SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K/A
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
December 22, 1997
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-26694 93-0945003
(Commission file number) (IRS employer identification no.)
655 East Medical Drive, Bountiful, Utah 84010
(Address of principal executive offices) (Zip code)
(801) 298-3360
(Registrant's telephone number, including area code)
This document contains a total of 27 pages.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a. Financial Statements of Businesses Acquired.
Not applicable.
b. Pro Forma Financial Information.
Not applicable.
c. Exhibits.
Number Description
10.1 Distribution and License Agreement, effective date of
December 22, 1997, by and among Specialized Health Products
International, Inc. and Johnson and Johnson Medical, Inc.
(certain portions of the agreement were omitted from the
exhibit pursuant to a request for confidential treatment).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
Date: April 7, 1998 By /s/ David A. Robinson
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Date: April 7, 1998 David A. Robinson
President, Chief Executive Officer
and Director
DEVELOPMENT AND LICENSE AGREEMENT
THIS AGREEMENT, is effective as of the 22nd day of December, 1997, by
and between JOHNSON & JOHNSON MEDICAL, INC., a New Jersey corporation having an
office at 2500 Arbrook Boulevard, Arlington, Texas 76004-3130 (hereinafter
"JJMI") and SPECIALIZED HEALTH PRODUCTS, INC., a corporation of the State of
Utah having an office at 655 East Medical Drive, Bountiful, Utah 84101
(hereinafter "SHP").
W I T N E S S E T H:
WHEREAS, SHP is the owner of certain patent rights and know-how related
to safety needles, and in particular, to developments described in U.S. Patents
listed on Exhibit A, certain other patent applications and continuing
development activities relating to safety devices for needles and sharpened
cannulae;
WHEREAS, JJMI wishes to fund and desires that SHP undertake a
development project concerning such safety devices particularly in the area of
blood collection needles;
WHEREAS, SHP desires that such developments and inventions be made
available to the commercial markets, and in particular, to the Field (as defined
below); and
WHEREAS, JJMI desires to develop and bring to market products which
utilize such inventions related to the Field and to obtain an exclusive,
worldwide license to such inventions, patents and pending patent applications
for the Field.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
Where used in this Agreement, the following terms shall have the
meanings attributed to them herein:
1.1 The term "Affiliate" of a party, shall mean any company or other
legal entity, other than the party, in whatever country organized, controlling,
controlled by, or under common control with the party. The term "control" means
the possession, direct or indirect, of the power to direct or cause the
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direction of the management and policies of an entity, whether through the
ownership of voting securities, by contract, or otherwise, and the term "entity"
includes a corporation or other entity.
1.2 The term "Field" shall mean systems designed primarily for blood
collection including needles and appurtenances but excluding containers for
blood, syringes and further excluding intravascular catheters and catheter
introducers.
1.3 The term "Technical Information" shall mean patents, patent
applications, inventions, know-how, and other proprietary rights within the
Field relating to blood collection needles or resulting from the performance of
the Joint Cooperative Program (defined below) and owned, licensed by or
controlled wholly or partially by SHP or an Affiliate of SHP as well as
improvements thereof.
1.4 The term "Licensed Patent Rights" shall mean (i) that portion of
Technical Information which comprises all patents and applications for patents
filed in any country containing one or more claims to any invention within the
Field including, but not limited to, those patents listed on Exhibit A; and (ii)
all patent applications filed in any country which claim the benefit of the
filing date of any of the patents or applications listed on Exhibit A including
all continuing, divisional, and renewal applications thereof, all patent
applications, all patents which may be granted thereon, and all reissues,
re-examinations and extensions thereof.
1.5 The term "Licensed Products" shall mean any product within the
Field which would, but for the licenses granted herein, infringe any Valid Claim
of an issued patent included in Licensed Patent Rights.
1.6 The term "Valid Claim" shall mean a claim of an issued patent which
has not lapsed or become abandoned and which claim has not been declared invalid
or unenforceable by an unappealed or unappealable decision or judgment of a
court of competent jurisdiction.
1.7 The term "Net Sales" shall mean the revenue received by JJMI or an
Affiliate from the sale of Licensed Products to independent third parties less
the following amounts: i) reasonable discounts, including cash discounts, or
rebates actually allowed or granted, ii) credits or allowances actually granted
upon claims or returns regardless of the party requesting the return, iii)
freight charges paid for delivery, and iv) taxes or other governmental charges
levied on or measured by the invoice amount whether absorbed by the billing or
the billed party.
2
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1.8 The term "Joint Cooperative Program" shall mean a joint effort
funded initially by JJMI and SHP, and anticipated to eventually be funded by a
revenue stream from sales as described in Article 8 hereof, for developing
technology and products in areas mutually approved by JJMI and SHP.
1.9 The term "Development Program" is the program through which
products are mutually approved by JJMI and SHP for development under the Joint
Cooperative Program.
1.10 The term "Development Plan" shall mean a development effort for a
single product that is performed under the Development Program.
1.11 The term "BCN Products" shall mean blood collection needle
products, including needles and appurtenances.
ARTICLE 2 - RESEARCH AND DEVELOPMENT
2.1 During the term of this Agreement, SHP shall use its reasonable
commercial efforts to develop two (2) BCN Products (the "Referenced BCN
Products") consistent with the product requirement documents and the development
schedule found in Exhibit B. The BCN Products will meet mutually approved JJMI
specifications to be provided pursuant to the development time and cost
schedules found in Schedule B. During the duration of each Development Plan the
JJMI specifications may be modified by mutual written consent.
2.2 SHP shall be responsible for delivery of BCN Products complying
with approved specifications supplied by JJMI for use in providing clinical data
necessary for submission for relevant regulatory approval. JJMI shall be
responsible for obtaining all regulatory approvals necessary for the free
marketing of the Licensed Products sold by JJMI. SHP shall, at JJMI expense,
assist and cooperate with JJMI in all regulatory submissions and activities as
requested by JJMI. This includes preparation of all applications to the United
States Food and Drug Administration, whether by application for premarket
approval or 510(k) notification, or otherwise.
3
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ARTICLE 3 - FUNDING OF DEVELOPMENT
3.1 Funding under the Joint Cooperative Program shall be paid for by
JJMI and SHP. SHP will pay for all of SHP's internal costs relating to
facilities, clerical and administrative. SHP shall also pay for all U.S. patent
filing, prosecution and maintenance costs relating to patents and patent
applications which result from the Joint Cooperative Program. JJMI shall pay for
the estimated costs summarized in the attached Exhibit C.
3.2 JJMI will separately fund expenditures on Capital Equipment related
to development of two Referenced BCN Products pursuant to the estimated amounts
set forth in attached Exhibit C. Any amount in excess of such estimates in
Exhibit C shall be paid by the parties as they agree in advance. ("Capital
Equipment" shall mean product machinery, molds, fixtures (including,
semi-automated and automated equipment costs) and material for prototypes.) JJMI
will own the Capital Equipment including product machinery, molds, fixtures,
prototypes, etc. regardless of the physical location and may at any time request
possession of such Capital Equipment. Upon a request by JJMI, SHP will make
available to JJMI all Capital Equipment within five (5) days of written notice.
ARTICLE 4 - RESEARCH REPORTS AND OVERSIGHT
4.1 SHP shall furnish to JJMI written monthly informal reports on the
progress of each Development Plan.
4.2 Key Contact - The parties shall each name a key contact through
which day-to-day contact and decision-making may be made and to facilitate
communication between the parties. JJMI will make reasonable effort to timely
respond to all questions and requests from SHP. The JJMI key contact shall have
access to the researchers and laboratories performing within the Joint
Cooperative Program with reasonable notice to and consent of SHP. A key contact
person may be changed from time to time by notifying the other party of the
change in its key contact person. In addition, SHP will provide a project
manager on a continuing basis for each product being developed and sold under
the Joint Cooperative Program.
4
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ARTICLE 5 - PROPRIETARY INFORMATION
All proprietary information of any party to this Agreement disclosed to
another party in connection with the Joint Cooperative Program and identified in
writing and marked by the disclosing party as confidential will be treated by
the receiving party and its employees as confidential throughout the term of
this Agreement and for an additional five (5) years. The above-mentioned
obligation of confidentiality shall not apply to information which: (i) at the
time of the disclosure was known to the receiving party as evidenced by written
records and was not previously subject to any obligation of confidentiality; or
(ii) was generally available to the public or was otherwise part of the public
domain at the time of its disclosure; or (iii) becomes generally available to
the public or otherwise part of the public domain after its disclosure other
than through an act of omission or commission of the receiving party in breach
of this Agreement; or (iv) becomes known to the receiving party by disclosure of
a third party under no obligation of confidentiality to the disclosing party.
ARTICLE 6 - OWNERSHIP OF TECHNICAL INFORMATION
6.1 Each party shall own title to all technical information created
solely by it, its employees and/or contractors after the Effective Date of this
Agreement, except as provided in Paragraph 6.2 below. SHP warrants that it and
its employees have entered into agreements wherein its employees have agreed to
assign their rights in and to all inventions, as well as all patents and patent
applications directed to such inventions, resulting from their employment with
SHP to SHP. Furthermore, SHP warrants that it has caused or will cause all
additional SHP employees, or personnel performing work pursuant to the Joint
Cooperative Program to execute similar agreements with respect to the rights in
and to all inventions, as well as all patents and patent applications directed
to such inventions, resulting from their association with SHP and warrants that
it will enforce such agreements to ensure that SHP has perfected its title to
the Technical Information. JJMI may at any time request any Technical
Information in the possession or control of SHP and SHP will deliver such
information to JJMI in usable form within five (5) days of such request.
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6.2 JJMI and SHP will jointly own title to any and all technical
information first conceived jointly or discovered jointly by JJMI's employees
and SHP's employees or personnel during the performance of the Joint Cooperative
Program.
6.3 Anything to the contrary notwithstanding, JJMI or its authorized
designees shall own the full right, title and interest in and to any government
approvals, associated government files or licenses related to making, using and
selling Licensed Products within the Field to the full extent possible under the
law of each appropriate country.
6.4 SHP warrants that it is the owner of all patents and patent
applications included in Licensed Patent Rights and it has full right to grant
the licenses granted herein.
ARTICLE 7 - LICENSE
7.1 SHP agrees to grant and hereby does grant to JJMI, and any JJMI
Affiliate designated in writing by JJMI, an exclusive, worldwide license, with
the right to sublicense others, under the Technical Information within the Field
to make, have made, use and sell Licensed Products within the Field and an
exclusive worldwide license to products and patents pursuant to agreements
reached pursuant to Article 9.4 below. JJMI may grant sublicenses to
unaffiliated third parties.
7.2 JJMI shall pay SHP a royalty on Net Sales of Licensed Products by
JJMI, its Affiliates, and sublicensees, in the amount of (i) ** on BCN Products,
or (ii) ** on non-BCN Products developed under the Joint Development Program.
7.3 Minimum Royalties - JJMI shall have a minimum annual royalty
obligation beginning in fiscal year 2000 or twelve months after FDA approval of
both Referenced BCN Products, whichever is later, and in each year thereafter,
for both of the Referenced BCN Products total, in aggregate, of **. In any year
in which the royalty that is provided for in paragraph 7.2 does not meet or
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The "**" marks the location of information that has been omitted and filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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exceed the amount of the minimum royalties set forth in this paragraph 7.3, JJMI
shall, with the final payment made for the final quarter of that calendar year,
pay an amount as additional royalty, sufficient to bring the total royalties
payable for such calendar year up to an amount equal to the minimum royalty
required hereby. Any such additional royalty paid on account of activity
occurring in the calendar years 2000 through 2002 shall be credited against
royalties due in future years in excess of such minimum royalties.
7.4 No royalty shall be payable on sales of any Licensed Product
between JJMI and any Affiliate or sublicensee, and only one (1) royalty shall be
payable hereunder with respect to the sale of any one (1) Licensed Product no
matter how many patents or claims may cover the Product.
7.5 JJMI's obligation to pay royalties with respect to sale of Licensed
Product shall terminate upon expiration of the last to expire issued patent
included in Licensed Patent Rights covering such Licensed Product. Thereafter,
JJMI, its Affiliates and sublicensees shall have a paid-up, non-exclusive,
royalty-free license to make, have made, use and sell such Licensed Product.
7.6 JJMI shall keep accurate books and records of sales of Licensed
Products and of all payments due SHP hereunder. JJMI shall deliver to SHP
written reports of Net Sales of Licensed Products during the preceding calendar
quarter, on or before the sixtieth (60th) day following the end of each calendar
quarter. Such reports shall include a calculation of the royalties due and be
accompanied by payment of the monies due. For avoidance of doubt calendar
quarter means each of the three calendar month periods ending on March 31, June
30, September 30 and December 31 respectively. If JJMI is reasonably unable to
determine the actual royalties due by the sixtieth (60th) day following a
calendar quarter, then it may make a good faith estimated payment by the
sixtieth (60th) day, followed by an actual report with any necessary additional
payment by the ninetieth (90th) day. If the estimated payment exceeds the actual
amount due then the difference between the estimated payment and the actual
amount due shall be a credit against the next payment due from JJMI to SHP.
7.7 If SHP is unwilling or unable to supply the quantities of BCN
Products required by JJMI to meet a Development Plan, then JJMI may manufacture
for itself or have product manufactured by others under this License Agreement.
If JJMI elects to manufacture BCN Products for itself or have others manufacture
BCN Products for it then JJMI maintains the exclusivity under the present
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Development and License Agreement. After the completion of a Development Plan,
JJMI may, at its sole discretion, assume responsibility for manufacturing the
completed product.
7.8 SHP agrees that the minimum royalties set forth in paragraph 7.3
are full consideration for the exclusive licenses granted herein. Therefore,
JJMI makes no representation or warranty that it will market the Licensed
Products covered by this Agreement, or, if JJMI does market any of the Licensed
Products, that such Licensed Products shall be the exclusive means by which JJMI
will participate in this Field. Furthermore, all business decisions including,
without limitation, the design, manufacture, sale, price and promotion of
Licensed Products after completion of execution of each the Development Plan
covered by this Agreement and the decision whether to sell a particular product
within the Licensed Products shall be within the sole discretion of JJMI. SHP
and JJMI further agree that the minimum royalties, are in lieu of any obligation
of best efforts or any level or standard of efforts to be used by JJMI in the
marketing of Licensed Products. Notwithstanding the forgoing, if JJMI does not
participate in the Field within five (5) years from the date hereof, then the
licenses relating to the BCN Products granted in this Article 7 shall terminate.
7.9 SHP shall have the right to nominate an independent accountant
acceptable to and approved by JJMI who shall have access to JJMI and/or its
Affiliates' and/or its sublicensees records during reasonable business hours,
upon executing an appropriate confidentiality agreement, for the purpose of
verifying the royalty payable as provided for in this Agreement for the two (2)
preceding years, but this right may not be exercised more than once in any year,
and the accountant shall disclose to SHP only information relating solely to the
accuracy of the royalty report and the royalty payments made in accordance with
this Agreement.
7.10 Royalty payments under this Agreement shall be made in United
States dollars.
7.11 Any sum required under United States tax laws, or the tax laws
of any other country, to be withheld by JJMI from payments shall be promptly
paid by JJMI to the appropriate tax authorities, and JJMI shall furnish SHP with
official tax receipts or other appropriate evidence issued by the appropriate
tax authorities sufficient to enable SHP to support a claim for income tax
credit in respect of any sum so withheld.
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ARTICLE 8 - RESEARCH AND DEVELOPMENT COOPERATION
8.1 JJMI and SHP shall commence technology development under the Joint
Cooperative Program for products excluding intravascular catheters and catheter
introducers. The direction and course of technology development of the Joint
Cooperative Program shall be set by the parties as set forth below and the
parties shall cooperate on appropriate methods for carrying out such development
programs. The parties to the Joint Cooperation Program shall not conduct
research and development under the Joint Cooperation Program in areas where SHP
provides written notice that it is actively involved in research and development
in a specified area in advance of the decision of the parties to the Joint
Cooperation Program to direct research and development efforts in such specified
area. In addition, the parties to the Joint Cooperation Program shall reasonably
limit areas in which research and development are conducted under the Joint
Cooperation Program to such areas that the parties to the Joint Cooperation
Program reasonably believe will be sufficiently funded to develop the identified
projects.
8.2 JJMI shall reimburse SHP for performing such research and
development under the Joint Cooperative Program at a minimum rate set forth in
Exhibit C. SHP shall provide written invoices to JJMI for work performed under
the Joint Cooperative Program and JJMI shall reimburse SHP by paying such
invoices until such time as the total amount paid for work performed during a
given calendar year meets or exceeds the amounts set forth in Exhibit C, unless
otherwise agreed to in writing by the parties hereto.
8.3 As additional compensation, JJMI shall reimburse SHP monthly for
work performed under the Joint Cooperative Program in the amount of the greater
of (i) the monthly amount set forth in the attached Exhibit C or (ii) ** of Net
Sales of Licensed Products by JJMI and its Affiliates and sublicensees under the
Joint Cooperative Program. The parties shall each share in the direction of
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The "**" marks the location of information that has been omitted and filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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funding as follows: (i) JJMI shall have the option to direct the use of up to
sixty percent (60%) of the Joint Cooperative Program funding, and (ii) SHP shall
direct the use of forty percent (40%) of the Joint Cooperative Program funding.
SHP shall also direct the use of any additional Joint Cooperative Program
funding that is not directed by JJMI within three (3) months of availability for
use unless JJMI provides notice to SHP that such funds are being reserved for
mutually agreed Joint Cooperative Program expenditures expected in the future
for identified matters. During the course of the Joint Cooperative Program, JJMI
shall own all prototypes, fixtures, and the like created, modified or developed
as part of the Joint Cooperative Program and paid for with Joint Cooperative
Program funding. At any time JJMI may take possession of such materials by
making a request to SHP, and SHP shall thereafter, within five (5) days of such
written request, make available to JJMI all such materials. The cost of molds
and other capital expenditure relating to production and manufacturing under the
Joint Cooperative Program will not be paid for with Joint Cooperative Program
funding unless otherwise agreed to by the parties and any such molds and other
capital equipment purchased by JJMI without Joint Cooperative Program funding
shall be the sole property of JJMI.
8.4 Should SHP sell products developed under the Joint Cooperative
Program to or through third parties, other than JJMI and its Affiliate and
sublicensees, then SHP shall contribute toward the Joint Development Program
seventy percent (70%) of the net proceeds from the sale of such products.
ARTICLE 9 - RIGHT OF FIRST REFUSAL AND SUPPLY OF PRODUCT
9.1 As part of the Development Program under this Agreement as provided
for in Articles 2 and 3, SHP shall supply to JJMI units according to the
Development Plans attached hereto as Schedule B of Exhibit B for each of the two
(2) Referenced BCN Products. JJMI shall pay to SHP for such units an amount
equal to standard variable cost plus fifteen percent (15%) as established by
generally accepted accounting principles consistently applied. In order to
receive such compensation, the BCN Products delivered by SHP must meet the
specifications of JJMI and be of merchantable quality free from defects in
workmanship, material and design. In addition, JJMI will pay to SHP an amount
equal to the total fixed cost associated with the molds, fixtures and equipment
necessary to manufacture the above referenced BCN Products.
9.2 Continued Supply - Upon receiving approval for each of the two
Referenced BCN Products respectively, and until such time as purchase
requirements reach a sustained level of Five Hundred Thousand (500,000) units
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per year, SHP shall supply to JJMI its requirements of each of the two
Referenced BCN Products. JJMI shall pay to SHP an amount equal to standard
variable cost plus fifteen percent (15%) as established by generally accepted
accounting principles consistently applied for such BCN Products. In order to
receive such compensation, such BCN Products delivered by SHP must meet the
specifications of JJMI and be of merchantable quality, free from defects in
workmanship material and design. Additionally, these products will generally be
considered time sensitive and therefore must be delivered in quantities ordered
in a timely manner and SHP will make reasonable commercial efforts to avoid
backlogs exceeding two (2) weeks. At any time upon thirty (30) days notice, JJMI
may take over responsibility for supply of each of the BCN Products to itself
(by third party manufacture or otherwise). Upon such notice, SHP and JJMI shall
meet to plan the transition. Thereafter, SHP shall be relieved of future supply
obligations for such BCN Products.
9.3 As part of the Joint Cooperative Program contemplated in Article 8
above, JJMI shall be offered a right of first refusal on any patents arising out
of the work contemplated by the Joint Cooperative Program. JJMI shall have all
rights in products that come out of the Joint Cooperative Program within the
Field, and a right of first refusal to products in areas outside the Field or
products not contemplated thereby that come out of the Joint Cooperative
Program. Such right of first refusal shall be a right to take a license under
any patents arising from the development work. Notwithstanding the foregoing,
such license shall be an exclusive, worldwide license at a ** royalty rate
applied to Net Sales of products, the manufacture, use or sale of which would
infringe a Valid Claim of the patents so arising. If JJMI does not launch a
product within four (4) years of taking such a license, somewhere in the world,
and such product would be covered by such patent in the jurisdiction of that
patent, then the license shall be converted to nonexclusive. If JJMI does not
launch such a product within two (2) years of receiving FDA approval for such
product, then such license shall terminate.
9.4 Additionally, JJMI shall have a "last look" for products outside
the Field of this Agreement that come out of the Joint Cooperative Program. Such
last look shall take the form of SHP, prior to entering into any Agreement
relating to any product with any third party, offering such agreement terms to
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The "**" marks the location of information that has been omitted and filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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JJMI for its consideration. If JJMI elects to take the terms of such agreement,
then JJMI and SHP will enter into an agreement on the terms offered. JJMI must
notify SHP within twenty-one (21) days of receiving notice of the complete terms
of such agreement.
ARTICLE 10 - PATENT FILINGS
10.1 SHP shall promptly disclose to JJMI all Technical Information. SHP
may elect to file and prosecute patent applications directed to any Licensed
Patent Right described in such written disclosures. JJMI shall identify those
jurisdictions outside the United States where it would like SHP to file,
prosecute and maintain patent protection with regard to patents protecting BCN
Products or coming out of the Joint Cooperative Program. JJMI shall pay one-half
(1/2) of SHP patent filings, prosecution and maintenance costs in those foreign
jurisdictions identified by JJMI. Such applications shall be filed and
prosecuted utilizing patent counsel selected by SHP. Should SHP elect not to
file such patent application or applications, JJMI may elect to pay, at its sole
cost and expense, for SHP to file and prosecute such patent application or
applications in SHP's name at JJMI's expense utilizing patent counsel selected
by SHP.
10.2 With respect to all patent applications referred to above, and to
the extent the parties are able to do so, the parties shall provide each other
with reasonable opportunity to advise the other and shall cooperate with each
other in the prosecution of all patent applications.
ARTICLE 11 - INFRINGEMENT
11.1 In the event that there is infringement within the Field by a
third party of any patent licensed to JJMI hereunder, JJMI shall notify SHP in
writing to that effect, including with such written notice, evidence
establishing a prima facia case of infringement by such third party. During the
one hundred twenty (120) day period after notice to SHP by JJMI, SHP will have
the right, but not the obligation to bring suit against the alleged infringer.
SHP shall bear the expenses of any suit brought by it, shall retain all damages
or other monies awarded or received in settlement of such suit. JJMI will
cooperate with SHP in any such suit and shall have the right to consult with SHP
and be represented by its own counsel at its own expense.
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If, after the expiration of said one hundred twenty (120) days
from the date of such notice, SHP has not brought suit against a third party
infringer, then JJMI shall have the right after such one hundred twenty (120)
day notice period, but not the obligation, to bring suit against such infringer
and join SHP as a party plaintiff provided that JJMI shall bear all expenses of
such suit. SHP will cooperate with JJMI in any suit for infringement of the
Licensed Patent brought by JJMI against a third party and shall have the right
to consult with JJMI and to participate in and be represented by independent
counsel in such litigation at its own expense. JJMI shall incur no liability to
SHP as a consequence of such litigation or any unfavorable decision resulting
therefrom, including any decision holding SHP's patent(s) invalid or
unenforceable. Damages awarded or received in settlement shall be paid to JJMI
in satisfaction of all expenses of such suit; any remainder shall be shared
fifty percent (50%) to JJMI and fifty percent (50%) to SHP.
11.2 SHP warrants that it is presently aware of no patents or patent
applications owned by a third party which would present any issue of
infringement by reason of the manufacture, use or sale of the Referenced BCN
Products. In the event JJMI is charged with such infringement by a third party,
JJMI shall have the right to defend against such charge of infringement, and
during the period in which such litigation is pending, JJMI shall have the right
to apply Fifty Percent (50%) of the royalties due SHP on sales of the allegedly
infringing Licensed Product against its litigation expenses. JJMI shall
reimburse SHP for all royalties diverted to litigation expenses to the extent
funds are recovered in such litigation. If, as a result of judgment in the
litigation or settlement with a third party without litigation, JJMI is required
to pay royalties or other monies to such third party, JJMI may thereafter deduct
from the amount of royalties due SHP on unit sales of the Licensed Product
charged to infringe, an amount which is the lesser of all sums paid by JJMI to
such third party, or Fifty Percent (50%) of all royalty payments otherwise
payable to SHP on the Net Sales of such Licensed Product. Notwithstanding
anything else in this Article 11, in no event shall JJMI pay less than 50% of
the royalties due SHP on sales.
ARTICLE 12 - TERMINATION
12.1 The term of this Agreement shall extend from the above-effective
date until the expiration of the last to expire of all patents included in or
issuing from Licensed Patent Rights.
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12.2 Upon any breach of or default under this Agreement by a party, the
other may terminate this Agreement by sixty (60) days' written notice to the
party. Said notice shall become effective at the end of such period unless
during such period the party shall cure such breach or default.
12.3 JJMI shall have the right to terminate this Agreement at any time
upon ninety (90) days' written notice to SHP. At any time after the seventh
(7th) anniversary of the Effective Date of this Agreement, JJMI may cancel the
Joint Cooperative Program set forth in Article 8 hereof. JJMI shall retain all
rights that have accrued under Article 8 prior to cancellation and may elect to
continue specified projects through completion.
12.4 Failure to terminate this Agreement following breach or failure to
comply with this Agreement shall not constitute a waiver of the party's
defenses, rights or causes of action arising from such or any future breach or
noncompliance.
12.5 The provisions hereof relating to ownership of Technical
Information and confidentiality shall survive the termination of this Agreement.
ARTICLE 13 - NOTICE
13.1 Any notices given under this Agreement shall be in writing and
shall be deemed delivered when sent by First Class mail, postage prepaid,
addressed to the parties as follows (or at such other addresses as the parties
may notify each other in writing:
To JJMI
Johnson & Johnson Medical, Inc.
2500 Arbrook Boulevard
Arlington, Texas 76004-3130
Attention: President
With a copy to:
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, New Jersey 08933
Attention: Chief Patent Counsel
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To SHP
Specialized Health Products, Inc.
Attn.: President
655 East Medical Drive
Bountiful, Utah 84101
With a copy to:
Eric L. Robinson
Blackburn & Stoll, LC
77 West 200 South, Suite 400
Salt Lake City, Utah 84101
ARTICLE 14 - GENERAL
14.1 Use of Name - No party to this Agreement shall employ or use the
name of the other party in any promotional materials or advertising without the
prior express written permission of such other party. Nothing herein, however,
shall limit the parties' right to disclose material information or to make such
disclosures as are required by applicable law.
14.2 SHP, for all purposes related to this Agreement, shall be deemed
an independent contractor of JJMI, and nothing in this Agreement shall be deemed
to create a relationship of employment or agency, or to constitute SHP and JJMI
as partners or joint venturers.
14.3 Representations and Warranties - Each party hereto acknowledges
and agrees: (i) that no representation or promise not expressly contained in
this Agreement has been made by the other party hereto or by any of its agents,
employees, representatives or attorneys concerning the subject matter of this
Agreement; (ii) that this Agreement is not being entered into on the basis of or
in reliance on, any promise or representation, express or implied, covering the
subject matter hereof other than those which are set forth expressly in this
Agreement; and (iii) that each party has had the opportunity to be represented
by counsel of its own choice in this matter, including during the negotiations
which preceded the execution of this Agreement.
14.4 SHP warrants and represents that it has the full right and power
to make the promises and grant the licenses set forth in this Agreement, and
that there are no outstanding agreements, assignments or encumbrances in
existence inconsistent with the provisions of this Agreement. SHP, however,
makes no representation or warranty with respect to the binding nature of this
Agreement on its Affiliates, which Affiliates are not a party to this Agreement.
<PAGE>
JJMI warrants and represents that it has the full right and power to
make the promises set forth in this Agreement, and that there are no outstanding
agreements, assignments or encumbrances in existence inconsistent with the
provisions of this Agreement. JJMI, however, makes no representation or warranty
with respect to the binding nature of this Agreement on its Affiliates, which
Affiliates are not a party to this Agreement.
14.5 Force Majeure - No party shall be liable for any failure to
perform as required by this Agreement, to the extent such failure to perform is
caused by any reason beyond the party's control, or by reason of any of the
following: labor disturbances or disputes of any kind, accidents, failure of any
required governmental approval, civil disorders, acts of aggression, acts of
God, energy or other conservation measures, failure of utilities, mechanical
breakdowns, material shortages, disease, or similar occurrences.
14.6 Assignment - No party hereto shall assign this Agreement to any
other person without the prior written consent of the other party, and any
purported assignment without such consent shall be void, except that JJMI may
assign this Agreement to an Affiliate or to a legal entity acquiring all or
substantially all of JJMI's assets to which this Agreement relates, on the
condition that any successor to or assignee of JJMI is and shall be bound by all
the terms, conditions and allegations under this Agreement, and that this
Agreement is and shall be incorporated into such assignment.
14.7 Severability - In the event that a court of competent jurisdiction
holds any provision of this Agreement to be invalid, such holding shall have no
effect on the remaining provisions of this Agreement, and they shall continue in
full force and effect.
14.8 Entire Agreement This Agreement contains the entire Agreement
between the parties. No amendments or modifications to this Agreement shall be
effective unless made in writing and signed by an authorized representative of
both parties.
14.9 Governing Law - This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
14.10 No party, except as required by law, shall originate any
publicity, news release, public disclosure or public announcement, written or
oral, whether to the public or press, stockholders or otherwise, relating to
this Agreement, including its existence, the subject matter to which it relates,
or any of its terms, to any amendment hereto or performances hereunder without
<PAGE>
the express written permission of the other party, which permission will not be
unreasonably withheld. If a party intends to make an announcement concerning
this Agreement, it will give the other party reasonable advance written notice
of the text of the proposed announcement so that the other party may have an
opportunity to comment upon the announcement. This paragraph 14.10 shall not
apply to information that is in the public domain without fault of the other
party hereto.
14.11 During the term of this Agreement, JJMI shall hold SHP free,
clear and harmless from, and shall indemnify SHP, for any and all costs and
expenses, including attorneys fees, arising out of any use or sale by JJMI or
its Affiliates or its sublicensees of BCN Products or products developed through
the Joint Cooperative Program. Any and all disputes between the parties relating
in any way to the entering into this Agreement and/or the validity,
construction, meaning, enforceability, or performance of this Agreement or any
of its provisions, or the intent of the parties in entering into this Agreement,
or any of its provisions, or any dispute relating to patent validity or
infringement arising under this Agreement shall be settled by arbitration. Such
arbitration shall be conducted in Salt Lake City, Utah in accordance with the
rules then pertaining to the American Arbitration Association with a sole
arbitrator who shall be an attorney experienced in patent licensing matters.
Reasonable discovery as determined by the arbitrator shall apply to the
arbitration proceeding. The law of the State of New Jersey shall apply to the
arbitration proceedings. Judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof.
14.12 Limitation of Damages - Neither party shall be responsible for
any indirect, speculative or consequential damages under this Agreement,
provided that product recall expenses required due to the fault of a party
hereto shall not be excluded damages.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers or representatives.
SPECIALIZED HEALTH JOHNSON & JOHNSON MEDICAL, INC.
PRODUCTS, INC.
By: /s/ David A. Robinson By: /s/ Yan Egbert
----------------------- --------------------
Title: President, CEO Title: Vice President
Date:12/19/97 Date: 12/19/97
<PAGE>
EXHIBIT A
Country Serial No. Date Filing Date Patent No. Issue SHP Docket
------- --------------- ----------- ---------- ----- ----------
United States 08/370,728 1/10/95 5,480,385 1/2/96 SHP002
PCT PCT/US95/16665 12/1/95 SHP002A
EPO SHP002A.1
Japan SHP002A.2
Canada SHP002A.4
Australia SHP002A.5
Mexico SHP002A.6
China SHP002A.7
New Zealand SHP002A.8
United States 08/455,514 5/31/95 5,549,708 8/27/96 SHP002.C
United States 08/436,976 5/8/95 5,487,734 1/30/96 SHP002.CIP
United States 8/484,533 6/7/95 5,542,927 8/6/96 SHP002.CP2
United States 08/565,881 12/1/95 5,616,135 4/1/97 SHP002.CP3
United States 08/595,802 2/2/96 5,656,031 8/12/97 SHP002.CP4
PCT PCT/US97/01319 1/30/97 SHP002.CP4A
EPO SHP002.CP4A.1
Japan SHP002.CP4A.2
Brazil SHP002.CP4A.3
Canada SHP002.CP4A.4
Australia SHP002.CP4A.5
Mexico SHP002.CP4A.6
United States 08/744,108 11/5/96 Allowed SHP002.CP5
United States ** ** SHP002.CP6
PCT SHP002.CP6A
Taiwan SHP002.CP6A.10
India SHP002.CP6A.11
United States ** ** SHP002.CP9
- ---------------
The "**" marks the location of information that has been omitted and filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
<PAGE>
EXHIBIT B**
** The first seven pages of Exhibit "B" have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment. Exhibit "B" is comprised of 32 pages.
<PAGE>
Specialized Health Products, Inc.
Product Requirements Document
1.0 Introduction
Accidental needlestick injuries are a major occupational health hazard
for healthcare professionals. In particular, phlebotomy needles present
a major occupational risk to phlebotomists and other health care
workers who must draw blood samples or perform percutaneous needle
insertions. Most accidental needlestick injuries (ANSI) involving
phlebotomy needles occur during or shortly after withdrawing the needle
from a patient resulting in a "dirty stick".
In an effort to protect clinicians, the Centers for Disease Control
(CDC) developed guidelines for needle disposal. According to these
guidelines, needles are not to be recapped and should be placed into a
puncture-resistant sharps disposal container at point of use. Even when
following these procedures significant risk of needle stick injuries is
still present.
The proposed phlebotomy device shall be optimally designed to eliminate
or, at a minimum, to greatly reduce the occupational risk of "dirty"
accidental needle sticks. In the design of the proposed product,
consideration shall be given to safety, convenience and cost while
striving to minimize changes in clinician technique and handling.
2.0 Product Description
The proposed phlebotomy device shall be similar to conventional devices
currently in use. The device shall be available in multiple needle
lengths and gauges and include an integral standard-size phlebotomy
barrel. The needle shall begin in a retracted state. It shall be
extended and made ready for use as a needle cap is removed. Following
use, depressing a button shall cause the needle to be automatically
retracted into a protected region where inadvertent access to the
needle is not possible.
The device shall be compatible with Vacutainer(R) brand and other
evacuated blood collection tubes. The product shall be shipped as a
fully assembled, ready-to-use device. It shall be a disposable
single-use device that cannot be inadvertently reused.
<PAGE>
The primary advantage of this SHP phlebotomy device will be powered
retraction of a needle into a protected shield at the conclusion of a
procedure. Depressing an activation button shall initiate the powered
retraction process to fully retract and shield the needle, thus
minimizing needle exposure and the potential for an accidental
needlestick. No on-site assembly shall be required to use the device
nor shall disassembly be necessary for proper disposal.
The overall length of the device may be approximately two inches longer
than conventional phlebotomy devices currently on the market. The added
length of the device is expected to make handling the device easier and
more convenient to use in a medical procedure. The activation button
shall be conveniently located on the top, forward part of the device
for enabling easy access and requiring minimal changes in user
technique. After depressing the activation button, the entire device
should be disposed of in an approved sharps container.
3.0 Customer Feedback
User and patient needs have been identified through customer and
patient interviews, product evaluation studies, and focus groups.
Important product attributes that should guide product design include:
* A high level of needle protection (through encasing and
shielding)
* Convenient to use
* Easy to learn
* Little change in technique required
* Easy to activate needle retraction
* Needle retraction activation unlikely to result in additional
injury to patient
* Low dead internal volume
* Cost effective
* Powered retraction unlikely to cause blood spatter
Additional marketing information identifying user and patient needs are
on file at SHP.
**
- ------------
** The "**" marks the location of approximately sixteen pages of information
that has been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
<PAGE>
Specialized Health Products, Inc.
Product Requirements Document
1.0 Introduction
Accidental needlestick injuries are a major occupational health hazard
for healthcare professionals. In an effort to protect clinicians, the
Centers for Disease Control (CDC) developed guidelines for needle
disposal. According to these guidelines, needles are not to be recapped
and should be placed into a puncture-resistant sharps disposal
container at point of use. In particular, phlebotomy needles present a
major occupational risk to phlebotomists and other health care workers
who must draw blood samples or perform percutaneous needle insertions.
Most accidental needlestick injuries (ANSI) involving phlebotomy
needles occur during or shortly after the action of withdrawing the
needle from a patient (when the needle makes a "dirty stick"). The
proposed phlebotomy device shall be designed to greatly reduce the
occupational risk of "dirty" accidental needle sticks. Overall,
consideration will be given to safety, convenience and cost while
striving to minimize changes in clinician technique and handling.
2.0 Product Description
The proposed phlebotomy device shall be similar to existing
conventional devices in that it shall provide a standard sized phlebotomy barrel
for blood collection and standard phlebotomy needle lengths and gauges. The
safety feature shall be a sheath comprising multiple segments joined by at least
one living hinge. These segments shall be molded on the forward part (needle
end) of the barrel and extend about the needle when activated. These segments
shall be held in place to prevent accidental activation of the safety mechanism.
An activation button shall be molded onto the first segment and shall be
positioned above the barrel at the forward end and shall be activated manually
by the user. The device shall be compatible with Vacutainer(R) brand and other
evacuated blood collection tubes. This product shall be designed as a disposable
phlebotomy collection device that may not be inadvertently reused. Product
configurations shall utilize an integral barrel and needle design.
The primary advantage of this SHP phlebotomy device shall be a shield
that extends and unfolds about the needle when activated by the user. This
shield shall conformably cover and permanently latch onto the patient needle
with a single activating motion, thus minimizing exposure to the needle and the
potential for an accidental needlestick. The integral barrel and needle shall
allow for fewer setup and disposal steps. When prepared for use, the overall
length of the device and the barrel diameter shall be similar to conventional
<PAGE>
phlebotomy devices currently on the market. The activation mechanism shall be
conveniently located on the top, forward part of the barrel to allow for easy
activation of the safety sheath and shall minimize change in user technique.
After activating and locking the safety sheath in place on the needle, the
entire device shall be disposed of in an approved sharps container.
3.0 Customer Feedback
User and patient needs have been identified through customer and
patient interviews, product evaluation studies, and focus groups.
Product attributes critical in the product design include:
* A high level of needle protection safety
* Convenience in use
* Ease of learning
* Little change in technique
* Ease of activation
* Activation motion unlikely to result in additional injury to
patient
* Low dead space volume
* Cost effectiveness
* Use and activation unlikely to cause blood spatter
* Avoidance of user contact with needle after use (encases or
shields needle)
Additional marketing information identifying user and patient needs are
on file at SHP.
**
- ------------
** The "**" marks the location of approximately five pages of information that
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
<PAGE>
EXHIBIT C**
** Exhibit "C" has been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment. Exhibit
"C" is comprised of 4 pages.
