SUPPLY AGREEMENT
EXHIBIT
10.21
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT CONFIDENTIAL
INFORMATION HAS BEEN OMITTED. CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL
INFORMATION. THE CONFIDENTIAL PORTIONS HAVE BEEN PROVIDED SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION]
THIS SUPPLY AGREEMENT (the “Agreement”) is made and entered into as of July 21, 2003
(the “Effective Date”) between VOLCANO THERAPEUTICS, INC. (as defined below,
“Volcano” or “Supplier”), a Delaware corporation, and AVE GALWAY LIMITED (as
defined below, “Medtronic”), a corporation existing under the laws of the Republic of
Ireland.
RECITALS
WHEREAS, Volcano has acquired substantially all of the assets associated with the functional
measurement and IVUS businesses of JOMED, Inc. and its affiliates (the “JOMED
Acquisition”);
WHEREAS, Volcano and Medtronic are simultaneously entering into a License Agreement (the
“License Agreement”), an Option to Distribute Agreement and a Right of First Negotiation
and First Refusal Agreement and a financing agreement pursuant to which Medtronic will purchase
Series B Preferred Stock of Volcano; and
WHEREAS, Supplier desires to manufacture and supply Products (as defined below) to Medtronic, and
Medtronic desires to purchase Products from Supplier, all in accordance with the terms of this
Agreement;
AGREEMENTS
NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements
contained herein, and for other valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties mutually agree as follows:
ARTICLE 1
DEFINITIONS
DEFINITIONS
1.1 Specific Definitions. As used in this Agreement, the following terms shall have
the meanings set forth or as referenced below:
“Adverse Event” means injury, toxicity or sensitivity reaction associated with the use
of the Product.
“Affiliate” of a specified person (natural or juridical) means a person that directly,
or indirectly through one or more intermediaries, controls, or is controlled by, or is under common
control with, the person specified. “Control” shall mean ownership of more than 50% of the shares
of stock entitled to vote for the election of directors in the case of a corporation, and more than
50% of the voting power in the case of a business entity other than a corporation.
“Agreement” means this Agreement and all Exhibits and Schedules hereto.
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“Confidential Information” means any written or tangible information of one of
the parties (the “disclosing party”) which is disclosed to the other party (the
“receiving party”) that is not generally known to the public that is marked or identified
as “Confidential,” “Proprietary” or the like, including, without limitation, trade secrets and
know-how, but excluding information which:
(a) was already in the possession of or known by the receiving party prior to its
receipt from the disclosing party;
(b) is or becomes part of the public domain by reason of acts not attributable to the
receiving party;
(c) is or becomes available to receiving party from a source other than the disclosing
party which source, has rightfully obtained such information and has no obligation of
non-disclosure or confidentiality to the disclosing party with respect thereto;
(d) has been independently developed by the receiving party without breach of this
Agreement or use of any Confidential Information of the other party; or
(e) has been or must be publicly disclosed by reason of legal, accounting or regulatory
requirements beyond the reasonable control of the receiving party provided the receiving
party provides the disclosing party notice of the intended disclosure in order for the
disclosing party to take such action it deems appropriate to protect the confidentiality of
the information to be disclosed.
“FDA” means the United States Food and Drug Administration.
“Force Majeure” means any event or condition, not existing as of the date of this
Agreement, not reasonably foreseeable as of such date and not reasonably within the control of
either party, which prevents in whole or in material part the performance by one of the parties of
its obligations hereunder, such as an act of government, war or related actions, civil
insurrection, riot, sabotage, strike, epidemic, fire, flood, windstorm, and similar events.
“GMP” means Good Manufacturing Practices as defined in 21 CFR Parts 210 through 226
and Parts 600 through 680 and any successor provisions thereof that apply to production of the
Products under this Agreement.
“Manufacturing Cost” means Supplier’s actual cost of raw materials, parts and sub
assemblies, direct labor and all related expenses incurred in the direct support of manufacturing
including but not limited to facilities including rent, utilities and property taxes, equipment
maintenance and depreciation, manufacturing engineering support, quality and control support,
including any testing requested by Medtronic, production planning and material warehousing, and
product volume-based fees and royalties payable under the Philips Technology and product
volume-based fees and royalties related to Supplier’s Trak Back product (disposable micro motor
device). To the extent that Supplier is obligated to pay any other license fees or royalties
pursuant to licenses executed after the Effective Date in connection with the manufacture of the
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Product, Supplier shall promptly notify Medtronic and the parties shall negotiate in good faith an
adjustment, if any, to the Manufacturing Cost. Such costs and expenses shall be consistently
applied and shall be determined and allocated in a manner consistent with generally accepted
accounting principles in effect in the United States from time to time. Manufacturing Cost shall
exclude any cost or expenses paid by Medtronic and expenses related to (i) research and
development, (ii) marketing and sales, and (iii) finance, legal and other general corporate
overhead.
“Medtronic” means AVE Galway Limited and its Affiliates.
“Medtronic Products” means any and all Medtronic products incorporating Product.
“Philips Technology” shall have the meaning assigned to such term in the License
Agreement.
“Product” means phased-array based transducers, transducer subassemblies and other
IVUS related accessories and components (other than consoles) currently produced by Volcano or
acquired in the JOMED Acquisition, and as improved or modified by Volcano in the future; provided,
however, that any transducer, transducer subassembly or other accessory or component that is
covered by the Philips Technology will constitute a “Product” hereunder to the extent, but only to
the extent, that (i) the license grant in Section 2.2(a) of the License Agreement becomes effective
with respect to such Philips Technology pursuant to the terms and conditions of Section 2.2(a), (c)
and (d) of the License Agreement or (ii) Medtronic has been granted a license to such Philips
Technology pursuant to the terms and condition of Section 2.2(b) of the License Agreement, as
limited by Sections 2.2(c) and (d) of the License Agreement.
“Product Liability Damages” means any liability, claim or expense, including but not
limited to reasonable attorneys’ fees and medical expenses, arising in whole or in part out of
claims of third parties for personal injury or loss of or damage to property relating to or arising
out of the Products or Medtronic Products, whether based on strict liability in tort, negligent
manufacture of product, or any other allegation of liability arising from the design, testing,
manufacture, packaging, labeling (including instructions for use), or sale of the Products and/or
Medtronic Products.
“Specifications” means the specifications of the Product as in effect from time to
time, as determined by Volcano in accordance with this Agreement.
“Supplier” or “Volcano” means Volcano Therapeutics, Inc. and its Affiliates.
1.2 Other Terms. Other terms may be defined elsewhere in the text of this Agreement
and shall have the meaning indicated throughout this Agreement.
1.3 Definitional Provisions.
(a) The words “hereof,” “herein,” and “hereunder” and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole and not to any particular
provisions of this Agreement.
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(b) The terms defined in the singular shall have a comparable meaning when used in the
plural, and vice versa.
(c) References to an “Exhibit” or to a “Schedule” are, unless otherwise specified, to
one of the Exhibits or Schedules attached to or referenced in this Agreement, and references
to an “Article” or a “Section” are, unless otherwise specified, to one of the Articles or
Sections of this Agreement.
(d) The term “person” includes any individual, partnership, joint venture, corporation,
trust, unincorporated organization or government or any department or agency thereof.
ARTICLE 2
SUPPLY
SUPPLY
2.1 Supply of Products. Supplier shall manufacture and supply the quantities of
Products ordered by Medtronic pursuant to Article 3 below, in accordance with the Specifications in
effect at the time of order for each Product.
2.2 Promotion and Training. Upon the reasonable request by Medtronic, Supplier will
assist Medtronic in preparing promotional, marketing and training literature and instructions for
the Products’ functionality within the Medtronic Products, including any artwork, and will conduct
training courses and seminars to educate medical professionals and Medtronic personnel with respect
to the Products’ functionality and use with the Medtronic Products. Further, upon the reasonable
request of Medtronic, Supplier shall provide training to Medtronic personnel with respect to final
testing of the Products after such Products have been incorporated into or combined with a
Medtronic Product. Medtronic shall pay Supplier a reasonable and customary per diem rate for each
Volcano employee providing services to Medtronic pursuant to this Section 2.2, provided that such
services are not otherwise required under the License Agreement to be provided by Volcano to
Medtronic. Further, Medtronic shall reimburse Supplier for travel, direct and indirect costs, and
other out-of-pocket costs reasonably incurred by Supplier in connection with such training upon
submission by Supplier of appropriate documentation thereof.
2.3 Packaging and Labeling. Supplier shall package and label the Products in
accordance with the Specifications and applicable regulatory requirements. Upon Medtronic’s
submission of its first Purchase Order, Medtronic shall to provide Supplier with a list of all
countries in which it anticipates marketing Medtronic Product and, in the event Medtronic adds a
country to said list, the addition of such new country shall be made at the time the next Purchase
Order is submitted. Medtronic further agrees that in each Purchase Order it shall identify the
country Medtronic anticipates to sell or market the Medtronic Product. Notwithstanding anything to
the contrary in this Section 2.3, in the event Medtronic fails to provide Supplier with such
initial list or fails to identify in any Purchase Order the country (or countries) Medtronic
Product shall be sold or marketed, Supplier shall label the Product for sale in the United States
of America.
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2.4 Compliance With Laws and Regulations.
(a) Supplier shall be responsible for compliance with the applicable statutes, laws,
ordinances and regulations of national, federal, state and local governments that relate to
its manufacture and sale of the Products.
(b) Medtronic shall be responsible for compliance with the applicable statutes, laws,
ordinances and regulations of national, federal, state and local governments that relate to
its marketing, distribution and sale of the Medtronic Products, including applicable import
and export laws.
2.5 Complaints and Adverse Events. Each party agrees to inform the other party
promptly (but in no event more than forty-eight (48) hours after becoming aware of same) of any
information concerning any complaint involving the Products or that might be applicable to the
Products, or an Adverse Event, provided that:
(a) all notifications to Medtronic shall be by facsimile and on Medtronic’s designated
adverse event forms (attached hereto as Schedule 2.5(a)); and
(b) all notifications to Supplier shall be by facsimile and on Supplier’s designated adverse
event forms (attached hereto as Schedule 2.5(b)).
2.6 Recall.
(a) In the event that Medtronic is required by any regulatory agency to recall
Medtronic Products or if Medtronic voluntarily initiates a recall of Medtronic Products, and
in either case such recall is due primarily as a result of a breach of any of the warranties
under Section 5.1, Supplier shall bear the direct costs of such recall, including shipping
costs related to returning recalled Medtronic Products to Medtronic and replacing Products
to Medtronic for replacement of the Products incorporated into the recalled Medtronic
Products. The cost and expense of recalls of Medtronic Products not due primarily as a
result of a breach of Supplier’s warranties under Section 5.1 shall be borne by Medtronic.
(b) Medtronic will control all recalls of Medtronic Product and Supplier will cooperate
with and assist Medtronic in effecting any recalls due in whole or in part to Supplier’s
breach of any of the warranties under Section 5.1, including assisting Medtronic in
determining the information and instructions to be transmitted by Medtronic to purchasers of
the Medtronic Products in connection with a recall.
2.7 Certain Responsibilities. Notwithstanding anything contained herein, Supplier
shall not be responsible for any loss or damage, including Products Liability Damages, from the use
or performance of the Products manufactured under this Agreement where (a) such loss or damage did
not arise out of or is not related to a breach of this Agreement by Supplier, including, without
limitation, Supplier’s warranties and (b) the Products complied with Specifications.
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ARTICLE 3
FORECASTS, ORDERS AND DELIVERY
FORECASTS, ORDERS AND DELIVERY
3.1 Forecasts. On the last day of each calendar month during the Term, Medtronic
shall provide Supplier with a twelve-month rolling forecast of Medtronic’s good faith estimate of
its Product requirements for the following twelve months. Except as set forth in this Section 3.1
and in Section 3.2, such forecasts are not firm commitments by Medtronic to order or purchase
Products, but are provided only as a guide to assist Supplier in scheduling production.
Notwithstanding the foregoing, such forecasts shall, in accordance with Section 3.2, become binding
and firm with respect to any given month (a “Binding Month”) 60 days prior to the beginning
of such month (the “Binding Date”). With respect to any month, such forecast may be
modified at any time prior to the Binding Date with respect to such month.
3.2 Purchase Orders. Medtronic shall submit on or before each Binding Date a firm
purchase order (a “Purchase Order”) setting forth (i) the quantity of Product to be
purchased during the Binding Month, (ii) the delivery date of Product, which date shall not be less
than 90 days after the date of the Purchase Order, and (iii) delivery destination for the Products
and freight arrangements for Product, provided that if Medtronic does not issue
such Purchase Order on or before a Binding Date, the most recently delivered forecast for the
Binding Month (provided such forecast is delivered prior to the Binding Date) shall be deemed a
binding Purchase Order as of the respective Binding Date for the quantity amount. Each Purchase
Order shall give rise to a contract between Medtronic and Supplier for the purchase and sale of the
Products ordered and shall be subject to and governed by the terms of this Agreement. The terms
and conditions of this Agreement shall so govern and supersede any additional or contrary terms set
forth in Medtronic’s Purchase Order or any Supplier or Medtronic acceptance, confirmation, invoice
or other document unless duly signed by an authorized officer of Medtronic and of Supplier and
expressly stating and identifying which specific additional or contrary terms shall supersede the
terms and conditions of this Agreement. With respect to all Purchase Orders submitted at least
ninety (90) days in advance of the earliest scheduled delivery date set forth in such Purchase
Order, Supplier shall fill such orders in accordance with the scheduled delivery dates set forth
therein, provided that the quantity of Product ordered pursuant to such Purchase
Order is not more than 120% of the quantity forecasted for the applicable period in the most
current forecast. Any amount in excess of 120% of such forecasted quantity shall be filled by
Supplier on a commercially reasonable basis.
3.3 Modification of Orders. No Purchase Order shall be modified or canceled except
upon the mutual agreement of the parties; provided, however, that Medtronic may cancel a Purchase
Order based upon actions of a regulatory authority and Medtronic may make changes to a Purchase
Order in quantities that do not exceed 10% more or less of such outstanding Purchase Order,
provided that Medtronic will reimburse Supplier for costs incurred on any such
cancelled orders to the extent Supplier is not able to recover its costs actually incurred in
connection therewith and provided further that Medtronic gives Supplier at least 30
days notice prior to the delivery date specified in such Purchase Order of any modification to the
Purchase Order. Mutually agreed change orders shall be subject to all provisions of this
Agreement, whether or not the change order so states. Notwithstanding the foregoing, any Purchase
Order
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may be cancelled by Medtronic, without any liability to Medtronic, as to any Product that is not
delivered within three (3) business days after the delivery date specified by Medtronic, and any
such cancellation shall not limit or affect any contract remedies available to Medtronic with
respect thereto, provided that a partial delivery of a Purchase Order that does not
deviate from the quantities ordered by more than 7.5% shall not be subject to such cancellation and
Medtronic’s sole remedy with respect to such shortage is Supplier’s delivery of the shortfall
amount within five (5) business days after the delivery date set forth in the Purchase Order and
the shipping charges for the shortfall amount shall be at Supplier’s cost. Any such cancellation
by Medtronic must be by written notice to Supplier given within ten (10) business days after such
three (3) business day period.
3.4 Delivery Terms. Unless otherwise agreed in writing by Medtronic and Supplier,
delivery of Products will be FCA Supplier’s facility (per Incoterms 2000), and title and risk of
loss will pass from Supplier to Medtronic when Products are tendered for shipment as directed by
Medtronic. Medtronic shall be responsible for all shipping, handling, and insurance costs.
3.5 Product Changes; Continuity of Supply; Prototypes.
(a) Change in Specifications and Continuity of Supply. Volcano shall have the
right to modify the Specifications at anytime and from time to time; provided,
however, that Volcano will use commercially reasonable efforts so that any modified
Specifications or Product will continue to be compatible with Medtronic Products;
provided, further, that in the event Supplier determines to modify any Product,
Supplier shall provide Medtronic with prompt written notice of such proposed modification so
as to allow Medtronic the reasonable opportunity to modify the Medtronic Products, at
Medtronic’s expense. To the extent that Medtronic chooses not to modify the Medtronic
Product or is unable to modify the Medtronic Product to become compatible with the modified
Product, Volcano agrees that it will continue to supply such Product without such
modification (such unmodified Product, the “Unmodified Product”) for the remainder
of the Term of this Agreement. Medtronic shall continue to forecast and order the
Unmodified Product in accordance with Section 3.1 and 3.2 above, and Volcano shall supply
such Unmodified Products in accordance with Section 2.1 above.
(b) Product Changes Requested by Medtronic. Upon written notice, Medtronic may
request that Supplier make commercially reasonable modifications to the Specifications, and
Volcano shall make such modifications to the Specifications, provided
however, that Supplier shall not have any obligation to make any requested changes
which are substantial or fundamental to the transducer portion of any Product unless
Supplier, in its reasonable determination, agrees to make such modifications.
(c) Adjustment in Transfer Price. If any modification to the Specifications
made pursuant to Section 3.5(a) or (b) above results in a change in the Manufacturing Cost
as shown by documentation provided by Supplier, the parties shall agree upon an appropriate
corresponding adjustment to the Transfer Price for the Product; and if such modification
result in a delay in delivery, the parties shall negotiate a reasonable extension of the
affected lead times.
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(d) Prototype Units. Upon the reasonable request by Medtronic, Supplier shall
meet with Medtronic to discuss the manufacture for Medtronic prototype units of a proposed
Product. Supplier agrees to manufacture such prototype unit, provided that
such prototype unit does not require any substantial or fundamental change to the transducer
portion of any Product. Supplier shall manufacture multiple copies of the prototype units
in order for Medtronic to verify design concepts. The number of prototypes that Supplier
will deliver to Medtronic shall be as reasonably requested by Medtronic and pursuant to
specifications reasonably requested by Medtronic. The cost of such prototypes shall be as
determined under the definition of “Manufacturing Cost” and pursuant to paragraph 3
of Exhibit A hereto. Once prototypes are completed and can be provided on a commercially
reasonable basis, such prototypes shall be considered “Products” hereunder, and any
modifications (including modifications to hardware, software or mechanical features
incorporated therein or associated therewith) required as a result of further testing will
be done in accordance with the terms hereof.
(e) Supplier shall provide to Medtronic upon request all Specifications for the
Product.
ARTICLE 4
PRICES AND PAYMENTS
PRICES AND PAYMENTS
4.1 Prices.
(a) Unless and until otherwise mutually agreed by the parties in writing, the purchase
price for Product manufactured by Supplier for Medtronic under this Agreement (the
“Transfer Price”) shall be determined under the definition of “Manufacturing
Cost” and Exhibit A.
(b) Supplier will use commercially reasonable efforts to minimize the Manufacturing
Cost of all Products.
4.2 Payment Terms. Payments made by Medtronic for Products purchased hereunder shall
be due and payable in full within 30 days after the date of invoice by Supplier, which date of
invoice shall be no earlier than the date of delivery of such Products.
4.3 Taxes. The Transfer Price does not include any sales, use, value added or similar
taxes, customs, duties, or tariffs imposed by any governmental authority or agency on Products or
any components thereof that are imported by Medtronic into any country, and Medtronic shall bear
all such taxes and duties (other than taxes on the net income of Supplier). Supplier shall be
required to take appropriate steps to minimize imposition of such taxes by filing sales exemption
certificates and taking similar actions where applicable to the Supplier. When Supplier has the
legal obligation to collect and/or pay such taxes, the appropriate amount shall be added to
Medtronic’s invoice and paid by Medtronic, unless Medtronic provides Supplier with a valid tax
exemption certificate authorized by the appropriate taxing authority. Notwithstanding the
foregoing, Medtronic shall not be obligated to pay or reimburse Supplier for taxes, duties or
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tariffs that are not imposed on the sale of Product to Medtronic or taxes related to the net income
of the Supplier.
ARTICLE 5
WARRANTY AND SERVICE
WARRANTY AND SERVICE
5.1 Warranty. Supplier represents and warrants to Medtronic that:
(a) All Products sold under this Agreement will have been manufactured, labeled and
packaged in accordance with all applicable laws and regulations, including (as applicable)
FDA GMP requirements and, if applicable, ISO 9001 certifications, or successor requirements,
and all other applicable manufacturing requirements, as well as the Specifications;
(b) Supplier has or will have (through contracting with third parties) the facilities,
equipment, licenses, permits and personnel to manufacture and supply the Products in
accordance with Specifications and in compliance with applicable laws and regulations; and
(c) The Product, at the time of delivery to Medtronic, shall: (i) meet the
Specifications and warranties set forth herein; (ii) be free from defects in materials and
workmanship; and (iii) not be adulterated or misbranded within the meaning of the U.S. Food,
Drug and Cosmetic Act and regulations thereunder or any similar law or regulation.
(d) EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 5.1 OR AS EXPRESSLY PROVIDED ELSEWHERE
IN THIS AGREEMENT, SUPPLIER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO
THE PRODUCT, AND SUPPLIER HEREBY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.
5.2 Intentionally Left Blank.
5.3 Non-Conforming Product.
(a) In the event that Medtronic determines that any of the Products shipped to it fails
to comply with the then current Specifications or fails to satisfy the representations and
warranties of Supplier herein (each such Product, a “Non-Conforming Product”),
Medtronic shall, except as in the case of any Latent Defect (as defined below), report the
same to Supplier within 30 days after delivery thereof to Medtronic and, if requested in
writing by Supplier, furnish such written evidence or other documentation as Supplier
reasonably may deem appropriate in connection therewith. Any Products not rejected by
Medtronic by written notice to Supplier within such 30-day period shall be deemed to have
been accepted by Medtronic for purposes of this Section 5.3; provided,
however, Medtronic will not be deemed to have accepted any Product whose
nonconformity
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making such Product a Non-Conforming Product is not reasonably apparent from a visual
inspection of such Product as packaged by Supplier, without performing any tests on or
measurements or other analysis of such Product (a “Latent Defect”). Medtronic shall
give written notice to Supplier of such Latent Defect within 10 days after Medtronic
actually became aware of such Latent Defect. Supplier shall promptly notify Medtronic in
writing if it has reason to believe that any Products delivered hereunder are Non-Conforming
Products.
(b) Any dispute in connection with whether a Product is a Non-Conforming Product shall
be resolved by an independent third party laboratory selected by the parties and the
findings of such independent laboratory shall be binding on the parties, absent manifest
error. The cost of such independent third party laboratory shall be borne by the party
adversely affected by such finding; provided however, that if the parties
cannot agree on the independent third party laboratory, then said dispute shall be resolved
in accordance with Section 10.15 hereof.
(c) All costs involved in the disposal, sale, return, storage, or replacement of
Non-Conforming Products shall be paid by Supplier. Medtronic shall handle the disposal of
such Non-Conforming Products in accordance with Supplier’s instructions, so as to minimize
to the extent reasonably practicable any such costs, and Medtronic’s reasonable
out-of-pocket handling charges shall be paid for by Supplier. Supplier will promptly
replace any such Non-Conforming Product at its own expense on the same shipping terms as
the original shipment or issue a credit note to Medtronic for such shipment including
shipping charges, customs and duties paid by Supplier. For purposes of this Section 5.3
only, the exclusive remedy of Medtronic with respect to Non-Conforming Products not yet
sold, transferred or otherwise disposed of by Medtronic will be replacement or credit, at
Medtronic’s option.
5.4 Audits and Inspections.
(a) Once each calendar year, Supplier shall permit Medtronic’s regulatory and quality
personnel to have reasonable access to that area of the facility that manufactures the
Product and records of Supplier relevant to the manufacture of the Product for Medtronic for
the purpose of confirming Supplier’s compliance with the terms and conditions hereunder and
applicable laws, rules and regulations, including without limitation FDA GMP.
(b) Supplier agrees to provide Medtronic with reasonable prior written notice, to the
extent practicable, of any FDA or governmental agency inspection of that area of the
facility that manufactures the Product and records of Supplier relevant to the manufacture
of the Product for Medtronic. If such prior written notice is not feasible, then to the
extent that such FDA or other governmental inspection results in any adverse finding that
impacts Supplier’s obligations hereunder, within ten (10) business days thereafter, Supplier
shall provide Medtronic with a copy of such inspection report by the FDA or other
governmental agency.
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(c) In the event that Supplier’s facility has been cited for violation or alleged
violation that materially impacts Supplier’s obligations hereunder, Medtronic shall have the
right, upon not less than 10 business days prior notice to the Supplier, to inspect (or have
a third party inspect) that area of Supplier’s manufacturing facilities that manufacture the
Product in order to (i) examine the manufacturing process, and (ii) inspect or audit
Supplier’s data and records directly related to the manufacture of the Products to ensure
compliance with the terms and conditions hereunder and applicable law, rule or regulation.
(d) In the event Supplier uses a sub-contractor or third party to perform any part of
the manufacturing, Supplier shall obtain the agreement of such sub-contractor or third party
that Medtronic shall have similar inspection rights as those set forth in this Section 5.4.
ARTICLE 6
CERTAIN REPRESENTATIONS AND WARRANTIES
CERTAIN REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties.
(a) Supplier represents and warrants to Medtronic that:
(i) The execution and delivery by Supplier of this Agreement and the
performance by Supplier of its obligations hereunder have been duly authorized by
all requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the Certificate of Incorporation or
Bylaws of Supplier, as amended, or any provision of any indenture, agreement or
other instrument to which Supplier or any of its properties or assets is bound, or
conflict with, result in a breach of or constitute (with due notice or lapse of time
or both) a default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of
Supplier; and
(ii) This Agreement has been duly executed and delivered by Supplier and
constitutes the legal, valid and binding obligation of Supplier, enforceable in
accordance with its terms, subject, as to the enforcement of remedies, to the
discretion of the courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally.
(b) Medtronic represents and warrants to Supplier that:
(i) The execution and delivery by Medtronic of this Agreement and the
performance by Medtronic of its obligations hereunder have been duly authorized by
all requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the organizational
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documents of Medtronic, as amended, or any provision of any indenture,
agreement or other instrument to which Medtronic or any of its properties or assets
is bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of Medtronic; and
(ii) This Agreement has been duly executed and delivered by Medtronic and
constitutes the legal, valid and binding obligation of Medtronic, enforceable in
accordance with its terms, subject, as to the enforcement of remedies, to the
discretion of the courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally.
ARTICLE 7
INDEMNIFICATION
INDEMNIFICATION
7.1 Supplier’s Indemnification. Supplier shall indemnify, defend and hold harmless
Medtronic and its subsidiaries, and their respective officers, directors, employees, shareholders
and distributors from and against and in respect of any and all demands, claims, actions or causes
of action, assessments, losses, damages, liabilities, interest and penalties, costs and expenses
(including, without limitation, reasonable legal fees and disbursements incurred in connection
therewith and in seeking indemnification therefor, and any amounts or expenses required to be paid
or incurred in connection with any action, suit, proceeding, claim, appeal, demand, assessment or
judgment), whether or not involving a third party claim (“Indemnifiable Losses”), resulting
from, arising out of, or imposed upon or incurred by any person to be indemnified hereunder by
reason of: (i) any breach of representation, warranty or agreement on the part of Supplier under
this Agreement; (ii) Product Liability Damages to the extent attributable to the Supplier’s breach
of its representations and warranties set forth in Section 5.1; and (ii) any gross negligence or
intentional misconduct of Supplier.
7.2 Medtronic’s Liability. Medtronic shall indemnify, defend and hold harmless
Supplier and its subsidiaries and their respective officers, directors, employees, shareholders and
suppliers from and against and in respect of any and all Indemnifiable Losses resulting from,
arising out of, or imposed upon or incurred by any person to be indemnified hereunder by reason of:
(i) any breach of representation, warranty or agreement on the part of Medtronic under this
Agreement; (ii) Product Liability Damages to the extent attributable to Medtronic Products (other
than any Product Liability Damages to the extent attributable to Supplier’s breach of its
representations and warranties set forth in Section 5.1); (iii) negligent handling by Medtronic of
the Products or changes, additions or modifications to the Products by Medtronic (other than
changes, additions or modifications made to the Products by Medtronic in connection with or related
to the incorporation of the Products into or onto, or the utilization of the Products in connection
with, a Medtronic Product), and (iv) any gross negligence or intentional misconduct of Medtronic.
- 12 -
7.3 Procedure. If a claim by a third party is made and a party (the “Indemnitee”)
intends to claim indemnification under this Article 7, the Indemnitee shall promptly notify the
other party (the “Indemnitor”) in writing of any claim in respect of which the Indemnitee
or any of its subsidiaries, directors, officers, employees, shareholders, suppliers or distributors
intends to claim such indemnification. If the Indemnitor accepts liability for indemnifying
Indemnitee hereunder, Indemnitor shall have sole control of the defense and/or settlement thereof;
provided that the Indemnitee may participate in any such proceeding with counsel of its choice at
its own expense. The indemnity agreement in this Article 7 shall not apply to amounts paid in
settlement of any Indemnifiable Losses if such settlement is effected without the consent of the
Indemnitor, which consent shall not be withheld unreasonably. The failure to deliver written
notice to the Indemnitor within a reasonable time after the commencement of any such action, if
adversely prejudicial to its ability to defend such action, shall relieve such Indemnitor of any
liability to the Indemnitee under this Article 7 but the omission to so deliver written notice to
the Indemnitor shall not relieve the Indemnitor of any liability that it may otherwise have to any
Indemnitee other than under this Article 7. If the Indemnitor fails to provide defense of the
claim, and diligently defend or settle the same after receipt of notice from Indemnitee of, and a
reasonable opportunity to cure, such failure, the Indemnitee may defend or settle the claim without
prejudice to its rights to indemnification hereunder, provided that the Indemnitee does so
diligently and in good faith and further does not enter into any settlement or agree to any
stipulation that would adversely affect the rights of the Indemnitor or impose any additional
obligation on the Indemnitor without the Indemnitor’s prior written consent (which consent will not
be unreasonably withheld). The Indemnitee under this Article 7, its employees and agents, shall
cooperate fully with the Indemnitor and its legal representatives and provide full information in
the investigation of any Indemnifiable Losses covered by this indemnification.
7.4 Insurance. During the term of this Agreement, Supplier shall maintain, at its
expense, a policy of comprehensive general liability insurance sufficient to honor the indemnity
made herein, with products liability endorsement, but in no event less than $10,000,000.00 per
occurrence and in the annual aggregate. Said policy shall name Medtronic and its Affiliates as
named insureds, it being understood that Medtronic shall have the right to seek recovery under
Supplier’s insurance policy. Within 45 days after the date of this Agreement, and upon each
anniversary of the date hereof, Supplier shall furnish Medtronic with a certificate of insurance
evidencing such coverage, which certificate shall provide for not less than thirty (30) days
advance written notice to Medtronic prior to material change in coverage or policy cancellation.
Supplier acknowledges that Medtronic is self insured with respect to its indemnity obligations
hereunder.
ARTICLE 8
TERM AND TERMINATION
TERM AND TERMINATION
8.1 Term. This Agreement shall take effect as of the date hereof and shall continue
in force for ten (10) years (the “Term”). Nothing contained in this Agreement will be
interpreted as requiring either party to renew or extend this Agreement beyond the Term.
- 13 -
8.2 Termination. Notwithstanding the provisions of Section 8.1 above, this Agreement
may be terminated by mutual consent of the parties or in accordance with the following provisions:
(a) Either party may terminate this Agreement by giving notice in writing to the other
party if such other party is in material breach of any representation, warranty or covenant
of this Agreement and, except as otherwise provided herein, shall have failed to cure such
breach within 60 days after receipt of written notice thereof from the party proposing to
terminate this Agreement;
(b) Medtronic may terminate this Agreement upon 9 months prior written notice to
Volcano; or
(c) Either party may terminate this Agreement at any time by giving notice in writing
to the other party, which notice shall be effective upon dispatch, if the other party (i) is
unable to pay its debts as they mature or admits in writing its inability to pay its debts
as they mature; (ii) makes a general assignment for the benefit of creditors; (iii) is
adjudicated involuntarily bankrupt or voluntarily files a petition for bankruptcy; (iv)
applies for the appointment of a receiver or a trustee for any of its property or assets or
permits the appointment of a receiver or trustee; or (v) has entered against it an order in
a foreclosure, execution and levy, or similar proceeding involving a substantial part of its
assets.
8.3 Rights and Obligations on Termination. In the event of termination of this
Agreement for any reason, the parties shall have the following rights and obligations:
(a) Termination of this Agreement shall not release either party from the obligation to
make payment of all amounts previously due and payable.
(b) The terminating party shall have the right, at its option, to cancel any or all
purchase orders that provide for delivery after the effective date of termination.
(c) Upon termination of this Agreement for any reason, nothing herein shall be
construed to release either party from any obligation that matured prior to the effective
date of such termination.
(d) Upon any termination of this Agreement, the parties will return and deliver to the
other party all of such party’s Confidential Information, provided that a party may retain
one copy of such other party’s Confidential Information for legal purposes.
(e) The parties’ obligations pursuant to Articles 5, 6, 7 and 8 and Sections 2.6 and
2.7 hereof and any and all other terms and provisions hereof intended to be observed and
performed by the parties after the termination hereof, shall survive termination of this
Agreement. All other provisions of this Agreement shall terminate upon termination of this
Agreement.
- 14 -
ARTICLE 9
FORCE MAJEURE; LICENSE
FORCE MAJEURE; LICENSE
9.1 Notice of Force Majeure. Upon giving notice to the other party, a party affected
by an event of Force Majeure shall be released without any liability on its part from the
performance of its obligations under this Agreement, except for the obligation to pay any amounts
due and owing hereunder, but only to the extent and only for the period that its performance of
such obligations is prevented by the event of Force Majeure.
9.2 Suspension of Performance. During the period that the performance by one of the
parties of its obligations under this Agreement has been suspended by reason of an event of Force
Majeure, the other party may likewise suspend the performance of all or part of its obligations
hereunder (except for the obligation to pay any amounts due and owing hereunder) to the extent that
such suspension is commercially reasonable.
ARTICLE 10
MISCELLANEOUS
MISCELLANEOUS
10.1 Nondisclosure. The parties agree not to disclose or use (except as permitted or
required for performance by the party receiving such Confidential Information of its rights or
duties hereunder or under other agreements between the parties or their Affiliates) any
Confidential Information of the other party obtained during the during the term of this Agreement
until the expiration of five years after the receiving party’s receipt of such Confidential
Information, but in no event prior to the termination of this Agreement. Each party further agrees
to take appropriate measures to prevent any such prohibited disclosure of Confidential Information
by its present and future employees, officers, agents, subsidiaries, or consultants during such
period.
10.2 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and the successors or assigns of the parties hereto; provided, that
(i) the rights and obligations of Supplier herein may not be assigned except to an Affiliate of
Supplier or to any person who succeeds to substantially all of the assets and business of Supplier
to which this Agreement relates, and (ii) the rights and obligations of Medtronic herein may not be
assigned except to an Affiliate of Medtronic or to any person who succeeds to substantially all of
that portion of Medtronic’s business to which this Agreement relates.
10.3 Complete Agreement. This Agreement and the agreements referred to herein, and
the Schedules and Exhibits hereto and thereto, constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and supersede all prior agreements whether written
or oral relating hereto.
10.4 Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of California without reference to the choice of law principles thereof.
Solely for the purposes of seeking interim injunctive relief, the parties hereby irrevocably
consent to the exclusive jurisdiction and venue of any United States court or state court of
- 15 -
competent jurisdiction located in San Francisco, California and waive any objections either may
have at any time to such jurisdiction and venue. The parties agree to the personal jurisdiction of
such courts and agree that service of process may be made pursuant to notice sent in accordance
with Section 10.6.
10.5 Waiver, Discharge, Amendment, Etc. The failure of any party hereto to enforce at
any time any of the provisions of this Agreement shall not, absent an express written waiver signed
by the party making such waiver specifying the provision being waived, be construed to be a waiver
of any such provision, nor in any way affect the validity of this Agreement or any part thereof or
the right of the party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to be a waiver of any other or subsequent breach. Any
amendment to this Agreement shall be in writing and signed by the parties hereto.
10.6 Notices. All notices or other communications to a party required or permitted
hereunder shall be in writing and shall be delivered personally or by facsimile (receipt confirmed
electronically) to such party (or, in the case of an entity, to an executive officer of such party)
or shall be sent by a reputable express delivery service or by certified mail, postage prepaid with
return receipt requested, addressed as follows:
if to Medtronic, to:
Medtronic, Inc.
000 Xxxxxxxxx Xxxxxxx XX
Xxxxxxxxxxx, XX 00000-0000
000 Xxxxxxxxx Xxxxxxx XX
Xxxxxxxxxxx, XX 00000-0000
with separate copies thereof addressed to
| Attention: | General Counsel Mail Stop LC400 Telecopier No.: (000) 000-0000 |
and
| Attention: | Vice President and Chief Development Officer Mail Stop LC390 Telecopier No.: (000) 000-0000 |
and
Medtronic AVE
0000 Xxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
0000 Xxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
| Attention: | General Counsel Telecopier No.: (000) 000-0000 |
if to Supplier to:
- 16 -
Volcano Therapeutics, Inc.
0000 Xxxxxxx Xxxx
Xxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, Vice President, Marketing and Business Development
0000 Xxxxxxx Xxxx
Xxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, Vice President, Marketing and Business Development
Any party may change the above-specified recipient and/or mailing address by notice to all other
parties given in the manner herein prescribed. All notices shall be deemed given on the day when
actually delivered as provided above (if delivered personally or by facsimile) or on the day shown
on the return receipt (if delivered by mail or delivery service).
10.7 Expenses. Except as expressly provided herein, Supplier and Medtronic shall each
pay their own expenses incident to this Agreement and the preparation for, and consummation of, the
transactions provided for herein.
10.8 Titles and Headings; Construction. The titles and headings to the Articles and
Sections herein are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement. This Agreement shall be
construed without regard to any presumption or other rule requiring construction hereof against the
party causing this Agreement to be drafted.
10.9 Severability. If any provision of this Agreement is held invalid, illegal or
unenforceable, such provision shall be enforced to the maximum extent permissible and the remaining
provisions shall nonetheless be enforceable according to their terms.
10.10 Relationship. This Agreement does not make either party the employee, agent or
legal representative of the other for any purpose whatsoever. Neither party is granted any right or
authority to assume or to create any obligation or responsibility, express or implied, on behalf of
or in the name of the other party. In fulfilling its obligations pursuant to this Agreement, each
party shall be acting as an independent contractor.
10.11 Benefit. Nothing in this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto or their respective successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
10.12 Survival. All of the representations, warranties, and covenants made in this
Agreement, and all terms and provisions hereof intended to be observed and performed by the parties
after the termination hereof, shall survive such termination and continue thereafter in full force
and effect, subject to applicable statutes of limitations.
10.13 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed as original and all of which together shall constitute one
instrument.
10.14 Execution of Further Documents. Each party agrees to execute and deliver
without further consideration any further applications, licenses, assignments or other documents,
- 17 -
and to perform such other lawful acts as the other party may reasonably require to fully secure
and/or evidence the rights or interests herein.
10.15 Arbitration. Except as specifically set forth in Section 5.3(b) hereof, any
dispute arising out of or relating to this Agreement, including the formation, interpretation or
alleged breach hereof, shall be settled in accordance with the Exhibit B attached hereto. The
results of such arbitration proceedings shall be binding upon the parties hereto, and judgment may
entered upon the arbitration award in any court having jurisdiction thereof. Notwithstanding the
foregoing, either party may seek interim injunctive relief from any court of competent jurisdiction
as provided in Section 10.4.
10.16 Public Announcement. Neither party will publicly disclose or divulge any
provisions of this Agreement nor the transactions contemplated hereby without the other party’s
written consent, except as may be required by applicable law or stock exchange regulation, and
except for communications to such party’s employees or customers or investors or prospective
investors (subject to appropriate confidentiality obligations); provided that, prior to disclosure
of any provision of this Agreement that either party considers particularly sensitive or
confidential to any governmental agency or stock exchange, the parties shall cooperate to seek
confidential treatment or other applicable limitations on the public availability of such
information. In particular, prior to such disclosure, each party shall use its best efforts to
redact the payment terms specified herein and each party shall provide the other the opportunity to
redact other information and seek confidential treatment of any such disclosure.
10.17 Medtronic Guaranty. Medtronic, Inc. hereby guaranties the performance by AVE
Galway Limited of AVE Galway Limited’s obligations under this Supply Agreement.
[signatures page to follow]
- 18 -
IN WITNESS WHEREOF, each of the parties has caused this Supply Agreement to be executed in the
manner appropriate to each, as of the date first above written.
| VOLCANO THERAPEUTICS, INC. | ||||||
| By: | /s/ Xxxxx Xxxxxxxxxx | |||||
| Name: | Xxxxx Xxxxxxxxxx | |||||
| Title: | President and CEO | |||||
| AVE GALWAY LIMITED | ||||||
| By: | /s/ Illegible | |||||
| Name: | ||||||
| Title: | ||||||
| MEDTRONIC, INC. | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxx, Xx. | |||||
| Name: | Xxxxxx X. Xxxxxxx, Xx. | |||||
| Title: | Chairman of The Board and Chief Executive Officer |
|||||
Attachments:
Exhibit A — Pricing
Exhibit B — Alternative Dispute Resolution
Exhibit A — Pricing
Exhibit B — Alternative Dispute Resolution
- 19 -
EXHIBIT A
Pricing
1. Supplier agrees to provide Medtronic, to the extent practicable, at least six (6) months
prior to the date of anticipated first commercial release of the Product, the initial Manufacturing
Cost accompanied by a reasonably detailed report on the computation thereof. Thereafter, Supplier
shall update the Manufacturing Cost by June 30th and December 31st of each
year during the Term, which notice shall be accompanied by a reasonably detailed report regarding
the computation thereof. Subject to Paragraph 2 below, the Manufacturing Cost as so updated shall
be effective for each six-month period commencing as of August 31st and February
28th following such update.
2. Supplier agrees to keep accurate written records sufficient in detail to enable the
Manufacturing Cost to be determined and verified. Supplier shall retain such records for a period
of not less than three years (or such longer period of time as may be required by FDA GMP
requirements or other applicable requirements). Upon reasonable notice and during regular business
hours, Supplier shall (but no more frequently than once annually) make available such records for
audit at Medtronic’s expense by independent representatives selected by Medtronic and reasonably
acceptable to Supplier to verify the accuracy of the Manufacturing Cost reported. Such
representatives shall execute a suitable confidentiality agreement reasonably acceptable to
Supplier prior to conducting such audit. Such representatives may disclose to Medtronic only their
conclusions regarding the actual Manufacturing Cost, and shall not disclose Supplier’s information
to Medtronic without the prior written consent of Supplier. The right to audit shall extend for two
(2) years from delivery of any report of the Manufacturing Cost and thereafter any report shall be
deemed complete and accurate. No claim may be asserted by Medtronic against Supplier for any
errors unless made within two months following the close of Supplier’s fiscal year in which such
examination took place. Each Manufacturing Cost report shall be subject to only one such
examination and audit. If a discrepancy is found which is greater than 5% of Manufacturing Cost
paid in any twelve month period, then the party benefiting from such discrepancy will promptly pay
such discrepancy to the other. If a discrepancy is found which is greater than 5% of Manufacturing
Cost paid in any twelve month period and Medtronic is the benefiting party, then Supplier shall pay
all reasonable audit costs for the related audit and for the next succeeding annual audit.
3. The per unit Transfer Price for a Product supplied hereunder for use solely for research
and development purposes shall equal the per unit Manufacturing Cost with respect to such Product,
multiplied by [CONFIDENTIAL].
4. The per unit Transfer Price for a Product supplied hereunder for commercial sale (or to be
incorporated into another product for commercial sale) shall equal the per unit Manufacturing Cost
with respect to such Product, multiplied by [CONFIDENTIAL].
EXHIBIT B
ALTERNATIVE DISPUTE RESOLUTION
1) Negotiations. If any dispute arises between Volcano and Medtronic with respect to
the Supply Agreement (the “Agreement”), or any alleged breach thereof, any party may, by written
notice to the other party, have such dispute referred to their respective designees listed below or
their successors for attempted resolution by good faith negotiations within 30 days after such
notice is received. Such designees are as follows:
For Volcano — the Vice President, Marketing and Business Development of Volcano or his/her
designee
For Medtronic — the President of Medtronic AVE, Inc.
Any settlement reached by the parties under this Section 1 shall not be binding until reduced to
writing and signed by the above-specified designees of Medtronic and Volcano. When reduced to
writing, such settlement agreement shall supersede all other agreements, written or oral, to the
extent such agreements specifically pertain to the matters so settled. If the designees are unable
to resolve such dispute within such 30-day period, any party may invoke the provisions of Section 2
below.
2) Arbitration. All claims, disputes, controversies, and other matters in question
arising out of or relating to the Agreements, including claims for Indemnifiable Losses and
disputes regarding the making of the Agreements, including claims of fraud in the inducement, or to
the alleged breach hereof, shall be settled by negotiation between the parties as described in
Section 1 above or, if negotiation is unsuccessful, by binding arbitration in accordance with
procedures set forth in Section 3 and 4 below.
3) Notice. Notice of demand for binding arbitration shall be given in writing to the
other party and shall be delivered personally or by facsimile (receipt confirmed) to an executive
officer of such party or shall be sent by a reputable express delivery service or by certified
mail, postage prepaid with return receipt requested, addressed as provided in the Agreement.
Any party may change the above-specified recipient and/or mailing address by notice to the
other party given in the manner herein prescribed. All notices shall be deemed given on the day
when actually delivered as provided above (if delivered personally or by facsimile (upon
appropriate electronic confirmation of successful transmission)) or on the day shown on the return
receipt (if delivered by mail or delivery service). In no event may a notice of demand of any
kind be filed more than two years after the date the claim, dispute, controversy, or other matter
in question was asserted by one party against another, and if such demand is not timely filed, the
claim, dispute, controversy, or other matter in question referenced in the demand shall be deemed
released, waived, barred, and unenforceable for all time, and barred as if by statute of
limitations.
4) Binding Arbitration. Upon filing of a notice of demand for binding arbitration by
any party hereto, arbitration shall be commenced and conducted as follows:
(a) Arbitrators. All claims, disputes, controversies, and other matters
(collectively “matters”) in question shall be referred to and decided and settled by a
standing panel of three independent arbitrators, one selected by each of Volcano and
Medtronic’s representative and the third by the two arbitrators so selected; provided, if
the amount in controversy (including reasonably anticipated future amounts or payments under
the Agreement affected by such arbitrated matter) is under $300,000, a single arbitrator
will be used. The third (or the single arbitrator, if applicable) shall be a former judge
of one of the U.S. District Courts or one of the U.S. Court of Appeals or such other classes
of persons as the parties may agree. Selection of arbitrators shall be made within 30 days
after the date of the first notice of demand given pursuant to Section 3 and within 30 days
after any resignation, disability or other removal of such arbitrator. Following
appointment, each arbitrator shall remain a member of the standing panel, subject to removal
for just cause or resignation or disability; provided, however, an arbitrator can be removed
by the party who appointed the arbitrator, or in the case of the third arbitrator, by either
party for any reason at any time when no matter is in arbitration.
(b) Cost of Arbitration. The cost of each arbitration proceeding, including
without limitation the arbitrators’ compensation and expenses, hearing room charges, court
reporter transcript charges etc., shall be borne by the party whom the arbitrators determine
has not prevailed in such proceeding, or borne equally by the parties if the arbitrators
determine that neither party has prevailed. The arbitrators shall also award the party that
prevails substantially in its pre-hearing position its reasonable attorneys’ fees and costs
incurred in connection with the arbitration. The arbitrators are specifically instructed to
award attorneys’ fees for instances of abuse of the discovery process.
(c) Location of Proceedings. An arbitration proceeding shall be held in San
Francisco, California, unless the parties agree otherwise.
(d) Pre-hearing Discovery. The parties shall have the right to conduct and
enforce pre-hearing discovery in accordance with the then current Federal Rules of Civil
Procedure, subject to these limitations: Document discovery and other discovery shall be
under the control of and enforceable by the arbitrators. The arbitrators shall permit and
facilitate such other discovery as they shall determine is appropriate under the
circumstances, taking into account the needs of the parties and the desirability of making
discovery expeditious and cost effective. The arbitrators shall decide discovery disputes.
The arbitrators are empowered:
(i) to issue subpoenas to compel pre-hearing document or deposition discovery;
(ii) to enforce the discovery rights and obligations of the parties; and
(iii) to otherwise control the scheduling and conduct of the proceedings.
Notwithstanding any contrary foregoing provisions, the arbitrators shall have the power
and authority to, and to the fullest extent practicable shall, abbreviate arbitration
discovery in a manner that is fair to all parties in order to expedite the arbitration
proceeding and render a final decision within six months after the pre-hearing conference.
(e) Pre-hearing Conference. Within 45 days after filing of notice of demand
for binding arbitration, the arbitrators shall hold a pre-hearing conference to establish
schedules for completion of discovery, for exchange of exhibit and witness lists, for
arbitration briefs, for the hearing, and to decide procedural matters and all other
questions that may be presented.
(f) Hearing Procedures. The hearing shall be conducted to preserve its privacy
and to allow reasonable procedural due process. Rules of evidence need not be strictly
followed, and the hearing shall be streamlined as follows:
(i) Documents shall be self-authenticating, subject to valid objection by the
opposing party;
(ii) Expert reports, witness biographies, depositions, and affidavits may be
utilized, subject to the opponent’s right of a live cross-examination of the witness
in person;
(iii) Charts, graphs, and summaries shall be utilized to present voluminous
data, provided (i) that the underlying data was made available to the opposing party
30 days prior to the hearing, and (ii) that the preparer of each chart, graph, or
summary is available for explanation and live cross-examination in person;
(iv) The hearing should be held on consecutive business days without
interruption to the maximum extent practicable; and
(v) The arbitrators shall establish all other procedural rules for the conduct
of the arbitration in accordance with the rules of arbitration of the Center for
Public Resources.
(g) Governing Law. This arbitration provision shall be governed by, and all
rights and obligations specifically enforceable under and pursuant to, the rules of the
Federal Arbitration Act and the laws of the State of California shall be applied, without
reference to the choice of law principles thereof, in resolving matters submitted to such
arbitration.
(h) Consolidation. No arbitration shall include, by consolidation, joinder, or
in any other manner, any additional person not a party to this Agreement (other than
affiliates of any such party, which affiliates may be included in the arbitration), except
by written consent of the parties hereto containing a specific reference to this Agreement.
(i) Award. The arbitrators shall be required to render their final decision
within six months after the pre-hearing conference. The arbitrators are empowered to render
an award of general compensatory damages and equitable relief (including, without
limitation, injunctive relief), but are not empowered to award punitive or presumptive
damages. The award rendered by the arbitrators (1) shall be final; (2) shall not constitute
a basis for collateral estoppel as to any issue; and (3) shall not be subject to vacation or
modification, except in the event of fraud or gross misconduct on the part of the
arbitrators.
(j) Confidentiality. The parties hereto will maintain the substance of any
proceedings hereunder in confidence and make disclosures to others only to the extent
necessary to properly conduct the proceedings.
(j) Entry of Judgment. The rulings of the arbitrators and 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 hereunder.
