EXHIBIT 10.12
SUPPLY AND DISTRIBUTORSHIP AGREEMENT
SUPPLY AND DISTRIBUTORSHIP AGREEMENT, dated as of December ___, 1999
(the "Agreement"), between STAIRMASTER SPORTS/MEDICAL PRODUCTS, INC., a Delaware
corporation ("Manufacturer"), and XXXXXXX INSTRUMENT COMPANY, a Washington
corporation ("New Xxxxxxx", and, together with Manufacturer, the "Parties", each
individually a "Party").
W I T N E S S E T H:
WHEREAS, Manufacturer produces certain treadmills and treadmill
components;
WHEREAS, New Xxxxxxx desires Manufacturer to manufacture the ST
Components and the CR/SR Treadmills;
WHEREAS, New Xxxxxxx will use the ST Components as component parts of
the Medical Treadmills and will sell the Finished Goods to end users;
WHEREAS, customers of New Xxxxxxx from time to time desire to purchase
Products, and New Xxxxxxx desires to distribute Products to such customers; and
WHEREAS, Manufacturer desires to sell to New Xxxxxxx, and New Xxxxxxx
desires to buy from Manufacturer, the Manufactured Goods, and Manufacturer has
offered to appoint New Xxxxxxx as non-exclusive distributor of Products in the
Territory, and New Xxxxxxx has agreed to accept such appointment, all subject to
the terms and conditions hereinafter set forth.
NOW, THEREFORE, the Parties hereby agree as follows:
ARTICLE I
MANUFACTURED GOOD AND PRODUCT SUPPLY
1.1. Purchase and Sale of Manufactured Goods and Distributorship of
Products. (a) Purchase and Sale of Manufactured Goods. Subject to the terms and
conditions hereof, Manufacturer shall sell to New Xxxxxxx and New Xxxxxxx shall
exclusively pur-
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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
chase from Manufacturer during the term of this Agreement all of New Quinton's
requirements of (i) ST Components, solely for use as a component part of the
Medical Treadmills, and (ii) CR/SR Treadmills. The Parties hereby acknowledge
and agree that (x) New Xxxxxxx shall sell the CR/SR Treadmills only in the
Territory, (y) without the prior consent of New Xxxxxxx, which consent shall not
be unreasonably withheld, Manufacturer shall not sell any Manufactured Goods to
competitors of New Xxxxxxx that primarily manufacture, market or sell cardiac or
cardiopulmonary monitoring equipment, except pursuant to OEM Agreements with
Xxxxxxxx XX, Nihon Khoden, Esaote and Xxxxx Xxxxx, and (z) Manufacturer shall
not sell any Manufactured Goods or Finished Goods in the Territory.
(b) Non-Exclusive Distributorship. Manufacturer hereby appoints New
Xxxxxxx as its non-exclusive distributor of the Products, together with upgrades
and additions thereto, in the Territory for the term of this Agreement, and New
Xxxxxxx hereby accepts such appointment.
1.2. Detailed Forecasts, etc. (a) Detailed Forecasts. On the first
business day of each month beginning with the first business day of January
2000, New Xxxxxxx shall deliver to Manufacturer a three-month forecast of its
anticipated requirements of Manufactured Goods and Products for the next three
months beginning with the second month following the month in which such
forecast is due (a "Detailed Forecast"). Each Detailed Forecast shall include
frequency of shipments and relevant minimum lots.
(b) Orders for Each Month to be at Least Seventy Percent (70%) and Not
More Than One Hundred Thirty Percent (130%) of the Most Recent Detailed
Forecast. If New Quinton's Purchase Order (which Purchase Order shall be for
Manufactured Goods and Products for a one-month period as provided in Section
1.3(b)) for a rolling average three-month period (each, an "Order Period")
specifies less than seventy percent (70%) of the minimum requirements of
Manufactured Goods specified in the most recent Detailed Forecast for each such
Order Period, New Xxxxxxx shall purchase the difference between (i) 70% of the
requirements of Manufactured Goods specified in such Detailed Forecasts and (ii)
the requirements of Manufactured Goods specified in such Purchase Orders for
such Order Period, and such difference shall be deemed automatically added to
New Quinton's Purchase Order for the next following month. If New Quinton's
Purchase Order for a month specifies more than one hundred thirty percent (130%)
of the Manufactured Goods or of the Products specified in the most recent
Detailed Forecast for that month, Manufacturer shall not be obligated to sell to
New Xxxxxxx during that month the excess over one hundred thirty percent (130%)
of the Manufactured Goods or Products specified in such Detailed Forecast.
1.3. Purchase Orders, Delivery and Shipments. (a) Initial Purchase
Order. As soon as practicable after the date hereof, New Xxxxxxx shall deliver
to Manufacturer a
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Purchase Order for Manufactured Goods and Products to be delivered in the months
of January and February 2000.
(b) Subsequent Purchase Orders. On the first business day of each month
beginning with the first business day of March 2000, New Xxxxxxx shall deliver
to Manufacturer a Purchase Order for Manufactured Goods and Products to be
delivered in the next succeeding month.
(c) Fulfillment of Orders. Manufacturer shall fill Purchase Orders in
accordance with the provisions of this Agreement. The Manufactured Goods and the
Products shall be packed by Manufacturer and shall be F.O.B. at Manufacturer's
plant. Manufacturer shall (upon instruction from New Xxxxxxx) arrange for, and
New Xxxxxxx shall pay for, shipping. New Xxxxxxx shall arrange for and pay for
insurance. Title and risk of loss shall pass to New Xxxxxxx upon delivery to
shipper at Manufacturer's plant. Manufacturer shall use reasonable efforts to
ship all Manufactured Goods and Products within four (4) weeks of its acceptance
of New Quinton's Purchase Order, provided that both Parties understand and agree
that (i) no delivery date can be guaranteed and (ii) Manufacturer shall not be
liable for damages resulting from late shipments, provided, however, that if
Manufacturer fails for three consecutive Order Months to have ready for shipping
within four (4) weeks of its acceptance of New Quinton's Purchase Order at least
ninety percent (90%), for a rolling average three-month period, of the
Manufactured Goods ordered by New Xxxxxxx, (x) Manufacturer shall credit to the
account of New Xxxxxxx the sum of $150 for each Manufactured Good not ready for
such shipping during such rolling average three-month period and (y) New Xxxxxxx
shall have the right to purchase equivalents of, or substitutes for, the ST
Components and the CR/SR Treadmills from other sellers (provided that the
license granted pursuant to the Technology License Agreement shall not thereby
come into effect.
(d) Storage of Inventory. Upon the request and at the sole expense of
New Xxxxxxx, Manufacturer shall store on its premises as inventory of New
Xxxxxxx, Manufactured Goods and Products purchased by New Xxxxxxx, provided that
upon delivery of such goods to storage, title and risk of loss shall pass to New
Xxxxxxx.
1.4. Price and Payment. (a) Prices. (i) Manufactured Goods. The price to
New Xxxxxxx of each Manufactured Good shall be (i) the Designated Percentage of
the Cost of Manufacture of such Manufactured Good, plus (ii) the Cost of
Manufacture of such Manufactured Good.
(ii) Products. The price to New Xxxxxxx of each Product shall be [*].
(b) Periodic Changes in Price. If the Cost of Manufacture of a
Manufactured Good or Product after January 1, 2001 increases or decreases by
more than ten percent
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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
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(10%) from the Cost of Manufacture of such Manufactured Good or Product for the
previous month (and "Excess Expense"), then, upon 60 days notice thereof by
Manufacturer to New Xxxxxxx, the Cost of Manufacture of such Manufactured Good
or Product shall be deemed increased or decreased, as applicable, by such Excess
Expense. New Xxxxxxx agrees that all Purchase Orders received by Manufacturer
later than 60 days after the date of such notice shall be for the purchase of
Manufactured Goods and Products at a price (calculated pursuant to Section
1.4(a)) that reflects such adjusted Cost of Manufacture. Manufacturer shall
promptly furnish New Xxxxxxx with or permit reasonable access to reasonable
supporting documentation and records evidencing such Excess Expense. Within 30
days after receipt of such supporting documents, New Xxxxxxx may (but without
deferring New Quinton's obligation to pay such Excess Expense) object to such
Excess Expense and the parties agree to act in good faith to resolve any
disputes regarding such Excess Expenses.
(c) Payment. Payment of the purchase price for each Manufactured Good
and Product purchased by New Xxxxxxx hereunder shall be due and payable [*] days
after delivery of such Manufactured Good or Product in accordance with New
Quinton's Purchase Order. In addition, at the end of any Agreement Year,
Manufacturer shall notify New Xxxxxxx of any Additional Charges, and New Xxxxxxx
shall pay Manufacturer within [*] days after such notice any such Additional
Charges.
1.5. Governmental and Regulatory Requirements. Manufacturer warrants
that, during the Term of this Agreement, all Manufactured Goods and Products
will meet all federal governmental and regulatory requirements in the United
States with which Manufacturer is legally required to comply. The Parties hereby
acknowledge and agree that, except as otherwise provided herein, New Xxxxxxx
shall be responsible for complying with any governmental and regulatory
requirements relating exclusively to the Finished Goods imposed by any
jurisdiction of the United States or by any jurisdiction located outside of the
United States. New Xxxxxxx shall also be responsible for complying with all
governmental and regulatory requirements relating to Finished Goods and Products
sold prior to the date of this Agreement.
ARTICLE II
INTELLECTUAL PROPERTY
2.1. License. Manufacturer hereby grants to New Xxxxxxx, during the term
of this Agreement and subject to the terms hereof, the right to (a) incorporate
the ST Components solely in the Medical Treadmills and (b) sell the Finished
Goods and the Products in the Territory. New Xxxxxxx may not incorporate the ST
Components in any product other than the Medical Treadmills or modify, sell,
offer for sale or otherwise use the Manufactured Goods or Products, except as
expressly provided herein.
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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
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2.2. Intellectual Property Rights. All intellectual property rights
relating to the Manufactured Goods and the Products, including all trademarks,
copyrights, patents, mask works, trade secrets and other intellectual property
rights, purchased by Manufacturer pursuant to the Asset Purchase Agreement are
and shall remain the property of Manufacturer. New Xxxxxxx shall not reverse
engineer any Product or misappropriate any proprietary or confidential
information embodied therein.
2.3. Trademarks. Without limiting the foregoing, New Xxxxxxx agrees not
to use any of Manufacturer's trademarks or trade names or any names or marks
confusingly similar thereto (the "Trademarks"). All trademarks and trade names
of Manufacturer shall remain the exclusive property of Manufacturer, and New
Xxxxxxx shall not acquire any rights thereunder or thereto. Without limiting the
foregoing, New Xxxxxxx shall not use the Trademarks on any Finished Goods or in
any advertising, marketing or promotional materials, packaging or documentation
relating to the Finished Goods, the Products or the ST Components, except upon
Manufacturer's prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, to the extent Manufacturer delivers to
New Xxxxxxx Products or Manufactured Goods or packaging material in connection
with this Agreement which contain Trademarks, Manufacturer hereby grants to New
Xxxxxxx a royalty-free right to use such Trademarks solely as contained in such
Products or Manufactured Goods or packaging material and only as hereby
authorized by Manufacturer to the extent necessary for New Xxxxxxx to sell or
use such items without infringing such marks, whether before or, pursuant to
Section 7.3(a), after termination of this Agreement.
2.4. Documentation. Manufacturer may from time to time provide New
Xxxxxxx with certain brochures, pamphlets or other documentation relating to the
Manufactured Goods or Products (the "Documentation"). Manufacturer shall not
independently distribute manuals, brochures, and other labeling which contain
medical device claims for use with the Finished Goods or Products. As between
New Xxxxxxx and Manufacturer, Manufacturer owns all right, title and interest in
and to the copyrights and other intellectual property rights to such
Documentation. New Xxxxxxx may not reproduce, distribute, modify or display the
Documentation, except as authorized by Manufacturer. New Xxxxxxx shall have the
right to use such Documentation solely in the manner directed by Manufacturer.
2.5. License for "Medtrack" Xxxx. New Xxxxxxx grants to Manufacturer a
nonexclusive, royalty-free license to use the xxxx "Medtrack" on Finished Goods
supplied to New Xxxxxxx or its designees in connection with this Agreement.
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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
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ARTICLE III
COVENANTS
3.1. Certain Covenants of New Xxxxxxx. During the Term of this
Agreement, New Xxxxxxx agrees:
(a) to ensure that any sub-agent or sub-distributor appointed by New
Xxxxxxx pursuant to the terms of this Agreement has trained sales
personnel capable of representing the Finished Goods and the Products in
a fair and accurate manner:
(b) to make no use of the Products or Manufactured Goods that would
reasonably be expected to harm the reputation of the Products, the
Manufactured Goods or Manufacturer; and
(c) to cease sales of Finished Goods and Products to any purchaser
of Finished Goods or Products that New Xxxxxxx reasonably believes has
altered any Finished Good in a manner that converts such Finished Good
into a treadmill to be used for purposes the same as those of the
Products, unless New Xxxxxxx assures Manufacturer to its reasonable
satisfaction that the situation has been properly addressed and such
purchaser will not continue to so alter Finished Goods.
3.2. Certain Covenants of Manufacturer. During the Term of this
Agreement, Manufacturer agrees:
(a) to provide and maintain manufacturing facilities and personnel
for the timely and quality production of the Manufactured Goods;
(b) to ensure that the quality standards and specifications for the
Manufactured Goods set forth on Schedule 1 (as may be amended by New
Xxxxxxx from time to time with reasonable notice and details to
Manufacturer) are met in production;
(c) to make available to New Xxxxxxx, to the extent that
Manufacturer so makes available to other distributors of the Products,
instructional manuals and qualified sales personnel able to assist New
Xxxxxxx in providing instructions and general information with respect
to the Products and the repair and maintenance thereof; and
(d) to cease sales of Products to any purchaser of Products that
Manufacturer reasonably believes has altered any Product in a manner
that
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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
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converts such Product into a treadmill to be used for purposes the same
as those of the Medical Treadmills.
(e) Manufacturer will not change the design of the Manufactured
Goods without the consent of New Xxxxxxx, which consent shall not be
unreasonably withheld.
ARTICLE IV
REPORTING AND CONSULTATION
4.1. Reporting. (a) Manufacturer. Manufacturer agrees to furnish to New
Xxxxxxx promptly:
(i) Any information concerning the Manufactured Goods and Products
generally furnished by Manufacturer to customers or other distributors
of the Products;
(ii) Notification of any claim asserted or threatened by any third
party that the Manufactured Goods or Products infringe or misappropriate
any intellectual property right of a third party; and
(iii) Notification with regard to changes in design of the
Manufactured Goods.
(b) New Xxxxxxx. New Xxxxxxx agrees to furnish to Manufacturer promptly:
(i) Quarterly reports showing post-sale servicing of the Finished
Goods performed by New Xxxxxxx;
(ii) Periodic reports showing all recorded complaints or suggestions
received from customers regarding the performance or quality of the
Manufactured Goods or the service provided by New Xxxxxxx;
(iii) (a) Notification of any claim asserted or threatened by any
third party that the Manufactured Goods or Products infringe or
misappropriate any intellectual property right and (b) any information
relating to a third party's infringement or misappropriation of any
intellectual property rights relating to the Products or Manufactured
Goods; and
(iv) Notification of any demands, claims, actions, suits or
proceedings brought in connection with the Manufactured Goods or the
Products.
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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
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(v) Full reports of any event that may be required to be submitted to
the FDA under the Medical Device Reporting regulations, and full reports
of any event that may constitute a complaint within the meaning of the
FDA's Quality System Regulations or comparable foreign regulations.
(c) Consultation. Each Party agrees: (i) to be available on reasonable
notice and reasonable terms for consultations concerning the progress of New
Quinton's efforts with respect to the sale of the Products and the Finished
Goods and Manufacturer's quality control and production schedule, and (ii) to
provide to the other on reasonable notice and reasonable terms access to all
necessary facilities for inspections reasonably necessary to verify compliance
with any of the terms of this Agreement. The Parties agree to consult on the
pricing of the Manufactured Goods annually, or at such other time as
subsequently agreed, following review of the Cost of Manufacture and other
relevant factors.
ARTICLE V
MANUFACTURER'S WARRANTY: INDEMNIFICATION
5.1. Manufacturer's Warranty. Manufacturer warrants to be free of
defects in material and workmanship each of the (i) Products for two (2) years
and (ii) Manufactured Goods for thirteen (13) months (the "Warranty").
Manufacturer shall be responsible for reasonable shipping costs of the defective
Manufactured Goods, Products or parts thereof and their return or replacement
during such warranty period. If upon an actual approved warranty claim of a
customer, Manufacturer or New Xxxxxxx deviates from the warranty limitations in
favor of the customer, this act in no way shall materially change or set
precedent for future claims.
5.2. After-Sales Service. (a) Manufactured Goods. New Xxxxxxx shall
establish in the Territory an after-sales service network for the Manufactured
Goods adequate to support customer needs for both warranty and post-warranty
service for the Manufactured Goods. Manufacturer shall reasonably assist New
Xxxxxxx in qualifying personnel for certification in the repair of each type of
Manufactured Good. Manufacturer shall provide New Xxxxxxx, at the Cost of
Manufacture, with a stock of a sufficient number of spare parts to meet
anticipated warranty repair needs for the Manufactured Goods. Any non-warranty
part for Manufactured Goods shall be sold at (i) the Designated Percentage of
the Cost of Manufacture of such part, plus (ii) the Cost of Manufacture of such
part. Manufacturer agrees to reimburse New Xxxxxxx at the rate of [*] (subject
to increase in accordance with any increase in Manufacturer's regular labor
rate) for any labor reasonably performed by New Xxxxxxx on any Manufactured Good
under warranty.
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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
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(b) Products. Manufacturer shall be responsible for both warranty and
post-warranty service for the Products.
5.3. Manufacturer's Obligations for Failure of Manufactured Goods or
Products to Conform to Manufacturer's Warranty. Manufacturer's obligations to
New Xxxxxxx shall be limited to repair or replacement of such defective
Manufactured Good or Product as provided in Section 5.1. Manufacturer shall not
be obligated to repair or replace Manufactured Goods or Products to the extent
damaged after delivery by Manufacturer pursuant to Section 1.3(c): (i) by
improper storage by New Xxxxxxx or third parties, including, but not limited to,
shippers and end-users of the Manufactured Goods or Products; (ii) by misuse,
including damage due to: (A) modifications by New Xxxxxxx not authorized in
advance in writing by Manufacturer or modifications by any third party to the
original conditions of the Manufactured Goods or Products obtained through any
type of intervention, and (B) failure and/or misrepresentation by New Xxxxxxx
and/or third parties in furnishing instructions on installation and use of the
Manufactured Goods or Products to the end user, except to the extent the result
of acts or omissions of Manufacturer, but only to the extent that New Quinton's
or such third party's acts or omissions did not exacerbate or fail to mitigate
such damage; or (iii) damaged in shipment after delivery. On or before the last
day of each month, New Xxxxxxx shall deliver to Manufacturer a list of
complaints received during the previous month concerning Manufactured Goods and
Products for which New Xxxxxxx seeks repair or replacement, it being understood
and acknowledged that such delivery shall not relieve New Xxxxxxx of its
regulatory obligations relating to the handling of complaints. Any Manufactured
Good or Product or part thereof on such list shall, at Manufacturer's sole
option, be returned, at New Quinton's cost, to Manufacturer for inspection and
testing. If such Manufactured Good or Product or part thereof is found to fail
to conform to the Warranty, Manufacturer shall refund the cost of returning the
Manufactured Good or Product or part thereof to Manufacturer, as well as the
cost of delivering repaired or replacement Manufactured Goods or Products to New
Xxxxxxx and shall, pursuant to Section 5.1, pay the cost of any such
Manufactured Good or Product or part thereof. If such Manufactured Good or
Product or part thereof is found to conform to the Warranty, then Manufacturer
will return such item to New Xxxxxxx or to New Quinton's designee at New
Quinton's expense.
5.4. Third Party Manufactured Good and Product Liability Claims. Subject
to Section 5.3, Manufacturer shall indemnify, defend and hold harmless New
Xxxxxxx from and against any demands, claims, actions, suits and proceedings,
together with costs and expenses relating thereto, asserted or brought by a
third party for (i) injury to person or property (except to the extent caused by
New Xxxxxxx) (collectively, "Claims") to the extent that such Claims arise out
of or result from (A) any product liability claim with respect to the
Manufactured Goods or the Products relating to occurrences of injuries occurring
or arising after the date hereof or (B) the failure of Manufacturer to meet all
of the specifications set forth in Schedule 1, but only to the extent that New
Xxxxxxx (1)
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could not reasonably be expected to have discovered such failure prior to the
time of such demand, claim, action, suit or proceeding or (2) provided
Manufacturer with reasonable written notice of such failure; or (ii)
infringement or misappropriation of intellectual property of such third party,
provided that Manufacturer shall be responsible only for claims of infringement
or misappropriation with respect to changes made by Manufacturer to the Products
or Manufactured Goods after the date hereof, and provided, however, that New
Xxxxxxx shall be solely responsible for claims of infringement or
misappropriation to the extent related to changes made by Manufacturer to the
Products or Manufactured Goods in accordance with and at the request of New
Xxxxxxx. Manufacturer shall obtain, and maintain during the terms of this
Agreement, insurance against liabilities arising out of Manufacturer's
obligations under this paragraph in amounts and against such risks as are
usually insured against in the same general area by companies engaged in the
same or a similar business and shall name New Xxxxxxx as an additional insured
on all such policies. Manufacturer shall provide New Xxxxxxx evidence of such
insurance within ten (10) days after execution of this Agreement, including an
endorsement or certificate issued in the name of New Xxxxxxx.
5.5. New Quinton's Indemnity for Finished Goods Sold by New Xxxxxxx. New
Xxxxxxx shall indemnify, defend and hold harmless Manufacturer from and against
any and all Claims relating to Finished Goods except to the extent (a) caused by
Manufacturer, (b) relating to the treadmill portion of the Finished Goods or (c)
otherwise covered by Manufacturer's indemnity under Section 5.4; provided, that
New Xxxxxxx shall be solely responsible for claims of infringement or
misappropriation to the extent related to changes made by Manufacturer to the
Products or Manufactured Goods in accordance with and at the request of New
Xxxxxxx. New Xxxxxxx shall obtain, and maintain during the terms of this
Agreement, insurance against liabilities arising out of New Quinton's
obligations under this paragraph in amounts and against such risks as are
usually insured against in the same general area by companies engaged in the
same or a similar business and shall name Manufacturer as an additional insured
on all such policies. New Xxxxxxx shall provide Manufacturer evidence of such
insurance within ten (10) days after execution of this Agreement, including an
endorsement or certificate issued in the name of Manufacturer.
5.6. Indemnification Procedures. A Party claiming indemnification under
this Agreement shall follow the procedures set forth in Section 10.5 of the
Asset Purchase Agreement, dated as of the date hereof, among Manufacturer,
Xxxxxxx Fitness, Inc. and New Xxxxxxx.
5.7. Recall of Finished Goods. (a) If at any time New Xxxxxxx believes
that Finished Goods or Products should be recalled and/or be the subject of a
notification to a governmental authority because the Manufactured Goods or
Products shall have failed to meet specifications or were otherwise
noncompliant, New Xxxxxxx shall promptly notify Manufacturer thereof. If at any
time Manufacturer believes that Finished Goods or
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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
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Products should be recalled and/or be the subject of a notification to a
governmental authority because the Manufactured Goods or Products shall have
failed to meet specifications or were otherwise noncompliant, Manufacturer shall
promptly notify New Xxxxxxx thereof. New Xxxxxxx shall be responsible for
conducting any recall that is initiated and for complying with any and all
regulatory requirements applicable to any such recall. Manufacturer shall assist
New Xxxxxxx by providing information reasonably needed by New Xxxxxxx to conduct
such recall and to comply with regulatory requirements.
(b) If the Manufactured Goods shall fail to meet the specifications set
forth in Schedule 1 and the recall is more likely than not due to such failure,
then Manufacturer shall pay the costs of such recall initially. New Xxxxxxx
shall repay such costs to Manufacturer (i) if it is determined that the
Manufactured Goods met such specifications and (ii) to the extent that New
Xxxxxxx could reasonably be expected to have discovered such nonconformance to
such specifications prior to the time the recall was initiated.
(c) If the Manufactured Goods shall meet the specifications set forth in
Schedule 1, then New Xxxxxxx shall pay the costs of such recall initially.
Manufacturer shall repay such costs to New Xxxxxxx (i) if it is later determined
that the Manufactured Goods (A) failed to meet such specifications and (B) the
recall is more likely than not due to such failure and (ii) to the extent that
New Xxxxxxx could not reasonably be expected to have discovered such
nonconformance to such specifications prior to the time the recall was
initiated.
ARTICLE VI
FORCE MAJEURE
6.1. Force Majeure. If Manufacturer or New Xxxxxxx fails to perform or
delays in performing any term, condition or covenant contained herein, other
than to make payments prescribed hereunder in respect of Manufactured Good or
Product shipments for which title and risk of loss have passed from Manufacturer
to New Xxxxxxx prior to an event of force majeure, the obligation to perform
such term, condition or covenant shall be suspended for a maximum period of six
(6) months if such failure or delay in performance was caused by an act of God
or the elements, or fire, unavailability of power or water, breakdown of
machinery or facilities at a facility not owned by Manufacturer, inability to
obtain raw materials, operating materials or plant equipment, interruption of
transportation, war or the consequence thereof, insurrection, civil strife or
mob violence, cessation or reduction of operation (including, without
limitation, by reason of strikes and/or lock-outs or other work stoppage) at
Manufacturer's plant, beyond the reasonable control of Manufacturer or New
Xxxxxxx (any one or more of such causes, occurring singly or in combination, an
event of "force majeure"), provided that during the
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REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
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occurrence of any force majeure of Manufacturer, New Xxxxxxx shall have the
right to purchase equivalents of, or substitutes for, the ST Components and the
CR/SR Treadmills from other sellers (provided further that the License granted
pursuant to the Technology License shall not thereby come into effect). Except
as otherwise provided in this Article V, upon cessation of an event of force
majeure in question, the Party affected by such event of force majeure shall
perform all obligations the performance of which was suspended during such event
of force majeure. Each Party agrees to use good faith efforts to prevent or
remedy any force majeure that shall affect such Party.
ARTICLE VII
TERM; TERMINATION
7.1. Term. The term of this Agreement (the "Term of this Agreement")
shall begin on the date hereof and end on December 31, 2004 (the "Scheduled
Termination Date"). This Agreement shall be extended automatically for
additional twelve (12) month periods thereafter (the "Extended Date"), unless
this Agreement is terminated under the provisions of Section 7.2 below.
7.2. Termination. (a) Agreement. This Agreement may be terminated on or
before the Scheduled Termination Date or the Extended Date under the following
conditions:
(i) Either Party may terminate this Agreement if the other Party
commits a material breach of its obligations or covenants hereunder and
such breach is not cured, or not capable of cure, within forty-five (45)
days following written notice of the breach;
(ii) Either Party may terminate this Agreement immediately (a) if the
other Party files or consents to the filing of a petition for
bankruptcy, reorganization, insolvency or other relief under any law for
the benefit of debtors or (b) if an involuntary petition is filed under
any such law against the other Party and is not dismissed within one
hundred twenty days of filing or (c) if the other Party is dissolved or
liquidated under applicable law; and
(iii) Either Party may terminate this Agreement without cause by
giving written notice to the other Party one (1) year prior to the
Scheduled Termination Date and thereafter four (4) months prior to any
anniversary of the Scheduled Termination Date.
(b) Production of Certain Manufactured Goods or Products. Manufacturer
may cease manufacturing any Manufactured Good or Product at any time upon the
issuance of
[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
12
an injunction in connection with a claim of infringement with respect to such
Manufactured Good or Product.
7.3. Effect of Termination. Following the expiration or termination of
this Agreement under Section 7.1 or 7.2, the Parties shall have the following
rights and obligations:
(a) Right to Sell. New Xxxxxxx shall have the right (i) to sell
(consistent with past practice) or otherwise dispose of its Products inventory
on hand on the date of termination, and (ii) for as long as necessary, to sell
or otherwise dispose of its Finished Goods inventory on hand on the date of
termination, if any, provided, in any case, that New Xxxxxxx shall not sell or
dispose of such inventory in a manner that might damage Manufacturer's trade
name or trademarks or their associated goodwill, and provided further that under
no circumstances shall New Xxxxxxx sell any Product or Finished Good in the
event Manufacturer ceases manufacture of such Product or the corresponding
Manufactured Good pursuant to Section 7.2(b) and Manufacturer notifies New
Xxxxxxx of such cessation in manufacturing pursuant to Section 7.2(b). Upon the
expiration of four (4) months following the date of such termination,
Manufacturer shall have the right to purchase any remaining Products inventory
at cost by giving New Xxxxxxx notice thereof.
(b) Return of Confidential Information. Each Party shall promptly return
to the other all Confidential Information of the other that may be in the other
Party's possession on the date of termination or expiration. In addition,
Section 8.1 shall survive termination of this Agreement.
(c) Return of Promotional Materials. New Xxxxxxx shall return to
Manufacturer all promotional, sales and other literature relating to the
Products or Manufactured Goods in New Quinton's possession or under its control
on the date of termination, except as may be reasonably necessary in connection
with the disposition of inventory under clause (a) above.
(d) Parts. During the term of this Agreement plus any extensions
thereof, Manufacturer shall make spare parts for repair of the Manufactured
Goods or Products available to New Xxxxxxx on the same terms and conditions as
would be required under Section 5.2(a)(i) if this Agreement were still in
effect, provided that the price of each such spare part shall be the Cost of
Manufacture for such part plus [*]. For a period of five (5) years after the
termination of this Agreement, Manufacturer shall make spare parts for repair of
the Manufactured Goods or Products available to New Xxxxxxx, provided that the
price of each such spare part shall be determined by Manufacturer on a
reasonable basis. Notwithstanding the foregoing, Manufacturer's obligation to
make spare parts for repair of any item which has been discontinued shall
terminate on the fifth anniversary of such discontinuance.
[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
13
(e) Accrued Liabilities. Each liability of either Party to the other
accrued on or before the date of termination or expiration shall continue in
full force and effect, unaffected by the termination.
(f) No Effect on Claims. No claim for damages on the part of either
Party by reason of any breach of this Agreement shall be affected by such
expiration or termination.
(g) Survival of Indemnification Provisions. The obligations provided in
Sections 5.4, 5.5 and 5.6 shall survive the date of expiration or termination
and be enforceable for a period of six (6) years following the date of
termination or expiration.
ARTICLE VIII
CONFIDENTIALITY
8.1. Confidential Information. (a) All Confidential Information shall be
held and protected by the recipient in strict confidence, shall be used by the
recipient only as required to render performance under this Agreement, and shall
not be disclosed to any personnel or other person except on a need to know
basis, and the recipient shall use its best efforts to prevent any unauthorized
use or disclosure thereof by the personnel and other persons to whom such
Confidential Information is disclosed by the recipient in accordance with the
foregoing.
(b) Notwithstanding the foregoing, the terms of this Section 8.1 shall
not apply to Confidential Information that (i) is publicly available or in the
public domain at the time disclosed, (ii) is or becomes publicly available or
enters the public domain through no fault of the recipient, (iii) is already in
the recipient's possession free of any confidentiality obligations with respect
thereto at the time of disclosure, (iv) is independently developed by the
recipient, (v) is approved for release or disclosure by the disclosing Party
without restriction, (vi) is disclosed as reasonably required in response to an
order of a court or other governmental body, provided that the Party making such
disclosure pursuant to such an order shall first have given notice to the other
Party and made a reasonable effort to obtain a protective order, (vii) is
otherwise required by law or regulation to be disclosed, or (viii) is disclosed,
but only to the extent necessary, to establish a Party's rights under this
Agreement.
(c) The parties acknowledge that any disclosure or misappropriation of
Confidential Information in violation of this Agreement would cause irreparable
harm, the amount of which may be extremely difficult to estimate, thus making
any remedy at law or in damages inadequate. Each Party therefore agrees that the
other Party shall have the right to apply to any court of competent jurisdiction
for an order restraining any
[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
14
breach or threatened breach of this Section 8.1 and for any other relief as such
other Party deems appropriate. This right shall be in addition to any other
remedy available in law or equity.
ARTICLE IX
DEFINITIONS
"Additional Charge" shall mean, for all Manufactured Goods ordered in
any Agreement Year, the difference between (x) the prices for such Manufactured
Goods adjusted to reflect any increase in the Designated Percentage and (y) the
prices for such Manufactured Goods unadjusted to reflect any increase in the
Designated Percentage.
"Agreement" is defined in the preamble.
"Agreement Year" shall mean the period of time that elapses between the
date hereof and December 31, 2000 and thereafter January 1 through December 31
of each year.
"Asset Purchase Agreement" shall mean the Asset Purchase Agreement,
dated as of November 10, 1999, among Manufacturer, New Xxxxxxx and Xxxxxxx
Fitness, Inc.
"Claims" is defined in Section 5.4.
"Confidential Information" shall consist of (i) any data or information,
oral or written, that relates to either Party's past, present or future
research, development or business activities, including any unannounced
product(s) and service(s), (ii) any algorithms, designs, or specifications
relating to the Products or Manufactured Goods, and (iii) information relating
to services, developments, inventions, processes, plans, financial information,
customer and supplier lists, forecasts and projections. Confidential Information
shall also include the terms and conditions of this Agreement and all charges,
fees, credits and invoices hereunder.
"Cost of Manufacture" shall mean all of Manufacturer's direct and
indirect costs of manufacture and certain allocated costs in the categories set
forth on Schedule 2, as adjusted by Manufacturer at the end of each calendar
year for the following calendar year.
"CR/SR Treadmills" shall mean each of the treadmill models SR 60 and CR
60, together with their respective successor models.
"Designated Percentage" shall mean that percentage equal to (i) [*], in
any Agreement Year in which New Xxxxxxx purchases at least [*] of Manufactured
Goods, or (ii) [*] plus, for each [*] less than [*] purchased by New Xxxxxxx in
any Agreement Year,
[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
15
[*], determined upon delivery of the Purchase Order for the twelfth month of
such Agreement Year, provided that such numbers of units shall be prorated to
account for any termination of this Agreement prior to the expiration of an
Agreement Year.
"Detailed Forecast" is defined in Section 1.2(a).
"Distributorship" shall mean the non-exclusive distributorship granted
by Manufacturer to New Xxxxxxx pursuant to Section 1.l(b).
"Extended Date" is defined in Section 7.1.
"FDA" shall mean the U.S. Food and Drug Administration.
"Finished Good" shall mean any Medical Treadmill or CR/SR Treadmill.
"force majeure" is defined in Article VI.
"Manufactured Goods" shall mean the ST Components and the CR/SR
Treadmills.
"Manufacturer" is defined in the preamble.
"Medical Treadmills" shall mean the ST 5S and ST 65 treadmills that are
part of the stress test system, together with their respective successor models.
"New Xxxxxxx" is defined in the preamble.
"Order Month" is defined in Section 1.2(a).
"Parties" and "Party" are defined in the preamble.
"Products" shall mean the treadmill models ClubTrack, ClubTrack Plus,
ClubTrack H.R. and ClubTrack H.R. Plus, and their respective successor models.
"Purchase Order" shall mean a purchase order covering a one-month period
issued by New Xxxxxxx to Manufacturer specifying (i) the types of Manufactured
Goods or Products to be purchased, (ii) the quantity of each such Manufactured
Good or Product, (iii) the respective delivery dates, and (iv) the shipping
instructions.
"QIC" shall mean QIC Holding Corp., a California corporation.
[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
16
"Regulatory Approvals" shall mean the consent, approval, authorization,
waiver, permit, clearance, concession, license or certificate of any
governmental body or any entity exercising regulatory functions.
"Scheduled Termination Date" is defined in Section 7.1.
"ST Component" shall mean the treadmill portion of each of the Medical
Treadmills.
"Technology License Agreement" shall mean the Technology License
Agreement, dated as of the date hereof, between Manufacturer and New Xxxxxxx.
"Term of this Agreement" is defined in Section 7.1.
"Territory" shall mean medical diagnostic testing and rehabilitation
facilities where subjects are monitored with medical equipment by medical
personnel. These facilities can be a hospital, medical research facility,
doctor's office or rehabilitation center. Hospital wellness centers and
community-based wellness centers are not considered part of the Territory except
for segregated locations within such wellness centers where cardiac or
cardio-pulmonary rehabilitation is monitored with medical equipment by medical
personnel.
"Warranty" is defined Section 5.1.
ARTICLE X
MISCELLANEOUS
10.1. Relationship of the Parties. The relationship between the Parties
created by this Agreement shall not be construed as one of agency, partnership,
joint venture or employer/employee. Each Party shall be and remain an
independent contractor and neither shall have the authority to represent or bind
the other.
10.2. Assignment, Successors and Assigns. This Agreement shall be
assignable by either party in connection with (i) a change of control, merger or
sale of all or substantially all of such party's assets or businesses or (ii)
the sale of all or substantially all of such party's treadmill or stress test
business (provided that such sale may not be to a competitor of the other party
hereto). Other than as set forth in the preceding sentence, this Agreement may
not be assigned, transferred, licensed, pledged or otherwise disposed of by
either party without the other party's prior written consent, and any attempt to
assign this Agreement other than as provided herein shall be void. This
Agreement shall
[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
17
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns.
10.3. Notices. All notices or other communications required or
contemplated by this Agreement shall be in English and in writing, and shall be
sent by confirmed facsimile, courier or prepaid registered first class airmail
to the address for each Party designated below or to such other address as such
Party may designate in a notice that complies with this paragraph.
If to Manufacturer: StairMaster Sports/Medical Products, Inc.
00000 Xxxxxxx Xxxx X.X., Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000 X.X.X.
Attention: President and Chief Executive Officer
Fax: (000) 000-0000
If to New Xxxxxxx: Xxxxxxx Instrument Company
0000 Xxxxx Xxxxx Xxxxxxx
Xxxxxxx, XX 00000-0000
Attention: President
Fax: (000) 000-0000
with a copy to: QIC Holding Corp.
000 00xx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: President
Fax: (000) 000-0000
Communications shall be deemed to have been given on the date of receipt.
10.4. Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington.
10.5. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision. The Parties intend that the provisions herein be enforced to the
fullest extent permitted by applicable law. Accordingly, the Parties agree that
if any provisions are deemed not enforceable, they shall be deemed modified to
the extent necessary to make them enforceable.
10.6. Waiver. No waiver of any term or condition of this Agreement shall
be valid unless in writing and signed by the appropriate Party, and no such
waiver shall extend to any term or condition or to any breach other than those
specifically described in such waiver. No failure or delay by either Party to
enforce strictly any of the provisions of this Agreement shall be construed as a
waiver of such provision.
[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
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10.7. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement of the Parties with respect to the subject matter hereof, and
supersedes all previous oral or written agreements. No amendment, modification,
change or alteration of this Agreement shall be effective unless made in writing
and signed by a duly authorized officer representative of each of the Parties.
10.8. No Liability for Certain Damages. Subject to Sections 5.4 and 5.5,
under no circumstances shall either Party have liability (except to the extent
foreseeable) for consequential, indirect, special or punitive damages arising
out or in connection with: (i) this Agreement, (ii) such Party's activities in
connection herewith, or (iii) the failure of Manufactured Goods, Products or
parts thereof to operate properly.
10.9. Headings. The headings in this Agreement are for purposes of
convenience only and shall not limit or otherwise affect any of the terms or
provisions hereof.
10.10. Counterparts. This Agreement may be executed by facsimile in one
or more counterparts, each of which shall be an original but all of which shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers on and as of the date hereof.
STAIRMASTER SPORTS/MEDICAL XXXXXXX INSTRUMENT COMPANY
PRODUCTS, INC.
By: /s/ Xxx Xxxxxx By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------- ----------------------------------
H. Xxx Xxxxxx
Chief Executive Officer
Stairmaster
[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
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Schedule 1
Quality Standards and Specifications
For Finished Goods:
1. StairMaster will maintain an internal Quality System that meets or
exceeds all of the requirements set forth in the Quality Systems
Regulation, 21 CFR 820 ("Medical Devices; Current Good Manufacturing
Practice (CGMP)").
2. StairMaster's Quality System will also comply with ISO 9000
standards.
3. Workmanship and appearance standards will meet or exceed those
specified in Quinton's Workmanship Standards Manual 018124 or other
Xxxxxxx approved standards.
4. Printed Circuit Boards will be manufactured in compliance with the
latest revision of the ANSI/IPC-A-600 standards.
5. Items shall be suitably packaged for acceptance by common carrier for
surface transportation, handling and storage without detrimental
effects to the items.
6. StairMaster will assure that devices will comply with all appropriate
regulations for the country of destination (etc. UI/CSA/CE).
[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
1
Schedule 2
Manufactured Good Prices
Product Cost
------- ----
ST 55 raw materials costs: [*]
00378-001 direct manufacturing costs: [*]
indirect manufacturing costs: [*]
manufacturing variances: [*]
FDA costs: [*]
maintenance and engineering [*]
costs associated with Medical
Treadmills:
administration costs: [*]
Total: [*]
ST 65 raw materials costs: [*]
00383-001 direct manufacturing costs: [*]
indirect manufacturing costs: [*]
manufacturing variances: [*]
FDA costs: [*]
maintenance and engineering [*]
costs associated with Medical
Treadmills:
administration costs: [*]
Total: [*]
SR 60 raw materials costs: [*]
00390-001 direct manufacturing costs: [*]
indirect manufacturing costs: [*]
manufacturing variances: [*]
FDA costs: [*]
[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
2
Product Cost
------- ----
maintenance and engineering [*]
costs associated with Medical
Treadmills:
administration costs: [*]
Total: [*]
CR 60 raw materials costs: [*]
00380-001 direct manufacturing costs: [*]
indirect manufacturing costs: [*]
manufacturing variances: [*]
FDA costs: [*]
maintenance and engineering [*]
costs associated with Medical
Treadmills:
administration costs: [*]
Total: [*]
[*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.
3
