1
EXHIBIT 10.23
January 17, 1997
Via Fax 404/000-0000
and First Class Mail
Xx. Xxxxxxx X. Xxxxxxxx, Xx.
Horizon Medical Products, Inc.
Seven North Parkway Square
0000 Xxxxxxxxx Xxxxxxx XX
Xxxxxxx, XX 00000
Re: Letter Agreement 2 to Supply Agreement between CarboMedics, Inc. and
Horizon Medical Products, Inc. dated February 17, 1993, as amended
February 17, 1993, and June 21, 1994; Development Agreement between
CarboMedics, Inc. and Horizon Medical Products, Inc. dated February
17, 1993, as amended February 17, 1993, and the Equity Agreement
between CarboMedics, Inc. and Horizon Medical Products, Inc. dated
February 17, 1993, as amended February 17, 1993 (the "Agreements")
Dear Xxxx:
The terms of this letter will confirm our recent discussions that it is the
intent of both parties to terminate the above-referenced Supply Agreement and to
have Horizon Medical Products, Inc. ("HMP") manufacture its Triumph-1(TM) family
of vascular ports. HMP will buy a sufficient inventory of ports from CarboMedics
to supply its customers while it starts its manufacturing operation. I believe
the following terms and conditions are the best way to accomplish this
transition:
1. The Transfer Date will be the date upon which CMI ceases manufacture of HMP
product and HMP takes possession of and responsibility for the equipment
listed in Attachment A. The transfer of production from CarboMedics'
facility to HMP's will be deemed to occur at that time. After that date,
CarboMedics will have no obligation to supply product to HMP. The Transfer
Date will be agreed upon by both companies within 30 days of signing this
letter, but the Transfer Date will be no later than September 30, 1997.
However, regardless of the Transfer
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Horizon Medical Products, Inc.
January 17, 1997
Page 2
Date agreed to by both parties, the Transfer Date will not occur until HMP
has either purchased at least 23,500 ports from CarboMedics or agreed in
writing to pay to CarboMedics, within 90 days, the additional fees
described in items 2 and 8 of this letter agreement.
2. The "Effective Date" for purposes of the Supply Agreement will be January
1, 1995. HMP will purchase 23,500 units from CarboMedics by the Transfer
Date at the prices and under the terms of the current Supply Agreement. If
HMP fails to purchase 23,500 units by the Transfer Date, HMP will pay to
CarboMedics, within 90 days, the sum of $50 times the difference between
23,500 and the number of units actually purchased by the Transfer Date.
3. HMP must decide how much product to purchase from CarboMedics, by catalog
number. Except as specifically modified by the terms of this letter, all
terms and conditions of the O.E.M. Supply Agreement will be applied to the
purchase of these ports.
4. Because CarboMedics will require additional time to order raw materials and
build the additional volume of ports, HMP must provide CarboMedics with
additional lead time on its purchase orders. CarboMedics must receive all
purchase orders for delivery under the terms of the Supply Agreement by
March 31, 1997. If purchase orders are received after this date,
CarboMedics will use reasonable effort to meet those orders. CarboMedics,
at its sole discretion, may reject any purchase orders which exceed the
23,500 unit limit.
5. CarboMedics may immediately cease to include the "Manufactured by
CarboMedics" label with the ports that it manufactures. Furthermore, HMP
may not use CarboMedics' name on any part of any port, instrument, package
or related device which was not manufactured by CarboMedics. HMP may not
use CarboMedics' name in any way.
6. CarboMedics may decline any requests by HMP to make changes in the
specifications. Since the Transfer Date is near, it is the intent of
CarboMedics to not permit any changes in the product specifications.
However, if CarboMedics consents to such requests, the requirements of
Paragraph 6 of the Supply Agreement will remain in full force and effect.
7. CarboMedics will not accept rejected product after October 31, 1997. All
other provisions in Paragraph 10 will remain in full force and effect.
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Horizon Medical Products, Inc.
January 17, 1997
Page 3
8. HMP will pay an additional $20 per unit development cost on each of the
23,500 units manufactured by CarboMedics. As is currently the practice,
HMP will be invoiced for this cost as the units are shipped. If HMP does
not purchase the required 23,500 units by the Transfer Date, HMP will pay
to CarboMedics, within 90 days, the sum of $20 times the difference
between 23,500 and the number of units actually purchased by the Transfer
Date. This payment will be in addition to any payments due under the terms
of item 2 of this letter agreement.
9. To compensate CarboMedics for the equipment and fixtures listed in
Attachment A, for providing documentation and training to HMP personnel,
and for the $20 per unit development fee on the first 14,000 units produced
by HMP, HMP owes CarboMedics an additional fee of $680,000. This fee will
be paid as follows: HMP will pay to CarboMedics the amount of $20 for each
port body that is shipped by the molding vendor to HMP between the
Effective Date and June 30, 1998. If the entire fee is not paid by June 30,
1998, HMP will pay to CarboMedics the amount of $40 for each port body
shipped by the molding vendor to HMP between June 30, 1998 and September
30, 1998. If the entire fee is not paid by September 30, 1998, the
remainder will be due in a single payment on September 30, 1998 regardless
of the number of port bodies shipped or the number of ports manufactured.
All such payments will be made by HMP via Federal Express on the date that
the port bodies are shipped to HMP by the molding vendor. The total amount
paid to CarboMedics will be setoff against HMP's outstanding debt and will
equal $680,000.
10. Since CarboMedics cannot control how the equipment and fixtures listed in
Attachment A are installed or used by HMP nor how HMP actually manufactures
the ports, CarboMedics assumes no liability for the equipment and fixtures
transferred or for the training provided.
11. Once this agreement is signed and the Transfer Date agreed to by both
parties, CarboMedics will immediately make available to HMP all
specifications, procedures and documents specific to the Triumph-1(TM)
port. The equipment listed in Attachment A will be moved from CarboMedics'
facility to HMP's facility upon termination of CarboMedics' obligation to
manufacture product. Transportation of the equipment and fixtures from
CarboMedics' facility to HMP's facility and installation of the equipment
and fixtures in HMP's facility are the responsibility of HMP. CarboMedics
will retain ownership of all equipment listed in Attachment A. HMP will
sign all documentation required by CarboMedics to perfect its security
interest in the equipment. Upon receipt of all monies due under the
Agreements, CarboMedics will transfer ownership of
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Horizon Medical Products, Inc.
January 17, 1997
Page 4
those items to HMP. However, until all monies due to CarboMedics under the
Agreements are paid by HMP, CarboMedics will retain ownership of all
equipment listed in Attachment A. If all monies are not paid when due, then
CarboMedics will regain possession of all equipment transferred.
12. HMP hereby authorizes CarboMedics to ship within 30 days of the Transfer
Date, all CarboMedics' usable raw materials, work-in-process and finished
goods inventories, except for those materials purchased by CarboMedics from
Dow-Corning. Raw materials will be purchased at the prices paid by
CarboMedics. Finished goods will be purchased at the prices specified in
the Supply Agreement. The prices for units in work-in-process will be based
on the percent complete times the finished goods price. HMP will also pay
for shipping and insurance fees. CarboMedics will invoice HMP on shipment
for all amounts due and payment will be due within 30 days from the date of
the invoice.
13. CarboMedics will provide limited support to assist HMP to establish its own
manufacturing operation. CarboMedics will have no obligation to provide
assistance beyond the terms specified in this agreement, and will not
participate in any process changes initiated by HMP. The support will be
limited exclusively to the following:
a. Interpretation of CarboMedics' written documentation.
b. Introduction to selected outside vendors.
c. Introduction to currently utilized manufacturing, inspection and
documentation systems.
d. A list of the tools and equipment to be transferred to HMP.
e. A suggested infrastructure that HMP should have in place before
beginning to transfer production to its facility. This infrastructure
will include, at a minimum, the technical personnel required (i.e.,
product engineer, supervisor, etc.) and the facilities required (i.e.,
a qualified cleanroom, etc.).
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Horizon Medical Products, Inc.
January 17, 1997
Page 5
f. A limited amount of training for HMP personnel. This training will cover
the procedures, etc. used by CarboMedics to manufacture ports, but will not
cover any changes that HMP may want to implement. The training will be
limited to no more than 3 HMP employees and 1 consultant retained by HMP at
the CarboMedics plant in Austin for no more than 4 weeks. The training will
be started no more than 8 weeks prior to the agreed upon Transfer Date and
will be completed by the agreed upon Transfer Date. During this training,
all expenses incurred by HMP personnel and by the consultant retained by
HMP will be the responsibility of HMP.
14. CarboMedics is responsible for providing the limited amount of training
specified in this document. However, CarboMedics is not responsible for
HMP's ability to produce acceptable parts. Once the equipment and fixtures
listed in Attachment A have been transferred from CarboMedics' facility,
then CarboMedics has fully met its obligation.
15. At HMP's request, CarboMedics may but is not required to provide additional
assistance by sending a limited number of personnel to HMP's facility. HMP
will pay a fee of $150 per man-hour, in increments of 8 man-hours, plus all
related travel and living expenses for this assistance. This assistance may
be terminated immediately by either party. Invoices for these fees will be
prepared weekly, and payment will be due within 30 days of the date of the
invoice.
16. If by September 30, 1998, CarboMedics has received all monies owed under
the Agreements, its equity share in HMP (the "Applicable Percentage"
as defined in the above-referenced equity agreement) will be reduced to 6%
and HMP will be granted an option to purchase such equity at a fair market
price. HMP may exercise this option by delivering a written notice to
CarboMedics. The parties agree to negotiate in good faith to determine the
value of the equity and the terms of payment. If the parties fail to reach
agreement within 90 days after HMP's exercise of the option, CarboMedics
will have no continuing obligation to sell its equity share in the
business.
17. For a period of one year after the Transfer Date, neither party will hire
or attempt to hire any current employee, agent or sales representative of
the other unless the consent of the other party's management has been
obtained in writing prior to any offer of employment.
18. The parties agree that all disputes in any way relating to, arising under,
connected with, or incident to this Agreement, and over which the federal
courts have subject matter jurisdiction, shall be litigated, if at all,
exclusively in
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Horizon Medical Products, Inc.
January 17, 1997
Page 6
the United States District Court for the Western District of Texas, Austin
Division, and if necessary, the corresponding appellate courts. The parties
further agree that all disputes in any way relating to, arising under,
connected with or incident to this Agreement, and over which the federal
courts do not have subject matter jurisdiction, shall be litigated, if at
all, exclusively in the Courts of the State of Texas, in Xxxxxx County,
and, if necessary, the corresponding appellate courts. The parties also
agree that Texas law exclusively shall govern all terms of this Agreement,
including this paragraph. The parties expressly submit themselves to the
personal jurisdiction of the State of Texas.
If you are agreeable to the terms and conditions of this letter, please
indicate your acceptance by signing below and returning one original for my
records. Please call me if you have any questions.
Very truly yours,
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
Vice President/General Manager
Operations
Read and Agreed:
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------
Its: President
-------------------------
Date: 1/27/97
------------------------
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Horizon Medical Products, Inc.
January 17, 1997
Page 7
ATTACHMENT A
EQUIPMENT AND DOCUMENTATION TRANSFER LIST
When an "X" is placed in the "DOCUMENTATION" column, CarboMedics will
provide applicable process procedures, specifications, or reports describing
the manner in which CarboMedics performs the process.
When an "X" is placed in the "EQUIPMENT" column, CarboMedics will transfer
the specific equipment listed. Some items are located at vendors.
ITEM OR PROCEDURE DOCUMEN-
DESCRIPTION TATION EQUIPMENT
--------------------------------------------------------------------------------
CATHETER
Post-Cure X
Curing oven. The same oven is used
for all operations that refer to an X
oven. Only one oven will be
transferred.
End-Tipping Fixture X
POLYMER COMPONENTS
Double Lumen Molds at Vendor. X
Secondary Operations
Drill Cross Holes X
Mill Glue Slot X
Single Lumen Molds at Vendor X
META COMPONENTS
Beadblast Procedure X
Passivation Procedure X
SEPTUM
Single-Shot Mold (Standard) at Vendor X
Single-Shot Mold (Low Profile) at Vendor X
Multi-Shot Mold (16 parts) at Vendor X
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Horizon Medical Products, Inc.
January 17, 1997
Page 8
ITEM OR PROCEDURE DOCUMEN-
DESCRIPTION TATION EQUIPMENT
--------------------------------------------------------------------------------
LOCKING SLEEVE
Turn Inner Diameter and End Radius X
STEM
Single Lumen
Xxxxxx X X
Xxxxxx Tooling X X
Double Lumen
Crimping Fixture X
Beadblasting X
Pressing Fixture X
NEEDLE
Cleaning Procedure X
ASSEMBLY
Titanium Body/Ring Press Fixture X
Stem Press Fixture X
Suture Hole Fill Process X
(See note at
Curing Oven Catheter
section.)
GLUING
Curing Oven (See note at
Catheter
section.)
Gluing Fixtures X
LEAK TESTING
Leak Tester X
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Horizon Medical Products, Inc.
January 17, 1997
Page 9
ITEM OR PROCEDURE DOCUMEN-
DESCRIPTION TATION EQUIPMENT
--------------------------------------------------------------------------------
PACKAGING
Inner Tray Mold at Vendor X
Double Inner Tray Mold at Vendor X
Outer Tray Mold at Vendor X
Tyvek Die at Vendor X
Sealer Dies X
STERILIZATION
Box Die at Vendor X
LABELING
Artwork at Vendor X
Labeling Software X
NOTE: HMP must purchase a license
to any third-party software as well
as computer and printing equipment.
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Horizon Medical Products, Inc.
January 17, 1997
Page 10
ATTACHMENT B
ITEMS THAT CARBOMEDICS WILL NOT TRANSFER
Listed below are capabilities, systems, equipment and knowledge that
CarboMedics will not transfer to HMP. This list is not comprehensive, but it
does include items that CarboMedics currently uses in producing the access
ports
1. Receiving Inspection
Material Analysis
-- Chemical Analysis, including an FTIR
-- Residual Stress Testing
Tensile Testing
Durometer Testing
Dimensional Inspection
Pyrogen Testing
2. Double Lumen Polymer Base Secondary Operations
Drill Cross Holes
-- Small Milling Machine or Drill press
Mill Glue Slot
-- Small Milling Machine
3. Metal Parts Sandblast Cabinet
4. Laser Etcher for Marking Parts
5. Catheter and Strain Relief
Extrusion Dies at Vendor
Dow-Corning is the vendor for this tubing. Due to contractual
agreements, CarboMedics cannot transfer these dies.
HMP will have to establish and qualify another source for silicone
tubing.
6. Secondary Operations on Locking Sleeve
A small lathe will be required to turn the inner diameter and end radius.
7. Ultrasonic Cleaner
An ultrasonic cleaner will be required for:
-- Cleaning plastic components
-- Cleaning needles
-- Metal component passivation
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January 17, 1997
Page 11
8. Packaging
A package sealer will be required for sealing the Tyvek lids on the
product trays.
CarboMedics will transfer the dies that match the trays, but will not
transfer the sealer itself.
9. Labeling
CarboMedics can transfer the software system. However, CarboMedics will not
provide any third-party software, a computer, or any printing equipment.
10. Microbiology
CarboMedics will not provide any equipment, knowledge or capability to
perform routine sterility testing, pyrogen testing, environment monitoring,
or bioburden testing.
11. Cleanroom Furniture and Equipment
CarboMedics will not provide any cleanroom furniture, fixtures or
equipment.
12. General Systems
CarboMedics will not provide any of the following:
-- Operator training records
-- Customer complaint system
-- Metrology and Calibration system
-- Preventative maintenance system
-- Archives
-- Production and material control
-- Supplier qualifications
-- Microbiology
-- Regulatory
-- Receiving Inspection
-- Shipping
13. Materials Purchased from Dow-Corning
Because of contractual limitations, CarboMedics cannot resell any
components or materials which were purchased from Dow-Corning and which
have not been assembled into finished products. These materials include the
septum material, catheters, strain relief sleeves, and adhesive.
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February 17, 1993
Xx. Xxxxx Xxxxx
CarboMedics, Inc.
0000X Xxxx Xxxxxxxx Xxxx
Xxxxxx, XX 00000-0000
Re: Development Agreement dated February 17, 1993 Between CarboMedics,
Inc. ("CMI") and Horizon Medical Products, Inc. ("Horizon") and
O.E.M. Supply Contract Dated February 17, 1993 Between CMI and Horizon
Dear Perry:
CMI and Horizon have entered into the above-referenced agreements for the
purpose of developing, testing and obtaining FDA 510K approval for five models
of a vascular access port product ("VAPs") and for the manufacture of the VAPs
for sale to Horizon.
As an inducement for its entering into the above-referenced agreements,
Horizon shall have the right to request CMI, pursuant to Section 4 of the
Development Agreement, to develop, test and obtain 510K approval for a VAP model
or models that contain CMI's pyrocarbon coatings for sale to Horizon under the
Supply Contract. Upon such request by Horizon, Horizon and CMI will negotiate in
good faith in order to determine (i) whether any additional development costs
will be payable under the Development Agreement to CMI for such development,
testing and regulatory submission and approval and (ii) the price for such VAP
models under Section 3(a) of the Supply Contract. If the parties fail to reach
agreement on such matters, CMI has no obligation to develop such products for
Horizon unless the parties each agree at some subsequent date. The amount of
development costs payable by Horizon for such development, testing and
regulatory submission and the prices to Horizon for such products will be no
greater than CMI charges to any third party for a similar vascular access port
product with pyrocarbon coating.
If CarboMedics is in agreement with the provisions of this letter, then a
duly authorized officer of CarboMedics should execute this letter as indicated
below.
Sincerely yours,
HORIZON MEDICAL PRODUCTS, INC.
/s/ Xxxxxxxx X. Xxxx
Xxxxxxxx X. Xxxx,
Chief Executive Officer
AGREED TO AND APPROVED:
CARBOMEDICS, INC.
By: /s/
-------------------
Title: President
----------------
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O.E.M. SUPPLY CONTRACT
THIS AGREEMENT, executed as of February 17th 1993, by and between
CARBOMEDICS, INC., a corporation organized and existing under the laws of the
State of Delaware, with its principal office located at 0000-X Xxxx Xxxxxxxx
Xxxx, Xxxxxx, Xxxxx 00000 ("CMI"), and HORIZON MEDICAL PRODUCTS, INC., a
corporation organized and existing under the laws of the State of Georgia, with
its principal office located at Seven North Parkway Square, 0000 Xxxxxxxxx
Xxxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000 (hereinafter "Horizon").
1. Recitals and Definitions.
(a) Horizon's Business. Horizon is engaged in the business of selling
medical devices. Horizon owns the "510k's" for the VAPs (as defined below).
(b) CMI's Business. CMI is engaged in the business of manufacturing
mechanical components for medical devices particularly such components coated
with its proprietary Pyrolite and Biolite pyrocarbon.
(c) Vascular Access Port. The term "Vascular Access Port" (hereinafter
"VAP" or "VAPs") means and includes the five VAP models developed and
manufactured by CMI for Horizon according to specifications and drawings owned
by Horizon (the "Specifications") and the Introducer (when ordered by Horizon
for a particular VAP). Each packaged VAP shall include the required needles and
syringes, patient identification cards, tray and FDA required instruction
manual. The Specifications are to be prepared, approved by Horizon and attached
to and made a part of this Agreement as Exhibit A.
(d) Effective Date. The term "Effective Date" means the date that the five
VAP models receive FDA approval but in no event sooner than June 1, 1994, unless
agreed to by the parties. The parties agree to be bound by the terms of this
Agreement as of the date executed.
(e) Development Agreement. The term "Development Agreement" means the
Development Agreement of even date herewith between CMI and Horizon.
(f) Introducer. Horizon will designate in the Specifications the type of
Introducer to be packaged with those VAPs purchased by Horizon from CMI where
Horizon's order specifies "with introducer."
2. Purchase of Goods. Horizon agrees to purchase the minimum quantities
for VAPs from CMI during the term of this Agreement as specified in Section 4
below.
3. Price.
(a) Effective as of the date first above written, CMI agrees to supply
VAPs at the prices set forth in Exhibit B. Notwithstanding
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the product mix actually purchased, Horizon agrees that it will
purchase from CMI the minimum quantities described in Section 4 below.
(b) Such prices will be adjusted for inflation one year after the
Effective Date using the previous twelve months to measure the adjustment.
Adjusted prices for each year (commencing with the second year after the
Effective Date) will be the prices for the prior calendar year plus such prices
times an inflation factor equal to the following: (i) 12-month average
percentage change in employment costs for private industry workers (excluding
farmers) for the 12 months ending September 30 as indicated on Table 5 of the
Employment Cost Index published by the Bureau of Labor Statistics of the United
States Department of Labor, plus (ii) 25% of the unadjusted percent change of
Intermediate Material Supplies and Components from Table 1 of the Producer Price
Indexes and Percent Charges by State of Processing ("PPI") published by the
United States Department of Labor, plus (iii) 50% of the unadjusted percent
change of Finished Energy Goods from Table 1 of the PPI. If the Employment Cost
Index and the PPI should cease to be published, any comparable category in a
comparable index to be agreed to in good faith by the parties will be used to
calculate the inflation factor.
(c) If the Employment Cost Index and the PPI are not available when the
first purchase order(s) in any calendar year is issued, the prices for VAPs
purchased under such purchase order(s) will be the prices for the prior calendar
year times the 12-month average percentage change in those costs as of the end
of the second calendar quarter. Such prices will be retroactively adjusted to
reflect the calculation set out in Paragraph 3(b) of this Agreement.
(d) Examples of how the price adjustment provisions in paragraphs (b) and
(c) above work are set forth in Exhibit C attached hereto.
4. Minimum Quantity and Schedule. Horizon will purchase from CMI 17,500
units of VAPs during the first eighteen (18) months following the Effective Date
and 22,500 units of VAPs during month nineteen (19) through month thirty (30)
following the Effective Date. Thereafter, Horizon will furnish to CMI in writing
once each year during the term an annual forecast (showing forecasted quarterly
purchases and annual minimum purchases) for the purchase of VAPs by Horizon. If
Horizon does not purchase at least forty thousand (40,000) units of VAPs from
CMI during such initial thirty (30) months after the Effective Date, Horizon
will pay to CMI within sixty (60) days after such thirty-month period the sum of
$50 times the difference between 40,000 and the number of units of VAPs actually
purchased during such thirty month period; provided, however, that such 40,000
minimum unit purchase requirement shall be deemed to have been satisfied where
Horizon orders from CMI
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during such 30 month period under the procedures in Section 5(a) hereof such
40,000 units and CMI is unable to ship during such 30 month period all of the
units ordered in accordance with Horizon's orders.
5. Ordering Procedure.
(a) Purchase Orders. Sales of VAPs will be made pursuant to purchase
orders issued by Horizon to CMI, specifying weekly delivery schedules by model
and quantity, price extension (based on Exhibit A pricing) and method of
shipment. Horizon will use its best efforts to maintain a uniform weekly
delivery schedule in terms of size and quantity of VAPs ordered. However, the
volume of the initial stocking order may exceed the equal weekly volume. On the
Effective Date, Horizon will issue purchase orders for the first 26 weeks of the
term of this Agreement. Thereafter, beginning 13 weeks after the commencement of
the term of this Agreement, subsequent purchase orders will be issued by Horizon
to CMI at thirteen-week intervals, thirteen weeks in advance. Notwithstanding
the foregoing, Horizon will supply CMI with its estimated volumes for the first
three months of the Agreement 60 days prior to the Effective Date.
(b) Limitations on Quantities Ordered. CMI will manufacture and ship VAPs
sufficient to fill Horizon's orders under Section 5(a) hereof. However, if any
thirteen week order for VAPs increases in number of units more than twenty
percent (20%) over the immediately preceding thirteen week order and if CMI can
manufacture and ship VAPs sufficient to fill Horizon's order up to or exceeding
the 20% increase but is unable to obtain sufficient quantities of raw materials
to fill Horizon's order with respect to some or all of the excess of units over
such 20%, then CMI is not required to fill that portion of Horizon's order for
which CMI is unable to obtain sufficient quantities of raw materials but CMI
will fill and complete such order as and when CMI can obtain such raw materials.
(c) Packaging. CMI will ship the VAPs in its final packaging as specified
in the Specifications. The following will appear only on the inner package for
the VAP: "Manufactured by CarboMedics, Inc."
6. Changes. Horizon will have the right, from time to time, to request
that changes be made in the Specifications for the VAPs as Horizon deems
necessary or desirable. All such requests, however, will be made by written
notice. The revised price (if any) and effective date for all such changes, and
the issue of payment for obsolete inventory resulting from a change in the
Specifications, will be negotiated in good faith between Horizon and CMI.
Notwithstanding such change, Horizon will purchase the VAP model or models
without such change that Horizon has ordered. In addition, if any such change
requires CMI to incur more than
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minimal engineering expenses, Horizon will reimburse CMI for such expenses.
7. Transportation Costs. CMI will ship VAPs to Horizon f.o.b. CMI's
facility.
8. Payment. CMI will invoice Horizon on shipment or completion of
services, as applicable, for all amounts due under this Agreement, including
without limitation amounts due under Sections 10(b) and 14. Each invoice is due
and payable in full at CMI's offices, within 60 days after the date of invoice
for invoices dated during the first six months after the initial sale of VAPs to
Horizon after the Effective Date, within 45 days after the date of invoice for
all invoices dated during the three months immediately following such six month
period, and within 30 days after the date of invoice for all invoices after such
three month period. If Horizon is delinquent in payment of any invoice, CMI may
refuse to ship, require cash in advance, letters of credit or other terms,
without limiting CMI's remedies. Horizon will pay service charges of 1.5 percent
per month or the maximum rate allowed by law, whichever is lower, on all
invoiced amounts due but not paid after the date due.
9. Excusable Delay or Failure to Perform. Neither party will be liable
for a delay in performance of or failure to perform an obligation under this
Agreement (except an obligation to make payment promptly when due), if and to
the extent such delay or failure is attributable to any cause beyond the
reasonable control of such party (the "affected party"). Such causes may include
but are not limited to act of God, act of government (including the Food and
Drug Administration), war or related actions, civil insurrection, riot,
sabotage, strike or other labor difficulties, epidemic, fire, flood, windstorm,
failure of suppliers, subcontractors or carriers, inability to obtain required
materials or qualified labor. The affected party will give prompt notice of the
cause to the other party, and will resume performance with reasonable diligence
upon cessation of the cause of the delay or failure. If the affected party's
performance is suspended or delayed because of the operation of this paragraph,
the term of this agreement will be correspondingly extended. If the suspension
or delay is excusable under this Section, Horizon will purchase from CMI all
VAPs that had been ordered by Horizon under Section 5(a) hereof but had not been
shipped by CMI, if such VAPs are shipped by CMI to Horizon within thirty (30)
days after the cessation of the cause of such delay or failure.
10. Horizon's Right to Reject. For a period of one year following
shipment, Horizon will have the right to reject VAPs which fail to conform to
the agreed Specifications or which have defects in materials or workmanship and
return same to CMI at CMI's expense. However, in conjunction with the rejection
of such VAPs, Horizon has the affirmative responsibility of providing CMI with
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a written, comprehensive description of the basis of the rejection by Horizon of
the VAPs being returned and/or a description of the mode in which the VAPs being
returned fail to meet the Specifications. If CMI, in its reasonable opinion and
confirmed by actual test, finds that the VAPs rejected by Horizon do not meet
Specifications or contain defects in materials or workmanship, CMI will at its
option repair or replace the rejected VAP or issue a credit memo to Horizon for
the cost of the VAPs returned as well as all shipment costs to and from Horizon.
For purposes of this Agreement, Horizon is deemed to have accepted all VAPs
which arc not affirmatively rejected by Horizon within 30 days after the VAP
packaging is opened. If, during any 3 month period, the total number of VAPs
returned by Horizon as non-conforming and subsequently determined to be in fact
conforming to Specifications exceeds 5 percent of the total number of VAPs
delivered to Horizon during the same period, Horizon will pay CMI an additional
handling charge of $50.00 per VAP for each in specification VAP in excess of
that 5 percent level (subject to increase by a percentage equal to the average
percent of increase in prices for the VAPs shown or Exhibit B as amended from
time to time) and will pay shipping costs on such VAPs.
11. Warranties. CMI warrants to Horizon that the VAPs sold hereunder will
conform to the Specifications and will be free from defects in materials and
workmanship and will be packaged in accordance with the packaging described in
the Specifications. Except for such warranties, CMI makes no other warranties of
any kind, express or implied, concerning the performance of the VAPs furnished
pursuant to this Agreement. Specifically, CMI MAKES NO WARRANTY OF FITNESS FOR
THE PURPOSE INTENDED AND NO WARRANTY OF MERCHANTABILITY. Except as provided in
Section 12 below, CMI's sole responsibility for such warranties will be, at
CMI's option, to repair, replace or issue credit respecting any defective VAPs
provided any such VAP is returned by Horizon to CMI in the manner provided for
in Section 10 hereof. Except as provided in Section 12 below, this paragraph
concerning warranties states CMI's entire obligation and the sole and exclusive
remedy of Horizon and any third party claiming under Horizon respecting the VAPs
or any defects therein.
12. Limitation of Liability and Indemnity.
(a) Limitation on CMI's Responsibility. Except as provided in paragraph
(c) below, CMI will not be liable or responsible for direct, incidental,
consequential and/or special damages arising out of use or implantation of VAPs
supplied hereunder including, but not limited to, damage to property of Horizon
or of other persons, or for injury to or death of any person.
(b) Horizon's Responsibility. CMI will have no control over the uses to
which the VAPs will be devoted, or over the circumstances of their use, storage,
handling, distribution or
-5-
18
application. Except for the warranty responsibility described in Section 11
above and the indemnification by CMI provided in paragraph (c) below, Horizon
will assume full responsibility with respect to the use of any VAP or
information furnished by Horizon hereunder, and CMI assumes no liabilities of
any kind with respect to the use by Horizon or any third party of such VAPs or
information.
(c) Indemnification.
CMI agrees, at its own expense, to defend, indemnify and hold harmless
Horizon, its officers, agents and employees from and against any and all claims,
losses, damages, causes of action, suits and liability of every kind, including
all expenses of litigation, court costs and reasonable attorney's fees, for
injury to or death of any person or for damage to any property, arising from or
out of or in connection with the failure of any VAP to conform to the
Specifications or for any VAP that is not free from defects in material or
workmanship.
Horizon agrees, at its own expense, to defend, indemnify, and hold harmless
CMI, its officers, agents and employees from and against any and all claims,
losses, damages, causes of action, suits and liability of every kind, including
all expenses of litigation, court costs and reasonable attorney's fees, for
injury to or death of any person or for damage to any property, arising from or
out of or in connection with Horizon's marketing, sale or distribution of any
VAP or Horizon's participation in the implantation of any VAP or any defect in
the Specifications, including any defect in the Specifications where the
negligence of CMI or its employees or agents caused such defect; provided that
any supplier that furnished materials or products to CMI for the VAPs shall not
be entitled to indemnification under this paragraph.
Horizon further agrees, at its own expense, to defend, indemnify and hold
harmless CMI from and against any and all claims, losses, damages, causes of
action, suits and liability of every kind, including all expenses of litigation,
court costs, and reasonable attorney's fees, based on a claim alleging that the
VAPs or any of the VAPs infringe upon a patent of any third party.
Any party seeking indemnification hereunder shall notify the other party
promptly of any claim or suit involving an indemnification claim under the
provisions of this paragraph. The notifying party shall grant the indemnifying
party a reasonable opportunity to control the defense of each such claim and
related settlement negotiations, and, provided the indemnifying party is taking
reasonable steps to defend or settle a claim, the notifying party agrees not to
settle such matter without the indemnifying party's prior written consent. If
the indemnifying party is taking reasonable steps to defend or settle a claim
and if the
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19
indemnifying party has obtained the notifying party's prior written consent
(which consent shall not be unreasonably or untimely withheld) to the attorneys
employed by the indemnifying party with respect to such claim, then if the
notifying party retains counsel regarding such claim, the notifying party will
bear the expense of such counsel and will not seek reimbursement under this
paragraph from the indemnifying party for such expense.
(d) General Liability/Product Liability Insurance. As of the Effective
Date, CMI will continue to maintain comprehensive general liability insurance in
the amount of $5,000,000, including coverage for products and completed
operations, written on an occurrence basis, during the term of this Agreement.
The liability insurance so maintained will include Horizon as an additional
insured, with respect to bodily injury or property damage liabilities assumed
under this contract, and contain an endorsement to endeavor to provide Horizon
with at least 30 days prior written notice of any cancellation, non-renewal, or
coverage reduction. This insurance coverage will survive termination of this
Agreement and will, in any event, provide coverage during the period any VAPs
supplied by CMI under the terms of this Agreement remain implanted in any living
patient. Horizon may demand a certificate of insurance at any time during the
period CMI is required to maintain coverage thereafter. In the event CMI fails
to provide Horizon with evidence of the liability insurance required to be
maintained pursuant to the provisions of this paragraph and the failure
continues for 10 days following CMI's receipt of a notice advising CMI of its
failure to provide such evidence, then at any time thereafter during the
pendency of such failure, Horizon will have the option in its sole discretion to
terminate this Agreement or to purchase the insurance at CMI's expense.
(e) General Liability/Product Liability Insurance. As of the Effective
Date, Horizon will continue to maintain comprehensive general liability
insurance in the amount of $1,000,000, including coverage for products and
completed operations, written on an occurrence basis, during the term of this
Agreement. The liability insurance so maintained will include CMI as an
additional insured, with respect to bodily injury or property damage liabilities
assumed under this contract, and contain an endorsement to endeavor to provide
CMI with at least 30 days prior written notice of any cancellation, non-renewal,
or coverage reduction. This insurance coverage will survive termination of this
Agreement and will, in any event, provide coverage during the period any VAPs
supplied by Horizon under the terms of this Agreement remain implanted in any
living patient. CMI may demand a certificate of insurance at any time during the
term of this Agreement and during the period Horizon is required to maintain
coverage thereafter. In the event Horizon fails to provide CMI with evidence of
the liability insurance required to be maintained pursuant to the provisions of
this paragraph and the failure continues for 10 days following Horizon's receipt
of a notice advising Horizon of its failure to
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20
provide such evidence, then at any time thereafter during the pendency of such
failure, CMI will have the option in its sole discretion to terminate this
Agreement or to purchase the insurance at Horizon's expense.
13. Confidential or Proprietary Information of CMI. Any information to be
disclosed by CMI to Horizon pursuant to this Agreement, and which is deemed by
CMI to constitute confidential or proprietary information must be disclosed in
writing and conspicuously labeled as confidential information or with words of
similar impact. Subject to paragraph 14(d) below, any such confidential
information which is initially disclosed orally must be noted at the outset by
CMI as confidential information, and must be reduced to writing and submitted to
Horizon within 15 business days after the original oral disclosure.
All information, inventions and improvements relating to pyrocarbon or
coatings developed by CMI will be the property of CMI.
Horizon will hold all such information in strict confidence and will use it
solely for the purposes for which it is supplied under this Agreement. Horizon
will not disclose such information to any third party or use same for the
benefit of any third party. The foregoing restrictions will not apply to any
information which
(i) is not disclosed and labeled as provided in the first paragraph of this
Section (except orally disclosed information for the first 15 business days
thereafter, pending the submission of same in writing) or
(ii) known to Horizon prior to receipt thereof from CMI or
(iii) of public knowledge without breach by Horizon of its obligations
hereunder or
(iv) rightfully received by Horizon from a third party without restriction
on disclosure or use or
(v) disclosed by CMI to a third party without restriction on disclosure or
use or
(vi) independently developed by personnel of Horizon who have not had
access to or knowledge of the contents of CMI's disclosure or
(vii) disclosed after receiving the written consent therefor of an
authorized officer of CMI;
provided that in events (ii), (iii), (iv), (v), (vi) and (vii), Horizon can
demonstrate same to the reasonable satisfaction of CMI.
-8-
21
The restrictions on use and disclosure of information under this Section
will survive the expiration or termination of this Agreement.
13A. Confidential or Proprietary Information of Horizon. Any information to
be disclosed by Horizon to CMI pursuant to this Agreement, and which is deemed
by Horizon to constitute confidential or proprietary information must be
disclosed in writing and conspicuously labelled as confidential information or
with words of similar impact. Subject to paragraph 14(d) below, any such
confidential information which is initially disclosed orally must be noted at
the outset by Horizon as confidential information, and must be reduced in
writing and submitted to CMI within 15 business days after the original oral
disclosure.
CMI will hold all such information in strict confidence and will use it
solely for the purposes for which it is supplied under this Agreement. CMI will
not disclose such information to any third party or use same for the benefit of
any third party. The foregoing restrictions will not apply to any information
which
(i) is not disclosed and labelled as provided in the first paragraph of
this section (except orally disclosed information for the first fifteen
business days thereafter, pending the submission of same in writing) or
(ii) known to CMI prior to receipt thereof from Horizon or
(iii) of public knowledge without breach by CMI of its obligations
hereunder or
(iv) rightfully received by CMI from a third party without restriction on
disclosure or use or
(v) disclosed by Horizon to a third party without restriction on
disclosure or use or
(vi) independently developed by personnel of CMI who have not had access to
or knowledge of the contents of Horizon's disclosure or
(vii) disclosed after receiving the written consent therefor of an
authorized officer of Horizon;
provided that in the events (ii), (iii), (iv), (v), (vi) and (vii), CMI can
demonstrate same to the reasonable satisfaction of Horizon.
The restrictions on use and disclosures of information under this Section
will survive the expiration or termination of this
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22
Agreement.
14. Termination. This Agreement will become effective on the date first
above written and, unless earlier terminated as provided in this Agreement, will
continue in effect for a term of 10 years from the Effective Date, at the end of
which this Agreement will automatically renew for another additional term of 5
years unless either party gives the other written notice 90 days before
expiration. However, the obligation to purchase the minimum quantities described
in paragraph 4 will not begin until the Effective Date.
(a) CMI may terminate this Agreement immediately if Horizon infringes any
patent of CMI by making or having made any product or using any method covered
by such patent in or in preparation for commercial sale of vascular access
ports. CMI may terminate this Agreement upon 90 days written notice to Horizon
if Horizon fails to make any payment promptly when due or if Horizon is in
default of any of its material obligations under this Agreement, and such
default in either of such cases is not cured within 90 days after Horizon
receives notice. CMI's remedies will not be deemed exclusive, but are in
addition to any and all other remedies available at law or under this Agreement.
(b) Horizon may terminate this Agreement upon 90 days written notice to CMI
if CMI defaults on any of its material obligations hereunder and such default is
not cured within 90 days after CMI receives notice. Horizon's remedies will not
be deemed exclusive, but are in addition to any and all other remedies available
at law or under this Agreement.
(c) If Horizon terminates this Agreement for any reason other than the
default of CMI, Horizon will purchase all VAPs conforming to the Specifications
in CMI's inventory at the time of such termination (both completed inventory and
inventory when completed from work-in-process and raw materials existing at the
time of such notice of termination) but not exceeding the then current orders of
Horizon under the provisions of Section 5(a) hereof. The obligations of this
paragraph 14(c) will be in addition to and not in lieu of CMI's other legal,
contractual and equitable remedies, if any.
(d) Sections 8, 10, 11, 12, 13 and 13A will survive termination or
expiration of this Agreement and remain in effect for the respective periods
specified therein, or, if no period is specified, for a period which is
reasonable in the circumstances.
-10-
23
15. Quality Assurance.
CMI's Quality Assurance Manual establishes the quality control system to be
employed throughout the performance of this Agreement. A copy of this
manual--with CMI's proprietary information, if any, deleted--will be made
available to Horizon.
16. Assignment. Neither party will have the right to assign this Agreement,
in whole or in part, to any third party without the prior written consent of a
duly authorized officer of the other party, which consent will not be
unreasonably withheld. An attempted assignment without consent will be grounds
for termination of this Agreement by such other party, without thereby affecting
any rights or remedies it may have under this Agreement or at law.
Notwithstanding the foregoing, CMI may freely assign this Agreement to any
company controlling, controlled by or under common control with CMI or
succeeding to the entire business of CMI. Notwithstanding the above, Horizon may
freely assign this Agreement to any entity succeeding to the entire VAP business
of Horizon. This Agreement will be binding upon and inure to the benefit of the
parties and their successors and permitted assigns.
17. General.
(a) Waivers. No waiver of any right or remedy hereunder will be effective
unless based upon a writing signed by the party against whom it is sought to be
enforced.
(b) Notices. All notices required or permitted under this Agreement must be
made in writing and delivered in person or by certified or registered mail,
postage prepaid, addressed to the attention of the President of the other party
at the respective address first written above, or such other address as may be
given by notice.
(c) Severability. If any provision of this Agreement is declared invalid or
unenforceable by a court of competent jurisdiction, such provision will be
severed from this Agreement and the remaining provisions will be unaffected
thereby. The parties will promptly meet and negotiate a substitute provision
meeting as closely as possible the intent of the invalid or unenforceable
provision and, with reasonable precision, avoiding the defects of the original
provision.
(d) Entire Agreement. Except for the Development Agreement and Equity
Agreement of even date herewith, this Agreement constitutes the entire agreement
and understanding between the parties in respect of the subject matter of this
Agreement and supersedes all prior agreements, understandings, discussions and
communications between the parties respecting such subject matter. No
modification of this Agreement will be effective unless made in writing signed
by a duly authorized officer of each party, except
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24
as otherwise expressly permitted herein. Nothing in this Agreement will limit
the scope of subsequent written agreements, signed by both parties, related to
nondisclosure of confidential information. In the event of a conflict between
this Agreement and the terms and conditions contained in the Specifications or
in Horizon's purchase orders, the terms of this Agreement will control.
(e) Governing Law. This Agreement has been entered into under the laws of
the State of Texas and will be governed by and construed in accordance with
those laws.
(f) Sale of Port Products to Third Parties. CMI will not sell the VAP
products (as described in the Specifications) to any other entity.
Executed by the parties as of the day and year first written above.
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ Xxxxxxxx X. Xxxx
-------------------------------
Typed Name: /s/ Xxxxxxxx X. Xxxx
------------------------
Title: Chief Executive Officer
----------------------------
CARBOMEDICS, INC.
By: /s/ Xxxxx Xxxxxxx
-------------------------------
Typed Name: Xxxxx Xxxxxxx
-----------------------
Title: President
----------------------------
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25
EXHIBIT A
TO
O.E.M. SUPPLY CONTRACT
The specifications are to be prepared, approved by Horizon Medical
Products, Inc. and set forth below in this Exhibit A.
26
EXHIBIT B
TO
O.E.M. SUPPLY CONTRACT
Product Introducer Price
------- ---------- -----
Single Lumen Titanium Without $135
detached
pre-attached
Single Lumen Titanium With $155
detached
pre-attached
Double Lumen Titanium Without $200
detached
pre-attached
Double Lumen Titanium With $220
detached
pre-attached
Pediatric Single Lumen Titanium Without $140
detached
pre-attached
Pediatric Single Lumen Titanium With $160
detached
pre-attached
Single Lumen Polysulphone Without $120
detached
pre-attached
Single Lumen Polysulphone With $140
detached
pre-attached
Double Lumen Polysulphone Without $175
detached
pre-attached
Double Lumen Polysulphone With $195
detached
pre-attached
27
Sample Calculation for Determining the Annual Price Adjustment for Vascular
Access Ports (VAPS)
For the purpose of this example, the annual period ends in June 1992.
Assume the price of the VAP was $175 for the period 7/91 through 6/92.
Employment Cost Index for Private Industry Workers, table 5, for the 12 month
period ending 6/92 shows the percent change was 3.7%.
Producer Price Index Values from table 1 are:
25% of the unadjusted percent change of Intermediate Material
Supplies and Components = 25% x 0.9% = 0.225%.
50% of the unadjusted percent change of Finished Energy Goods
= 50% x 3.1% = 1.55%.
The total adjustment would then be 3.7% + .225% + 1.55% = 5.475%. To calculate
the new price, multiply 1.05475 x $175 = $184.58.
This price would be effective beginning 7/92 through 6/93.
EXHIBIT C
to
O.E.M. SUPPLY CONTRACT
28
Table 5. COMPENSATION (NOT SEASONALLY ADJUSTED): Employment Cost Index for total
compensation, private industry workers, by industry and occupational
group
Percent Changes for
Series Indexes ---------------------------------------------
(June 1989 = 100) 3 Months Ended 12 Months Ended
--------------------- --------------------- ---------------------
Jun. Mar. Jun. Jun. Mar. Jun. Jun. Mar. Jun.
1991 1992 1992 1991 1992 1992 1991 1992 1992
----- ----- ----- ----- ----- ----- ----- ----- -----
Private industry workers ................................... 109.8 113.1 113.9 1.2 1.3 0.7 4.4 4.2 3.7
Excluding sales ..................................... 109.8 113.3 114.1 1.1 1.2 .7 4.5 4.3 3.9
White-collar occupations ................................ 110.3 113.4 114.2 1.2 1.1 .7 4.5 4.0 3.5
Excluding sales ..................................... 110.4 113.8 114.6 1.1 1.0 .7 4.7 4.2 3.8
Professional specialty and technical .................. 111.1 115.3 116.4 .9 1.2 1.0 5.0 4.7 4.8
Executive, administrative, and managerial ............. 110.3 112.7 113.1 1.3 .4 .4 4.7 3.5 2.5
Sales ................................................. 109.8 111.6 112.2 1.7 1.8 .5 4.0 3.3 2.2
Administrative support, including clerical ............ 109.9 113.6 114.4 1.2 1.5 .7 4.4 4.6 4.1
Blue-collar occupations ................................. 109.0 112.5 113.4 1.0 1.4 .8 4.1 4.3 4.0
Precision production, craft, and repair ............... 109.2 112.2 113.1 1.1 1.1 .8 4.3 3.9 3.6
Machine operators, assemblers,
and inspectors .................................... 109.4 113.9 114.6 1.0 2.1 .6 4.2 5.2 4.8
Transportation and material moving .................... 107.6 110.4 111.4 1.2 1.3 .9 3.2 3.9 3.5
Handlers, equipment cleaners,
helpers, and laborers .............................. 109.3 112.6 113.4 1.1 1.1 .7 4.4 4.2 3.8
Service occupations ..................................... 109.9 113.5 114.2 1.5 1.0 .6 4.8 4.8 3.9
Production and nonsupervisory
occupations(4) ....................................... 109.6 113.0 113.8 1.1 1.3 .7 4.3 4.2 3.8
Goods-producing industries(1) .............................. 109.8 113.5 114.3 1.2 1.4 .7 4.4 4.6 4.1
Excluding sales occupations ......................... 109.8 113.4 114.1 1.3 1.4 .6 4.5 4.6 3.9
White-collar occupations .............................. 110.1 113.6 114.5 1.2 1.2 .8 4.6 4.4 4.0
Excluding sales ..................................... 110.0 113.2 113.9 1.4 .9 .6 4.6 4.3 3.5
Blue-collar occupations ............................... 109.7 113.4 114.1 1.2 1.6 .6 4.4 4.6 4.0
Service occupations ................................... 109.3 113.8 115.5 1.3 1.5 1.5 4.7 5.5 5.7
Construction ............................................ 108.5 110.6 111.7 1.0 .6 1.0 4.0 3.0 2.9
Manufacturing ........................................... 110.0 114.0 114.7 1.3 1.6 .6 4.5 5.0 4.3
White-collar occupations ............................ 110.2 113.6 114.6 1.3 1.1 .9 4.7 4.4 4.0
Excluding sales ................................... 109.9 113.0 113.8 1.5 .7 .7 4.6 4.3 3.5
Blue-collar occupations ............................. 109.8 114.2 114.8 1.2 2.0 .5 4.4 5.3 4.6
Service occupations ................................. 109.2 113.9 115.4 1.3 1.6 1.3 4.5 5.7 5.7
Durables .............................................. 109.9 114.1 114.8 1.3 1.8 .6 4.6 5.2 4.5
Nondurables ........................................... 110.1 113.8 114.7 1.2 1.3 .8 4.4 4.6 4.2
----- ----- ----- ----- ----- ----- ----- ----- -----
29
Table 1. Producer price indexes and percentage changes by stage of processing
(1982 = 100)
Unadjusted
percent
Relative change to Seasonally adjusted
Grouping importance Unadjusted index June 1992 from: percent change from:
----------------------- --------------- -------------------------
Dec. Feb. May June June May Mar. to Apr. to May to
1991(1) 1992(2) 1992(2) 0000(0) 0000 0000 Apr. May June
----------------------------------------------------- ------- ------- ------- ------- ------ ------- ------- ------- ------
Finished goods ...................................... 100.000 122.1 123.1 123.7 1.5 0.5 0.2 0.4 0.2
Finished consumer goods ........................... 75.255 120.3 121.6 122.5 1.5 .7 .2 .3 .4
Finished consumer foods ......................... 21.933 123.4 122.9 123.0 -1.8 .1 -.3 -.4 .2
Crude ......................................... 1.301 118.7 98.6 00.0 -00.0 -0.0 -0.0 -00.0 1.9
Processed ..................................... 20.632 123.7 124.7 125.0 .2 .2 .2 .2 .2
Finished consumer goods, excluding foods ........ 53.322 118.8 120.7 122.0 2.9 1.1 .3 .7 .4
Nondurable goods less foods ................... 36.041 114.6 117.4 119.2 3.5 1.5 .5 1.0 .7
Durable goods ................................. 17.281 125.5 125.5 125.4 1.9 -.1 .2 -.1 -.1
Capital equipment ................................. 24.745 128.7 129.0 128.9 1.9 -.1 .2 .5 -.1
Manufacturing industries ........................ 5.935 129.0 129.2 129.1 1.0 -.1 .1 .2 -.1
Nonmanufacturing industries ..................... 18.810 123.5 128.9 128.3 2.2 -.1 .2 .7 -.1
Intermediate materials, supplies, and components .... 100.000 113.5 114.4 115.3 .9 .8 .1 .4 .7
Materials and components for manufacturing ........ 49.257 117.4 117.3 118.0 .2 .2 .1 .2 .3
Materials for food manufacturing ................ 3.349 113.5 114.6 115.3 -.1 .6 0 .2 .4
Materials for nondurable manufacturing .......... 15.250 114.6 115.0 115.6 -.3 .5 .2 .3 .9
Materials for durable manufacturing ............. 11.089 116.6 117.3 117.4 .2 .1 -.2 .2 .4
Components for manufacturing(3) ................. 19.569 121.6 121.7 121.7 .5 0 0 0 0
Materials and components for construction ......... 13.462 125.9 126.9 126.6 1.1 -.2 0 0 0
Processed fuels and lubricants .................... 13.550 80.6 83.6 87.7 3.2 4.9 .6 2.4 3.1
Manufacturing industries ........................ 5.573 83.7 86.6 90.1 2.2 4.0 .6 2.0 2.2
Nonmanufacturing industries ..................... 7.977 78.5 81.6 86.1 3.7 5.5 .6 2.8 3.8
Containers ........................................ 3.563 127.7 127.7 127.6 -.1 -.1 0 0 0
Supplies .......................................... 20.168 122.1 122.6 122.7 1.1 .1 .1 .1 .1
Manufacturing industries ........................ 7.436 125.0 125.6 125.7 1.0 .1 .2 .2 .2
Nonmanufacturing industries ..................... 12.731 120.7 121.1 121.1 1.0 0 0 0 0
Feeds ......................................... 1.343 103.6 103.7 104.4 4.3 .7 -1.1 -.7 .4
Other supplies ................................ 11.388 123.1 123.6 123.5 .7 -.1 .1 0 .1
Crude materials for further processing .............. 100.000 98.6 101.0 101.5 1.7 .5 .5 1.4 1.3
Foodstuffs and feedstuffs ......................... 41.228 106.0 108.2 107.3 -.1 -.8 -1.4 .9 .8
Nonfood materials ................................. 38.772 90.1 92.6 93.9 2.6 1.4 1.3 2.0 1.6
Nonfood materials except fuel(4) ................ 38.295 89.7 95.1 98.3 6.9 3.9 6.9 1.4 5.2
Manufacturing(4) .............................. 34.018 83.7 89.0 92.3 6.7 4.3 4.7 2.9 4.5
Construction .................................. 4.278 155.5 160.5 161.1 9.3 .5 1.3 1.3 .6
Crude fuel(3)(5) ................................ 20.476 82.6 79.7 76.8 -6.9 -3.6 -3.2 .5 -3.6
Manufacturing industries(3) ................... 4.374 82.0 79.5 76.9 -6.3 -3.3 -2.7 .5 -3.3
Nonmanufacturing industries(3) ................ 16.102 83.9 80.7 77.5 -7.0 -3.6 -3.2 .4 -3.6
Special groupings
Finished goods, excluding foods .....................(6) 78.067 121.6 123.0 123.9 2.6 .7 .2 .7 .2
Intermediate materials less foods and feeds .........(7) 95.308 113.6 114.6 115.5 .9 .8 .4 .4 .7
Intermediate foods and feeds ........................(7) 4.692 110.7 111.4 112.2 1.3 .7 -.3 -.1 .4
Crude materials less agricultural products(4)(8) ....(9) 57.096 89.7 92.2 93.5 3.2 1.4 2.0 2.0 1.5
Finished energy goods ...............................(6) 13.831 74.3 77.6 80.8 3.1 4.1 .5 .9 2.3
Finished goods less energy ..........................(6) 86.169 130.6 131.0 131.0 1.3 0 .2 .3 -.1
Finished consumer goods less energy .................(6) 61.424 131.3 131.7 131.7 1.1 0 .2 .2 -.9
Finished goods less foods and energy ................(6) 64.236 133.5 134.2 134.1 2.5 -.1 .4 .6 -.1
Finished consumer goods less foods and energy .......(6) 39.491 136.4 137.3 137.3 3.0 0 .4 .7 -.3
Consumer nondurable goods less foods and energy .....(6) 22.210 144.4 146.1 146.2 3.9 .1 .6 1.1 -.4
Intermediate energy goods ...........................(7) 13.654 80.4 83.4 87.4 3.1 4.8 .5 2.4 3.1
Intermediate materials less energy ..................(7) 86.346 120.7 121.2 121.4 .6 .2 0 .1 .2
Intermediate materials less foods and energy ........(7) 81.654 121.4 121.9 121.9 .4 0 0 .1 .2
Crude energy materials(3)(4) ........................(9) 40.028 75.5 77.4 79.2 2.7 2.3 2.7 2.5 2.3
Crude materials less energy .........................(9) 59.972 110.5 113.2 112.4 .4 -.7 -.9 .8 .5
Crude nonfood materials less energy(5) ..............(9) 18.744 125.2 129.2 128.8 1.6 -.3 .2 .9 .2
------- ------- ------- ------- ------ ------- ------- ------- ------
--------------------
(1) Comprehensive relative importance figures are computed once each year
in December.
(2) Data for Feb. 1992 have been revised to reflect the availability of
late reports and corrections by respondents. All data are subject to
revision 4 months after original publication.
(3) Not seasonally adjusted.
(4) Includes crude petroleum.
(5) Excludes crude petroleum.
(6) Percent of total finished goods.
(7) Percent of total intermediate materials.
(8) Formerly titled "Crude materials for further processing, excluding
crude foodstuffs and feedstuffs, plant and animal fibers, oilseeds,
and leaf tobacco."
(9) Percent of total crude materials.
30
DEVELOPMENT AGREEMENT
THIS AGREEMENT made as of February 17th, 1993 by and between CARBOMEDICS,
INC., a Delaware corporation, having a place of business at 0000 Xxxx Xxxxxxxx
Xxxx, Xxxxxx, Xxxxx 00000 (hereinafter referred to as "CMI"), and HORIZON
MEDICAL PRODUCTS, INC., a Georgia corporation, with a place of business at
Seven North Parkway Square, 0000 Xxxxxxxxx Xxxxxxx X.X., Xxxxxxx, Xxxxxxx 00000
("Horizon").
WHEREAS CMI desires to develop and manufacture a vascular access port (the
"VAP") upon the terms and conditions set forth herein and in the OEM Supply
Contract of even date herewith between CMI and Horizon (the "Supply Contract")
and
WHEREAS Horizon desires to complete testing, design and development and
have the VAP approved and manufactured for commercial production and for sale
by Horizon and
WHEREAS CMI is unwilling to incur the expense of such research and
development without the additional consideration of a long-term supply contract
to manufacture the VAP in commercial quantities,
NOW, THEREFORE, in consideration of the premises and in reliance upon the
mutual covenants and agreements hereinafter set forth, the parties agree as
follows:
1. Purposes of Agreement. The purpose of this Agreement is to establish
a program and schedule to complete the design, testing and FDA approval of five
models of the VAP, so that commercial distribution can begin (hereinafter
referred to as the "Program").
2. Program Schedule. Work on the Program will be scheduled for
completion as set forth in the schedule in Exhibit A attached to and made part
of this Agreement (the "Program Schedule"). CMI will use all reasonable efforts
to meet the deadlines set forth in the Program Schedule but does not guaranty
that such deadlines can be met because the Program Schedule assumes that there
are no unforeseen technical difficulties and that all current assumptions
related to the design of the VAP are proven correct. The Program Schedule does
not allow for redesigns or reiteration of any step. For purposes of this
section 2, the term "unforeseen technical difficulties" will include but not be
limited to difficulties such as failure in any FDA- or CMI-recommended test.
1
31
3. Development Costs.
3.1 Payments. Horizon will pay CMI for the development work performed
under this Agreement according to the following schedule:
3.1.1 $15,000 upon execution of this Agreement.
3.1.2 $7941.17 per month for 17 months beginning 30 days after execution
of this Agreement.
3.1.3 An additional $20 per VAP for the first 37,500 VAPs sold to Horizon
after the Effective Date of the Supply Agreement.
3.1.4 If, through no fault of CMI, 510K approval is delayed, as defined
herein, then Horizon will pay CMI $25,000 per month for 30 months or until
510K approval is received. For purposes of this paragraph, a delay (and
the obligation to pay CMI) begins on the first day following the end of
the 90-day time period for the FDA to act on answers submitted by CMI in
response to FDA questions. The delay will be suspended until the end of
similar 90-day periods if the FDA submits additional questions. Any
amounts paid under this section 3.1.4 will reduce the number of VAPs
bearing the $20 charge identified in section 3.1.3 so that the total
payments under this Article 3.1 equal $900,000. Notwithstanding the
foregoing, Horizon's obligations to pay CMI under this section 3.1.4 will
not begin until the later of 18 months following the date of execution of
this Agreement or 510K approval is delayed as defined above.
Any amounts due under this Agreement that are outstanding more than 10
days beyond the date due will accrue interest at the highest rate allowed by
law not to exceed twelve percent (12%) per year.
3.2 Progress Reviews. The parties will undertake a joint progress review
as described in the Program Schedule or at such other times as may be mutually
agreed to at CMI's facility.
4. Changes in Specifications. During the term of this Agreement Horizon
will have the right, exercisable at any time or from time to time, to make any
changes(s) in the VAP drawings or specifications (the "Specifications"). If
any such change requires CMI to incur additional expenses, CMI and Horizon will
agree in advance on such additional expenses and Horizon agrees to reimburse
CMI for such expenses.
2
32
5. Tooling and Fixtures. All tooling and fixtures which are designed and
built using funds provided by Horizon will be the exclusive property of CMI.
6. Confidentiality and Proprietary Rights.
6.1 Confidential Information of CMI. All knowledge and information which
Horizon may acquire from CMI pursuant to the terms of this Agreement respecting
methods, systems, trade secrets and other private matters (hereinafter referred
to as the "Information"), will for all time and for all purposes be regarded as
strictly confidential and held in trust solely for the benefit and use of CMI,
and it is agreed that the use or public disclosure of any such Information by
Horizon would be wrongful and would cause irreparable injury to CMI. In
addition, all CMI's special tooling, fixtures, data, manufacturing techniques,
processes and research and development relating to the manufacture, inspection
and testing of the VAPs will be the sole property of CMI.
6.2 Confidential Information of Horizon. All Horizon's proprietary
information, inventions, improvements, technology, research and development
will be the sole property of Horizon. Horizon will acquire no interest in CMI's
manufacturing processes or other related information as a result of the
execution and performance of this Agreement.
6.3 Procedures for Maintaining Confidentiality. Each party agrees to
maintain the confidentiality of any confidential information of the other party
and to that end agrees as follows:
(a) Not to make any use whatsoever of any confidential information except
for the purpose for which it is supplied, either for itself or any other
person, firm or corporation;
(b) Not to reveal any confidential information to third parties, without
the prior written approval of the other party;
(c) To keep all confidential information strictly secret and confidential
and to that end, without limiting the generality of the foregoing, to
cause all written materials relating to or containing any confidential
information to be plainly marked to indicate the secret and confidential
nature thereof, and to prevent unauthorized use or reproduction thereof;
(d) To maintain such confidential information in controlled files
accessible only to authorized personnel;
3
33
(e) To limit access to said confidential information to those of its
employees with a need to know such confidential information, which
employees shall first have executed a confidentiality agreement which
requires, among other things, that such employee will maintain the
secrecy of all confidential customer and/or supplier information which
such employee may obtain;
(f) In the event a party receives a request to disclose all or any part
of any confidential information under the terms of a valid and effective
subpoena or order issued by a court of competent jurisdiction, such party
agrees to (i) notify the other party immediately of the existence, terms
and circumstances surrounding such request; (ii) consult with the other
party on the advisability of taking legally available steps to resist or
narrow such request, and (iii) if disclosure of such confidential
information is required, exercise its best efforts to obtain an order or
other reliable assurance that confidential treatment will be accorded to
such portion of the confidential information as must be produced or
disclosed.
6.4 Exceptions. The foregoing restrictions will not apply to any
confidential information which is (i) known prior to receipt thereof from the
other party as evidenced by written records kept in the ordinary course of
business, or (ii) of public knowledge without breach by the party of its
obligations hereunder, or (iii) rightfully received from a third party without
restriction on disclosure or use, or (iv) disclosed by the other party to a
third party without restriction on disclosure or use, or (v) independently
developed by personnel of a party who have not had access to or knowledge of
the contents of the other party's disclosure, or (vi) disclosed after receiving
the written consent therefor of an authorized officer of the other party.
7. Excusable Delay or Failure to Perform. Neither party will be liable
for a delay in performance of or failure to perform an obligation under this
Agreement (except an obligation to make payment promptly when due), if and to
the extent such delay or failure is attributable to any cause beyond the
reasonable control of such party to prevent. Such causes may include, but are
not limited to act of God, act of government (including the Food and Drug
Administration), war or related actions, civil insurrection, riot, sabotage,
strike, epidemic, fire, flood, windstorm, or a failure of suppliers,
subcontractors or carriers, or inability to obtain required materials or
qualified labor, which are reasonably beyond the control of the defaulting
party to prevent. The party affected will give prompt notice of the cause to
the other party, and will resume performance with reasonable diligence upon
cessation of the cause of the delay or failure.
4
34
The causes enumerated in this section 7 will suspend the obligation of
Horizon listed in section 3.1.4. However, a delay as defined in section 3.1.4
will not suspend that obligation.
8. CMI's Representations and Warranties.
8.1 Performance of Obligations. CMI hereby represents and warrants to
Horizon that CMI will faithfully perform all of the obligations, covenants and
agreements on its part to be performed as set forth in this Agreement.
8.2 Disclaimer of Warranties. The parties acknowledge and agree that VAPs
manufactured under this Agreement will be for development purposes only and not
manufactured in commercial quantities. Therefore CMI makes no warranty of any
kind. CMI EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES WITH
RESPECT TO THE VAP, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF FITNESS FOR
A PARTICULAR PURPOSE AND MERCHANTABILITY.
9. Horizon's Representations and Warranties. Horizon will faithfully and
fully perform all of the obligations, covenants and agreements on its part to
be performed as set forth in this Agreement.
10. Limitation of Liability and Indemnity.
(a) Limitation on CMI's Responsibility. Except as provided in paragraph
(c) below, CMI will not be liable or responsible for direct, incidental,
consequential and/or special damages arising out of use or implantation of VAPs
supplied hereunder including, but not limited to, damage to property of Horizon
or of other persons, or for injury to or death of any person.
(b) Horizon's Responsibility. CMI will have no control over the uses to
which the VAPs will be devoted, or over the circumstances of their use,
storage, handling, distribution or application. Except for the indemnification
by CMI provided in paragraph (c) below, Horizon will assume full responsibility
with respect to the use of any VAP or information furnished by Horizon
hereunder, and CMI assumes no liabilities of any kind with respect to the use
by Horizon or any third party of such VAPs or information.
(c) Indemnification.
CMI agrees, at its own expense, to defend, indemnify and hold harmless
Horizon, its officers, agents and employees from and against any and all
claims, losses, damages, causes of action, suits and liability of every kind,
including all expenses
5
35
of litigation, court costs and reasonable attorney's fees, for injury to or
death of any person or for damage to any property, arising from or out of or in
connection with the failure of any VAP to conform to the Specifications or for
any VAP that is not free from defects in material or workmanship.
Horizon agrees, at its own expense, to defend, indemnify, and hold
harmless CMI, its officers, agents and employees from and against any and all
claims, losses, damages, causes of action, suits and liability of every kind,
including all expenses of litigation, court costs and reasonable attorney's
fees, for injury to or death of any person or for damage to any property,
arising from or out of or in connection with Horizon's marketing, sale or
distribution of any VAP or Horizon's participation in the implantation of any
VAP or any defect in the Specifications, including any defect in the
Specifications where the negligence of CMI or its employees or agents caused
such defect; provided further, that any supplier that furnished materials or
products to CMI for the VAPs shall not be entitled to indemnification under
this paragraph.
Any party seeking indemnification hereunder shall notify the other party
promptly of any claim or suit involving an indemnification claim under the
provisions of this paragraph. The notifying party shall grant the indemnifying
party a reasonable opportunity to control the defense of each such claim and
related settlement negotiations, and, provided the indemnifying party is taking
reasonable steps to defend or settle a claim, the notifying party agrees not to
settle such matter without the indemnifying party's prior written consent. If
the indemnifying party is taking reasonable steps to defend or settle a claim
and if the indemnifying party has obtained the notifying party's prior written
consent (which consent shall not be unreasonably or untimely withheld) to the
attorneys employed by the indemnifying party with respect to such claim, then
if the notifying party retains counsel regarding such claim, the notifying
party will bear the expense of such counsel and will not seek reimbursement
under this paragraph from the indemnifying party for such expense.
(d) General Liability/Product Liability Insurance. As of the Effective
Date, CMI will continue to maintain comprehensive general liability insurance,
including coverage for products and completed operations, written on an
occurrence basis, during the term of this Agreement. The liability insurance so
maintained will include Horizon as an additional insured, and contain an
endorsement to provide Horizon with at least 30 days prior written notice of
any cancellation, non-renewal, or coverage reduction. This insurance coverage
will survive termination of this Agreement and will, in any event, provide
coverage during the period any VAPs supplied by CMI under the terms of this
6
36
Agreement remain implanted in any living patient. Horizon may demand evidence
of coverage at any time during the term of this Agreement and during the period
CMI is required to maintain coverage thereafter. In the event CMI fails to
provide Horizon with evidence of the liability insurance required to be
maintained pursuant to the provisions of this paragraph and the failure
continues for 10 days following CMI's receipt of a notice advising Horizon of
its failure to provide such evidence, then at any time thereafter during the
pendency of such failure, Horizon will have the option in its sole discretion
to terminate this Agreement or to purchase the insurance at CMI's expense.
(e) Product Liability Insurance. Horizon and its successors and assigns
will maintain general liability insurance, written on an occurrence basis,
during the term of this Agreement in the minimum amount of $1 million. The
product liability insurance so maintained will be written by an insurance
carrier acceptable to CMI, include CMI as an additional insured, and contain an
endorsement to provide CMI with at least 30 days prior written notice of any
cancellation, non-renewal, or coverage reduction. This insurance coverage will
survive termination of this Agreement and will, in any event, provide coverage
during the period any VAP supplied by CMI under the terms of this Agreement
remain implanted in any living patient. CMI may demand evidence of coverage at
any time during the term of this Agreement and during the period Horizon is
required to maintain coverage thereafter. In the event Horizon fails to provide
CMI with evidence of the product liability insurance required to be maintained
pursuant to the provisions of this paragraph and the failure continues for 10
business days following Horizon's receipt of a notice advising Horizon of its
failure to provide such evidence, then at any time thereafter during the
pendency of such failure, CMI will have the option in its sole discretion to
purchase the insurance required herein and xxxx Horizon for the entire cost of
such insurance or to terminate this Agreement.
10.2 Patent Infringement. Horizon will in no manner infringe any patent or
claim to patent held or asserted by CMI.
10.3 Use of Information Developed by CMI. The procedures, methodology,
processes, techniques and the like which may be developed or learned by CMI in
connection with its manufacture of VAPs for Horizon may be incorporated in
CMI's general manufacturing operations.
11. Infringement. Prior to completion of the Program Schedule, CMI will
obtain a patent search with respect to patents issued by the United States
Patent Office in order to determine whether the VAP infringes the claims of any
Letters Patent. CMI will review with Horizon the results of such patent search.
Should any action be commenced against Horizon alleging that the VAP
7
37
infringes the claims of any Letters Patent, Horizon will have the right but not
the obligation to defend and settle such action. If Horizon fails or refuses to
defend such action, CMI will have the right, but not the obligation to defend
and settle it. Regardless of which party, if either, defends such action, the
other party will cooperate with the defending party in any manner reasonably
requested for such defense and/or settlement, at the defending party's expense.
Should any action be commenced against CMI alleging that any of Horizon's
inventions (which terminology includes, without limitation, discoveries,
designs, methods, processes, products, conceptions, innovations, improvements,
enhancements and the like), whether patentable or not, infringe the claims of
any Letters Patent, Horizon will have the right but not the obligation to
defend and settle such action. CMI will cooperate with Horizon in any manner
reasonably requested for such defense and/or settlement, at Horizon's expense.
12. Term and Termination.
12.1 Term. The term of this Agreement will commence on the date first
written above and will continue in effect until completion of the Program or
termination under the provisions of this Section 12.
12.2 Termination by Horizon. Notwithstanding the foregoing, Horizon will
have the right to terminate this Agreement on 90 days prior written notice to
CMI, subject to the survival of all confidentiality and indemnification
provisions, if CMI defaults in performing any of its obligations under this
Agreement and such default continues for a period of 90 days after such notice.
Upon receipt of such notice, CMI will immediately stop work on the Program and
terminate all outstanding purchase orders for supplies and/or services, and
take all reasonable steps necessary to eliminate or reduce any further costs
allocable to the Program.
12.3 Termination by CMI. If payment to CMI is in arrears for 60 days after
written notice of default to Horizon, or if Horizon defaults in performing any
of the other provisions of this Agreement and such default continues for a
period of 60 days after written notice to Horizon, or if Horizon is adjudicated
bankrupt or becomes insolvent, or enters into a composition with creditors, or
if a receiver is appointed, then CMI will have the right to terminate this
Agreement immediately upon written notice to Horizon, subject to the survival
of all confidentiality and indemnification provisions hereof.
8
38
12.4 Remedies of CMI. If Horizon terminates this Agreement other than due
to the default of CMI as described in Section 12.2 or if CMI terminates this
Agreement as provided in Section 12.3, then the following will apply:
12.4.1 The Effective Date of the Supply Agreement will be accelerated to
the date of such termination and its provisions will be in full force and
effect.
12.4.2 Except as provided in section 12.4.3 below, all work product,
including regulatory submissions, performed by CMI under this Agreement
and all materials obtained in connection with this Agreement will become
the property of CMI.
12.4.3 Horizon will make all payments to CMI described in Article 3 which
have not been paid at the time of termination on a percentage of
completion basis according to the Project Schedule. Upon receipt of such
payment, CMI will furnish Horizon, and Horizon may freely use, copies of
all designs, drawings, and regulatory submissions for the VAP and all
materials and VAPs for which payment has been received.
12.5 Remedies for Horizon. If CMI terminates this Agreement other than due
to the default of Horizon as described in section 12.3 or if Horizon terminates
this Agreement as provided in section 12.2, then the following will apply:
12.5.1 Horizon will receive from CMI all payments made by Horizon under
Article 3 which have been paid at the time of termination and all work
product, including the 510(K) submission, and VAPs for which payment has
been received will remain the property of Horizon. Horizon will have the
right to pursue any other remedy available to Horizon under law, including
the right to lost profits, not to exceed 30 months profit following the
date of such termination.
13. Relationship of Parties. The relationship between CMI and Horizon as
established by this Agreement is that of independent contractors. As such,
subject to the provisions of this Agreement, CMI and Horizon each will conduct
their respective business at their own initiative, responsibility and expense,
and each will have no authority to incur any obligation on behalf of the other.
13.1 Hiring. The parties agree that during the term of this Agreement and
the term of the Supply Contract, and for a period of one year following
termination or expiration of this Agreement or the Supply Contract (whichever
occurs last), neither party will hire, or attempt to hire, any current
employee, agent
9
39
or sales representative of the other. This provision will survive the
termination or expiration of this Agreement and of the Supply Contract.
14. Miscellaneous.
14.1 Assignment. Neither party will have the right to assign this
Agreement, in whole or in part, to any third party without the prior written
consent of a duly authorized officer of the other party, which consent will not
be unreasonably withheld. An attempted assignment without consent will be
grounds for termination of this Agreement by such other party, without thereby
affecting any rights or remedies it may have under this Agreement or at law.
Notwithstanding the foregoing, CMI may freely assign this Agreement to any
company controlling, controlled by or under common control with CMI or
succeeding to the entire business of CMI. Notwithstanding the foregoing,
Horizon may freely assign this Agreement to any entity succeeding to the entire
VAP business of Horizon. This Agreement will be binding upon and inure to the
benefit of the parties and their successors and assigns to which such consent,
if necessary, is given.
14.2 Choice of Law. This Agreement has been entered into and will be
deemed made under the laws of the State of Texas and for all purposes will be
governed by, enforced under and construed in accordance with the laws of said
state, without regard to principles of conflicts of law.
14.3 Waiver and Delay. No delay or omission by any party in enforcing any
of the terms or conditions of this Agreement will be construed as a waiver
thereof, and no waiver of any conditions, breach or default will be construed
or determined to be a waiver of any other or subsequent conditions, breach or
default or a bar to the enforcement of such terms and conditions on any future
occasion.
14.4 Notices. All notices required or permitted hereunder, will be
effective upon their receipt and will be given in writing and delivered in
person or by certified or registered mail, postage prepaid, addressed to the
attention of the president of each respective company at the respective address
first above written or such other address as may be given by notice.
14.5 Captions and Headings. All section headings of this Agreement are for
convenience of reference only, and are not to be used for purposes of
interpretation of their respective provisions.
10
40
14.6 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under the
applicable law, but if such provision is or becomes invalid or unenforceable
under such law, then such provision will be reformed in order to conform to
applicable law. If such reformation is not possible, then such provision will
be ineffective only to the extent of such unenforceability or invalidity, and
the remainder of the Agreement will continue to be binding and in full force
and effect.
14.7 Merger. Except for the Supply Agreement and the Equity Agreement of
even date herewith, this Agreement constitutes the entire understanding of the
parties with respect to its subject matter and supersedes all prior agreements,
understandings, discussions, and communication between the parties respecting
such subject matter. No modification of this Agreement will be effective unless
made in writing and signed by a duly authorized officer of each party.
14.8 Benefit. This Agreement will be binding upon and will inure to the
benefit of the parties, their legal representatives, successors and assigns,
provided that the provisions with respect to assignment and delegation are
fully complied with.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HORIZON MEDICAL PRODUCTS, INC. CARBOMEDICS, INC.
By:/s/ By:/s/ Xxxxx Xxxxxxx
--------------------------------- ----------------------------------
Title: Chief Executive Officer Xxxxx Xxxxxxx, President
------------------------------
Printed Name:/s/ Xxxxxx X. Xxxx
-----------------------
11
41
Program Schedule
EXHIBIT A
42
PROGRAM SCHEDULE
Activity Responsibility Duration Starting Condition
-------- --------------- --------- ------------------
in Weeks
--------
1. Start of project. CMI/HORIZON contract start date sign contract
Single Lumen Metal and Plastic Port
2. Design Port and Packaging CMI 4 Completion of 1
3. Design Labeling and Literature HORIZON 4 Completion of 1
4. Design Review #1 CMI/HORIZON 1 Completion of 2 and 3
5. Prototype and Testing CMI 10 Completion of 4
6. Design Review #2 CMI/HORIZON 1 Completion of 5
7. Regulatory Submission CMI -- Completion of 6
8. Final Design Review - Metal Port CMI/HORIZON 1 Completion of 6 plus 38 weeks
9. Final Design Review - Plastic Port CMI/HORIZON 1 Completion of 6 plus 42 weeks
Double Lumen Metal Plastic Port
10. Design Port and Packaging CMI 4 Completion of 2
11. Design Labeling and Literature HORIZON 4 Completion of 1
12. Design Review #1 CMI/HORIZON 1 Completion of 10 and 11
13. Prototype and Testing CMI 12 Completion of 12
14. Design Review #2 CMI/HORIZON 1 Completion of 13
15. Regulatory Submission CMI -- Completion of 14
16. Final Design Review - Metal Port CMI/HORIZON 1 Completion of 14 plus 40 weeks
17 Final Design Review - Plastic Port CMI/HORIZON 1 Completion of 14 plus 42 weeks
Pediatric Single Lumen Metal Port
18. Design Port and Packaging CMI 4 Completion of 10 plus 4 weeks
19. Design Labeling and Literature HORIZON 4 Completion of 1
20. Design Review #1 CMI/HORIZON 1 Completion of 18 and 19
21. Prototype and Testing CMI 10 Completion of 20
22. Design Review #2 CMI/HORIZON 1 Completion of 21
23. Regulatory Submission CMI -- Completion of 22
24. Final Design Review CMI/HORIZON 1 Completion of 22 plus 38 weeks
2/11/93 Revision EXHIBIT A Page 1 of 2
43
2/11/93 Revision EXHIBIT A Page 2 of 2
Design Port and Packaging - During this phase CMI will design and prepare
engineering specifications for the items described in Exhibit B.
Design Labeling and Literature - During this phase Horizon will design all
labeling and literature including but, not limited to, instructions for use,
package and box labels, patient ID card, patient registration card and patient
information booklet. These designs will include camera ready artwork.
Design Review #1 - This will be the first formal design review at which CMI and
Horizon will present their respective design work. This review must be
completed and both parties must approve the designs prior to start of the
prototype and testing phase.
Prototype and Testing - During this phase CMI will fabricate prototypes of
sufficient quantities to complete the testing required for the regulatory
submission.
Design Review #2 - CMI will present a prototype of the product and the results
of testing. Approval of both parties is required prior to regulatory
submission.
Regulatory Submission - CMI is responsible for obtaining FDA 510(k) approval
for each product. The submission will meet all requirements of "Guidance on
510(k) Submissions for Implanted Infusion Ports" dated October 1990 issued from
Center for Devices and Radiological Health Office of Device Evaluation,
Division of Gastroenterology/Urology and General Use Devices. This document is
attached as Exhibit C. Horizon is responsible for providing to CMI all
information related to Labelling/Instructions for Use as defined in Section 2.
a. through 2. h. of Exhibit C a minimum of eight (8) weeks prior to the
scheduled submission date. If the FDA issues any new guidelines, prior to or
during the submission process for FDA 510(k) approval of the VAPs under the
"Guidance on 510(k) Submissions for Implanted Infusion Ports" referred to
above, CMI AND Horizon will negotiate in good faith an agreement relating to
the additional efforts by CMI that will be necessary for obtaining FDA 510(k)
approval for each product and the cost of such efforts. If agreement cannot be
reached by CMI and Horizon, then this Agreement will terminate. Horizon will
pay CMI for work product performed up to the date of such termination as
described in Section 12.4.3. The regulatory submission will be made in the
name of Horizon Medical Products. CMI will be the primary contact with the FDA
up to the point at which the 510(k) approval is granted. After each 510(k) is
granted CMI will only be responsible for providing product as defined in the
Supply agreement and will cease to provide any regulatory services not related
to a component supplier including but, not limited to, product complaints,
product tracking and patient registration.
Final Design Review - This will be the final review of all test data and
regulatory issues. Prior to this review all testing to validate the sterility
shelf life will have been completed. This review must be completed prior to
submittal of purchase orders under the terms of the Supply Agreement.
Depending on FDA actions 510(k) approval may not be obtained by this date.
44
EXHIBIT B PAGE 1 OF 3
SPECIFICATIONS
====================================================================================================================================
SINGLE LUMEN TITANIUM DOUBLE LUMEN TITANIUM PEDIATRIC
(1000 SERIES) (2000 SERIES) SINGLE LUMEN TITANIUM
(3000 SERIES)
------------------------------------------------------------------------------------------------------------------------------------
FINISHED PRODUCT
- WEIGHT 18 g Max. 40 g Max. TBD g Max.
- INT. VOL. 0.5 ml 0.5 ml each TBD ml
- NEEDLE GRIP Comparable to Competitors Comparable to Competitors Comparable to Competitors
- NEEDLE CLEARANCE Adequate for 20-22 GAUGE Adequate for 20-22 GAUGE Adequate for TBD Gauge
- DURABILITY 2,000 punc. with 22 GAUGE 2,000 punc. with 22 GAUGE 2,000 punc. with 22 GAUGE
- STABILITY 100 psi rating 100 psi rating 100 psi rating
-----------------------------------------------------------------------------------------------------------------------------------
PORT BODY
- MATERIAL TITANIUM TITANIUM TITANIUM
- DESIGN 2-PIECE 2-PIECE 2-PIECE
- SHAPE 65 DEGREE SIDE ANGLE 65 DEGREE SIDE ANGLE 65 DEGREE SIDE ANGLE
- HEIGHT 12.7 mm 12.7 mm TBD mm
- BASE DIMEN. 30 mm DIA. 30 mm X 50 mm TBD mm DIA.
- LOCATING RIM SMOOTH, ROUNDED SMOOTH, ROUNDED SMOOTH, ROUNDED
- SUTURE HOLES 5-SILICONE FILLED 5-SILICONE FILLED 5-SILICONE FILLED
-----------------------------------------------------------------------------------------------------------------------------------
SEPTUM SILICONE SILICONE SILICONE
- MATERIAL/DIAMETER 12.7 mm 12.7 mm each TBD mm
-----------------------------------------------------------------------------------------------------------------------------------
STUD - MATERIAL TITANIUM TITANIUM TITANIUM
-----------------------------------------------------------------------------------------------------------------------------------
CATHETER
- MATERIAL RADIOPAQUE SILICONE RADIOPAQUE SILICONE RADIOPAQUE SILICONE
- I.D. 1.0 mm; 1.4 mm; 1.6mm 1.2 mm each 1.0 mm
- INTRODUCER SIZE 7.0 Fr; 8.0 Fr; 10.0 Fr 12.0 Fr 7.0 Fr
- LENGTH 76 cmm; 70 cm; 70 cm TBD cm 76 cm
-----------------------------------------------------------------------------------------------------------------------------------
CONNECTOR POLYSULPHONE TITANIUM POLYSULPHONE
(DETACHED) LOCKING SLEEVE THREADED LOCKING SLEEVE
- MATERIAL/DESIGN
-----------------------------------------------------------------------------------------------------------------------------------
NEEDLE NON-CORING NON-CORING NON-CORING
NON-SILICONIZED NON-SILICONIZED NON-SILICONIZED
20 GAUGE, 1 INCH, S.S. 20 GAUGE, 1 INCH, S.S. 20 GAUGE, 1 INCH, S.S.
-----------------------------------------------------------------------------------------------------------------------------------
INTRODUCER KIT INTRODUCER DILATOR\SHEATH; INTRODUCER DILATOR\SHEATH; INTRODUCER DILATOR\SHEATH;
10 CC SYRINGE; "J" TIP GUIDE- 10 CC SYRINGE; "J" TIP GUIDE- 10 CC SYRINGE; "J" TIP GUIDE-
WIRE; INTRODUCER NEEDLE; WIRE; INTRODUCER NEEDLE; WIRE; INTRODUCER NEEDLE;
DOUBLE STERILE POUCH; DOUBLE STERILE POUCH; DOUBLE STERILE POUCH;
TBD YEAR SHELF LIFE TBD YEAR SHELF LIFE TBD YEAR SHELF LIFE
-----------------------------------------------------------------------------------------------------------------------------------
- PACKAGING-STERILE DOUBLE; HEAT SEALED; DOUBLE; HEAT SEALED; DOUBLE; HEAT SEALED;
(PORT, CATHETER, TYVEK LIDS; TBD YR. SHELF TYVEK LIDS; TBD YR. SHELF TYVEK LIDS; TBD YR. SHELF
NEEDLE & CONNECTOR) LIFE; 6 in. X 6.5 in. X 1 in. LIFE; 6 in. X 6.5 in. X 1 in. LIFE; 6 in. X 6.5 in. X 1 in.
- PACKAGING NON-STERILE FOAM CUSHIONED PLASTIC FOAM CUSHIONED PLASTIC FOAM CUSHIONED PLASTIC
w/o INTRODUCER 7 in. X 8.5 in. X 2 in. 7 in. X 8.5 in. X 2 in. 7 in. X 8.5 in. X 2 in.
with INTRODUCER 12 in. X 8.5 in. X 2.5 in. 12 in. X 8.5 in. X 2.5 in. 12 in. X 8.5 in. X 2.5 in.
====================================================================================================================================
====================================================================================================================================
SINGLE LUMEN DOUBLE LUMEN
POLYSULPHONE POLYSULPHONE
(4000 SERIES) (5000 SERIES)
------------------------------------------------------------------------------------------------------------------------------------
FINISHED PRODUCT
- WEIGHT N/A N/A
- INT. VOL. 0.5 ml 0.5 ml each
- NEEDLE GRIP Comparable to Competitors Comparable to Competitors
- NEEDLE CLEARANCE Adequate for 20-22 GAUGE Adequate for 20-22 GAUGE
- DURABILITY 2,000 punc. with 22 GAUGE 2,000 punc. with 22 GAUGE
- STABILITY 100 psi rating 100 psi rating
------------------------------------------------------------------------------------------------------------------------------------
PORT BODY
- MATERIAL POLYSULPHONE POYSULPHONE
- DESIGN 2-PIECE 2-PIECE
- SHAPE 65 DEGREE SIDE ANGLE 65 DEGREE SIDE ANGLE
- HEIGHT 12.7 mm 12.7 mm
- BASE DIMEN. 30 mm DIA. 30 mm X 50 mm
- LOCATING RIM SMOOTH, ROUNDED SMOOTH, ROUNDED
- SUTURE HOLES 5-NON-FILLED 5-NON-FILLED
------------------------------------------------------------------------------------------------------------------------------------
SEPTUM SILICONE SILICONE
- MATERIAL/DIAMETER 12.7 mm 12.7 mm each
-----------------------------------------------------------------------------------------------------------------------------------
STUD - MATERIAL TITANIUM TITANIUM
-----------------------------------------------------------------------------------------------------------------------------------
CATHETER
- MATERIAL RADIOPAQUE SILICONE RADIOPAQUE SILICONE
- I.D. 1.4 mm; 1.6 mm 1.0 mm each; 1.2 mm each
- INTRODUCER SIZE 8.0 Fr; 10.0 Fr 10.0 Fr; 12.0 Fr
- LENGTH 70 cm TBD cm
-----------------------------------------------------------------------------------------------------------------------------------
CONNECTOR POLYSULPHONE POLYSULPHONE
(DETACHED) LOCKING SLEEVE THREADED
- MATERIAL/DESIGN
-----------------------------------------------------------------------------------------------------------------------------------
NEEDLE NON-CORING NON-CORING
NON-SILICONIZED NON-SILICONIZED
20 GAUGE, 1 INCH, S.S 20 GAUGE, 1 INCH, S.S.
-----------------------------------------------------------------------------------------------------------------------------------
INTRODUCER KIT INTRODUCER DILATOR\SHEATH; INTRODUCER DILATOR\SHEATH;
10 CC SYRINGE; "J" TIP GUIDE- 10 CC SYRINGE; "J" TIP GUIDE-
WIRE; INTRODUCER NEEDLE; WIRE; INTRODUCER NEEDLE;
DOUBLE STERILE POUCH; DOUBLE STERILE POUCH;
TBD YEAR SHELF LIFE TBD YEAR SHELF LIFE
------------------------------------------------------------------------------------------------------------------------------------
- PACKAGING-STERILE DOUBLE; HEAT SEALED; DOUBLE; HEAT SEALED;
(PORT, CATHETER, TYVEK LIDS; TBD YR. SHELF TYVEK LIDS; TBD YR. SHELF
NEEDLE & CONNECTOR) LIFE; 6 in. X 6.5 in. X 1 in. LIFE; 6 in. X 6.5 in. X 1 in.
- PACKAGING NON-STERILE FOAM CUSHIONED PLASTIC FOAM CUSHIONED PLASTIC
w/o INTRODUCER 7 in. X 8.5 in. X 2 in. 7 in. X 8.5 in. X 2 in.
with INTRODUCER 12 in. X 8.5 in. X 2.5 in. 12 in. X 8.5 in. X 2.5 in.
====================================================================================================================================
NOTE: ALL PHYSICAL DIMENSIONS AND PROPERTIES ARE APPROXIMATE
TBD - TO BE DETERMINED BY HMP/CMI DURING DEVELOPMENT PROGRAM
45
Page 2 of 3
EXHIBIT B
ACCESS PORT PRODUCT OFFERINGS
SINGLE LUMEN TITANIUM
Item # Connection W or W/O Catheter Introducer
Mode Introducer I.D. Size
================================================================================
1 Detached W/O 1.0 mm 7.0 Fr
2 Detached W/O 1.4 mm 8.0 Fr
3 Detached W/O 1.6 mm 10.0 Fr
4 Detached With 1.0 mm 7.0 Fr
5 Detached With 1.4 mm 8.0 Fr
6 Detached With 1.6 mm 10.0 Fr
7 Pre-attached W/O 1.0 mm 7.0 Fr
8 Pre-attached W/O 1.4 mm 8.0 Fr
9 Pre-attached W/O 1.6 mm 10.0 Fr
10 Pre-attached With 1.0 mm 7.0 Fr
11 Pre-attached With 1.4 mm 8.0 Fr
12 Pre-attached With 1.6 mm 10.0 Fr
DOUBLE LUMEN TITANIUM
Item # Connection W or W/O Catheter Introducer
Mode Introducer I.D. Size
================================================================================
13 Detached W/O 1.2 mm each 12.0 Fr
14 Detached With 1.2 mm each 12.0 Fr
15 Pre-Attached W/O 1.2 mm each 12.0 Fr
16 Pre-Attached With 1.2 mm each 12.0 Fr
PEDIATRIC SINGLE LUMEN TITANIUM
Item # Connection W or W/O Catheter Introducer
Mode Introducer I.D. Size
================================================================================
17 Detached W/O 1.0 mm 7.0 Fr
18 Detached With 1.0 mm 7.0 Fr
19 Pre-Attached W/O 1.0 mm 7.0 Fr
20 Pre-Attached With 1.0 mm 7.0 Fr
46
Page 3 of 3
EXHIBIT B
ACCESS PORT PRODUCT OFFERINGS
SINGLE LUMEN POLYSULPHONE
Item # Connection W or W/O Catheter Introducer
Mode Introducer I.D. Size
================================================================================
21 Detached W/O 1.4 mm 8.0 Fr
22 Detached W/O 1.6 mm 10.0 Fr
23 Detached With 1.4 mm 8.0 Fr
24 Detached With 1.6 mm 10.0 Fr
25 Pre-attached W/O 1.4 mm 8.0 Fr
26 Pre-attached W/O 1.6 mm 10.0 Fr
27 Pre-attached With 1.4 mm 8.0 Fr
28 Pre-attached With 1.6 mm 10.0 Fr
DOUBLE LUMEN POLYSULPHONE
Item # Connection W or W/O Catheter Introducer
Mode Introducer I.D. Size
================================================================================
29 Detached W/O 1.0 mm 10.0 Fr
30 Detached W/O 1.2 mm 12.0 Fr
31 Detached With 1.0 mm 10.0 Fr
32 Detached With 1.2 mm 12.0 Fr
33 Pre-attached W/O 1.0 mm 10.0 Fr
34 Pre-attached W/O 1.2 mm 12.0 Fr
35 Pre-attached With 1.0 mm 10.0 Fr
36 Pre-attached With 1.2 mm 12.0 Fr
47
EQUITY AGREEMENT
THIS AGREEMENT, made as of February 17, 1993 by and between CarboMedics,
Inc., a Delaware corporation, having a place of business at 0000 Xxxx Xxxxxxxx
Xxxx, Xxxxxx, XX 00000 (hereinafter referred to as "CMI"), and Horizon Medical
Products, Inc., a Georgia corporation, with a place of business at Seven North
Parkway Square, 0000 Xxxxxxxxx Xxxxxxx, X.X., Xxxxxxx, XX 00000 ("Horizon");
WHEREAS, Horizon and CMI have entered into the Development Agreement dated
February 17, 1993 ("Development Agreement"), pursuant to which a vascular access
port product (the "VAP") will be designed and developed, tested and submitted to
the Food and Drug Administration for approval;
WHEREAS, Horizon and CMI have entered into the OEM Supply Contract dated
February 17, 1993 ("Supply Contract"), pursuant to which five models of the VAP,
after FDA approval, will be manufactured by CMI for sale to Horizon, and Horizon
will market and sell the VAPs under the Horizon name (the "VAP Business");
WHEREAS, as additional consideration to CMI for entering into the
Development Agreement and the Supply Contract, the parties desire to provide in
this Agreement for a payment to CMI upon a future sale by Horizon of the VAP
Business;
NOW, THEREFORE, in consideration of the premises and in reliance upon the
mutual covenants and agreements hereinafter set forth, the parties agree as
follows:
1. Payment to CMI Upon Sale of VAP Business
If Horizon sells the VAP Business, either alone as a separate transaction
or together with the sale of other Horizon assets and business or in connection
with a Stock Sale (as defined below), then Horizon will pay to CMI an amount
calculated by multiplying the Applicable Percentage times the VAP Business
Purchase Price (as such terms are defined below).
2. VAP Business Purchase Price; Stock Sale.
The term "VAP Business Purchase Price" for purposes of this Agreement shall
mean:
(a) In a sale where Horizon sells only the VAP Business, the purchase
price paid to Horizon for the VAP Business, minus any indebtedness of Horizon
associated with the VAP Business that is paid by Horizon within ten (10) days
after such sale; or
(b) In a sale of the VAP Business together with other assets and/or
business or Horizon, or in a Stock Sale, the accounting firm retained by Horizon
shall calculate that portion of the total
48
purchase price received by Horizon (or its shareholders in a Stock Sale) that is
reasonably allocable to the VAP Business, using the contribution of the VAP
Business to the fully burdened net profit of Horizon as of the time of such
sale. Such calculation shall be submitted to CMI no later than thirty (30) days
after such sale. If CMI objects to such calculation, CMI may at its expense have
another big six accounting firm calculate that portion of the total purchase
price received by Horizon (or its shareholders in a Stock Sale) that is
reasonably allocable to the VAP Business, using the contribution of the VAP
Business to the fully burdened net profit of Horizon as of the time of such
sale. The VAP Business Purchase Price shall be the amount so calculated by
Horizon's accounting firm (or, if CMI retains another accounting firm to prepare
such calculation, then the average of the two amounts so calculated by Horizon's
accounting firm and CMI's accounting firm), minus any indebtedness of Horizon
associated the VAP Business that is paid by Horizon within ten (10) days after
such sale.
The term "Stock Sale" for purposes of this Agreement shall mean either (x)
a transaction in which shareholders of Horizon (including Xxx X. Xxxxxxx, Xx.,
Xxxxxxxx X. Xxxx and/or Xxxxxxx X. Xxxxxxxx, Xx.) sell shares of Horizon stock
and as a result of such sale Xxxxxxx, Xxxx and Xxxxxxxx cease to be involved in
the day-to-day management of Horizon, or (y) the sale by shareholders of Horizon
of in excess of eighty percent of all shares of Horizon stock outstanding as of
the time of such sale.
3. Applicable Percentage.
The term "Applicable Percentage" for purposes of this Agreement shall mean
the lowest percentage determined under (a) or (b) below:
(a) Ten percent (10%); or
(b) A percentage determined as follows: After Horizon has purchased its
initial 40,000 units of VAPs, starting with 10% and then deducting therefrom (i)
one percentage point (to 9%) for the next 20,000 units of VAPs purchased by
Horizon (with the reduction made when such 20,000 units are purchased by
Horizon), (ii) one percentage point (to 8%) for the next 20,000 units of VAPs
purchased by Horizon (with the reduction made when such 20,000 units are
purchased by Horizon) and (iii) two percentage points (to 6%) for the next
20,000 units of VAPs purchased by Horizon (with the reduction made when such
20,000 units are purchased by Horizon); provided, however, that under clauses
(i) (ii) and (iii) there will not be more than one reduction during each 12
month period, with the initial 12 month period commencing on the day Horizon
sells its initial 40,000 units of VAPs (under the example below each twelve
month period begins on January 1 and ends December 31). Any percentage
determined under this paragraph shall not be less than 6%. For example, as of
December 31, 1995 Horizon
-2-
49
has sold 40,000 units, and Horizon sells its next 60,000 units as of the
following dates: 20,000 on November 1, 1996, 20,000 on April 1, 1997 and 20,000
on January 1, 1998. The 10% is reduced to 9% on November 1, 1996; the 9% is
reduced to 8% on April 1, 1997 and the 8% is reduced to 6% on January 31, 1998.
4. Payment to CMI.
(a) If the entire purchase price payable to Horizon in a sale of the VAP
Business described in paragraph 1 above is paid in cash or its equivalent at
the closing of the sale, the amount payable to CMI under paragraph 1 shall be
paid within ten (10) days after the VAP Business Purchase Price is determined.
(b) If the purchase price payable to Horizon in a sale of the VAP
Business described in paragraph 1 above is payable in part in cash at the
closing of the sale and in part by one or more promissory note payments
subsequent to the closing, the total amount payable to CMI under paragraph 1
above shall be prorated and paid in installments, with a portion of the total
amount payable to CMI within ten (10) days after the VAP Business Purchase
Price is determined (using a percentage determined by dividing the amount of
cash payable to Horizon at the closing by the total purchase price payable to
Horizon) and with a portion of the total amount payable to CMI within ten (10)
days after Horizon receives each note payment (using a percentage determined by
dividing the amount of principal note payment by the total purchase price
payable to Horizon).
(c) In a sale of the VAP Business described in paragraph 1 above, if the
purchase price for the sale is payable to Horizon (or to its shareholders in a
Stock Sale) in whole or in part in publicly traded securities, CMI shall
receive from Horizon the amount calculated under paragraph 1 in the form of
shares of such publicly traded securities (if the entire purchase price is
payable in such securities) or in the form of cash or its equivalent and shares
of such publicly traded securities, with the number of shares and the amount of
cash determined as follows. A percentage shall be determined by dividing the
value of the securities received by Horizon or its shareholders (using the
closing price for the securities on the date of closing of the sale) by the
total purchase price. Such percentage shall then be multiplied times the amount
determined under paragraph 1 hereof, and the product of that multiplication
shall be divided by the closing price per share for the securities on the date
of the closing of the sale. The result of that division shall be the number of
shares that CMI shall receive. The product of that multiplication shall be
subtracted from the amount determined under paragraph 1 hereof, and the result
of that subtraction shall be the amount of cash that CMI shall receive under
paragraph 1 hereof. For example, Horizon sells the VAP Business alone in a
separate transaction for a purchase price of $10,000,000 with a closing in
January 1995, and the purchaser
-3-
50
paid the purchase price with $5,000,000 cash and securities with a value of
$5,000,000 and a closing price on the date of closing of $20 per share. CMI
would receive $1,000,000 (10% times $10,000,000) which would be payable in
25,000 shares of such securities ($5,000,000 divided by $10,000,000 = 50%; 50%
times $1,000,000 = $500,000; $500,000 divided by $20) and with $500,000 in cash
(($1,000,000 minus $500,000).
5. No Rights as Shareholder.
Nothing in this Agreement shall give CMI any rights as an owner of shares
of Horizon stock or any rights as a shareholder of Horizon.
6. Termination.
(a) After CMI has been paid the entire amount payable to CMI under
paragraph 1 above with respect to a sale of the VAP Business described therein,
this Agreement shall terminate, and CMI shall not be entitled to receive any
amounts on subsequent sales of the VAP Business by any successor owner of the
VAP Business.
(b) At Horizon's sole option, exercisable by written notice to CMI,
Horizon may terminate this Agreement by payment of the following amounts in one
payment to CMI:
(i) an amount that is a thirty percent annual return on $765,000
(CMI's share of the total development costs of the VAP), calculated by
multiplying the number of months from the Effective Date under the Supply
Contract through the date of payment under this paragraph times 2 1/2%
times $765,000; plus
(ii) if Horizon has not purchased 40,000 units of VAPs from CMI as of
the date of payment under this paragraph, then Horizon shall pay to CMI an
amount equal to $50 times the difference between 40,000 and the number of
units of VAPs actually purchased from CMI as of such date of payment (in
the event of which payment Horizon will have satisfied all obligations to
CMI under paragraph 4 of the Supply Contract); plus
(iii) if Horizon has not paid the total amount required by Section
3.1 of the Development Agreement for development costs as of the date of
payment under this paragraph, then Horizon shall pay to CMI the remaining
unpaid portion under Section 3.1 of the Development Agreement (in the event
of which payment Horizon will have satisfied all obligations to CMI under
Section 3.1 of the Development Agreement).
-4-
51
7. Assignment.
Neither party will have the right to assign this Agreement, in whole or in
part, to any third party without the prior written consent of a duly authorized
officer of the other party, which consent will not be unreasonably withheld. An
attempted assignment without consent will be grounds for termination of this
Agreement by the other party, without thereby affecting any rights or remedies
it may have under this Agreement or at law. Notwithstanding the foregoing, CMI
may freely assign this Agreement to any company controlling, controlled by or
under common control with CMI or succeeding to the entire business of CMI.
Notwithstanding the above, Horizon may freely assign this Agreement to any
company controlling, controlled by or under common control with Horizon or to
any entity succeeding to the entire VAP business of Horizon. The parties
understand that an event described in the preceding sentence may result in an
obligation to make the payment to CMI provided for in paragraph 1 above. This
Agreement will be binding upon and inure to the benefit of the parties and their
successors and permitted assigns.
8. General.
(a) Exclusions. The following sales or transactions are excluded from
this Agreement and are not considered a sale of the VAP Business under
paragraph 1 above: (1) the sale of Horizon shares by Horizon, (ii) the sale of
Horizon shares by a shareholder of Horizon to an individual who at the time of
such sale is an existing shareholder of Horizon where such a sale is not a
""Stock Sale'' (as defined above), (iii) stock dividends issued by Horizon,
(iv) a recapitalization of Horizon stock, (v) the repurchase of outstanding
shares of Horizon stock by Horizon, and (vi) a transfer of the VAP Business by
Horizon to another corporation, a majority of whose shares are owned by Xxx X.
Xxxxxxx, Xx. and Xxxxxxxx X. Xxxx.
(b) Waivers. No waiver of any right or remedy hereunder will be
effective unless based upon a writing signed by the party against whom it is
sought to be enforced.
(c) Notices. All notices required or permitted under this Agreement must
be made in writing and delivered in person or by certified or registered mail,
postage prepaid, addressed to the attention of the president of the other party
at the respective address first written above, or such other address as may be
given by notice.
(d) Severability. If any provision of this Agreement is declared invalid
or unenforceable by a court of competent jurisdiction, such provision will be
severed from this Agreement and the remaining provisions will be unaffected
thereby. The parties will promptly meet and negotiate a substitute provision
-5-
