***Portions of this exhibit are considered confidential by the registrant
and have been omitted from this filing and filed separately with the
Securities and Exchange Commission
pursuant to a request for confidential treatment.
GN RESOUND NORTH AMERICA SALES AGREEMENT
This Agreement is made as of May 31, 2001 (the "EFFECTIVE DATE"), by
and between GN ReSound North America Corporation (formerly known as GN ReSound
Corporation) (the "COMPANY") and the undersigned designated as Customer
("CUSTOMER") with respect to the following:
A. The Company manufactures and distributes a number of different
models of hearing instruments which are set forth on the current product and
price list attached hereto as Exhibit A (the "COMPANY PRODUCTS").
B. Customer is in the business of distributing and/or selling hearing
instruments.
C. The parties entered into a GN ReSound Sales Agreement dated as of
April 1, 2000 (the "ORIGINAL AGREEMENT"), pursuant to which Customer purchased
hearing instruments from the Company for resale.
D. The parties desire to enter into this Agreement, which shall
supersede the Original Agreement to the extent described below, pursuant to
which Customer may purchase hearing instruments from the Company for resale.
Therefore, the parties agree as follows:
ARTICLE 1
ORIGINAL AGREEMENT
Section 1.01 . Terms And Conditions . Except as set forth below in
Section 1.02 and Section 1.03 below, the Original Agreement, including all
exhibits thereto, is hereby superseded by this Agreement, including all exhibits
and schedules hereto, but the parties to the Original Agreement shall continue
to be bound to their respective obligations thereunder.
Section 1.02 . Warranties. The provisions of the Original Agreement,
including all exhibits thereto, relating to warranties, returns and repairs
shall continue to apply to all Company Products shipped by the Company to
Customer on or before the date hereof. The provisions of this Agreement,
including all exhibits thereto, relating to warranties, returns and repairs
shall apply to all Company Products shipped by the Company to Customer after the
date hereof.
Section 1.03 . Pricing; Rebates. The price list as set forth in Exhibit
A (the "OLD PRICE LIST") to the Original Agreement shall continue to apply to
all Company Products shipped by the Company to any of Sonus-USA, Inc. ("SONUS
USA"), Sonus-Canada Ltd ("SONUS CANADA"), Sonus-Texas, Inc. or an Acquisition
Subsidiary (as defined in the Credit Agreement, as defined below) (such four
entities, collectively, the "SONUS ENTITIES") on or before May 31, 2001.
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The rebate provisions as set forth in Section 2 of Exhibit C to the Original
Agreement shall continue to apply to all Company Products shipped by the Company
to Customer on or before May 31, 2001, except that the "applicable twelve (12)
month" period described therein shall be deemed to be the months of April, 2001
and May, 2001 for purposes of the Original Agreement. The price list as set
forth in Exhibit A to this Agreement (the "NEW PRICE LIST") shall apply to all
Company Products shipped by the Company to any Sonus Entity on or after June 1,
2001. The rebate provisions as set forth in Section 4 of Exhibit C to this
Agreement shall apply to all Company Products shipped by the Company to Customer
on or after June 1, 2001.
ARTICLE 2
CUSTOMER ORDERS
Section 2.01 . Ordering. During the term of this Agreement, the Company
will sell, and Customer will buy, those Company Products that Customer orders
from time to time. Customer's orders will be on forms provided by the Company,
and orders for custom products will include patient impressions.
Section 2.02 . Price List. The list prices for Company Products
purchased by the Sonus Entities are set forth on the Old Price List and the New
Price List. Also set forth on the Old Price List and the New Price List are the
discounts to which the Sonus Entities are entitled. The Sonus Entities shall pay
the discounted price for all Company Products as set forth on the Old Price List
and the New Price List, as applicable. The Company can modify the New Price List
upon at least sixty (60) days prior notice in writing, including adding new
Company Products and removing discontinued Company Products.
Section 2.03 . Terms And Conditions. The terms and conditions of the GN
ReSound Policies, attached to this Agreement as Exhibit B (the "GN ReSound
Policies"), are incorporated into this Agreement by this reference. If there is
a conflict between the provisions of the GN ReSound Policies and the provisions
of this Agreement, the provisions of this Agreement shall govern.
ARTICLE 3
LIMITED WARRANTY
Section 3.01 . Limited Warranty. The Company grants a comprehensive
warranty for each Company Product as set forth in the GN ReSound Policies. The
Company may modify the GN ReSound Policies upon at least sixty (60) days prior
notice in writing. THE COMPANY MAKES NO WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER
MATTER, OTHER THAN THOSE SET FORTH IN THE GN RESOUND POLICIES.
-2-
ARTICLE 4
TERM OF AGREEMENT AND TERMINATION
Section 4.01 . Term. Except as otherwise provided in this Agreement or
the exhibits hereto, the initial term of this Agreement is seven (7) years from
the Effective Date, and will be automatically renewed for additional periods of
one year unless either party notifies the other party in writing of its intent
not to renew the Agreement at least sixty (60) days before the end of the
then-current term, provided, however, that this Agreement may not be terminated
by Customer prior to the repayment in full of all outstanding Obligations (as
defined in the Credit Agreement) and the termination of the Commitment (as
defined in the Credit Agreement), each in accordance with the terms and
conditions of the Credit Agreement dated as of the date hereof among Sonus USA,
Sonus Corp. ("SONUS") and GN Great Nordic AS (as it may be amended from time to
time in accordance with the terms thereof, the "CREDIT AGREEMENT").
Section 4.02 . Termination. Either party can terminate the Agreement by
giving the other party written notice if the other party breaches a material
provision of the Agreement and does not cure that breach within fifteen (15)
days after receiving written notice.
ARTICLE 5
MISCELLANEOUS
Section 5.01 . Representations And Warranties. (a) Each of Sonus USA,
Sonus Canada and Sonus, jointly and severally, represents and warrants to the
Company that on and as of the date hereof, (i) such entity is a duly organized
and existing corporation, (ii) such entity is duly authorized to enter into,
deliver and perform this Agreement and the transactions contemplated hereunder,
(iii) this Agreement constitutes a valid and binding obligation of such entity,
enforceable in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to the enforcement of creditors' rights
generally or by principles governing the availability of equitable remedies, and
(iv) the execution and delivery by such entity of, its performance under and its
consummation of the transactions contemplated by, this Agreement do not and will
not conflict with or violate any provision of such entity's organizational
documents, violate any Requirement of Law (as defined in the Credit Agreement),
or require any authority from or approval by any Governmental Authority (as
defined in the Credit Agreement).
(b) The Company represents and warrants to each of Sonus USA, Sonus
Canada and Sonus that on and as of the date hereof, (i) the Company is a duly
organized and existing corporation, (ii) the Company is duly authorized to enter
into, deliver and perform this Agreement and the transactions contemplated
hereunder, (iii) this Agreement constitutes a valid and binding obligation of
the Company, enforceable in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to the enforcement of
creditors' rights generally or by principles governing the availability of
equitable remedies, and (iv) the execution and delivery by the Company of, its
performance under and its consummation of the transactions contemplated by, this
Agreement do not and will not conflict with or violate any provision of the
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Company's organizational documents, violate any Requirement of Law, or require
any authority from or approval by any Governmental Authority.
Section 5.02 . Force Majeure. The Company shall not be subject to any
liability for delay or failure to perform hereunder, in whole or in part, by
reason of contingencies beyond its reasonable control, whether herein
specifically enumerated or not, including, among others, acts of God, war, acts
of war, revolution, civil commotion, riots, acts of public enemies, blockade or
embargo, delays of carriers, car shortage, fire, explosion, material breakdown
of equipment, strike, chemical reversal reactions, lockout, labor dispute,
casualty or accident, earthquake, epidemic, flood, cyclone, tornado, hurricane,
or other windstorm, delays of vendors or suppliers, inability to produce or
obtain raw materials or other contingencies interfering with the production,
sale or delivery of any of the Company Products, or by reason of any law, order,
proclamation, regulation, ordinance, demand, requisition, requirement or any
other act of any governmental authority, local, state or federal, including
court orders, judgments or decrees, or actions of any governmental authority
respecting the registration, re-registration, cancellation, suspension or
labeling of, or ability to produce, deliver, transport or sell, any of the
Company Products; provided, however, that the Company shall, as promptly as
reasonably possible under the circumstances, give written or verbal notice to
Customer whenever such a contingency appears likely to occur or has occurred and
shall use all reasonable efforts to overcome the effects of the contingency as
promptly as possible and shall allow the other party such access and information
as may be necessary or desirable to evaluate such contingency. The Company shall
not be required to resolve a strike, lockout or other labor problem in a manner
which it alone does not deem proper and advisable. The Company and Customer
shall suspend performance of this Agreement for a period of time equal to the
duration of the event excusing such performance and the time required to
overcome the consequences of such event and resume performance, and the
then-current term of this Agreement shall be automatically extended by such
period of time, and all terms and conditions of this Agreement, including the
exhibits and schedules attached hereto, shall apply during such extension,
mutatis mutandis. The Company and Customer shall timely agree in good faith and
in writing on the dates upon which performance of this Agreement is suspended
and resumed in accordance with this Section 5.02.
Section 5.03 . Definition of Customer. The definition of Customer is
expanded to include those Persons listed on Schedule 1 attached hereto and such
other Sonus related entities or programs as may be established by Sonus from
time to time. Sonus shall provide to the Company a list of the entities and
persons included within the definition of Customer from time to time, and shall
update it regularly with any changes. The Company will not be required to
process orders from any entity or person until Customer has advised Sonus that
such entity or person is to be included within the definition of Customer. For
purposes of this Agreement,
(a) "SUBSIDIARY" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by such Person;
(b) "PERSON" means an individual, corporation, limited liability
company, partnership, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof; and
-4-
(c) "AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person, provided that no securityholder or any Person shall be deemed an
Affiliate of any other securityholder solely by reason of any investment in such
Person. For purposes of this definition, the term "control" (including, with
correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
Section 5.04 . Governing Law. This Agreement is governed by the laws of
New York, without regard to or application of its laws relating to conflicts of
law.
Section 5.05 . Attorneys' Fees. If litigation occurs between the
parties in connection with this Agreement, the prevailing party will be entitled
to its reasonable attorneys' fees, expert witness fees and costs of suit. Also,
Customer will reimburse the Company for its costs, including, without
limitation, attorneys' fees, collection agency fees and other expenses, if the
Company pursues the payment of a past due invoice, whether or not litigation
occurs.
Section 5.06 . Amendments; Assignment; Change of Control. Amendments to
this Agreement are effective only if in writing and signed by the parties. No
amendment, extension or release from any provision hereof shall be effected by
mutual agreement, acknowledgment, acceptance or purchase order, invoice or
shipping instructions forms, or otherwise, unless the same shall be in writing,
signed by the party to be bound and specifically described as an amendment,
extension or release of this Agreement. Neither the Company nor Customer may
assign its rights or obligations under this Agreement without the other party's
prior consent in writing, which consent will not be unreasonably withheld. Any
assignment of this Agreement by a party without the other party's prior written
consent shall constitute a material breach of this Agreement. A Change of
Control shall be deemed to be an assignment for purposes of this Agreement. For
purposes of this Agreement, "CHANGE OF CONTROL" means (a) such time as any Third
Party (as defined below) acquires, directly or indirectly, by virtue of the
consummation of any purchase, merger or other combination, securities or
ownership interests of a Person representing more than 51% of the combined
voting power of such Person's then outstanding voting securities or ownership
interests with respect to matters submitted to a vote of the stockholders or
interest holders generally or (b) a sale or transfer by a Person, directly or
indirectly, of substantially all of its assets to a Person that is not an
Affiliate of such transferor prior to such sale or transfer. For purposes of
this Section 5.06, a "Third Party" with respect to Customer shall not be deemed
to include any of the following: current or future executive officers of Sonus,
Warburg Pincus Ventures LP or any of its Affiliates, Xxxx Xxxxxxxx, RS
Investment Management Co. or any of its Affiliates, C3 Holdings or any of its
Affiliates, or Clover Capital Partners or any of its Affiliates. The rights and
liabilities of the parties under this Agreement bind and inure to the benefit of
the parties and their respective successors and permitted assigns.
Section 5.07 . Severability. If a court finds any part of this
Agreement to be unenforceable, that part will be enforced to the extent
permissible so as to carry out the intent of the parties, and the remainder of
the Agreement will continue in full force and effect.
-5-
Section 5.08 . Notices. All notices under this Agreement will be in
writing and delivered by courier or overnight delivery service, or by certified
mail, sent to the addresses set forth below the signatures of the parties or to
such other address of which a party has given the other party notice, and will
be deemed delivered upon receipt, or three (3) days after it is sent, whichever
occurs first.
Section 5.09 . Relationship of Parties. The parties to this Agreement
are independent contractors, and nothing in this Agreement is intended to create
any relationship of partnership, joint venture, employment, franchise, or agency
between the parties.
Section 5.10 . Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original, but which together will
constitute one instrument.
Section 5.11 . Currency. All prices and payments will be in United
States dollars.
Section 5.12 . Confidentiality.
(a) Notwithstanding anything in this Agreement to the contrary, with
respect to any of Sonus's filings with the Securities and Exchange Commission
(the "SEC"), at the request of the Company, Sonus and its Affiliates agree to
use their best efforts to obtain from the SEC confidential treatment of any
information contained in this Agreement for which such treatment may reasonably
be argued to be available and for as long as is permitted under applicable law.
Sonus and its Affiliates agree to cooperate fully with the Company in applying
for such confidential treatment, including, but not limited to, allowing the
Company and its counsel to review any application in advance of its submission
and incorporating such of the Company's and its counsel's comments in such
application as may reasonably be requested. Furthermore, Sonus and its
Affiliates agree not to publicly disclose in any manner, oral or written,
including, but not limited to, in any portion of its filings with the SEC, press
releases or other communications, any information with respect to which
confidential treatment has been requested, unless required to so disclose
pursuant to applicable law. Any breach of any provision of this Section 5.12(a)
shall be considered a material breach of this Agreement.
(b) Any technical, health, environmental and safety, manufacturing,
market or customer information, or price or cost related information
communicated to one party by the other, under any provision of this Agreement,
whether in writing, verbally or visually observed (hereinafter "CONFIDENTIAL
INFORMATION") shall be considered confidential at the time of communication and
shall not be disclosed to any person or entity other than the parties hereto,
their Affiliates and their respective officers, directors, employees and agents
(each, a "THIRD PARTY"), nor used by the recipient party other than as
contemplated by this Agreement. The recipient party shall use the same degree of
care protecting this Confidential Information as it applies to its own
confidential information. This Section 5.12(b) shall not apply to:
(i) Confidential Information already in the public domain, or
released to the public through no fault of the recipient;
(ii) Confidential Information already known to the recipient except
through prior disclosure by the other party hereto or which is
developed by the recipient independently of its relationship to the
other party hereunder;
-6-
(iii) Confidential Information acquired by the recipient from a
Third Party entitled to disclose it; and
(iv) Confidential Information the recipient is legally required to
disclose; provided that, subject to applicable law, prior to any
disclosure permitted by this clause (iv), the recipient gives the other
party hereto, to the extent reasonably practicable, reasonable notice
and a reasonable opportunity to seek a protective order protecting
against the disclosure of such Confidential Information.
Section 5.13 . Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in the United States District Court for the Southern District of New
York or any New York state court sitting in the Borough of Manhattan and that
any cause of action arising out of this Agreement shall be deemed to have arisen
from a transaction of business in the State of New York, and each of the parties
hereby irrevocably consents to the non-exclusive jurisdiction of such court(s)
(and of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum.
Section 5.14 . Waiver of Jury Trial. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 5.15 . Headings and Titles. The headings and titles of this
Agreement are inserted for convenience only and shall not be deemed a part
hereof or affect the construction or interpretation of any provision hereof.
ARTICLE 6
ADDITIONAL TERMS AND CONDITIONS
Section 6.01 . Additional Terms and Conditions. Additional terms and
conditions, if any, are attached hereto as Exhibit C and are, for all purposes,
incorporated herein by reference.
-7-
The parties have executed this Agreement as of the Effective Date.
GN RESOUND NORTH AMERICA CORPORATION, a
California corporation
By: /s/ Carsten Trads
----------------------------------------------
Name: Carsten Trads
-------------------------------------------
Title: President
-------------------------------------------
Address: 000 Xxxxxxx Xxxxx
Xxxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention:
CUSTOMER:
SONUS-USA, INC, a Washington corporation
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
----------------------------
Title: Chairman
----------------------------
Address: 000 X.X. Xxxxx Xxxxxx,
Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
SONUS-CANADA LTD, a British Columbia
corporation
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
----------------------------
Title: Chairman
----------------------------
Address: 000 X.X. Xxxxx Xxxxxx,
Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
For purposes of Section 5.12 of this Agreement and Section 5 of Exhibit C to
this Agreement only:
SONUS CORP., a Yukon Territory corporation
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
----------------------------
Title: Chairman
----------------------------
Address: 000 X.X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
-8-
EXHIBIT A
Contract Prices for Sonus
-------------------------
***
***Confidential portions omitted
pursuant to a request for
confidential treatment
-1-
EXHIBIT B
GN ReSound Policies
WARRANTIES TERMS
Standard Warranty Coverage Payment
GN ReSound North America provides a two-year product Each GN ReSound North America order is invoiced
warranty for its advanced technology digital hearing separately. Payments for invoiced orders are due net 30
instruments and a one-year product warranty for its analog from the invoice date. Past due charges are subject to a
programmable hearing instruments, remote controls and monthly service charge of 1.5% (18% per annum). Orders
conventional instruments. All product warranties are in may be put on hold for accounts that are not current. An
effect from the date of the original invoice. For BTE account must be in good standing to receive discount
instruments, a 90-day "stocking period" is added to the privileges or be eligible for promotional activities.
standard warranty. Earmolds, tubing, batteries and
accessories are not covered under our warranties. Accounts will receive monthly statements summarizing
open items on account.
For warranty work, all products must be returned to an
authorized GN ReSound North America manufacturing VISA, MasterCard and Discover are accepted.
facility. Proof of purchase may be required.
Credit
Extended Warranty Coverage
A completed, signed credit application must be submitted
An additional year of product warranty for hearing and approved before any hearing instrument orders are
instruments may be purchased from GN ReSound at any shipped. Upon approval, a line of credit will be established.
time during the original warranty period. When purchases posted to your account have exceeded the
assigned credit limit, all products will be shipped C.O.D.
For an advanced technology digital or analog until the balance is reduced below the credit limit, or the
programmable instrument, the charge for the extended credit line is extended. Alternative payment arrangements
coverage is $75. may be available upon request.
Return for Credit
Loss and Damage Coverage
All GN ReSound Products are covered by a one-year loss All GN ReSound instruments, parts and accessories in good
and damage policy. Any remote control that is stolen, working condition may be returned for full credit within 90
lost or damaged can be replaced for a $50 per-unit fee days of the date of the original invoice. (Please note that
during the first year of the product warranty - any CIC payment is due 30 days from the date of the original
or advanced technology digital or analog programmable invoice.)
instrument for a $150 per-unit fee. If the consumer
would prefer additional loss and damage coverage, third
party insurers will cover our instruments.
An instrument may be replaced only once under this Certain promotional activities may restrict the right of return
program -- the effective date of the product warranty on the to "exchange only" as indicated on the invoice. All returns
replacement unit is the date of the invoice of the original for credit must be accompanied by a Return Authorization
unit. The replacement must be for the same user, the same form to ensure proper and prompt processing.
ear and with the same options package as the original
hearing instrument and it may not be returned for credit. Products returned after 90 days will be subject to a 25%
Ownership of the stolen, lost or damaged unit reverts to GN restocking fee. No returns will be accepted after 180 days.
ReSound Damaged units will be subject to additional charges.
Should a claim need to be filed, a complete written and
notarized statement from the user is required.
Service Warranties
Please refer to the Service section for specific warranty
information on repairs and remakes.
Services Remake
Shipping During the intial warranty period, GN ReSound will remake
custom shells (and place the original faceplate and
GN ReSound North America provides Airborne Next components into the new shell) as often as necessary at no
Afternoon Service free of charge for all new orders, repairs charge. A remake performed under warranty maintains the
and remakes. (Next Afternoon Service means next original purchase warranty effective date. Note: a remake
business afternoon delivery for packages under 15 pounds, requires a new impression
and two-day delivery for packages over 15 pounds.)
Preprinted Airborne forms for Next Afternoon Service are To remake an out-of-warranty advanced technology
available from Customer Service. Please enter name and hearing instrument less than 60 months old, the charge is
address information only -- do not make any changes to the $150 per instrument. This charge includes a 12-month
form. You will be billed for any additional charges incurred. warranty in effect from the date of the remake invoice.
Insurance is the sole responsibility of the sender. If To remake an out-of-warranty conventional hearing
additional insurance is purchased by the sender from instrument less than 60 months old, the charge is $100 per
Airborne, the sender will be billed for such costs. instrument. This charge includes a 6-month warranty in
effect from the date of the remake invoices.
Warranty Repair
To remake any out-of-warranty hearing instrument 60
Should repair of a GN ReSound product be necessary, we months or older, the charge is $250 per instrument. This
will make every effort to provide this service in a timely and charge includes a 6-month warranty in effect from the date
efficient manner. To facilitate this service, please return the of the remake invoice.
product with a completed Repair/Remake form to
Customer Service in appropriate packaging. A produce Recasing to a New Color
repair under warranty maintains the original purchase
warranty effective date. BTE instruments with color options may be recased with a
different color at no charge during the first 90 days. After
Out-of-Warranty Repair 90 days from the date of the original invoice, the recasing
charge is $35 per instrument for the BT4 and BT2-ES
GN ReSound hearing instruments (excluding shell models, and $55 per instrument for the BTP model. A
remakes) and remote controls that are no longer covered recasing performed under warranty maintains the original
under the original purchase warranty may be repaired "out purchase warranty effective date.
of warranty."
Remote Control Replacement
To repair an out-of-warranty advance technology device
less than 60 months old, the charge is $105 per hearing In an effort to minimize patient inconvenience during trial
instrument and $90 per remote control. This charge periods, GN ReSound will ship replacement remote
includes a supplemental 12-month warranty in effect from controls in exchange for malfunctioning units. To receive
the date of the repair invoice. credit, the units must be received within 90 days from the
date of the original invoice. Note: We recommend that
To repiar an out-of-warranty conventional device less than dispensers stock extra remote controls for "loaner" use.
60 months old, the standard charge is $65 per hearing
instrument. This charge includes a supplemental 6-month
warranty in effect from the date of the repair invoice.
For a device 60 months or older, GN ReSound will repair or
replace it at our discretion (based upon parts availability)
for a charge of $150. This charge includes a supplemental
6-month warranty in effect fromt he date of the repair
invoice.
GN ReSound cannot guarantee repair or replacement of
devices which have been discontinued from our product
line for more than five years.
Policies Summary
Warranties
STANDARD WARRANTY COVERAGE
Advanced technology digital programmable instruments Two-year
Analog programmable instruments One-year
Remote controls One-year
BTE instruments: add 90-day "stocking period")
EXTENDED WARRANTY COVERAGE
Advanced technology digital programmable instruments $ 75
Analog programmable instruments 75
LOSS AND DAMAGE COVERAGE (DEDUCTIBLES)
Advanced technology digital programmable instruments $ 150
Analog programmable instruments 150
CICs (all circuits) 150
Remote controls 50
Terms
PAYMENT
Invoice due date (each order invoices
separately) Net 30
Past due charges 1.5%/month
Credit cards accepted VISA, MasterCard, Discover
CREDIT
Initial orders Accepted after credit application completed
Credit limit exceeded All products shipped C.O.D.
RETURN FOR CREDIT
First 90 days Full credit
90-180 days 25% restocking fee
After 180 days No returns
(Damaged units subject to additional charges)
Services
SHIPPING
New orders, repairs and remakes Airborne Next Afternoon (no charge)
(Insurance is sole responsibility
of the sender)
OUT-OF-WARRANTY REPAIR
Advanced technology instruments <60 months old (+12-month warranty) $ 105
Conventional instruments <60 months old (+6-month warranty) 65
Remote controls <60 months old (+12-month warranty) 90
Any device 60 months or older (+6-month warranty) 150
REMAKE
Initial warranty period No charge
Advanced technology instruments <60 months old (+12-month warranty) 150
Conventional instruments <60 months old (+6-month warranty) 100
Any device 60 months or older (+6-month warranty) 250
RECASING TO A NEW COLOR (if available)
First 90 days No charge
BT4 and BT2 ES models after 90 days $35
BTP models after 90 days 55
REMOTE CONTROL REPLACEMENT
Malfunction during first 90 days No charge
EXHIBIT C
ADDITIONAL TERMS AND CONDITIONS
(Unless otherwise defined herein, capitalized terms used herein shall
have the meanings ascribed to them in the Agreement.)
1. No Modification of Price List. Notwithstanding any provision to the
contrary in the Agreement, the Company shall not be entitled to adjust the
prices on the New Price List until June 1, 2004, after which the Company may
increase prices with respect to any Company Product for the remainder of the
term of this Agreement not more than *** each year. In the event that the CANTA
Series Company Products are not available to Customer by June 1, 2001, the price
set forth on the New Price List with respect to such Company Products shall be
effective as of the date that such Company Products are available to Customer.
The Company represents and warrants that the "list price" set forth on Exhibit A
will be the Company's published list price for the Company Products listed on
Exhibit A as of June 1, 2001. ***
2. Sales Requirements. (a) The "SALES NUMBER" for any period shall be
the number of Company Products purchased from the Company and its Affiliates
during such period by all Persons included within the definition of "Customer"
under this Agreement. The "DIGITAL SALES NUMBER" for any period shall be the
number of digital Company Products purchased from the Company and its Affiliates
during such period by all Persons included within the definition of "Customer"
under this Agreement. The "CUSTOMER CLINIC NUMBER" for any period shall be the
number of hearing instruments (produced by any manufacturer, including, but not
limited to, the Company and its Affiliates) sold during such period by retail
hearing centers that are controlled by Sonus or its Subsidiaries. The "D2
NUMBER" for any period shall be the number of OEM Viennatone digital Company
Products (private label brands, including, but not limited to, D2 and ListenEar)
("D2 PRODUCTS") purchased from the Company and its Affiliates during such period
by all Persons included within the definition of "Customer" under this
Agreement. Each Sales Number, Digital Sales Number, Customer Clinic Number and
D2 Number shall be determined on a "NET BASIS", i.e. reduced by any orders for
hearing instruments placed during such period that are canceled and any hearing
instruments sold in such period that are returned for any reason. For the
avoidance of doubt, for any given period, the Sales Number, the Digital Sales
Number and the Customer Clinic Number shall each include the number of
Viennatone products sold on a Net Basis during such period but shall each
exclude the number of Avance units and V-Series units sold on a Net Basis during
such period. In the event Sonus or any of its Subsidiaries or Affiliates
consummates a transaction involving expansion or acquisition of assets, business
or third parties subsequent to the execution of the Agreement, references to
"Customer" in the Agreement and this Exhibit C shall give effect to such
expansion or acquisition. In the event that Company Products are not available
for sale or permitted to be sold in a jurisdiction (an "EXCLUDED JURISDICTION")
under the applicable laws of such jurisdiction after any date (the "EXCLUDED
DATE") following the date hereof, the Customer Clinic Number for any period or
*** Confidential portions omitted pursuant to a request for confidential
treatment
-1-
portion thereof after the Excluded Date shall not include the number of hearing
instruments sold on a Net Basis in the Excluded Jurisdiction by Customer.
(b) Each calendar year following the Effective Date shall be a
"CUSTOMER SALES Period", except that the initial "CUSTOMER SALES PERIOD" shall
begin on June 1, 2001 and end on December 31, 2001. With respect to the period
from October 1, 2001 through December 31, 2001 ("2001 Q4") and each Customer
Sales Period thereafter, (i) the "TARGET NUMBER" for each such period shall be
***, and (ii) the "DIGITAL TARGET NUMBER" for each such period shall be ***.
(c) No later than 90 days after the end of each Customer Sales Period,
Sonus USA shall deliver to the Company a statement (each, a "CUSTOMER SALES
STATEMENT") in a form mutually agreed upon by Sonus USA and the Company setting
forth, without limitation, the Customer Clinic Number for such period. Sonus USA
and the Company shall also agree in good faith as to the Sales Number, Digital
Sales Number and D2 Number for such Customer Sales Period, and such numbers
shall be added to the Customer Sales Statement. In the event of a dispute
regarding the information set forth on a Customer Sales Statement, the Company
and Sonus USA shall make a good faith effort to resolve any discrepancies and to
make a final determination of the information required to be set forth on such
Customer Sales Statement (a "FINAL DETERMINATION").
(d) The excess of the Sales Number during 2001 Q4 or during any
subsequent Customer Sales Period thereafter over the Target Number (or, if
applicable, the Revised Target Number (as defined below)) for such period shall
be the "EXCESS NUMBER" for the following Customer Sales Period. The excess of
the Digital Sales Number during 2001 Q4 or during any Customer Sales Period
thereafter over the Digital Target Number (or, if applicable, the Revised
Digital Target Number) for such period shall be the "DIGITAL EXCESS NUMBER" for
the following Customer Sales Period.
(e) In the event that the Final Determination of a Customer Sales
Statement indicates that the Sales Number during 2001 Q4 or during any Customer
Sales Period thereafter was fewer than the Target Number (or, if applicable, the
Revised Target Number) for such period, then the following shall apply:
(i) If the Sales Number for such period is less than *** for such
period:
(x) Sonus USA shall pay to the Company in immediately
available funds by the 100th day following such Final
Determination (the "PAYMENT DATE") an amount (the
"CASH PAYMENT") equal to *** provided that if the
Cash Payment is not paid by the Payment Date, then it
shall bear interest for each day from and including
the Payment Date to and including the date on which
the Cash Payment, plus all such accrued interest is
paid in full, at a rate per annum equal to six
percent (6%); provided further that the Cash Payment
shall be reduced by *** (and such number of Company
Products so purchased shall not, for the avoidance of
doubt, be included in the calculation of the Sales
Number, Digital Sales Number or D2 Number
*** Confidential portions omitted pursuant to a request for confidential
treatment
-2-
for the Customer Sales Period during which such
purchases are made); and
(y) *** for such period (the "FULL DIFFERENCE") shall
be added to the Target Number for the following
Customer Sales Period as computed in accordance with
subsection (b) of this Section 2 (the sum of the Full
Difference and the Target Number for such following
Customer Sales Period, a "REVISED TARGET NUMBER").
(ii) If the Sales Number for such period is greater than or equal
to *** for such period, *** (the "PARTIAL DIFFERENCE") *** as computed
in accordance with subsection (b) of this Section 2 (the sum of the
Partial Difference and the Target Number for such following Customer
Sales Period, also a "REVISED TARGET NUMBER").
(iii) In the event a One Quarter Termination (as defined below) is
in effect at the time such Customer Sales Statement is delivered, any
Full Difference or Partial Difference resulting from such period shall
be added to the Termination Target Number of the first Termination
Quarter (each as defined below).
(iv) In the event a One Year Termination (as defined below) is in
effect at the time such Customer Sales Statement is delivered, any Full
Difference or Partial Difference resulting from such period shall be
added to the Termination Target Number of the then-current Termination
Quarter.
In the event that the Sales Number during the last Customer Sales Period of the
then-current term of this Agreement is fewer than the Target Number (or, if
applicable, the Revised Target Number) for such Customer Sales Period (such
difference, the "SHORTFALL NUMBER"), then Sonus USA shall either (i) pay in
immediately available funds to the Company within 10 business days of the Final
Determination of the Customer Sales Statement relating to such period *** or
(ii) purchase from the Company and its Affiliates during the 90 days following
such Final Determination ***. The first proviso of clause (e)(i)(x) of this
Section 2 shall apply, mutatis mutandis, to any payments due under the preceding
sentence. Notwithstanding the foregoing, in the event of a Termination (as
defined below), the provisions of Section 3 of this Exhibit C shall supersede
the foregoing two sentences.
(f) In the event that the Final Determination of a Customer Sales
Statement indicates that the Digital Sales Number during 2001 Q4 or during any
Customer Sales Period thereafter was fewer than the Digital Target Number (or,
if applicable, the Revised Digital Target Number) for such period, then the
following shall apply:
(i) If the Digital Sales Number for such period is less than ***
for such period:
(x) Sonus USA shall pay to the Company in immediately
available funds by the 100th business day following
such Final Determination (the "DIGITAL PAYMENT DATE")
an amount (the "DIGITAL CASH PAYMENT") equal to ***
provided that if the Digital Cash Payment is not
*** Confidential portions omitted pursuant to a request for confidential
treatment
-3-
paid by the Digital Payment Date, then it shall bear
interest for each day from and including the Digital
Payment Date to and including the date on which the
Digital Cash Payment, plus all such accrued interest
is paid in full, at a rate per annum equal to six
percent (6%); provided further that the Digital Cash
Payment shall be reduced by *** (and such number of
digital Company Products so purchased shall not, for
the avoidance of doubt, be included in the
calculation of the Sales Number, Digital Sales Number
or D2 Number for the Customer Sales Period during
which such purchases are made); and
(y) *** for such period (the "DIGITAL FULL
DIFFERENCE") shall be added to the Digital Target
Number for the following Customer Sales Period as
computed in accordance with subsection (b) of this
Section 2 (the sum of the Digital Full Difference and
the Digital Target Number for such following Customer
Sales Period, a "REVISED DIGITAL TARGET NUMBER").
(ii) If the Digital Sales Number for such period is greater than or
equal to *** for such period, as computed in accordance with subsection
(b) of this Section 2 (the sum of the Digital Partial Difference and
the Digital Target Number for such following Customer Sales Period,
also a "REVISED DIGITAL TARGET NUMBER").
(iii) In the event a One Quarter Termination is in effect at the
time such Customer Sales Statement is delivered, any Digital Full
Difference or Digital Partial Difference resulting from such period
shall be added to the Termination Digital Target Number of the first
Termination Quarter (each as defined below).
(iv) In the event a One Year Termination is in effect at the time
such Customer Sales Statement is delivered, any Digital Full Difference
or Digital Partial Difference resulting from such period shall be added
to the Termination Digital Target Number of the then-current
Termination Quarter.
In the event that the Digital Sales Number during the last Customer Sales Period
of the then-current term of this Agreement is fewer than the Digital Target
Number (or, if applicable, the Revised Digital Target Number) for such Customer
Sales Period (such difference, the "DIGITAL SHORTFALL NUMBER"), then Sonus USA
shall either (i) pay in immediately available funds to the Company within 10
business days of the Final Determination of the Customer Sales Statement
relating to such period *** or (ii) purchase from the Company and its Affiliates
during the 90 days following such Final Determination ***. The first proviso of
clause (e)(i)(x) of this Section 2 shall apply, mutatis mutandis, to any
payments due under the preceding sentence. Notwithstanding the foregoing, in the
event of a Termination (as defined below), the provisions of Section 3 of this
Exhibit C shall supersede the foregoing two sentences.
(g) In the event that the Customer Sales Statement relating to the last
Customer Sales Period indicates that there is no Shortfall Number or Digital
Shortfall Number, Customer shall have no further obligations to purchase Company
Products from the Company and its Affiliates except as otherwise provided under
this Agreement.
*** Confidential portions omitted pursuant to a request for confidential
treatment
-4-
(h) Except in the event of a Termination, upon satisfaction of
Customer's obligations described in this Section 2 and of the parties'
obligations described in Section 4 of this Exhibit C, the term of this Agreement
shall expire. 3. Early Termination. (a) In the event that Sonus USA repays in
full the outstanding Obligations and the Commitment terminates, each in
accordance with the terms and conditions of the Credit Agreement, Customer may
terminate this Agreement if it agrees to either:
(i) (x) purchase from the Company and its Affiliates during the
first Termination Quarter (as defined below) a number of Company
Products equal to the Termination Target Number (as defined below) for
such Termination Quarter, of which a number equal to the Termination
Digital Target Number (as defined below) must be digital Company
Products, and (y) transfer to the Company in immediately available
funds by the last business day of the first Termination Quarter (the
"TERMINATION PAYMENT DATE") an amount equal to $2,000,000 (the
"TERMINATION PAYMENT"), or
(ii) purchase from the Company and its Affiliates during each
Termination Quarter a number of Company Products equal to the
Termination Target Number for such Termination Quarter, of which a
number equal to the Termination Digital Target Number must be digital
Company Products.
A "ONE QUARTER TERMINATION" means a termination pursuant to (i) above, a "ONE
YEAR TERMINATION" means a termination pursuant to (ii) above, and a
"TERMINATION" means either a One Quarter Termination or a One Year Termination.
Customer may effect a Termination at any time after repaying the outstanding
Obligations but must provide written notice to the Company of its desire to
effect a Termination (the "TERMINATION NOTICE").
(b) For purposes of this Agreement:
(i) The Customer Sales Period during which the Termination Notice
is received by the Company (the "FINAL CUSTOMER SALES PERIOD") shall be
deemed to end on the last day of the month of such receipt (the
"RECEIPT MONTH"), if the Termination Notice is received by the first
business day of the Receipt Month, or on the last day of the month
following the Receipt Month, if the Termination Notice is not received
by the first business day of the Receipt Month. The 3-month period
starting on the first day of the month immediately following the Final
Customer Sales Period, as well as each of the three 3-month periods
thereafter, shall be a "TERMINATION QUARTER". For example, if the
Company receives the Termination Notice on May 15, 2004, (v) the Final
Customer Sales Period shall end on June 30, 2004, (w) the first
Termination Quarter shall be from July 1, 2004 through September 30,
2004, (x) the second Termination Quarter shall be from October 1, 2004
through December 31, 2004, (y) the third Termination Quarter shall be
from January 1, 2005 through March 31, 2005 and (z) the fourth
Termination Quarter shall be from April 1, 2005 through June 30, 2005.
(ii) The "TERMINATION TARGET NUMBER" for the first, second, third
and fourth Termination Quarters shall be ***, respectively, of the
Customer Clinic Number for such
*** Confidential portions omitted pursuant to a request for confidential
treatment
-5-
Termination Quarter. The "TERMINATION DIGITAL TARGET NUMBER" for each
Termination Quarter shall be *** of the Termination Target Number for
such Termination Quarter. ***.
(c) No later than 90 days after the end of the first Termination
Quarter, in the event of a One Quarter Termination, or 90 days after the end of
the fourth Termination Quarter, in the event of a One Year Termination, Sonus
USA shall deliver to the Company a statement (the "TERMINATION CUSTOMER SALES
STATEMENT") in a form mutually agreed upon by Sonus USA and the Company setting
forth, without limitation, the Customer Clinic Number for each Termination
Quarter. Sonus USA and the Company shall also agree in good faith as to the
Sales Number, Digital Sales Number and D2 Number for each Termination Quarter.
In the event of a dispute regarding the information set forth on the Termination
Customer Sales Statement, the Company and Sonus USA shall make a good faith
effort to resolve any discrepancies and to make a final determination of the
information required to be set forth on the Termination Customer Sales
Statement.
(d) In the event that the Termination Customer Sales Statement
indicates that the Sales Number during any Termination Quarter was fewer than
the Termination Target Number for such period (the sum of any such differences,
the "TERMINATION SHORTFALL NUMBER"), then Sonus USA shall pay to the Company in
immediately available funds by the 100th day following the Final Determination
of the Termination Customer Sales Statement (the "TERMINATION PAYMENT DATE") an
amount (the "TERMINATION CASH PAYMENT") *** (the "TERMINATION PENALTY PRICE");
provided that if the Termination Cash Payment is not paid by the Termination
Payment Date, then it shall bear interest for each day from and including the
Termination Payment Date to and including the date on which the Termination Cash
Payment, plus all such accrued interest is paid in full, at a rate per annum
equal to six percent (6%); provided further that the Termination Cash Payment
shall be reduced by ***.
(e) In the event that the Termination Customer Sales Statement
indicates that the Digital Sales Number during any Termination Quarter was fewer
than the Termination Digital Target Number for such period (the sum of any such
differences, the "DIGITAL TERMINATION SHORTFALL NUMBER"), then Sonus USA shall
pay to the Company in immediately available funds by the 100th day following the
Final Determination of the Termination Customer Sales Statement (the "DIGITAL
TERMINATION PAYMENT DATE") an amount (the "DIGITAL TERMINATION CASH PAYMENT")
***; provided that if the Digital Termination Cash Payment is not paid by the
Digital Termination Payment Date, then it shall bear interest for each day from
and including the Digital Termination Payment Date to and including the date on
which the Digital Termination Cash Payment, plus all such accrued interest is
paid in full, at a rate per annum equal to six percent (6%); provided further
that the Digital Termination Cash Payment shall be reduced by ***.
(f) In the event that the Termination Customer Sales Statement
indicates that there is no Termination Shortfall Number or Termination Digital
Shortfall Number, Customer shall have no further obligations to purchase Company
Products from the Company and its Affiliates except as otherwise provided under
this Agreement.
(g) In the event of a One Quarter Termination, if the Termination
Payment is not paid by the Termination Payment Date, the Termination Payment
shall bear interest on $2,000,000, for
*** Confidential portions omitted pursuant to a request for confidential
treatment
-6-
each day from and including the Termination Payment Date to and including the
date on which the Termination Payment plus all accrued interest is paid in full,
at a rate per annum equal to six percent (6%).
(h) Upon satisfaction of Customer's obligations described in this
Section 3 and of the parties' obligations described in Section 4 of this Exhibit
C, the term of this Agreement shall expire.
4. Sales Rebates. (a) For Company Products listed on the New Price List
that are billed to Customer after the Effective Date, including during any
period during which a Termination is in effect, Sonus USA shall be entitled to a
rebate as follows:
Sonus USA shall receive a rebate of *** purchased by Customer from the
Company. Of such rebate, *** (the "REPAYMENT REBATE") shall be payable *** (as
described below) *** subject to the following: (i) during the first three years
following the date hereof, the Repayment Rebate will first be applied by Sonus
USA toward Current Interest as defined and described in Section 2.05(a) of the
Credit Agreement, and Sonus USA shall be entitled to keep any remaining portion
of such rebate (subject to Section 4(b) of this Exhibit C); and (ii) during each
year after the first two years following the date hereof, the Repayment Rebate
will first be applied by Sonus USA to repay any Current Interest and then will
be applied by Sonus USA to repay any amounts described in Section 2.05(a)(ii) of
the Credit Agreement, and Sonus USA shall be entitled to keep any remaining
portion of such rebate (subject to Section 4(b) of this Exhibit C). The
remaining *** of such *** rebate (such ***, the "WORKING CAPITAL REBATE") shall
be payable *** (as described below). In addition to the *** rebate above, Sonus
USA shall receive a rebate (the "SONUS SOLUTION REBATE", and together with the
Repayment Rebate and the Working Capital Rebate, the "REBATES") of *** purchased
from the Company by Customer, which rebate will be used for the purpose of
national advertising. It is the understanding of the parties hereto that
Customer may make any additional requests that the Company provide funds for
marketing programs, but the Company is under no obligation to grant or even
consider such requests.
(b) Notwithstanding the foregoing, in the event that any Sonus Entity
has not remitted to the Company any amount (an "INVOICED AMOUNT") for which it
has been invoiced by 90 days after the date of such invoice, after application
by Sonus USA of the Repayment Rebate in accordance with Section 4(a) of this
Exhibit C, the Company shall be allowed to apply the Rebates, including any
portion of the Repayment Rebate not so applied by Sonus USA, or any portion
thereof toward such Invoiced Amount.
(c) The Sonus Entities and the Company understand and agree that each
Person other than the Sonus Entities included within the definition of
"Customer" (each, a "SONUS Affiliate") shall order Company Products directly
from the Company, which shall deliver and xxxx such Sonus Affiliate for such
Company Products. ***
(d) All rebates described above shall be paid to Sonus USA ***.
Determination of rebate level shall be based on the total number of units billed
to Customer during the applicable period on a Net Basis. The Company shall pay
to Sonus USA each Repayment Rebate earned by Customer during each *** of Sonus
USA beginning after the date hereof by 12:00 noon, New York City time, of the
10th business day ***, provided that in the event that Sonus USA has
*** Confidential portions omitted pursuant to a request for confidential
treatment
-7-
provided notice to GN ReSound AS of a material adverse change pursuant to
Section 5.01(k) of the Credit Agreement, the Company shall be allowed to apply
the full amount of each Repayment Rebate owed by the Company to pay any Current
Interest owed by Sonus USA to the Company or any of its Affiliates. The Company
shall pay to Sonus USA each Working Capital Rebate and Sonus Solution Rebate
earned by Customer *** by the 10th business day of ***. By each date that each
Customer Sales Statement or, if applicable, Termination Customer Sales
Statement, is due, the Company shall calculate and deliver to Sonus USA a final
reconciliation for units qualifying for a rebate *** owed Sonus USA during the
relevant period. If such reconciliation indicates that the Company has underpaid
the rebates ***, the Company shall pay any and all amounts due to Sonus USA
within 30 days of the Company's delivery of such reconciliation. If such
reconciliation indicates that the Company has overpaid the rebates ***, and if
Sonus USA has a credit balance in its account, the Company shall be entitled to
reduce such credit balance by the overpaid amount. Alternatively, Sonus USA
shall refund such overpayment to the Company within 30 days of the Company's
invoice to Sonus USA for such amount.
(e) All determinations of net orders shall be based on the books and
records of the Company and such determinations made in good faith shall be
deemed conclusive. If Sonus USA disputes such determination and such dispute is
with respect to an amount in excess of 5% of the total number reported by the
Company for the applicable period, Sonus USA shall notify the Company and the
parties shall made a good faith effort to resolve any discrepancies.
5. Right of First Offer. (a) For the period commencing on the date
hereof and ending on the second anniversary hereof, Sonus will not consent to
any Change of Control Transaction unless Sonus shall have first made an offer to
sell itself to the Company, and the Company shall have had an opportunity to
purchase Sonus, each as set forth below in this Section 5.
(b) A copy of Sonus's offer (the "SONUS NOTICE") shall be given to the
Company and shall consist of an invitation to the Company and its Affiliates to
make an offer to purchase Sonus upon the terms and conditions set forth therein.
The offer contained in the Sonus Notice shall be confidential unless Sonus
specifies to the contrary in the Sonus Notice. Subject to the foregoing
sentence, no public disclosure shall be made by Sonus, the Company or any of
their respective Affiliates of the delivery of the Sonus Notice or the terms and
conditions contained therein, except as may be required under any applicable
state, federal or foreign law, in which case the disclosing party shall as
promptly as practicable give notice to the other parties in advance of such
disclosure.
(c) The Company or any of its Affiliates shall have the right to make a
confidential offer to acquire Sonus upon the terms and conditions set forth in
the Sonus Notice at a purchase price per share (the "BUYER OFFER PRICE") to be
proposed in the Buyer Notice and Proposed Purchase Agreement (each as defined
below).
(d) Within thirty (30) days after the receipt of the Sonus Notice, the
Company or any of its Affiliates may, at its option, offer to purchase all, but
not fewer than all, of the outstanding voting securities of Sonus (assuming
conversion or exercise of all securities and options that are convertible or
exercisable into voting securities) (such offering party or parties, "BUYER").
*** Confidential portions omitted pursuant to a request for confidential
treatment
-8-
Buyer shall exercise such option by giving notice thereof to Sonus within such
30-day period. Such notice (the "BUYER NOTICE") shall set forth the Buyer Offer
Price and an estimated date for the closing of the purchase of Sonus, which
shall not be more than ninety (90) days after the date that a merger agreement
between Sonus and Buyer is entered into (which date may be extended for an
additional sixty (60) days if necessary to obtain any required shareholder,
regulatory, Securities and Exchange Commission, or other approvals). The Buyer
Notice shall be accompanied by a merger agreement executed on behalf of Buyer
containing customary terms and provisions for the acquisition of a public
company (the "PROPOSED PURCHASE AGREEMENT"). Without limiting the generality of
the foregoing, the Proposed Purchase Agreement shall contain no indemnification
provisions and no provisions that survive the closing of the transactions
contemplated by the Proposed Purchase Agreement.
(e) The Proposed Purchase Agreement shall set forth the Buyer Offer
Price and the form of the consideration of which the Buyer Offer Price shall
consist. The Buyer Offer Price may be paid in any combination of cash and/or
marketable securities. If any portion of the Buyer Offer Price consists of
marketable securities, the value of such portion shall be based on the Fair
Market Price (as defined below) of such securities.
(f) Within thirty (30) days of receiving the Buyer Notice, Sonus may
either accept or reject Buyer's offer to purchase Sonus at the Buyer Offer Price
("BUYER'S OFFER"). Sonus shall have no obligation whatsoever to accept Buyer's
Offer or to negotiate with Buyer, and may reject Buyer's Offer for any reason or
no reason.
(g) If Sonus rejects Buyer's Offer, Sonus may enter into an agreement
with a Third Party or any of its Affiliates that provides for a Change of
Control Transaction (a "MERGER AGREEMENT").
(h) If Sonus enters into a Merger Agreement but fails to close the
related Change of Control Transaction within 180 days following rejection of
Buyer's Offer, Sonus shall again comply with the procedures set forth in this
Section 5 with respect to any Change of Control Transaction.
(i) For purposes hereof, the following terms shall have the following
meanings:
(i) "CHANGE OF CONTROL TRANSACTION" shall mean (A) the acquisition
by any Third Party, directly or indirectly, by virtue of the
consummation of any purchase, merger or other business combination, of
all outstanding voting securities of Sonus (assuming conversion and
exercise of all securities and options convertible or exercisable into
voting securities) with respect to matters submitted to a vote of the
stockholders generally or (B) the sale or transfer by Sonus, directly
or indirectly, of substantially all of its assets to a Person that is
not an Affiliate of Sonus prior to such sale or transfer;
(ii) The "FAIR MARKET PRICE" for any security shall be deemed to be
the average of the daily closing prices for the ten (10) consecutive
business days prior to the Valuation Date. The closing price for each
day shall be the average of the reported closing bid and ask prices, in
either case on the principal national securities
-9-
exchange on which the security is listed or admitted to trading, or
if not listed or admitted to trading on any national securities
exchange, the average of the highest reported bid and lowest
reported asked prices as furnished by the National Association of
Securities Dealers, Inc.'s Automated Quotation System ("NASDAQ"),
or the nearest comparable system, or, in the absence or either, as
determined by the majority of the board of directors of Sonus; and
(iii) "VALUATION DATE" shall mean the date which is ten (10)
consecutive business days prior to the date on which the Buyer
Notice is given to Sonus.
6. Distribution of D2. The Company grants Sonus USA the exclusive right
to distribute D2 Products within North America during the entire term of this
Agreement, provided that (a) the reconciliation of the Customer Sales Period for
the initial Customer Sales Period indicates that the D2 Number for such period
is at least the product of *** times a fraction, the numerator of which is the
number of days during such period during which the CIC, ITE and BTE D2 Products
are available from the Company and the denominator of which is 365, (b) the
reconciliation of the Customer Sales Statement for any other Customer Sales
Period other than the Final Customer Sales Period indicates that the D2 Number
for such period is at least ***, or (c) in the event of a Termination, the
reconciliation of the Customer Sales Statement for the Final Customer Sales
Period indicates that the D2 Number for such period is at least the product of
*** times a fraction, the numerator of which is the number of months in the
Final Customer Sales Period and the denominator of which is 12. In the event
that any such reconciliation indicates the relevant requirement has not been
met, Customer shall have 30 days from the date of such reconciliation to meet
such requirement by the purchase of additional D2 Products or else it shall
forfeit the exclusive distribution right granted under this Section 6 effective
immediately.
7. Sonus Network. Sonus USA shall use reasonable efforts to support the
purchase of Company Products by members of The Sonus Network, provided, however,
that the form of such support shall be within the sole discretion of Sonus USA
and that such support shall not be to the detriment of Sonus USA's relationships
with other hearing instrument manufacturers.
8. Private Label Program. Unless otherwise agreed between the parties,
or unless otherwise requested when ordering, Company Products shipped by the
Company to fill Customer's orders, shall reflect the names, trademarks, service
marks, logos and/or trade names (collectively, the "MARKS") of Customer and not
of the Company ("SONUS SOLUTION PRODUCTS"). The parties shall mutually agree on
the specific Marks to be used in this regard and the respective placement of
those Marks on the products and in the associated printed materials. Customer
grants to the Company a non-exclusive limited license to the Marks for the term
of the Agreement and any extensions thereof solely for the purpose of affixing
them to the Company Products so ordered by Customer. Customer will defend, at
its expense, any action brought against the Company to the extent that it is
based on a claim that Customer does not have the right to use the Marks in any
manner whatsoever, and Customer will pay any settlements and any costs, damages
and attorneys' fees finally awarded against the Company in such action which are
attributable to such claim; provided, the foregoing obligation shall be subject
to the Company notifying Customer promptly in writing of the claim, giving
Customer the exclusive control of the defense and settlement thereof, and
providing reasonable assistance in connection therewith.
*** Confidential portions omitted pursuant to a request for confidential
treatment
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After the parties have agreed on the placement of the Marks on the
Company Products and in the associated printed materials, Customer may not make
changes thereto without the prior consent of the Company, which consent may be
conditioned upon Customer reimbursing the Company for any costs associated with
such change.
9. Warranty Period. Notwithstanding any provision contained in the
Agreement or in Exhibit B, the warranty period for Sonus Solution Products
(digital and analog) sold to Customer by the Company commencing with the
Effective Date shall be *** from the date of the original invoice and the
warranty period shall be *** from the date of the original invoice for units
that are not Sonus Solution Products.
10. U.S. and Canada Sales Only. This Agreement shall only apply to
sales of units to end users in the United States and Canada. The parties may
expend the application of the Agreement in the future to include additional
countries but without such written agreement no units may be sold for delivery
to end users in countries other than the United States and Canada.
11. Canadian Pricing Adjustments. Canadian prices are intended
approximately to reflect the current exchange rate between the U.S. Dollar and
the Canadian Dollar. For ease of administration, the Canadian price list is
subject to adjustment at the end of each calendar quarter to reflect adjustments
in such exchange rate, however, the Canadian price list will be adjusted only if
such adjustment results in an adjustment either up or down of at least ten
percent (10%). Payment for units purchased for Canada from the Canadian price
list shall be made in Canadian dollars.
12. Internet Ordering and Centralized Invoicing and Payment. The
parties agree to cooperate in developing and implementing a system whereby
Customer may order units through the Internet. Until such system is implemented,
the Company will invoice each ordering entity separately in a manner acceptable
to Customer. It is anticipated that such invoices will reflect less than the
full discount from the list price. When the ordering entity remits its payment
to the Company, the Company will in turn promptly remit to Customer the
difference between the discount reflected on the invoice and the discount to
which Customer is entitled. After the Internet ordering system is implemented,
invoicing and payment will be centralized through a single office of Customer.
*** Confidential portions omitted pursuant to a request for confidential
treatment
-11-
SCHEDULE 1
"CUSTOMER" ENTITIES
SONUS CORP.
SONUS-USA, INC.
SONUS-CANADA LTD.
SONUS-TEXAS, INC.
ANY ACQUISITION SUBSIDIARY (AS DEFINED IN THE CREDIT AGREEMENT)
ANY AFFILIATE (AS DEFINED IN THE AGREEMENT) OF SONUS CORP.
HEAR PO CORP.
MEMBERS OF THE SONUS NETWORK
MEMBERS OF THE SONUS PHYSICIAN NETWORK
XXXXX.XXX
-1-
