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EXHIBIT 10.1
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED
BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT
PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
HAVE BEEN SEPARATELY FILED WITH THE COMMISSION
AGREEMENT
BY AND BETWEEN
MICRO THERAPEUTICS, INC.
AND
ABBOTT LABORATORIES
THIS AGREEMENT (the "Agreement") is entered into as of June 28, 2000
(the "Effective Date") by and between MICRO THERAPEUTICS, INC., a Delaware
corporation, having a place of business at 2 Goodyear, Irvine, California 92618
("MTI") and ABBOTT LABORATORIES, an Illinois corporation, having offices at 200
Abbott Park Road, Abbott Park, Illinois 60064 ("Abbott").
W I T N E S E T H:
WHEREAS, the parties entered into an Exclusive Distribution Agreement
(the "Distribution Agreement") and other agreements on August 12, 1998, under
which the parties agreed that Abbott would act as exclusive distributor and
promoter of the Products (as hereinafter defined);
WHEREAS, the parties have determined that it would be more efficient and
advantageous for the parties to co-promote together the Products in the
Territory (as hereinafter defined);
WHEREAS, MTI and Abbott wish to enter into an agreement to co-promote
together such Products throughout the Territory and allow Abbott to exclusively
distribute such Products throughout the Territory;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth below, the parties agree as follows:
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ARTICLE 1 - DEFINITIONS
The following words and phrases, when used herein with capital letters, shall
have the meaning set forth or referenced below:
1.1 "Affiliate" means any company or entity that controls, is controlled by,
or is under common control with, a party to this Agreement. As used
herein, "control" means the direct or indirect ownership of fifty
percent (50%) or more of the authorized issued voting shares in such
entity or such other relationship as in fact legally results in
effective control over the management, business and affairs of such
entity.
1.2 "ASP" or "Average Selling Price" means the Net Sales (as defined
hereinbelow) of any given Product divided by the total number of units
of that Product shipped (excluding non-revenue units, such as samples)
and invoiced by Abbott or its Affiliates to Customers (as hereinafter
defined).
1.3 "Business Day" means any day Monday through Friday excluding Abbott
observed holidays.
1.4 "Change of Control Event" means any sale of all or substantially all of
a party's assets or stock or a change in ownership or control (as
"control" is defined in Section 1.1) of a party, whether by merger or
acquisition or otherwise.
1.5 "Confidential Information" means proprietary, non-public information
owned or controlled by one party to this Agreement to which the other
party has access hereunder, including but not limited to, trade secrets,
discoveries, ideas, concepts, know-how, techniques, designs,
specifications, drawings, diagrams, data, business activities and
operations, customer lists, reports, studies and other technical and
business information.
1.6 "Cost" means the transfer price paid by Abbott to MTI for each Product
purchased under this Agreement, pursuant to Section 7.1.
1.7 "Customer" means any end-user that purchases Products for use in the
Territory.
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1.8 "FDA" means the United States Food and Drug Administration and any
successor agency thereto.
1.9 "Field" means devices and methods of use directed toward diagnosis,
treatment or prevention of blood clot disorders in the peripheral
vasculature, including related peripheral blood clot therapy access
products.
1.10 "First Commercial Sale" means the first sale by MTI of any Product to a
Customer after the Effective Date. "First Commercial Sale" shall not
include any sales to MTI Affiliates or to any third party in connection
with any clinical trials or regulatory or safety testing.
1.11 "LES" means MTI's Liquid Embolic System (Onyx(TM)) that includes an
embolic agent and delivery system.
1.12 "Margin" means Net Sales minus the Cost of the Product sold.
1.13 "MTI Sales Representatives" means an individual who is regularly
employed by MTI on a full-time basis as a member of its hospital sales
force and who is qualified and has been trained by MTI to make sales
presentations for MTI's hospital-based device products to physicians and
hospitals.
1.14 "MTI's Successor" means a third party that assumes control of MTI's
management, business and affairs following an MTI Change of Control
Event.
1.15 "Net Sales" means gross amounts recorded by Abbott on the accrual method
minus reasonable reserves for bad debt consistent with Generally
Accepted Accounting Principles ("GAAP") consistently applied by Abbott
for sales of, and in connection with, Abbott's purchase, transportation
and importation of the Product, less any discounts, rebates and credit
for damaged, outdated, returned, withdrawn and recalled goods, less any
allowances for partial-revenue or non-revenue units (e.g., samples),
less any trade discounts earned or granted, less any cash discounts,
management fees or rebates paid to Customers (including but not limited
to Group Purchasing Organizations ("GPOs"),
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Integrated Heath Care Systems ("IHSs") and government agencies) 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 Abbott in connection with the sale of
Products under this Agreement. For sales outside of the United States,
the aforementioned shall be converted to United States dollars each
calendar quarter, using Abbott's standard practices to determine Net
Sales.
1.16 "PMA Code" means the Pharmaceutical Manufacturers Association's Code of
Pharmaceutical Marketing Practices, as amended from time to time.
1.17 "Products" means all of the current MTI products referenced in the
attached Exhibit 1.17 as well as MTI's devices or technology developed
or otherwise acquired by MTI after the Effective Date that have any
application in the Field, including but not limited to any improvements,
enhancements or line extensions thereto. The parties shall amend Exhibit
1.17 from time to time to reflect any and all Product improvements,
enhancements and line extensions of new Products and, as applicable,
shall amend Sections 7.1 and 7.2 accordingly.
1.18 "Product Lines" means the following five (5) categories of Products as
of the Effective Date: thrombolytic brushes, infusion catheters,
infusion guidewires, peripheral micro catheters and accessory kits.
"Products Lines" also shall include other Product categories that may be
developed during the Term (as hereinafter defined).
1.19 "Promotion Effort" means or refers to a sales presentation in the
Territory by an MTI Sales Representative authorized by MTI during which
presentation such representative promotes Products to Customers such as
hospital-based (including free-standing surgical centers) surgeons,
physicians and other appropriate reference physicians, as well as,
appropriate purchasing personnel within Customer's organization.
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1.20 "Promotional Materials" means printed matter, including printed
literature and reprints, or graphic matter relating or referring to the
Product that is deemed by MTI to be essential for use by the MTI Sales
Representatives in Promotion Efforts.
1.21 "QSR" or "Quality System Regulations" means all applicable standards
relating to manufacturing practices for medical devices promulgated by
the FDA in the form of laws, regulations or guidance documents
(including but not limited to advisory opinions, compliance policy
guides and guidelines), and which guidance documents MTI knows or
reasonably should have known to be applicable, current, feasible and
valuable in ensuring device quality within the device manufacturing
industry for such products in effect on the Effective Date or at any
time thereafter during the Term.
1.22 "Sampling Act" means the Prescription Drug Marketing Act of 1987, as
amended from time to time and any regulations promulgated thereunder.
1.23 "Specifications" means MTI's most current specifications for the
manufacture of each of the Products.
1.24 "Standard Manufacturing Cost" means, with respect to any Product, MTI's
fully allocated cost of manufacturing such Product (in accordance with
QSR and the Specifications) as determined in accordance with Generally
Accepted Accounting Principles ("GAAP") consistently applied, including
all direct and indirect costs related to the manufacture of such
Product, including without limitation, costs for labor, materials
(including, without limitation, components of such Product), quality
control, regulatory compliance, manufacturing administrative expenses,
subcontractors, fixed and variable manufacturing overhead costs and
business unit, division or company costs reasonably allocable to the
manufacture, packaging and labeling of such Product, in each case,
respectively.
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1.25 "Term" means the "Initial Term" (as defined in Section 11.1) unless
earlier terminated pursuant to Sections 11.2, 11.3 or 11.4.
1.26 "Territory" means the fifty (50) states of the United States of America
and territories of the United States (including but not limited to
Puerto Rico) as well as Canada. The Territory may be expanded from time
to time by mutual agreement of the parties to include additional
countries not currently committed by MTI to alternative distributors for
the Products.
ARTICLE 2--APPOINTMENT TO DISTRIBUTE PRODUCTS; ABBOTT'S DUTIES
2.1 Appointment. MTI hereby appoints Abbott as the exclusive distributor of
the Products to Customers in the Territory. During the Term, MTI shall
not itself or through its Affiliates (i) appoint or authorize any other
distributor or sales representative to make sales of any Products within
the Territory or (ii) sell any Products to any entity that it knows or
has reason to know will sell such Products in the Territory, without
Abbott's prior written permission. Abbott may, in its discretion,
distribute, market and sell the Products in the Territory through any
Affiliate of Abbott or use other subdistributors and agents of its own
choosing in distributing any Products in the Territory. Abbott shall
have the right during the Term to represent to the public that it is an
authorized exclusive independent distributor of the Products within the
Territory.
2.2 Abbott's Duties. Abbott shall use reasonable commercial efforts to
introduce, promote the sale of, solicit and obtain orders for Products
from Customers in accordance with the terms of this Agreement.
Additionally, Abbott shall be responsible for all order entry,
distribution, billing, collection of sales revenue, Customer service
support (excluding technical Product support), contracting and
processing of returns for the Products in the Territory. In particular,
Abbott shall assume the following responsibilities:
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2.2.1 Sales. Subject to the provisions of Article 3, Abbott shall
assume responsibility for all sales and marketing activities for
the Products in the Territory, through its Abbott Critical Care
Systems commercial organization or another commercial
organization, at Abbott's sole discretion. Except as otherwise
expressly stated herein, Abbott shall be responsible for its own
sales and marketing costs, including but not limited to, training
and maintenance of its sales organization.
2.2.2 Contracting and Pricing. As of the Effective Date, except as
otherwise mutually agreed herein, Abbott shall assume full
responsibility for negotiating and entering into all Customer
contracts, including but not limited to, all hospital, GPO and
IHS sales contracts for the Products in the Territory. Abbott
shall be solely responsible for establishing sales prices for
Products for all Customers in the Territory. Current product
prices shall be as set forth on Exhibit 2.2.2. Pursuant to
Article 3, Abbott shall provide MTI with Abbott's current
Customer lists as well as current and proposed Customer contracts
for the Products. Abbott shall administer all of its pre-existing
sales contracts with Customers for the Products in the Territory
during the Term. In addition, Abbott shall administer all
contracts executed by MTI pursuant to Article 3. MTI Sales
Representatives shall consult with Abbott's Hospital Products
Division's Contract Marketing Department pursuant to Section 3.9
to coordinate presentation and content of Customer contract
proposals and implement distribution of Products to Customers.
MTI understands and agrees that any Customer who is a member of a
group purchasing organization (hereinafter, "GPO") may have
membership obligations to such GPO. MTI agrees that it shall not
offer Products to such Customers at prices that are below such
Customer's GPO contracted price established by Abbott for such
GPO without prior written approval from Abbott.
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2.3 Forecast. Abbott and MTI shall prepare and agree upon a new Forecast
prior to September 30 of each calendar year during the Term. Each
Forecast shall encompass a one year Forecast, with projections gaited on
a monthly basis. Such Forecasts shall include a sales Forecast by
Product Line, anticipated quantity and quarterly estimated delivery
dates. With respect to Product Line extensions, the parties shall make
Forecast adjustments as mutually agreed upon, commensurate with the
expanded total available market opportunity associated with the expanded
Product offerings.
2.4 No Minimum Purchase Requirements. Nothing herein shall be construed to
obligate Abbott to purchase any minimum quantity of any of the Products.
2.5 Compliance with Laws. Subject to Article 4 below, Abbott shall, at all
times during the Term, maintain any necessary legal permits and licenses
required by any governmental unit or agency to distribute the Products
hereunder and shall comply with all applicable national, state, regional
and local laws and regulations, in performing its duties hereunder and
in any of its dealings with respect to the Products as an independent
distributor, except where the failure to obtain such permits or licenses
or failure to comply will not have a material adverse effect on Abbott's
ability to distribute the Products.
2.6 Commission. As consideration for MTI's performance of its obligations
hereunder, Abbott shall pay MTI a commission pursuant to Section 7.2.
2.7 Pricing and Marketing Strategies. Abbott, as exclusive distributor
hereunder, shall solely and exclusively formulate all prices, pricing
strategies and marketing strategies relating to the Product in the
Territory. Abbott shall pre-approve a limited price range within which
MTI Sales Representatives can present sales contracts to Customers as
provided in Section 3.9. In the event that an MTI Sales Representative
desires to contract outside of the pre-approved contract price range
provided in Section 3.9, such MTI Sales Representative shall contact
Abbott's Hospital Products Division's Contract Marketing
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Department and shall obtain from such Department the Product prices.
Neither MTI nor any MTI Sales Representative shall have the right to
establish Product prices. Abbott shall have the right to quarterly
review prices for Products and adjust such prices accordingly.
2.8 Accounts Receivable. Abbott shall notify MTI and the appropriate MTI
Sales Representative of any Customers placed on "credit hold" status
within forty-eight (48) hours of such action by Abbott. Abbott also
shall provide to MTI the name of the Abbott sales representative
responsible for such Customer account. These responsibilities imposed on
Abbott as described in this Section 2.8 are referred to in Sections 7.7
and 11.5 as the "Accounts Receivable Performance Standard."
2.9 Customer Service. Abbott shall fill Customer orders according to
Abbott's current policy, as follows: Customer orders placed by 12 noon
shall be shipped the same business day as the order was placed. Customer
orders placed after 12 noon shall be shipped either: (i) on an emergency
basis with the Customer paying shipping charges; or (ii) the next
business day. In the event that Product cannot be shipped according to
Abbott's current policy, Abbott shall inform MTI within forty-eight (48)
hours of the order's placement that such order cannot be filled and of
the underlying circumstances. These responsibilities imposed on Abbott
as described in this Section 2.9 are referred to in Sections 7.7 and
11.5 as the "Customer Service Performance Standard."
ARTICLE 3 - APPOINTMENT TO CO-PROMOTE; MTI'S RESPONSIBILITIES
3.1 Appointment. Abbott hereby appoints MTI, on an exclusive basis, to
co-promote the Products with Abbott in the Territory through the use of
MTI Sales Representatives for the Term. MTI's duties shall include, but
not be limited to, the following provisions of this Article 3.
3.2 Product Promotion.
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3.2.1 General. During the Term, MTI, by and through MTI Sales
Representatives, shall perform Promotion Efforts in accordance
with the terms of this Agreement. MTI shall consult with Abbott
from time to time with respect to the manner in which MTI shall
promote the Products, including the indications for the Products
and the frequency with which the MTI Sales Representatives shall
perform Promotion Efforts to any particular Customer. MTI shall
make the final determination with respect to the manner in which
either party shall promote the Products, except that Abbott shall
not be required to violate the PMA Code or any applicable
federal, state or local laws or regulations. MTI shall perform
Promotion Efforts of the Products only in strict accordance with:
(i) the PMA Code; (ii) the approved Product labeling; and (iii)
the applicable federal, state and local laws and regulations of
the Territory including, but not limited to, the Sampling Act and
the Controlled Drug Act. Neither party shall be deemed to be in
default of this obligation as a result of any administrative or
judicial determination that either an item of Promotional
Material or MTI's advertising for the Product(s) is in violation
of: (x) the PMA Code; or (y) the approved Product labeling; or
(z) any applicable federal, state or local laws and regulations
of the Territory. As part of the Promotion Effort, and in
accordance with Sections 3.6.2 and 3.7 hereof, the MTI Sales
Representatives shall distribute Promotional Materials to
Customers to whom the MTI Sales Representatives make Promotion
Efforts and shall arrange for MTI's distribution of samples to
Customers.
3.2.2 Number of Promotion Efforts. During the Term, MTI, by and
through the MTI Sales Representatives, shall use its reasonable
best efforts to promote the Products and to obtain a commitment
from Customers to conduct trial evaluation of Products.
Thereafter, MTI, by and through the MTI Sales Representatives,
shall
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use its reasonable best efforts to maintain Product usage
profiles. MTI shall prepare quarterly reports to Abbott
summarizing its Promotion Efforts.
3.3 Sales Force. At all times during the Term, MTI shall maintain a minimum
sales force of at least two (2) representatives.
3.4 Sales Representative Training. MTI shall be responsible for training and
supervising the MTI Sales Representatives in the promotion of the
Product. In addition, MTI shall provide reasonable initial training of
Abbott's personnel in the use of the Products, upon Abbott's reasonable
request. Abbott shall pay the cost of any travel and lodging for its
personnel attending any such training, and MTI shall pay the cost of the
trainers and materials.
3.5 MTI Sales Representatives' Incentive Compensation. For the Term, MTI, at
its sole cost and at its sole discretion, shall award incentive
compensation, bonuses or prizes to MTI Sales Representatives for
achieving goals for volume of sales generated for the Products in such
MTI Sales Representative's sales territory. Pursuant to Section 2.2.2,
Abbott shall supply certain sales information to aid MTI in the
determination of incentive compensation related to the Products.
3.6 Development and Distribution of Promotional Materials.
3.6.1 Promotional Materials. Upon Abbott's request, MTI shall furnish
Abbott, without charge (except as otherwise agreed in writing),
with reasonable quantities of technical, advertising and selling
information and literature in English concerning the Products
which Abbott may distribute, incorporate or include with its own
marketing materials and information relating to the Products.
Abbott shall have the right to develop and distribute its own
marketing materials, brochures and other information regarding
the Products in connection with its sales and marketing
activities under this Agreement, subject to the prior approval
of MTI,
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which approval shall not be unreasonably withheld. If Abbott
determines that any Promotional Material conflicts with the PMA
Code or any law or regulation of the Territory, Abbott shall
inform MTI of such determination as soon as reasonably possible,
and Abbott shall not be required to distribute such Promotional
Material. If MTI decides to use such Promotional Material, such
Promotional Material shall be printed or reprinted, as the case
may be, without the Abbott logo or name thereon.
3.6.2 Distribution of Promotional Materials. In connection with the
Promotion Efforts, MTI Sales Representatives shall distribute
Promotional Materials to Customers. MTI shall consult with
Abbott with respect to the distribution of the Promotional
Materials. It is understood, however, that MTI shall have the
final decision with respect to such distribution, except as
otherwise provided herein.
3.7 Responsibility for Samples. MTI shall, at its expense, supply samples to
Customers as part of its Promotion Efforts hereunder and as MTI
reasonably deems appropriate, to support its Promotion Efforts. On an
as-needed basis and at Abbott's request, MTI also shall provide Abbott
with a reasonable amount of samples of each of the Products to assist
Abbott in its sales presentations and medical meeting demonstrations or
presentations and for Customer testing purposes. Such samples shall be
provided to Abbott at MTI's expense.
3.8 Requests for Information by Third Parties. In the event Abbott's Medical
Affairs Liaison appointed pursuant to Section 4.12 receives inquiries
which relate to the efficacy, safety or other medical issues regarding
the Product(s) from third parties, Abbott's Medical Affairs Liaison
shall direct such inquiries within two (2) business days of such
liaison's receipt of such inquiry to MTI's Medical Affairs Liaison
appointed pursuant to Section 4.12.1, unless such inquiry is of a
routine nature and the response is clearly set forth in
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either the Product labeling or the Product inquiry report supplied by
MTI to Abbott. The Product inquiry report shall set forth the standard
responses used by MTI to respond to questions of a routine nature
directed to MTI with respect to the Product. MTI shall supply the
Product inquiry report to Abbott within a reasonable time period prior
to the Product Launch Date.
3.9 Responsibilities of MTI's Sales Representatives. MTI Sales
Representatives shall have the right, through their Promotion Efforts,
to present contracts to Customers at prices that are within the limited
price range pre-approved by Abbott as set forth in Exhibit 2.2.2 and
pursuant to Section 2.7. All such contracts shall be sent to Abbott;
Abbott Laboratories Inc., HPD Contract Marketing, Attention: Manager,
Major Accounts, D36J, AP30-2 Center, 200 Abbott Park Road, Abbott Park,
IL 60064.
ARTICLE 4. MANUFACTURING, REGULATORY AND SAFETY CONSIDERATIONS
4.1 Regulatory and Safety Testing Requirements. MTI 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. MTI shall provide Abbott
with the data and results from clinical trials with respect to each of
the Products.
4.2 Regulatory Approvals and Registrations. MTI shall establish and maintain
all regulatory approvals required to manufacture and permit sale of the
Products in the Territory, including, at a minimum all necessary, FDA
approvals and the equivalent Canadian approvals for each Product.
4.3 Quality System Compliance. MTI shall be solely responsible for
compliance with all Quality System Regulations affecting the Products,
including, at a minimum, International Standards Organization ("ISO")
certification and compliance with FDA
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Quality System Regulations. During the Term, MTI shall manage the
complaint files associated with the Products in the Territory and
provide copies of those complaint files to Abbott upon Abbott's request.
In accordance with a timetable to be mutually agreed upon by the
parties, Abbott shall have the right to review MTI's manufacturing
operations in order to ensure compliance with Quality System
Regulations. Abbott may, in its discretion, make QSR recommendations to
MTI and MTI shall use reasonable efforts to implement any QSR
recommendations made by Abbott.
4.4 Post-Marketing Regulatory Reporting. MTI shall be responsible for
reporting any reportable events, including but not limited to patient
deaths or injuries, associated with the Products to the FDA and other
appropriate authorities; provided, however, that to the extent required
by applicable law Abbott may also report such events to the applicable
authorities. Abbott shall notify MTI of any such event within two (2)
Business Days after Abbott learns of such an event. Abbott shall use
reasonable commercial efforts to notify MTI of any such event prior to
notifying the FDA or other appropriate authorities. Each party shall
provide the other party with any assistance reasonably requested by the
other party in connection with such activities, including without
limitation access to the Product files. MTI shall update Abbott
periodically (in accordance with a timetable to be mutually agreed upon
by the parties) on any reportable events involving the Products in the
Territory for which MTI has filed reports with the FDA or other
regulatory authorities in the Territory.
4.5 Post-Marketing Clinical Trials. MTI shall fund, conduct and complete
post-approval clinical trials in order to establish clinical/commercial
user preference status for the Products, in accordance with the
Post-Market Clinical Development Program attached hereto as Exhibit 4.5.
Upon mutual agreement of the parties regarding appropriate
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timetables, these clinical trials shall be conducted by MTI, with
assistance from Abbott if so requested by MTI.
4.6 Reimbursement. MTI shall use its best efforts to assist Customers in
obtaining reimbursement from governmental agencies, third-party payors,
or other parties from whom reimbursement may be sought in connection
with sales of the Products to Customers.
4.7 Cooperation. To assist in selling and marketing the Products in the
Territory, each party shall, as applicable:
(i) provide the other party with any information reasonably
requested by the other party for the purpose of complying with
regulatory and other legal requirements relating to the
Products;
(ii) provide the other party with information on marketing and
promotional plans for the Products as well as copies of
marketing, advertising, sales and promotional literature
concerning the Products, if any; and
(iii) provide the other party with certificates of free sale,
trademark authorizations and any other documents relating to the
Products which the other party may reasonably request to satisfy
the requirements of the laws of the various jurisdictions within
the Territory and of any competent authority.
4.8 Trade Shows. For trade shows and congresses pertinent to the Field in
the Territory, Abbott shall use reasonable efforts to assist MTI,
subject to mutual written agreement of the parties, with the promotion
of the Products. Such assistance may include sharing of costs, provision
of personnel and materials as well as joint exhibits.
4.9 Product Changes. MTI shall provide Abbott with at least ninety (90) days
prior written notice of any change in the Specifications or the
processes, materials, equipment, inspection, testing, manufacturing
location and the like of which it has knowledge that
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may have any effect on the Products or their uses. MTI shall give due
consideration to any comments or suggestions Abbott may make with
respect to such changes.
4.10 MTI's Manufacturing Responsibilities. MTI shall use reasonable
commercial efforts to maintain adequate manufacturing capacity and
sufficient supply of the Products during the Term. Should MTI fail to
maintain adequate manufacturing capacity and/or sufficient supply of the
Products, MTI and Abbott shall in good faith use their best efforts to
develop jointly a plan to ensure continued Product supply, which plan
may include, at Abbott's reasonable discretion, Abbott's exercise of its
standby right to manufacture the Products under Section 4.11 and
appropriate mutually agreed upon Forecast adjustments pursuant to
Section 2.3. MTI shall use commercially reasonable efforts to develop
appropriate Product Line extensions in order to assure maintenance of
market-competitive Products in the Field. MTI shall give due
consideration to recommendations from Abbott in this regard.
4.11 Standby Right to Manufacture. If MTI is unable or unwilling for any
reason (other than where determined as due to Abbott's breach of this
Agreement or due to bona fide dispute that the parties have submitted
for resolution pursuant to the provisions of Section 12.5) to supply any
Products as and when ordered by Abbott in accordance with this
Agreement, then, after the expiration of a reasonable period of time
(not to exceed [*] ([*]) days), during which MTI may remedy the cause of
its inability to supply the Products, Abbott, shall have the right, but
not the obligation, to manufacture or have manufactured the Products
under MTI's patents and other intellectual property rights during the
period that MTI is unable to supply.
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.
<PAGE> 17
To the extent necessary to implement Abbott's standby manufacturing
rights under this Section 4.11, MTI hereby grants Abbott a
non-exclusive, royalty-free license under MTI patents and other
intellectual property rights to make, have made, use, import, sell and
offer for sale the Products in the Territory. During such period, MTI
shall provide Abbott with manufacturing know-how and reasonable
assistance to enable Abbott (and, as applicable, Abbott's third party
manufacturer) to manufacture the Products. At such time as MTI can
demonstrate to Abbott's reasonable satisfaction that MTI is capable of
resuming the manufacture and supply of Products, Abbott's license
hereunder shall cease and Abbott shall resume purchasing Products from
MTI and Abbott shall return to MTI all MTI equipment and technology
utilized by Abbott for the manufacture of Products.
4.12 Notification of Adverse Events.
4.12.1 Communication. Within thirty (30) days after the execution of
this Agreement, the parties shall each appoint a primary liaison
(the "Medical Affairs Liaison") to communicate with each other
with regard to information required pursuant to this Section
4.12.1. Either party may change its Medical Affairs Liaison by
notice to the other party.
4.12.2 Notification. During the term of this Agreement, Abbott shall
give MTI notice as set forth in this Section 4.12.2 of any
adverse device experience, as defined in 21 CFR 314.80,
associated with the Product as to which Abbott obtains
information in accordance with the following:
(a) Any adverse device experience information obtained by
Abbott shall be reported to MTI's Medical Affairs Liaison, by
telephone or in writing (only by facsimile) within three (3)
working days after Abbott's initial receipt of the
information; provided however, any report of a serious
unlabelled event or any report of a death shall be reported to
MTI's Medical Affairs Liaison within
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twenty-four (24) hours of Abbott's receipt of the information.
Abbott shall use reasonable commercial efforts to notify MTI
prior to notifying the FDA or other appropriate authorities;
(b) Abbott's reports to MTI shall contain: (i) the date the
report was received by Abbott; (ii) the name of the reporter and
the reporter's title; (iii) the address and telephone number of
the reporter; (iv) a description of the adverse device
experience; (v) the indication for treatment; (vi) the outcome
of the event; (vii) the dose and duration of treatment; and
(viii) the lot number of the Product, if available; and
(c) in accordance with 21 CFR 314.80, Abbott shall maintain a
record of the adverse device experience, including: (i) a copy
of the device experience report; (ii) the date the report was
received; (iii) the date the report was provided to MTI; and
(iv) MTI's name and address.
4.12.3 Product Report. If, during the Term, MTI determines it is
necessary to issue a report to its representatives with respect
to the medical efficacy or side effects of the Product(s), MTI
shall also provide such report to Abbott within five (5) business
days of its issuance to the MTI Sales Representatives, which
report Abbott shall immediately distribute to the Abbott sales
representatives.
4.13 Recalls. The parties shall give prompt notice of any contemplated recall
of any Products to the other party (including notice by MTI to Abbott of
any such recall outside the Territory). 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
laws, regulations and governmental agency directives with respect to
such recall. Any recall expenses incurred by Abbott resulting from MTI
QSR
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deficiencies, Product quality defects, Product performance defects or
government actions will be fully reimbursed to Abbott from MTI.
ARTICLE 5 - NEW PRODUCTS
5.1 Right of First Discussion. During the Term, MTI shall provide to Abbott
an exclusive right of first discussion if MTI elects to consider and/or
pursue discussions with third parties on potential commercial
collaborations in the Territory for potential peripheral vascular
applications of MTI's LES (Onyx(TM)) embolization product currently
under development. If MTI considers and/or desires to pursue potential
third party sales, marketing and/or distribution collaborations for
peripheral applications of LES in the Territory, MTI shall negotiate
first and in good faith with Abbott for a period of not less than [*]
([*]) days for distribution rights for such products. If the parties do
not execute an agreement for distribution of such products within such
[*] ([*]) day period (or such longer period as may be mutually agreed
upon by the parties), MTI shall have no further obligations to Abbott
in this regard. MTI shall give serious consideration to any reasonable
commercial terms proposed by Abbott in writing with regard to
peripheral LES applications. If the parties are unable to agree on the
terms of such written offer, then for a period of [*] ([*]) [*]
following the above-referenced discussion period, MTI shall not accept
a third party offer for commercialization of peripheral LES
applications that, in MTI's sole opinion, is less favorable to MTI than
Abbott's last written offer, considering all relevant factors,
including without limitation, any equity components as well as
milestones, commissions and/or royalties.
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.
<PAGE> 20
ARTICLE 6. INTELLECTUAL PROPERTY
6.1 General. MTI shall use reasonable commercial efforts to file, prosecute,
protect and maintain its intellectual property rights (including
patents, know-how and MTI Trademarks, as defined below) relevant to the
Products in the Territory at its own expense. If either party becomes
aware of any actual or potential third party infringement of such
intellectual property rights or any third party claim that MTI's
manufacture and sale of the Products to Abbott hereunder or Abbott's
sale of Products to Customers infringes any third party intellectual
property rights, either party shall promptly notify the other.
6.2 Trademark License. During the Term, MTI hereby grants to Abbott an
exclusive, royalty-free license to use the current and future
trademarks, trade names and logos used by MTI at any time during the
Term to identify the Products (the "MTI Trademarks") solely in the
course of Abbott's advertisement, promotion, distribution and sale of
the Products in the Territory. Abbott's use of the MTI Trademarks shall
be in accordance with MTI's policies that are provided to Abbott in
writing from time to time. Abbott shall display the MTI Trademarks on
the Products distributed under this Agreement. Use of the MTI Trademarks
on the Products shall not give Abbott any proprietary rights in the MTI
Trademarks except for the license rights granted in this Section 6.2.
6.3 Trademark Ownership. Abbott acknowledges that, subject only to the
license granted herein to Abbott, MTI owns and retains all proprietary
rights in all MTI Trademarks.
6.4 No Continuing Rights. Upon termination of this Agreement, Abbott shall
cease all further display, advertising and use of all MTI Trademarks
except in connection with the sale of Products in inventory as provided
in Section 11.6.2 below.
6.5 Trademarks Used In Labeling. In addition to the MTI Trademarks, the
Products may bear trademarks selected by Abbott ("Abbott Trademarks") in
a manner mutually agreed
<PAGE> 21
upon by the parties. Notwithstanding anything to the contrary set forth
herein, MTI shall not use the Abbott Trademarks on any Product sold
outside the Territory without the prior written consent of Abbott. Upon
termination of this Agreement, MTI shall cease all use of the Abbott
Trademarks.
6.6 Lot Numbers and List Numbers in Labeling. As soon as commercially
feasible after the Effective Date, MTI shall make the following Product
labeling changes: (a) each saleable unit of the Products shall have an
Abbott list number printed on the label (including the case labeling)
and (b) each saleable unit of the Products shall have identification
numbers using the Abbott lot numbering convention and expiration dating
formats (in compliance with [*], which Abbott shall supply to MTI) on
the label (including the case labeling). Abbott shall supply MTI with
Product list numbers, lot number suffix and lot number blocks as soon as
commercially feasible after the Effective Date.
ARTICLE 7. FINANCIAL TERMS AND PRODUCT ORDERS
7.1 Cost. The Cost to Abbott for each Product purchased by Abbott from MTI
under this Agreement shall be a percent of the Average Selling Price of
such Product for the years 2000 - 2008, commencing on January 1, 2000,
calculated according to the following schedule:
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.
<PAGE> 22
COST (as a % of Average Selling Price)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
Immediately Prior Immediately Prior
MTI Product Line Quarter Net Sales Quarterly Net
Less Than [*]% Sales Greater
Than or Equal To
[*]
-----------------------------------------------------------------------
-----------------------------------------------------------------------
<S> <C> <C>
Infusion Catheters [*]% [*]%
-----------------------------------------------------------------------
Infusion Guidewires [*]% [*]%
-----------------------------------------------------------------------
Peripheral Micro Catheters [*]% [*]%
-----------------------------------------------------------------------
Mechanical Thrombolytic [*]% [*]%
Devices
-----------------------------------------------------------------------
Accessory Kits [*]% [*]%
-----------------------------------------------------------------------
</TABLE>
7.2 Commissions. Net Sales shall be calculated by Abbott and reviewed by the
parties on a quarterly basis. As consideration for MTI's performance of
its obligations hereunder, Abbott shall pay MTI a commission, on a
calendar quarterly basis, as follows:
7.2.1 For Net Sales up to and including [*] Dollars ($[*]) in any
calendar quarter during the year 2000, such commission shall be
paid as follows:
(a) Within forty-five (45) days following the end of each
calendar quarter, Abbott shall pay MTI a portion of the
commission equal to [*]% of such calendar quarter's Net
Sales.
(b) Upon each of (i) the Effective Date and (ii) a date within
ninety (90) days following the Effective Date, Abbott
shall pay MTI, as a prepaid, minimum, non-refundable
commission, [*] Dollars ($[*]), for a total of [*] Dollars
($[*]).
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.
<PAGE> 23
7.2.2 For Net Sales up to and including [*] Dollars ($[*]) in any
calendar quarter during the year 2001 Abbott shall pay MTI a
commission equal to [*] percent ([*]%) within forty-five (45)
days following the end of each such calendar quarter.
7.2.3 For Net Sales in excess of [*] Dollars ($[*]) in any calendar
quarter beginning subsequent to April 1, 2000 and through 2001,
Abbott shall pay MTI a commission equal to [*] ([*]%) within
forty-five (45) days following the end of each such calendar
quarter.
7.2.4 For Net Sales in any calendar quarter during each of the years
2002 through 2008, Abbott shall pay MTI a commission equal to [*]
([*]%) within forty-five (45) days following the end of each such
calendar quarter.
7.3 Order Placement
7.3.1 Purchase Orders. All purchases of the Products by Abbott from MTI
shall be made by written purchase order specifying Product type,
quantity, price, requested delivery schedule, delivery location,
and shipping instructions. All purchases of the Products by
Abbott from MTI during the Term shall be subject to the terms and
conditions of this Agreement. Any additional or different terms
and conditions in a purchase order or confirmation form which
conflict with this Agreement shall be of no force and effect
unless the parties specifically agree in writing to such
conflicting terms and conditions.
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.
<PAGE> 24
7.3.2 Acceptance of Orders. All orders and modifications to orders are
subject to acceptance by MTI; provided, however, that MTI shall
accept all purchase orders by Abbott for the Products as long as
such orders are consistent with the current Forecasts (as
described in Section 2.3 above). MTI shall use commercially
reasonable efforts to fill all other orders by Abbott for the
Products hereunder. If MTI believes that it will not be able to
satisfy Abbott's orders for the Products, MTI shall promptly
notify Abbott, specifying the reasons for the delay and its
expected duration.
7.4 Product Delivery
7.4.1 Title and Delivery. All Products shall be delivered FOB, MTI's
United States manufacturing facility, to the carrier designated
by Abbott. If no such designation is made by Abbott, MTI shall
select the most cost-effective carrier, given the time
constraints known to MTI. MTI's title and the risk of loss to the
Products shall pass to Abbott upon delivery of the Products to
the carrier.
7.4.2 Taxes. Abbott 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, except for
taxes based on MTI's income.
7.4.3 Shipping Instructions and Charges. All Products shall be suitably
packed for shipment and marked by MTI for shipment to Abbott's
United States facilities designated in the purchase order. Abbott
shall not export the Product outside the Territory, and shall pay
all freight, insurance and other shipping expenses, as well as
any special packing expense.
7.4.4 Partial Shipments. MTI may make partial shipments against
Abbott's purchase orders upon mutual agreement of the parties.
<PAGE> 25
7.4.5 Rejected Products. Any delivery of Products by MTI to Abbott
which fail to meet the Specifications shall be promptly returned
to MTI at MTI's expense.
7.5 Order Changes
7.5.1 Rescheduling of Delivery. Abbott may reschedule each order once,
provided no such rescheduling shall exceed forty-five (45) days
from the originally scheduled ship date. MTI shall work with
Abbott in good faith on a case by case basis to resolve any
issues related to market changes and potential impact on orders
placed with MTI.
7.5.2 Cancellation of Orders. Abbott may cancel all or any portion of
an order or change the scope of an order at any time prior to
fifteen (15) days before the scheduled ship date. Thereafter,
Abbott may do so only with MTI's written approval.
7.6 Payment Terms. Abbott shall pay to MTI within forty-five (45) days of
the receipt of invoice an estimated amount mutually agreed by the
parties for the Cost specified in Section 7.1 above for each Product
delivered during that month. Additionally, Abbott shall pay to MTI
within forty-five (45) days of the end of each calendar quarter an
actual amount for the commission on Product sales during such quarter as
specified in Section 7.2. All payments shall be made in United States
dollars. In accordance with Section 3.7, Abbott may distribute clinical
samples of Products provided to Abbott under this Agreement pursuant to
Section 3.7 without payment of commissions. Such samples will be
included in any reconciliation as Net Sales at the price (if any) for
such samples at zero dollars if the sample was distributed by Abbott
free of charge.
7.6.1 Quarterly Reconciliation. At the end of each calendar quarter,
Abbott shall reconcile the estimated payments made to MTI under
Section 7.1 above with the actual Cost for the Products
purchased during such calendar quarter and shall
<PAGE> 26
provide a report to MTI of such reconciliation within thirty (30) days
after the end of such quarter. Specifically, reconciliations shall be
made
(i) to account for unanticipated changes to Product ASPs,
if such ASP changes served to affect Abbott's Costs paid
pursuant to Sections 7.1 and 7.6, and
(ii) to account for non-revenue (e.g., sample) units
distributed by Abbott but previously paid for by Abbott
pursuant to Section 7.1.
If the reconciliation reveals that Abbott owes MTI additional
amounts, Abbott shall remit payment of such amount with its
report. If the reconciliation reveals that Abbott has overpaid in
its estimated payment, MTI shall reimburse Abbott within ten (10)
days of receipt of the report.
7.7 Abbott's Records. No more frequently than once in any twelve (12) month
period during the Term, upon MTI's request and at MTI's expense, Abbott
shall allow an independent auditor mutually agreed upon by the parties
to examine Abbott's books and records only as such relate to the
distribution and sale of the Products for the sole purpose of verifying
(a) Abbott's compliance with its obligations to MTI relating to the
Accounts Receivable and Customer Service Performance Standards as such
compliance relates solely to filling orders of Products as described in
Sections 2.8 and 2.9, respectively, and referred to in Section 11.5, and
(b) the payments made by Abbott pursuant to Section 7.6. If, as a result
of such examination, an underpayment or overpayment is found, the
applicable party will rectify the underpayment or overpayment within
thirty (30) days; provided that if such examination shows an
underpayment by Abbott of more than ten percent (10%), then Abbott shall
pay the cost of such audit. The audit shall take place during Abbott's
normal business hours, at a location to be designated by Abbott, and may
not disrupt the operation of Abbott's business. The audit shall be
completed within five (5) Business
<PAGE> 27
Days and shall cover a period not more than two (2) years back from the
date of the audit. Scheduling of the audit shall be subject to mutual
agreement of the parties.
7.8 Returns
7.8.1 If Product Does Not Meet Warranty. Abbott may return for a refund
any Product that does not meet MTI's warranty as set forth in
Section 9.2. MTI shall issue a return material authorization
("RMA") number for such defective Product upon Abbott's request.
At MTI's expense, Abbott shall return any such defective Product
to MTI with documentation referencing the applicable RMA number.
MTI shall submit such refund and reimbursement of the return
shipment cost to Abbott within forty-five (45) days of receiving
the defective Product.
7.8.2 Remaining Shelf Life. Each Product delivered under this Agreement
shall have, upon Abbott's receipt of such Product, at least
seventy-five percent (75%) of the applicable original Product
shelf-life remaining, except as otherwise agreed in writing by
Abbott. At MTI's expense, Abbott may return for a refund or
replacement, at Abbott's option, any Product that does not meet
this requirement. MTI shall submit such refund and reimbursement
for shipping costs or replacement Product to Abbott within
forty-five (45) days of receiving the returned Product.
ARTICLE 8. CONFIDENTIAL INFORMATION
8.1. Identification of Confidential Information. Confidential Information
provided by the disclosing party (or any of its Affiliates) and entitled
to protection under this Agreement shall be identified as such by
appropriate markings on any documents exchanged. If the disclosing party
provides information other than in written form, such information shall
be considered Confidential Information only if the information by its
nature would
<PAGE> 28
reasonably be considered of a confidential nature or if the receiving
party, due to the context in which the information was disclosed, should
have reasonably known it to be confidential, and the disclosing party
gives written notice within ten (10) days of disclosure that such
information is to remain confidential or the disclosing party had
previously confirmed in writing that such information was confidential.
8.2 Protection of Confidential Information. Each party acknowledges that the
other party claims its Confidential Information as a special, valuable
and unique asset. During the Term and for three (3) years thereafter,
for itself and on behalf of its Affiliates, officers, directors, agents,
and employees, each party agrees to the following:
8.2.1 Disclosure to Third Parties. Receiving party shall not disclose
the Confidential Information to any third party or disclose to an
employee unless such third party or employee has a need to know
the Confidential Information in order to enable the disclosing
party to exercise its rights or perform its obligations under
this Agreement. Receiving party shall use the Confidential
Information only for the purposes of exercising its rights or
fulfilling its obligations under this Agreement and shall not
otherwise use it for its own benefit. In no event shall the
receiving party use less than the same degree of care to protect
the Confidential Information as it would employ with respect to
its own information of like importance which it does not desire
to have published or disseminated;
8.2.2 Required Disclosure. If the receiving party faces legal action or
is subject to legal proceedings requiring disclosure of
Confidential Information, then, prior to disclosing any such
Confidential Information, the receiving party shall promptly
notify the disclosing party and, upon the disclosing party's
request, shall cooperate with the disclosing party in responding
to and/or contesting such request.
<PAGE> 29
8.3 Return of Confidential Information. All information furnished under this
Agreement shall remain the property of the disclosing party and shall be
returned to it or destroyed or purged promptly at its request upon
termination of this Agreement; provided, however, that Abbott may retain
Confidential Information of MTI as reasonably necessary for Abbott to be
able to complete the sale of Products on order or in inventory at the
time of termination and to support Products already sold by Abbott under
this Agreement. All documents, memoranda, notes and other tangible
embodiments whatsoever prepared by the receiving party based on or which
includes Confidential Information shall be destroyed to the extent
necessary to remove all such Confidential Information upon the
disclosing party's request, except that one copy of such information
that may be retained in the legal files of the receiving party. Upon the
request of the disclosing party, all destruction under this Section 8.3
shall be certified in writing to the disclosing party by an authorized
representative of the receiving party.
8.4 Residual Information. Either party shall be free to use for any purpose
(including, but not limited to, use in the development, manufacture,
marketing and maintenance of its own products and services) the
Residuals resulting from access to or work with Confidential Information
of the other party, provided that the party maintains the
confidentiality of the Confidential Information as provided herein. The
term "Residuals" shall mean information in non-tangible form that may be
inadvertently retained by persons who have had rightful access to the
Confidential Information, including the ideas, concepts, know-how or
techniques contained therein. Notwithstanding the provisions of this
Section 8.4, during the Term, neither party may avoid its obligations
toward a particular item of the Confidential Information merely by
having a person commit such item to memory so as to reduce it to a
non-tangible form. Further, this Section 8.4 does not provide to either
<PAGE> 30
party a license to use any patented, trademarked or copyrighted material
of the other party.
8.5 Limitations. The confidentiality obligations set forth in this Article 8
shall not apply to disclosed information which the receiving party can
prove receiving party knows at the time of disclosure, free of any
obligation to keep it confidential, as evidenced by written records; is
or becomes generally publicly known through no fault of the receiving
party; receiving party independently developed without the use of any
Confidential Information, as evidenced by written records; or receiving
party rightfully obtains from a third party who has the right to
transfer or disclose it.
8.6 Public Announcements. Notwithstanding anything to the contrary contained
in this Agreement, neither party may initiate any public announcement
concerning the subject matter of this Agreement without the prior
written approval of the other party; provided, however, that this
Section 8.6 shall not be construed to limit Abbott's ability to market,
or MTI's ability to co-promote, the Products as either party deems
necessary or appropriate.
ARTICLE 9 -- REPRESENTATIONS AND WARRANTIES
9.1 Reciprocal Representations and Warranties. Each party represents and
warrants to the other party as follows:
(i) It is a corporation duly organized and validly existing under the
laws of its state or other jurisdiction of incorporation or formation;
(ii) It has the power and authority to execute and deliver this
Agreement, and to perform its obligations hereunder;
(iii) The execution, delivery and performance by it of this Agreement
and its compliance with the terms and provisions hereof does not and
will not conflict with or result in a breach of any of the terms and
provisions of or constitute a default under (a) any loan
<PAGE> 31
agreement, guaranty, financing agreement, agreement affecting a product
or other agreement or instrument binding or affecting it or its
property, including but not limited to any agreements resulting in a
Change of Control Event; (b) the provisions of its charter documents or
by-laws; or (c) any order, writ, injunction or decree of any court or
governmental authority entered against it or by which any of its
property is bound; (iv) No authorization, consent or approval of any
governmental authority or third party is required for the execution,
delivery or performance by it of this Agreement, and the execution,
delivery or performance of this Agreement will not violate any law, rule
or regulation applicable to such party; and (v) This Agreement has been
duly authorized, executed and delivered and constitutes its legal, valid
and binding obligation enforceable against it in accordance with its
terms and subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to the availability of particular
remedies under general equity principles.
9.2 MTI Product Warranties. MTI warrants that the Products manufactured by
MTI and delivered to Abbott hereunder shall (i) from the date of
shipment until the end of the specified shelf-life (as specified in
Section 7.9 .2) conform to the Specifications and all applicable laws
and regulations relating to the manufacture of the Product, including,
but not limited to FDA and Canadian Quality System Regulations, (ii) be
transferred free and clear of any security interest, liens, and
encumbrances, and (iii) not infringe any third party patents,
trademarks, copyrights, or other third party proprietary rights.
ARTICLE 10 -- INDEMNIFICATION
10.1 Indemnification. Subject to Section 10.3 below, MTI shall at its own
expense, defend Abbott (including its Affiliates, directors, officers,
employees and shareholders) against
<PAGE> 32
an "Indemnified Claim," as defined in Section 10.2 below, and hold
Abbott (including its Affiliates, directors, officers, employees and
shareholders) harmless and indemnify Abbott (including its Affiliates,
directors, officers, employees and shareholders) from any loss, expense,
liability and/or settlement (including attorneys' fees) resulting from
an Indemnified Claim.
10.2 Indemnified Claim. For purposes of this Agreement, an "Indemnified
Claim" shall mean: (i) any claim asserting that Abbott's sale or
manufacturing in accordance with Section 4.11, or Abbott's or any
Customer's purchase, possession or use of the Products or any part
thereof infringes any third party patent, trade secret, trademark,
copyright or other proprietary right; (ii) any claim arising from or
related to a failure of MTI to comply with its representations and
warranties under this Agreement; and (iii) any claim asserting that the
Products caused injury or death to a person or damage to property;
except to the extent such Indemnified Claims arise from Abbott's
negligence, willful misconduct or breach of this Agreement in which
event Abbott shall indemnify MTI (including its Affiliates, directors,
officers, employees and shareholders) from such claims.
10.3 Limitations. Each party's obligation to indemnify the other party is
contingent upon the party seeking indemnification (i) promptly notifying
the indemnifying party of such claim and (ii) cooperating with the
indemnifying party in the defense thereof, of which the indemnifying
party shall have control at the indemnifying party's expense.
Notwithstanding the above, the party seeking indemnification shall have
the right but not the obligation, at its own expense, to participate in
any such defense.
10.4 Infringements. If a claim of patent or other proprietary right
infringement is made by a third party with respect to a Product, then
MTI, at its option, shall (i) obtain for Abbott the right to continue to
market and distribute the Product at MTI's own expense, (ii) replace the
Product with a functionally-equivalent non-infringing Product, or (iii)
modify
<PAGE> 33
the Product so that it becomes non-infringing, so long as the
functionality of the Product is not adversely affected. If MTI is unable
to accomplish any of the foregoing within one hundred eighty (180) days
of the initial claim of infringement, MTI shall grant Abbott a full
refund of Costs paid by Abbott to MTI for all affected Products and
accept return of them, and the parties shall remove all such affected
Products from the Forecast for the remainder of the Term.
10.5 Limitation of Liability. EXCEPT FOR THE INDEMNIFICATION OBLIGATIONS
UNDER ARTICLE 10, 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 OF THE POSSIBILITY OF
SUCH DAMAGES.
10.7 Insurance. MTI shall at all times during the Term 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. MTI shall maintain such insurance for a
minimum of five (5) years after termination of this Agreement. Within
thirty (30) days of the Effective Date, MTI shall deliver to Abbott 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 Abbott.
<PAGE> 34
ARTICLE 11 -- TERM AND TERMINATION
11.1 Initial Term and Extensions. Unless earlier terminated pursuant to
Sections 11.2, 11.3, 11.4 or 11.5, or renegotiated pursuant to Section
11.5, and subject to Section 11.6, the Initial Term of this Agreement
shall commence on the Effective Date and shall expire on December 31,
2008; provided, that one party has provided written notice of such
termination to the other party at least six (6) months prior to such
termination. During the Initial Term, the parties may negotiate and
mutually agree to extend the Initial Term, whether for renewal periods
or for a fixed period.
11.2 Termination by Abbott. Abbott may terminate this Agreement at any time
upon one hundred and eighty (180) days written notice to MTI.
11.3 Termination Based on Change of Control Event. MTI or MTI's Successor may
terminate this Agreement for a Change of Control Event affecting MTI
upon ninety (90) days prior written notice to Abbott. Termination
subsequent to a Change of Control Event shall occur by one of the
following two mechanisms:
11.3.1 Abbott Buyout of Product Lines. For a period of ninety (90) days
following Abbott's receipt of notice from MTI of a Change in
Control Event, the parties shall discuss Abbott's potential
buyout of the Product Lines. Upon mutual agreement of Abbott and
MTI's Successor, Abbott shall purchase all of the pertinent
manufacturing assets (tooling, assembly and packaging equipment,
manufacturing know-how and specifications) for the Products and
all intellectual property rights (patents, additional commercial
know-how and the MTI Trademarks) for the Products in the Field
and in the Territory from MTI's
<PAGE> 35
Successor for a price of [*] times ([*]X) the aggregate [*] for
the twelve-month period preceding the Change of Control Event.
11.3.2 MTI's Successor Buyout of Agreement. In the event that Abbott and
MTI's Successor do not agree to proceed with the Abbott buyout of
Product Lines pursuant to Section 11.3.1 within ninety (90) days,
MTI 's Successor may terminate this Agreement, and Abbott shall
thereby relinquish all distribution rights under this Agreement,
upon one hundred and eighty (180) days prior written notice,
conditioned upon payment of a "Termination Fee" to Abbott. For
purposes of determining the Termination Fee herein, the term
"Abbott's Net Sales" shall mean the [*] of the Products in the
twelve (12) months preceding the Effective Date of the
Termination to the extent such sales are equal to or less than
[*] Dollars ($[*]) plus [*] percent ([*]%) of all sales of the
Products during such period in excess of such amount. The
Termination Fee shall be calculated and payable over a five (5)
year period as follows:
<TABLE>
<CAPTION>
Year After Amount Payable as a % of Abbott's Net Sales in
Effective Date of Termination 12 Months Preceding Effective Date of Termination
----------------------------- -------------------------------------------------
<S> <C>
Year 1 [*]%
Year 2 [*]%
Year 3 [*]%
Year 4 [*]%
Year 5 [*]%
</TABLE>
Such amounts shall be payable by MTI's Successor to Abbott once
annually on the anniversary of the effective date of termination
for a period of five (5) years
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.
<PAGE> 36
following termination of this Agreement.
Following an MTI Change of Control Event, if MTI's Successor
fails to notify Abbott of its intention to terminate this
Agreement within ninety (90) days of such MTI Change of Control
Event, the Agreement shall remain in effect, provided that if MTI
ceases to exist as a corporate entity, MTI's Successor has taken
assignment of and assumed all rights and obligations of MTI under
the terms and conditions of the Agreement for the remainder of
the Term.
11.4 Termination For Cause. Either party may terminate this Agreement by
giving the other party ninety (90) days written notice of such
termination if the other party materially breaches or defaults in any of
the material terms or conditions of this Agreement and fails to cure
such breach or default within ninety (90) days of receiving notice
thereof.
11.5 Termination or Renegotiation For Lack of Performance By Abbott.
11.5.1 Performance Through June 30, 2002. If, on or prior to June 30,
2002, any of the following events has not occurred, MTI shall
have the right, upon written notice to Abbott which shall be
delivered to Abbott no later than July 31, 2002, to terminate,
effective December 31, 2002, or renegotiate the terms and
conditions of, this Agreement:
A. [*] is available for sale;
b. Net sales for the twelve months ending June 30, 2002
aggregates [*] Dollars ($[*]) or greater; and
c. During the period from the Effective Date through June 30,
2002, Abbott is in ninety-nine percent (99%) or greater
compliance with the Accounts Receivable and Customer Service
Performance Standards described in
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.
<PAGE> 37
Sections 2.8 and 2.9, respectively, and referred to in Section
7.7, as evidenced by Abbott's records.
11.5.2 Performance Subsequent to June 30, 2002. On June 30 of each year
from 2003 through 2007, MTI shall have the right, upon written
notice to Abbott which shall be delivered to Abbott no later
than July 31 of the same year, to terminate, effective December
31 of the same year, or renegotiate the terms and conditions of,
this Agreement if any of the following events has not occurred:
a. [*] is available for sale;
b. Net sales for the twelve months ending on the most
recent June 30 aggregates [*] Dollars ($[*]) or greater;
and
c. During the period from the Effective Date through the
applicable June 30, Abbott is in ninety-nine percent
(99%) or greater compliance with the Accounts Receivable
and Customer Service Performance Standards set forth in
Sections 2.8 and 2.9, respectively, and referred to in
Section 7.7 as evidenced by Abbott's records.
11.6 The Effect of Termination
11.6.1 Delivery of Previously Ordered Products. Upon any termination of
this Agreement by MTI, Abbott shall be entitled to have
delivered the Products ordered prior to termination.
11.6.2 Disposition of Inventory. Upon any termination of this
Agreement, Abbott may sell all or any part of its remaining
inventory of the Products to Customers, or,
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.
<PAGE> 38
upon mutual agreement between Abbott and MTI, MTI may agree to
repurchase all or any part of Abbott's remaining inventory of the
Products (excluding discontinued and demonstration units). The
price for such inventory shall be the Cost paid by Abbott to MTI
for such Products, plus Abbott's shipping and handling costs.
11.6.3 Termination Fee. In the event that MTI terminates or otherwise
cancels this Agreement pursuant to Section 11.5, MTI shall make
the following payment to Abbott within thirty (30) days of such
cancellation or termination.
<TABLE>
<CAPTION>
---------------------------------------------
Year of Cancellation/ MTI Payment to
Termination Abbott
---------------------------------------------
<S> <C>
2002 $[*]
---------------------------------------------
2003 $[*]
---------------------------------------------
2004 $[*]
---------------------------------------------
2005 $[*]
---------------------------------------------
2006 $[*]
---------------------------------------------
2007 $[*]
---------------------------------------------
</TABLE>
11.7 Survival. Articles 8 and 10, Sections 4.12, 7.7 (for the term
indicated), , 9.2, 11.3, 11.6, 12.1, 12.2 and 12.5 through and including
12.12 shall survive any termination of this Agreement.
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.
<PAGE> 39
ARTICLE 12 -- GENERAL PROVISIONS
12.1 Independent Contractors. The parties at all times are and shall be
independent contractors in all matters relating to this Agreement. Each
party and its employees are not agents or partners of the other party
for any purposes and, except as otherwise expressly agreed in writing by
the other party, have no power or authority to bind or commit the other
party in any way.
12.2 No Waiver. The failure of either party to enforce at any time or for any
period any of the provisions of this Agreement shall not be construed to
be waiver of those provisions or of the right of that party thereafter
to enforce each and every provision hereof.
12.3 Assignment. Except as otherwise provided herein, this Agreement shall
not be assignable by either party without the prior written consent of
the other party. Any attempted assignment not otherwise permitted herein
shall be void. The provisions hereof shall be binding upon and inure to
the benefit of the parties, their successors and permitted assigns.
12.4 Notices. Any notice, report or statement to either party required or
permitted under this Agreement shall be in writing and shall be sent by
certified mail, return receipt requested, postage prepaid, or by
facsimile transmission with confirmation sent by certified mail as
above, or by courier, such as Federal Express, DHL or the like, with
confirmation of receipt by signature requested, directed to the other
party at its mailing address set forth below, or to such other mailing
address as the party may from time to time designate by prior written
notice in accordance herewith. Any such notice, report or statement sent
in accordance with this Section 12.4 shall be deemed duly given upon
receipt.
12.5 Governing Law and Dispute Resolution. This Agreement (and any other
documents referred to herein) shall be construed in accordance with the
laws of the State of California without reference to choice of law
principles, as to all matters, including, but
<PAGE> 40
not limited to, matters of validity, construction, effect or
performance. Any disputes between the parties relating to this Agreement
that cannot be resolved amicably shall be resolved by binding
Alternative Dispute Resolution in accordance with the attached Exhibit
12.5.
12.6 Force Majeure. The parties shall not be liable for any delay or failure
of obligations under this Agreement, in whole or in part, for any causes
beyond the reasonable control of the parties, including, but not limited
to, acts of God, war, riot, civil disturbances, strikes, lockouts or
other labor disputes, accident of transportation or other force majeure.
If MTI is unable to supply to Abbott any of the Products for any period
of time, then MTI shall immediately notify Abbott of such inability,
stating the reasons therefor and the estimated time of the delay and the
Forecasts shall be adjusted accordingly by mutual written agreement. In
such event, and upon Abbott's request, the Term shall be extended for a
period equal to the period of time in which MTI is unable to supply
Products to Abbott.
12.7 Titles of Sections. The titles of the various sections of this Agreement
are used for convenience of reference only and are not intended to and
shall not in any way enlarge or diminish the rights or obligations of
the parties or affect the meaning or construction of this document.
12.8 Investigation; Joint Preparation. Each party acknowledges that it has
had adequate opportunity to make whatever investigation or inquiry it
deems necessary or desirable in connection with the subject matter of
this Agreement prior to the execution hereof. Each party further
acknowledges that it has read and understands each provision of this
Agreement. This Agreement has been prepared jointly by the parties and
shall not be strictly construed against either party, it being agreed
that each party has had an
<PAGE> 41
opportunity to consult with counsel of its own choosing regarding the
term and conditions of this Agreement.
12.9 Binding Effect. This Agreement shall be binding upon and inure to the
benefits of the parties hereto and, and their respective successor and
permitted assigns.
12.10 Integration/Modification/Entire Agreement. This Agreement, together with
the attached Exhibits, sets forth the entire agreement and understanding
between the parties as to the subject matter hereof, and supersedes,
integrates and merges all prior discussions, correspondence,
negotiations, understandings or agreements. This Agreement may not be
altered, amended, modified or otherwise changed in any way except by a
written instrument, which specifically identifies the intended
alteration, amendment, modification or other change, clearly expresses
the intention to so change this Agreement, and is signed by an
authorized representative of each of the parties.
12.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which when executed shall be deemed an original,
and all of which together shall constitute one and the same instrument.
12.12 Severability. If any provision, or portion thereof, of this Agreement
shall be held to be invalid, illegal, void or otherwise unenforceable,
such provision, or portion thereof, shall be amended to achieve as
nearly as possible the same economic effect as the original provision to
the fullest extent permitted by applicable law, and the validity,
legality and enforceability of the remainder of the Agreement will
remain in full force and effect.
<PAGE> 42
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date.
ABBOTT LABORATORIES MICRO THERAPEUTICS, INC.
By: /s/ Richard A. Gonzalez By: /s/ George Wallace
------------------------------- ---------------------------------
Richard A. Gonzalez
Title: President HPD Title: President & CEO
---------------------------- ------------------------------
Date: 6/29/00 Date: 6/28/00
----------------------------- -------------------------------
<PAGE> 43
LIST OF EXHIBITS
1.17 Products
2.2.2 Product Prices and Pre-Approved Product Price Ranges
4.5 Post-Marketing Clinical Development Program
12.5 Alternative Dispute Resolution
<PAGE> 44
AGREEMENT
by and between
Micro Therapeutics, Inc.
and
Abbott Laboratories
Exhibit 1.17
Products
LIST OF PRODUCTS FROM
PRODUCT CATALOGUE (DOMESTIC PRICE LIST)
Valved Infusion Catheters
Current Exp. 18 months (36 month expiration pending, September 1998)
Cragg-McNamara(R) Valved Infusion Catheters
<TABLE>
<CAPTION>
Model # Diameter (F) Usable Length (Cm) Infusion Length (Cm) Max. Guidewire (In.)
===================================================================================================
<S> <C> <C> <C> <C>
201-0236 4 40 5 .035
201-0237 4 40 10 .035
201-0238 4 40 20 .035
201-0230 4 65 5 .035
201-0232 4 65 10 .035
201-0234 4 65 20 .035
201-0231 4 100 5 .035
201-0233 4 100 10 .035
201-0235 4 100 20 .035
201-0239 4 135 5 .035
201-0240 4 135 10 .035
201-0241 4 135 20 .035
===================================================================================================
201-0216 5 40 5 .038
201-0217 5 40 10 .038
201-0218 5 40 20 .038
201-0210 5 65 5 .038
201-0212 5 65 10 .038
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
201-0214 5 65 20 .038
201-0211 5 100 5 .038
===================================================================================================
201-0213 5 100 10 .038
201-0215 5 100 20 .038
201-0227 5 100 30 .038
201-0228 5 100 40 .038
201-0229 5 100 50 .038
201-0219 5 135 5 .038
201-0220 5 135 10 .038
201-0221 5 135 20 .038
201-0222 5 135 30 .038
201-0223 5 135 40 .038
201-0224 5 135 50 .038
</TABLE>
Focused(TM) Valved Infusion Catheters
Current Exp. 18 months (36 month expiration pending, September 1998)
<TABLE>
<CAPTION>
Model # Diameter (F) Usable Length (Cm) Infusion Length (Cm) Max. Guidewire (In.)
===================================================================================================
<S> <C> <C> <C> <C>
201-0225 5 65 1 .038
201-0226 5 100 1 .038
</TABLE>
<PAGE> 46
Peripheral Micro Catheters
Current Exp. 12 months (36 month expiration pending, September 1998)
MicroMewi(TM) Sidehole Infusion Catheters
<TABLE>
<CAPTION>
Model # Diameter (F) Usable Length (Cm) Infusion Length (Cm) Max. Guidewire (In.)
===================================================================================================
<S> <C> <C> <C> <C>
201-0120 2.9 150 5 .018
201-0121 2.9 150 10 .018
201-0122 2.9 40 5 .018
201-0124 2.9 180 5 .018
201-0125 2.9 180 10 .018
</TABLE>
Micro Patency(TM) Endhole Infusion Catheters
Exp. 5 years
<TABLE>
<CAPTION>
Model # Diameter (F) Usable Length (Cm) Infusion Length (Cm) Max. Guidewire (In.)
===================================================================================================
<S> <C> <C> <C> <C>
201-5020 2.9 40 Endhole .018
201-5021 2.9 100 Endhold .018
201-5022 2.9 150 Endhole .018
</TABLE>
<PAGE> 47
Sidehole Infusion Catheters
Current Exp. 18 months (36 month expiration pending, September 1998)
Mewi-5(TM) Sidehole Infusion Catheters
<TABLE>
<CAPTION>
Model # Diameter (F) Usable Length (Cm) Infusion Length (Cm) Max. Guidewire (In.)
===================================================================================================
<S> <C> <C> <C> <C>
201-0150 5 40 5 .035
201-0151 5 40 10 .035
201-0152 5 40 15 .035
201-0153 5 65 5 .035
201-0154 5 65 10 .035
201-0155 5 65 15 .035
201-0156 5 100 5 .035
201-0157 5 100 10 .035
201-0158 5 100 15 .035
201-0160 5 40 5 .038
201-0161 5 40 10 .038
201-0162 5 40 15 .038
201-0163 5 65 5 .038
201-0164 5 65 10 .038
201-0165 5 65 15 .038
201-0166 5 100 5 .038
201-0167 5 100 10 .038
201-0168 5 100 15 .038
</TABLE>
<PAGE> 48
Mechanical Thrombolysis
Cragg Thrombolytic Brush(TM)
Exp. 18 months
<TABLE>
<CAPTION>
Catheter
Model # Diameter (F) Usable Length (Cm) Infusion Length (Cm) Brush Diameter (mm)
===================================================================================================
<S> <C> <C> <C> <C>
202-0101 6 65 Endhole 6
</TABLE>
Contents:
A System contains one Brush Catheter and one Brush Motor Drive Unit
Castaneda Over-The-Wire Brush(TM)
Exp. 18 months
<TABLE>
<CAPTION>
Catheter
Model # Diameter (F) Usable Length (Cm) Infusion Length (Cm) Brush Diameter (mm)
===================================================================================================
<S> <C> <C> <C> <C>
202-0107 6 65 Endhole & Sidehole 6
</TABLE>
Max Guidewire: .035
Contents:
A System contains one Brush Catheter and one Brush Motor Drive Unit
<PAGE> 49
Accessories
Introducer Sheaths
Exp. 5 years
<TABLE>
<CAPTION>
Model # Size (F) Sheath Length (Cm)
===============================================================================================
<S> <C> <C> <C>
203-6001-P10 6 5.5
203-6002-P10 5 40
</TABLE>
Contents Per Pack (all models)
1-Hemostasis value with hi-flow sideport and removable 3-way stopcock
1-radiopaque sheath
1-vessel dilator
Pulse-Spray Accessory Pack
Exp. 2001
Model #
================================================================================
203-9000-P5 Contents Per Pack (all models):
1-dual check valve
1-1cc luer lock syringe
1-20cc luer lock syringe
<PAGE> 50
Infusion Wires
Exp. 18 months
ProStream Sidehole Infusion Wires
<TABLE>
<CAPTION>
Model # Diameter (In.) Usable Length (Cm) Infusion Length (Cm) Max. Guidewire (In.)
===================================================================================================
<S> <C> <C> <C> <C>
201-0410 .035 145 3 N/A
201-0411 .035 145 6 N/A
201-0412 .035 145 9 N/A
201-0413 .035 145 12 N/A
201-0414 .035 175 3 N/A
201-0415 .035 175 6 N/A
201-0416 .035 175 9 N/A
201-0417 .035 175 12 N/A
201-0610 .035 145 Endhole N/A
201-0611 .038 145 Endhole N/A
</TABLE>
<PAGE> 51
AGREEMENT
by and between
Micro Therapeutics, Inc.
and
Abbott Laboratories
Exhibit 2.2.2
Pre-approved Product Price Range
In conformity with Sections 2.2.2 and 3.9 of the Agreement, MTI shall have the
right to present contracts to Customers that provide the customer with up to a
[*] percent ([*]%) deduction off of the published list price for each Product
under this Agreement. MTI shall not have the right to deviate from this price
range without prior written approval from Abbott. Abbott shall have the sole
right to amend this Product price range at any time during the Agreement, and
shall provide MTI with written notice when doing so.
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH COMMISSION.
<PAGE> 52
AGREEMENT
by and between
Micro Therapeutics, Inc.
and
Abbott Laboratories
Exhibit 4.5
Post-Marketing Clinical Development Program
This exhibit will be mutually agreed to by the parties to the Agreement no later
than September 30, 2000.
<PAGE> 53
AGREEMENT
by and between
Micro Therapeutics, Inc.
and
Abbott Laboratories
Exhibit 12.5
Alternative Dispute Resolution
ADR (ALTERNATIVE DISPUTE RESOLUTION)
The parties recognize that a bona fide dispute as to certain matters may arise
from time to time during the term of this Agreement which relates to either
party's rights and/or obligations. To have such a dispute resolved by this
Alternative Dispute Resolution ("ADR") provision, a party 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, either party may request the President of the CPR Institute for
Dispute Resolution ("CPR"), 366 Madison Avenue, 14th Floor, New York,
New York 10017, to select a neutral pursuant to the following
procedures:
(a) The CPR shall submit to the parties a list of
not less than five (5) candidates within fourteen (14)
days after receipt of the request, along with a Curriculum
Vitae for each candidate. No candidate shall be an
employee, director, or shareholder of either party or any
of their subsidiaries or affiliates.
<PAGE> 54
(b) Such list shall include a statement of
disclosure by each candidate of any circumstances likely
to affect his or her impartiality.
(c) Each party shall number the candidates in
order of preference (with the number one (1) signifying
the greatest preference) and shall deliver the list to
the CPR within seven (7) days following receipt of the
list of candidates. If a party believes a conflict of
interest exists regarding any of the candidates, that
party shall provide a written explanation of the
conflict to the CPR along with its list showing its
order of preference for the candidates. Any party
failing to return a list of preferences on time shall be
deemed to have no order of preference.
(d) If the parties collectively have identified
fewer than three (3) candidates deemed to have
conflicts, the CPR immediately shall designate as the
neutral the candidate for whom the parties collectively
have indicated the greatest preference. If a tie should
result between two candidates, the CPR may designate
either candidate. If the parties collectively have
identified three (3) or more candidates deemed to have
conflicts, the CPR shall review the explanations
regarding conflicts and, in its sole discretion, may
either (i) immediately designate as the neutral the
candidate for whom the parties collectively have
indicated the greatest preference, or (ii) issue a new
list of not less than five (5) candidates, in which case
the procedures set forth in subparagraphs 2(a) - 2(d)
shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six (56) days
after selection, the neutral shall hold a hearing to resolve each of the
issues identified by the parties. The ADR proceeding shall take place at
a location in the State of California agreed upon by the parties. If the
parties cannot agree, the neutral shall designate a location in the
State of California other than the principal place of business of either
party or any of their subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall submit
the following to the other party and the neutral:
(a) a copy of all exhibits on which such party
intends to rely in any oral or written presentation to
the neutral;
(b) a list of any witnesses such party intends
to call at the hearing, and a short summary of the
anticipated testimony of each witness;
(c) a proposed ruling on each issue to be
resolved, together with a request for a specific damage
award or other remedy for each issue. The proposed
rulings and remedies shall not contain any recitation of
the facts or any legal arguments and shall not exceed
one (1) page per issue.
(d) a brief in support of such party's proposed
rulings and remedies, provided that the brief shall not
exceed twenty (20) pages. This page limitation shall
apply regardless of the number of issues raised in the
ADR proceeding.
<PAGE> 55
Except as expressly set forth in subparagraphs 4(a) - 4(d), no discovery
shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
5. The hearing shall be conducted on two (2) consecutive days and shall be
governed by the following rules:
(a) Each party shall be entitled to five (5) hours
of hearing time to present its case. The neutral shall
determine whether each party has had the five (5) hours to
which it is entitled.
(b) Each party shall be entitled, but not required,
to make an opening statement, to present regular and
rebuttal testimony, documents or other evidence, to
cross-examine witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately
after their direct testimony, and cross-examination time
shall be charged against the party conducting the
cross-examination.
(c) The party initiating the ADR shall begin the
hearing and, if it chooses to make an opening statement,
shall address not only issues it raised but also any
issues raised by the responding party. The responding
party, if it chooses to make an opening statement, also
shall address all issues raised in the ADR. Thereafter,
the presentation of regular and rebuttal testimony and
documents, other evidence, and closing arguments shall
proceed in the same sequence.
(d) Except when testifying, witnesses shall be
excluded from the hearing until closing arguments.
(e) Settlement negotiations, including any
statements made therein, shall not be admissible under any
circumstances. Affidavits prepared for purposes of the ADR
hearing also shall not be admissible. As to all other
matters, the neutral shall have sole discretion regarding
the admissibility of any evidence.
6. Within seven (7) days following completion of the hearing, each party
may submit to the other party and the neutral a post-hearing brief in
support of its proposed rulings and remedies, provided that such brief
shall not contain or discuss any new evidence and shall not exceed ten
(10) pages. This page limitation shall apply regardless of the number of
issues raised in the ADR proceeding.
7. The neutral shall rule on each disputed issue within fourteen (14) days
following completion of the hearing. Such ruling shall adopt in its
entirety the proposed ruling and remedy of one of the parties on each
disputed issue but may adopt one party's proposed rulings and remedies
on some issues and the other party's proposed rulings and remedies on
other issues. The neutral shall not issue any written opinion or
otherwise explain the basis of the ruling.
<PAGE> 56
8. The neutral shall be paid a reasonable fee plus expenses. These fees and
expenses, along with the reasonable legal fees and expenses of the
prevailing party (including all expert witness fees and expenses), the
fees and expenses of a court reporter, and any expenses for a hearing
room, shall be paid as follows:
(a) If the neutral rules in favor of one party on
all disputed issues in the ADR, the losing party shall pay
100% of such fees and expenses.
(b) If the neutral rules in favor of one party on
some issues and the other party on other issues, the
neutral shall issue with the rulings a written
determination as to how such fees and expenses shall be
allocated between the parties. The neutral shall allocate
fees and expenses in a way that bears a reasonable
relationship to the outcome of the ADR, with the party
prevailing on more issues, or on issues of greater value
or gravity, recovering a relatively larger share of its
legal fees and expenses.
9. The rulings of the neutral and the allocation of fees and expenses shall
be binding, non-reviewable, and non-appealable, and may be entered as a
final judgment in any court having jurisdiction.
10. Except as provided in paragraph 9 or as required by law, the existence
of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and
briefs), and the rulings shall be deemed Confidential Information. The
neutral shall have the authority to impose sanctions for unauthorized
disclosure of Confidential Information.
