SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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 11, 1998
POSSIS MEDICAL, INC.
(Exact name of registrant as specified in Charter)
MINNESOTA 001-12567 41-0783184
(State or other jurisdiction (Commission File Number) (IRS Employer
or incorporation) Identification Number)
9055 Evergreen Boulevard N.W.
Minneapolis, Minnesota 55433-8003
(Address of principal executive offices)
Registrant's telephone number, including area code: 612-780-4555
Not Applicable
(former name or former address,
if changed since last report.)
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Item 5. Other Events
Possis Medical, Inc. on December 11, 1998, executed a Distributor Agreement
with Horizon Medical Products, Inc., pursuant to which Horizon acquired the
exclusive right to distribute the Possis Perma-Seal(R) Dialysis Access Graft
worldwide. The Agreement provides for an initial term of three years, with
extensions dependent on performance requirements. This event is further
described in the News Release dated December 14, 1998, which is incorporated
herein by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits:
10.1: Distributor Agreement dated December 11, 1998
99.1: News Release dated December 14, 1998
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 undersigned
hereunto duly authorized.
POSSIS MEDICAL, INC.
Date: December 16, 1998 By: /s/ Irving R. Colacci
Irving R. Colacci
Vice President, Legal Affairs & Human Resources
General Counsel and Secretary
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EXHIBIT INDEX
Exhibit Description of Exhibit Page Number
10.1 Distribution Agreement dated December 11, 1998 4
99.1 News Released dated December 14, 1998 22
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Exhibit 10.1
DISTRIBUTOR AGREEMENT
This Agreement is made effective as of the 11th day of December, 1998
("Effective Date"), by and between Possis Medical, Inc., a corporation organized
and existing under the laws of the State of Minnesota and located at 9055
Evergreen Blvd. N.W., Minneapolis, Minnesota 55433-8003 ("PMI") and Horizon
Medical Products, Inc., a company organized under the laws of the state of
Georgia, with offices located at Seven North Parkway Square, 4200 Northside
Parkway N.W., Atlanta, Georgia 30327 ("Distributor" or "Horizon")
WITNESSETH
WHEREAS, PMI is engaged in the business of developing, manufacturing, and
marketing medical devices and desires that the sale and use of its products be
actively promoted worldwide; and
WHEREAS, PMI has developed an A-V Access Dialysis Graft known as the
Perma-Seal(R) Graft ("Perma-Seal Graft", "Graft" or the "Products"), as further
described in Exhibit A hereto; and
WHEREAS, Horizon is a well-known company in the medical field, with
experience and expertise in the commercialization and distribution of medical
devices; and
WHEREAS, Horizon has an organization capable of commercializing medical
devices such as the Perma-Seal Graft; and
WHEREAS, PMI desires to engage Horizon to purchase, promote and resell the
Perma-Seal Graft worldwide, subject to specified restrictions; and
WHEREAS, Horizon desires to obtain rights to purchase, promote and resell
the Perma-Seal Graft in exchange for assumption of specified obligations;
NOW, THEREFORE, in consideration of the mutual premises, obligations and
covenants contained herein, the parties agree as follows:
I. Appointment
A. Subject to the terms and conditions contained in this Agreement, PMI
hereby appoints Horizon as its exclusive independent distributor of the
Perma-Seal Graft worldwide. PMI shall not appoint any other agents,
representatives, or distributors for the purpose of selling the Perma-Seal
Graft, nor shall it sell or distribute the Perma-Seal Graft directly, by itself
or through any subsidiary or affiliate, except as provided herein.
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B. The parties shall, upon request by Horizon, engage in good faith
negotiations concerning Horizon's acquisition of ownership of the Perma-Seal
Graft.
C. In the event that PMI receives an offer from a third-party to acquire
rights to the Perma-Seal Graft during the term of this Agreement, Horizon will
have the right, subject to conditions provided herein, to acquire the Graft on
the same terms and conditions as offered or proposed by said third-party. If
Horizon does not exercise its right of first refusal under this Section I and
thereafter the offer or proposal from the third-party to PMI is materially
revised so as to reduce the value of said offer, then Horizon will be given the
right to acquire the Graft on the same terms and conditions as offered or
proposed by said third-party in such revised offer or proposal.
D. The right of Horizon to acquire ownership of the Perma-Seal Graft, as
provided in Section I(C)herein, shall be subject to the following conditions:
i) Horizon shall, within 30 days of notice from PMI of receipt of a bona
fide offer from a third-party to acquire rights to the Perma-Seal Graft, elect
whether or not to exercise its right of first refusal; with such notice, PMI
will provide such third-party offer or proposal and materials and information
that PMI receives from such third-party relating to its offer or proposal as is
reasonable necessary to allow Horizon to evaluate such third-party offer or
proposal; and
ii) Horizon shall, within sixty (60) days of said notice, provide PMI with
proof that it has obtained necessary financing commitments to proceed with the
acquisition of rights to the Perma-Seal Graft, on the same or better terms than
those offered by the third-party; and
iii) Horizon shall, within ninety (90) days of said notice, be prepared to
close on its acquisition of rights to the Perma-Seal Graft; and
iv) PMI and Horizon shall enter into a Purchase Agreement at or prior to
closing with customary representations and warranties and indemnification
provisions.
E. In the event that Horizon elects not to exercise its right of first
refusal to acquire rights to the Perma-Seal Graft, then the acquiring
third-party, in the event that it proceeds with the acquisition, shall have the
right to select one of the following two termination options as to this
Agreement, or to elect to honor this Agreement until its stated expiration date:
i) This Agreement shall terminate eighteen (18) months following the
closing date of the third-party's acquisition of the Perma-Seal Graft (the
"Continuation Period"); or
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ii) This Agreement shall terminate immediately upon the closing of the
third-party's acquisition of the Perma-Seal Graft, subject to a buyout payment
equal to the value of the eighteen month Continuation Period provided by Section
I(E)(i) herein, calculated as follows:
a) Forty-five percent (45%) of the Projected Sales to Horizon's customers
over the prospective eighteen-month Continuation Period.
b) Projected Sales shall be calculated based on the average quarterly
growth rate of sales to Horizo's customers over the twelve (12) month period
immediately prior to the termination of the Agreement, as applied to the final
quarter of actual sales prior to termination of the Agreement. An example of
such calculation is set forth in Exhibit B hereto.
F. Upon termination of this Agreement pursuant to Section I(E) herein, PMI
shall be obligated to accept return of Horizon's unsold inventory of Perma-Seal
Grafts and to refund the price paid by Horizon for said product, subject to the
conditions imposed by Section X(E) herein.
G. If Horizon does not exercise its right to purchase provided herein and
if the purchase by the third party is not consummated for any reason, then the
right of first refusal provisions in this Section I shall continue in effect.
II. Obligations of Distributor
Horizon shall use commercially reasonable efforts to promote the sale and
use of the Perma-Seal Graft worldwide, and shall, among other requirements:
A. Purchase the Perma-Seal Graft pursuant to the terms contained herein on
a timely basis and in such quantities as to maintain a high level of customer
service and support;
B. Advertise and promote the Perma-Seal Graft by such methods as in
Horizon's judgment are best suited for the sale of such a product, including
without limitation the advertisement and promotion in trade shows;
C. Use commercially reasonable efforts to provide its customers with
training and instruction on the proper use of the Perma-Seal Graft. Horizon is
responsible for all training expenses, selling expenses (including travel,
salaries, benefits and commissions of its sales force), and all other expenses
required in connection with its sales of the Products;
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D. Respond to customer inquiries and complaints on a timely basis and
provide such assistance and information as are reasonably requested;
E. Return any defective products to PMI for replacement;
F. Keep PMI informed of pertinent events and competing products having an
impact upon the Perma-Seal Graft's marketability;
G. Inform PMI promptly upon discovery of any defect, customer problem,
claim or threatened claim regarding the use of the Perma-Seal Graft, and any
violation of the law involving the Perma-Seal Graft;
H. Maintain and provide PMI, on a quarterly basis, with such information as
is reasonably requested by PMI as necessary to track product use and location
and to comply with all applicable governmental regulations;
I. Maintain, at its own expense, such office space and facilities, and hire
and train such personnel, as may be required to carry out its obligations under
this Agreement;
J. Develop promotional literature, including product brochures and other
sales aids for the Perma-Seal Graft, which shall be subject to prior written
approval of PMI as to the accuracy of the text;
K. Horizon has no authority to appoint any subagent, sub-distributor or
other person to promote the sale of the Perma-Seal Graft or to otherwise perform
any of its obligations hereunder without full disclosure to and the consent of
PMI, said consent not to be unreasonably withheld, unless sales through
distributors or sub-distributors is customary country practice outside of the
United States, and Horizon notifies PMI prior to commencement of sales in that
country, in which case consent of PMI shall not be required; and
L. Comply with all requirements in the countries in which the Perma-Seal
Graft is sold relating to the reporting of adverse reactions suffered by end
users of the Perma-Seal Graft, and will promptly report all such instances to
PMI, specifying the date, time and nature of the occurrence, the customer's name
and address, the product sold (including batch number if available) and any
other relevant information which PMI may reasonably request.
III. Obligations of PMI
In supplying Horizon with the Perma-Seal Graft, PMI shall:
A. Fulfill Horizon's reasonable purchase requests; provided, however, that
PMI shall not be liable in any way for failure to ship or for any delay in
shipment caused by events or circumstances beyond PMI's control;
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B. Keep Horizon informed of new products and policies;
C. Provide Horizon with product information and product use training as is
reasonably appropriate and mutually agreed to by the parties;
D. Provide finished Perma-Seal Grafts (labeled, packaged and sterilized)
under Possi' label;
E. Replace at no charge to Horizon all defective or otherwise
unmerchantable Grafts returned by Horizon, or returned by the customers to
Horizon and subsequently returned to PMI by Horizon;
F. Comply with all applicable requirements in the countries in which the
Perma-Seal Graft is sold relating to the reporting of adverse reactions suffered
by end users of the Perma-Seal Graft, and will promptly report all such
instances to Horizon, specifying the date, time, and nature of the occurrence,
the customer's name and address, the Graft (including batch number if available)
and any other relevant information which Horizon may reasonably request;
G. Inspect all Grafts for compliance with Specifications in accordance with
PMI quality control standards and systems;
H. Replace any obsolete inventory resulting from changes made to Grafts by
PMI;
I. Comply with all requirements imposed by the U.S. Food and Drug
Administration pursuant to the PMA regulatory approval of the Perma-Seal Graft,
including the manufacture of the Products in accordance with PMI specifications;
the Products shall be sterile and of a quality and design consistent with
industry standards for medical products; and
J. Supply a reasonable quantity of non-sterile demonstration samples at no
charge, subject to availability of such demonstration samples.
IV. Registration of Products; Import and Export Restrictions
A. Horizon shall, at its own expense, pay for all import and export
licenses and permits, pay customs charges and duty fees, and take all other
actions required to accomplish the export and import of the products it
purchases. Horizon understands that PMI is subject to regulation by agencies of
the United States government, including the United States Department of
Commerce, which prohibit export or diversion of certain technical products to
certain countries. Horizon warrants that it will comply in all respects with the
export and re-export restrictions set forth in the export license for every
product shipped to Horizon under this Agreement.
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B. PMI shall retain all rights and obligations associated with governmental
and other regulatory approvals and shall use its best efforts to obtain required
approvals in any country in which PMI and Horizon determine a reasonable
commercial opportunity exists.
C. In the event of termination of this Agreement, Horizon shall cooperate
with PMI and do whatever is reasonably necessary to ensure that any required
transfer of registration is effectuated as between PMI and a replacement
distributor.
V. Minimum Purchase Requirements
A. Horizon agrees to the following annual minimum purchase targets of
Perma-Seal Grafts during the term of this Agreement as follows:
Year One: 4,500 Units
Year Two: 6,300 Units
Year Three: 8,800 Units
Year Four: 11,000 Units
Year Five: 14,500 Units
B. All orders for Products submitted by Horizon shall be initiated by
written purchase orders sent to PMI and requesting a delivery date during the
term of this Agreement; provided, however, that an order may initially be placed
orally or by facsimile if a confirmational written purchase order is received by
PMI within five (5) days after said oral or facsimile order. PMI shall use its
reasonable best efforts to notify Horizon of the acceptance or rejection of an
assigned delivery date for orders within five (5) days after receipt of the
purchase order and shall be allowed a reasonable time to fill and ship any order
submitted by Horizon. The reasonableness of any delivery schedule proposed by
PMI shall be evaluated in light of the history of orders for Products submitted
by Horizon and PMI's manufacturing capabilities. No partial shipment of an order
shall constitute the acceptance of the entire order, absent the written
acceptance of such entire order. Horizon's purchase orders submitted to PMI from
time to time with respect to products to be purchased hereunder shall be
governed by the terms of this Agreement, and nothing contained in any such
purchase order shall in any way modify such terms of purchase or add any
additional terms or conditions.
C. At the time of execution of this Agreement, Horizon shall submit to PMI
a binding purchase order covering the first nine months of this Agreement,
together with a twelve (12) month forecast of Horizon's orders for the first
twelve (12) months of this Agreement. The nine (9) month binding purchase order
shall become a rolling six (6) month binding purchase order upon expiration of
the first three (3) months of this Agreement and shall thereafter be updated on
a monthly basis for the remaining term of this Agreement. The twelve (12)
forecast provided for herein shall be updated on a monthly basis so as to
maintain a rolling twelve (12) month product purchase forecast for the term of
this Agreement. The binding purchase order and forecast required herein shall be
in the amounts reflected in and otherwise consistent with Exhibit C attached
hereto.
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VI. Prices
A. The Purchase Price to Horizon for each Perma-Seal Graft shall be
forty-five percent (45%) less than the Average Sales Price for the Products.
B. The Average Sales Price shall mean the average invoiced price of each
Graft Product sold by Horizon to retail customers, exclusive of sales to
distributors and of taxes, freight, duties or shipping charges. The average
invoiced price shall be determined by dividing Horizon's worldwide invoiced
sales of each Product during a calendar quarter (not including promotional
giveaways) by the number of units of that product sold by Horizon to retail
customers during such calendar quarter.
C. The Average Sales Price shall be calculated for each and every Graft
Product (not including promotional giveaways) every calendar quarter and will
serve as the basis for calculation of the Purchase Price for the next succeeding
quarter.
D. For sales of the Perma-Seal Graft from the date of this Agreement until
an Average Sale Price is established Horizon shall pay to PMI Two Hundred and
Seventy Five Dollars ($275.00) for each Perma-Seal Graft purchased.
E. Each Graft Product purchased prior to establishment of an Average Sales
Price shall be subject to a pricing adjustment to reflect the appropriate
Purchase Price upon establishment of the applicable Average Sales Price.
F. Notwithstanding the above, the Purchase Price for each Graft Product
shall not be less than Two Hundred and Twenty Dollars ($220.00) per unit..
G. PMI, its counsel and its accountants, shall have reasonable access
during normal business hours, after at least five (5) business days notice to
Horizon, to all accounts, records, contracts and documents directly relating to
the establishment of the Average Sales Price provided herein.
H. All prices are F.O.B. PMI's Minnesota manufacturing facility and do not
include any foreign, federal, state or local sales, use, excise or value added
tax that may be applicable. When PMI has the legal obligation to collect such
taxes, the appropriate amount shall be added to Horizon's invoice and paid by
Horizon unless Horizon provides PMI with a valid tax exemption certificate
authorized by the appropriate taxing authority.
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VII. Payment Terms
Full payment (including any freight, taxes or other applicable costs
initially paid by PMI but to be borne by Horizon pursuant to the terms hereof)
shall be made by Horizon to PMI within forty-five (45) days of the date of
shipment. Payment shall be in United States Dollars. Horizon shall pay all of
PMI's costs and expenses (including reasonable attorneys' fees) to enforce and
preserve PMI's rights under this Section VII. Notwithstanding the above, payment
terms on the initial purchase and shipment of PMI's existing inventory of
Perma-Seal Grafts, in a quantity of at least 900 units and not to exceed 1,200
units, shall be sixty (60) days on the first fifty percent (50%) of units
purchased and ninety (90) days on the remainder of said purchase.
VIII.Shipping Terms, Shipment Date
A. In all cases, title, risk of loss and all responsibility for
transportation, insurance and storage shall pass from PMI to Horizon upon
shipment from PMI's plant.
B. For purposes of this Agreement, "Shipment Date" shall mean the time, in
regard to any Perma-Seal Graft, when the Perma-Seal Graft is first shipped FOB
PMI's plant. Horizon shall specify a method of transportation and a carrier in
writing at the time Horizon submits the purchase order to PMI. If Horizon does
not so specify, PMI will determine the method of transportation and the carrier.
IX. Product Recalls
A. In the event that PMI recalls any Perma-Seal Graft for any reason, PMI
shall so notify Horizon in writing. Horizon shall, immediately upon receipt of
such notice, give notice of the recall to each customer to which it has sold,
along with the instructions, if any, delivered by PMI relating to the recall.
B. Horizon shall assist PMI in giving effect to the recall. PMI shall bear
all costs and expenses of a recall caused by its manufacturing, design,
packaging, labeling or other issues caused by acts of PMI that potentially
affect the safety, use or efficacy of the Perma-Seal Grafts including, without
limitation, obligations to third parties, costs of notifying customers and costs
associated with the shipment of recalled Perma-Seal Grafts from customers to
Horizon or PMI, and replacement of such products. Horizon shall, however, bear
all costs of any recall caused by its misrepresentations or other acts causing a
recall to occur.
C. In the event that Horizon desires to recall any Perma-Seal Graft for a
reason caused by acts or omissions of Horizon, Horizon shall notify PMI prior to
said recall and shall bear all costs associated with such recall.
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X. Term and Termination
A. This Agreement shall commence on the Effective Date and be valid for an
initial term of three years. At the end of the fixed term, or any extension
thereof, this Agreement shall terminate automatically without notice unless
prior to that time the term of this Agreement is extended by mutual written
consent of the parties. The parties expressly agree that it is not their intent
that this Agreement shall be of indefinite duration. Upon achievement of the
annual minimum purchase target for products provided in Section V herein for
Year One of the Agreement, the term of this Agreement shall automatically be
extended for one year. Upon achievement of the annual minimum purchase target
for product purchases provided in Section V herein for Year Two of the
Agreement, the term of this Agreement shall automatically be extended for one
additional year.
B. This Agreement may be terminated by either party immediately in the
event that: (i) the other party should become insolvent or upon the filing of a
petition by or against the other party under the federal bankruptcy laws; (ii)
the other party is found guilty of any fraudulent act; or (iii) operation of
local law invalidates this Agreement.
C. This Agreement may be terminated by either party upon a material breach
of the Agreement by the other party and such breach is not cured within sixty
(60) days of receiving written notice breach and demand for cure.
D. Upon any termination of this Agreement, Horizon shall immediately cease
using the name, trademark, service mark, logo or any other reference of or to
PMI and shall, at its expense, surrender and deliver to PMI within thirty (30)
days, all documents, papers and records which contain confidential information
of PMI and all undistributed samples, instruments, equipment, pamphlets,
catalogs, booklets, technical information, advertising, demonstration equipment,
consigned inventory, selling data and other papers relating to the business of
PMI (collectively, the "Sales Materials"); provided, however, that only Sales
Materials that are exclusive to the Graft will be returned hereunder.
E. Upon termination of this Agreement by PMI prior to expiration of its
three-year term, other than pursuant to Section X (B) or (C) or (I) herein, PMI
shall accept the return of Horizon's inventory of Perma-Seal Grafts and refund
the price Horizon paid, subject to the following conditions:
1. The returned products must be new, within the applicable product
expiration time period and packaged in their original, unopened, unmarked, and
unbroken sterile containers;
2. The returned products must pass inspection by PMI's Quality Department;
and
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3. Horizon must have complied with all obligations under this Agreement;
If PMI does not accept Horizon's inventory of Perma-Seal Grafts because of
such conditions, Horizon may dispose of such remaining inventory until depleted.
G. Upon termination of this Agreement by Horizon or by PMI under Section
X(B) or Section X(C), or Section X(I), PMI shall have no obligation to accept
return of Perma-Seal Grafts purchased or ordered by Horizon, provided, however,
that Horizon shall have the right to sell its remaining inventory to customers
until depleted.
H. The parties agree to enter into good faith negotiations to consider an
extension or modification of this Agreement. Such negotiations shall be
initiated no later than six (6) months prior to expiration of the initial three
year term provided herein.
I. In the event that Horizon fails to purchase the annual minimum purchase
target amount provided in Section V(A) herein for any year of this Agreement,
this Agreement and all rights of first refusal granted to Horizon therein may be
terminated by PMI upon thirty (30) days written notice to Horizon. Upon receipt
of such notice, Horizon will have thirty (30) days to cure such failure by
placing new purchase orders, under the procedures in Section V above, for the
products in sufficient quantity to satisfy such annual minimum purchase target.
XI. Warranties and Indemnification
A. PMI warrants that it possesses good and marketable title to Perma-Seal
Grafts sold to Horizon under this Agreement.
B. PMI hereby indemnifies and agrees to defend and to hold harmless
Horizon, its officers, directors, shareholders, employees, parents, successors,
affiliates, assigns, customers and users of the Perma-Seal Graft from and
against any and all claims, demands, actions, causes of action, liabilities,
losses, damages and expenses, including reasonable attorney fees, arising out of
or in connection with the design, manufacture, sale or use of the Perma-Seal
Graft, or any negligent act or omission of PMI; except to the extent of harm
resulting from the mishandling of the Perma-Seal Graft by Horizon, any
misrepresentation by Horizon concerning any of the characteristics of the
Perma-Seal Graft or concerning the proper manner of usage or the performance of
the Perma-Seal Graft, or any negligent act or omission of Horizon relating to
the Perma-Seal Graft.
C. Horizon hereby indemnifies and agrees to defend and to hold PMI, its
successors, affiliates, assigns, customers and users of the Perma-Seal Graft
harmless from and against all claims, liabilities, losses or expenses, including
reasonable attorney fees, to the extent of harm resulting from mishandling of
the Perma-Seal Graft by Horizon, any misrepresentation by Horizon concerning any
of the characteristics of the Perma-Seal Graft or concerning the proper manner
of usage or the performance of the Perma-Seal Graft, or any negligent act or
omission of Horizon relating to the Perma-Seal Graft.
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D. PMI shall defend, indemnify and hold Horizon, its officers, directors,
shareholders, employees, parents, successors, affiliates, assigns, customers and
users of the Perma-Seal Graft harmless from and against all loss, damage, cost
or expense arising out of any claims, demands, actions, causes of action,
liabilities, losses, damages and expenses, including reasonable attorney fees,
arising out of or in connection with any claim of infringement of patents,
trademarks, trade names, or copyrights, any claim of misappropriation or misuse
of trade secrets or information or any similar claim, by reason of the sale or
use of the Perma-Seal Graft, other than any such claim, loss, damage, or expense
relating to words, symbols, or other material placed on or supplied with the
Perm-Seal Graft by or at the request of Horizon. Horizon shall promptly notify
PMI of any such claim and may either tender its defense of such claim to PMI or
may retain its own counsel without waiving any of its right to indemnification
hereunder.
XII. Property Rights and Confidentiality
A. Horizon agrees that PMI owns all right, title, and interest in the
Perma-Seal Graft and in all of PMI's patents, trademarks, service marks, trade
names, inventions, copyrights, know-how, and trade secrets relating to the
design, manufacture, operation or service of the Perma-Seal Graft. The use by
Horizon of any of these property rights is authorized only for the purposes
herein set forth, and upon termination of this Agreement for any reason such
authorization shall cease.
B. The Perma-Seal Graft is offered for sale and sold by PMI subject in
every case to the condition that such sale does not convey any license,
expressly or by implication, to manufacture, duplicate or otherwise copy or
reproduce any product. Horizon shall take such appropriate steps with its
customers as PMI may request to inform them of these restrictions.
C. In order to avoid disclosure of confidential and proprietary information
("Information") to any other person, firm or corporation, the parties agree that
during the term of this Agreement and for a period of five (5) years from the
expiration or termination of this Agreement, each will treat any such
information which is received from one another in writing and clearly market
"Confidential" or if disclosed orally, which is confirmed in writing as
"Confidential" within thirty (30) days of initial disclosure, with the same
degree of care that each employs with respect to its own information which it
does not desire to have published or disseminated. It is understood that each
party shall be liable for any unauthorized disclosure should it fail to
safeguard the disclosed information with such care. This obligation shall
survive the termination of this Agreement. The parties shall not have any
obligation with respect to such information which is:
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1. independently developed by the receiving party without the benefit of
the disclosure or is already known to the receiving party at the time of the
disclosure, as evidenced by written documentation;
2. publicly known or becomes publicly known without the wrongful act or
breach of this Agreement by the receiving party; or
3. rightfully received by the receiving party from a third-party who is not
under any obligation of confidentiality or trade secret obligation to the
originating party.
XIII.Trademarks, Service Marks and Trade Names
A. During the term of this Agreement, Horizon will have the right to
indicate to the public that it is an authorized distributor of the Perma-Seal
Graft and to advertise and sell Products under the trademarks, service marks and
trade names that PMI may adopt from time to time (the "PMI Trademarks"). Except
as set forth in this Section XIII, nothing contained in this Agreement shall
grant Horizon any right, title or interest in any PMI Trademark.
B. All Perma-Seal Grafts sold by PMI to Horizon will bear one or more PMI
Trademark and shall bear PMI's labeling. In connection with sales to Horizon's
customers, Horizon may indicate that the Perma-Seal Graft is being distributed
by Horizon as an authorized distributor but shall not alter, remove, or modify
any PMI Trademark, nor affix any other trademark, to any of the products or
their packaging without the prior written consent of PMI.
C. All representations of every PMI Trademark that Horizon intends to use
shall first be submitted to PMI for approval of design, color and other details
or shall be exact copies of those representations previously approved by PMI
hereunder. If any PMI Trademark is to be used in conjunction with another
trademark on or in relation to the Perma-Seal Graft, the PMI Trademark shall be
presented equally legibly, equally prominently and of greater size than the
other, but shall nevertheless be separated from the other trademark so that each
appears to be a mark in its own right, distinct from the other mark. Horizon's
use of any PMI Trademark shall be conditioned upon the use clearly indicating
PMI's ownership of the mark.
D. Horizon shall immediately notify PMI in writing of any infringement,
unauthorized use or challenge to the validity of any PMI Trademark that comes to
its attention. Horizon shall, at PMI's request, provide PMI with all reasonable
assistance in initiating and prosecuting any legal action against any infringer
of any PMI Trademark; provided, however, that all costs incurred in connection
with any such trademark infringement action shall be borne by PMI.
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E. Horizon shall obtain PMI's prior written approval for all uses in any
publication, including any advertising mailer, literature, promotional item or
other such material originated by Horizon, its employees, agents,
representatives or associates, which such materials use PMI's name or a PMI
Trademark, unless such use has been previously approved by PMI in exactly the
form proposed for use again.
XIV. Patent Infringement
PMI warrants that the Perma-Seal Graft Products does not violate or
infringe upon any validly issued United States Patent or associated right. PMI
disclaims all warranties, express or implied, regarding all other intellectual
property rights of PMI and third parties related to the Products, except that,
as of the date of this Agreement, PMI has no knowledge of any right which would
be materially affected by the use of the Perma-Seal Graft.
XV. Independent Contractors
The relationship of Horizon and PMI established by this Agreement is of
independent contractors and not agents, and nothing in this Agreement shall be
construed:
A. To give either party the power to direct or control the daily activities
of the other party beyond the obligations imposed on Horizon or on PMI by this
Agreement;
B. To constitute the parties as partners, joint ventures, co-owners or
otherwise as participants in joint undertaking; or
C. To allow either party to create or assume any obligation on behalf of
the other party for any purpose whatsoever. The purchase, promotion, and resale
of, or any other legal transactions concerning the Perma-Seal Graft hereunder
shall be carried out in the name of and for the account of Horizon as principal,
and Horizon shall not enter into any agreement with third persons binding in any
way on PMI.
XVI. No Conflict with Other Contracts
Each party represents and warrants to the other party that it is not
subject to any contractual obligation or restraint which will interfere with its
right and ability to perform pursuant to the terms of this Agreement.
XVII.Compliance with Laws
Each party represents and agrees that it is and will remain in compliance
with all applicable federal, state and local laws, regulations and orders,
including laws of the countries in which Horizon sells products.
<PAGE>
XVIII.Assignments
PMI may freely assign this Agreement, subject to reasonable notice to
Horizon. Horizon may assign this Agreement only in the event that all or
substantially all of its assets are acquired by a third-party or Horizon is
acquired in a merger transaction or in a transaction where more than fifty
percent (50%) of Horizon's shares are acquired; said assignment to be valid only
as to said acquiring third-party.
XIX. Governing Law and Jurisdiction
This Agreement shall be governed by and construed in accordance with the
laws of the State of Minnesota.
XX. Legal Expenses
The prevailing party in any legal action brought by one party against the
other party and arising out of this Agreement shall be entitled, in addition to
any other rights and remedies it may have, to reimbursement for its expenses,
including court costs and reasonable attorney's fees.
XXI.Entire Agreement; Orders
This Agreement, including the Exhibits hereto, sets forth the entire
agreement and understanding of the parties relating to the subject matter herein
and supersedes all prior discussions between them. The acceptance by PMI of any
order from Horizon is made expressly conditioned upon Horizon's assent to, and
PMI agrees to sell the Perma-Seal Graft only on, the terms and conditions
contained herein. Every term and condition of Horizon's order in addition to, or
not identical with, the terms and conditions contained herein is hereby rejected
and shall not be binding on PMI. The terms and conditions contained herein shall
be applicable to all sales by PMI, whether or not any purchase or sale form is
executed for the particular sale.
XXIII.Severability
Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement should be prohibited or invalid, in whole or in part
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
<PAGE>
XXIV.Notices
All notices required or permitted hereunder shall be deemed sufficient if
given in writing and sent by appropriate overnight or second-day courier with
return receipt requested or delivered by hand to the party to whom such notice
is required or permitted to be given. Any such notice shall be considered given
when received or forty-eight (48) hours after deposit with such courier,
whichever is earlier. All notices shall be addressed to party's President at the
address set forth for each party on the first page of this Agreement. Either
party may change the address to which notice to it is to be given by written
notice to the other party.
XXV. Amendments and Waivers
No modification of, or amendment to this Agreement nor any waiver of any
rights under this Agreement shall be effective unless in writing and signed by
the party to be charged. Failure by either party at any time to require the
other party's performance of any obligation under this Agreement shall not
affect the right subsequently to require performance of that obligation. Any
waiver of any breach of any provision of this Agreement shall not be construed
as a waiver of any continuing or succeeding breach of such provision or a waiver
or modification of the provision.
XXVI.Subject Headings
The subject headings of the Sections of this Agreement are included for the
purpose of convenience only and shall not affect the construction or
interpretation of any of its provisions.
IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the
date first written above, and this Agreement shall only become effective when it
is accepted and executed by PMI at its offices in Minneapolis, Minnesota.
HORIZON MEDICAL PRODUCTS, INC. POSSIS MEDICAL, INC.
By:________________________________ By: __________________________
Title:_____________________________ Title: __________________________
Dated:_____________________________ Dated: __________________________
<PAGE>
EXHIBIT "A" TO DISTRIBUTION AGREEMENT
Description of Possis Perma-Seal(R) Dialysis Access Graft
The Possis Perma-Seal Dialysis Access Graft, for purposes of the
Distribution Agreement between Possis Medical, Inc. and Horizon Medical
Products, Inc. of which this Exhibit "A" is a part, shall mean:
A vascular graft designed to provide arteriovenous access for
high-efficiency hemodialysis, that has a 6 mm internal diameter, and is made
primarily of elastomerically spun silicon graft material with a winding of
polyester yarn encapsulated within the wall.
Product modifications and improvements are included in this description,
but expressly exclude new graft products and processes developed by PMI
utilizing materials or structures other than those currently used in the
manufacture of Perma-Seal Grafts.
<PAGE>
EXHIBIT "B" TO DISTRIBUTION AGREEMENT
Sample Buyout Calculation
As an example of the calculation of the buyout payment under Section
I(A)(ii), assume that the closing of the third-party's acquisition occurs on
December 31, 1998 and that Horizon's quarterly sales to its customers during
1998 were:
1st Q - 100 25% increase
2nd Q - 125 4% decrease
3rd Q - 120 25% increase
4th Q - 150
15.33% average quarterly
increase during 1998
1st Quarter 1999 - 150 x 15.33% = 173
2nd Quarter 1999 - 173 x 15.33% = 200
3rd Quarter 1999 - 200 x 15.33% = 231
4th Quarter 1999 - 231 x 15.33% = 266
1st Quarter 2000 - 266 x 15.33% = 307
2nd Quarter 2000 - 307 x 15.33% = 354
1,531
x 45%
689
<PAGE>
EXHIBIT "C" TO DISTRIBUTION AGREEMENT
Binding Nine (9) Month Purchase Order and
Twelve (12) Month Forecast
P.O. Delivery Date Units Running Total
December 1998 1,000 1,000
January 1999 0 1,000
February 1999 50 1,050
March 1999 100 1,150
April 1999 100 1,250
May 1999 100 1,350
June 1999 200 1,550
July 1999 250 1,800
August 1999 300 2,100
September 1999 400 2,500
Proposed P.O
October 1999 600 3,100
November 1999 650 3,750
December 1999 750 4,500
<PAGE>
Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT:
ROBERT G. DUTCHER
POSSIS MEDICAL, INC.
(612) 780-4555
POSSIS MEDICAL SIGNS DISTRIBUTION AGREEMENT WITH
HORIZON MEDICAL PRODUCTS FOR PERMA-SEAL(R) GRAFT
MINNEAPOLIS, MN (December 14, 1998) -- Possis Medical, Inc.
(NASDAQ/NMS:POSS) announced today that it has entered into an exclusive
worldwide supply and distribution agreement with Horizon Medical Products, Inc.
for its Perma-Seal(R) Dialysis Access Graft. Possis Medical will manufacture and
sell Perma-Seal Grafts exclusively to Horizon for distribution worldwide. The
Agreement is subject to minimum sales performance requirements, has an initial
term of three years, and provides for automatic extensions of two additional
years provided Horizon meets certain minimum sales performance requirements in
the first and second years of the Agreement.
Horizon, headquartered in Manchester, Georgia, is a rapidly growing
specialty medical device company focused on manufacturing and marketing vascular
products. The company's vascular access product line includes implantable ports,
which are used primarily in cancer treatment protocols, and specialty catheters,
which are used in hemodialysis and stem cell apheresis procedures. Horizon
offers the broadest available product lines in each of these product categories,
and has the largest sales force focused exclusively on vascular access products.
Mr. Robert G. Dutcher, President and CEO of Possis Medical, Inc., stated,
"We are very excited about entering into this Agreement with Horizon, and we
look forward to their making the pioneering Perma-Seal Graft available to
hemodialysis patients as quickly as possible. Horizon is an emerging leader in
the vascular access business with an 80-person direct U.S. sales and marketing
team and an additional 40 independent distributor sales representatives. Outside
the U.S., Horizon has a network of independent distributors covering 50
countries including all major countries in Europe and the Far East. Horizon's
highly focused and well-staffed sales force makes them, I believe, very capable
and well suited to market the Perma-Seal Graft worldwide as a pioneering,
early-use dialysis access graft."
Mr. Dutcher continued, "The Perma-Seal Graft is designed to provide
hemodialysis patients a synthetic vascular access option with needle-hole
sealing capability in order to provide immediate access, minimize bleeding,
shorten dialysis sessions and eliminate the need for temporary central venous
catheters. Worldwide approximately 420,000 patients undergo hemodialysis and we
estimate that approximately 93,000 patients annually are implanted with a
synthetic graft."
<PAGE>
Possis Medical, Inc. develops, manufactures and markets pioneering medical
devices for the growing cardiovascular and vascular treatment markets. Its
AngioJe(R) Rheolytic(TM) Thrombectomy System is marketed in the United States
for treatment of dialysis access graft thrombosis. Its three products - the
AngioJe(R) Rheolytic(TM) Thrombectomy System, the Perma-Flow(R) Coronary Bypass
Graft, and the Perma-Seal(R) Dialysis Access Graft - are highly differentiated,
next-generation medical devices that have the potential to become preferred
treatment options.
Certain statements in this press release constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
forward-looking statements involve risks and uncertainties that may cause the
Company's actual results to be materially different. Factors that could impact
the Company's future results are set forth in the cautionary statements included
in Exhibit 99 to the Company's Form 10-Q dated April 30, 1998, filed with the
Securities and Exchange Commission.
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