Exhibit 10.28
INTERNATIONAL LICENSE AGREEMENT
BETWEEN
ABBOTT INTERNATIONAL, LTD.
AND
SONUS PHARMACEUTICALS, INC.
TABLE OF CONTENTS
1. DEFINITIONS 1
2. DEVELOPMENT 5
3. ALLOCATION OF PRODUCT RIGHTS AND RESPONSIBILITIES 8
4. OTHER TERRITORIES 17
5. MILESTONES, LICENSES AND OPTIONS 17
6. ROYALTY; ROYALTY PAYMENTS 18
7. BUYOUT OPTION 21
8. IMPROVEMENTS 22
9. RIGHT OF FIRST REFUSAL FOR ADDITIONAL PRODUCTS 22
10. REPRESENTATIONS AND WARRANTIES 24
11. TERM AND TERMINATION 25
12. INDEMNIFICATION 27
13. LIMITATION OF LIABILITY 28
14. CONFIDENTIAL INFORMATION 29
15. NON-COMPETE 29
16. FORCE MAJEURE 30
17. NOTICES 30
18. ASSIGNMENT 31
19. SUCCESSORS AND ASSIGNS 31
20. ALTERNATIVE DISPUTE RESOLUTION 31
21. PUBLICITY 31
22. RELATIONSHIP OF PARTIES 32
23. APPENDICES 32
24. HEADINGS 32
25. WAIVER 32
26. SEVERABILITY 32
27. ENTIRE AGREEMENT; AMENDMENT 32
28. APPLICABLE LAW 33
29. COUNTERPARTS 33
APPENDICES
ARTICLE 1.1(ii) AFFILIATES Appendix 1.1
INDICATIONS AND USAGE Appendix 1.7
LICENSED PATENTS Appendix 1.16
TERRITORY Appendix 1.21
PRODUCT SPECIFICATIONS Appendix 3.4
TRADEMARKS Appendix 3.10
MILESTONE AND LICENSE FEES Appendix 5.2
OFFSETTABLE MILESTONE, LICENSE
AND OPTION FEES Appendix 5.3
ALTERNATIVE DISPUTE RESOLUTION Appendix 20
INTERNATIONAL LICENSE AGREEMENT
BETWEEN
ABBOTT INTERNATIONAL, LTD.
AND
SONUS PHARMACEUTICALS, INC.
INTERNATIONAL LICENSE AGREEMENT
THIS AGREEMENT dated October 1, 1996 ("Effective Date"), by and between
Abbott International, Ltd., a Delaware corporation with principal offices at 100
Abbott Park Road, Abbott Park, Illinois 60064-3500 ("ABBOTT") and SONUS
Pharmaceuticals, Inc., a Delaware corporation with principal offices at 22026
20th Avenue, S.E., Suite 102, Bothell, Washington 98021 ("SONUS").
RECITALS
WHEREAS, SONUS has developed and holds patents and patent applications
on an ultrasound contrast agent, now trademarked as "EchoGen" in the United
States ("EchoGen"); and
WHEREAS, SONUS and Abbott Laboratories have previously entered into a
Development and Supply Agreement, dated May 6, 1993, as amended and as may be
amended ("Supply Agreement"), whereby Abbott Laboratories agreed to assist in
the manufacturing scale-up of and to manufacture EchoGen for SONUS; and
WHEREAS, SONUS and Abbott Laboratories have also previously entered
into an Agreement dated May 14, 1996, as amended and as may be amended ("United
States Agreement"), whereby ABBOTT obtained certain exclusive marketing rights
in the United States, subject to limited SONUS co-promotion rights, to the
ultrasound contrast; and
WHEREAS, SONUS desires to grant, and ABBOTT desires to obtain, certain
exclusive marketing rights in the Territory (as defined below) to EchoGen (as
described more fully below) in accordance with the terms and conditions of this
agreement ("Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants set forth below, ABBOTT and SONUS mutually agree as
follows:
1. DEFINITIONS
In addition to the terms defined in the provisions of this Agreement,
the following terms shall have the meaning as described below:
1.1 "Affiliate" means any entity which controls, is controlled by or is
under common control with another entity. An entity is deemed to be in control
of another entity (controlled entity) if: (i) the former owns directly or
indirectly at least the lesser of (a) fifty percent (50%), or (b) the maximum
percentage allowed by law in the country of the controlled entity, of the
outstanding voting equity of the controlled entity; or (ii) if the entity is
listed on Appendix 1.1 hereto, which Appendix may be modified by mutual
agreement of the parties without formal amendment of this Agreement.
1.2 "Agreement" means this Agreement, as may be amended, including all
Appendices attached hereto.
1.3 "Average Unit Selling Price" means, on a Country-by-Country basis,
Net Sales (as defined below) for a time period divided by the number of Units of
Product shipped by ABBOTT Affiliates or sublicensees to Third Parties (as
defined below) in the Territory for the same period, less returned goods,
inventory outdates and damage, samples, free goods, recalls and/or withdrawals
of Product ("Net Units Shipped").
1.4 "Confidential Information" means information disclosed in writing
by one party to the other pursuant to this Agreement and identified as
"CONFIDENTIAL" as well as information disclosed orally or visually to the extent
such information is identified in writing as "CONFIDENTIAL" and which is
provided to the other party within thirty (30) days after such disclosure.
"Confidential Information" does not include any of such information which:
(A) is known to the receiving party before receipt thereof
under this Agreement, or is independently developed by the receiving party
without recourse to the other party's Confidential Information, as evidenced by
the receiving party's written records;
(B) is disclosed to the receiving party without restriction
after full execution of this Agreement by a Third Party having a legal right to
make such disclosure; or
(C) is or becomes part of the public domain through no breach
of this Agreement.
1.5 "EMEA" means the European Medicines Evaluation Agency or any
successor entity thereto.
1.6 "FDA" means the United States Food and Drug Administration or any
successor entity thereto.
1.7 "Field" means diagnostic ultrasound pharmaceuticals for all current
and future markets for the indications set forth in Appendix 1.7, as such
indications are approved by the regulatory agencies in the Territory.
1.8 "Finished Goods Inventory" means the Product inventory whereby the
Product has completed production and testing procedures and is ready for sale to
Third Party customers.
1.9 "Finished Product" means Units of the Product tested and ready for
sale, either supplied to ABBOTT by SONUS (directly or through a Third Party), or
manufactured by Abbott Laboratories for SONUS.
1.10 "First Sale Date" means on a Country-by-Country basis the earlier
of: (i) the date of the first sale by ABBOTT or an ABBOTT Affiliate or
sublicensee to a Third Party; or (ii) the date ninety (90) days after Regulatory
Approval (as defined below).
1.11 "Fiscal Quarter" means a three (3 ) month period ending February
28, May 31, August 31 or November 30.
1.12 "Fiscal Year" means the period from December 1 through November
30.
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1.13 "GMP" means current Good Manufacturing Practices as established by
the FDA or EMEA; whichever is appropriate, and as practiced by the industry in
which the parties operate.
1.14 "Improvements" means any and all developments, inventions or
discoveries in the Field relating to the Product, Licensed Patents or Know-How
and developed or acquired with the right to sublicense, by SONUS and/or ABBOTT
during the term of this Agreement, and shall include, but not be limited to,
developments intended to enhance the safety and efficacy of the Product.
1.15 "Know-How" means that proprietary technology of SONUS relating to
the Product including, but not limited to, manufacture or product techniques,
formulations or production technology, methods of synthesis or other processes.
1.16 "Licensed Patents" means:
(A) the patents and patent applications set forth in Appendix
1.16 and any other patents or patent applications covering the Product now owned
or hereafter acquired by SONUS or under which SONUS has the right to grant
sublicenses during the term of this Agreement in the Territory;
(B) all patents arising from such applications identified in
(A) and any divisions, continuations, and continuations-in-part thereof; and
(C) any extension, renewal, reexamination or reissue of a
patent identified in (A) or (B).
1.17 "NDA" means an application filed with a regulatory agency in any
Country in the Territory for approval by such agency of the sale of the Product,
whether such application is characterized as a New Drug Application, New Drug
Submission or otherwise.
1.18 "Net Sales" means the gross sales of the Product in all of its
final packaged forms shipped by ABBOTT Affiliates or sublicensees to Third
Parties in the Territory, less:
(A) allowances and adjustments separately and actually
credited or payable, including credit for damaged, outdated and returned
products;
(B) trade discounts earned or granted;
(C) cash discounts actually allowed;
(D) transportation charges (including insurance costs),
handling charges, sales taxes, excise taxes and duties, and other similar
charges invoiced to customers;
(E) wholesaler chargebacks; and
(F) rebates and management fees earned or granted.
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Net Sales shall be calculated in accordance with ABBOTT's
standard internal policies and procedures. Any discount, allowance, rebate, free
goods or samples, management fee or wholesaler chargeback for the Product which
is given to a customer due to the purchase of a product other than the Product
or due to the purchase of any service, shall not be taken into consideration for
the calculation of Net Sales. Net Sales shall not include sales between ABBOTT
and its Affiliates or sublicensees, or sales between ABBOTT Affiliates, or sales
between ABBOTT Affiliates and ABBOTT sublicensees.
1.19 "Product" means a colloidal dispersion ultrasound contrast agent
suitable for intravenous administration containing the active ingredient
dodecafluoropentane, which is covered by one or more claims of the Licensed
Patents regardless of form, dose, or package. Without limiting the generality of
the foregoing, "Product" shall include: (i) a complete product with kit,
including one or more vials of EchoGen(R) together with a kit including a
syringe, tubing and other accessories as may be included in the final package;
(ii) one or more vials of EchoGen(R) without any kit; and (iii) a kit only,
consisting of a syringe, tubing and other accessories as are included in the
final package, but not including any EchoGen(R).
1.20 "Regulatory Approval" means any and all approvals, authorizations,
licenses and other actions required by the relevant government authority or
authorities, in each Country in the Territory, in order to permit ABBOTT and/or
ABBOTT Affiliates or sublicensees to market and sell the Product in the Field in
each Country in the Territory. Regulatory Approval shall include, but not be
limited to marketing authorization, price approval and reimbursement approval
for the Product.
1.21 "Territory" means:
(A) the entire world except:
(i) the territory covered by the United States
Agreement; and
(ii) Japan, Taiwan, China, South Korea, Hong
Kong, Thailand, Indonesia, Singapore,
Malaysia and the Philippines.
(B) For purposes of this Agreement, the Territory is divided
into four areas ("Areas"):
(i) Europe
(ii) Latin America
(iii) Pacific/Asia/Africa
(iv) Canada
(C) For purposes of this Agreement, "Country" means a place
now known under a current name and with current geographic and political
boundaries, but such a place is intended to be included in the Territory and in
its respective Area even if its name changes or its boundaries
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change. The Countries included in each of the four Areas are listed in Appendix
1.21. In addition, the listings of Countries included in the Europe, Latin
America and Pacific/Asia/Africa Areas are divided in Appendix 1.21 into major
countries ("Major Countries") and minor countries ("Minor Countries"); except
that the listings of Minor Countries are illustrative only and not exhaustive.
1.22 "Third Party" means any individual, corporation, partnership,
trust or other business organization or entity, and any other recognized
organization other than the parties hereto and their Affiliates.
1.23 "Unit" means a single vial of the Product or a combination of a
single vial with a kit which is in final salable form.
2. DEVELOPMENT
2.1 Regulatory Approvals.
(A) SONUS shall be responsible for all activities required to
obtain Regulatory Approval in Countries which as of the Effective Date, are
members of the European Community ("EC Countries"). These activities will
include, but not be limited to, clinical trials and the filing of an application
for marketing approval with the European Medicines Evaluation Agency ("EMEA").
SONUS will pursue these activities diligently and will use its reasonable best
efforts to obtain such Regulatory Approval as quickly as is feasible.
(i) In the event that clinical trials are required
for Regulatory Approval in one or more of the EC Countries,
SONUS will design and prepare plans and protocols for these
clinical trials and will pay all out-of-pocket costs for these
clinical trials, but ABBOTT will provide management support,
at no cost to SONUS, from ABBOTT's internal regulatory and
clinical resources.
(ii) In the event that clinical trials are required,
or are deemed necessary by ABBOTT, for marketing or other
purposes (as opposed to for Regulatory Approval) in one or
more of the EC Countries, then ABBOTT will pay all
out-of-pocket costs for these clinical trials and will manage
and control all aspects of these clinical trials.
(iii) Regardless of whether clinical trials are
required for Regulatory Approval, ABBOTT will provide
management support at no cost to SONUS from ABBOTT's internal
regulatory resources.
(B) ABBOTT shall be responsible for all activities required to
obtain Regulatory Approval in all other Countries in the Territory which are not
covered under Article 2.1(A) above. These activities will include, but not be
limited to, clinical trials and the filing of an application for marketing
authorization with the relevant government authority in each such Country.
ABBOTT will pay all costs for these clinical trials, except for the cost of the
Product required for these clinical trials, and will manage and control all
aspects of these clinical trials. ABBOTT will pursue these activities diligently
and will use its reasonable best efforts to obtain such Regulatory Approval as
quickly as is feasible.
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(C) Within sixty (60) days after the Effective Date, SONUS
shall provide ABBOTT with a regulatory plan ("Plan") for each of the EC
Countries for ABBOTT's review and approval, which approval shall not be
unreasonably withheld. Within sixty (60) days after the Effective Date, ABBOTT
shall provide SONUS with a Plan for each Area of the Territory (excluding the EC
countries) for SONUS' review and approval, which approval shall not be
unreasonably withheld. Neither party will commence any clinical trial without
the prior review and approval of the other party, which approval shall not be
unreasonably withheld.
(i) The Plans shall include plans and protocols for
clinical research to be conducted with respect to the Product
within the Territory, plans for securing Regulatory Approvals
of the Product, and timetables for the accomplishment of
milestones, for each EC Country in the case of SONUS's Plan,
and for each other Major Country in the Territory in the case
of ABBOTT's Plan.
(ii) ABBOTT and SONUS will update their respective
Plans on a quarterly basis; and each party shall submit to the
other party a quarterly status report summarizing the
completion or phase of completion of each milestone in such
Plan. The parties shall meet on no less than a quarterly basis
to review the Plans and status reports.
(iii) ABBOTT and SONUS will pursue their respective
Plans diligently and will use their reasonable best efforts to
accomplish the milestones in such Plans as quickly as is
feasible.
(D) SONUS shall provide at its own expense all United
States-based clinical support necessary and appropriate for the Regulatory
Approval of the Product in the Territory. SONUS shall also provide, at SONUS'
expense, all quantities of the Product reasonably required by ABBOTT for
regulatory purposes, including but not limited to, nonclinical and/or clinical
studies. In addition, SONUS shall use its reasonable best efforts to complete
the United States Phase III Clinical Study of the Product for myocardial
perfusion as quickly as possible.
2.2 Additional Clinical Research for New Indications. ABBOTT shall have
no obligation to provide financial support for development of the Product in the
Territory, except for the costs payable by ABBOTT under Article 2.1 above.
ABBOTT and SONUS agree that, if SONUS wishes to conduct or to have conducted any
clinical research in the Territory relating to ultrasound diagnostic
applications for one or more of the following new indications for the Product:
(i) breast cancer, (ii) prostate cancer, (iii) central nervous system ("CNS")
and (iv) stress echocardiography, then the definition of the "Field" set forth
in Article 1.7 of this Agreement shall be expanded to include the new
indication(s), and the following provisions will apply:
(A) If ABBOTT desires to participate financially in such
additional clinical research, and communicates its decision to participate in
accordance with Article 2.4 of the United States Agreement, SONUS shall
reimburse ABBOTT fifty percent (50%) of such costs and expenses funded by ABBOTT
by either, at the option of SONUS: (i) reimbursing ABBOTT such costs and
expenses with interest at the United States prime rate of interest (as published
in the Wall Street Journal Midwest Edition on the date on which ABBOTT requests
reimbursement) within five (5) years of the date such costs and expenses are
paid by ABBOTT; or (ii) reducing the royalty rates
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payable by ABBOTT to SONUS as provided in Article 6.1 at such dates and in such
amounts as is mutually agreed by the parties. If the parties are unable to agree
on a reduction of the royalty rates pursuant to Article 2.2 (A)(ii) within
thirty (30) days of the date on which they began discussing such reduction, then
SONUS shall reimburse Abbott pursuant to Article 2.2 (A)(i).
(B) If ABBOTT determines not to provide additional financial
support for such additional clinical research and SONUS proceeds with the
additional research and development, then the parties shall negotiate in good
faith to modify the royalty rates under Section 6.1 below to reflect the amount
of the expenditures to be made by SONUS for such additional clinical research
related to such additional indications, together with such other factors as are
appropriate. If the parties fail to agree to a reasonable modification of the
royalty rates as set forth above within thirty(30) days of the date on which
they began discussing such modification, then the parties shall utilize the
Dispute Resolution Procedure under Article 20 below to determine what
modification of the royalty rates shall apply.
2.3 NDA Approval
(A) SONUS shall provide, or cause to be provided to ABBOTT,
all documents, data, supplies and information submitted by SONUS to the EMEA,
and received by SONUS from the EMEA, within thirty (30) days of such submission
or receipt.
(B) (i) If, (1) no clinical trials are required for Regulatory
Approval and SONUS does not receive EMEA approval to market the Product within
two (2) years of the date of the EMEA filing, or (2) clinical trials are
required for Regulatory Approval and SONUS does not diligently pursue the
completion of such clinical trials as provided in Section 2.1 (A) (i) and SONUS
does not receive EMEA approval within three years (3) of the date of the EMEA
filing, then ABBOTT may, but does not have the obligation to, pursue such EMEA
approval of the Product. If ABBOTT determines to pursue EMEA approval, then
ABBOTT may conduct any necessary research or clinical studies to obtain such
EMEA approval of the Product. All reasonable costs incurred by ABBOTT in
pursuing such EMEA approval shall be deducted from any payments due SONUS under
this Agreement.
(ii) If, (1) no clinical trials are required for
Regulatory Approval and ABBOTT does not receive Regulatory Approval to market
the Product in all other countries in the Territory which are not covered under
Article 2.1(A) above within two (2) years of the date of the relevant regulatory
filing, or (2) clinical trials are required for Regulatory Approval and ABBOTT
does not diligently pursue the completion of such clinical trials as provided in
Section 2.1 (B) and ABBOTT does not receive Regulatory Approval within three
years (3) of the date of the relevant regulatory filing, then SONUS may, but
does not have the obligation to, pursue such Regulatory Approval of the Product.
If SONUS determines to pursue such Regulatory Approval, then SONUS may conduct
any necessary research or clinical studies to obtain such Regulatory Approval of
the Product. ABBOTT will reimburse SONUS for all reasonable costs incurred by
SONUS in pursuing such Regulatory Approval.
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3. ALLOCATION OF PRODUCT RIGHTS AND RESPONSIBILITIES
3.1 Premise. Under this Article 3, ABBOTT and SONUS agree to a division
of responsibilities regarding the Product. If there is a material change in the
division of such responsibilities, whether by the agreement of the parties or by
operation of this Agreement, then the parties shall negotiate in good faith
toward a corresponding change in the royalty rates under Article 6.1. If the
parties are unable to agree to a reasonable modification of the royalty rates,
within thirty (30) days of the date on which they began discussing such
modification, then the parties shall utilize the Dispute Resolution Procedure
under Article 20 below to determine what modification of the royalty rates shall
apply.
3.2 Marketing and Sales.
(A) ABBOTT shall have the exclusive right and the associated
responsibilities for the marketing, sales, and technical support of the Product
in the Field in the Territory, which shall include responsibility for
importation, distribution, order entry, invoicing and collection regarding sales
of the Product. ABBOTT shall use its reasonable best efforts to optimize sales,
profitability, and market share of the Product in the Territory. The efforts of
ABBOTT shall be evidenced by carrying out those specific tasks as mutually
agreed to by the parties. ABBOTT shall prepare pre-and post-launch marketing
plans by Area for the Territory which shall be reviewed and approved by SONUS
prior to implementation, such approval not to be unreasonably withheld. ABBOTT
shall provide such marketing plans to SONUS no later than one hundred twenty
(120) days after the Effective Date.
(i) SONUS may, at its election, provide additional
technical support for the Product in the Field in Major Countries in
the Territory, at SONUS's expense. SONUS shall give ABBOTT advance
notice of each instance of SONUS's intention to do so, and, for each
instance, SONUS shall not begin providing such additional technical
support without first obtaining ABBOTT's approval of SONUS's plans for
such technical support, which approval will not be unreasonably
withheld.
(B) SONUS shall have the right to co-promote (as defined in
Article 3.2(D) below) the Product at its own expense in the Territory only under
the following circumstances:
(i) After the first anniversary of the First Sale
Date by an ABBOTT Affiliate to a Third Party in a Major Country in the
Territory, ABBOTT shall make minimum royalty payments to SONUS based on
fifty percent (50%) of the mutually agreed annual Net Sales forecast for
that Major Country. If ABBOTT fails to make such minimum royalty
payments, then SONUS may, as its sole remedy for such failure, elect to
co-promote the Product in the Major Country for which ABBOTT failed to
make such minimum royalty payments.
(a) SONUS shall notify ABBOTT in writing within
sixty (60) days of the date on which ABBOTT's missed minimum
royalty payment was due, of SONUS's intention to co-promote the
Product in that Major Country. SONUS' right to co-promote would
be effective thirty (30) days after the date of ABBOTT's receipt
of notice from SONUS.
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(b) If SONUS does not so inform ABBOTT, then
SONUS shall have waived its right to co-promote the
Product with regard to that specific failure of
ABBOTT to make its minimum royalty payments.
(c) Notwithstanding the foregoing provisions
of this Article 3.2(B)(i), SONUS shall not have the
right to co-promote if either of the following occur:
(1) ABBOTT's failure to make the
minimum royalty payment in a Major Country
in the Territory was due to the fact that
Regulatory Approval was not obtained within
the time frame contemplated by the parties
as set forth in the Plan for that Major
Country. The Net Sales forecast shall be
adjusted as mutually agreed by the parties
to reflect the actual times that Regulatory
Approvals are obtained and the actual
indications approved, and any material
changes to the assumptions for the Net Sales
forecast. If the parties are unable to agree
on such adjustment within thirty (30) days
of the date on which they began discussing
such adjustment, then the parties will
utilize the Dispute Resolution Procedure
under Article 20 to determine such
adjustment.
(2) ABBOTT pays the amount due,
plus interest running from the date on which
payment was due, at the United States prime
rate of interest as published in the Wall
Street Journal Midwest Edition, within
thirty (30) days of ABBOTT's receipt of
notice from SONUS that SONUS intends to
co-promote.
(ii) After the second anniversary of the first sale by an ABBOTT
Affiliate to a Third Party in a Major Country in an Area of the Territory,
ABBOTT shall make minimum royalty payments to SONUS based on fifty percent (50%)
of the mutually agreed annual Net Sales forecast for total Net Sales in the
Minor Countries in that Area. If ABBOTT fails to make such minimum royalty
payments, then SONUS may, as its sole remedy for such failure, elect to
terminate this Agreement with respect to all of the Minor Countries in the Area
for which ABBOTT failed to make such minimum royalty payments.
(a) SONUS shall notify ABBOTT in writing
within sixty (60) days of the date on which ABBOTT's
missed minimum royalty payment was due, of SONUS's
intention to terminate the Agreement with respect to
the Minor Countries in that Area. SONUS' right to
terminate would be effective thirty (30) days after
the date of ABBOTT's receipt of notice from SONUS.
(b) If SONUS does not so inform ABBOTT, then
SONUS shall have waived its right to terminate the
Agreement with respect the Minor Countries in that
Area with regard to that specific failure of ABBOTT
to make its minimum royalty payments.
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(c) Notwithstanding the foregoing provisions
of this Article 3.2(B)(ii), SONUS shall not have the
right to terminate if either of the following occur:
(1) ABBOTT's failure to make the
minimum royalty payment for the Minor
Countries in that Area in the Territory was
due to the fact that Regulatory Approval was
not obtained within the time frame
contemplated by the parties as set forth in
the Plan for that Area. The Net Sales
forecast shall be adjusted as mutually
agreed by the parties to reflect the actual
times that Regulatory Approvals are obtained
and the actual indications approved, and any
material changes in the assumptions to the
Net Sales forecast. If the parties are
unable to agree to such adjustment within
thirty (30) days of the date on which they
began discussing such adjustment, the
parties shall utilize the Dispute Resolution
Procedure under Article 20 to determine such
adjustment.
(2) ABBOTT pays the amount due,
plus interest running from the date on which
payment was due, at the United States prime
rate of interest as published in the Wall
Street Journal Midwest Edition within thirty
(30) days of ABBOTT's receipt of notice from
SONUS that SONUS intends to terminate.
(iii) SONUS may co-promote the Product in the Territory at any time for
any one or more of the new indications specified in Article 2.2 above, if ABBOTT
has declined to provide financial support for research for such new
indication(s).
(C) SONUS's rights to co-promote the Product as set forth in
Article 3.2(B)(i) and (iii) include the right of SONUS to sublicense, transfer,
or grant, directly or indirectly, such rights to a Third Party in a Major
Country in the Territory.
(D) For purposes of this Agreement, "co-promotion" means the
detailing of the Product to a Third Party customer including providing
promotional materials and technical assistance, but does not include any
activity relating to the pricing, distribution or actual sale of the Product,
such as offering or negotiating pricing for the Product and accepting sales
orders. SONUS shall inform all such customers to place all sales resulting from
SONUS' co-promotion of the Product directly with ABBOTT and provide the
necessary sales processing information to the customer.
3.3 Raw Materials, Quality Control. SONUS shall be responsible for
procurement of all raw materials necessary for the manufacture of the Product as
well as quality control of the raw materials. ABBOTT shall be responsible for
any required quality control in the Territory. However, if the Product is
manufactured by SONUS or a Third Party supplier in the Territory, SONUS or such
Third Party supplier shall be responsible for quality control as it relates to
the manufacture of the Product. SONUS shall handle raw materials in accordance
with the applicable provisions of the Supply Agreement.
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3.4 Product Manufacture.
(A) Abbott Laboratories and SONUS have previously entered into
the Supply Agreement under which Abbott Laboratories has agreed to manufacture
the Product for SONUS. SONUS may purchase Product under the Supply Agreement to
fulfill ABBOTT Affiliates' purchase orders under Article 3.5. All manufacturing
of the Product by Abbott Laboratories for sale in the Territory by ABBOTT
Affiliates shall be in accordance with the terms of the Supply Agreement and the
specifications for the Product in effect under the Supply Agreement
("Specifications") attached hereto as Appendix 3.4. The parties agree to
negotiate in good faith an amendment to the Supply Agreement to include within
the terms of the Supply Agreement the purchase and sale of the kits consisting
of syringes, tubing and other accessories as are included in the final package
of the complete Product, including the pricing and other terms and conditions of
sale which are consistent with the Supply Agreement and the general custom and
practice within the industry regarding such materials.
(B) The Supply Agreement shall govern Abbott Laboratories's
manufacture of all Product provided to SONUS for sale by SONUS in the countries
referred to in Article 1.21(A)(ii) and SONUS's right to manufacture or have
manufactured the Product by a Third Party. SONUS shall give ABBOTT reasonable
prior notice in writing if SONUS decides to manufacture or have manufactured by
a Third Party the Product for purchase by ABBOTT Affiliates under this
Agreement. Upon such notice, ABBOTT and SONUS shall enter into good faith
negotiations to reach agreement on the terms and conditions for a Third Party
manufacturer for the Product to be purchased by ABBOTT Affiliates. If the
parties are unable to agree on such terms and conditions within thirty (30) days
of the date on which they began discussing such terms and conditions, then the
parties will utilize the Dispute Resolution Procedure under Article 20 to
determine what terms and conditions will apply.
(C) All Product manufactured by SONUS or by a Third Party
shall conform with the Specifications. Any Third Party manufacturer appointed by
SONUS to manufacture the Product must be approved by the FDA or EMEA and have a
reasonable history and record of conforming with current GMP.
(D) If any of the provisions of the Supply Agreement and this
Agreement are inconsistent, then the provisions of this Agreement shall control
for purposes of the manufacture and supply of Product subject to this Agreement.
3.5 Product Forecasts, Orders and Rejected Product.
(A) Not later than one hundred twenty (120) days prior to the
date of the first forecasted sale by an ABBOTT Affiliate or sublicensee to a
Third Party in each Country in the Territory and thereafter, at least thirty
(30) days prior to the first day of each fiscal quarter, ABBOTT shall furnish to
SONUS a rolling forecast of the quantities of the Product ABBOTT Affiliates
intend to order for sale in the Territory during the twelve (12) month period
commencing with such date of first sale as described above or such fiscal
quarter, as the case may be. The first three (3) months of such forecast shall
constitute a firm order and a binding commitment of ABBOTT Affiliates to
purchase such quantities as evidenced by purchase orders received from
11
ABBOTT Affiliates in accordance with Article 3.5(B). The balance of each such
forecast shall merely represent reasonable estimates, not purchase commitments
for the Product.
(B) ABBOTT Affiliates shall place each purchase order with
SONUS for Product to be delivered hereunder thirty (30) days prior to the
delivery date specified in each respective purchase order. SONUS may reject any
purchase order which exceeds one hundred fifty percent (150%) of the most
current forecast underlying such purchase order. No rejection shall be effective
unless in writing and delivered to the ordering ABBOTT Affiliate within ten (10)
days of SONUS's receipt of such ABBOTT Affiliates' purchase order. The ordering
ABBOTT Affiliate shall be obligated to purchase all Product ordered and
delivered by the specified delivery date provided that, if Product is
manufactured by SONUS or a Third Party manufacturer and not by Abbott
Laboratories, such Product meets the Specifications. All shipments of Product to
ABBOTT or ABBOTT Affiliates shall be made FOB SONUS', Abbott Laboratories', or
supplier's place of manufacture.
(C) If the Product is manufactured solely by SONUS or a Third
Party and if SONUS is unable to meet its supply obligations under any purchase
order, then SONUS shall give prompt written notice to ABBOTT. In such event, if
SONUS fails, or notifies ABBOTT that it will fail, to supply any amount of
Product for a ninety (90) day period, then ABBOTT may:
(i) set up a manufacturing source, at the reasonable
expense of SONUS, and manufacture the Product or have the
Product manufactured by a Third Party at the reasonable
expense of SONUS for the time period of such failure or one
hundred eighty (180) days, whichever is longer, or
(ii) terminate this Agreement in accordance with
Article 11.3(D). The rights of ABBOTT to terminate the
Agreement pursuant to this Article 3.5(C) will not apply if
Abbott Laboratories is in default of the Supply Agreement,
unless Abbott Laboratories's default or inability to supply is
directly or indirectly due to SONUS, including, but not
limited to, SONUS's failure to supply raw materials to Abbott
Laboratories as required under the Supply Agreement and this
Agreement.
(D) If the Product is manufactured solely by Abbott
Laboratories and if Abbott Laboratories is unable to meet its supply obligations
under any purchase order, then ABBOTT shall give prompt written notice to SONUS.
In such event, if ABBOTT fails, or notifies SONUS that it will fail, to supply
any amount of Product for a ninety (90) day period, then SONUS may:
(i) set up a manufacturing source, at the reasonable
expense of ABBOTT, and manufacture or have the Product
manufactured, by a Third Party at the reasonable expense of
ABBOTT for the time period of such failure or one hundred
eighty (180) days, whichever is longer, or
(ii) terminate this Agreement in accordance with
Article 11.3(D). Notwithstanding the foregoing, SONUS shall
not have the right to terminate this Agreement if the cause of
Abbott Laboratories's inability to supply is directly or
indirectly due to SONUS, including, but not limited to, SONUS'
failure to supply
12
raw materials to Abbott Laboratories as required under the
Supply Agreement and this Agreement.
(E) If SONUS and Abbott Laboratories are both manufacturing or
otherwise supplying Finished Product to ABBOTT for sale in the Territory and
either Abbott Laboratories or SONUS ("Non-Performing Party") notifies the other
party ("Other Party") that the Non-Performing Party is unable to supply Product
to the Other Party or either fails to supply Product pursuant to this Article
3.5, and is unable to correct such failure within ninety (90) days of written
notice thereof from the Other Party, then the right of Non-Performing Party to
manufacture or otherwise supply Product to the Other Party under the Supply
Agreement shall cease until such time as the Non-Performing Party notifies the
other that it is again able to supply Product.
(F) For Product provided by SONUS to ABBOTT Affiliates which
SONUS has provided itself or secured from a party other than Abbott
Laboratories, ABBOTT Affiliates shall notify SONUS in writing of any claim
relating to damaged, defective or nonconforming Product or any shortage in
quantity of any shipment of Product within thirty (30) days of receipt of such
Product by ABBOTT Affiliates. In the event of such rejection or shortage, SONUS
shall replace the rejected Product or make up the shortage within thirty (30)
days of receiving such notice, at no additional cost to ABBOTT or its
Affiliates, and shall make arrangements with ABBOTT Affiliates for the return of
any rejected Product at the expense of SONUS. For Products provided by SONUS to
ABBOTT Affiliates which SONUS has secured from Abbott Laboratories, ABBOTT shall
accept such Products as conforming upon delivery to ABBOTT Affiliates.
(G) In the event that SONUS is unable to provide raw material
under the Supply Agreement for a period of ninety (90) days or longer, then
ABBOTT shall have the right to purchase the raw materials from a Third Party at
SONUS' expense or manufacture the raw materials or have a Third Party
manufacture the raw materials at SONUS' expense.
3.6 Samples. ABBOTT will reimburse SONUS on a Fiscal Quarterly basis
for SONUS's actual cost for all samples of the Product utilized by ABBOTT in the
Territory. For purposes of this Agreement, a "sample" is a Unit of the Product
which is utilized by ABBOTT in the Territory for marketing purposes.
3.7 Post-Launch Regulatory Affairs, Technical Marketing/Medical
Support.
(A) ABBOTT shall be responsible for all post-launch
communications with regulatory agencies in the Territory, including review of
promotional materials, and all post-launch requirements of such agencies
regarding the Product (except those communications and requirements specifically
associated with GMP applicable to the manufacture of the Product by Abbott
Laboratories as addressed in the Supply Agreement). ABBOTT shall be responsible
for all medical communication and adverse drug event reporting with regulatory
agencies in the Territory and will consult with SONUS prior to such required
reports to allow SONUS to conduct an investigation of the event and to review
all such reports prior to submission to regulatory agencies. Notwithstanding the
foregoing provision, however, nothing in this Agreement shall require ABBOTT to
delay submitting any adverse event report beyond the time limits set for
reporting such events by such regulatory agencies. Each party shall promptly
notify the other party of all communications from and to such agencies regarding
the Product.
13
(B) ABBOTT shall be responsible for all medical and technical
support in the Field in the Territory, including those specific tasks mutually
agreed to by the parties, except as otherwise provided under Article 3.2(A)(i).
This support shall be designed to fit with the Product positioning and ABBOTT's
promotional plan.
3.8 Product Recalls. In the event (A) any regulatory agency issues a
request, directive or order that the Product be recalled, or (B) a court of
competent jurisdiction orders such a recall, or (C) ABBOTT and SONUS, after
consultation with each other, determine that the Product should be recalled, the
parties shall take all appropriate corrective actions, and shall cooperate in
the investigations surrounding the recall. ABBOTT shall handle notification of
customers, return of Product from customers and all regulatory agency or court
communications and requests regarding any recalls. If such recall results from
any cause or event arising from a sole responsibility of SONUS as set forth in
this Agreement or in the Supply Agreement or is solely attributable to SONUS,
SONUS shall be responsible for all expenses of the recall and ABBOTT may deduct
any such expenses borne by ABBOTT from any payment due to SONUS under this
Agreement. If such recall results from a sole responsibility of ABBOTT as set
forth in this Agreement or in the Supply Agreement or is solely attributable to
ABBOTT, ABBOTT shall be responsible for the expenses of recall and shall
reimburse SONUS for expenses incurred by SONUS for such recall. In the event
that the recall results from any cause(s) or event(s) arising from a joint
responsibility of the parties or partially from a responsibility of SONUS and
partially from a responsibility of ABBOTT, SONUS and ABBOTT shall be jointly
responsible for expenses of the recall in proportion to each such party's
proximate fault with respect to the recall. For the purpose of this Agreement,
the expenses of recall shall include, without limitation, the expenses of
notification and destruction or return of the recalled Product, cost for the
Product recalled, legal expenses, inventory write-offs and penalties resulting
from third-party contracts but shall not include any indirect or consequential
losses or damages.
3.9 Patents; Know-How.
(A) SONUS shall be responsible for and shall diligently carry
out and shall bear all costs (including attorney fees) for the preparation,
filing, prosecution, maintenance, and extensions, if any, of all patents or
patent applications included in the Licensed Patents. In addition, SONUS shall
promptly advise ABBOTT of all material correspondence, filings and notices of
action between SONUS and government patent offices relating to or directed to
the Licensed Patents.
(i) If SONUS elects not to prepare and file a patent
application or elects to discontinue the prosecution of any patent application
or maintenance of any patent under the Licensed Patents, relating to an
Improvement referenced under Article 8 where SONUS has the right to file,
prosecute and/or maintain such patent application or patent, then SONUS shall
promptly notify ABBOTT and supply ABBOTT with copies of all written
communications with the government patent office or offices involved in
sufficient time to maintain such patents and/or continue prosecution of such
patent application.
(ii) In the event that ABBOTT reasonably determines
that the failure of SONUS to pursue the filing and prosecution of the patent
application or to maintain such patent would adversely affect the rights of
ABBOTT under this Agreement, ABBOTT may, but does not have the obligation to,
file or continue prosecution of such application or maintain such patent. If
ABBOTT so elects, then SONUS shall be responsible for the reasonable expenses
(including attorney
14
fees) incurred by ABBOTT in connection with such filing or prosecution and shall
promptly reimburse ABBOTT for such costs upon notice by ABBOTT. SONUS will fully
cooperate with ABBOTT in such prosecution or maintenances including but not
limited to the execution and provision of all documents ABBOTT deems necessary
for such prosecution and/or maintenance, at SONUS's expense.
(B) SONUS shall register ABBOTT as SONUS' exclusive licensee
under the Licensed Patents in the relevant government patent office(s) of each
Country in the Territory, promptly upon ABBOTT's request at ABBOTT's expense.
(C) If either ABBOTT or SONUS has knowledge of any
infringement or likely infringement of a Licensed Patent or unauthorized use of
Know-How in the Territory by a Third Party, then the party having such knowledge
shall promptly inform the other party in writing, and the parties shall promptly
consult with one another regarding the action to be taken.
(i) Unless the parties otherwise mutually agree,
SONUS shall promptly initiate actions against such Third Party with respect to
such infringement. Each party shall cooperate with the other party in the
prosecution thereof. SONUS shall have the right to determine the strategy of the
prosecution of such suit.
(ii) Notwithstanding the foregoing, if ABBOTT is
participating in the prosecution, ABBOTT shall be entitled to have input in the
strategy of prosecution. SONUS shall have the right to determine the counsel to
be retained by the parties in connection with such action or claim, which
counsel shall be approved by ABBOTT, such approval not to be unreasonably
withheld. SONUS may seek the assistance and participation of ABBOTT in the
action or claim.
(iii) If SONUS requests ABBOTT's participation, (i)
ABBOTT shall participate in the prosecution if the action or claim involves an
infringement by a Third Party's product, or potential product, which
substantially falls within the definition of Product in Article 1.19, and (ii)
ABBOTT may participate if ABBOTT determines that it would be in ABBOTT's
interests to participate if the action or claim does not directly involve an
infringement by a Third Party's product, or potential product, which
substantially falls within the definition of Product in Article 1.19.
Notwithstanding the foregoing, in the event that the action or claim involves an
infringement by a Third Party's product, or potential product, which
substantially falls within the definition of Product in Article 1.19. ABBOTT
shall have the right to participate, on an equal basis with SONUS, in the
prosecution of such action or claim.
(iv) If SONUS prosecutes such claim without the
participation of ABBOTT, the costs and expenses incurred in connection with such
action or claim shall be borne by SONUS. If ABBOTT participates in the action or
claim, the costs and expenses incurred in connection with such action or claim
shall be shared equally by SONUS and ABBOTT.
(v) If ABBOTT does not participate in the prosecution
of the action or claim, or unless otherwise provided in this Article 3.9(C), any
offer of settlement and any settlement shall be in SONUS's discretion, provided
that any offer of settlement or settlement does not conflict with licenses and
options granted under Article 5. If ABBOTT participates in the prosecution of
the action or claim any offer of settlement and any settlement shall be subject
to the prior approval of
15
both ABBOTT and SONUS. Each party agrees not to withhold unreasonably its
approval of any such settlement.
(vi) If ABBOTT does not participate in the
prosecution of the action or claim, any recovery of damages or other payments
received in connection with such action or claim shall be realized by SONUS. Any
recovery of damages or other payments received in connection with such action
for which ABBOTT participates in the prosecution shall be allocated between and
disbursed to ABBOTT and SONUS as follows: (i) first, to reimburse ABBOTT and
SONUS for their respective costs and expenses incurred in connection with such
action, and (ii) the balance of recovery or other payments to be divided equally
between ABBOTT and SONUS. In the event that the recovery of damages is not
sufficient to cover costs and expenses incurred by the parties in connection
with such action, each party shall be reimbursed on a pro rata basis according
to each party's percentage of the total costs and expenses incurred by the
parties together.
(vii) ABBOTT may, but does not have the obligation
to, participate in the prosecution of any infringement action in any Country
referred to in Article 1.21(A)(ii). However, if ABBOTT does participate in any
action and prosecution in any such country, ABBOTT shall be entitled to share in
the proceeds or recovery of damages or other payments received in connection
with such action. Such amounts shall be allocated between and disbursed to
ABBOTT and SONUS as follows: (i) first, to reimburse ABBOTT for ABBOTT's costs
and expenses incurred in connection with such action, (ii) second, to reimburse
SONUS for SONUS' costs and expenses incurred in connection with such action, and
(iii) the balance of recovery or other payments to be divided equally between
ABBOTT and SONUS.
(D) If a claim or suit is brought against ABBOTT alleging: (i)
infringement of any patent or unauthorized use of any Know-How owned by a Third
Party by reason of ABBOTT's exercise of its licenses hereunder; or (ii) an
interest in any patent under the Licensed Patents, ABBOTT shall promptly give
written notice to SONUS. SONUS, within a reasonable time after such notice, but
not longer than sixty (60) days, shall advise ABBOTT of SONUS's decision on the
intended disposition of such claim or suit. If SONUS elects not to dispose of
the claim or defend the suit, ABBOTT may do so. The parties will furnish each
other with reasonable assistance regarding such claim or suit as may be
requested by the other party. Any offer of settlement or settlement of the claim
or suit by one party shall have the prior written approval of the other party,
such approval not to be unreasonably withheld. ABBOTT shall have the right to
settle such claim or suit by payment in any form. If any amounts are paid or
payable to a Third Party by ABBOTT or any damages and/or costs are awarded
against ABBOTT in such suit, then at the time of payment, such amounts, damages
and costs may be offset against any royalty due in such year or, if necessary,
in succeeding years to SONUS. If ABBOTT is prevented from marketing and selling
the Product in any Major Country in the Territory as a result of settlement or
judgment arising from any such claim or suit, then, on the basis of sales
forecasted for the Countries affected by such settlement or judgment as a
percentage of forecasted sales for the Territory ("pro rata portion"), (i)
ABBOTT shall not be obligated to make the pro rata portion of the payments owed
to SONUS pursuant to Appendices 5.2 and 5.3, and, (ii) to the extent that ABBOTT
has made such payments, the pro rata portion of such payments, including
interest running from the date on which ABBOTT made such payment(s) at the
United States prime rate of interest as published in the Wall Street Journal
Midwest Edition, shall be offset against future payments to SONUS. If for any
reason the pro rata portion cannot be fully offset against such future payments,
SONUS shall repay to ABBOTT the outstanding
16
amounts within ninety (90) days of the date of early termination or expiration
of this Agreement, with interest running from the date on which ABBOTT made such
payment(s), at the United States prime rate of interest as published in the Wall
Street Journal Midwest Edition.
3.10 Trademarks. SONUS and ABBOTT agree to enter into a Trademark
License Agreement, pursuant to which SONUS will grant to ABBOTT a nonexclusive
license (the "Trademark License") in the Territory to use the SONUS trademarks
set forth in Appendix 3.10 on all labels, advertisements, promotional materials
and literature for the product. To the extent that the terms of the Trademark
License Agreement are inconsistent with the terms of this Agreement, this
Agreement shall govern. The parties shall enter into the Trademark License
Agreement no later than thirty (30) days after the Effective Date.
4. OTHER TERRITORIES
SONUS has previously granted to Daiichi Pharmaceutical Co., Ltd.
("Daiichi") the right to market and sell the Product in the Countries referred
to in Article 1.21(A)(ii) pursuant to an Agreement dated March 31, 1995 between
SONUS and Daiichi ("SONUS/Daiichi Agreement"). In the event that any Country
covered under the SONUS/Daiichi Agreement is no longer covered under the
SONUS/Daiichi Agreement, SONUS shall within sixty (60) days notify ABBOTT and
facilitate discussions with ABBOTT regarding ABBOTT acquiring marketing and sale
rights for the Product in such Country.
5. MILESTONES, LICENSES AND OPTIONS
5.1 Licenses and Options
(A) SONUS hereby grants to ABBOTT an exclusive license,
exclusive even as to SONUS, with the right to sublicense Affiliates and Third
Parties, under the Licensed Patents and Know-How to use, offer to sell and sell
the Product in the Field in the Territory (except for the Pacific/Asia/Africa
Area) subject to SONUS' co-promotion rights pursuant to Article 3.2(B). The
right to sublicense to a Third Party shall be subject to the approval of SONUS,
such approval not to be unreasonably withheld.
(B) SONUS hereby grants to ABBOTT a nonexclusive license, with
the right to sublicense Affiliates and Third Parties, under the Licensed Patents
and Know-How to make, have made, and import the Product for the Field in the
Territory (except for the Pacific/Asia/Africa Area) subject to the limitations
set forth in Article 3.5. The right to sublicense to a Third Party shall be
subject to the approval of SONUS, such approval not to be unreasonably withheld.
(C) (i) SONUS hereby grants to ABBOTT an exclusive option to
obtain an exclusive license, with the right to sublicense Affiliates and Third
Parties, under the Licensed Patents and Know-How, to use, offer to sell and sell
the Product in the Field in the Pacific/Asia/Africa Area in the Territory,
subject to SONUS's co-promotion rights pursuant to Article 3.2(B). The right to
sublicense shall be subject to the approval of SONUS, such approval not to be
unreasonably withheld.
17
(ii) SONUS hereby grants to ABBOTT an exclusive
option to obtain a nonexclusive license, with the right to sublicense Affiliates
and Third Parties, under the Licensed Patents and Know-How to make, have made,
and import the Product for the Field in the Pacific/Asia/Africa Area in the
Territory subject to the limitations set forth in Article 3.5. The right to
sublicense to a Third Party shall be subject to the approval of SONUS, such
approval not to be unreasonably withheld.
(iii) Notwithstanding the foregoing, ABBOTT has the
right to seek immediately and obtain Regulatory Approval in each Country in the
Pacific/Asia/Africa Area in the Territory. If ABBOTT does not exercise its
option pursuant to this Article 5.1, then, after the expiration of the option,
ABBOTT shall promptly take all actions reasonably required to transfer any
Regulatory Approvals obtained for such Countries to SONUS at no cost to SONUS.
(D) The term of the options granted to ABBOTT under Article
5.1(C) above shall expire on December 15, 1997.
(E) SONUS may not exercise, and may not grant to any Third
Party the right to exercise, any rights included in the options granted to
ABBOTT under Article 5.1 (C) above, until after the expiration of ABBOTT's
option pursuant to Article 5.1 (D) above.
(F) By and upon ABBOTT's exercise of the option(s) granted
under Article 5.1(C), which exercise shall be accomplished by ABBOTT providing
written notice to SONUS, the licenses relating respectively to the options shall
be granted to ABBOTT automatically, and such licenses shall become a part of,
and subject to the terms and conditions of, this Agreement.
5.2 Milestones and License Fees. ABBOTT shall pay SONUS twenty-two
million United States dollars (US $22,000,000) for the accomplishment of
milestones as set forth in Appendix 5.2, and for the grant of the licenses under
the Licensed Patents and Know-How in Article 5.1. These payments shall be
nonrefundable, shall not be creditable against the Royalty under Article 6, and
shall be paid by ABBOTT to SONUS in the amounts and at the times set forth on
the schedule in Appendix 5.2.
5.3 Offsettable Milestones, License and Option Fees. ABBOTT shall pay
to SONUS additional fees for the accomplishment of milestones as set forth in
Appendix 5.3, for the grant of the licenses under the Licensed Patents and
Know-How in Article 5.1 and for the options granted under Article 5.1(C),
pursuant to the schedule set forth on Appendix 5.3. Such fees shall be
nonrefundable, but shall be creditable against the Royalty payable under Article
6 up to a maximum of thirty-eight (38%) of the Royalties payable in each of the
Royalty Quarters (as defined below) of the first two (2) years of sales in the
Territory, and up to a maximum of fifty percent (50%) of the Royalties payable
in each Royalty Quarter thereafter.
6. ROYALTY; ROYALTY PAYMENTS
6.1 Royalty Rate. The Royalty Rate applicable to calculate ABBOTT's
Royalty payment, pursuant to Article 6.2 below, shall be based upon the level of
ABBOTT's annual Net Sales in the Territory, as follows:
18
Annual Net Sales (US$) Royalty Rate
--------------------------------------------------------
$0 - $60 million 36% of Net Sales
greater than $60 million - $125 million 38% of Net Sales
greater than $125 million - $225 million 40% of Net Sales
greater than $225 million 42% of Net Sales
(A) These royalty rates include the cost of the Product
supplied by SONUS.
6.2 Calculation of Royalty. Following the First Sale Date, ABBOTT shall
pay SONUS an amount as follows ("Royalty"):
Royalty = Royalty Rate x Units of Finished Product x Average Unit Selling
accepted into Finished Price from Fiscal
Goods Inventory by ABBOTT Quarter prior to Royalty
Affiliates in the Territory Quarter
during the Royalty Quarter
(defined in Section 6.4(A)
below) Less: returned goods,
samples, free goods, inventory
outdates and damage, recalls
and/or withdrawals ("Net Units
Accepted")
For the first Royalty Quarter (as defined in Article 6.4(A) below) covered by
this Article 6, the estimated Average Unit Selling Price shall be communicated
to SONUS on or before ninety (90) days prior to the First Shipment Date.
6.3 Reduction of Royalty. Royalty rates shall be reduced by fifty
percent (50%) for any Country in the Territory in which patent coverage is not
established or expires or is found invalid or unenforceable and a Third Party
sells or offers to sell the Product in that Country, and if in ABBOTT's
reasonable determination, such offer or sale by such Third Party has or will
have a material adverse effect on ABBOTT's business in such Country. If SONUS
disagrees with ABBOTT's determination, SONUS may seek resolution of this issue
pursuant to the Dispute Resolution Procedure under Article 20.
6.4 Royalty Payments.
(A) Royalty Payments.
(i) The Royalty for any ABBOTT Fiscal Quarter
("Royalty Quarter") shall be paid within thirty (30) days
after the end of each such Royalty Quarter. The payment will
be made in United States dollars by wire transfer. SONUS shall
supply to ABBOTT all wire transfer account information.
19
(ii) ABBOTT's first Royalty payment will include
Units accepted into Finished Goods Inventory prior to the date
of the first sale by an ABBOTT Affiliate to a Third Party in
each Country in the Territory.
(iii) Royalty payments made by ABBOTT pursuant to
Article 6 shall be credited against the amount of minimum
royalty owed by ABBOTT pursuant to Article 3.2(B).
(iv) There will be no penalty for late payment of any
Royalty, including the payment of any minimum royalty under
Article 3.2(B), until such payment is more than fifteen (15 )
days overdue. After any such payment is more than fifteen (15)
days overdue, ABBOTT shall also pay to SONUS interest on the
overdue payment, running from the date on which payment was
due, at the United States prime rate then prevailing as
published in the Wall Street Journal (Midwest Edition).
(v) ABBOTT will calculate on quarterly basis an
estimated Royalty payment using the actual Net Sales in the
Fiscal Quarter at the average Royalty Rate based on the
mutually agreed annual Net Sales Forecast levels for the
Territory for the Fiscal year which includes such Fiscal
Quarter.
(vi) Within thirty (30) days of the end of each
Fiscal Year, ABBOTT will calculate the actual Royalties due to
SONUS based on the actual Net Sales in the Fiscal Year
utilizing the applicable Royalty Rates from Article 6.1. Any
required adjustment for the Fiscal Year will be reflected in
the Royalty payment made to SONUS for the first Fiscal Quarter
of the following Fiscal Year.
(B) Royalty Report. At the time of each wire transfer under
Article 6.4(A), ABBOTT shall send to SONUS by electronic-mail, facsimile or
overnight courier, a report to SONUS setting forth the calculation used to
determine the Royalty. Such report shall set forth (i) the Net Units Accepted
(see Article 6.2); (ii) Net Sales, Net Units Shipped (see Article 1.3), and the
Average Unit Selling Price from the fiscal quarter prior to the Royalty Quarter
(or, in the case of the first Royalty Quarter covered by this Article 6, the
estimated Average Unit Selling Price previously communicated to SONUS pursuant
to Article 6.2); and (iii) the Royalty. The Average Unit Selling Price shall be
computed by translating the sales in local currency into United States dollars
at the average exchange rate published in International Financial Statistics by
the International Monetary Fund for the month ending the Royalty Quarter.
(C) Payment by Affiliate or Sublicensee. SONUS agrees that any
ABBOTT Affiliate or Third Party sublicensee may pay, on behalf of ABBOTT, any
obligation of ABBOTT under this Agreement, and that such payment shall be
received in lieu of payment by ABBOTT in satisfaction of such obligation,
provided, however, that any such payment will not result in adverse tax
consequences to SONUS.
(D) Agreement to Contract with Affiliate or Third Party
Sublicensee. Upon written request of ABBOTT, SONUS shall contract directly with
any ABBOTT Affiliate or Third Party sublicensee to provide such Affiliate or
Third Party sublicensee the licenses granted under this Agreement in any country
of the Territory on substantially the same terms and conditions as those
20
contained in this Agreement, provided that ABBOTT shall guarantee to SONUS
performance of such Affiliate's or Third Party sublicensee's duties and
obligations under such contract.
(E) Taxes. All taxes assessed or imposed against, or required
to be withheld from payments due SONUS under this Agreement shall be deducted
from amounts payable hereunder and shall be paid to appropriate fiscal or tax
authorities on behalf of SONUS. Tax receipts received by ABBOTT evidencing
payment of such taxes shall be forwarded promptly to SONUS.
6.5 SONUS Co-Promotion. In the event that SONUS is co-promoting the
Product in the Territory pursuant to Article 3.2(B), all sales of Product
resulting from SONUS' promotional efforts shall be made by ABBOTT and included
in Net Sales for purposes of the Royalty calculation. In the event that SONUS is
co-promoting the Product pursuant to Article 3.2(B)(i), the Royalty rate payable
by ABBOTT pursuant to Article 6.1 shall not be adjusted. Further, in the event
that SONUS is co-promoting the Product pursuant to Article 3.2(B)(iii), the
royalty rate payable by ABBOTT pursuant to Article 6.1 shall be adjusted to
reflect SONUS's actual contribution at such time and to such amount as the
parties mutually agree. If the parties fail to agree to a reasonable
modification of the royalty rates, then the parties shall utilize the Dispute
Resolution Procedure under Article 20 below to determine what modification of
the royalty rates shall apply.
6.6 Records and Audit. ABBOTT shall keep and maintain records of sales
made pursuant to this Agreement. On a monthly basis, ABBOTT shall provide SONUS
with records of sales of Units by list numbers which will include information by
Major Country and Area consistent with ABBOTT's other products of a similar
nature in the normal course of business. On a quarterly basis, ABBOTT shall
provide SONUS with reports reconciling sales of Products with discounts and
other deductions to support Net Sales figures. Such records shall be kept for a
period of four (4) years after the sales period to which such records relate.
During this period, such records shall be open to inspection upon reasonable
written notice by SONUS to ABBOTT. Such inspection shall be performed by an
independent certified public accountant, recognized nationally in the United
States, selected by SONUS and approved by ABBOTT, which approval shall not be
unreasonably withheld. All expenses of such inspection shall be borne by SONUS.
However, if an inspection reveals that payments to SONUS have been understated
by five percent (5%) or more, and if such understatement is greater than
$25,000, ABBOTT shall pay the cost of inspection, the understated amount and
interest, running from the date on which the payment was originally due at the
United States prime rate of interest then prevailing as published in the Wall
Street Journal (Midwest Edition) on the understated amount. Any independent
certified public accountant engaged by SONUS shall sign a confidentiality
agreement prior to any audit and shall then have the right to examine the
records kept pursuant to this Agreement and report findings (but not the
underlying data) of the examination to SONUS as is necessary to evidence that
records were or were not maintained and used in accordance with this Agreement.
A copy of any report provided to SONUS by the independent certified public
accountant shall be given concurrently to ABBOTT.
7. BUYOUT OPTION
It is the intent of the parties to provide for a buyout of this
Agreement by one party from the other subject to the mutual agreement of the
parties. On the sixth (6th), ninth (9th), and twelfth (12th) anniversary of the
Effective Date of the United States Agreement, either party may give written
notice to the other party of its interest in buying out the other party's rights
and obligations
21
under this Agreement. If both parties agree, a process will be established
whereby either party may buy out the rights and obligations of the other party
at a price equal to or greater than the net present value of the projected net
profit before tax, discounted at fifteen percent (15%) for the remaining term of
the Agreement ("Option Price"). If both parties desire to exercise the buyout
and ABBOTT and SONUS do agree on the Option Price, then the representatives of
ABBOTT and SONUS shall meet and simultaneously exchange closed bids, which bids
shall be opened in the presence of both representatives. If both parties agree,
the higher bid shall prevail. If the parties mutually agree that the buyout is
to take place, the parties shall enter into an agreement that sets forth the
timetable and process for the orderly transfer of such rights. If both parties
do not agree on the calculation of the buyout price or do not agree on the
transfer of rights and terms of the buyout, then the buyout shall not take place
and notwithstanding anything else in this Article, the buyout option will not be
effective again during the remaining term of this Agreement.
8. IMPROVEMENTS
8.1 ABBOTT Improvements. ABBOTT shall promptly notify SONUS of any
Improvements of ABBOTT relating to the Product and of any efforts by ABBOTT to
patent such Improvements outside the Territory (except for the United States)
including, but not limited to, designation of the specific countries in which
any patent application related thereto is to be filed. SONUS shall have a
royalty-free nonexclusive license, without the right to sublicense or transfer,
to such Improvements outside the Territory (except for the United States)
whether patentable, patented or kept by ABBOTT as proprietary know-how or trade
secret.
8.2 SONUS Improvements . SONUS shall promptly notify ABBOTT of any
Improvements of SONUS and of any efforts by SONUS to patent such Improvements in
the Territory, including, but not limited to, designation of the specific
countries in which any patent application related thereto is to be filed. Any
patent application related to such Improvement, and any patent issued from such
application, including any continuations-in-part, divisionals, extensions,
renewals, reexaminations, and reissues, shall become part of the Licensed
Patents under this Agreement and Appendix 1.13 shall be modified to reflect the
addition to Licensed Patents. Any such Improvement which is not part of the
Licensed Patents shall become part of the Know-How.
8.3 ABBOTT and SONUS Improvements. For any Improvements of ABBOTT and
SONUS jointly, SONUS shall have exclusive rights, without the right to
sublicense or transfer, outside the Territory (except for the rights of Abbott
Laboratories in the United States pursuant to the United States Agreement), and
ABBOTT shall have exclusive rights, without the right to sublicense or transfer,
within the Territory and Abbott Laboratories shall have such rights in the
United States pursuant to the U.S. Agreement.
9. RIGHT OF FIRST REFUSAL FOR ADDITIONAL PRODUCTS
(A) In the event SONUS desires to grant any license to market, sell
and/or distribute to a Third Party, any ultrasound diagnostic imaging product
for the Field and in the Territory which are not covered by the licenses set
forth in Article 5 or the terms of Article 2.2 and which are the proprietary
technology of SONUS, then ABBOTT shall have a right of first refusal with
respect to such license. If SONUS desires to solicit and/or receives any offer
from any Third Party to market, sell and/or distribute such product for the
Field in the Territory, then SONUS shall promptly give
22
written notice to ABBOTT. Within thirty (30) days of such notice, ABBOTT shall
indicate whether or not it is interested in such product. If ABBOTT is
interested, SONUS and ABBOTT shall negotiate in good faith for a maximum of
sixty (60) days to mutually determine the material terms of a definitive
agreement regarding such product. If ABBOTT and SONUS do not reach such
agreement, but during the negotiation period, ABBOTT offered in writing economic
terms which were rejected by SONUS, and during the term of this Agreement SONUS
subsequently solicits and/or receives a bona fide Third Party offer, then the
following terms shall apply:
(i) If SONUS determines that such Third Party offer
is on the same or less economic terms considered as a whole
than those offered by ABBOTT, then SONUS shall promptly notify
ABBOTT in writing. ABBOTT may then offer to meet such Third
Party offer within forty-five (45) days from such notice. The
parties will then negotiate in good faith towards a definitive
agreement for the product. If ABBOTT does not offer to meet
such Third Party offer within such forty-five (45) day period,
then ABBOTT shall have no further rights under this Article 9
(A) with respect to such product.
(ii) If SONUS determines that such Third Party offer
is on better economic terms considered as a whole than those
offered by ABBOTT ("better economic terms") then SONUS shall
promptly notify ABBOTT in writing, which notice shall include
such information as shall be necessary for ABBOTT to verify
the economic terms of such Third Party offer. If ABBOTT
notifies SONUS within five (5) business days of receipt of
such notice that ABBOTT disagrees with SONUS' determination
that such Third Party offer is on better economic terms, the
parties will retain an independent "Big 6" United States
national accounting firm, which has no current relationship
with either ABBOTT or SONUS, to determine whether such Third
Party offer is on better economic terms. If the parties are
unable to agree upon an acceptable accounting firm for this
purpose, within five (5) business days of the date on which
they first attempted to so agree, then the accounting firm
shall be selected by lot. The accounting firm's determination
shall then be made within ten (10 ) business days from the
date on which the parties submitted the issue to such firm,
and such firm's determination shall be final and binding upon
the parties. If such Third Party offer is on better economic
terms, then ABBOTT shall have no further rights under this
Article 9(A) with respect to such product. If such Third Party
offer is not on better economic terms, ABBOTT may then offer
to meet such Third Party offer within forty-five (45) days
from such final determination. The parties will then negotiate
in good faith towards a definitive agreement for the product.
If ABBOTT does not offer to meet such Third Party offer within
such forty-five (45) day period, then ABBOTT shall have no
further rights under this Article 9 (A) with respect to such
product.
(B) If SONUS desires to market, sell and/or distribute such product for
the Field and in the Territory itself, then SONUS shall promptly give written
notice to ABBOTT. Within thirty (30) days of such notice ABBOTT may offer to
SONUS terms under which ABBOTT proposes to market, sell and distribute such
product for the Field and in the Territory. If ABBOTT makes such an offer then
SONUS and ABBOTT shall negotiate in good faith for a maximum of sixty (60) days
to mutually determine the material terms of a definitive agreement regarding
such product. If the
23
parties are unable to agree on the terms of such agreement regarding such
product within the sixty (60) day period, then SONUS may market, sell and/or
distribute such product for the Field and in the Territory, subject to Article
15 below.
10. REPRESENTATIONS AND WARRANTIES
10.1 SONUS hereby represents and warrants that:
(A) SONUS has the full right, power and corporate authority to
enter into this Agreement, and to make the promises and grant the licenses set
forth in this Agreement and that there are no outstanding agreements,
assignments or encumbrances in existence inconsistent with the provisions of
this Agreement.
(B) To the best knowledge of SONUS, the Licensed Patents have
not or will not be obtained through any activity, omission or representation
that would limit or destroy the validity of the Licensed Patents and SONUS has
no knowledge or information that would materially adversely impact on or affect
the validity and/or enforceability of the Licensed Patents.
(C) There are no actions threatened or pending before any
court or governmental agency or other tribunal, except for those pending as of
the Effective Date before a governmental patent agency relating to the Licensed
Patents or Know-How.
(D) SONUS has not authorized and will not during the term of
this Agreement authorize Third Parties to practice the Licensed Patents or the
Know-How in the Field in the Territory or otherwise grant rights or licenses to
market and sell the Product in the Field in the Territory, other than as may be
granted in any patent infringement settlement as permitted pursuant to the terms
of Article 3.9(C) and as may be provided elsewhere in this Agreement.
(E) No Third Party has acquired, owns or possesses any right,
title or interest in or to the Licensed Patents or Know-How in the Field in the
Territory.
(F) The Licensed Patents and Know-How include all the patents
and patent applications and proprietary technology necessary to make, have made,
use, sell and import the Product in the Field in the Territory and, to the best
of SONUS' knowledge, ABBOTT's exercise of the rights granted under this
Agreement will not infringe any patent or other intellectual property rights of
any Third Party.
10.2 ABBOTT hereby represents and warrants that ABBOTT has the full
right, power and corporate authority to enter into this Agreement and to make
the promises set forth in this Agreement and that there are no outstanding
agreements, assignments or encumbrances in existence inconsistent with the
provisions of this Agreement.
10.3 THE PARTIES MAKE NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH
RESPECT TO THE SUBJECT OF THIS AGREEMENT. ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED BY THE PARTIES.
24
11. TERM AND TERMINATION
11.1 Term. The term of this Agreement shall commence on the Effective
Date, and, unless sooner terminated pursuant to Article 11.3 or Article 7, shall
continue in effect in a given country of the Territory until the latest to occur
of:
(A) expiration of the last to expire of the patents included
in the Licensed Patents in such country;
(B) the end of ten (10) years following the date of first
commercial sale of the Product in such country; and
(C) three (3) months after regulatory marketing approval of
the first generic form of the Product to be marketed by a Third Party in a
country in the Territory.
11.2 Early Termination. This Agreement may be terminated in accordance
with the following provisions:
(A) Surrender. In whole by ABBOTT's surrender and termination
of all of the licenses and rights granted hereunder at any time upon one (1)
year prior written notice to SONUS.
(B) Insolvency. By notice by either party to the other party
upon (i) the insolvency of the other party, or the appointment of a receiver by
the other party for all or any substantial part of its properties, provided that
such receiver is not discharged within sixty (60) days of his appointment; (ii)
the adjudication of the other party as a bankrupt; (iii) the admission by the
other party in writing of its inability to generally pay its debts as they
become due; (iv) the execution by the other party of an assignment for the
benefit of its creditors; or (v) the filing by the other party of a petition to
be adjudged a bankrupt, or a petition or answer admitting the material
allegations of a petition filed against the other party in any bankruptcy
proceeding, or the act of the other party in instituting or voluntarily being or
becoming a party to any other judicial proceeding intended to effect a discharge
of the debts of the other party, in whole or in substantial part.
(C) Product Failure. If the Product is found to be not safe or
efficacious by ABBOTT, then ABBOTT may terminate this Agreement upon thirty (30)
days written notice to SONUS, subject to applicable indemnification as set forth
in Article 12.1.
(D) Supply Failure. In the event of failure to supply Product,
the provisions of Article 3.5 shall apply. Any termination under Article 3.5
shall be subject to the provisions of Article 11.3(E).
(E) Default. Except as provided in Article 11.2 and Article
16.1, the rights set forth in this Article 11 to terminate this Agreement and to
terminate the licenses granted hereunder are the only such rights of the parties
to take such actions under this Agreement. If either party believes that the
other party has committed a breach of any material provision of this Agreement,
the following shall apply:
25
(i) If the other party has failed to remedy such breach within
ninety (90) days after the receipt of notice in writing of such breach
from the nonbreaching party, then the nonbreaching party may submit the
issue of whether the other party has committed a breach of any material
provision hereunder for resolution in accordance with the procedure set
forth in Article 20 (Alternative Dispute Resolution); and
(ii) If the neutral person (as set forth in Article 20) in
accordance with the procedures set forth in Article 20 renders a ruling
that the breaching party has materially breached the Agreement; and
(iii) If the breaching party has materially failed to comply
with the terms of such ruling within the time period specified therein
for compliance or, if no time period is stated, then the nonbreaching
party has served notice upon the breaching party to undertake the
actions specified to comply with the terms of the ruling and the
breaching party has materially failed, within thirty (30) days of such
notice with regard to payment obligations and within ninety (90) days
of such notice with regard to other obligations, to undertake such
action; then the nonbreaching party shall have the right to terminate
this Agreement by delivering written notice to the breaching party
within thirty (30) days after expiration of the applicable period under
this Article 11.2(E)(iii).
(iv) In the event that ABBOTT is the nonbreaching party, in
lieu of terminating the Agreement, ABBOTT may proceed under Article
11.4.
(F) Force Majeure. If an event of force majeure (as defined in
Article 16) prevents a party from performing its obligations under this
Agreement for more than six (6) months, then the other party may terminate this
Agreement by written notice to the party which was prevented from performing.
11.3 Consequences of Expiration or Early Termination; Survival.
(A) Upon expiration of this Agreement, ABBOTT shall have a
fully paid up, irrevocable and nonexclusive license under the Licensed Patents
and Know-How and to the SONUS trademarks as set forth in Appendix 3.10, subject
only to the terms of the Trademark License Agreement.
(B) Upon expiration or early termination, including that set
forth in Article 11.2(A), SONUS shall retain ownership of all regulatory filings
or approvals, clinical data and clinical and nonclinical data developed by SONUS
in the Territory; and ABBOTT shall retain ownership of all data developed solely
by ABBOTT in the Territory, except that upon early termination, ABBOTT shall
deliver to SONUS a copy of all regulatory documentation and data developed by
ABBOTT in the Territory. In the event of surrender, ABBOTT shall make no further
use of the Licensed Patents or Know-How within the Territory. Expiration or
early termination of the Agreement shall not effect the Supply Agreement, which
shall remain effective as to its terms.
(C) If this Agreement is terminated in whole by ABBOTT under
Article 11.2, then SONUS, at ABBOTT's option, shall repurchase all remaining
Product which is reasonably
26
resalable from ABBOTT at ABBOTT's cost, unless otherwise mutually agreed by the
parties, within thirty (30) days of termination.
(D) If the Agreement is terminated under Article 11.2(B), then
the parties shall have the rights as set forth in those bankruptcy statutes, as
may be amended at the time of such termination, governing intellectual property
rights of licensors and licensees, as appropriate, in a bankruptcy proceeding.
(E) If this Agreement is terminated in whole by either party
for any reason, then ABBOTT's exclusive license hereunder shall terminate, SONUS
shall repurchase the remaining Product which is reasonably resalable from ABBOTT
at ABBOTT's cost, unless otherwise mutually agreed by the parties within thirty
(30) days of termination and neither party will have any further liability to
the other except as set forth in Article 11.3(E). If this Agreement is
terminated by either party under Article 11.2(D) or 11.2(E) due to breach of the
provisions of this Agreement, then the nonbreaching party may seek damages for
breach from the breaching party. If the breach is a breach of a representation
or warranty set forth in Article 10, then the nonbreaching party shall also have
the remedy set forth in Article 12. Neither party shall have any further
liability to the other except as set forth in Article 11.3(E) and this Article.
(F) Expiration or early termination of this Agreement shall
not relieve either party of its obligations incurred prior to expiration or
early termination. The obligations under Article 21 (Publicity); Article 20
(Alternative Dispute Resolution); Article 18 (Assignment); Article 14
(Confidential Information); Article 13 (Limitation of Liability); Article 12
(Indemnification); and Article 10 (Representations and Warranties) shall survive
expiration or early termination of this Agreement or of any extensions thereof.
11.4 ABBOTT Right to Continue. Notwithstanding the foregoing, in the
event of default by SONUS under Article 11.2(E), then ABBOTT may, at ABBOTT's
option (i) seek damages for breach by SONUS and continue to operate under the
Agreement and keep the Agreement in effect, in which case ABBOTT shall have the
right, but not the obligation, to assume any and all responsibilities of SONUS
as set forth under Article 3 and be entitled to adjustment in the Royalty
reflecting ABBOTT's assumption of such responsibilities as reasonably determined
by ABBOTT, or (ii) seek damages for breach by SONUS and terminate the Agreement.
If SONUS disagrees with ABBOTT's determination of the amount of damages or the
adjustment of the Royalty, then the parties shall utilize the Dispute Resolution
Procedure under Article 20.
12. INDEMNIFICATION
12.1 By SONUS. SONUS shall indemnify, defend and hold ABBOTT, its
directors, employees, agents and representatives harmless from and against all
claims, causes of action, settlement costs, (including reasonable attorney fees
and expenses), losses or liabilities of any kind which (A) are asserted by a
Third Party and which (i) arise from or are attributable to any negligent act or
omission or willful misconduct on the part of SONUS, its directors, employees,
agents or representatives, or (ii) involve the use of the Product as a
pharmaceutical product or the safety or efficacy of the Product, including any
theory of strict liability in tort or any other theory of product liability, and
which are not otherwise attributable to any negligent act or omission or willful
misconduct on the part of ABBOTT, its directors, employees, agents or
representatives; or (iii) arise
27
from claims that the Product or its manufacture, use or sale infringes a patent,
trademark or other proprietary right of a Third Party provided that the
infringement does not relate solely to the manufacturing procedure of ABBOTT; or
(B) arise from a breach of a representation or warranty in Article 10.1; or (C)
arise from the negligent act or omission or willful misconduct by SONUS in the
manufacture of the Product by SONUS; or (D) arise from the supply by SONUS and
use by ABBOTT of bulk raw materials which fail to comply with Bulk Raw Materials
Specifications, as defined in the Supply Agreement, where ABBOTT manufactures
the Product; or (E) arise from provision of technical assistance for, or
co-promotion of, the Product for indications for which there has not been
Regulatory Approval in the Territory by SONUS or by a Third Party on behalf of
SONUS.
12.2 By ABBOTT. ABBOTT shall indemnify, defend and hold SONUS, its
directors, employees, agents and representatives harmless from and against all
claims, causes of action, settlement costs (including reasonable attorney fees
and expenses), losses or liabilities of any kind (A) which are asserted by a
Third Party and which arise out of or are attributable to any negligent act or
omission or willful misconduct on the part of ABBOTT, its employees, agents, or
representatives, or (B) which arise from a breach of a representation or
warranty in Article 10.2; or (C) which arise from ABBOTT's marketing and
promotion of the Product in the Territory for indications which are not in the
Field.
12.3 Condition of Indemnification. If either party expects to seek
indemnification under this Article, it shall promptly give notice to the
indemnifying party of the basis for such claim of indemnification. If
indemnification is sought as a result of any Third Party claim or suit, such
notice to the indemnifying party shall be within fifteen (15) days after receipt
by the other party of such claim or suit (if to ABBOTT, notice to Abbott
Laboratories, Risk Management, D-317, 100 Abbott Park Road, Abbott Park, IL
60064-3500; if to SONUS, notice as set forth in Article 17); provided, however,
that the failure to give notice within such time period shall not relieve the
indemnifying party of its obligation to indemnify unless it shall be materially
prejudiced by the failure. Each party shall cooperate fully with the other party
in the defense of all such claims or suits. No offer of settlement, settlement
or compromise shall be binding on a party hereto without its prior written
consent (which consent will not be unreasonably withheld) unless such settlement
fully releases the other party without any liability, loss, cost or obligation
to such party.
12.4 Term of Indemnification. The obligations of the parties set forth
in this Article 12 shall apply during the term hereof and for a period of five
(5) years after the date of termination in whole, or expiration of this
Agreement or any extension thereof.
13. LIMITATION OF LIABILITY
Except for Third Party liability arising under Article 12, in no event
shall either party be liable for loss of profits or other economic loss, or for
indirect, incidental, penalties or consequential damages, or other similar
damages arising out of this Agreement.
28
14. CONFIDENTIAL INFORMATION
14.1 Due Care. It is recognized by the parties that during the term of
this Agreement, the parties will exchange Confidential Information pertaining to
their performance hereunder. Each party will exercise due care to prevent the
disclosure of Confidential Information of the other party.
14.2 Permitted Disclosures.
(A) Notwithstanding the above, nothing contained in this
Agreement shall preclude SONUS or ABBOTT from utilizing or disclosing to others
its Confidential Information or utilizing Confidential Information received from
the other party as may be required (i) for regulatory purposes, including
obtaining regulatory approvals; (ii) for audit, tax or customs purposes; or
(iii) by law (including disclosure obligations under applicable securities
laws), court or other government order, provided that the party subject to such
order notifies the other party and uses reasonable efforts to obtain a
protective order covering such Confidential Information.
(B) In addition to the foregoing, ABBOTT and SONUS may
disclose the Confidential Information of the other party, only to such employees
or Third Parties who have a reasonable need for the Confidential Information in
the performance of their services in connection with the matters set forth in
this Agreement or otherwise within the scope of the licenses set forth in
Article 5 and Article 3.10; who are informed of the confidential nature of the
Confidential Information; and who are bound not to disclose such Confidential
Information.
14.3 Other Agreements. The parties have entered into a Confidential
Disclosure Agreement dated August 6, 1996 ("CDA"). The CDA shall remain in full
force and effect as to its confidentiality requirements for the terms specified
therein. However, on and after the Effective Date of this Agreement, all subject
matter conveyed or covered under this Agreement shall be governed in all
respects by the confidentiality provisions contained in this Article 14. The
obligations of the parties set forth in this Article 14 shall apply during the
term hereof and for a period of five (5) years after the date of early
termination or expiration of this Agreement or any extension thereof.
15. NON-COMPETE
For a period of [ * ] after the date of the first sale by an ABBOTT
Affiliate or sublicensee to a Third Party in a Major EC Country, each party and
its Affiliates and sublicensees shall undertake not to market or sell a
competing product in the Territory. However, nothing contained in this Article
15 shall be construed as preventing (i) either party from conducting research
and development, regulatory, manufacturing and/or formulation development
activities relating to a competing product during such period or thereafter, or
(ii) the grant of any rights in any patent infringement settlement as permitted
pursuant to the terms of Article 3.9(C).
For purposes of this Article 15, a "competing product" shall mean a
product in the Field and/or a diagnostic ultrasound pharmaceutical product for
myocardial perfusion.
* Confidential portions have been
omitted and filed separately.
29
16. FORCE MAJEURE
16.1 Events of Force Majeure. Delay or failure on the part of either
party in performing its obligations under this Agreement shall not subject such
party to any liability to the other if such delay or failure is caused by or
results from acts such as but not limited to acts of God, fire, explosion,
flood, drought, war, riot, sabotage, embargo, strikes or other labor trouble, or
compliance with any law, order or regulation of any government entity acting
with color of right.
16.2 Consequences of Force Majeure. Upon occurrence of an event of
force majeure, the party affected shall promptly notify the other in writing,
setting forth the details of the occurrence, and making every attempt to resume
the performance of its obligations as soon as practicable after the force
majeure event ceases. If such event prevents performance by one party for more
than six (6) months, then the other party may terminate this Agreement pursuant
to Article 11.2(F).
17. NOTICES
Any notices permitted or required by this Agreement shall be sent by
(A) facsimile, (B) registered mail or (C) a recognized private mail carrier
service, and such notice shall be effective on the date received as indicated by
the facsimile imprint date in the case of (A) and the carrier receipt in the
case of (B) and (C). If sent and addressed as follows or to such other address
as may be designated by a party in writing:
If to SONUS: SONUS PHARMACEUTICALS, INC.
22026 20th Avenue, S.E.
Suite 102
Bothell, Washington 98021
Telefax: (206) 489-0626
Attention: Steven Quay, M.D., Ph.D
With copy to: Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660-6441
Telefax: (714) 725-4100
Attention: K. C. Schaaf
If to ABBOTT: ABBOTT LABORATORIES
International Division
200 Abbott Park Road
Abbott Park, IL 60064-3537
Telefax: (847) 938-6365
Attention: President, International Division
30
With copy to: Division Vice President
International Legal Operations
D-323, AP6D
Abbott Laboratories
100 Abbott Park Road
Abbott Park, IL 60064-3500
Telefax: (847) 938-1342
18. ASSIGNMENT
18.1 Limitation on Assignment. This Agreement may not be assigned or
transferred by either party, whether by operation of law or otherwise, except
that either party may assign this Agreement to any of its Affiliates, or to any
successor by merger or sale of substantially all of its business unit to which
this Agreement relates without the consent of the other party. Any attempted
delegation or assignment not in accordance with this Article 18 shall be of no
force or effect.
18.2 Assumption by ABBOTT. In the event that SONUS sells, transfers or
otherwise assigns this Agreement to a third party ("Assignee") as permitted in
this Article 18, and ABBOTT, in ABBOTT's reasonable discretion, determines that
the Assignee is not at least as capable as SONUS of performing SONUS'
responsibilities under this Agreement, ABBOTT may, upon thirty (30) days prior
written notice to Assignee, assume any or all of Assignee's responsibilities
under this Agreement, including, but not limited to, responsibilities set forth
in Article 3, and adjust, in ABBOTT's reasonable discretion, the Royalty set
forth in Article 6 proportionately in accordance with the reduction in the
responsibilities of Assignee. If SONUS disagrees with ABBOTT's determination,
SONUS may seek resolution of this issue pursuant to the Dispute Resolution
Procedure under Article 20.
19. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their successors and permitted assigns.
20. ALTERNATIVE DISPUTE RESOLUTION
The parties agree that any dispute that arises in connection with this
Agreement shall first be presented to the respective presidents of the ABBOTT
International Division, and of SONUS, or their designees, for resolution. If no
resolution is reached, then such dispute shall be resolved by binding
Alternative Dispute Resolution ("ADR") in the manner described in the Appendix
20. Anything herein to the contrary notwithstanding the neutral shall not have
the ability to change or alter any decision of ABBOTT to exercise its rights
under Article 11.4.
21. PUBLICITY
The parties agree that upon the execution of this Agreement, a press
release approved by both parties will be issued. Except for such press release
and periodic disclosures by SONUS required by law or regulation or in the
ordinary course of its SEC filings, neither party shall (A) originate any
publicity, news release or other public announcement, written or oral, whether
to the public press, stockholders or otherwise, relating to this Agreement, any
amendment hereto or performance hereunder, or (B) use the name of the other in
any publicity, news release or other public
31
announcement, except (i) with the prior written consent of the other party, or
(ii) as required by law, in which case the originating party will give to the
other party at least ten (10) days prior notice of such proposed disclosure to
complete a review in order to offer comments and modifications. Consistent with
applicable law, the other party will have the right to request reasonable
changes to the disclosure to protect its interests. In all other cases, the
originating party shall give the consenting party at least twenty-one (21) days
to complete a review in order to offer comments, modifications or to give such
consent. The party required to give consent shall endeavor to respond in less
than twenty-one (21) days if practicable.
22. RELATIONSHIP OF PARTIES
The relationship of the parties under this Agreement is that of
independent contractors. Nothing contained in this Agreement is intended or is
to be construed so as to constitute the parties as partners, joint venturers, or
either party as an agent or employee of the other. Neither party has any express
or implied right under this Agreement to assume or create any obligation on
behalf of or in the name of the other, or to bind the other party to any
contract, agreement or undertaking with any Third Party, and no conduct of the
parties shall be deemed to infer such right.
23. APPENDICES
All Appendices referenced herein are hereby made a part of this
Agreement.
24. HEADINGS
The headings used in this Agreement are for convenience only and are
not a part of this Agreement
25. WAIVER
No waiver by either party of any default, right or remedy shall be
effective unless in writing, nor shall any such waiver operate as a waiver of
any other or of the same default, right or remedy respectively, on a future
occasion.
26. SEVERABILITY
If any term or provision of this Agreement shall for any reason be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other term or provision hereof, and this
Agreement shall be interpreted and construed as if such term or provision, to
the extent the same shall have been held to be invalid, illegal or
unenforceable, had never been contained herein.
27. ENTIRE AGREEMENT; AMENDMENT
Except as specifically contemplated in this Agreement and except for
the United States Agreement, the CDA and the Supply Agreement, this Agreement
sets forth the entire understanding of the parties with respect to the subject
matter hereof and supersedes all prior agreements, written and oral, between the
parties. No modification of any of the terms of this Agreement shall be deemed
to
32
be valid unless it is in writing and signed by both parties. No course of
dealing or usage of trade shall be used to modify the terms and conditions
herein.
28. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with
the laws of Washington, excluding its conflict of laws principles.
29. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized representative as of the day and
year first above written.
ABBOTT INTERNATIONAL , LTD. SONUS PHARMACEUTICALS, INC.
By: /s/ Robert L. Parkinson By: /s/ Steven C. Quay, M.D., Ph.D.
----------------------------- --------------------------------------
Robert L. Parkinson Steven C. Quay, M.D., Ph.D
President President and Chief Executive Officer
Date: October 3, 1996 Date: October 4, 1996
--------------- ---------------
33
APPENDIX 1.1
AFFILIATES OF THE PARTIES
UNDER ARTICLE 1.1(ii)
For ABBOTT:
Famar S.A. - Industrial Societe Anonyme of Pharmaceuticals and Cosmetics
Panos A. Marinopoulos - Famar Commercial Societe Anonyme
Abbott Laboratories Nigeria Limited
Abbott Laboratories (India) Limited
For SONUS:
None.
34
APPENDIX 1.7
INDICATIONS AND USAGE
AS OF SEPTEMBER 30, 1996
[ * ]
* Confidential portions have been
omitted and filed separately.
35
APPENDIX 1.16
LICENSED PATENTS
See attached list.
36
APPENDIX 1.16
LICENSED PATENTS
[ * ]
* Confidential portions have been
omitted and filed separately.
37
APPENDIX 1.21
TERRITORY
AREAS
I. EUROPE
(A) Major Countries
Austria, Belgium, Czech Republic, Denmark, Ireland, Finland,
France, Germany, Greece, Israel, Italy, Netherlands, Norway,
Poland, Portugal, Spain, Sweden, Switzerland and United
Kingdom.
(B) Minor Countries
Albania, Armenia, Azerbaijan, Belarus, Bosnia, Bulgaria,
Croatia, Cyprus, Estonia, Georgia, Gibraltar, Hungary,
Iceland, Latvia, Liechtenstein, Lithuania, Luxemberg,
Macedonia, Malta, Moldova, Monaco, Romania, Russia, Serbia,
Slovakia, Slovania, Ukraine, and Yugoslavia.
II. LATIN AMERICA
(A) Major Countries
Argentina, Brazil, Chile, Columbia, Mexico and Venezuela.
(B) Minor Countries
Anguilla, Antigua, Aruba, Bahamas, Barbados, Barbuda, Belize,
Bermuda, Bolivia, Bonaire, Cayman Islands, Costa Rica, Cuba,
Curacao, Dominica, Dominican Republic, El Salvador, Ecuador,
French Guiana, Grenada, Guadeloupe, Guatemala, Guyana, Haiti,
Honduras, Jamaica, Martinique, Montserrat, Nicaragua, Panama,
Paraguay, Peru, Saba, Surinam, Trinidad/Tobago, Turks &
Caicos, Uruguay and Virgin Islands.
III. PACIFIC/ ASIA/ AFRICA
(A) Major Countries
Australia, India, New Zealand, Saudi Arabia, South Africa and
Turkey.
38
APPENDIX 1.21
TERRITORY
AREAS (Cont.)
(B) Minor Countries
Afghanistan, Algeria, Bahrain, Cameroon, Dubai, Egypt,
Ethiopia, Ghana, Guam, Indochina, Iran, Iraq, Ivory Coast,
Jordan, Kenya, Kuwait, Lebanon, Mauritius, Morocco, Myanmar,
Nigeria, Oman, Other West Africa, Pakistan, Qatar, Reunion
Islands, Sri Lanka, Sudan, Syria, Tanzania, Tunisia, United
Arab Emirates, Vietnam, Yemen and Zaire.
IV. CANADA
(A) Major Countries
Canada.
(B) Minor Countries
None.
39
APPENDIX 3.4
PRODUCT SPECIFICATIONS
See attached list.
40
APPENDIX 3.4
Specifications for EchoGen(R) (Perflenapent Emulsion) for European Union
[ * ]
* Confidential portions have been
omitted and filed separately.
41
APPENDIX 3.10
TRADEMARKS OF SONUS PHARMACEUTICALS, INC.
See attached list.
42
APPENDIX 3.10
Trademark Properties: SONUS Pharmaceuticals, Inc.
[ * ]
* Confidential portions have been
omitted and filed separately.
43
APPENDIX 5.2
MILESTONE AND LICENSE FEES
PAYMENT SCHEDULE
1. Execution of Definitive Agreement US $1 million
2. Filing of NDA with EMEA
within 15 days US $1 million
3. Commencement of Phase III Myocardial Perfusion Studies*
within 30 days US $1 million
within 120 days 1 million
within 150 days 1 million
4. United States NDA Approval
within 15 days US $3 million
5. European Community Marketing Authorization Granted
within 15 days US $2 million
within 105 days 1 million
within 195 days 1 million
6. First Shipment Date of Product for Sale**
within 15 days US $2 million
within 105 days 1 million
within 195 days 1 million
7. Cumulative U.S. $25 Million Net Sales in the US $4 million
Territory
8. Cumulative U.S. $50 Million Net Sales in the US $2 million
---------
Territory
Total License and Milestone Payments US $22 million
==========
*"Commencement" means enrollment of first patient in a U.S. clinical study.
**To Germany, France, Italy, Spain, Canada or the United Kingdom.
44
APPENDIX 5.3
OFFSETTABLE MILESTONES, LICENSE AND OPTION FEES
PAYMENT SCHEDULE
1. Execution of Definitive Agreement
within 300 days US $ 700,000
2. Commencement of Phase III Myocardial Perfusion Studies*
within 30 days US $ 700,000
within 120 days 700,000
3. After Exercise by ABBOTT of Article 5.1 (C) Option
On December 15, 1997 US $ 1,400,000
On January 15, 1998 700,000
On April 15, 1998 700,000
4. European Community Marketing Authorization Granted
within 15 days US $ 700,000
within 105 days 700,000
within 195 days 700,000
within 265 days 700,000
5. Cumulative U.S. $25 Million Net Sales in the Territory US $ 2,800,000
6. Cumulative U.S. $50 Million Net Sales in the Territory US $ 2,100,000
Total Offsettable License and Milestone Payments US $ 12,600,000
----------
* "Commencement" means enrollment of first patient in a U.S. clinical study.
45
APPENDIX 20
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
equivalents or 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"), 366 Madison Avenue, 14th
Floor, New York, New York 10017, 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
46
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 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 five (5) pages per issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed fifty (50)
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 up to fifteen (15) consecutive
business days and shall be governed by the following rules:
47
(a) Each party shall be entitled to five (5) business days of
hearing time to present its case. The neutral shall determine
whether each party has had the five (5) business days 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 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
thirty (30) 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.
48
(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 nonappealable, 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.
49