Exhibit 10.2
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PRODUCTION, MARKETING AND PRODUCT DEVELOPMENT SUPPORT AGREEMENT
This Production, Marketing and Product Development Support Agreement
(this "Agreement") is made as of February 1, 2002, by and between Span-America
Medical Systems, Inc., a South Carolina corporation ("Company"), and VADUS,
Inc., a Delaware corporation ("VADUS").
RECITALS
A. Company is engaged in the medical supply business.
X. XXXXX has been engaged in the medical product development,
manufacturing and marketing business and has acquired significant
experience and expertise in such areas.
C. Pursuant to that certain Asset Purchase Agreement between Company and
VADUS of even date (the "Purchase Agreement"), Company is acquiring
certain assets of VADUS, including tangible and intellectual property
associated with catheter products previously created, manufactured and
marketed by VADUS.
D. Company wishes to retain VADUS to assist Company in the start up of
operations relating to the production and marketing of products based
on the assets acquired pursuant to the Purchase Agreement and with the
development of future products and VADUS wishes to provide Company with
such services.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and conditions
hereinafter set forth and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties, intending to be
legally bound, agree as follows:
1. Scope of Work
VADUS will perform the consulting services for Company or one of its
affiliated corporations (together, the "Company") described in Schedule 1 (the
"Services"), as may from time to time be requested by the Company during the
Term (as defined herein) of this Agreement. For purposes of this Agreement, the
term "Field" shall mean peripheral intravenous catheter products, including
peripherally inserted central catheter lines and arterial lines.
2. Compensation
a. Fees. As compensation for the Services performed pursuant to the
Agreement which relate to the Field, Company will pay VADUS an annul fee in the
amounts set forth below, which shall be paid in equal installments by the tenth
day of each month during the Term of this Agreement, and pro-rated for partial
months:
i. Year One - $200,000.00;
ii. Year Two - $175,000.00; and
iii. Year Three - $150,000.00.
b. Expenses. Company shall reimburse VADUS for the following expenses
actually incurred in connection with the Services furnished under this
Agreement:
i. Reasonable travel expenses (not including relocation expenses
and normal daily working and commuting expenses);
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ii. Component materials required for the development of proto-
type products as required under this Agreement, but not
including standard laboratory supplies;
iii. Molds and other tooling required for the development of
proto-type products; and
iv. Technician labor required for the production of proto-type
products.
All such expenses must be authorized in advance by Company, except for the
travel related expenses identified in item i. of this Section 2.b. that do not
exceed $500.00 per trip in total. The Company shall reimburse all such expenses
within fifteen days after receipt of written invoices, which invoices shall be
accompanied by supporting documents reasonably satisfactory to the Company
regarding all such expenses. The parties agree that VADUS may incur expenses in
delivery of the Services other than those listed in this Section 2.b (the "Other
Expenses"). Company will not reimburse VADUS for any Other Expenses, unless
VADUS has obtained prior authorization for such Other Expenses from Company,
where such authorization for such Other Expenses is solely in the discretion of
Company.
c. Fees for Nonfield Services. For all Services rendered by VADUS that do
not relate to the Field ("Nonfield Services"), Company shall pay VADUS such fees
as VADUS and Company shall negotiate and memorialize in writing before VADUS
renders any such Nonfield Services. Such Nonfield Services shall be provided on
a project basis.
3. Manner of Performance
a. Experience; Quality. VADUS represents and warrants that VADUS has the
requisite expertise, ability, and legal right to render the Services and will
perform the Services with care, skill, and diligence, in accordance with
applicable industry standards, and shall be responsible for the professional
quality, technical accuracy, completeness, and coordination of all reports,
designs, drawings, plans, information, specifications, and other items and
services furnished under this Agreement.
b. Compliance with Laws. VADUS shall comply with all applicable federal,
state, and local laws, ordinances, codes, and regulations in performing the
Services.
c. Employees; Key Personnel. Each of VADUS' employees performing Services
will have the expertise to perform assigned Services in an efficient manner.
Xxxx Xxxxxx is considered the key person for this Agreement and shall commit his
full time efforts to providing the Services during the Term of this Agreement.
Substitutions for Xxxx Xxxxxx or substantial reductions in his performance shall
not be made without the prior written consent of Company.
d. Conduct on Company Premises. VADUS and employees of VADUS, when on
Company's premises, will comply with Company's policies with respect to conduct
of visitors.
4. Confidentiality
a. VADUS' Obligation. In the course of this relationship, it is anticipated
that VADUS will learn information that Company regards as confidential or
proprietary (collectively, "Proprietary Information"). Except as may be
necessary in the ordinary course of performing its duties under this Agreement,
VADUS will keep confidential all Proprietary Information which VADUS may acquire
with respect to Company's business, including, but not limited to, information
developed by VADUS in the course of performance of the Services and information
relating to new products, customers, pricing, know-how, processes, and
practices. Notwithstanding the foregoing, this Agreement shall not apply to any
disclosures of Proprietary Information (i) which was known by VADUS prior the
date hereof as may be established by prior documentation;(ii) which is or
becomes generally known to the public through no fault of VADUS; (iii) is
subsequently rightfully obtained by VADUS from a third party, provided said
third party did not derive such information from VADUS or at VADUS' request and
is otherwise legally permitted to disclose such Proprietary Information; or (iv)
pursuant to any court order or other operation of law. It is also understood
that, at all such times, VADUS is free to use information that is generally
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known in the trade or industry, which is not gained as a result of a breach of
this Agreement. VADUS will not disclose to others, without Company's consent,
the fact that it is acting on behalf of Company and will not publish on the
subject of this consulting relationship without the written consent of Company.
This undertaking to keep information confidential will survive the termination
of this Agreement. VADUS will require each of its employees performing Services
to execute a written acknowledgement of and consent to be bound by the
obligations of confidentiality set forth in this Section 4.a. At the termination
of this Agreement, VADUS will return to Company all drawings, specifications,
manuals, and other printed or reproduced material (including information stored
on machine readable media) provided by Company to VADUS and all copies of such
information made by VADUS or its employees.
b. Company's Obligation. If Company does not exercise the right granted
under Section 5.b., any confidential or proprietary information of VADUS
disclosed or otherwise provided to Company pursuant to Section 5.b. of this
Agreement ("VADUS Information") shall be held in confidence by the Company and
not disclosed to others or used by Company without VADUS' consent. If Company
does not exercise the right granted under Section 5.b, Company shall return to
VADUS all VADUS Information related to the product or process that is the
subject of right granted under Section 5.b. and not exercised by Company.
Notwithstanding the foregoing, this Agreement shall not apply to any disclosures
of VADUS Information (i) which was known by Company prior the date hereof as may
be established by prior documentation;(ii) which is or becomes generally known
to the public through no fault of Company; (iii) is subsequently rightfully
obtained by Company from a third party, provided said third party did not derive
such information from Company or at Company's request and is otherwise legally
permitted to disclose such VADUS Information; or (iv) pursuant to any court
order or other operation of law.
5. Relationships with Others
a. Exclusivity. During the term of this Agreement and for one year after
its termination date, neither VADUS nor its employees performing the Services
will perform services in the area in which VADUS actually has consulted under
this Agreement for any other entity engaged in the development, manufacture,
distribution, or sale of (i) human or veterinary peripheral intravenous catheter
products or services, (ii) products and services that compete with any products
or services of Company created or derived from the Services rendered under this
Agreement, or (iii) products or services that would infringe any patent acquired
by Company under the Purchase Agreement or compete with any products or services
derived from such patents.
b. Right of First Refusal. VADUS has the right to develop products and
processes not included in Section 5.a. either for its benefit or for the benefit
of an independent third party paying value for such products or process. The
right to commercialize, including manufacturing, distribution and selling, all
such products and processes created by VADUS, but not developed for an
independent third party who is paying VADUS fair value for such development
services, shall first be offered in writing to Company ("Offer Notice") upon
reduction to practice by VADUS. Such Offer Notice shall be delivered as
described in Section 11.c. Company shall have 120 days from receipt of such
Offer Notice to exercise its right to commercialize such product or process by
giving VADUS written Notice of exercise. If Company exercises the right, the
parties shall negotiate the terms of commercialization in good faith. If Company
does not exercise the right or fails to negotiate in good faith, VADUS shall be
free to pursue commercialization of such products or processes, subject to the
limitations of this Agreement.
6. Independent Contractor
VADUS is an independent contractor, not an employee or agent of Company.
Nothing in this Agreement shall render VADUS, or any of its agents or employees,
an employee or agent of Company, nor authorize or empower VADUS or its agents or
employees to speak for, represent, or obligate Company in any way. Company
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recognizes that VADUS retains all the rights and privileges of an employer,
including, but not limited to, the right to hire, direct, discipline,
compensate, and terminate its employees assigned to the Company account. VADUS
shall pay all wages, salaries, and other amounts due its agents or employees in
connection with this Agreement and shall be responsible for all reports and
obligations respecting them relating to social security, income tax withholding,
unemployment compensation, workers' compensation, and similar matters.
7. Intellectual Property
a. Definition. In this Agreement, "Intellectual Property" means all works,
including all ideas, inventions, discoveries, and improvements, whether or not
patentable; literary works, pictorial, graphic, and sculptural works,
architectural works, works of visual art, and any other work that may be the
subject matter of copyright protection; advertising and marketing concepts;
information; data; formulas; designs; models; drawings; computer programs;
including all documentation, related listings, design specifications, and
flowcharts, trade secrets, and any inventions including all processes, machines,
manufactures and compositions of matter and any other invention that may be the
subject matter of patent protection; and all statutory protection obtained or
obtainable thereon.
b. Ownership; Assignment. Each work that is copyrightable will be
considered a work made for hire pursuant to the United States Copyright Act, 17
U.S.C. xx.xx. 101 et seq., and the authorship and copyright of the work shall be
in Company's name to the extent permitted by law. VADUS hereby assigns to
Company all worldwide right, title and interest in and to Intellectual Property
created, made, conceived, reduced to practice, or authored by VADUS, or any
persons provided by VADUS either solely or jointly with others, during the
performance of the Services or with the use of information, materials, or
facilities of Company received by VADUS during the term of this Agreement.
Company shall be free to make, have made, use and sell products utilizing the
Intellectual Property assigned to Company. Notwithstanding the foregoing,
Company has obligations to pay royalties and other compensation to VADUS for use
of certain of the Intellectual Property that are independent of this Agreement.
c. Disclosure. VADUS shall promptly disclose to Company all Intellectual
Property in the Field created by VADUS during the term of this Agreement.
d. Cooperation. VADUS shall execute or cause to be executed, all documents
and perform such acts as may be necessary, useful or convenient to secure for
Company statutory protection throughout the world for all Intellectual Property
assigned to Company pursuant to this Section 7.
e. Evidence of Assignment by VADUS' Employees. VADUS shall either (i)
provide Company with a copy of a written agreement with each of its employees
prior to their working hereunder through which all rights to Intellectual
Property created, made, conceived, reduced to practice, or authored by VADUS's
employee(s) within the scope of employment by VADUS in the performance of this
Agreement are owned by VADUS and thereby subject to the preceding assignment; or
(ii) require that the persons it provides to perform the services under this
Agreement shall execute an instrument assigning such Intellectual Property to
Company prior to commencing work under this Agreement, the form of which is
attached hereto as Exhibit B.
f. Disclosures to Company. If during the term of this Agreement VADUS
discloses any copyrightable works, inventions, discoveries, or ideas in the
Field to Company which were conceived or written prior to this Agreement ("Other
Works") and not disclosed to Company in Schedule 5.24(c) of the Purchase
Agreement, Company will have no liability to VADUS because of its use of such
Other Works, except liability for infringement of any valid copyright or patent
now or hereafter issued thereon. The provisions of this Section 7.f. do not
supersede, invalidate, or otherwise void any limitations that bind the Company
to treat Other Works in a manner other than set forth herein.
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8. Term and Termination
a. Term. The term of this Agreement shall commence upon the Effective Date
and shall terminate on the third year anniversary thereafter, unless terminated
earlier as provided herein (the "Term"). The Effective Date shall mean the
Closing Date as that term is defined in the Asset Purchase Agreement by and
between VADUS and Company, dated February 1, 2002 (the "Purchase Agreement"). In
the event that the Closing, as defined in the Purchase Agreement, never occurs
and the Purchase Agreement is terminated, this Agreement shall become null and
void simultaneous with the termination of the Purchase Agreement.
b. Termination for Cause. Company may terminate this Agreement effective
the day of notice by giving VADUS written notice of termination if VADUS:
i. breaches any of its material obligations under this Agreement;
ii. fails to provide the standard of performance of Services that
substantially meets Company's reasonable expectations; or
iii. fails at any time to provide the contracted Services defined in
Schedules 1; or
iv. is no longer able to provide the services of Xxxx Xxxxxx as
required by Section 3.c.
c. Effect of Termination. If this Agreement is terminated pursuant to
Section 8.b., Company's remaining obligation under this Agreement shall all
cease, except, Company shall pay VADUS for Services rendered and expenses
incurred up to the termination date.
9. Indemnification
a. Definitions. As used in this Agreement, "Indemnify" means to indemnify,
defend and hold harmless the indemnified party (including each of its officers,
directors, employees and agents). "Claims" means all claims, actions, demands,
losses, findings, causes of action, penalties, determinations, and fines,
including reasonable attorneys' fees.
x. XXXXX'x Acts or Ommissions. VADUS shall Indemnify Company from all
Claims arising from acts or omissions on the part of VADUS or its employees that
result in:
i. Loss, damage to or destruction of property of Company or third
parties;
ii. Injuries or death to employees of VADUS, except as may result
from the gross negligence or willful misconduct of Company or its
employees, agents or contractors, wherein Company shall indemnify
VADUS; or
iii. Injuries or death to any person, including but not limited
to employees or invitees of Company.
However, nothing in this Section 9.b.iii. shall create any indemnification
liability obligation on the part of VADUS for any portion of Claims that are
products liability claims.
c. Characterization of Company as Employer. VADUS shall Indemnify Company
from all Claims whereby Company is deemed or considered to be the employer of
any personnel that VADUS assigns to Company pursuant to this Agreement.
d. General. The following applies to all Indemnities provided in this
Agreement: Promptly after receipt by an indemnified party of Notice of a Claim,
the indemnified party shall give Notice to the indemnifying party. The failure
of the indemnified party to give such Notice shall not relieve the indemnifying
party of any of its indemnity obligations except to the extent that the
indemnifying party is actually prejudiced by such failure. The indemnifying
party shall assume and control the defense of any Claim subject to
indemnification hereunder. The indemnified party shall have the right, at its
own expense, to participate in the defense of any covered Claim without
relieving the indemnifying party of any obligation of indemnity, although the
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indemnifying party shall control the defense. The indemnified party shall
cooperate in its defense, and any out-of-pocket costs incurred in such
cooperation shall be born by the indemnifying party. The indemnifying party
shall have the right to consent to judgment or to settle a Claim only if (i) it
will fully satisfy the judgment or pay the Claim in full; (ii) any Claim against
the indemnified party will be dismissed with prejudice or barred; and (iii) no
nonmonetary relief (including, without limitation, an injunction) will remain
against the interests of the indemnified party.
e. Intellectual Property Infringement. If a third party Claims that the
methods, apparatus, or any other technologies or tools used by VADUS in
delivering the Services, including computer programs, infringe any patent,
copyright, or trade secret, VADUS will (as long as Company is not in default
under this Agreement) defend and hold harmless Company against such Claim at
VADUS' expense. VADUS also shall pay and Indemnify Company for all damages that
a court finally awards. In addition to paying such damages, if such a Claim is
made or appears possible, VADUS may, at its sole option, secure for Company the
right to continue to use the Services, modify or replace the Services so they
are noninfringing, or, if neither of the foregoing options is available in
VADUS' judgment, require Company to return the Services for a credit equal to
the fees paid for the infringing Services.
10. Limitation of Liability
In no event shall either of the parties hereto be liable to the other for
the payment of any consequential, incidental, indirect, or special damages,
including lost profits. The cumulative liability of VADUS to Company for all
claims arising under or related to this Agreement, whether in contract, tort or
otherwise, shall not exceed the total amount of fees paid by Company to VADUS
under this Agreement. This limitation shall not apply to Sections 9.b.(i),
9.b.(ii), and 9.e. of this Agreement.
11. General
a. Assignment. No assignment by VADUS of this Agreement or any sums due
under it will be binding on Company without Company's prior written consent.
b. Applicable Law and Forum. This Agreement shall be governed and construed
in accordance with the laws of the State of South Carolina without regard to the
conflicts of laws or principles thereof.
c. Notices. Any notice or other communication required or permitted under
this Agreement ("Notice") shall be given in writing and delivered by hand or by
registered or certified mail, postage prepaid and return receipt requested, to
the following persons (or their successors pursuant to due notice):
If to Company: If to VADUS:
Span-America Medical Systems, Inc. VADUS, Inc.
00 Xxxxxxxx Xxxxxx Xxxx Xxxxxx Xxxxxx
Post Office Box 5231 (Zip Code 29606) Xxxxx 000/000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 Xxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Mr. Xxxxx Xxxxxxxx Attention: Xx. Xxxx Xxxxxx
With copies to:
Wyche, Burgess, Xxxxxxx & Xxxxxx, P.A. Pep & Hazard LLP
00 Xxxx Xxxxxxxxxx Xxx Xxxxxxx Xxxxxx
Post Office Box 728 (Zip Code 29602-0728) 000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esquire Attention: Xxxxxx X. Xxxxxxx, Esquire
Notices shall be deemed delivered upon the earlier of receipt by the
recipient or three days after mailing as specified herein.
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d. Waiver. No waiver by either party of any breach by the other party of
any of the provisions of this Agreement shall be deemed a waiver of any
preceding or succeeding breach of the same or any other provisions hereof. No
such waiver shall be effective unless in writing and then only to the extent
expressly set forth in writing.
e. Entire Agreement. This Agreement, including Schedule 1 or other
agreements or exhibits attached hereto or that reference the Agreement and that
have been signed by both parties, constitutes the entire agreement between
Company and VADUS. This Agreement supersedes all proposals or prior agreements,
oral or written, and any other communications between the parties relating to
the subject matter hereof.
f. Modifications. No modification of this Agreement shall be effective
unless in writing and signed by both parties.
g. Severability. If any provision of this Agreement is invalid or
unenforceable under any statute, rule of law or judicial order, the provision is
to that extent to be deemed omitted, and the remaining provisions shall not be
affected in any way.
h. Force Majeure. Neither party shall be liable for any failure of or delay
in performance of the Agreement for the period that such failure or delay is due
to acts of God, public enemy, civil war, strikes or labor disputes. Each party
agrees to give Notice to the other party promptly of the occurrence of any such
cause and to carry out this Agreement as promptly as practicable after such
cause is terminated.
i. Headings. The headings in this Agreement are finding aids only and shall
have no effect on the meaning of the terms of this Agreement.
j. Survival of Terms. Any terms of this Agreement that by their nature
extend beyond the termination of this Agreement remain in effect until
fulfilled. Such terms include, but are not limited to, Sections 4,5,7 and 9.
Additionally, if any Offer Notice is outstanding under Section 5.b at the time
of termination, such Offer Notice and the rights and obligations of Section 5.b
related to the subject matter of such Offer Notice shall survive until their
natural termination under Section 5.b.
k. Authority, Counterparts. Each person signing this Agreement covenants
that he or she is duly authorized by all necessary and appropriate corporate
actions to execute this Agreement. The parties may execute this Agreement in
counterparts and, without limitation, may deliver executed copies by fax.
l. Attorneys' Fees. If any litigation shall ever occur between the parties
arising from or related to this Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys' fees and costs from the
non-prevailing party. This includes, without limitation, the recovery of any
reasonable attorneys' fees and costs incurred in addressing violations of this
Agreement prior to litigation.
m. Negotiated Document. The parties acknowledge that this is a negotiated
document. No party to this Agreement shall be deemed to be the drafter of it and
any construction of its terms shall be without regard to any rules of
construction concerning the drafter.
Executed by the parties hereto as an instrument under seal as of the
Effective Date written above.
COMPANY: VADUS:
(Seal) (Seal)
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Signature Signature
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Title Title
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Date Date
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SCHEDULE 1
Services
VADUS shall provide the following services:
1. Relocation and setup of Company's production facility for the Secure IV
product, which includes, but is not limited to, VADUS:
a. Preparing a plan for the relocation of the production line for the
Secure IV product (the "Secure IV Production Line") currently located in
Haverhill, Massachusetts to Company's South Carolina facility;
b. Overseeing and assisting in disassembly of Secure IV Production Line in
Haverhill, Massachusetts;
c. Overseeing and assisting with packing and relocation of the Secure IV
Production Line;
d. Overseeing and assisting with the setup of the Secure IV Production Line
in Company's South Carolina facility;
e. Assist in revalidating the Secure IV Production Line upon completion of
setup in South Carolina;
f. Providing instruction and hands on training to Company personnel in the
operation of the Secure IV Production Line;
g. Assisting with problem identification and resolution associate with the
Secure IV Production Line; and
h. Assisting with establishment of relationships between Company and
vendors and supplier associated with the Secure IV Production Line, including,
but not limited to:
i. Plastic and rubber parts mold development;
ii. Plastic and parts molding; and
iii. Needles.
2. Sales and marketing support, which includes, but is not limited to, VADUS:
a. Conducting marketing studies of products or services created from the
assets acquired pursuant to the Purchase Agreement or created from Services
provided by VADUS under this Agreement, including in-hospital product
evaluations;
b. Training Company sales people; and
c. Assisting Company's commercialization team in defining strategies for
commercializing products or services created from the assets acquired pursuant
to the Purchase Agreement or created from Services provided by VADUS under this
Agreement.
3. Enhancement of production process, which includes, but is not
limited to, VADUS:
a. Assisting in the improvement of the existing production process to
increase productivity and reduce costs; and
b. Assisting in the automation of the existing production process.
4. Development of new products and extensions to existing product lines, which
includes, but is not limited to, VADUS:
a. Creating and providing Company an outline of opportunities for new
products and current product line extensions (individually, an "Opportunity, and
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collectively, "Opportunities");
b. Preparing a development plan for each Opportunity Company elects to
pursue, which plan shall include, but is not limited to, timeframes, resources,
milestones, reporting requirements, and all information known by VADUS regarding
the potential to successfully patent or the susceptibility to claims of
infringement against each such Opportunity; and
c. Upon approval of the plan by Company, which shall occur within the
earlier of (i) 30 days of submittal of the development plan by VADUS to Company
if a patent search is not required by the Company, or (ii) if a patent search is
required by the Company, within 30 days after receipt of the results of the
patent search by the Company, unless Company objects to the development plan, in
which case such objection must be communicated within the applicable 30 day
period, VADUS shall commence execution of the development plan.
All Services identified in Sections 1, 2, and 3 of this Schedule 1 are Services
related to the Field. The Services provided in Section 4 of this Schedule 1
consist of both Services related to the Field and Nonfield Services. Upon
identification of Opportunities, VADUS shall designate each one as either a
Service related to the Field or a Nonfield Service.
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