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EXHIBIT 10.22
LICENSE AGREEMENT
This License Agreement ("AGREEMENT") is made as of this 2nd day
of January, 2001 (the "EFFECTIVE DATE") by and between XXXXXX LABORATORIES, an
Illinois corporation, with its principal office at 000 Xxxxxx Xxxx Xxxx, Xxxxxx
Xxxx, XX 00000 ("ABBOTT") and DISCOVERY PARTNERS INTERNATIONAL, a Delaware
corporation, with its principal office at 0000 Xxxxx Xxxxxx Xxxxx, Xxx Xxxxx, XX
00000 ("DPI").
WITNESSETH
WHEREAS, Abbott is the owner of certain proprietary rights and
Know-How (as defined below) relating to arrayed compound screening ("ARCS"), a
methodology and technology for continuous format high throughput screening of
chemical compounds, as more fully defined below;
WHEREAS, DPI wishes to obtain, and Abbott wishes to grant to DPI
and its Affiliates (as defined below), an exclusive license in the Territory (as
defined below) under such proprietary rights and Know-How relating to the ARCS
Technology (as defined below) to provide Services (as defined below) and develop
and commercialize Products (as defined below) in the Field (as defined below)
utilizing ARCS Technology.
NOW THEREFORE, in consideration of the mutual obligations and
promises as set forth herein, the parties do hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following respective meanings:
1.1 "AFFILIATE" means any corporation, company, partnership, joint
venture and/or firm which controls, is controlled by, or is under
common control of either party hereto. For purposes of this
definition, control shall mean direct or indirect ownership of
more than fifty percent (50%) of the stock or participating
shares entitled to vote for the election of directors (but only
as long as such ownership exists).
1.2 "ARCS" means arrayed compound screening which comprises a method
for screening chemical compounds by depositing compounds onto a
plastic sheet in an array and contacting a gel containing
reagents on top of the plastic sheet for testing or screening
chemical compounds for biological or biochemical activity which
can be performed in a continuous high throughput screening
format, together with all equipment and materials utilized in
performing ARCS, including, but not limited to, gels, reagents,
compounds on sheets, compound spotting equipment, gel casting
equipment, read-out mechanisms, and the like materials.
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1.3 "ARCS TECHNOLOGY" means the Patents and Xxxxxx'x Know-How,
including all Improvements made by Abbott during the Term.
1.4 "COMMERCIAL SALE" means the sale of a Product or Service in the
Territory, by DPI or by any Affiliate, sublicensee or customer of
DPI, or by any contract sales force of any of them to any
unaffiliated third party, as evidenced by the selling party's
invoice or other relevant document to such third party.
1.5 "CONFIDENTIAL INFORMATION" means any and all information or data
relating to ARCS (including, but not limited to, ARCS Technology,
DPI Technology and Products) which a party discloses to the other
party, its employees or representatives, or is conceived or
reduced to practice during the Term by either party or by a third
party working with a party in connection with ARCS or in
connection with this Agreement, whether in writing, orally or by
observation, including, without limitation, all scientific,
clinical, technical, commercial, financial and business
information and Know-How, and other information or data
considered confidential in nature. Confidential Information shall
not include information which:
(a) is known to the receiving party at the time of disclosure
and documented by written records of the receiving party
made prior to the date of disclosure;
(b) is subsequently disclosed to the receiving party without
any obligations of confidence by an unaffiliated third
person who has not obtained it directly or indirectly from
the other party and who has the right to make such
disclosure;
(c) becomes patented, published or otherwise part of the
public domain;
(d) is independently developed by or for the receiving party
by person(s) having no knowledge of or access to such
information and without breach of any confidentiality
obligation, as evidenced by its written records; or
(e) is required to be disclosed by legal, regulatory,
statutory or governmental process or authorities, provided
in each case the party disclosing information promptly
informs the other and uses its best efforts to limit the
disclosure and to maintain confidentiality to the maximum
extent possible and permits the other party to attempt by
appropriate legal means to limit such disclosure.
This Agreement shall constitute Confidential Information.
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1.6 "DPI TECHNOLOGY" means any Improvements and Know-How developed by
DPI and any and all patent applications and patents and
amendments thereto, including foreign equivalents, and any and
all substitutions, extensions, additions, reissues,
re-examinations, renewals, divisions, continuations,
continuations-in-part or supplementary protection certificates
owned by or licensed to (with the right to sublicense) DPI during
the Term (other than the Patents).
1.7 "EFFECTIVE DATE" shall have the meaning ascribed to such term in
the opening paragraph of this Agreement.
1.8 "FIELD" means continuous format high throughput screening of
chemical compounds.
1.9 "IMPROVEMENTS" means all additions, developments, modifications,
enhancements and adaptations which (i) directly relate to or are
used in connection with (A) ARCS Technology in the Field, as
developed by Abbott; or (B) ARCS, as developed by DPI, and (ii)
are conceived and reduced to practice during the Term. Ownership
of Improvements shall be as set forth in Article 13 hereof.
1.10 "KNOW-HOW" means any proprietary technology, information, methods
of use, processes, techniques, ideas or inventions (whether
patentable or not) owned, possessed or used by Abbott or DPI, as
the case may be, which is directly related to or used in
connection with ARCS, including all trade secrets and any other
information relating thereto.
l.11 "NET SALES" means gross sales of Services by DPI or by any
Affiliate, sublicensee or customer of DPI; gross sales of any
Product by DPI, by any Affiliate, sublicensee or customer of DPI;
or by any contract sales force of any of them to unrelated third
parties, in arm's length transactions, less any of the following
charges or expenses that are incurred in connection with such
gross sales during the Term:
(a) discounts, including cash discounts, customary trade
allowances or rebates actually taken, and commissions;
(b) credits or allowances given or made for rejection, recall
or return of previously sold Product actually taken;
(c) any tax or government charge, duty or assessment
(including any tax such as a value added or similar tax or
government charge) levied on the sale, transportation or
delivery of a Product when included on the invoice or
other written document between the parties as payable by
the purchaser and collectable by DPI, its Affiliate or
sub-licensee; and
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(d) freight, postage, transportation, insurance and duties on
shipment of Product when included on the invoice or other
written document between the parties as payable by the
purchaser and collectable by DPI, its Affiliate or
sublicensee.
The parties acknowledge that Abbott shall be entitled to a direct
royalty under Section 5.2 hereof on all Net Sales by DPI, any
Affiliate, sublicensee or customer of DPI, or by any contract
sales force of any of them. Net Sales shall also include all
Sublicense Consideration received by DPI pursuant to Section
4.3(b) hereof.
1.12 "PATENTS" means the patent applications and patents listed in
Exhibit A hereto and any and all other patent applications and
patents and amendments thereto, including foreign equivalents,
and any and all substitutions, extensions, additions, reissues,
re-examinations, renewals, divisions, continuations,
continuations-in-part or supplementary protection certificates
owned by or licensed to (with the right to sublicense) Abbott
during the Term relating to ARCS in the Field.
1.13 "PRODUCT" means any product developed hereunder by DPI, any
Affiliate, sublicensee or customer utilizing ARCS and/or ARCS
Technology in the Field.
1.14 "ROYALTY PERIOD" shall have the meaning ascribed to such term in
Section 5.2(a) hereof.
1.15 "SERVICES" means providing continuous format high throughput
screening of chemical compounds by DPI, any Affiliate,
sublicensee or customer utilizing ARCS and/or ARCS Technology in
the Field on behalf of third parties, together with any and all
associated services provided to third parties, including, but not
limited to, training services, equipment services, technical
support services, consulting services, and the like services.
1.16 "SUBLICENSE CONSIDERATION" shall have the meaning ascribed to
such term in Section 4.3(b) hereof.
1.17 "TERM" means the period commencing on the Effective Date and
terminating as set forth in Article 8 below.
1.18 "TERRITORY" means the entire world.
1.19 "TRADEMARK" means any trademark registered, owned and chosen for
Product by DPI in any country of the Territory.
1.20 "VALID CLAIM" means any claim issued on an unexpired Patent,
which claim has not been held unenforceable, unpatentable or
invalid by a decision of a court or other governmental agency of
competent jurisdiction following exhaustion of all possible
appeal processes, and which has not been admitted to be invalid
or unenforceable through reissue, reexamination or disclaimer.
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2. LICENSE GRANT.
2.1 (a) LICENSE GRANT TO DPI: Abbott hereby grants to DPI and its
Affiliates an exclusive right and license in the Territory
under ARCS Technology in the Field, with the right to
grant sublicenses pursuant to Section 4.3 hereof, to
utilize ARCS Technology in the Field: (i) to research,
develop, modify, improve, make or have made, Products for
Commercial Sale; and (ii) to provide Services utilizing
ARCS Technology.
(b) LICENSE GRANT TO ABBOTT: DPI hereby grants to Abbott and
its Affiliates a non-exclusive right and license in the
Territory under DPI Technology and DPI Know-How: (i) to
research, develop, modify, improve, make or have made
devices, apparatus and equipment relating to ARCS; (ii) to
license the ARCS Technology to its collaborative partners
for use in collaborative projects to research, develop,
make, have made, use, have used, and sell compounds; and
(iii) to research, develop, make, have made, use, have
used, and sell compounds for whatever use.
(c) RESERVATION: Notwithstanding the foregoing exclusive grant
to the contrary, nothing contained in this Agreement shall
preclude Abbott from further developing and utilizing
ARCS, ARCS Technology, DPI Technology and DPI Know-How for
its own internal purposes, including, but not limited to,
researching, developing, making, having made, using,
having used, and selling compounds for whatever purpose,
and licensing the ARCS Technology, DPI Technology and DPI
Know-How to its collaborative partners for use in
collaborative projects to research, develop, make, have
made, use, have used, and sell compounds for whatever
purpose. No such development and utilization of ARCS
Technology, DPI Technology and DPI Know-How by Abbott or
its collaborative partners hereunder shall require any
payment to DPI and DPI shall have no rights whatsoever to
any compounds so developed by Abbott or its collaborative
partners using ARCS Technology, DPI Technology and DPI
Know-How.
3. TECHNOLOGY TRANSFER.
3.1 CONVEYANCE OF INFORMATION: Within forty-five (45) days following
the Effective Date, Abbott shall convey to DPI the information
under Xxxxxx'x and its Affiliates' control involving ARCS
Technology in the Field. For purposes of this Section 3.1,
information shall not be deemed under Xxxxxx'x or its Affiliates'
control if such information was obtained from third parties and
is protected by confidentiality agreements with third parties.
With respect to such protected information, Abbott shall use
reasonable efforts to obtain the consent of such third parties to
release the protected information to DPI.
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3.2 Review: Beginning one month following the Effective Date and
during the Term, unless otherwise agreed by the parties,
representatives of Abbott and representatives of DPI shall meet
for informational purposes on a regular basis, at a mutually
agreeable time and place, to exchange information and Know-How,
to review the progress of and to coordinate their respective
development efforts with respect to ARCS. Nothing contained in
this Agreement shall require or obligate Abbott to further
develop ARCS Technology, or to restrict Abbott from further
developing ARCS Technology.
4. DEVELOPMENT/MANUFACTURING/SUBLICENSING.
4.1 DEVELOPMENT: DPI shall use the same commercially reasonable
efforts that it would use for its own technology to further
develop the ARCS and/or ARCS Technology to enable it to
manufacture Products for Commercial Sale and provide Services.
DPI shall have sole responsibility for designing, conducting and
paying for the cost of the development of Products and Services
and shall use commercially reasonable efforts to diligently
conduct such development.
4.2 MANUFACTURING: DPI and its Affiliates shall have sole
responsibility for manufacturing Product or having Product
manufactured for it by a third party manufacturer.
4.3 SUBLICENSING:
(a) DPI may sublicense to unrelated third parties its rights
under this Agreement. Each sublicense (any any
sub-sublicense by any such third party) shall be in
writing and shall include provisions acknowledging that
such sublicense is subject to the license granted by
Abbott to DPI under this Agreement, including the
obligation of each sublicensee to pay direct royalties to
Abbott on Net Sales as provided in Section 5.2 below, that
each sublicensee shall make reports and keep and maintain
records of Commercial Sales to at least the same extent as
required under this Agreement, allowing Abbott the same
access and audit rights permitted under this Agreement,
and that each such sublicense shall be automatically
terminated upon expiration or termination of this
Agreement. Each sublicense shall also provide for the
regular conveyance of information and Know-How developed
by sublicensees to Abbott and DPI, as well as a license to
Improvements developed by sublicensees to Abbott and DPI
as provided in Section 13 hereof. DPI shall remain
primarily liable for the performance of all sublicensees.
DPI shall provide Abbott with a copy of each sublicense
agreement within thirty (30) days of the execution
thereof.
(b) All consideration received by DPI as a result of each
sublicense of its rights under this Agreement and any
sub-sublicense agreement (including, but not limited to,
fees, payments, milestones, royalties, etc.)
(collectively,
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the "SUBLICENSE CONSIDERATION") shall be considered Net
Sales under this Agreement and subject to royalty under
Section 5.2 hereof.
5. ROYALTIES.
5.1 PRE-PAID, NON-REFUNDABLE ROYALTY. DPI shall pay to Abbott *** ***
as a pre-paid and non-refundable royalty. ***.
5.2 ROYALTY PAYMENTS:
(a) ROYALTY RATE AND ROYALTY PERIOD: Beginning on the
Effective Date, DPI shall pay to Abbott a royalty on
annual aggregate worldwide Net Sales in accordance with
the following schedule:
ANNUAL NET SALES ROYALTY
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Effective Date through Third (3rd) Anniversary ***
Fourth (4th) Year ***
Fifth (5th) Year ***
Sixth (6th) Year and Thereafter ***
All royalties earned by Abbott up to *** shall be credited
against the pre-paid royalty made by DPI under Section 5.1
hereof.
The obligation of DPI, any Affiliate, sublicensee or
customer to pay a royalty to Abbott shall continue until
such time as U.S. Patent #5,976,813 containing a Valid
Claim, identified in Exhibit A, has expired ("ROYALTY
PERIOD"). Upon the end of the Royalty Period, DPI shall
have an exclusive, perpetual and irrevocable license under
ARCS Technology, with all of the rights granted under
Article 2 hereof, and without any further obligation to
Abbott, except for the payment obligations accruing prior
to such date.
(b) ROYALTY REPORTS AND PAYMENTS: Within forty-five (45) days
after the end of each calendar quarter, DPI shall prepare
and deliver to Abbott a
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
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report detailing the calculation of Net Sales in the
Territory, for such just ended quarter along with the
calculation of royalties due thereon pursuant to Section
5.2 (a) above. Each report shall be accompanied by full
payment in U.S. dollars of the royalties shown thereon to
be due, less any credits against such royalties under
Section 5.2(a) above. In the event that conversion from
foreign currency is required in calculating a royalty
payment hereunder, the exchange rate used shall be the
ratio in effect at the end of the last business day of the
applicable quarter for which royalties are calculated, as
reported by The Wall Street Journal, or a substantially
similar global publication if The Wall Street Journal is
no longer published.
(c) BOOKS AND RECORDS/AUDIT RIGHTS: DPI shall keep books and
records accurately showing all Products manufactured, used
or sold, and Services provided, under the terms of this
Agreement. The relevant portions of such books and records
shall be open to inspection by representatives of Abbott,
at Xxxxxx'x cost, solely for the purposes of determining
the correctness of the royalties payable under this
Agreement. Such audit, conducted no more than one time per
calendar year, shall be during normal business hours after
reasonable advance notice and subject to suitable
confidentiality provisions. In the event an audit shows a
deficiency to be due, DPI shall immediately pay such
deficiency along with the reasonable costs and expenses of
the audit if the deficiency is more than five percent (5%)
of the amount due during such audited period. If the audit
shows that an excess was paid, DPI shall be entitled to
deduct the amount of such excess from the payment due for
the next calendar quarter. Such books and records shall be
preserved for a period of at least three (3) years after
the date of the royalty payment to which they pertain, and
no audit may be conducted with respect to royalties due in
any calendar year that is more than two (2) years
preceding the calendar year in which the audit is being
conducted. Books and records for a given calendar year may
only be audited once.
(d) WITHHOLDING TAXES ON ROYALTIES: Where any sum due to be
paid to Abbott hereunder is subject to any withholding or
similar tax, the parties shall use all reasonable efforts
to do all such acts 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, DPI
shall pay such withholding or similar tax to the
appropriate government authority, deduct the amount paid
from the amount due Abbott, and secure and send to Abbott
the best available evidence of such payment sufficient to
enable Abbott to obtain a deduction for such withheld
taxes or obtain a refund thereof.
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6. REPRESENTATIONS/WARRANTIES.
6.1 REPRESENTATIONS AND WARRANTIES OF XXXXXX: Xxxxxx represents and
warrants: (a) that it is duly organized, validly existing and in
good standing under the laws of Illinois, (b) that it has full
corporate power and authority to enter into this Agreement and to
carry out its provisions, (c) that there are no outstanding
agreements or assignments in existence that are inconsistent with
the provisions of this Agreement, (d) that it is duly authorized
to execute and deliver this Agreement and to perform its
obligations hereunder, (e) that the execution, delivery and
performance of this Agreement by it does not require the consent,
approval or authorization of, or notice, filing or registration
with, any governmental or regulatory authority, (f) that, to the
best of its knowledge, it has delivered (or will deliver to DPI
within forty-five (45) days as required under Section 3.1
hereof), all Abbott Know-How necessary to practice ARCS
Technology, (g) that it is the owner of or has sufficient rights
to ARCS Technology to grant the license granted herein free of
any lien or encumbrance that would materially impair DPI's rights
and obligations hereunder, (h) that, to the best of its
knowledge, there is no suit, action or claim instituted or
threatened by a third party against the ARCS Technology, (i) that
it has not assigned or conveyed any interest in the intellectual
property rights inconsistent with the rights granted hereunder,
(j) that, to the best of its knowledge, it is not aware that any
third party infringes Patents as of the Effective Date, and (k)
that to the extent it has prosecuted any patent applications for
Patents, it has prosecuted such applications in good faith.
6.2 REPRESENTATIONS AND WARRANTIES OF DPI: DPI represents and
warrants: (a) that it is duly organized, validly existing and in
good standing under the laws of Delaware, (b) that it has full
corporate power and authority to enter into this Agreement and to
carry out its provisions, (c) that there are no outstanding
agreements or assignments in existence that are inconsistent with
the provisions of this Agreement, (d) that it is duly authorized
to execute and deliver this Agreement and to perform its
obligations hereunder, (e) that the execution, delivery and
performance of this Agreement by it does not require the consent,
approval or authorization of, or notice, filing or registration
with, any governmental agency or regulatory authority, (f) that
it is the owner or has sufficient rights in DPI Know-How or any
other intellectual property rights licensed to Abbott hereunder
to grant the license granted herein free of any lien or
encumbrance that would materially impair Xxxxxx'x rights and
obligations hereunder, and (g) that it has not assigned or
conveyed any interest in DPI Know-How or any other intellectual
property rights inconsistent with the rights granted hereunder.
6.3 INDEMNIFICATION BY DPI: DPI shall indemnify, defend, save and
hold Abbott, and each of its Affiliates, directors, officers,
employees and agents harmless from and against any and all
liabilities, actions, suits, claims, demands, prosecutions,
damages, costs, expenses or money judgments finally awarded
(including
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reasonable legal fees) (collectively, "LIABILITIES") incurred by
or instituted or rendered against Abbott to the extent such
Liabilities result from a third party claim arising from the
willful misconduct or the negligent acts or omissions of DPI or
its Affiliates or DPI's material breach of this Agreement, and
provided that Abbott gives DPI prompt notice in writing of any
such claim or lawsuit and permits DPI to undertake sole control
of the defense and settlement thereof at DPI's expense. In any
such claim or lawsuit:
(a) Abbott will cooperate in the defense by providing access to
witnesses and evidence available to it. Abbott shall have
the right to participate, at its expense, in any defense to
the extent that in its reasonable judgment Abbott may be
prejudiced by DPI"s sole defense thereof.
(b) With respect to this Agreement, Abbott shall not settle,
offer to settle or admit liability in any claim or suit in
which Abbott intends to seek indemnification by DPI without
the written consent of a duly authorized officer of DPI.
6.4 INDEMNIFICATION BY XXXXXX: Xxxxxx shall indemnify, defend, save
and hold DPI and each of its Affiliates, officers, directors,
employees and agents harmless from and against any Liabilities
incurred by or instituted or rendered against DPI to the extent
such Liabilities result from or arise out of any breach of any
express warranty hereunder or non-fulfillment or non-performance
by Abbott of any written or express agreement, covenant or
obligation of Abbott under this Agreement, provided that DPI
gives Abbott prompt notice in writing of any such claim or
lawsuit and permits Abbott to undertake sole control of the
defense and settlement thereof at Xxxxxx'x expense. In any such
claim or lawsuit:
(a) DPI will cooperate in the defense by providing access to
witnesses and evidence available to it. DPI shall have the
right to participate, at its expense, in any defense to the
extent that in its reasonable judgment DPI may be prejudiced
by Xxxxxx'x sole defense thereof.
(b) With respect to this Agreement, DPI shall not settle, offer
to settle or admit liability in any claim or suit in which
DPI intends to seek indemnification by Xxxxxx without the
written consent of a duly authorized officer of Xxxxxx.
6.5 REPORTING: Each party warrants that it shall advise the other
promptly of any suspected defect in the ARCS Technology or in any
Products.
6.6 LIMITATION: EXCEPT FOR THE EXPRESS WARRANTIES IN THIS ARTICLE 6,
NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS OR IMPLIED, IN FACT
OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE. EACH PARTY
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR
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PURPOSE. EXCEPT FOR VIOLATIONS OF ARTICLE 7 AND AMOUNTS FINALLY
AWARDED FOR INDEMNIFICATION FOR THIRD PARTY LIABILITIES UNDER
SECTIONS 6.3 AND 6.4, NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY HERETO OR TO ANY THIRD PARTY FOR ANY SPECIAL,
CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST OR
ANTICIPATED PROFITS RELATING TO THE SAME) ARISING FROM ANY CLAIM
RELATING TO THIS AGREEMENT, WHETHER SUCH CLAIM IS BASED ON
CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, EVEN IF AN
AUTHORIZED REPRESENTATIVE OF SUCH PARTY IS ADVISED OF THE
POSSIBILITY OR LIKELIHOOD OF SAME.
7. CONFIDENTIALITY AND NONDISCLOSURE.
7.1 NONDISCLOSURE: Neither party shall use or disclose any
Confidential Information received by it from the other party
pursuant to this Agreement without the prior written consent of
the other, except that selected disclosures to potential or
actual sublicensees, partners, contractors, customers and agents
shall be permitted so long as the disclosing party shall ensure
that the recipient of such information is under a duty of
confidentiality to the disclosing party. This obligation will
continue for a period of seven (7) years after termination or
expiration of the Term, whichever is earlier.
7.2 RESTRICTION: Each party shall restrict dissemination of
Confidential Information to those of its employees, contractors,
customers, partners, agents and sublicensees (if any) who have an
actual need to know and have a legal obligation to protect the
confidentiality of such Confidential Information. All
Confidential Information disclosed by one party to the other
shall remain the sole property of the disclosing party and
neither party shall obtain any right of any kind to the
Confidential Information disclosed, except as granted under this
Agreement.
7.3 RESTRICTION EXEMPTIONS: Nothing contained in this Article 7 shall
be construed to restrict the parties from using or disclosing
Confidential Information solely to the extent and solely as
required:
(a) for regulatory, tax or customs reasons;
(b) for audit purposes;
(c) by court order or other governmental order or request; or
(d) to perform acts permitted by this Agreement.
If such a disclosure is required, the party required to make the
disclosure shall provide the other party with prompt notice of
the required disclosure in order to provide such party the
opportunity to review the proposed disclosure and, if
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deemed necessary by such party, to obtain a protective order
covering all or part of such information.
8. TERM AND TERMINATION.
8.1 This Agreement shall continue in effect until the end of the
Royalty Period unless and until terminated as provided in this
Section 8.
8.2 If DPI determines in its reasonable scientific and commercial
judgment that the ARCS Technology does not have a reasonable
likelihood of commercial success, or that it is economically or
technically impractical for DPI to continue developing and
marketing Products and Services utilizing the ARCS Technology,
DPI shall have the right to terminate this Agreement upon ninety
(90) days written notice, at the end of which the termination
shall be effective. Upon such termination DPI shall pay all
payments or royalties which may have become due prior to the
effective date of such termination, and DPI shall assign and
Xxxxxx shall be entitled to retain for its own use, all studies
and information relating to the ARCS Technology and shall be
granted a license to all Improvements and Know-How as set forth
in Section 13 hereof. In no event shall any installment of the
pre-paid royalty already paid under Section 5.1 be refundable
under any circumstances.
8.3 Either party may terminate this Agreement by giving to the other
party prior written notice of not less than thirty (30) days in
the case of a monetary breach and of not less than ninety (90)
days in the event the other party shall commit a non-monetary
material breach of this Agreement, and such breaching party shall
fail to cure, or commence action to cure, such breach during such
thirty (30) or ninety (90) day period, as applicable. In the case
of a non-monetary breach, the cure period may be extended for
such longer period as may reasonably be necessary if cure is not
reasonably possible within the initial ninety (90) day period,
provided the breaching party continues its diligent efforts to
cure. No such cancellation and termination shall release the
breaching party from any obligations hereunder incurred prior
thereto. In the event of a dispute whether a material breach has
occurred, the existence of material breach shall be determined
using the ADR procedure set forth in Exhibit B. A party's right
to terminate this Agreement shall only apply if the breaching
party fails to cure such breach in the manner required by the
final judgment of the ADR hearing. In the event that this
Agreement is terminated for DPI's material breach, Xxxxxx shall
be entitled to retain for its own use all funds previously paid
by DPI, together with all Confidential Information, Know-How and
Improvements generated by DPI hereunder, together with a fully
paid-up license under Section 2.1(b) hereof. In the event that
this Agreement is terminated for Xxxxxx'x material breach, DPI
shall be entitled to retain for its own use all Confidential
Information, Know-How and Improvements generated by Xxxxxx
hereunder together with a fully paid-up license under Section
2.1(a) hereof.
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8.4 Either party may terminate this Agreement on thirty (30) days
written notice if the other party passes a resolution or the
court makes an order for its winding up; or has a receiver or
administrator appointed over its business or all of its assets;
or is or becomes bankrupt; or ceases its business operations. In
the event that this Agreement is terminated under this Section
8.4 subject to the other terms of this Agreement, the terminating
party shall be entitled to retain for its own use all
Confidential Information, Know-How and Improvements generated
hereunder, together with a fully paid-up license to it under
Section 2.1 (a) or (b), as applicable. Notwithstanding the
bankruptcy or insolvency of Xxxxxx or DPI or the impairment of
performance by Xxxxxx or DPI of its obligations under this
Agreement as a result of bankruptcy or insolvency of Xxxxxx or
DPI, the non-bankrupt/non-insolvent party shall be entitled to
retain the licenses granted herein, without any further
obligation to the other party other than the payment obligations
under Article 5.
8.5 Termination of this Agreement shall be without prejudice to any
rights of either party against the other which may have accrued
up to the date such termination becomes effective.
8.6 All causes of action accruing to either party under this
Agreement shall survive expiration or termination of this
Agreement for any reason.
8.7 Upon any termination or expiration of this Agreement, each party
shall promptly return to the other party all written Confidential
Information, and all copies thereof (retaining one copy of the
Confidential Information of the other in its confidential files
for archival purposes only), which is not covered by a paid-up
license or other rights specified herein surviving such
termination or expiration.
9. INFRINGEMENT OF PATENTS BY THIRD PARTY. In the event of an actual or
suspected infringement of a Patent by a third party, the following shall
apply:
9.1 NOTICE: Each party shall promptly give the other written notice
if one of them becomes aware of any infringement by a third party
of any Patent.
9.2 RIGHTS TO BRING INFRINGEMENT ACTION: If a third party infringes
any Patent, and DPI can demonstrate to Xxxxxx'x reasonable
satisfaction that such infringement has caused a twenty percent
(20%) or greater reduction in Net Sales, then Xxxxxx shall have
the first right but not the obligation to institute and prosecute
an action or proceeding to xxxxx such infringement and to resolve
such matter by settlement or otherwise. If the parties do not
agree that an infringement caused a twenty percent (20%) or
greater reduction in Net Sales, then the dispute shall be
resolved according to the ADR procedure attached hereto as
Exhibit B.
(a) XXXXXX ACTION: If Xxxxxx elects to institute and prosecute
an action or proceeding, Xxxxxx shall notify DPI of its
intention to bring an action or proceeding. Xxxxxx shall
keep DPI timely informed of material
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developments in the prosecution or settlement of such
action or proceeding. Xxxxxx shall be responsible for all
fees and expenses of any action or proceeding against
infringers which Xxxxxx initiates. DPI shall cooperate
fully by joining as a party plaintiff if reasonably
requested to do so by Xxxxxx or if required to do so by
law to maintain such action or proceeding and by executing
and making available such documents as Xxxxxx may
reasonably request. DPI may be represented by counsel in
any such legal proceedings. Xxxxxx shall pay all third
party expenses incurred by DPI in any such legal
proceeding.
(b) In the event that the prepaid royalty provided for in
Section 5.1 of this Agreement has been completely
exhausted and DPI is able to demonstrate to Xxxxxx'x
reasonable satisfaction that the third party infringement
has caused a twenty percent (20%) or greater reduction in
Net Sales, then during the pendency of any patent
infringement action for the enforcement of any Patent by
Xxxxxx, DPI's royalty obligation shall be modified such
that DPI shall pay directly to Xxxxxx only one-half of the
royalty otherwise payable under Section 5.2 of this
Agreement, and the remaining one-half of such royalty
shall be deposited into an interest-bearing joint escrow
account with a mutually acceptable third party escrow
holder.
(c) If Xxxxxx is successful in such patent infringement action
such that the defendant in such action is found to
infringe Patents which is/are the subject of such action,
then the amount of royalties held in escrow, together with
all accrued interest thereon, shall be paid to Xxxxxx and
DPI's royalty obligation shall resume as provided for in
Section 5.2 hereof. One-half of the proceeds awarded to
Xxxxxx in the infringement action shall belong to Xxxxxx
and the remainder shall be used first to pay Xxxxxx for
its documented and actual costs of enforcement, including
attorneys' fees, expert fees and all other related
expenses of the infringement action, and the balance shall
be paid to DPI.
(d) If Xxxxxx is unsuccessful in such patent infringement
action such that the defendant in such action is found not
to infringe such Patents, then the escrowed amount, less a
sum sufficient to compensate Xxxxxx for its documented and
actual costs of enforcement, including attorneys' fees,
expert fees, and all other related expenses of the
infringement action, shall be paid to DPI and no
additional royalties under Section 5.2 hereof shall be
payable to Xxxxxx.
(e) DPI ACTION: If Xxxxxx elects not to exercise such first
right to institute and enforce an action or proceeding,
DPI shall have the right, at its discretion, to institute
and enforce an action or proceeding to xxxxx such
infringement and to resolve such matter by settlement or
otherwise. Xxxxxx shall cooperate fully by joining as a
party plaintiff if reasonably requested to do so by DPI or
if required to do so by law to maintain such
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action and by executing and making available such
documents as DPI may reasonably request. Xxxxxx may be
represented by counsel in any such action, at its own
expense.
(i) All amounts of every kind and nature recovered from
an action or proceeding of infringement brought by
DPI shall belong to DPI, and shall first be used to
reimburse DPI for its documented and actual costs
of prosecution, second to reimburse Xxxxxx for its
documented and actual costs if it is represented by
counsel in the proceedings, and the balance shall
thereafter be considered Net Sales under this
Agreement and subject to royalty payments under
Section 5.2 hereof.
(ii) If DPI is unsuccessful in such patent infringement
action such that the defendant in such action is
allowed to continue the practice which DPI claimed
was infringing the Patents, then no additional
royalties under Section 5.2 hereof shall be payable
to Xxxxxx.
10. INFRINGEMENT OF THIRD PARTY RIGHTS; XXXXXX DEFENSE OF SUIT: If Xxxxxx,
DPI, or any of their Affiliates, sublicensees, distributors or other
customers are sued or threatened with suit by a third party alleging
infringement of patents or other intellectual property rights that are
alleged to cover the manufacture, use, sale or distribution of one or
more Products utilizing ARCS Technology, which suit is based upon
alleged infringement by ARCS Technology, then Xxxxxx or DPI, whichever
is relevant, will promptly notify the other in writing and provide a
copy of the lawsuit or claim. In the event (i) DPI chooses to control
the defense of any such action, any settlement amounts or court-awarded
damages, costs and fees (including reasonable attorneys' fees and
professional fees) incurred in connection with such action shall be paid
by DPI; or (ii) if DPI chooses not to control the defense of any such
action, Xxxxxx shall control the defense in such action and DPI shall
fully cooperate with Xxxxxx in the defense of any such action DPI's
expenses will be paid by DPI. Nothing contained in this Section 10 shall
be construed to impose liability on Xxxxxx for ---------- damages
awarded against DPI or for settlement amounts made by or on behalf of
DPI in lieu of such damages. Xxxxxx shall not settle any such action
where DPI would be liable for settlement amounts without first obtaining
DPI's prior written consent to such settlement.
11. PATENT PROSECUTION AND MAINTENANCE; PATENT COSTS.
11.1 DISCLOSURE OF PATENTS/APPLICATIONS TO DPI: Prior to the Effective
Date, the parties acknowledge that Xxxxxx has disclosed to DPI
the complete text of, and all other information in its possession
or control directly related to (a) all patent applications
included in the Patents; and (b) all patents included in the
Patents as well as all information in Xxxxxx'x, its Affiliates
and its patent counsel's possession concerning the institution or
possible institution of any interference, opposition,
reexamination, reissue, revocation, nullification or any official
proceeding involving an issued or granted patent included in the
Patents.
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11.2 PROSECUTION AND MAINTENANCE OF PATENTS BY XXXXXX: Xxxxxx shall be
solely responsible for the preparation, filing, prosecution and
maintenance of the Patents owned by or assigned to Xxxxxx,
including oppositions and interferences. Xxxxxx shall keep DPI
reasonably informed with respect to the prosecution and
maintenance of the Patents. If Xxxxxx determines that it would
otherwise terminate either the prosecution or maintenance of the
Patents prior to the completion of normal prosecution thereof
before the patent examiner or prior to the end of the term for
maintenance therefor, as the case may be, then Xxxxxx shall give
DPI written notice of such determination (a "DETERMINATION
NOTICE") that, under the circumstances, is reasonably in advance
of any deadline for any material action due in connection with
such prosecution or maintenance. Following receipt of such
notice, DPI may continue such prosecution or maintenance,
provided, however, that if the Royalty Period is still
continuing, Xxxxxx shall reimburse DPI for all reasonable costs
and expenses associated with such prosecution or maintenance
incurred from the date of the Determination Notice. If the
Royalty Period is no longer continuing, then Xxxxxx shall no
longer have reimbursement responsibilities to DPI.
11.3 DISCLOSURE OF PATENTS/APPLICATIONS TO XXXXXX: During the Term,
DPI shall disclose to Xxxxxx the complete text of, and all other
information in its possession or control directly related to (a)
all patent applications applied for by DPI related to ARCS; and
(b) all patents issued from such patent applications, as well as
all information in DPI's, its Affiliates and its patent counsel's
possession concerning the institution or possible institution of
any interference, opposition, reexamination, reissue, revocation,
nullification or any official proceeding involving an issued
patent.
11.4 PROSECUTION AND MAINTENANCE OF PATENTS BY DPI: DPI shall be
solely responsible for the preparation, filing, prosecution and
maintenance of patents owned by or assigned to DPI (other than
Patents), including oppositions and interferences. DPI shall keep
Xxxxxx reasonably informed with respect to the prosecution and
maintenance of such patents.
11.5 PATENT MARKING: DPI shall ensure that all Products and associated
Product and Services literature contains appropriate references
to Xxxxxx'x Patents.
12. TRADEMARK: DPI may select any Trademark or Trademarks for the Product in
the Territory. All costs related to the selection and maintenance of the
Trademark(s) shall be borne by DPI. The Trademark(s) shall be owned by
DPI, and Xxxxxx shall have no claims or rights in or to the
Trademark(s).
13. IMPROVEMENTS: All Improvements and any patents which relate to ARCS
which are made solely by DPI and/or its Affiliates and/or sublicensees
hereunder and which are conceived or reduced to practice during the
Term, shall be the sole and exclusive property of DPI, its Affiliates
and/or sublicensees, as applicable, provided, however, that
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17
all such Improvements and patents shall be non-exclusively licensed to
Xxxxxx solely for its own use and for use with third party
collaborations as permitted under Sections 2.1 (b) and (c) hereof on a
worldwide, royalty-free, paid-up basis. All Improvements and any Patents
which are made solely by Xxxxxx and/or its Affiliates and which are
conceived or reduced to practice during the Term, shall become part of
ARCS Technology, licensed exclusively to DPI with all of the rights set
forth in Section 2.1(a) hereof. All Improvements made jointly by Xxxxxx
and DPI (or by their Affiliates) hereunder shall become jointly owned,
provided that to the extent that such Improvements are owned by Xxxxxx,
they shall be included in the license granted to DPI under Section
2.1(a) hereof, and to the extent such Improvements are owned by DPI,
they shall be included in the license granted to Xxxxxx under Section
2.1(b) hereof. The provisions of this Article 13 are subject to the
rights of the terminating party under Article 8 hereof. Upon termination
of this Agreement under Article 8 hereof, except as provided in this
Article 8 neither party shall be obligated to license any of its future
improvements and/or patents to the other.
14. PATENTABLE INVENTIONS. If a patentable invention relating to ARCS is
conceived or reduced to practice during the course of this Agreement
and/or within six (6) months of expiration or termination of this
Agreement, Xxxxxx and DPI shall discuss such invention and the
desirability of filing a United States patent application covering such
invention as well as any foreign counterparts. The party owning the
invention (or both parties if the invention is a joint invention) shall
make the final decision with respect to any such filings. All patent
applications and patents on inventions made in the course of this
Agreement solely by employees of Xxxxxx shall be owned by Xxxxxx. All
patent applications and patents on inventions made in the course of this
Agreement solely by employees of DPI shall be owned by DPI. All patent
applications and patents on inventions made jointly by employees of
Xxxxxx and employees of DPI during the course of this Agreement shall be
jointly owned by Xxxxxx and DPI. Each party shall be responsible for
preparing, filing, prosecuting and maintaining patent applications and
patents relating to sole inventions, as set forth in this Article 14, at
its sole expense. DPI shall also be responsible for preparing, filing,
prosecuting and maintaining, using counsel mutually acceptable to Xxxxxx
and DPI, patent applications and patents relating to inventions jointly
owned by Xxxxxx and DPI and the parties shall equally share all
out-of-pocket costs (including attorney's fees) associated with such
activities. The parties shall cooperate with each other in connection
with any activities described herein and shall keep the other informed
of all material developments regarding patent matters relating to any
patent applications and patents filed hereunder. Each party shall,
further, provide to the other a copy of any patent application which
discloses Confidential Information prior to filing in the United States
or elsewhere if reasonably possible, for review and comment by the other
party. Any such patent application shall be maintained in confidence by
the receiving party pursuant to Article 7 hereof. If a patent
application on a joint invention encompassed by this Article 14 and
either party, later, decides that it no longer wishes to continue to pay
for its share of costs associated with prosecution and/or maintenance of
such application (or any patent resulting therefrom), the party
declining to pay for any further costs shall inform the other party of
its decision to discontinue payment, in writing. Such non-declining
party may then elect to continue prosecution and/or
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18
maintenance of such application or patent at its sole expense. The party
declining to pay for any further costs shall provide all reasonable
assistance (including preparing any papers required to allow the other
party to prosecute and/or maintain such application) required by the
non-declining party in prosecuting and/or maintaining such application
or patent. Further, if one party declines to pay for any further costs
associated with prosecuting and/or maintaining such application or
patent, and the other party elects to continue to pay for such costs,
the party declining to pay for such costs shall lose all ownership
rights to such application or patent and such rights shall vest totally
in the party continuing to pay for such costs.
15. MISCELLANEOUS.
15.1 FORCE MAJEURE: If the performance by either party of any of its
obligations under this Agreement shall be prevented by
circumstances beyond its reasonable control which could not have
been avoided by the exercise of reasonable diligence, then such
party shall be excused from the performance of that obligation
for the duration of the event. The affected party shall promptly
notify the other party in writing should such circumstances
arise, give an indication of the likely extent and duration
thereof, and shall use commercially reasonable efforts to resume
performance of its obligations as soon as practicable.
15.2 NOTICES: Any notice required to be given or made under this
Agreement by one of the parties hereto to the other shall be in
writing, by personal delivery, registered U.S. mail or overnight
courier, addressed to such other party at its address indicated
below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon
the date of receipt.
If to DPI: Discovery Partners International
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: President
With a copy to: Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
00000 Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxxx, Esq.
If to Xxxxxx: Xxxxxx Laboratories
000 Xxxxxx Xxxx Xxxx
Xxxx. 467; Bldg. AP10
Xxxxxx Park, IL 60064-
Attn: Divisional Vice President,
Advanced Technology
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With a copy to: Xxxxxx Laboratories
000 Xxxxxx Xxxx Xxxx
Xxxx. 364; Bldg. AP6D
Xxxxxx Xxxx, XX 00000-0000
Attn: Senior Vice President,
General Counsel and Secretary
15.3 APPLICABLE LAW/COMPLIANCE: This Agreement shall be governed by
and construed in accordance with the laws of the State of New
York, excluding its conflict of laws provisions. Each party
hereto shall comply with all applicable laws, rules, ordinances,
guidelines, consent decrees and regulations of any federal, state
or other governmental authority. The location of any ADR
proceeding shall be in the metropolitan area of the party who did
not initiate the ADR proceeding.
15.4 ENTIRE AGREEMENT: This Agreement and the Exhibits attached hereto
contain 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
expressly merged in and made a part of this Agreement. This
Agreement may be amended, or any term hereof modified, only by a
written instrument duly executed by both parties hereto.
15.5 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.
15.6 SEVERABILITY/HEADINGS: If any provision of this Agreement is
deemed unenforceable, the remainder of the Agreement will not be
affected and, if appropriate, the parties will attempt to replace
the unenforceable provision with a new provision that, to the
extent possible, reflects the parties' original intent. The
captions and headings used in this Agreement are for reference
only and are not to be construed in any way as terms or used to
interpret the provisions of this Agreement.
15.7 ASSIGNMENT: Neither party may without written approval of the
other assign this Agreement or transfer its interest or any part
thereof under this Agreement to any third party except that
either party may assign this Agreement without consent to a third
party that acquires all or substantially all of the business to
which this Agreement pertains.
15.8 DISPUTE RESOLUTION: The parties hereto shall attempt to settle
any dispute arising out of or relating to this Agreement in an
amicable way. Except for claims for injunctive or other equitable
relief, which may be brought in any court of competent
jurisdiction, any controversy, claim or right of termination for
cause which may arise under, out of, in connection with, or
relating to this Agreement, or any breach thereof, shall be
settled according to the Alternative Dispute Resolution
provisions attached hereto as Exhibit B.
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15.9 INDEPENDENT CONTRACTOR: It is understood that both parties hereto
are independent contractors and engage in the operation of their
own respective businesses and neither party hereto is to be
considered the agent of the other party for any purpose
whatsoever and neither party has any authority to enter into any
contract or assume any obligation for the other party or to make
any warranty or representation on behalf of the other party. Each
party shall be fully responsible for its own employees, servants
and agents, and the employees, servants and agents of one party
shall not be deemed to be employees, servants and agents of the
other party for any purpose whatsoever.
15.10 PUBLICITY: No press release or other public announcement shall be
made by either party concerning the execution of this Agreement
or the fact that DPI has licensed ARCS Technology from Abbott
without the other party's prior written approval. Neither party
shall use the name of the other party, its officers, the other
party's employees and agents for purposes of any public
commercial activity without the other party's prior written
approval, except where the name of the other party must be
disclosed as a matter of law. Should either party be required by
law to make a disclosure, the disclosing party shall submit a
copy of the proposed disclosure to the other party for review.
The non-disclosing party shall have three (3) weeks to review and
comment on the content of such disclosure. The disclosing party,
subject to legal requirements, shall use all reasonable efforts
to accommodate the non-disclosing party's comments.
15.11 SURVIVAL: The following provisions of this Agreement shall
survive its expiration or termination: 6.3, 6.4, 6.5, 6.6, 7, 14,
15.3, 15.8, 15.9, 15.10 and 15.11.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the Effective Date.
XXXXXX LABORATORIES DISCOVERY PARTNERS INTERNATIONAL
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxxxx Xxxxxxxxx
------------------------------- --------------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxxxxxx Xxxxxxxxx
----------------------------- ------------------------------
Its: V.P. Pharmaceutical Discovery Its: C.E.O.
------------------------------ -------------------------------
Date: 1/15/01 Date: 1/2/2001
----------------------------- ------------------------------
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EXHIBIT A
TO
EXCLUSIVE LICENSE AGREEMENT
BETWEEN
XXXXXX LABORATORIES
AND
DISCOVERY PARTNERS INTERNATIONAL
DATED JANUARY 2, 2001
PATENTS AND PATENT APPLICATIONS
U.S. Patent No. 5,976,813
Country Serial # Filing Date Patent # Issue Date
------- -------- ----------- -------- ----------
U.S. 08/990,168 12/12/1997 5,976,813 11/02/1999
Corresponding Pending Foreign Patent Applications:
Country Application # Filing Date
------- ------------- -----------
Australia 18216/99 12/11/1998
Brazil PI9815059-6 12/11/1998
Bulgaria 104564 12/11/1998
China 98812079.8 12/11/1998
Canada 2,310,684 12/11/1998
Czechoslovakia PV 2000-2078 12/11/1998
European 98963130.4 12/11/1998
Hungary 12/11/1998
Israel 135,793 12/11/1998
Japan 2000-524662 12/11/1998
Korea 00-0000-0000 12/11/1998
Mexico 0005800 12/11/1998
Norway 20002079 12/11/1998
New Zealand 504112 12/11/1998
PCT PCT/US98/264 12/11/1998
Poland P-341655 12/11/1998
Slovak Republic PV 0836-2000 12/11/1998
Turkey 2000/01647 12/11/1998
Taiwan 87120533 12/01/1998
U.S. 990,168 12/12/1997
22
EXHIBIT B
TO
EXCLUSIVE LICENSE AGREEMENT
BETWEEN
XXXXXX LABORATORIES
AND
DISCOVERY PARTNERS INTERNATIONAL
DATED JANUARY 2, 2001
ALTERNATIVE DISPUTE RESOLUTION
The parties recognize that a bona fide dispute as to certain matters may arise
from time to time during the term of this Agreement which relates to either
party's rights and/or obligations. To have such a dispute resolved by this
Alternative Dispute Resolution (ADR) provision, a party must send written notice
of the dispute to the other party for attempted resolution by good faith
negotiations between their respective presidents (or their equivalents) 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 the 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
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 circumstance likely to affect his or her impartiality.
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(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, the 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.
(d) If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR shall designate as
neutral the candidate for whom the parties collectively have indicated the
greatest preference. If a tie shall 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 the 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 principle 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 each 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.
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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.
(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 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.
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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 recorder, 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.
(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 the 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.
