Exhibit
10.35


 


SETTLEMENT
AND LICENSE AGREEMENT


 


This Settlement and License Agreement (the “Agreement”), made effective
the 15th day of August, 2003 (“Effective Date”), is by and between
SPECIALTY LABORATORIES, INC, a California company having a principal place of
business at 2211 Michigan Avenue, Santa Monica, California 90404 (“SPECIALTY”),
and BAYER HEALTHCARE, LLC, a Delaware limited liability company acting through
its Diagnostics Division, having its principal place of business at 511
Benedict Avenue, Tarrytown, New York 10591, with offices for purposes of this
Agreement at 725 Potter Street, Berkeley, California 94710 (“BAYER”).


 


BACKGROUND:


 


WHEREAS, BAYER has a license, with the right to sublicense, to certain
patent rights relating to Hepatitis C (“HCV”) and Human Immunodeficiency Virus
(“HIV”) owned by Chiron Corporation (“Chiron”) pursuant to that certain Cross
License Agreement dated November 30, 1998, between Chiron and Chiron
Diagnostics Corporation, now BAYER (“Cross-License”); and


 


WHEREAS, SPECIALTY has performed certain nucleic acid clinical assays
for HCV and HIV (collectively, the “Specialty Assays”);


 


WHEREAS, Chiron has alleged that SPECIALTY may have infringed certain
of the Chiron patent rights by the performance of certain Specialty Assays;


 


WHEREAS, the parties mutually desire to resolve and settle their
differences about Chiron’s allegation of infringement by SPECIALTY without the
cost, delay and financial exposure which would be incurred in litigating that
claim; and


 


WHEREAS, the parties are, concurrently with this Agreement, entering
into an Amended and Restated Supply Agreement (the “Supply Agreement”); and


 


WHEREAS, BAYER intends and agrees to indemnify SPECIALTY against any
such claims of infringement by Chiron, on the terms and conditions set forth in
this Agreement.


 


NOW THEREFORE, intending to be legally bound, the parties agree as
follows:


 


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1.             CONSIDERATION


 


1.1           Cash
Payment.  SPECIALTY shall pay to
BAYER the amount of [*] (the “Cash Payment”).


 


A.            The Cash Payment shall first be offset by
an amount of [*]
previously received by BAYER from SPECIALTY and being held by BAYER pursuant to
the Addendum to HealthPak Agreement and ASR Supply Agreement Regarding Pricing
of Hepatitis C Products between SPECIALTY and BAYER dated May 26, 2000, as
amended on April 29, 2002 (the “Indemnity Addendum”).


 


B.            The remaining [*]
shall be paid to BAYER within sixty (60) days of the Effective Date.


 


1.2           The
consideration paid by SPECIALTY hereunder shall cover any and all royalty
payments which would otherwise be due under the Chiron Patent Rights (defined
below) up to and including October 15, 2003.


 


2.             CONVERSION
TO LICENSED PRODUCTS


 


2.1           SPECIALTY
shall use its reasonable commercial efforts to convert as soon as practicable
from performing its HIV and HCV genotyping assays to purchasing the appropriate
products from BAYER, under the terms agreed to by both BAYER and SPECIALTY in
the Supply Agreement, which products (the “Licensed Products”) carry a fully
paid license under the Chiron patent rights as listed in Appendix A hereto and
incorporated by reference herein (the “Patent Rights”).


 


2.2           Such
conversion shall be completed no later than the close of business
October 15, 2003 (the “Conversion Date”); otherwise, royalties in
accordance with the Sublicense of Section 3 shall be due on applicable
assays performed after the Conversion Date. 
In no event shall any failure by SPECIALTY to convert to the Licensed
Products on or prior to the Conversion Date in any way affect the obligations
of BAYER under this Agreement with respect to activities of SPECIALTY prior to
the Conversion Date.


 


3.             SUBLICENSE


 


3.1           Definitions.  The following terms as used in this
Agreement shall have the meanings set forth in this Section 3.1.


 


A.            “Affiliate” means any business entity which
directly or indirectly controls, is controlled by, or is under common control
with a party to this 


 












* Information for which
confidential treatment has been requested pursuant to Rule 24(b)(2) of the
Securities Exchange Act of 1934, as amended. The omitted material has been
filed separately with the Securities and Exchange Commission.


 


2

















 


Agreement.  A business entity
shall be deemed to “control” another business entity if (i) it owns, directly
or indirectly, at least fifty percent (50%) of the issued and outstanding
voting securities, capital stock, or other comparable equity or ownership
interest of such business entity, or (ii) it has the de facto ability to
control or direct the management of such business entity.


 


B.            “Blood Screening” means the use of products
that detect nucleic acid sequences(s) of HIV and/or HCV for: (1) the screening
of blood, plasma or blood components intended for transfusion; and (2)
confirmatory or supplemental testing of the same samples otherwise screened for
purposes described in Section 3.1.A(1). 
For the avoidance of doubt, Blood Screening specifically excludes serological,
or immunoassay, screening.


 


C.            “In Vitro Diagnostics” means the use of
products that detect nucleic acid sequence(s) of HCV and/or HIV in individual
human specimens, including the use of such products for diagnosis, prognosis,
monitoring or classification purposes, but specifically excluding use for
Transplantation Screening, Blood Screening, and Plasma Fractionation Screening.


 


D.            “Licensed Assays” means nucleic acid
clinical assays for HCV and HIV-1 wherein:


 


(1)           in the case of HCV, such assays are for
qualitative, quantitative, genotyping (i.e., determination of viral type or
subtype) or resistance (i.e., determination of mutations
conferring viral resistance to therapeutics) testing (i.e., the term “Licensed
Assays” does not include HCV phenotyping testing); and


 


(2)           in the case of HIV, such assays are for
genotyping/resistance testing only (i.e., the term “Licensed Assays” does not
include HIV qualitative, quantitative or phenotyping testing).


 


In further limitation of the foregoing, the term “Licensed Assay”
specifically does not include assays performed using products purchased by
SPECIALTY from BAYER (including products purchased by SPECIALTY pursuant to the
Supply Agreement), other Chiron licensees, or other sub-licensees of Bayer
authorized under the terms of the Bayer-Chiron Cross-License Agreement;
provided, however, that such products are used by SPECIALTY to perform the type
of testing (i.e., qualitative, quantitative, genotyping or resistance) for
which they are designed and labeled. 
For the avoidance of doubt, the use of qualitative test components,
sales of which may be included for purposes of determining the royalty due from
a third party licensee of Chiron’s, to perform a genotyping test shall not
result in any reduction in the royalty due from SPECIALTY for the performance of
a Licensed Assay.


 


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E.             “Plasma Fractionation Screening” means use
of products that detect nucleic acid sequence(s) of HCV and/or HIV for the
screening of plasma or other blood components intended for use in the
manufacture of blood products (e.g., without limitation, immunoglobulins).


 


F.             “Transplantation Screening” means the use
of products that detect nucleic acid sequences of HCV and/or HIV for the
screening of any biological materials intended for transfusion or
transplantation, in each case from any donor, including antilogous donors,
other than the transfusion or transplantation of blood or its derivatives,
components or replacements.


 


3.2           Grant.  BAYER hereby grants to SPECIALTY a
royalty-bearing, non-transferable, non-exclusive license under the Patent
Rights, to perform Licensed Assays and to provide the results thereof to third
parties for In
Vitro Diagnostics (the “License”). 
Such License is not sub-licensable and is limited to the United States.  These licensing terms are not applicable to
the manufacture, use, sale, offer for sale or importation of diagnostics
products by BAYER, other Chiron licensees, or other sub-licensees of Bayer
authorized under the terms of the Bayer-Chiron Cross-License Agreement.


 


3.3           License
Fees.  In consideration for the
grant of the License under Section 3.1 above, SPECIALTY shall pay to BAYER
the license fees (“License Fees”) identified in Appendix B, attached hereto and
incorporated by reference herein, in accordance with the following provisions:


 


A.            (i)            SPECIALTY
shall pay to BAYER the HCV License Fee if, but only if, after the Conversion
Date, SPECIALTY regularly performs any HCV Licensed Assays for a cumulative
period of [*].  The HCV License Fee
shall be due within sixty (60) days of such occurrence.


 


(ii)           Notwithstanding
the provisions of Section 3.3(A)(i) above, the HCV License Fee shall not
be due or payable by SPECIALTY if less than [*]
HCV Licensed Assays were performed under the License within such [*] period.


 


(iii)          Notwithstanding
the provisions of Sections 3.3(A)(i) and (ii), the HCV License Fee shall not be
due or payable by SPECIALTY for performance of HCV Licensed Assays for a period
of up to [*] that is caused by
the failure of BAYER to provide adequate supplies of Licensed Products to
SPECIALTY in accordance with the terms of the Supply Agreement (i.e.,
as forecast and ordered), or any amendment or replacement of the Supply
Agreement.  HCV Licensed Assays
performed 


 












* Information for which confidential
treatment has been requested pursuant to Rule 24(b)(2) of the Securities
Exchange Act of 1934, as amended. The omitted material has been filed
separately with the Securities and Exchange Commission.


 


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pursuant to this Section 3.3(A)(iii) shall not be counted in
applying the provisions of Section 3.3(A)(ii), but shall be fully counted
against the future application of Section 3.3(A)(i).  That is, if this Section 3.3(A)(iii) is
invoked and the HCV Licensed Assays continue to be performed after the
expiration of this [*]
period, then the HCV License Fee shall become due within sixty (60) days after
the end of the [*]
period of this Section 3.3(A)(iii).


 


B.            (i)            SPECIALTY
shall pay to BAYER the HIV License Fee if, but only if, after the Conversion
Date, SPECIALTY regularly performs any HIV Licensed Assays for a cumulative
period of [*].  The HIV License Fee shall be due within
sixty (60) days of such occurrence.


 


(ii)           Notwithstanding
the provisions of Section 3.3(B)(i) above, the HIV License Fee shall not
be due or payable by SPECIALTY if less than [*] HIV Licensed Assays were
performed under the License within such [*]
period.


 


(iii)          Notwithstanding
the provisions of Sections 3.3(B)(i) and (ii), the HIV License Fee shall not be
due or payable by SPECIALTY for performance of HIV Licensed Assays for a period
of up to [*] that is caused by
the failure of BAYER to provide adequate supplies of Licensed Products to
SPECIALTY in accordance with the terms of the Supply Agreement (i.e.,
as forecast and ordered), or any amendment or replacement of the Supply
Agreement.  HIV Licensed Assays
performed pursuant to this Section 3.3(B)(iii) shall not be counted in
applying the provisions of Section 3.3(B)(ii), but shall be fully counted
against the future application of Section 3.3(B)(i).  That is, if this Section 3.3(B)(iii) is
invoked and the HIV Licensed Assays continue to be performed after the
expiration of this [*]
period, then the HIV License Fee shall become due within sixty (60) days after
the end of the [*]
period of this Section 3.3(B)(iii).


 


3.4           Royalties.  In consideration for the grant of the
License under Section 3.2 above and subject to the terms herein, SPECIALTY
shall make the royalty payments identified in paragraph 2 of Appendix B to
BAYER on a quarterly basis, within thirty (30) days after the end of the
relevant quarter; provided, however, that no such royalty payments shall be due
or payable with respect to Licensed Assays performed by SPECIALTY pursuant to
Sections 3.3(A)(iii) and 3.3(B)(iii) above. 
Such payments shall be accompanied by a report as specified in
Section 3.5 


 












* Information for which
confidential treatment has been requested pursuant to Rule 24(b)(2) of the
Securities Exchange Act of 1934, as amended. The omitted material has been
filed separately with the Securities and Exchange Commission.


 


5

















 


below.  Any late payments shall bear interest at the
lesser of (i) two percent (2%) above the 90 Day US Dollar LIBOR rate as
published in the Wall Street Journal as of the date payment is due; or (ii)
the maximum rate permitted by applicable law.


 


3.5           Records
and Reports.  SPECIALTY shall keep
complete and accurate records containing all information required for the
computation and verification of the royalties to be paid hereunder.  SPECIALTY shall, with each royalty payment,
provide a written report for such quarter setting forth the revenue for each
Licensed Assay subject to royalties pursuant to Appendix B, the number of units
of each type of Licensed Assay performed, and the calculation of such royalties
(earned or minimum royalties). 
Notwithstanding the foregoing, if SPECIALTY does not perform any Licensed
Assays during any quarterly period, no quarterly report shall be required of
SPECIALTY; however, if no Licensed Assays have been performed in any calendar
year, SPECIALTY shall inform BAYER in writing that no such Licensed Assays have
been performed, such notice to be sent in lieu of the fourth quarter royalty
report for such year.


 


3.6           Audit.  BAYER or Chiron shall have the right to
audit the records of SPECIALTY using an independent certified public accounting
firm reasonably acceptable to SPECIALTY, during reasonable business hours and
on reasonable notice but not more than once per calendar year, solely for the
purpose of verifying the royalties payable pursuant to the License for the
eight (8) full quarters immediately preceding the date of the audit, provided
that such accountants agree to keep all information received strictly
confidential and agree to provide to BAYER or Chiron only the information
necessary to verify the calculation of amounts due hereunder.  If any such audit discloses an underpayment
of five percent (5%) or more for the period of such audit, which shall be at
least four (4) quarters in length, SPECIALTY shall bear the costs of such
audit.  Otherwise such audit shall be at
the expense of BAYER or Chiron. 
Underpayments resulting from withholding taxes shall not be deemed
underpayments for the purposes of this Section 3.6.  Under no circumstances shall SPECIALTY have
any obligation to disclose any Protected Health Information (“PHI”), as defined
under the Health Insurance Portability and Accountability Act of 1996, to BAYER
or the selected accounting firm; however, SPECIALTY shall have the obligation
to make available the books of account and records identified above, with the
necessary PHI redacted.


 


3.7           No
Implied License.  Except as
expressly granted under Paragraph 3.2 above, no other right or license is
granted by BAYER to SPECIALTY under any patent or other intellectual property
rights, and the parties intend that no such grant should be otherwise construed
or implied, whether by estoppel or other manner.


 


4.             REPRESENTATIONS,
WARRANTIES AND COVENANTS


 


4.1           Challenge
of Patent Rights.


 


A.            SPECIALTY covenants and agrees, on behalf
of itself and its Affiliates, not to initiate or maintain any opposition,
challenge, compulsory license application or the like with respect to the
Patent Rights, nor initiate or maintain any proceeding, civil or otherwise,
seeking any monetary or other remedy against Chiron or any of its licensees in
connection with (i) 


 


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any licenses in respect of the Patent Rights, or (ii) any act or
omission of Chiron relating thereto.


 


B.            SPECIALTY covenants and agrees, on behalf
of itself and its Affiliates, not to support any third party in any opposition,
challenge, compulsory license application or the like with respect to the
Patent Rights nor support any third party in any proceeding, civil or
otherwise, seeking any monetary or other remedy against Chiron or any of its
licensees in connection with (i) any licenses in respect of the Patent Rights
in any jurisdiction; (ii) the performance of any Licensed Assays under the
Patent Rights; or (iii) any act or omission of Chiron relating thereto.  As used herein, “support” of a third party
challenge or application shall mean any of (i) financial support of a third
party, (ii) delivery of information to a third party under an obligation of
confidentiality, or (iii) active participation in any proceeding initiated by a
third party, where such third party is challenging the validity or
enforceability of any such claims within the Patent Rights or seeking
compulsory licensing of any such claims within the Patent Rights.  BAYER may, from time to time, reasonably
request SPECIALTY to provide written confirmation of the absence of any such
support activities.  As used in this
paragraph, the term “support” shall not include any action which SPECIALTY is
obligated to perform pursuant to a contract in effect as of the Effective Date,
or any compulsory judicial process or proceeding.


 


The provisions of this Section 4.1 do not modify the commercial
terms of this Agreement or the Supply Agreement and do not control any
commercial dispute that may arise between SPECIALTY and BAYER under such
agreements or any future replacements or amendments thereof.  Anything in this Agreement to the contrary
notwithstanding, the sole and exclusive remedy for any violation or alleged
violation of this Section 4.1 by SPECIALTY, shall be the application by
BAYER or its designated appointee to a court of competent jurisdiction either:
(i) to dismiss with prejudice any claim brought by SPECIALTY in violation of
this Section 4.1, or (ii) to grant appropriate injunctive relief against
SPECIALTY enjoining actions that violate this Section 4.1.  SPECIALTY shall not be liable for monetary
or other damages for violation of this provision, except as related to
court-ordered sanctions, as determined by such court in its reasonable
discretion for failure to comply with an injunction previously issued under
this provision, or for sanctions under Federal Rules of Civil Procedure Rule 11
or any state or local equivalents. 
BAYER shall not have the right to terminate this Agreement or be excused
from performing its obligations under this Agreement because of a violation of
this provision; provided, however, that BAYER retains its rights to terminate
the License pursuant to Section 6. 
The provisions of this Section 4.1 shall not apply to and shall not
bind any person or entity which subsequent to the Effective Date becomes an
Affiliate of SPECIALTY through the acquisition (direct or indirect, by purchase
of stock, merger or otherwise) of some or all of the equity securities of
SPECIALTY; provided that SPECIALTY shall continue to be fully bound by this
provision following such acquisition.


 


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4.2           BAYER
covenants that, in the event Chiron, its Affiliates, officers, directors,
shareholders or assigns brings any claim against SPECIALTY relating to or
arising from infringement of Chiron patent rights solely with respect to the
HIV and HCV detection aspects of the Specialty Assays performed on or before
the Conversion Date (“Chiron Claim”), BAYER shall indemnify, defend and save
SPECIALTY harmless from and against any and all losses, claims, suits, damages,
liabilities and expenses, including attorneys’ fees, arising from the Chiron
Claims.  In the event of such a Chiron
Claim, BAYER agrees to defend the claim at BAYER’s expense, using legal counsel
reasonably acceptable to SPECIALTY.


 


4.3           BAYER
hereby represents and warrants to SPECIALTY that:  (1) BAYER has obtained a license under the Patent Rights to make,
use and sell molecular diagnostics products for HCV and HIV testing; (2) the
products that BAYER will supply to SPECIALTY under the Supply Agreement are
licensed under the Patent Rights; and (3) the products that BAYER will supply
to SPECIALTY under the Supply Agreement do not, to the knowledge of BAYER,
infringe any other party’s intellectual property rights.


 


4.4           Acknowledgment.  Each of the parties represents and warrants
to the other that in executing this Agreement, each party has relied on the
advice of its own counsel and that the terms and provisions of this Agreement
and their consequences have been completely explained to it by its counsel,
each party fully understands the terms and provisions of this Agreement, and
each party believes that each of said terms and provisions is legal, valid and
fully enforceable in accordance with its express words.


 


4.5           Authority.  Each of the parties represents and warrants
that it has full right and authority to enter into this Agreement on behalf of
itself.


 


4.6           Confidential
Information.  BAYER and SPECIALTY
each covenant, except as otherwise required by law, that all information
obtained by one party (“receiving party”) from any other party (“disclosing
party”) in connection with this Agreement, including without limitation the
terms and conditions of this Agreement and the Supply Agreement themselves,
shall be considered confidential information and shall not knowingly be disclosed
by the receiving party to any third party. 
For purposes of this Section 4.6, “confidential information” shall
not include information which (a) was known to the receiving party prior to
disclosure by the disclosing party; (b) is later obtained from a third party
without an obligation of secrecy; (c) becomes knowledge of the general public
through no fault of the receiving party; or (d) is released from this provision
by mutual agreement of the parties.  The
burden of proof that such exception applies in each case shall be on the
receiving party.


 


4.7           In
the event that a party is requested or required by law, regulation or legal
process (including, but not limited to, oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative demand or
other process) to disclose all or any part of the confidential information,
such party agrees that: (a) it will provide each of the other parties with
prompt written notice of any such request or requirement so that the other parties
may, where appropriate and feasible, seek an appropriate protective order or
other remedy; (b) it will not oppose, and will cooperate with the other parties
in, seeking such order or remedy; and (c) it will disclose only that portion of
the confidential information which it is legally compelled to 


 


8

















 


disclosed, and it will exercise
commercially reasonable efforts to obtain confidential treatment for that
portion of the confidential information which is being disclosed.  Notwithstanding the foregoing, the parties
hereby acknowledge that SPECIALTY may be required to disclose the existence and
the terms of this Agreement in one or more filings with the US Securities and
Exchange Commission (“SEC”), and that any such filings or disclosure shall not
be deemed a breach of this Section 4.7, nor require notice under
Section 4.7(a); provided, however, that SPECIALTY shall use its
commercially reasonable efforts to obtain confidential treatment from the SEC
for all the confidential portions of this Agreement, including but not limited
to the dollar amounts and the licensing terms contained herein.


 


5.             MUTUAL
RELEASES


 


5.1           General
Release.  In consideration of the
Cash Payment to BAYER under Section 1 above and other valuable
consideration as set forth in this Agreement, each party (the “RELEASING
PARTY”) does hereby fully release and forever discharge the other party, and
its Affiliates, officers, directors, employees, shareholders, attorneys, and
assigns thereof, but each only in his, her or its capacity as such
(individually and collectively, the “RELEASED PARTY”) from any and all costs,
claims, demands, attorneys’ fees, actions and causes of action that have
accrued to the RELEASING PARTY with respect only to any conduct by SPECIALTY
that could, in whole or in part, form the basis of a claim of infringement of
the Patent Rights with respect to the Specialty Assays from the beginning of
time through the Conversion Date.


 


5.2           Past
and Present Claims.  The RELEASING
PARTY acknowledges and agrees that this Agreement applies to all claims and
damages, known or unknown, that the RELEASING PARTY may have against the
RELEASED PARTY as of the Conversion Date arising out of SPECIALTY’s performance
of the Specialty Assays that in part or in whole would form the basis of a
claim for infringement of any BAYER or Chiron patent rights.


 


5.3           SPECIALTY
and BAYER, collectively and individually, hereby represent, warrant and
acknowledge to the others that they have received independent legal advice from
their respective attorneys regarding the advisability of executing this
Agreement and giving the releases provided herein.  The parties have been fully advised by their respective attorneys
of the contents of Section 1542 of the California Civil Code and that the
section and the benefits thereof are hereby expressly waived.  Section 1542 provides as follows:


 


A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.


 


It is understood and agreed by all the parties that this is a full and
final release of any and all claims described above, and the parties agree that
it shall apply to all known and unknown claims, demands, liabilities, actions
or causes of action which relate to the subject matter of this Agreement.


 


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6.             TERMINATION


 


6.1           The
License granted in Section 3 is terminable only upon the occurrence of any
one or more of the following grounds.


 


A.            Material breach of the License of
Section 3 of this Agreement by SPECIALTY or any of its Affiliate,
including, without limitation, a breach resulting from SPECIALTY or its
Affiliate’s failure to pay any sums due hereunder, where such breach shall not
have been remedied within thirty (30) days of the receipt of a written
notification identifying the breach and requiring its remedy; whereupon
termination under this Section 6 shall be effective upon the expiration of
such thirty (30) day cure period; or


 


B.            SPECIALTY or any of its Affiliates violates
any of the covenants of Subsections (A) or (B) of Section 4.1 hereof,
then, immediately upon receipt of a written notification from BAYER, the
License granted in Section 3 shall terminate.


 


6.2           Notwithstanding
any of the above provisions, BAYER shall retain the right to collect any and
all royalties and License Fees due or accrued prior to the effective date of
any termination of the License.


 


7.             MISCELLANEOUS


 


7.1           Construction.  This Agreement shall not be strictly
construed against any party hereto, whether that party is the drafting party or
not, and shall instead be liberally construed to effectuate the purposes and
goals set forth herein.


 


7.2           Severability.  Should any one or more of the provisions of
this Agreement be held invalid or unenforceable by a court of competent
jurisdiction, it shall be considered severed from this Agreement and shall not
serve to invalidate the remaining provisions thereof.  The parties shall make a good faith effort to replace any invalid
or unenforceable provision with a valid and enforceable one such that the
objectives contemplated by them when entering this Agreement may be realized.


 


7.3           Independent
Contractors.  The parties are
independent contractors and neither shall be liable for the debts, accounts,
obligations or other liabilities of the other, its agents, employees or other
independent contractors.  Neither party
shall have the authority or power, express or implied, to act for or bind the
other.


 


7.4           Governing
Law.  This Agreement is to be
construed and enforced in accordance with the substantive laws of the State of
California, without regard to its conflict of laws provisions.


 


7.5           Dispute
Resolution.  Prior to either party
filing suit, in addition to other dispute resolution discussions that may be
engaged in by the parties, one of the top three executives or the appropriate
legal counsel of each party shall first meet in person (and not by proxy or
telephone) and attempt to resolve any dispute that arises between the parties
concerning this 


 


10

















 


Agreement.  In such event, either party shall have ten
(10) business days in which to notify the other of the initiation of such
dispute resolution, upon such notification, each party shall use its reasonable
best efforts to arrange a meeting in prompt fashion, and, unless the parties
agree otherwise, the parties shall have sixty (60) days from the date of the
first meeting to settle such dispute. 
If, after such sixty (60) days period, the parties are unable to resolve
such dispute, any party may bring suit or other legal action as appropriate in
any court of competent jurisdiction.


 


7.6           Assignment.  No party may assign any of its rights or
delegate any of its duties under this Agreement without the prior written consent of the other parties, except that no
such consent is required for assignment to any Affiliate of a party or to any
third party who succeeds to all or substantially all of the business or assets
of the assignor to which this Agreement applies, whether by merger, acquisition
or otherwise.  This Agreement shall be
binding on and inure to the benefit of the successors and permitted assigns of
the parties.


 


7.7           Entire
Agreement.  This Agreement recites
the full and complete agreement and understanding between the parties regarding
the subject matter thereof, and supercedes any and all prior agreements and
understandings between the parties with respect thereto, whether oral or
written, and each party acknowledges and agrees that in entering into and
executing this Agreement, it is not relying on any statement, representation or
promise of the other party except as expressly set forth herein.


 


7.8           No
Third Party Rights.  No provision of
this Agreement shall be deemed or construed in any way to result in the
creation of any rights in any other individual or entity not a party to this
Agreement.


 


7.9           Counterparts.  This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one and the
same instrument, and any Party hereto may execute this Agreement by signing any
such counterpart.


 


7.10         No
Waiver.  No waiver of any breach or
failure by either party to enforce any of the terms or conditions of this
Agreement at any time will, in any manner, limit or waive such party’s right
thereafter to enforce and to compel strict compliance with every term and
condition hereof.


 


7.11         Further
Assurances.  The parties shall
perform all legally proper acts and execute all documents as are reasonably
needed for carrying out the intent of this Agreement.


 


7.12         No
Admission.  Nothing in this
Agreement shall be deemed or constitute an admission by SPECIALTY that any of
the Specialty Assays infringe or infringed any patent rights or other
intellectual property rights of BAYER, Chiron or any other party.


 


IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate originals by their duly authorized officers or representatives.


 


11

















 


	
  BAYER HEALTHCARE
  LLC

  DIAGNOSTICS DIVISION

  	
   

  	
  SPECIALTY
  LABORATORIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Illegible

  	
   

  	
  By:

  	
  /s/ Thomas Kosco

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Senior VP Business Segment

  	
   

  	
  Title:

  	
  VP Business Development

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  August 15, 2003

  	
   

  	
  Date:

  	
  August 15, 2003

  
								



 


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APPENDIX
A:  PATENT RIGHTS


 


For purposes of this Agreement, “Patent Rights” shall mean:  (1) the U.S. patents listed below; and (2)
any and all U.S. patent applications claiming priority from the U.S. patents
listed herein or from their parent applications, wherein such patent
applications have a filing date on or before October 10, 2000.


 


	
  Inventors

  	
   

  	
  US Patent
  No

  	
   

  	
  Patent
  Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  



 


 












* Information for which
confidential treatment has been requested pursuant to Rule 24(b)(2) of the
Securities Exchange Act of 1934, as amended. The omitted material has been
filed separately with the Securities and Exchange Commission.


 


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APPENDIX B:  LICENSE TERMS


 


1.             License
Fees:


 


A.            HCV
License Fee:  [*]


 


B.            HIV
License Fee:  [*]


 


2.           Royalty
Rate:


 


A.            For HCV Licensed Assays:  Specialty shall pay the higher of:  (i) earned royalties of [*]; or (ii) the
minimum royalties (“Minimum Royalties”) as follows.


 


qualitative – [*]
per result


 


quantitative - [*]
per result


 


genotyping - [*]
per result


 


resistance - [*]
per result


 


B.            For HIV Licensed Assays:  Specialty shall pay the higher of:  (i) earned royalties of [*];
or (ii) the Minimum Royalties of [*]
per result.


 


 












* Information for which confidential treatment has been requested
pursuant to Rule 24(b)(2) of the Securities Exchange Act of 1934, as
amended  The omitted material has been
filed separately with the Securities and Exchange Commission.


 


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