EXCLUSIVE DISTRIBUTOR AGREEMENT
This EXCLUSIVE DISTRIBUTOR AGREEMENT, including the attached
Exhibits (the "Agreement"), is made and entered into as of August
21, 1997 (the "Effective Date"), by and between ArthroCare
Corporation, a Delaware corporation with offices at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("ArthroCare"), and
Kobayashi Pharmaceutical Co., Ltd., a corporation organized under
the laws of Japan with offices at 3-6, 4-Chome, Doshomachi, ▇▇▇▇-
▇▇, ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ("Kobayashi").
A. ArthroCare is engaged in the business of
manufacturing, distributing, and selling Products (as defined
below) and desires to engage a marketing and distribution partner
in Japan;
▇. ▇▇▇▇▇▇▇▇▇ desires to solicit orders for Products from
customers in Japan, and desires to be ArthroCare's sole marketing
and distribution partner in Japan for Products solely for use
within the Field (as defined below);
▇. ▇▇▇▇▇▇▇▇▇ desires to purchase, and ArthroCare desires
to sell to Kobayashi, such Products for the purpose of resale to
customers in Japan; and
D. The relationship between Kobayashi and ArthroCare is
that of buyer and seller.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, the parties agree as follows:
1. DEFINITIONS
1.1 "Affiliate" shall mean any entity which controls, is
controlled by or is under common control with Kobayashi or
ArthroCare. An entity shall be regarded as in control of another
entity for purposes of this definition if it owns or controls more
than fifty percent (50%) of the shares of the subject entity
entitled to vote in the election of directors (or, in the case of
an entity that is not a corporation, for the election of the
corresponding managing authority).
1.2 "Field" shall mean arthroscopic applications.
1.3 "Marketing Approval Application" shall mean any
application with a governmental regulatory agency for authority to
market a Product within Japan, including without limitation an
import approval application ("▇▇▇▇▇ ▇▇▇▇▇▇ shinsei"), import
license application ("yunyu kyoka shinsei"), or other similar
application or filing.
1.4 "Product(s)" shall mean, collectively and
individually, ArthroCare's (i) disposable, bipolar arthroscopic
wand, (ii) connecting cable and, (iii) radio frequency power
controller; in each case as defined in ArthroCare's 510K filed
with the U.S. Food and Drug Administration prior to the Effective
Date and supplements thereto, to the extent such products are
specifically intended for use within the Field and with respect to
modifications or improvements thereto, to the extent that
ArthroCare has the right to include the same hereunder. It is
understood that Products, and/or any component thereof, may be
changed, substituted or added to by ArthroCare to the extent such
changes do not require modifications or changes to a Market
Approval Application for a Product approved by the Ministry of
Health & Welfare in Japan to market and distribute such Product in
Japan, upon ninety (90) days prior written notice to Kobayashi.
If a change to a Product requires modifications or changes to a
Market Approval Application for such Product approved by the
Ministry of Health & Welfare in Japan, the parties shall consult
in good faith to determine a reasonable transition period with
respect to implementation of such Product change in Japan. The
parties contemplate the addition of other products to the
Agreement on terms substantially similar to those herein, which
addition shall only be made upon the mutual agreement of the
parties. ArthroCare shall be under no obligation to continue the
production of any Product, except as provided herein.
2. GRANT OF DISTRIBUTION RIGHTS
2.1 Appointment. Subject to the terms and conditions of
this Agreement, ArthroCare hereby grants to Kobayashi the
exclusive right to market, sell and distribute Products in Japan
solely for use in the Field. Kobayashi agrees not to market,
promote or distribute any Product for use outside the Field or
outside Japan. Notwithstanding anything herein to the contrary,
Kobayashi shall market, promote, sell, and otherwise distribute
Products in accordance with all applicable law and regulations.
ArthroCare reserves all rights not expressly granted herein.
2.2 Exclusivity of Efforts. During the term of this
Agreement, neither Kobayashi nor their Affiliates shall directly
or indirectly market, sell or otherwise distribute in Japan any
product lines or products which, in ArthroCare's or Kobayashi's
reasonable judgment, compete with any Products.
2.3 No Rights Beyond Products. Nothing in this Agreement
shall be deemed to grant to Kobayashi rights in products or
technology other than the Products; nor shall any provision of
this Agreement be deemed to restrict ArthroCare's right to exploit
Products, or patents or any other intellectual property rights,
outside the Field, outside Japan or in products other than
Products.
2.4 Sale Conveys No Right to Manufacture or Copy. The
Products are offered for sale and are sold by ArthroCare subject
in every case to the condition that such sale does not convey any
license, expressly or by implication, to manufacture, duplicate or
otherwise copy or reproduce any of the Products.
3. PRICE AND PAYMENT
3.1 Prices. The transfer price paid by Kobayashi for each
Product shall be as set forth in Exhibit A, and shall remain fixed
from the Effective Date until the [*****] of such Effective Date.
Thereafter, ArthroCare may increase the transfer prices in
Exhibit A [*****] upon at least [*****] prior written notice to
Kobayashi, provided that any such price increases [*****]. Price
decreases on Products hereunder will be effective when declared.
3.2 Payment Terms. Kobayashi shall make payments to
ArthroCare under this Agreement by wire transfer in United States
dollars in immediately available funds to a bank account
designated by ArthroCare. Payment for Products supplied hereunder
shall be made net [*****] after the date of invoice. Any payments
due hereunder which are not paid on the date such payments are due
shall bear interest at the lesser of [*****] or the maximum rate
permitted by California law, calculated on the numbered days such
payment is delinquent. This Section 3.2 shall in no way limit any
other remedies available to ArthroCare.
3.3 Taxes. Any and all amounts payable hereunder do not
include any government taxes (including without limitation,
withholding, sales, use, excise, and value added taxes) or duties
imposed by any Japanese governmental agency that are applicable to
the export, import, or purchase of the Products (other than taxes
on the net income of ArthroCare), and [*****].
4. TERMS OF PURCHASE AND SALE
4.1 Terms and Conditions. All Product purchases hereunder
shall be subject to the terms and conditions of this Agreement.
Nothing contained in any purchase order submitted pursuant to this
Agreement shall in any way modify or add any terms or conditions
to said purchases, unless otherwise agreed in writing by the
parties.
4.2 Initial Stocking Order. An initial stocking order
placed by Kobayashi on the Effective Date is attached hereto as
Exhibit B and will be processed upon notification by Kobayashi no
later than ninety (90) days from receipt of regulatory approval
for Products by the Ministry of Health and Welfare in Japan. Such
initial stocking order will be Kobayashi's minimum performance
requirement for the first calendar year following regulatory
approval of Products in Japan.
4.3 Forecasts. At least [*****] prior to the first
commercial sale of a Product in Japan, and thereafter, on a
calendar monthly basis, by the [*****] day of each calendar month,
Kobayashi shall provide to ArthroCare a good faith rolling [*****]
forecast showing Kobayashi's prospective purchases of Products on
a monthly basis for the next [*****], which forecasts shall
commence on the first day of the calendar month following
submission of the forecast to ArthroCare (the "Forecasts"). Such
Forecasts are for ArthroCare's planning purposes only and shall
not constitute a binding obligation upon ArthroCare or Kobayashi.
In the event that Kobayashi believes, in good faith, that the
information provided in any Forecast is no longer accurate,
Kobayashi will promptly notify ArthroCare and provide ArthroCare
with revised Forecast.
4.4 Order and Acceptance. Kobayashi shall use its
commercially reasonable efforts to place its firm orders with
ArthroCare for Products [*****] in advance of the requested
delivery date, and ArthroCare will use its commercially reasonable
efforts to fulfill purchase orders in accordance with its normal
practices and lead times then in effect. Kobayashi will use its
commercially reasonable efforts to submit purchase orders in a
regular fashion, i.e., monthly, so as to allow for efficient
scheduling of ArthroCare production and warehousing. All orders
for Products submitted by Kobayashi shall be initiated by the
office at Kobayashi's address for notice hereunder. All orders
shall be by means of signed written purchase orders by Kobayashi
to ArthroCare, sent to ArthroCare at ArthroCare's address for
notice hereunder and requesting a delivery date during the term of
this Agreement. Orders may initially be placed by telephone,
provided that a signed confirming purchase order is received in
writing (which may include telecopy transmission) by ArthroCare
within five (5) business days after, a telephone order is placed.
ArthroCare will notify Kobayashi within five (5) business days
from receipt of a purchase order of the proposed delivery date to
Kobayashi. ArthroCare agrees to accept purchase orders that do
not exceed the quantities projected in the Forecasts by more than
[*****]. ArthroCare will have no liability to Kobayashi with
respect to purchase orders that are not accepted. No partial
shipment of an order shall constitute the acceptance of the entire
order, absent the written acceptance of such entire order.
Kobayashi may cancel or reschedule purchase orders for Products
only with ArthroCare's prior written approval.
4.5 Shipping. All Products delivered pursuant to the
terms of this Agreement shall be suitably packed for shipment in
ArthroCare's standard shipping cartons marked for shipment to the
destination point indicated in Kobayashi's purchase order and
delivered to Kobayashi at such destination points. ArthroCare
shall ship Products F.C.A. ArthroCare's facility using the carrier
specified in Kobayashi's purchase order provided that if Kobayashi
does not provide instructions with respect to the carrier to be
used, ArthroCare shall select the carrier. All freight,
insurance, and other shipping expenses, as well as any special
packing expenses, shall be paid by Kobayashi. Kobayashi shall
also bear all applicable taxes, duties and similar charges that
may be assessed against the Products after delivery to the carrier
F.C.A. ArthroCare's facility location. All shipments and freight
charges shall be deemed correct unless ArthroCare receives from
Kobayashi, no later than [*****] after the shipping date of a
given shipment, a written notice specifying the shipment, the
purchase order number, and the exact nature of the discrepancy
between the order and shipment or discrepancy in the freight cost,
as applicable.
4.6 Product Returns. Except as set forth in Article 6
below, Kobayashi may return sterile wands and undamaged Products
in saleable condition only with ArthroCare's prior written
approval and only within [*****] of receipt by Kobayashi.
Products returned to ArthroCare other than under Article 6 shall
be returned F.O.B. the destination point designated by ArthroCare
and Products returned more than [*****] after receipt by Kobayashi
of such Products shall be subject to a restocking fee in an amount
equal to [*****] of the transfer price paid by Kobayashi to
ArthroCare for such Products.
5. ACCEPTANCE
Kobayashi shall inspect all Products promptly upon receipt
thereof and may reject any Product that fails to conform to the
warranties set forth in Article 6 below at the time of delivery to
Kobayashi, provided that Kobayashi complies with the provisions of
Section 6.2 below. Except as set forth in this Article 5 and
Article 6 below, Kobayashi shall return Products to ArthroCare
only with ArthroCare's prior written approval.
6. WARRANTY
6.1 Product Warranty. ArthroCare warrants to Kobayashi
that at the time of delivery to Kobayashi the Products purchased
by Kobayashi shall (i) conform to packaging and labeling
specifications agreed upon by the parties, (ii) meet the
specifications for the Products set forth in the Marketing
Approval Application for such Product approved by the Ministry of
Health and Welfare, (iii) be free from defects in design,
materials or workmanship, (iv) be of merchantable quality and fit
for the purpose for which they are intended; and (v) the
manufacture of such Products will comply with all applicable laws
in the place of manufacture. This warranty is contingent upon
proper use of Products in the application for which they were
intended as indicated in the Product label claims, and ArthroCare
makes no warranty (express, implied, or statutory) for Products
that are modified (except as expressly contemplated herein), or
subjected to accident, misuse, neglect, unauthorized repair, or
improper testing or storage.
6.2 Exclusive Remedy. In the event that any Product
purchased by Kobayashi from ArthroCare fails to conform to the
warranty set forth in Section 6.1 above or is recalled pursuant to
Section 7.8.2, ArthroCare shall, at ArthroCare's sole election,
repair or replace the Product, or component thereof, or credit
Kobayashi's account for the amount actually paid for any such
Product, or component thereof or direct costs of promotion
actually incurred by Kobayashi as a result of such failure to
conform or recall within [*****] of receipt by ArthroCare thereof,
provided that (i) Kobayashi promptly notifies ArthroCare in
writing that such Product failed to conform and furnishes an
explanation of any reported nonconformity and requests a return
material authorization number; (ii) such Product is returned to
ArthroCare by Kobayashi F.O.B. the address designated by
ArthroCare during the warranty period with the return material
authorization number affixed prominently to the outside packaging;
and (iii) the reported nonconformities actually exist and were not
caused by accident, misuse, neglect, alteration, repair or
improper testing or storage. If such Product fails to so conform,
ArthroCare will reimburse Kobayashi for shipment charges for
return of the nonconforming Product.
6.3 Exclusion of Other Warranties. EXCEPT FOR THE LIMITED
WARRANTIES PROVIDED IN SECTION 6.1 ABOVE, ARTHROCARE GRANTS NO
OTHER WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED, BY STATUTE, IN
ANY COMMUNICATION WITH KOBAYASHI OR ITS CUSTOMERS, OR OTHERWISE,
REGARDING THE PRODUCTS OR VALIDITY OF ARTHROCARE TECHNOLOGY, AND
ARTHROCARE SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTY OF
NONINFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.
ARTHROCARE NEITHER ASSUMES NOR AUTHORIZES ANY OTHER PERSON TO
ASSUME ANY OTHER LIABILITIES ARISING OUT OF OR IN CONNECTION WITH
THE SALE OR USE OF ANY ARTHROCARE PRODUCT.
7. ADDITIONAL OBLIGATIONS OF KOBAYASHI
7.1 Marketing Approval. Kobayashi shall prepare and file
all regulatory documents in ArthroCare's name with respect to
Products. In addition, Kobayashi agrees to file this Agreement,
if required, with the Japan Fair Trade Commission (the "JFTC").
ArthroCare shall own all regulatory filings and shall have the
right to obtain copies directly from Kobayashi of, and to
reference, for any purpose, any and all regulatory filings made by
Kobayashi with respect to Products. If any Product clinical
trials are required under the laws of Japan at any time during the
term of the Agreement, then Kobayashi, at Kobayashi's expense
(exclusive of Products provided by ArthroCare pursuant to
Section 8.1), shall organize, conduct and support any and all
preclinical and clinical trials required to obtain registrations,
licenses and permits required to comply with the laws of
regulations of Japan for sale and distribution of Products.
7.2 Minimum Performance Requirements. For the [*****]
following regulatory approval for the Products in Japan,
ArthroCare and Kobayashi will agree to minimum performance
requirements and during each calendar year, Kobayashi shall
purchase from ArthroCare the quantity of Products required to meet
the minimum performance requirements. The minimum performance
requirements shall be determined in good faith by mutual agreement
of ArthroCare and Kobayashi. The parties intend that such
minimums will be realistic, taking into account the numbers
actually attained in the immediately preceding year, market
conditions then prevailing and other relevant factors. Should the
parties fail to mutually agree to the minimum performance
requirements within [*****] before the beginning of each of the
[*****], then they shall submit their differences to mediation to
discuss and attempt to resolve the differences amicable without
resort to arbitration. Any differences which have not been
resolved within [*****] shall be resolved by arbitration in
accordance with Article 16 of this Agreement. The minimum
performance requirements shall be provided for all Products as a
total, not for a specific Product. In case of failure to attain
the minimum performance requirements, both parties shall in good
faith consult regarding the reasons for such shortfall. Failure
to meet such minimum performance requirements will constitute a
breach of this Agreement. Beginning in the [*****] following
regulatory approval for the Products in Japan, upon any failure of
Kobayashi to meet the minimum performance requirements for [*****]
Kobayashi will be on a probationary period for a period of [*****]
and upon Kobayashi's subsequent failure to meet minimum
performance requirements for such [*****] probationary period,
ArthroCare shall have the right to terminate this Agreement, such
termination to be at ArthroCare's discretion either (i) effective
immediately, or (ii) effective [*****] from notice to Kobayashi of
ArthroCare's intent to terminate, and in either case there will be
a wind up period of [*****].
7.3 Advertising and Promotions.
Kobayashi shall:
i. list the Products in its catalogs and make such
Products available to its customers;
ii. employ adequate and experienced sales personnel;
iii. dedicate sufficient product and project
management, marketing and financial resources to pursue the market
opportunities for the Product in Japan;
iv. advertise the Product in trade and other
relevant publications;
v. participate in appropriate trade shows; and
vi. make sales calls on physicians.
7.4 Materials. ArthroCare shall provide to Kobayashi
samples of ArthroCare's promotional, educational and training
materials for the Products in English. Kobayashi shall translate
into Japanese, at its own expense, any promotional materials, user
and technical manuals, or advertising and marketing information
which Kobayashi determines may be useful in the marketing of
Products. Kobayashi shall have an exclusive right to use all such
materials in Japan during the term of this Agreement in connection
with its activities pursuant to this Agreement. ArthroCare will
pay Kobayashi's reasonable costs for the translation of user and
technical manuals from English into Japanese, in the event
ArthroCare elects to own them. Kobayashi shall provide to
ArthroCare samples of all promotional, advertising, exhibition,
training and educational materials prepared by or on behalf of
Kobayashi and relating to the Products, for informational purposes
only.
7.5 Product Packaging and Labeling. Kobayashi shall not
repackage or relabel Products supplied to Kobayashi by ArthroCare
hereunder without the prior written consent of ArthroCare, except
as may be required by regulatory authorities in Japan.
7.6 Inventory. Kobayashi will use its commercially
reasonable efforts, at its own expense, to maintain a sufficient
inventory of the Products and of replacement parts to fulfill
Kobayashi's forecasted demand for the Products in Japan.
7.7 Market Research. Kobayashi shall assist ArthroCare in
assessing customer requirements for the Products, including
modifications and improvements thereto, in terms of quality,
design, functional capability, and other features. Kobayashi
shall advise ArthroCare on market conditions as reasonably
requested by ArthroCare.
7.8 Other Reporting.
7.8.1 Kobayashi shall provide, at Kobayashi's expense,
within thirty (30) days after publication, copies of any and all
articles, manuscripts, abstracts or other literature relating to
the Products generated by investigators or others in Japan in each
case to the extent reasonably available to Kobayashi.
7.8.2 Pursuant to the FDA's Medical Device Reporting
(MDR) Regulations, ArthroCare may be required to report to the FDA
information that reasonably suggests that a Product may have
caused or contributed to the death or serious injury or has
malfunctioned and that the device would be likely to cause or
contribute to a death or serious injury if the malfunction were to
recur. Each of ArthroCare and Kobayashi agree to supply to the
other any such information promptly after becoming aware of it so
that each of ArthroCare and Kobayashi can comply with governmental
reporting requirements. It is understood and agreed that
reporting to ArthroCare shall be within twenty-four (24) hours
after notification to Kobayashi to enable ArthroCare to comply
with FDA reporting requirements. In the event that ArthroCare is
required by any regulatory agency to recall the Products or if
ArthroCare voluntarily initiates a recall of the Products,
Kobayashi shall cooperate with and assist ArthroCare in locating
and retrieving if necessary, the recalled Products from
Kobayashi's customers. Kobayashi shall maintain records of sales
of Products to customer by lot number, and/or Kobayashi shall make
such records available to ArthroCare in the event of a Product
recall or other quality related issue, upon reasonable request
from ArthroCare. Kobayashi shall be responsible for obtaining all
records of Kobayashi sales to end users in the event of a Product
recall or other quality related issue. During the time that the
Products are commercially marketed, distributed, or sold by
Kobayashi, Kobayashi also shall, within five (5) business days,
forward all Product complaints which it receives to ArthroCare.
Kobayashi shall make available to ArthroCare for inspection
Kobayashi's process and records for adverse event and other
regulatory reporting purposes at mutually agreed upon times and
further shall ensure that Kobayashi's processes comply with all
applicable laws and regulations in the United States and Japan.
7.9 Business Obligations. Any and all obligations
associated with Kobayashi's business shall remain the sole
responsibility of Kobayashi. Any and all sales and other
agreements between Kobayashi and its customers are and shall
remain Kobayashi's exclusive responsibility and shall have no
affect on Kobayashi's obligations pursuant to this Agreement.
7.10 Annual Operating and Marketing Plans. Kobayashi shall
develop annual operating and marketing plans for the Products
(collectively, the "Business Plan") which shall include without
limitation (i) promotion strategy and tactics, (ii) historic
sales, sales and other marketing plans, and (iii) education
programs, training programs and plans for support of Kobayashi
personnel and customers. For each year during the term of this
Agreement, the Business Plan shall be provided to ArthroCare for
review by ArthroCare not later than [*****] of such year.
Kobayashi shall comply with the Business Plan, and shall appoint a
product manager who shall be responsible for management of the
Business Plan.
7.11 Customer Support. Kobayashi shall maintain
knowledgeable support personnel to provide instructions to
customers in the use of the Products. Kobayashi agrees that such
support personnel will, at Kobayashi's expense attend a hands-on
sales training session relating to the Products in a location to
be mutually agreed upon, and observe the use of the Products in
applicable surgical applications to improve the clinical knowledge
of such personnel relating to the Products. Kobayashi shall be
fully responsible for any and all technical support of Kobayashi's
customers.
7.12 Sales and Inventory Reports. Kobayashi shall provide
to ArthroCare a sales report, in English and expressed in units on
[*****] interval and in a format to be agreed by ArthroCare and
Kobayashi. This information will at a minimum include: item and
unit reported by month.
8. ADDITIONAL OBLIGATIONS OF ARTHROCARE
8.1 Samples. ArthroCare at its expense shall provide to
Kobayashi samples of three (3) demonstration controllers and a
reasonable number of accessories for Kobayashi's use in obtaining
marketing approval. If additional clinical applications are
mutually agreed to by the parties and are required for regulatory
approved, additional samples will be provided by ArthroCare at
[*****] of ArthroCare's then fully burdened cost of goods as
calculated in accordance with generally accepted accounting
principles.
8.2 Promotional Materials. ArthroCare, at ArthroCare's
expense, shall provide to Kobayashi English language samples of
promotional support materials for the Products. Such materials
shall include, without limitation, brochures and advertising
literature.
8.3 Training. ArthroCare will provide training for
Kobayashi's personnel in connection with the marketing, sale,
installation, maintenance and support of Products; provided,
however, that such training shall be reasonably available and
necessary to assist Kobayashi to market and distribute Products
and to perform its obligations under this Agreement. All expenses
incurred by Kobayashi's personnel in connection with all training
including, without limitation, travel and lodging expenses,
[*****]. Training shall be conducted at mutually agreed
facilities.
8.4 Technical Support. ArthroCare will provide Kobayashi
access to ArthroCare maintenance and support personnel to assist
Kobayashi's support personnel in providing maintenance and support
centers; provided, however, that such training shall be reasonably
available and necessary to assist Kobayashi to market and
distribute Products and to perform its obligations under this
Agreement.
8.5 Scientific and Technical Information. ArthroCare
shall provide to Kobayashi scientific and technical information
required to obtain and maintain registrations, licenses and
permits required for sale and distribution of the Products in
Japan, or to respond to inquiries from customers, or governmental
or regulatory authorities.
8.6 Support. ArthroCare, at ArthroCare's expense and as
deemed reasonable by ArthroCare, shall provide consultation to
Kobayashi concerning technical aspects and use of the Products.
In addition, if ArthroCare introduces a modified version of a
Product which is then added to this Agreement, ArthroCare will
provide to Kobayashi any information and additional marketing and
sales support materials necessary to permit Kobayashi to promote
Products in Japan or obtain registration for such Products.
9. TERM AND TERMINATION
9.1 Term. This Agreement shall become effective as of the
Effective Date and shall continue in full force and effect for a
period of [*****] after approval of the first Marketing Approval
Application by the Japanese Ministry of Health and Welfare for the
first Product ("Initial Term"), unless earlier terminated in
accordance with this Article 9. At least [*****] prior to the
expiration of the Initial Term or any subsequent term, this
Agreement may be renewed for additional [*****] periods by mutual
written agreement of the parties. Unless the parties so agree to
extend this Agreement, this Agreement shall expire at the end of
the Initial Term, or subsequent term, as the case may be.
9.2 Termination for Cause. Either ArthroCare or Kobayashi
may terminate this Agreement by written notice stating each
party's intent to terminate in the event the other shall have
breached or defaulted in the performance of any of its material
obligations hereunder, and such default shall have continued for
[*****] after written notice thereof was provided to the breaching
party by the non-breaching party.
9.3 Termination for Serious Adverse Events. In the event
a Product causes death or serious injury resulting in a
requirement by the Ministry of Health and Welfare to cease
marketing of the Products ("Serious Event"), Kobayashi shall
notify ArthroCare promptly and thereafter Kobayashi and ArthroCare
shall consult with one another to determine the cause of the
Serious Event and the appropriate course of action. If the
parties do not agree upon an acceptable course of action during
the [*****] following a Serious Event, either party may terminate
this Agreement during the [*****] thereafter upon [*****] prior
written notice.
9.4 Termination for Bankruptcy. Either party may
terminate this Agreement effective upon written notice to the
other party in the event the other party declares bankruptcy or
becomes the subject of any voluntary or involuntary proceeding
under the U.S. Bankruptcy Code, foreign equivalent or state
insolvency proceeding and such proceeding is not terminated within
[*****] of its commencement.
9.5 Effect of Termination.
9.5.1 In the event of termination by either party in
accordance with any of the provisions of this Agreement, neither
party shall be liable to the other, because of such termination,
for compensation, reimbursement or damages on account of the loss
of prospective profits or anticipated sales or on account of
expenditures, inventory, investments, leases or commitments in
connection with the business or goodwill of ArthroCare or
Kobayashi. Expiration or termination of this Agreement for any
reason shall not release any party hereto from any liability
which, at the time of such termination, has already accrued to the
other party or which is attributable to a period prior to such
termination nor preclude either party from pursuing any rights and
remedies it may have hereunder or at law or in equity with respect
to any breach of this Agreement. It is understood and agreed that
monetary damages may not be a sufficient remedy for any breach of
this Agreement and that the non-breaching party may be entitled to
injunctive relief as a remedy for any such breach. Such remedy
shall not be deemed to be the exclusive remedy for any such breach
of this Agreement, but shall be in addition to all other remedies
available at law or in equity.
9.5.2 Within thirty (30) days after the effective date
of termination of this Agreement, Kobayashi shall use its
reasonable efforts to provide ArthroCare with a complete inventory
of unsold, resalable Products in Japan, and in transit to
Kobayashi from ArthroCare.
9.5.3 Upon expiration or any termination of this
Agreement, ArthroCare or its designee may repurchase and Kobayashi
shall sell to ArthroCare or its designee, all of Kobayashi's
inventory of Products existing on the effective date of
termination. The price of inventory repurchased upon Kobayashi's
termination of this Agreement pursuant to Section 9.2 shall be
[*****]. If ArthroCare terminates this Agreement pursuant to
Section 7.2 or 9.2, then a restocking charge of [*****] of the
repurchase price shall be deducted from the transfer price for
Products repurchased upon termination. Products repurchased from
Kobayashi by ArthroCare pursuant to this Section 9.5.3 shall be
shipped promptly by Kobayashi, at ArthroCare's expense, to a
location specified by ArthroCare.
9.5.4 Upon expiration or any termination of this
Agreement, Kobayashi shall transfer any ownership not then
residing in ArthroCare of any and all Product authorizations,
registrations, permits, and approvals of any kind with respect to
Products and applications therefor, including without limitation
marketing approval applications, and any other governmental
approvals, registrations and the like to ArthroCare, at
ArthroCare's cost and expense and shall execute such documents and
perform such acts as may be necessary, useful, or convenient to
perfect such transfer. It is understood that ArthroCare may use
and disclose the foregoing for any purpose.
9.5.5 Upon termination of this Agreement, ArthroCare
will fill orders received by Kobayashi prior to the date of notice
of such termination.
9.6 Return of Materials. All trademarks, marks, trade
names, patents, copyrights, designs, drawings, formulas or other
data, photographs, samples, literature, and sales and promotional
aids of every kind relating to the Products shall remain the
property of ArthroCare except those items Kobayashi has solely
developed or translated. Effective upon the termination of this
Agreement, Kobayashi shall cease to use all trademarks and trade
names of ArthroCare.
9.7 No Renewal, Extension or Waiver. Acceptance of any
order from, or sale of, any Product to Kobayashi after the date of
termination of this Agreement shall not be construed as a renewal
or extension hereof, or as a waiver of termination by ArthroCare.
9.8 Survival of Certain Terms. The provisions of Articles
6, 10, 12, 13 and 15, 16, and 17; Sections 2.3, 2.4, and 9.5;
shall survive the expiration or termination of this Agreement for
any reason.
10. CONFIDENTIALITY
10.1 Confidential Information. Except as expressly
provided herein, the parties agree that, for the term of this
Agreement and for [*****] thereafter, the receiving party shall
not publish or otherwise disclose and shall not use for any
purpose, except as expressly permitted herein any information
furnished to it by the other party hereto pursuant to this
Agreement which if disclosed in tangible form is marked
"Confidential" or with other similar designation to indicate its
confidential or proprietary nature, or if disclosed orally is
confirmed as confidential or proprietary by the party disclosing
such information at the time of such disclosure or within [*****]
thereafter ("Confidential Information"). Notwithstanding the
foregoing, it is understood and agreed that Confidential
Information shall not include information that, in each case as
demonstrated by written documentation:
i. was already known to the receiving party, other
than under an obligation of confidentiality, at the time of
disclosure;
ii. was generally available to the public or
otherwise part of the public domain at the time of its disclosure
to the receiving party;
iii. became generally available to the public or
otherwise part of the public domain after its disclosure and other
than through any act or omission of the receiving party in breach
of this Agreement; or
iv. was subsequently lawfully disclosed to the
receiving party by a person other than a party hereto or developed
by the receiving party without reference to any information or
materials disclosed by the disclosing party.
10.2 Permitted Disclosures. Notwithstanding the provisions
of Section 10.1 above, each party hereto may disclose the other's
Confidential Information to the extent such disclosure is
reasonably necessary in prosecuting or defending litigation,
complying with applicable governmental regulations, or submitting
information to tax or other governmental authorities provided that
if a party is required to make any such disclosure of another
party hereto's Confidential Information, to the extent it may
legally do so, it will give reasonable advance written notice to
the latter party of such disclosure and will use its reasonable
efforts to secure confidential treatment of such Confidential
Information prior to its disclosure (whether through protective
orders or otherwise). If the party whose Confidential Information
is to be disclosed has not filed a patent application with respect
to such Confidential Information, it may require the other party
to delay the proposed disclosure (to the extent the disclosing
party may legally do so), for up to [*****] after receipt of
written notice from the disclosing party of its intent to
disclose, to allow for the filing of such an application. In
addition, ArthroCare may disclose the existence of this Agreement
and the terms and conditions hereof to advisors, prospective
investors, and others under circumstances that reasonably ensure
the confidentiality thereof.
11. TRADEMARKS AND TRADE NAMES
11.1 Marks. During the term of this Agreement, Kobayashi
shall have the right and agrees to, advertise and promote the
Products in Japan under ArthroCare's trademarks and trade names
identified on Exhibit B as modified by ArthroCare pursuant to this
Section 11.1 ("Marks"). ArthroCare reserves the right to modify
Marks or substitute alternative marks for any or all of the Marks
at any time upon ninety (90) days prior written notice, provided
that ArthroCare shall not modify the Marks unreasonably after the
filing of the Marketing Approval Application. The rights granted
under this Section 11.1 shall automatically terminate on
termination or expiration of this Agreement. ArthroCare shall
endeavor to register the Marks with the Japanese Patent Office as
trademarks in the appropriate classes and maintain the
registrations of such Marks, and Kobayashi shall cooperate and
upon ArthroCare's reasonable request, provide full information and
reasonable assistance to ArthroCare in registering and maintaining
the Marks, including without limitation providing evidence of use
of the Marks as reasonably required to renew registrations or
defend actions for cancellations.
11.2 Use. Kobayashi shall not remove, modify, or obscure
Marks affixed to Products without the prior written consent of
ArthroCare, unless required by law. Except as set forth in this
Section 11.2, nothing contained in this Agreement shall grant to
Kobayashi any right, title or interest in or to Marks whether or
not specifically recognized or perfected under applicable laws of
Japan, and Kobayashi irrevocably assigns to ArthroCare all such
right, title and interest, if any, in any Marks. At no time
during or after the term of this Agreement shall Kobayashi
challenge or assist others to challenge Marks or the registration
thereof or attempt to register any trademarks, marks or trade
names confusingly similar to Marks. All representations of Marks
that Kobayashi intends to use shall first be submitted to
ArthroCare for review of design, color, and other details or shall
be exact copies of those used by ArthroCare. In addition,
Kobayashi shall fully comply with all reasonable guidelines, if
any, communicated by ArthroCare concerning the use of Marks.
12. INTELLECTUAL PROPERTY
12.1 Maintenance. ArthroCare will be responsible for
maintaining all patents, trademarks, and trade names and
diligently prosecuting all patent applications covering the
Products in Japan.
12.2 ArthroCare Defense. Kobayashi agrees that ArthroCare
has the right to defend, or at its option to settle, and
ArthroCare agrees, at its own expense, to defend or at its option
to settle, any claim, suit or proceeding brought against Kobayashi
by any third party for infringement of any patent by the Products.
ArthroCare shall have sole control of any such action or
settlement negotiations, and ArthroCare agrees to pay, subject to
the limitations hereinafter set forth, any final judgment entered
against Kobayashi on such issue in any such claim, suit or
proceeding defended by ArthroCare. Kobayashi agrees that
ArthroCare shall be relieved of the foregoing obligations unless
Kobayashi (i) notifies ArthroCare promptly in writing of such
claim, suit or proceeding; (ii) gives ArthroCare authority to
proceed as contemplated herein; and (iii) at ArthroCare's expense,
gives ArthroCare proper and complete information to the best of
Kobayashi's knowledge and assistance to settle or defend any such
claim, suit or proceeding for infringement of any patent.
Notwithstanding the foregoing, ArthroCare's obligation to defend
Kobayashi under this Section 12.2 shall not apply to any claims,
suits, or proceedings to the extent they allege infringement of
third party components. Notwithstanding the provisions of this
Article 12, ArthroCare assumes no infringement liability for
(x) combination of Products with other products not approved by
ArthroCare, which infringement would not arise from such Products
standing alone, or (y) the modification of such Products not
approved by ArthroCare, where such infringement would not have
occurred but for such modifications.
12.3 Kobayashi Remedy. Notwithstanding the foregoing, if
it is adjudicatively determined that any Product infringes, or in
ArthroCare's sole opinion, may be found to infringe a third
party's patent, or if the sale or use of the Products is, as a
result, enjoined, then ArthroCare may, at its option and expense,
either: (i) procure for Kobayashi the right under such patent to
sell or use, as appropriate, the Products; or (ii) replace the
Products with other non-infringing functionally equivalent
products; or (iii) modify the Products to make the Products
functionally equivalent and non-infringing; or (iv) if the use of
the Products is prevented by injunction, discontinue Product sales
under the Agreement and remove any Products in Kobayashi's
inventory and refund the aggregate payments paid therefor by
Kobayashi.
12.4 DISCLAIMER. THE FOREGOING PROVISIONS OF THIS ARTICLE
12 STATE THE ENTIRE LIABILITY OF ARTHROCARE AND THE EXCLUSIVE
REMEDY OF KOBAYASHI AND ITS CUSTOMERS, WITH RESPECT TO ANY ALLEGED
INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADEMARKS OR OTHER
INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS OR ANY PART THEREOF.
13. INDEMNIFICATION
13.1 Indemnification of Kobayashi. ArthroCare shall
indemnify, defend, and hold harmless Kobayashi, and its directors,
officers, employees, and agents, and the successors and assigns of
any of the foregoing (the "Kobayashi Indemnitees") from and
against all claims, losses, costs, and liabilities (including,
without limitation, payment of reasonable attorneys' fees and
other expenses of litigation), and shall pay any damages
(including settlement amounts) finally awarded with respect to
claims, suits, or proceedings (any of the foregoing, a "Claim")
brought by third parties against a Kobayashi Indemnitee, alleging
bodily injury, death or property damage caused by (a) a breach by
ArthroCare of warranties and representations, or (b) the
negligence or willful misconduct of ArthroCare, its employees or
agents, except to the extent such Claim is covered under
Section 13.2 below or is caused by the negligence or willful
misconduct of a Kobayashi Indemnitee.
13.2 Indemnification of ArthroCare. Kobayashi shall
indemnify, defend, and hold harmless ArthroCare, and its
directors, officers, employees and agents, and the successors, and
assigns of any of the foregoing (the "ArthroCare Indemnitees")
from and against all claims, losses, costs, and liabilities
(including, without limitation, payment of reasonable attorneys'
fees and other expenses of litigation), and shall pay any damages
(including settlement amounts) finally awarded with respect to a
Claim brought by third parties against a ArthroCare Indemnitee,
arising out of or relating to (a) Products sold, or otherwise
distributed by Kobayashi, except to the extent such claim is
covered under Section 13.1 above; (b) breach of any of the
representations or warranties made by Kobayashi hereunder, or
(c) the negligence or willful misconduct of Kobayashi or its
employees.
13.3 Indemnification Procedures. A party (the
"Indemnitee") that intends to claim indemnification under this
Article 13 shall promptly notify the other party (the
"Indemnitor") in writing of any claim in respect of which the
Indemnitee or any of its directors, officers, employees, agents,
licensors, successors, or assigns intends to claim such
indemnification, and the Indemnitor shall have sole control of the
defense and/or settlement thereof, provided that the indemnified
party may participate in any such proceeding with counsel of its
choice at its own expense. The indemnity agreement in this
Article 13 shall not apply to amounts paid in settlement of any
Claim 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
prejudicial to its ability to defend such action, shall relieve
such Indemnitor of any liability to the Indemnitee under this
Article 13, 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 than under this
Article 13. The Indemnitee under this Article 13, its employees
and agents, shall cooperate fully with the Indemnitor and its
legal representatives and provide reasonable information in the
investigation of any Claim covered by this indemnification.
Notwithstanding anything to the contrary contained in this Article
13, neither party shall be liable for any costs or expenses
incurred without its prior written authorization.
14. COMPLIANCE WITH LAWS AND FOREIGN LAW WARRANTIES AND
OBLIGATIONS
14.1 Compliance with Laws. Kobayashi shall at all times
conduct its efforts hereunder with the highest commercial
standards and in strict accordance with all applicable laws,
rules, directives and regulations ("Laws"). The Kobayashi shall
be responsible for current and ongoing familiarity and compliance
with all Laws applicable to the importation, distribution,
marketing, sale, operation, use or support of the Products in
Japan.
14.2 Currency Control. Kobayashi represents and warrants
that, on the Effective Date of this Agreement, no currency control
laws applicable in Japan prevent the payment to ArthroCare of any
sums due under this Agreement.
14.3 Foreign Corrupt Practices Act. In conformity with the
United States Foreign Corrupt Practices Act and with ArthroCare's
established corporate policies regarding foreign business
practices, Kobayashi and its employees and agents shall not
directly or indirectly make any offer, payment, promise to pay, or
authorize payment, or offer a gift, promise to give, or authorize
the giving of anything of value for the purpose of influencing an
act or decision of an official of any government within Japan or
the United States Government (including a decision not to act) or
inducing such a person to use his influence to affect any such
governmental act or decision in order to assist ArthroCare in
obtaining, retaining or directing any such business in violation
of the Foreign Corrupt Practices Act.
15. LIMITATION OF LIABILITY
EXCEPT FOR LIABILITY ARISING UNDER SECTION 13.1 AND
ARTICLE 12, ARTHROCARE'S LIABILITY ARISING OUT OF THIS AGREEMENT,
THE TERMINATION THEREOF, AND/OR SALE OF THE PRODUCTS SHALL BE
LIMITED TO THE AMOUNT PAID BY KOBAYASHI FOR THE PRODUCT. IN NO
EVENT SHALL ARTHROCARE BE LIABLE TO KOBAYASHI FOR COSTS OF
PROCUREMENT OF SUBSTITUTE GOODS, LOST PROFITS, OR ANY OTHER
SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND
UNDER ANY THEORY OF LIABILITY ARISING OUT OF THIS AGREEMENT
WHETHER BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE), OR
OTHERWISE. THESE LIMITATIONS SHALL APPLY WHETHER OR NOT
ARTHROCARE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY PROVIDED HEREIN.
16. DISPUTE RESOLUTION
16.1 Disputes. If ArthroCare and Kobayashi are unable to
resolve any dispute between them, either ArthroCare or Kobayashi
may, by written notice to the other, have such dispute referred to
the chief executive officers (or equivalent) of ArthroCare and
Kobayashi, for attempted resolution by good faith negotiations
within thirty (30) days after such notice is received. Unless
otherwise mutually agreed, the negotiations between the designated
officers shall be conducted by telephone, within three (3) days,
and at times within the period stated above as offered by the
designated officers of Kobayashi to the designated officer of
ArthroCare for consideration.
16.2 Arbitration. Any dispute, controversy or claim
arising out of or relating to the validity, construction,
enforceability or performance of this Agreement, including
disputes relating to alleged breach or to termination of this
Agreement, shall be settled by final, binding arbitration in the
manner described in this Section 16.2. The arbitration shall be
conducted pursuant to the Commercial Arbitration Rules of the
American Arbitration Association then in effect ("Rules").
Notwithstanding those Rules, the following provisions shall apply
to the arbitration hereunder:
1. Arbitrators. The arbitration shall be conducted
by a panel of three (3) arbitrators ("the Panel"). Each party
shall have the right to appoint one (1) member of the Panel, with
the third member to be mutually agreed by the two (2) Panel
members appointed by the parties or appointed in accordance with
the rules of the American Arbitration Association. The
arbitrators shall be persons in the medical device industry with
experience in the matters in dispute.
2. Proceedings. The parties and the arbitrators
shall use their best efforts to complete the arbitration within
one (1) year after the appointment of the Panel under Section
16.2.1 above, unless a party can demonstrate to the Panel that the
complexity of the issues or other reasons warrant the extension of
the time table. In such case, the Panel may extend such time
table as reasonably required. Notwithstanding the foregoing, any
arbitration of whether a payment is due under Article 3 above
shall be completed and a decision reached within sixty (60) days
after the appointment of the Panel. The Panel shall, in rendering
its decision, apply the substantive law of the State of
California, without regard to its conflict of laws provisions,
except that the interpretation of and enforcement of this
Article 16 shall be governed by the U.S. Federal Arbitration Act.
The proceeding shall take place in the city of Honolulu and
county of Oahu. The fees of the Panel shall be paid by the losing
party which party shall be designated by the Panel. If the Panel
is unable to designate a losing party, it shall so state and the
fees shall be shared equally between the parties.
17. MISCELLANEOUS PROVISIONS
17.1 Independent Contractors. The relationship of
ArthroCare and Kobayashi established by this Agreement is that of
independent contractors, and nothing contained in this Agreement
shall be construed to (i) give either party the power to direct or
control the day-to-day activities of the other, (ii) constitute
the parties as partners, joint venturers, co-owners or otherwise
as participates in a joint or common undertaking, or (iii) allow a
party to create or assume any obligation on behalf of the other
party for any purpose whatsoever.
17.2 Notices. Any notice required or permitted by this
Agreement shall be in writing and shall be sent by prepaid
registered or certified mail, return receipt requested,
internationally-recognized courier or personal delivery, addressed
to the other party at the address shown at the beginning of this
Agreement or at such other address for which such party gives
notice hereunder. Such notice shall be deemed to have been given
when delivered:
If to Kobayashi: Kobayashi Pharmaceutical Co., Ltd.
3-6, 4-Chome, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇-▇▇, ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
If to ArthroCare: ArthroCare Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Vice President, Sales & Marketing
17.3 Force Majeure. Nonperformance of any party hereto
(except for payment obligations) shall be excused to the extent
that performance is rendered impossible by strike, fire,
earthquake, flood, governmental acts or orders or restrictions,
delay or failure of suppliers, or any other reason where failure
to perform is beyond the reasonable control and not caused by the
gross negligence or willful misconduct of the nonperforming party.
17.4 Assignment. This Agreement shall not be assignable by
either party to any third party hereto without the written consent
of the other party hereto, except that either party will assign
this Agreement without the other party's consent to an entity that
acquires all or substantially all of the business or assets of the
assigning party pertaining to the subject matter hereof, in each
case whether by merger, acquisition, or otherwise.
17.5 No Implied Waivers; Rights Cumulative. No failure on
the part of ArthroCare or Kobayashi to exercise and no delay in
exercising any right under this Agreement, or provided by statute
or at law or in equity or otherwise, shall impair, prejudice or
constitute a waiver of any such right, nor shall any partial
exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right.
17.6 Partial Invalidity. If any provision of this
Agreement is held to be invalid by a court of competent
jurisdiction, then the remaining provisions shall remain,
nevertheless, in full force and effect. The parties agree to
renegotiate in good faith any term held invalid and to be bound by
the mutually agreed substitute provision in order to give the most
approximate effect intended by the parties.
17.7 No Implied Licenses. Except as expressly provided
herein, no party hereto grants to any other party hereto any
rights or licenses under such party's patent rights, trade secrets
or other intellectual property rights.
17.8 Language. This Agreement is in the English language,
which language shall be controlling in all respects, and all
versions hereof in any other language shall be for accommodation
only and shall not be binding upon the parties hereto. All
communications and notices to be made or given pursuant to this
Agreement shall be in the English language.
17.9 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one instrument.
17.10 Entire Agreement. This Agreement, including the
Exhibits attached hereto, constitutes the entire agreement of the
parties with respect to the subject matter hereof, and supersedes
all prior or contemporaneous understandings or agreements, whether
written or oral, between ArthroCare and Kobayashi with respect to
such subject matter. No amendment or modification hereof shall be
valid or binding upon the parties unless made in writing and
signed by the duly authorized representatives of both parties.
IN WITNESS WHEREOF, the undersigned are duly authorized to
execute this Agreement on behalf of ArthroCare and Kobayashi as
applicable effective as of the Effective Date.
ARTHROCARE CORPORATION KOBAYASHI PHARMACEUTICAL CO.,LTD.
("ArthroCare") ("Kobayashi")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------- -----------------------------
Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Print Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------- -----------------------------
Title: President and CEO Title: Chairman
----------------------------- -----------------------------
Date: August 21, 1997 Date: August 21, 1997
----------------------------- -----------------------------
Exhibit A
TRANSFER PRICES
Demonstration Controllers [*****] each
Resale Controllers [*****] each
Wands [*****]
Additional Cables [*****] each
Exhibit B
INITIAL STOCKING ORDER
"Initial Stocking Order":
Controllers:
Sales and Inventory Units [*****] x [*****] = [*****]
Demonstration Units [*****] x [*****] = [*****]
Wands: [*****] x [*****] = [*****]
======== -------
[*****]
========
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*Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.