Exhibit 99.1
DISTRIBUTION AGREEMENT
THIS IS AN AGREEMENT (the "Agreement"), made as of this 6th day of June,
1999 (the "Effective Date"), by and among Diametrics Medical Incorporated, a
Minnesota corporation having its principal place of business at 0000 Xxxxxx
Xxxx, Xx. Xxxx, Xxxxxxxxx 00000 ("COMPANY") and Hewlett Packard or its successor
in a planned reorganization, a Delaware corporation, having its principal place
of business at 0000 Xxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 ("DISTRIBUTOR").
WITNESSETH:
WHEREAS, COMPANY develops, manufactures (or has manufactured), sells and
distributes point of care medical diagnostic products for blood analysis,
including certain continuous and intermittent monitoring products which include
diagnostic probes and cartridges and related hardware and accessories for
monitoring certain components of blood; and,
WHEREAS, DISTRIBUTOR and its subsidiaries develop, manufacture and
distribute patient monitoring systems and other medical products throughout the
world; and
WHEREAS, COMPANY seeks to sell certain of its products to DISTRIBUTOR for
distribution on a worldwide basis, and DISTRIBUTOR desires to purchase such
products sold by COMPANY for distribution and resale as a stand-alone system or
an option to or an element of DISTRIBUTOR's products, and
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and subject to the terms and conditions set forth herein below,
DISTRIBUTOR and COMPANY agree as follows:
ARTICLE 1. Definitions
The following terms, when used herein with initial capital letters, shall
have the following respective meanings:
1.1 Acceptance. Indication by DISTRIBUTOR that, upon inspection or deemed
acceptance by DISTRIBUTOR as set forth in Section 4.8, the Products conform to
an agreed upon test procedure which shall be based upon the Product
specifications and labeling and FDA and EU specifications applicable to such
Product.
1.2 Accessories. Those accessories for the Intermittent Monitoring
Products, having the specifications set forth on Exhibit 1.2 (as may be changed
from time to time as provided herein) and those accessories for the Continuous
Monitoring Products, having the specifications set forth on Exhibit 1.4 (as may
be changed from time to time as provided herein) (and including Improved
Products thereof).
1.3 Affiliate. Any person, firm, corporation or other legal entity which
controls, is controlled by or is under common control with COMPANY or
DISTRIBUTOR.
1.4 Calibrators. The calibrator portion of the Continuous Monitoring
Products, having the specifications set forth on Exhibit 1.4 (as may be changed
from time to time as provided herein) (and including Improved Products thereof).
1.5 Cartridges. The cartridge portion of the Intermittent Monitoring
Products, having the specifications set forth on Exhibit 1.2 (as may be changed
from time to time as provided herein) (and including Improved Products thereof).
1.6 Competing Product. (a) With respect to the Continuous Monitoring
Products, any in-vivo or ex-vivo blood analysis products within the Field that
compete directly with the Continuous Monitoring Products in humans, and (b) with
respect to the Intermittent Monitoring Products, any in vitro blood analysis
products for critical care and emergency care applications that compete directly
with the Intermittent Monitoring Products in humans.
1.7 Confidential Information. Information of any kind and form, whether
technical or business, which a Party hereto holds in confidence and regards as
valuable, but only when treated by the disclosing Party as set forth in Article
12.
1.8 Continuous Monitoring Products. Those continuous monitoring products
(including Improved Products) sold by COMPANY for use in the applicable Field
and currently marketed under the trademarks ParaTrend(R), NeoTrend(TM) and
TrendCare(TM), consisting of the Sensors, Calibrators, Monitors, Patient Data
Module and Accessories including the manuals, labeling, packaging and package
inserts for such Continuous Monitoring Products. The Continuous Monitoring
Products expressly exclude the NeoCath products in their oxygen-only form as of
the Effective Date; the NeoCath product will only be distributed to existing
NeoCath product users and will not be changed or enhanced without DISTRIBUTOR's
consent.
1.9 Effective Date. June 6, 1999
1.10 Exclusivity Period. The period starting on June 6, 1999, during which
DISTRIBUTOR has the exclusive right hereunder to distribute the Products in the
Field, until such period terminates or expires as provided herein.
1.11 Extension Term. The extension term or terms of this Agreement, as
described in Section 11.1.
1.12 Field. (a) With respect to the Continuous Monitoring Products,
intra-vascular monitoring of biochemical and physiological parameters in humans.
The Field excludes all other uses or applications, including without limitation,
all applications in the central nervous system (i.e. the cranial cavity or the
spinal column) and all monitoring in tissue and fluids other than blood, and (b)
with respect to the Intermittent Monitoring Products, in vitro analysis of blood
in humans.
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1.13 Fiscal Quarter or FQ. With respect to any Fiscal Year, the periods
November 1 through the following January 31 ("FQ1"), February 1 though the
following April 30 ("FQ2"), May 1 though the following July 31 ("FQ3"), and
August 1 though the following October 31 ("FQ4").
1.14 Fiscal Year or FY. The period from November 1 through the following
October 31of the applicable year.
1.15 Gross Margin. DISTRIBUTOR's average selling price for the Products to
third parties, as determined in accordance with DISTRIBUTOR's accounting
practices and procedures, consistently applied, less the prices actually paid by
DISTRIBUTOR to COMPANY for such Products (including shipping, handling and
import duties thereon), for the relevant Fiscal Quarters. In the case of
international sales, Gross Margin does not include the Uplift, as defined below.
In the event that Products are sold or bundled by DISTRIBUTOR or its Affiliates
along with other products and/or services at a package price, or are transferred
without or for reduced consideration, the Gross Margin shall be allocated on an
equitable and pro rata basis with such other products and/or services.
1.16 IDMS Software. The software portions of the Intermittent Monitoring
Products, having the specifications set forth on Exhibit 1.2 (as may be changed
from time to time as provided herein) (and including Improved Products thereof).
1.17 Improved Products.
(a) Any Product that incorporates (a) any on-going improvements,
modifications or enhancements, such as bug fixes, which are developed by COMPANY
pursuant to Section 7.3 or (b) any improvements, modifications or enhancements
to the current platform for XXXX and TrendCare, such as new interfaces or new
measurement parameters, such as glucose, lactate or electrolytes, for the
Continuous Monitoring Products, or new electrochemical measurements or new
modules for the Intermittent Monitoring Products which are developed by COMPANY,
and
(b) any new generation continuous or intermittent blood analysis product
for use in the Field (e.g. a new platform (such as thick/thin films), new
measurement methodology (such as electrochemical or optical measurement), or
separate platform, methodology, application, intellectual property or Product in
the Field acquired from a third party) that is developed or acquired by COMPANY
during the Exclusivity Period and the development or acquisition of which is
funded at least (***) percent (***) by DISTRIBUTOR as provided in Section 7.1.
1.18 Initial Term. The initial term of this Agreement, as described in
Section 11.1.
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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1.19 Intermittent Monitoring Products. Those intermittent monitoring
products (including Improved Products) sold by COMPANY for use in the applicable
Field and currently marketed under the trademark XXXX(R), and consisting of the
XXXX Analyzer, Cartridges, Accessories, IDMS Software, and Modules (such as the
SureStep Pro Blood Glucose Module) including the manuals, labeling, packaging
and package inserts for such Intermittent Monitoring Products.
1.20 XXXX Analyzers. The analyzer portion of the Intermittent Monitoring
Products, having the specifications set forth on Exhibit 1.2 (as may be changed
from time to time as provided herein) (and including Improved Products thereof).
1.21 Minimum Purchase Requirement. The aggregate minimum dollar amount of
Products to be purchased by DISTRIBUTOR in the applicable Fiscal Year, as set
forth on Exhibit 1.21.
1.22 Modules. The module portion of the Intermittent Monitoring Products
(such as the SureStep Pro Blood Glucose Module), having the specifications set
forth on Exhibit 1.2 (as may be changed from time to time as provided herein)
(and including Improved Products thereof).
1.23 Monitors. The monitor portion of the Continuous Monitoring Products,
having the specifications set forth on Exhibit 1.4 (as may be changed from time
to time as provided herein) (and including Improved Products thereof).
1.24 New Products. Any new generation continuous monitoring product or
intermittent blood analysis product for use in the Field (a) which is not a
Product or an Improved Product, (b) which is developed or acquired by COMPANY
during the Exclusivity Period, and (c) the development or acquisition of which
is not funded at least (***) percent (***%) by DISTRIBUTOR as provided in
Section 7.1. All COMPANY products in the Field are either Products, Improved
Products or New Products. New Products shall be subject to Section 7.4.
1.25 Party. Either DISTRIBUTOR or COMPANY, as the case may be.
1.26 Patient Data Module. The patient data module portion of the Continuous
Monitoring Products, having the Specifications set forth on Exhibit 1.4 (as may
be changed from time to time as provided herein) (and including Improved
Products thereof).
1.27 Products. The Continuous Monitoring Products and Intermittent
Monitoring Products, collectively.
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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1.28 Regulatory Approval. Applications for permission or clearance and
permissions, clearances or approvals from local and national governments, if
required in any country or jurisdiction, to market, and sell Products.
1.29 Sensors. The disposable sensor portion of the Continuous Monitoring
Products, having the specifications set forth on Exhibit 1.4 (as may be changed
from time to time as provided herein) (and including Improved Products thereof).
1.30 Transition Period. The period from the Effective Date through October
31, 1999 (or such earlier date as the Parties may mutually agree).
1.31 Uplift. An accounting mechanism employed by DISTRIBUTOR to approximate
the costs for the following elements in intracorporate transfers between
DISTRIBUTOR and its international Affiliates, as consistently applied pursuant
to DISTRIBUTOR's internal accounting procedures:
Shipment/freight
Differential insurance
Differential in higher discounts
Import duty
Tax differentials
Quote validity extension
Currency hedging
Other differentials to standard terms and conditions
ARTICLE 2. Appointment
2.1 Appointment. Subject to the terms and conditions of this Agreement,
COMPANY hereby appoints DISTRIBUTOR as its sole and exclusive worldwide
distributor of the Products and Improved Products for use in the applicable
Field commencing on the Effective Date, during the Exclusivity Period, and
COMPANY appoints DISTRIBUTOR as its non-exclusive worldwide distributor of
Sensors and Cartridges and Improved Sensors and Improved Cartridges for use in
the Field for the periods and on the terms provided in Sections 11.2 11.3 and
11.4, and DISTRIBUTOR hereby accepts such appointment.
2.2 Restrictions on Distribution. During the term of this Agreement,
DISTRIBUTOR shall not sell or distribute for resale outside of or for use
outside of the Field, any of the Products.
2.3 Exclusivity.
(a) Commencing on the Effective Date and until termination of the
Exclusivity Period, DISTRIBUTOR will not, directly or indirectly (through any
Affiliate or third party or otherwise), actively distribute, market, advertise,
promote, sell, lease or solicit the sale, distribution or lease of any Competing
Products, or authorize, encourage or induce any person or entity to do any of
the foregoing. As used herein the term "active" shall mean that DISTRIBUTOR
shall not list such Competing Product on its price list, and that DISTRIBUTOR
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shall not incentivize its sales force or Subdistributors with respect to such
Competing Product, nor count such sale of Competing Product against the sales
quotas of its patient monitoring or point of care diagnostic sales force.
Notwithstanding the foregoing, DISTRIBUTOR shall be permitted to distribute (i)
the (***) as per Exhibit 2.3(a) attached hereto and (ii) the (***), as modified
from time to time, for (***) as per Exhibit 2.3(a) attached hereto.
Notwithstanding the foregoing, if a customer so requests, DISTRIBUTOR may
provide a Competing Product; provided that DISTRIBUTOR shall use reasonable
efforts to inform COMPANY of such transaction and that DISTRIBUTOR does not
incentivize its sales force or Subdistributors with respect to such Competing
Products nor count such sales of Competing Products against the sales quotas of
its sales force. In most cases, the Competing Product will be sold as an item in
a larger purchase which includes DISTRIBUTOR's monitoring products and the
Parties intend that such bundling of Competing Products shall occur infrequently
and shall not be a significant portion of DISTRIBUTOR's business in the Field.
In addition, DISTRIBUTOR may sell, and DISTRIBUTOR intends to sell, the Products
to customers who request them for use with other manufacturers' products and to
third parties who desire to bundle the Products with their own products.
(b) Commencing on the Effective Date and until termination of the
Exclusivity Period, COMPANY shall not, directly or indirectly (through any
Affiliate or third party or otherwise), license its technology for the
development of integrated modules of the Products with patient monitors,
ventilators, anesthesia machines, cardiology products and / or emergency care
products other than DISTRIBUTOR products, unless the Parties mutually agree
otherwise in writing. Notwithstanding the foregoing, COMPANY shall be entitled
to complete the development of the interface, but not the integration, of the
Products with those of (***) as set forth in Exhibit 2.3(b). Nothing herein
shall be deemed to restrict COMPANY from licensing or providing third parties
(a) its communications protocols for the Products to allow such third parties to
connect their products with the Products or (b) its technology for use outside
of the Field.
2.4 Subdistributors and Manufacturer's Representatives. DISTRIBUTOR may
appoint sub-distributors, sales agents, manufacturer's representatives and the
like (collectively, "Subdistributors") to promote, distribute and sell the
Products in the Field. DISTRIBUTOR shall be entitled to use its standard forms
of distribution agreement for such Subdistributors; provided however, that
DISTRIBUTOR shall at all times remain responsible for performance of all of its
obligations under this Agreement and shall take appropriate corrective actions
to bring its Subdistributors into full compliance with this Agreement. If
COMPANY has actual knowledge of improper acts or omissions on the part of such
Subdistributors, it will use reasonable efforts to inform DISTRIBUTOR of such
acts or omissions; however such obligation shall not relieve DISTRIBUTOR of any
of its obligations under this Agreement with respect to such Subdistributors.
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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2.5 Exclusive Appointment. Except during the Transition Period as expressly
set forth in Section 3.3, COMPANY shall not, (i) during the Exclusivity Period
sell or distribute into or sell or distribute for resale into or for use in the
Field any Product or Improved Product to any person or entity other than
DISTRIBUTOR nor shall it (ii) enter into any agreement with any other person or
entity pursuant to which COMPANY shall agree to supply any such Product or
Improved Product for sale or use (or any such Product which is, to COMPANY's
knowledge, likely to be sold) in the Field during the Exclusivity Period and
COMPANY shall take appropriate action against any person or entity who does sell
or use any Product or Improved Product into or in the Field. In addition, except
during the Transition Period as expressly set forth in Section 3.3, during the
Exclusivity Period, if COMPANY desires to license or transfer (other than as
provided in Section 13.6) the technology contained in the Products or its
Improved Products to any person or entity other than DISTRIBUTOR for use in the
Field, COMPANY and DISTRIBUTOR shall discuss and evaluate such potential license
or technology transfer, and COMPANY shall not so license or transfer such
technology without the prior written consent of DISTRIBUTOR, not to be
unreasonably withheld. For the avoidance of doubt, the Parties acknowledge and
agree that at any time COMPANY may sell and distribute any continuous monitoring
product or intermittent monitoring product for use solely outside of the Field.
2.6 Alliance Managers and Meetings. Within thirty (30) days after the
Effective Date, each Party shall appoint an individual, reasonably acceptable to
the other Party, to facilitate communications between the Parties relating to
the Products and the relationship contemplated herein. Such individuals shall
meet not less than semi-annually to discuss the manufacture, marketing and
distribution of the Products as contemplated hereunder. In addition, DISTRIBUTOR
shall provide COMPANY (a) within thirty (30) days after the end of each Fiscal
Year, a summary report of its marketing and distribution activities and
expenditures with respect to the Products during such Fiscal Year and (b) at
least ninety (90) days in advance of the first day of each Fiscal Year, a
summary presentation of its proposed activities and marketing and promotional
budget for such Fiscal Year.
ARTICLE 3. Marketing and Distribution of Products.
3.1 General Obligation. During the Exclusivity Period, DISTRIBUTOR shall
diligently market, promote, sell and distribute the Products in the Field on a
worldwide basis. During FY1999 and FY2000 (provided the Exclusivity Period has
not been terminated), DISTRIBUTOR shall expend (including out-of-pocket
expenses) an aggregate minimum of $(***) (including amounts paid by DISTRIBUTOR
for (i) COMPANY's sales expenses during the transition period, pursuant to
Section 3.3(b), (ii) sales and marketing programs and training and education
materials, pursuant to Section 3.5, and (iii) market development, pursuant to
Section 3.8) for the sales channel, market development, business development,
market communication, technical marketing and sales support dedicated to the
Products). DISTRIBUTOR shall discuss its marketing strategy, positioning and
tactics for the Products with COMPANY on a regular basis and no less than
semi-annually.
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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3.2 Minimum Purchase Requirements. Subject to the terms of this Agreement,
DISTRIBUTOR shall purchase the Minimum Purchase Requirements for the Products.
If DISTRIBUTOR fails to purchase the applicable Minimum Purchase Requirement for
the Products during the applicable Fiscal Year, such failure shall be a material
breach of DISTRIBUTOR's obligations under this Agreement and COMPANY shall
provide DISTRIBUTOR written notice of such breach. In the event that DISTRIBUTOR
fails to cure such material breach by purchasing any shortfall or paying COMPANY
for such shortfall within (***) days of such notice, COMPANY may, in its sole
discretion and effective on written notice to DISTRIBUTOR, convert DISTRIBUTOR's
rights hereunder to non-exclusive in accordance with Section 11.2, in which case
the Exclusivity Period shall be deemed to have expired.
3.3 Transition to DISTRIBUTOR.
(a) The Parties acknowledge that COMPANY has existing distributors of the
Products in various countries; a complete list of such distributors and the
territories and Products to which they are restricted is attached hereto as
Exhibit 3.3(a) (the "COMPANY Distributors"). COMPANY shall use reasonable
efforts, at its own expense, to terminate the COMPANY Distributors' rights to
distribute the Products no later than November 1, 1999; provided that at
DISTRIBUTOR's written request that must be received by COMPANY on or before
October 1, 1999, COMPANY may instead transfer and assign to DISTRIBUTOR certain
of such distribution relationships, subject to the consent of the applicable
COMPANY Distributor, or maintain such distribution relationships after November
1, 1999. Prior to any such termination, transfer or assignment, COMPANY will use
reasonable efforts, to enforce against any such COMPANY Distributors any
contractual territorial restrictions on sales of the Products by such COMPANY
Distributors; the expenses of such enforcement efforts shall be shared equally
by the Parties. COMPANY agrees to indemnify and hold harmless DISTRIBUTOR from
any claims or damages which may be asserted by any such COMPANY Distributor on
account of such termination or enforcement.
(b) During the Transition Period, DISTRIBUTOR will bear $(***) of COMPANY's
sales costs with respect to the Products, as specified on Exhibit 3.4. Such
amount shall be paid in two equal installments on or before(***) business days
after the Effective Date and (***), 1999.
(c) COMPANY shall (i) credit against DISTRIBUTOR's Minimum Purchase
Requirements all sales of the Products by COMPANY, through its U.S. and
international sales organization and the COMPANY Distributors, after (***),
1999, at the pricing set forth in Section 5.3 and (ii) compensate DISTRIBUTOR
for the difference between the price COMPANY receives and the purchase prices
for such sales at the pricing set forth on Section 5.3 and less shipping and
handling expenses incurred by COMPANY. The amounts set forth in (ii) above
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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shall be provided in the form of a credit against future purchases of Products
by DISTRIBUTOR. An example of the treatment of such sales is set forth on
Exhibit 3.3(c). If DISTRIBUTOR cannot recognize revenue on such sales under its
accounting practices and procedures, COMPANY shall credit against DISTRIBUTOR's
Minimum Purchase Requirements all such sales by COMPANY at the price COMPANY
receives.
(d) On or before November 1, 1999, DISTRIBUTOR will assume responsibility
for COMPANY's U.S. and international sales function for the Products in the
Field based on an agreed transition plan; provided that DISTRIBUTOR has the
right to determine, in its sole discretion, which of COMPANY sales personnel
shall be offered employment with DISTRIBUTOR. During the Transition and
Exclusivity Periods, COMPANY will use reasonable efforts to provide DISTRIBUTOR
with lists and information regarding Company's customers for the Products in its
possession and, to the extent feasible, in the possession of COMPANY
Distributors.
(e) The Parties acknowledge that due to DISTRIBUTOR's pre-existing
obligations under its distribution agreement with (***), DISTRIBUTOR cannot
commence marketing or distributing the Intermittent Monitoring Products until
August 1, 1999.
3.4 Sales Force. DISTRIBUTOR will provide sales and clinical specialist
personnel with responsibility to market, sell, distribute and support the sale
and distribution of the Products in the Field, and to support DISTRIBUTOR's
distribution channel.
3.5 Training and Education. DISTRIBUTOR will develop all sales and
marketing support programs and education materials for the Products, consistent
with its training and transition plan. COMPANY shall be entitled to review and
comment on DISTRIBUTOR'S initial training and transition plan in advance of
implementation. COMPANY shall provide to DISTRIBUTOR its training materials for
the Products, which DISTRIBUTOR may use for its training. At its own expense and
subject to its resource constraints, COMPANY will work with DISTRIBUTOR to
develop comprehensive training programs for DISTRIBUTOR's sales representatives,
Subdistributors, clinical specialists and customers and will actively assist in
training DISTRIBUTOR trainers, who will then train such sales representatives,
Subdistributors, clinical specialists and customers. DISTRIBUTOR shall provide a
similar level of training and support to DISTRIBUTOR's sales representatives,
Subdistributors, clinical specialists and customers as DISTRIBUTOR provides with
respect to its other products and customers. Training will include special
instructions regarding storage and use of Products.
3.6 Marketing Materials. Subject to Section 6.2, DISTRIBUTOR will develop
all promotional materials for the Products, and will provide reasonable
quantities of the same to COMPANY. DISTRIBUTOR will, from time to time, provide
such materials to COMPANY, for its review and comment, and will consult with
COMPANY on such materials. DISTRIBUTOR will market the Products under the
ParaTrend(R), NeoTrend(TM), TrendCare(TM) and
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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XXXX(R) trademarks, as applicable. The Products and their labeling shall include
the names of COMPANY and DISTRIBUTOR as specified in Section 6.2.
3.7 Trademarks. COMPANY hereby grants DISTRIBUTOR, its Affiliates, its
Subdistributors, permitted successors and assigns, and DISTRIBUTOR hereby
accepts and agrees to, a limited, non-exclusive, non-transferable, and worldwide
license to use the COMPANY Trademarks (as defined below) on the Products, and
otherwise use the COMPANY Trademarks in connection with and in sales and
promotional literature relating to Products, in accordance with the terms of
this Agreement. DISTRIBUTOR shall follow COMPANY's written standards and
specifications for trademark usage, in using the COMPANY Trademarks hereunder,
the current version of which is attached hereto as Exhibit 3.7. Ownership of the
COMPANY Trademarks used in the marketing and sales of Products shall be and
remain with COMPANY, and all use of such trademarks shall inure to COMPANY's
benefit. DISTRIBUTOR agrees not to adopt or make use of any confusingly similar
marks. A list of COMPANY's registered and pending trademarks used in connection
with the Products is attached as Exhibit 3.7 (the "COMPANY Trademarks"). COMPANY
may add to or delete from the list of COMPANY Trademarks or change its written
standards and specifications for trademark usage upon ninety (90) days prior
written notice, in which event DISTRIBUTOR shall modify its training,
educational, marketing, sales and promotional materials for the Products, and
other usage of the COMPANY Trademarks, to reflect such changes, pursuant to a
mutually agreed transition plan. Unless the Parties otherwise agree, all
reasonable out-of-pocket costs of such changes shall be borne by COMPANY. If any
deletion or change of any COMPANY Trademark by COMPANY hereunder directly and
materially impacts DISTRIBUTOR's ability to meet the Minimum Purchase
Requirements, the parties shall determine, in good faith, a reasonable and
appropriate reduction in the Minimum Purchase Requirements. From time to time,
at COMPANY's request, DISTRIBUTOR will supply samples of its usage of the
COMPANY Trademarks for conformity to COMPANY's standards and specifications, and
shall promptly comply with any alterations reasonably requested by COMPANY.
3.8 Market Development. DISTRIBUTOR will conduct marketing evaluations and
outcome studies of the Products to demonstrate the usability of the Products in
the Field and to generate peer-reviewed clinical papers which support the sale
of the Products in the Field.
3.9 Product Inventory. DISTRIBUTOR and COMPANY shall each maintain its
inventory of the Products in accordance with all labeled instructions.
3.10 Sales and Marketing Assistance. During the Exclusivity Period, if
DISTRIBUTOR requires the assistance of COMPANY personnel in activities or
matters related to the distribution of the Products in the Field that is not
contemplated or provided for herein, COMPANY agrees to use reasonable efforts to
furnish such personnel to DISTRIBUTOR subject to COMPANY's resource constraints,
e.g., providing personnel to assist DISTRIBUTOR in major trade shows. COMPANY
shall have the right to market, but not sell, the Products as part of its
overall promotion of its product lines, and during the Exclusivity Period, for
use in the Field only in coordination and consultation with DISTRIBUTOR and only
if it acknowledges that DISTRIBUTOR is the exclusive, world-wide distributor of
the Products in the Field, as
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contemplated herein, provided that, except during the Transition Period as
expressly provided in Section 3.3, COMPANY forwards all Product purchase orders,
inquiries and leads in the Field to DISTRIBUTOR. DISTRIBUTOR will be entitled to
pursue these sales as set forth in this Agreement. COMPANY and DISTRIBUTOR
consult with each other and shall coordinate such marketing with DISTRIBUTOR
during the semi-annual alliance meetings.
3.11 License of Product Software. The parties acknowledge that any software
or other proprietary portion of the Products (including without limitation the
IDMS Software) is licensed, and not sold, to DISTRIBUTOR and any end user
customers, and that such license shall be pursuant to DISTRIBUTOR's customary
license terms used for DISTRIBUTOR's software or proprietary products as are in
effect from time to time, the current U.S. version of which is attached hereto
as Exhibit 3.11. If DISTRIBUTOR revises such license terms, it shall, from time
to time, provide COMPANY with a copy of such revised terms.
ARTICLE 4. Product Manufacture and Supply.
4.1 Manufacture. COMPANY shall manufacture the Products in accordance with
the applicable specifications and in accordance with the FDA, EU and all
applicable regulations. Attached hereto as Exhibit 4.1 is DISTRIBUTOR's Supplier
Certification Process, which the Parties shall use reasonable efforts to
implement during the Transition Period.
4.2 Initial Purchase Orders. Within (***) business days of the Effective
Date, DISTRIBUTOR shall issue to COMPANY a firm, binding purchase order for at
least $(***) of Products, for shipment and/or transfer of ownership on or before
(***). COMPANY acknowledges receipt of an additional purchase order (P.O.
#29D3005780) for $(***) of Products and DISTRIBUTOR acknowledges receipt of a
shipment from COMPANY with respect to such purchase order, which shipment is
subject to confirmation and acceptance by DISTRIBUTOR.
4.3 Forecasts and Subsequent Purchase Orders.
(a) Within (***) days of the Effective Date and then at least (***) days
before the beginning of each Fiscal Quarter beginning with FQ1 of FY 2000,
DISTRIBUTOR shall issue to COMPANY a written (***) month forecast of its
purchase of the Products, the first (***) months of which shall be binding with
respect to the aggregate numbers of Products ordered, by month, by product
(e.g., Continuous Monitoring Product or Intermittent Monitoring Product) and by
category (e.g., Sensors, Calibrators, Monitors, Patient Data Modules and
Accessories, for Continuous Monitoring Products, and Accessories, Cartridges (by
Cartridge type), IDMS Software and XXXX Analyzers, for Intermittent Monitoring
Products) and the last (***) months of which shall be for COMPANY's planning
purposes and shall be DISTRIBUTOR's non-binding good faith estimate of its
requirements during such period. DISTRIBUTOR agrees that its actual, binding
orders for the (***) months in the next (***) shall not deviate from the
quantities forecasted for those months in DISTRIBUTOR's immediately preceding
forecast for those
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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months by more than plus or minus (***) percent (***%) for Sensors or
Cartridges, and (***) percent (***%) for all other categories of Products, if
COMPANY has met the previous quarter's deliveries against purchase orders
submitted in accordance with the terms of this Agreement and has eliminated any
uncanceled accumulated delivery shortfall from any previous quarters.
DISTRIBUTOR may, from time to time, issue additional purchase orders for amounts
in excess of its binding forecast; however, such additional purchase orders
shall be subject to COMPANY's acceptance. Forecasts shall state the overall
quantities of Sensors, Monitors, Calibrators, Patient Data Module and
Accessories for Continuous Monitoring Products, and Accessories, Cartridges,
Modules, IDMS Software and XXXX Analyzers, for Intermittent Monitoring Products,
to be purchased by DISTRIBUTOR during each month. If forecasts exceed the
reasonable production capabilities of COMPANY, COMPANY may reject the forecast,
and the Parties shall mutually agree on how the forecast will be revised, and
Minimum Purchase Requirements will be revised if such reduced forecast impacts
DISTRIBUTOR's ability to achieve Minimum Purchase Requirements.
(b) DISTRIBUTOR shall issue written purchase orders for the Products at
least (***) days prior to the proposed shipping date for Monitors, Patient Data
Modules and Calibrators for the Continuous Monitoring Products, and for
Accessories, Modules, IDMS Software, Cartridges and XXXX Analyzers for
Intermittent Monitoring Products and (***) days prior to the proposed shipping
date for Sensors. Such purchase orders shall be consistent with DISTRIBUTOR's
binding forecast; provided, however, that DISTRIBUTOR shall be entitled to
change the phasing and mix of the Products (e.g., NeoTrend and ParaTrend);
provided that such changes are made prior to such (***) and (***) day lead
times, as applicable.
(c) DISTRIBUTOR will use reasonable efforts in generating quarterly
forecasts and in placing orders for Products to minimize unusual fluctuations
between months and Fiscal Quarters and to facilitate orderly increases in
production requirements for the Products, and COMPANY will likewise be mindful
of the unpredictability of regulatory approvals and actions, as well as customer
demands, and will use reasonable efforts to accommodate any rush orders or
cancellations due to unexpected regulatory actions or customer requests.
4.4 COMPANY Supply Obligation. COMPANY will use reasonable efforts to meet
DISTRIBUTOR's properly forecasted requirements for Products in a timely fashion.
Specifically, excluding the initial purchase orders under Section 4.2 and
subject to COMPANY's acceptance of DISTRIBUTOR forecasts under Section 4.3,
should COMPANY fail to supply (***) percent (***%) of dollar amounts of
Calibrators, Continuous Monitoring Products or Intermittent Monitoring Products
ordered by DISTRIBUTOR, in the aggregate, under firm purchase orders for a
rolling (***) consecutive month period (e.g., the total value of Calibrators
delivered during (***) consecutive month period pursuant to orders for delivery
during same (***) consecutive month period is less than (***)% of total value of
Calibrators ordered for delivery during same (***) month period) and should
COMPANY fail to cure such failure within
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
12
thirty (30) days of receipt of written notice thereof from DISTRIBUTOR, as its
sole remedies, (a) during the Exclusivity Period, DISTRIBUTOR shall be excused
from its Minimum Purchase Requirements in any amount equal to the shortfall
(plus any Requirements which are rendered unnecessary because of the shortfall)
attributable to COMPANY's failure to supply, and (b) DISTRIBUTOR may cancel its
purchase order for the shortfall amount (plus any amount for Products which are
rendered unnecessary because of the shortfall) by giving COMPANY prompt written
notice of such cancellation. COMPANY shall subsequently use commercially
reasonable efforts to supply any shortfall amounts which are not so canceled.
If, during the Exclusivity Period, COMPANY fails to supply at least (***)
percent (***%), in dollar amounts, of Calibrators, Continuous Monitoring
Products or Intermittent Monitoring Products ordered by DISTRIBUTOR, in the
aggregate, under firm purchase orders in any (***) consecutive Fiscal Quarters,
Section 4.11 shall apply. In the event of a shortage of the Products or any
component thereof, COMPANY shall allocate Products in a reasonable manner so as
to support DISTRIBUTOR as a distributor of the Products, and in any event, such
allocation shall not be less than on a pro rata basis based on DISTRIBUTOR's
orders and orders placed by third parties with respect to the relevant period.
COMPANY and DISTRIBUTOR shall establish a Manufacturing Council which will meet
upon request by DISTRIBUTOR not more than monthly by phone and quarterly in
person to discuss and monitor any manufacturing and manufacturing capacity
issues. COMPANY will diligently monitor its supply chain and its production
processes and will promptly inform DISTRIBUTOR of any anticipated interruption
or inability to supply Products to DISTRIBUTOR to meet its forecasts or its
firm, binding purchase orders, in order to permit DISTRIBUTOR to assess the
manufacturing situation, to inform its sales and planning personnel to attempt
to adjust for such shortfall, and to advise and assist COMPANY, at COMPANY's
expense in its efforts to minimize or avert such interruption in or inability to
supply Products. Notwithstanding the above, if DISTRIBUTOR has issued firm,
binding purchase orders for Products to be delivered in any Fiscal Year equal to
or greater than its Minimum Purchase Requirements for that Fiscal Year,
DISTRIBUTOR shall not be deemed to have failed to meet its Minimum Purchase
Requirements for that Fiscal Year if COMPANY has failed to deliver Products
sufficient to meet the Minimum Purchase Requirements.
4.5 Purchase Order Forms. DISTRIBUTOR shall be entitled to use its then
current standard purchase order for purchases of the Products hereunder. In the
event of a conflict between the terms of any such purchase order and the terms
of this Agreement, the terms of this Agreement shall govern. Additional terms
will be subject to mutual prior written agreement. A copy of DISTRIBUTOR's
current U.S. form, Revision S is attached hereto as Exhibit 4.5.
4.6 Promotional Activities. To the extent reasonably feasible and in any
event at the semi-annual alliance meetings, DISTRIBUTOR shall advise COMPANY of
any major sales or promotional activities which DISTRIBUTOR believes may have an
effect upon orders. This provision does not change DISTRIBUTOR's obligations
under Sections 4.2 and 4.3, above.
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
13
4.7 Delivery. All Product deliveries shall be made by COMPANY F.O.B.
COMPANY's manufacturing facility ( High Wykcombe, England, UK, for Continuous
Monitoring Products, and Roseville, MN for Intermittent Monitoring Products).
Title and risk of loss shall pass to DISTRIBUTOR at the time of tender by
COMPANY at COMPANY's facility to the carrier designated by DISTRIBUTOR. Upon
delivery to DISTRIBUTOR's designated carrier, DISTRIBUTOR will assume title and
risk of loss, and will be responsible for transportation, and, if applicable,
export of Products from the country of manufacture and shall be entitled to any
duty drawback for which the Products qualify. COMPANY shall provide DISTRIBUTOR,
upon DISTRIBUTOR's reasonable request and at DISTRIBUTOR's expense, reasonable
substantiation and assistance with respect to such duty drawbacks. The pricing
for the Products excludes, and DISTRIBUTOR shall pay, all shipping, handling and
insurance costs and other costs of transporting for the Products after delivery
to the F.O.B. point.
4.8 Product Inspection and Acceptance. Prior to the end of the Transition
Period, the Parties shall agree to acceptance test procedures for the Products
which shall be based on the applicable specifications and in accordance with the
FDA, EU and other applicable regulations. DISTRIBUTOR may, at its option,
inspect either on COMPANY's premises or at DISTRIBUTOR's or the Subdistributor's
or end user's facility each lot of Products to be delivered to it by COMPANY and
may reject Acceptance with respect to any Products which fail such acceptance
test. DISTRIBUTOR shall give COMPANY at least fourteen (14) days notice of its
intention to inspect at COMPANY's premises. In the event that such inspection
shall occur at COMPANY's premises, such inspection shall be as follows (at
DISTRIBUTOR's option):
1. By DISTRIBUTOR personnel;
2. By a mutually agreed upon third party; or
3. By DISTRIBUTOR acceptance in writing of COMPANY's quality
control report (including final test results to be
performed by COMPANY under the agreed acceptance test
procedures) for the production of the Products.
If DISTRIBUTOR elects to inspect at COMPANY's premises, DISTRIBUTOR shall do so
within five (5) days of the day the Products are ready for inspection (provided
DISTRIBUTOR has received adequate notice of the day of availability). If
DISTRIBUTOR does not inspect at COMPANY's premises, DISTRIBUTOR shall accept or
reject each lot of Products within ten (10) business days of (i) receipt at the
final destination or, (ii) if applicable, with respect to Products scheduled for
delivery to another location, receipt of a notice of the Products' availability
for inspection and transfer. In the event of rejection, DISTRIBUTOR shall inform
COMPANY of its reasons in writing of the specific basis which the Product fails
to meet the acceptance procedure, and, if requested by COMPANY, DISTRIBUTOR will
discuss in good faith how to best resolve any difference of opinion between the
Parties as to whether or not such Products are in fact within such
specifications. Any Product for which COMPANY does not receive a written
rejection in accordance with this Section 4.8 shall be deemed to be Accepted.
Subject to Sections 4.4, 4.11, and 6.5, DISTRIBUTOR's sole remedy for rejection
of such Products pursuant to this Section 4.8 shall be replacement of such
Products by COMPANY.
14
4.9 Demonstration Samples. COMPANY shall supply to DISTRIBUTOR mutually
agreed quantities of Sensors and Cartridges, to be used as demonstrators and
samples, at a discounted price as set forth in Exhibit 5.3. These quantities
will be included as part of the forecast to be submitted pursuant to Section
4.3, and shall be credited against the Minimum Purchase Requirements hereunder.
4.10 Manufacturing Transfer. The parties agree to evaluate the feasibility
of transferring to DISTRIBUTOR the manufacturing of the XXXX Analyzer and
TrendCare Monitor, and if such transfer is deemed feasible, to negotiate in good
faith the terms of a customary and reasonable technology transfer and license
agreement.
4.11 Failure to Supply.
(a) Notwithstanding the provisions of Section 13.4, in the event that
during the Exclusivity Period, COMPANY shall be unable or unwilling or has
failed for any reason (including as a result of the bankruptcy or insolvency of
COMPANY to the extent permitted by law) to deliver to DISTRIBUTOR with at least
(***) percent (***%), in dollar amounts, of Calibrators, Continuous Monitoring
Products, or Intermittent Monitoring Products ordered by DISTRIBUTOR, in the
aggregate, pursuant to firm, binding purchase orders in any (***) consecutive
Fiscal Quarters in accordance with Section 4.4 hereof (a "Failure to Supply"),
then, upon ninety (90) days written notice from DISTRIBUTOR, if COMPANY has
failed to cure the breach during such ninety (90) day period, which cure may
include the use of a third party manufacturer of Products that has satisfied the
DISTRIBUTOR's Supplier Certification Process, DISTRIBUTOR may make and have made
the Product or Products causing the Failure to Supply (the "Licensed Products")
in order to supply its own requirements and the requirements of its Affiliates
and Subdistributors for such Licensed Products until termination of the license
as provided in Section 4.11(b) below (such time period, a "License Period").
COMPANY shall be deemed to have cured such Failure to Supply if, during such
cure period, it supplies (i) the shortfall between the amount actually delivered
to DISTRIBUTOR and such (***)% level, and (ii) at least (***)% of the applicable
Products (e.g., Calibrators, Continuous Monitoring Products or Intermittent
Monitoring Products) ordered by DISTRIBUTOR pursuant to firm, binding purchase
orders for delivery during the cure period and otherwise due for shipment to
DISTRIBUTOR during such cure period. On or before May 1, 2000, COMPANY shall
deliver to a third party escrow agent, reasonably acceptable to DISTRIBUTOR, and
COMPANY shall update from time to time thereafter, a complete manufacturing
documentation package, sufficient in detail and extent to allow a manufacturer
of DISTRIBUTOR's qualifications to manufacture Products. Such materials shall be
released to DISTRIBUTOR in the event of a Failure to Supply, which Failure is
not cured by COMPANY as provided in this Section 4.11(a).
(b) If DISTRIBUTOR exercises its rights to manufacture under this Section
4.11, DISTRIBUTOR shall have no obligation to purchase the Licensed Products
from COMPANY; provided however that if so requested by DISTRIBUTOR, COMPANY
shall
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
15
continue to supply the Licensed Products at volumes consistent with COMPANY's
then current capacity, and at the pricing set forth on Exhibit 5.3.
(c) COMPANY hereby grants to DISTRIBUTOR a worldwide license, which license
shall be non-transferable except for the limited right to grant sublicenses to
its Affiliates or third parties reasonably acceptable to COMPANY, under the
COMPANY Technology in the Field, to make and have made the Licensed Products in
order to supply its own requirements and the requirements of its Affiliates and
Subdistributors for such Licensed Products; provided that the license granted
hereunder shall be effective only during License Periods and provided further
that DISTRIBUTOR shall not exercise its rights under this License other than
during such License Periods. Such license shall be exclusive during the
Exclusivity Period, and if the Licensed Products include Sensors or Cartridges,
shall be non-exclusive beginning at the conclusion of the Exclusivity Period and
continuing for the applicable period set forth in Article 11. DISTRIBUTOR (or
its Affiliate or third party manufacturer, if any) shall pay to COMPANY a
royalty equal to (***) percent (***%) of Net Sales of Licensed Products
manufactured by or for DISTRIBUTOR under this Section 4.11. In the event of such
Failure to Supply, COMPANY shall make available to DISTRIBUTOR or such Affiliate
or third party manufacturer access to all and any other technical materials,
information and techniques necessary or helpful for DISTRIBUTOR to manufacture
products, including to procure required raw materials or produce or arrange an
alternative supplier of Product, and to provide advice and consultation in
connection therewith. COMPANY shall reimburse DISTRIBUTOR for any out-of-pocket
costs and expenses (including without limitation reasonable attorneys' fees)
reasonably incurred by DISTRIBUTOR to enforce COMPANY's obligations under this
Section 4.12(c).
(d) As used herein, (i) the term "Company Technology" shall mean any
patents, trade marks and know how owned and controlled by COMPANY which cover
the manufacture, maintenance and upgrade of the applicable Products in the Field
and (ii) the term "Net Sales" shall mean the gross revenues received from the
sale of applicable Products to independent third parties during the applicable
period less (A) discounts and rebates, (B) credits or allowances granted upon
claims or returns, (C) freight charges paid for delivery and (D) taxes and other
governmental charges levied on or measured by the invoiced amount, and (E) any
Uplift customarily applied to transfers between international Affiliates of
DISTRIBUTOR.
(e) The License Period shall continue, until the earlier of (i) any
contractual obligations that DISTRIBUTOR has assumed in connection with
producing the same or obtaining such substitute source of supply shall have
terminated, or (ii) (***) days following the date on which COMPANY demonstrates
to DISTRIBUTOR's reasonable satisfaction its ability to fully resume its supply
obligations in accordance with Section 4.4. If COMPANY so resumes manufacture
and supply of the applicable Products to DISTRIBUTOR, it shall reimburse
DISTRIBUTOR for those reasonable costs actually incurred by DISTRIBUTOR to start
up manufacture of the applicable Products. Consistent with sound business
practices, DISTRIBUTOR will use reasonable efforts to minimize such start up
costs and prior to
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
16
establishing any alternative manufacture capacity for the Products hereunder,
shall use reasonable efforts, consistent with urgency of the situation, at
COMPANY's expense, to bring COMPANY's existing manufacturing capability into
compliance with this Agreement.
(f) If DISTRIBUTOR exercises its rights to manufacture under this Section
4.11 , COMPANY shall consider allowing joint or combined manufacturing
arrangements with COMPANY's distributors for the Licensed Products outside of
the Field.
(g) The Minimum Purchase Requirements shall be reduced in the applicable
Fiscal Year or Years to equitably reflect the lost sales attributable to
COMPANY's Failure to Supply.
(h) In the event of merger, consolidation, reorganization or sale of
substantially all of the assets of COMPANYor if any individual, group or entity
either acquires (***) percent (***%) of the outstanding shares of COMPANY's
voting securities or obtains through election, appointment or other means, a
majority of the directors of COMPANY, all references herein to "(***) percent
(***%)" shall be deemed to be changed to "(***) percent (***%)" effective with
the first (***) consecutive full Fiscal Quarters after the closing date of such
transaction.
(i) The provisions of this Section 4.11 shall constitute COMPANY's entire
liability and DISTRIBUTOR's sole and exclusive remedy for a Failure to Supply
except to the extent such Failure to Supply is attributable to an intentional or
willful act or omission by COMPANY or to its gross negligence.
ARTICLE 5. Royalties, Product Purchases and Payments.
5.1 Prepaid Royalty. Within five (5) business days of the Effective Date,
DISTRIBUTOR shall pay to COMPANY, as prepaid royalties on sales of the
Continuous Monitoring Products for FY1999 and FY2000, the amount of $(***) in
immediately available funds by electronic wire transfer to an account designated
by COMPANY. Such prepaid royalties shall be non-refundable and, except as
provided in Section 5.2, shall not be credited against the purchase price
payable by DISTRIBUTOR under Section 5.3 or any other amounts owing hereunder,
including, without limitation, the Minimum Purchase Requirements.
5.2 Running Royalties. Starting in FY2001, DISTRIBUTOR shall pay to COMPANY
a running royalty of (***) percent (***%) of Gross Margin on the Continuous
Monitoring Products, until DISTRIBUTOR has paid an aggregate royalty of $(***)
(including pre-paid royalties paid under Section 5.1); thereafter DISTRIBUTOR
shall pay to COMPANY a running royalty of (***) percent (***%) of Gross Margin
on the Continuous Monitoring Products. Such royalty shall be payable within
(***) days of the end of the FQ2 and FQ4 of each Fiscal Year during the
Exclusivity Period of this Agreement (including any Extension Term) for the
immediately preceding (***) month period. At such time, DISTRIBUTOR shall also
provide
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
17
COMPANY with a written royalty statement, setting forth the sales of the
Products during such Fiscal Quarters, the calculation of the Gross Margin and
royalties thereon. Such royalties shall be non-refundable and shall not be
credited against the purchase price payable by DISTRIBUTOR under Section 5.3 or
any other amounts owing hereunder, including, without limitation, the Minimum
Purchase Requirements.
5.3 Product Prices.
(a) The prices for Products to be paid by DISTRIBUTOR hereunder shall be as
provided in Exhibit 5.3.
(b) Consistent with sound business practices, COMPANY agrees to use
commercially reasonable efforts to seek to reduce overall Product cost. The
Parties intend, and the pricing set forth on Exhibit 5.3 assumes, that COMPANY
will reduce its costs through proactive efforts to include process improvement,
component cost reductions and certain anticipated manufacturing efficiencies.
DISTRIBUTOR agrees to provide assistance and information to assist COMPANY in
achieving manufacturing cost reductions and efficiencies, where appropriate, and
if COMPANY achieves such cost reductions and efficiencies, beyond the cost
reductions and efficiencies already factored into the Product pricing set forth
on Exhibit 5.3, the Parties shall discuss in good faith appropriate reductions
in the prices for the applicable Products so as to share in such reductions.
Notwithstanding the foregoing, the Parties agree that the first $(***) of cost
reductions achieved on the Analyzer of the Intermittent Monitoring Products
shall be allocated to COMPANY.
(c) The prices set forth on Exhibit 5.3 shall remain in effect until (***).
Thereafter, the prices may be adjusted on a Product-by-Product basis effective
on (***) of the applicable Fiscal Year (starting with (***)) to reflect actual
increases or decreases (which decreases are beyond the cost reductions and
efficiencies already factored into the Product pricing set forth on Exhibit 5.3
or achieved with assistance and information provided by DISTRIBUTOR, as
contemplated in Section 5.3(b)), if any, in COMPANY's manufacturing costs since
the most recent price increase (or the initial price, as the case may be);
provided that in no event shall any price adjustment for a particular Product be
greater than (***) since the most recent price increase (or the initial price,
as the case may be). COMPANY shall give DISTRIBUTOR at least ninety (90) days
written notice of such increase, and upon DISTRIBUTOR's request, shall provide
reasonable evidence of such actual increases in COMPANY's manufacturing costs.
5.4 Terms of Payment. All royalties shall be payable as set forth in
Sections 4.11(c), 5.1, 5.2, 7.1 and 7.6. All payments for Products shall be due
and payable within (***) days of the invoice date therefore. DISTRIBUTOR shall
make all payments in immediately available funds to the location and in the
manner designated by COMPANY from time to time. A late fee shall be paid by
DISTRIBUTOR on any amount not received by COMPANY when due at a rate of
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
18
(***)% per month on all unpaid amounts, or the maximum rate permitted by law,
whichever is less. As between the Parties, DISTRIBUTOR shall be responsible for
all taxes relating to Products (except for taxes on COMPANY's net income). All
payments to COMPANY hereunder shall be made by wire transfer to an account
designated by COMPANY.
5.5 Audit.
(a) DISTRIBUTOR shall at all times maintain complete and accurate books and
records relating to its sales of the Products, the Gross Margin thereon, and the
calculation of any royalty payments hereunder, its investment in market
development pursuant to Section 3.1, and its funding of research and development
pursuant to Sections 7.1 and 7.2. DISTRIBUTOR shall permit a third party major
accounting firm designated by COMPANY who has signed a confidentiality agreement
that is as protective of DISTRIBUTOR as the confidentiality provisions agreed to
by the Parties in this Agreement, to examine and audit records relevant to the
foregoing during reasonable business hours upon five (5) days prior written
notice, but no more than once in any twelve (12) month period. Such audit right
shall survive termination or expiration of this Agreement for a period of one
(1) year.
(b) COMPANY shall at all times maintain complete and accurate books and
records relating to its manufacturing costs and research and development
expenses related to projects funded or co-funded by DISTRIBUTOR pursuant to
Section 7.1. COMPANY shall permit a third party major accounting firm designated
by DISTRIBUTOR who has signed a confidentiality agreement that is as protective
of COMPANY as the confidentiality provisions agreed to by the Parties in this
Agreement, to examine and audit records relevant to the foregoing during
reasonable business hours upon five (5) days prior written notice, but no more
than once in any twelve (12) month period. Such audit right shall survive
termination or expiration of this Agreement for a period of one (1) year.
ARTICLE 6. Regulatory Matters
6.1 Regulatory Approvals. The Parties shall cooperate to develop a mutually
agreed regulatory strategy for the Products. COMPANY will retain all rights to
and ownership of all Regulatory Approvals for the Products, and will grant to
DISTRIBUTOR a right of reference to its regulatory submissions and technical
files, including, without limitation, those Regulatory Approvals listed on
Exhibit 6.1, as necessary to fulfill its obligations hereunder. COMPANY will
maintain FDA and EU regulatory approvals for the Products. During the
Exclusivity Period, the Parties shall mutually agree on any additional countries
in which Regulatory Approvals for the Products will be sought. During the
Exclusivity Period, COMPANY will be responsible for obtaining such additional
Regulatory Approvals, provided that if requested by COMPANY or if required by
local law, DISTRIBUTOR will obtain and maintain any additional regulatory
approvals necessary for the sale or use of the Products, in COMPANY's name and
COMPANY's expense. After the Exclusivity Period, upon COMPANY's request,
DISTRIBUTOR shall use commercially reasonable efforts to assist COMPANY's
efforts to transfer or assign to COMPANY all regulatory registrations and sales
and/or marketing authorizations held by DISTRIBUTOR required to enable COMPANY
to sell the Products. DISTRIBUTOR's
19
assistance shall be limited to executing required documents after review and
providing information required to effect the transfer or assignment. All
incremental out-of-pocket costs associated with such transfer or assignment
shall be borne by COMPANY. Notwithstanding COMPANY's obligations hereunder,
DISTRIBUTOR will make reasonable efforts to inform COMPANY from time to time of
relevant regulatory changes to the extent it is aware of such changes and
COMPANY's interest in them.
6.2 Product Inserts and Labeling. During the Exclusivity Period, COMPANY
shall be responsible for the text and regulatory compliance of all package
labels and Product inserts used in connection with the Products; provided after
the Transition Period, DISTRIBUTOR shall have the opportunity to review and
comment on all such documents prior to their implementation. During the
Exclusivity Period, DISTRIBUTOR shall develop all sales and promotional
literature for the Products, subject to compliance with approved Product claims
and labeling; provided that, DISTRIBUTOR will use reasonable efforts to provide
such literature to COMPANY for its review and comment prior to its
implementation. COMPANY agrees that all labels and labeling shall prominently
identify DISTRIBUTOR as the distributor of the Products if permitted by law and
in a format to be mutually agreed by the Parties (except for Products shipped
during the Transition Period). All labels and labeling shall also prominently
identify COMPANY as the manufacturer of the Products if permitted by law. In
addition, during the Exclusivity Period, all Monitors and XXXX Analyzers and all
packaging for the Sensors, Calibrators and Cartridges shall be printed, embossed
or engraved to prominently identify DISTRIBUTOR, if permitted by law and in a
format to be mutually agreed by the Parties and consistent with the
DISTRIBUTOR's policies for use of its trademarks (except for Products shipped
during the Transition Period). For purposes of this Agreement the terms "label"
and "labeling" shall have the meanings set forth in Sections 201(k) and 201(m)
respectively of the U.S. Federal Food, Drug and Cosmetics Act.
6.3 Localization. DISTRIBUTOR shall translate and COMPANY shall implement
the translations by modifying each Product's documentation and labeling and
translating all Monitor and Analyzer screens and displays, into those languages,
as the parties may mutually agree or as specified on Exhibit 6.3, by the end of
the Transition Period so that they comply with the local regulatory requirements
for sale and clinical use in certain countries. Additional languages shall be
subject to mutual agreement of the Parties. DISTRIBUTOR shall also translate all
required technical Product literature including operator manuals, service
manuals, and labeling into the following languages (in addition to those set
forth on Exhibit 6.3): Dutch and Chinese (Simple & Traditional). COMPANY shall
pay fifty percent (50%) of the out-of-pocket translation expenses. DISTRIBUTOR
shall select the translators and the Parties shall agree on budgets for
translations. The Parties' respective rights and obligations under this Section
6.3 shall terminate upon termination or expiration of the Exclusivity Period.
6.4 Product Reporting. COMPANY will maintain MDR and other product
performance monitoring systems for the Products. In addition to its obligations
under Section 5.5, DISTRIBUTOR shall cooperate with COMPANY in connection with
its obligations under this Section 6.4 and provide to COMPANY, on a timely basis
to permit COMPANY to fulfill its regulatory obligations, the necessary reports
relating to complaints and product performance
20
issues relating to the Products. Upon reasonable request by COMPANY, DISTRIBUTOR
shall promptly make such reports (on behalf of COMPANY, if appropriate) directly
to the appropriate regulatory authorities. In addition, DISTRIBUTOR shall
maintain sales and service records to assist it in locating Products for the
purpose of implementing recalls and other corrective actions. If COMPANY
implements a recall or corrective action in accordance with Section 6.5,
DISTRIBUTOR shall provide such location information to COMPANY unless
DISTRIBUTOR implements such recall or corrective action itself. In addition,
within thirty (30) days after the Effective Date, the Parties shall establish an
appropriate notification, consultation and escalation procedure, to be used
during the Exclusivity Period, for adverse events relating to the Products,
which procedure will permit either Party to take actions consistent with its own
regulatory guidelines and criteria, if the Parties cannot mutually agree on a
course of action or if the notifying Party is unable to contact the appropriate
senior management of the other Party through the notification process.
DISTRIBUTOR and COMPANY shall each be responsible for bearing their own costs
associated with all product tracking, complaint analyses and related
evaluations.
6.5 Product Recalls.
(a) Within thirty (30) days of the Effective Date, the Parties shall
establish a mutually agreeable procedure for communicating and consulting with
each other with respect to any recall issues with respect to the Products. If
either Party believes that a recall of any Product is desirable or required by
law, it shall promptly notify the other Party. The Parties shall then discuss
reasonably and in good faith whether such recall is appropriate or required and
the manner in which any mutually agreed recall shall be handled. This Section
6.5 shall not limit the obligations of either Party under law with respect to
recall of Products required by law or properly mandated by governmental
authority. Voluntary recalls shall be conducted by mutual agreement (with such
agreement not to be unreasonably withheld) provided that if mutual agreement is
not reached, either Party may individually conduct the voluntary recall in
question in a manner consistent with its own regulatory guidelines and criteria.
COMPANY shall bear all costs and expenses of any voluntary recall of any
Products and shall reimburse DISTRIBUTOR for the reasonable, out-of-pocket costs
incurred by DISTRIBUTOR as a result of such recall, including the replacement
cost of any Products affected thereby, unless (i) such recall is unjustified and
neither requested nor classified as a recall by a governmental agency or delegee
or (ii) the cause or basis of such recall is attributable to a condition, fact
or action that constitutes a breach by DISTRIBUTOR of any of its obligations
hereunder in which case DISTRIBUTOR will be liable for the costs and expenses of
such recall, and shall reimburse COMPANY for the reasonable, out-of-pocket costs
incurred by COMPANY as a result of such recall, including the replacement cost
of any Product affected thereby. The Parties shall cooperate fully with each
other in effecting any recall of the Products pursuant to this Section 6.5,
including communications with any customers or to the public. Notwithstanding
the foregoing, DISTRIBUTOR shall not have the right to recall the Products
without COMPANY's prior written consent after the termination or expiration of
the Exclusivity Period.
(b) If any governmental agency having jurisdiction (including without
limitation the FDA) shall request or order any corrective action with respect to
Products supplied hereunder, including any Product recall, customer notice,
restriction, corrective action or market
21
action or any Product change, COMPANY shall bear the costs and expenses of such
corrective action and shall reimburse DISTRIBUTOR for the reasonable,
out-of-pocket costs incurred by DISTRIBUTOR as a result of such corrective
action, including the replacement cost of any Products affected thereby, unless
the cause or basis of such corrective action is attributable to a condition,
fact or action that constitutes a breach by DISTRIBUTOR of any of its
obligations hereunder, in which case, DISTRIBUTOR shall bear the costs and
expenses of such corrective action, and shall reimburse COMPANY for the
reasonable out-of-pocket costs incurred by COMPANY as a result of such action,
including the replacement cost of any Product affected thereby.
(c) In the event of any recall or corrective action hereunder, the Minimum
Purchase Requirements shall be adjusted appropriately to account for such
interruption (unless (i) such recall is unjustified and neither requested nor
classified as a recall by a governmental agency or delegee or (ii) the cause or
basis of such corrective action is attributable to a condition, fact or action
that constitutes a breach by DISTRIBUTOR of any of its obligations hereunder).
ARTICLE 7. Research and Development, New Products.
7.1 Collaboration.
(a) During the Exclusivity Period, the Parties shall work together to
identify, prioritize and collaborate on research and development projects for
new features and improvements to the Products in the Field ("R&D Projects"),
such as integrated modules, improved interfaces for the Monitors and Analyzers
and additional measurement parameters for the Sensors and Cartridges. In order
to implement such R&D collaboration, the Parties shall establish an R&D
committee (the "R&D Committee") to be comprised of two (2) representatives of
each Party. Such R&D Committee shall meet within three (3) months after the
Effective Date, and at least quarterly thereafter, to develop appropriate R&D
Projects for the Products. The R&D Committee shall select and prioritize such
R&D projects and establish appropriate milestones. The Parties shall provide
technical assistance and advice, as well as funding estimates, with respect to
such Projects. COMPANY and DISTRIBUTOR shall commit to delivering products
according to the agreed R&D plan (the "R&D Plan"). If COMPANY materially fails
to meet the R&D Plan (other than due to acts or omissions of DISTRIBUTOR), and
such failure has a reasonably demonstrated impact on DISTRIBUTOR's ability to
meet the Minimum Purchase Requirements hereunder, the Parties shall discuss in
good faith appropriate reductions in the Minimum Purchase Requirements.
(b) During the Exclusivity Period, COMPANY shall promptly inform DISRIBUTOR
in writing of all research and development it anticipates or undertakes, either
alone or in conjunction with another party, and of any products or intellectual
property it may acquire which may have utility in the Field and DISTRIBUTOR
shall have the opportunity to fund or co-fund any such development or
acquisition as provided herein. The Parties may decide to develop or market a
new generation of continuous or intermittent blood analysis products for use in
the Field (e.g, a new platform (such as thick/thin films), or new measurement
methodology (such as electrochemical vs. optical measurement) or to acquire a
separate platform,
22
methodology, application, intellectual property or Products in the Field from a
third party. If such development or acquisition is co-funded by DISTRIBUTOR on
at least a (***) percent ((***)%) basis with COMPANY, such products shall be
deemed to be Improved Products hereunder, provided that revised pricing for such
Improved Products, if any, shall be mutually agreed by the Parties prior to
commercialization. DISTRIBUTOR shall be entitled to contribute cash and/or
headcount to meet such co-funding level, in amounts to be mutually agreed by the
Parties on a project-by-project basis. If DISTRIBUTOR decides not to fund or
co-fund such development or acquisition on at least a (***)% basis, such product
shall be deemed to be a New Product hereunder and subject to Section 7.4. The
Parties shall, from time to time, discuss changes in funding budgets during the
course of any such R&D Project so that DISTRIBUTOR does not inadvertently lose
the opportunity to co-fund such Project at the minimum level hereunder to retain
its rights under this Section 7.1(b) with respect to such developments. However,
a product or a development shall not lose its status as an Improved Product due
to a cost overrun to the extent such overrun is attributable to COMPANY and
DISTRIBUTOR was not informed on a timely basis that such overrun was going to
occur. If DISTRIBUTOR elects to fund less than (***)% of any project, or if a
project incurs a cost overrun and DISTRIBUTOR does not fund at least (***)% of
the overrun, the funds contributed by DISTRIBUTOR towards that project shall be
counted in calculating DISTRIBUTOR's offer with respect to such product under
Section 7.4.
(c) All other R&D Projects undertaken pursuant to this Section 7.1 shall be
co-funded by DISTRIBUTOR, as provided in Section 7.2. All Improved Products
resulting from such projects shall be deemed to be Products hereunder; provided
that revised pricing for such Improved Products, if any, shall be mutually
agreed by the Parties prior to commercialization.
(d) If COMPANY commercializes, other than through DISTRIBUTOR, any
invention, copyrightable material or trade secrets made or conceived or acquired
pursuant to an R&D Project conducted by COMPANY (an "Incremental Improvement"),
and provided that DISTRIBUTOR funded at least (***) percent (***%) of the
applicable R&D Project or acquisition cost, COMPANY shall pay DISTRIBUTOR a
royalty of (i) (***) percent of the Net Sales received by COMPANY with respect
to the sales of the product by COMPANY containing the Incremental Improvement,
if such product is sold on a stand-alone basis, and (ii) (***) percent (***%) of
the aggregate Net Sales (including integrated (e.g. lactate measurement added to
a blood gas cartridge) products and components) received by COMPANY with respect
to the sales of such a product, if such product is sold on an integrated basis
with other products or components, (a) for any such sales in the Field occurring
after the end of the Exclusivity Period, and (b) for any such sales outside the
Field occurring during the term of the Agreement and thereafter. Such royalties
shall be payable semi-annually within (***) days of the end of the FQ2 and FQ4.
Such royalty obligation shall terminate on the later of (i) the last to expire
of the patents covering such Incremental Improvement, or (ii) (***) years from
the first commercial sale of such Incremental Improvement. In addition,
DISTRIBUTOR shall receive a perpetual, royalty-free and non-
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
23
exclusive license under such invention or trade secret to use the Incremental
Improvement in the Field. As used herein, the term "Net Sales" shall mean the
gross revenues received from the sale of such products to independent third
parties during the applicable period less (A) discounts and rebates, (B) credits
or allowances granted upon claims or returns, (C) freight charges paid for
delivery and (D) taxes and other governmental charges levied on or measured by
the invoiced amount.
7.2 Research and Development Funding. During the Exclusivity Period,
DISTRIBUTOR shall provide to COMPANY funding for all R&D Projects in the Field,
in such amounts as the Parties may mutually agree and consistent with COMPANY's
funding estimates, but in no event shall such funding be less than $(***) in
cash payment to COMPANY on or before the following dates: (***) business days
after the Effective Date, and (***). Thereafter DISTRIBUTOR shall make its
payments in advance, in two semi-annual installments of $(***) each, on (***)
and (***) of each succeeding Fiscal Year commencing on (***). Such minimum
payments will only be applied to identified R&D projects and will "count" in
calculating the (***)% funding requirement set forth herein.
7.3 On-going Research and Development. COMPANY shall provide, at its own
expense, reasonable on-going research and development to maintain and improve
the Products, such as bug fixes, access devices and introducers, subject to
COMPANY's resource constraints. All Improved Products resulting from such
on-going research and development shall be deemed to be Products hereunder;
provided that revised pricing for such Improved Products, if any, shall be
mutually agreed by the Parties prior to commercialization.
7.4 Right of First Refusal for New Products. If, at any time during the
Exclusivity Period, COMPANY develops or acquires any New Products and desires to
distribute and sell such New Products in the Field or to appoint a third party
to do so in any country or COMPANY acquires technology with applicability in the
Field ("New Technology") and desires to license such technology in the Field,
then DISTRIBUTOR shall have a right of first refusal with respect to the right
to distribute such New Product in the Field in such countries, or license such
technology in the Field, as provided herein. During the Exclusivity Period,
COMPANY shall not consummate a proposed distribution agreement with any third
party with respect to the distribution of any New Product in the Field or a
license agreement with any third party for the use of such technology in the
Field, without first giving prompt notice thereof to DISTRIBUTOR in writing (the
"Notice") specifying the pricing, terms, conditions and other material
provisions of such proposed agreement. In the event that DISTRIBUTOR elects to
consummate a proposed agreement upon the same pricing, terms, conditions and
other material provisions as specified in the Notice (or terms more favorable to
COMPANY than those set forth in the Notice), DISTRIBUTOR shall have (***) days
following receipt of the Notice to so notify COMPANY and the Parties shall
thereafter use their reasonable best efforts to finalize the negotiation and
execution of such a proposed agreement within (***) days following the receipt
of such reply notification from DISTRIBUTOR. In the event that DISTRIBUTOR does
not elect to enter into
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
24
the proposed transaction within such (***) day notice period or the Parties fail
to execute an agreement within such (***) day period, COMPANY may enter into an
agreement with respect to the proposed transaction on terms that are, in the
aggregate, not less favorable to COMPANY than the terms specified by COMPANY in
the Notice, however, that if the pricing, terms, conditions and other material
provisions of the proposed agreement are modified to be, in the aggregate, less
favorable to COMPANY than were specified in the Notice to DISTRIBUTOR, then
COMPANY shall give a new Notice to DISTRIBUTOR and comply with the right of
first refusal set forth herein for an additional (***) day period following the
receipt of such new Notice. The provisions of this Section 7.4 shall not apply
if DISTRIBUTOR is in breach of any of its material obligations hereunder. In
addition, if the New Products are Competing Products, Section 2.3(b) and Section
2.5 shall not apply with respect to such New Products and the Parties shall
negotiate in good faith appropriate reductions, if any, in the Minimum Purchase
Requirements.
7.5 Improvements. DISTRIBUTOR shall use reasonable efforts to provide
timely information and assistance to Affiliates, Subdistributors and customers
in upgrading Products as any Improved Products become available hereunder.
7.6 License to COMPANY Technology. COMPANY hereby grants to DISTRIBUTOR a
worldwide, royalty-free (except as provided below) license to use, in the Field,
the COMPANY Technology so long as DISTRIBUTOR buys core elements of the
Technology (optical subassembly for Continuous Monitoring Products, cartridge
reading subassembly for Intermittent Monitoring Products) from the Company (as
defined below) for the sole purpose of integrating the Monitors and Analyzers
(and the measurements taken therewith) into DISTRIBUTOR's patient monitoring,
cardiology and emergency care products in the Field. The purchase of these
subassemblies may be replaced by a royalty of (***)% of the average sales price
(less Uplift, freight and duties thereon) of the resulting incremental blood
analyte measurement portion of the resulting product if DISTRIBUTOR ceases the
purchase of subassembly core elements from COMPANY. Such license shall be sole
during the Exclusivity Period and non-exclusive for the (***) years following
the expiration of the Exclusivity Period.
ARTICLE 8. Warranties.
8.1 Intellectual Property Representation and Warranty. COMPANY warrants to
DISTRIBUTOR that on the Effective Date, it has not received formal notice of any
alleged infringement or violation of valid patents, copyrights, trade marks,
mask works or trade secrets of any third party. Attached as Exhibit 8.1 is a
list of COMPANY's current patent portfolio with respect to the Products.
8.2 Product Warranty. COMPANY warrants to DISTRIBUTOR that the Products at
the time of their delivery by COMPANY to DISTRIBUTOR (i) shall meet the agreed
applicable specifications attached hereto as Exhibits 1.2 and 1.3 (as may be
changed from time to time as provided herein), which shall be no less than the
published specifications and documentation as
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
25
of the date thereof and subject to Section 4.1, DISTRIBUTOR's Supplier
Certification guidelines; (ii) shall have been manufactured in accordance with
all laws and regulations applicable to their manufacture in those jurisdictions
in which DISTRIBUTOR is distributing the Products (provided that DISTRIBUTOR
gives COMPANY at least ninety (90) days written notice of any jurisdictions in
addition to those listed on Exhibit 6.1); (iii) shall be new or newly
manufactured; and (iv) shall be of good and merchantable title, free of liens
and encumbrances, (v) shall be "Y2K" compliant, as that term is defined on
DISTRIBUTOR's external website on the Effective Date, and (vi) that, as of the
Effective Date clearance or permission to sell the Products has been obtained in
those countries as set forth in Exhibit 6.1. COMPANY shall promptly, at
COMPANY's sole option, replace, repair or make a purchase price (in the amount
paid by DISTRIBUTOR to COMPANY) refund for any of such Products proved to be
non-conforming, provided that written notice and reasonable documented evidence
of each warranty claim and the fact that the failure occurred during the
warranty period is received by COMPANY within thirty (30) days after the
expiration thereof. COMPANY will have the right to verify such non-conformance.
Such replacement, repair or refund shall be DISTRIBUTOR's sole remedy hereunder.
Unless otherwise agreed by the Parties, the warranty period under this Section
8.2 for (a) any Sensor shall be the stated shelf life as set forth on the label
for such Product, not to be less than ten (10) months from the date of shipment
to DISTRIBUTOR; (b) any Cartridge shall be the stated shelf life as set forth on
the label for such Product, not to be less than three (3) months from the date
of shipment to DISTRIBUTOR; (c) any Monitor or Calibrator of any Continuous
Monitoring Product, or any Accessory or XXXX Analyzer of any Intermittent
Monitoring Product covered hereunder shall expire on the date eighteen (18)
months after the date of shipment of such item to DISTRIBUTOR; and (d) any IDMS
Software shall expire on the date forty-five (45) days after the date of
delivery of such software to DISTRIBUTOR's customer. The warranty period for any
Improved Products shall be mutually agreed by the Parties. If requested by
COMPANY, DISTRIBUTOR shall return the non-conforming Product to COMPANY at the
time of submission of the warranty claim therefor. DISTRIBUTOR agrees to provide
COMPANY sufficient notice of additional countries in which it intends to
distribute the Products to permit COMPANY to meet its obligations under
subsection (ii) of this Section 8.2.
8.3 Warranty Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN SECTIONS 8.1 AND
8.2, COMPANY MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESSED OR IMPLIED,
INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
8.4 Customer Complaints, Warranty and Out-of-Warranty Repair. DISTRIBUTOR
will be responsible for handling customer complaints regarding the Products and
other product performance issues with customers. COMPANY will provide reasonable
assistance to DISTRIBUTOR in resolving customer complaints. COMPANY will accept
the return of any Products that do not conform to the warranties set forth in
Section 8.2, and will repair or replace any such defective Product (or refund
DISTRIBUTOR's purchase price) as provided in Section 8.2. DISTRIBUTOR agrees to
maintain an inventory of Products (other than Sensors and Cartridges) to meet
its on-going repair obligations; provided that COMPANY agrees to maintain a
reasonable inventory of Products (other than Sensors and Cartridges) to support
significant
26
Product warranty issues. As between COMPANY and DISTRIBUTOR, DISTRIBUTOR will be
responsible for providing its customers with such replacement Products for use
while such defective Products are being repaired or replaced. COMPANY will also
provide out-of-warranty repair service on all hardware components of the
Products, on the terms set forth on Exhibit 8.2 for a period not to exceed seven
(7) years after last production run of the DISTRIBUTOR (or such longer period as
may be required by local laws). The Parties agree to discuss, in good faith, the
feasibility of DISTRIBUTOR providing warranty repair service for the Monitors
and Calibrators of the Continuous Monitoring Products and XXXX Analyzers of the
Intermittent Monitoring Products, at its warranty depots or in the field, on
mutually agreed terms.
8.5 Customer Warranties. DISTRIBUTOR shall be entitled to warrant the
Products to its customers on terms it deems appropriate; provided that
DISTRIBUTOR shall bear any expenses it may incur with respect to such
warranties, to the extent that such warranties exceed the scope or term of the
express warranties made by COMPANY hereunder.
ARTICLE 9: Intellectual Property
9.1 Ownership of Intellectual Property
(a) All inventions and trade secrets made, conceived or acquired by COMPANY
and all inventions and trade secrets made or conceived pursuant to Sections 7.1,
7.2 and 7.3, and the intellectual property related thereto, shall be the
exclusive property of COMPANY. COMPANY will pay all expenses relating to the
securing and maintaining of appropriate intellectual property protection with
respect to such inventions.
(b) All inventions and trade secrets made, conceived or acquired by
DISTRIBUTOR, and the intellectual property related thereto, will be the
exclusive property of DISTRIBUTOR and that DISTRIBUTOR will pay all expenses
relating to the securing and maintaining of appropriate intellectual property
protection with respect to such inventions.
(c) In the event that personnel of COMPANY and DISTRIBUTOR jointly
participate in an invention or trade secret, such invention or trade secret, and
the intellectual property related thereto shall be owned jointly by the Parties.
Determination of inventorship shall be made in accordance with U.S. patent laws.
The Parties shall jointly share in the expenses of obtaining intellectual
property protection of any joint invention.
ARTICLE 10: INDEMNIFICATION
10.1 Trademark Indemnification. COMPANY shall defend, indemnify and hold
DISTRIBUTOR harmless from liability based on a claim of trademark infringement,
unfair competition, or any other basis for liability arising from DISTRIBUTOR's
use of any COMPANY Trademark as licensed hereunder and consistent with the terms
hereof. DISTRIBUTOR shall promptly notify COMPANY in writing of the pendency of
such claim within fifteen (15) days of becoming aware of such claim; provided,
however that failure to give notice within such time period shall not relieve
COMPANY of its obligations hereunder unless
27
such failure results in material prejudice to COMPANY's rights with respect to
such claim. DISTRIBUTOR shall thereafter reasonably cooperate with COMPANY in
the defense of such claim, but at the expense of COMPANY and shall permit
COMPANY to assume control over the defense and/or settlement of such claim. If
COMPANY becomes aware of a threat of action based on trademark infringement,
unfair competition, or any other liability due to use of the trademark in a
particular country, then with sixty (60) days written notice COMPANY may
terminate the trademark license with respect to that particular country. This
Section states COMPANY's entire liability, and DISTRIBUTOR's sole remedy for
trademark infringement and is lieu of all other warranties, express or implied.
10.2 Indemnification by COMPANY. COMPANY shall defend, indemnify and hold
DISTRIBUTOR harmless from liability to the extent such liability is based upon a
third party claim that Products in the form supplied by COMPANY to DISTRIBUTOR
and used consistent with the documentation supplied by COMPANY infringe any
patent or other intellectual property right of any third Parties. DISTRIBUTOR
shall promptly notify COMPANY in writing of the pendency of such claim within
fifteen (15) days of becoming aware of such claim; provided, however that
failure to give notice within such time period shall not relieve COMPANY of its
obligations hereunder unless such failure results in material prejudice to
COMPANY's rights with respect to such claim. DISTRIBUTOR shall thereafter
reasonably cooperate with COMPANY in the defense of such claim, but at the
expense of COMPANY, and shall permit COMPANY to assume control over the defense
and/or settlement of such claim. In the event that Product is held to infringe
any patent or other intellectual property right of any party covered by the
foregoing indemnity, COMPANY shall either (i) obtain for DISTRIBUTOR a license
to such right, (ii) modify the infringing Products so that they no longer
infringe or (iii) replace the infringing Product with a non-infringing Product
which performs the same functions as the infringing Product or if COMPANY is
unable to effect any of the foregoing remedies, COMPANY shall refund to
DISTRIBUTOR the relevant purchase price actually paid by DISTRIBUTOR for such
Products and, in such event, the Parties shall discuss in good faith appropriate
and equitable adjustments to the terms of this Agreement, if any. This Section
states COMPANY's entire liability, and DISTRIBUTOR's sole remedy for
infringement of intellectual property rights and is in lieu of all other
warranties, express or implied. DISTRIBUTOR shall cease distribution in any
country in which COMPANY requests DISTRIBUTOR to do so due to a challenge in
that country based upon patent right of a third party (and the Minimum Purchase
Requirements shall be adjusted accordingly). COMPANY shall have no obligation
under this Article 10 if and to the extent that such claim arises from: (i)
compliance by COMPANY with DISTRIBUTOR's specifications, if any, (ii)
modification of the Products other than by COMPANY or modifications expressly
authorized by COMPANY, (iii) combination of the Products with products other
than those supplied from COMPANY, and the alleged infringement or
misappropriation would not have occurred but for such compliance, modification
or combination, or (iv) used in a way other than intended by COMPANY. COMPANY
shall not have any obligation with respect to a claim if it has provided
DISTRIBUTOR with changes that would have avoided the problem and the changes are
not fully implemented (at COMPANY's cost) within a reasonable time frame,
provided that the changes do not materially adversely affect functionality or
performance and that DISTRIBUTOR is notified of the problem the changes avoid.
28
10.3 Indemnification. Except as specifically provided in Sections 10.1 and
10.2, nothing herein shall be construed to limit the Parties' respective rights
to and obligations of indemnification and contribution which may be available to
them at law.
ARTICLE 11. Term and Termination.
11.1 Term. This Agreement shall become effective upon the Effective Date
hereof and, unless terminated earlier pursuant to this Article 11, shall expire
on October 31, 2002 (the "Initial Term"). Thereafter, the term of this Agreement
may be extended, on a term-by-term basis, for up to three (3) additional three
(3) year periods (each, an "Extension Term") as follows: (a) if DISTRIBUTOR has
met its Minimum Purchase Requirements ( including by making a shortfall purchase
or payment as provided in Section 3.2) during the then current term (either the
Initial Term or an Extension Term); Distributor is not otherwise in material
breach of this Agreement, and DISTRIBUTOR's rights hereunder have not been
converted to non-exclusive for any reason, DISTRIBUTOR shall have the option, in
its sole discretion, to extend the term of this Agreement for the next Extension
Term by giving COMPANY of written notice of its intention to extend the term of
this Agreement, assuming that DISTRIBUTOR meets the criteria set forth above at
the end of the then current term, which notice shall be given not later than
three (3) months prior to the end of the then current term, or (b) the Parties
may mutually agree to extend the term of this Agreement for an additional
Extension Term, subject, in each case, to agreement on appropriate Minimum
Purchase Requirements for such Extension Term, to be negotiated in good faith by
the Parties. If the Parties are unable to agree on such Minimum Purchase
Requirements for an Extension Term, the Minimum Purchase Requirements shall be
calculated according to the formula in Exhibit 1.14, namely, the Minimum
Purchase Requirement in any given year shall be equal to the prior year's actual
purchases (excluding amounts which are purchased solely to cure shortfall), plus
(***) percent (***%) of such actual purchases, but in no event shall such
Minimum Purchase Requirements be less than (***).
11.2 Termination of Exclusivity Period for Failure to Meet Minimum Purchase
Requirements.
(a) As provided in Section 3.2, COMPANY may terminate the Exclusivity
Period for failure by DISTRIBUTOR to meet the Minimum Purchase Requirements
after notice and an opportunity to cure as set forth in Section 3.2. In such
event, DISTRIBUTOR shall pay COMPANY on demand (i) for any remaining Minimum
Purchase Requirements (and take delivery of such Product, if DISTRIBUTOR so
chooses) for the Initial Term of this Agreement, if such failure occurs with
respect to the Minimum Purchase Requirements of any Fiscal Year during the
Initial Term, or (ii) for any remaining Minimum Purchase Requirements (and take
delivery of such Product, if DISTRIBUTOR so chooses) for such Fiscal Year during
any Extension Term and (***) percent (***%) of the Minimum Purchase Requirements
for the following
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
29
Fiscal Year. In addition, DISTRIBUTOR shall reimburse COMPANY for any
out-of-pocket costs and expenses (including without limitation reasonable
attorneys' fees) reasonably incurred by COMPANY to enforce DISTRIBUTOR's
obligations under this Section 11.2(a). Such amounts shall constitute
DISTRIBUTOR's entire liability, and COMPANY's sole and exclusive remedy, with
respect to such failure to meet the Minimum Purchase Requirements hereunder.
(b) In addition, DISTRIBUTOR's exclusive rights to distribute the Products
hereunder shall cease and the Exclusivity Period shall be deemed to be
terminated; provided, however, that so long as DISTRIBUTOR has paid amounts
owing to COMPANY under Section 11.2(a), DISTRIBUTOR shall be entitled to
purchase Sensors and Cartridges from COMPANY (or its third party manufacturer,
if any) on a non-exclusive basis for resale in the Field for a period of two (2)
years from such termination, at non-discriminatory prices for non-exclusive
distributors. During such non-exclusive period, it is not DISTRIBUTOR's
intention to sell Sensors and Cartridges to customers who have not purchased
Products from Distributor; however, the Parties acknowledge that DISTRIBUTOR
cannot, consistent with good DISTRIBUTOR business practices, distinguish between
its customers for this purpose and DISTRIBUTOR shall not be in breach of the
terms of this Section 11.2(b) for such sales; provided that if DISTRIBUTOR
becomes aware that it is selling Sensors or Cartridges to customers who have not
purchased Products from DISTRIBUTOR, it shall so notify COMPANY, and COMPANY (or
its distributor) shall have the opportunity to sell Sensors and Cartridges to
such customer, and DISTRIBUTOR will use reasonable efforts to assign to COMPANY
or its designee any long-term supply contract for Sensors and Cartridges, with
such a customer. DISTRIBUTOR shall inform its sales channel of its intention not
to sell Sensors and Cartridges to customers who have not purchased Products from
DISTRIBUTOR.
(c) In addition, DISTRIBUTOR shall enable COMPANY to connect the Products
into and with DISTRIBUTOR's then current products and to ensure on-going
compatibility with such products for a period of two (2) years from such
expiration; provided that COMPANY supplies the necessary information for
DISTRIBUTOR to maintain such connectivity and compatibility, and that
DISTRIBUTOR shall be obligated to so modify or change its products only if the
changes are not major, or if DISTRIBUTOR desires to make changes that are major.
COMPANY shall supply such information to DISTRIBUTOR in sufficient time for
DISTRIBUTOR to make such changes to its products so that they will be available
to end users at the same time as COMPANY's changed products. In addition,
COMPANY shall have the non-exclusive right to purchase DISTRIBUTOR's COMPANY
integrated modules for a period of two (2) years from such termination, at
prices to be mutually agreed. Upon expiration of such two (2) year period, this
Agreement shall terminate.
11.3 Termination of Exclusivity Period for Other Material Breaches.
(a) The Parties acknowledge that their respective rights and obligations,
with respect to (i) failure to supply are set forth in Sections 4.4 and 4.11
(except for any Failure to Supply attributable to an intentional or willful or
grossly negligent act or omission by COMPANY) and (ii) failure to meet the
Minimum Purchase Requirements are set forth in Section 11.2. In the event of any
other material default by a Party of a material obligation
30
hereunder to which such Party was entitled, including, but not limited to,
failure to pay any material moneys due from one Party to the other Party
excepting amounts as to which there is a legitimate dispute, upon written notice
to the defaulting Party, which termination shall be effective ninety (90) days
(except that with respect to any amount that is not subject to a good faith
dispute, termination shall be effective if such amount is not paid within 10
days of notice thereof) after such notice of default is given, unless the
default shall be cured by the defaulting Party with such ninety (90) day period,
or (ii) to the extent permitted by U.S. bankruptcy law immediately upon written
notice in the event of the bankruptcy or insolvency of the other Party.
Notwithstanding the foregoing, DISTRIBUTOR shall have a ten (10) day cure period
for any breach of its obligations under Sections 4.2, 5.1 and 7.2 to pay for
Products ordered, or to make certain payments within five (5) business days of
the Effective Date.
(b) In addition, DISTRIBUTOR's exclusive rights to distribute the Products
hereunder shall cease and the Exclusivity Period shall be deemed to be
terminated; provided, however, that DISTRIBUTOR shall be entitled to purchase
Sensors and Cartridges from COMPANY (or its third party manufacturer, if any),
at the then current prices, on a non-exclusive basis for resale in the Field for
a period of two (2) years from such termination (in the case of termination for
COMPANY's breach) or one (1) year from such termination (in the case of
termination for DISTRIBUTOR's breach), at non-discriminatory prices for
non-exclusive distributors. During such non-exclusive period, it is not
DISTRIBUTOR's intention to sell Sensors and Cartridges to customers who have not
purchased Products from Distributor; however, the Parties acknowledge that
DISTRIBUTOR cannot, consistent with good DISTRIBUTOR business practices,
distinguish between its customers for this purpose and DISTRIBUTOR shall not be
in breach of the terms of this Section 11.3(b) for such sales; provided that if
DISTRIBUTOR becomes aware that it is selling Sensors or Cartridges to customers
who have not purchased Products from DISTRIBUTOR, it shall so notify COMPANY,
and COMPANY (or its distributor) shall have the opportunity to sell Sensors and
Cartridges to such customer, and DISTRIBUTOR will use reasonable efforts to
assign to COMPANY or its designee any long-term supply contract for Sensors and
Cartridges, with such a customer. DISTRIBUTOR shall inform its sales channel of
its intention not to sell Sensors and Cartridges to customers who have not
purchased Products from DISTRIBUTOR.
(c) In addition, DISTRIBUTOR shall enable COMPANY to connect the Products
into and with DISTRIBUTOR's then current products and to ensure on-going
compatibility with such products for a period of two (2) years from such
expiration; provided that COMPANY supplies the necessary information for
DISTRIBUTOR to maintain such connectivity and compatibility, and that
DISTRIBUTOR shall be obligated to so modify or change its products only if the
changes are not major, or if DISTRIBUTOR desires to make changes that are major.
COMPANY shall supply such information to DISTRIBUTOR in sufficient time for
DISTRIBUTOR to make such changes to its products so that they will be available
to end users at the same time as COMPANY's changed products. In addition,
COMPANY shall have the non-exclusive right to purchase DISTRIBUTOR's COMPANY
integrated modules for a period of two (2) years from such termination, at
prices to be mutually agreed. Upon expiration of such two (2) year period, this
Agreement shall terminate.
31
11.4 Expiration of Exclusivity Period.
(a) Upon any expiration of the Exclusivity Period (including, without
limitation expiration of the Initial Term or any Extension Term in which
DISTRIBUTOR does not renew the Term as provided in Section 11.1), DISTRIBUTOR
shall cease to be the exclusive distributor of the Products and the Exclusivity
Period shall be deemed to be terminated, provided, however, that DISTRIBUTOR
shall be entitled to purchase Sensors and Cartridges from COMPANY (or its third
party manufacturer, if any), on a non-exclusive basis for resale in the Field
only to customers who have purchased DISTRIBUTOR's Intermittent and Continuous
Monitoring Products prior to such expiration or DISTRIBUTOR's blood analysis
module prior to such expiration or during the non-exclusive period set forth
herein, for a period of two (2) years from such expiration, at
non-discriminatory prices for non-exclusive distributors. During such
non-exclusive period, it is not DISTRIBUTOR's intention to sell Sensors and
Cartridges to customers who have not purchased Products from Distributor;
however, the Parties acknowledge that DISTRIBUTOR cannot, consistent with good
DISTRIBUTOR business practices, distinguish between its customers for this
purpose and DISTRIBUTOR shall not be in breach of the terms of this Section
11.4(a) for such sales; provided that if DISTRIBUTOR becomes aware that it is
selling Sensors or Cartridges to customers who have not purchased Products from
DISTRIBUTOR, it shall so notify COMPANY, and COMPANY (or its distributor) shall
have the opportunity to sell Sensors and Cartridges to such customer, and
DISTRIBUTOR will use reasonable efforts to assign to COMPANY or its designee any
long-term supply contract for Sensors and Cartridges, with such a customer.
DISTRIBUTOR shall inform its sales channel of its intention not to sell Sensors
and Cartridges to customers who have not purchased Products from DISTRIBUTOR.
For avoidance of doubt, such two (2) year non-exclusive period shall not be in
addition to any non-exclusive period provided under Sections 11.2 and 11.3.
(b) In addition, DISTRIBUTOR shall enable COMPANY to connect the Products
into and with DISTRIBUTOR's then current products and to ensure on-going
compatibility with such products for a period of two (2) years from such
expiration; provided that COMPANY supplies the necessary information for
DISTRIBUTOR to maintain such connectivity and compatibility, and that
DISTRIBUTOR shall be obligated to so modify or change its products only if the
changes are not major, or if DISTRIBUTOR desires to make changes that are major.
COMPANY shall supply such information to DISTRIBUTOR in sufficient time for
DISTRIBUTOR to make such changes to its products so that they will be available
to end users at the same time as COMPANY's changed products. In addition,
COMPANY shall have the non-exclusive right to purchase DISTRIBUTOR's COMPANY
integrated modules for a period of two (2) years from such termination, at
prices to be mutually agreed. Upon expiration of such two (2) year period, this
Agreement shall terminate.
11.5 No Prejudice. Termination of this Agreement for any reason shall be
without prejudice to COMPANY's right to receive all payments accrued and unpaid
on the effective date of termination and shall not release either party hereto
from any liability which at such time has already accrued or which thereafter
accrues from a breach or default prior to such expiration or
32
termination. Except as expressly provided herein, all of the parties' rights and
remedies hereunder are cumulative and non-exclusive.
11.6 Surviving Obligations. No termination or expiration of this Agreement
shall affect or discharge any obligations, rights, disclaimers, conditions or
limitations of either Party which arose prior to the effective date of such
termination. In addition, Sections 5.4, 5.5, 7.1 (with respect to COMPANY's
royalty obligation thereunder), 8.3, and Articles 9 (Intellectual Property), 10
(Indemnification), 11 (Term and Termination), 12 (Confidentiality) and 13
(Miscellaneous) and any Sections necessary to give effect to this Article 11
shall survive any termination or expiration of this Agreement.
11.7 Cooperation in the Unwinding. During the period immediately preceding
and following any expiration or termination of this Agreement, the Parties will
use reasonable efforts to cooperate with each other in the unwinding of the
relationship established herein. This cooperation shall include cooperation in
supporting existing customers. In addition, the Parties agree to be mindful of
each other's good name and reputation in such unwinding.
ARTICLE 12: Confidentiality
12.1 Non-Use and Non-Disclosure. Each Party acknowledges and agrees that
all the other Party's Confidential Information is confidential to the disclosing
Party. Each Party shall take the same reasonable measures as it uses to protect
its own confidential information from the unauthorized disclosure or misuse to
protect the other Party's Confidential Information from unauthorized disclosure
or misuse, including without limitation, any disclosure by its employees,
agents, contractors, permitted sublicensees, or consultants of the other Party's
Confidential Information. As used herein, the term reasonable measures shall
mean at least those measures a Party applies to the protection of its own
Confidential Information and the term misuse shall mean use for any purpose
other than as permitted or required hereunder.
12.2 Marking. To be entitled to protection as Confidential Information, all
COMPANY or DISTRIBUTOR documents containing that Party's Confidential
Information shall be appropriately and clearly marked as "Proprietary,"
"Secret," "Confidential," or other words to similar effect. If a disclosure of
Confidential Information is made orally, as in a meeting, the disclosing Party
shall indicate the nature of that information at the time of its disclosure and
shall confirm such designation in writing within ten (10) days of the date of
such disclosure to the receiving Party.
12.3 Exclusions. Information shall not be considered Confidential
Information hereunder if it:
(a) was already in the possession of the receiving Party prior to its
receipt from the disclosing Party;
(b) is, or becomes, part of the public knowledge or literature through no
fault, act or omission of the receiving Party, provided, Proprietary Product
Information shall not be
33
deemed to have entered the public domain by reason of its having been filed with
any regulatory authority; provided the disclosing Party has taken advantage of
any procedures available to protect confidentiality, including FOIA marking and
protective orders;
(c) is, or becomes, available to the receiving Party from a source other
than the disclosing Party, which source has rightfully obtained the same
information and has no obligation of confidentiality to the disclosing Party
with respect to it;
(d) is made available on an unrestricted basis by the disclosing Party to a
third party unaffiliated with the disclosing Party; or
(e) is required to be revealed pursuant to law or requirements of any
securities exchange on which a Party's shares are listed and traded, provided,
however, the receiving Party which is under any such requirement of law shall
give reasonable notice to the disclosing Party of such requirement and shall
cooperate with the disclosing Party, at the disclosing Party's expense in
reasonable legal efforts to limit or mitigate any such revelation so as to
preserve the proprietary nature of any Confidential Information contained
therein.
12.4 Duration; Surviving Obligation. This Article 12 shall be deemed to
cover and include any non-public information disclosed by a Party to the other
during the course of their negotiations of this Agreement, whether or not marked
or indicated as provided in Section 12.2. Each Party's obligations of non-use
and non-disclosure of the other Party's Confidential Information shall apply
during the term of this Agreement and shall also survive for a period of five
(5) years after its termination for any reason.
12.5 Confidentiality of this Agreement. The terms of this Agreement itself
shall be deemed to be Confidential Information hereunder. In the event that a
Party is required to disclose the content of this Agreement pursuant SEC
requirements or requirements of any securities exchange on which a Party's share
are listed and traded, such Party shall use its reasonable efforts to obtain
confidential treatment of at least the following portions of the Agreement: (i)
financial terms (such as all dollar amounts and price terms), (ii) quantities
(such as Minimum Purchase Requirements) and (iii) time periods (such as times
relating to Exclusivity Period or term).
ARTICLE 13. Miscellaneous.
13.1 Compliance with Laws. The Parties agree to comply with all applicable
statutes, laws, ordinances, rules and regulations relating to their respective
obligations hereunder, including without limitation, the Foreign Corrupt
Practices Act and export control laws.
13.2 Disclaimer of Consequential Damages. EXCEPT AS OTHERWISE PROVIDED
BELOW, AND NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, AS
BETWEEN THE PARTIES, NEITHER PARTY SHALL BE LIABLE OR OBLIGATED UNDER ANY
SECTION OF THIS AGREEMENT OR UNDER CONTRACT, NEGLIGENCE, STRICT LIABILITY OR
OTHER LEGAL OR EQUITABLE THEORY FOR
34
ANY INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, SPECIAL OR PUNITIVE DAMAGES. THE
LIMITATIONS IN THIS SECTION 13.2 SHALL NOT APPLY TO BREACHES OF ARTICLE 12
(CONFIDENTIALITY) OR TO ANY RECALL OF THE PRODUCTS INITIATED BY EITHER PARTY
WITHOUT THE EXPRESS WRITTEN CONSENT OF THE OTHER PARTY (EXCLUDING RECALLS
REQUESTED OR ORDERED BY THE FDA OR OTHER APPLICABLE REGULATORY AGENCY). Amounts
incurred by a Party pursuant to Section 6.5 shall not be deemed to be
incidental, consequential, exemplary, special or punitive damages hereunder.
13.3 Status. No agency, partnership or joint venture is hereby established.
Neither COMPANY nor DISTRIBUTOR shall enter into, or incur, or hold itself out
to third parties as having authority to enter into or to incur on behalf of any
other Party any contractual obligations, expenses or liabilities whatsoever.
13.4 Excused Delay. The untimely performance of any obligations arising
hereunder by any Party will be excused, and such delay of performance shall not
constitute breach, or grounds for termination or prejudice of any rights
hereunder, if the delay of performance is a result of circumstances or
occurrences beyond the reasonable control of the Party whose performance is
excused hereunder ("Force Majeure"), provided that such Party (i) shall
immediately notify the other of any such anticipated delay and its expected
duration and (ii) shall immediately resume performance after the cause of delay
is removed, and (iii) shall during such delay be reasonably diligent in avoiding
further delay. Without limiting the generality of circumstances or occurrences
beyond the reasonable control of a Party, examples of such circumstances or
occurrences are strikes, shortages of power, materials or transportation, acts
of government or of God, sabotage or insurrection. Notwithstanding the above,
the suffering by one Party of any actual and material delay greater than one
hundred eighty (180) days in any one year period (or any material delay which is
reasonably expected to exceed 270 days in any one year period) shall be grounds
for termination (without cause or penalty) by the other Party.
13.5 Notices. All notices, reports or demands to be given by either Party
to the other under the provisions of this Agreement shall be forwarded, charges
prepaid, by express mail or reputable overnight courier service, or may be
telexed or transmitted by facsimile, properly addressed to the respective
Parties as follows:
If to DISTRIBUTOR: Hewlett-Packard Company
Medical Products Group
ATT: General Manager, Patient Monitoring Division
0000 Xxxxxxxxx Xx.
Xxxxxxx, XX 00000
With copies to: Hewlett Packard Company
Legal Department
0000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
35
If to COMPANY: Diametrics Medical Incorporated
0000 Xxxxxx Xxxx
Xx. Xxxx, XX 00000
With copies to: Xxxxxx & Xxxxxxx
Attention: Xxxxxxx X. Xxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
or to such address or addresses the Parties hereto may designate for such
purposes during the term hereof. Notices given hereunder if actually received
shall be deemed given upon the tenth day after mailing and on the day after
dispatch if given by telex or facsimile transmission.
13.6 Binding Effect and Assignment. The Parties acknowledge and agree that
DISTRIBUTOR is intending to reorganize as two separate corporate entities and
that this Agreement shall be assigned to the measurement company to be created
thereby. During the term of this Agreement, the rights of either Party under
this Agreement shall not be assigned nor shall the performance of either Party's
duties hereunder be delegated, without the other Party's written consent (which
shall not be unreasonably withheld) except that, without the other Party's prior
consent, either Party may assign this Agreement (i) to an Affiliate that is an
affiliate as of the date of execution of this Agreement or (ii) to an Affiliate
whose assets consist entirely of the assets of an Affiliate or Affiliates that
were Affiliates as of the date of execution of this Agreement or (iii) in
connection with a merger, consolidation, reorganization or sale of substantially
all of its assets; provided, however, that COMPANY shall notify DISTRIBUTOR (the
"Sale Date") in the event of merger, consolidation, reorganization or sale of
substantially all of assets of COMPANY or if any individual, group or entity
either acquires thirty three percent (33%) of the outstanding shares of
COMPANY's voting securities or obtains through election, appointment or other
means, a majority of the directors of COMPANY, and (a) DISTRIBUTOR shall have
the right to terminate this Agreement by written notice to COMPANY not later
than ninety (90) days from the Sale Date, such termination to take effect on the
nine (9) month anniversary of the Sale Date, unless the Parties agree in writing
to the contrary; and (b) COMPANY shall have the right to terminate this
Agreement by written notice to DISTRIBUTOR not later than ninety (90) days from
the Sale Date, such termination to take effect, unless the Parties otherwise
agree in writing to the contrary, on the later of (1) the nine (9) month
anniversary of the Sale Date or (2) the expiration of the Initial Term or the
first Extension Term, provided that DISTRIBUTOR duly exercises its right to
extend the Term for an Extension Term at the end of the Initial Term, as
provided in Section 11.1. In the event that this Agreement is terminated
pursuant to this Section 13.6, Section 11.4 shall apply and the Parties shall
use all reasonable efforts to ensure a smooth transition that takes into account
the interests of end users and minimizes any negative impact on the reputation
or financial status of the Parties as a result of such termination. No sale,
assignment or other transfer of any rights of a Party hereunder shall be
effective unless the purchaser, assignee or transferee assumes such Party's
obligations under this Agreement. Any assignment shall not relieve the assigning
Party of its responsibility for its obligations hereunder.
36
13.7 Dispute Resolution.
(a) For any dispute or claim arising out of or relating to this Agreement,
of breach hereof, the Parties, prior to filing any action as provided herein,
shall in good faith first negotiate towards a written resolution of such dispute
or claim for a period not to exceed twenty (20) days from the date of receipt of
a Party's request for such negotiation. Such negotiations shall be conducted by
managers of each Party who have full authorization to finally resolve any such
dispute or claim. Notwithstanding the foregoing, each Party expressly reserves
the right to seek interim or temporary judicial relief, without limitation, any
injunction or other preliminary relief from a court of competent jurisdiction.
(b) The Parties agree to consider appropriate forms of alternative dispute
resolution (including non-binding mediation, arbitration and conciliation) for
any dispute arising out of or relating to this Agreement.
13.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the United States and the State of Delaware,
excluding its choice of law rules. The Parties consent to the jurisdiction of
the state and federal courts of Delaware.
13.9 Severability. If any provision or provisions of this Agreement shall
be determined to be unenforceable, then the Parties shall in good faith
negotiate for a substitute provision addressing the same subject matter as the
unenforceable provision(s) as may then be considered to be enforceable,
provided, however, if no substitute provision can be formulated which shall be
accepted by the Parties as enforceable, this Agreement shall nonetheless
continue in full force and effect with the unenforceable provision(s) stricken
here from. In such case the applicable law shall apply with regard to
unenforceable and/or void provisions.
13.10 Headings and Authorship. The Article headings set forth in this
Agreement are intended only as a convenience and shall not be given any effect
to interpret the provisions of this Agreement. This Agreement shall be deemed to
have been written jointly by the Parties.
13.11 Waiver. The failure or delay of either Party to enforce at any time
any provision hereof shall not be construed to be a waiver of such provision or
of the right thereafter to enforce each and every provision. No waiver by either
Party to this Agreement, either express or implied, of any breach of any term,
condition, or obligation of this Agreement, shall be construed as a waiver of
any subsequent term, condition, or obligation of this Agreement. Nor shall the
performance of any act of mitigation, such as allocation of Product, or
adjustment of milestones be deemed a waiver of any prior or subsequent breach of
this Agreement. In the event of a breach of any provision of this Agreement, the
facts and circumstances of said breach shall be considered in determining
whether said breach and provision are material. No waiver shall be effective
unless it is made in writing, executed by both Parties, and refers expressly to
this Agreement.
13.12 Dollar Denomination. Unless otherwise specified all amounts stated in
this Agreement as payable in U.S. Dollars shall not be subject to currency
exchange adjustments.
37
13.13 Entire Agreement and Modification. This Agreement, including all
Exhibits hereto, sets forth the entire agreement between Parties with respect to
the subject matter hereof and as such, supersedes all prior and contemporaneous
negotiations, agreements, representations, understandings and commitments with
respect thereto and shall take precedence over all terms, conditions and
provisions on any purchase order form, or order acknowledgment, or order release
purporting to address the same subject matter. This Agreement shall not be
released, discharged, changed or modified in any manner except by a writing
signed by the duly authorized officers or agents of each Party hereto, which
writing shall make specific reference to this Agreement and shall express the
plan or intention to modify same.
13.14 Authority. Each of the signatories below expressly represents that
he/she has the authority to sign this Agreement on behalf of his/her Company to
bind his/her Company to all of the terms and conditions of this Agreement.
13.15 Publicity. Neither party hereto shall originate any publicity, news
release, or other announcement, written or oral, whether to the public press,
the trade, DISTRIBUTOR's or COMPANY's customers or otherwise, relating to this
Agreement, or to performance hereunder or the existence of an arrangement
between the parties without the prior written approval of the other party
hereto, not to be unreasonably withheld, or as provided in Sections 12.3(e) and
12.5.
13.16 Insurance. The Parties shall maintain during the entire term of this
Agreement, including extensions, insurance adequate to cover any reasonably
anticipated claims that may arise hereunder.
38
IN WITNESS WHEREOF, DISTRIBUTOR and COMPANY have executed this Agreement by
their respective duly authorized officers or representatives as of the day first
above written.
COMPANY DISTRIBUTOR
By: /s/ Xxxx-Xxxxxx Xxxxxxx By: /s/ Xxxxx X. Xxxxxxxx
----------------------------- -------------------------------
Title: General Manager Title: Chairman, President and
-------------------------- Chief Executive Officer
----------------------------
Date: June 6, 1999 Date: June 6, 1999
-------------------------- ----------------------------
Schedule of Exhibits:
Exhibit 1.2 Intermittent Monitoring Product Specifications
Exhibit 1.4 Continuous Monitoring Product Specifications
Exhibit 1.14 Minimum Purchase Requirements
Exhibit 2.3(a) Transition of HP Sales from (***) to COMPANY Intermittent
Monitoring Products
Exhibit 2.3 (b) Integration with (***) Exhibit 3.3(a) COMPANY Distributors
Exhibit 3.3(c) Compensation to DISTRIBUTOR
Exhibit 3.4 Payment for COMPANY Sales Organization
Exhibit 3.7 COMPANY Trademarks
Exhibit 3.11 DISTRIBUTOR's Standard Software License Terms
Exhibit 4.1 DISTRIBUTOR Supplier Certification Guidelines
Exhibit 4.5 DISTRIBUTOR Purchase Order Form
Exhibit 5.3 Product Pricing
Exhibit 6.1 Regulatory Approvals
Exhibit 6.3 Localization
Exhibit 8.1 Patent Portfolio
Exhibit 8.4 Out-of-Warranty Repair Terms (to be completed within
15 days of the Effective Date)
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
39
Exhibit 1.2
Intermittent Monitoring Product Specifications
(Specifications are Subject to change during the term of the Agreement)
XXXX(R) SL Series 2000 Blood Analysis System
(***)
If COMPANY changes the specifications for the Intermittent Monitoring Products
or changes the design of, or manufacturing process for the Intermittent
Monitoring Products in a way that affects the electrical performance, the
mechanical form, fit or function, or the software compatibility of such
Intermittent Monitoring Products (an "Engineering Change"), COMPANY shall
provide DISTRIBUTOR reasonable notice of such Engineering Change and provide
evaluation samples, and other information, at DISTRIBUTOR's reasonable request,
and DISTRIBUTOR shall have the right to review and approve such Engineering
Changes prior to their implementation, such approval not to be unreasonably
withheld. COMPANY and DISTRIBUTOR will discuss an appropriate sharing of
potential upgrade costs, if any, resulting from such Engineering Changes.
Distributor may request changes to the Products by submitting a written request
for such change to COMPANY. COMPANY shall respond to DISTRIBUTOR within 30 days
with a quotation indicating the price, effect on production, and other factors
involved in the change. Unless the Parties agree in writing upon such change, it
shall not be made; provided that COMPANY's consent to changes requested by
DISTRIBUTOR shall not be unreasonably withheld.
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
Exhibit 1.4
Continuous Monitoring Product Specifications
(Specifications are Subject to change during the term of the Agreement)
1. Neotrend
(***)
2. Paratrend 7
(***)
3. TrendCare Satellite Monitor
(***)
4. TrendCare calibrator
(***)
5. TrendCare Patient Data Module
(***)
If COMPANY changes the specifications for the Continuous Monitoring Products or
changes the design of, or manufacturing process for the Continuous Monitoring
Products in a way that affects the electrical performance, the mechanical form,
fit or function, or the software compatibility of such Continuous Monitoring
Products (an "Engineering Change"), COMPANY shall provide DISTRIBUTOR reasonable
notice of such Engineering Change and provide evaluation samples and other
information, at DISTRIBUTOR's reasonable request, and DISTRIBUTOR shall have the
right to review and approve such Engineering Changes prior to their
implementation, such approval not to be unreasonably withheld. COMPANY and
DISTRIBUTOR will discuss an appropriate sharing of potential upgrade costs, if
any, resulting from such Engineering Changes.
Distributor may request changes to the Products by submitting a written request
for such change to COMPANY. COMPANY shall respond to DISTRIBUTOR within 30 days
with a quotation indicating the price, effect on production, and other factors
involved in the change. Unless the Parties agree in writing upon such change, it
shall not be made; provided that COMPANY's consent to changes requested by
DISTRIBUTOR shall not be unreasonably withheld.
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
Exhibit 1.14
Minimum Purchase Requirements
Year: FY1999 FY2000
Minimum $(***) (***)
Purchase
Requirement
The Minimum Purchase Requirement for each subsequent Fiscal Year shall be
equal to the actual purchases of Products made by DISTRIBUTOR from COMPANY
during the immediately prior Fiscal Year ("Actual Purchases"), plus (***)
percent (***%) of such Actual Purchases, but in no event shall the Minimum
Purchase Requirement for such subsequent Fiscal Year be less than the Minimum
Purchase Requirement for the immediately preceding Fiscal Year. For the purposes
of determining the Actual Purchases in a given Fiscal Year, all purchases
actually made in such Fiscal Year shall be included, and any shortfall payment
or purchase made thereafter pursuant to Section 3.2 shall be excluded from such
Actual Purchases and shall not be counted toward the Minimum Purchase
Requirement for the Fiscal Year in which such shortfall payment or purchase is
actually made.
* Orders for Products booked by COMPANY as of (***), 1999 will count toward the
Minimum Purchase Requirements for fiscal year 1999.
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
Exhibit 2.3
A. Transition of DISTRIBUTOR Sales from (***) to COMPANY Intermittent
Monitoring Products
(***)
B. (***) Relationship
(***)
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
Exhibit 3.3 (a)
COMPANY Distributors
Territory is limited to country or countries indicated; Products are
limited to those indicated.
(***)
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
Exhibit 3.3(c)
Compensation to Distributor
EXAMPLE
(1) (2) (3)
NET CREDIT
SALES AGAINST PAYMENT DUE
AMOUNT MINIMUM DISTRIBUTOR
------ ------- -----------
Company sells 100 Paratrend
Sensors at $(***) each $(***) $(***) $(***)
Less freight/handling (***)(4)
-----
Net Payment to Distributor $(***)(5)
-----
(1) Equals amount invoiced Customer for the Product, excluding cost recovery
type charges (ie. taxes and freight). In addition, if disposables are uplifted
to pay for equipment, the uplift will be excluded from the payment due
DISTRIBUTOR, unless DISTRIBUTOR has purchased the equipment or receivable
related to the uplift from the COMPANY. It is the intent of the Parties that
DISTRIBUTOR will purchase such equipment and receivables, a list of which will
be provided by the COMPANY to the DISTRIBUTOR within 15 days after the Effective
Date.
(2) Equals units sold, multiplied by the transfer price of $(***).
(3) Equals the difference between the amount invoiced to the Customer, less the
credit against the minimum, less shipping and handling charges (see (1) for
uplift exclusion).
(4) Using an estimated freight amount of $(***) and handling charge of (***)%.
Actual freight may vary depending on Customer location and will not be billed to
Distributor if billed to Customer.
(5) Payment could be in the form of a cash payment or credit against future
purchases/outstanding receivable balances.
NOTE: If the sales price is less than the transfer price, no payment will be due
to Distributor.
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
Exhibit 3.4
Payment for COMPANY Sales Organization
NUMBER OF COST PER 1/2 YEAR
POSITIONS HEADCOUNT EXTENDED COST
--------- --------- -------------
INTERNATIONAL:
(Sales manager, sales specialists, product
specialists, clinical support specialists,
customer support, advertising and promotion) (***) $(***) (***)
AMERICAS:
(Area sales managers, account managers,
clinical specialists, inservice specialists,
product specialists, customer support,
advertising and promotion) (***) $(***) (***)
---- ----- -----
Total Funded by DISTRIBUTOR (***) $(***)
---- -----
NOTE: Excludes product samples (see Exhibit 5.3) and depreciation of demo/eval
units, which will be owned by DISTRIBUTOR. In addition to the costs above, the
COMPANY will bear any general and administrative costs to support the sales
function.
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
Exhibit 3.7
COMPANY Trademarks and Usage Guidelines
Paratrend 7(R)
Paratrend 7+(TM)
Neotrend(TM)
TrendCare(TM)
XXXX(R) SL
Exhibit 3.11
DISTRIBUTOR's Standard Software License Terms
(already provided)
Exhibit 4.1
DISTRIBUTOR's Supplier Certification Guidelines
(***)
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
Exhibit 4.5
DISTRIBUTOR Purchase Order Form
Exhibit 5.3
Product Pricing
CONTINUOUS MONITORING PRODUCTS:
-------------------------------------------------------------------------------
Annual Sensor Unit Volumes
-------------------------------------------------------------------------------
Less Than Greater
Sensors 20k 20k-30k 30k-75k 75k-150k 150k-250k Than 250k
-------------------------------------------------------------------------------
Neotrend $(***) $(***) $(***) $(***) $(***) $(***)
Paratrend $(***) $(***) $(***) $(***) $(***) $(***)
-------------------------------------------------------------------------------
Hardware & Accessory Pricing:
Item Description Price
-------------------------------------------------------------------------------
Trendcare Senior Monitoring System $(***)
Trendcare Satellite System $(***)
Complete with Monitor, Patient Data
Module and Thermal Printer Paper (2 rolls).
Calibration System with Gas Pack. $(***)
Patient Data Module $(***)
Calibration Gas Pack (3 Cylinders) $(***)
Average Life 6 Months
Thermal Printer Paper (2 Rolls) $(***)
Dummy Load $(***)
Power Cable:
United States $(***)
UK/Europe $(***)
-------------------------------------------------------------------------------
Refurbished Equipment Pricing:
Item Description Price
-------------------------------------------------------------------------------
Senior Monitoring System $(***)
Satellite System $(***)
Calibration System $(***)
NOTE: There is an additional (***)% discount on refurbished equipment greater
than 24 months old.
INTERMITTENT MONITORING PRODUCTS:
---------------------------------
CARTRIDGE PRICING: ANNUAL VOLUME
-------------
Less Than Greater
1M 1-3M 3-5M 5-10M 10-15M 15-20M Than 20M
--------- ---- ---- ----- ------ ------ --------
SINGLE-USE
PRICE PER CARTRIDGE $(***) (***) (***) (***) (***) (***) (***)
MINIMUM ANNUAL VOLUME
---------------------
20K 75K 100K 150K 200K 250K
--- --- ---- ---- ---- ----
MULTI-USE PRICE:
PER TEST $(***) (***) (***) (***) (***) (***)
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
PER CARTRIDGE $(***) (***) (***) (***) (***) (***)
TESTS PER CARTRIDGE (***) (***) (***) (***) (***) (***)
Pricing for multi-use cartridges is dependent upon volume for that cartridge,
volume of single-use cartridges purchased and cartridge test size.
--------------------------------------------------------------------------------
Hardware and Accessories Pricing:
Item Description Price
--------------------------------------------------------------------------------
XXXX SL 2000 Analyzer
with battery charger, 2 batteries and modem $(***)
XXXX SL 2000 Analyzer
with battery charger & 2 batteries, without modem $(***)
Refurbished XXXX SL 2000 Analyzer $(***)
SureStep Pro Glucose module $(***)
IDMS Software Package $(***)
Includes: 3.5" Diskettes, User Manual
RJ45 Cable, RJ45/D89 PC Adapter
EQC Cartridge $(***)
Battery Pack $(***)
Battery Charger/Power Supply $(***)
AC Adaptor $(***)
Carrying Bag Assembly $(***)
Cord, Battery Charger $(***)
Thermal Paper (5 rolls) $(***)
Prices shown are minimum prices. If DISTRIBUTOR achieves an aggregate Gross
Margin on the Products, excluding the XXXX Analyzer for the first 18 months of
this Agreement, in excess of (***)% over the Initial Term of the Agreement or in
any year subsequent to the Initial Term, DISTRIBUTOR and the COMPANY will share
equally in the excess for such Initial Term or subsequent year. During the first
18 months of this Agreement, if DISTRIBUTOR's Gross Margin on the XXXX Analyzer
exceeds (***)%, all of such excess will paid back to the COMPANY up to an amount
equal to $(***) per analyzer sold, after which, any remaining such excess will
be shared equally by the Parties. Payments due to the COMPANY related to excess
Gross Margin on the XXXX Analyzer will be determined and made every months (***)
after the Effective Date of this Agreement.
Sensors and Cartridges will be invoiced to DISTRIBUTOR at price levels based on
DISTRIBUTOR's initial annual volume forecast for a Fiscal Year. At the end of
the Fiscal Year, COMPANY will determine what prices should have applied based on
actual sensor purchase volumes. DISTRIBUTOR will be reimbursed or invoiced for
the difference between the pricing based on forecast volumes and the pricing
based on actual volumes, multiplied by the actual volumes purchased in the
Fiscal Year.
COMPANY will sell DISTRIBUTOR up to (***) sensors, (***) single-use cartridges
and (***) multi-use cartridges per year for evaluations at a (***)% discount to
the agreed upon transfer price for years 1999-2001. In addition, COMPANY will
provide expired or rejected Sensors and Cartridges to DISTRIBUTOR free of
charge, except for shipping charges, on a limited basis as availability permits.
All used equipment supplied to DISTRIBUTOR shall carry standard (new product)
warranty terms and shall be updated to latest revision by COMPANY.
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
Exhibit 6.1
Regulatory Approvals
Continuous Monitoring Products:
-------------------------------------------------------------------------------------------------------------------
X0 XX X0XX X0 + Neotrend TrendCare TrendCare TrendCare
Senior Satellite Calibrator
-------------------------------------------------------------------------------------------------------------------
Europe CE Cleared Cleared Cleared Cleared Certified Certified Certified
May 98 May 98 May 98 May 98 Nov 97 Nov 97 Dec 98
CE 01845 CE 01845 CE 01845 CE 01845
-------------------------------------------------------------------------------------------------------------------
USA Cleared Cleared Cleared Cleared Cleared Cleared Cleared
Jan 91 Nov 97 Sept 97 Dec 97 Sept 97 Sept 97 Pending audit
K901548 K953893 K970906 K972314 K970906 K970906
-------------------------------------------------------------------------------------------------------------------
Japan Cleared Not filed Cleared Not filed Cleared Not filed Not filed
Jan 94 Feb 98 Feb 98
-------------------------------------------------------------------------------------------------------------------
Australia Cleared Submitted Not filed Submitted Submitted Submitted Submitted
April 94 Jan 99 pending Jan 99 pending Jan 99 pending Jan 99 pending Jan 99 pending
clearance clearance clearance clearance clearance
-------------------------------------------------------------------------------------------------------------------
China Not filed Submitted Not filed Not filed Submitted Not filed Not filed
Sept 98 Sept 98
-------------------------------------------------------------------------------------------------------------------
Taiwan Cleared Not filed Not filed Not filed Cleared Not filed Not filed
May 98 May 98
-------------------------------------------------------------------------------------------------------------------
Thailand Submitted Not filed Not filed Not filed Submitted Not filed Not filed
Nov 97 Nov 97
-------------------------------------------------------------------------------------------------------------------
Israel Not filed Submitted Submitted Submitted Submitted Submitted Not filed
July 98 July 98 July 98 July 98 July 98
-------------------------------------------------------------------------------------------------------------------
Exhibit 6.1 (continued)
World Wide Market for
XXXX Blood Analysis System and Cartridges April 28,1999
-----------------------------------------------------------------------------------------
Series Combo BG H3 H5
2000 Cartridge
Analyzer Blood Gas Electrolytes + Electrolytes +
Cartridge Hct Hct + BUN/Cl
-----------------------------------------------------------------------------------------
USA + + + + +
-----------------------------------------------------------------------------------------
Europe CE + + + + X
-----------------------------------------------------------------------------------------
Argentina + + + + +
-----------------------------------------------------------------------------------------
Australia + + + + +
-----------------------------------------------------------------------------------------
Bolivia + + + + +
-----------------------------------------------------------------------------------------
Brazil + + + + +
-----------------------------------------------------------------------------------------
Canada + + + + +
-----------------------------------------------------------------------------------------
China + + + + +
-----------------------------------------------------------------------------------------
Columbia + + + + +
-----------------------------------------------------------------------------------------
Equador + + + + +
-----------------------------------------------------------------------------------------
Greece + + + + +
-----------------------------------------------------------------------------------------
Hong Kong + + + + +
-----------------------------------------------------------------------------------------
Japan + + + + +
-----------------------------------------------------------------------------------------
Jordan + + + + +
-----------------------------------------------------------------------------------------
Korea + + + + +
-----------------------------------------------------------------------------------------
Kuwait + + + + +
-----------------------------------------------------------------------------------------
Netherlands + + + + +
Antilles
-----------------------------------------------------------------------------------------
Panama + + + + +
-----------------------------------------------------------------------------------------
Paraguay + + + + +
-----------------------------------------------------------------------------------------
Peru + + + + +
-----------------------------------------------------------------------------------------
Puerto Rico + + + + +
-----------------------------------------------------------------------------------------
Turkey + + + + +
-----------------------------------------------------------------------------------------
U.A.E. + + + + +
-----------------------------------------------------------------------------------------
Uraguay + + + + +
-----------------------------------------------------------------------------------------
Venezuela + + + + +
-----------------------------------------------------------------------------------------
+ - Cleared for market and distributor in place.
X - Cleared for market with the exception of France which will require reagent
licensure.
Exhibit 6.3
Localization Languages
--------------------------------------------------------------------------------------------------------
XXXX(R)SL with Glucose SOFTWARE MANUALS PACKAGE LABELS INSERVICE VIDEO
Module
--------------------------------------------------------------------------------------------------------
GERMAN X X X
--------------------------------------------------------------------------------------------------------
ENGLISH X X X X
--------------------------------------------------------------------------------------------------------
SPANISH X X X X
--------------------------------------------------------------------------------------------------------
FRENCH X X X
--------------------------------------------------------------------------------------------------------
ITALIAN X X X
--------------------------------------------------------------------------------------------------------
SWEDISH X X X
--------------------------------------------------------------------------------------------------------
GREEK
--------------------------------------------------------------------------------------------------------
JAPANESE
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
X0 XX X0XX X0 + Neotrend TrendCare TrendCare
Senior/Satellite Calibrator
--------------------------------------------------------------------------------------------------------------------------------
English Insert complete Insert complete Multilingual Insert Complete Complete Complete
Insert complete
--------------------------------------------------------------------------------------------------------------------------------
German Not translated Insert translated Multilingual Insert translated Complete Not yet
pending Insert complete pending verification translated
verification
--------------------------------------------------------------------------------------------------------------------------------
French Not translated Insert translated Multilingual Insert translated Translated pending Not yet
pending Insert complete pending verification verification translated
verification
--------------------------------------------------------------------------------------------------------------------------------
Italian Not translated Insert translated Multilingual Insert translated Complete Not yet
pending Insert complete pending verification translated
verification
--------------------------------------------------------------------------------------------------------------------------------
Swedish Not translated Insert translated Multilingual Insert translated Complete Not yet
pending Insert complete pending verification translated
verification
--------------------------------------------------------------------------------------------------------------------------------
Spanish Not translated Insert translated Multilingual Insert translated Translated pending Not yet
pending Insert complete pending verification verification translated
verification
--------------------------------------------------------------------------------------------------------------------------------
Greek Not translated Insert translated Not translated Insert translated Translated pending Not translated
pending pending verification verfication
verification
--------------------------------------------------------------------------------------------------------------------------------
Japanese Not translated Not translated Not translated Not translated Not translated Not translated
--------------------------------------------------------------------------------------------------------------------------------
Product labels are available in the following languages for all products:
English, German, French, Italian, Swedish, and Spanish
Japanese is available for P7 Electrochemical and P7 +
Exhibit 8.1
PATENT PORTFOLIO FOR NEOTREND AND PARATREND
Optical Transmitter Optical Waveguide Multiparameter
Title and Reflector Solid State Sensors Sensors Sensor Apparatus
----- ------------- ------------------- ----------------- ----------------
(***) (***) (***) (***) (***)
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
Exhibit 8.1 (continued)
COMPANY Technology
Patent List - Intermittent Testing Platform Technology
Diametrics Medical, Inc. April, 1999
Patent US Patent # Date of Issue
-------------------------------------------------------------------------------
(***) (***) (***)
Patents for most of the above technologies have also been applied for, or have
been granted, in several foreign countries.
--------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
Exhibit 8.4
Out-of-Warranty Repair Terms
[To be provided within 15 days of the Effective Date]
