Document:

Unassociated Document

Exhibit 10.3

 

	
 

Quota Share Reinsurance Contract

 

 

	
Reinsured

	 	
AmTrust Europe Limited, Nottingham, England and/or AmTrust International Underwriters Limited, Eire.

 

	
Principal Address

 

	 	
Market Square House

St. James’s Street

Nottingham

NG1 6FG

United Kingdom

 

	
Preamble

 

 

	 	
Whereas the Reinsured underwrite certain business and are desirous of reinsuring a proportion of such business, being all policies and/or contracts.  Now therefore it is agreed that this Contract shall indemnify the Reinsured, subject to the following terms and conditions.

 

The titles allocated to the clauses listed under Conditions are intended solely for the convenience of reference and will not affect the meaning, interpretation, construction or effect of this Contract.

 

	  	 	  
	
Type

	 	
Quota Share Treaty.

 

	
Class and Period of Business

	 	
This Contract shall cover all policies classified by the Reinsured as Medical Malpractice, including associated liability coverages and policies covering physician defense costs, written or renewed by the Reinsured on or after 2nd April 2011.

 

This Contract will also cover all such policies written or renewed by the Reinsured on or before 1st April 2011 at the sole option of the Reinsured (the “Inforce Option”), such option to be exercised by June 30, 2011.

 

This Contract shall remain in effect continuously thereafter unless the Reinsurer or Reinsured elects to terminate this Contract effective as of April 1, 2012 or any April 2 thereafter.  If the Reinsurer or Reinsured elects to so terminate this Contract, it shall give written notice to the other party hereto not less than four months prior to the termination date.  Termination shall be on a run-off basis, with runoff to include the full original term of multi-year policies.  In the alternative, the Reinsured in its sole option may elect to cut off the Reinsurer’s liabilities and return the  associated unearned premium, with such cut-off to occur either as of the date of termination or as of the first anniversary date of each multi-year policy that falls on or after the termination date.

 

	
Treaty Detail

	 	
The Reinsured shall cede and the Reinsurer shall accept by way of reinsurance a Quota Share Percentage of the business stated in ‘Class and Period of Business’.

 

The percentage Quota Share Cession to the Reinsurer shall be Forty per cent (40%). Cessions to AmTrust International Insurance Ltd. shall be deemed retained by the Reinsured.

 

The maximum limit of liability attaching hereunder shall be:

 

  

  

  

	  	 	
EUR 5,000,000 (Five Million Euros) or currency equivalent (on a 100% (One Hundred Percent) basis) per original claim any one original policy.

 

The Reinsured may submit risks that are not otherwise subject to this Contract, including but not limited to risks with limits greater than EUD 5,000,000, to the Reinsurer for Special Acceptance (“Acceptance”).  Such risks, if accepted by the Reinsurer in its sole judgment, will be subject to the terms of this Contract except to the extent that such terms are modified in the Acceptance.  For any such risks, the Reinsurer shall confirm its Acceptance in writing, along with any modification of the Contract terms for such Acceptance. The Reinsurer’s written confirmation of the Acceptance will become part of the Contract.

 

It is agreed that the liability of the Reinsurer on all business ceded hereunder shall commence and cease simultaneously with that of the original Policies and shall follow the original terms, clauses, conditions and settlements of the said Policies, subject to the terms and conditions of this Contract.

 

	
Original Net Premium

	 	
In respect of the risks ceded hereunder the Reinsured shall pay to the Reinsurer their proportion of the Original Net Premiums.

 

Original Net Premium shall mean the gross premium written by the Reinsured on business protected hereunder during the period of this Contract less taxes, cancellations, returned premiums and original commissions.

 

	
Territorial Scope

	 	
The territorial scope of this Contract shall be as provided in the risks ceded hereunder for insureds located in Italy.

 

	
Commission

	 	
The Reinsurer shall allow the Reinsured a Fixed Commission of 3.5% (Three and one half Percent) on Original Net Premium ceded hereunder.

 

The Reinsurer shall further allow the Reinsured a Profit Share on Original Net Premiums ceded hereunder, being in addition to the 3.5% Fixed Commission.

 

The Profit Share will apply separately to each twelve month period this Contract remains in effect (“Contract Year”) and will be adjusted quarterly, the first adjustment to be made 1st April 2013.  Reinsured’s Profit Share is 50% of the amount by which Incurred Net Loss Ratio is below 65% of the Original Net Premium.  For purposes of calculating profit share, multi-year policies shall be split into individual years so that the maximum original policy period in a Contract Year shall be 12 months plus odd time not exceeding 18 months in all.  In the event that the Reinsured exercises its Inforce Option as described above, the premium and losses reinsured under that option will be combined with the first Contract Year for the calculation of the Profit Share. The first Contract Year will be- April 2, 2011 through March 31, 2012, both days inclusive, and subsequent Contract Years will begin April 1 of each year).

 

“Incurred Net Loss Ratio” shall be defined as net paid and outstanding Losses (inclusive of IBNR as established by the Reinsured after consultation with the Reinsurer), being paid and outstanding Losses (“Losses” being further defined under the Loss Settlement Clause) less third party recoveries, divided by Original Net Premium (as defined above) for risks attaching during the Contract Year, as a percentage.

	  	 	  
	
Brokerage

	 	
1.25% on Original Net Premium ceded.

 

  

  

  

 

	
Accounts

	 	
Accounts of the transactions between the Reinsured and the Reinsurer hereunder both in respect of premiums and Losses and all items relative to these risks, separately for each Contract Year, shall be rendered by the Reinsured to the Reinsurer quaterly and received by the Reinsuer within 30 (Thirty) days after the end of each quarter.   After receipt of the account by the Reinsurer the balance due hereon shall be paid within 30 (Thirty) days thereafter.

 

The Reinsured shall provide a full individual claim listing quarterly for each of the risks ceded hereunder.

 

	
Cash Loss Limit

	 	
Should any claim payment hereunder in respect of any loss to this Contract exceed EUR 50,000 (Fifty thousand Euros) (for 100%) or currency equivalent then the Reinsured may request special payment by the Reinsurer of the relative amount of such Cash Claim on submission in writing of full loss details.  Amounts falling to the share of the Reinsurer will be due immediately (and in any event within 30 days).

 

	
Reinsurer Contract Documentation

 

 

	 	
This document details the contract terms entered into by the Reinsurer and constitutes the contract document.

 

With the exception of Contract Endorsements, which may become necessary to formalise any amendments or alterations to this Contract, no further evidence of cover will be issued.

	 	 	 
	 
Security

	 	 
The Reinsurer will post security equal to 100% of the ceded unearned premium and outstanding Losses including IBNR/ calculated by the Reinsured at 75% confidence factor immediately upon being asked to do so and adjusted quarterly.  Security shall only be required if the Reinsurer’s Bests rating is reduced to lower than A minus stable or if the Reinsurer’s surplus is less than $600,000,000.

	  	 	  
	
Conditions

	 	
Reinsurance Clause

It is agreed that the liability of the Reinsurer on all business ceded hereunder shall commence and cease simultaneously with that of the original policies and shall follow the original terms of the said policies, subject to the terms of this Contract.

 

	  	 	
Offset Clause

The Reinsured and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract.

 

	  	 	
Loss Settlement Clause

“Losses” as defined herein include all loss settlements made or to be made  by the Reinsured, provided the same are within the terms of the original policies, - including loss adjustment costs and expenses allocable to a specific claim incurred by the Reinsured in the investigation, appraisal, adjustment, settlement, litigation, defence or appeal of a specific claim. Losses shall be unconditionally binding upon the Reinsurer and amounts falling to the share of the Reinsurer shall be payable by them upon reasonable evidence of the amount paid being given by the Reinsured.

 

	  	 	
Currency Conversion Clause

For the purpose of this Contract currencies other than the currency in which this Contract is written shall be converted into that currency at the rates of exchange used in the Reinsured’s books or where there is a specific remittance for a loss settlement at the rates of exchange used in making such remittance.

 

  

  

  

	  	 	
Inspection Clause

For as long as either party remains under any liability hereunder the Reinsured shall, upon request by the Reinsurer, make available at the Reinsured’s head office or wherever the same may be located, for inspection at any reasonable time by such representatives as may be authorised by the Reinsurer for that purpose, all non-privileged information (meaning information which would not breach an applicable privilege by being shared) relating to business reinsured hereunder in the Reinsured’s possession or under its control and the said representatives may arrange for copies to be made at the Reinsurer’s expense of any of the records containing such information as they may require.

 

If required by the Reinsured, the Reinsurer agrees to enter into a confidentiality agreement prior to undertaking any inspection of records.  This would provide that all terms and conditions of this Contract and any information provided in the course of inspection shall be kept confidential by the Reinsurer as against third parties, unless the disclosure is in line with those scenarios detailed in the “Confidentiality” Clause.

 

	  	 	
Confidentiality Clause

The Reinsurer shall regard the transactions under this Contract as strictly confidential and shall not at any time, during its currency or thereafter, make any use, either directly or indirectly, of the information afforded of the business and connections of the Reinsured which shall or may in any way operate to the prejudice or detriment of the latter.

 

The restrictions as outlined in the Clause shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, associates, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other duly issued order of a court of other governmental agency or regulatory authority.

 

	  	 	
Follow the Fortunes

A.       Any business ceded hereunder is subject to the terms and conditions of the Reinsured’s Original Policy or Policies and automatically follows all changes in coverage and all endorsements made a part of such policy or policies. Should any regulatory or other legal restriction of any state require modification of any subject policy to which this Contract applies, the liability of the Reinsurer will follow that of the Reinsured.

 

B.       Nothing herein will in any manner create any obligations or establish any rights against the Reinsurer in favour of any third parties or any persons not parties to this Contract except as provided in the Insolvency Clause.

 

	  	 	
Errors and Omissions Clause

Any inadvertent error or omission on the part of either the Reinsured or the Reinsurer shall not relieve either party from any liability which would have attached hereunder, provided that such error or omission is rectified immediately upon discovery.

 

  

  

  

	  	 	
Special Termination Clause

The Reinsurer may terminate this Contract in the event of any of the following (clauses 1 through 5 below, collectively, the “Reinsured Special Termination Events”) by written notice to the Reinsured no later than thirty (30) days (or in the case of a Reinsured Special Termination Event described in subsection (1) below, ten (10) days) following actual knowledge of the applicable Reinsured Special Termination Event by the Reinsurer:

 

1)     the Reinsured is thirty (30) or more days in arrears on payment due to the Reinsurer under this Contract, and has not cured such breach within thirty (30) days following written notice thereof from the Reinsurer (unless the amount not so paid is the subject of a good faith dispute) (a “Reinsured Payment Default”);

2)     the Reinsured has ceased writing new or renewal business and has elected to run off its existing business or an insurance or other regulatory authority has ordered such party to cease writing new or renewal business;

3)     the Reinsured has become insolvent, or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy or other agent known by whatever name, to take possession of its assets or control of its operations

4)     a Reinsured Change of Control has occurred.  For purposes of this Agreement, a “Reinsured Change of Control” will be deemed to occur with respect to the Reinsured when either (a) an individual person, corporation or other entity, or a group of commonly controlled persons, corporations or entities, acquires, including through merger, directly or indirectly, more than fifty percent (50%) of the voting securities of the Reinsured or obtains the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of the Reinsured, except if such individual person, corporation or other entity is under common control with such Reinsured, or (b) AmTrust Financial Services, Inc. (“AmTrust”) no longer directly or indirectly controls the power to vote more than fifty percent (50%) of the voting securities of the Reinsured; provided that in no event shall the acquisition, including through merger, of more than fifty percent (50%) of the voting securities of AmTrust or of the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of AmTrust, or the merger, combination or amalgamation of AmTrust into any person, or similar transaction pursuant to which AmTrust shall not be the surviving entity, be deemed a " Reinsured Change of Control"; or

5)     the combined shareholders' equity of the Reinsured and the Affiliates is reduced to 50% or less of the amount of such shareholders’ equity at either the inception of this Contract or at the latest renewal or anniversary date of this Contract.

 

Termination as a result of a Reinsured Payment Default shall be effective upon not less than ten (10) days prior written notice from the Reinsurer to the Reinsured, and termination as a result of any other Reinsured Special Termination Event shall be effective upon not less than thirty (30) days prior written notice from the Reinsurer to the Reinsured.  For greater certainty, the Reinsurer may not terminate this Contract as a result of a Reinsured Special Termination Event unless such event is continuing on the date it delivers its notice of termination to the Reinsured.

 

The Reinsured may terminate this Contract, in the event of any of the following (clauses 1 through 6 below, collectively, the “Reinsurer Special Termination Events”) by written notice to the Reinsurer no later than thirty (30) days (or in the case of a Reinsurer Special Termination Event described in subsection (1) below, ten (10) days) following actual knowledge of the applicable Reinsurer Special Termination Event by the Reinsured:

 

  

  

  

	  	 	
1)     the Reinsurer is thirty (30) or more days in arrears on payment due to the Reinsured under this Contract and the Reinsurer has not cured such breach within thirty (30) days following written notice thereof from the Reinsured (unless the amount not so paid is the subject of a good faith dispute) (a “Reinsurer Payment Default”);

2)     the Reinsurer has ceased writing new or renewal business and has elected to run off its existing business or an insurance or other regulatory authority has ordered the party to cease writing new or renewal business;

3)     the Reinsurer has become insolvent, or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy or other agent known by whatever name, to take possession of its assets or control of its operations;

4)     a Reinsurer Change of Control has occurred.  For purposes of this Agreement, a “Reinsurer Change of Control” will be deemed to occur when either (a) an individual person, corporation or other entity, or a group of commonly controlled persons, corporations or entities, acquires, including through merger, directly or indirectly, more than fifty percent (50%) of the voting securities of the Reinsurer or obtains the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of the Reinsurer, except if such individual person, corporation or other entity is under common control with the Reinsurer or (b) Maiden Holdings, Ltd. no longer directly or indirectly controls the power to vote more than fifty percent (50%) of the voting securities of the Reinsurer;

5)     the Reinsurer's shareholders' equity is reduced to 50% or less of the amount of its shareholders’ equity at either the inception of this Contract or at the latest renewal or anniversary date of this Contract; or

6)     The Reinsurer fails to maintain an A.M. Best rating of A- (Stable) or better.

 

Termination as a result of a Reinsurer Payment Default shall be effective upon not less than ten (10) days prior written notice from the Reinsured to the Reinsurer, and termination as a result of any other Reinsurer Special Termination Event shall be effective upon not less than thirty (30) days prior written notice from the Reinsured to the Reinsurer.  For greater certainty, the Reinsured may not terminate this Contract as a result of a Reinsurer Special Termination Event unless such event is continuing on the date the applicable Reinsured delivers its notice of termination to the Reinsurer.

 

Following the effective date of the termination of this Contract as described in this termination clause all reinsurance hereunder shall remain in force until the expiration date, anniversary date, or prior termination date of all Policies included therein, unless, not later than thirty (30) days following such effective date of termination of this Contract, the Reinsured shall elect that the Reinsurer shall not be liable for any Losses that occur, accrue or arise on or after the effective date of termination.  If the Reinsured shall make such election, within thirty (30) days following the date of such election, the Reinsurer shall return to the Reinsured the unearned premium applicable to such Policies in force at the time and date of termination, less the unearned portion of the ceding commission paid thereon.

 

  

  

  

 

	  	  	
Insolvency Clause (G86)

	  	  	
1.

	
Where an Insolvency Event occurs in relation to the Reinsured the following terms shall apply (and, in the event of any inconsistency between these terms and any other terms of this Contract, these terms shall prevail):

	  	  	  	  	  	  
	  	  	  	
(1)

	
Notwithstanding any requirement in this Contract that the Reinsured shall actually make payment in discharge of its liability to its policyholder before becoming entitled to payment from the Reinsurer.

	  	  	  	  	  	  
	  	  	  	  	
a)

	
the Reinsurer shall be liable to pay the Reinsured even though the Reinsured is unable to actually pay, or to discharge its liability to, its policyholder, but

	  	  	  	  	  	  
	  	  	  	  	
b)

	
nothing in this Clause shall operate to accelerate the date for payment by the Reinsurer of any sum which may be payable to the Reinsured, which sum shall only become payable as and when the Reinsured would have discharged, by actual payment, its liability for its current net loss but for it being the subject of an Insolvency Event.

	  	  	  	  	  	  
	  	  	  	
(2)

	
The existence, quantum, valuation and date for payment of any sum which the Reinsurer is liable to pay the Reinsured under this Contract shall be those and only those for which the Reinsurer would be liable to the Reinsured if the liability of the Reinsured to its policyholders had been determined without reference to any term in any composition or scheme of arrangement or any similar such arrangement, entered into between the Reinsured and all or any part of its policyholders, unless and until the Reinsurer serves written notice to the contrary on the Reinsured in relation to any composition or scheme of arrangement.

	  	  	  	  	  	  
	  	  	  	
(3)

	
The Reinsurer shall be entitled (but not obliged) to set-off, against any sum which it may be liable to pay the Reinsured, any sum for which the Reinsured is liable to pay the Reinsurer.

	  	  	  	  	  	  
	  	  	
2.

	
An Insolvency Event shall occur if:

	  	  	  	  	  	  
	  	  	  	
(A)

	
i)

	
 (in relation to (1), (2) and (3) above) a winding up petition is presented in respect of the Reinsured or a provisional liquidator is appointed over it or if the Reinsured goes into administration, administrative receivership or receivership or if the Reinsured has a scheme of arrangement or voluntary arrangement proposed in relation to all or any parts of its affairs; or

	  	  	  	  	  	  
	  	  	  	  	
ii)

	
 (in relation to (1) above) if the Reinsured goes into compulsory or voluntary liquidation; or

	  	  	  	  	  	  
	  	  	  	  	
in each case, if the Reinsured becomes subject to any other similar insolvency process (whether under the laws of England and Wales or elsewhere); and

	  	  	  	  	  	  
	  	  	  	
(B)

	the Reinsured is unable to pay its debts as and when they fall due within the meaning of section 123 of the Insolvency  Act 1986 (or any statutory amendment or re-enactment of that section).
	  	  	  	  	  	  
	  	  	Contracts (Rights of Third Parties) Act 1999 Clarification Clause NMA 2852 A person who is not a party to this Contract has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Contract but this does not affect any right or remedy of a third party which exists or is available apart from that Act.

 

  

  

  

	  	 	
Intermediary Clause

All communications and notices served in accordance with any of the provisions of this Contract shall be addressed to the party concerned through the offices of  AII Reinsurance Broker Ltd., Hamilton, Bermuda who are hereby recognised by all parties as the Intermediary.

 

	  	 	
Amendments Clause

It is understood and agreed that any mutually agreed modifications to this Contract (whether by Addendum/Endorsement or other written correspondence) shall be binding on both parties and shall be deemed to form a part of this Contract, and attached hereto.

 

	
Arbitration

	 	
All disputes and differences arising under or in connection with this Contract shall be referred to arbitration under ARIAS Arbitration Rules.

 

The Arbitration Tribunal shall consist of three arbitrators, one to be appointed by the Claimant, one to be appointed by the Respondent and the third to be appointed by the two appointed arbitrators.

 

The third member of the Tribunal shall be appointed as soon as practicable (and no later than 28 days) after the appointment of the two party-appointed arbitrators.  The Tribunal shall be constituted upon the appointment of the third arbitrator.

 

The Arbitrators shall be persons (including those who have retired) with not less than ten years’ experience of insurance or reinsurance within the industry or as lawyers or other professional advisers serving the industry.

 

Where a party fails to appoint an arbitrator within 14 days of being called upon to do so or where the two party-appointed arbitrators fail to appoint a third within 28 days of their appointment, then upon application ARIAS (UK) will appoint an arbitrator to fill the vacancy.  At any time prior to the appointment by ARIAS (UK) the party or arbitrators in default may make such appointment.

 

The Tribunal may in its sole discretion make such orders and directions as it considers to be necessary for the final determination of the matters in dispute.  The Tribunal shall have the widest discretion permitted under the law governing the arbitral procedure when making such orders or directions.

 

The seat of arbitration shall be London, England.

 

The proper law of this Contract shall be the law of England.

 

	
Non-Waiver

	 	
The failure of the Reinsured or the Reinsurer to insist on compliance with this Contract or to exercise any right or remedy hereunder shall not constitute a waiver of any rights or remedy contained herein nor estop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedy in the future.

 

  

  

  

	
No Third Party Rights

	 	
Nothing in this Contract, express or implied, is intended to or shall confer upon any person, other than the parties hereto, any rights, benefits or remedies of any nature whatsoever under or by reason of this Contract.

 

	
Right to Associate

	 	
The Reinsurer shall have the right, but not the obligation, to associate at its own expense in the defense or settlement of all claims impacting this Contract, and the Reinsured shall cooperate with the Reinsurer in this regard. However, nothing in this clause shall over-ride the provisions of the Loss Settlements Clause.

 

 

	
Choice of Law & Jurisdiction

	 	
The validity, construction and performance of this Contract shall be governed by the law of England and Wales and the Courts of England and Wales shall have exclusive jurisdiction in any dispute hereunder.

 

 

  

  

  

IN WITNESS WHEREOF, the Parties hereto, by their respective duly authorized representatives have executed this Contract as of the dates specified below:

	
AmTrust Europe, Limited

	  	  
	
BY:

	
/s/ Jeremy Cadle

	
Dated

	
April 1, 2011

	  	  
	
AmTrust International Underwriters, Limited

	  	  
	
BY:

	
/s/ Edward Bennett, CEO

	
Dated

	
April 1, 2011

	  	  
	
Maiden Insurance Company, Limited

	  	  
	
BY:

	
/s/ David A. Lamneck, Senior Vice President

	
Dated

	
April 1, 2011

 

  

  

  

ENDORSEMENT NO. 1

to the

Quota Share Reinsurance Contract

(hereinafter referred to as the “Contract”)

between

AmTrust Europe Limited, Nottingham, England

and/or

AmTrust International Underwriters Limited, Eire.

(hereinafter collectively referred to as the “Reinsured”)

and

Maiden Insurance Company Ltd.

(hereinafter referred to as the “Reinsurer”)

IT IS HEREBY AGREED, effective 1st April 2011, that:

	
1)

	
The section entitled “Class and Period of Business” of this Contract shall be deleted and the following substituted therefor:

“This Contract shall cover all policies classified by the Reinsured as Medical Malpractice, including associated liability coverages and policies covering physician defense costs, written or renewed by the Reinsured on or after 1st April 2011.

This Contract shall also apply to all such policies written or renewed by the Reinsured on or before 31st March 2011, but only as respects Losses that occur, accrue or arise on or after 1st April 2011.  For all purposes of this Contract, the loss date as determined by the Reinsured shall be the date the Loss “occurs, accrues or arises”.

The Contract shall remain in effect continuously thereafter unless the Reinsurer or Reinsured elects to terminate this Contract at April 1, 2012 or any April 1 thereafter. If the Reinsurer or Reinsured elects to so terminate this Contract, it shall give written notice to the other party hereto not less than four months prior to the termination date.  Termination shall be on a runoff basis, with runoff to include the full original term of multi-year policies.  In the alternative, the Reinsured in its sole option may elect to cut off the Reinsurer’s liabilities and return the associated unearned premium with such cut-off to occur either 1) as of the date of termination or 2) as of the first anniversary date of each such multi-year policy that falls on or after the termination date, at the Reinsured’s sole option.”

	
2)

	
The section entitled “Commission” of this Contract shall be deleted and the following substituted therefor:

“The Reinsurer shall allow the Reinsured a Fixed Commission of 5.0% (Five Percent) on Original Net Premium ceded hereunder.

The Reinsurer shall further allow the Reinsured a Profit Share on Original Net Premiums ceded hereunder, being in addition to the 5.0% (Five Percent) Fixed Commission.

The Profit Share shall apply separately to each twelve month period this Contract remains in effect (“Contract Year”) and will be adjusted quarterly, the first adjustment to be made 1st April 2013.  Reinsured’s Profit Share is 50% of the amount by which Incurred Net Loss Ratio is below 65% of the Original Net Premium.  For purposes of calculating Profit Share, multi-year policies will be split into individual years so that the maximum original policy period in a Contract Year shall be 12 months plus odd time not exceeding 18 months in all.  The first Contract Year will be 1st April, 2011 through 31st March, 2012, both days inclusive, including the in force exposures at 1 April 2011. Subsequent Contract Years will begin at 1st April of each year.”

  

  

  

“Incurred Net Loss Ratio” shall be defined as net paid and outstanding Losses (inclusive of IBNR as established by the Reinsured after consultation with the Reinsurer), being paid and outstanding Losses (“Losses” being further defined under the Loss Settlement Clause) less third party recoveries, divided by Original Net Premium (as defined above) for risks attaching during the Contract Year, as a percentage.

	
3)

	
The section entitled “Conditions” of this Contract shall be amended by the inclusion of the following subsection directly after the subsection entitled “Loss Settlement Clause”:

“Aggregate Annual Deductible

As respects policies with effective dates prior to 1st April 2011, for the purposes of calculating the liability of the Reinsurer for losses occurring on or after 1st April 2011, the Aggregate Annual Deductible (AAD) specified under an original policy shall be apportioned on a pro rata basis by reference to the aggregate value of claims paid for the period from 1st April 2011 through the end of the policy period, and the aggregate value of claims paid for the entire period of the original policy.

The apportionment of the AAD for a Policy Period shall be provisionally calculated each month on the basis of claims paid through the prior month and the Reinsurer shall pay their share of claims on this basis of this provisional apportionment. The provisional calculation shall be submitted at the date the claims bordereau is submitted to the Reinsurer.

Settlements required as a consequence of changes in the value of the paid claims under the original policy (and consequent changes to the AAD apportionment) shall take effect at the next closing, with the adjustment paid in addition to or set off from the amount due at such closing.

The final calculation of the apportionment of the AAD shall take place within 30 days of the date that all Reinsured liability under a Policy terminates or such other time as the Parties agree and the final reconciliation be paid by the Reinsured or Reinsurer as relevant within 30 days of that calculation.

In the event this Contract (or any Contract Year hereunder if mutually agreed) is terminated on a cut off basis, the AAD under any policy that earns premium both before and after the cutoff date shall be apportioned in the same manner set forth above.”

	
4)

	
The section entitled “Security” of this Contract shall be deleted and the following substituted therefor:

“The Reinsurer will post security equal to 100% of the ceded unearned premium and outstanding Losses including IBNR, calculated by the Reinsured at 75% confidence factor immediately upon being asked to do so and adjusted quarterly.”

	
5)

	
The name of the Reinsurer shall be corrected to “Maiden Insurance Company Ltd.” in all places it appears in the Contract.

All other terms and conditions of the Contract shall remain unchanged except to the degree necessary to give effect to the changes made herein.

  

  

  

IN WITNESS WHEREOF, the Parties hereto, by their respective duly authorized representatives have executed this Endorsement as of the dates specified below:

	
AmTrust Europe, Limited

	  	  
	
BY:

	
/s/ Jeremy Cadle

	
Dated

	
July 26, 2011

	  	  
	
AmTrust International Underwriters, Limited

	  	  
	
BY:

	
/s/ Ronan Conboy

	
Dated

	
July 26, 2011

	  	  
	
Maiden Insurance Company Ltd.

	  	  
	
BY:

	
/s/ David A. Lamneck

	
Dated

	
July 26, 2011Unassociated Document

DISTRIBUTION AGREEMENT

 

This Agreement is made and entered into as of the latest date set forth on the signature lines below (the “Effective Date”) by and between Oculus Innovative Sciences, Inc., a California corporation having a place of business located at 1129 No. McDowell Boulevard, Petaluma, CA 94954 and a manufacturing site located at Industria Vidriera 81Fraccionamiento Industrial, Zapopan Norte Zapopan, Jalisco Mexico 45130 ("Company"), and Shanghai Sunvic Technology Co. Ltd, a Chinese limited liability company having a place of business at Suite 2012, 915 Zhenbei Road, Shanghai, China, 200333 (“Distributor”).

	
WHEREAS

	
Company has developed proprietary technology and know-how known as the “Microcyn Technology” which Company distributes and sells in the form of gel solutions, as further identified in Exhibit A to this Agreement,

	
WHEREAS

	
Distributor and its Subdistributors import and sell hospital supplies, OTC medical devices and has considerable experience in the marketing, sale and servicing of such supplies and devices for such applications; and

	
WHEREAS

	
Supplier desires Distributor to distribute Supplier’s Products, and Distributor desires to distribute Supplier’s Products, all as provided for in, in accordance with and subject to the terms, conditions and provisions set forth in this Agreement.

 

NOW THEREFORE in consideration of the mutual promises and undertakings of the parties hereto the parties agree as follows:

 

1.   Definitions.

 

1.1 “Confidential Information” means information of a party, which information is conspicuously marked with "Confidential", or "Proprietary" or other similar legend.  If Confidential Information is orally disclosed of it is observed, it shall be identified as such at the time of disclosure or observation and a brief written description and confirmation of the confidential nature of the information shall be sent to the recipient within thirty (30) days after the disclosure. The Solution Specifications, quantities, schedules and pricing, projections and business plans shall be considered Confidential Information hereunder whether disclosed orally or in writing, or whether or not marked "Confidential" or "Proprietary".

 

1.2 “Intellectual Property Rights” means all intellectual property rights worldwide arising under statutory or common law or by contract and whether or not perfected, now existing or hereafter filed, issued, or acquired, including all (a) patent rights; (b) rights associated with works of authorship including copyrights and mask work rights; (c) trademarks, service marks, trade dress and trade names; (d) rights relating to the protection of trade secrets and confidential information; and (e) any right analogous to those set forth herein and any other proprietary rights relating to intangible property.

 

  

  

  

1.3 “Markets” means the advanced human wound care for humans within the Territory defined in this Agreement.

 

1.4 “Purchase Order” shall mean an offer from Distributor received by Company, whether in written or other form, or in electronic form, to purchase or schedule delivery of a specified amount of Products that complies with the requirements set forth in this Agreement.

 

1.5 “Regulatory Approvals” means any and all approvals, applications, registrations, licenses, certifications and other requirements imposed by any governmental agency or other entity exercising any regulatory or other governmental or quasi-governmental authority, including but not limited to the US Food and Drug Administration, the Chinese Food and Drug Administration and the US or Chinese Environmental Protection Agency.

 

1.6 “Company’s Technology” means Company’s proprietary technology and know-how known as the Microcyn Technology, used for (among other things) wound care applications.

 

1.7 “Products” means the gel solutions based on Company’s Microcyn Technology which is to be provided by Company under this Agreement as further described in Exhibit A.

 

1.8 “Product Specifications” means the specifications for the Products as set forth in Exhibit B.

 

1.9           “Territory” shall mean the People’s Republic of China.

 

2.   Purchases and Products.

 

2.1 General.  This Agreement establishes the terms and conditions on which Company will sell to Distributor the Products.  The purchase and sale of Products between Company and Distributor shall be governed solely and exclu­sively by this Agreement, which shall supersede the terms and conditions contained in any purchase order, acknowledgment or other document related to the purchase and sale of Products.  Company’s failure to object to any additional or different term or condition contained in any communication from Distributor shall not be deemed a waiver of the terms of this Agreement and any additional or different term or condition is expressly rejected unless agreed to by the Company in writing.  This Agreement shall not be modified, supplemented or interpreted by any trade usage or prior course of dealing not made a part of this Agreement by its express terms.

 

2.2 Appointment.  Subject to all the terms and conditions of this Agreement, Company hereby appoints Distributor for the Term of this Agreement as an exclusive distributor of the Products only within the Market and only within the Territory. Distributor may distribute Products only to persons and entities located and taking delivery within the Territory.  Furthermore, Solution distributed by Distributor for further distribution may be distributed only through subdistributors who are bound in writing for Company's benefit to all the restrictions on Distributor contained in this Agreement. 

 

  

  

  

 

2.3 Development Fee.  After execution of this Agreement, Distributor will pay the Company a one time, non-refundable up-front fee, equal to [ ]* ($[ ]* USD) for the exclusive right to market and sell products referenced in Exhibit A.  [ ]* ($[ ]*) will be due by June 24th, 2011 and the balance of [ ]* ($[ ]*) is due within [ ]* after the regulatory approval of the product by the China State Food and Drug Administration (SFDA).

2.4 Purchase Orders and Forecasts.  Solution is delivered based on F.O.B. term, that Company must deliver the products to the loading port. Company cannot adjust the price of the product at any time during the first 3 years of the agreement, Company shall have the right, in its sole discretion, to change such prices with one hundred eighty (180) days' written notice before the execution of the updated prices for the 4th and 5th year of the agreement. New prices will apply to all shipments made after such notice period.  If there are unavoidable circumstances that the price must be adjusted, then both parties can negotiate and decide on the price issue. In addition, Distributor will pay all charges, including without limitation transportation charges and insurance premiums and shall be responsible for all taxes, duties and other governmental assessments (this includes, without limitation, sales taxes, unless Distributor provides appropriate resale certificates).

 

2.5 Purchase Order and Forecast.  On or before the 15th day of each month, Distributor will submit to Company a Purchase Order covering the next calendar month and a non-binding, rolling forecast of purchases of Products for the next three (3) months after the period covered by the Purchase Order.

 

2.6 Purchase Orders. The following requirements shall apply to all purchase orders:

 

(a) Purchase Orders shall be issued by Distributor to Oculus or its designee; and

 

(b) All Purchase Orders shall contain such pricing, requested shipment schedule, delivery address, requested carrier and quantity terms as set forth in Exhibit A; and

 

(c) Company must arrange shipment of Solutions within thirty (30) days after receipt of a valid Purchase Order; and

 

(d) All Purchase Orders shall reference this Agreement.

 

When acknowledgement of receipt and acceptance of the Purchase Order is made by Company (either by written notice or by shipment of the Products covered by the Purchase Order), the Purchase Order shall be deemed a commitment to purchase and sell the Products pursuant to the terms of this Agreement.  Shipment and delivery schedules will be at all times subject to Company’s approval, and Company may at any time decline to make any shipments or deliveries except upon receipt of payment or upon terms and conditions or security satisfactory to Company.

 

* Confidential material redacted and separately filed with the Commission.

  

  

  

 

2.7 Pricing. The Solution prices are set forth in Exhibit A. (Refer to 2.4 as settled agreement.)

 

2.8 Taxes.  Prices are exclusive of ocean transportation and insurance. All taxes, duties and other related charges that occur from Mexico or U.S. delivery port to final destination in China are the responsibility of the distributor.  Unless prior to shipment of the Products the Distributor provides Company with a tax exemption certificate acceptable to the appropriate taxing authorities, Distributor shall pay any present or future excise, sales, use or similar tax, duties or other governmental charges, and Distributor agrees to indemnify Company against liability for payment of such taxes.  Such taxes, when applicable, will appear as separate items on the invoice.

 

2.9 Payment Terms. Payment shall be made in full prior to a shipment of product by wire to an Oculus account that will be furnished.

 

2.10  Minimum Orders; Minimum Purchase.  Minimum ordering quantities are set forth in Exhibit A.   No orders shall be accepted, unless such orders are at least equal to or greater than the minimum quantities set forth in Exhibit A.    Distributor agrees to purchase sufficient Products to meet the minimum purchase obligation set forth in Exhibit A for each calendar year during the term of this Agreement.  If, at the end of each calendar year during the term of this Agreement, Distributor has failed to purchase the quantity of Products specified in the minimum purchase obligation set forth in Exhibit A, then Company may, in its sole discretion, adjust the price charged for all Products sold to Distributor during the term and recover from Distributor the difference between: (i) the greater of the price Company would have charged for the Solution absent the volume discount or, a [ ]* ([ ]*%) increase in the purchase price set forth on Exhibit A attached hereto; and (ii) the price Company charged Distributor during the term.

 

3.   Delivery and Acceptance.

 

3.1 Delivery of Solution.  Delivery of Solution shall be F.O.B. point of Mexico or U.S. delivery port.  Regarding shipment dates, refer to 2.6 (c).

 

3.2 Packaging.  Company shall package the Products for shipment to Distributor in the manner customarily used by Company(refer to Exhibition A), unless Distributor requires different packaging specifications, in which case any such different packaging shall be at Distributor’s expense.  Distributor will provide such reasonable specifications to Company in writing within thirty (30) days of the Effective Date.

 

3.3  Risk of Loss or Damage.  Title and risk of loss will be transferred to Distributor upon delivery of Products by Company to the point of Mexico or U.S. delivery port.  Unless Company receives specific shipping instructions from Distributor within thirty (30) days prior to the scheduled shipment date, Company may exercise its own discretion in selecting the method of shipment.  In no event will the carrier be considered an agent or representative of Company.  Distributor will also bear the risk of loss with respect to any Products rejected by Distributor until received by Company.

 

* Confidential material redacted and separately filed with the Commission.

  

  

  

3.4  Delivery Performance. Company may make partial deliveries of the Products under this Agreement.  Partial deliveries will be separately invoiced by Company. Shipment dates and separate invoices of partial deliveries must be exactly set and issued by Company. Distributor only pays for separate deliveries upon separate invoices.

 

3.5 Cancellation; Rescheduling.  Distributor and Company may not cancel or reschedule or change the quantity to any shipment under a Purchase Order once the Purchase Order is accepted by Company.

 

3.6 Product Acceptance. Company is fully responsible for the quality of the products.  Products shipped by Company must materially conform to the Solution Specifications as further defined in Exhibit B at the time of shipment by Company.  Use of the Products by Distributor or its customers, or the failure by Distributor to return the defective Products after fifteen (15) days following the arrival date of the Distributor’s warehouse of such Products shall constitute acceptance by the Distributor.  Any Products properly rejected will be returned to Company in accordance with the return procedures set forth in Article VI with respect to warranty claims.

 

3.7 Security Interest.  Company hereby reserves and Distributor hereby grants to Company a purchase money security interest in the Products sold under this Agreement and the proceeds thereof and accounts receivable, until payment in full of the purchase price.  Distributor agrees to execute any financing statements, continuation statements or other documents as Company requests to protect its security interest.

 

3.8 Force Majeure.  In no event will Company be liable for any reprocurement costs for delay in delivery or non-delivery due to causes beyond Company’s reasonable control, including but not limited to supplier delays, shortages of labor, energy, components, raw materials or supplies, acts of God, labor unrest, fire, explosion or earthquake.  If such delay occurs, the date of delivery shall automatically be extended for a period equal to the time lost by reason of the delay.  In any event, Company shall not be in default for failure to deliver unless Company does not commence to cure such failure within ten (10) days after receipt of written notice from Distributor of such failure to deliver.  Distributor’s sole remedy for such default shall be cancellation of the applicable Purchase Order.

 

4.   Certain Obligations.

 

4.1 Distribution Efforts.  Distributor shall consult and cooperate with Supplier in connection with the marketing, sale and distribution of Supplier’s Products under this Agreement.  Without limiting the generality of the foregoing, Distributor shall prepare and submit to Supplier, at least ninety (90) days prior to the commencement of each Contract Year, a written plan for the marketing, sale and distribution of Supplier’s Products under this Agreement in the Territory during such Contract Year.  Distributor’s plan shall include, without limitation:  (a) a description of the promotional, advertising and other marketing activities planned by Distributor for each division within the Territory during the applicable Contract Year; (b) a budget and schedule for such activities; (c) Distributor’s best estimate of anticipated sales of Supplier’s Products in each  division within the Territory during the applicable Contract Year; and (d) a description of any training or other support to be provided by Distributor during the applicable Contract Year, which shall be subject to Supplier’s approval not to be unreasonably withheld or delayed.  Distributor shall use commercially reasonable effort to comply with the plan for each Contract Year.  Distributor shall supply all sales and marketing material in the Field (included, but not limited to translation of promotional literature marketing materials manuals and other documentation for the gel. Supplier shall supply Distributor, as reasonably, requested from time to time, information required in order to prepare sales and marketing materials.

 

  

  

  

4.2 Lab testing.  Company shall cooperate with Distributor for the rebottling aging test.  The Distributor will be responsible for sending samples using Fedex to Company for testing.  Company shall provide test reports back to Distributor.

 

4.3 Documents and Licensing. The Company must provide the necessary documentations and licensing to Distributor in order to allow rebottling the products in China within 30 days after the agreement is executed.

 

4.4 Products Registration and Extension. Distributor will be responsible for updating the registrations before expiration date in order to continue the legal sale of Products in China. Company shall provide necessary documents and information to Distributor for the registration.

 

4.5 Compliance with Laws.  Distributor shall conduct its business in accordance with all laws and regulations of any country in which Licensee is marketing and distributing the Products.  Without limiting the foregoing, Licensee shall not market sell any Solution except in compliance with the Regulatory Approvals and all applicable laws and regulations.

 

4.6 Use of Products.  Distributor’s purchase of Solution is solely for use by Distributor in the Markets.  Distributor shall not market, distribute, sell the Solution on a stand-alone basis or in any market other than the Markets.

 

4.7 Support.  Subject to Company’s scheduling and personnel constraints, Company will provide to Distributor reasonable engineering, research, development and  marketing support, including training in the proper use and clinical benefits of the Products, and access to its personnel as needed for sales of the Products in the Markets. The two parties shall have scheduled academic exchanges.  Chinese experts or professionals will come to the U.S. for observation and study, and/or Company will send their experts or professionals to China. Each party shall bear their own expenses for the visit trip.

 

4.8 Branding of Solution.   Distributor may market, sell and distribute the Products using Company’s trademarks, logos, and other proprietary designations, packaging and marketing materials.  Distributor shall have no right whatsoever to use Company’s marks without Company’s prior written consent.

 

4.9 Shared Knowledge.  Company agrees that Distributor can use the website link between the two parties.

 

  

  

  

4.10 Management Review.  The senior project managers of both parties will meet at least bi-annually during the term of this Agreement to discuss the status of the parties’ business relationship, each party’s upcoming plans relating to the Products, the competitive situation in the Markets for the Products, and similar matters.

5.   Ownership.

 

5.1 Company’s IP.  Company is and shall be the sole and exclusive owner of all Intellectual Property Rights in and to the Products and Company’s Technology, including without limitation its Microcyn Technology, and any and all inventions, technology, know-how and other intellectual property made, conceived, created, reduced to practice or otherwise developed as part of Company’s services pursuant to Article IV of this Agreement, and all improvements, enhancements, modifications and derivatives of any of the foregoing (collectively, “Company’s IP”).

 

5.2 No Reverse Engineering.  Distributor acknowledges that the Products contain the valuable trade secret information of Company and other proprietary information of Company.  Accordingly, Distributor agrees that it will not, at any time during the term of this Agreement or thereafter, reverse engineer or otherwise attempt to discern the trade secret information of the Products, nor will Distributor permit any third party to do any of the foregoing.   Company acknowledges that the Distributor’s Process contains the valuable trade secret information of Distributor and other proprietary information of Distributor.  Accordingly, Company agrees that it will not, at any time during the term of this Agreement or thereafter, reverse engineer or otherwise attempt to discern the trade secret information of the Distributor’s Process, nor will Company permit any third party to do any of the foregoing.

 

6.   Limitation On Liability And Remedies.

 

6.1 Company Limited Warranty; Limitation of Remedies.

 

(a) Company warrants that each Solution delivered will, under normal use and conditions, substantially conform to the applicable Solution Specifications for a period of thirty (30) days after the specific Solution has been shipped to Distributor.  This limited warranty does not cover the results of accident, abuse, misapplication, vandalism, acts of God, use contrary to specifications or instructions, or modification by anyone other than Company.

 

(b) Company’s entire liability and Distributor’s exclusive remedy shall be replacement of the materially non-conforming Products.  Distributor may reject and return such non-conforming Products for modification or replacement by Company provided that Distributor must first obtain a Return Material Authorization from Company. Company shall issue a Return Material Authorization ("RMA") within two (2) business days after Distributor's request. Any additional terms of the RMA procedure shall be mutually agreed to between the parties. Distributor shall include the RMA number with all returns.  Distributor shall return all such non-conforming Products to Company within fifteen (15) days of Distributor’s receipt of such Products.

 

(c) Company is liable for all transit costs associated with replacement (freight/insurance/customs duty) of non-conforming Solution. Any replacement Solution will be warranted according to its new production date. If modification or replacement is not reasonably possible, then Company may elect to refund to Distributor an amount equal to the purchase price for the non-conforming Products.  Company shall also be responsible for freight, insurance and customs duty costs Distributor incurs incident to the non-conforming Solution.

 

  

  

  

(d) If Company determines that any returned Solution conformed to the warranty, Company will return the Solution to Distributor at Distributor’s expense, freight collect, along with a written statement setting forth Company’s conclusion that the returned Solution was not defective, and Distributor agrees to pay Company’s reasonable cost of handling and testing the returned Solution.

 

(e) EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE VI, THE PRODUCTS ARE PROVIDED “AS-IS” WITHOUT WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND AGAINST INFRINGEMENT.  EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE VI, COMPANY DOES NOT WARRANT THAT THE PRODUCTS WILL MEET SPECIFIC REQUIREMENTS.

 

6.2 Consequential Damages Waiver.  IN NO EVENT WILL COMPANY BE LIABLE TO DISTRIBUTOR OR ITS CUSTOMERS FOR ANY INCIDENTAL, SPECIAL, CONSEQUENTIAL, PUNITIVE OR INDIRECT DAMAGES, INCLUDING BUT NOT LIMITED TO ANY LOST PROFITS OR LOST SAVINGS ARISING OUT OF THE USE OR INABILITY TO USE THE PRODUCTS OR OTHERWISE ARISING OUT OF OR RELATED TO THIS AGREEMENT, EVEN IF COMPANY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

6.3 Limitation of Liability.  COMPANY’S AGGREGATE LIABILITY UNDER OR ARISING OUT OF THIS AGREEMENT FOR ANY CLAIM, WHETHER BASED ON CONTRACT, TORT OR OTHERWISE, SHALL BE LIMITED TO AN AMOUNT EQUAL TO THE AMOUNT PAID BY DISTRIBUTOR TO COMPANY UNDER THIS AGREEMENT FOR THE PRODUCTS THAT ARE THE SUBJECT OF THE LIABILITY IN THE SIX-MONTH PERIOD IMMEDIATELY PRECEDING THE DATE ON WHICH THE CLAIM AROSE.

 

7.   Indemnification.

 

7.1 Indemnity.  Distributor agrees that it will, at its own expense, defend all suits or proceedings instituted against Company arising out of any marketing, sale or use of the Solution that is not expressly permitted by the terms of this Agreement or any breach of Distributor’s obligations hereunder.

 

8.   Confidential Information

 

8.1 Ownership of Confidential Information.  Company is and shall remain the owner of its Confidential Information.  Nothing contained in this Agreement shall be construed as granting any rights by license or otherwise to such Confidential Information.

 

  

  

  

8.2 Agreement to Maintain Confidentiality.  Distributor shall take all reasonable steps to ensure that it and its agents maintain the confidentiality of the Confidential Information.

 

8.3 Agreement Not to Use or Disclose.  Except as provided in this Agreement, Distributor shall not dis­close to any other person or entity the Company’s Confidential Information of the disclosing party or use such Confidential Information for any purpose other than the purposes expressly authorized under this Agreement.  Such Confidential Information may be disclosed to an independent contractor of the receiving party solely in the performance of the obliga­tions of the receiving party under this Agreement; provided, however, that the receiving party shall ensure that any such independent contractor has first signed an appropriate confiden­tiality agreement, at least as restrictive as the provisions contained in this Article VIII and the receiving party shall remain fully responsible for the independent contractor’s performance of its obligations under such agreement.

 

8.4 Specific Performance.  The parties recognize and agree that any breach by the receiving party of its obligations contained in this Article VIII would cause irreparable harm to the disclosing party such that the disclosing party could not be compensated for the harm by money damages alone.  Therefore, the parties agree that the provisions of this Article VIII shall be enforceable by specific performance, including injunctive relief.

 

9.   Term and Termination.

 

9.1 Term.  This Agreement shall be effective and in full force for five (5) years from the Effective Date (“Term”). The expiration date shall be the fifth anniversary of the Distributor’s receiving the China SFDA approval to market the Solution in the Territory.  Thereafter the Agreement shall renew by mutual written consent for additional, successive periods of three (3) years each, unless terminated earlier pursuant to this Article 9.

 

9.2 Termination for Failure to Meet Minimum Purchase Requirement.  Company will have the right to terminate this Agreement if Distributor fails to meet the Minimum Purchase Requirements as listed in Exhibit A.  Company will provide one hundred and twenty (120) days written notice upon failure to meet the Minimum Purchase Requirements during which time the Company will maintain effective pricing to Distributor and may elect to sell products to other parties.

 

9.3 Termination for Cause.  Either party will have the right to terminate this Agreement for cause upon forty five (45) days’ prior written notice to the other party of a material breach of this Agreement by the other party that remains uncured during such forty five (45) day period.

 

9.4 Effect of Termination.

 

(a) Upon the termination of this Agreement for any reason, each party shall retain ownership of its respective Confidential Information and shall return to the other party all of the Confidential Information received from the other party up to the time of termination.

 

  

  

  

(b) Upon termination of this Agreement, Distributor will pay to Company any amounts due under this Agreement.

 

(c) If Distributor terminates this Agreement without cause or if Company terminates this Agreement for cause, then, Company may elect to (i) continue to supply Products to Distributor under Purchase Orders that Company accepted prior to the effective date of termination and Distributor agrees to pay Company the purchase price for such Products or (ii) cancel all such Purchase Orders and Company will have no liability for such cancellation.

 

(d) If Company terminates this Agreement without cause or if Distributor terminates this Agreement for cause, then Distributor may elect either (i) to have Company supply the Products under Purchase Orders that Company accepted prior to the effective date of termination and Distributor agrees to pay Company the purchase price for such Products or (ii) to cancel such Purchase Orders in accordance with the terms of this Agreement.

 

(e) Neither Company nor Distributor shall be liable to the other for compensation, reimbursement or damages for the loss of prospective profits, anticipated sales or goodwill as a result of the termination of this Agreement in accordance with the terms of Section 9.2 or Section 9.3.

 

9.5   Survival.  Upon the expiration, or the termination for any reason, of this Agreement, the rights and obligations of the parties under Sections 2.6, 2.7, 3.7, 3.8, 4.1, 9.4, 9.5 and Articles I, V, VI, VII, VIII, IX and X shall survive and remain in effect.

 

10.   Miscellaneous.

 

10.1   Notices.  All notices shall be deemed given (i) five days after being deposited in the U.S. mail, postage prepaid, certified or registered, return receipt request­ed; or (ii) one day after being sent by overnight courier, charges prepaid, with a confirm­ing fax; and addressed as set forth at the signature line below or to such other address as the party to receive the notice or request so designates by written notice to the other.

 

10.2   Export Controls. Distributor shall comply with all applicable laws and regulations, including without limitation, applicable export and import laws and regulations. Distributor will not export, reexport, divert, transfer or disclose, directly or indirectly, the Products and any related technical information or materials without complying with the export control laws and all legal requirements in the relevant jurisdiction.  Obtaining any necessary export or import approval for the Products and/or any portion thereof is the responsibility of Distributor.

 

10.3           Storage and Distribution. Supply of Solution by Company to Distributor will be in accordance with the shipping instructions provided by Company.  The storage conditions will be established and defined in the Solution specifications.  Expiration dating of the Solution will be provided by the Company.

10.4           Customer Complaints. All customer feedback received by Company or Distributor which could be related to the quality of Company will be communicated in writing to the Quality Assurance Department of Company as soon as possible.  Complaints will be documented and managed in accordance with Company procedures.  Complaints relating to Company manufacturing or Quality Control issues will be fully investigated by Distributor’s Quality Unit and a report prepared and issued to Company’s QA Representative within a reasonable time-frame mutually agreed to between Company and Distributor from receipt of the complaint unless otherwise specified (medical urgency).

  

  

  

10.5           Recalls. In the event either party has reason to believe that one or more batches of any of the Solution which are the subject of this Agreement should be recalled or withdrawn from distribution, such party shall immediately inform the other in writing.  Recalls will be managed by Company in accordance with Company procedures.

10.6           Audits. Upon reasonable advanced notice, Distributor will permit Company, or persons designated by Company, to audit manufacturing and storage facilities, processes and related procedures used by Distributor to process, inspect, package, label or store Solution and may also be performed by Company representatives to qualify facilities and equipment and to ensure regulatory compliance of Distributor quality systems.  Distributor will provide a written response to any audit findings communicated to Distributor in an Audit Report.  The final determination for fitness of Distributor as a contract manufacturer for Company Product rests with Company.

 

10.7           Assignment and Subcontracting.  This Agree­ment and all rights and obligations hereunder are personal to the parties hereto and shall not be assigned by either party to any third party without the prior written consent thereto by the other party except that Company may assign this Agreement to an affiliate or to a successor to all or substantially all of the Company’s assets or to a majority of Company’s voting stock. This Agreement shall benefit and be binding upon the parties to this Agreement and their respective permitted successors and assigns.

 

10.8           Waiver.  No term or condition of this Agree­ment shall be deemed waived unless such waiver is in a writing executed by the party against whom the waiver is sought to be enforced.  Failure or delay in the exercise of any right, power or privilege hereunder shall not operate as a waiver thereof or of any subsequent failure or delay.

 

10.9           Governing Law, Jurisdiction, Venue.  The formation, validity, construction and the performance of this Agreement are governed by the Laws of the State of California. In the event of any differences or disputes arising out of the performance of this Agreement, the parties agree that the same shall be settled through discussions between them.  If the differences or disputes remain unresolved thereafter, the same would be settled through an arbitration proceeding, to be held in Hong Kong, under the substantive Laws of the State of California.  The English language shall be the controlling language.

 

10.10           Severability.  If any of the provisions of this Agreement in any way violate or contravene any laws applicable to this Agreement, such provision shall be deemed not to be a part of this Agreement and the remainder of this Agreement shall remain in full force and effect.  In such event, the parties agree to negotiate in good faith to substitute legal and enforceable provisions that most nearly effect the original intent of the severed provision.

 

  

  

  

10.11           Subject Headings.  The captions and headings used herein are intended for convenience only, and shall not affect the construction or interpretation of any section or provision of this Agreement.

 

10.12           Entire Agreement; Amendments.  This Agreement, including Exhibits A and B hereto, constitutes the entire understanding and agreement of the parties related to the subject matter hereof, and supersedes any and all prior or contemporaneous offers, negotiations, agreements and/or understandings, written or oral, as to such subject matter.  Except as provided herein, no amendment, revision or modification of this Agreement shall be effective or binding unless made in writing and signed by the party against whom enforcement is sought.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date transcribed below.

 

	
COMPANY:

OCULUS INNOVATIVE SCIENCES, INC.

	
DISTRIBUTOR:

Shanghai Sunvic Technology Co. Ltd

	 	 
	
BY:  Bruce Thornton

 

TITLE:  Executive Vice President

 

DATE:  June 26, 2011

	
BY:  _________________________

 

TITLE: _______________________

 

DATE: June 14, 2011

 

	
ADDRESS:  1129 No. McDowell Boulevard

Petaluma, CA 94954

 

PHONE: (707) 283-0550

 

FAX: (707) 283-0551

	
ADDRESS: Suite 2012, 915 Zhenbei Road, 

Shanghai, China, 200333

 

PHONE: (___) __________________

 

FAX: (___)  ____________________

 

 

 

 

 

MANDARIN TRANSLATION OF DEFINITVE ENGLISH TEXT FOR INFORMATION ONLY

 

  

  

  

 

EXHIBIT A

 

PRODUCTION VOLUME QUANTITY AND PRICING SCHEDULE

 

	
I.

	
Solution

 

	
  

	
The gel solution shall be defined as Microcyn Skin and Wound Care Gel that is manufactured by Oculus using Oculus’ patented electrolysis process and currently sold under the name Microcyn in the United States in the advanced wound care human health market.”

 

	
  

	
From time to time, the Company may introduce new products into the marketplace for use in the Market.  The parties agree to work in good faith regarding distribution rights to those new products in the Territory.

 

	
II. 

	
Minimum Order

 

Minimum ordering quantity per purchase order to be placed with Company under this Agreement shall not be less than $[ ]* per shipment and may be comprised of any combination of the product sizes noted below. The minimum ordering quantity per purchase order before the approval from the SFDA is not subject to the minimum order requirement.

 

	
III. 

	
Pricing and Annual Minimum Quantity

 

The annual minimum purchase order volume to maintain distribution rights within the Territory is as listed below. The first year starts upon the SFDA regulatory approval of the product. A total amount of $[ ]* must be placed within the first month after Distributor getting the SFDA regulatory approval.

 

	
($US Dollars)

	
Year 1

	
Year 2

	
Year 3

	
Year 4

	
Year 5

	  	  	  	  	  	  
	
Minimum Sales

	
$[ ]*

	
$[ ]*

	
$[ ]*

	
$[ ]*

	
$[ ]*

	
Price per 100 liter drum

	
$[ ]* 

	
$[ ]* 

	
$[ ]*

	
$[ ]*

	
$[ ]*

	
Price per 10 liter unit

	
$[ ]* 

	
$[ ]* 

	
$[ ]*

	
$[ ]*

	
$[ ]* 

 

Above prices do not include shipping costs from destination port in Mexico or U.S. The Distributor assumes shipping and insurance costs from destination port in Mexico or U.S. to final destination in China.

 

[ ]* shall equal [ ]* % of every purchase order. If in Year 1 Distributor purchase $[ ]* worth of products, then Company shall provide $[ ]* worth of [ ]* to Distributor. In Year 2 Distributor purchase $[ ]* worth of products, Company shall provide $[ ]* worth of [ ]*. Distributor assumes shipping and insurance costs for [ ]* from destination port in Mexico or U.S. to final destination in China.

 

* Confidential material redacted and separately filed with the Commission.

 

  

  

  

 

EXHIBIT B

 

PRODUCT SPECIFICATIONS

 

Product Specifications shall mean the product claims and specifications contained in the Company’s current Microcyn Skin and Wound Gel FDA cleared 510(K) label claim sold in the United States of America as an advanced wound care product with no less than a eighteen (18) month self life from date of shipment. The production date of the products cannot exceed more than 30 days since the shipment date of the products.

For each lot of Products shipped, the Company will provide copies to Distributor of a Certificate of Conformation, attached as Exhibit C, reflecting the Solution meets the manufacturer’s specifications for the following tests:

 

	 	1.  pH:	[ ]*
	 	2.  Free Available Chlorine:	[ ]*
	 	3.  Microbial Kill:	[ ]*

* Confidential material redacted and separately filed with the Commission.

  

  

  

EXHIBIT C

CERTIFICATE OF CONFORMATION

	
Lot#:

	
H -

	
No of units:

	  
	
Manufacturing date:

	  
	
Expiration date:

	  
	
Chemical analysis

	
pH-value

	  
	
Free available Chlorine

	
Ppm

	
Microbiological Spore Reduction

	  
	
Tested by:

	  
	
Date:

	  
	  	  

CERTIFICATE OF ANALYSIS

Microcyn Skin and Wound Gel

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00192-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00192-of-00352.parquet"}]]