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EXHIBIT 10.3
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (the "Agreement") is entered into in San
Clemente, California, U.S.A. as of September 1, 1998, ("Effective Date") by and
between Micro Therapeutics, Inc., a corporation duly organized and existing
under the laws of the State of Delaware, U.S.A., with its principal office
located at 0000-X Xxxxx Xxxxxxx, Xxx Xxxxxxxx, XX 00000, X.X.X. ("COMPANY"), and
Century Medical, Inc., a corporation duly organized and existing under the laws
of Japan with its principal place of business located at 0-0-0 Xxxxxx,
Xxxxxxxxx-Xx, Xxxxx, 000-0000, Xxxxx ("DISTRIBUTOR").
IN CONSIDERATION OF THE MUTUAL PROMISES CONTAINED HEREIN, THE PARTIES
AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 "ASP" OR "AVERAGE SELLING PRICE" means the Net Sales of any
given Product divided by the total number units of that Product
shipped (excluding non-revenue units, such as samples) and
invoiced by DISTRIBUTOR to customers.
1.2 "CONTRACT YEAR" shall mean the twelve month period commencing on
January 1 and ending December 31 and shall have the same meaning
as calendar year.
1.3 "GROSS MARGIN" shall mean Net Sales minus the price of Product
paid to Company.
1.4 "INITIAL TERM" shall mean the period beginning on the Effective
Date and expiring five (5) years from the date that DISTRIBUTOR
first receives a medical device import approval to commercially
market and sell the Liquid Embolic Material (LES) Product in the
Territory.
1.5 "NET SALES" means the gross revenues recorded by DISTRIBUTOR on
the accrual method minus reasonable reserves for bad debt
consistent with generally accepted accounting principles
consistently applied by DISTRIBUTOR for sales of, and in
connection with DISTRIBUTOR's purchase, transportation and
importation of, the Products, less any discounts, rebates and
credit for returned goods and cancellations, and less all
freight charges, insurance and other costs of shipping and
handling, taxes, duties and the like, all to the extent that any
of the foregoing may be recorded or incurred by DISTRIBUTOR in
connection with the Products under this Agreement.
1.6 "PARTY" OR "PARTIES" shall mean COMPANY or DISTRIBUTOR,
individually or collectively, depending on the context.
1.7 "PRODUCTS" shall mean all current and future products
manufactured by COMPANY or technology developed or otherwise
acquired by COMPANY and any improvements, enhancements or line
extensions thereto, including, without limitation, those
Products specifically listed in EXHIBIT A, as amended from time
to time.
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1.8 "TERM" shall mean the Initial Term as defined in Section 3.1
plus any extensions pursuant to Section 3.2 or Section 3.3
unless earlier terminated pursuant to the terms hereof.
1.9 "TERRITORY" shall mean the entire country of Japan.
2. APPOINTMENT AND AUTHORITY OF DISTRIBUTOR
2.1 APPOINTMENT. COMPANY hereby appoints DISTRIBUTOR as COMPANY's
exclusive distributor and importer of the Products within the
Territory, and DISTRIBUTOR hereby accepts such appointment.
During the term of this Agreement, COMPANY shall not distribute
or import nor shall COMPANY authorize any other entity to
distribute or import, directly or indirectly, the Products in
the Territory, and neither shall COMPANY sell or authorize sales
to any person or entity outside of the Territory who is known to
COMPANY as intending to introduce Products into the Territory.
Under no circumstances shall DISTRIBUTOR have authority to sell,
distribute or re-export any Products outside the Territory.
2.2 SUBDISTRIBUTORS. DISTRIBUTOR may appoint subdistributors to make
sales of Products within the Territory on such terms and
conditions as DISTRIBUTOR determines to be necessary to fulfill
its obligations under this Agreement; provided that no such
appointment or delegation shall relieve DISTRIBUTOR from any
obligations hereunder. COMPANY acknowledges and accepts that
DISTRIBUTOR will use subdistributors in the sale of Products,
the use of said subdistributors being a normal business custom
in the Territory.
3. TERM OF AGREEMENT
3.1 INITIAL TERM. The Initial Term shall commence as of the
Effective Date and shall expire five (5) years from the date
that DISTRIBUTOR first receives a medical device import approval
to commercially market and sell the Liquid Embolization System
("LES") in the Territory in accordance with Section 4.2 of this
Agreement, unless terminated earlier pursuant to the terms
hereof.
3.2 RENEWAL PERIOD. At the end of the Initial Term, this Agreement
shall automatically renew for an additional five (5) years
("Renewal Period"), subject to Sections 8.11(d) and (e), unless
terminated earlier pursuant to the terms hereof.
3.3 EXTENSION BY MUTUAL AGREEMENT. After the Renewal Period the term
of the Agreement may be extended for additional five (5) year
periods upon written agreement of the Parties.
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4. DISTRIBUTOR'S DUTIES
4.1 TERRITORY RESPONSIBILITY. DISTRIBUTOR materially represents that
it has adequate facilities, financing, and personnel to perform,
at its own expense, its obligations under this Agreement.
DISTRIBUTOR covenants to do each of the following:
(a) To use commercially reasonable efforts to promote and
sell the Products in the Territory and to maintain and
enhance the goodwill of the Products.
(b) To create and maintain a dedicated sales and marketing
group exclusively focused on COMPANY Products and
facilities capable of handling promptly all purchase
requests in the Territory. DISTRIBUTOR may at its sole
and exclusive option form a subsidiary company of
DISTRIBUTOR and operate the distribution of the Products
through such subsidiary. In the event of such a spin-off
to a subsidiary company, DISTRIBUTOR may at its sole
discretion offer to COMPANY the option to acquire an
equity interest in the new company at terms and
conditions to be determined by DISTRIBUTOR.
(c) To maintain a commercially reasonable stock of the
Products in order to satisfy the purchase requirements
in the Territory.
(d) To confer, from time to time, upon request, with COMPANY
on matters relating to the marketing and promotion of
the Products in the Territory.
(e) To translate Product literature into Japanese when
necessary.
(f) Not to solicit the sale of, promote the sale of, sell,
exhibit for sale, distribute or manufacture any product
directly competitive with the Products.
4.2 PRODUCT APPROVALS. DISTRIBUTOR shall use its reasonable
commercial efforts, at its own expense (except as otherwise
provided herein) and in its name, to secure all necessary
medical device approvals ("Shonins") from the Japanese Ministry
of Health and Welfare and to conduct when necessary any clinical
trials needed to obtain medical device approvals to market the
Products in the Territory. DISTRIBUTOR shall consult with
COMPANY regarding selection of the clinical trial sites.
COMPANY, at its option, shall have the sole right to select the
clinical trial sites and investigators in the Territory.
4.3 REIMBURSEMENT. DISTRIBUTOR shall develop a plan for securing in
the Territory National Health Insurance reimbursement for the
Products, filing any applications necessary or required by the
local government to review a reimbursement request, attending
meetings with the local government when required to review the
application and in general, to use its reasonable commercial
efforts to secure reimbursement approval.
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5. COMPANY'S DUTIES
5.1 PRODUCT DEVELOPMENT. COMPANY will use reasonable commercial
efforts to develop for commercialization those Products
currently under development and to create new Products for
commercialization. COMPANY will inform DISTRIBUTOR, from time to
time, of the technical and other developments regarding the
Products as these may occur.
5.2 LICENSES AND REGISTRATION MATERIALS. COMPANY shall provide
DISTRIBUTOR with the materials necessary to obtain and maintain
import licenses and health registrations required to import and
sell the Products within the Territory by furnishing to
DISTRIBUTOR, at COMPANY's cost, such technical descriptions,
specifications, data, drawings, information, service manuals,
quality control audits, facility inspection reports issued by
governmental regulators or international quality control
auditors regarding the Products, in the English language, as
DISTRIBUTOR may reasonably request.
5.3 PRODUCT APPROVALS. COMPANY shall provide to DISTRIBUTOR, at no
cost to DISTRIBUTOR, all Products necessary for DISTRIBUTOR to
fulfill it obligations under Sections 4.2 and 4.3.
5.4 REGULATORY AND SAFETY TESTING REQUIREMENTS. COMPANY shall be
considered to be the finished device manufacturer for the
Products and shall be responsible for compliance with all
regulatory and safety testing requirements for the Products in
the Territory. COMPANY will provide DISTRIBUTOR any information
reasonably requested for the purpose of complying with
governmental requirements; provided, that COMPANY is reasonably
satisfied that the confidentiality of any proprietary
information it is asked to provide will be protected. COMPANY
will notify DISTRIBUTOR promptly of any actions taken with
respect to COMPANY or the Products by regulators in other
jurisdictions, including (i) any facility inspection resulting
in any notice of infraction, warning or other action, (ii)
voluntary or mandatory recalls or withdrawal of products, (iii)
administrative or court proceedings, (iv) any changes of factory
location and the method of sterilization, packaging, materials,
design or other specifications of Products and (v) similar
matters. COMPANY will promptly provide DISTRIBUTOR with copies
of any correspondence with regulators regarding any of the
foregoing.
5.5 PRODUCT TRAINING. COMPANY shall provide reasonable product
training to DISTRIBUTOR's personnel and customers at mutually
agreed upon times and places. Each party shall bear its own
participants' expenses for attending such training, unless
mutually agreed otherwise.
5.6 MARKETING MATERIALS. Upon DISTRIBUTOR's reasonable request,
COMPANY shall furnish DISTRIBUTOR, without charge (except as
otherwise agreed), with reasonable quantities of technical,
advertising and selling information and other promotional
literature in the English language concerning the Products.
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5.7 SAMPLES. COMPANY shall provide DISTRIBUTOR with a reasonable
amount of samples of each of the Products, at no charge, as
requested by DISTRIBUTOR, for sales presentations, medical
meeting demonstrations or presentations, and for testing
purposes.
5.8 PERSONNEL. During the Term of this Agreement and for a period of
five (5) years from the expiration or termination of this
Agreement, COMPANY, its affiliates, successors and assigns shall
not solicit or hire in any capacity any personnel employed by
DISTRIBUTOR who are involved in the distribution or promotion of
the Products.
5.9 RECALLED PRODUCT. COMPANY shall give prompt notice to
DISTRIBUTOR of any recall or contemplated recall of the
Products. The parties shall give each other full cooperation
throughout the recall process whether such recall is voluntary
or otherwise and shall comply in full with applicable legal and
governmental requirements. COMPANY shall reimburse DISTRIBUTOR
for the price paid hereunder for such Products as may be
recalled, plus all freight and related costs incurred by
DISTRIBUTOR in connection with such recalled Products, including
any cost incurred in returning such Products to COMPANY.
5.10 INSURANCE. COMPANY shall at all times during the term of this
Agreement maintain product liability insurance covering the
products with minimum annual limits of Two Million Dollars
($2,000,000) per occurrence and Two Million Dollars ($2,000,000)
in the aggregate. COMPANY shall maintain such insurance for a
minimum of five (5) years after termination of this Agreement.
Within thirty (30) days of the Effective Date, COMPANY shall
deliver to DISTRIBUTOR a certificate of insurance evidencing
such insurance and stating that the policy will not be canceled
or modified without at least thirty (30) days prior written
notice to DISTRIBUTOR. "Dollars" shall refer to United States
Dollars.
6. EXPENSES
6.1 DISTRIBUTOR'S EXPENSES. Except as otherwise specifically
provided herein, Distributor shall be responsible for all
expenses incurred by it in connection with the implementation of
this Agreement, including without limitation salaries, office
and travel expenses of its employees, advertising and trade
shows within the Territory and any and all taxes which may be
imposed on DISTRIBUTOR within the Territory. COMPANY shall bear
only such of these expenses as to which it has, by written
agreement, given advance approval.
6.2 COMPANY'S EXPENSES. Except as otherwise specifically provided
herein, COMPANY shall be responsible for payment of all expenses
incurred by it including any taxes imposed on it and shall also
pay those expenses incurred in connection with the
implementation of this Agreement for which it has given prior
written approval of the reimbursement of such expense.
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7. RECORDS AND REPORTS
7.1 PURCHASE RECORDS. Subject at all times to Section 13,
DISTRIBUTOR shall maintain complete and accurate records of
aggregate purchases and resales of the Products and all other
information received by or relating to Products, including
market conditions, and shall permit, or cause to permit, COMPANY
or its agents at any time during regular business hours to
examine such records for purposes related to the performance of
the Agreement. The duty of DISTRIBUTOR to preserve and the right
of the COMPANY to examine all such records shall not cease until
termination or expiration of this Agreement and shall survive
until all moneys have been paid, all inventory sold or returned
and no disputes exist. DISTRIBUTOR and COMPANY each shall, for
tracking purposes, maintain accurate delivery, receiving and
shipping records including model and lot number of the Products.
7.2 QUARTERLY REPORT. DISTRIBUTOR shall provide to COMPANY, by the
thirtieth (30th) day of the first month following the end of
each quarter during the Term, a quarterly report summarizing
DISTRIBUTOR's activities under this Agreement for the prior
calendar quarter and containing such other information as
COMPANY may reasonably request, including without limitation a
description of and the amount of all Products in DISTRIBUTOR's
inventory as of the first day of each calendar month.
8. SALE OF PRODUCT TO DISTRIBUTOR
8.1 PURCHASE PRICES. Three categories of Product pricing to
DISTRIBUTOR will be established for this Agreement: (1)
Peripheral Blood Clot Therapy Products, (2) Access Products, and
(3) Liquid Embolization Systems (LES). COMPANY may also offer
additional discounts depending upon the competitiveness of
individual Products or give special consideration for additional
volume discounting on a case by case basis. The calculation of
Product purchase prices ("Purchase Price") to DISTRIBUTOR by
category will be as follows:
(a) Peripheral Blood Clot Therapy Products: the Purchase
Price shall be the U.S. dollar equivalent of [*]% of
DISTRIBUTOR'S ASP in the Territory for each such Product
converted at a Yen/Dollar exchange rate of (Y)140/$1.00.
In the event that the average daily exchange rate (T/T
Selling Rate) during any quarter falls outside the range
of (Y)135 to (Y)145, either Party may request of the
other an opportunity to adjust prices.
(b) Access Products: the Purchase Price shall be the U.S.
dollar equivalent of [*]% of DISTRIBUTOR's ASP in the
Territory for each such Product converted at a
Yen/Dollar exchange rate of (Y)140/$1.00. COMPANY shall,
at its sole discretion, have the option of (i)
increasing Access Products pricing by [*]% of
DISTRIBUTOR's ASP once DISTRIBUTOR's annual purchases
from COMPANY reach $[*] in any calendar year, and
(ii) increasing Access Products pricing by an additional
[*]% of DISTRIBUTOR's ASP once DISTRIBUTOR's annual
purchases from COMPANY exceed $[*] in
* Confidential Portions Omitted and Filed Separately with the Commission.
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any calendar year. Notwithstanding the foregoing, on
January 1 of each calendar year, the Purchase Prices for
Access Products shall be reduced by an appropriate
amount to negate the effect of any such optional
increase imposed by COMPANY in the previous calendar
year. In the event that the average daily exchange rate
(T/T Selling Rate) during any quarter falls outside the
range of (Y)135 to (Y)145, either Party may request of
the other an opportunity to adjust prices.
(c) Liquid Embolization Systems (EMBOLYX(TM)and Delivery
Systems): the Purchase Price shall be the U.S. dollar
equivalent of [*]% of DISTRIBUTOR's ASP in the Territory
for each such Product at a Yen/Dollar exchange rate
of(Y)140/$1.00. COMPANY shall, at its discretion, have
the option of increasing LES pricing by [*]% of
DISTRIBUTOR's ASP at its sole discretion once
DISTRIBUTOR's annual purchases from COMPANY reach $[*]
in any calendar year. COMPANY shall have the
option of increasing LES pricing an additional [*]% of
DISTRIBUTOR's ASP for any DISTRIBUTOR LES purchases from
COMPANY that exceed $[*] in any calendar year.
Notwithstanding the foregoing, on January 1 of each
calendar year, the Purchase Prices for LES shall be
reduced by an appropriate amount to negate the effect of
any such optional increases imposed by COMPANY in the
previous calendar year. In the event that the average
daily exchange rate (T/T Selling Rate) during any
quarter falls outside the range of(Y)135 to(Y)145,
either Party may request of the other an opportunity to
adjust prices.
(d) For the purposes of calculating the Purchase Price for
each category of Products in accordance with this
Section 8.1, DISTRIBUTOR's ASP shall be reviewed and
reconciled by DISTRIBUTOR each calendar quarter of a
Contract Year. For the first quarter of Contract Year 1,
DISTRIBUTOR shall make a good faith estimate of its ASP
for each Product category for the purpose of determining
the appropriate Purchase Prices. Thereafter, the ASP
used to determine Purchase Prices (for each Product
category) in a given quarter of a Contract Year shall be
DISTRIBUTOR's actual ASP in the preceding quarter, as
reported by DISTRIBUTOR and documented in DISTRIBUTOR's
quarterly report to COMPANY pursuant to Section 7.2. In
addition, as set forth in subsections (a), (b) and (c)
above, each Party may request of the other an
opportunity to adjust the Yen/Dollar exchange rate used
in calculating the Purchase Prices to account for a
shift in such exchange rate beyond the specified range,
which request the Parties agree to discuss in good
faith, and no Party shall unreasonably withhold,
condition or delay its approval of any such request made
in accordance with the terms of this Section 8.1.
(e) For purposes of this Section 8.1 all references to a
Yen/Dollar daily exchange rate shall refer to the
opening T/T Selling Rate for U.S. Dollars (as stated in
Yen) as publicly reported on such day by Sumitomo Bank
in Tokyo, Japan.
* Confidential Portions Omitted and Filed Separately with the Commission.
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(f) For the purposes of this Section 8.1 and Section 8.11,
in the event that DISTRIBUTOR creates a separate
subsidiary company to market and sell the Products in
the Territory as provided for in Section 4.1(b), then
DISTRIBUTOR's Purchase Price shall be based upon the
subsidiary's ASP in the same manner as provided for
DISTRIBUTOR in Sections 8.1(a), (b), (c) and (d) above.
8.2 PURCHASE ORDERS. All orders for Products by DISTRIBUTOR shall be
initiated by DISTRIBUTOR's issuance of a written purchase order
sent via facsimile or mail. Such orders shall state unit
quantities, unit descriptions, requested delivery dates, and
shipping instructions. This Agreement shall control orders of
Products by DISTRIBUTOR. All different or additional terms or
conditions in DISTRIBUTOR's purchase order, acknowledgment or
other similar document shall not add to or modify the terms of
this Agreement.
8.3 ACCEPTANCE OF ORDERS. All orders and modification to orders are
subject to acceptance by COMPANY; provided, however, that
COMPANY agrees to accept all purchase orders by DISTRIBUTOR for
the Products as long as such orders are consistent with
DISTRIBUTOR's Annual Sales Plan as described in Section 8.11;
and provided further, that COMPANY shall use its commercially
reasonable efforts to accept or refuse any purchase order within
five business days following receipt from DISTRIBUTOR. COMPANY
shall use commercially reasonable efforts to fulfill all other
orders by DISTRIBUTOR for the Products in the Territory. If
COMPANY believes that it will not be able to satisfy
DISTRIBUTOR's orders for the Products, it shall promptly notify
DISTRIBUTOR, specifying the reasons for the delay and its
expected duration. COMPANY shall have the right to cancel any
order placed by DISTRIBUTOR or to refuse or delay the shipment
thereof if DISTRIBUTOR shall fail to meet any payments as
provided herein.
8.4 TITLE AND DELIVERY OF PRODUCT.
(a) All Products shall be delivered FOB/FCA COMPANY's
manufacturing facility to the carrier designated by
DISTRIBUTOR. If no such designation is made by
DISTRIBUTOR, COMPANY shall select the most
cost-effective carrier, given the time constraints known
to COMPANY. COMPANY's title and the risk of loss to the
Products shall pass to DISTRIBUTOR upon delivery of the
Products to the carrier. For purposes of this Agreement,
FOB and FCA shall have the meanings assigned to them
under, and shall be governed by, Incoterms 1990 of the
International Chamber of Commerce.
(b) All shipments of Products shall be billed to DISTRIBUTOR
at the Purchase Price in effect for each Product at the
time of confirmation by COMPANY of DISTRIBUTOR's order
for such Products.
(c) All Products shall be suitably packed for shipment and
marked for shipment to DISTRIBUTOR's facility designated
in the purchase order. DISTRIBUTOR agrees to undertake
all import formalities required to import
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the Products into the Territory, and to pay all custom
duties, freight, insurance and other shipping expenses,
as well as any special packing expense.
(d) COMPANY may make partial shipments against DISTRIBUTOR's
purchase orders upon mutual agreement of the parties.
8.5 PRODUCT SPECIFICATIONS. Each Product delivered under this
Agreement will have upon shipment a minimum remaining shelf life
of three-fourths (3/4) of such Product's approved shelf life.
COMPANY reserves the right to change the design or
specifications of any of the Products or part thereof at any
time and with ninety (90) days prior notice to the DISTRIBUTOR.
COMPANY also reserves the right to discontinue the manufacture
and distribution of any of the Products at any time with ninety
(90) days prior notice to DISTRIBUTOR and without substitution,
in COMPANY's sole discretion. COMPANY recognizes that a
substantial lead time is required to obtain import license
approvals for Product specification changes and COMPANY will
endeavor to its best reasonable ability to give DISTRIBUTOR as
much advance notification as possible to Product specification
changes. In the event COMPANY discontinues the manufacture or
distribution of any Product or in the event of a Product
specification change, DISTRIBUTOR's Annual Sales Plan
obligations under Section 8.11 shall be amended and adjusted
accordingly. Notwithstanding the foregoing, with respect to a
Product or Product line that has been sold by COMPANY to
DISTRIBUTOR for distribution hereunder, any discontinuation or
cancellation of such Product or Product line for the purpose,
directly or indirectly, of transfer of same to a third party or
to an affiliate of COMPANY shall be deemed an assignment
thereof, and any such transferee shall be bound to the terms and
conditions of this Agreement to the same extent as COMPANY with
respect to such Product or Product line.
8.6 CANCELLATION OF ORDERS. DISTRIBUTOR may cancel an order for
standard Products normally kept in COMPANY's inventory which
COMPANY has accepted only by providing written notice to COMPANY
prior to the shipment of any part thereof and by paying such
reasonable cancellation charge requested by COMPANY. DISTRIBUTOR
may not cancel an order for non-inventory Products or custom
made Products which COMPANY has accepted unless confirmed in
writing by COMPANY and by paying such reasonable cancellation
charge, including, but not limited to, reasonable tooling and
works-in-progress expenses requested by COMPANY.
8.7 ACCEPTANCE. DISTRIBUTOR shall inspect all Products promptly upon
receipt thereof and may reject any Product that fails in any
material way to meet the specifications set forth in COMPANY's
current data sheet for that Product. Any Product not properly
rejected within ten (10) days after receipt of that Product by
DISTRIBUTOR ("Rejection Period") shall be deemed accepted. If
any unit of a Product is shipped by DISTRIBUTOR to its customer
prior to the expiration of the Rejection Period, then that unit
shall be deemed accepted upon shipment by DISTRIBUTOR. To reject
a Product, DISTRIBUTOR shall (i) within ten (10) days
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of receipt of such Product notify COMPANY of its rejection and
request a Return Goods Authorization ("RGA") number, and (ii)
within ten (10) days of receipt of the RGA number from COMPANY
return such rejected Product to COMPANY, freight prepaid and
properly insured. In the event that COMPANY determines that the
returned Product was properly rejected by DISTRIBUTOR,
DISTRIBUTOR shall be issued credit or a replacement Product
shall be shipped to DISTRIBUTOR at COMPANY's expense. After the
Rejection Period, DISTRIBUTOR may not return a Product to
COMPANY for any reason without COMPANY's prior written consent.
8.8 PAYMENT TERMS. Payments shall be made by DISTRIBUTOR sixty (60)
days after receipt of Products. Payment shall be made by wire
transfer in U.S. funds to an account designated by COMPANY.
8.9 TAXES. DISTRIBUTOR shall pay all taxes (including, without
limitation, sales, value-added and similar taxes) payable with
respect to the sale and purchase of Products under this
Agreement imposed by Japanese taxing authorities, except for
taxes based on COMPANY's income. COMPANY shall be responsible
for all taxes imposed by United States taxing authorities, other
than any tax based on DISTRIBUTOR's income. In any event,
DISTRIBUTOR may deduct from any payments to COMPANY the amount
of any withholding taxes imposed upon such payment by Japanese
taxing authorities to the extent that DISTRIBUTOR provides to
COMPANY adequate receipts of such tax payment to enable COMPANY
to claim equivalent United States tax credits.
8.10 INITIAL ORDERS.
(a) Upon execution of this Agreement, DISTRIBUTOR shall
deliver to COMPANY a payment of Five Hundred Thousand
Dollars ($500,000) for an initial order of the Products.
This initial order shall be applied as a credit against
the first Annual Sales Plan.
(b) Upon achievement of the first regulatory approval for
the application of LES, DISTRIBUTOR shall deliver to
COMPANY a payment of One Million Dollars ($1,000,000)
for an initial order of LES. This initial order of LES
shall be applied as a credit against the Annual Sales
Plan for that respective Contract Year.
8.11 ANNUAL SALES PLAN.
(a) DISTRIBUTOR and COMPANY shall prepare and agree upon by
October 31 of each year an annual sales plan ("Annual
Sales Plan") for the subsequent Contract Year during the
Term. Each Annual Sales Plan shall include purchase and
sales projections for Products for five (5) full
calendar years with the first year projected by
quarters. With respect to Product line extensions, the
parties shall make Annual Sales Plan adjustments as
mutually agreed upon, commensurate with the expanded
total available market opportunity associated with the
expanded Product offerings. The first year
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projections will serve as the minimum purchase
obligation for DISTRIBUTOR for the next Contract Year.
The quarterly projections will serve as the production
plan for the COMPANY. If after exhausting all reasonable
effort COMPANY and DISTRIBUTOR are unable to mutually
agree upon any Annual Sales Plan during the term of this
Agreement, then the Annual Sales Plan shall be the same
as the actual purchase and sales results during the
Contract Year immediately preceding the Contract Year in
which there is no agreement on the Annual Sales Plan.
(b) Within ninety (90) days of the conclusion of any
Contract Year of the Agreement in which DISTRIBUTOR has
not attained the minimum purchase obligation under the
Annual Sales Plan, DISTRIBUTOR shall have the
discretionary right but not the obligation to purchase
additional Products from COMPANY at the appropriate
Purchase Prices in order to satisfy DISTRIBUTOR's
obligation. Any purchases credited towards the prior
Contract Year's Annual Sales Plan in accordance with the
immediately preceding sentence shall not be credited
towards the then current Contract Year's Annual Sales
Plan. For the purposes of this Section 8.11 a Product
shall be deemed purchased during a designated Contract
Year when a firm purchase order has been received and
accepted by COMPANY during such Contract Year, and which
order calls for delivery of Products within that
Contract Year; provided, that COMPANY shall accept or
reject any such purchase order within fifteen (15) days
following its receipt.
(c) Notwithstanding any other provision of this Agreement to
the contrary, any Annual Sales Plan then in effect shall
be adjusted accordingly to reflect the effect of any
Product recall, any discontinuation of a Product or
Product line, any refusal or failure by COMPANY to
satisfy a bona fide purchase order made in accordance
with the terms of Section 8.2, or any relevant event of
force majeure as set forth in Section 16.1.
(d) COMPANY shall have the right but not the obligation to
terminate this Agreement in the event that DISTRIBUTOR
has not attained at least [*] percent ([*]%) of the
Annual Sales Plan in at least three (3) Contract Years
of any consecutive five (5) Contract Years.
(e) If the Parties hereto do not agree on an Annual Sales
Plan for the immediately following Contract Year for any
three (3) Contract Years of five (5) consecutive
Contract Years during the Initial Term, the commencement
of the Renewal Period provided for in Section 3.2 shall
be suspended pending the completion of good faith
negotiations between the Parties resulting in a mutually
agreeable Annual Sales Plan for the first Contract Year
of such Renewal Period.
* Confidential Portions Omitted and Filed Separately with the Commission.
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9. PRODUCT LIABILITY
COMPANY shall indemnify and hold DISTRIBUTOR harmless from and against
any and all liability, damages, judgments, fees, penalties, fines or
other costs or expenses, including reasonable attorney's fees, arising
out of any action brought against the DISTRIBUTOR, in which it is
alleged that any of the Products are defectively designed, manufactured,
or labeled, or contain defective operating instructions or safety
warnings, except to the extent that such liability arises out of
DISTRIBUTOR's own negligent acts or omissions. DISTRIBUTOR shall give
COMPANY reasonable notice of any such action and shall assist COMPANY in
the defense of any such action as may be reasonably requested by
COMPANY.
10. WARRANTY
COMPANY warrants that the Products sold to DISTRIBUTOR are free from any
defects in material, design, workmanship, manufacture, treatment,
packing, instruction manuals, labeling, warning or otherwise and shall
at all times comply with the requirements of and regulations adopted
pursuant to the U.S. Federal Food, Drug and Cosmetic Act and applicable
Japanese law. COMPANY further warrants that it will convey good title to
all Products delivered to DISTRIBUTOR free from any security interest,
liens or other encumbrance. COMPANY will provide, when requested by
DISTRIBUTOR, certification that, to the best of its knowledge, it is in
compliance with U.S. and Japanese laws, statutes, rules, and regulations
and relevant orders relating to the manufacture, use, distribution and
sale of the Products. SUBJECT TO ARTICLES 9 AND 14, COMPANY'S SOLE
OBLIGATION UNDER THE FOREGOING WARRANTY SHALL BE, AT COMPANY'S SOLE
ELECTION, TO EITHER REPLACE THE RELEVANT PRODUCT OR REFUND DISTRIBUTOR'S
FULLY-LANDED PURCHASE PRICE FOR SUCH PRODUCT. Such obligation shall be
subject to COMPANY being granted the reasonable opportunity to inspect,
at COMPANY's expense, the defective Product at the location of its use
or storage and, upon request in accordance with the COMPANY's
instruction, return of the Product to COMPANY at COMPANY's cost. Any
such replacement of Products may be made by substitution of any similar
Product meeting quality specifications and payment by the COMPANY of all
freight, handling and duty charges or taxes incident thereto.
NOTWITHSTANDING THE FOREGOING, COMPANY MAKES NO WARRANTY, NOR SHALL IT
HAVE ANY OTHER OBLIGATION TO DISTRIBUTOR WITH RESPECT TO ANY PRODUCT
SOLD HEREUNDER, TO THE EXTENT THAT SUCH PRODUCT HAS EXPIRED ACCORDING TO
PRODUCT LABELS OR HAS NOT BEEN USED, HANDLED OR STORED IN ACCORDANCE
WITH COMPANY GUIDELINES AS COMMUNICATED BY COMPANY.
EXCEPT AS EXPRESSLY PROVIDED ABOVE AND IN SECTION 12 BELOW, COMPANY
GRANTS DISTRIBUTOR NO OTHER WARRANTIES, EXPRESS OR IMPLIED, BY STATUTE,
IN THIS AGREEMENT OR IN ANY COMMUNICATION BY COMPANY, REGARDING THE
PRODUCTS, THEIR FITNESS FOR ANY PARTICULAR PURPOSE, THEIR QUALITY, THEIR
MERCHANTABILITY OR OTHERWISE.
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11. TRADEMARKS AND TRADE NAMES
COMPANY hereby grants to DISTRIBUTOR a non-exclusive license (with right
of sub-license to subdistributors appointed under Section 2.2) to use
trademarks, trade names, copyrights and logos of COMPANY as communicated
to DISTRIBUTOR from time to time (hereinafter referred to as the
"Trademarks") in connection with its sales, promotion and distribution
of the Products under this Agreement. Upon request, DISTRIBUTOR shall
use its commercially reasonable efforts to register the Trademarks in
the Territory on behalf of COMPANY and at COMPANY's expense during the
effective term of this Agreement. DISTRIBUTOR may indicate in its
advertising and promotion and on its stationery that it is an
"authorized exclusive distributor" of the Products in the Territory.
DISTRIBUTOR has no permission to and will not adopt, use or register as
a trademark, trade name, business name or corporate name or part
thereof, whether during the term of this Agreement or after its
termination, any word, or symbol similar to any Trademarks. Furthermore,
upon request of and at the expense of COMPANY, DISTRIBUTOR shall
discontinue or cancel the registration of any and all Trademarks
utilized and registered by DISTRIBUTOR in connection with the Products
prior to or after the execution of this Agreement.
12. INTELLECTUAL PROPERTY RIGHTS
DISTRIBUTOR agrees that COMPANY owns all right, title and interest in
all of COMPANY's patents, trademarks, trade names, inventories,
copyrights, know-how and trade secrets relating to the design,
manufacture, operation or service of the Products. The use by
DISTRIBUTOR of any of these intellectual property rights is authorized
only for the purposes herein set forth, and, subject to Section 15.4,
upon termination of this Agreement for any reason such authorization
shall cease. DISTRIBUTOR agrees to assign, and to execute all
documentation reasonably necessary to effect assignment of, any and all
such intellectual property rights to COMPANY, and agrees that material
infringement by DISTRIBUTOR upon such right, title and interest, whether
or not authorized or required under Japanese law or otherwise by
governmental action, shall be grounds for termination of this Agreement.
13. CONFIDENTIALITY
Without the prior written consent of the disclosing Party, no receiving
Party, its officers, agents, or employees shall, in any manner
whatsoever for use in any way for its own account or for the account of
any third party, public or private, disclose or communicate to a third
party, public or private, any technical, engineering, manufacturing,
business, financial or other information and know how (hereinafter
referred to as the "Confidential Information") generated by any Party
hereto and acquired directly or indirectly by the other Party. Nothing
in this Section 13 shall prevent disclosure or use of information (i)
already known to the receiving Party; (ii) which is or becomes public
knowledge without the fault of the receiving Party; (iii) which is
properly acquired by the receiving Party from a third party having the
legal right to such information; (iv) is required to be disclosed by a
governmental or judicial authority; (v) is independently developed by
the receiving Party without reference to the supplying Party's
Confidential Information, as documented by written evidence; or (vi) as
required or as may be desirable in connection with a financing of
COMPANY or
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DISTRIBUTOR. No receiving Party shall, in any manner whatever for use in
any way for its own account or for the account of any third party,
public or private, disclose or communicate to a third party, public or
private, any Confidential Information for any purpose except for the
purposes for which such Confidential Information was supplied, and such
receiving Party will take every reasonable precaution to protect the
confidentiality of such information. Each Party acknowledges that any
breach of any obligation under this Section 13 is likely to cause or
threaten irreparable harm to the other Party, and accordingly, each
Party agrees that in such event the non-breaching Party shall be
entitled to equitable relief to protect its interests, including, but
not limited to, preliminary and permanent injunctive relief.
14. INDEMNIFICATION AND LIMITATION OF LIABILITY
14.1 INDEMNIFICATION.
(a) Each Party agrees to indemnify, defend and hold the
other Party and its officers, directors, employees,
agents, successors and assigns harmless from and against
any and all claims made by any third party arising out
of the manufacture, processing, marketing, distribution
or sale of the Products or otherwise, where and to the
extent such damages are alleged to have been caused by
the fault of such indemnifying Party or its officers,
directors, employees, agents, successors or assigns. The
indemnifying Party under this Section 14.1 shall be
relieved of its obligation except to the extent that the
indemnified Party: (i) gives the indemnifying Party
written notice of such claim as soon as reasonably
practicable; (ii) cooperates in the defense of such
claim at the expense of the indemnifying Party, and
(iii) gives the indemnifying Party the sole control of
defense and/or settlement of such claim. No settlement
shall take place without the consent of the indemnified
Party.
(b) COMPANY shall defend, hold harmless and indemnify
DISTRIBUTOR and its officers, directors, employees,
agents, successors and assigns against any damages,
disbursements, expense, liability, penalty or loss of
any kind or nature (including reasonable attorneys'
fees) ("Damages") incurred in connection with any suit,
claim, or proceeding brought against COMPANY and/or
DISTRIBUTOR for an alleged infringement of any patent,
trademark or other intellectual property right in
connection with the Products or for bodily injuries or
death to any person caused by a defect in a Product or
its design or manufacture, and COMPANY shall pay any
such Damages incurred by or awarded against DISTRIBUTOR
in connection with any such suit, claim or proceeding
except to the extent that: (i) such Product has been
modified or tampered with by DISTRIBUTOR, (ii) such
Product has been misused as a result of DISTRIBUTOR's
unauthorized representation about the Product; or (iii)
DISTRIBUTOR fails to give COMPANY reasonable written
notice of any such claim as soon as is reasonable
practicable. COMPANY shall have the sole control of the
defense and/or settlement of such claim; however,
COMPANY agrees that it will not control or settle the
same without prior consultation with DISTRIBUTOR.
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14.2 INFRINGING PRODUCTS. If a claim of patent or other proprietary
right infringement is made by a third party with respect to a
Product, then COMPANY, at its option and expense, shall (i)
obtain for DISTRIBUTOR the right to continue to market and
distribute the Product, (ii) replace the Product with a
functionally-equivalent non-infringing Product, (iii) modify the
Product so that it becomes non-infringing, so long as the
functionality of the Product is not thereby adversely affected,
and replace the infringing Product with such modified Product or
(iv) have dismissed, settle or otherwise cause such claim to be
withdrawn. If COMPANY is unable to accomplish any of the
foregoing within one hundred eighty (180) days of the initial
infringement claim, COMPANY shall grant DISTRIBUTOR a full
refund of DISTRIBUTOR's fully-landed cost for all affected
Products and accept return of such Products, and the parties
shall remove all such affected Products from any then current
and future Annual Sales Plans.
14.3 LIMITATION OF LIABILITY. EXCEPT FOR THE INDEMNIFICATION
OBLIGATIONS UNDER ARTICLE 9 AND SECTION 14.1 ABOVE, NEITHER
PARTY SHALL, BY REASON OF THE TERMINATION OF THIS AGREEMENT OR
OTHERWISE, BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL,
SPECIAL, INCIDENTAL, OR OTHER DAMAGES (INCLUDING WITHOUT
LIMITATION LOSS OF PROFIT) WHETHER OR NOT ADVISED TO THE
POSSIBILITY OF SUCH DAMAGES.
15. TERMINATION
15.1 TERMINATION FOR CAUSE. COMPANY or DISTRIBUTOR, as the
non-defaulting Party, may terminate this Agreement, immediately
upon the giving of written notice to the defaulting Party, in
the event that any of the following events occur:
(a) COMPANY or DISTRIBUTOR defaults in the material
performance of any obligation under this Agreement and
fails to cure such default within sixty (60) days after
written notice thereof from the non-defaulting Party.
(b) COMPANY or DISTRIBUTOR becomes insolvent or is unable to
pay its debts as they mature or ceases to pay in the
ordinary course of business its debts as they mature; or
either Party makes an assignment for the benefit of its
creditors; or a receiver, liquidator, custodian, trustee
or the like is appointed for the Party or its property;
or either Party commences a voluntary case under any
applicable bankruptcy or insolvency law or consents to
the entry of an order for relief in any involuntary
case, or a court with jurisdiction enters a decree for
relief in any involuntary case involving either party.
(c) DISTRIBUTOR fails to meet the Annual Sales Plan amounts
as provided in Section 8.11(d).
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15.2 CHANGE OF CONTROL. Notwithstanding Section 16.3, in the event of
the sale of all or substantially all of COMPANY's assets or
stock or a change in ownership or control of COMPANY, whether by
merger or acquisition or otherwise (Change of Control),
COMPANY's successor shall have ninety (90) days to notify
DISTRIBUTOR of its intention either to terminate this Agreement
or that it will take assignment of and assume all rights and
obligations of COMPANY under the terms and conditions of this
Agreement. In the event that the COMPANY's successor notifies
DISTRIBUTOR within ninety (90) days of the Change of Control
that it has chosen to terminate this Agreement, then COMPANY
shall promptly pay to DISTRIBUTOR by wire transfer of same day
funds to an account to be specified by DISTRIBUTOR the
Termination Fee as set forth below. Subject to prior payment to
DISTRIBUTOR of the Termination Fee, DISTRIBUTOR shall relinquish
all rights under the Agreement upon the latter of the expiration
of the Initial Term or one hundred eighty (180) days after
receiving such written notice from COMPANY's successor. In no
event shall a Change of Control cause termination of this
Agreement prior to the expiration of the Initial Term.
15.3 TERMINATION FEE. The Termination Fee shall be determined as
follows: (i) if this Agreement is terminated during the Initial
Term or during the first three Contract Years of the first
Renewal Period, if any, then the Termination Fee shall be three
multiplied by DISTRIBUTOR's Gross Margin during the four
quarters immediately preceding termination; or (ii) if this
Agreement is terminated during the last two Contract Years of
the first Renewal Period, if any, or during any subsequent
Renewal Period, then the Termination Fee shall be two multiplied
by DISTRIBUTOR's Gross Margin during the four quarters
immediately preceding termination.
15.4 EFFECT OF TERMINATION. Upon expiration or termination of this
Agreement for any reason whatsoever, DISTRIBUTOR and COMPANY
each promise to immediately do the following:
(a) DISTRIBUTOR shall pay to COMPANY all amounts which are
payable by DISTRIBUTOR to COMPANY under this Agreement
less any such amounts payable on the grounds of a
dispute arising out of this Agreement against any claim
or damages sought by DISTRIBUTOR.
(b) Each Party shall return to the other Party all of the
Confidential Information of the other Party in the
possession or under the control of the receiving Party.
(c) DISTRIBUTOR shall be entitled to have delivered the
Products ordered prior to termination.
(d) DISTRIBUTOR may, at its option, either sell all or any
part of its remaining inventory of the Products to
Customers or sell to COMPANY all or any part of
DISTRIBUTOR's remaining inventory of the Products
(excluding discontinued and demonstration units).
COMPANY shall repurchase all of the Products that
DISTRIBUTOR decides to sell to COMPANY.
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DISTRIBUTOR must exercise the right to resell to COMPANY
within sixty (60) days after termination of this
Agreement. The price for such inventory shall be the
cost paid by DISTRIBUTOR to COMPANY for such Products,
plus DISTRIBUTOR's shipping and handling costs.
(e) DISTRIBUTOR shall transfer to COMPANY, or any third
party designated by COMPANY, the medical registrations
and import permits ("Xxxxxx(s)") for the Products. If
termination of this Agreement occurs during the Initial
Term, COMPANY agrees to reimburse DISTRIBUTOR for all of
DISTRIBUTOR'S out-of-pocket expenses related to
DISTRIBUTOR obtaining and maintaining the Xxxxxx(s),
including without limitation Product costs,
documentation and Product testing fees, patient fees
paid to the institution performing the clinical trials,
fees paid to the institutions to perform and conduct the
clinical trial including issuance of final reports,
meeting expenses, training expenses, clinical trial
product liability insurance and post-marketing
surveillance fees; provided, however, that COMPANY shall
not be obligated to reimburse DISTRIBUTOR for any
amounts in excess of One Million Dollars
($1,000,000.00). DISTRIBUTOR overhead, salary and travel
expenses in the Territory are specifically excluded from
reimbursement hereunder. Any such reimbursable
out-of-pocket expenses owed by DISTRIBUTOR upon
termination of this Agreement shall become immediately
due and payable.
16. GENERAL PROVISIONS
16.1 FORCE MAJEURE. Nonperformance of either party (except for
payment obligations) shall be excused to the extent that
performance is rendered impossible by strike, fire, flood,
governmental acts or orders or restrictions, failure of
suppliers or any other reason where failure to perform is beyond
the control and not caused by the negligence of the
nonperforming party, provided, however, that should such
material nonperformance by a party resulting from an event
described in this Section 16.1 continue for a period in excess
of ninety (90) days, then the other party may elect to terminate
this Agreement by written notice hereof.
16.2 INDEPENDENT CONTRACTORS. The relationship of COMPANY and
DISTRIBUTOR established by this Agreement is that of independent
contractors, and nothing contained in this Agreement shall be
construed to (i) give either party the power to direct and
control the day-to-day activities of the other, (ii) constitute
the parties as partners, joint venturers, co-owners or otherwise
as participants in a joint or common undertaking, or (iii) allow
DISTRIBUTOR to create or assume any obligation on behalf of
COMPANY for any purpose whatsoever. All financial obligations
associated with DISTRIBUTOR's business are the sole
responsibility of DISTRIBUTOR.
16.3 NONASSIGNABILITY AND BINDING EFFECT. A mutually agreed
consideration for COMPANY entering into this Agreement is the
reputation, business standing, and goodwill already honored and
enjoyed by DISTRIBUTOR under its present
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ownership, and, accordingly, DISTRIBUTOR agrees that its rights
and obligations under this Agreement may not be transferred or
assigned directly or indirectly without the prior written
consent of COMPANY, except to the extent provided for under
Sections 2.2 and 4.1(b). COMPANY agrees that, except in
connection with (i) a Change in Control, or (ii) the sale or
transfer of a substantial portion of the assets of COMPANY
constituting one or more Product lines to an unaffiliated third
party along with an assignment of this Agreement with respect to
such Product lines, COMPANY's rights and obligations under this
Agreement may not be transferred or assigned directly or
indirectly without the prior written consent of DISTRIBUTOR. Any
such purported transfer not consented to by the other party
shall be void and of no effect, and shall be grounds for
termination of this Agreement. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
16.4 SURVIVAL OF OBLIGATIONS. Both Parties agree that the obligation
described in Sections 5.8, 5.10, 9, 10, 11, 12, 13, 14, 15, and
16 of this Agreement shall survive any termination,
cancellation, or expiration of this Agreement.
16.5 REMEDIES. The rights and remedies of each Party under this
Agreement are not exclusive but shall be in addition to all of
the rights and remedies to which that Party is entitled against
the other Party under the law governing this Agreement.
16.6 NOTICES. Unless otherwise specified, any notice required by this
Agreement shall be made in a writing sent by prepaid certified
mail, overnight courier or any means of electronic
communications with confirmation copy sent by certified mail to
the addresses first listed above, until notice of another
address shall be given in the manner provided herein. All
notices, consents or requests shall be effective form the date
of mailing if sent by facsimile, seven days if sent by certified
mail and when received if sent by international courier.
16.7 DISPUTE RESOLUTION. Disputes arising under, in connection with
or as to the interpretation of this Agreement shall be resolved
as provided in Exhibit A hereto.
16.8 UNENFORCEABLE TERMS. In the event any term or provision of this
Agreement shall for any reason be invalid, illegal or
unenforceable in any respect, it shall be deemed separate and
shall not affect any other provisions hereof or the validity
hereof. The Parties agree to re-negotiate in good faith any term
or provision held invalid and to be bound by the mutually agreed
substitute term or provision.
16.9 NO WAIVER. The failure of either Party to enforce at any time
any of the provisions of the Agreement, or the failure to
require at any time performance by the other Party of any of the
provisions of this Agreement, will in no way be construed to be
a present or future waiver of such provisions, nor in any way
affect the validity of either Party to enforce each and every
such provision thereafter.
16.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the substantive law of the State of
California, excluding that body of law
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applicable to choice of law, and the applicability of the United
Nations Convention on Contracts for the International Sale of
Goods is expressly waived hereby.
16.11 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding of the parties relating to the subject matter
herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in
writing signed by the party to be charged.
16.12 LANGUAGE. This Agreement is in the English language only, which
language shall be controlling in all respects, and all versions
hereof in any other language shall be for accommodation only and
shall not be binding upon the parties hereto. All
correspondence, notices, orders, claims, suits and other
communication between the parties hereto shall be written or
conducted in English. The headings to the paragraphs of this
Agreement are for the convenience of reference only, do not form
a part of this Agreement, and shall not in any way affect the
interpretation hereof.
16.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all
of which together shall constitute one instrument.
MICRO THERAPEUTICS, INC. CENTURY MEDICAL, INC.
By: /s/ Xxxxxx Xxxxxxx By: /s/ M. Suzuki
---------------------------- -------------------------
Title: President and CEO Title: President and CEO
Date: September 23, 1998 Date: September 23, 1998
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EXHIBIT A
DISPUTE RESOLUTION
The parties recognize that a bona fide dispute as to certain matters may arise
from time to time during the term of this Agreement which relates to either
party's rights and/or obligations under this Agreement. 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) 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, (a) if the arbitration is to be held in California pursuant to
Paragraph 3 below, the parties shall request that the President of the
CPR Institute for Dispute Resolution ("CPR"), 000 Xxxxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000, select a neutral; and (b) if the
arbitration is to be held in Japan pursuant to Paragraph 3 below, the
parties shall request that the Japan Commercial Arbitration Association
("JCAA") select a neutral.
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 in Orange County in the State of California and
proceed pursuant to CPR rules if the ADR is initiated and brought by
Century, or in Tokyo, Japan and pursuant to JCAA rules if initiated and
brought by the Company.
4. The rulings of the neutral and the allocation of fees and expenses shall
be binding, non-reviewable, and non-appealable, and may be entered as a
final judgment in any court having jurisdiction. Any arbitral award made
pursuant to the ADR shall be enforceable under the 1958 United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards.
5. Except as provided in paragraph 4 or as required by law, the
existence of the dispute, any settlement negotiations, the ADR hearing,
any submissions (including exhibits, testimony, proposed rulings, and
briefs), and the rulings shall be deemed Confidential Information. The
neutral shall have the authority to impose sanctions for unauthorized
disclosure of Confidential Information.
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