1
Exhibit 10.9
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
.
DISTRIBUTION AND LICENSE AGREEMENT
BETWEEN
SPACELABS MEDICAL, INC.
AND
ASPECT MEDICAL SYSTEMS, INC.
2
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS.....................................................................................1
1.1 "Best Price"....................................................................................1
1.2 "Bispectral Index"..............................................................................1
1.3 "BIS Software"..................................................................................1
1.4 "Digital Signal Converter"......................................................................1
1.5 "Four Channel Digital Signal Converter".........................................................2
1.6 "Fully Burdened Costs"..........................................................................2
1.7 "International Territory".......................................................................2
1.8 "Losses"........................................................................................2
1.9 "Module"........................................................................................2
1.10 "Monitor".......................................................................................2
1.11 "Monitor Products"..............................................................................2
1.12 "Proprietary Information".......................................................................2
1.13 "Sensor"........................................................................................2
1.14 "Sensor Products"...............................................................................2
1.15 "Specifications"................................................................................3
1.16 "United States Territory".......................................................................3
1.17 "ZipPrep Electrode Product".....................................................................3
1.18 "ZipPrep Technology"............................................................................3
ARTICLE II - DISTRIBUTION RIGHTS TO MONITOR..................................................................3
2.1 Appointment.....................................................................................3
2.2 Claims..........................................................................................3
2.3 Approvals.......................................................................................4
2.4 Promotion.......................................................................................4
2.5 Demonstration...................................................................................5
2.6 Installation and Training.......................................................................5
2.7 Service.........................................................................................6
2.8 Training by Aspect..............................................................................6
2.9 Marketing Support in the International Territory................................................6
2.10 Provision of Spare Parts........................................................................6
2.11 Right of Aspect to Contact Customers............................................................7
2.12 Purchase Price..................................................................................7
2.13 International Purchase Requirements.............................................................8
2.14 Forecasts.......................................................................................9
2.15 Orders..........................................................................................9
2.16 Shipment.......................................................................................10
2.17 Labeling.......................................................................................10
2.18 Title and Risk of Loss.........................................................................10
2.19 Payment........................................................................................10
2.20 Warranty.......................................................................................10
2.21 Warranty Claims................................................................................11
3
2.22 Customer Complaints............................................................................12
2.23 Recalls........................................................................................12
2.24 Product Liability..............................................................................12
2.25 Claimed Infringement...........................................................................13
2.26 Clinical Testing...............................................................................14
2.27 Restrictive Covenant...........................................................................14
2.28 Improvements...................................................................................14
2.29 Obsolete Products..............................................................................15
ARTICLE III - DISTRIBUTION RIGHTS TO SENSOR PRODUCTS.........................................................15
3.1 Appointment....................................................................................15
3.2 Availability...................................................................................15
3.3 Promotion......................................................................................16
3.4 Purchase Price.................................................................................16
3.5 Additional Payments............................................................................16
3.6 Forecasts......................................................................................17
3.7 Orders.........................................................................................17
3.8 Shipment.......................................................................................17
3.9 Labeling.......................................................................................18
3.10 Title and Risk of Loss.........................................................................18
3.11 Payment........................................................................................18
3.12 Warranty.......................................................................................18
3.13 Warranty Claims................................................................................19
3.14 Customer Complaints............................................................................19
3.15 Recalls........................................................................................19
3.16 Product Liability..............................................................................19
3.17 Claimed Infringement...........................................................................20
3.18 Improvements...................................................................................21
3.19 Failure to Supply..............................................................................21
3.20 Restrictive Covenant...........................................................................22
3.21 Obsolete Products..............................................................................22
ARTICLE IV - RIGHTS TO BISPECTRAL INDEX.....................................................................23
4.1 Licenses.......................................................................................23
4.2 Development Efforts............................................................................23
4.3 BIS Software Maintenance.......................................................................24
4.4 Commercialization Obligation...................................................................24
4.5 Regulatory Process.............................................................................24
4.6 Quality Control................................................................................24
4.7 Royalties......................................................................................25
4.8 License to Manufacture Four Channel Digital Signal Converter...................................25
4.9 Reports and Payment............................................................................25
4.10 Customer Complaints............................................................................25
4.11 Product Liability of SMI.......................................................................26
4.12 Product Liability of Aspect....................................................................26
4.13 Claimed Infringement of SMI Technology.........................................................26
4
4.14 Claimed Infringement of Aspect Technology......................................................27
4.15 Digital Signal Converter.......................................................................28
4.16 Restrictive Covenant...........................................................................28
4.17 Right of Aspect to Contact Customers...........................................................29
ARTICLE V - COMMUNICATIONS.................................................................................29
5.1 Communications.................................................................................29
ARTICLE VI - TERMINATION....................................................................................30
6.1 Term...........................................................................................30
6.2 Termination by SMI.............................................................................30
6.3 Termination for Breach.........................................................................30
ARTICLE VII - CONFIDENTIALITY................................................................................31
ARTICLE VIII - MISCELLANEOUS..................................................................................32
8.1 Trademarks and Trade Names.....................................................................32
8.2 Records........................................................................................32
8.3 Publicity......................................................................................32
8.4 Force Majeure..................................................................................33
8.5 Relationship Between Parties...................................................................33
8.6 Notices........................................................................................33
8.7 Entire Agreement...............................................................................34
8.8 Severability...................................................................................34
8.9 Assignments....................................................................................34
8.10 Governing Law..................................................................................34
8.11 Compliance with Laws...........................................................................34
8.12 Waivers and Extensions.........................................................................34
8.13 Counterparts...................................................................................35
8.14 Consents.......................................................................................35
8.15 Limitation of Liability........................................................................35
5
DISTRIBUTION AND LICENSE AGREEMENT
THIS DISTRIBUTION AND LICENSE AGREEMENT (the "Agreement") is made as of
April 1, 1996 between ASPECT MEDICAL SYSTEMS, INC., a Delaware corporation with
its principal place of business at 0 Xxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000-0000 ("Aspect") and SPACELABS MEDICAL, INC., a California corporation with
its principal place of business at 00000 XX 00xx Xxxxxx, Xxxxxxx, Xxxxxxxxxx
00000 ("SMI").
A. Aspect has developed certain EEG monitoring technology for measuring
the effects of anesthesia on the brain and SMI desires to market and distribute
products employing such technology;
B. Aspect and SMI desire to enter into an agreement that supersedes all
prior agreements between them, including but not limited to the Distribution and
License Agreement dated as of June 30, 1994.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Best Price" means the lowest price on which Aspect charges any
other third party for a product for an "unbundled sale" of the product to a
third party which is buying similar quantities of such product under similar
terms and conditions. An "unbundled sale" means that the product is sold by
Aspect without being sold in, as part of, or as a condition to, the sale, lease,
loan, consignment or other disposition of any other product.
1.2 "Bispectral Index" means Aspect's index which is incorporated in
Aspect's A-1000 and A-1050 monitors used to monitor the hypnotic effects of
anesthetics on the brain.
1.3 "BIS Software" means Aspect's software which computes the
Bispectral Index.
1.4 "Digital Signal Converter" means an interface device that connects
to and accepts input from the Sensor or EEG electrodes, converts the signal into
digital form and inputs it into the Monitor or Module.
- 1 -
6
1.5 "Four Channel Digital Signal Converter" means a Digital Signal
Converter developed by SMI under this Agreement that utilizes four EEG channels
for use with the Module.
1.6 "Fully Burdened Costs" means the direct and indirect costs to
manufacture a product, which costs are determined in accordance with generally
accepted accounting principles. Direct costs shall include direct materials and
direct labor costs associated with manufacturing the product. Indirect costs
mean the party's allocable overhead expenses which are applicable to the direct
costs of manufacturing the product.
1.7 "International Territory" means all countries and territories of
the world other than Japan and the United States Territory.
1.8 "Losses" means any claims, liability, suits, judgments, costs and
expenses (including but not limited to fines, penalties and reasonable
attorneys' fees).
1.9 "Module" means an integral EEG module that (i) can be incorporated
into SMI's patient monitoring equipment, and (ii) incorporates the Bispectral
Index. The term "Module" specifically excludes interface devices that allow data
from any Monitor to be displayed on other patient monitoring equipment.
1.10 "Monitor" means Aspect's EEG monitors which includes the
Bispectral Index, and all models of the EEG monitor, including those designated
by Aspect as its A-1000, A-1050, and A-2000 monitors (and such other
designations as Aspect may give to subsequently developed models of the
Monitor).
1.11 "Monitor Products" means the Monitors and the related products
listed on Schedule A to this Agreement.
1.12 "Proprietary Information" means all proprietary information and
materials of a party, whether or not patentable, which are communicated to,
learned of, or otherwise acquired by the other party during the course of this
Agreement.
1.13 "Sensor" means Aspect's disposable EEG sensor comprised of an
array of electrodes known by Aspect as its ZipPrep disposable EEG sensor. The
Sensor is designed and configured to detect EEG signals utilized for purposes of
determining the Bispectral Index. The term "Sensor" specifically excludes
individual, stand alone electrodes.
1.14 "Sensor Products" means the Sensor and the ZipPrep Electrode
Product, collectively.
- 2 -
7
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
1.15 "Specifications" means the product specifications established from
time to time by Aspect for its Monitor Products and Sensor Products.
1.16 "United States Territory" means the United States of America
excluding its territories and protectorates.
1.17 "ZipPrep Electrode Product" means the ZipPrep snap electrode
configuration that utilizes the ZipPrep Technology.
1.18 "ZipPrep Technology" means the self-prepping electrode technology
which is proprietary to Aspect.
ARTICLE II - DISTRIBUTION RIGHTS TO MONITOR
2.1 Appointment. Subject to the terms and conditions of this Agreement,
Aspect hereby appoints SMI as its exclusive distributor of the Monitor Products
for the International Territory. Aspect will refer promptly to SMI all inquiries
Aspect receives, including but not limited to orders, E-mail, etc. regarding
Monitor Products from within the International Territory. This appointment shall
commence on the date of this Agreement [**], provided, however, that [**] in
accordance with the provisions of Section 2.13(b) of the Agreement.
2.2 Claims. Aspect shall provide SMI with the text of any marketing
claims which are approved and/or cleared by the FDA; by providing the text of
such marketing claims to SMI, Aspect will be deemed to represent to SMI that
such claims have been approved and/or cleared by the FDA. Aspect may choose to
provide to SMI the text of other marketing claims which Aspect has determined
are permitted under applicable federal and state laws and regulations; by
providing the text of such other marketing claims to SMI, Aspect will be deemed
to represent to SMI that such claims are permitted under all applicable federal
and state laws and regulations governing such claims for use in the
International Territory. SMI shall have the right in the International Territory
(unless additional clearance is needed from applicable international regulatory
agencies), but not in the United States Territory, to make claims which are the
same or equivalent to the claims provided by Aspect. SMI shall defend, indemnify
and hold Aspect harmless from any and all Losses resulting from any breach of
its obligations set forth in this Section. In addition and notwithstanding any
other provisions of this Agreement, if a party breaches its obligations under
this Section, the other party shall have the right to immediately terminate this
Agreement in accordance with the provisions of Section 6.3. Aspect shall defend,
indemnify and hold SMI harmless from any and all Losses arising from SMI's use
of the text of claims which have been provided to SMI by Aspect or from
- 3 -
8
SMI's use of the text of claims in marketing materials which have been approved
in writing by Aspect as contemplated in this Section. In the event SMI elects to
incorporate in SMI's marketing materials the text of claims provided by Aspect
hereunder, SMI will provide Aspect copies of such materials for Aspect's
approval. Aspect will not unreasonably withhold such approval and will respond
to SMI within three business days of its receipt of such materials. If Aspect
fails to respond within three business days, such materials will be deemed to
approved by Aspect. The text of any claims which are "provided" by Aspect to SMI
as contemplated in this Section, must be designated by Aspect in writing as
claims which SMI may use in its own marketing materials.
2.3 Approvals. Aspect, at its sole expense, shall be responsible for
obtaining the following safety approvals for the Monitors and the Sensor
Products, both individually and when used as a system: (a) UL Xxxx for Canada
("C UL"); (b) Xxxx for European Countries (compliance with EMC and/or Medical
Device Directive as required to sell into all countries in the European Union);
and (c) Underwriters Laboratory ("UL"). In connection with obtaining such safety
approvals, SMI shall be responsible for any required translation of the human
interface contained in the Monitor Products. At SMI's request, Aspect shall work
with SMI to implement any required translation of the human interface contained
in the Monitor Products, provided that (a) any direct costs incurred by Aspect
in translating or coding foreign language translations shall be reimbursed by
SMI as long as such costs have been approved in advance in writing by SMI, and
(b) SMI shall assist Aspect in validating such translation. SMI, at its sole
expense, shall be responsible for obtaining all other regulatory and marketing
approvals for the Monitor Products in those countries in the International
Territory in which SMI elects to distribute the Monitors. In addition, SMI shall
be responsible for obtaining safety approvals in those countries in the
International Territory in which SMI elects to distribute the monitors other
than those countries covered by the "C UL," the "CE," or the "UL" approvals. If
any language translations or product design changes are required in order for
SMI to obtain these additional safety, regulatory and marketing approvals,
Aspect shall assist SMI with such translations or changes, and SMI shall
reimburse Aspect for the reasonable and necessary costs associated with such
translations as long as such costs are approved in writing in advance by SMI.
Aspect, at its sole expense, shall be responsible for obtaining FDA clearance or
approval for the Monitor Products and Sensor Products for the United States
Territory. Aspect shall promptly apply for the approvals and clearances for
which it is responsible and shall diligently pursue such approvals and
clearances.
2.4 Promotion.
(a) Promotion of Monitor Products. SMI shall use reasonable
efforts to promote the sale of the Monitor Products, and shall do so using the
Aspect name.
- 4 -
9
Such promotion shall include carrying the Monitor Products in its International
Price List.
(b) Advertising and Sales Promotional Material. Subject to
Section 2.2, Aspect shall provide SMI with reasonable quantities of certain
advertising and sales promotional material developed for Aspect's U.S. products
at no charge to SMI. At its expense and in its discretion, SMI may translate
these materials into the language or languages of its customers and provide
Aspect with at least one copy of all such materials. SMI shall be responsible
for the printing of all such materials. Aspect will provide SMI, at no charge to
SMI, any existing or available backup materials necessary to reproduce the
promotional materials of Aspect relating to the Monitor, Bispectral Index, or
Sensor, including but not limited to files, disks and artwork.
(c) Reimbursement. In no event shall either party be
responsible for any punitive, incidental or consequential damages, including
lost profits or lost sales, incurred by the other part and relating to the other
party's use of the promotional materials created in accordance with Sections 2.2
and 2.4; provided, however, that the foregoing limitation shall not limit or
modify a party's obligation under Section 2.2. If SMI receives notice that the
FDA intends to assess a fine, fee, assessment or other penalty, or receives any
notification from the FDA relating thereto, SMI shall promptly inform Aspect and
provide it with copies of all correspondence, notices and other materials
received by SMI from the FDA with respect thereto.
2.5 Demonstration. SMI shall keep available at all reasonable times for
demonstration purposes sufficient numbers of Monitor Products as are necessary
for appropriate sales promotion. Such demonstration Monitor Products shall be in
a condition appropriate for sales promotion.
2.6 Installation and Training. At its expense, SMI shall install the
Monitor Products on the premises of its customers of the Monitor Products and
shall train the employees of such customers to operate the Monitor Products. At
no charge to SMI, Aspect shall provide one copy of each user and technical
manual for each Monitor it ships to SMI and upon request shall provide SMI with
reasonable additional quantities of user and technical manuals. At its expense
and in its discretion, SMI may translate all user manuals (and any other manuals
required to sell the Monitor Products) into the language or languages of its
customers and shall provide Aspect both with copies of all such materials and
the master copy required to produce additional manuals. If SMI requests Aspect
to translate the human interface contained in the Monitor into a language other
than those languages required for the safety approvals listed in clauses (a),
(b) and (c) of Section 2.3 of this Agreement, Aspect shall perform such
translation at the expense of SMI and SMI shall reasonably cooperate with Aspect
in validating such translation. The costs of any such translation shall be
approved in writing in advance by SMI.
- 5 -
10
2.7 Service. SMI shall render prompt, workmanlike and willing service
with respect to the Monitor Products and shall use reasonable efforts to handle
satisfactorily all matters relating to the sale and servicing of the Monitor
Products in the International Territory. To facilitate timely customer service,
SMI may request support from Aspect. If such support is requested and approved
in writing by SMI and provided by Aspect, Aspect may, at its sole discretion,
xxxx SMI at Aspect's then current rates offered to similarly situated licensees
acquiring such services on similar terms and conditions for field or service
time and for reasonable expenses, provided that no charges shall be made for
services rendered by telephone (and Aspect hereby agrees to provide commercially
reasonable levels of telephone support). Aspect shall provide such support in a
prompt, workmanlike and willing manner. In addition, SMI shall use a method for
handling customer complaints which is the same or similar to that established by
SMI for its own products. SMI shall use reasonable efforts to maintain a supply
of spare parts and consumables to service the Monitor Products at levels
consistent with those maintained by SMI for its own products.
2.8 Training by Aspect. Aspect shall train designated groups of
employees of SMI at times mutually agreeable to the parties (a) in the use,
marketing and sale of the Monitor Products at Aspect's facilities, provided that
Aspect shall not be required to conduct more than six such training sessions per
calendar year, and (b) in the servicing of the Monitor Products at Aspect's
facilities, provided that Aspect shall not be required to conduct more than six
such training sessions per calendar year. The direct out-of-pocket costs of
reasonable and necessary travel, lodging and meals for these training sessions
shall be borne by SMI. The internal costs incurred by Aspect for these training
sessions shall be borne by Aspect. Additional training sessions shall be
conducted with the mutual consent of both parties, and SMI shall be required to
reimburse Aspect at Aspect's then current billing rates for all Aspect employees
and consultants involved.
2.9 Marketing Support in the International Territory. If SMI requests
Aspect to provide extraordinary marketing support (e.g. a lecture in the
International Territory by an Aspect representative, or protocol development in
the field) in the International Territory, over and above what Aspect is
required to provide under the other provisions by this Agreement, and over and
above what Aspect customarily provides to its own customers, then SMI will
reimburse Aspect for such support. The parties will agree on the costs, scope
and schedule for any extraordinary marketing support in advance and in writing
prior to Aspect's provision of such support.
2.10 Provision of Spare Parts. Aspect shall provide SMI a reasonable
and adequate number of spare parts at no charge and on consignment for servicing
of warranty claims on the Monitor Products during the period in which SMI
maintains rights to distribute the Monitor. At the end of each calendar quarter,
SMI shall account to Aspect for the disposition and use of such spare parts, and
shall return to
- 6 -
11
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Aspect all parts returned to SMI by its customers which were replaced with the
consigned spare parts. SMI's return of such parts to Aspect shall be at Aspect's
expense. SMI shall purchase spare parts from Aspect for servicing the
non-warranty claims during the period in which SMI maintains rights to
distribute the Monitor for the purpose of providing service to its customers. At
such time as SMI's rights to distribute the Monitor expire, at SMI's option,
Aspect will have the right and responsibility to furnish spare parts for the
Monitor Products directly to customers of SMI, provided that SMI shall provide
to Aspect promptly at such time all customer records and information necessary
for Aspect to provide such customers with spare parts. Alternatively, SMI may
elect to purchase spare parts from Aspect for the purpose of servicing
non-warranty claims of its customers.
2.11 Right of Aspect to Contact Customers. SMI shall notify Aspect on a
quarterly basis of each customer order in the International Territory for any
Monitor. Aspect shall have the right to contact the customers of SMI solely for
the purpose of assessing and ensuring customer satisfaction with the Monitor
Products. Aspect shall advise SMI of all contacts relating to its assessment of
customer satisfaction with the Monitor Products on a regular basis. Information
provided by SMI to Aspect pursuant to this Section 2.11 shall constitute
Proprietary Information of SMI. Aspect shall provide SMI with the information it
obtains from each such customer, on an ongoing basis.
2.12 Purchase Price.
(a) The purchase price for Monitors, with the exception of (i)
purchases of units for demonstration, loaner and similar purposes, and (ii) the
[**] Monitors purchased by SMI upon execution of this Agreement, shall be [**];
the price of the[**] of Aspect's material costs for the [**] for such
Monitor(s), [**]. The purchase price for the [**] Monitors purchased by SMI upon
execution of this Agreement, and for [**] Monitors purchased for demonstration,
loaner and similar purposes during the first year of this Agreement, shall be
[**] per Monitor.
(b) The purchase price for each other Monitor Product (other
than Monitors) for the International Territory shall be Aspect's United States
list price existing from time to time less that percentage discount as is set
forth on Schedule A to this Agreement. The particular purchase price for each
order shall be determined at the time of order. Aspect (i) shall [**] and (ii)
shall provide SMI with [**] of any
- 7 -
12
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
price increase. Aspect's price increases will not be effective on any SMI orders
that have been subject to a written price quotation provided to a customer
within 60 days of receipt by SMI of the notification of such increase. Aspect
shall have the right to review the documentation relating to any such price
quotations.
(c) Aspect shall provide SMI reasonable sales records, sales
reports and cost and pricing information upon request to enable SMI to confirm
the accuracy of the prices charged by Aspect under this Section 2.12. SMI shall
be entitled to audit such information and records pursuant to Section 8.2.
2.13 International Purchase Requirements.
(a) To maintain its exclusive right to distribute the Monitor
Products in the International Territory under this Agreement, SMI agrees to
purchase for resale to customers in the International Territory the following
minimum number of Monitors during the time periods indicated below. Purchases of
Monitors for demonstration, loaner, or other similar purposes do not count
towards SMI's minimum purchase requirements.
PERIOD NUMBER OF MONITORS
First Year (expiring on April 1, 1997, the [**]
first anniversary of this Agreement) (Upon execution of this Agreement)
[**]
(during the remainder of the year.)
Second Year [**]
Third Year [**]
Note A: SMI will [**] to be purchased by SMI upon execution of this Agreement
[**] purchased by SMI from the April 1, 1996 effective date of this Agreement
through the date SMI executes this Agreement. In the third year, SMI's minimum
number of Monitors will [**] for that period. On a quarterly basis, [**]. SMI
shall be deemed to have met the minimum Monitor purchase requirements if [**]
for that year. In calculating Aspect's sales of Monitors for this purpose, the
parties will [**].
- 8 -
13
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(b) SMI shall be entitled to an automatic extension, as
described in the balance of this paragraph, [**] are equal to or greater than
[**] in the U.S. This extension shall be granted automatically for the [**] and
shall continue for the [**] continue to [**]. Prior to the end of [**], Aspect
and SMI will in good faith discuss mutually satisfactory, commercially
reasonable terms for extending SMI's exclusive rights to distribute the Monitor
in the International Territory for an additional period of time under this
Agreement.
(c) SMI's compliance with the minimum purchase requirements
for each year of this Agreement will be jointly confirmed by the parties as soon
as practicable following the end of the year, but in no event more than [**]
following the end of the year. If SMI fails, with respect to any year, to meet
the minimum purchase requirements set forth above, Aspect may, on written notice
to SMI, elect to terminate SMI's right to distribute the Monitor. Upon receipt
of any such termination notice, SMI will have [**] within which to purchase
sufficient quantities of the Monitors to satisfy the minimum purchase
requirements. If Aspect elects not to terminate SMI's distribution rights
notwithstanding the failure of SMI to meet its total minimum purchase
requirements with respect to any year, Aspect shall have the right to terminate
such rights if, during the next succeeding year, SMI fails to meet a total
minimum purchase requirement equal to [**] by SMI during the preceding year.
2.14 Forecasts. At least [**], upon Aspect's request, SMI shall provide
Aspect with an estimated forecast of its requirements of Monitor Products [**]
broken out on a monthly basis and on an area basis. Such forecasts shall be
furnished solely for planning purposes and shall not constitute a commitment to
purchase.
2.15 Orders. All orders for Monitor Products shall be in writing.
Aspect shall fill each order from SMI within [**] after its receipt of the
order, provided that the aggregate of all orders placed by SMI during any
calendar quarter does not exceed the aggregate of the orders required to be
filled by Aspect during the immediately preceding calendar quarter by more than
[**]. In any event Aspect shall (i) fill orders during the calendar quarter up
to an aggregate of [**] of the aggregate amount of the orders required to be
filled by Aspect during the preceding calendar quarter, and (ii) Aspect shall
use reasonable efforts to fill the remaining portion of the order(s) as soon as
practicable thereafter. All sales of the Monitor Products shall be subject to
the terms and conditions of this Agreement, which terms and conditions shall
control to the extent that they conflict with the terms of any purchase order or
order confirmation. No terms in any purchase order for the Monitor Products
shall affect the dealings between the parties except as specifically set forth
in this Section 2.15, or as otherwise agreed in a written document signed by
both parties.
- 9 -
14
2.16 Shipment. Aspect shall ship the Monitor Products from its
manufacturing facility to the destinations specified by SMI. Freight and
insurance charges prepaid by Aspect shall be added to the purchase price for the
Monitor Products or billed separately to SMI. SMI shall be responsible for
payment of all export and import duties, local taxes and similar charges with
respect to the Monitor Products.
2.17 Labeling. All Monitor Products shall be labeled and packaged in
the manner standard for Aspect unless otherwise requested by SMI. SMI will pay
any incremental costs incurred by Aspect to modify, at SMI's request, the
labeling or packaging of Monitor Products shipped to SMI or its customers, if
such costs are approved writing in advance by SMI.
2.18 Title and Risk of Loss. Title and ownership of the Monitor
Products shall pass to SMI upon delivery of the Monitor Products to the
destination(s) specified by to SMI pursuant to Section 2.16 of this Agreement.
Risk of loss to the Monitor Products following delivery of the Monitor Products
to a common carrier at Aspect's manufacturing facility shall be borne by SMI,
which shall reimburse Aspect for all claims of loss or damage to the Monitor
Products in transit. Aspect shall cooperate with and assist SMI in processing
all claims for loss or damage to the Monitor Products.
2.19 Payment. Aspect shall invoice SMI for the Monitor Products upon
delivery to a common carrier for shipment. The terms of payment granted to SMI
shall be net 60 days from the date of invoice. All payments by SMI to Aspect
shall be in the currency of the United States.
2.20 Warranty. Aspect warrants to SMI that each Monitor Product
(including expendable and supply items such as, but not limited to, electrodes,
cables and prep solutions) sold by it to SMI (a) shall be in good working
condition and free from defects in material and workmanship when given normal,
proper and intended usage and (b) with respect to the Monitor Products listed on
Schedule A, shall conform to its Specifications for the period of time set forth
on Schedule A to this Agreement for such Monitor Product measured from the date
of shipment of such Monitor Product to SMI or other destination designated by
SMI. For all other consumable supplies (including expendable and supply items
such as, but not limited to, electrodes, cables, and prep solutions) provided by
Aspect for use with the Monitor Products which were manufactured by third
parties, Aspect shall pass on the manufacturers warranties provided that Aspect
has the right to do so. Aspect shall not be responsible for defects which are
not due to a breach of Aspect's warranty such as, but not limited to, defects
due to fault or negligence on the part of the customer or SMI, or improper or
unauthorized use of the Monitor by the customer or SMI.
- 10 -
15
EXCEPT AS PROVIDED IN THIS AGREEMENT, ASPECT DISCLAIMS ALL WARRANTIES,
WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THE MONITOR
PRODUCTS, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL EITHER
PARTY BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING FROM
THE BREACH OF THIS AGREEMENT, INCLUDING A BREACH BY ASPECT OF THE ABOVE STATED
WARRANTY. NOTHING IN THIS LIMITATION WILL BE DEEMED TO LIMIT ASPECT'S
OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS SMI IN ACCORDANCE WITH
SECTIONS 2.2, 2.4, 2.23, 2.24, 2.25 AND 8.11.
SMI shall undertake reasonable and appropriate action permitted or
required by the laws and regulations of the International Territory to ensure
that Aspect's limits of warranty responsibility as set forth above are valid and
enforceable against whomever they are applicable, to the extent permitted by
applicable law.
2.21 Warranty Claims. Under its warranty, Aspect shall repair or
replace, at its discretion, each demonstrably defective part returned by SMI,
provided that such parts shall have been returned to Aspect with all charges
prepaid by SMI within the time provided by and substantially in accordance with
Aspect's current instructions and procedures relating to returns. The
replacement part will come from Aspect's stock and may be new or refurbished. In
the case of refurbished parts, the warranty set forth in Section 2.20 of this
Agreement shall apply as if such parts were new. Aspect shall respond promptly
to any claims by SMI that any Monitor Product fails to conform to the warranty
set forth in Section 2.20. For allowed warranty claims, SMI shall pay for
transportation of Monitor Products (or components thereof) from the customer's
facility to the facility designated by Aspect, and Aspect shall pay for
transportation of replacement or repaired parts from Aspect's manufacturing
facility to the customer's facility. The party obligated to pay for such
transportation shall be responsible for all shipping costs, taxes, export and
import duties and other costs associated with the transportation of the parts.
If the returned part is not demonstrably defective, Aspect shall return the part
to SMI if SMI so requests; in that case, the costs of transportation shall be
borne by SMI. All labor costs for replacement of the defective part in the field
shall be borne by SMI.
2.22 Customer Complaints. SMI shall provide Aspect, on a quarterly
basis, with a written report of all customer complaints which require written
notifications to, or follow-up with, any regulatory agency, and follow-up
activities conducted by SMI relating to the Monitor Products. SMI shall notify
Aspect immediately of any complaints involving death or serious injury (MDR
reports) or of any other material complaints relating to the safety or efficacy
of the Monitor Products.
- 11 -
16
2.23 Recalls. Upon receipt of any information relating to the safety or
efficacy of the Monitor Products, Aspect shall consult with SMI in an effort to
arrive at a mutually acceptable procedure for taking appropriate action, it
being understood that the ultimate decision-making authority shall rest with
Aspect, provided, however, that Aspect shall comply with all laws, regulations
and FDA and other agency guidelines regarding recalls. SMI agrees to follow any
reasonable recall or general corrective action procedures submitted to it by
Aspect and Aspect shall indemnify, defend and hold harmless SMI from any Losses
arising from any such recall or general corrective action. SMI shall be
responsible for maintaining sales records sufficient to effect any required
recall or general corrective action.
2.24 Product Liability. Aspect hereby agrees to indemnify, defend and
hold harmless SMI, its affiliates, directors, officers, employees and agents,
from and against Losses arising out of or in connection with the marketing, sale
or service of any Monitor Product, including, but not limited to, any actual or
alleged injury, damage, death or other consequence occurring to any person as a
result, directly or indirectly, of the possession or use of any such Monitor
Product, whether claimed by reason of breach of warranty, negligence, product
defect or otherwise, and regardless of the form in which such claim is made,
provided that such Losses arise from or are related to (a) a defect in the
design, manufacture or repair (to the extent the repair is performed by Aspect
or its agents other than SMI and SMI's subdistributors) of a Monitor Product or
the use of the Bispectral Index in accordance with its claims or (b) the
negligence, recklessness or intentional misconduct of Aspect. If SMI becomes
aware of a product liability claim which might give rise to a right or
obligation of indemnification and defense as provided herein, SMI shall promptly
notify Aspect. Aspect shall control and bear the full expense of the defense
against or settlement of such claim. SMI shall cooperate in such action if
reasonably necessary and requested by Aspect. In no event shall Aspect settle
any matter involving SMI without the prior written consent of SMI, which consent
shall not be unreasonably withheld. SMI may, in its own discretion, be
represented in the defense or settlement of any such claim by counsel of its own
choosing at its sole expense.
2.25 Claimed Infringement.
(a) Aspect hereby agrees to indemnify, defend and hold
harmless SMI, its affiliates, directors, officers, employees and agents, from
and against all Losses arising out of or in connection with any claim by a third
party that the manufacture, use or sale of a Monitor Product infringes any
intellectual property right claimed by such third party and relating to the
intellectual property rights owned by such party. If SMI becomes aware of an
infringement allegation which might give rise to a right or obligation of
indemnification and defense as provided herein, SMI shall promptly notify
Aspect. Aspect shall control, bear the full expense of and retain all proceeds
of the defense against or settlement of such allegation. SMI shall cooperate in
such action if reasonably necessary and requested by Aspect. In no
- 12 -
17
event shall Aspect settle any matter involving SMI without the prior written
consent of SMI, which consent will not be unreasonably withheld or delayed. SMI
may, in its own discretion, be represented in the defense or settlement of any
such allegation by counsel of its own choosing at its sole expense.
(b) Should any Monitor Product become the subject of an
injunction preventing its use or sale as contemplated herein, Aspect shall, at
its option (and in addition to its obligations under subsection 2.25(a)),
promptly (1) procure for SMI the right to continue to use and sell such Monitor
Product, (2) replace or modify such Monitor Product so that it becomes
non-infringing or, if options (1) and (2) are not reasonably available to
Aspect, then (3) terminate SMI's license to the allegedly infringing Monitor
Product and refund to SMI the amounts paid to Aspect for all Monitor Products,
parts or supplies in the possession of SMI or its subdistributors, upon the
return of the Monitor Products to Aspect. In addition, Aspect may undertake any
of the foregoing options (1), (2) and (3) if Aspect determines, in its
reasonable opinion, that a Monitor Product is likely to become the subject of an
injunction preventing its use or sale as contemplated herein.
(c) Aspect shall have no liability or obligation to SMI
hereunder with respect to any patent, copyright, trade secret or other
intellectual property infringement or claim thereof, to the extent such
liability or obligation is based upon (i) use or sale of a Monitor Product in
combination with devices or products not provided by Aspect, (ii) use of other
than the most recently mandatory released version of any software in a Monitor
Product or (iii) modifications, alterations or enhancements of a Monitor Product
not created by or for Aspect. SMI shall indemnify and hold Aspect harmless from
all costs, damages and expenses (including reasonable attorneys' fees) arising
from any claim enumerated in the preceding sentence. The limitations set forth
in the foregoing clause (ii) shall only apply to the extent Aspect has made the
most recently released version of the software available to SMI at no cost to
SMI for incorporation in Monitor Products which are then in SMI's possession or
have been previously distributed by SMI and the liability or obligation arises
after Aspect makes such revised version available to SMI. SMI will return the
PromCards for any such infringing software to Aspect upon receipt of replacement
PromCards; if the infringing PromCards are not returned to Aspect within six (6)
months of SMI's receipt of the replacement PromCards, Aspect will have the right
to charge SMI a reasonable amount for such unreturned PromCards.
- 13 -
18
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
2.26 Clinical Testing. If SMI desires to conduct any clinical testing
of the Monitor, where the data from such testing is expected to be presented at
a public forum or be published, SMI shall advise Aspect and no such clinical
testing shall occur unless Aspect shall first have approved the protocols for
such clinical testing. Aspect shall not unreasonably delay or withhold its
approval of such clinical testing.
2.27 Restrictive Covenant. During the term of the appointment set forth
in Section 2.1 of this Agreement, SMI will not directly engage in, and will use
good faith and reasonable efforts to prevent its subdistributors from engaging
in, the sale of any products competitive with the Monitor, Aspect's Digital
Signal Converter(s), or the Bispectral Index (a "Competitive Monitor Product"),
except for the Module, an SMI EEG module which does not incorporate technology
competitive with the Bispectral Index, or SMI's Four Channel Digital Signal
Converters for which SMI has paid Aspect the license fee specified in Article IV
of this Agreement. Furthermore, in the event that SMI directly engages in the
sale of any Competitive Monitor Product, or fails (within thirty (30) days after
notice from Aspect) to use good faith and reasonable efforts to prevent a
subdistributor from engaging in the sale of any Competitive Monitor Product,
Aspect shall have the right to terminate the right of SMI to distribute Monitor
Products, effective thirty (30) days after delivery of written notice to SMI. In
the event that SMI fails to prevent a subdistributor from engaging in the sale
of any Competitive Monitor Product Aspect shall have the right to terminate the
right of SMI to distribute Monitor Products in the country for which the
subdistributor is responsible. SMI's obligation to prevent its subdistributors
from breaching the foregoing restrictive covenant shall not require SMI to take
any action which is illegal under any applicable laws or which could reasonably
be expected to expose SMI to liability in damages to the subdistributor or the
subdistributor's customers.
2.28 Improvements. In the event that Aspect develops an improved
version of the software embedded in the Monitor, Aspect shall supply such
upgrades to SMI to meet customer requirements. SMI shall be required to pay for
all software upgrades to the Monitor affected through the use of the PromCard
and all related shipping charges. The price to SMI of software upgrades will be
set at [**]. SMI agrees to use reasonable efforts to make the software upgrades
to the Monitor relating to improved performance of the Bispectral Index
available to its customers which have purchased the Monitor. If Aspect requests
that SMI provide the software upgrade free of charge to SMI customers that have
purchased the Monitor, and so informs SMI in writing, SMI agrees to take all
reasonable steps to distribute the software upgrade at no cost to the SMI
customers which have purchased the Monitor. Aspect shall provide updated
software to SMI in the form of a PromCard. Aspect will charge SMI a reasonable
cost for each PromCard, but will issue a credit to SMI
- 14 -
19
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
for the cost of the PromCard when each old PromCard is returned. In such event,
all reasonable shipping expenses incurred by SMI to send the software upgrade to
SMI customers will be borne by Aspect.
2.29 Obsolete Products. In the event Aspect elects to discontinue the
production of a particular model of Monitor Product because such Monitor Product
has been replaced by later models, Aspect shall provide SMI not less than six
(6) months prior written notice (the "Notice Period") of such discontinuance,
and shall fill such orders for the discontinued Monitor Product(s) as SMI
reasonably determines prior to the end of the Notice Period, will be required to
enable SMI to meet the requirements of its subdistributors and customers.
ARTICLE III - DISTRIBUTION RIGHTS TO SENSOR PRODUCTS
3.1 Appointment. Subject to the terms and conditions of this Agreement,
Aspect hereby appoints SMI as [**]. SMI shall [**]; provided, however, that
Aspect agrees to sell to SMI (at the same price that Sensors are sold to SMI for
distribution in the International Territory) a limited number of Sensors that
[**]. Aspect shall not be required to sell SMI more than [**] of the expected
requirements for Sensors (established by Aspect's consumption rate for Sensors)
for new Modules sold by SMI [**]. By way of example, if SMI has an installed
base of [**] Modules [**]. at the end of 1996, and sells [**] new Modules [**]
in 1997 to increase the installed base from [**], and Aspect's consumption rate
for Sensors is [**] Sensors/year per system, SMI may distribute [**] Sensors
[**] in 1997. This appointment shall commence on the date of this Agreement and
shall expire on the [**] anniversary of this Agreement.
3.2 Availability. Aspect agrees to use reasonable efforts to pursue and
receive 510(K) clearance from the FDA for the Sensor Products and to make the
Sensor Products available for commercial distribution by SMI for use with
Monitor Products and Modules. Except as provided by law, SMI at its sole expense
and in its reasonable discretion, shall be responsible for obtaining the
necessary regulatory and marketing approvals for the Sensor for all countries in
the International Territory in which the Monitor or Module will be distributed.
In the event that SMI is prohibited from obtaining such approvals, SMI shall
reimburse Aspect for Aspect's reasonable
- 15 -
20
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
costs incurred in assisting SMI to obtain such approvals, provided that SMI
shall approve all expenses in writing and advance.
3.3 Promotion. SMI shall use reasonable efforts to promote the sale of
the Sensor in the International Territory and Japan under Aspect's ZipPrep
trademark. Aspect shall provide SMI with reasonable quantities of its
advertising and sales promotion material at no charge to SMI. At its expense and
in its discretion, SMI may translate Aspect's advertising and sales promotion
material into the language or languages of its customers and provide Aspect with
copies of all such materials. Aspect shall not provide copies of such translated
material to its other customers, including distributors, nor permit the
customers or distributors to use them, but shall own the copyright to such
translations (which rights SMI will be deemed to assign to Aspect upon creation
of the translations). Aspect hereby grants SMI a royalty free license to use
such translations during the term of this Agreement throughout the International
Territory.
3.4 Purchase Price. The purchase price for the Sensor Products shall be
[**] existing from time to time (the "International and Japanese Sensor Purchase
Price"), but in no event [**] for the Sensor Products. SMI's purchase price for
Sensor Products shall be determined at each anniversary of this Agreement and be
based on Aspect's [**]. Aspect agrees to provide SMI reasonable sales records
and reports upon request to enable SMI to confirm the accuracy of the prices
charged by Aspect under this Section 3.4. SMI may audit this information in
accordance with Section 8.2.
3.5 Additional Payments. Aspect shall make the following payments to
SMI with respect to Net Sales (as defined below) in the United States Territory:
(a) During the term of this Agreement, Aspect shall pay to SMI
[**] in the United States Territory sold to [**], provided that if both Aspect
and SMI have [**], the payment to SMI shall be [**]. By way of illustration, if
(i) [**] to Account X in a year, (ii) [**] to Account X, and (iii) SMI has
previously sold [**] to Account X, then the additional payment shall be
determined as follows:
- 16 -
21
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Number of Units Sold by
[**]
[**] Total Number of Unit Sold = [**]
by SMI and Aspect to
Account X [**]
(b) As used in subsection (a), "Net Sales" means the gross
revenues realized by Aspect from or on account of the sales of Sensors sold in
the United States Territory to the accounts described in subsection (a), less
(i) credits or allowances, if any, actually granted on account of price
adjustments, rejection or return of items previously sold, (ii) excises, sales
taxes, duties or other taxes or franchise taxes imposed upon and paid with
respect to such sales (excluding income taxes), and (iii) separately itemized
insurance and transportation costs incurred in shipping products.
3.6 Forecasts. Beginning with the quarter in which Aspect and SMI
anticipate that the Sensor Products will become commercially available, at least
four weeks prior to the commencement of each quarter, upon Aspect's request, SMI
shall provide Aspect with a forecast of its requirements of Sensors for such
quarter and for the ensuing three quarters broken out on a monthly basis and for
the International Territory, United States Territory and Japan. Such forecasts
shall be furnished solely for planning purposes and shall not constitute a
commitment to purchase.
3.7 Orders. Promptly after the receipt from Aspect of written
notification of the availability of the Sensor Products for commercial
distribution, SMI shall order Sensor Products from Aspect when and as needed in
order to fulfill its responsibilities under this Agreement. All orders shall be
in writing. Aspect shall fill each order from SMI within 90 days after receipt
of the order, provided that the aggregate of all orders placed by SMI during any
calendar quarter does not exceed the aggregate of the orders required to be
filled by Aspect during the immediately preceding calendar quarter by more than
[**]. In any event, Aspect shall (i) fill orders during the calendar quarter up
to an aggregate of [**] of the aggregate amount of the orders required to be
filled by Aspect during the preceding calendar quarter, and (ii) Aspect shall
use reasonable efforts to fill the remaining portion of the order(s) as soon as
practicable thereafter. All sales of the Sensor Products shall be subject to the
terms and conditions of this Agreement, which terms and conditions shall control
to the extent that they conflict with the terms of any purchase order or order
confirmation.
- 17 -
22
3.8 Shipment. Aspect shall ship the Sensor Products F.O.B. its
manufacturing facility to the destinations specified by SMI. Freight and
insurance charges prepaid by Aspect shall be added to the purchase price for the
Sensor Products or billed separately to SMI. SMI shall be responsible for
payment of all export and import duties, local taxes and similar charges with
respect to the Sensor Products.
3.9 Labeling. All Sensor Products shall be labeled and packaged in the
manner standard for Aspect unless otherwise requested by SMI. SMI will pay any
incremental costs incurred by Aspect to modify, at SMI's request, the labeling
or packaging of Sensor Products shipped to SMI or its customers, if such costs
are approved in writing in advance by SMI.
3.10 Title and Risk of Loss. Title and ownership of and risk of loss to
the Sensor Products shall pass to SMI upon delivery of the Sensor Products to a
common carrier at Aspect's manufacturing facility. Aspect shall cooperate with
SMI in processing all claims for loss or damage to the Sensor Products.
3.11 Payment. Aspect shall invoice SMI for the Sensor Products upon
delivery to a common carrier for shipment. The terms of payment granted to SMI
shall be net 60 days from the date of invoice. All payments by SMI to Aspect
shall be in the currency of the United States.
3.12 Warranty. Aspect warrants to SMI that each Sensor Product sold by
it to SMI (a) shall be in good working condition and free from defects in
material and workmanship when given normal, proper and intended usage and (b)
shall conform to its Specifications for a period of six (6) months from the date
of shipment of the Sensor Products to SMI. For all other consumable supplies
provided by Aspect for use with the Monitor Products which were manufactured by
third parties, Aspect shall provide the manufacturers warranties to SMI. Aspect
shall not be responsible for defects which are not due to a breach of Aspect's
warranty such as, but not limited to, defects due to fault or negligence on the
part of the customer or SMI, or improper or unauthorized use of the Sensor
Products by the customer or SMI.
EXCEPT AS PROVIDED IN THIS AGREEMENT, ASPECT DISCLAIMS ALL WARRANTIES,
WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THE SENSOR
PRODUCTS, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL EITHER
PARTY BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING FROM
THE BREACH OF THIS AGREEMENT, INCLUDING A BREACH BY ASPECT OF THE ABOVE STATED
WARRANTY. NOTHING IN THIS LIMITATION WILL BE DEEMED TO LIMIT ASPECT'S
OBLIGATIONS TO DEFEND, INDEMNIFY OR
- 18 -
23
HOLD HARMLESS SMI IN ACCORDANCE WITH SECTIONS 2.2, 2.25, 3.15, 3.16 AND 8.11.
SMI shall undertake all reasonable and appropriate actions permitted or
required by laws and regulations of the Territory to ensure that Aspect's limits
of warranty responsibility as set forth above are valid and enforceable against
whomever they are applicable to the extent permitted by applicable law.
3.13 Warranty Claims. Under its warranty, Aspect shall replace each
demonstrably defective Sensor Product and other consumable supplies provided by
Aspect for use with the Sensor Product, returned by SMI, provided that such
Sensor Products shall have been returned to Aspect with all charges prepaid by
SMI (or destroyed by SMI or its customers at Aspect's request) within the time
provided by and substantially in accordance with Aspect's current instructions
and procedures relating to returns. Aspect shall respond promptly to any claims
by SMI that any Sensor Product and consumable supplies fails to conform to the
warranty set forth in Section 3.12. For allowed warranty claims, Aspect shall
pay for transportation of replacements from Aspect's manufacturing facility to
SMI customer. The party obligated to pay for such transportation shall be
responsible for all shipping costs, taxes, export and import duties and other
costs associated with the transportation of Sensor Products. If the returned
Sensor Product is not demonstrably defective, Aspect shall return the Sensor
Product if SMI so requests; in that case, the costs of transportation shall be
borne by SMI. All labor costs for replacement of the defective Sensor Products
in the field shall be borne by SMI.
3.14 Customer Complaints. SMI shall provide Aspect, on a quarterly
basis, with a written report of all customer complaints which require written
notification to, or follow up with, any regulatory agency, and follow up
activities conducted by SMI relating to the Sensor. SMI shall notify Aspect
immediately of any complaints involving death or serious injury (MDR reports) or
of any other material complaints relating to the safety or efficacy of the
Sensor Products.
3.15 Recalls. Upon receipt of any information relating to the safety or
efficacy of the Sensor Products, Aspect shall consult with SMI in an effort to
arrive at a mutually acceptable procedure for taking appropriate action, it
being understood that the ultimate decision-making authority shall rest with
Aspect, provided, however, that Aspect shall comply with all laws, regulations
and FDA and other agency guidelines regarding recalls. SMI agrees to follow any
reasonable recall or general corrective action procedures submitted to it by
Aspect and Aspect shall indemnify, defend and hold harmless SMI from any Losses
arising from any such recall or general corrective action. SMI shall be
responsible for maintaining sales records sufficient to effect any required
recall or general corrective action.
- 19 -
24
3.16 Product Liability. Aspect hereby agrees to indemnify, defend and
hold harmless SMI, its affiliates, directors, officers, employees and agents,
from and against all Losses arising out of or in connection with the marketing
or sale of any Sensor Product, including, but not limited to, any actual or
alleged injury, damage, death or other consequence occurring to any person as a
result, directly or indirectly, of the possession or use of any such Sensor
Product, whether claimed by reason of breach of warranty, negligence, product
defect or otherwise, and regardless of the form in which such claim is made,
provided that such Losses arise from or are related to (a) a defect in the
design or manufacture of the Sensor Product or improper written instructions for
use of the Sensor Product provided by Aspect, or (b) the negligence,
recklessness or intentional misconduct of Aspect. If SMI becomes aware of a
product liability claim which might give rise to a right or obligation of
indemnification and defense as provided herein, SMI shall promptly notify
Aspect. Aspect shall control and bear the full expense of the defense against or
settlement of such claim. SMI shall cooperate in such action if reasonably
necessary and requested by Aspect. In no event shall Aspect settle any matter
involving SMI without the prior written consent of SMI, which consent will not
be unreasonably withheld or delayed. SMI may, in its own discretion, be
represented in the defense or settlement of any such claim by counsel of its own
choosing at its sole expense.
3.17 Claimed Infringement.
(a) Aspect hereby agrees to indemnify, defend and hold
harmless SMI, its affiliates, directors, officers, employees and agents, from
and against all Losses arising out of or in connection with any claim by a third
party that the manufacture, use or sale of a Sensor Product infringes any
intellectual property right claimed by such third party and relating to the
intellectual property rights owned by such party. If SMI becomes aware of an
infringement allegation which might give rise to a right or obligation of
indemnification and defense as provided herein, SMI shall promptly notify
Aspect. Aspect shall control, bear the full expense of and retain all proceeds
of the defense against or settlement of such allegation. SMI shall cooperate in
such action if reasonably necessary and requested by Aspect. In no event shall
Aspect settle any matter involving SMI without the prior written consent of SMI,
which consent shall not be unreasonably withheld or delayed. SMI may, in its own
discretion, be represented in the defense or settlement of any such allegation
by counsel of its own choosing at its sole expense.
(b) Should any Sensor Product become the subject of an
injunction preventing its use or sale as contemplated herein, Aspect shall (in
addition to its obligations under Section 3.17), at its option, promptly (1)
procure for SMI the right to continue to use and sell such Sensor Product, (2)
replace or modify such Sensor Product so that it becomes non-infringing or, if
options (1) and (2) are not reasonably available to Aspect, then (3) terminate
SMI's license to the allegedly infringing Sensor Product and refund to SMI the
amounts paid to Aspect for all Sensor Products in the
- 20 -
25
possession of SMI or its subdistributors, upon the return of the Sensor Products
to Aspect. In addition, Aspect may undertake any of the foregoing options (1),
(2) and (3) if Aspect determines, in its reasonable opinion, that a Sensor
Product is likely to become the subject of an injunction preventing its use or
sale as contemplated herein.
(c) Aspect shall have no liability or obligation to SMI
hereunder with respect to any patent, copyright, trade secret or other
intellectual property infringement or claim thereof, to the extent such
liability or obligation is based upon (i) use or sale of a Sensor Product in
combination with devices or products not provided by Aspect, or (ii)
modifications, alterations or enhancements of a Sensor Product not created by or
for Aspect. SMI shall indemnify and hold Aspect harmless from all costs, damages
and expenses (including reasonable attorneys' fees) arising from any claim
enumerated in the preceding sentence.
3.18 Improvements. In the event that Aspect develops an improved
version of the Sensor Products, the rights set forth in this Agreement with
respect to the Sensor Products shall apply to the improved version of the Sensor
Products at such time as the improved version of the Sensor Products first
becomes available for commercial distribution. Notwithstanding the foregoing, in
the event that Aspect is able to document an increase in the cost to manufacture
the improved version of the Sensor Products, Aspect shall be entitled to a
commensurate increase in the International and Japanese Sensor Product Purchase
Price.
3.19 Failure to Supply. If, at any time during the term of this
Agreement, Aspect shall fail to supply SMI with Sensors in accordance with
Section 3.7, Aspect and SMI shall meet to discuss the situation promptly
following written notice from SMI of Aspect's failure to supply, and shall
cooperate in good faith to resolve the reason for the failure to supply. If
Aspect and SMI are unable to agree on a resolution within 30 days of Aspect's
receipt of SMI's written notice of Aspect's failure to supply, and if Aspect is
unable to meet SMI's requirements for Sensors within such period, SMI shall have
the right (in addition to its other rights and remedies hereunder) to choose one
of the following options for meeting its customers' requirements for Sensors:
(a) SMI may elect to manufacture its Sensor requirements. In
the event SMI elects this option, SMI will not be required to pay Aspect a
royalty during the period in which SMI is manufacturing the Sensor. However,
when Aspect is once again able to supply SMI with its requirements for Sensors,
Aspect may do so on the same terms that existed prior to the interruption of
supply, provided that SMI will be allowed to continue to manufacture Sensors for
a sufficiently long period of time to recover its investment in establishing
Sensor production. For this purpose, "sufficiently long" means the point at
which SMI's investment in tooling and non-recurring engineering costs to
establish Sensor production equals SMI's gross
- 21 -
26
margin per Sensor (calculated using its Fully Burdened Costs) multiplied by the
total quantity of Sensors produced by SMI; or
(b) SMI may select an alternative electrode set to provide BIS
functionality, provided that the alternative electrode set will maintain the
closed nature of the BIS Software system to the reasonable satisfaction of
Aspect through a proprietary connector or other means. When Aspect is once again
able to supply SMI with its requirements for Sensors, Aspect may do so on the
same terms that existed prior to the interruption of supply, provided that SMI
will be allowed to continue to utilize the alternative electrode set for up to
60 days.
In the event the failure to supply exceeds one year, SMI will have the
right to utilize an alternative electrode set of its own choosing on a
royalty-free basis in perpetuity. Notwithstanding anything to the contrary in
this Agreement, the foregoing rights of SMI shall not apply if Aspect's failure
to supply SMI is excused pursuant to Section 8.4 of this Agreement. At any time
during the term of this Agreement, Aspect will, at SMI's request, deposit into
escrow all drawings, diagrams, schematics, source code and other proprietary
information which may be necessary or desirable to enable SMI to exercise its
rights under this Section 3.19. The escrow of such material shall be made
pursuant to an escrow agreement with an independent third party escrow agent, on
terms and conditions which are consistent with this Section 3.19, and which are
reasonable and customary for escrow transactions of this type. SMI shall pay the
fees of the escrow agent for establishing and maintaining the escrow.
3.20 Restrictive Covenant. Except as provided in Section 3.19, during
the term of the appointment set forth in Section 3.1 of this Agreement, SMI will
not directly engage in, and will use good faith and reasonable efforts to
prevent its subdistributors from engaging in, the sale in the International
Territory or Japan or in the United States Territory of any products that are
competitive with the Sensor (a "Competitor Sensor Product"). In addition, SMI
agrees that it will not promote or market the ZipPrep electrode product for use
as an EKG electrode. The restriction set forth in this section shall not apply
to the sale of electrode products compatible with SMI's own EEG products or Four
Channel Digital Signal Converter, provided that these products are used for EEG
monitoring only without the Bispectral Index. Furthermore, in the event that SMI
directly engages in the sale of any Competitor Sensor Product, or fails (within
thirty (30) days after notice from Aspect) to use good faith and reasonable
efforts to prevent a subdistributor from engaging in the sale of any Competitive
Sensor Product, Aspect shall have the right to terminate the right of SMI to
distribute the Sensor Products, effective thirty (30) days after delivery of
written notice to SMI. SMI's obligation to prevent its subdistributors from
breaching the foregoing restrictive covenant shall not require SMI to take any
action which is illegal under any applicable law or which could reasonably be
expected to expose SMI to liability and damages to the subdistributor or the
subdistributor's customers.
- 22 -
27
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
3.21 Obsolete Products. In the event Aspect elects to discontinue the
production of a particular model of a Sensor Product because such Sensor Product
has been replaced by later models, Aspect shall provide SMI not less than six
(6) months prior written notice (the "Notice Period") of such discontinuance,
and shall fill such orders for the discontinued Sensor Product(s) as SMI
reasonably determines, prior to the end of the Notice Period, will be required
to enable SMI to meet the requirements of its subdistributors and customers.
ARTICLE IV - RIGHTS TO BISPECTRAL INDEX
4.1 Licenses. Subject to the terms and conditions of this Agreement,
Aspect hereby grants to SMI a non-exclusive license to the Bispectral Index for
the purposes of developing, manufacturing, marketing and selling the Module
worldwide. This license shall commence on the date of this Agreement and shall
expire on the tenth anniversary of this Agreement. Prior to the expiration of
this license, Aspect and SMI agree to negotiate in good faith concerning
commercially reasonable terms under which SMI may elect to renew the license.
SMI shall have the right to grant sublicenses to third party distributors for
the sole purpose of marketing and selling the Module. Subject to Section 4.16,
in the event Aspect obtains PMA approval of the Bispectral Index, Aspect hereby
grants to SMI, and SMI accepts, a nonexclusive royalty free license to reference
and use information in the Aspect PMA to enable SMI to file for and obtain PMA
approval of the Module from the FDA. SMI may continue to reference and use the
same PMA information in support of changes or modifications to the Module
subsequently proposed by SMI. In addition, in consideration of SMI's payment of
a license fee of [**] due upon execution of this Agreement, Aspect hereby grants
SMI a fully paid, perpetual and worldwide license to use the source code for low
level communication and control interface to the Field Programmable Gate Array
("FPGA"), in accordance with the provisions of Schedule B, and to incorporate
such source code in the Module.
4.2 Development Efforts. SMI agrees to use reasonable efforts to
develop the Module. The development shall be conducted at and/or coordinated
from the facilities of SMI. Aspect agrees to provide such assistance and such
information about the Bispectral Index, the ZipPrep Technology and other Aspect
technology as SMI reasonably requests in order to develop the Module. SMI shall
be responsible for all costs incurred in developing the Module in excess of
costs incurred in delivering the items and services set forth in Schedule B, and
shall reimburse Aspect for both its internal and reasonable out-of-pocket
expenses. The role of Aspect and SMI with respect to the (i) development of
modifications to the BIS Software to be incorporated in SMI's Module, (ii) the
source code license for the FPGA and low level drivers which control the FPGA,
and (iii) for the development of a Four Channel
- 23 -
28
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Digital Signal Converter, are set forth in detail in Schedule B. SMI agrees to
xxxx the Four-Channel Digital Signal Converter and the Module in the form of
"Licensed under U.S. Xxx. No. 5,381,804; 4,907,597; 5,010,891; 5,320,109;
5,458,117; 5,368,041; and other patents pending" at a location and in a manner
on the products sufficient to meet the requirements of 35 U.S.C. 287. In
addition, [**] between: (a) [**] or (b) [**]. The Module will also [**], which
the Module [**].
4.3 BIS Software Maintenance. In addition, SMI will pay Aspect an
annual maintenance fee of [**] per year, payable in advance upon execution of
this Agreement and on the first and second anniversary of this Agreement. In
consideration of this maintenance fee, Aspect shall provide SMI up to [**],
shall reasonably assist SMI in debugging and utilizing the software and shall
provide software updates to BIS Software. Upon request by SMI, Aspect will, on
or about the third anniversary of this Agreement, negotiate in good faith on
commercially reasonable terms under which Aspect would agree to continue to
provide software maintenance support. SMI shall have the sole responsibility to
develop all other software for the Module.
4.4 Commercialization Obligation. Subsequent to development of the
Module, SMI agrees to use reasonable efforts to (a) obtain necessary regulatory
approvals for the marketing and sale of the Module in the International
Territory, in those countries in which it elects to commercially distribute the
Module, (b) provide for commercial production of the Module and (c) diligently
market the Module after receipt of the necessary regulatory approvals,
including, but not limited to, listing the Module in all of SMI's standard price
lists and promoting and selling the Module at a level of effort and expense
similar to the levels devoted to SMI's own patient monitoring equipment.
4.5 Regulatory Process. SMI shall provide Aspect with an advance copy
of any regulatory filing relating to the Modules and Aspect shall have the right
to make comments and suggestions on any such regulatory filing, provided that
SMI shall only be required to provide portions of such filings describing or
relating to the Bispectral Index. Any comments or suggestions made by Aspect
shall be given due consideration by SMI in its discretion and changes to the
regulatory filings specifically requested by Aspect shall not be unreasonably
refused. Aspect agrees to promptly provide such comments (in any event within
thirty (30) days of its receipt
- 24 -
29
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
of the proposed filing), and agrees that such filings shall be the Proprietary
Information of SMI.
4.6 Quality Control. Aspect shall furnish SMI the executable code for
the Bispectral Index. SMI shall have no right to the source code for the
Bispectral Index and shall have no right to modify the Bispectral Index. Prior
to the first commercial sale of a Module, Aspect shall test Modules at the
facilities of either Aspect or SMI and Aspect and SMI shall determine and
implement the most efficient method for such testing.
4.7 Royalties. SMI shall pay Aspect upon execution of this Agreement,
either a prepaid royalty of [**], which shall authorize SMI to sell up to [**]
Modules, or a prepaid royalty of [**], which shall authorize SMI to sell up to
[**] Modules; in either case, SMI shall also pay Aspect prepaid royalties of
[**] when Aspect completes the modifications to the BIS software in accordance
with the Specifications set forth in Schedule B, and prepaid royalties of [**]
when the modified BIS software is validated in accordance with Schedule B. At
any time after the date of this Agreement through [**] from the date of this
Agreement, SMI may, at its election, prepay an additional royalty of [**], which
shall authorize SMI to sell an additional [**] Modules. In addition, at any time
from the date of this Agreement through the [**] anniversary of the date of this
Agreement, SMI may prepay an additional royalty of [**] to Aspect, which shall
authorize SMI to sell an additional [**] Modules. For any Module sales in excess
of the amounts authorized by the foregoing prepaid royalties, Aspect shall grant
SMI commercially reasonable royalty price and payment terms, which terms [**],
and in any event such royalty will not exceed [**] per Module sold by SMI.
4.8 License to Manufacture Four Channel Digital Signal Converter. In
consideration of SMI's payment of a prepaid license fee of [**] payable on
execution of this Agreement, an additional [**] license fee payable on
completion of the electronic and mechanical design reviews between Aspect and
SMI, and an additional [**] license fee payable when fully functional prototypes
of the Four-Channel Digital Signal Converter are tested and meet the
specifications set forth in Schedule B, Aspect hereby grants SMI a worldwide,
nonexclusive, fully-paid, perpetual and irrevocable license to develop,
manufacture, market and sell the Four Channel Digital Signal Converter. SMI may
only use the Four Channel Digital Signal Converter in conjunction with the
Module for the EEG and Bispectral Index.
4.9 Reports and Payment. SMI shall deliver to Aspect within 30 days
after the end of each quarter a written report showing its sales of Modules
during such quarter. All sales shall be segmented in each such report on a
country-by-country
- 25 -
30
basis. SMI, simultaneously with the delivery of each such report, shall tender
payment in United States dollars of all royalties shown to be due thereon.
4.10 Customer Complaints. To the extent related to the Bispectral Index
or its performance, SMI shall provide Aspect, on a quarterly basis, with a
written report of all customer complaints which require written notification to,
or follow up with, any regulatory agency, and follow up activities conducted by
SMI relating to the Module. SMI shall notify Aspect immediately of any
complaints involving death or serious injury (MDR reports) or any other
complaints relating to the safety or efficacy claims of the Bispectral Index.
4.11 Product Liability of SMI. SMI hereby agrees to indemnify, defend
and hold harmless Aspect, its affiliates, directors, officers, employees and
agents, from and against all Losses arising out of or in connection with the
marketing or sale of any Module, including, but not limited to, any actual or
alleged injury, damage, death or other consequence occurring to any person as a
result, directly or indirectly, of the possession or use of any such Module,
whether claimed by reason of breach of warranty, negligence, product defect or
otherwise, and regardless of the form in which such claim is made, provided that
such Losses are due to (a) a defect in the design or manufacture of the Module
(excluding defects in the BIS Software, the Bispectral Index or other products
provided by Aspect hereunder) or modifications to the BIS Software made by SMI
or (b) the negligence, recklessness or intentional misconduct of SMI. If Aspect
becomes aware of a product liability claim which might give rise to a right or
obligation of indemnification and defense as provided herein, Aspect shall
promptly notify SMI. SMI shall control and bear the full expense of the defense
against or settlement of such claim. Aspect shall cooperate in such action if
reasonably necessary and requested by SMI. In no event shall SMI settle any
matter involving Aspect without the prior written consent of Aspect, which
consent shall not be unreasonably withheld or delayed. Aspect may, in its own
discretion, be represented in the defense or settlement of any such claim by
counsel of its own choosing at its sole expense.
4.12 Product Liability of Aspect. Aspect hereby agrees to indemnify,
defend and hold harmless SMI, its affiliates, directors, officers, employees and
agents, from and against all Losses arising out of or in connection with the
marketing or sale of any Module, including, but not limited to, any actual or
alleged injury, damage, death or other consequence occurring to any person as a
result, directly or indirectly, of the possession or use of any such Module,
whether claimed by reason of breach of warranty, negligence, product defect or
otherwise, and regardless of the form in which such claim is made, provided that
such Losses arise from or are related to (a) a defect in the design or
manufacture of the BIS Software or the Bispectral Index as delivered by Aspect
or as modified by Aspect, or (b) the negligent, recklessness or intentional
misconduct of Aspect. If SMI becomes aware of a product liability claim which
might give rise to a right or obligation of indemnification and defense as
- 26 -
31
provided herein, SMI shall promptly notify Aspect. Aspect shall control and bear
the full expense of the defense against or settlement of such claim. SMI shall
cooperate in such action if reasonably necessary and requested by Aspect. In no
event shall Aspect settle any matter involving SMI without the prior written
consent of SMI, which consent shall not be unreasonably withheld or delayed. SMI
may, in its own discretion, be represented in the defense or settlement of any
such claim by counsel of its own choosing at its sole expense.
4.13 Claimed Infringement of SMI Technology. SMI hereby agrees to
indemnify, defend and hold harmless Aspect, its affiliates, directors, officers,
employees and agents, from and against all Losses arising out of or in
connection with any claim by a third party that the manufacture, use or sale of
a Module infringes any intellectual property right claimed by such third party
and relating to the intellectual property rights owned by such party.
Notwithstanding the preceding sentence, SMI will not be required to indemnify,
defend or hold Aspect harmless from Losses which arise from the BIS Software,
the Bispectral Index or other products provided by Aspect hereunder, except to
the extent such Losses result from the use or sale of the BIS Software,
Bispectral Index or other Aspect products in combination with products which are
provided by parties other than Aspect. If Aspect becomes aware of an
infringement allegation which might give rise to a right or obligation of
indemnification and defense as provided herein, Aspect shall promptly notify
SMI. SMI shall control, bear the full expense of and retain all proceeds of the
defense against or settlement of such allegation. Aspect shall cooperate in such
action if reasonably necessary and requested by SMI. In no event shall SMI
settle any matter involving Aspect without the prior written consent of Aspect,
which consent shall not be unreasonably withheld or delayed. Aspect may, in its
own discretion, be represented in the defense or settlement of any such
allegation by counsel of its own choosing at its sole expense.
4.14 Claimed Infringement of Aspect Technology.
(a) Aspect hereby agrees to indemnify, defend and hold
harmless SMI, its affiliates, directors, officers, employees and agents, from
and against all Losses arising out of or in connection with any claim by a third
party that the BIS Software, the Bispectral Index or other products provided by
Aspect hereunder infringes any intellectual property right claimed by such third
party and relating to the intellectual property rights owned by such party. If
SMI becomes aware of an infringement allegation which might give rise to a right
or obligation of indemnification and defense as provided herein, SMI shall
promptly notify Aspect. Aspect shall control, bear the full expense of and
retain all proceeds of the defense against or settlement of such allegation. SMI
shall cooperate in such action if reasonably necessary and requested by Aspect.
In no event shall Aspect settle any matter involving SMI without the prior
written consent of SMI, which consent shall not be unreasonably withheld or
delayed. SMI may, in its own discretion, be
- 27 -
32
represented in the defense or settlement of any such allegation by counsel of
its own choosing at its sole expense.
(b) Should any BIS Software or the Bispectral Index become the
subject of an injunction preventing its use or sale as contemplated herein,
Aspect shall, at its option (and in addition to its obligations under subsection
4.13(a)), promptly (1) procure for SMI the right to continue to use and sell
such BIS Software or Bispectral Index, (2) replace or modify such BIS Software
or Bispectral Index so that it becomes non-infringing or, if options (1) and (2)
are not reasonably available to Aspect, then (3) terminate SMI's license to the
allegedly infringing BIS Software or Bispectral Index and refund to SMI the
amounts paid to Aspect for all BIS Software or the Bispectral Index in the
possession of SMI or its subdistributors, upon the return of the BIS Software or
Bispectral Index to Aspect. In addition, Aspect may undertake any of the
foregoing options (1)(2) and (3) if Aspect determines, in its reasonable
opinion, that the BIS Software or Bispectral Index is likely to become the
subject of an injunction preventing its use or sale as contemplated herein.
(c) Aspect shall have no liability or obligation to SMI
hereunder with respect to any patent, copyright, trade secret or other
intellectual property infringement or claim thereof, to the extent such
liability or obligation is based upon (i) use or sale of BIS Software or the
Bispectral Index in combination with devices or products not provided by Aspect,
(ii) use of other than the most recently released version of any software
included in the BIS Software or the Bispectral Index or (iii) modifications,
alterations or enhancements of the BIS Software or Bispectral Index not created
by or for Aspect. SMI shall indemnify and hold Aspect harmless from all costs,
damages and expenses (including reasonable attorneys' fees) arising from any
claim enumerated in the preceding sentence. The limitations set forth in the
foregoing clause (ii) shall only apply to the extent Aspect has made the most
recently released version of the software available to SMI at no cost to SMI for
incorporation in the BIS Software or Bispectral Index which are then in SMI's
possession or have been previously distributed by SMI and the liability or
obligation arises after Aspect makes such revised version available to SMI.
4.15 Digital Signal Converter. Aspect agrees to sell to SMI, and SMI
agrees to purchase exclusively from Aspect, the Digital Signal Converters (the
DSC II, or Aspect's next generation Digital Signal Converter, such as a
one-channel Digital Signal Converter, which may take the place of the DSC II) to
be used in conjunction with the Module and the Monitor. In addition, SMI at its
option may distribute the Four Channel Digital Signal Converter for use with the
Module in configurations with Bispectral Index, EEG, or both capabilities
enabled. In either case, the Bispectral Index will only be operated through the
use of the Sensor except for failure to supply
- 28 -
33
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
pursuant to Section 3.20. The price for each Digital Signal Converter
manufactured by Aspect shall be [**]. Aspect's obligation to sell Digital Signal
Converters to SMI shall be in effect during the term of the license set forth in
Section 4.1 above. The provisions of Sections 2.14 and 2.15 (regarding forecasts
and orders) and 2.16, 2.18 and 2.19 (regarding shipment, risk of loss and
payments) shall apply with respect to Digital Signal Converters.
4.16 Restrictive Covenant. During the term of the appointment set forth
in Section 4.1, SMI will not directly engage in, and will use good faith and
reasonable efforts to prevent its sublicensees and subdistributors from engaging
in, the sale anywhere in the world of any EEG Module that incorporates the
technology that can be used to measure the hypnotic effects of anesthetics on
the brain, provided that the foregoing restriction shall not apply to an EEG
module that includes spectral edge frequency (SEF) as long as SMI or any
sublicensee or subdistributor does not market or promote such SEF product for
use in anesthesia monitoring. Furthermore, in the event that SMI directly
engages in the sale of such a competitive product, or fails (within thirty (30)
days after notice from Aspect) to use good faith and reasonable efforts to
prevent a subdistributor or sublicensee from engaging in the sale of any such
competitive product), Aspect shall have the right to terminate the right of SMI
to distribute the Module, effective thirty (30) days after delivery of written
notice to SMI. SMI's obligation to prevent its subdistributors and sublicensees
from breaching the foregoing restrictive covenant shall not require SMI to take
any action which is illegal under any applicable laws or which could reasonably
expected to expose SMI to liability and damages to the subdistributor or
sublicensee, or the subdistributor or sublicensee's customers.
4.17 Right of Aspect to Contact Customers. After the first Sensor
shipment, SMI shall notify Aspect on a monthly basis of each customer order in
the United States territory for any Module. Aspect shall have the right to
contact the customers of SMI solely for the purpose of selling the Sensor in the
United States territory. All information provided by SMI to Aspect pursuant to
this Section 4.17 shall constitute Proprietary Information of SMI.
ARTICLE V - COMMUNICATIONS
5.1 Communications: Aspect and SMI agree that during the first 3 years
of this Agreement, a working group composed of senior personnel at Aspect and at
SMI will meet on a quarterly basis to discuss the relationship between the
parties and to review issues relating to the Agreement including, but not
limited to the following:
- 29 -
34
(a) to review the extent to which the Agreement has met the
objectives of the parties;
(b) to monitor performance measures (such as the number of
units sold, the number on consignment, average selling prices, Sensor
consumption rates, etc.);
(c) to monitor compliance with the terms of the Agreement on
the part of both Aspect and SMI;
(d) to identify steps that might be taken to improve the
Agreement, or the way in which the Agreement is administered, to better meet the
objectives of both parties; and
(e) to coordinate joint and separate market development
activities, and to plan new initiatives designed to accelerate development of
the market.
It is expected that the composition of the working group may change
over time (for example, development personnel will be included initially during
the period in which the Module is under development), but SMI and Aspect agree
to identify at least one senior member of their respective organizations who
will have primary oversight responsibility for the Agreement and who will attend
all of the quarterly meetings to provide continuity over time. It is understood
that the parties will identify mutually convenient times and locations to hold
the quarterly meetings to minimize the cost and the time required of company
personnel, and that a preliminary schedule of quarterly meetings will be
established within ninety (90) days after this Agreement is signed.
ARTICLE VI - TERMINATION
6.1 Term. This Agreement shall commence on the date first set forth
above and shall continue for a term of ten (10) years, subject to earlier
termination as provided herein.
6.2 Termination by SMI. SMI shall have the right, at any time following
the second anniversary of this Agreement, to terminate this Agreement in its
entirety or to terminate the provisions of any of Articles II, III or IV of this
Agreement, on six months prior written notice to Aspect.
6.3 Termination for Breach.
(a) If SMI breaches the provisions of this Agreement relating
to the making or promotion of claims, Aspect shall have the right to terminate
this Agreement immediately upon written notice to SMI. Aspect shall be entitled
to
- 30 -
35
terminate this Agreement by written notice to SMI in the event that SMI shall
fail to make any required payment, and shall fail to remedy such default within
30 days after notice thereof by Aspect. SMI shall be entitled to terminate this
Agreement by written notice to Aspect if Aspect shall fail to fill an order for
Monitor Products or Sensor Products in accordance with the terms of Sections
2.15 or 3.7 and shall fail to remedy such default within 30 days after notice of
default from SMI; provided, however, if SMI elects to use the remedies provided
by Section 3.19, such remedies will be in lieu of SMI's right to terminate this
Agreement for Aspect's failure to supply the Sensor Products. In addition,
except for a breach by SMI of its minimum purchase requirements set forth in
Sections 2.12 of this Agreement, which breach will be governed by the provisions
of that Section 2.12, either party shall be entitled to terminate this Agreement
by written notice to the other party in the event that the other party shall be
in material default of any of its other obligations hereunder, and shall fail to
remedy any such default within 90 days after notice thereof by the non-breaching
party. Notwithstanding the foregoing provisions of this Section 6.3 relating to
payment or other breaches by SMI of this Agreement, (a) if such breach relates
to Monitor Products, the provisions of Article II shall terminate and the
distribution rights of SMI to the Sensor shall continue, but the other
provisions of this Agreement shall remain in effect; (b) if such breach relates
to the Sensor the provisions of Article III shall terminate, but the other
provisions of this Agreement shall remain in effect; and (c) if such breach
relates to the Modules, the provisions of Article IV shall terminate, but the
other provisions of this Agreement shall remain in effect.
(b) Effect of Expiration or Termination. Upon any expiration
or termination of this Agreement, neither party shall be relieved of any
obligations incurred prior to such expiration or termination. In the event of
any expiration or termination of this Agreement, each party shall return to the
other party all tangible Proprietary Information of the other party, provided
that SMI shall be entitled to retain one copy of any such tangible Proprietary
Information as is necessary to service its customers of Monitor Products, Sensor
Products and Modules.
ARTICLE VII - CONFIDENTIALITY
Each party shall maintain the Proprietary Information of the other
party in confidence, and shall not disclose, divulge or otherwise communicate
such Proprietary Information to others, or use it for any purpose, except
pursuant to, and in order to carry out, the terms and objectives of this
Agreement, and hereby agrees to exercise every reasonable precaution to prevent
and restrain the unauthorized disclosure of such Proprietary information by any
of its directors, officers, employees, consultants, subcontractors, sublicensees
or agents. Without limiting the generality of the foregoing, neither party
shall, without the prior written consent of the other party, (i) make any
disclosures to any third party concerning the Module development program
conducted under this Agreement, or (ii) provide advance
- 31 -
36
notice, whether written or oral, concerning product introductions to sales
representatives or customers that is inconsistent with its policies and
procedures for introducing its own new products. The foregoing provisions shall
not apply to any Proprietary Information disclosed hereunder which: (a) was
known or used by the receiving party prior to its date of disclosure to the
receiving party, as evidenced by the prior written records of the receiving
party; (b) either before or after the date of the disclosure to the receiving
party is lawfully disclosed to the receiving party by an independent,
unaffiliated third party rightfully in possession of the Proprietary
Information; (c) either before or after the date of the disclosure to the
receiving party becomes published or generally known to the public through no
fault or omission on the part of the receiving party; or (d) is required to be
disclosed by the receiving party to comply with applicable laws, to defend or
prosecute litigation or to comply with governmental regulations, provided that
the receiving party provides prior written notice of such disclosure to the
other party and takes reasonable and lawful actions to avoid and/or minimize the
degree of such disclosure. This Section shall survive the expiration or
termination of this Agreement.
ARTICLE VIII - MISCELLANEOUS
8.1 Trademarks and Trade Names. SMI shall not use the Aspect name or
any other trademark or trade name used or claimed by Aspect (all of which names
or marks shall hereinafter be referred to as "Aspect Proprietary Marks") in
connection with any business conducted by SMI other than in dealing with the
Monitor Products, the Sensor Products and the Module or unless otherwise
approved in writing by Aspect. In the event the Module bears Aspects's
trademarks, the Module must meet Aspect's reasonable quality standards; Aspect
acknowledges that SMI's current line of monitor products meets such quality
standards, and the Module will be deemed to meet Aspect's quality standards if
it is of a quality substantially equivalent to the current quality standards for
SMI's monitor products. Aspect shall not use the SMI name or any other trademark
or trade name used or claimed by SMI (all of which names or marks shall
hereafter be referred to as the "SMI Proprietary Marks"). The "Aspect
Proprietary Marks" and "SMI Proprietary Marks" shall hereinafter be referred to
as the "Proprietary Marks". Each party agrees that its use of the Proprietary
Marks of the other party shall not create in its favor any right, title or
interest therein and acknowledges the other party's exclusive right, title and
interest in the Proprietary Marks of the other party. Each party shall use the
trademarks of the other party in compliance with all relevant laws and
regulations and not modify any of the other party's trademarks in any way.
Neither party shall take any action calculated or likely to prejudice, affect,
impair or destroy the title and interest of the other party in the Proprietary
Marks.
8.2 Records. Each party shall keep, and shall require all affiliates to
keep, full, true and accurate books of accounts and other records containing all
information and data which may be necessary to ascertain and verify the data
required to be
- 32 -
37
maintained or furnished pursuant to the terms of this Agreement. During the term
of this Agreement and for a period of one year following its termination, each
party shall have the right from time to time (not to exceed once during each
calendar year) to have an accounting firm inspect such books, records and
supporting data of the other party during reasonable business hours at such time
as is approved in advance by the other party, provided that such accounting firm
executes a standard nondisclosure agreement in a form reasonably acceptable to
the other party.
8.3 Publicity. Neither party shall originate any publicity, news
release or other public announcement, written or oral, relating to this
Agreement or the existence of an arrangement between the parties, without the
prior written consent of the other party except as otherwise required by law (in
which case, such party shall use reasonable efforts to provide a copy of such
information to the other party prior to the required legal disclosure and
provide a reasonable opportunity for review and comment).
8.4 Force Majeure. In the event that either party is prevented from
performing, or is unable to perform, any of its obligations under this Agreement
due to any act of God, acts or omissions of any government or any agency
thereof, compliance with request, recommendations, rules, regulations or orders
of any international government or agency thereof, fire, storm, flood,
earthquake, accident, war, rebellion, insurrection, riots, sabotage, invasion,
quarantine, strikes, lockouts, disputes or differences with workers,
transportation embargoes or failure of public facilities, and if such party
shall have used reasonable efforts to avoid such occurrence and minimize its
duration and shall have given proper written notice to the other party, then the
affected party's performance shall be excused and the time for performance shall
be extended for the period of delay or inability to perform due to such
occurrence.
8.5 Relationship Between Parties. The relationship between the parties
is that of independent contractors, and nothing in this Agreement shall be
construed to constitute either party as an employee, partner or agent of the
other party. Without limiting the foregoing, neither party shall have authority
to act for or to bind the other party in any way, to make representations or
warranties or to execute agreements on behalf of the other party or to represent
that the other party is in any way responsible for the acts or omissions of such
party.
8.6 Notices. All notices, demands, requests, consents, approvals or
other communications required or permitted to be given hereunder or which are
given with respect to this Agreement shall be in writing and may be personally
served, deposited in certified mail postage prepaid, or deposited with an
overnight courier service, or sent via facsimile transmission, addressed as
follows:
- 33 -
38
If to Aspect: Aspect Medical Systems, Inc.
0 Xxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attn: President
If to SMI: SpaceLabs Medical, Inc.
00000 XX 00xx Xxxxxx
X.X. Xxx 00000
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxx X. Xxxxx,
Director, Business Development
Copy to: Xxxxxx X. XxXxxxxx
General Counsel
or to such other address or person as either party shall have specified most
recently by written notice provided in accordance with this Section 8.6. Notice
shall be deemed given on the date of service if personally served. Notice mailed
as provided herein shall be deemed given on the fifth business day following the
date so mailed. Notice deposited with an overnight courier service shall be
deemed given on the next business day following the date so deposited. Notice
sent via facsimile transmission shall be deemed given when acknowledged by the
recipient.
8.7 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all prior agreements of the parties, including but not limited to the
Distribution and License Agreement between them dated as of June 30, 1994, which
is hereby terminated in its entirety. No waiver, consent, modification,
amendment or change of the terms of this Agreement shall bind either party
unless in writing and signed by both parties.
8.8 Severability. In the event that any provision of this Agreement is
held by a court of competent jurisdiction to be unenforceable because it is
invalid or in conflict with any law of any relevant jurisdiction, the validity
of the remaining provisions shall not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular provisions held to be unenforceable.
8.9 Assignments. Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the prior written consent of
the other party, except to a party who acquires all or substantially all of the
business of the assigning party by merger, sale of assets or otherwise.
- 34 -
39
8.10 Governing Law. This Agreement shall be governed by and construed
as a sealed instrument in accordance with the laws of the Commonwealth of
Massachusetts.
8.11 Compliance with Laws. Each party agrees to comply with all laws
and regulations that may be applicable to such party's performance hereunder,
including but not limited to the Food, Drug and Cosmetics Act and good
manufacturing practices regulations. Each party (the "Indemnitor") agrees to
defend, indemnify and hold harmless the other party from all Losses arising out
of the Indemnitor's failure to comply with any applicable law or regulation.
8.12 Waivers and Extensions. No waiver of any breach of any agreement
or provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof or of any other agreement or provision herein
contained. No extension of time for performance of any obligations or acts shall
be deemed an extension of the time for performance of any other obligations or
acts.
8.13 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute but one and the same instrument.
8.14 Consents. Whenever any provision of this Agreement requires one
party to seek the prior approval or consent of the other party, the parties
agree that such consents or approvals will not be withheld unreasonably.
8.15 Limitation of Liability. Neither party shall be responsible to the
other party for any punitive, incidental or consequential damages, including
lost profits or lost sales, arising from or related to a breach of this
Agreement; provided, however, that nothing herein shall be deemed to limit or
modify either party's obligations to indemnify the other party from any Losses
asserted by third parties, to the extent such indemnity is contractually
required hereunder.
IN WITNESS WHEREOF, the parties hereto have set their hand and seal as
of July 24, 1996.
ASPECT MEDICAL SYSTEMS, INC.
By: /s/X. Xxxxxxxxxxxx Eagle
Its: President
SPACELABS MEDICAL, INC.
By: /s/Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
Its: Director, Business Development
- 35 -
40
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE A
SpaceLabs Pricing
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.
Aspect's SpaceLabs
Prod. No. Product Description U.S. Price Intl. Price
----------------- --------------------------------------------------------- --------------- ---------------
Monitoring System
Components
A-1000(TM) 4-channel EEG monitoring system. Supplied with
one A-1000 4-channel EEG monitor, one A-1000 4-channel EEG
digital signal converter, one power cord, one digital
signal converter cable, and one electrode starter kit.
(Monitor and digital signal converter include 15 months
warranty.)
186-0026 A-1000 4-channel EEG monitoring system, German [**]
language, UL/cUL, TUV, CEemc, 50 Hz
186-0039 A-1000 4-channel EEG monitoring [**]
system, English language, UL/cUL, TUV, CEemc,
60 Hz
186-0040 A-1000 4-channel EEG monitoring system, French [**]
language, UL/cUL, TUV, CEemc, 60 Hz
186-0041 A-1000 4-channel EEG monitoring system, French [**]
language, UL/cUL, TUV, CEemc, 50 Hz
186-0042 A-1000 4-channel EEG monitoring system, English [**]
language, UL/cUL, TUV, CEemc, 50 Hz
186-0051 A-1000 4-channel EEG monitoring system, [**]
ENGLISH language, CE, 50 Hz
186-0058 A-1000 4-channel EEG monitoring system, French [**]
language, CE, 50 Hz
- 36 -
41
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.
Aspect's SpaceLabs
Prod. No. Product Description U.S. Price Intl. Price
----------------- --------------------------------------------------------- --------------- ---------------
186-0060 A-1000 4-channel EEG monitoring system, German [**]
language, CE, 50 Hz
186-0053 A-1050(TM) 2-channel EEG Brain Monitor system, [**]
English language, UL/cUL, TUV, CEemc, 60Hz
Supplied with one A-1050 2-channel EEG monitor, one A-1050
2-channel EEG digital signal converter (DSC-2), one power
cord. (Monitor and digital signal converter include 15
months warranty.)
*Discount %
186-0008 A-1000 4-channel EEG digital signal converter (DSC). For
use with A-1000 4-channel EEG monitor only. (Includes 15
months warranty).
186-0045 A-1050 2-channel EEG digital signal converter [**] [**]
(DSC-2) (includes 15 months warranty.)
186-0009 Digital Signal Converter cable (20 feet) to connect [**]
[**] A-1000 EEG monitor to A-1000 4-channel EEG digital
signal converter.
186-0025 Female Snap EEG Lead Wires with safety [**] [**]
connector 24" long, 10 leads per set
186-0055 A-1050 Two channel Referential patient Interface [**] [**]
Cable (PIC)
186-0014 Printrex printer (115V) compatible for use with the [**] [**]
A-10xx.
186-0011 Printer interface cable (6 feet), DB25 parallel port. [**] [**]
Centronics 36, isolated ground, shield.
186-0015 Permanent thermal paper for use with Printrex [**] [**]
printer. Provided in 100 feet rolls. (4 rolls/case)
186-0016 Permanent thermal paper for use with Printrex [**] [**]
printer. Provided in 100 feet rolls. (8 rolls/case)
186-0043 Starter kit with Zipprep(TM)Self-Prepping [**] [**]
Disposable Electronics; 1 case containing 300
electrodes (75 box, 4 boxes/case)
- 37 -
42
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.
Aspect's SpaceLabs
Prod. No. Product Description U.S. Price Intl. Price
----------------- --------------------------------------------------------- --------------- ---------------
185-0043 Starter kit with Zipprep(TM)Self-Prepping [**] [**]
Disposable Electrodes:
* 1 Box (75) electrodes
* 15 alcohol swaps
* 1 Set (5) leadwires
* 15 gaude pads
*Discount Off Prevailing U.S.A. Price List
- 38 -
43
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE B
Aspect Development Activities for the SMI BIS Module
BIS SOFTWARE DEVELOPMENT
Scope. Aspect shall provide to SMI the standard Aspect BIS Software (in
binary form) along with suitable documentation in a form reasonably acceptable
to SMI and sufficient to enable SMI to use the BIS Software for execution in the
Module. In addition, Aspect shall provide FPGA source code, and source code
which controls the following elements of the Digital Signal Converter (the "Low
Level Interface Source Code"): Digital Signal Converter interface code including
acquisition and control (impedance checking, self test initiation and
termination).
[**]
- 39 -
