EXHIBIT 10.19
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (the "Agreement") is made effective as of
the 20th day of December, 1995 by and between Cardiac Control Systems, Inc., a
Florida corporation having its principal place of business at 0 Xxxxxxxx
Xxxxxxxxx, Xxxx Xxxxx, Xxxxxxx, the Xxxxxx Xxxxxx xx Xxxxxxx, 00000 ("CCS"),
and Grupo Taper, S.A., an entity organized under the laws of Madrid, Spain and
having its principal place of business at Xxxx. Xxx xxx Xxxxxxxxx 00, Xxxxx 7
Xxxxxxxx 0, 00000 Xxxxxxx xx Xxxxxxx, Xxxxxx.
W I T N E S S E T H:
That in consideration of the mutual covenants and agreements hereinafter
set forth, Grupo Taper and CCS hereby expressly agree as follows:
SECTION 1. EXCLUSIVE DISTRIBUTION RIGHTS.
(a) CCS hereby designates and appoints Grupo Taper as its sole agent to
distribute the Product (as hereinafter defined) in the territory described on
EXHIBIT A attached hereto and incorporated herein by this reference (the
"Territory"), subject to and conditioned upon the following exceptions:
(i) agreement by and between CCS and LEM Biomedica s.r.l.
("LEM"), dated October 24, 1994, governing the sale by CCS of hybrid circuits
for implantable pulse generators to LEM for use in the manufacture and world-
wide sale of LEM's implantable pacemakers (the "LEM Agreement"); and
(ii) agreement by and between CCS and Intermedics Inc.
("Intermedics") for the sale of electrode leads by CCS to Intermedics for use in
the manufacture and world-wide sale of Intermedics' ventricular cardiac pacing
systems, (the "Intermedics Agreement"); and
(iii) agreement by and between CCS and Holland Medical, B.V., for
the distribution of CCS products in the Netherlands ("Holland Medical
Agreement") (the LEM Agreement, Intermedics Agreement and Holland Medical
Agreement, collectively, the "Exception Agreements")
Grupo Taper agrees to participate in this Agreement with the knowledge
of the existence of, and consents to the continued effectiveness of the
Exception Agreements.
(b) Grupo Taper agrees to purchase, import and coordinate distribution
and sales of the Product in the Territory in accordance with the terms and
conditions of this
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Agreement Grupo Taper shall not distribute or sell the Product outside the
Territory. Grupo Taper shall use its best efforts to ensure that purchasers of
the Product do not redistribute or resell the Product outside the Territory.
(c) Grupo Taper agrees to represent CCS exclusively, and agrees not to
work for, manufacture for, or represent a competitor of CCS in the Territory
during the Term (as defined herein) of this Agreement without the express
written consent of CCS.
SECTION 2. TERM
(a) Initial Term. The initial term of this Agreement shall commence
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on the Effective Date and shall terminate ten (10) years after such date (the
"Initial Term"), unless earlier terminated as provided elsewhere in this
Agreement.
(b) Automatic Renewal. Upon expiration of the Initial Term, this
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Agreement shall renew automatically for a five (5) year period (such renewal
period shall be defined as a "Renewal Period") (the Initial Term and the Renewal
Period, hereinafter collectively called the "Term"), unless and until either
party shall notify the other party in writing, on or before the one hundred
eightieth (180th) day prior to the expiration of the Initial Term or
commencement of such Renewal Period, of the notifying party's desire to
terminate this Agreement. CCS and Grupo Taper agree to negotiate in good faith
Renewal Period terms and condition, including Product prices and minimum
purchase requirements, on or before the one hundred eightieth (180th) day prior
to the expiration of the Initial Term or the commencement of the Renewal Period.
If CCS and Grupo Taper do not come to an agreement concerning the Renewal Period
terms and conditions, either party may terminate this Agreement, however, if
neither party terminates this Agreement, the Agreement shall continue on the
then current terms and conditions, subject to the minimum increase in purchase
requirements provision and the price increase provision set forth in Section 5
and 6(c), respectively.
Section 3. Description of Products. During the Term, CCS shall supply
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Grupo Taper with those cardiovascular pacemaker products and related accessories
set forth on EXHIBIT B attached hereto and incorporated herein by this
reference (the "Products"). Grupo Taper agrees to purchase, import and
coordinate the sale and distribution of the Products in the Territory in
accordance with the terms and conditions of this Agreement. Grupo Taper shall
have the right of first refusal to distribute new cardiovascular products as
they are introduced by CCS to the market place in the Territory. The wholesale
price shall be reasonable and not artificially increased to dissuade Grupo Taper
for distribution the Product.
Section 4. Product Warranties. The terms and conditions of CCS's
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Product warranties are set out in the labeling associated with the Products, and
Product warranties are limited to those terms and conditions. Those terms and
conditions expressly prohibit Grupo Taper from making any alterations or
additions to the published war-
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ranties on Products. Grupo Taper is required to return Products for replacement
under Product warranties to CCS in a timely manner, or CCS's obligation under
applicable product warranties shall become null and void. If any product is
determined by Grupo Taper and CCS (such determination to be made with due regard
for patient safety and industry standards) to be defectively manufactured, CCS
shall replace Product at no charge and pay for shipping to the world port of
Grupo Taper's choice.
In the event a CCS Product shall be recalled by any government having
jurisdiction over such matter and CCS's manufacturing or product design is
proven to be at fault, or in the event of a voluntary recall on the part of CCS,
the following policies will apply: (i) merchandise recall will be credited at
actual cost to Grupo Taper; (ii) merchandise recall shall be shipped prepaid by
CCS to CCS, or destroyed locally as instructed by CCS; and (iii) Grupo Taper
will assume the logistical responsibility for any recall under the direction of
CCS.
Section 5. Minimum Sales Performance. During the term of this
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Agreement, Grupo Tape agrees to biannual (2 Year) minimum purchase quotas as
agreed to by the parties. Enforcement of these quotas will begin upon receipt of
ISO & CE approvals. Any purchases made prior to receipt of such ISO & CE
approvals will be allocated toward quotas. Quotas for the first three (3) years
of this agreement are listed on EXHIBIT C attached hereto and incorporated
herein by this reference. For the years four (4) through ten (10), CCS and Grupo
Taper shall use their best efforts to negotiate mutually acceptable minimum
purchase requirements for each year. However, should CCS and Grupo Taper be
unable to determine mutually agreeable minimum purchase requirements for any
year, the minimum purchase requirement for such year shall equal the minimum
purchase requirement for the immediately preceding year increased by 7% on a
cumulative basis.
This Agreement may, at the option of CCS, upon 90 days notice in
writing, be terminated if Grupo Taper fails to meet minimum biannual (2 year)
purchase requirements for any 2 years of the term, provided such notice is given
within thirty (30) days after the end of the year of the Term in which Grupo
Taper failed to meet the stipulated minimum purchase requirement. In the event
of the failure of CCS to provide Products ordered by Grupo Taper for any reason,
of if CCS provides Products that do not conform to CCS specification, the
specified minimum sales/purchase quota for each two years of the term in which
such events occur shall be reduced proportionately. In the event of the failure
of CCS to provide Products ordered by distributor for any reason, or if CCS
provides Products that do not conform to CCS specifications, the specified
minimum sales/purchase quota for each two years of the Term in which such events
occur shall be reduced proportionately.
Section 6. Distribution, Sales and Marketing Expenses. Grupo Taper
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agrees to bear all distribution, sales and marketing and regulatory costs and
expenses in the Territory incurred by or imposed upon Grupo Taper by reason of,
or on account of, this
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Agreement, including, but not limited to: (i) Shipping; (ii) Customs and Duties;
(iii) Sales and Marketing Literature; (iv) Advertising and Promotion; and (v)
Modification to Packaging and/or Labeling, if any. CCS will provide initial
sales training and will provide one (1) each of each piece of literature or
other advertising material developed for Grupo Taper's reproduction. CCS will be
responsible for and will bear expenses associated with obtaining ISO and CE
regulatory approvals, and such other governmental approvals that may reasonably
be required for market entrance in the Territory.
Section 7. Payment Terms.
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(a) Method of Payment. During the Term, Grupo Taper shall pay for
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orders accepted by CCS in cash in United States dollars, net ninety (90) days.
(b) Initial Inventory Payment and Equity Investment. Concurrently with
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the execution of this Agreement (i) Grupo Taper shall pay Five Hundred Thousand
and No/100 Dollars ($500,000.00) in cash in United States dollars (the "Initial
Inventory Payment") to CCS to offset a portion of the cost of Products to be
purchased by Grupo Taper from CCS; and (ii) Grupo Taper will pay to CCS Five
Hundred Thousand and No/100 Dollars ($500,000.00) (at $5.00 per share) in
exchange for which CCS will issue to Grupo Taper the number of shares of common
stock of CCS that are then equal in total value to $500,000.00 (at $5.00 U.S.
per share), pursuant to the terms of a stock purchase agreement to be signed by
the parties at the time of signing of this Agreement. As soon as practicable
following the execution of this Agreement CCS will issue Grupo Taper a warrant
(in form and substance mutually acceptable to each party hereto) to purchase
100,000 shares of common stock of CCS at an exercise price of $0.80 U.S. per
share. This warrant would be exercisable in accordance with the following
schedule; (i) 50,000 shares would be exercisable one (1) year after CCS achieves
ISO and CE approval if the Agreement is still in force and if Grupo Taper has
achieved at least 60% of its forecasted sales commitment of 500 units; (ii)
25,000 shares exercisable after the end of the second year of this Agreement if
the Agreement is still in force and if Grupo Taper has achieved at least 60% of
its forecasted sales commitment of 500 units; and (iii) 25,000 shares
exercisable three (3) years after the third year of the Agreement if the
Agreement is still in force and if Grupo Taper has achieved its forecasted sales
commitment of 5,500 units over the last two (2) year period.
(c) Product Pricing and Manner of Payment. The prices to be paid for
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Products by Grupo Taper during the first three (3) years of this Agreement are
set forth on EXHIBIT B. Grupo Tape shall pay fifty percent (50%) of the price of
each Product delivered by CCS, the remaining fifty percent (50%) of the price to
be credited against the Initial Inventory Payment until the Initial Inventory
Payment is entirely offset. Thereafter, Grupo Taper shall pay the full price of
the Product as payment becomes due upon delivery. During the Term, CCS may in
good faith modify the prices set forth on EXHIBIT B, should CCS's cost to
purchase or manufacture Products increase or
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decrease by five percent (5%) or more, cumulatively since the price was
established or last modified. EXHIBIT B shall be updated to reflect
modifications to Product prices if and when they are modified by CCS pursuant to
this Section 6(c). Grupo Taper or their representative has the option to audit
product cost records every six (6) months during the life of this contract.
Section 8. Trademarks and Trade Names. Grupo Taper acknowledges CCS's
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exclusive right, title and interest in and to the trademarks and trade names
used by CCS, including but not limited to the name "Cardiac Control Systems,
Inc." Grupo Taper may use CCS trademarks and trade names but only a separately
approved by CCS in writing. Grupo Taper agrees that Grupo Taper will not, during
the Term or thereafter, do or cause to be done any act which impairs or intends
to impair CCS's right, title and interest in such trademarks and trade names,
nor shall it represent that it has any ownership interest therein. Grupo Taper
has no authority to license or sublicense the trademarks or trade names of CCS.
Section 9. Non-Performance by Grupo Taper. Subject to the provisions
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set forth in Section 5 hereof, in the event Grupo Taper fails to perform any of
its obligations under this Agreement, then CCS, in its sole discretion, shall
have the right to suspend all Product shipments until Grupo Taper has cured its
breach or default hereunder, and/or to terminate this Agreement. The
non-defaulting party shall give the defaulting party sixty (60) days' notice of
its intent to terminate this Agreement. During the sixty (60) day cure period,
the Agreement shall remain in full force. If the defaulting party substantially
cures the default within sixty (60) days, the Agreement will remain in full
force.
Section 10. Director. CCS shall upon execution of this Agreement
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appoint any one director designated by Grupo Taper to serve on CCS's Board of
Directors (the "Board") until the next annual meeting of shareholders of CCS. At
future annual meetings, CCS shall continue to nominate a Grupo Taper designated
director, for as long as Grupo Taper holds at least 50% of its initial
investment, or has any of its original working capital investment outstanding.
Any nomination by CCS of such Grupo Taper designated director shall be made in
the same manner and on equal standing as other director nominees comprising
management's slate.
However, if Grupo Taper's designee is not elected as a director by CCS
shareholders, such designee shall nevertheless be permitted to attend all Board
and executive staff meetings and shall be entitled to receive copies of all
information available to members of the Board of Directors and executive staff,
as a non-voting member of the Board.
Grupo Taper's designee shall be entitled to the same compensation as
other Board members during his tenure on the Board of Directors, either as an
elected or non elected member.
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Section 11. Force Majeurs. Neither CCS nor Grupo Taper shall be liable
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for any failure to deliver, failure to sell or delay in delivery or sale of
Products due to: (i) acts of God, fires, floods, and other casualties; (ii)
strikes or other labor disputes, including but not limited to, hospital strikes,
accidents to machinery, acts of sabotage, riots, (iii) instruction of any
federal, foreign, state or municipal government or any department or agency
thereof; (iv) export or import restrictions, delays in transportation or lack of
transportation facilities, customer allocations put into effect on account of
demand for the Products exceeding its productive capacity; or (v) any other
cause beyond the control of either party, including failure of suppliers to
provide components for Products.
Section 12. Entire Agreement. This Agreement constitutes the entire
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agreement between the parties hereto with respect to the transactions
contemplated herein, and it supersedes all prior understandings or agreements
between the parties with respect to the subject matter hereof.
Section 13. Notices. All notices, requests, demands and other
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communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed first class, postage prepaid to the following:
To CCS: Cardiac Control Systems, Inc.
0 Xxxxxxxx Xxxxxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: President and Chief Executive Officer
With a copy to: Xxxxxxxxx Xxxxxxx
00 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
To Grupo Taper: Grupo Taper, S.A.
Avda. Xxx xxx Xxxxxxxxx 00
Xxxxx 0 Xxxxxxxx 0
00000 Xxxxxxx xx Xxxxxxx
Xxxxxx, Xxxxx
Section 14. Assignment. Grupo Taper may not assign to a third party,
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with the exception of its affiliates, distributors or sales agents, any of its
rights or benefits under this Agreement nor delegate any duties or obligations
hereunder without the prior written consent of CCS, which consent may be
withheld in the sole discretion of CCS.
Section 15. Amendment. This Agreement may not be amended or modified
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except by a written instrument executed by CCS and Grupo Taper.
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Section 16. Assistance in Accessing Components. In the event CCS
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ceases operations or is in voluntary or involuntary bankruptcy for more than
ninety (90) days and cannot manufacture and provide pacemakers for Grupo Taper,
CCS shall assist Grupo Taper by purchasing proprietary and critical components
for the manufacture of pacemakers from CCS's vendors and reselling them to Grupo
Taper at its cost plus margin prior to ceasing operations. In addition, in such
event, CCS shall provide all documentation and test results in our possession to
assist Grupo Taper in achieving its own CE xxxx for manufacture of such
pacemakers. In addition, in such event, CCS shall provide assistance setting up
manufacturing procedures for the Product. Actual costs associated with providing
this assistance in setting up manufacturing procedures for the Product will be
the responsibility of Grupo Taper. In the event that CCS does not exist as an
entity, Grupo Taper may attempt to purchase proprietary components directly from
CCS' vendors.
Section 17. Counterparts. This Agreement may be executed in
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counterparts, each of which shall constitute an original, but all taken together
shall constitute one and the same Agreement.
Section 18. No Partnership or Joint Venture. This Agreement shall not
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be construed to create any joint venture or partnership by or between the
parties hereto.
Section 19. Governing Law. This Agreement shall not be construed under
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the laws of the State of Florida, without regard to Florida conflicts of laws
principles. Any suit as to this Agreement shall be brought in the federal courts
located in Orange County, Florida. The parties agree that the United Nations
Convention on Contracts for the International Sales of Goods, The Hague
Convention, and other treaties shall not apply to the construction or
interpretation of this Agreement or affect any of its provisions.
Section 20. Arbitration. Any claim or controversy arising out of, or
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related to this Agreement, or the making of performance or interpretation
thereof, except for any actions brought with respect to ownership or use of the
proprietary marks, shall be finally settled by binding arbitration pursuant to
the then prevailing Rules of the American Arbitration Association, by a three
arbitrator panel appointed in accordance with such rules. Any such arbitration
proceeding shall take place within the State of Florida, or any other such
location as may be mutually agreed to by the parties.
Section 21. Severability. In the event that any provision, or portion
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thereof, of this Agreement is held to be unenforceable or invalid by any court
of competent jurisdiction, the validity and enforceability of the remaining
provisions or portions of the Agreement shall not be affected.
Section 22. Disposition of Inventory. In the event that this Agreement
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terminates prior to the end of its 10-year term, Grupo Taper may resell all
remaining Product inventory in the Territory, or at the Grupo Taper's option,
CCS will accept in return for
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credit any Product that is saleable. In such instance, credit given shall be the
purchase price, minus any costs associated with inspection, repair and shipment
of returned Product. A Product is "saleable" when it has intact packaging and
seal, is in good physical and functional condition, and has a minimum of eight
(8) months remaining prior to its expiration date for implant.
Section 23. Other Merchandise. Additional merchandise from Grupo Taper
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may be offered for sale through the CCS sales force. Such merchandise would be
subject to a separate agreement between CCS and Grupo Taper. The additional
merchandise that may be sold and the terms of representation shall be subject to
CCS's prior written approval.
Section 24. Binding Successors. This Agreement shall be binding upon,
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and inure to the benefit of, the parties hereto and, as applicable, their
personal representative, successors in interest, heirs, assigns or transferees.
Section 25. Hold Harmless. CCS agrees to hold Grupo Taper, nd its
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sub-distributors, affiliates and agents harmless from any claim for injuries or
damage resulting from a defective product supplies by CCS to Grupo Taper for
sale. Grupo Taper agrees to hold CCS harmless from any claim for injuries or
damage resulting from Grupo Taper's negligence in the promotion or distribution
of products.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
instrument in Orange County, Florida as of the date first set forth hereinabove.
CARDIA CONTROL SYSTEMS, INC.
Attest:
/s/ Xxxxx Xxxxxxxx By: /s/ Xxxx X. Xxxxx
--------------------------------- -------------------------------
Secretary Xxxx X. Xxxxx
Its: President and
Chief Executive Officer
Attest: GRUPO TAPER, S.A.
By: /s/ Xxxx Xxxxxxx Xxxxx Fabregas
--------------------------------- -------------------------------
Secretary Xxxx Xxxxxxx Xxxxx Fabregas
Its: Chairman and
Chief Executive Officer
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EXHIBIT A
THE TERRITORY
The following countries are covered under the terms of this contract.
EUROPE
Germany, Spain, France, United Kingdom, Belgium, Italy, Switzerland, Russia,
Algeria, Croatia, Lithuania, Austria, Netherlands, Estonia, Slovenia, Portugal,
Ex-Yugoslavia, Hungary, Bulgaria, Romania, Chechnia, Slovachia, Latvia, Poland,
Greece.
NON EUROPE:
New Zealand, Cuba, Mauritius, Tunisia, South Africa, Pakistan, Jordan, Syria,
Egypt, Phillippines.
LATIN AMERICA:
A separate agreement will be written covering the countries to be included in
Central and South America.
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EXHIBIT B
PRODUCTS AND PRICING
This Exhibit B sets forth the Products covered by the Distribution
Agreement by and between Cardiac Control Systems, Inc. ("CCS") and Grupo Taper,
S.A. ("Grupo Taper") and the negotiated Product prices to be paid to CCS from
December 31, 1995 through December 31, 1998.
MODEL PRODUCT DESCRIPTION PRICE*
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Maestro II 231 Unipolar single-chamber $1,500.00
Multi-programmable pacemaker,
telemetry plus, 3.2 mm IS-1
connector port, 6 mm, with lead
Maestro II 232 Bipolar single-chamber $1,500.00
Multi-programmable pacemaker,
telemetry plus, 3.2 mm IS-1
connector port, 6 mm, with lead
Maestro II Unipolar atrial rate responsive $1,500.00
SAVVI/T/ 333 multi-programmable ventricular
pacemaker, telemetry plus,
3.2 mm IS-1 connector ports,
6 mm, with lead
1006 Maestro Pacemaker release III $1,500.00
programmer, with detachable
programming wand and power cable
*All prices listed are FCA CCS's premises at Palm Coast, Florida.
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In addition, the following new products are expected to be added during the
next 2 years. These products would also be made available to Grupo Taper.
Pricing for these products will be determined upon date of product release.
1. Model 533 & 534 dual-chamber, multi-programmable pacemakers
2. Single Lead External Temporary Pacemaker System
3. Redesigned computerized programmer
4. Enhanced Single Lead VDD pacing system.
Also as referenced in Section 3 of this Agreement any other Cardiovascular
products that are developed and released to the market place during the term of
this Agreement will be offered to Grupo Taper for sale in the Territory.
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EXHIBIT C
MINIMUM SALES PERFORMANCE
FOR THE "INITIAL TERM"
Year Pacemakers
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One and Two 1,000 Total Pacemakers
Two and Three 5,500 Total Pacemakers
If registration (other than ISO / CE requirements) has not been obtained by the
beginning of year three, then quota for the third year will be reduced by 1000
units.
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