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EXHIBIT 10.4
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN
ASTERISK ([*]) ) AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT DATED AUGUST 28, 1998
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement"), is entered into as of
August 12, 1998, by and between XXXXXX LABORATORIES, an Illinois
corporation ("Xxxxxx"), as lender, and MICRO THERAPEUTICS, INC., a
Delaware corporation (the "Company"), as borrower.
W I T N E S S E T H:
WHEREAS, Xxxxxx has purchased from the Company, and the Company has
sold to Xxxxxx, a certain 5% Convertible Subordinated Note, due August
19, 2003, in the principal aggregate amount of Five Million Dollars
($5,000,000) (the "Note") pursuant to the terms and conditions of that
certain Convertible Subordinated Note Agreement, dated as of August 12,
1998, by and between Xxxxxx and the Company (the "Note Agreement"); and
WHEREAS, pursuant to Section 6 of the Note Agreement, the Company and
Xxxxxx agreed to enter into this Credit Agreement, which provides that
Xxxxxx, as lender, shall loan to the Company, as borrower at the
Company's request, an amount not to exceed an aggregate of Five Million
Dollars ($5,000,000).
NOW, THEREFORE, in consideration of the premises and of the mutual
provisions, agreements and covenants contained herein, the Company and
Xxxxxx hereby agree as follows:
1. DEFINITIONS. In addition to any terms defined elsewhere in this
Agreement, the following terms have the meanings indicated for purposes
of this Agreement (such definitions being equally applicable to the
singular and plural forms of the defined term):
"Acceleration" means that the Loan (i)shall not have been paid at the
Maturity Date, or (ii)shall have become due and payable prior to its
stated maturity pursuant to Section 7.2 hereof.
"Disbursement Date" means any date on or prior to July 31, 1999 on
which a disbursement of the Loan is made. Each Disbursement Date shall
be on the date designated in a written notice from the Company to
Xxxxxx; provided, however, that
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(a) Xxxxxx shall not be required to make any disbursement if the
conditions hereto and the Note Agreement are not satisfied, and
(b) Xxxxxx shall in no event be required to make any disbursement after
July 31, 1999.
"Maturity" means any date on which the Loan or any portion thereof
becomes due and payable, whether as stated or by virtue of mandatory
prepayment, by acceleration or otherwise.
"Maturity Date" means the fifth year anniversary of the first
Disbursement Date.
"Obligations" means all loans, advances, debts, liabilities,
obligations, covenants and duties owing to Xxxxxx by the Company, of
any kind or nature, present or future, whether or not evidenced by any
note, guaranty or other instrument, arising under this Agreement.
Each accounting term not defined herein and each accounting term partly
defined herein to the extent not defined shall have the meaning given
to it under generally accepted accounting principles.
2. LOAN.
2.1 PROCEDURE FOR LOAN. Subject to all of the terms and
conditions of this Agreement and the Note Agreement, Xxxxxx
agrees to make periodic loans (the "Loan") prior to July 31,
1999 to the Company in the amount of up to Five Million
Dollars ($5,000,000) to be governed by the terms and
conditions of, and repaid in accordance with, this Agreement
and the Note Agreement. The Company shall provide Xxxxxx with
fifteen (15) business days (as defined in the Note Agreement)
written notice of a requested disbursement. Disbursement
amounts shall be in multiples of One Million Dollars
($1,000,000). Subject to the satisfaction of the terms and
conditions set forth in this Agreement and the Note Agreement,
Xxxxxx shall disburse up to Five Million Dollars ($5,000,000)
to the Company at the Company's request. Amounts repaid may
not be reborrowed.
2.2 INTEREST.
(a) INTEREST. The Loan shall bear interest from the
date of disbursement on the unpaid principal amount
thereof until the earlier of an Event of Default or
the date upon which such amount shall become due and
payable (whether upon Maturity, by Acceleration or
otherwise) at a rate per annum equal to five percent
(5%).
(b) ACCRUAL AND COMPUTATION OF INTEREST. Interest
shall accrue daily and shall be computed on the basis
of a year of 360 days for the actual number of days
elapsed.
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2.3 MAXIMUM INTEREST RATE. Nothing in this Agreement shall
require the Company to pay interest at a rate exceeding the
maximum amount permitted by applicable law to be charged by
Xxxxxx.
2.4 REPAYMENT.
(a) INTEREST PAYMENTS. On the last day of each
quarter payable in arrears on January 31, April 30,
July 31 and October 31, commencing with the quarter
of the first Disbursement Date until the Maturity
Date, and on the Maturity Date, the Company shall pay
Xxxxxx all interest then accrued.
(b) LOAN PAYMENT. The Company shall repay the entire
outstanding principal amount of the Loan in full on
the Maturity Date.
(c) OPTIONAL PREPAYMENT. The Company may at any time
prepay the entire outstanding principal amount of the
Loan or any portion thereof without penalty.
2.5 POST-MATURITY INTEREST. After the earlier of an Event of
Default or Maturity (whether by Acceleration or otherwise) of
the Loan, the Loan shall bear interest, payable on demand, at
a rate per annum equal to ten percent (10%), subject to
Section 2.3 hereof.
2.6 CREDIT FACILITY NOTE. The Loan made by Xxxxxx pursuant
hereto shall be evidenced by a credit facility note (the
"Credit Facility Note") of the Company in the form of Annex A
hereto, payable to the order of Xxxxxx on the Maturity Date in
the principal amount of up to Five Million Dollars
($5,000,000) in accordance with Section 2.1 hereof. The
Company hereby authorizes Xxxxxx to indicate upon a schedule
attached to the Credit Facility Note all disbursements made by
Xxxxxx pursuant to this Agreement and all payments of
principal and interest thereon. Absent manifest error, such
notations shall be presumptive as to the aggregate unpaid
principal amount of the Loan, and interest due thereon, but
the failure by Xxxxxx to make such notations or the inaccuracy
or incompleteness of any such notations shall not affect the
obligations of the Company hereunder or under the Credit
Facility Note.
2.7 PAYMENTS BY THE COMPANY. All payments (including
prepayments) to be made by the Company shall be made without
set-off or counterclaim and shall be made to Xxxxxx by wire
transfer in United States dollars and in immediately available
funds to the following Xxxxxx account: [*] for credit to
Xxxxxx Laboratories Account [*] (or to such other account as
may be designated by written notice to the Company), no later
than 12:00 noon, Pacific time, of the business day on which
payment is due. Any payment
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which is received in Xxxxxx'x account later than 12:00 noon,
Pacific time, shall be deemed to have been received on the
immediately succeeding business day. Whenever any payment
hereunder shall be stated to be due on a day other than a
business day, such payment shall be made on the next
succeeding business day, and such extension of time shall in
such case be included in the computation of interest.
3. CONVERSION OF CREDIT FACILITY NOTE.
3.1 CONVERSION PRIVILEGE AND CONVERSION PRICE.
(a) Subject to and upon compliance with the
provisions of this Section 3, at the option of the
Company at any time and at the Company's sole
discretion without regard to the price of the Common
Stock (except as set forth in Section 3.1(b)) and the
Conversion Price (as defined herein), the Credit
Facility Note or any portion of the principal amount
thereof which is One Million Dollars ($1,000,000) or
an integral multiple of One Million Dollars
($1,000,000) (a "$1,000,000 Integral Multiple") may
be converted at the principal amount thereof, or of
such portion thereof, into fully paid and
nonassessable shares of Common Stock at the
Conversion Price, in effect at the time of
conversion. Such conversion right shall expire at the
close of business on the Maturity Date. The price at
which shares of Common Stock shall be delivered upon
conversion (the "Conversion Price") shall be
initially [*] of Common Stock, unless the Conversion
Price shall be adjusted in certain instances as
provided in this Section 3.
(b) The Company shall not have the option to convert
the Credit Facility Note into shares of Common Stock
(i) to the extent that such shares of Common Stock,
together with the shares of Common Stock then
beneficially owned by Xxxxxx, would exceed 19% of the
then outstanding shares of Common Stock of the
Company (giving effect to such issuance upon
conversion to Xxxxxx) or (ii) if the Fair Market
Value of the Common Stock as of the date that written
notice of conversion is provided to Xxxxxx shall be
less than [*] .
"Fair Market Value" of the Common Stock as of any date of determination
means the arithmetic mean of the reported last sale price of the Common
Stock regular way on each of the 20 trading days preceding such date of
determination or, if no such sale takes place on any of such days, the
average of the reported closing bid and asked prices regular way, in
each case on the principal national securities exchange on which the
security is listed or admitted to trading, or, if the security is not
listed or admitted to trading on any national securities exchange, the
closing sales prices, or, if there are no closing sales prices on any
such days, the average of the closing bid and asked prices, in the
Nasdaq Stock Market or other over-the-counter market as
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reported by the National Association of Securities Dealers Automated
Quotation System, or, if not so reported, the fair market value of the
security as estimated by a nationally recognized investment banking
firm selected by Xxxxxx and acceptable to the Company in the exercise
of its reasonable discretion, which estimate shall be prepared at the
expense of the Company.
3.2 EXERCISE OF CONVERSION PRIVILEGE. Upon receipt of written
notice of conversion (pursuant to Section 8.1 hereof) in the
form provided on the Credit Facility Note, Xxxxxx shall
immediately surrender the Credit Facility Note or any
$1,000,000 Integral Multiple thereof duly endorsed or assigned
to the Company or in blank, at any office or agency of the
Company maintained for that purpose. No payment or adjustment
shall be made upon any conversion on account of any interest
accrued on the Credit Facility Note surrendered for conversion
or on account of any dividends on the Common Stock issued upon
conversion.
The Credit Facility Note shall be deemed to have been converted
immediately prior to the close of business on the day of mailing of the
written notice of conversion (pursuant to Section 8.1 hereof) by the
Company, and at such time the rights of Xxxxxx shall cease, and the
Person or Persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or
holders of such Common Stock at such time. As promptly as practicable
on or after the conversion date, the Company shall issue and shall
deliver at such office or agency a certificate or certificates for the
number of duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock issuable upon conversion, together with payment
in lieu of any fraction of a share, as provided in Section 3.3 hereof.
In the case of any Credit Facility Note which is converted in part
only, upon such conversion, the Company shall execute and deliver to
Xxxxxx, at the expense of the Company, a new Credit Facility Note or
Credit Facility Notes of authorized denominations in the aggregate
principal amount equal to the unconverted portion of the principal
amount of the Credit Facility Note.
3.3 FRACTIONS OF SHARES. No fractional shares of Common Stock
shall be issued upon conversion of the Credit Facility Note or
$1,000,000 Integral Multiple thereof. Instead of any
fractional share of Common Stock which would otherwise be
issuable upon the conversion of the Credit Facility Note or
the $1,000,000 Integral Multiple thereof, the Company shall
pay a cash adjustment in respect of such fraction of a share
of Common Stock in an amount equal to the remaining amount
which is not converted by reason of this Section 3.3.
3.4 ADJUSTMENT OF CONVERSION PRICE.
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(a) In case the Company shall pay or make a dividend
or other distribution on any class of capital stock
of the Company in Common Stock, the Conversion Price
in effect at the opening of business on the day
following the date fixed for the determination of
stockholders entitled to receive such dividend or
other distribution shall be reduced by multiplying
such Conversion Price by a fraction the numerator of
which shall be the number of shares of Common Stock
outstanding at the close of business on the date
fixed for such determination and the denominator
shall be the sum of such number of shares and the
total number of shares constituting such dividend or
other distribution, such reduction to become
effective immediately after the opening of business
on the day following the date fixed for such
determination. For the purposes of this Section
3.4(a), the number of shares of Common Stock at any
time outstanding shall not include shares held in the
treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in
lieu of fractions of shares of Common Stock. The
Company will not pay any dividend or make any
distribution on shares of Common Stock held in the
treasury of the Company.
(b) In case the Company shall issue rights, options
or warrants to all holders of its Common Stock (not
being available on an equivalent basis to Xxxxxx upon
conversion) entitling them to subscribe for or
purchase shares of Common Stock at a price per share
less than the current market price per share of the
Common Stock (determined as provided in Section
3.4(h) hereof) on the date fixed for the
determination of stockholders entitled to receive
such rights, options or warrants (other than pursuant
to a dividend reinvestment plan), the Conversion
Price in effect at the opening of business on the day
following the date fixed for such determination shall
be reduced to a price (calculated to the nearest
cent) determined by multiplying such Conversion Price
by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding at the
close of business on the date fixed for such
determination plus the number of shares of Common
Stock which the aggregate consideration received by
the Company for the total number of additional shares
of Common Stock so offered for subscription or
purchase would purchase at such Conversion Price in
effect immediately prior to the date fixed for such
determination and the denominator of which shall be
the number of shares of Common Stock outstanding at
the close of business on the date fixed for such
determination plus the number of shares of Common
Stock so offered for subscription or purchase, such
reduction to become effective immediately after the
opening of business on the day following the date
fixed for such determination. For purposes of
calculating the Conversion Price in this Section
3.4(b), the number of shares of Common Stock
outstanding
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immediately prior to the date fixed for such
determination of rights, options or warrants shall be
calculated as if all shares had been fully converted
into shares of Common Stock. Also, for the purposes
of this Section 3.4(b), the number of shares of
Common Stock at any time outstanding shall not
include shares held in the treasury of the Company
but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of
Common Stock. The Company will not issue any rights,
options or warrants in respect of shares of Common
Stock held in the treasury of the Company.
(c) In case outstanding shares of Common Stock shall
be subdivided into a greater number of shares of
Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon
which such subdivision becomes effective shall be
proportionately reduced, and, conversely, in case
outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common
Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which
such combination becomes effective shall be
proportionately increased, such reduction or
increase, as the case may be, to become effective
immediately after the opening of business on the day
following the day upon which such subdivision or
combination becomes effective.
(d) In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common
Stock evidences of its indebtedness or assets
(including securities, but excluding any rights,
options or warrants referred to in Section 3.4(b)
hereof, any dividend or distribution paid exclusively
in cash and any dividend or distribution referred to
in Section 3.4), the Conversion Price shall be
adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in
effect immediately prior to the close of business on
the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction
the numerator of which shall be the current market
price per share (determined as provided in Section
3.4(h)) of the Common Stock on the date fixed for
such determination less the then fair market value
(as determined by an independent majority of the
Board of Directors, whose determination shall be
conclusive and described in a board resolution) of
the portion of the assets or evidences of
indebtedness so distributed applicable to one share
of Common Stock and the denominator shall be such
current market price per share of the Common Stock,
such adjustment to become effective immediately prior
to the opening of business on the day following the
date fixed for the determination of stockholders
entitled to receive such
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distribution. In any case in which this Section
3.4(d) is applicable, Section 3.4(b) hereof shall not
be applicable.
(e) In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common
Stock cash (excluding any cash that is distributed
upon a merger or consolidation to which Section 3.10
hereof applies or as part of a distribution referred
to in paragraph (d) of this Section 3.4) in an
aggregate amount that, combined together with (i) the
aggregate amount of any other distributions to all
holders of its Common Stock made exclusively in cash
within the twelve (12) months preceding the date of
payment of such distribution and in respect of which
no adjustment pursuant to this paragraph (e) has been
made and (ii) the aggregate of any cash plus the fair
market value (as determined by an independent
majority of the Board of Directors, whose
determination shall be conclusive and described in a
Board Resolution) of consideration payable in respect
of any tender offer by the Company or any of its
Subsidiaries for all or any portion of the Common
Stock concluded within the twelve (12) months
preceding the date of payment of such distribution
and in respect of which no adjustment pursuant to
paragraph (f) of this Section 3.4 has been made,
exceeds ten percent (10%) of the product of the
current market price per share of the Common Stock on
the date for the determination of holders of shares
of Common Stock entitled to receive such distribution
multiplied by the number of shares of Common Stock
outstanding on such date, then, and in each such
case, immediately after the close of business on such
date for determination, the Conversion Price shall be
reduced so that the same shall equal the price
determined by multiplying the Conversion Price in
effect immediately prior to the close of business on
the date fixed for determination of the stockholders
entitled to receive such distribution by a fraction
(A) the numerator of which shall be equal to the
current market price per share of the Common Stock
(determined as provided in paragraph (h) of this
Section 3.4) on the date fixed for such determination
less an amount equal to the quotient of (x) the
excess of such combined amount over such ten percent
(10%) and (y) the number of shares of Common Stock
outstanding on such date for determination and (B)
the denominator of which shall be equal to the
current market price per share of the Common Stock
(determined as provided in paragraph (h) of this
Section 3.4) on such date for determination.
(f) In case a tender offer made by the Company or any
Subsidiary for all or any portion of the Common Stock
shall expire and such tender offer (as amended upon
the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any
maximum specified in the terms of the tender offer)
of Purchased
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Shares (as defined herein)) of an aggregate
consideration having a fair market value (as
determined by an independent majority of the Board of
Directors, whose determination shall be conclusive
and described in a board resolution) that combined
together with (i) the aggregate of the cash plus the
fair market value (as determined by an independent
majority of the Board of Directors, whose
determination shall be conclusive and described in a
board resolution), as of the expiration of such
tender offer, of consideration payable in respect of
any other tender offer, by the Company or any
Subsidiary for all or any portion of the Common Stock
expiring within the twelve (12) months preceding the
expiration of such tender offer and in respect of
which no adjustment pursuant to this paragraph (f)
has been made and (ii) the aggregate amount of any
distributions to all holders of the Common Stock made
exclusively in cash within twelve (12) months
preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to paragraph
(e) of this Section 3.4 has been made, exceeds ten
percent (10%) of the product of the current market
price per share of the Common Stock (determined as
provided in paragraph (h) of this Section 3.4) as of
the last time (the "Expiration Time") tenders could
have been made pursuant to such tender offer (as it
may be amended) multiplied by the number of shares of
Common Stock outstanding (including any tendered
shares) on the Expiration Time, then, and in each
such case, immediately prior to the opening of
business on the day after the date of the Expiration
Time, the Conversion Price shall be adjusted so that
the same shall equal the price determined by
multiplying the Conversion Price in effect
immediately prior to the close of business on the
date of the Expiration Time by a fraction (A) the
numerator of which shall be equal to (1) the product
of (a) the current market price per share of the
Common Stock (determined as provided in paragraph (h)
of this Section 3.4) on the date of the Expiration
Time and (b) the number of shares of Common Stock
outstanding (including any tendered shares) on the
Expiration Time, less (2) the amount of cash plus the
fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based
on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares, and
(B) the denominator of which shall be equal to the
product of (1) the current market price per share of
the Common Stock (determined as provided in paragraph
(h) of this Section 3.4) as of the Expiration Time
and (2) the number of shares of Common Stock
outstanding (including any tendered shares) as of the
Expiration Time less the number of all shares validly
tendered and not withdrawn as of the Expiration Time
(the shares deemed so accepted up to any such
maximum, being referred to as the "Purchased
Shares").
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(g) The reclassification of Common Stock into
securities including securities other than Common
Stock (other than any reclassification upon a
consolidation or merger to which Section 3.10 hereof
applies) shall be deemed to involve (i) a
distribution of such securities other than Common
Stock to all holders of Common Stock (and the
effective date of such reclassification shall be
deemed to be "the date fixed for the determination of
stockholders entitled to receive such distribution"
and the "date fixed for such determination" within
the meaning of paragraph (d) of this Section 3.4),
and (ii) a subdivision or combination, as the case
may be, of the number of shares of Common Stock
outstanding immediately prior to such
reclassification into the number of shares of Common
Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be
deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such
combination becomes effective," as the case may be,
and "the day upon which such subdivision or
combination becomes effective" within the meaning of
paragraph (c) of this Section 3.4).
(h) For the purpose of any computation under
paragraphs (d), (e) and (f) of this Section 3.4, the
current market price per share of Common Stock on any
date shall be deemed to be the average of the daily
Closing Prices for the five (5) consecutive trading
days selected by the Company commencing not more than
twenty (20) trading days before, and ending not later
than, the earlier of the day in question and the day
before the "ex" date with respect to the issuance or
distribution requiring such computation. The "Closing
Price" for each trading day shall be the reported
last sale price regular way or, in case no such
reported sale takes place on such day, the average of
the reported closing bid and asked prices regular
way, in either case on the principal national
securities exchange on which the Common Stock is
listed or admitted to trading or, if not listed or
admitted to trading on any national securities
exchange, on the National Association of Securities
Dealers Automated Quotations system ("Nasdaq")
National Market System ("Nasdaq National Market") or,
if not listed or admitted to trading on Nasdaq
National Market, on Nasdaq, or, if the Common Stock
is not listed or admitted to trading on any national
securities exchange or Nasdaq National Market or
quoted on Nasdaq, the average of the closing bid and
asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm
selected from time to time by the Company for that
purpose, or, if the Common Stock does not have any
closing bid and asked prices in the over-the-counter
market during the relevant period of time, the fair
market value per share as determined by an
independent majority of the Board of Directors as of
the most recent available month-end determined
pursuant to GAAP. For
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purposes of this paragraph, the term "'ex' date,"
when used with respect to any issuance or
distribution, shall mean the first date on which the
Common Stock trades regular way on such exchange or
in such market without the right to receive such
issuance or distribution.
(i) No adjustment in the Conversion Price shall be
required unless such adjustment (plus any adjustments
not previously made by reason of this paragraph (i))
would require an increase or decrease of at least one
percent (1%) in such price; provided, however, that
any adjustments which by reason of this paragraph (i)
are not required to be made shall be carried forward
and taken into account in any subsequent adjustment.
All calculations under this paragraph (i) shall be
made to the nearest cent.
(j) The Company may make such reductions in the
Conversion Price, in addition to those required by
paragraphs (a), (b), (c), (d), (e) and (f) of this
Section 3.4, as it considers to be advisable in order
to avoid or diminish any income tax to any holders of
shares of Common Stock resulting from any dividend or
distribution of stock or issuance of rights or
warrants to purchase or subscribe for stock or from
any event treated as such for federal income tax
purposes or for any other reasons. An independent
majority of the Board of Directors shall have the
power to resolve any ambiguity or correct any error
in this Section 3.4 and its actions in so doing shall
be final and conclusive.
3.5 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE. Whenever the
Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion
Price in accordance with Section 3.4 hereof and shall
prepare a certificate signed by the Chief Financial
Officer of the Company setting forth the adjusted
Conversion Price and showing in reasonable detail the
facts upon which such adjustment is based, and such
certificate shall forthwith be filed at the offices
of the Company.
(b) a notice stating that the Conversion Price has
been adjusted and setting forth the adjusted
Conversion Price shall forthwith be required, and as
soon as practicable after it is required, such notice
shall be mailed by the Company to the Holder in
accordance with the terms of Section 8.1 herein.
3.6 NOTICE OF CERTAIN CORPORATE ACTION. In case:
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(a) the Company shall declare a dividend (or any
other distribution) on its Common Stock payable
otherwise than in cash out of its earned surplus; or
(b) the Company shall authorize the granting to the
holders of its Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any other rights; or
(c) of any reclassification of the Common Stock of
the Company (other than a subdivision or combination
of its outstanding shares of Common Stock), or of any
consolidation, merger or share exchange to which the
Company is a party and for which approval of any
stockholders of the Company is required, or of the
sale or transfer of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; then the
Company shall cause to be filed at the offices of the
Company, and shall cause to be mailed to the Holder
at its last addresses as it shall appear in the Note
Register, at least twenty (20) days (or ten (10) days
in any case specified in clause (a) or (b) of this
Section 3.6) prior to the applicable record or
effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be
determined, or (y) the date on which such
reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or
winding up is expected to become effective, and the
date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or
other property deliverable upon such
reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or
winding up. Neither the failure to give such notice
nor any defect therein shall affect the legality or
validity of the proceedings described in clauses (a)
through (d) of this Section 3.6.
3.7 COMPANY TO RESERVE COMMON STOCK. The Company shall at all
times reserve and keep available out of its authorized but
unissued Common Stock, for the purpose of effecting the
conversion of the Credit Facility Note, the full number of
shares of Common Stock issuable upon the conversion of the
entire Credit Facility Note.
3.8 TAXES ON CONVERSIONS. The Company will pay any and all
taxes that may be payable in respect of the issuance or
delivery of shares of Common
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Stock on conversion of the Credit Facility Note pursuant
hereto. The Company shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved
in the issuance and delivery of shares of Common Stock in a
name other than that of Abbott and no such issuance or
delivery shall be made unless and until the Person requesting
such issuance has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company
that such tax has been paid.
3.9 COVENANT AS TO COMMON STOCK. The Company covenants that
all shares of Common Stock which may be issued upon conversion
of the Credit Facility Note will upon issuance be fully paid
and nonassessable and, except as provided in Section 3.8
hereof, the Company will pay all taxes, liens and charges with
respect to the issue thereof.
3.10 PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE OF
ASSETS. In case of any Change of Control of the Company, the
Company will notify Abbott at least thirty (30) days prior to
the closing of the transaction that will effect the Change of
Control, and the Company shall notify Abbott whether the
Company elects to convert the Credit Facility Note in
accordance with Section 3 hereof prior to the transaction or
pay the Credit Facility Note and terminate this Agreement in
accordance with Section 2 hereof.
3.11 TRANSFER AND EXCHANGE OF CREDIT FACILITY NOTE. The Credit
Facility Note may be freely transferred or assigned by Abbott
without the consent of the Company. Such transfer and
assignment shall be made in accordance with applicable federal
and state securities laws. At any time and from time to time,
upon not less than ten (10) days notice to that effect given
by Abbott and, upon surrender of the Credit Facility Note at
the Company's office by Abbott, the Company will deliver in
exchange therefor, without expense to Abbott, except as set
forth below, one Credit Facility Note for the same aggregate
principal amount as the then unpaid principal amount of the
Credit Facility Note so surrendered, provided such Credit
Facility Note shall be in the amount of the full principal
amount of the Credit Facility Note and there shall be no right
to divide the Credit Facility Note, dated as of the date to
which interest has been paid on the Credit Facility Note so
surrendered or, if such surrender is prior to the payment of
any interest thereon, then dated as of the date of issue,
registered in the name of such Person as may be designated by
Abbott, and otherwise of the same form and tenor as the Credit
Facility Note so surrendered for exchange. The Company may
require the payment of a sum sufficient to cover any stamp tax
or governmental charge imposed upon such exchange or transfer.
3.12 LOSS, THEFT, MUTILATION OR DESTRUCTION OF CREDIT FACILITY
NOTE. Upon receipt of evidence satisfactory to the Company of
the loss, theft, mutilation or destruction of the Credit
Facility Note, the Company will make and deliver without
expense to Abbott thereof, a new Credit Facility Note, of
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like tenor, in lieu of such lost, stolen, mutilated or
destroyed Credit Facility Note.
3.13 EXPENSES, STAMP TAX INDEMNITY. The Company agrees to pay
duplicating and printing costs and charges for shipping the
Credit Facility Note, adequately insured to Xxxxxx'x home
office or at such other place as Abbott may designate, and all
reasonable expenses of Abbott (including, without limitation,
the reasonable fees and expenses of any financial advisor to
Abbott) relating to any proposed or actual amendment, waivers
or consents pursuant to the provisions hereof, including,
without limitation, any proposed or actual amendments,
waivers, or consents resulting from any work-out,
re-negotiations or restructuring relating to the performance
by the Company of its obligations under this Agreement and the
Credit Facility Note. The Company also agrees that it will pay
and hold Abbott harmless against any and all liabilities with
respect to stamp and other taxes, if any, which may be payable
or which may be determined to be payable in connection with
the execution and delivery of this Agreement or the Credit
Facility Note, whether or not the Credit Facility Note is then
outstanding. The Company agrees to protect and indemnify
Abbott against any liability for any and all brokerage fees
and commissions payable or claimed to be payable to any Person
(other than any Person engaged by a Purchaser) in connection
with the transactions contemplated by this Agreement.
3.14 CANCELLATION OF CONVERTED CREDIT FACILITY NOTE. The
Credit Facility Note or $1,000,000 Integral Multiple portions
thereof delivered for conversion shall be canceled by or at
the direction of the Company.
4. CONDITIONS PRECEDENT.
4.1 DISBURSEMENTS. The obligation of Abbott to make any
disbursement of the Loan shall be subject to the prior or
contemporaneous satisfaction of each of the following
conditions:
(a) AUTHORIZATIONS. Abbott shall have received such
instruments or documents as Abbott may reasonably
request relating to the existence and good standing
of the Company or the authority for execution,
delivery and performance of this Agreement, dated and
in full force and effect on the Disbursement Date.
(b) NO EXISTING DEFAULT. No Event of Default (as
defined in Section 7.1) or event which, upon the
lapse of time or the giving of notice or both, would
constitute an Event of Default by the Company (an
"Incipient Default") shall exist on the Disbursement
Date.
(c) REPRESENTATIONS AND WARRANTIES CORRECT. Each of
the representations and warranties made by the
Company in the Note
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Agreement and as incorporated by reference herein
shall be true and correct in all material respects on
the Disbursement Date with the same effect as though
made on and as of such date; and the Company shall
have performed and complied with all agreements,
covenants and conditions required by this Agreement
and the Note Agreement to be performed and complied
with by the Company on or prior to the Disbursement
Date.
(d) OTHER AGREEMENTS. The Distribution Agreement and
the Note Agreement shall be in full force and effect,
and the Company shall not be in breach or default of
any material covenant, condition or other provision
thereof beyond the applicable grace period, if any,
specified therein.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company and its
subsidiaries represent and warrant to Abbott as of the date hereof that
the representations and warranties as made by the Company in Section 3
of the Note Agreement are true and correct in all material respects
with the same effect as though made on and as of the Disbursement Date,
subject to delivery of an updated Disclosure Schedule. The
representations and warranties as made by the Company in Section 3 of
the Note Agreement are incorporated by reference in their entirety
herein.
6. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company has performed
and complied with all of the covenants and agreements of the Company in
Section 5 and Section 8 of the Note Agreement and further covenants and
agrees to perform and comply with such provisions. The covenants and
agreements of the Company in Section 5 and Section 8 of the Note
Agreement are incorporated by reference in their entirety herein.
7. EVENTS OF DEFAULT.
7.1 EVENTS OF DEFAULT. The following shall constitute "Events
of Default": (a) an Event of Default as defined in Section 9
of the Note Agreement (which is hereby incorporated by
reference in its entirety herein); (b) an Event of Default as
defined under the Security Agreement dated as of August 12,
1998 between Abbott and the Company (which is hereby
incorporated by reference in its entirety herein); (c) default
by the Company in the payment of any amount under this
Agreement or the Note; or (d) any representation or warranties
by the Company set forth in this Agreement, the Note Agreement
or the Security Agreement shall not be true and correct in all
material respects as and when made.
7.2 TERMINATION OF COMMITMENT AND ACCELERATION. If any Event
of Default described in Section 7.1 hereof shall occur, Abbott
shall have no obligation to make disbursements hereunder and
may declare all Obligations
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to be due and payable, whereupon all Obligations shall
immediately become due and payable, all as so declared by
Abbott and without presentment, demand, protest or other
notice of any kind. Any such declaration made pursuant to this
Section 7.2 may be rescinded by Abbott.
7.3 OTHER REMEDIES. If any Event of Default shall occur and be
continuing, Abbott shall have, in addition to the remedies set
forth in Section 7.2 hereof, all other remedies otherwise
available at law.
8. MISCELLANEOUS.
8.1 NOTICES. Except as otherwise expressly provided herein,
any notice, consent or document required or permitted
hereunder shall be given in writing and it or any certificates
or other documents delivered hereunder shall be deemed
effectively given or delivered (as the case may be) upon
personal delivery (professional courier permissible) or when
mailed by receipted United States certified mail delivery, or
five (5) business days after deposit in the United States
mail. Such certificates, documents or notice may be personally
delivered to an authorized representative of the Company or
Abbott (as the case may be) at any address where such
authorized representative is present and otherwise shall be
sent to the following address:
If to the Company: Micro Therapeutics, Inc.
0000 Xxxxx Xxxxxxx #X
Xxx Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
With a copy to: Stradling, Yocca, Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Attention: Xxxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
If to Xxxxxx: Xxxxxx Laboratories
D-960, AP30
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, XX 00000-0000
Attention: President, Hospital Products Division
Telecopy No.: (000) 000-0000
With a copy to: Xxxxxx Laboratories
Legal Division
D-322, AP6D
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, XX 00000-0000
Attn: Divisional Vice President,
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Domestic Legal Operations
Telecopy No.: (000) 000-0000
8.2 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Company and its
successors and assigns and shall be binding upon and inure to
the benefit of Abbott and its successors and assigns;
provided, however, that neither the Company nor Abbott shall
assign this Agreement or any of its rights, duties or
obligations hereunder without the prior written consent of the
other party which consent shall not be unreasonably withheld,
and provided further, Abbott may assign its rights hereunder
after July 31, 1999 without the Company's prior written
consent.
8.3 SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations and warranties made by the Company herein and
in any certificates delivered pursuant hereto, whether or not
in connection with the Disbursement Date, shall survive the
closing and the delivery of this Agreement and the Credit
Facility Note.
8.4 SEVERABILITY. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision
shall not affect the validity or enforceability of any
remaining portion, which remaining portion shall remain in
force and effect as if this Agreement had been executed with
the invalid or unenforceable portion thereof eliminated and it
is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this
Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared
invalid or unenforceable.
8.5 WAIVER OF CONDITIONS. If on any Disbursement Date, either
party hereto fails to fulfill each of the conditions specified
in Section 4 hereof, the other party may thereupon elect to be
relieved of all further obligations under this Agreement.
Without limiting the foregoing, if the conditions specified in
Section 4 hereof have not been fulfilled, the other party may
waive compliance by such party with any such condition to such
extent as such party may in its sole discretion determine.
Nothing in this Section 8.5 shall operate to relieve either
party of any obligations hereunder or to waive any of the
other party's rights against such party.
8.6 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
8.7 GOVERNING LAW. This Agreement and the Credit Facility Note
issued and sold hereunder shall be governed by and construed
in accordance with Delaware law, without regard to the
conflict of laws provisions thereof.
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8.8 CAPTIONS. The descriptive headings of the various sections
or parts of this Agreement are for convenience only and shall
not affect the meaning or construction of any of the
provisions hereof.
8.9 DISPUTE RESOLUTION. Disputes shall be resolved as provided
in Annex 2 attached hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
XXXXXX LABORATORIES
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Its: President HPD
-------------------------------
MICRO THERAPEUTICS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Its: Executive Vice President
-------------------------------
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ANNEX 1
FORM OF CREDIT FACILITY NOTE
MICRO THERAPEUTICS, INC.
5% Convertible Credit Facility Note, due on August 19, 2003.
San Clemente, California
[Up to $5,000,000]
[Date]
Micro Therapeutics, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (the "Company"), for value
received, hereby promises to pay to Xxxxxx Laboratories, an Illinois
corporation ("Abbott"), or its registered assigns (the "Holder"), the
principal sum of [Up to Five Million Dollars ($5,000,000)] on August
19, 2003 (the "Maturity"), and to pay interest (i) on the unpaid
principal balance thereof from the date of this Credit Facility Note at
the rate of five percent (5%) per annum, payable quarterly in arrears
on January 31, April 30, July 31 and October 31 of each year (each, an
"Interest Payment Date") (commencing on the first Interest Payment Date
following the date hereof) until such unpaid balance shall become due
and payable (whether at Maturity, or by declaration, acceleration or
otherwise) and (ii) on each overdue payment of principal or any overdue
payment of interest, at a rate per annum equal to ten percent (10%).
The interest and principal payments payable with respect to this Credit
Facility Note, on any Interest Payment Date, at Maturity or by
declaration, acceleration or otherwise, pursuant to the Credit
Agreement (as defined herein), shall be paid to Abbott in such coin or
currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. Such interest and
principal payments shall be made to Abbott in accordance with the
provisions of the Credit Agreement.
This Credit Facility Note is the sole issue of a 5% Convertible Credit
Facility Note, due on the fifth anniversary of the date hereof, the
Company issued in an aggregate principal amount of [Up to Five Million
Dollars ($5,000,000)] pursuant to the Credit Agreement, dated August
12, 1998 by and between the Company and Abbott (the "Credit
Agreement"). The Holder of this Credit Facility Note is entitled to the
benefits of the Credit Agreement, and may enforce the Credit Agreement
and exercise the remedies provided for thereby or otherwise available
in respect thereof.
This Credit Facility Note may be transferred or assigned as provided in
the Credit Agreement, upon surrender of this Credit Facility Note for
registration of transfer, duly endorsed, or accompanied by a written
instrument of transfer duly executed by Abbott or Xxxxxx'x attorney
duly authorized in writing, a new Credit Facility Note for a like
aggregate principal amount and otherwise of similar tenor, will be
issued to, and registered in the name of, the transferee or
transferees. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this
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Credit Facility Note is registered as the Holder and owner hereof for
the purpose of receiving payments and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
In the case of an Event of Default (as defined in the Credit
Agreement), the principal of this Credit Facility Note in certain
circumstances shall become due and payable and in other circumstances
may be declared and become due and payable in the manner and with the
effect provided in the Credit Agreement. This Credit Facility Note is
subject to conversion into Common Stock pursuant to the terms and
conditions of the Credit Agreement and conversion shall be evidenced by
a Notice of Conversion as attached hereto.
The indebtedness evidenced by this Credit Facility Note is, to the
extent provided in the Credit Agreement, subordinate and subject in
right of payment to the prior payment in full of all Senior
Indebtedness (as defined in the Credit Agreement), and this Credit
Facility Note is issued subject to the provisions of the Credit
Agreement with respect thereto. Each Holder of this Credit Facility
Note, by accepting the same, agrees to and shall be bound by such
provisions.
No reference herein to the Note Agreement or Credit Agreement and no
provision of this Credit Facility Note, the Note Agreement or the
Credit Agreement shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Credit Facility Note at the
times, place and rate, and in the coin or currency, herein prescribed
or to convert this Credit Facility Note as provided in the Credit
Agreement.
All terms used in this Credit Facility Note which are defined in the
Credit Agreement shall have the meanings assigned to them in the Credit
Agreement. This Credit Facility Note, the Note Agreement and the Credit
Agreement are governed by and construed in accordance with the law of
the State of Delaware. IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal.
Dated:
-------------------
MICRO THERAPEUTICS, INC.
By:
Its:
ATTEST:
By:
------------------------------
Its:
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NOTICE OF CONVERSION
Micro Therapeutics, Inc. hereby irrevocably exercises the option to
convert this Credit Facility Note, or portion hereof below designated
(which is One Million Dollars ($1,000,000) or an integral multiple
thereof), into shares of Common Stock in accordance with the terms of
the Credit Agreement, and represents that the shares issuable and
deliverable upon such conversion, together with any check in payment
for fractional shares and any Credit Facility Note representing any
unconverted principal amount hereof, will be issued and delivered to
the current Holder of the Credit Facility Note.
Principal amount to be converted (if less than all): $__________
MICRO THERAPEUTICS, INC.
By:
------------------------------------
Its:
------------------------------------
ANNEX 2
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.
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2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to
preside in the resolution of any disputes in this ADR proceeding. If
the parties are unable to agree on a mutually acceptable neutral within
such period, either party may request the President of the CPR
Institute for Dispute Resolution ("CPR"), 000 Xxxxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, to select a neutral pursuant to the
following procedures:
(a) The CPR shall submit to the parties a
list of not less than five (5) candidates within
fourteen (14) days after receipt of the request,
along with a Curriculum Vitae for each candidate. No
candidate shall be an employee, director, or
shareholder of either party or any of their
subsidiaries or affiliates.
(b) Such list shall include a statement of
disclosure by each candidate of any 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
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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.
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
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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.
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.
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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.
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