EXHIBIT 10.24
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT
FOR PORTIONS OF THIS EXHIBIT PURSUANT TO
RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
EXOGEN, INC.
AND
XXXXX & NEPHEW, INC.
UNITED STATES SALES REPRESENTATIVE AGREEMENT
August 10, 1998
TABLE OF CONTENTS
PAGE
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1. Appointment...........................................................1
2. Current Arrangements in Certain Territories...........................2
3. Commission............................................................3
4. Minimum Number of Orders..............................................4
5. Prices and Terms of Sale..............................................6
6. S&N's Responsibilities................................................6
7. Exogen's Responsibilities.............................................7
8. FDA Laws and Regulations..............................................9
9. HCFA Reimbursement Codes and CPT Codes...............................10
10. Warranty Disclaimer; Limitation of Liability.........................10
11. Insurance............................................................10
12. Arbitration..........................................................11
13. Assignment and Successors............................................11
14. Effective Date, Term and Termination.................................11
15. Relationship of Parties..............................................13
16. Miscellaneous........................................................13
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EXHIBITS
Exhibit A Current Arrangements in Certain Territories
Exhibit B Prices, Discounts, Allowances and Terms of Sale
Exhibit C Potentially Transferred Employees
Exhibit D [Intentionally Omitted]
Exhibit E Form of Assignment and Assumption Agreement
ii
UNITED STATES SALES REPRESENTATIVE AGREEMENT
Agreement dated as of August 10, 1998 between Exogen, Inc., a
Delaware corporation of 00 Xxxxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000
("Exogen"), and Xxxxx & Nephew, Inc., a Delaware corporation of 0000 Xxxxxx
Xxxx, Xxxxxxx, Xxxxxxxxx 00000 ("S&N").
PRELIMINARY STATEMENTS
A. Exogen and S&N have entered into a Master Agreement, dated
as of the date hereof (the "Master Agreement"), providing for, among other
things, (i) the purchase of shares of Exogen's capital stock by S&N, (ii) the
option in favor of S&N to enter into a U.S. Stocking Distribution Agreement, a
Global Distribution Agreement and (in certain cases) one or more non-U.S.
individual country Distribution Agreements, and (iii) the option to acquire
additional shares of Exogen Common Stock.
B. The parties wish to enter into this Agreement as part of
the relationship contemplated by and pursuant to the terms of the Master
Agreement.
1. Appointment.
(a) Subject to the terms and conditions of this Agreement,
for the term of this Agreement Exogen hereby appoints S&N as its exclusive
representative for the Sale (as defined below) and promotion in the United
States and Puerto Rico of all models of Exogen's Sonic Accelerated Fracture
Healing System ("SAFHS"), including without limitation the SAFHS Model 2A
(subject to Exhibit B), the SAFHS 2000 and the Exogen (or SAFHS) 3000 currently
under development, including all improvements and enhancements thereto
incorporated into the Products on a commercial basis, for the treatment of bone
fractures, osteotomies, arthrodeses (other than spine fusion) and distractive
osteogenesis ("Products"). The terms "Sale," "Sell," "Sold" and "Selling" as
used in this Agreement shall include outright sales or transfer in which title
to a Product passes to the customer and short and long term leases, bailments
and other arrangements whereby Products are made available to users by Exogen.
S&N hereby accepts such appointment. Exogen shall not itself Sell or solicit
Sales, or authorize others to Sell or solicit Sales, for the use or delivery of
the Products anywhere in the United States. Any inquiries regarding the Sale or
potential Sale of the Products received by Exogen shall be referred to S&N.
(b) S&N shall have the right to discharge its obligations
hereunder through its own employees, through its Affiliates (as defined in the
Master Agreement), through independent sales representatives or distributors,
provided that S&N shall at all times remain liable for the activities of such
persons and for compliance with S&N's obligations under this Agreement. Attached
as Exhibit C is a complete and accurate list of all employees of Exogen whose
current primary responsibilities involve the Sale of the Products, together with
the job title, job description, compensation and benefits of each such employee
("Potentially Transferred Employees"). S&N shall have the right to offer any or
all Potentially Transferred Employees employment with S&N and Exogen shall
encourage the Potentially Transferred Employees to
whom S&N offers employment to accept employment with S&N. S&N shall have
absolute discretion with respect to which, if any, of the Potentially
Transferred Employees S&N may offer employment. S&N shall also have absolute
discretion as to the compensation and benefits to be paid by S&N to any
Potentially Transferred Employee who accept S&N's offer of employment
("Transferred Employee"). S&N shall also have the right to establish the terms
of the employment of the Transferred Employees and shall have the right to
terminate or fire any Transferred Employee. Exogen shall be responsible for any
severance and other obligations owed to Potentially Transferred Employees who do
not become Transferred Employees and shall indemnify and hold S&N harmless from
any claims, losses or damages relating to the Potentially Transferred Employees
who do not become Transferred Employees. Exogen shall [****]; provided, however,
Exogen's obligations shall not exceed those set forth in Exogen's severance
policy in effect as of the date of this Agreement. Exogen shall also indemnify
and hold S&N harmless from and against any claims, losses or damages with
respect to Potentially Transferred Employees arising prior to or accrued to the
date of this Agreement and with respect to Transferred Employees arising prior
to or accrued to the date on which such employee becomes a Transferred Employee
(except for any claims, losses or damages caused by S&N). S&N shall indemnify
and hold harmless Exogen from and against any claims, losses or damages with
respect to Transferred Employees arising on or after the date on which such
employee becomes a Transferred Employee (except for (i) the specific severance
obligation of Exogen set forth in the precedent sentence; and (ii) any claims,
losses or damages caused by Exogen. The parties agree that if (a) any
Potentially Transferred Employees who are identified in Exhibit C do not, during
the first 180 days after the effective date of this Agreement, become a
Transferred Employee or do not remain a Transferred Employee or sales
representative or distributor of S&N (or employee thereof) at the end of such
180 day period, and (b) the percentage of volume as shown on Exhibit C
associated with all Potentially Transferred Employees who do not become
Transferred Employees or do not remain a Transferred Employee or sales
representative or distributor (or employee thereof) of S&N at the end of such
180 day period exceeds 20%, then the sum of the number of Units listed next to
such Potentially Transferred Employees will be deducted from the Minimum Number
of Units for Contract Year 1, but in no event shall the reduction exceed [****]
Units.
2. Current Arrangements in Certain Territories.
(a) Attached hereto as Exhibit A is a complete and
accurate list of territories in the United States in which Exogen currently has
agreements ("Distribution Agreements") with sales representatives or
distributors ("Distributors") for the Sale of Products. Exogen represents and
warrants that Exogen has delivered a full and complete copy of all Distribution
Agreements to S&N, together with all addenda, amendments, modifications,
extensions, renewals, and notices sent or received pursuant to the terms of each
Distribution Agreement and copies or summaries of any programs or policies
applicable to Distributors. Exogen further represents and warrants to S&N that
the Distribution Agreements constitute a
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[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
2
valid and binding obligation of the parties thereto and are in full force and
effect and may be transferred to S&N and immediately thereafter will continue in
full force and effect, and in each case without breaching the terms thereof
resulting in the forfeiture or impairment of any rights thereunder and without
the consent, approval or act of, or the making of any filing with or providing
any notice to, any other party. Exogen has fulfilled and performed in all
material respects its obligations under each of the Distribution Agreements and
Exogen is not in nor, to the best of its knowledge, alleged to be in breach or
default under any of the Distribution Agreements, and there is no basis for
termination of the Distribution Agreements. Exogen further represents and
warrants that, to the best of Exogen's knowledge, no Distributor has breached or
defaulted thereunder, and no event has occurred and no condition or state of
facts exists which, with the passage of time or the giving of notice or both,
would constitute such a default or breach by Exogen, or to the best of Exogen's
knowledge by any Distributor. Exogen also represents and warrants that Exogen is
not currently renegotiating any of the Distribution Agreements or has offered or
paid or agreed to pay any consideration to any Distributor not required under
the Distribution Agreements. Exogen further represents and warrants to S&N that
there have been no modifications or amendments to the Distributor Agreements
either orally or in practice other than those amendments delivered or described
to S&N. Exogen shall make all payments and satisfy all of its obligations under
the Distribution Agreements arising or accruing prior to the date of this
Agreement. Any announcement or initial communication to the Distributors
concerning the assignment of the Distribution Agreements from Exogen to S&N
shall be mutually agreed upon by Exogen and S&N.
(b) Exogen and S&N shall, on the date of this Agreement,
execute and deliver an Assignment and Assumption Agreement duly executed by
Exogen in the form attached hereto as Exhibit E pursuant to which Exogen shall
assign the Distribution Agreements to S&N and S&N shall assume the Distribution
Agreements.
3. Commission. S&N will be entitled to a commission of [****] on the
Net Sales of Products by Exogen for use or delivery anywhere in the United
States for sales up to the then applicable Minimum Number of Units (as defined
in Section 4) and [****] of the Net Sales for Sales in excess of the then
applicable Minimum Number of Units. "Net Sales" means the amount shown on the
invoice as due from the patient and/or insurer, after giving effect to quantity
or other discounts (as provided for in Section 5 hereof), less any shipping and
insurance charges and taxes shown on such invoice and a reasonable reserve for
bad debt. The reserve for bad debt shall be estimated based upon Exogen's
history of reimbursement for the Products by patients and/or insurers during the
preceding 12-month period. This reserve will be recalculated at the end of each
calendar quarter and the new estimate will be applied to all Net Sales of
Products sold during the next following calendar quarter. Adjustments to Net
Sales for Units returned unused shall not be included in the reserve for bad
debt, but shall be credited against and reduce any future commission payable to
S&N in an amount equal to the original commission paid to S&N on such Net Sales.
Exogen shall, within 15 days after the end of each
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[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
3
month, deliver to S&N (i) a report showing the Net Sales of Products Sold during
such month (which report shall include physician and patient information) on a
sales territory by sales territory basis and (ii) payment of the commissions
owed to S&N for the Net Sales of Products shown in such report. In addition,
Exogen shall provide S&N with reports concerning sales commissions and order
activity to the same extent as Exogen generates such reports as of the date of
this Agreement. S&N shall have the right upon reasonable notice and during
regular business hours to audit the reports delivered to it by Exogen.
4. Minimum Number of Orders.
(a) Except as otherwise provided in this Agreement, S&N shall
place orders with Exogen for not less than the applicable minimum number of
Units (the "Minimum Number of Units") of Products set forth below for each year
commencing on August 1, 1998 and on August 1 of each year thereafter during the
term of this Agreement (each such year being referred to herein as a "Contract
Year"). The Minimum Number of Units for Contract Year 1 shall be reduced on a
pro rata basis for the period between August 1, 1998 and the date of this
Agreement.
Contract Year Tier 1 Tier 2 Requisite
Minimums Minimums Approval
Differential
Year 1 [****] [****] [****]
Year 2 [****] [****] [****]
Year 3 [****] [****] [****]
Year 4 and each subsequent year to be negotiated in good faith no sooner than 7
months and no later than 6 months prior to the expiration of the then current
Contract Year.
If the parties are unable to agree upon the Minimum Number of Units for any such
Contract Year, then this Agreement shall terminate in accordance with the
provisions of Section 14(e).
For purposes of this Agreement, a "Unit" shall consist of a main operating unit
and a transducer head but shall not include any Units covered by Sections 7(d)
and (e). S&N shall not be deemed to have "ordered" a Unit unless and until such
Unit has received reimbursement approval and has been shipped and invoiced by
Exogen (unless Exogen fails to ship such Unit in accordance with Section 7(a),
in which case such Unit shall be deemed to have been shipped in accordance with
Section 7(a)).
(b) Tier 1 Minimums shall apply commencing on the later of [****] or the
Requisite Approval Date. "Requisite Approval Date" shall mean the date on which
all of the following have occurred: (i) the Pre-Market Approval ("PMA")
Supplement for one or more of the Products for [****] fractures has been
approved by the U.S. Food and Drug Administration
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[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
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("FDA"), and (ii) the PMA Supplement for the Exogen 3000 Product has been
approved by the FDA, and can be marketed for [****] fresh fractures, and (iii) a
favorable national coverage policy for one or more of the Products has been
issued by the US Health Care Financing Administration ("HCFA"), (the approvals
under clauses (i), (ii) and (iii) being referred to herein as the "Requisite
Approval"). Tier 2 Minimums shall apply so long as the Requisite Approval has
not occurred.
(c) If the Requisite Approval Date occurs during Contract
Year 2, the applicable Minimum Number for Contract Year 2 and for Contract Year
3 shall be as follows:
(i) The Minimum Number for Contract Year 2 shall
equal the sum of [****]:
plus the product of (x) a fraction, the numerator of which is the number of days
occurring in Contract Year 2 after the Requisite Approval Date and the
denominator of which is 365, times (y) [****] (being the Requisite Approval
Differential for Contract Year 2 as shown in the above table).
(ii) The Minimum Number for Contract Year 3 shall
equal the sum of:
(A) The product of (A) a fraction, the
numerator of which is the number of days in Contract Year 3 ending on or before
the first anniversary of the Requisite Approval Date and the denominator of
which is 365, times (B) [****] (being the sum of the Tier 2 Minimum for Contract
Year 3 plus the Requisite Approval Differential for Contract Year 2, both as
shown in the above table); plus
(B) The product of (A) a fraction, the
numerator of which is the number of days in Contract Year 3 ending after such
first anniversary and the denominator of which is 365, times (B) [****] (being
the sum of the Tier 2 Minimum for Contract Year 3 plus the Requisite Approval
Differential for Contract Year 3, both as shown in the above table).
(d) If the Requisite Approval Date occurs during Contract
Year 3, the applicable Minimum Number for Contract Year 3 shall be the sum of
[****]:
plus the product of (x) a fraction, the number of which is the number of days
occurring in Contract Year 3 after the Requisite Approval Date and the
denominator of which is 365, times (y) [****] (being the Requisite Approval
Differential for Contract Year 2 as shown in the above table).
(e) If the applicable Minimum Number of Orders is not
achieved in any Contract Year, then, at S&N's option, S&N shall do one or a
combination of the following:
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[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
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(i) Within 60 days after the end of such Contract
Year, S&N shall pay to Exogen its Net Profit on the difference between the
applicable Minimum Number for such Contract Year and the actual number of Sales
of Products during such Contract Year. "Net Profit" means the average Net Sales
price to the patient or third party payor of each Product Sold in the United
States during the Contract Year, less S&N's commission and Exogen's Standard
Manufacturing Cost, multiplied by the difference between the number of units
actually sold and the Minimum Number for that Contract Year. "Standard
Manufacturing Cost" means direct materials, direct labor and factory overhead
computed in accordance with generally accepted accounting principles
consistently applied and averaged for each device on the basis of unit Sales
over the Contract Year; and/or
(ii) S&N may elect to have the Minimum Number for
the next Contract Year increased by the difference between the number of units
actually Sold under this Agreement and the Minimum Number for the applicable
Contract Year, up to 10% of the Minimum Number; or
(iii) S&N may elect to terminate this Agreement on
six months' written notice to Exogen, during which six-month period S&N shall
continue to be a sales representative for Products on a non-exclusive basis with
no obligation to meet any minimum requirement or to spend any particular amount
on marketing, advertising and promotional activities. Any election by S&N under
this Subsection (e) shall be exercised by written notice to Exogen no later than
60 days after the end of a Contract Year.
5. Prices and Terms of Sale. Products shall be offered for Sale by S&N
at such prices, discounts, allowances and on such terms of Sale as are
established by Exogen from time to time after reasonable consultation with S&N,
taking into account manufacturing, sales and marketing costs, customer demand,
and competitive factors in the marketplace. S&N shall receive at least 30 days'
advance written notice of any change in prices, discounts, allowances and terms
of Sale. Current prices, discounts, allowances and terms of Sale, which are set
forth in Exhibit B, will not be modified in any material respect prior to
December 31, 1998 without the prior written approval of S&N.
6. S&N's Responsibilities.
(a) S&N and its sales representatives and distributors shall
regularly call upon or otherwise contact physicians, trauma centers and other
organizations and individuals who are in a position to prescribe the use of
Products to their patients. Each order for a Product shall be written on an
order form to be developed jointly by S&N and Exogen, and shall be submitted
promptly to Exogen by S&N along with a physician's prescription and a letter of
medical necessity and any other information reasonably required by the
applicable third party payor.
(b) S&N shall provide reasonable follow up contact with
physicians and patients to demonstrate, explain and in-service the use of the
Products.
6
(c) S&N shall submit a non-binding sales forecast to Exogen on
or prior to the first day of each calendar quarter for the next succeeding
twelve-month period. Exogen shall have the right to disapprove the forecast by
providing S&N with written notice of disapproval no later than ten (10) days
following receipt of the forecast. The forecast shall be deemed approved unless
a notice of disapproval is transmitted in accordance with this section. The
parties shall negotiate in good faith with respect to any dispute or
disagreement concerning the forecast. Such forecast shall be updated more
frequently if there is a material change in any information on which the
forecast is based.
(d) S&N shall incur costs for marketing, advertising and
promotional activities in connection with the Products of not less than [****]
during each of the first two Contract Years. Such marketing, advertising and
promotional activities shall be as agreed upon from time to time by Exogen and
S&N in the manner specified in Section 7(j).
(e) S&N shall provide a project manager for the Products at
S&N's expense. The project manager may support both the Products and other
products of S&N. The salary and benefits associated with the project manager
shall not be considered as marketing expenses for purposes of Section 6(d).
(f) S&N will use diligent efforts to integrate the Products
into its distribution structure within its Orthopaedics Division as well as
other divisions of S&N throughout the United States to enhance the distribution
channels established by Exogen and assigned to S&N as part of this Agreement.
(g) Exogen shall enter into service agreements for the benefit
of S&N with respect to other equipment, supplies and services as the parties
agree may be required or desired for S&N to satisfy its obligations under this
Agreement.
7. Exogen's Responsibilities.
(a) Except as provided in Subsection (b), Exogen shall process
all orders submitted to it by S&N and shall be responsible for pre-certifying,
arranging shipments and making collections from patients and/or their insurers.
Exogen shall use diligent efforts to supply Products in excess of the quantities
provided for on the forecast delivered under Section 6(c). Provided, however, in
no event shall Exogen be obligated to supply Products in excess of [****] of the
quantities provided for on the forecast delivered under Section 6(c) shall not
constitute a default under this Agreement. Upon receipt from S&N of the
documentation required under Section 6(a) and appropriate reimbursement
approvals under Section 6(a) of this Agreement, Exogen shall promptly (but no
later than 5 days after obtaining such documentation and approvals) ship the
Product. Shipments shall be made to S&N or directly to the prescribing physician
or patient as S&N shall direct. Each unit shipped shall be accompanied by
appropriate
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[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
7
directions for use and a standard warranty. Exogen shall also transmit an
invoice to the patient and/or insurer, as applicable, setting forth the price,
discount or allowance, if any, and other terms of Sale. Exogen may reject orders
submitted to it by S&N only if Exogen has a good faith belief that the patient
and/or insurer may be unable or unwilling to pay the invoice submitted by
Exogen. In such a case, Exogen shall give S&N written notice within seven days
that the order has been rejected. S&N may then, at its option and on written
notice, require Exogen to fill such order and shall indicate in the written
notice whether the Units ordered are to be considered PCUs (as defined below).
If such Units are not considered PCUs and if the patient and/or insurer should
fail to pay Exogen's invoice within 150 days, S&N shall pay Exogen an amount
equal to 150% of Exogen's Standard Manufacturing Cost for the Product (less any
amount paid by such patient and/or insurer). Exogen shall thereupon assign to
S&N all of its legal rights against such patient and/or insurer with respect to
such invoice, and S&N shall be entitled to pursue such rights in its own name.
(b) S&N shall have the right to visit Exogen's manufacturing
facility and to observe the work in process and perform quality and compliance
audits during regular business hours on reasonable advance notice to Exogen. The
parties shall discuss S&N's observations and findings in good faith, and Exogen
will take any corrective actions mutually agreed to by Exogen and S&N resulting
from those good faith negotiations at Exogen's expense.
(c) Exogen will provide to S&N, at Exogen's cost, a reasonable
quantity of training materials, directions for use, advertising materials,
catalog sheets and other promotional material. Materials which refer to S&N in
any manner shall not be used or distributed without the prior written approval
of S&N.
(d) At the request of S&N, Exogen shall furnish to S&N up to
150 SAFHS fully operational demonstration units of the model requested by S&N
and 150 additional transducer heads during the first two Contract Years at no
cost to S&N.
(e) During the first two Contract Years, Exogen shall furnish
up to [****] Professional Courtesy Units ("PCUs") in the United States at no
cost to S&N. PCUs will either be designated by S&N on the orders submitted to
Exogen or designated as such in accordance with Section 5.
(f) Exogen will maintain a 24-hour a day hot line and
toll-free telephone number to respond to inquiries from physicians and patients
and will provide reasonable field service assistance as required from time to
time. Exogen will also provide other technical support for the Products,
including clinical and scientific data collected by Exogen with regard to the
use of the Products by patients.
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[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
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(g) Exogen will provide S&N with any changes in the plans or
specifications for existing Products or any new Product or improvement or
development no later than 60 days prior to implementing any change or
initiative. S&N shall have the right to provide comments regarding any such
change or initiative and Exogen shall consider such comments in good faith.
(h) Exogen shall perform all warranty work on Products and
shall process and refurbish all returned Products at its own cost and expense.
(i) Exogen shall incur out-of-pocket costs for marketing,
advertising and promotional activities in connection with the Products of not
less than [****] during each of the first two Contract Years. Such marketing,
advertising and promotional activities shall be as agreed upon from time to time
by Exogen and S&N and the parties shall develop an annual marketing plan and
budget which shall include, without limitation, scientific meeting support,
speaker forum activity and third-party payor marketing materials and programs.
(j) Exogen shall not pay or grant any consideration, bonus,
stock option or other benefit to any employee, distributor or sales
representative of S&N or its Affiliates, except as provided in this Agreement.
(k) Exogen will provide, during each Contract Year, up to
three 2-day training sessions at Exogen's offices, including the cost of the
trainers, facilities and equipment required for the training. Exogen shall also
reimburse S&N an amount not to exceed [****] in the aggregate during the first
two Contract Years for expenses paid or incurred by S&N for training (but in no
event including internal personnel or overhead costs of S&N). Exogen shall
reimburse S&N for any such expenses associated with training paid by S&N no
later than 30 days following receipt of S&N's invoice.
8. FDA Laws and Regulations.
(a) Exogen warrants and represents to S&N that the SAFHS
device received PreMarketing Approval ("PMA") from the FDA in October 1994, and
that a PMA Supplement for the SAFHS 2000 device was approved by the FDA in March
1997. Exogen will keep such approvals in full force and effect by filing
required supplements and annual reports with the FDA. Exogen further warrants
and represents that prior to the effective date of this Agreement, Exogen has
operated its business in the United States in compliance with all Permits (as
defined in the Master Agreement) in all material respects. Exogen has not
engaged in any practice or course of conduct, which, if continued or practiced
by S&N would result in a material breach of any law, rule or regulation.
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[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
9
(b) Products shall be manufactured and labeled by Exogen in
accordance with the submissions it has made and the approvals it has received
from the FDA in all material respects and in accordance with all laws applicable
to the manufacture and labeling of medical devices including the rules and
regulations of the FDA and good manufacturing practices. Products or the
packaging shall indicate that the Product is manufactured by Exogen and
distributed by S&N, and the parties shall mutually agree on the artwork, layout
and presentation of company names, trade names, trademarks and logos; provided,
however, that Exogen shall have the right to review and approve in advance any
material changes to the promotional materials for compliance with FDA labeling
requirements and related regulatory issues.
(c) Exogen is currently involved in the development of the
Exogen (or SAFHS) 3000 device, in submitting a PMA Supplement with the FDA for
the Exogen (or SAFHS) 3000 device, and in submitting a PMA Supplement with the
FDA for expanded labeling for the SAFHS 2000 device for certain additional
indications. Exogen will use its diligent efforts to complete these activities
as soon as possible, and to obtain such FDA and other approvals as may be
required, in order to market in the United States the Exogen (or SAFHS) 3000
device and the SAFHS 2000 and/or 3000 device for additional indications, all at
Exogen's expense. S&N shall be kept advised of the status of the foregoing
programs.
9. HCFA Reimbursement Codes and CPT Codes. Exogen will use its diligent
efforts to obtain a favorable national coverage policy from HCFA for the
Products for the additional indications referred to above and Current Procedural
Terminology ("CPT") codes for all applications of the Products at Exogen's
expense. Exogen shall be solely responsible for verifying and using correct and
approved code numbers in all billing, reimbursement materials, labeling and
advertising and promotional material.
10. Warranty Disclaimer; Limitation of Liability.
(a) Except as specifically set forth in this Agreement, Exogen
makes no warranties to S&N with respect to the Products or any services. Exogen
disclaims all implied warranties, including warranties of merchantability and
fitness for a particular purpose.
(b) Neither Exogen nor S&N shall in any event be liable for
any loss of profits, or for any special, incidental or consequential damages
arising out of or in connection with the sale, use or performance of the
Products.
(c) In no event will Exogen be liable for: (i) damages caused
by S&N's failure to perform its covenants and responsibilities under this
Agreement and the Master Agreement, by reason of S&N's negligence or otherwise
(other than failures by S&N that are caused by Exogen's failure to perform its
covenants and responsibilities); or (ii) damages caused by repairs or
alterations to Products by S&N, its Affiliates, distributors and sales
representatives.
11. Insurance. Exogen warrants and represents to S&N that it has
products liability insurance coverage for its SAFHS devices in the amount of $3
million per occurrence and $3 million in the aggregate, and additional umbrella
coverage in the amount of $10 million
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per occurrence and $10 million in the aggregate. Exogen shall name S&N as an
additional party insured under all such policies, shall maintain such coverage
during the term of this Agreement and shall, upon request from S&N from time to
time, direct the carriers to issue certificates confirming that such coverage is
in effect.
12. Arbitration. Disputes regarding this Agreement shall be resolved
through arbitration by a single, qualified arbitrator selected by mutual
decision of the parties from three candidates furnished by the then President of
the Health Industry Manufacturers Association ("HIMA"). If the President of HIMA
is unwilling or unable to provide a list of candidates, the candidates shall be
proposed by the American Arbitration Association, Wilmington, Delaware office,
from its Large, Complex Dispute Panel. If the parties are unable to mutually
select the single arbitrator from said list, then the arbitrator shall be
selected by said American Arbitration Association, Wilmington, Delaware office.
The arbitration proceedings shall be conducted in accordance with the then
current Rules for Large, Complex Disputes of the American Arbitration
Association, or in accordance with such other rules or procedures as the
Arbitrator may specify. The arbitration shall take place in Wilmington,
Delaware. Each party will bear its own arbitration expenses plus one-half of the
arbitrator's fee. The ruling of the arbitrator shall be final and binding.
13. Assignment and Successors. Neither this Agreement nor any rights
granted hereunder may be assigned or transferred by either party except with the
prior written consent of the other party or in accordance with Section 7(b) of
the Master Agreement. Such consent shall not be unreasonably withheld, except in
the case of assignment to an Affiliate , in which case such consent shall not be
required. Any purported assignment which requires consent shall be void without
consent. Subject to the limitations on assignment herein, this Agreement shall
be binding upon and inure to the benefit of any successors and assigns of Exogen
and S&N. Any such successor or assignee of a party's interest shall expressly
assume in writing the performance of all the terms and conditions of this
Agreement to be performed by such party.
14. Effective Date, Term and Termination.
(a) This Agreement shall become effective on August 10, 1998
and shall remain in effect to and including August 9, 2008 or until the
execution and delivery of the U.S. Stocking Distribution Agreement (as such term
is defined in the Master Agreement) unless sooner terminated by mutual consent
or pursuant to Subsection 16(c).
(b) S&N shall have the right and option to renew the term of
this Agreement for successive three year terms, each upon mutually acceptable
terms and conditions. S&N shall exercise these renewal options by providing
Exogen with written notice no later than six months prior to the expiration of
the current term. The parties shall negotiate in good faith. In the event the
parties are unable to mutually agree upon such terms and conditions upon the
expiration of the initial term, S&N shall have the right to extend the term of
this Agreement for one five year period on the terms and conditions then in
effect, except that: S&N's appointment shall be non-exclusive; there shall be no
Minimum Number of Units; and S&N shall not be entitled to any improvements or
enhancements incorporated into the Products on a commercialized basis during the
five year extension term. Notwithstanding the foregoing, if any
11
improvements or enhancements are incorporated into the Products on a
commercialized basis during that period, Exogen shall notify S&N in writing and
shall provide a description of the improvements or enhancements and an offer
whereby Exogen would include the improvements and enhancements under this
Agreement ("Initial Offer"). S&N shall have thirty (30) days from receipt of the
Initial Offer to accept the Initial Offer by providing written notice to Exogen.
Thereafter, the parties shall negotiate in good faith with respect to an
amendment to this Agreement which includes the improvements or enhancements as a
Product under this Agreement. If S&N does not accept the Initial Offer, then
Exogen shall be permitted to execute a sales representative or distribution
agreement with a third party provided the terms and conditions of such agreement
are no more favorable to the third party than the Initial Offer. If the terms of
the proposed agreement with a third party ("Third Party Terms") are more
favorable to the third party than the Initial Offer, then Exogen shall provide
written notice to S&N together with the Third Party Terms and S&N shall have a
period of thirty (30) days from receipt to provide written notice to Exogen that
S&N is willing to accept the Third Party Terms. If S&N provides a written
acceptance, the parties shall execute an amendment to this Agreement
incorporating the Third Party Terms. If S&N fails to accept, then Exogen shall
be permitted to enter into an agreement with the third party on the Third Party
Terms. Any dispute as to whether the Third Party Terms are more favorable to the
third party than the Initial Offer shall be decided by arbitration in accordance
with Section 12.
(c) This Agreement may be terminated at any time by either
party in the event of a material default by the other party, provided that the
party seeking to terminate the Agreement gives the other party written notice of
the default and a period of 60 days in which to cure the default. If this
Agreement is terminated pursuant to this Subsection (c), in addition to all
rights and remedies any party may have available at law or at equity, all orders
outstanding on the date of termination will be honored by Exogen and all
commissions due to S&N will be paid. If the material default is a result of
Exogen's failure to provide or supply Products in accordance with this
Agreement, S&N may elect not to terminate this Agreement, S&N shall retain all
of its rights under this Agreement and require Exogen to satisfy all other
obligations and responsibilities hereunder to the extent Exogen is able to
perform. If Exogen is not able to satisfy such other obligations and
responsibilities, S&N shall be permitted to do so.
(d) If the Agreement should be terminated because of a
material default on the part of S&N, S&N will within 60 days after the date of
termination pay to Exogen in a lump sum [****] and will assign to Exogen all
agreements relating to the Products with its distributors and, if requested by
Exogen, terminate its relationship with respect to the Transferred Employees. In
addition, S&N will allow Exogen to offer employment to all Transferred Employees
who remain employed by S&N and shall cooperate with Exogen in the transfer of
any such individuals who accept re-employment with Exogen. Provided, however,
S&N shall not be liable or responsible if Transferred Employees do not wish to
be re-employed by Exogen or elect to remain an employee of S&N. Nothing in this
Section 14(d) shall limit the rights and
------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
12
remedies of Exogen at law or in equity with respect to Losses (as defined in
Section 12.2 of the Master Agreement) from third party claims.
(e) If the parties are unable to agree upon the Minimum Number
of Units in accordance with Section 4(a), then this Agreement shall terminate
six months following the end of the then current Contract Year. During the six
month period S&N shall have the right to continue to be a sales representative
for Products on a non-exclusive basis with no obligation to meet any minimum
requirement or to spend any particular amount on marketing, advertising and
promotional activities. During the six month period the parties shall cooperate
in good faith to unwind this Agreement. At the end of the six month period S&N
will assign to Exogen all agreements relating to the Products with its
distributors and, at Exogen's election, terminate its relationship with respect
to the Transferred Employees. In addition, S&N will allow Exogen to offer
employment to all Transferred Employees who remain employed by S&N and shall
cooperate with Exogen in the transfer of any such individuals who accept
re-employment with Exogen. Provided, however, S&N shall not be liable or
responsible if Transferred Employees do not wish to be re-employed by Exogen or
elect to remain an employee of S&N.
15. Relationship of Parties. The parties hereto are independent
contractors. This Agreement shall not create any partnership or joint venture
relationship. Neither party has the authority, right or ability to bind or
commit the other in any way (including, without limitation, by S&N accepting
orders) and will not attempt to do so or imply that it may do so.
16. Miscellaneous.
(a) This Agreement shall be governed by the substantive law of
the State of Delaware. Any action to enforce the arbitration provisions of this
Agreement pursuant to Section 14, or any arbitration award, may be brought in
any State or Federal Court in the United States where the party is subject to
personal jurisdiction.
(b) This Agreement, together with all Exhibits attached
hereto, the Master Agreement and the other agreements contemplated by the Master
Agreement represent the entire agreement of the parties with respect to the
subject matter hereof.
(c) This Agreement may be amended only by an agreement in
writing executed by both parties.
(d) The obligations of the parties under this Agreement shall
be subject to Government regulations, significant material shortages, labor
disputes, war, embargoes, and causes beyond the reasonable control of a party.
The party whose performance is prevented or delayed as the result of any of the
foregoing shall use continuous, diligent efforts to remedy its inability to
perform.
(e) If one of the provisions of this Agreement should be
declared void or unenforceable, the remaining terms of the Agreement shall
continue in full force and effect unless such construction is unreasonable.
(f) This Agreement may be signed in one or more counterparts.
13
(g) All notices shall be deemed complete on transmission by
facsimile or within ten days from the date of mailing if sent by registered or
certified mail. Notices shall be sent to the addresses set forth above unless
either party designates a different address.
[SIGNATURE PAGE TO FOLLOW]
14
August 10, 1998 EXOGEN, INC.
By: /s/ Xxxxxxx X. XxXxxxxx
-----------------------
Name: Xxxxxxx X. XxXxxxxx
Title: President and Chief Executive Officer
XXXXX & NEPHEW, INC.
By: /s/ X.X. Xxxxx
---------------------
Name: X.X. Xxxxx
Title: President
Healthcare Division
[SIGNATURE PAGE TO
UNITED STATES SALES REPRESENTATIVE AGREEMENT]
15
EXHIBIT A
CURRENT ARRANGEMENTS
IN CERTAIN TERRITORIES
Contract Term/ Contract Executed Agency Key Contact General Territory
Change Notice
[****]
------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
EXHIBIT B
PRICES, DISCOUNTS, ALLOWANCES
AND TERMS OF SALE
List Price
SAFHS(R)Model 2A $2,950 (devices shipped prior to May 1997. The Company
ceased selling the model 2A in the United States
in May 1997)
SAFHS 2000(R) $3,500 (commenced commercial distribution in May 1997 in
the United States)
[****]
Standard Warranty and Return Policy
Attached is the Company's Service Agreement which outlines the Company's support
for the device while the patient is under treatment.
------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
Multi-Part Form - Press Hard/Use Ballpoint Pen Please sign where "x" appears and date your
signature.
EXOGEN(R), INC. Tel: 000-000-0000 & 732-981-0990
00 Xxxxxxxxxxxx Xxx., X.X. Xxx 0000, Xxxxxxxxxx, X.X. 00000, X.X.X. Fax: 000-000-0000
(I.R.S. Identification No. 00-0000000)
--------------------------------------------------------------------------------
SERVICE AGREEMENT
Dear Patient: Please read the entire Service Agreement. Record the main
operating unit (MOU) serial number on the bottom of this form. The serial number
is located on the backside of the MOU. Please sign both areas indicated by "X"
and return the white copy in the enclosed business reply envelope or fax a copy
to 000-000-0000. You should retain the yellow copy for your records.
Exogen, Inc. agrees to provide _______________________________________ ("USER")
with a SAFHS(R) treatment device subject to the following:
TERMS: This agreement shall become effective when signed by the User. The
agreement will continue until the attending physician determines that the
treatment is no longer necessary. The User will then ship the equipment back to
Exogen following the instructions included in the device container. All shipping
charges will be paid by Exogen.
SERVICE CHARGE: The service charge for this treatment service will be $3,500.
The User is responsible for the payment of the service charge and may assign
his/her insurance benefits to pay Exogen for the service charge. If the User
assigns his/her insurance benefits to Exogen, the User will remain responsible
for any co-payment or deductible insurance balance not paid by their insurer. If
payments are received from insurers and/or the patient in excess of the service
charge, Exogen will refund the balance to the patient or appropriate third party
insurer.
THE EQUIPMENT: The equipment is the sole property of Exogen, Inc. Exogen agrees
to maintain the equipment in proper working order at no charge to the User
except for those service costs that might result from improper use or accidental
damage to the equipment.
OBLIGATION OF THE USER: Exogen is not prescribing a course of treatment for the
User. The company merely provides instructions for the proper use of the
equipment for whatever indication is prescribed by the physician. Exogen may
terminate this agreement if the User attempts, or allows any other party to
attempt to make any unauthorized use, inspection, repair, or adjustment to, or
to make available to any other party the content, design, or mechanism of the
equipment. The User understands that the equipment is intended only for their
personal use. The User agrees to handle and use the equipment with reasonable
care. CAUTION: Federal law restricts this device to be used on the prescription
of a physician. Use is restricted to the individual for whom it is prescribed.
COLLECTING MEDICAL INFORMATION: Exogen is required by the Food and Drug
Administration (FDA) to collect certain patient, fracture and physician
information and to maintain a registry and collect follow-up data pertaining to
healing on all patients for whom SAFHS(R) therapy is prescribed. Confidentiality
of your records will be maintained and access will be limited to specific Exogen
clinical personnel and FDA employees as required. You will not be identified by
name at any time. If you do not wish to allow Exogen to collect this
information, please check the following box. |_| I will not allow Exogen to
collect information.
MISCELLANEOUS: This agreement cannot be assigned by the User but is enforceable
against and binding on the User's successors and legal representative. This
agreement shall be governed by and construed in accordance with the internal law
of the State of New Jersey.
USER SIGNATURE: X ________________________________________________
(User/Parent/Guardian)
DATE: _______________
--------------------------------------------------------------------------------
AUTHORIZATION TO RELEASE INFORMATION AND ASSIGNMENT OF INSURANCE BENEFITS TO
PROVIDER (EXOGEN, INC.)
I certify that the information given by me in applying for payment to my private
health insuring organizations and/or State Medical Assistance Program and/or
Federal Government's Medicare program is correct. I authorize the release, to
Exogen and their representatives, of any medical or other information about me
which may be required for the processing and payment of this claim with the
insuring organizations (private, State or Federal Government). I request that
payment of authorized benefits be made on my behalf and I assign the benefits
payable for the service performed by Exogen (service charge for the use of the
SAFHS(R) treatment device) to Exogen. Although I recognize that I have the
primary responsibility for contacting and submitting claims to my health
insurance organization (private, State or Federal Government), I authorize
Exogen to submit a claim to any of my insurers as may be required.
Although I may be covered by one or more insuring organizations (private, State
or Federal Government) I hereby personally assume all amounts owing for the
described services of Exogen (described in service agreement above). This
includes any amounts not paid by the insuring organization. For outpatient
services, I request that this authorization apply for the entire treatment
period:
SIGNATURE OF INSURED PARTY: X_______________________________ DATE: ___________
--------------------------------------------------------------------------------
DEVICE APPLICATION PERFORMED BY: ___________________________ DATE: ___________
MOU SERIAL #: ______________________________________________
(located on the back of the Main Operating Unit at the bottom of the label)
EXHIBIT C
POTENTIALLY TRANSFERRED EMPLOYEES
Name (L, F, M) Volume % Units [a]
[****] na [****]
[****] 16% [****]
[****] 7% [****]
[****] 8% [****]
[****] 9% [****]
[****] 9% [****]
[****] 6% [****]
[****] na [****]
[****] 9% [****]
[****] 7% [****]
[****] 6% [****]
[****] 10% [****]
[****] 13% [****]
Total 100% [****]
------------
[****] REPRESENTS MATERIAL WHICH HAS BEEN REDACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
EXHIBIT D
[INTENTIONALLY OMITTED]
EXHIBIT E
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Assignment") is
entered into this 10th day of August 1998, by and between Xxxxx & Nephew, Inc.,
a Delaware corporation ("Assignee"), and Exogen, Inc., a Delaware corporation
("Assignor").
RECITALS
WHEREAS, Assignor and Assignee have entered into that certain
U.S. Sales Representative Agreement, dated the date hereof (the "Sales Rep
Agreement") by and between Assignor and Assignee, providing among other things
for the assignment by Assignor of the Distribution Agreements listed on Exhibit
A to the Sales Rep Agreement) (capitalized terms used herein and not otherwise
defined herein shall have the meanings given to such terms in the Sales Rep
Agreement);
NOW, THEREFORE, in consideration of the mutual covenants and
promises set forth herein, and for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Assignment and Assumption. Assignor hereby assigns, sells,
conveys, sets over, transfers and delivers unto Assignee, effective as of the
Initial Closing Date, and Assignee hereby accepts and assumes, all of Assignor's
right, title and interest in and to all the Distribution Agreements. Except as
set forth in Section 2(a) of the Sales Rep Agreement, Assignee hereby assumes,
agrees to pay, perform and discharge when due, any liability or obligation with
respect to the Distribution Agreements arising on and after the Initial Closing
Date.
2. Entire Agreement; Amendment. This Assignment, together with
the Master Agreement and the Sales Rep Agreement, constitutes the entire
agreement and understanding between the parties hereto with respect to the
matters set forth herein, and supersedes and replaces any prior agreements and
understandings, whether oral or written, between and among them with respect to
such matters. Neither this Agreement nor any provisions hereof may be modified,
amended or waived except by the written agreement of the parties hereto.
3. Effect. Notwithstanding any other provisions of this
Assignment to the contrary, nothing contained in this Assignment shall in any
way supersede, modify, replace, amend, change, rescind, waive, exceed, expand,
enlarge or in any way affect the provisions, including warranties, covenants,
agreements, conditions, representations or, in general any of rights and
remedies, and any of the obligations and indemnifications of Assignor or
Assignee set forth in the Sales Rep Agreement or the Master Agreement nor shall
this Assignment expand or enlarge any remedies under the Sales Rep Agreement or
the Master Agreement including without limitation any limits on indemnification
specified therein. This Assignment is intended only to effect the transfer of
certain rights and obligations transferred pursuant to the Sales Rep Agreement
and shall be
governed entirely in accordance with the terms and conditions of the Sales Rep
Agreement and the Master Agreement.
4. Additional Documents and Further Assurances. From time to
time after the date hereof, Assignor will execute and deliver, or cause its
affiliates to execute and deliver, to Assignee such instruments of sale,
transfer, conveyance, assignment and delivery, and such consents, assurances,
powers of attorney and other instruments as may be reasonably requested by
Assignee or its counsel in order to vest in Assignee all right, title and
interest of Assignor in and to the Distribution Agreements and otherwise in
order to carry out the purpose and intent of this Assignment.
5. Governing Law. This Assignment shall in all respects be
construed in accordance with and governed by the laws of the State of Delaware
without giving effect to its conflicts-of-laws principles (other than any
provisions thereof validating the choice of the laws of the State of Delaware in
the governing law).
6. Counterparts. This Agreement may be executed in any number
of counter parts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.
[SIGNATURE PAGE TO FOLLOW]
2
IN WITNESS WHEREOF, the parties have executed this Assignment
as of the day and year first written above.
Exogen, Inc.
By: /s/ Xxxxxxx X. XxXxxxxx
-----------------------
Name: Xxxxxxx X. XxXxxxxx
Title: President and Chief Executive Officer
Address: 00 Xxxxxxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
Xxxxx & Nephew, Inc.
By: /s/ X.X. Xxxxx
------------------------
Name: X.X. Xxxxx
Title: President, Healthcare Division
Address: 0000 Xxxxxx Xxxx.
Xxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
