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Exhibit 10.40
AMENDMENT TO GLUCOSE SENSOR OPTION AGREEMENT
THIS AMENDMENT TO GLUCOSE SENSOR OPTION AGREEMENT (this "Amendment") is
made as of the 1st day of February, 2001 by and between MINIMED INC.
("MiniMed"), a Delaware corporation, and MEDICAL RESEARCH GROUP, INC. ("MRG"), a
Delaware corporation with respect to the following facts:
RECITALS
MiniMed and MRG are parties to the Glucose Sensor Option Agreement dated as
of September 1, 1998 (the "Agreement") pursuant to which MRG granted an option
to MiniMed to purchase the worldwide distribution rights with respect to certain
long-term glucose sensor technology being developed by MRG. On January 25, 2001
MiniMed delivered notice of its exercise of the option. The parties now desire
to amend and supplement the Agreement on the terms set forth herein.
Concurrently with the execution and delivery of this Agreement, the parties are
also entering into an Amended and Restated Implantable Pump License and
Distribution Agreement and a Stock Purchase Agreement, both dated as of the same
date as this Agreement.
1. DEFINITIONS:
All capitalized terms not otherwise defined in this Amendment have the
meanings set forth in the Agreement.
2. DEVELOPMENT OF STAND-ALONE SENSOR SYSTEM
2.1 OBLIGATION TO DEVELOP. MRG will use commercially reasonable efforts to
develop a Stand-Alone Long-Term Glucose Sensor System which will include an
implantable glucose sensor suitable for use in vivo in humans or animals for a
period of at least 45 days, a transmitter and a receiver/monitor, but not
including an implantable pump (the "Stand-Alone Sensor System"). MRG will
prepare a development plan (which will include scheduled milestones) with
respect to its development efforts, and MiniMed will be entitled to participate
in the preparation of the plan. MRG's initial development plan will be completed
as soon as practicable after the date of this Agreement.
2.2 PAYMENT. Upon completion of the development and qualification of the
Stand-Alone Sensor System in accordance with MRG's Product Development Protocol
attached hereto as Exhibit 2.2, and delivery by MRG to MiniMed of written notice
that those events have occurred, MiniMed shall become unconditionally obligated
to pay to MRG $13 million in cash, within 30 days after receipt of the notice,
for the exclusive world-wide distribution rights for Covered Applications with
respect to the Stand-Alone Sensor System and all improvements and modifications
thereof. If MiniMed purchases the additional $16 million "Second Tranche" of
MRG's common stock contemplated by Section 2.2 of the Stock Purchase Agreement,
the foregoing amount payable by MiniMed shall be reduced to $5 million. In order
to preserve MiniMed's exclusive rights to the Stand-Alone Sensor System, MiniMed
will use commercially reasonable efforts in marketing the Stand-Alone Sensor
System. MRG's sole remedy for MiniMed's failure to use such commercially
reasonable efforts shall be to convert MiniMed's exclusive distribution rights
to non-exclusive rights.
2.3 TRANSFER PRICES. After development of the Stand-Alone Sensor System and
its qualification pursuant to Section 2.2, the Transfer Price of the sensor
component of the Stand-Alone Sensor System will be determined in accordance with
Section 6.4.1 of the Agreement, and the transmitter and the receiver/monitor
will be subject to Transfer Prices equal to the average of MRG's manufacturing
cost (determined in accordance with generally accepted accounting principles
consistently applied) and MiniMed's List Price. In no event, however, will the
transfer price exceed MiniMed's List Price less 15% thereof or be less than
MRG's manufacturing cost plus 30% thereof. If no transfer price satisfies the
foregoing requirements, the price shall be determined by arbitration in
accordance with Section 2.4. If the Stand-Alone Sensor System is sold with an
implantable or external pump and/or other products, the Transfer Price for the
Stand-Alone Sensor System will be based upon a reasonable allocation of the
total List Price for the Stand-Alone Sensor System and the other products (which
may include a pump) so that the List Price of the Stand-Alone Sensor System is
equal to the portion of the total List Price that is reasonably allocable to the
Stand-Alone Sensor System, whether or not a separate List Price is specified for
the Stand-Alone Sensor System. The lead connecting the Long-Term Glucose Sensor
to an implantable pump will have a Transfer Price determined as provided above
for the transmitter and the receiver/monitor.
2.4 ADJUSTMENT IN PRICES. If, at any time after MiniMed becomes the
exclusive distributor of the Stand-Alone Sensor System, either Party believes
that the Transfer Price referred to in Section 2.3 is materially unfair to
either, the Parties will meet and
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seek in good faith to agree on revised prices that are agreeable to both Parties
and approximate pricing structures that are customary for other comparable
distribution agreements involving high technology products. If the Parties are
unable to agree on price, the matter shall be resolved by arbitration in
accordance with Section 18 of the Agreement.
2.5 STATUS OF STAND-ALONE SENSOR SYSTEM. After its development by MRG, the
Stand-Alone Sensor System will be deemed to be a "Long-Term Glucose Sensor and
other Licensed Products," and the technology relating thereto shall be deemed to
be "MRG Glucose Sensing Technology" for all purposes of this Amendment except as
expressly set forth herein and for all purposes of the Agreement except for
purposes of Sections 5.1, 5.3, 5.4, 6.4.1 (except as referred to in Section 2.3
of this Amendment), 6.6, and 6.6.1 through 6.6.7 thereof.
2.6 MANUFACTURING RIGHTS WITH RESPECT TO STAND-ALONE SENSOR SYSTEM. The
rights of MiniMed to itself undertake the manufacture of the Long-Term Glucose
Sensor and the other Licensed Products set forth in Section 6.4.2 and 6.4.3 of
the Agreement shall apply separately with respect to the Stand-Alone Sensor
System, which MiniMed will have the right to undertake to manufacture, or
contract with others to manufacture, without at the same time undertaking to
manufacture, or contract with others to manufacture, any other Long-Term Glucose
Sensor or Licensed Products.
2.7 ROYALTIES PAYABLE TO THIRD PARTIES. For purposes of the last sentence
of Section 6.9.3 of the Agreement, if MiniMed is required to pay royalties to a
Third Party as provided therein and MiniMed has made the payment provided for in
Section 2.2 of this Amendment (whether the payment is made before or after the
obligation to pay royalties arises), the amount of the refund to which MiniMed
shall be entitled shall be equal to one-half of the royalties paid to such Third
Party up to a maximum of $17,500,000.
2.8 TERMINATION OF EXCLUSIVITY. The rights of MiniMed to terminate the
Exclusive Marketing Agreement or Section 6.3 of the Agreement as provided in
Section 6.23 of the Agreement shall be exercisable by MiniMed, at its option,
separately with respect to the Long-Term Glucose Sensor and Licensed Products
without exercising such rights with respect to the Stand-Alone Sensor System,
and MiniMed's election to do so shall terminate all of its obligations under the
Agreement with respect to such other products which terminate upon the exercise
of the rights under Section 6.23 of the Agreement.
3. CLINICAL TRIALS
Notwithstanding the provisions of Section 6.11.1 of the Agreement, the cost
of all clinical trials with respect to the Long-Term Glucose Sensor and other
Licensed Products (including the Stand-Alone Sensor System) shall be paid by MRG
through December 31, 2002, up to a maximum aggregate amount of $4 million. MRG
shall be entitled to credit against its $4 million funding obligation expenses
it reasonably incurs in connection with the clinical trials. MiniMed and MRG
each will contribute one-half of the costs of the clinical trials in excess of
said $4 million, but neither party will be required by the provisions of this
Section 3 to make any expenditure which is not commercially reasonable. MRG will
make the payments of its share the funding costs to MiniMed from time to time
within 30 days after receipt from MiniMed of a request for payment setting forth
in reasonable detail, and/or accompanied by appropriate documentation with
respect to, the costs incurred by MiniMed in connection with the clinical
trials. Such statements shall not be submitted by MiniMed to MRG more frequently
than monthly and no less frequently than quarterly. MRG shall submit to MiniMed
statements setting forth in reasonable detail and/or accompanied by appropriate
documentation with respect to the costs incurred by MRG with respect to the
clinical trials. Expenses incurred by MiniMed and MRG which are payable by MRG
pursuant to this Section 3 and expenses incurred by MRG which are to be credited
to its obligations under this Section 3 shall include and be limited to all
direct out-of-pocket costs and expenses incurred in connection with the clinical
trials together with all direct employee expenses for the time spent by
employees on these programs, which amounts shall be reasonably documented. Such
expenses for employees' time shall include a pro rata portion of indirect
employee expenses, such as employee benefits and payroll taxes. In no event
shall either party charge any portion of its general overhead, facilities
allocation or administrative expense as an expense of the clinical trials
pursuant to this Section 3.
4. LOSS OF EXCLUSIVE RIGHTS
The Parties acknowledge that pursuant to Section 7.6.1 of the Implantable
Pump License and Distribution Agreement MRG has the right to repurchase from
MiniMed MiniMed's rights to distribute the NewMIP (as defined in the Implantable
Pump License Agreement and Distribution Agreement) and that, pursuant to Section
7.6.3 of the Implantable Pump License Agreement, if that right is exercised,
MiniMed's rights with respect to the Long-Term Glucose Sensor and other Licensed
Products shall include:
(a) exclusive rights to distribute the Stand-Alone Sensor System,
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(b) exclusive rights to distribute the Stand-Alone Sensor System as
part of a system combined with an external infusion pump and
(c) non-exclusive rights to distribute the Long-Term Glucose Sensor
(not the Stand-Alone Sensor System) as part of a Closed Loop System in
combination with MRG's MIP 2007 model of implantable pumping systems or
Improvements thereto.
5. LICENSE ON MINIMED TECHNOLOGY
Effective if and when MiniMed's distribution rights under Section 6 of the
Agreement become nonexclusive or MRG repurchases rights pursuant to Section
7.6.1(a) of the Amended and Restated License and Distribution Agreement, MiniMed
hereby grants MRG a fully paid-up, royalty-free license on all Technology that
is developed by MiniMed through said effective date but limited to the field of
use of fully implanted, oxygen-based sensors configured to the then current
Long-Term Glucose Sensor or subsequent Improvements or modifications.
6. LEADS
The last sentence of Section 1.15 of the Agreement is hereby amended to
read in full as follows:
"The lead connecting the Long-Term Glucose Sensor to an implantable
pump is a Licensed Product.
7. SETTLEMENT OF DISPUTES
Section 18.1.2(A) of the Agreement is hereby amended by adding a new
sentence at the end thereof reading as follows:
"In the event either party fails to select an arbitrator within the
time period specified where the two arbitrators fail to select a
third arbitrator within the time period specified above, either
party may request that the American Arbitration Association
appoint any such arbitrator, and any arbitrator so appointed
shall be one of the arbitrators pursuant to this Section 18."
8. SEPARATE AGREEMENTS
Section 8.3 of the Agreement is hereby amended to read in full as follows:
"The Amended and Restated Implantable Pump License and
Distribution Agreement, the Agreement Re Implantable Pump Business
between the Parties dated as of September 1, 1998, the Secured
Promissory Note and Security Agreement referred to in Section 2.4, the
Line of Credit Note referred to in Section 4.2, the Lease referred to
in Section 5 of the Agreement Re Implantable Pump Business and the
Stock Purchase Agreement dated as of the same date as this Amendment
shall be considered completely separate from the Agreement as amended
by this Amendment and not a part thereof. Except as provided in the
Stock Purchase Agreement, a default under such other documents shall
not affect the rights and obligations of the Parties under the
Agreement as amended by this Amendment, and no default under the
Agreement as so amended shall affect the rights and obligations of the
Parties under those other documents."
9. NOTICES
Section 10 of the Agreement is amended to read in full as follows:
"Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed
to have been given (a) if personally delivered, when so delivered, (b)
if mailed, seventy-two (72) hours after having been placed in the
United States mail, registered or certified, postage prepaid, addressed
to the Party to whom it is directed at the address set forth below or
(c) if given by telex or telecopier, when such notice or other
communication Is transmitted to the telex or telecopier number
specified below and the appropriate answer back or telephonic,
confirmation is received:
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If to MiniMed:
MiniMed Inc.
00000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: General Counsel
Telephone No.: (000) 000-0000
Telecopier No: (000) 000-0000
With a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
If to Medical Research Group, Inc:
Medical Research Group, Inc.
00000 Xxx Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Telephone No.: (000) 000-0000
Telecopier No: (000) 000-0000
With a copy to:
Xxxxx Xxxxxxx Xxxxxx & Xxxxxx LLP
00000 Xxxxx Xxxxxx Xxxx., 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Telecopier No: (000) 000-0000"
10. ENTIRE AGREEMENT
This Amendment, the Agreement, the Mutual Nondisclosure Agreement between
the Parties with an effective date of January 2, 1996, the Amended and Restated
Implantable Pump License and Distribution Agreement, the Agreement Re
Implantable Pump Business dated as of September 1, 1998, the other agreements
and instruments entered into pursuant to said Agreement Re Implantable Pump
Business and the Stock Purchase Agreement together constitute the entire
agreement between the Parties hereto pertaining to the subject matter hereof and
thereof and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, relating to the subject matter hereof or
thereof.
11. CONTINUED EFFECT OF AGREEMENT
Except as amended and supplemented by this Amendment, the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the date and year first set forth. above.
MINIMED INC., a Delaware corporation MEDICAL RESEARCH GROUP, a Delaware
corporation
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By: /s/ XXXX X. XXXXXX By: /s/ XXXXXX XXXXX
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Xxxx X. Xxxxxx Xxxxxx Xxxxx,
Senior Vice President and President
General Counsel
By: /s/ XXXXX X. XXXXX
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Xxxxx X. Xxxxx
Senior Vice President, Finance and
Chief Financial Officer
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