Paladin shall purchase its requirements of
Product exclusively from VIVUS, at the Supply Price.
4.2 Supply Price. Subject to Article 4.3, the Supply Price shall equal
(***) of Paladin's Net Sales of the Product in the Territory,
calculated as provided in Article 4.2(b) below.
a. In order to enable the parties to sell and purchase the
Product prior to the time in which Paladin's Net Sales for a
Sales Quarter are determined, Paladin shall pay for Product
ordered, delivered and accepted pursuant to Article 5 below
based upon an interim "Transfer Price," which shall be equal
to (***) of Paladin's estimated average net selling price per
unit for the Product in the Territory. Paladin shall advise
VIVUS no later than forty-five (45) days prior to the start of
each Sales Year during the term of this Agreement of Paladin's
estimated average net selling price per unit of Product in the
Territory for the coming Sales Year, and the Transfer Price
for that Sales Year shall be based upon such price, subject to
any adjustment required under Article 4.2(b) below.
b. The parties shall conduct a reconciliation no later than
forty-five (45) days after the end of each Sales Quarter, in
order to determine whether one party owes the other party any
amount in connection with the sale and purchase of the Product
in that Sales Quarter, based upon the difference (if any)
between the respective Transfer Price and the Supply Price for
that Sales Quarter. For the purposes of such reconciliation,
Paladin shall provide to VIVUS a statement of Paladin's sales
in units in the Territory, and of Paladin's Net Sales in the
Territory and in local currency as well as in U.S. dollars,
converted pursuant to Article 4.6 below. In the event that one
party owes the other party any amount in accordance with this
Article 4.2(b), the owing party shall pay such amount within
thirty (30) days of the date upon which the parties have
agreed in writing upon the reconciliation calculation. In the
event that the Supply Price is greater than one hundred ten
percent (110%) or less than ninety percent (90%) of the
Transfer Price for two (2) consecutive Sales Quarters, the
Transfer Price established in Article 4.2(a) above shall be
changed for the remainder of that Sales Year to the Supply
Price applicable to the most recent Sales Quarter.
4.3 Minimum Supply Price. Starting after the first Sales Year, the
Supply Price for the Product shall in no event be less than the
Minimum Supply Price as set forth in Exhibit 4 attached to this
Agreement.
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4.4 Samples. VIVUS shall sell a quantity of Product to Paladin for use
as samples, at "Sample Prices" as set forth in Exhibit 4 attached to
this Agreement. Paladin may purchase such samples in quantities not
to exceed the following percentages of Paladin's total unit
purchases of Product in the Territory:
a. Ten percent (10%) in each of the first two (2) Sales Years;
b. Seven percent (7%) in each of the third and fourth Sales
Years; and
c. Five percent (5%) in each Sales Year thereafter.
4.5 Records. Paladin and/or its Affiliates shall keep and maintain
records of sales made pursuant to the license granted hereunder so
that Paladin's Net Sales and the calculation of the Transfer Price
and the Supply Price may be verified. Such records shall be open to
inspection upon prior written notice at any reasonable time during
business hours, not more than once per calendar year, and each
inspection shall cover no more than the two (2) calendar years
preceding such notice of inspection. The inspection shall be
conducted at VIVUS's expense by a nationally recognized independent
certified public accountant who is not VIVUS's auditor of record and
who is selected by VIVUS and approved by Paladin, which approval
shall not be unreasonably withheld, and shall then have the right to
examine the records kept pursuant to this Agreement and report to
VIVUS the findings (but not the underlying data) of the inspection
as are necessary to evidence that the records were or were not
maintained and used in accordance with this Agreement. A copy of any
report provided to VIVUS by the accountant shall be given
concurrently to Paladin. If the inspection of records reveals more
than five percent (5%) underpayment by Paladin for the purchase of
the Product (calculated as a percentage of all such payments made in
connection with a Sales Year), then the expenses for the accountant
shall be borne by Paladin and Paladin shall promptly repay to VIVUS
the amount of such underpayment, plus interest calculated at the
U.S. prime rate of interest as published in the Wall Street Journal
for the date upon which such underpayment was made. For the purposes
of this Article 4.5, an "underpayment" shall not include any amount
that the parties determine is owed to VIVUS pursuant to the
reconciliation procedure set forth in Article 4.2(b) above. If the
inspection of records reveals an overpayment by Paladin for the
purchase of the Product (calculated as a percentage of all such
payments made in connection with a Sales Year), then the expenses
for the accountant shall be borne by VIVUS and VIVUS shall promptly
repay to Paladin the amount of such overpayment.
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4.6 Payments. Any payments due VIVUS or Paladin under this Agreement
shall be made by remitting to the bank account designated by the
party to whom payment is to be made. Any such payments shall be made
in U.S. Dollars and, in the case of quarterly payments based upon
Paladin Net Sales in currencies other than U.S. Dollars, such
quarterly payments shall be the sum of payments due for the three
(3) months of the applicable quarter calculated for each such month
using the beginning and ending month's published exchange rate, set
one business day prior to month end, by Reuters divided by two (if a
Reuters exchange rate is not available, an exchange rate established
by a recognized third party will be used.) Any payment which is more
than ten (10) days overdue shall bear interest from the original due
date at the U.S. prime rate of interest as published in the Wall
Street Journal for the due date.
4.7 Taxes. Where any sum due to be paid to VIVUS hereunder is subject to
any withholding or similar tax, the parties shall use their best
efforts to do all such acts and things and to sign all such
documents as will enable them to take advantage of any applicable
double taxation agreement or treaty. In the event there is no
applicable double taxation agreement or treaty, or if an applicable
double taxation agreement or treaty reduces but does not eliminate
such withholding or similar tax, Paladin shall pay such withholding
or similar tax to the appropriate government authority, deduct the
amount paid from the amount due VIVUS and secure and send to VIVUS
the best available evidence of such payment.
ARTICLE 5 - FORECASTS, ORDERS, INVOICES AND TITLE
5.1 Initial Forecast. Within thirty (30) days of the Effective Date,
Paladin shall give VIVUS its then current best forecast of the
quantity of Product that Paladin will require from VIVUS prior to
and during the first four Sales Quarters. Paladin shall break down
the forecast for the period prior to the first Sales Quarter and for
the first two Sales Quarters of such forecast by month and by Stock
Keeping Unit ("SKU") per Product.
5.2 Rolling Forecasts. No later than ninety (90) days prior to the first
day of each Sales Quarter after the initial Sales Quarter, Paladin
shall give VIVUS its then current best forecast of the quantity of
Product that Paladin will require from VIVUS during each of the next
four (4) Sales Quarters. Paladin shall break down the forecast for
the first two such Sales Quarters of the forecast by month and by
SKU per Product.
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5.3 Order and Acceptance. The forecast for the first Sales Quarter in
each of Paladin's rolling forecasts made pursuant to Article 5.2
above shall constitute Paladin's firm order for that Sales Quarter,
and all firm orders shall specify delivery date(s) no less than
ninety (90) days from the date of such firm order. Paladin shall not
increase or decrease its forecast (by SKU and in total), for the
second Sales Quarter in each of Paladin's rolling forecasts made
pursuant to Article 5.2 above, by more than twenty percent (20%).
VIVUS shall accept all firm orders from Paladin for quantities of
Product up to and including one hundred twenty percent (120%) of the
quantity (by SKU and in total) of Product previously forecasted by
Paladin for such Sales Quarter, and shall use its best efforts to
accept all firm orders from Paladin for quantities of Product in
excess of that quantity of Product. Paladin shall not increase or
decrease its forecast, for the third Sales Quarter in each of
Paladin's rolling forecasts made pursuant to Article 5.2 above, by
more than fifty percent (50%). VIVUS shall accept all firm orders
from Paladin for quantities of Product up to and including one
hundred fifty percent (150%) of the quantity of Product previously
forecasted by Paladin for such Sales Quarter, and shall use its best
efforts to accept all firm orders from Paladin for quantities of
Product in excess of that quantity of Product. Once an order has
been accepted by VIVUS, then VIVUS shall be obligated to sell, and
Paladin shall be obligated to purchase, the ordered Product. It is
understood and agreed that VIVUS' obligations to supply Product will
be in full lot quantities and that VIVUS will not split lots for
supply of Product to Paladin in the Territory.
5.4 Invoices. VIVUS shall invoice Paladin for the Transfer Price in
United States dollars for the Product shipped on the day of
shipment. Paladin shall pay VIVUS such invoiced amount within thirty
(30) days from the date of the receipt of the Product.
5.5 Delivery. VIVUS shall deliver the Product to Paladin, FOB at VIVUS's
facilities located in Lakewood, New Jersey, USA. All shipping costs,
liability, ownership and logistics of Product beyond the Lakewood
facility's loading dock are the responsibility of Paladin.
5.6 Conflicting Terms and Conditions. Except as otherwise provided in
this Agreement, the terms and conditions of this Agreement shall
govern, notwithstanding any additional or inconsistent terms or
conditions in Paladin's form of purchase order or similar document
or in VIVUS's acknowledgment, invoice, or similar documents.
ARTICLE 6 - SAMPLING, TESTING AND ANALYSIS
6.1 Certificate of Analysis. VIVUS shall test or cause to be tested each
lot of the Product pursuant to the Specifications before delivery to
Paladin. Each test shall set forth the items tested, specifications
and test results in a certificate of analysis for each lot
delivered. VIVUS shall send or cause to be sent such certificates to
Paladin along with delivery of the Product. Paladin is entitled to
rely on such certificates for all purposes of this Agreement.
Paladin will perform, at its own expense, any testing upon entry of
the Product into the Territory that is necessary for the sale or
distribution of such Product in the Territory.
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6.2 Defective Product. Paladin shall notify VIVUS in writing of any
claim relating to damaged, defective or nonconforming Product or any
shortage in quantity of any shipment of the Product within thirty
(30) days of receipt of such Product or, if the defect is not
readily apparent based upon a reasonable inspection (a "Hidden
Defect"), within thirty (30) days after which the Hidden Defect
becomes known to Paladin. A Hidden Defect is defined as a defect
that existed at the time Product is delivered and, for avoidance of
doubt, a Hidden Defect does not include any defect that might be
caused in storage or transportation of the Product. If Paladin fails
to give such written claim notice to VIVUS within said thirty (30)
day period, the Product shipped shall be deemed to be conforming,
not damaged nor defective at the time of delivery and shall be
deemed to be sufficient in quantity. If Paladin gives such written
claim notice to VIVUS within said thirty (30) day period, then
Paladin and VIVUS shall, in an appropriate manner to be agreed,
jointly inspect the Product to see if claimed nonconformity, damage
or defect actually exists in the Product shipped. If existence of
claimed nonconformity, damage, defect or shortage is reasonably
verified through such inspection, VIVUS shall replace the rejected
Product or make up the shortage as soon as practicable but no later
than ninety (90) days after such verification, at no extra cost to
Paladin, and shall make arrangements with Paladin for the
destruction of any rejected Product, at VIVUS's expense.
6.3 Specifications. The Specifications may be modified in accordance
with regulatory requirements by written agreement of the parties
without the necessity of amending this Agreement.
6.4 Technical Agreement. Within ninety (90) days of the Effective Date,
VIVUS and Paladin shall enter into a separate technical agreement,
in a format suitable for submission to the regulatory authorities in
the Territory, recording the Specifications and Manufacturing
Standards and measures to ensure compliance with applicable
regulations relating to production, storage, transportation and
release of the Product.
ARTICLE 7 - PATENTS
7.1 Patent Prosecution and Maintenance. To the extent it has the right
to do so, VIVUS shall, at its sole cost and expense, maintain any
patent applications and patents and shall diligently prosecute any
such patent applications and obtain all available patent term
extensions in the Territory; provided that VIVUS may decide not to
prosecute certain Patents, or to cause or permit certain of the
Patents to lapse or become abandoned in the Territory if, in VIVUS's
reasonable commercial judgment, such decision would not adversely
affect Paladin's ability to exercise its rights and perform its
obligations under this Agreement.
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ARTICLE 8 - DEVELOPMENT AND REGULATORY ISSUES
8.1 VIVUS Responsibilities. VIVUS shall be responsible for, and shall
bear all costs of the following:
a. Promptly after the Effective Date, VIVUS shall arrange for the
transfer to Paladin of all Marketing Authorizations in the
Territory for the Product as expeditiously as possible.
b. VIVUS shall provide to Paladin, as expeditiously as possible,
appropriate assistance, information and/or materials in
VIVUS's possession or control in order to enable or facilitate
Paladin to market and sell the Product in the Territory.
c. In fulfilling its obligations under this Agreement, VIVUS
shall use its best efforts to ensure that the Product is
entitled to and receives the maximum available benefit of any
regulatory market exclusivity periods or other safeguards or
extensions of proprietary status, which are or may be
applicable in the Territory.
d. VIVUS shall be responsible for filing trademark applications
for, and for the maintenance and upkeep of, the Trademark in
the Territory.
8.2 Paladin Responsibilities. During the term of this Agreement, Paladin
shall be responsible for, and shall bear all cost of, the following:
a. Paladin shall, at its own expense, be responsible for
(i) maintaining all Marketing Authorizations for the Product
in the Territory;
(ii) obtaining all pricing and reimbursement approvals in
Paladin's name for the Product in the Territory; and
(iii) obtaining and maintaining all Regulatory Approvals in
Paladin's name.
b. Paladin shall own all registrations and Regulatory Approvals
for the Product in the Territory.
c. In fulfilling its obligations under this Agreement, Paladin
shall use its best efforts to ensure that the Product is
entitled to and receives the maximum available benefit of any
regulatory market exclusivity periods or other safeguards or
extensions of proprietary status, which are or may be
applicable in the Territory.
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8.3 Pharmacovigilance. Promptly after the Effective Date and prior to
Product distribution by Paladin, the respective pharmacovigilance
groups of VIVUS and Paladin shall enter into a separate agreement
covering adverse event information exchange relating to the Product.
Such agreement will permit the inclusion of the respective
pharmacovigilance groups of other third parties to whom VIVUS has
granted or will grant (during the term of this Agreement) a license
under the VIVUS Technology to make, have made, use and sell the
Product outside the Territory.
8.4 Regulatory Communications. Paladin and VIVUS shall promptly inform
each other of any material communications to or from governmental
authorities or agencies relating to the Product that affect
marketing and/or sale of Product in the Territory. With the
exception of product recalls, which are to be handled pursuant to
Article 10 below, and adverse event reporting, which is to be
handled pursuant to Article 8.3 above, the parties shall consult
with each other regarding any issues raised in such communications,
and shall attempt in good faith to agree upon any action to be taken
or response to be made in connection with such communications. If
the parties are unable to agree within a reasonable time prior to
when the action is to be taken or the response is to be made the
party receiving the material communication for the Product shall
decide what action to take or response to make.
8.5 Expiration Dating. The Product has approved expiration dating of
twenty-four (24) months in the Territory as of the Effective Date of
this Agreement. At Paladin's request, VIVUS shall cooperate with and
provide all reasonable assistance, including providing appropriate
supporting stability data, if any, to extend the expiration date for
the Product in the Territory beyond twenty-four (24) months. Paladin
shall bear all costs associated with gaining regulatory approval for
such an extension.
ARTICLE 9 - MARKETING AND SALES
9.1 Paladin Diligence. In addition to the items set forth in Article 3.1
above, Paladin shall use its diligent efforts to market and/or sell
the Product in the Territory, consistent with the efforts that
Paladin expends on pursuing commercialization of other products
Paladin markets in the Territory of similar market potential,
including but not limited to product for the treatment of erectile
dysfunction, taking into consideration the proprietary or
non-proprietary status of the Product.
9.2 License Fees. In the event that the license fee provided in Article
3.1(a) above does not become payable by the end of the fourth Sales
Year, or that the license fee provided in Article 3.1(b) above does
not become payable by the end of the sixth Sales Year, then VIVUS
may terminate this Agreement upon thirty (30) days written notice;
provided that in either event, Paladin may, at its option, avoid
termination by paying to VIVUS an amount equal to the license fee
otherwise applicable under Article 3.1(a) or (b) (as the case may
be). If Paladin makes such payment within thirty (30) days of the
date of VIVUS's notice of termination, then such notice shall become
null and void, and this Agreement shall remain in full force and
effect.
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9.3 Adjustment to License Fee. The license fee payment contemplated in
Article 3.1 (a) and Article 3.1 (b) shall be adjusted according to
the following schedule in the event that Paladin's gross margin
falls below (***) during the twelve (12) month period prior to the
license fee being payable to VIVUS in Article 9.2. Gross Margin
shall be defined as Net Sales less the Supply Price actually paid
pursuant to Articles 4.2 and 4.3 above.
Adjustment Schedule to License Fee
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Gross Margin Adjusted License Fee
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(***) (***) as per Articles 3.1(a) & (b)
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(***) (***)
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(***) (***)
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(***) (***)
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(***) (***)
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ARTICLE 10 - PRODUCT RECALL
10.1 Recall in the Territory. In the event that in the Territory (i) any
government authority issues a request, directive or order that the
Product be recalled, or (ii) a court of competent jurisdiction
orders such a recall, or (iii) Paladin and VIVUS jointly determine
that the Product should be recalled, Paladin shall take all
appropriate corrective actions. If such recall results from any
cause or event attributable solely to VIVUS's negligence or fault,
VIVUS shall be responsible for the direct expenses of the recall. If
such recall results from any cause or event attributable solely to
Paladin's negligence or fault, Paladin shall be responsible for the
direct expenses of the recall. If such recall results from any other
cause or event (including attribution to the negligence or fault of
both VIVUS and Paladin), the parties shall share equally the direct
expenses of the recall. For the purposes of this Agreement, the
direct expenses of recall shall include, without limitation, the
expenses of notification and return of the recalled Product and
Paladin's costs for the Product, and shall not include the cost of
any re-launch by Paladin of the Product in the Territory subsequent
to a recall.
10.2 Recall Outside the Territory. In the event that outside the
Territory (i) any government authority issues a request, directive
or order that the Product be recalled, or (ii) a court of competent
jurisdiction orders such a recall, or (iii) VIVUS (or its Affiliates
or sublicensees, as the case may be) decides that the Product should
be recalled, VIVUS shall notify Paladin as expeditiously as possible
and shall provide Paladin with all information and assistance as
Paladin may reasonably request in order to enable Paladin to
determine any appropriate actions relating to the Product in the
Territory arising from such recall.
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ARTICLE 11 - REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants for itself as follows:
11.1 Organized. It is a corporation duly organized, validly existing and
is in good standing under the laws of the jurisdiction of its
incorporation, is qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which the conduct
of its business or the ownership of its properties requires such
qualification and failure to have such would prevent it from
performing its obligations under this Agreement and has all
requisite corporate power and authority to conduct its business as
now being conducted, to own, lease and operate its properties and to
execute, deliver and perform this Agreement.
11.2 Due Execution. The execution, delivery and performance by it of this
Agreement have been duly authorized by all necessary corporate
action and do not and will not (i) require any consent or approval
of its stockholders; (ii) violate any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination
or award presently in effect having applicability to it or any
provision of its charter or by-laws; or (iii) result in a breach of
or constitute a default under any material agreement, mortgage,
lease, license (including any license from a third party which is
necessary for the full performance of this Agreement), permit or
other instrument or obligation to which it is a party or by which it
or its properties may be bound or affected.
11.3 No Third Party Approval. No authorization, consent, approval,
license, exemption of, or filing or registration with, any court or
governmental authority or regulatory body (other than health
regulatory authorities) is required for the due execution, delivery
or performance by it of this Agreement, except as provided herein.
11.4 Binding Agreement. This Agreement is a legal, valid and binding
obligation of such party, enforceable against it in accordance with
its terms and conditions. It is not under any obligation to any
person, contractual or otherwise, that is in conflict with the terms
of this Agreement.
11.5 Full Disclosure. Each Party has disclosed to the other in good faith
all material information relevant to the subject matter of this
Agreement and to such party's ability to observe and perform its
obligations hereunder.
ARTICLE 12 - COVENANTS, REPRESENTATIONS AND WARRANTIES OF VIVUS
VIVUS covenants, represents and warrants to Paladin that:
12.1 VIVUS Rights. VIVUS has the right to grant the rights granted in
this Agreement and no provision in any third party agreement to
which VIVUS is a party will prevent VIVUS from performing its
obligations under this Agreement.
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12.2 Specifications. All quantities of the Product will comply with, and
VIVUS shall only release Product for shipment to Paladin which
comply with (i) all specifications of the Product in the Marketing
Authorization applications approved by the regulatory authorities in
the Territory; (ii) all Specifications; and (iii) all applicable
legal and regulatory requirements relating to the manufacture of the
Product for sale in the Territory, including but not limited to Good
Manufacturing Practices.
12.3 Quality of Starting Materials and Packing Materials. All starting
materials and packaging materials used in the manufacture of the
Product shall comply with the applicable Specifications and the
Manufacturing Standards (as defined below).
12.4 Current Good Manufacturing Practices ("cGMP")/Regulatory
Requirements. All manufacturing and quality control methods utilized
by VIVUS in the manufacture of the Product shall be carried out and
in accordance with all applicable rules governing medicinal product
and/or medical devices in the Good Manufacturing Practice for
medicinal product and/or medical devices and regulations issued by
the health regulatory authorities in the Territory for which such
Product is to be sold as in effect at the time and the applicable
standards in effect at the time (collectively, the "Manufacturing
Standards").
12.5 Documentation. VIVUS shall keep and maintain, for the approved shelf
life of the Product plus two (2) years, (i) reference samples and
quality control records for each batch of starting materials and
packaging material used in the manufacture of the Product, and (ii)
manufacturing and quality control records for each batch of the
Product. Each shipment of the Product shall be accompanied by the
following written documentation:
a. the date of manufacture;
b. delivered amount of Product units; and
c. a certificate of analysis pursuant to Article 6.
12.6 Paladin Right of Inspection. VIVUS shall, upon written request of
Paladin, permit Paladin's authorized third-party representative to
inspect the following records related to Product manufactured for
sale by Paladin in the Territory: (i) all manufacturing and quality
control records for all manufacture of the Product, and (ii) quality
control records of all starting materials used in the manufacture of
each of the Product. Such inspection to take place at VIVUS's
facilities in Lakewood, New Jersey, during normal business hours.
12.7 Shelf Life. At the time of delivery to Paladin, each lot of the
Product delivered pursuant to this Agreement shall be no more than
five (5) months past its manufacturing date. Notwithstanding the
above, Paladin shall be under no obligation to purchase Product that
has, on receipt at Paladin, under 18 months of shelf life remaining.
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12.8 Product Liability Insurance. The Parties shall maintain product
liability insurance consistent with their normal business practices
from time to time to cover risks related to the Product and, upon
either Party's request, to provide the other Party with certificates
of insurance attesting to the existence of such insurance.
12.9 Coverage. During the Term and for a period of two (2) years
thereafter, each Party shall obtain and maintain insurance coverage
from a reputable arm's-length insurer in respect of its respective
obligations under Article 12.8 and in respect of third-Person
liability in an amount of not less than Three Million United States
Dollars ($3,000,000). Each Party shall add the other Party as a
co-insured under its respective insurance policy.
ARTICLE 13 - FORCE MAJEURE
Upon occurrence of an event of force majeure, the party affected shall
promptly notify the other party in writing, setting forth the details of the
occurrence, its expected duration and how that party's performance of its
obligations under this Agreement is affected. The affected party shall resume
the performance of its obligations as soon as practicable after the force
majeure event ceases. If a party's performance of any obligation under this
Agreement is significantly hindered or is prevented by an event of force majeure
for more than six (6) months, whether or not consecutive, in any twelve (12)
month period, then the other party may terminate this Agreement upon thirty (30)
days' notice.
ARTICLE 14 - ALLOCATION OF SUPPLY
14.1 Allocation of Supply. In the event of VIVUS's inability to supply
the Product ordered by Paladin, VIVUS shall allocate its available
supply between Paladin, VIVUS and VIVUS's licensee(s) outside the
Territory on a fair and equitable basis based on a pro-rata share of
worldwide Product sales for the six (6) months preceding and the
forecasted worldwide Product sales for the next six (6) months
following such allocation. SUCH ALLOCATION SHALL BE PALADIN'S SOLE
REMEDY FOR VIVUS'S FAILURE TO SUPPLY PALADIN QUANTITIES OF PRODUCT
VIVUS IS OTHERWISE OBLIGATED TO SUPPLY UNDER ARTICLE 5 OF THIS
AGREEMENT.
ARTICLE 15 - TRADEMARKS
15.1 Trademark Rights. VIVUS hereby grants to Paladin the exclusive
right, exclusive even as to VIVUS, to use the Trademarks in
connection with the Product in the Territory during the term of this
Agreement. Paladin acknowledges that such Trademarks shall be and
are the sole property of VIVUS.
15.2 Electronic Address. VIVUS hereby grants to Paladin a non-exclusive
right to use VIVUS's registered electronic address, xxx.xxxxx.xxx,
for the purpose of linking electronic users with Paladin's relevant
web pages, web sites or other electronic addresses relating to the
Product in the Territory. Paladin hereby grants to VIVUS a
non-exclusive right to use Paladin's registered electronic address,
xxx.xxxxxxx-xxxx.xxx, for the purpose of linking electronic users
with VIVUS's relevant web pages, web sites or other electronic
addresses relating to the Product.
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ARTICLE 16 - INFRINGEMENT
16.1 Third Party Infringement. Each party will notify the other party if
it becomes aware of the activities of any third party that are
believed to infringe any of the Patents or Trademarks. The parties
shall consult as to potential strategies against the alleged
infringer, including but not limited to litigation strategy.
16.2 Litigation.
a. If the efforts of the parties are not successful in abating
the alleged infringement, then VIVUS shall have the right, but
not the obligation, to bring an appropriate suit or action
against such infringement, at its own expense. Paladin agrees
to cooperate in any such infringement action and agrees to
execute all papers and perform such other acts as may be
reasonably requested by VIVUS at Paladin's expense. VIVUS
shall consult with Paladin and take into account Paladin's
recommendations regarding the conduct of such action, provided
that VIVUS shall have full right and authority to determine
the strategy and tactics for such action and to settle,
consent to judgment, or otherwise resolve any such action or
suit. The provisions of the foregoing notwithstanding, no such
resolution shall be binding on Paladin without its prior
written consent (which consent shall not be unreasonably
withheld) unless such resolution does not (i) impose any
liability, loss, cost or obligation upon Paladin and (ii)
adversely affect Paladin's rights under this Agreement.
b. If VIVUS does not elect to bring suit against the alleged
infringer, Paladin shall have the right, but not the
obligation, to bring an appropriate suit or action against
such infringer in the Territory, at Paladin's own expense.
VIVUS agrees to cooperate in any such infringement action and
agrees to execute all papers and perform such other acts as
may be reasonably requested by Paladin (including but not
limited to consent to be joined as a nominal party plaintiff
in such action), at VIVUS's expense. Paladin shall consult
with VIVUS and take into account VIVUS's recommendations
regarding the conduct of such action, provided that Paladin
shall have full right and authority to determine the strategy
and tactics for such action and to settle, consent to
judgment, or otherwise resolve any such action or suit. The
provisions of the foregoing notwithstanding, no such
resolution shall be binding on VIVUS without its prior written
consent (which consent shall not be unreasonably withheld)
unless such resolution does not (i) impose any liability,
loss, cost or obligation upon VIVUS and (ii) adversely affect
VIVUS's rights under this Agreement.
c. If VIVUS or Paladin brings an infringement action pursuant to
this Article 16, any amount recovered in any action or suit
against a third party infringer shall be allocated as follows:
first, to the party bringing such action in order to reimburse
such party for the costs and expenses of such action; second,
with respect to any remaining amount, (***) of that portion of
such amount resulting from
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infringement within the Territory to Paladin, and the rest of
any remaining amount to VIVUS.
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ARTICLE 17 - TERM AND TERMINATION
17.1 Term. The term of this Agreement shall commence on the Effective
Date and shall, unless earlier terminated pursuant to this Article
17 or other express termination provisions in this Agreement, expire
on the tenth (10th) anniversary of the First Commercial Sale of
Product.
17.2 Breach. Either party may, in addition to any other remedies
available to it by law or in equity, terminate this Agreement upon
sixty (60) days' written notice in the event that the other party
commits a material breach of this Agreement and fails to cure such
breach within sixty (60) days of notice of the breach. The party
giving notice of breach may withhold any payments otherwise due and
owing to the breaching party, to be used as a setoff against any
loss or damage arising from the breach, and said withholding shall
not constitute breach of this Agreement. Any amounts so withheld
shall be deposited by the withholding party into an interest-bearing
escrow account. If the breaching party cures the breach within the
sixty (60) day cure period and this Agreement is not terminated,
then the withholding party shall promptly pay to the other party the
withheld amount, less that portion of such amount which was applied
as a setoff. Notwithstanding the foregoing provision, if Paladin
gives notice of breach to VIVUS, Paladin may withhold other payments
pursuant to this Article 17.2 but shall not be entitled to withhold
payment for Product actually ordered by and delivered to Paladin
pursuant to Article 5 of this Agreement.
17.3 Insolvency or Bankruptcy. Either party may, in addition to any other
remedies available to it by law or in equity, terminate this
Agreement, upon thirty (30) days' written notice to the other party
in the event the other party shall have become insolvent or
bankrupt, or shall have made an assignment for the benefit of its
creditors, or there shall have been appointed a trustee or receiver
of the other party or for all or a substantial part of its property,
or any case or proceeding shall have been commenced or other action
taken by or against the other party in bankruptcy or seeking
reorganization, liquidation, dissolution, winding-up, arrangement,
composition or readjustment of its debts or any relief under any
bankruptcy, insolvency, reorganization or other similar act or law
of any jurisdiction now or hereinafter in effect.
17.4 Serious Events. Should there occur serious and unexpected events
which, from a reasonable pharmaceutical company's point of view,
would make it impossible or impracticable to pursue the
commercialization of the Product, including but not limited to a
serious adverse event associated with the Product, either party may,
with full consultation with the other party, terminate this
Agreement upon thirty (30) days' written notice. Termination by a
party in good faith pursuant to this Article 17.4 shall not, in
itself, constitute a basis for any claim for compensation or other
remedies by the other party. In the event of termination by VIVUS
under this Article 17.4, VIVUS shall be restricted from
commericializing the Product, either directly or indirectly, for a
period of two (2) years in the Territory.
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17.5 Change of Control or Ownership. Either party may terminate this
Agreement upon thirty (30) days' written notice if the ownership or
control of at least fifty percent (50%) of the assets or voting
securities of the other party are transferred and, in the
non-changing party's reasonable judgment, the other party's new
owner or controlling entity is a competitor of the non-changing
party in the field of erectile dysfunction in the Territory.
17.6 Survival of Liability. Except as expressly provided otherwise in
this Agreement, termination, expiration, cancellation or abandonment
of this Agreement through any means and for any reason shall not
relieve the parties of any obligation accruing prior thereto and
shall be without prejudice to the rights and remedies of either
party with respect to any antecedent breach of any provision of this
Agreement.
17.7 Remaining Inventory. Paladin shall maintain a normal level of
inventory of the Product prior to expiration or termination of this
Agreement, and shall have a period of six (6) months from the date
of termination of this Agreement during which it may sell its
remaining inventory of Product, provided it sell such inventory in a
manner substantially similar to the manner in which it was selling
Product prior to the termination.
17.8 Survival. Upon expiration or termination of this Agreement, all
rights and obligations of the parties under this Agreement shall
terminate except those rights and obligations described in Articles
1, 4.5, 10.1, 12.5, 17, 18, 19 and 20.
ARTICLE 18 - INDEMNITY
18.1 Indemnification by Paladin. Paladin shall defend, indemnify and hold
harmless VIVUS, its officers, directors, shareholders, employees,
successor and assigns from any loss, damage, or liability, including
reasonable attorney's fees, resulting from any claim, complaint,
suit, proceeding or cause of action by a Third Party against any of
them alleging physical injury or death or otherwise arising out of
the administration, utilization and/or ingestion of Product, sold or
otherwise provided to the injured party by or under authority of
Paladin (or its permitted subdistributor or contractor); or
otherwise with respect to Product supplied to, or sold or
distributed by, Paladin (or its permitted subdistributor or
contractor), provided:
a. Paladin shall not be obligated under this Section 18.1 if it
is shown by evidence acceptable in a court of law having
jurisdiction over the subject matter and meeting the
appropriate degree of proof of such action, that the injury
was the result of (i) gross negligence or willful misconduct
of any employee or agent of VIVUS, or (ii) a breach by VIVUS
of its obligations or warranties hereunder, including the
supply by VIVUS of Product that fails to meet applicable
Specifications;
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b. Paladin shall have no obligation under this Section 18.1
unless VIVUS (i) gives Paladin prompt written notice of any
claim or lawsuit or other action for which it seeks to be
indemnified by this Agreement; (ii) Paladin is granted full
authority and control over the defense, including settlement,
against such claim or lawsuit or other action; and (iii) VIVUS
cooperates fully with Paladin and its agents in defense of the
claims or lawsuit or other action; and
c. VIVUS shall have the right to participate in the defense of
any such claim, complaint, suit, proceeding or cause of action
referred to in this Section 18.1 utilizing attorneys of its
choice, at its own expense, provided, however, that Paladin
shall have full authority and control to handle any such
claim, complaint, suit, proceeding or cause of action,
including any settlement or other disposition thereof, to the
extent VIVUS seeks indemnification under this Section 18.1.
18.2 Indemnification by VIVUS. VIVUS shall defend, indemnify, and hold
harmless Paladin, its officers, directors, shareholders, employees,
successors or assigns from any loss, damage, or liability, including
reasonable attorney's fees, resulting from any claim, complaint,
suit, proceeding or cause of action by a Third Party against any of
them alleging physical injury or death or otherwise arising out of
(i) the administration, utilization and/or ingestion of Product,
sold or otherwise provided to the injured party by VIVUS (or its
permitted subdistributor or contractor other than by or under
authority of Paladin); or (ii) the supply of VIVUS of Product that
fails to meet applicable Specifications, provided:
a. VIVUS shall not be obligated under this Section 18.2 if it is
shown by evidence acceptable in a court of law having
jurisdiction over the subject matter and meeting the
appropriate degree of proof for such action, that the injury
was the result of (i) the gross negligence or willful
misconduct of any employee or agent of Paladin; or (ii) a
breach by Paladin of its obligations or warranties hereunder,
including the transportation, storage and distribution of
Product in the Territory.
b. VIVUS shall have no obligation under this Section 18.2 unless
Paladin (i) gives VIVUS prompt written notice of any claim or
lawsuit or other action for which is seeks to be indemnified
under this Agreement; (ii) VIVUS is granted full authority and
control over the defense, including settlement, against such
claim or lawsuit or other action; and (iii) Paladin cooperates
fully with VIVUS and its agents in defense of the claims or
lawsuit or other action; and
c. Paladin shall have the right to participate in the defense of
any such claim, complaint, suit, proceeding or cause of action
referred to in this Section 18.2 utilizing attorneys of its
choice, at its own expense, provided, however, that VIVUS
shall have full authority and control to handle any such
claim, complaint, suit, proceeding or cause of action,
including any settlement or other disposition thereof, to the
extent Paladin seeks indemnification under this Section 18.2.
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d. VIVUS shall defend, indemnify, and hold harmless Paladin, its
officers, directors, shareholders, employees, successors or
assigns from any loss, damage, or liability, including
reasonable attorney's fees, resulting from any claim,
complaint, suit, proceeding or cause of action by a Third
Party against any of them alleging that the price for the
Product in the Territory was excessive prior to the Effective
Date of this Agreement.
ARTICLE 19 - CONFIDENTIALITY AND DISCLOSURE
19.1 Confidentiality. Neither party shall use or disclose any
Confidential Information received by it pursuant to this Agreement
without the prior written consent of the other. This obligation
shall continue for a period of seven (7) years after expiration or
termination of this Agreement.
19.2 Disclosure. Nothing contained in this Article 19 shall be construed
to restrict the parties from disclosing Confidential Information as
required: (i) for regulatory, tax, securities or customs reasons,
(ii) by court or other government order, (iii) for confidential
audit purposes; or (iv) from using such Confidential Information as
is reasonably necessary to perform acts permitted by this Agreement,
including the registration, marketing, sale or use of the Product.
ARTICLE 20 - MISCELLANEOUS
20.1 Assignment. This Agreement may not be assigned or otherwise
transferred, nor, except as expressly provided hereunder, may any
right or obligation hereunder be assigned or transferred by either
party without the prior written consent of the other party;
provided, however, that either VIVUS or Paladin may, without such
consent, assign this Agreement and its rights and obligations
hereunder in connection with the transfer or sale of all or
substantially all of its assets, its merger or consolidation or any
similar transaction, and that Paladin may, without such consent,
assign this Agreement and its rights and obligations hereunder to
one or more of its Affiliates. Any permitted assignee shall assume
all obligations of its assignor under this Agreement.
20.2 Sublicensees. In the event that Paladin grants sublicenses under
Article 2, Paladin shall ensure that such sublicensees abide by all
the obligations of Paladin contained in this Agreement to the extent
that such obligations are relevant to and applicable to such
sublicensees.
20.3 Damages. Notwithstanding any provision in this Agreement to the
contrary, in no event shall a party hereto be liable to the other
party for any indirect or consequential damages, including but not
limited to loss of profits or business opportunity.
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20.4 Severability. Each party intends not to violate any public policy,
statutory or common law, rule, regulation, treaty or decision of any
government agency or executive body thereof of any country or
community or association of countries. If any term or provision of
this Agreement is held to be invalid, illegal or unenforceable by a
court or other governmental authority of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any
other term or provision of this Agreement, which shall remain in
full force and effect. The holding of a term or provision to be
invalid, illegal or unenforceable in a jurisdiction shall not have
any effect on the application of the term or provision in any other
jurisdiction.
20.5 Notices. Any consent or notice required or permitted to be given or
made under this Agreement by one party to the other shall be in
writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery, first-class mail or courier),
first-class mail or courier, postage prepaid (where applicable),
addressed to the other party as shown below or to such other address
as the addressee shall have last furnished in writing to the
addresser and (except as otherwise provided in this Agreement) shall
be effective upon receipt by the addressee.
If to VIVUS: VIVUS International Limited
c/o VIVUS, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Legal Department
Fax: (000-000-0000)
If to Paladin: Paladin Labs Inc.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx, Xxxxxx X0X 0X0
Attention: (Xxxxxxxx Xxxxxxx)
Fax: (000-000-0000)
20.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, excluding its
conflict of laws provision. Application of the United Nations
Convention On Contracts For The International Sale Of Goods is
hereby excluded.
20.7 Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof. All
express or implied agreements and understandings, either oral or
written, heretofore made are superseded by this Agreement. Except as
expressly provided elsewhere in this Agreement, this Agreement may
be amended, or any term hereof modified, only by a written
instrument duly executed by both parties hereto.
20.8 Headings. The captions to the Articles hereof are not a part of this
Agreement, but are merely guides or labels to assist in locating and
reading the Articles hereof.
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20.9 Independent Contractors. It is expressly understood and agreed that
VIVUS and Paladin are independent contractors and that the
relationship between the two parties shall not constitute a
partnership, joint venture or agency. Neither VIVUS nor Paladin
shall have the authority to make any statement, representations or
commitments of any kind, or to take any action, which shall be
binding on the other, without the prior written consent of the party
to do so.
20.10 Waiver. The waiver by either party of any right hereunder or of a
failure to perform or breach by the other party shall not be deemed
a waiver of any other right hereunder or of any other failure or
breach whether of a similar nature or otherwise.
20.11 Alternative Dispute Resolution. The parties agree that any dispute
that arises in connection with this Agreement that cannot be
amicably resolved by the parties shall be resolved by Alternative
Dispute Resolution ("ADR") pursuant to the procedure set forth in
Exhibit 20.11 attached hereto.
20.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
THEREFORE, the parties hereto have executed this Agreement as of the first
day above written.
PALADIN LABS, INC. VIVUS INTERNATIONAL, LTD.
By: /s/ Xxxxxxxx Xxxxxxx By: /s/ Xxxxxx Xxxxxx
Title: President Title: President & CEO
Date: November 20, 2000 Date: November 20, 2000
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EXHIBIT 1.5 - PATENTS
---------- ----------------- ---------------------------- ----------------------
REF. NO. TITLE/INVENTORS COUNTRY; FILING/PUBLISHING STATUS AND DEADLINES
INFO; SUMMARY
---------- ----------------- ---------------------------- ----------------------
(***) (***) (***) (***)
---------- ----------------- ---------------------------- ----------------------
(***) (***) (***) (***)
---------- ----------------- ---------------------------- ----------------------
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EXHIBIT 4
PRICES (In United States Dollars)
----------- ------------- ------------- ------------- ------------- -------------
VIVUS VIVUS VIVUS VIVUS VIVUS
produces up produces produces produces produces
to (***) up to (***) up to (***) up to > (***) units
(***) units (***) units (***) units (***) units of Product*
of Product* of Product* of Product* of Product*
----------- ------------- ------------- ------------- ------------- -------------
Sample (***) (***) (***) (***) (***)
Price per
unit of
Product
----------- ------------- ------------- ------------- ------------- -------------
Minimum (***) (***) (***) (***) (***)
Supply
Price per
unit of
Product **
----------- ------------- ------------- ------------- ------------- -------------
* Total VIVUS worldwide unit production of saleable finished Product in a
calendar year (not only VIVUS finished Product produced for Paladin). VIVUS
shall provide a certificate, signed by an officer of VIVUS, attesting to the
unit production of saleable finished Product, with thirty (30) days of the end
of each calendar year.
** No Minimum Supply Price applies until after the first anniversary of the
First Commercial Sale in the Territory.
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EXHIBIT 20.11
ALTERNATIVE DISPUTE RESOLUTION
The parties recognize that bona fide disputes as to certain matters may
arise from time to time during the term of this Agreement which relate to either
party's rights and/or obligations. To have such a dispute resolved by this
Alternative Dispute Resolution ("ADR") provision, a party first must send
written notice of the dispute to the other party for attempted resolution by
good faith negotiations between their respective presidents (or their designees)
of the affected subsidiaries, divisions, or business units within twenty-eight
(28) days after such notice is received (all references to "days" in this ADR
provision are to calendar days).
If the matter has not been resolved within twenty-eight (28) days of the
notice of dispute, or if the parties fail to meet within such twenty-eight (28)
days, either party may initiate an ADR proceeding as provided herein. The
parties shall have the right to be represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice to
the other party of the issues to be resolved by ADR. Within fourteen
(14) days after its receipt of such notice, the other party may, by
written notice to the party initiating the ADR, add additional
issues to be resolved within the same ADR.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to
preside in the resolution of any disputes in this ADR proceeding. If
the parties are unable to agree on a mutually acceptable neutral
within such period, either party may request the President of the
CPR Institute for Dispute Resolution ("CPR"), 000 Xxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, to select a neutral pursuant
to the following procedures:
(a) The CPR shall submit to the parties a list of not less than
five (5) candidates within fourteen (14) days after receipt of
the request, along with a Curriculum Vitae for each candidate.
No candidate shall be an employee, director, or shareholder of
either party or any of their subsidiaries or affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her
impartiality.
(c) Each party shall number the candidates in order of preference
(with the number one (1) signifying the greatest preference)
and shall deliver the list to the CPR within seven (7) days
following receipt of the list of candidates. If a party
believes a conflict of interest exists regarding any of the
candidates, that party shall provide a written explanation of
the conflict to the CPR along with its list showing its order
of preference for the candidates. Any party failing to return
a list of preferences on time shall be deemed to have no order
of preference.
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(d) If the parties collectively have identified fewer than three
(3) candidates deemed to have conflicts, the CPR immediately
shall designate as the neutral the candidate for whom the
parties collectively have indicated the greatest preference.
If a tie should result between two candidates, the CPR may
designate either candidate. If the parties collectively have
identified three (3) or more candidates deemed to have
conflicts, the CPR shall review the explanations regarding
conflicts and, in its sole discretion, may either (i)
immediately designate as the neutral the candidate for whom
the parties collectively have indicated the greatest
preference, or (ii) issue a new list of not less than five (5)
candidates, in which case the procedures set forth in
subparagraphs 2(a) - 2(d) shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six (56)
days after selection, the neutral shall hold a hearing to resolve
each of the issues identified by the parties. The ADR proceeding
shall take place at a location agreed upon by the parties. If the
parties cannot agree, the neutral shall designate a location other
than the principal place of business of either party or any of their
subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) a copy of all exhibits on which such party intends to rely in
any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony of
each witness;
(c) a proposed ruling on each issue to be resolved, together with
a request for a specific damage award or other remedy for each
issue. The proposed rulings and remedies shall not contain any
recitation of the facts or any legal arguments and shall not
exceed one (1) page per issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty (20)
pages. This page limitation shall apply regardless of the
number of issues raised in the ADR proceeding.
Except as expressly set forth in subparagraphs 4(a) - 4(d), no discovery
shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
5. The hearing shall be conducted on two (2) consecutive days and shall
be governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing time
to present its case. The neutral shall determine whether each
party has had the five (5) hours to which it is entitled.
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(b) Each party shall be entitled, but not required, to make an
opening statement, to present regular and rebuttal testimony,
documents or other evidence, to cross-examine witnesses, and
to make a closing argument. Cross-examination of witnesses
shall occur immediately after their direct testimony, and
cross-examination time shall be charged against the party
conducting the cross-examination.
(c) The party initiating the ADR shall begin the hearing and, if
it chooses to make an opening statement, shall address not
only issues it raised but also any issues raised by the
responding party. The responding party, if it chooses to make
an opening statement, also shall address all issues raised in
the ADR. Thereafter, the presentation of regular and rebuttal
testimony and documents, other evidence, and closing arguments
shall proceed in the same sequence.
(d) Except when testifying, witnesses shall be excluded from the
hearing until closing arguments.
(e) Settlement negotiations, including any statements made
therein, shall not be admissible under any circumstances.
Affidavits prepared for purposes of the ADR hearing also shall
not be admissible. As to all other matters, the neutral shall
have sole discretion regarding the admissibility of any
evidence.
6. Within seven (7) days following completion of the hearing, each
party may submit to the other party and the neutral a post-hearing
brief in support of its proposed rulings and remedies, provided that
such brief shall not contain or discuss any new evidence and shall
not exceed ten (10) pages. This page limitation shall apply
regardless of the number of issues raised in the ADR proceeding.
7. The neutral shall rule on each disputed issue within fourteen (14)
days following completion of the hearing. Such ruling shall adopt in
its entirety the proposed ruling and remedy of one of the parties on
each disputed issue but may adopt one party's proposed rulings and
remedies on some issues and the other party's proposed rulings and
remedies on other issues. The neutral shall not issue any written
opinion or otherwise explain the basis of the ruling.
8. The neutral shall be paid a reasonable fee plus expenses. These fees
and expenses, along with the reasonable legal fees and expenses of
the prevailing party (including all expert witness fees and
expenses), the fees and expenses of a court reporter, and any
expenses for a hearing room, shall be paid as follows:
(a) If the neutral rules in favor of one party on all disputed
issues in the ADR, the losing party shall pay 100% of such
fees and expenses.
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(b) If the neutral rules in favor of one party on some issues and
the other party on other issues, the neutral shall issue with
the rulings a written determination as to how such fees and
expenses shall be allocated between the parties. The neutral
shall allocate fees and expenses in a way that bears a
reasonable relationship to the outcome of the ADR, with the
party prevailing on more issues, or on issues of greater value
or gravity, recovering a relatively larger share of its legal
fees and expenses.
9. The rulings of the neutral and the allocation of fees and expenses
shall be binding, non-reviewable, and non-appealable, and may be
entered as a final judgment in any court having jurisdiction.
10. Except as provided in paragraph 9 or as required by law, the
existence of the dispute, any settlement negotiations, the ADR
hearing, any submissions (including exhibits, testimony, proposed
rulings, and briefs), and the rulings shall be deemed Confidential
Information. The neutral shall have the authority to impose
sanctions for unauthorized disclosure of Confidential Information.
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