<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number: ____________33-26398___________
ADVANCED MEDICAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-3492624
- ---------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
</TABLE>
9775 Businesspark Avenue, San Diego, CA 92131
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(Address of principal executive offices) (Zip Code)
(619) 566-0426
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(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ___X___ No _______
On October 16, 1995, 16,130,717 shares of Registrant's Common Stock were
outstanding.
Page 1 of 96
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1 - Financial Statements:
<S> <C>
PAGE
---------------
Condensed consolidated balance sheets at December 31, 1994 and
September 30, 1995........................................... 3
Condensed consolidated statements of operations for the three
and nine months ended September 30, 1994 and 1995........... 4
Condensed consolidated statements of cash flows for the nine
months ended September 30, 1994 and 1995.................... 5
Condensed consolidated statement of changes in stockholders'
equity (deficit) for the period from December 31, 1994 to
September 30, 1995.......................................... 6
Notes to the condensed consolidated financial statements..... 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 9
</TABLE>
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
Item 1 - Legal Proceedings..................................... 14
Item 2 - Changes in Securities................................. Not applicable
Item 3 - Defaults Upon Senior Securities....................... 14
Item 4 - Submission of Matters to a Vote of Security -
Holders....................................................... Not applicable
Item 5 - Other Information..................................... Not applicable
Item 6 - Exhibits and Reports on Form 8-K...................... 15
</TABLE>
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<PAGE>
FORM 10 -- Q
PART 1 -- ITEM 1
FINANCIAL INFORMATION
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------ SEPTEMBER
30, 1995
-----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents..................................................... $ 1,340 $ 1,353
Restricted cash and investment securities..................................... 1,732 2,202
Securities available for sale................................................. 2,883 5,516
Receivables, net.............................................................. 24,841 21,448
Inventories................................................................... 20,347 17,164
Prepaid expenses and other current assets..................................... 2,140 1,500
------------ -----------
Total current assets........................................................ 53,283 49,183
Net investment in sales-type and direct financing leases........................ 14,807 15,315
Property, plant and equipment, net.............................................. 11,595 12,799
Other non-current assets........................................................ 4,921 4,271
Intangible assets, net.......................................................... 47,518 48,236
------------ -----------
$132,124 $129,804
------------ -----------
------------ -----------
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<S> <C> <C>
Current liabilities:
Current portion of long-term debt............................................. $ 1,214 $ 502
Accounts payable.............................................................. 8,427 7,535
Accrued expenses and other current liabilities................................ 14,066 14,231
------------ -----------
Total current liabilities................................................... 23,707 22,268
------------ -----------
Long-term debt.................................................................. 91,803 63,202
Other non-current liabilities................................................... 7,285 6,579
------------ -----------
99,088 69,781
------------ -----------
Minority interests in consolidated subsidiaries................................. 5,000 5,000
------------ -----------
Contingent liabilities (Note 5)
Mandatorily redeemable equity securities........................................ 6,567 7,054
------------ -----------
Non-redeemable preferred stock, common stock, and other stockholders' equity
(deficit):
Preferred stock, authorized 6,000 and 3,000 shares at $.001 and $.01 par
value, respectively; issued and outstanding -- none
Common stock, authorized 75,000 shares at $.01 par value; issued and
outstanding -- 14,152 shares and 16,214 shares at December 31, 1994 and
September 30, 1995, respectively............................................. 142 162
Capital in excess of par value................................................ 58,703 63,128
Accumulated deficit........................................................... (61,922) (41,278)
Treasury stock................................................................ (734) (734)
Unrealized holding gains from securities available for sale................... 883 3,829
Other equity.................................................................. 690 594
------------ -----------
Total non-redeemable preferred stock, common stock and other stockholders'
equity (deficit)........................................................... (2,238) 25,701
------------ -----------
$132,124 $129,804
------------ -----------
------------ -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
- 3 -
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1994 1995 1994 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales.............................................................. $ 27,427 $ 24,925 $ 82,010 $ 82,681
Cost of sales...................................................... 15,675 13,181 48,448 46,595
--------- --------- --------- ---------
Gross margin..................................................... 11,752 11,744 33,562 36,086
--------- --------- --------- ---------
License fees revenue............................................... 111 111 331 331
--------- --------- --------- ---------
Selling expenses................................................... 4,119 4,051 12,679 12,965
General and administrative expenses................................ 2,722 2,496 8,382 7,697
Research and development expenses.................................. 1,546 1,612 4,471 5,603
--------- --------- --------- ---------
Total operating expenses......................................... 8,387 8,159 25,532 26,265
--------- --------- --------- ---------
Income from operations........................................... 3,476 3,696 8,361 10,152
--------- --------- --------- ---------
Other income (expense):
Interest income.................................................. 651 625 1,890 1,814
Interest expense................................................. (2,011) (2,088) (6,660) (6,184)
Other, net....................................................... (158) 534 1,075 381
--------- --------- --------- ---------
(1,518) (929) (3,695) (3,989)
--------- --------- --------- ---------
Income before income taxes and extraordinary item.................. 1,958 2,767 4,666 6,163
Income tax provision............................................... 499 361 1,169 696
--------- --------- --------- ---------
Income before extraordinary item................................... 1,459 2,406 3,497 5,467
Extraordinary item -- gain on early retirement of debt, net of
tax............................................................... 15,177
--------- --------- --------- ---------
Net income......................................................... 1,459 2,406 3,497 20,644
Dividends and accretion on mandatorily redeemable preferred
stock............................................................. 180 162 716 487
--------- --------- --------- ---------
Net income applicable to common stock.............................. $ 1,279 $ 2,244 $ 2,781 $ 20,157
--------- --------- --------- ---------
--------- --------- --------- ---------
Income per common share assuming no dilution:
Income before extraordinary item................................. $ .09 $ .14 $ .20 $ .32
Extraordinary item -- gain on early retirement of debt........... .98
--------- --------- --------- ---------
Net income per common share assuming no dilution............... $ .09 $ .14 $ .20 $ 1.30
--------- --------- --------- ---------
--------- --------- --------- ---------
Income per common share assuming full dilution:
Income before extraordinary item................................. $ .06 $ .07 $ .14 $ .17
Extraordinary item -- gain on early retirement of debt........... .47
--------- --------- --------- ---------
Net income per common share assuming full dilution............. $ .06 $ .07 $ .14 $ .64
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common shares outstanding assuming no dilution.... 14,069 16,451 14,069 15,500
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common shares outstanding assuming full
dilution.......................................................... 25,767 33,119 21,923 32,257
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
- 4 -
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1994 1995
---------- ---------
<S> <C> <C>
Net cash provided by operating activities................................................. $ 9,119 $ 15,075
---------- ---------
Cash flows from investing activities:
Capital expenditures.................................................................... (3,325) (4,629)
Proceeds from sale of investments....................................................... 3,689 859
Proceeds from sale of Irish operations.................................................. 3,766
Payments for product distribution rights................................................ (3,391)
Other................................................................................... 379 (441)
---------- ---------
Net cash provided by (used in) investing activities....................................... 4,509 (7,602)
---------- ---------
Cash flows from financing activities:
Net repayments under credit facilities.................................................. (4,401) (6,351)
Principal payments on long-term debt.................................................... (45,687) (1,038)
Purchase of preferred stock............................................................. (646)
Proceeds from issuance of secured promissory notes...................................... 12,500
Proceeds from issuance of long-term credit facility..................................... 23,793
Other................................................................................... 20
---------- ---------
Net cash used in financing activities..................................................... (14,421) (7,389)
---------- ---------
Effect of exchange rate changes on cash................................................... 34 (71)
---------- ---------
Net increase (decrease) in cash and cash equivalents...................................... (759) 13
Cash and cash equivalents at beginning of period.......................................... 1,762 1,340
---------- ---------
Cash and cash equivalents at end of period................................................ $ 1,003 $ 1,353
---------- ---------
---------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
- 5 -
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
HOLDING
GAINS FROM
COMMON STOCK CAPITAL IN TREASURY STOCK SECURITIES
---------------------- EXCESS OF ACCUMULATED ------------------------ AVAILABLE
SHARES AMOUNT PAR VALUE DEFICIT SHARES AMOUNT FOR SALE
--------- ----------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994.......... 14,152 $ 142 $ 58,703 $ (61,922) 83 $ (734) $ 883
Issuance of common stock.............. 2,062 20 4,912
Dividends on mandatorily redeemable
preferred stock...................... (487)
Current year change in net unrealized
holding gains from securities
available for sale................... 2,946
Other equity transactions.............
Net income for the period............. 20,644
--
--------- ----- ----------- ------------ ----------- -----------
Balance at September 30, 1995......... 16,214 $ 162 $ 63,128 $ (41,278) 83 $ (734) $ 3,829
--
--
--------- ----- ----------- ------------ ----------- -----------
--------- ----- ----------- ------------ ----------- -----------
<CAPTION>
OTHER
EQUITY TOTAL
----------- ---------
<S> <C> <C>
Balance at December 31, 1994.......... $ 690 $ (2,238)
Issuance of common stock.............. 4,932
Dividends on mandatorily redeemable
preferred stock...................... (487)
Current year change in net unrealized
holding gains from securities
available for sale................... 2,946
Other equity transactions............. (96) (96)
Net income for the period............. 20,644
----------- ---------
Balance at September 30, 1995......... $ 594 $ 25,701
----------- ---------
----------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
- 6 -
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
NOTE 1 -- BUSINESS AND STATEMENT OF ACCOUNTING POLICY
BUSINESS:
Advanced Medical, Inc. ("Advanced Medical"), operating through its major
operating subsidiary, IMED Corporation ("IMED"), is a leading developer and
manufacturer of infusion products and related technologies for the health care
industry (Advanced Medical and its subsidiaries are collectively referred to
herein as "the Company").
STATEMENT OF ACCOUNTING POLICY:
The accompanying financial statements have been prepared by the Company without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures herein are
adequate to make the information not misleading.
In the opinion of the Company, the accompanying financial statements contain all
adjustments, consisting of normal recurring adjustments, necessary for a fair
statement of the Company's financial position as of September 30, 1995, and the
results of its operations and its cash flows for the nine months ended September
30, 1994 and 1995.
NET INCOME PER COMMON SHARE:
Net income per common share assuming no dilution is computed using the weighted
average number of common and common stock equivalent shares outstanding during
the period. Net income per common share assuming full dilution is computed using
the weighted average number of common and common stock equivalent shares
outstanding during the period plus the shares that would be outstanding assuming
conversion of the $6,000 secured promissory note ("Decisions Note") issued to
Decisions Incorporated during January 1994 and the $6,500 secured promissory
note (the "Note") issued to Decisions Incorporated during August 1994. Assuming
conversion of the Decisions Note and the Note, interest expense (net of taxes)
on the convertible debt has been added to the net income applicable to common
stock in the amount of $140 and $152 for the three months ended September 30,
1994 and 1995, respectively, and $293 and $451 for the nine months ended
September 30, 1994 and 1995, respectively. Common stock equivalent shares are
excluded from the computation in periods in which they have an anti-dilutive
effect.
NOTE 2 -- INVENTORIES
Inventories comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
<S> <C> <C>
Raw materials.............................. $ 5,311 $ 6,315
Work-in-process............................ 3,753 2,250
Finished goods............................. 11,283 8,599
------------ -------------
$20,347 $17,164
------------ -------------
------------ -------------
</TABLE>
NOTE 3 -- DEVELOPMENT AND EXCLUSIVE DISTRIBUTION AGREEMENT
On May 8, 1995, IMED entered into a development and exclusive distribution
agreement ("the Agreement") with Debiotech SA ("Debiotech"). Pursuant to the
Agreement, Debiotech granted IMED the exclusive right to distribute Debiotech's
products in certain North and Central American countries. IMED paid Debiotech
$3,000 upon the signing of the Agreement and also agreed to pay Debiotech
additional amounts upon attainment of agreed upon milestones by Debiotech with
respect to the development of certain future products. IMED will purchase the
products it sells from
- 7 -
<PAGE>
NOTE 3 -- DEVELOPMENT AND EXCLUSIVE DISTRIBUTION AGREEMENT (CONTINUED)
Debiotech at predetermined prices. The product distribution fee of $3,000 and
related expenses of $391 have been classified as an intangible asset and are
being amortized on a straight-line basis over the 15 year term of the Agreement.
NOTE 4 -- DEBT
On March 31, 1995, the Company completed an exchange (the "Exchange") wherein
$28,245, or approximately 47%, in principal amount of the Company's 7 1/4%
Convertible Subordinated Debentures due 2002 ("Old Debentures") were exchanged
for an aggregate of $14,123 in principal amount of newly created subordinated
debentures ("First Debentures") and 1,340 shares of the Company's common stock
("Common Stock"). As a result of this transaction, the Company recognized an
extraordinary gain on the extinguishment of debt of $8,807 (net of the write-off
of unamortized debt issue costs of $1,343 related to the Old Debentures and net
of $705, the taxes applicable to the Exchange).
On May 19, 1995, the Company completed a second exchange ("Second Exchange")
wherein $15,603 of Old Debentures were exchanged for an aggregate of $7,801 of
newly created 15% Subordinated Debentures due 1999 ("New Debentures") and 735
shares of Common Stock. In addition, the Company accepted for exchange all of
the First Debentures and Common Stock from the Exchange for an aggregate of
$14,123 of New Debentures and 1,327 shares of Common Stock. As a result of these
transactions, the Company recognized an extraordinary gain on the extinguishment
of debt of $6,370 (net of the write-off of unamortized debt issue costs of $727
related to the Old Debentures and net of $362, the taxes applicable to the
Second Exchange).
As of September 30, 1995, the principal amount of New Debentures issued and
outstanding was $21,924 and the principal amount of Old Debentures issued and
outstanding was $16,152.
NOTE 5 -- LITIGATION AND CONTINGENCIES
The Company is a defendant in various actions, claims and legal proceedings
arising from normal business operations. Management believes they have
meritorious defenses and intends to vigorously defend against all allegations
and claims. As the ultimate outcome of the matters is uncertain, no contingent
liabilities or provisions have been recorded in the accompanying financial
statements for such matters. However, in management's opinion, based upon
discussion with legal counsel, liabilities arising from these matters, if any,
will not have a material adverse affect on consolidated financial position or
results of operations.
NOTE 6 -- MANDATORILY REDEEMABLE EQUITY SECURITIES
As of September 30, 1995, dividends in arrears on the $.01 par value mandatorily
redeemable preferred stock ("10% Preferred Stock") and the $.01 par value
mandatorily redeemable convertible preferred stock ("Convertible Preferred
Stock") were approximately $825 and $800, respectively. Additionally, the
Company did not declare the March 28, 1994 redemption of its 10% Preferred Stock
(redemption price of approximately $3,300).
NOTE 7 -- SALE OF MARKETABLE SECURITIES
Other income for the three months ended September 30, 1994 and 1995 includes
gains on the sale of marketable securities of $121 and $546, respectively. Other
income for the nine months ended September 30, 1994 and 1995 includes gains on
the sale of marketable securities of $1,385 and $546, respectively.
NOTE 8 -- SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Income taxes paid during the nine months ended September 30, 1994 and 1995
totaled $1,047 and $1,412, respectively. Interest paid during the nine months
ended September 30, 1994 and 1995 totaled $6,824 and $5,267, respectively.
Depreciation and amortization expense for the nine months ended September 30,
1994 and 1995 totaled $6,249 and $6,070, respectively. As more fully described
in Note 4, the Company completed noncash transactions wherein $43,848 of Old
Debentures were exchanged for an aggregate of $21,924 of New Debentures plus
2,062 shares of Common Stock.
- 8 -
<PAGE>
PART I -- ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
OVERVIEW
Advanced Medical is a holding company for IMED, Fidata Corporation ("Fidata")
and several investments. It also identifies and evaluates potential acquisitions
and investments and performs various corporate functions. As a holding company,
Advanced Medical currently has no revenues to fund its operating and interest
expense and relies on cash generated by cash flow from IMED, external
borrowings, sale of investments and other external sources of funds to meet its
obligations.
For purposes of this discussion and analysis, the three months ended September
30, 1994 and 1995 are referred to as the 1994 Third Quarter and 1995 Third
Quarter, respectively, and the nine months ended September 30, 1994 and 1995 are
referred to as 1994 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the Company's debt restructurings during 1994, management
currently believes that sufficient cash will be available through IMED, based
upon current operations, to satisfy debt service and other corporate expenses of
Advanced Medical in the foreseeable future. In 1995, IMED's cash flow from
operations was $20.3 million which was used for (i) repayments of $6.4 million
under the revolving credit facility, (ii) advances of $6.0 million to Advanced
Medical, as permitted under IMED's Amended and Restated Loan Agreement ("Amended
Loan Agreement") with General Electric Capital Corporation ("GECC"), (iii)
payments of $3.4 million for the Agreement with Debiotech and (iv) capital
expenditures of $4.6 million. IMED relies on cash generated from operations,
together with funds available from the revolving credit facility, to fund its
working capital requirements, interest on the GECC credit facility and capital
expenditures.
The Company had working capital of $29.6 million as of December 31, 1994
compared with working capital of $26.9 million as of September 30, 1995. The
decrease in working capital from December 31, 1994 to September 30, 1995
resulted from reductions in finished goods inventory levels due to sales of
instruments and the collection of receivables. The decrease in working capital
was partially offset by an increase in the market value of securities available
for sale and a decrease in current liabilities.
On March 31, 1995, the Company completed the Exchange, wherein $28.2 million of
Old Debentures were exchanged for an aggregate of $14.1 million of First
Debentures and approximately 1.3 million shares of Common Stock. As a result of
the Exchange, the Company's long-term debt was reduced $14.1 million and
shareholders' equity increased $12.1 million. See Note 4 to the Condensed
Consolidated Financial Statements.
On May 19, 1995, the Company completed the Second Exchange wherein $15.6 million
of Old Debentures were exchanged for an aggregate of $7.8 million of New
Debentures and .7 million shares of Common Stock. In addition, the Company
accepted for exchange all of the First Debentures and Common Stock from the
Exchange for an aggregate of $14.1 million of New Debentures and 1.3 million
shares of Common Stock. As a result of these transactions, the Company's
long-term debt was reduced $7.8 million and shareholders' equity increased by
$8.0 million. See Note 4 to the Condensed Consolidated Financial Statements.
The Company considers its investment in the common stock of Alteon, Inc.
("Alteon") to be a significant source of capital and liquidity. Under the
Decisions Note and the Note loan agreements, the Alteon common stock holdings
and the proceeds from any sales are pledged as security and are restricted to
the satisfaction of working capital requirements. During the third quarter of
1995, the Company sold 80,000 shares of Alteon for approximately $.9 million. As
of September 30, 1995, the Company owned 432,600 shares of Alteon common stock
which were registered under the Securities Act on October 1, 1993, and had an
aggregate market value of approximately $5.5 million based upon the closing
price per share on the NASDAQ National Market System ("NASDAQ"). Prices
obtainable in any private sales of such securities are likely to be lower than
those quoted on the NASDAQ. Alteon
- 9 -
<PAGE>
is engaged in the research and development of medical and pharmaceutical
products and as such has not yet successfully brought products to the market.
Therefore, failure of Alteon to develop and market their products successfully
could adversely affect the ability of the Company to dispose of its investments
therein upon favorable terms.
Advanced Medical did not pay the March 28, 1994 mandatory redemption of all
outstanding shares of 10% Preferred Stock. As of September 30, 1995, there were
329,913 shares of 10% Preferred Stock currently outstanding with a liquidation
preference of $10 per share and accrued and unpaid dividends were approximately
$.8 million. In addition to the 10% Preferred Stock, as of September 30, 1995,
there were 333,000 shares of Convertible Preferred Stock currently outstanding
with a liquidation preference of $6.40 per share and accrued and unpaid
dividends were approximately $.8 million. Advanced Medical does not expect to
declare dividends or redeem the preferred stock issues in the near term due to
its limited capital resources.
In connection with borrowings associated with the IMED acquisition, IMED issued
to GECC a warrant to acquire at a de minimis price common shares equal to 10%,
on a fully diluted basis, of the common stock of IMED. Under the Amended Loan
Agreement, GECC retained the warrant. The IMED warrant is redeemable at the
option of GECC until August 12, 2004 at the higher of fair value or
fully-diluted net book value at the redemption date. Additionally, IMED has the
option to redeem not less than 25% of the shares under warrant, or warrant stock
if exercised, beginning April 2, 1995. The Company's liquidity would be
adversely affected, and capital resources would be significantly reduced, in the
event GECC exercises its mandatory redemption rights. However, GECC cannot
require redemption to the extent that it would render IMED unable to pay its
debts as they mature.
RESULTS OF OPERATIONS
SALES
The Company's sales, cost of sales, and selling expenses for the historical
periods shown consist exclusively of IMED's sales, cost of sales and selling
expenses and are presented in the table below.
<TABLE>
<CAPTION>
1994 1995
THIRD THIRD
QUARTER QUARTER 1994 1995
-------- -------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C>
United States............................. $ 22.0 $ 19.8 $ 66.1 $ 67.3
International............................. 4.5 5.1 13.3 15.4
Discontinued IMED Irish Operations (1).... .9 2.6
-------- -------- ------- -------
Total sales........................... $ 27.4 $ 24.9 $ 82.0 $ 82.7
-------- -------- ------- -------
-------- -------- ------- -------
Total sales............................... 100.0% 100.0% 100.0% 100.0%
Cost of sales............................. 57.2% 52.9% 59.1% 56.4%
-------- -------- ------- -------
Gross margin.............................. 42.8% 47.1% 40.9% 43.6%
-------- -------- ------- -------
-------- -------- ------- -------
Selling expenses.......................... $ 4.1 $ 4.1 $ 12.7 $ 13.0
-------- -------- ------- -------
-------- -------- ------- -------
Selling expenses as a percentage of
sales.................................... 15.0% 16.3% 15.5% 15.7%
-------- -------- ------- -------
-------- -------- ------- -------
</TABLE>
- ------------------------
(1) Represents revenue associated with Pharmacia AB ("Pharmacia") products
manufactured in IMED's Irish Manufacturing Facility ("IMED Ireland") for
Pharmacia during 1994 that has discontinued due to the sale of IMED Ireland
in August 1994.
- 10 -
<PAGE>
The following table sets forth IMED sales by major product groups for the
periods presented.
<TABLE>
<CAPTION>
1994 1995
THIRD THIRD
QUARTER QUARTER 1994 1995
-------- -------- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C>
Piston Cassette Disposables................... $ 5.3 $ 3.8 $17.1 $13.0
Peristaltic Disposables....................... 13.6 14.9 39.3 44.2
Piston Cassette Pumps......................... .2 .1 .6 .5
Peristaltic Pumps............................. 5.1 4.2 14.7 18.0
ReadyMED...................................... .9 .5 2.7 2.0
Pharmacia product manufactured in Ireland..... .9 2.6
Other (1)..................................... 1.4 1.4 5.0 5.0
-------- -------- ----- -----
Total......................................... $ 27.4 $ 24.9 $82.0 $82.7
-------- -------- ----- -----
-------- -------- ----- -----
</TABLE>
- ------------------------
(1) Primarily includes operating lease income relating to pumps, service fees
and accessory sales.
The Company's major source of revenue is the sale of proprietary disposable
administration sets for its installed infusion instrument base. The overall
volume of disposables sold has grown from 1994 through 1995. This growth has
been achieved despite a change in protocol at certain hospitals increasing the
maximum time between set changes from every 24 hours to as much as every 72
hours, and results primarily from an increase in IMED's installed base,
including the addition of new accounts. The Company is unable to predict the
potential effect of this change in protocol, which is expected to continue with
respect to certain applications of IMED's products, on the Company's future
financial condition or results of operations. IMED's products are at the high
end of the industry price range and compete on the basis of technological
sophistication, quality, safety and flexibility in application.
Disposable administration sets used with IMED's piston cassette pumps had
generated, prior to the third quarter of 1992, a majority of IMED's overall
sales of disposables and of IMED's total revenues. However, during 1994 and 1995
fewer than 7% of the worldwide unit sales of new pumps were attributable to
piston cassette pumps, with the remainder being represented by sales of Gemini
pumps. Virtually all placements to new customers during 1994 and 1995 consisted
of Gemini instruments. Therefore, sales of piston cassette products (pumps and
disposables) are expected to continue to decline as demand for IMED's pumps and
proprietary disposable administration sets reflects to an increasing extent the
expected gradual shift away from piston cassette technology and toward
peristaltic technology, such as that used in IMED's Gemini series of
instruments, and other newer technology. IMED's current sales efforts, which
emphasize its Gemini series of products, are both consistent with and encourage
this shift. There can be no assurance that future sales of peristaltic products
will be sufficient to offset the anticipated continued decline in sales of older
technology.
The decrease in U.S. sales from the 1994 Third Quarter to the 1995 Third Quarter
is due primarily to decreased volumes of instruments and a decline in selling
prices of disposable administration sets. Also contributing to the decrease in
sales is a reduction of Readymed volume due to lower demand for the product,
which is expected to continue. The increase in U.S. sales from 1994 to 1995 is
due primarily to increased volumes of instruments and disposable administration
sets partially offset by a slight decline in selling prices of instruments and
disposable administration sets and the decline in Readymed volume discussed
previously. Declines in selling prices are a result of market conditions. As
hospitals continue to seek ways to control operating costs, IMED can expect
continuing pressure to reduce prices. The Company believes that its future
levels of profitability will depend on reducing manufacturing costs, successful
new product introductions and the development of new markets for these new
products.
The increase in international sales from the 1994 Third Quarter to the 1995
Third Quarter is primarily due to increased volumes of disposables sold in
Australia and the Middle East due to the
- 11 -
<PAGE>
increases in the installed base in those regions. The increase in international
sales from 1994 to 1995 is primarily due to (i) increased volumes of instruments
sold in the Middle East, the Far East and in the European Territory ("European
Territory") covered by the distribution agreement with its European marketing
and distribution partner, Pharmacia, and (ii) increased volumes of disposables
sold in Australia, the Middle East and the Far East. These increases were
partially offset by decreased volumes of disposables sold in the European
Territory reflecting a decline in installed instrument base.
GROSS MARGIN
The gross margin percentage increased from the 1994 Third Quarter to the 1995
Third Quarter and from 1994 to 1995 primarily due to (i) molded parts and
components for disposable administration sets sourced from outside vendors at
lower costs than previous costs to manufacture at IMED Ireland, (ii) the
discontinuance of sales generated from low margin Pharmacia products
manufactured by IMED Ireland for Pharmacia, and (iii) the favorable effects of
peso devaluation on the labor costs of disposable administration set assembly at
the Tijuana facility of $193 in the 1995 Third Quarter and $688 in 1995. The
increase in gross margin percentage from the 1994 Third Quarter to the 1995
Third Quarter and from 1994 to 1995 was achieved despite the decline in selling
prices in the U.S. market, as previously discussed.
SELLING EXPENSES
The increase in selling expenses from 1994 to 1995 is primarily due to (i)
increases in promotion and advertising expenses, (ii) expenses associated with
certain 1995 sales meetings not held in 1994 and (iii) increases in personnel
costs associated with additional headcount in international territories
previously covered exclusively by a dealer network. These increases were
partially offset by cost containment programs which have eliminated certain
non-value added activities and expenditures.
GENERAL AND ADMINISTRATIVE EXPENSES
The following table sets forth general and administrative ("G&A") expenses, in
millions, for Advanced Medical and its subsidiaries for the periods presented.
<TABLE>
<CAPTION>
1994 1995
THIRD THIRD
QUARTER QUARTER 1994 1995
------- ------- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C>
IMED...................................... $2.3 $2.1 $7.0 $6.5
Advanced Medical.......................... .3 .3 1.0 .9
Fidata.................................... .1 .1 .4 .3
------- ------- ---- ----
Total G&A expenses.................... $2.7 $2.5 $8.4 $7.7
------- ------- ---- ----
------- ------- ---- ----
</TABLE>
Due to the nature of Advanced Medical's operations, G&A expenses can fluctuate
from period to period as the majority of its costs are comprised of (i)
professional and consulting fees and indirect costs (such as travel costs)
associated with identifying, evaluating and making acquisitions and investments,
(ii) communication and meeting costs of shareholder and investor relations and
(iii) other costs of performing general holding company functions.
Advanced Medical is winding down Fidata's remaining operations. Management
expects to settle certain remaining claims and liquidate Fidata completely in
the fourth quarter of 1995. However, there can be no assurance that Fidata will
be completely liquidated in the fourth quarter of 1995 as such will require
court and regulatory approval.
RESEARCH AND DEVELOPMENT EXPENSES
The Company's Research and Development ("R&D") expenses, which consist
exclusively of IMED's R&D, increased from the 1994 Third Quarter to the 1995
Third Quarter and from 1994 to 1995 due primarily to personnel and related costs
associated with IMED's in-house development of a new line of
- 12 -
<PAGE>
hospital infusion pumps and associated disposable administration sets based upon
its patented technology and know-how. Staffing and development programs which
are in place in 1995 were not fully implemented in 1994.
RESTRUCTURINGS
During 1993, the Company recorded a $3.5 million restructuring charge in
connection with the sale of IMED Ireland and relocation of its molding
operations to the United States. The charge included accruals of $1.3 million
related to estimated relocation costs and professional fees. Cash payments of
approximately $.1 million were made during 1994 and 1995. Accrued expenses of
$.6 million remained at September 30, 1995. Expenditures of $.2 million and $.4
million are expected to be paid during the remainder of 1995 and 1996,
respectively.
The Company implemented a plan to restructure the operations of IMED during the
fourth quarter of 1993 and recorded a $1.2 million restructuring accrual. The
restructuring included (i) consolidation of certain operations, (ii) the
reduction in IMED's domestic work force by approximately 10%, (iii) the
modification of certain employee benefit plans and (iv) the elimination of
non-value added activities and expenditures. Cash payments of $.5 and $.3
million were paid during 1994 and 1995, respectively. Accrued restructuring
expenses of approximately $.2 million remained at September 30, 1995.
Expenditures of $.2 million, relating primarily to (i) above, are expected to be
paid during the remainder of 1995.
SEASONALITY
Infusion instrument sales are typically higher in the fourth quarter due to
sales compensation plans which reward the achievement of annual quotas and the
seasonal characteristics of the industry, including hospital purchasing
patterns. First quarter sales are traditionally not as strong as the fourth
quarter. The Company anticipates that this trend will continue but is unable to
predict the effect, if any, from health care reform and increased competitive
pressures.
OTHER MATTERS
Other income (expense), net for 1994 Third Quarter and 1995 Third Quarter,
includes income of $.1 million and $.5 million, respectively, from the sale of
marketable securities. Other income (expense), net for 1994 and 1995, includes
income of $1.4 million and $.5 million, respectively, from the sale of
marketable securities.
Effective January 1, 1994 the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."
HEALTH CARE REFORM
Heightened public awareness and concerns regarding the growth in overall health
care expenditures in the United States may result in the enactment of national
and state health care reform or other legislation affecting payment mechanisms
and health care delivery. Legislation which imposes limits on the number and
type of medical procedures which may be performed or which has the effect of
restricting a provider's ability to select specific devices or products for use
in administrating medical care may adversely impact the demand for the Company's
products. In addition, legislation which imposes restrictions on the price which
may be charged for medical products may adversely affect the Company's results
of operations. It is not possible to predict the extent to which the Company or
the health care industry in general may be adversely affected by the
aforementioned in the future.
- 13 -
<PAGE>
PART II
OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
U.S., ex rel and Geisler v. IMED Corporation et al. This is an action in the
United States District Court for the Northern District of Illinois. The
complaint, which was received by IMED Corporation on September 25, 1995, was
commenced under the Federal False Claims Act and alleges, among other things,
participation in a scheme to file false claims under federal medicare programs,
fraud in connection with employment relations with plaintiff Geisler, common law
fraud, violations of the Racketeer Influenced and Corrupt Organizations Act and
violations of the Medicare Fraud and Abuse Act. The complaint seeks significant
damages and requests treble damages in certain instances.
To the knowledge of IMED Corporation, the federal government has not intervened
in, and has no participation in, the case. As IMED has only recently received
the complaint, it is currently reviewing and analyzing the matters set forth in
the complaint and has not yet responded to the allegations set forth therein.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(B) ARREARAGES IN THE PAYMENT OF PREFERRED STOCK DIVIDENDS
On March 28, 1994, Advanced Medical was required to redeem all the shares
outstanding of its 10% Preferred Stock at the redemption price of $10 per share
plus all accrued and unpaid dividends to the redemption date (329,913 shares
currently outstanding). On October 16, 1995, the total amount of dividend
arrearages on the 10% Preferred Stock was approximately $840,000. Unless
converted, Advanced Medical is required to redeem all the shares outstanding of
its Convertible Preferred Stock at an aggregate redemption price of
approximately $2,100,000 plus accrued and unpaid dividends at such time as the
10% Preferred Stock is completely redeemed. On October 16, 1995, the total
amount of dividend arrearages on the Convertible Preferred Stock was
approximately $815,000. No such redemption and dividend payments have been made
due to Advanced Medical's limited capital resources.
Advanced Medical did not declare and pay the September 1993, March 1994,
September 1994, March 1995 and September 1995 dividends.
- 14 -
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
4.1 Form of Certificate of Voting Powers, Designation, Rights, Preferences and
Restrictions of 10% Cumulative Preferred Stock. (Incorporated by reference to
Appendix A to the Prospectus/Joint Proxy Statement, dated March 3, 1989, of Fidata
Corporation, Advanced Medical, Inc. and Controlled Therapeutics Corporation
included and forming part of the Registration Statement on Form S-4 of Advanced
Medical.)
4.2 Loan Agreement, dated as of April 2, 1990, by and among IMED, as borrower, and
General Electric Capital Corporation ("GECC"), as agent and lender. (Incorporated
by reference to Exhibit 10(a) to the Company's report on Form 8-K dated April 17,
1990.)
4.3 Form of Certificates of Voting Powers, Designation, Rights, Preferences and
Restrictions of Convertible Preferred Stock. (Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1990 [the
"1990 10-K"].)
4.4 Registration Rights Agreement, dated as of March 26, 1991, by and among the
Company, Mr. Picower, Decisions and JA Special Limited Partnership, regarding the
Convertible Preferred Stock. (Incorporated by reference to Exhibit 10.10(a) to the
1990 10-K.)
4.5 Indenture to U.S. Trust Company California, N.A., Trustee, dated January 30, 1992.
(Incorporated by reference to Exhibit 4.26 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991.)
4.6 Letter Agreement, dated as of December 27, 1993, by and between Mr. Picower and the
Company (Incorporated by reference to Exhibit 1 to the Company's Report on Form 8-K
dated January 12, 1994.)
4.7 Promissory Note dated January 4, 1994 issued to Decisions. (Incorporated by
reference to Exhibit 4.33 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993.)
4.8 Promissory Note, dated August 12, 1994, issued to Decisions. (Incorporated by
reference to Exhibit 99.3 to the Company's report on Form 10-Q for the quarter
ended June 30, 1994 [the "June 30, 1994 10-Q].)
4.9 Modification Agreement dated February 3, 1995, by and between the Company and
Decisions Incorporated. (Incorporated by reference to the Exhibit 4.11 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 [the
"1994 10-K"].)
4.10 Exchange Agreement dated February 3, 1995, by and among the Company and Fidelity
Convertible Securities Fund and Fidelity Select Healthcare Fund. (Incorporated by
reference to Exhibit 4.12 to the Company's 1994 10-K.)
4.11 Indenture to United States Trust Company of New York dated as of June 1, 1995.
(Incorporated by reference to Exhibit 9(c)(4) to the Company's Schedule 13E-4 dated
April 21, 1995.)
10.1 Warrant Purchase Agreement, dated April 2, 1990, between IMED and GECC.
(Incorporated by reference to Exhibit 10-18 to the Company's report on Form 10-Q
for the quarter ended March 31, 1990 ([the "March 31, 1990 10-Q].)
10.2 Warrant to Purchase Common Stock of IMED, dated April 2, 1990. (Incorporated by
reference to Exhibit 10-19 to the March 31, 1990 10-Q.)
10.3 Amended and Restated Distribution Agreement dated as of August 12, 1994 by and
among Pharmacia AB, IMED Corporation and the Company. (Incorporated by reference to
Exhibit 10.25 to the Company's Form 10-Q for the quarter ended September 30, 1994
[the "September 30, 1994 10-Q"].)*
</TABLE>
- 15 -
<PAGE>
<TABLE>
<S> <C>
10.4 Final Agreement dated as of August 12, 1994 by and among the Company, AM General
Development Corp., AM Development Limited, Kamen, Deka Research & Development Corp.
and IMED Corporation. (Incorporated by reference to Exhibit 10.26 to the Company's
September 30, 1994 10-Q.)*
10.5 Letter Agreement, dated as of June 29, 1994, by and between Mr. Picower and the
Company. (Incorporated by reference to Exhibit 99.1 to the June 30, 1994 10-Q.)
10.6 Amended and Restated Loan Agreement, dated August 12, 1994, by and between IMED and
GECC. (Incorporated by reference to Exhibit 99.2 to the June 30, 1994 10-Q.)
10.7 Development and Exclusive Distribution Agreement, dated May 8, 1995, by and between
Debiotech SA and IMED Corporation.**
11.1 Computation of Net Income per share for the three and nine month periods ended
September 30, 1994 and 1995.
</TABLE>
---------------------------------------
*The Company has been granted confidential treatment with respect to certain
portions of this exhibit under Rule 24b-2 of the Securities Exchange Act of
1934, as amended.
**The Company has requested that certain portions of this exhibit be afforded
confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report is
being filed.
- 16 -
<PAGE>
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, thereunto duly authorized.
<TABLE>
<S> <C>
ADVANCED MEDICAL, INC.
---------------------------------------------
(REGISTRANT)
Date: October 17, 1995 By: /s/ JOSEPH W. KUHN
---------------------------------------------
Joseph W. Kuhn
PRESIDENT
(PRINCIPAL FINANCIAL OFFICER)
</TABLE>
- 17 -
<PAGE>
EXHIBIT INDEX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE NO.
- --------- -----
<S> <C> <C>
10.7 Development and Exclusive Distribution Agreement, dated May 8, 1995, by and between Debiotech SA
and IMED Corporation............................................................................. 19
11.1 Computation of Net Income per share for the three and nine month periods ended September 30, 1994
and 1995......................................................................................... 96
</TABLE>
- ------------------------
- 18 -
<PAGE>
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
FOR THE INFORMATION OMITTED IN THIS DOCUMENT
PURSUANT TO RULE 24B-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
DEVELOPMENT AND EXCLUSIVE
DISTRIBUTION AGREEMENT
BETWEEN
DEBIOTECH SA
AND
IMED CORP.
<PAGE>
DEVELOPMENT AND EXCLUSIVE DISTRIBUTION AGREEMENT
Between
DEBIOTECH SA, a corporation organized and existing under the laws of
Switzerland, with its principal office at:
17 rue des Terreaux, CP82
CH - 1000 LAUSANNE 9
Switzerland
(hereinafter referred to as: "DEBIOTECH")
ON THE ONE HAND,
And
IMED CORP., a corporation organized and existing under the laws of
Delaware, with its principal office at:
9775 Businesspark Avenue
SAN DIEGO, CA 92131-1699
USA
(hereinafter referred to as: "IMED")
ON THE OTHER HAND.
WHEREAS
DEBIOTECH is an independent and autonomous company active in the development and
industrialization of new technologies for the medical field and is the holder of
all distribution rights in a patented technology (US Patent No. 5.044.902, dated
Sept. 3rd. 1991, and extensions in various countries listed in Enclosure 1) for
the parenteral administration of Medical Fluids (as defined hereafter) by means
of a disposable peristaltic cassette with rollers, connectable to a pump.
DEBIOTECH has further developed a new miniaturized Pump (as defined hereafter)
and a corresponding Cassette (as defined hereafter), which are manufactured by
third parties for DEBIOTECH exclusively. DEBIOTECH has also filed applications
for several patents covering the Pump and the Cassette as set forth on Enclosure
2. Furthermore, DEBIOTECH has already licensed the Product (as defined
hereafter) for the Field of Application (as defined hereafter) in Europe.
IMED is an independent and autonomous company, active in the commercialization
of pumps for the medical field, which expressed an interest in acquiring the
exclusive rights to use, market, sell, lease and distribute the Product for the
parenteral administration of Medical Fluids.
DEBIOTECH and IMED have signed, on February 27th 1992, and on October 21st 1993
(as extended on February 10, 1995), Non Disclosure Agreements regarding the
Product.
<PAGE>
The subject matter of this Agreement is the further development of the Product
for the Territory (as defined hereafter) and the granting of an exclusive
distribution right in the Territory for the Product to IMED, subject to certain
conditions and limitations.
NOW THEREFORE IN CONSIDERATION OF THE FOREGOING AND THE COVENANTS AND
UNDERTAKINGS HEREIN, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1: DEFINITIONS
Unless otherwise indicated, references to Exhibits, Enclosures, Schedules and
the like refer to those Exhibits, Enclosures, and Schedules attached hereto and
references to Articles refer to the Articles hereof.
As used herein, the following words shall have the meanings herein specified and
defined terms in this Agreement shall include both the singular and plural forms
and the past, present and future tenses thereof.
-"ACCESSORIES": any additional or optional equipment and/or
accessory specifically developed : (i) for the Product's use; or (ii) to
be used specifically with the Product in the Field of Application
(including as examples but not limited to belt clip, pole/bed fixation
module, Cassette/Reservoir Module, Cassette/Reservoir Module Housing,
single and/or multiple charger, shoulder strap fixation module, etc...),
some of these Accessories being described in Enclosure 3 as examples.
-"ACCESSORY NET PROCEEDS OF SALE": the total actual invoice prices
(including royalty income, if any) of each type of Accessory (other than
any Cassette/Reservoir Module) shipped and invoiced by IMED or by any of
its Affiliates (to the extent actually collected) in any Contract Year,
less the following documented items (whether or not shown on such
invoice): (a) governmental license and governmental permit fees, sales,
excise, value added and similar taxes levied on the purchase, sale or
resale of such Accessory; (b) customary trade or quantity discounts and
rebates actually allowed; (c) returns of the same Accessory for credit or
refund; and (d) freight, transportation and related transportation
insurance and handling costs to move Accessories to IMED and, provided
such costs are paid by IMED and not reimbursed, from IMED to its
customers, provided however, Accessories given away by IMED or sold below
transfer price from DEBIOTECH to IMED for marketing or other purposes
shall be excluded from the calculation. In the event of bundled sales or
other sales where the true sales price of an Accessory is not readily
determinable, the price used shall be the price determined in accordance
with IMED's accounting policies and procedures regarding such sales,
consistently applied (examples of which are contained in Schedule 1
hereto).
<PAGE>
-"ACT": The Food, Drug and Cosmetics Act (21 U.S.C. Section 301 ET SEQ.)
and the regulations promulgated thereunder, as the same may be amended
from time to time.
-"AFFILIATE": Any Person that directly, or indirectly through one or more
intermediaries, Controls, or is Controlled by, or is under common Control
with the Party specified and for so long as they are Controlling, or
Controlled by, or under common Control with the Party specified.
-"AGREEMENT": shall mean this Development and Exclusive Distribution
Agreement between DEBIOTECH and IMED.
-"AUTHORIZED PERSON": any Third Person authorized to market, sell, lease
or distribute any Product or Accessory.
-"BUSINESS DAY": any day which is not a Saturday, Sunday, legal holiday
or day on which banking institutions are authorized or required to remain
closed in Zurich, Lausanne or New York City.
-"CASSETTE": the disposable peristaltic cassette with rollers,
connectable to a Pump, which is described in Enclosure 4 and which is
protected by the Cassette Patent, together with all Improvements made
thereto pursuant to Article 5.10.
-"CASSETTE NET PROCEEDS OF SALE": the total actual invoice prices
(including royalty income, if any) of the Cassettes, Cassette Sets and
Cassette/Reservoir Modules shipped and invoiced by IMED or by any of its
Affiliates (to the extent actually collected) in any Contract Year, less
the following documented items (whether or not shown on such invoice):
(a) governmental license and governmental permit fees, sales, excise,
value added and similar taxes levied on the purchase, sale or resale of
such Cassettes, Cassette Sets and Cassette/Reservoir Modules; (b)
customary trade or quantity discounts and rebates actually allowed; (c)
returns of the same for credit or refund; and (d) freight, transportation
and related transportation insurance and handling costs to move Cassettes,
Cassette/Reservoir Modules and Cassette Sets to IMED and, provided such
costs are paid by IMED and not reimbursed, from IMED to its customers,
provided however, that Cassettes, Cassette Sets and Cassette/Reservoir
Modules given away by IMED or sold below transfer price from DEBIOTECH to
IMED for marketing or other purposes shall be excluded from the
calculation. In the event of bundled sales or other sales where the true
sales price of the Cassette, Cassette Set or Cassette/Reservoir Module is
not readily determinable, the price used shall be the price determined in
accordance with IMED's accounting policies and procedures regarding such
sales, consistently applied (examples of which are contained in Schedule 1
hereto).
-"CASSETTE PATENT": US Patent No. 5.044.902 dated Sept. 3rd 1991 and/or
its extensions, divisions, continuations, continuations-in-part, re-
examinations and reissues of the foregoing listed in Enclosure 1.
<PAGE>
-"CASSETTE/RESERVOIR MODULE": the bag reservoir filled or capable of
being filled with Medical Fluid attached or to be attached to a Cassette
(and any other components, as the case may be), to be manufactured by
IMED, together with all Improvements made thereto pursuant to Article 5.10
-"CASSETTE/RESERVOIR MODULE HOUSING": the casing (an example of which is
pictured and described on Enclosure 10 hereto) which will: (i) house the
Cassette/Reservoir Module; and (ii) connect to the Pump so as to create a
single integrated unit including both the Pump and the housing for the
Cassette/Reservoir Module, to be manufactured by DEBIOTECH, together with
all Improvements made thereto pursuant to Article 5.10.
- "CASSETTE SET" any and all sets (such as a sterile tubing set,
pre-assembled to the Cassette), provided that they are containing a
Cassette, which are put on the market by an IMED Related Person.
-"CHANGE": a modification, change, supplement or addition (but not
including any clarification), to or with respect to, any Specification
Document and/or Project Plan which is not contemplated in such
Specification Document and/or Project Plan: (i) as of the Effective Date
with respect to Pump v.1; and (ii) for the Pump v.2, from the date of
approval by the Development Committee of the Project Plan for Pump Version
2 and/or Specification Document 2.
-"CHANGE OF CONTROL": shall be deemed to have occurred at such time as
any Third Person (other than Advanced Medical, Inc. ("AM"), and their
respective Affiliates), together with its Affiliates, takes Control of
IMED; PROVIDED, HOWEVER, that a Change in Control shall not result from:
(i) any stock transfers within the immediate family of Jeffry M. Picower
or among any of IMED's Affiliates; or (ii) a public sale of stock of IMED
or AM so long as IMED is not thereafter Controlled by a Third Person.
-"CONFIDENTIAL INFORMATION": all secret, confidential information or
proprietary information which is disclosed by one Party during the term of
this Agreement or prior thereto including, without limitation, to the
extent secret, confidential or proprietary, manufacturing know-how,
materials, data, program software, security features and/or methods,
technical data and/or results, patents, trademarks, licenses, agreements,
development programs, marketing strategies, business plans, explanations,
financial information, specifications, manufacturing procedures,
evaluation standards, assembly and/or production information, quality
information and/or controls, stability data, medical evaluations,
submissions to official agencies and/or any other information relating to
the Product and/or Accessories, their development, improvement,
manufacturing and/or distribution thereof. Confidential Information shall
NOT include any information which the receiving Party can show: (a) was
generally available to the public before the date of receipt by the
receiving Party; (b) has become generally available to the public after
the date of receipt by the
<PAGE>
receiving Party without the assistance or fault of the receiving Party;
(c) the receiving Party was in possession of before its disclosure by the
disclosing Party and the Confidential Information was not acquired
directly or indirectly from the disclosing Party; or (d) has been
disclosed or made available lawfully to the receiving Party at any time by
a third party who was not itself required to hold it in confidence. The
Party wishing to take advantage of any of the exceptions (a) to (d)
hereabove shall bear the burden of proving that the exception applies.
-"CONFIRMED DATE": as defined in Article 10.1(b).
-"CONTRACT YEAR": yearly period starting from the first January 1st after
the First Introduction Date in the first country of the Territory or any
anniversary thereof. The first Contract Year shall be the partial year
starting from the beginning of the first Quarter beginning after such
First Introduction Date.
-"CONTRAST MEDIA": all substances dedicated to medical diagnostic through
imaging techniques (e.g. Omnipaque-Registered Trademark-, Ultravist-
Registered Trademark-, etc...) or similar substances.
-"CONTROL": the power to, directly or indirectly, direct or cause the
direction of the management and policy of a Person, whether through
ownership of voting securities, by contract, by beneficial ownership or
otherwise.
-"COST PRICE": the cost price of IMED Group for the Cassette Set and/or
the empty or prefilled Cassette/Reservoir Module determined in accordance
with IMED's accounting policies and procedures consistently applied.
-"COUNTRY YEAR": yearly period for a given country starting from the
beginning of the first Quarter beginning after the First Introduction Date
in said country or any anniversary thereof.
-"DEBIOTECH GROUP": DEBIOTECH and its Affiliates.
-"DEBIOTECH RELATED PERSON": any member of the DEBIOTECH Group and any
Authorized Person by DEBIOTECH.
-"DEBIOTECH TRADEMARKS": (i) the trademarks listed in Enclosure 9A; and
(ii) any other trademarks now or in the future owned or licensed by
DEBIOTECH for the Product which, in either case, DEBIOTECH has elected to
use for a Product or Accessory in the Territory.
-"DEVELOPMENT COMMITTEE": as defined in Article 5.1.
-"DEVELOPMENT COST": a sum equal to (i) any and all direct material and
labor costs and expenses incurred by DEBIOTECH in connection with the
development of an Improvement and its manufacturing process, including,
but not limited to, any new
<PAGE>
Manufacturing Equipment (to the extent not excluded pursuant to Article
5.10(a)) necessary for the production of such Improvement and any
necessary components, prototypes, samples and the like, thereof; plus (ii)
[CONFIDENTIAL TREATMENT REQUESTED] of such labor costs and expenses and
[CONFIDENTIAL TREATMENT REQUESTED] of such materials (excluding new
Manufacturing Equipment) costs and expenses.
-"DISTRIBUTOR": a wholesaler or other Third Person who purchases for
resale or other further distribution, but shall not include any Third
Person acquiring the Product, Cassette/Reservoir Module or any other
Accessory pursuant to Article 3.3. A Distributor appointed by IMED is a
"sub-Distributor".
-"EFFECTIVE DATE": the latest date of signature set forth below.
-"EPIDEMIC FAILURE": any material defect which occurs during the normal
expected life (e.g. the operating life or shelf life contemplated in the
Specifications Documents) of a Product or Accessory and which is not due
to normal wear and tear, misuse or incorrect handling, affecting the
safety or intended use or operation of the Product or an Accessory and
involving an entire production lot or other substantial number of any such
Product or Accessory, whether or not such Product or Accessory is subject
to recall pursuant to Article 11.3(a) or 11.3(b). A defect related to any
component which is not warranted by its manufacturer (such as the
rechargeable batteries) shall not be considered an Epidemic Failure.
-"EXCLUSIVE DISTRIBUTION RIGHT": the exclusive right to use, market,
sell, lease and distribute the Product and Accessories in the Territory,
limited to the Field of Application.
-"FAILURE EVENT": the occurrence of a Failure Event 1A or Failure Event
2, as the case may be.
-"FAILURE EVENT 1A": means any of the following: (i) the Pumps delivered
by DEBIOTECH pursuant to section (e) of the Project Plan for Pump Version
1A do not satisfy the protocol contemplated in section (f) entitled
"Version 1A 35 Unit Delivery" and would require major work and changes to
satisfy to such section (f) (as determined by tests conducted, at IMED's
request and cost within sixty days after receiving the corresponding
samples, by an independent official technical agency agreed by both
Parties and bound vis a vis DEBIOTECH by adequate confidentiality
obligations); (ii) DEBIOTECH does not satisfy the requirements of section
(c) of Project Plan for Pump Version 1A entitled "510K Filing"; (iii) FDA
510k Market Approval for such Pump v.1A or Cassette does not occur within
[CONFIDENTIAL TREATMENT REQUESTED] after the submission of the 510k
application with respect to the products contemplated in Project Plan For
Pump Version 1A to the FDA; or (iv) Product Availability of such Pump v.1A
and Cassette in the USA does not occur within [CONFIDENTIAL TREATMENT
REQUESTED] of such FDA
<PAGE>
Market Approval. No Failure Event 1A can occur after the date of Product
Availability.
-"FAILURE EVENT 2": means any of the following: (i) DEBIOTECH does not
satisfy the "Acceptance Testing and Completion of the Version 2"
requirements established in accordance with section (j) of Project Plan
for Pump Version 1A and would require major work and changes to satisfy to
such item 5 (as determined by tests conducted, at IMED's request and cost
within sixty days after receiving the corresponding samples, by an
independent official technical agency agreed by both Parties and bound vis
a vis DEBIOTECH by adequate confidentiality obligations); (ii) DEBIOTECH
does not satisfy the "510K Filing" requirements established in accordance
with section (j) of Project Plan for Pump Version 1A; (iii) FDA 510k
Market Approval for such Product or Cassette does not occur within
[CONFIDENTIAL TREATMENT REQUESTED] after the submission of the 510k
application with respect to the products contemplated in Project Plan For
Pump Version 2 to the FDA; or (iv) Product Availability of such products
in the USA does not occur within [CONFIDENTIAL TREATMENT REQUESTED] of
such FDA Market Approval. No Failure Event 2 can occur after the date of
Product Availability.
-"FDA": United States Food and Drug Administration and any successor
thereto.
-"FIELD OF APPLICATION": is limited to the field of parenteral
administration of Medical Fluids in the human body. In particular, the
Field of Application does not include the enteral administration of
Medical Fluids, nor hemo or peritoneal dialysis, nor plasmapheresys, nor
extracorporeal circulation nor the enteral and/or parenteral
administration of Contrast Media, nor the aerosol inhalation and/or
nebulization of Medical Fluids, nor any use in veterinary therapy and/or
any laboratory use. The Field of Application does also not include the
particular use described hereafter in Article 3.1.
-"FIRM ORDER": as defined in Article 10.1(a).
-"FIRST INTRODUCTION DATE": for each country in the Territory, the day of
the first market introduction of the Product in said country but, in any
event, not later than the latest date between (i) [CONFIDENTIAL TREATMENT
REQUESTED] after the Market Approval in said country and (ii) the Product
Availability for said country.
-"FORCE MAJEURE": as defined in Article 19.1 hereof.
-"GOOD MANUFACTURING PRACTICE": the applicable current good manufacturing
practice promulgated from time to time by the FDA in accordance with the
Act, including those set forth in 21 CFR Part 820.
-"GROSS MARGIN": for any annual accounting period, the sum of Accessory
Net Proceeds of Sales, Cassette Net Proceeds of Sales and Pump Net
Proceeds of Sales,
<PAGE>
minus IMED Group's aggregate cost of such Accessories, Cassettes and Pumps
included in the calculation in the respective Net Proceeds of Sale and
sold (i.e. the transfer price from DEBIOTECH to IMED or Cost Price, as the
case may be, of such Accessories, Cassettes and Pumps, plus up to an
amount equal to [CONFIDENTIAL TREATMENT REQUESTED] of such transfer price
for Pumps and Accessories to cover material handling and overhead costs
calculated in accordance with IMED's accounting policies and procedures
consistently applied).
-"IMED GROUP": IMED and its Affiliates.
-"IMED RELATED PERSON": any member of the IMED Group and any Authorized
Person by IMED.
-"IMED TRADEMARKS": (i) the trademarks listed in Enclosure 9B; and (ii)
any other trademarks now or in the future owned or licensed by IMED for
the Product which, in either case, IMED has elected to use for a Product
or Accessory in the Territory.
-"IMPROVEMENT": (i) any enhancement of a Product or Accessory that
permits such Product or Accessory to perform its function in a better or
more useful way; and/or (ii) any New Accessory, but excluding any New
Development and any New Competing Product.
-"INDEX": the manufacturing index known as the "PSD C Indice des Produits
et Services Divers C" published on a periodic basis by the French
I.N.S.E.E. or, in the event that such Index shall cease to be published in
France (or in the event that DEBIOTECH were to transfer manufacturing to a
country other than France) such successor index or substitute index mostly
closely similar to the Index for such manufacturing in such country.
-"INTELLECTUAL PROPERTY": any intellectual property including, but not
limited to, inventions, patents, patent applications, copyrights,
copyright applications, trade secrets, know-how, formulas, compositions of
matter, software, designs and other intellectual property rights related
thereto, including any foreign counterparts to any of the above.
-"MANUFACTURING INFORMATION": as defined in Article 10.5(c).
-"MANUFACTURING EQUIPMENT": all molds, machinery and equipment owned and
used by DEBIOTECH in the manufacture of the Products and Accessories,
including, without limitation, all molds, machinery and equipment used in
the manufacture of the foregoing contained in the manufacturing facilities
of [CONFIDENTIAL TREATMENT REQUESTED] and [CONFIDENTIAL TREATMENT
REQUESTED] located at La Verpilliere, France and Montlucon, France,
respectively, or any other location, as the case may be at the Effective
Date. Any new equipment, mold or machinery after the Effective Date shall
be called a "new Manufacturing Equipment".
<PAGE>
-"MARKET APPROVAL": for a given country, the approval given or issued by
the relevant government agency in such country (e.g. FDA in the USA) which
is necessary to market and sell the Product in such country.
-"MEDICAL FLUIDS": total parenteral nutrition fluids, large volume
parenteral fluids, small volume solutions, blood and blood products,
parenteral nutritional additives, premixed intravenous solutions, drug
fluids and other fluids administered for medical purposes, with the
exception of Contrast Media fluids, dialysis fluids used in connection
with dialysis equipment and washing fluids.
-"MINUTES": as defined in Article 5.1.
-"NEW ACCESSORIES": Accessories not included in Article 8.1(d).
-"NEW COMPETING PRODUCT": any new product which includes a pump using a
disposable administration set other than any Product, Improvement or New
Development, which is not commercially available at the Effective Date,
which is not depending on the Cassette Patent and which addresses the
Field of Application .
-"NEW DEVELOPMENT": any new development of the Product for the Field of
Application still depending on the Cassette Patent, which both: (i) would
include substantial material differences from the Pump and the Cassette
including without limitation, operation and market differences, and which
would include at least one new patent protection applied for by DEBIOTECH
or for which DEBIOTECH is the holder of all relevant rights in the Field
of Application; and (ii) is not intended to replace or directly compete
with the Product in the Field of Application.
-"PACKAGING SPECIFICATIONS": as defined in Article 10.3(e).
-"PARTY": either IMED or DEBIOTECH, as the case may be.
-"PATENTS": any and all patents covering the Product and/or Accessories
in any country of the Territory and for which DEBIOTECH is the holder of
all relevant rights in the Field of Application.
-"PERSON": any individual or entity, whether a natural person, trustee,
corporation, general partnership, limited partnership, limited liability
company or partnership, joint stock company, trust, unincorporated
organization, bank, business association, firm, joint venture,
governmental agency or otherwise.
-"PRIME RATE": the current official prime rate charged to its best
customers in US$ of the Citibank in New York .
-"PRODUCT": Cassettes and/or Pumps.
<PAGE>
-"PRODUCT AVAILABILITY": with respect to any Product, that point in time
as of which both: (i) all necessary Market Approvals for such Product
have been obtained; and (ii) DEBIOTECH delivers the Initial Firm Order for
such Product in accordance with Article 10.2 (or is otherwise deemed to
have occurred as provided in Article 10.2) and at such time it then has
the capability to continue normal supply.
-"PROJECT PLAN FOR PUMP VERSION 1A": the development plan for the Pump
v.1A, the related Cassette, the Cassette/Reservoir Module Housing and the
related Accessories, attached hereto as Enclosure 11.
-"PROJECT PLAN FOR PUMP VERSION 2": the development plan referred to in
section (j) of the Project Plan for Pump Version 1A.
-"PROJECT PLANS": the Project Plan For Pump Version 1A and the Project
Plan For Pump Version 2.
-"PROPOSAL DATA": as defined in Article 5.10(a).
-"PUMP": all of the reusable miniaturized programmable pumps which are
described in the Specification Documents and in which the Cassette is to
be inserted and used once with a single patient, together with all
Improvements thereto made by DEBIOTECH pursuant to Article 5.10.
-"PUMP NET PROCEEDS OF SALE": the total actual invoice prices (including
royalty income, if any) of each type of Pump (excluding Refurbished Pumps)
shipped and invoiced by IMED or by any of its Affiliates (to the extent
actually collected) in any Contract Year, less the following documented
items (whether or not shown on such invoice): (a) governmental license
and governmental permit fees, sales, excise, value added and similar taxes
levied on the purchase, sale or resale of such Pump; (b) customary trade
or quantity discounts and rebates actually allowed; (c) returns of the
same Pump for credit or refund; and (d) freight, transportation and
related transportation insurance and handling costs to move Pumps to IMED
and, provided such costs are paid by IMED and not reimbursed, from IMED to
its customers provided however, Pumps given away by IMED or sold below
transfer price from DEBIOTECH to IMED for marketing or other purposes
shall be excluded from the calculation. In the event of bundled sales or
other sales where the true sales price of the Pump is not readily
determinable, the price used shall be the price determined in accordance
with IMED's accounting policies and procedures regarding such sales
consistently applied (examples of which are contained in Schedule 1
hereto).
-"PUMP V.1": the Pump which is described in the TUV Approval.
-"PUMP V.1A": the Pump which is described in the Specification Document
1A under the heading "Version 1A".
<PAGE>
-"PUMP V.2": the Pump which is described in the Specification Document 2
under the heading "Version 2".
-"QUALITY CONTROL PROCEDURES": shall mean all of the Quality and Validity
Testing Procedures For Pump v.1A and the Quality and Validity Testing
Procedures for Pump v.2 and any other quality control procedures developed
by the Development Committee pursuant to Article 5.
-"QUARTER": each three months period of each calendar year, commencing
January 1st, April 1st, July 1st and October 1st respectively.
-"RECALL AMOUNT": an amount corresponding to [CONFIDENTIAL TREATMENT
REQUESTED] of the transfer price at which those Products, Accessories
and/or Spare Parts subject to recall as contemplated in Articles 11.3,
were sold by DEBIOTECH to IMED, reduced by any amounts previously paid by
DEBIOTECH in respect of such Products, Accessories and/or Spare Parts
pursuant to the foregoing Article.
-"RECALL INSURANCE POLICY": the insurance policy, if available, procured
by DEBIOTECH as defined in Article 20.3(c) .
-"RECALL ORDER": as defined in Article 11.3(a) .
-"REFURBISHED PUMPS": Pumps which are taken back by IMED from a customer,
reconditioned or modified and then sold or leased by IMED in a new
transaction (as the case may be, with Spare Parts acquired from
DEBIOTECH); PROVIDED, HOWEVER, that an extension or renewal of any leased
Pump or any sale of such Pump to the lessee thereof shall not constitute a
new transaction.
-"SHIPMENT DATE": as defined in Article 10.1(b).
-"SOFTWARE CHANGES": modifications to the user interface of a Pump
through the implementation of programming changes to the software for such
Pump.
-"SPARE PARTS": those parts and components necessary to repair,
refurbish, recondition, maintain and service the Products and Accessories.
-"SPECIFICATION DOCUMENT 1A": the document setting out product
specifications relating to Pump v.1A and Cassette attached hereto as
Enclosure 5A, which may be amended from time to time pursuant to Article
5.
-"SPECIFICATION DOCUMENT 2": the document setting forth product
specifications relating to Pump v.2 and Cassette attached hereto as
Enclosure 5B, which may be amended from time to time pursuant to Article
5.
<PAGE>
-"SPECIFICATION DOCUMENTS": Specification Document 1A and Specification
Document 2.
-"STANDBY AGREEMENT": as defined in Article 10.5(a).
-"STANDBY LICENSE": as defined in Article 10.5(b).
-"SUSTAINING ENGINEERING ACTIVITIES": all day to day activities in
connection with the manufacture of a product, accessory or device and the
processes of manufacturing the same, normally engaged in by a manufacturer
of a product, accessory or device.
-"TECHNOLOGY": all Intellectual Property relating to any Product or
Accessory in the Field of Application in which DEBIOTECH has rights,
including, without limitation, the Patents together with all patent
applications and all divisions, continuations, continuations-in-part,
re-examinations and reissues of any of the foregoing.
-"TERRITORY": the countries and all successor countries comprising the
geographical territory of the countries in North and Central America
listed in Enclosure 7.
-"THIRD PERSON": any Person other than IMED, DEBIOTECH and their
respective Affiliates.
-"TUV": Technische Uberwachungs Verein.
-"TUV APPROVAL": TUV approval in Germany for the Pump v.1 (Enclosure 6) .
-"USA": the United States of America.
-"US$": US dollar.
ARTICLE 2: EXCLUSIVE DISTRIBUTION RIGHT
2.1 GRANT OF DISTRIBUTION RIGHT. DEBIOTECH hereby grants to IMED, which
accepts, the exclusive right to use, market, sell, lease and distribute
the Product and Accessories in the Territory, limited to the Field of
Application. This Exclusive Distribution Right may be exercised solely by
IMED directly or through its Affiliates in the USA (except as provided
below) and by IMED directly or through its Affiliates or Third Person
sub-Distributors in the other countries of the Territory, provided that
IMED has informed DEBIOTECH of each of their name(s) together with the
list of countries concerned for each of them prior to their appointment by
IMED and provided further that IMED remains primarily liable for all such
Affiliates and/or Third Person sub-Distributors with respect to all
obligations hereunder.
<PAGE>
As an exception to the general rule for the USA, IMED may distribute
through Third Person sub-Distributors in limited cases where it is
commercially reasonable under the circumstances and in areas of the USA in
which, and with sub-Distributors through which, IMED uses sub-Distributors
for its own pumps and other products and such sub-Distributors have
general distribution activities within the medical field, provided that
IMED has informed DEBIOTECH of each of their name(s) together with the
area concerned for each of them prior to their appointment by IMED and
provided further that IMED remains primarily liable for all such Third
Person sub-Distributors with respect to all obligations hereunder.
2.2 LIMITATION ON MANUFACTURING RIGHTS. Except as expressly provided in this
Agreement: (i) DEBIOTECH does not grant hereby any right whatsoever to
IMED regarding the manufacturing of all or any part of the Product and/or
Accessories; and (ii) IMED undertakes not to manufacture, directly or
indirectly, and/or acquire from any source other than DEBIOTECH all or any
part of the Product and/or Accessories without the prior written consent
of DEBIOTECH. Maintenance and servicing of Pumps and refurbishing of
Pumps (Refurbished Pumps) for resale by IMED using Spare Parts supplied by
DEBIOTECH shall not be considered manufacturing for the purpose of this
paragraph.
2.3 LIMITATION OF TERRITORY AND MARKET. IMED and its Affiliates shall not,
and IMED shall enter into agreements with its Third Person
sub-Distributors whereby such sub-Distributors shall agree (the "IMED
Restriction Provision") not to, directly or indirectly use, have used,
market, lease, sell, distribute or export the Product or Accessories (i)
outside the Territory and/or (ii) within the Territory but outside the
Field of Application. In the event that IMED becomes aware, through
notice by DEBIOTECH or otherwise, that one of its Third Person
sub-Distributors is in violation of the IMED Restriction Provision, IMED
shall, at IMED's sole cost and expense, enforce the IMED Restriction
Provision or immediately cause the termination of all Product and
Accessories sales to such breaching sub-Distributor and shall be liable
for any damage caused by a material breach thereof.
2.4 DEBIOTECH DISTRIBUTOR RESTRICTION. DEBIOTECH and its Affiliates shall
not, and shall enter into agreements with all DEBIOTECH Distributors
(other than IMED) whereby such DEBIOTECH Distributors shall agree (the
"DEBIOTECH Restriction Provision") not to, directly or indirectly use,
market, sell, license, lease or distribute or make available the Product
or the Accessories for the Field of Application in the Territory. In the
event that DEBIOTECH becomes aware, through notice by IMED or otherwise,
that one of DEBIOTECH Distributors is in violation of the DEBIOTECH
Restriction Provision, DEBIOTECH shall, at DEBIOTECH's sole cost and
expense, enforce the DEBIOTECH Restriction Provision or immediately cause
the termination of all Product and Accessories sales to such breaching
Distributors and shall be liable for any damage caused by a material
breach thereof.
<PAGE>
2.5 CASSETTE SET ASSEMBLY. IMED is hereby authorized by DEBIOTECH to assemble
each Cassette to a tubing set for parenteral medical use including,
without limitation, as the case may be, an empty or prefilled
Cassette/Reservoir Module, provided such assembly complies with all
manufacturing and quality standards required by the FDA or under the Act
for such Cassette Set assembly (including Good Manufacturing Practice).
IMED Related Person shall not market, sell, lease or distribute Cassettes
which: (i) are not directly connected to a tubing set for parenteral
medical use; and/or (ii) include enteral sets, without the prior written
consent of DEBIOTECH.
ARTICLE 3: EXCLUSIVITY RETAINED BY DEBIOTECH
3.1 RESERVATION OF RIGHT: SINGLE USE/USER. Notwithstanding anything to the
contrary in this Agreement, DEBIOTECH retains all the rights, and does not
grant hereby any right whatsoever to IMED, regarding the use of the
Patents, Technology and/or Improvements for the use, marketing, sale,
leasing and/or distribution of any New Development product which is both:
(i) designed for use with a cassette and reservoir; and (ii) employs a
pump which is either (a) dedicated to one single use and not reusable
after the end of its injection program or after the emptying of its
reservoir; or (b) limited to a certain number of interchangeable cassettes
and reservoirs, for one single patient's use within one single indication
and is labeled as such. According to this Article 3.1, DEBIOTECH retains
the right to grant to any Third Person and/or pharmaceutical company the
right to use, market, sell, lease and/or distribute, in the Territory, any
New Development product as described under this Article 3.1, including all
the corresponding cassettes, reservoirs and pumps.
3.2 RESERVATION OF RIGHTS: CASSETTE/RESERVOIR MODULE AND PRODUCT;
PHARMACEUTICAL COMPANY. In the event that DEBIOTECH desires to arrange
for the Cassette/Reservoir Module and/or Product to be provided to a
pharmaceutical company in the Territory solely to permit such
pharmaceutical company to acquire the Cassette/Reservoir Module and/or
Product to be used on a dedicated basis with a drug distributed by that
pharmaceutical company, DEBIOTECH will request in writing that IMED supply
that pharmaceutical company with the Cassette/Reservoir Module and/or
Product and IMED agrees to do so upon terms and conditions specified by
IMED. In such an event, DEBIOTECH shall provide IMED with sufficient
notice to enable IMED to incorporate into its supply forecast and orders
the quantities needed to satisfy such request under the standard ordering
procedures set forth in Article 10.1 hereof.
3.3 RESERVATION OF RIGHTS: CASSETTE/RESERVOIR MODULE PRODUCT AND ACCESSORIES;
AFFILIATE. Notwithstanding anything to the contrary in this Agreement,
IMED hereby agrees that, at DEBIOTECH's written request, it will sell the
Cassette/Reservoir Module, Product and Accessories in the Territory for
use by any licensee of DEBIOTECH Group if such Product and/or
Cassette/Reservoir Module and/or Accessories are required by such licensee
for the use with a drug developed by
<PAGE>
DEBIOTECH Group (e.g. the anti-cancer drug LOHP-Registered Trademark-).
In such an event: (i) DEBIOTECH shall provide IMED with sufficient notice
to enable IMED to incorporate into its supply forecast and orders the
quantities needed to satisfy such request under the standard ordering
procedures set forth in Article 10.1 hereof; and (ii) IMED shall supply
the Product and/or Cassette/Reservoir Module and/or Accessories to
DEBIOTECH for said licensee for the use with said drug at the best price
offered to any other of IMED's clients under the most comparable
conditions.
3.4 RESERVATION OF RIGHTS: CONTRAST MEDIA; HEPARIN; SALINE. Notwithstanding
anything to the contrary in this Agreement, as a limited exception to the
Exclusive Distribution Right granted to IMED in this Agreement, DEBIOTECH
is entitled to grant to any Person having the right to use, market,
distribute, lease or sell the Chronorad-Registered Trademark- Contrast
Media injection device (or the like) and cassettes (under the Patents,
Technology and/or Improvements) for Contrast Media injection in the
Territory, the right to use, market, sell, lease and/or distribute such
device and cassette for heparin injection or saline solution flush but
solely if combined with, or alternated with, a Contrast Media injection.
3.5 RESERVATION OF RIGHTS: SUPPLY TO INVESTIGATORS. Notwithstanding anything
to the contrary in this Agreement, DEBIOTECH shall have the right for
evaluation, Market Approval and/or development purposes only, to supply
(free of charge, to the extent permitted by law) the Product,
Cassette/Reservoir Module and/or Accessories in limited quantities and to
limited investigators in the Territory for the Field of Application
provided that the Product, Cassette/Reservoir Module and/or Accessories
shall not bear the IMED Trademarks, IMED's name or the IMED label without
IMED's prior written consent. In such an event, DEBIOTECH shall inform
IMED prior thereto and mention the name and location of such
investigators. IMED shall have the right to participate in such
investigation research. DEBIOTECH shall be solely liable for any actions
taken by anyone under this Article 3.5, and agrees to insure itself
against all liabilities resulting therefrom. IMED shall not be
responsible or held accountable (criminally or civilly), and DEBIOTECH
shall indemnify IMED, for any liability, including, without limitation,
costs, penalties and damages, resulting from actions taken under this
Article 3.5.
3.6 DEBIOTECH'S OBLIGATIONS REGARDING SIMILAR PRODUCTS. Notwithstanding
anything to the contrary in this Agreement, DEBIOTECH agrees, and shall
take appropriate measures to assure, that, with respect to the countries
for which IMED has not lost exclusivity under Article 12.2 hereof, the
Cassettes have been specifically designed to fit the Pump and that no
other cassette designed, manufactured, developed, sold, licensed or
distributed, directly or indirectly, by any member of the DEBIOTECH Group
(or any DEBIOTECH Related Person with the assistance of any member of the
DEBIOTECH Group), including, without limitation: (x) any cassette for any
product contemplated in Article 3.1 or 3.4; or (y) any cassette for use
with: (a) any pump outside of the Field of Application in the Territory;
or (b) any New Competing Product, shall fit the Pump and in furtherance
thereof shall use the special
<PAGE>
IMED code of the coding system described in Enclosure 15. DEBIOTECH
agrees, and shall take appropriate measures to assure, that any pump
designed, manufactured, developed, sold, licensed or distributed, directly
or indirectly, by any member of the DEBIOTECH Group (or any DEBIOTECH
Related Person with the assistance of any member of the DEBIOTECH Group)
shall not contain the IMED Trademarks, IMED's name, the IMED label or the
color scheme of any Product or Accessory to be supplied to IMED under this
Agreement, without the prior written consent of IMED.
ARTICLE 4: TRADEMARKS/LABELING/ADVERTISEMENT
4.1 PROMOTION. IMED will be solely responsible for promoting the Product and
Accessories and will alone bear any related costs of such promotion for
the Field of Application in the Territory. DEBIOTECH shall cooperate with
IMED with respect to the promotion of the Product in the Territory by:
(a) communicating to IMED any request it receives from Third Parties
concerning any Product or Accessory for the Field of Application within
the Territory; (b) furnishing IMED with samples or copies of all
promotional literature and advertisements used by DEBIOTECH or, to the
extent known by DEBIOTECH, by other DEBIOTECH Authorized Persons for wide
dissemination in connection with the Product to the extent permitted by
such DEBIOTECH Authorized Persons; (c) furnishing advice to IMED as may be
reasonably requested with respect to any promotional literature and
advertisements for the Product which IMED may desire to prepare at its own
expense; (d) allowing IMED to use or reproduce, at IMED's expense, any
promotional materials (including trade show displays) used by DEBIOTECH
subject to the consent of any Third Person whose name, trademarks or
products may be included; and (e) any such other reasonable promotional
assistance customarily provided by DEBIOTECH to its other Distributors.
DEBIOTECH shall not be liable for any advice, copy or materials it may
provide in connection with any such promotional assistance for which it is
not otherwise liable under this Agreement.
4.2 LABELING. IMED shall be responsible, subject to Article 10.3(e), for the
content and adequacy for regulatory purposes of the labeling of the
Product and Accessories and packaging thereof in final form for
distribution by IMED Related Persons. All labels shall be procured and
printed by DEBIOTECH using appropriate camera-ready mock-ups submitted by
IMED. IMED shall comply with all USA, Canada and Mexico labeling
requirements with respect to such Products and Accessories and shall be
responsible for any other labeling requirements unique to any jurisdiction
within the Territory. Each Pump and Cassette shall include a label
stating as follows: "FOR PARENTERAL USE ONLY".
If and to the extent mandatorily required by applicable law, each label
for a Product or Accessory shall identify, in a reasonable manner,
DEBIOTECH's manufacturer as the manufacturer and IMED or one of its
Affiliates as the Distributor.
<PAGE>
DEBIOTECH may, upon prior written notice and at DEBIOTECH's sole cost and
expense, put in a visible size and reasonable manner: (i) its name; (ii)
its license logo as set forth on Enclosure 8; (iii) any of the DEBIOTECH
Trademarks; (iv) the sentence "Product Under License from
DEBIOTECH-Switzerland"; and (v) the word "patent(s)" or "patent(s)
pending" and the number or numbers of the patents applicable thereto and
otherwise as may be necessary to preserve the maximum rights against any
infringer of the Patents, and/or other patents and/or patent applications
for which DEBIOTECH is the holder of rights in the Field of Application,
on the Product and Accessories and on any package of the Product and
Accessories.
4.3 USE OF DEBIOTECH TRADEMARKS. DEBIOTECH hereby grants to IMED the
nontransferable (except as contemplated in Article 21.1 hereof), exclusive
(or non exclusive, as the case may be, according to Article 12.2
hereafter) license to use the DEBIOTECH Trademarks, solely in connection
with the use, marketing, sale, lease and distribution for the Field of
Application of the Product and Accessories in the Territory.
IMED shall not use DEBIOTECH Trademarks in any manner which jeopardizes
the distinctiveness, significance or validity thereof; PROVIDED, HOWEVER,
that IMED may use the DEBIOTECH Trademarks in any manner consistent with
the use thereof by any DEBIOTECH Distributor. IMED acknowledges and
agrees that (a) the DEBIOTECH Trademarks are the exclusive licensed
properties of DEBIOTECH, (b) any use by IMED of the DEBIOTECH Trademarks
shall not give IMED any ownership or other rights therein, (c) all uses by
IMED of the DEBIOTECH Trademarks shall inure solely to the benefit of
DEBIOTECH and (d) IMED shall only use the DEBIOTECH Trademarks in
connection with the Product and/or the Accessories for the Field of
Application in the Territory.
4.4 USE OF IMED TRADEMARKS. DEBIOTECH shall not use the IMED Trademarks in
connection with the use, marketing, sale, lease, distribution, manufacture
or delivery of any goods except for the placement of the same on the
Product or Accessory which will be delivered to IMED and the related
packaging and or related documents.
4.5 STATEMENT REGARDING LIMITATION ON USE. IMED hereby agrees to state
clearly in any, brochure, manual, or any advertising material describing
the Product, Accessories, and Cassette Sets, that it is strictly limited
to parenteral use, by means of the following instructions for use, in the
English language in the USA, in the English language and translated into
the French language in Canada and translated into the Spanish language in
Mexico: "FOR PARENTERAL USE ONLY".
On DEBIOTECH's request, IMED shall, at its sole cost and expense, put in a
visible size and reasonable manner: (i) DEBIOTECH's name; (ii) DEBIOTECH's
license logo as set forth on Enclosure 8; (iii) any of DEBIOTECH
Trademarks; (iv) the sentence "Product Under License from
DEBIOTECH-Switzerland"; and (v) the word "patent(s)" or "patent(s)
pending" and the number or numbers of the patents
<PAGE>
applicable thereto and otherwise as may be necessary to preserve the
maximum rights against any infringer of the Patents, and/or other patents
and/or patent applications for which DEBIOTECH is the holder of rights in
the Field of Application, on any Cassette Set package and any advertising,
brochure, manual and the like describing the Product and/or Accessories.
DEBIOTECH hereby agrees to state clearly, or make sure that any Third
Person entitled to use, market, sell, distribute or lease the Product and
Accessories outside the Field of Application in the Territory (e.g. for
enteral use) shall state clearly, in any document, brochure, manual, or
any advertising material regarding any such Product or Accessory, as well
as on the Product, that it is strictly limited to non parenteral use (e.g.
by means of the following instructions for use, in the English language in
the USA, in the English language and translated into the French language
in Canada and translated into the Spanish language in Mexico: "FOR
ENTERAL USE ONLY").
4.6 IMED AS DISTRIBUTOR. DEBIOTECH shall have the right to mention IMED as
its exclusive (or non exclusive, as the case may be according to Article
12.2) Distributor of Products and Accessories for the Territory in its
advertising and/or company brochure, as well as to display IMED's Product
during public events. In connection therewith, DEBIOTECH shall supply
free of charge to IMED, at least five (5) days prior to its distribution
if practicable under the circumstances, at least one (1) sample of every
such advertising and/or company brochure.
4.7 NO REFERENCE TO OTHER DISTRIBUTORS. Neither IMED, its Affiliates or
sub-Distributors shall use or allow to be used, in any printed material,
the names or trademarks of any of DEBIOTECH's Related Persons except as
permitted in Article 4.3 and 4.5 hereof.
4.8 OPERATING MANUAL. IMED shall be solely responsible for the production,
content and adequacy (assuming, for this purpose, that each of the Product
and Accessories functions as intended, conforms to its specifications and
complies with the warranty provisions contained in Article 11) of any
operating manual, instruction or brochure provided to users, customers,
clients or the general public in connection with the Product and/or
Accessories and IMED shall be solely liable for any liabilities
attributable to its negligent drafting of the foregoing to the extent such
negligence caused such liabilities. This Article 4.8 shall not limit or
otherwise alter any liability DEBIOTECH may have under Article 11 or as
otherwise provided in the Agreement.
ARTICLE 5: PRODUCT DEVELOPMENT
5.1 DEVELOPMENT COMMITTEE/PROJECT LEADER. IMED and DEBIOTECH shall establish
a development committee to coordinate, implement and follow the
development of: (i) the Pump v.1A and Pump v.2; (ii) the Cassette for
each such Pump; (iii) the
<PAGE>
Accessories, including, without limitation, the Cassette/Reservoir Module
and the Cassette/Reservoir Module Housing for each Pump; and (iv)
Improvements (the "Development Committee"). The Development Committee
will consist of one representative from each of IMED and DEBIOTECH. The
Development Committee will communicate or meet regularly from time to time
as determined by its members. IMED or DEBIOTECH shall be entitled, upon
reasonable notice, to call a meeting of the Development Committee. The
location of the Development Committee meetings dealing with development
and quality controls shall be held at the appropriate location for the
subject matter, but in general shall be alternately held at DEBIOTECH and
IMED, with the first meeting location being at DEBIOTECH. In order to
facilitate the functions of the Development Committee, minutes will be
maintained of all Development Committee meetings and such minutes will be
circulated to all Development Committee members as promptly as practicable
prior to the next meeting of the Development Committee and shall be
approved and signed by all Development Committee members in two original
copies (after such approval, the "Minutes") of which one shall be
distributed to each Party. Such Minutes will, among other things, set
forth in reasonable detail the development status with respect to each
product covered by the Project Plans and all actions of IMED or DEBIOTECH,
as the case may be, taken in furtherance of the Project Plans and the
results thereof.
The Development Committee will be the principal means through which the
Parties will exchange development concepts, ideas for Improvements and
information concerning end-user requirements and determine and monitor
development activities and Changes. The member of the Development
Committee designated by one Party shall keep the member designated by the
other Party informed with respect to the foregoing and shall act
reasonably and in good faith to address those matters regarding product
development and quality control that are properly brought to the
Development Committee for consideration in accordance with the terms of
this Article 5 (the "Area of Authority"). Any matter approved in writing
by a member of the Development Committee designated by any Party within
the Area of Authority shall be binding upon such Party; PROVIDED THAT, no
member of the Development Committee shall be deemed to have the authority
to bind any Party to make or incur any payment of money or supplementary
development costs and the same shall be evidenced only by a writing signed
by a Party. Each Party shall alone bear any of its costs and expenses
(including travel, hotel, etc...) relating to the Development Committee
meetings and work.
In addition, each Party shall appoint one project leader (a "Project
Leader") who shall meet regularly with the Project Leader designated by
the other Party. Each Project Leader shall be the principal liaison for
day-to-day communication and interaction between IMED and DEBIOTECH with
respect to each Project Plan, and shall be available promptly to respond
to communications. Each of the Parties retains the right, upon notice to
the other, to change the Development Committee member or the Project
Leader designated by such Party.
<PAGE>
5.2 PROJECT PLAN FOR PUMP VERSION 1A. DEBIOTECH shall develop, manufacture
and deliver the Pump v.1A, the related Cassette, the Cassette/Reservoir
Module Housing and the related Accessories specified in the Project Plan
For Pump Version 1A, pursuant to the terms of this Agreement and in
accordance with the Project Plan For Pump Version 1A. In connection
therewith, each of IMED and DEBIOTECH will use reasonable efforts to
satisfy the requirements of, and complete those actions and tasks
contemplated in the Project Plan For Pump Version 1A, on about the dates
set forth therein, or, if any of same cannot be achieved by such date,
then as promptly as practical thereafter. The Parties acknowledge that
the Project Plan For Pump Version 1A assigns specific actions and tasks to
particular Parties and that each Party is responsible to perform the
actions and tasks assigned to it, however, the Project Plan For Pump
Version 1A represents a joint effort to be conducted by the Parties and
each Party shall provide reasonable assistance, cooperation and
information in order to aid the other in the performance of its assigned
duties under the Project Plan For Pump Version 1A. The Parties further
acknowledge that the Project Plan For Pump Version 1A is written in a
summary fashion and that, in connection with fulfilling their assigned
actions and tasks thereunder, they will also take such actions as are
reasonably necessary and appropriate in connection therewith or are
otherwise consistent with such summary description.
5.3 SPECIFICATION DOCUMENT 1A. The Parties acknowledge that as of the
Effective Date the Specification Document 1A is preliminary and embodies
high level specifications. It is intended that through the work of the
Development Committee the Specification Document 1A will be modified and
supplemented as reasonably necessary to implement the Project Plan For
Pump Version 1A, and to reflect Changes requested by all Committee members
in completing activities contemplated in the Project Plan For Pump Version
1A. A Change to the Specification Document, for Pump v.1A shall be
effective only if set forth in a written document signed by all members of
the Development Committee, PROVIDED, HOWEVER, that (i) DEBIOTECH (and the
member of the Development Committee designated by it) shall be required to
consent to any Change requested by IMED that constitutes a Software
Change, if no serious objection can be made; and (ii) each Party (and the
member of the Development Committee designated by it) shall be required to
consent to any Change which is necessary to cause each Product to be
produced as a result of the Project Plan For Pump Version 1A to be safe
and efficacious for its intended use or conforming to any regulatory
requirement.
The Minutes noting the approval of any Change shall also include any time
schedule delays which may result from such Change. Any Change which
involves new Manufacturing Equipment and/or a modification of existing
Manufacturing Equipment and/or a modified manufacturing process shall be
treated as an Improvement (except if required under (ii) hereabove).
5.4 QUALITY CONTROL FOR PUMP V.1A. In furtherance of the Project Plan For
Pump Version 1A and the manufacturing and delivery of the products
contemplated thereby,
<PAGE>
the Development Committee shall establish quality and validity testing for
the products to be conducted by DEBIOTECH (the "Quality and Validity
Testing Procedures for Pump v.1A") according to Schedule 5.4 hereto. Any
change in the Quality and Validity Testing Procedures for Pump v.1A beyond
the scope of the guidelines of Schedule 5.4 shall be at the sole cost of
IMED.
5.5 PROJECT PLAN FOR PUMP VERSION 2. DEBIOTECH shall develop, manufacture and
deliver the Pump v.2, the related Cassette, the Cassette/Reservoir Module
Housing and the related Accessories specified in the Project Plan For Pump
Version 2, pursuant to the terms of this Agreement and in accordance with
the Project Plan For Pump Version 2. The Project Plan For Pump 2 shall be
agreed upon by the Development Committee promptly following completion of
Project Plan For Pump Version 1A through good faith discussions. The
Project Plan For Pump Version 2 shall follow the format and methodology
(including, without limitation, task allocation and Party responsibility
and establishment of dates) set forth in Project Plan For Pump Version 1A,
as applicable to the development of Pump v.2 and taking into consideration
the Specification Document 2. In connection with the performance of the
Project Plan For Pump Version 2, each of IMED and DEBIOTECH will use
reasonable efforts to satisfy the requirements of, and complete those
actions and tasks contemplated in, the Project Plan For Pump Version 2, on
about the dates set forth therein, or, if any of same cannot be achieved
by such date, then as promptly as practical thereafter. The Parties
acknowledge that the Project Plan For Pump Version 2 will assign specific
actions and tasks to particular Parties and that each Party is responsible
to perform the actions and tasks assigned to it, however, the Project Plan
For Pump Version 2 will represent a joint effort to be conducted by the
Parties and each Party shall provide reasonable assistance, cooperation
and information in order to aid the other in the development of the
Project Plan For Pump Version 2 and the performance of its assigned duties
under the Project Plan For Pump Version 2. The Parties further
acknowledge that the Project Plan For Pump Version 2 will be written in a
summary fashion and that, in connection with fulfilling their assigned
actions and tasks thereunder, they will also take such actions as are
reasonably necessary and appropriate in connection therewith or are
otherwise consistent with such summary description.
5.6 SPECIFICATION DOCUMENT 2. The Parties acknowledge that as of the
Effective Date the Specification Document 2 is preliminary and embodies
only certain broadly stated attributes that IMED and DEBIOTECH desire to
incorporate into the Pump v.2. It is intended that through the work of
the Development Committee the Specification Document 2 will be modified
and supplemented as reasonably necessary to complete formal specifications
following the format and methodology set forth in the Project Plan For
Pump Version 1A in order to implement the Project Plan For Pump Version 2,
and to reflect Changes requested by all Committee members in completing
activities contemplated in the Project Plan For Pump Version 2. A Change
to the Specification Document for Pump v.2 shall be effective only if set
forth in a written document signed by all members of the Development
Committee, PROVIDED, HOWEVER,
<PAGE>
that (i) DEBIOTECH (and the member of the Development Committee designated
by it) shall be required to consent to any Change requested by IMED that
constitutes a Software Change, if no serious objection can be made; and
(ii) each Party (and the member of the Development Committee designated by
it) shall be required to consent to any Change which is necessary to cause
each Product to be produced as a result of the Project Plan For Pump
Version 2 to be safe and efficacious for its intended use or conforming to
any regulatory requirement.
The Minutes noting the approval of any Change shall also include any time
schedule delays which may result from such Change. Any Change which
involves new Manufacturing Equipment and/or a modification of existing
Manufacturing Equipment and/or a modified manufacturing process shall be
treated as an Improvement (except if required under (ii) hereabove).
5.7 QUALITY CONTROL FOR PUMP V.2. In furtherance of the Project Plan For Pump
Version 2 and the manufacturing and delivery of the products contemplated
thereby, the Development Committee shall establish quality and validity
testing for the products to be conducted by DEBIOTECH (the "Quality and
Validity Testing Procedures for Pump v.2") according to Schedule 5.4
hereto. Any change in the Quality and Validity Testing Procedures for
Pump v.2 beyond the scope of the guidelines of Schedule 5.4 shall be at
the sole cost of IMED.
5.8 SUSTAINING ENGINEERING ACTIVITIES - RESEARCH AND DEVELOPMENT. DEBIOTECH
shall perform or cause to be performed, at its sole cost and expense, and
with reasonable competence, all Sustaining Engineering Activities.
DEBIOTECH alone shall be entitled to undertake and shall be in charge of,
all research and development involving the Product, Accessories and
Improvements thereto, as well as New Developments, based on the
Technology. IMED may not use the Technology for research and development
or other purposes without DEBIOTECH's prior written consent; PROVIDED,
HOWEVER, that IMED shall be entitled to conduct research and development
on the Cassette Sets, but not the Cassette itself.
5.9 PRODUCT CHANGES. DEBIOTECH shall notify the Development Committee in
writing, no later than thirty (30) days in advance, if DEBIOTECH plans to
change the design, specifications, manufacturer or method of manufacture
of any Products in a manner which will increase cost (as reasonably
determined at the time such changes become effective), change the exterior
appearance, performance or service requirements or otherwise adversely
affect the operation or use of any Product in a material respect. In
addition, DEBIOTECH shall notify the Development Committee not later than
thirty (30) days in advance for any change of the Pump motor manufacturer,
the memory component manufacturer and the microprocessor manufacturer. No
such changes shall be made without the Development Committee's prior
written consent, which consent shall not be unreasonably withheld or
delayed (failure to respond to a notice within fourteen (14) days of the
receipt of such a notice shall be deemed consent thereto); PROVIDED,
HOWEVER, that no such consent shall be required for any
<PAGE>
such change which is (i) required to satisfy any applicable law, rule or
legal requirement, or directive from a competent authority, or (ii)
reasonably required to permit DEBIOTECH to comply with the warranties set
forth in Article 11.1 (a) hereof. Furthermore, DEBIOTECH shall not
replace [CONFIDENTIAL TREATMENT REQUESTED] or [CONFIDENTIAL TREATMENT
REQUESTED] with another manufacturer without the prior written consent of
IMED which cannot be unreasonably withheld or delayed. In the event that
DEBIOTECH determines that it is reasonably necessary to make any changes
contemplated above pursuant to the foregoing provision, DEBIOTECH shall
notify IMED in writing in advance of such change as promptly as
practicable.
5.10 IMPROVEMENTS.
(a) PROPOSAL BY DEBIOTECH OR UPON REQUEST BY IMED. In the event that
IMED desires to have any Improvement to any Product or Accessory supplied
hereunder it must obtain the same from DEBIOTECH. IMED shall notify
DEBIOTECH that it desires to create any Improvement, and DEBIOTECH shall
notify IMED that it desires to create or has created any Improvement and
shall offer it to IMED. Then the Development Committee shall meet
promptly in order to discuss the technical and economic implications of
any such Improvement, as well as the timetable associated with the
implementation thereof. In the event that, within sixty (60) days from
such discussion, IMED were to notify DEBIOTECH that it wishes to consider
proceeding with such Improvement, DEBIOTECH shall provide to IMED a
project plan for such Improvement, addressing, as appropriate: (i)
relevant product specifications; (ii) matters of the type set forth in the
Project Plans; (iii) the cost to IMED of having DEBIOTECH proceed with
such plan and other appropriate budget information (the information
contemplated in clauses (i) through (iii) being referred to collectively
as the "Proposal Data"); and (iv) the effect of such Improvement on costs
to IMED for the Product or Accessory subject to such Improvement, pursuant
to Article 8.9 hereof, which plan, following appropriate changes as
approved by the Development Committee and ratified in writing by IMED and
DEBIOTECH, shall constitute the project plan for such Improvement. IMED
failure to notify its wish to consider proceeding with such Improvement
within the 60 day period above or failure to deliver notification to
DEBIOTECH of its approval of the project plan within sixty (60) days of
its receipt, shall be deemed a rejection of the Improvement. IMED shall
be required to pay DEBIOTECH the Development Costs of such Improvement, if
proposed by IMED, and the reasonable cost (not to be less than the
Development Cost of such Improvement) if proposed by DEBIOTECH. In the
event that any Improvement includes new Manufacturing Equipment, the cost
of which would be solely paid by IMED (and not shared by any DEBIOTECH
Authorized Person pursuant to Article 5.10(b)), DEBIOTECH shall include in
the Proposal Data its election to either: (i) include the cost of such
new Manufacturing Equipment in the Development Costs of such Improvement,
in which case IMED shall be the rightful owner and title holder thereto
(but shall not be entitled to possession thereof so long as (x) DEBIOTECH
continues to supply IMED with Products and
<PAGE>
Accessories in accordance with this Agreement and (y) the Standby
Agreements or Standby License have not been exercised); or (ii) exclude
such new Manufacturing Equipment from the Development Costs of such
Improvement and reasonably amortise the cost thereof by reasonably
increasing the transfer price of the Product or Accessories effected
thereby.
(b) ALLOCATION OF IMPROVEMENT DEVELOPMENT COSTS; CONFIDENTIALITY.
[CONFIDENTIAL TREATMENT REQUESTED FOR THIS PARAGRAPH]
If any Improvement involves material Confidential Information of one of
the DEBIOTECH Authorized Person, if shall not be available to any other
Authorized Person without the written consent of the one whose
Confidential Information is involved.
(c) ACCEPTANCE OF IMPROVEMENT BY IMED; IMPLEMENTATION BY DEBIOTECH. In
no event shall IMED be required to accept or acquire any Improvement for
any country in the Territory or permit it in any country for which it
retains exclusivity. Following the approval of a project plan
contemplated for any Improvement, DEBIOTECH shall proceed, using
reasonable commercial efforts, with the implementation of such plan.
5.11 NEW DEVELOPMENT. DEBIOTECH agrees that IMED shall have a right of first
refusal following the procedure of Article 5.13 on each New Development.
5.12 RESTRICTION ON DEVELOPMENT OF NEW COMPETING PRODUCTS. DEBIOTECH
represents, warrants, covenants and agrees that neither it nor any member
of the DEBIOTECH Group is currently developing or will, during the period
commencing on the Effective Date and continuing until one (1) year
thereafter, directly or indirectly, develop, market, sell, license, lease
or offer to any Person, a New Competing Product or assist any Person to do
so. Furthermore, DEBIOTECH agrees that IMED shall have for a period of
six (6) years after such one year period, a right of first refusal, as and
to the extent set forth in this Article 5, to use, market, sell, lease and
distribute in the Territory any New Competing Product in the Field of
Application.
5.13 RIGHT OF FIRST REFUSAL. DEBIOTECH agrees that before: (i) any member of
DEBIOTECH Group enters into discussions with any Third Person with respect
to the use, marketing, sale, lease, or distribution for the Field of
Application in any country in the Territory by such Third Person of any
New Development or New Competing Product invented, created or developed,
directly or indirectly, by or with the participation of, any member of
DEBIOTECH Group; or (ii) DEBIOTECH or any member of the DEBIOTECH Group
uses, markets, sells, leases, licenses or distributes any such New
Development or New Competing Product in any country in the Territory for
the Field of Application, DEBIOTECH will give IMED a written
<PAGE>
notice ("Offer Notice") containing a description thereof, a development
plan, financial terms and all other material business terms and conditions
of the offer ("Offer Conditions"). IMED will have thirty (30) days from
receipt of such Offer Notice (the "Offer Period") to decide whether or not
it wishes to pursue discussions regarding such New Development or New
Competing Product pursuant to this Article 5.13. During such Notice
Period, DEBIOTECH will provide IMED with such additional relevant non-
confidential information in DEBIOTECH Group's possession requested by IMED
as is reasonable under the circumstances.
If within the Offer Period, IMED notifies DEBIOTECH in writing that it
desires to propose and discuss a distribution or marketing arrangement
relating to any such New Competing Product (the "Discussion Notice"), IMED
will have an additional sixty (60) day period (the "Discussion Period")
during which DEBIOTECH shall discuss such proposal exclusively with IMED;
PROVIDED, that neither party shall be required to conclude any agreement
in respect thereto.
If IMED fails to deliver the Discussion Notice during the Offer Period or
if the Parties fail to reach a written agreement for IMED to distribute or
market the New Development or New Competing Product for any reason during
such Discussion Period, DEBIOTECH shall be free to offer the New
Development or New Competing Product to any Third Person on the Offer
Conditions, or on other conditions more favorable to DEBIOTECH, at any
time within one year after the expiration of the latest of the Offer
Period or the Discussion Period, as the case may be, after which, if no
written agreement has been signed, it must again be offered to IMED
following the procedures of Discussion and Offer Periods set forth in this
Article 5.13.
ARTICLE 6: PRODUCT APPROVAL
6.1 MARKET APPROVALS OBTAINED BY IMED. IMED will use commercially reasonable
efforts to obtain as expeditiously as possible any and all Market
Approvals in all countries in the Territory, whenever possible in the name
of both DEBIOTECH and IMED, for the Products and Accessories.
IMED shall pay the cost and expense of such procedures as charged by any
relevant agencies, as well as all necessary expenses charged by Third
Persons in relation with such procedures (e.g.: technical testing
expenses, translation expenses, etc...).
All governmental cost reimbursement or pricing approvals in the Territory
shall be the responsibility of and at the cost of IMED.
Each of IMED and DEBIOTECH shall use commercially reasonable efforts to
keep the other Party informed of the progress in obtaining such approvals,
shall allow the other Party to (i) review any correspondence with
regulatory authorities reasonably prior to their sending to such
authorities; (ii) participate in any meetings or telephone
<PAGE>
conversations with regulatory authorities, and (iii) shall cooperate in
complying with post-marketing legal requirements. All documents,
correspondence, testing material and other material concerning or related
to the Market Approvals in all countries of the Territory shall be made
available by IMED to DEBIOTECH as promptly as practicable when available
and DEBIOTECH shall have all rights to use them.
6.2 MARKET APPROVALS OBTAINED BY DEBIOTECH. DEBIOTECH has the right to obtain
directly or indirectly all Market Approvals in all countries inside or
outside the Territory in its own name for the Product and Accessories with
reference to all documents, correspondence, testing material and other
material made available to it under Article 6.1 hereabove, as well as by
reference to any Market Approval obtained by IMED under Article 6.1
hereabove.
6.3 IMPORT LICENSES. With IMED's reasonable assistance in respect to the
execution of documents and other ministerial actions, DEBIOTECH shall
cooperate as reasonably necessary to enable IMED to procure and maintain
all licenses reasonably necessary to ship Products and Accessories from
the point of manufacture to IMED in accordance herewith. DEBIOTECH shall
comply with, and IMED agrees to inform DEBIOTECH of any change in, to the
extent IMED is aware or has been made aware of, all other laws,
regulations and governmental directives relating to the import of
technical data, goods and services including, without limitation, those
enforced by the United States Departments of Commerce and Defense and
shall not permit the Products and Accessories to be manufactured in a
manner or with any component, or involving any jurisdiction, so that it
may not lawfully be imported into the Territory.
6.4 ASSISTANCE BY PARTIES. Each Party shall, without incurring any cost to
any Third Person, in both cases of Articles 6.1 and 6.2 hereabove, provide
free of charge to the other Party reasonable advice and assistance
whenever requested (local address and responsible person or correspondent
for the relevant government agency, sharing of experience in approval
procedures, assistance in translation and document preparation, etc.)
based upon such Party's experiences with the FDA and other relevant
government agencies. Each Party shall keep the other Party regularly
informed about the approval procedures contemplated in this Article 6.
6.5 CASSETTE SET MARKET APPROVAL OBTAINED BY IMED. Pursuant to the provisions
of Article 2.5 hereabove, IMED shall be in charge and will use
commercially reasonable efforts to obtain as expeditiously as possible any
and all Market Approvals in all countries in the Territory for each
Cassette Set assembled by or for IMED. In connection thereto, DEBIOTECH
shall, at its sole expense, provide IMED with all data, assistance and
other information reasonably necessary to obtain such Market Approval.
6.6 CLINICAL TRIALS. IMED shall, at its sole expense, conduct or arrange for
others to conduct, as the case may be, all clinical trials necessary, if
any, to obtain the Market
<PAGE>
Approvals referred to in this Article 6. IMED shall promptly provide to
DEBIOTECH copies of all reports of the results of such clinical trials.
ARTICLE 7: FINANCIAL CONDITIONS
7.1 PAYMENTS TO DEBIOTECH. For the Exclusive Distribution Right granted in
Article 2 to IMED and the development of the Product according to the
Specification Documents, IMED shall pay to DEBIOTECH, in an account
designated by DEBIOTECH, the total sum of [CONFIDENTIAL TREATMENT
REQUESTED] for the USA, and additional [CONFIDENTIAL TREATMENT REQUESTED]
each for Canada and Mexico, which amounts shall be non-refundable, except
as expressly provided in this Agreement, in separate installments as
follows:
(a) [CONFIDENTIAL TREATMENT REQUESTED] not later than ten days after
the Effective Date;
(b) [CONFIDENTIAL TREATMENT REQUESTED] not later than ten days after
obtaining the 510k Market Approval from the FDA for the Pump v.1A;
(c) [CONFIDENTIAL TREATMENT REQUESTED] not later than ten days after
Product Availability of Pump v.1A;
(d) [CONFIDENTIAL TREATMENT REQUESTED] not later than ten days after
the submission by IMED of the 510k application to the FDA for the Pump v.2
but in the event the foregoing amount has not yet been paid, [CONFIDENTIAL
TREATMENT REQUESTED] of that amount is due on the date six (6) months
after the Product Availability of Pump v.1A;
(e) [CONFIDENTIAL TREATMENT REQUESTED] not later than ten days after
obtaining the 510k Market Approval from the FDA for the Pump v.2 but in
the event the foregoing amount has not yet been paid, [CONFIDENTIAL
TREATMENT REQUESTED] of that amount is due on the date twelve (12) months
after the Product Availability of Pump v.1A;
(f) [CONFIDENTIAL TREATMENT REQUESTED] not later than ten days after
Product Availability of Pump v.2;
(g) [CONFIDENTIAL TREATMENT REQUESTED] eighteen (18) months after the
first to occur of (i) Market Approval for Canada for Pump v.1A or (ii)
510k Market Approval by the FDA for Pump v.1A, if IMED wishes to retain
Canada in the Territory. In the event IMED does not elect to retain
Canada in the Territory by making such payment, Canada shall be forthwith
excluded from the Territory. DEBIOTECH shall thereafter be free to offer
Canada to any Third Person and IMED shall have no further rights with
respect thereto including any rights to compensation
<PAGE>
for customers or installed Pumps in Canada. However, in such event,
DEBIOTECH shall continue to provide to IMED Cassettes, services, Spare
Parts and other materials (except Pumps) necessary to service IMED's
Canadian customers but only until either DEBIOTECH or a new Distributor
for Canada selected by DEBIOTECH is willing to provide Cassettes, Spare
Parts and otherwise service IMED's Canadian customers and assumes the
obligations of IMED under such service and supply contracts. Thereafter,
IMED shall cooperate as necessary to assure a smooth transition to
DEBIOTECH or to such new Distributor, as the case may be and shall
thereafter have no rights to the Products and Accessories regarding
Canada; and
(h) [CONFIDENTIAL TREATMENT REQUESTED] eighteen (18) months after the
first to occur of (i) Market Approval for Mexico for Pump v.1A or (ii)
510k Market Approval by the FDA for Pump v.1A, if IMED wishes to retain
Mexico in the Territory. In the event IMED does not elect to retain
Mexico in the Territory by making such payment, Mexico shall be forthwith
excluded from the Territory. DEBIOTECH shall thereafter be free to offer
Mexico to any Third Person and IMED shall have no further rights with
respect thereto including any rights to compensation for customers or
installed Pumps in Mexico. However, in such event, DEBIOTECH shall
continue to provide to IMED Cassettes, services, Spare Parts and other
materials (except Pumps) necessary to service IMED's Mexican customers but
only until either DEBIOTECH or a new Distributor for Mexico selected by
DEBIOTECH is willing to provide Cassettes, Spare Parts and otherwise
service IMED's Mexican customers and assumes the obligations of IMED under
such service and supply contracts. Thereafter, IMED shall cooperate as
necessary to assure a smooth transition to DEBIOTECH or to such new
Distributor, as the case may be and shall thereafter have no rights to the
Products and Accessories regarding Mexico.
7.2 FAILURE EVENT 1A. Upon the occurrence of a Failure Event 1A, then, IMED
shall have the right, as IMED's sole remedy, to terminate this Agreement
by written notice to DEBIOTECH, and DEBIOTECH shall refund by SWIFT
transfer to IMED together with interest at the Prime Rate from the
termination date, as soon as DEBIOTECH has signed with a new Distributor
for the Territory, but in any event not later than forty five (45) days
after such termination, [CONFIDENTIAL TREATMENT REQUESTED] of any and all
sums paid to DEBIOTECH under Article 7.1 (a) to (f); PROVIDED, HOWEVER,
that if at the time of the occurrence of such Failure Event 1A IMED has
only paid the initial [CONFIDENTIAL TREATMENT REQUESTED] under Article
7.1(a), there shall be no refund to IMED. IMED agrees that, except as
otherwise provided in this Agreement, the other [CONFIDENTIAL TREATMENT
REQUESTED] of the foregoing amount paid by IMED pursuant to this Agreement
is non refundable by DEBIOTECH.
7.3 FAILURE EVENT 2. Upon the occurrence of a Failure Event 2, then, as
IMED's sole remedy, DEBIOTECH shall refund by SWIFT transfer to IMED,
together with interest at the Prime Rate from the date of notification by
IMED to DEBIOTECH of such Failure Event 2, within forty five (45) days
after such Failure Event 2,
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED] of any and all sums paid to DEBIOTECH
under Article 7.1 (d) through (f), PROVIDED, HOWEVER, that if at the time
of the occurrence of such Failure Event 2 IMED has only paid [CONFIDENTIAL
TREATMENT REQUESTED] under either or both of Article 7.1 (d) and/or (e),
there shall be no refund to IMED in respect of such payment(s). IMED
agrees that, except as otherwise provided in this Agreement, the other
[CONFIDENTIAL TREATMENT REQUESTED] of the foregoing amount paid by IMED
pursuant to this Agreement is non refundable by DEBIOTECH.
7.4 EFFECT OF TERMINATION. As soon as DEBIOTECH has received IMED's
termination notice according to Article 7.2, this Agreement shall be
deemed terminated and DEBIOTECH shall be free to seek any Third Person
regarding the Exclusive Distribution Right of the Product in the
Territory. The refunds provided in Articles 7.2 and 7.3, are mutually
exclusive and not cumulative.
ARTICLE 8: PRODUCT PRICING
8.1 SALES PRICE. The selling price of the Product and Accessories by
DEBIOTECH to IMED as of the Effective Date shall be as set forth below and
shall vary according to the quantities ordered by IMED per Contract Year,
in accordance with the following scale which is to remain valid throughout
the duration of this Agreement, PROVIDED, HOWEVER, that a price adjustment
is to take place every year pursuant to Article 8.3:
(a) CASSETTE UNIT PRICES PER CONTRACT YEAR.
(i) [CONFIDENTIAL TREATMENT REQUESTED] per unit for the
[CONFIDENTIAL TREATMENT REQUESTED] units ordered pursuant
to Article 10.4 hereunder; such [CONFIDENTIAL TREATMENT
REQUESTED] units not to be counted in 8.1(a)(ii) to
8.1(a)(vi) thereafter;
(ii) [CONFIDENTIAL TREATMENT REQUESTED] per unit if less than
[CONFIDENTIAL TREATMENT REQUESTED] units have been
ordered per Contract Year;
(iii) [CONFIDENTIAL TREATMENT REQUESTED] per unit if
[CONFIDENTIAL TREATMENT REQUESTED] units or more, but
less than [CONFIDENTIAL TREATMENT REQUESTED] units, have
been ordered per Contract Year;
(iv) [CONFIDENTIAL TREATMENT REQUESTED] per unit if
[CONFIDENTIAL TREATMENT REQUESTED] units or more, but
less than [CONFIDENTIAL TREATMENT REQUESTED] units, have
been ordered per Contract Year;
<PAGE>
(v) [CONFIDENTIAL TREATMENT REQUESTED] per unit if
[CONFIDENTIAL TREATMENT REQUESTED] units or more, but
less than [CONFIDENTIAL TREATMENT REQUESTED] units, have
been ordered per Contract Year; and
(vi) [CONFIDENTIAL TREATMENT REQUESTED] per unit if more than
[CONFIDENTIAL TREATMENT REQUESTED] units have been
ordered for delivery per Contract Year.
Orders for quantities in excess of the range contemplated in Article
10.1(a) hereof shall be deemed "ordered" for purposes of Article 8.1(a)
only if confirmed for delivery by DEBIOTECH in accordance with Article
10.1(b) hereof.
These Cassettes will be delivered pursuant to the Packaging Specifications
contemplated in Article 10.3(e), non sterilized and in bulk in multiples
of at least [CONFIDENTIAL TREATMENT REQUESTED] units during the first
Contract Year and in multiples of at least [CONFIDENTIAL TREATMENT
REQUESTED] units in the Contract Years thereafter.
(b) PUMP V.1A:
(i) [CONFIDENTIAL TREATMENT REQUESTED] per unit if
[CONFIDENTIAL TREATMENT REQUESTED] units or more, but
less than [CONFIDENTIAL TREATMENT REQUESTED] units, have
been ordered per Contract Year;
(ii) [CONFIDENTIAL TREATMENT REQUESTED] per unit if
[CONFIDENTIAL TREATMENT REQUESTED] units or more, but
less than [CONFIDENTIAL TREATMENT REQUESTED] units, have
been ordered per Contract Year;
(iii) [CONFIDENTIAL TREATMENT REQUESTED] per unit if
[CONFIDENTIAL TREATMENT REQUESTED] units or more, but
less than [CONFIDENTIAL TREATMENT REQUESTED] units, have
been ordered per Contract Year; and
(iv) [CONFIDENTIAL TREATMENT REQUESTED] per unit if more than
[CONFIDENTIAL TREATMENT REQUESTED] units have been
ordered per Contract Year.
Orders for quantities in excess of the range contemplated in Article
10.1(a) hereof shall be deemed "ordered" for purposes of Article 8.1(b)
only if confirmed for delivery by DEBIOTECH in accordance with Article
10.1(b) hereof.
<PAGE>
These Pumps are delivered pursuant to the Packaging Specifications
contemplated in Article 10.3(e), with one external power supply, one
cleaning cassette and one belt clip (or pole clip, at the election of IMED
if it agrees to pay the price differential), including one rechargeable
battery module inside the Pump, in multiples of at least [CONFIDENTIAL
TREATMENT REQUESTED] units.
(c) PUMP V.2:
The price for the Pump v.2 will be defined by DEBIOTECH at the date of
Market Approval of Pump v.2 but shall in no event exceed the price for the
Pump v.1A by more than [CONFIDENTIAL TREATMENT REQUESTED].
Orders for the quantities in excess of the range contemplated in Article
10.1(a) hereof shall be deemed "ordered" for purposes of Article 8.1(c)
only if confirmed for delivery by DEBIOTECH in accordance with Article
10.1(b) hereof.
These Pumps are delivered pursuant to the Packaging Specifications
contemplated in Article 10.3(e), with one external power supply, one
cleaning cassette and one belt clip (or pole clip, at the election of IMED
if it agrees to pay the price differential), including one replaceable
rechargeable battery pack inside the Pump, in multiples of at least
[CONFIDENTIAL TREATMENT REQUESTED] units.
(d) ACCESSORIES
If ordered separately from a Pump:
(i) [CONFIDENTIAL TREATMENT REQUESTED] per unit for the
pole/bed fixation module by multiple of at least
[CONFIDENTIAL TREATMENT REQUESTED] units;
(ii) [CONFIDENTIAL TREATMENT REQUESTED] per unit for the
shoulder strap fixation module by multiple of at least
[CONFIDENTIAL TREATMENT REQUESTED] units;
(iii) [CONFIDENTIAL TREATMENT REQUESTED] per unit for the belt
clip by multiple of at least [CONFIDENTIAL TREATMENT
REQUESTED] units;
(iv) [CONFIDENTIAL TREATMENT REQUESTED] per unit for the
external power supply for the Pump v.1 and v.1A by
multiple of at least [CONFIDENTIAL TREATMENT REQUESTED]
units;
(v) [CONFIDENTIAL TREATMENT REQUESTED] per unit for the Pump
storage plastic casing by multiple of at least
[CONFIDENTIAL TREATMENT REQUESTED] units; and
<PAGE>
(vi) not more than [CONFIDENTIAL TREATMENT REQUESTED] per unit
for the Cassette/Reservoir Module Housing by multiple of
at least [CONFIDENTIAL TREATMENT REQUESTED] units.
8.2 TAXES; CURRENCY. The prices mentioned in Article 8.1 hereabove are
exclusive of any tax and for deliveries made F.O.B. freeport in Geneva, or
other European port of embarkation mutually agreed upon, such agreement
not to be unreasonably withheld by either Party, pursuant to Incoterms ICC
1990 in accordance with Article 10.3(b). IMED shall be responsible for
the payment of all taxes and customs duties, if any, that are due to
governmental authorities in connection with the importation, sale and
distribution of the Product and/or Accessories.
Invoicing will be in US$, or in any other currency agreed to by the
Parties, applying the official exchange rate of US$ to this currency
posted by Union Bank of Switzerland in Zurich on the due date of payment.
8.3 PRICE INCREASES OR DECREASES.
(a) ANNUAL MANUFACTURING COSTS. One year after the commencing of the
first Quarter in which the Effective Date occurs, and on each one year
anniversary of such date (the "Calculation Date"), the prices will be
increased or decreased, as the case may be, in respect of the following
one year period by an amount equal to the lesser of: (i) DEBIOTECH's
actual increases or decreases in manufacturing costs from the Effective
Date to the most recent Calculation Date, as evidenced by a certificate
from DEBIOTECH's original or second source manufacturer as the case may
be; and (ii) the percentage increase or decrease in the Index from the
Effective Date to the Calculation Date; PROVIDED, HOWEVER, that the price
shall never be reduced below the prices applicable as of the Effective
Date. The price of the Product and Accessories will be the price valid on
the date the Firm Order is given to DEBIOTECH. DEBIOTECH shall promptly
notify IMED in writing of any price increase or decrease, which notice
shall contain the amount of such increase or decrease and shall illustrate
the calculation method used by DEBIOTECH to determine such increase or
decrease.
Should IMED find it impossible to pass to a majority of its clients the
Product and/or Accessories price increases according to this Article 8.3
in its own prices to its customers in certain countries of the Territory,
then the Parties hereto shall negotiate in good faith in order to find, if
possible, a more limited increase for the Product and/or Accessories price
for the year and in the country(ies) concerned than the price which would
result from the application of the immediately preceding paragraph. In
such an event, the price increase shall not exceed the cumulative increase
which would have resulted applying a notional index, the increase of which
would have been at the constant rate of [CONFIDENTIAL TREATMENT REQUESTED]
per year from the Effective Date.
<PAGE>
(b) PRODUCT CHANGES. In the event that Product changes described in
Article 5.9 (other than those changes contemplated in clause (i) of
Article 5.9 which are due to any applicable law, rule or legal requirement
in effect on the Effective Date and which shall be made at the sole cost
of DEBIOTECH) result in an increase of direct or indirect manufacturing
costs, the transfer price will be increased accordingly; PROVIDED,
HOWEVER, that any such changes which are Improvements shall be treated
under Article 5.10.
8.4 PRICE FORECASTS; ADJUSTMENTS. In order to apply a reasonable price at the
beginning of each Contract Year, the beginning unit transfer price shall
be based on the total number of units ordered by IMED during the previous
Contract Year and its increase ratio compared to volumes for the Contract
Year before, and any final adjustment being either invoiced in the last
Quarter or adjusted on the last payments for deliveries within the said
last Quarter. The price of the Pumps delivered during the first Contract
Year shall be based on the purchases anticipated for the said Contract
Year but not below [CONFIDENTIAL TREATMENT REQUESTED], the balance being
either invoiced in the last Quarter or adjusted on the last deliveries of
the said last Quarter.
8.5 PAYMENT TERMS; INTEREST ON LATE PAYMENTS. All payments concerning
deliveries by DEBIOTECH shall be made by IMED to a bank account designated
by DEBIOTECH to IMED, by SWIFT transfer, as follows: (a) [CONFIDENTIAL
TREATMENT REQUESTED] of the sum due (i) when ordering pursuant to Article
10.1(a) or (ii) three (3) months plus the remaining number of days of the
Initial Firm Order Period after ordering pursuant to Article 10.2; and (b)
the balance within [CONFIDENTIAL TREATMENT REQUESTED] days after delivery
to the port contemplated in Article 10.3(b) hereof. Sums overdue by
either Party under this Agreement will bear interest at three (3) points
above Prime Rate or at such lower rate as shall then be the maximum rate
permitted by law, calculated for the duration of the delay, on a daily
basis, starting from the due date of payment. Each substantially complete
delivery by DEBIOTECH to IMED shall constitute a separate sale obligating
IMED to pay therefor, but IMED shall have a right to advance notice of
substantially incomplete deliveries with an election to delay delivery to
the next requested delivery date.
8.6 LIQUIDATED DAMAGES FOR DELIVERY DELAY. In the event that DEBIOTECH fails
to deliver Products or Accessories ordered by a Firm Order (Article
10.1(a)) by the Confirmed Date (Article 10.1(b)) in quantities
substantially equal to the quantities in such Firm Order, so long as
DEBIOTECH uses commercially reasonable efforts, the sole damages available
to IMED for such delay in delivery shall be liquidated damages as provided
in this Article 8.6; PROVIDED, HOWEVER, that, so long as DEBIOTECH uses
commercially reasonable efforts, if such delay is due to (i) Force
Majeure, (ii) the fault of IMED, (iii) a universal delay in the supply of
a major component (other than the Pump motor) to the Product or Accessory
which was (x) commonly available from multiple sources immediately prior
to its unavailability or (y) only available from one source which was
reliable immediately prior to the
<PAGE>
unavailability of such component or (iv) the result of design and/or
manufacturing difficulties which arise in connection with responding to a
Mandatory or Voluntary Recall or Epidemic Failure event under Article 11.3
(so long as DEBIOTECH expends commercially reasonable efforts to eliminate
the causes thereof and again commences and continues supply in accordance
with the terms of this Agreement within the shortest time reasonable under
the circumstances following the occurrence of Recall or Epidemic Failure
event), then in such cases no damages for such delay in delivery or
consequences thereof may be claimed by IMED.
Beginning after a grace period of thirty (30) days after such Confirmed
Date, (i) IMED shall be able to deduct from any amounts then due and owing
to DEBIOTECH or (ii) if no amounts are due under the foregoing clause (i)
DEBIOTECH shall pay to IMED by SWIFT transfer within forty-five (45) days,
or reduce the invoice amount due for delayed goods delivered prior to such
45 day period, the following amounts:
- [CONFIDENTIAL TREATMENT REQUESTED] of the transfer price of any
such delayed Firm Order for each full week of delay from the first
to fifth week after the grace period; and
- [CONFIDENTIAL TREATMENT REQUESTED] of the transfer price of any
such delayed Firm Order for each full week of delay from the sixth
to fifteenth week after the grace period.
Liquidated Damages payable under this Article 8.6 shall not exceed
[CONFIDENTIAL TREATMENT REQUESTED] of the transfer price of each delayed
Firm Order.
8.7 SPECIAL PACKAGING COSTS. All costs for special packaging as requested by
IMED in writing pursuant to Article 10.3(e) shall be in addition to the
prices of the Product and/or Accessories, and shall be paid together with
payment for the applicable Product and/or Accessories.
8.8 LETTER OF CREDIT. In the event IMED shall fail to make any payment for
any delivery when due and such failure shall continue for more than
fifteen (15) days after written notice from DEBIOTECH of such failure,
DEBIOTECH shall have the right to accept further orders and/or send
confirmed deliveries for the Product and/or Accessories in that Contract
Year only if IMED causes its bank (reasonably acceptable to DEBIOTECH) to
open in favor of DEBIOTECH a confirmed and irrevocable letter of credit,
payable in US$ upon the delivery of the corresponding Product and/or
Accessories, such letter of credit being opened when placing the order
pursuant to Article 10.1(a) or at DEBIOTECH's requested time before
delivery, in an amount equal to the balance due in respect of such order,
and shall not expire before sixty (60) days after the confirmed date of
delivery. If DEBIOTECH has the right to require such a letter of credit
more than twice, it shall have the right to require such a letter of
credit for the duration of the Agreement.
<PAGE>
8.9 COST OF IMPROVEMENTS. In the event of any Improvements of either the
Pump, the Cassette or Accessories except New Accessories, pursuant to
Article 5.10 hereabove, the price for the Product or Accessory including
such Improvement will be increased by [CONFIDENTIAL TREATMENT REQUESTED]
of DEBIOTECH's increased direct manufacturing costs attributable solely to
the Improvement.
8.10 REDUCTION IN SALES PRICE; OTHER ALTERNATIVES. Subject to Articles 8.3 and
8.9, the above Pump and Cassette prices shall remain in effect for the
duration of this Agreement PROVIDED, HOWEVER, that in the event IMED can
establish at any time from and after January 1, 1997 that, on the sole
basis of objective information relating to then existing market
conditions, IMED must lower its average sales price for the Pump, Cassette
and Accessories because it has not made over a consecutive twelve (12)
month period a [CONFIDENTIAL TREATMENT REQUESTED] Gross Margin, IMED may
request no more than once per Contract Year a price reduction by written
notice to DEBIOTECH including the objective information about market
conditions showing the need to lower the sales prices to customers and the
relevant Gross Margin data (in particular selling prices and sales volumes
of Pump, Cassette and Accessories). The Parties shall meet to discuss a
solution within fifteen (15) days from receipt of such notice.
In the event that the Parties are unable to agree on price reductions of
one or more of the Pump, Cassette or Accessories that are satisfactory to
IMED, within thirty (30) days from the written notice by IMED to
DEBIOTECH, then DEBIOTECH shall have the election to choose, by sending
written notice thereof to IMED, any one of the following options:
(a) DEBIOTECH may elect to lower the price of the Pump, Cassette
and/or Accessories in such amounts and combination of amounts as
DEBIOTECH may elect in its sole discretion, to a fixed level which
would provide to IMED such [CONFIDENTIAL TREATMENT REQUESTED] Gross
Margin based on the Gross Margin calculation data provided by IMED.
In such a case, IMED must accept such reduction and continue full
performance of the Agreement. Further, IMED agrees that to the
extent it shall at any time thereafter have a Gross Margin in excess
of [CONFIDENTIAL TREATMENT REQUESTED], such excess shall be used to
restore to DEBIOTECH the difference between the reduced price
provided pursuant to this Article 8.10(a) and the price DEBIOTECH
would otherwise have received under Article 8.1 and Article 8.3 but
for such a price reduction (the "Restoration Amount"). In the event
that prices shall ever be reduced under this Article 8.10(a), the
Parties shall calculate annually the Restoration Amount for each
Contract Year. At the end of any subsequent Contract Year in which
IMED shall have a Gross Margin in excess of [CONFIDENTIAL TREATMENT
REQUESTED], it shall pay such Restoration Amount to DEBIOTECH within
thirty (30) days after the end of such Contract Year. The
Restoration Amounts shall continue to accumulate during the term of
this
<PAGE>
Agreement until paid and shall be paid each Contract Year to the
extent of accumulated, but unpaid, Restoration Amounts, but shall
not bear interest; or
(b) DEBIOTECH may elect to eliminate the minimum order
requirements in Article 12.1 hereof; or
(c) DEBIOTECH may elect to send a Termination Notice and pay to
IMED the Purchase Price pursuant to Article 17.7, PROVIDED, HOWEVER,
that IMED shall have the right, exercisable within ten (10) days of
its receipt of written notice of DEBIOTECH's election of this option
(c), to avoid such termination by giving written notice to DEBIOTECH
of IMED's withdrawal of its price reduction request and continuing
this Agreement by paying the transfer prices in effect.
DEBIOTECH may elect option (a), (b) or (c) each time IMED requests such a
price reduction but once option (b) has been elected, that election cannot
be changed without the consent of IMED.
ARTICLE 9: ROYALTIES
9.1 PUMP. IMED shall pay to DEBIOTECH a royalty on the Pump Net Proceeds of
Sales for each type of Pump at a rate which shall be determined as
follows:
(a) if the Pump Net Proceeds of Sales are less than twice the aggregate
price paid by IMED during that Contract Year for such Pump pursuant
to Article 8 hereabove (after taking into consideration all final
adjustments pursuant to Article 8.4), the rate shall be
[CONFIDENTIAL TREATMENT REQUESTED];
(b) if the Pump Net Proceeds of Sales are more than twice, but less than
two and one half times, the aggregate price paid by IMED during that
Contract Year for such Pump pursuant to Article 8 hereabove (after
taking into consideration all final adjustments pursuant to Article
8.4), the rate shall be [CONFIDENTIAL TREATMENT REQUESTED];
(c) if the Pump Net Proceeds of Sales are over two and one half times,
but less than three times, the aggregate price paid by IMED during
that Contract Year for such Pump pursuant to Article 8 hereabove
(after taking into consideration all final adjustments pursuant to
Article 8.4), the rate shall be [CONFIDENTIAL TREATMENT REQUESTED];
(d) if the Pump Net Proceeds of Sales are more than three times, but
less three and one half times, the aggregate price paid by IMED
during that Contract Year for such Pump pursuant to Article 8
hereabove (after taking into
<PAGE>
consideration all final adjustments pursuant to Article 8.4), the
rate shall be [CONFIDENTIAL TREATMENT REQUESTED]; or
(e) if the Pump Net Proceeds of Sales are more than three and one half
times the aggregate price paid by IMED during that Contract Year for
such Pump pursuant to Article 8 hereabove (after taking into
consideration all final adjustments pursuant to Article 8.4), the
rate shall be [CONFIDENTIAL TREATMENT REQUESTED].
9.2 CASSETTE. IMED shall pay to DEBIOTECH a royalty on the Cassette Net
Proceeds of Sales for Cassette/Reservoir Modules and Cassette Sets sold in
any Contract Year in connection with an empty or prefilled
Cassette/Reservoir Module (minus the cost to IMED of the drug itself if
sold by IMED or its Affiliates pre-filled) at a rate which shall be
determined as follows:
(a) if the Cassette Net Proceeds of Sales are less than twice the Cost
Price (after taking into consideration all final adjustments
pursuant to Article 8.4), the rate shall be [CONFIDENTIAL TREATMENT
REQUESTED];
(b) if the Cassette Net Proceeds of Sales are more than twice, but less
than two and one half times, the Cost Price (after taking into
consideration all final adjustments pursuant to Article 8.4), the
rate shall be [CONFIDENTIAL TREATMENT REQUESTED];
(c) if the Cassette Net Proceeds of Sales are over two and one half
times, but less than three times, the Cost Price (after taking into
consideration all final adjustments pursuant to Article 8.4), the
rate shall be [CONFIDENTIAL TREATMENT REQUESTED];
(d) if the Cassette Net Proceeds of Sales are more than three times, but
less three and one half times, the Cost Price (after taking into
consideration all final adjustments pursuant to Article 8.4), the
rate shall be [CONFIDENTIAL TREATMENT REQUESTED]; or
(e) if the Cassette Net Proceeds of Sales are more than three and one
half times the Cost Price (after taking into consideration all final
adjustments pursuant to Article 8.4), the rate shall be
[CONFIDENTIAL TREATMENT REQUESTED].
9.3 ACCESSORIES. IMED shall pay to DEBIOTECH a royalty on the Accessory Net
Proceeds of Sales for each type of Accessory at a rate which shall be
determined as follows:
(a) if the Accessory Net Proceeds of Sales are less than twice the
aggregate price paid by IMED during that Contract Year for such
Accessory pursuant to
<PAGE>
Article 8 hereabove (after taking into consideration all final
adjustments pursuant to Article 8.4), the rate shall be
[CONFIDENTIAL TREATMENT REQUESTED];
(b) if the Accessory Net Proceeds of Sales are more than twice, but less
than two and one half times, the aggregate price paid by IMED during
that Contract Year for such Accessory pursuant to Article 8
hereabove (after taking into consideration all final adjustments
pursuant to Article 8.4), the rate shall be [CONFIDENTIAL TREATMENT
REQUESTED];
(c) if the Accessory Net Proceeds of Sales are over two and one half
times, but less than three times, the aggregate price paid by IMED
during that Contract Year for such Accessory pursuant to Article 8
hereabove (after taking into consideration all final adjustments
pursuant to Article 8.4), the rate shall be [CONFIDENTIAL TREATMENT
REQUESTED];
(d) if the Accessory Net Proceeds of Sales are more than three times,
but less three and one half times, the aggregate price paid by IMED
during that Contract Year for such Accessory pursuant to Article 8
hereabove (after taking into consideration all final adjustments
pursuant to Article 8.4), the rate shall be [CONFIDENTIAL TREATMENT
REQUESTED]; or
(e) if the Accessory Net Proceeds of Sales are more than three and one
half times the aggregate price paid by IMED during that Contract
Year for such Accessory pursuant to Article 8 hereabove (after
taking into consideration all final adjustments pursuant to Article
8.4), the rate shall be [CONFIDENTIAL TREATMENT REQUESTED].
9.4 SALES TO IMED AFFILIATES. Notwithstanding the foregoing, any sales
between IMED and its Affiliates shall not be counted as sales to Third
Persons and therefore shall not generate any royalty payment provided
however that such Affiliates are not in fact users of such Products and/or
Accessories.
9.5 PAYMENT OF ROYALTIES.
(a) TIMING. The royalties pursuant to Articles 9.1, 9.2 and 9.3
hereabove shall be paid to DEBIOTECH within [CONFIDENTIAL TREATMENT
REQUESTED] after the end of each Contract Year with a written statement
specifying the quantities of Pumps, Cassettes (in connection with an empty
or prefilled Cassette/Reservoir Module), Cassette/Reservoir Modules and
other Accessories sold during that Contract Year and the corresponding Net
Proceeds of Sales during the said Contract Year.
(b) METHOD. All payments shall be made by SWIFT transfer to a bank
account to be designated to IMED by DEBIOTECH in writing, in US$, or in
any other currency agreed to by the Parties, applying the official
exchange rate of US$ to this currency
<PAGE>
posted by Union Bank of Switzerland in Zurich on the last day of the
relevant Quarter.
(c) LATE RATE. Overdue royalties shall bear interest at three (3)
points above Prime Rate or at such lower rate as shall then be the maximum
rate permitted by law, calculated for the duration of the delay, on a
daily basis, starting from the due date of payment.
9.6 ACCOUNTING RECORDS. IMED and DEBIOTECH and/or any of their Affiliates, as
the case may be, shall keep accounting records regarding the sales of the
Product, Cassette/Reservoir Modules and Accessories pursuant to this
Agreement separate from its sales of other products, in order to
facilitate audits by any accountant according to the provisions of Article
21.4.
ARTICLE 10: ORDERS & DELIVERY
10.1 ORDERS.
(a) FIRM ORDERS; FORECAST. IMED shall deliver to DEBIOTECH a written
notice [CONFIDENTIAL TREATMENT REQUESTED] prior to the beginning of each
Quarter specifying: (i) a firm and irrevocable order for the Product
and/or Accessories for that Quarter (the "Firm Order") (which may be
divided by IMED into monthly purchase orders) indicating requested
delivery dates; and (ii) a non-binding forecast for Product and/or
Accessories for the Quarter thereafter, accompanied, when applicable, by
the information contemplated in Article 14.4 hereof; PROVIDED, that the
forecast shall not be more than [CONFIDENTIAL TREATMENT REQUESTED] of the
Firm Order for the immediately preceding Quarter unless IMED gives at
least [CONFIDENTIAL TREATMENT REQUESTED] advance notice. The Firm Order
in respect of any Quarter shall be greater than or equal to [CONFIDENTIAL
TREATMENT REQUESTED] and less than or equal to [CONFIDENTIAL TREATMENT
REQUESTED] of the forecast delivered to DEBIOTECH for such Quarter
pursuant to clause (ii) of the preceding sentence, with respect to any
particular Product or Accessory.
(b) PURCHASE ORDERS. Each Firm Order may specify the shipment date(s)
within the applicable Quarter (each a "Shipment Date"). DEBIOTECH shall:
(i) be obligated to supply, subject only to the provisions of Article 19,
all Products and Accessories ordered pursuant to the Firm Order; and (ii)
promptly acknowledge each purchase order in writing and confirm the
Shipment Dates for all ordered Products and Accessories (or a date as soon
as possible thereafter but in any event within thirty (30) days of the
date specified by IMED, the date so confirmed by DEBIOTECH, the "Confirmed
Date") and destinations specified by IMED in accordance with Article
10.3(d). DEBIOTECH shall not be obligated (although it shall use
commercially reasonable efforts) to supply in any Quarter any quantity of
Products or Accessories,
<PAGE>
exceeding with respect to any particular Product or Accessory,
[CONFIDENTIAL TREATMENT REQUESTED] of IMED's forecast for such Quarter
furnished in accordance with Article 10.1(a)(ii) above.
10.2 INITIAL ORDERS. DEBIOTECH shall notify IMED within two (2) weeks and six
(6) months in advance of the time at which it is capable of providing IMED
with production quantities of any Product (provided that, in the event
that such Product is a Pump, DEBIOTECH must then also be capable of
providing IMED with Cassettes for such Pump). IMED shall have two (2)
weeks from the receipt of such notification (the "Initial Firm Order
Period") to deliver to DEBIOTECH a Firm Order (the "Initial Firm Order")
for such Product. In the event that IMED fails to deliver the Initial
Firm Order to DEBIOTECH within the Initial Firm Order Period without any
valid reason, Product Availability for such Product shall deem to have
occurred six (6) months following the expiration of the Initial Firm Order
Period.
IMED hereby places with DEBIOTECH a firm and irrevocable order for a first
delivery of [CONFIDENTIAL TREATMENT REQUESTED] Cassettes, at a unit cost
price according to Article 8.1(a)(i) and according to the conditions
stipulated in Article 8 hereof. These Cassettes will be delivered over
[CONFIDENTIAL TREATMENT REQUESTED] running from the first day of the first
Country Year for the USA, according to individual Firm Order confirmations
for delivery according to the schedule mentioned in Article 10.1
hereabove.
10.3 DELIVERY.
(a) DELIVERY TIME. DEBIOTECH shall ship Products and Accessories to
IMED on the Confirmed Shipment Date. DEBIOTECH shall notify IMED at least
seven (7) days in advance when the Product and/or Accessories are ready to
be shipped. If a delivery is delayed as a result of any action or
inaction of IMED, DEBIOTECH may invoice IMED for the Product and/or
Accessories as of the Confirmed Shipment Date and may charge IMED for
warehousing and other expenses incurred directly resulting from the delay.
(b) DELIVERY TERMS. The Products and Accessories shall be shipped to
IMED F.O.B., freeport in Geneva or other European port of embarkation
mutually agreed upon, such agreement not to be unreasonably withheld by
either Party, pursuant to Incoterms ICC 1990. Notwithstanding the
foregoing delivery terms, upon IMED's written request DEBIOTECH shall:
(i) arrange for and procure contracts of carriage and insurance on
customary terms; and (ii) provide IMED with assistance in obtaining any
documents issued or transmitted in the country of shipment which IMED may
require for the importation or export of Products and Accessories
therefrom, in each case at IMED's risk and expense.
(c) PACKING LIST. DEBIOTECH shall include a packaging list in each
shipment of Products and/or Accessories which shall provide the following
information: (i) IMED
<PAGE>
purchase order number; (ii) quantity; and (iii) DEBIOTECH lot number, and
which shall be accompanied by the certificate contemplated in Article
11.2(c). DEBIOTECH shall mail a copy of each packing list to IMED at the
time of shipment.
(d) DESTINATION. The Products, Accessories and Spare Parts will be made
ready for shipment to IMED by DEBIOTECH at one address only in each
country of the Territory. IMED may change the address of such shipments
from time to time upon written notice to DEBIOTECH.
(e) PACKAGING. Each Product and Accessory sold to IMED by DEBIOTECH
hereunder shall be packed using the packaging specifications for such
Product or Accessory described on Enclosure 13 hereto (the "Packaging
Specifications"). IMED will deliver sufficiently in advance all manuals,
inserts, special labeling and the like to be provided by IMED and included
in the package by DEBIOTECH's manufacturer at no supplementary cost to
IMED.
IMED shall notify DEBIOTECH in writing of any special packaging
requirements or change in the Packaging Specifications when placing firm
order pursuant to Article 10.1(a). Upon receipt of such notice, DEBIOTECH
shall take all necessary measures to comply with any such request;
PROVIDED, HOWEVER, that the additional costs associated with such request,
if any, shall be paid by IMED in accordance with Article 8.7.
10.4 SUPPLY INTERRUPTION SAFEGUARDS.
(a) MINIMUM CASSETTE SUPPLY RESERVE REQUIREMENTS. DEBIOTECH shall
maintain in a secure warehouse independent from manufacturing facilities a
[CONFIDENTIAL TREATMENT REQUESTED] supply of Cassettes (based on then
current sales volumes) so that there is always a [CONFIDENTIAL TREATMENT
REQUESTED] reserve available. In addition, either IMED or DEBIOTECH may,
at its sole discretion, elect to maintain any additional reserve.
(b) SECOND SOURCE SUPPLIER. DEBIOTECH shall, promptly after the First
Introduction Date in the USA, take all reasonably necessary measures in
order to have a second source Cassette manufacturer (reasonably acceptable
to IMED as to reliability, quality, technical capability, financial
capability and creditworthiness) ready to begin Cassette supply within
[CONFIDENTIAL TREATMENT REQUESTED] from any first source Supply
Interruption (as hereinafter defined), such second source manufacturer
being able to fulfill all required manufacturing standards hereunder,
including those set forth in Article 11.1(a) and 11.2 hereunder, and to
supply the required orders from IMED, according to the rolling forecasts
and Firm Orders communicated to DEBIOTECH as mentioned in Article 10.1.
In addition, DEBIOTECH may at any time have a second source Pump and/or
Accessory manufacturer (reasonably acceptable to IMED as to reliability,
quality, technical capability, financial capability and creditworthiness)
ready to begin Pump
<PAGE>
and/or Accessory supply within [CONFIDENTIAL TREATMENT REQUESTED] from any
first source Supply Interruption, such second source manufacturer being
able to fulfill all required manufacturing standards hereunder, including
those set forth in Article 11.1(a) and 11.2 hereunder, and to supply the
required orders from IMED, according to the rolling forecasts and Firm
Orders communicated to DEBIOTECH as mentioned in Article 10.1. DEBIOTECH
shall keep IMED informed in general regarding the progress of such
arrangements and shall provide to IMED the identity of such
manufacturer(s) in a written request for IMED's reasonable consent (as to
reliability, quality, technical capability, financial capability and
creditworthiness).
(c) GOOD FAITH EFFORTS. Each of DEBIOTECH and IMED shall cooperate in
good faith at all times during any Supply Interruption of supply of Pumps,
Cassettes or Accessories, sharing information and suggesting alternative
solutions. It is agreed that it is the intent of the Parties to find a
solution to any Supply Interruption problem that maintains the rights and
obligations of DEBIOTECH to supply Product and Accessories and, to the
extent practicable, most rapidly re-establishes the regular primary source
manufacturers.
(d) SUPPLY INTERRUPTION PROCEDURES. In the event of any supply
interruption from the first source to DEBIOTECH which would or does result
in a delivery delay to DEBIOTECH of more than [CONFIDENTIAL TREATMENT
REQUESTED] (a "Supply Interruption"), DEBIOTECH shall inform IMED in
writing immediately (the "Supply Interruption Notice"). As the first step
in the resolution of any such Supply Interruption, DEBIOTECH and IMED
shall meet within [CONFIDENTIAL TREATMENT REQUESTED] of such Supply
Interruption Notice to determine the facts and discuss in good faith the
most reasonable alternative solutions under the circumstances. As soon as
possible and in any event not later than [CONFIDENTIAL TREATMENT
REQUESTED] after such Supply Interruption Notice (the "Consultation
Period"), the Parties shall use their commercially reasonable efforts to
reach a mutual good faith determination as to the nature and probable
duration of the Supply Interruption. Given the objectives of the Parties,
in general, only if it reasonably appears that such first source
manufacturer is not capable or willing to resume regular supply in a
reasonable period of time shall a shift to a second source be necessary.
Accordingly, the Parties agree to take the following actions in the
following circumstances:
(i) LESS THAN [CONFIDENTIAL TREATMENT REQUESTED]. If the
Parties mutually agree that the Supply Interruption appears reasonably
likely to be of less than [CONFIDENTIAL TREATMENT REQUESTED] duration
from the Supply Interruption Notice and the then primary manufacturer
appears reasonably likely to be capable to produce ordered quantities
again before the end of such period, then the Parties agree to assist
such primary manufacturer to restore supply in the shortest possible
period and not to activate any available second source during such
[CONFIDENTIAL TREATMENT REQUESTED] period, unless during such period
the Supply
<PAGE>
Interruption then appears reasonably likely to continue beyond
[CONFIDENTIAL TREATMENT REQUESTED].
(ii) FROM [CONFIDENTIAL TREATMENT REQUESTED]. If the Parties
mutually agree that the Supply Interruption reasonably appears to be
of more than [CONFIDENTIAL TREATMENT REQUESTED] but less than
[CONFIDENTIAL TREATMENT REQUESTED] duration from the Supply
Interruption Notice or the then primary manufacturer appears
reasonably unlikely to be capable to produce ordered quantities again
before the end of such [CONFIDENTIAL TREATMENT REQUESTED] period, the
Parties shall discuss in good faith and decide whether it is necessary
under all of the circumstances to activate the second source in order
to assure adequate future supply, PROVIDED HOWEVER, that IMED may
require in the case of a Cassette Supply Interruption that a second
source Cassette manufacturer be immediately activated.
(iii) MORE THAN [CONFIDENTIAL TREATMENT REQUESTED]. If the
Parties mutually agree that the Supply Interruption reasonably appears
to be of more than [CONFIDENTIAL TREATMENT REQUESTED] duration from
the Supply Interruption Notice or the then primary manufacturer
appears reasonably unlikely to be capable to produce ordered
quantities again after such period, the Parties agree to immediately
activate the second source Cassette manufacturer (or in the case of
Pumps or Accessories any second source manufacturer selected by
DEBIOTECH which is reasonably acceptable to IMED as to reliability,
quality, technical capability, financial capability and
creditworthiness) to have it operational in the shortest possible
delay.
If despite their commercially reasonable efforts the Parties cannot agree
on an analysis of the circumstances of the Supply Interruption or on the
best course of action to take, (i) either Party may subject the question
to the accelerated arbitration proceeding described in Article 22.3(a) and
until there is a final determination, DEBIOTECH shall proceed in
accordance with its commercially reasonable judgement or (ii) if neither
Party commences such an arbitration proceeding, DEBIOTECH shall in good
faith be entitled to follow its commercial reasonable judgment in solving
the Supply Interruption, both clauses (i) and (ii) being subject to the
following provisions:
(i) IMED RIGHT TO REQUEST SECOND SOURCE ACTIVATION. If
during the consultation period IMED believes that the second source
manufacturer should be immediately activated by DEBIOTECH because in
IMED's reasonable judgment the primary source will not be capable of
resuming adequate supply within [CONFIDENTIAL TREATMENT REQUESTED] of
the Supply Interruption Notice, it shall deliver a written request to
DEBIOTECH to activate such second source ("IMED Activation Request").
<PAGE>
(a) DEBIOTECH COMPLIANCE. If DEBIOTECH complies with
such IMED Activation Request, the Parties shall follow such course
of action to conclusion and DEBIOTECH shall have a period of up to
[CONFIDENTIAL TREATMENT REQUESTED] from and after receipt of the
IMED Activation Request to have such second source producing an
adequate supply. In the event that DEBIOTECH determines to comply
with IMED's request against its better judgment, it may promptly
deliver a written notice to IMED indicating the date by which it
believed in its reasonable judgment that the primary source would
have been producing an adequate supply. In the event that such
notice was provided to IMED and the primary source was able to cure
the Supply Failure prior to the date [CONFIDENTIAL TREATMENT
REQUESTED] after the IMED Activation Request, DEBIOTECH shall be
entitled to an additional grace period under the liquidated damage
provisions of Article 8.6 hereof equal to the number of days between
(x) the date of receipt of the IMED Activation Request and (y) the
date [CONFIDENTIAL TREATMENT REQUESTED] after the Supply
Interruption Notice.
(b) DEBIOTECH NON-COMPLIANCE. If DEBIOTECH elects
using its reasonable commercial judgment to refuse to comply with
the IMED Activation Request and to continue with the first source,
it shall be entitled to follow such course of action so long as such
primary source is again producing an adequate supply before a date
[CONFIDENTIAL TREATMENT REQUESTED] after the Supply Interruption
Notice. DEBIOTECH shall immediately activate its second source
manufacturer in the event of a Supply Interruption that is
continuing after such [CONFIDENTIAL TREATMENT REQUESTED] period,
unless (i) the Parties are then pursuing a mutually agreed plan to
continue with the primary source and such plan is reasonably likely
to result in the restoration of adequate supply within the estimated
time frame or in any event no later than [CONFIDENTIAL TREATMENT
REQUESTED] after such IMED Activation Request or (ii) otherwise
notified by IMED. In the event that the primary source is not
producing an adequate supply [CONFIDENTIAL TREATMENT REQUESTED]
after receipt of the IMED Activation Request or if DEBIOTECH
subsequently changes it strategy and activates the second source,
DEBIOTECH shall be liable to IMED for damages equal to the
reasonable out-of-pocket costs incurred by IMED as a direct result
of being without supply during the period between the date
[CONFIDENTIAL TREATMENT REQUESTED] after receipt of the IMED
Activation Request and the date DEBIOTECH's primary or second source
manufacturer, as the case may be, is actively producing an adequate
supply.
(ii) IMED RIGHT TO REQUIRE ARBITRATION. In the event
that the restoration of adequate supply has not been achieved within
[CONFIDENTIAL TREATMENT REQUESTED] after the Supply Interruption
Notice, IMED may request an accelerated arbitration pursuant to
Article 22.3 to determine
<PAGE>
the best course of action if it reasonably believes that the current
course of action will not result in the restoration of adequate
supply more rapidly than an alternative proposed by IMED. DEBIOTECH
shall carry the burden of proof that such current course of action
will result in a restoration of adequate supply by the time
estimated.
The time periods in this Article 10.4(d) measured from the Supply
Interruption Notice shall be extended for Cassette Supply Interruptions by
[CONFIDENTIAL TREATMENT REQUESTED] for every [CONFIDENTIAL TREATMENT
REQUESTED] of supply reserve of Cassettes maintained by DEBIOTECH in
excess of the [CONFIDENTIAL TREATMENT REQUESTED] reserve provided for in
Article 10.4(a) hereof and for Pump or Accessory Supply Interruptions by
[CONFIDENTIAL TREATMENT REQUESTED] for every day of supply reserve of
Pumps or Accessories, as the case may be, maintained by DEBIOTECH, but in
no event shall the time periods be extended by more than [CONFIDENTIAL
TREATMENT REQUESTED].
10.5 STANDBY ARRANGEMENTS. The parties have entered into this Article 10.5 in
order to provide to IMED the ability to obtain and sell the Products and
Accessories in the Territory under circumstances where, notwithstanding
the sequential application of the above provisions and the efforts of the
Parties hereto to perform this Agreement in good faith so as to continue
their relationships as contemplated herein, DEBIOTECH is no longer able
to, or does not, satisfy its obligations to provide IMED with its
reasonable requirements of Products and Accessories as contemplated
herein. Accordingly, in those cases where the Parties have been unable
to resolve a Supply Interruption problem pursuant to Article 10.4 through
their mutual assistance of the first source manufacturer or the transfer
of manufacture to a second source manufacturer selected by DEBIOTECH, the
second step in the resolution process will be either for IMED to contract
directly with [CONFIDENTIAL TREATMENT REQUESTED], [CONFIDENTIAL TREATMENT
REQUESTED] or other first source manufacturer, as the case may be,
pursuant to a Standby Agreement, or for IMED to assume direct
responsibility for such manufacture pursuant to the Standby License, in
either case, in accordance with the respective provisions which follow.
(a) STANDBY AGREEMENTS. On the Effective Date, DEBIOTECH shall
provide IMED with written undertakings from: (i) [CONFIDENTIAL
TREATMENT REQUESTED] stating that IMED will always have the
opportunity to cure any DEBIOTECH default under the license between
DEBIOTECH and [CONFIDENTIAL TREATMENT REQUESTED] contemplated in
Schedule 13.2 (the "[CONFIDENTIAL TREATMENT REQUESTED] License"), so
that the technology contemplated in the [CONFIDENTIAL TREATMENT
REQUESTED] License will continue to be available to IMED on terms
which are at least as favorable as those then currently provided to
DEBIOTECH; and (ii) [CONFIDENTIAL TREATMENT REQUESTED] and
[CONFIDENTIAL TREATMENT
<PAGE>
REQUESTED] to supply IMED directly with Product and Accessories on
the same terms at which IMED receives Product and Accessories from
DEBIOTECH under this Agreement, such undertakings attached hereto as
Exhibits 10.5A, 10.5B and 10.5C, respectively (the "Standby
Agreements"). IMED shall only be entitled to enforce its rights
under the Standby Agreements if: (i) the provisions of Article 10.4
have been complied with; (ii) [CONFIDENTIAL TREATMENT REQUESTED]
have past since the receipt of the Supply Interruption Notice; and
(iii) in the event at least one of the following has occurred: (x)
the filing of a bankruptcy case or reorganization proceeding (i.e. a
composition) by or against DEBIOTECH which has not been dismissed
within [CONFIDENTIAL TREATMENT REQUESTED]; (y) the failure of
DEBIOTECH to operate its business in the ordinary course as it
relates to the manufacture and sale of any Product or Accessories
for [CONFIDENTIAL TREATMENT REQUESTED] (or [CONFIDENTIAL TREATMENT
REQUESTED] within any period of [CONFIDENTIAL TREATMENT REQUESTED]
and such failure has a material adverse effect upon the ability of
DEBIOTECH to supply such Product or Accessories in accordance with
Article 10.1; or (z) the failure of DEBIOTECH to achieve the timely
commencement of manufacture within [CONFIDENTIAL TREATMENT
REQUESTED] of the supply interruption to IMED for the Pump or
[CONFIDENTIAL TREATMENT REQUESTED] of the supply interruption to
IMED for the Cassette (in any such case, a "Supply Failure");
PROVIDED, HOWEVER, that:
(i) FORCE MAJEURE. If the Supply Interruption is due to a
Force Majeure event, as described in Article 19.1, DEBIOTECH
shall provide notice to IMED of the occurrence of such event
within [CONFIDENTIAL TREATMENT REQUESTED] following such
occurrence and DEBIOTECH shall, upon IMED's request, provide
IMED with reasonable assurances that DEBIOTECH will
manufacture (or cause to be manufactured) and sell such
Product and Accessories to IMED within [CONFIDENTIAL TREATMENT
REQUESTED] of the occurrence of such Force Majeure event, then
the same shall not be deemed to be a Supply Failure hereunder
and the time periods contemplated in Article 10.4 shall not
begin to run during the period which is the lesser of: (a)
the continuing existence of such Force Majeure event; and (b)
[CONFIDENTIAL TREATMENT REQUESTED].
(ii) RECALL. If the Supply Interruption is the result of
design and/or manufacturing modifications which are necessary
to respond to a Mandatory or Voluntary Recall event under
Article 11.3 hereof, then the same shall not be deemed a
Supply Failure hereunder, so long as DEBIOTECH expends its
commercially reasonable efforts to eliminate the causes
thereof and again commences and continues supply of such
<PAGE>
Product and Accessories in accordance with the terms of this
Agreement within the shortest time reasonable under the
circumstances following the occurrence of such recall event,
and the time periods contemplated in Article 10.4 shall not
begin to run during the period of which is the lesser of: (a)
the continuing existence of such recall event; and (b)
[CONFIDENTIAL TREATMENT REQUESTED]; or
(iii) MAJOR COMPONENT. If the Supply Interruption is the
result of the general unavailability of a major component to a
Product or Accessory (other than the Pump motor) which was (x)
commonly available from multiple sources immediately prior to
its unavailability or (y) only available from one source which
was reliable immediately prior to the unavailability of such
component, which DEBIOTECH is unable to obtain either through
its own sources or with the advice and assistance of IMED
which IMED agrees to use commercially reasonable efforts to
provide, then the same shall not be deemed a Supply Failure
hereunder so long as DEBIOTECH expends commercially reasonable
efforts to eliminate the causes thereof and again commences
and continues supply of such Product and Accessories in
accordance with the terms of this Agreement, within the
shortest time reasonable under the circumstances following the
occurrence of the general unavailability of a major component.
As soon as DEBIOTECH is again able to and does assume all of its
supply obligations under the Agreement, then IMED's rights under the
Standby Agreements shall terminate with respect to such Supply
Failure.
DEBIOTECH represents and warrants that the price for the Products
and Accessories paid by IMED to [CONFIDENTIAL TREATMENT REQUESTED]
or [CONFIDENTIAL TREATMENT REQUESTED] or other manufacturer, as the
case may be, under the Standby Agreements will not be more than the
price for Products and Accessories paid by IMED to DEBIOTECH.
(b) STANDBY LICENSES. DEBIOTECH hereby grants IMED under all
Technology: (i) an exclusive license (or non-exclusive license
pursuant to Article 12.2, as the case may be) to use, market, sell,
lease and distribute any of the Products or Accessories in the
Territory, limited to the Field of Application; (ii) a non-exclusive
license to have made worldwide any of the Products and Accessories
by a Third Person manufacturer(s) selected by IMED which is
reasonably acceptable to DEBIOTECH (or by IMED itself, but only if
neither IMED nor DEBIOTECH can procure a Third Person manufacturer
within a reasonable period of time), and subject to appropriate
confidentiality and exclusivity undertakings to DEBIOTECH; and (iii)
a nonexclusive right to
<PAGE>
modify, adapt and further develop any of the Products or Accessories
(collectively, the "Standby Licenses").
IMED shall be entitled to exercise its rights under the Standby
Licenses by sending a written notice to DEBIOTECH (the "Standby
Notice") only after the provisions of Article 10.4 have been fully
complied with and in the event all of the following have occurred:
(i) a Supply Failure exists; (ii) [CONFIDENTIAL TREATMENT REQUESTED]
have passed after written notice from IMED to DEBIOTECH, and to
[CONFIDENTIAL TREATMENT REQUESTED] or [CONFIDENTIAL TREATMENT
REQUESTED], as the case may be, that either [CONFIDENTIAL TREATMENT
REQUESTED] or [CONFIDENTIAL TREATMENT REQUESTED], as the case may
be, has failed or is unable to fulfill its obligations under the
applicable Standby Agreement and such failure has not been cured
within such [CONFIDENTIAL TREATMENT REQUESTED] period; and (iii)
DEBIOTECH has not undertaken effective steps to assure that adequate
supply will be restored by a second source manufacturer in a
time-frame reasonably likely to be shorter than the time that will
be required for IMED to achieve production with its Third Person
manufacturer. The Standby Licenses arising under this Article
10.5(b) shall apply only to those Products and Accessories the
supply of which is affected and only so long as the supply is
affected. In the event that DEBIOTECH contests the existence of the
conditions entitling IMED to exercise such Standby License rights,
DEBIOTECH shall have the right to submit that question to
accelerated arbitration under Article 22.3 hereof and IMED's ability
to exercise such rights shall be stayed until a final determination
by such arbitrator.
In the event that IMED were to exercise its rights under the
Standby Licenses and directly contract with a Third Person
manufacturer to manufacture Pumps, Cassettes or Accessories (or IMED
manufactures the same itself), as the case may be, DEBIOTECH shall
be immediately thereafter relieved of all obligations under this
Agreement relating to the manufacture of any Product or Accessory
pursuant to the Standby License including, without limitation, all
supply, delivery, quality control, warranty, Recall, Epidemic
Failure, and liability of all kinds and description only with
respect to those Products and Accessories so manufactured by such
Third Person manufacturer (or IMED).
With respect to all such Pumps, Cassettes or Accessories, as
the case may be, manufactured for IMED by such Third Person
manufacturer (or by IMED itself), IMED shall pay to DEBIOTECH an
annual royalty in lieu of any royalty payable under Article 9 hereof
on such Pump Net Proceeds of Sales, Cassette Net Proceeds of Sales
or Accessory Net Proceeds of Sales, as the case may be, equal to the
sum of (i) [CONFIDENTIAL TREATMENT REQUESTED] of such Net Proceeds
of Sales plus (ii) [CONFIDENTIAL
<PAGE>
TREATMENT REQUESTED] of IMED's Gross Margin (in this case limited to
such Pump, Cassette or Accessory and before such royalty payment is
taken into consideration) in excess of [CONFIDENTIAL TREATMENT
REQUESTED] but such royalty shall not apply to any portion of IMED's
Gross Margin beyond [CONFIDENTIAL TREATMENT REQUESTED]. Such
royalty shall be paid annually at the times and in accordance with
the procedures generally provided for royalties in Article 9.5.
IMED shall be able to take as a credit against such royalties in
excess of [CONFIDENTIAL TREATMENT REQUESTED] all of its reasonable
out-of-pocket costs of transferring manufacture to a Third Person
manufacturer or the direct cost of transferring manufacture to IMED,
as the case may be. IMED agrees that so long as any such Third
Person manufacturer is reasonably capable of manufacturing
quantities of such Product or Accessory in excess of IMED's supply
requirements, (i) DEBIOTECH shall be free to obtain supply directly
from such Third Person manufacturer and (ii) such Third Person
manufacturer may, to the extent the same do not contain any of
IMED's Patented Technology (as hereinafter defined), use the molds
and equipment used to manufacture such Product or Accessory for IMED
with no payment to IMED in respect thereof.
(c) TRANSFER OF KNOW-HOW. Following the first commercial sale of
any Product or Accessory in the Territory and upon written notice
from IMED, DEBIOTECH shall deposit duplicates of all material
Confidential Information, and other specifications, drawings,
methods and test data which relate to the manufacture of the Product
and Accessories (including procurement of all components) (the
"Manufacturing Information") in a safe deposit box, vault or
appropriate safe locked storage in a bank or other appropriate
facility located in Switzerland (the "Vault") under the joint
supervision of DEBIOTECH's General Counsel and IMED's General
Counsel. The annual cost of the Vault shall be shared equally by
the Parties. Contemporaneously therewith, DEBIOTECH shall provide
to [CONFIDENTIAL TREATMENT REQUESTED] and [CONFIDENTIAL TREATMENT
REQUESTED] and their respective approved successor manufacturers
copies of Manufacturing Information. DEBIOTECH shall also
periodically (but not less frequently than semi-annually) deposit in
the Vault duplicates of all revisions, modifications, updates and
enhancements to such information which may be developed or acquired
by DEBIOTECH from time to time during the duration of this
Agreement. IMED shall have the right periodically (but not more
frequently than quarterly), upon ten (10) Business Days' prior
written notice to DEBIOTECH, to appoint an independent
representative reasonably acceptable to DEBIOTECH and subject to
appropriate confidentiality undertakings to DEBIOTECH, to visually
inspect but not copy, photograph, take notes on (other than to
inventory the contents thereof) or otherwise remove the
Manufacturing Information to determine if such Manufacturing
Information is complete (which inspection shall be conducted at
DEBIOTECH's option in the
<PAGE>
presence of a DEBIOTECH representative). The Manufacturing
Information shall not be used by or released to any of IMED's other
representatives until ten (10) days after the Standby Notice has
been provided to DEBIOTECH in accordance with Article 10.5(b);
PROVIDED, HOWEVER, that if DEBIOTECH contests the existence of the
conditions entitling IMED to exercise the Standby License by sending
IMED a written notice of objection within five (5) Business Days
from receipt of the Standby Notice, DEBIOTECH shall have the right
to submit that question to accelerated arbitration under Article
22.3 hereof and the Manufacturing Information shall not be used or
released to any of IMED's representatives until a final
determination by such arbitrator. All Manufacturing Information
provided under this Article 10.5(c) shall be deemed to be
Confidential Information and shall be subject to the terms of
Article 18. Such Information may be used only as contemplated in
Article 10.5(a) and 10.5(b).
(d) USE OF MANUFACTURING EQUIPMENT. DEBIOTECH agrees that
[CONFIDENTIAL TREATMENT REQUESTED] and [CONFIDENTIAL TREATMENT
REQUESTED] (or approved successors) may use the Manufacturing
Equipment (including, without limitation, new Manufacturing
Equipment) in connection with the fulfillment of their obligations
under the Standby Agreements. In addition, DEBIOTECH shall execute
such documents and take such action, or cause the same to be
executed or taken, as the case may be, as may be reasonably
necessary to enable [CONFIDENTIAL TREATMENT REQUESTED] and
[CONFIDENTIAL TREATMENT REQUESTED] to use the Manufacturing
Equipment in connection with the foregoing. Because DEBIOTECH has
supply obligations to other distributors that require the use of the
Manufacturing Equipment, DEBIOTECH grants no rights to IMED to use
the Manufacturing Equipment in connection with the Standby Licenses.
DEBIOTECH agrees to maintain and take all reasonably necessary
actions to ensure that the Manufacturing Equipment remains free and
clear of all liens, claims and encumbrances which would prevent IMED
from exercising and utilizing any of its rights under the Standby
Agreements.
(e) TECHNICAL ASSISTANCE. Following the exercise by IMED of its
rights under the Standby Licenses, at IMED's reasonable request and
from time to time, DEBIOTECH shall provide its technical and other
personnel to provide: (a) non-documentary and other Manufacturing
Information not previously furnished; and (b) consulting assistance
to IMED in utilizing the Manufacturing Information, dealing with
regulatory agencies and in connection with the manufacture and sale
of the Product and Accessories. In addition, DEBIOTECH shall
execute such documents and take such action as may be reasonably
necessary to transfer any registrations of the Product and
<PAGE>
Accessories into IMED's name for the purpose of enabling IMED to
utilize the Standby Licenses.
The Standby Agreements and Standby License shall apply only with respect
to the particular Pump, Cassette or Accessory, as the case may be, that
are subject to Supply Interruption. An interruption in the supply of only
one product such as Pumps, for example, shall not cause IMED to have any
rights under the Standby Agreements or Licenses with respect to any other
product such as Cassettes or Accessories, for example.
ARTICLE 11: WARRANTIES/QUALITY CONTROL/PRODUCT CHANGES
11.1 WARRANTY.
(a) QUALITY. DEBIOTECH warrants that the Products, Accessories and
Spare Parts shall be manufactured by or for DEBIOTECH by exerting the
greatest care and in accordance with applicable laws and regulations.
DEBIOTECH warrants that the Products, Accessories and Spare Parts, as
delivered to IMED or its Affiliates shall: (i) conform to the
Specification Documents; (ii) be free from manufacturing defects; and
(iii) not be "adulterated" or "misbranded" as such terms are defined in
the Act.
DEBIOTECH shall be responsible, at its sole expense, for complying with
all applicable regulatory requirements relating to the manufacture of the
Product and Accessories for sale in the Territory, including the Act, Good
Manufacturing Practices and other requirements of the FDA.
(b) TITLE. DEBIOTECH warrants that upon delivery to and payment by
IMED, the Products, Accessories and Spare Parts shall be free from any and
all claims, demands, encumbrances, and liens affecting title, and
DEBIOTECH will defend title thereto.
(c) EXCLUSIONS. The warranties of DEBIOTECH set forth above shall not
apply to any Product which: (a) has been tampered with or otherwise
altered by Persons other than DEBIOTECH or its Affiliates or other than
pursuant to and in accordance with DEBIOTECH's directions; or (b) has been
subjected to misuse, negligence or accident by Persons other than
DEBIOTECH or its Affiliates; or (c) is a Refurbished Pump.
(d) REMEDY.
(i) PUMP. As IMED's sole remedy for breach of warranty, should
any failure to conform with the warranties in Article 11.1 (a) above
appear within [CONFIDENTIAL TREATMENT REQUESTED] after a Pump is delivered
by IMED to an end user, or [CONFIDENTIAL TREATMENT REQUESTED] after a Pump
is delivered to IMED by DEBIOTECH, whichever period ends first,
<PAGE>
DEBIOTECH shall promptly repair or replace free of charge any Pump not
meeting DEBIOTECH's above warranty during the said warranty period;
PROVIDED, HOWEVER, that if replacing or repairing the defective Pump fails
to remedy the defect, IMED is entitled at its choice to rescind the sales
contract insofar as the defective Pump is concerned or to reduce the
purchase price by an appropriate amount agreed by DEBIOTECH. IMED shall
pay the cost of shipping the defective Pump to DEBIOTECH and DEBIOTECH
shall pay the cost of shipping the repaired or replacement Pump to IMED.
(ii) CASSETTES, ACCESSORIES AND SPARE PARTS. As IMED's sole
remedy for breach of warranty, should any failure to conform with the
warranties in Article 11.1 (a) above appear within [CONFIDENTIAL TREATMENT
REQUESTED] after a Cassette, Accessory and/or Spare Part is delivered to
IMED by DEBIOTECH: (a) IMED shall notify DEBIOTECH of any Cassette,
Accessory and/or Spare Part not meeting DEBIOTECH's above warranty; and
(b) IMED shall, if available from IMED's customer, ship to DEBIOTECH or
destroy, at DEBIOTECH's option and IMED's cost, the defective Cassette,
Accessory and/or Spare Part; and (c) DEBIOTECH shall promptly supply to
IMED a Cassette, Accessory and/or Spare Part replacing the defective
one(s) at no cost to IMED, except that DEBIOTECH shall replace each
defective Cassette which has been supplied by IMED to a customer in a
Cassette Set with two (2) replacement Cassettes at no cost to IMED.
Notwithstanding the foregoing clauses (i) and (ii), Third Person
liabilities shall be treated in accordance with Article 20.3.
(e) DISPUTE CONCERNING DEFECT. In the event that the Parties do not
agree as to the existence of a defect and/or the applicability of warranty
provisions, that question shall be submitted to an independent third party
expert accepted by both Parties, bound with DEBIOTECH by adequate
confidential obligations, for a final and binding determination. The cost
of such expert and expertise procedure shall be at the full charge of the
Party which was wrong in its interpretation of the defect and/or
applicability of the warranty provisions.
11.2 QUALITY CONTROL.
(a) INSPECTION BY DEBIOTECH. Prior to shipment, the Product and
Accessories shall be subjected to a quality control inspection by
DEBIOTECH or its manufacturer in accordance with the Quality Control
Procedures. Upon reasonable prior written notice, DEBIOTECH shall permit
the IMED independent person designated below to review periodically
DEBIOTECH's production and quality control procedures and records and to
visit DEBIOTECH's manufacturer's facilities, at reasonable times with a
representative of DEBIOTECH present, in order to assure satisfaction of
the requirements of this Article 11.2(a).
<PAGE>
(b) INSPECTION BY IMED. Upon receipt of any Cassettes or Accessories,
IMED shall perform a visual lot inspection of Cassettes or Accessories for
conformance with the Specification Documents and for manufacturing
defects.
Any quality control conducted by IMED on the production site shall be
handled at IMED's cost, by an independent Person acceptable to both
Parties and bound vis-a-vis DEBIOTECH by an appropriate confidentiality
agreement. Such on site inspection shall be limited to once per Contract
Year, except in the event of material or recurring defects.
(c) QUALITY CONTROL CERTIFICATE AND RECORDS. DEBIOTECH agrees to
supply, and to attach to each shipment of Products and Accessories a
quality control certificate indicating compliance by DEBIOTECH with the
requirements of Article 11.2(a). DEBIOTECH agrees to keep for further
reference one sample Cassette of each shipment of Cassettes and all
manufacturing documentation and records pertaining to the Product and
Accessories for the period required by applicable laws or regulation in
the country where such Products and Accessories are sold.
11.3 PRODUCT RECALL.
(a) MANDATORY RECALL. In the event that a nonappealable administrative
or judicial order (the "Recall Order") is issued or requested by an entity
or authority having legal jurisdiction in the matter, IMED shall comply
with the Recall Order and DEBIOTECH shall cooperate as herein provided.
IMED shall be responsible for the administrative and transportation costs
and expenses of complying with such Recall Order including, the cost of
notifying customers and the costs associated with handling and any
necessary shipment of such recalled Products and Accessories. DEBIOTECH
shall be responsible for the costs of repair or replacement of such
recalled Product or Accessory, up to an amount equal to the Recall Amount.
All repair or replacement costs of the Recall Order in excess of such
amount paid by DEBIOTECH shall be paid from the proceeds of the Recall
Insurance Policy obtained by DEBIOTECH to cover such risk, the premiums
for such policy being shared equally by the Parties, or if no such Recall
Insurance Policy is then available, shall be shared equally by the
Parties. Third Person liabilities shall be treated in accordance with
Article 20.3.
(b) VOLUNTARY RECALL. In the event that DEBIOTECH or IMED reasonably
believes that any Product or Accessory violates any provision of
applicable law, rule or regulation or should be recalled due to health or
safety considerations, DEBIOTECH and IMED shall consult in good faith
concerning the necessity for implementing any action and the means of
implementing the same and shall mutually agree to take such action in
respect thereof as is necessary. In such an event, the Voluntary Recall
shall be treated in accordance with Article 11.3(a) hereabove, including,
without limitation, calculation of costs.
<PAGE>
(c) EPIDEMIC FAILURE. In the event of an Epidemic Failure of any
Product or Accessory not constituting a Mandatory or Voluntary Recall and
occurring after the expiry of the warranty period, DEBIOTECH and IMED
shall consult in good faith concerning the action to be taken regarding
such Product and/or Accessory and the means of implementing the same and
shall mutually agree to take such action in respect thereof as is
necessary including those Products and Accessories to be supplied by
DEBIOTECH to IMED in the future (the "Necessary Action"). In such an
event, the Necessary Action shall be treated in a manner consistent with
Article 11.3(a) hereabove, including, without limitation, calculation of
costs.
RECALL COOPERATION. DEBIOTECH and IMED will keep one another fully
informed with respect to any information, inquiry or correspondence from
any government, agency or authority relating to the investigation or
review of Product and Accessories compliance with applicable legal, health
or safety requirements including prompt delivery to the other Party of all
correspondence with any such government authority or agency as well as
with any purchaser, customer or other user of such Product and
Accessories. DEBIOTECH and IMED will cooperate fully with each other in
effecting any recall or any other type of corrective action with respect
to any Product and Accessories.
(e) EXCLUSION. Nothing in this Article 11.3 applies to any rechargeable
battery, rechargeable battery module and/or rechargeable battery pack.
11.4 SERVICE OBLIGATIONS. In addition to the obligations under Article 11.1(d)
above, DEBIOTECH shall, at its expense, to the extent DEBIOTECH determines
to modify software in order to: (i) permit the Products to comply with
applicable regulatory requirements; or (ii) to improve product safety,
provide, when possible, software update cards or other software media to
IMED for replacement by IMED or the customer; PROVIDED, HOWEVER, the cost
for new microprocessors or memory chips (such as EEPROM) provided under
the Article 11.4 shall not be at DEBIOTECH's expense.
11.5 REMEDY EXCLUSIVE. With respect to the warranty obligations contained in
Article 11.1 (a) and the recall obligations contained in Article 11.3, so
long as DEBIOTECH honors such obligations, IMED shall not be entitled to
ask for any losses, costs, damages, compensation, reimbursement, or
damages on account of the loss of prospective profits on anticipated
sales, or on account of expenditures or commitments incurred in connection
with the business or goodwill of IMED, interest and/or indemnification
(except for Third Party liabilities) of any type other than the repair or
replacement of the defective Product under the warranty limitation
described in Article 11.1(a) or the recall obligations described in
Article 11.3. Third Party liabilities shall be treated in accordance with
Article 20.3.
11.6 DISCLAIMER. DEBIOTECH makes no warranties or guarantees, express or
implied, with respect to the Product or Accessories except and to the
extent that such warranty
<PAGE>
is set forth in this Article 11. This warranty is extended only to IMED
and to no other persons. THERE SHALL BE NO OTHER WARRANTIES, EXPRESS OR
IMPLIED, ON THE PART OF DEBIOTECH WITH RESPECT TO ANY OF THE PRODUCT OR
ACCESSORIES EXCEPT THE WARRANTIES CONTAINED HEREIN.
ARTICLE 12: MINIMUM ORDERS
12.1 MINIMUM PUMP AND CASSETTE ORDERS. From the First Introduction Date in
each country of the Territory, the following minimum quantities of Pumps
and Cassettes shall be applicable for each Country Year:
<TABLE>
<CAPTION>
PUMPS:
COUNTRY: 1ST YEAR 2ND YEAR 3RD YEAR 4TH YEAR 5TH YEAR
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
USA
CANADA [CONFIDENTIAL TREATMENT REQUESTED]
MEXICO
<CAPTION>
CASSETTES:
COUNTRY: 1ST YEAR 2ND YEAR 3RD YEAR 4TH YEAR 5TH YEAR
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
USA
CANADA [CONFIDENTIAL TREATMENT REQUESTED]
MEXICO
</TABLE>
The above minimum quantities are established for each country for each
corresponding Country Year and shall be based upon Firm Orders placed by
IMED for delivery during the applicable Country Year.
Firm Orders for delivery during the last Quarter of any Country Year may,
to the extent that they exceed the minimum quantities applicable for that
Country Year, be counted towards the minimum quantities of the following
Country Year.
At the end of each five (5) year anniversary of the First Introduction
Date, the Parties shall discuss in good faith and agree for each country
of the Territory on minimums
<PAGE>
with respect to the Pump and Cassettes for the next five (5) year period
(or the balance of the term of the Agreement if shorter) which shall be
reasonable under the circumstances (including the possibility that such
minimums would decrease), with the rebuttable presumption that such
minimums should continue at the last applicable level.
The minimum order amounts shall be increased by [CONFIDENTIAL TREATMENT
REQUESTED] in the event of the occurrence of a Change of Control of IMED
or of a sale or transfer of all or substantially all of the assets of IMED
to a Third Person.
12.2 RIGHT OF OFFSET; LOSS OF EXCLUSIVITY. Notwithstanding anything to the
contrary in this Agreement, any shortage of minimum orders in one of the
countries mentioned in Article 12.1 hereabove in any corresponding Country
Year (year "Y") may be offset by an excess of orders and distribution in
another one of such countries (however, such offsetting is possible only
one time for each country, and the excess of one country can not be
counted more than one time for the offset of another country). Otherwise,
IMED would immediately and irrevocably lose its exclusive right regarding
the Product and Accessories for such country concerned with immediate
effect after written notice by DEBIOTECH.
In the event of such an offset, IMED would have a limited further three
(3) months period to order the shortage of Cassette and Pumps in the
concerned country together with [CONFIDENTIAL TREATMENT REQUESTED] of the
minimum Quantity of Cassette and/or Pumps for the next Country Year (Year
"Y+1") in the same country (the "Minimum Order Cure Period").
In the event that IMED fails to meet the minimum order requirements for
Pumps in any Country Year, following the expiration of the Minimum Order
Cure Period and receipt of written notice thereof from DEBIOTECH, IMED
would immediately and irrevocably lose its exclusive right under Article
12.2 regarding the Product and Accessories, and its exclusive rights under
Article 2.1 and 4.3 hereof for the applicable country.
In the event that IMED fails to meet the minimum order requirements for
Cassettes in any Country Year, following the expiration of the Minimum
Order Cure Period and receipt of written notice thereof from DEBIOTECH,
IMED shall pay to DEBIOTECH a royalty on the Cassettes Sets (excluding the
Cassette/Reservoir Module) sold in the applicable country, provided that
IMED's overall Gross Margin on Products and Accessories exceeds
[CONFIDENTIAL TREATMENT REQUESTED], in an amount equal to [CONFIDENTIAL
TREATMENT REQUESTED] of the amount, if any, by which IMED's Gross Margin
on such Cassette Sets exceeds [CONFIDENTIAL TREATMENT REQUESTED].
Notwithstanding the foregoing, if IMED's failure to meet any minimum order
requirement in any Country Year is due to the failure of DEBIOTECH to
perform its
<PAGE>
obligations under the Agreement, then IMED shall be deemed to have
satisfied such minimum order requirement for such Country Year.
Furthermore, if IMED's failure to meet such minimum orders is due to a
Supply Interruption, then the Parties shall discuss in good faith and
agree on an appropriate reduction on minimum orders for Products and
Accessories for the remainder of the five year period, which shall be
reasonable under the circumstances.
If IMED loses its exclusive right regarding the Product and Accessories in
any country according to the provisions of this Article 12.2, DEBIOTECH
would continue to supply IMED for this country on a non-exclusive basis
according to the conditions set forth in Article 8 except that the price
to IMED shall not be more than the price charged by DEBIOTECH to any other
Distributor for the same Product and Accessories for the Field of
Application in the same country of the Territory for corresponding order
volumes and quality.
ARTICLE 13: PATENT RIGHTS AND KNOW-HOW
13.1 PATENTS. The Cassette has been patented in the USA under Nr 5.044.902. A
patent is pending in Canada under Nr 2.011.988.8. Further patents are
pending concerning the Cassette and Pump in several countries of the
Territory, as set forth on Enclosure 2.
13.2 DEBIOTECH REPRESENTATIONS. DEBIOTECH makes no representations with
respect to the Technology, except for the representations set forth below:
(i) DEBIOTECH is the exclusive licensee of the Cassette Patent for the
Product in the Field of Application and the Cassette Patent, to the
best of DEBIOTECH's knowledge (after reasonable investigation) up to
the Effective Date, is free from third party claim of infringement;
(ii) The Cassette Patent has been properly filed, prosecuted and issued
in the respective offices and jurisdictions, and all applicable fees
due and payable have been paid;
(iii) Except as disclosed on Schedule 13.2, neither DEBIOTECH nor any
member of the DEBIOTECH Group is the licensee or sublicensee of any
Technology regarding any Product or Accessory.
(iv) The Product and Accessories, to the best of DEBIOTECH's knowledge
(after reasonable investigation) up to the Effective Date, do not
contain any Intellectual Property that infringes the Intellectual
Property rights of any Third Person;
<PAGE>
(v) DEBIOTECH has the sole and exclusive right to enter into this
Agreement and there are no outstanding assignments, grants,
licenses, encumbrances, obligations or agreements, whether written,
oral or implied, which are inconsistent with this Agreement; and
(vi) DEBIOTECH is the owner of the existing Manufacturing Equipment.
13.3 LIMITATION ON DEBIOTECH REPRESENTATIONS. Except as expressly provided in
this Agreement, nothing in this Agreement shall be construed as:
(a) A warranty or representation that anything used or sold or otherwise
disposed of under any license or grant of rights in this Agreement is or
will be free from infringement of patents of Third Persons;
(b) An obligation by DEBIOTECH to bring or prosecute actions or suits
against Third Persons for infringement of any Patent; or
(c) An obligation by DEBIOTECH to furnish any Manufacturing Information
to IMED.
13.4 INFRINGEMENT. In the event that (i) the Cassette or (ii) any elements of
the Pump v.1A or Pump v.2 that were based on technology contained in Pump
v.1 or on any of DEBIOTECH's issued or pending Patents on a worldwide
basis as of the Effective Date (the "Existing Patented Technology") is
determined to infringe in any country in the Territory the Intellectual
Property of any Third Person by a final, non-appealable judgment of a
court of competent jurisdiction, then DEBIOTECH shall be obligated to pay
[CONFIDENTIAL TREATMENT REQUESTED] of all royalties, damages and any other
costs associated therewith, up to an amount equal to [CONFIDENTIAL
TREATMENT REQUESTED] of DEBIOTECH's transfer price to IMED of all Products
and Accessories included in the damage award. In the event that any new
element of Pump v.1A or Pump v.2 which was not based on technology
contained in Pump v.1 or on any Existing Patented Technology or Accessory
is determined to infringe in any country in the Territory the Intellectual
Property of any Third Person by a final, nonappealable judgment of a court
of competent jurisdiction, then DEBIOTECH shall be obligated to pay
[CONFIDENTIAL TREATMENT REQUESTED] of all royalties, damages and costs
associated therewith without limit. IMED shall be obligated to pay the
balance of such royalties, damages and costs in either such case.
13.5 PATENT PROSECUTION. DEBIOTECH and IMED shall promptly report to each
other all information received relating to any actual or threatened
infringement of any Patent or patent application concerning the Product
and/or Accessories, in any country in the Territory and shall cooperate in
defending the Patents. If any infringement occurs in the Territory, IMED
may take an action at its own expense against any such infringer
(including, without limitation, commencement of legal action) and shall
keep
<PAGE>
DEBIOTECH regularly informed about any detail of such action. DEBIOTECH
shall be free to join IMED's action at any moment, at its own expense.
If IMED does not make a timely effort to take such action, DEBIOTECH may,
after a written notice to IMED has been left without effect for at least
two (2) months, take an action against such infringer at its own expense
and DEBIOTECH shall keep IMED regularly informed about any detail of such
action. IMED shall be free to join DEBIOTECH's action at any moment, at
its own expense.
In the event any such action should result in any indemnification of any
type (damages, expenses, etc... ) to any Party hereto, such
indemnification shall first be applied to cover the legal and other
expenses directly incurred by the Parties hereto in connection thereto,
and the surplus shall be shared in equal proportion between DEBIOTECH and
IMED.
13.6 PATENT MAINTENANCE. DEBIOTECH undertakes and agrees to use commercially
reasonable efforts to maintain or obtain, as the case may be, reasonably
necessary and desirable patent coverage with respect to the Technology,
including, without limitation: (i) using commercially reasonable efforts
to cause the Patents to remain in full force and effect until their
respective stated expiration dates; and (ii) entering into confidential
agreements with respect to the Technology.
If at any time during the duration of this Agreement, DEBIOTECH intends to
abandon or allow to lapse any of the Patents, patent applications and/or
any rights to the Technology, DEBIOTECH shall notify IMED in writing of
such intent at least forty-five (45) days before the proposed date of
abandonment or lapse.
In such event, and if requested by IMED within fifteen (15) days following
DEBIOTECH's notice, DEBIOTECH shall take any and all appropriate measures
to maintain such Patent, patent application and/or rights to Technology at
IMED's costs. In such circumstances, IMED will be allowed to recover the
costs mentioned above by offsetting them against the purchase price of the
Cassettes delivered by DEBIOTECH for the country(ies) concerned, and
within a limit of [CONFIDENTIAL TREATMENT REQUESTED] of the Cassette
price, provided such Patent precludes the distribution or sale of the
Product by Third Persons as it is manufactured for IMED.
IMED shall be under no obligation to prosecute or maintain any patent
application or Patent under the provisions of this Article 13.6.
IMED shall not challenge, directly or indirectly, the Cassette Patent.
<PAGE>
13.7 IMED'S TECHNOLOGY.
(a) NO PATENTS ON PRODUCT. IMED shall have freedom to carry on its
normal research and development activities involving pumps or otherwise
(including any products relating thereto). However, IMED agrees that, in
addition to its undertakings in Article 5.8 hereof, concerning research
and development, unless the parties agree otherwise, IMED will not use
DEBIOTECH's Confidential Information or Technology in preparing any patent
applications. If notwithstanding such undertakings it is determined that
a future patent obtained by IMED was prepared using DEBIOTECH's
Confidential Information or Technology, IMED shall grant DEBIOTECH a
royalty free worldwide license for all fields to manufacture, use, market,
sell, or sublicense only the technology covered by the claims of said
patent which have been determined to be based on DEBIOTECH's Confidential
Information or Technology for so long as said patent is valid
(notwithstanding termination or expiration of this Agreement). IMED will
not apply for any patent which is derivative of DEBIOTECH's Patents (such
that if such patent was filed by DEBIOTECH it would be considered under
U.S. law to be a continuation-in-part). IMED will not file patent
applications as part of a scheme to limit the improvement of the Products.
(b) DEBIOTECH USE OF IMED'S TECHNOLOGY. Consistent with the provisions
of Article 5.10(c) IMED may refuse to permit DEBIOTECH to use any IMED
patents or patent applications ("IMED's Patented Technology") for any
purpose, including, without limitation, in any Improvement to the Product,
Accessories or New Developments for which IMED has exercised its rights or
may limit the use of IMED's Patented Technology to Products, Accessories
or such New Developments manufactured by DEBIOTECH for IMED. DEBIOTECH
may refuse to incorporate IMED's Patented Technology into such Improvement
if DEBIOTECH is able to obtain an equivalent result without such
incorporation or if DEBIOTECH can reasonably show that such incorporation
would bring no material advantage to the Product or Accessory, unless IMED
agrees to grant to DEBIOTECH a royalty free non-exclusive worldwide
license on such patents, in connection with such Products, Accessories or
New Developments, with the right for DEBIOTECH to sub-license to its
Distributors outside the Territory or Field of Application, for as long as
those patents are valid (notwithstanding termination or expiration of this
Agreement).
(c) EFFECT OF IMED'S TECHNOLOGY ON NET PROCEEDS OF SALES. In the event
that IMED's Patented Technology is incorporated into a Pump and IMED is
able to establish with objective evidence that such Pump has a materially
improved competitive position as a direct result thereof such that the
sales price for the Pump can be increased, the Parties agree to negotiate
in good faith an appropriate exclusion from the Pump Net Proceeds of Sales
so that IMED does not pay royalties to DEBIOTECH based on the increased
margin due solely on IMED's Patented Technology and which would result
from the sale of such improvement in another product.
<PAGE>
ARTICLE 14: SALES PROMOTION/TRAINING AND SERVICING
14.1 DIRECT SALES. IMED will be solely responsible for promoting the sales of
the Product in the Field of Application in the Territory, and will alone
bear any related costs of such promotion. IMED shall also maintain at all
times throughout the duration of this Agreement an appropriate sales
force, subject to IMED's right to use sub-Distributors outside the USA
pursuant to Article 2.1 hereof, for the Product commensurate with the
sales in every country of the Territory and use commercially reasonable
efforts in connection with the sale and distribution of the Products
pursuant to this Agreement.
In respect of any Contract Year and for purposes of this Article 14.1,
IMED shall be presumed to have satisfied its obligation to use
commercially reasonable efforts if IMED has satisfied the minimum orders
contemplated in Article 12.1; provided, HOWEVER, that IMED's failure to
satisfy such minimum orders in any Contract Year shall not alone
constitute conclusive evidence that IMED has failed to use commercially
reasonable efforts.
14.2 SERVICE ASSISTANCE.
(a) DISCLOSURE. At the request of IMED, DEBIOTECH shall supply to IMED
reasonable technical information, including service manuals, regarding
each Product's and Accessory's functioning, maintenance and use.
(b) TRAINING ASSISTANCE BY DEBIOTECH; FEES AND EXPENSES. At the request
of IMED, DEBIOTECH shall reasonably assist in the training of the service
managers of IMED and its Affiliates to maintain and service the Products
and Accessories. Unless the Parties otherwise agree, such training shall
be conducted in the English language at DEBIOTECH facilities. The manner
and extent of instruction, the number of trainees, and the date, location,
duration and frequency of instruction shall be reasonably agreed to by
DEBIOTECH. In addition to the foregoing, DEBIOTECH agrees to provide
technical assistance for promotional events at the launch of Products as
well as for the introduction of Products to IMED's Affiliates.
DEBIOTECH will be entitled to charge IMED a per diem lump sum (per
participating member of DEBIOTECH's personnel) of seven hundred fifty
Swiss Francs (750 Sfr.), plus all reasonable related costs and expenses,
including, without limitation, travel and hotel expenses, incurred by
DEBIOTECH in connection with this Article 14.2(b).
(c) SPARE PARTS. In furtherance of the foregoing, DEBIOTECH will supply
to IMED Spare Parts for all Products and Accessories solely for
maintenance, repair or refurbishment. If IMED orders Spare Parts to have
Pumps repaired or refurbished under its own responsibility, the sub-units
and parts will be invoiced by DEBIOTECH to IMED at a price not to exceed
the price invoiced to DEBIOTECH by its
<PAGE>
manufacturer increased by [CONFIDENTIAL TREATMENT REQUESTED] for overhead
(the "Parts Price").
In case of a change of the Specification Document implying the change of
Spare Parts so that new Spare Parts could not be used for old Pumps or
Accessories and old Spare Parts could not be produced later on, DEBIOTECH
shall inform IMED of the occurrence of such change and IMED shall give
notice to DEBIOTECH of the reasonable quantity of Spare Parts according to
old Specification Document which need to be stored at manufacturer's plant
for the possible repair or maintenance (but not refurbishment) of old
Pumps or Accessories. IMED and DEBIOTECH shall each bear fifty per cent
(50%) of the Parts Price for such Spare Parts and their storage, the
foregoing amount paid by IMED (i) being credited against fifty per cent
(50%) of the Spare Parts Price when Spare Parts are later ordered by IMED;
and (ii) in the event that the Agreement has terminated or expired, being
reimbursed to IMED as such Spare Parts are sold by DEBIOTECH from time to
time.
14.3 TRAINING BY IMED. IMED will take all necessary measures and full
responsibility to train, in the manner normally used by IMED for its own
similar products, its own personnel, sales and service staff, hospital
staff, and all other users, in the use of the Product in a way
commensurate with its intended use in every country of the Territory, as
well as in organizing the after-sales service and maintenance for the
Product for as long as any Product may still be in use.
14.4 PROGRESS REPORTS; MARKETING MEETINGS. IMED will keep DEBIOTECH regularly
informed on the progress of sales of the Product and Accessories, country
by country. In connection therewith, IMED shall provide to DEBIOTECH:
(i) preceding each calendar year, IMED's marketing strategy, including a
tactical marketing plan, and amendments thereto, if any, from time to time
during such calendar year; and (ii) on a half yearly basis, actual
historical sales data (or estimated data to the extent the provision of
actual data is not practicable) for each Product and Accessory by relevant
market segments and geographic areas of the Territory. This information
may be transmitted with the rolling forecast mentioned in Article 10.1
hereabove. Furthermore, IMED agrees to have marketing meetings regarding
distribution of the Product at regular intervals, not less than two (2)
times a year, with representatives of DEBIOTECH in attendance. At least
one (1) month's advance notification of such meetings shall be given to
DEBIOTECH.
14.5 PROMOTIONAL MATERIAL. IMED shall supply free of charge to DEBIOTECH at
least one (1) sample of every brochure, video and advertising in any
country of the Territory relating to the Product and/or the Accessories
made for the public, end-users, hospitals, clinics, nurses, medical staff
and/or technicians. IMED also agrees to supply, at DEBIOTECH's request
and at cost price, any reasonable further quantity of such brochure,
video, advertising and/or promotional material (including a picture or
photograph of any trade show display) for public events as DEBIOTECH may
request.
<PAGE>
ARTICLE 15: NON COMPETITION
15.1 NON-SOLICITATION. The Parties agree that for the duration of this
Agreement and for the three (3) year period following thereafter, neither
IMED Group nor DEBIOTECH Group will directly or indirectly, on its behalf
or on behalf of any other Person, employ, endeavor to solicit or induce
any employees of the other Party to leave their employment with such other
Party in order to accept employment with another Person, including
DEBIOTECH or IMED.
15.2 PRESENTATION TO EXPERTS. Each Party shall have the right to present the
Product and Accessories in the Territory to selected external experts
(excluding business competitors of one of the Parties as long as IMED
retains its exclusivity) for Improvement and/or New Development purposes
(e.g.: during focus group meetings, but not operating such Product for use
with any living being) provided it has informed the other Party with at
least fifteen (15) day's advance written notification of such presentation
and offered to at least one of the other Party's representative to
participate in such presentation. Any Product and/or Accessories
presented by DEBIOTECH under this Article 15.2 shall not bear the IMED
Trademarks or IMED's name without IMED's prior written consent.
ARTICLE 16: DURATION
This Agreement is entered into for a duration of fifteen (15) years from the
Effective Date. The Parties agree that no less than six (6) months prior to the
end of the foregoing term, the Parties shall negotiate in good faith the
extension of this Agreement. In the event that the Parties are unable to agree
upon such an extension this Agreement shall terminate upon the expiration of
such term. Notwithstanding expiration of this Agreement, DEBIOTECH agrees to
supply non-exclusively to IMED, and IMED agrees to continue to purchase
exclusively from DEBIOTECH, Cassettes for three (3) years after such expiration
on the supply terms of this Agreement; PROVIDED, HOWEVER, that if DEBIOTECH is
unable to supply IMED with a reasonable supply of Cassettes, IMED shall be
permitted to purchase Cassettes from Third Persons, but the warranty provisions
contemplated in Article 11.1(a) hereof shall not apply to any Product once used
in connection with such Cassette.
ARTICLE 17: TERMINATION
17.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties and indemnifications contained in Articles 11.1, 13.2 and 20,
shall not terminate, but shall survive the termination or expiration of
this Agreement, for whatever reason, and continue thereafter in full force
and effect, subject to applicable statutes of limitations.
<PAGE>
17.2 SURVIVAL OF COVENANTS AND AGREEMENTS. All: (i) covenants and agreements
contained in Articles 4.8, 6, 11, 13.7, 14.2(c), 15.1, 17, 18, 20.3, 21.4
and 21.16 and all warranty and service obligations of DEBIOTECH with
respect to all Products, Accessories and Spare Parts delivered to IMED
pursuant to this Agreement; and (ii) liabilities or obligations with
respect to any breach of this Agreement accruing prior to the termination
or expiration of this Agreement, shall not terminate, but shall survive
the termination or expiration of this Agreement, for whatever reason, and
continue thereafter in full force and effect. The expiration or
termination of this Agreement shall be effective without prejudice to the
collection of sums and/or royalties previously due or resulting from
current Firm Orders if to the benefit of DEBIOTECH, or the refund provided
under Article 17.4 if to the benefit of IMED.
17.3 RESERVATION OF RIGHTS. Except as otherwise provided herein, at the
termination or expiration, for whatever reason, of this Agreement and for
a further period of five (5) years, IMED shall not manufacture, market,
distribute, lease and/or sell Cassettes (as defined in Article 1
hereabove) and/or pumps to be used with Cassettes not originating from
DEBIOTECH in any country of the world without the prior written consent of
DEBIOTECH. If all the Patents for the Cassette have expired and the
entire know-how for the Cassette is in the public domain other than by a
breach of the provisions of Article 18 hereafter by IMED, IMED shall not
be bound by the terms of this Article 17.3, except if DEBIOTECH has
terminated this Agreement pursuant to Article 17.7 or 8.10(c).
17.4 TERMINATION BY IMED FOR REGULATORY REFUSAL. In addition to the other
rights of IMED hereunder to terminate this Agreement, including, without
limitation, those rights contained in Article 7.2 and 17.5, IMED may
terminate this Agreement at any time upon written notice to DEBIOTECH by
certified mail return receipt requested or by Federal Express or by
another reputable express courier service, if, through no fault of IMED or
its Affiliates and due to major governmental or regulatory action
(excluding actions which constitute a Failure Event 1A or Failure Event
2), IMED or its Affiliates are unable to market any Product in the USA
without any appeal possible. In such an event, DEBIOTECH shall refund to
IMED within [CONFIDENTIAL TREATMENT REQUESTED] from receipt of such
termination notice [CONFIDENTIAL TREATMENT REQUESTED] of any and all sums
paid to DEBIOTECH under Article 7.1 (b) to (h), less any refund and/or
compensation previously paid to IMED under Article 7 or 11.3 hereabove,
less [CONFIDENTIAL TREATMENT REQUESTED] for each half (1/2) Contract Year
elapsed. However, any refund under this Article 17.4 shall be exclusive
of any other refund or payment under any other provision of this
Agreement.
17.5 MATERIAL BREACH.
(a) CURABLE EVENTS. In the event that either Party is in material
breach with any material provision or representation of this Agreement
(such as, as examples only, for IMED, any delay in paying any material sum
or royalty, unallowed manufacturing of
<PAGE>
any part of the Product and/or Accessories, non compliance with the
insurance policy obligation according to Article 20.3(a) hereafter,
refusing to allow an audit according to the provisions of Article 21.4
hereafter or, for DEBIOTECH, non-compliance with delivery obligations,
failure to honor warranty or Recall obligations, etc.) and such breach is
materially adverse to the interests of the non-breaching Party, the
non-breaching Party shall have the right to terminate this Agreement at
the expiration of a [CONFIDENTIAL TREATMENT REQUESTED] [[CONFIDENTIAL
TREATMENT REQUESTED] in case of any delay of payment of money due] cure
period (the "Cure Period"), starting on the date of receipt of a written
notice ("Breach Notice"), sent certified mail-return receipt requested or
by Federal Express or another reputable express courier service, stating
which provision has not been complied with and requesting that it be
remedied within such Cure Period. If a material breach has not been
remedied or, with respect to defaults which by their nature are not
susceptible to immediate cure, if the breaching Party has not commenced
and is not diligently pursuing the remedy within the Cure Period the non-
breaching Party may send a written notice of termination (the "Termination
Notice"), in which event the provisions of Article 17.7 hereof shall apply
upon receipt by the breaching party of such Termination Notice.
(b) NONCURABLE EVENTS. Notwithstanding the terms of Article 17.5(a), in
the event that a Party receives a Breach Notice in respect of a noncurable
event (e.g., distributing the Product outside the Field of Application or
outside the Territory), the non-breaching Party may send a Termination
Notice at the end of the Cure Period only if the breaching Party has
failed to: (i) cease the noncurable activity; (ii) take all necessary and
appropriate actions to ensure that such action will not continue; and
(iii) make reparations for any damage caused.
(c) ACCELERATED ARBITRATION TO CONTEST BREACH. In the event that the
Party receiving the Breach Notice contests in good faith the existence, or
the materiality, or the adversity of the claimed breach, such Party shall
have the right to initiate accelerated arbitration proceedings under
Article 22.3 hereof within fifteen (15) days of its receipt of the Breach
Notice. The question to be determined by the arbitrator shall be limited
to the existence, materiality and adversity of the claimed breach and
whether the claimed breach has been properly cured. In the event such an
accelerated arbitration is commenced in good faith, the Cure Period of
[CONFIDENTIAL TREATMENT REQUESTED] ([CONFIDENTIAL TREATMENT REQUESTED] in
the case of material payment defaults) shall be extended if necessary so
that the Cure Period will not end sooner than [CONFIDENTIAL TREATMENT
REQUESTED] ([CONFIDENTIAL TREATMENT REQUESTED] in the case of material
payment defaults) after the date of the final determination of the
arbitrator in this accelerated proceeding; PROVIDED, HOWEVER, that if the
arbitrator expressly determines that the arbitration was not commenced in
good faith, the Cure Period shall be extended for only [CONFIDENTIAL
TREATMENT REQUESTED] in all cases and the Party initiating the accelerated
arbitration shall be liable for all of the costs of the arbitration and
the legal expense of the other Party incurred in such proceeding. It is
the
<PAGE>
intention and expectation of the Parties that such an accelerated
arbitration will take place as rapidly as possible and will be concluded
within [CONFIDENTIAL TREATMENT REQUESTED] after it is commenced.
Accordingly, the Parties agree to act in good faith and to use their
commercially reasonable efforts to assure that the arbitration proceeds
rapidly and without undue delay.
(d) EXCLUSIVE REMEDY. In the event that any Party elects to send a
Termination Notice pursuant to this Article 17.5 as a result of any
material and adverse breach of this Agreement, the resulting sale of the
IMED Product Business pursuant to Article 17.7 hereof and the termination
resulting therefrom shall be the sole and exclusive remedy with respect to
such breach and the non-breaching Party shall have no right to ask for any
losses, costs, damages, compensation, reimbursement, or damages on account
of the loss of prospective profits on anticipated sales, or on account of
expenditures or commitments incurred in connection with the business or
goodwill of the non-breaching Party, interest and/or indemnification of
any type, but each Party shall have the right to full performance of all
obligations incurred up to the date of termination.
17.6 EXPIRATION; TRANSFER OF MARKET APPROVALS. After DEBIOTECH or a new
DEBIOTECH Distributor has assumed the rights and obligations of IMED under
Article 17.8 upon expiration or termination of this Agreement for whatever
reason, to the extent permitted by law and to the extent no longer
required by IMED in connection with its Product and Accessory business,
IMED agrees to transfer, or cause the transfer of, free of charge, all
Market Approvals and/or any other documents or authorization to market the
Product in the Territory, promptly to DEBIOTECH, or to any party which
DEBIOTECH shall nominate.
17.7 EFFECT OF TERMINATION. [CONFIDENTIAL TREATMENT REQUESTED FOR THIS SECTION]
17.8 CONTINUED SUPPLY; TRANSFER OF CONTRACTS TO NEW DISTRIBUTOR. For as long
as no new Distributor has been appointed by DEBIOTECH for the Territory
notwithstanding any expiration or termination of this Agreement, DEBIOTECH
agrees to continue to supply Cassettes, services, Spare Parts necessary to
service IMED's customers pursuant to the terms of this Agreement, and IMED
agrees to continue to purchase such Cassettes, Spare Parts and other
materials from DEBIOTECH on such terms and to supply the same to its
customers according to their needs, so as to maintain the value of the
Product Business. Upon written notification from DEBIOTECH of the
identity of a new Distributor, IMED shall immediately notify all of its
former customers of the identity of such new Distributor and will
cooperate in the transfer of all service and supply contracts relating to
the Products to such new Distributor without further compensation,
provided that such Distributor is willing to and does assume the
obligations of IMED under such service and supply contracts, and the
obligations of IMED to provide Cassettes, Spare Parts and otherwise
service its customers, at which time the rights of IMED under this Article
17.8 shall cease;
<PAGE>
PROVIDED, HOWEVER, that IMED shall be entitled to collect payments from
its customers on all Products and Accessories previously sold by IMED to
such customers.
ARTICLE 18: CONFIDENTIALITY
18.1 CONFIDENTIALITY PERIOD. During the term of this Agreement, and for a
period of five (5) years thereafter, each Party will maintain in
confidence all Confidential Information disclosed by the other Party
hereto. Each Party will keep the other Party's Confidential Information
in strict confidence and shall not divulge, publish or otherwise reveal
such Confidential Information, directly or indirectly, to any other
person, firm or entity, or use or grant use of such Confidential
Information except as expressly authorized by this Agreement. Each Party
will promptly notify the other Party upon discovery of any unauthorized
use or disclosure of the Confidential Information.
18.2 LIMITATION ON DISCLOSURE; SAFEGUARDS. A receiving Party of a disclosing
Party's Confidential Information agrees to limit the internal
dissemination of such Confidential Information to only those directors,
officers, consultants, clinical investigators and regular employees of the
receiving Party whose access to such Confidential Information is necessary
for the full exercise by the receiving Party of the rights granted
pursuant hereto and contemplated hereby and the proper performance of the
functions of such individuals in connection therewith; and further agrees
to take, and to cause its directors, officers, consultants, clinical
investigators and regular employees who may have access to such
Confidential Information to take all appropriate safeguards so as to
protect the secret and proprietary nature of such Confidential Information
and to prevent unauthorized use, reproduction, disclosure and other
dissemination thereof. Such safeguards shall include, without limitation,
the execution and delivery to the disclosing Party by such directors,
officers, consultants, clinical investigators and employees of written
undertakings of non-disclosure and non-use.
18.3 NOTATION ON DOCUMENTS. The Parties shall endeavor to mark all
Confidential Information with a stamp bearing the term "Confidential".
Confidential Information not stamped with the term "Confidential" shall
not terminate the confidential and proprietary status thereof.
18.4 DISCLOSURES REQUIRED BY LAW. The receiving Party may disclose
Confidential Information to governmental authorities to the extent
required by law to obtain and maintain Market Approvals. Such Party will
use commercially reasonable efforts to secure confidential treatment from
governmental authorities of disclosed Confidential Information.
<PAGE>
18.5 NO ADEQUATE REMEDY AT LAW. Because a disclosing Party cannot be
adequately compensated by money damages in the event of a violation of
Article 15.1 or 18.1, a disclosing Party shall be entitled, in addition to
any other right or remedy available to it, to an injunction in any country
at the election of the disclosing Party, to restrain such violation or any
threatened violation and to specific performance of any provision, hereof
and, in either case, no bond or other security shall be required in
connection with such injunction.
18.6 DISCLOSURE OF AGREEMENT. The Parties agree that the contents of this
Agreement constitute Confidential Information, and as such, will not be
disclosed by either Party without the written consent of the other, except
as otherwise provided herein, required by law or as a contractual
obligation for the fulfillment of this Agreement.
However, DEBIOTECH and IMED are entitled to disclose the fact that an
Exclusive Distribution agreement concerning the Product has been signed
between both Parties hereto, provided that a limitation to the Territory
and the Field of Application is mentioned.
ARTICLE 19: FORCE MAJEURE
19.1 FORCE MAJEURE. Neither Party shall be liable for a failure to comply with
a provision herein, if it is prevented from performing the said provision
because of force majeure ("Force Majeure"), this term being defined as
strikes or other labor trouble, war, insurrection, fire, flood, explosion,
discontinuity in the supply of power, court order or governmental
interference, acts of God and the like.
19.2 COMMERCIALLY REASONABLE EFFORTS. Despite the event of Force Majeure,
either Party hereto shall use commercially reasonable efforts to comply to
the extent possible with its obligations vis-a-vis the other Party,
pursuant to this Agreement.
19.3 NOTIFICATION OF FORCE MAJEURE. The Party invoking an event of Force
Majeure must notify it forthwith to the other Party, must specify which
one or ones of its obligations it is being prevented from complying with,
and the nature of the event of Force Majeure, and must give an estimate of
the period during which it is likely that it shall be prevented from
complying with the said obligation or obligations.
ARTICLE 20: REPRESENTATIONS AND WARRANTIES; RESPONSIBILITY
20.1 REPRESENTATIONS AND WARRANTIES OF DEBIOTECH. DEBIOTECH hereby represents
and warrants as follows:
<PAGE>
(a) CORPORATE POWER. DEBIOTECH is duly organized and validly existing
under the laws of the country of Switzerland and has full corporate power
and authority to enter into this Agreement and carry out the provisions
hereof.
(b) DUE AUTHORIZATION. DEBIOTECH is duly authorized to execute and
deliver this Agreement and to perform its obligations under this
Agreement. The person executing this Agreement on DEBIOTECH's behalf has
been duly authorized to do so by all requisite corporate action.
(c) BINDING AGREEMENT. This Agreement is a legal and valid obligation
binding upon DEBIOTECH, and enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by DEBIOTECH does
not conflict with any agreement, instrument or understanding, oral or
written, to which it is a party or by which it may be bound, nor violate
any law or regulation of any court, governmental body or administrative or
other agency having jurisdiction over it.
(d) NO ADVERSE ACTS. DEBIOTECH represents and warrants to IMED that it
does not know of any circumstances and has not done and, throughout the
duration of this Agreement, will not do any acts that are inconsistent
with the terms of this Agreement or which infringe any of the rights of
IMED.
20.2 REPRESENTATIONS AND WARRANTIES OF IMED. IMED hereby represents and
warrants as follows:
(a) CORPORATE POWER. IMED is duly organized and validly existing under
the laws of the State of Delaware and has full corporate power and
authority to enter into this Agreement and carry out the provisions
hereof.
(b) DUE AUTHORIZATION. IMED is duly authorized to execute and deliver
this Agreement and to perform its obligation under this Agreement. The
person executing this Agreement on IMED's behalf has been duly authorized
to do so by all requisite corporate action.
(c) BINDING AGREEMENT. This Agreement is a legal and valid obligation
binding upon IMED, and enforceable in accordance with its terms. The
execution delivery and performance of this Agreement by IMED does not
conflict with any agreement, instrument or understanding, oral or written,
to which it is a party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other
agency having jurisdiction over it.
(d) NO ADVERSE ACTS. IMED represents and warrants to DEBIOTECH that it
does not know of any circumstances and has not done and, throughout the
duration of this Agreement, will not do any acts that are inconsistent
with the terms of this Agreement or which infringe any of the rights of
DEBIOTECH.
<PAGE>
20.3 MAINTENANCE OF INSURANCE.
(a) IMED LIABILITY INSURANCE. From and after the first user trials by
IMED of the Product, IMED agrees to use commercially reasonable efforts to
maintain an insurance policy having a minimum coverage of [CONFIDENTIAL
TREATMENT REQUESTED] per occurrence and in the aggregate per policy year
covering the risks and on the terms described in the insurance policy
attached hereto as Exhibit 20.3(a) (the "Original IMED Policy") so long as
such policy is reasonably available at commercially reasonable rates (as a
minimum, the current premium rates paid by IMED as of the Effective Date
increased by the annual United States inflation rate shall for all
purposes, be deemed commercially reasonable for the duration of this
Agreement). In the event that such policy is not reasonably available at
commercially reasonable rates, IMED must notify DEBIOTECH not less than
three (3) months in advance of its intention to modify the coverage and
the Parties shall discuss alternative solutions in good faith. If after
not less than thirty (30) days of good faith discussions between the
Parties no solution is found to continue the coverage in the Original IMED
Policy or any previously accepted modified policy, IMED may maintain
modified coverage and compensate adequately DEBIOTECH for any commercially
reasonable surplus premium due by DEBIOTECH to its insurance company as a
direct consequence of such modification of IMED's coverage. In the event
IMED elects to terminate even modified insurance coverage because the
premium is no longer commercially reasonable, it may terminate such
coverage after the above notice and good faith discussion periods and
become self-insured in which event IMED shall (i) only indemnify DEBIOTECH
so as to put DEBIOTECH in the same position it would have been in had the
last insurance policy so maintained by IMED been in effect (assuming for
this purpose, that such last insurance policy had a maximum coverage of
[CONFIDENTIAL TREATMENT REQUESTED] per occurrence and in the aggregate
policy year); and (ii) not be required to pay DEBIOTECH for any surplus
premium due by DEBIOTECH to its insurance company as a direct consequence
of such self-insurance by IMED.
IMED will not insure itself without insuring DEBIOTECH. From and after
the first user trials by IMED of the Product, IMED shall cause its insurer
to name DEBIOTECH as an additional insured on such policy and to deliver
to DEBIOTECH an original copy of such policy together with a certificate
of insurance addressed to DEBIOTECH assuring that such policy cannot be
canceled or amended without at least thirty (30) days prior written notice
to DEBIOTECH.
(b) DEBIOTECH LIABILITY INSURANCE. From and after the First
Introduction Date in the USA, DEBIOTECH agrees to use commercially
reasonable efforts to maintain an insurance policy having a minimum
coverage of [CONFIDENTIAL TREATMENT REQUESTED] per occurrence and in the
aggregate per policy year covering the risks and on the terms described in
the insurance policy attached hereto as Exhibit 20.3(b) (the "Original
DEBIOTECH Policy"). DEBIOTECH further agrees to renew such policy at or
prior to the expiration of the term thereof. In the
<PAGE>
event that the same policy coverage is not reasonably available in the
future or is available at increased premium rates that are no longer
commercially reasonable (as a minimum, the current premium rates paid by
DEBIOTECH as of the Effective Date increased by the annual Switzerland
inflation rate shall for all purposes, be deemed commercially reasonable
for the duration of this Agreement). In the event that such policy is not
reasonably available at commercially reasonable rates, DEBIOTECH must
notify IMED not less than three (3) months in advance of its intention to
modify the coverage and the Parties shall discuss alternative solutions in
good faith. If after not less than thirty (30) days of good faith
discussions between the Parties no solution is found to continue the
coverage in the Original DEBIOTECH Policy or any previously accepted
modified policy, DEBIOTECH may maintain modified coverage and compensate
adequately IMED for any commercially reasonable surplus premium due by
IMED to its insurance company as a direct consequence of such modification
of DEBIOTECH's coverage. In the event DEBIOTECH elects to terminate even
modified insurance coverage because the premium is no longer commercially
reasonable, it may terminate such coverage after the above notice and good
faith discussion periods and become self-insured in which event DEBIOTECH
shall (i) only indemnify IMED so as to put IMED in the same position it
would have been in had the last insurance policy so maintained by
DEBIOTECH been in effect (assuming for this purpose, that such last
insurance policy had a maximum coverage of [CONFIDENTIAL TREATMENT
REQUESTED] per occurrence and in the aggregate policy year); and (ii) not
be required to pay IMED for any surplus premium due by IMED to its
insurance company as a direct consequence of such self-insurance by
DEBIOTECH.
DEBIOTECH shall before the First Introduction Date in the USA cause its
insurer to add IMED in a vendor endorsement on such policy and to deliver
to IMED an original copy of such policy together with a certificate of
insurance addressed to IMED assuring that such policy cannot be canceled
or amended without at least thirty (30) days prior written notice to IMED.
(c) RECALL INSURANCE. DEBIOTECH undertakes and agrees to use
commercially reasonable efforts to procure an insurance policy to cover
the costs of repair or replacement in connection with a recall
contemplated in Article 11.3 in excess of the Recall Amount (the "Recall
Insurance Policy") at or prior to the First Introduction Date of the
Product. DEBIOTECH further agrees to use commercially reasonable efforts
to renew such policy at or prior to the expiration of the term thereof
upon such comparable terms as are available at the time of such renewal.
(d) PROCEEDINGS. In the event of any action against any Party, IMED
shall be responsible for conducting the proceedings of such action and
shall keep DEBIOTECH regularly informed about any detail of such action.
DEBIOTECH and/or its insurer shall be free to join the action at any
moment at its own expense.
<PAGE>
20.4 NOTIFICATION BY IMED. IMED shall immediately and without any delay report
to DEBIOTECH any serious adverse reaction concerning the Product and/or
Accessories, as well as any relevant information concerning the Product or
Accessories which is reasonably likely to require DEBIOTECH to apply
corrective measures.
ARTICLE 21: MISCELLANEOUS
21.1 ASSIGNMENT. The rights and obligations under this Agreement shall not be
assignable by one Party to any third party in the absence of the prior
written approval of the other Party; PROVIDED, HOWEVER, that no such
approval shall be required in connection with any such assignment that
involves or relates to the transfer, sale, lease or financing of all or
substantially all of the assets of one of the Parties, including, without
limitation, an assignment by IMED hereunder to its existing lender as part
of IMED's continuing obligation to provide such lender with a lien on
substantially all of IMED's assets.
21.2 SEVERABILITY. If any provision hereof is, or later becomes, invalid or
unenforceable or incompatible with any applicable law, such provision
shall be ineffective without affecting the validity of the remaining
provisions. The Parties shall attempt to replace the invalid provision
with a valid provision as closely aligned with the original intent of the
Parties as possible.
21.3 ENTIRE AGREEMENT; WAIVER. This Agreement represents the entire
understanding between the Parties and supersedes any and all previous
understandings both oral and written, with respect to the subject matter
hereof. Amendments and supplements to this Agreement shall not be
effective unless in written form and signed by both Parties. The failure
of either Party to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such
provision, nor in any way to affect the validity of this Agreement or any
part of it or the right of either Party after any such failure to enforce
each and every such provision. No waiver of any breach of this Agreement
shall be held to be a waiver of any other or subsequent breach.
21.4 INSPECTION OF BOOKS AND RECORDS. Each Party shall be entitled to have an
independent public accountant of its choice, but reasonably acceptable to
the other Party and bound by adequate confidentiality obligations, inspect
all relevant accounts and other documents in the possession of the other
Party, and its Affiliates, during normal business hours, with reasonable
notice, no more often than once per calendar year, in order to satisfy
such accountant of the valid performance of this Agreement.
In the event of any shortfall amounting to five percent (5%) or more of
amounts due to a Party, the other Party shall pay to that Party, without
any delay, all costs charged for the inspection contemplated above.
<PAGE>
21.5 NOTICES. All notices or other communications to a Party required or
permitted hereunder shall be in writing and shall be delivered personally
to such Party (or, in the case of an entity, to an executive officer of
such Party) or shall be given by certified mail, postage prepaid with
return receipt requested, or by Federal Express or by another reputable
express courier service addressed as follows:
if to DEBIOTECH to:
DEBIOTECH SA
17-rue des Terreaux, CP82
CH - 1000 LAUSANNE 9
Switzerland
Attention: Frederic Neftel, C.E.O.
With a copy (which shall not constitute notice) to send
simultaneously by the same medium:
Bourquin & Biner Bradley
6, Avenue De Frontenex
Place Des Eaux-Vives
CH-1207 Geneve
Switzerland
Attention: Russ V.V. Bradley, Jr.
if to IMED to:
IMED CORP.
9775 Businesspark Avenue
SAN DIEGO, CA 92131-1599
USA
Attention: Joseph W. Kuhn, President
With a copy (which shall not constitute notice) to send
simultaneously by the same medium:
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street - 20th Floor
New York, New York 10036
USA
Attention: Barry D. Shalov
DEBIOTECH and IMED may change their respective above specified addresses
by notice to the other Party given in the manner herein prescribed. All
notices shall be deemed given on the day when actually delivered as
provided above (if delivered
<PAGE>
personally) or on the day shown on the return receipt or express courier
invoice (if delivered by mail or express courier service).
21.6 ENGLISH LANGUAGE. If this Agreement is translated into any language, the
English language version shall govern in the event of any conflict or
question of construction or interpretation.
21.7 PUBLICITY. Except as provided in Article 18.6 or as otherwise provided
below, any public disclosure of the transactions contemplated hereby and
the terms hereof or results obtained hereunder (including but not limited
to press releases or other statements made available generally by a Party
to the public) will be reviewed and consented to by each Party prior to
such disclosure. Such consent shall not be untimely or unreasonably
withheld by any Party. Notwithstanding the foregoing, any Party may,
without the prior consent of the other Party : (a) disclose: (i) the
existence of the Agreement to the extent contemplated in Article 18.6,
(ii) the general subject matter thereof (other than material business,
technical and commercial terms thereof or related thereto), and (iii) the
identity of the Party; or (b) make public disclosure of this Agreement and
of the transactions contemplated hereby, the aggregate consideration to be
paid hereunder, the terms hereof or the results obtained hereunder to the
extent that such public disclosure is required by any law, or rule or
regulation of any governmental agency, including without limitation, the
United States Securities and Exchange Commission or any securities
exchange on which securities of the disclosing party are then listed;
PROVIDED, HOWEVER, that in the case of any disclosure under clause (b)
above, the disclosing Party shall endeavor to obtain confidential
treatment of information to be disclosed to the extent requested by the
other Party. In addition, the Parties agree that DEBIOTECH and IMED will,
upon execution of this Agreement by the Parties, publicly release the
statements, respectively, set forth on Enclosure 14 hereto.
21.8 CURRENCY. All payments due hereunder shall be made in lawful coin and
currency of the USA.
21.9 NO BROKER. DEBIOTECH, on the one hand, and IMED, on the other hand,
represent that it has not employed any broker, finder, investment bank or
financial adviser as to whom the other Party may have an obligation to pay
any broker's or finders fee in connection with the origin, negotiation,
execution or performance of this Agreement.
21.10 HEADINGS. The titles and headings to Articles are inserted for the
convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
21.11 ACTIONS BY AFFILIATES. Each Party agrees that, to the extent this
Agreement contemplates any action to be taken by an Affiliate of such
Party, such Party, as the case may be, will take all actions necessary to
ensure that such Affiliate takes such
<PAGE>
action and the failure of such Affiliate to take such action shall be
deemed a default by such Party.
21.12 DECLARATION OF ACCOUNTANT REGARDING ROYALTIES. IMED's auditors shall
provide DEBIOTECH with a certified declaration each calendar year, stating
that IMED's accounting of royalties pursuant to Article 9 to DEBIOTECH is
correct.
21.13 INDEPENDENT CONTRACTOR. No Party is the legal representative or agent of
the other Party as a result of this Agreement. Nothing herein shall be
construed as creating the relationship of joint venture or partnership.
No Party shall have the right to bind the other Party in contract or
otherwise.
21.14 CHANGE OF CONDITIONS. In the event that, during the duration of this
Agreement, the regulations in force at the time of its execution are
drastically modified, or in the event that the data on which the Parties
relied to enter into this Agreement change in such a manner that one Party
shall suffer severe hardship from its performance of this Agreement, which
could not reasonably be foreseen as of the date on which this Agreement
was executed, the Parties shall then meet and adapt the conditions of this
Agreement to the new situation, in a manner equitable to both Parties.
21.15 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same Agreement, and shall
become a binding Agreement when one or more counterparts have been signed
by each Party and delivered to the other Party.
21.16 TAX RECUPERATION. Each Party shall cooperate with the other Party to
recuperate withholding taxes and the like, to the extent possible by law.
ARTICLE 22: ARBITRATION AND GOVERNING LAW
22.1 MEDIATION. In the event the Parties are unable to resolve a dispute, the
Parties may engage a mediator acceptable to both Parties. Said mediator
will immediately meet with the President of both parties to discuss the
basis for the dispute and to attempt to resolve the dispute.
22.2 JURISDICTION. The ordinary courts of the place of residence of the
defending Party have jurisdiction to grant interim injunctions as long as
an arbitration panel is not constituted. After an arbitration panel is
convened, such courts have no jurisdiction, except to the extent necessary
to execute interim orders issued by the arbitration panel.
22.3 ARBITRATION. With the exception of interim injunctions subject to Article
22.2 hereabove, any controversy or claim among the parties arising out of
or relating to this Agreement shall be finally settled under the rules of
arbitration set forth in
<PAGE>
Exhibit 22.3 hereto. The arbitration panel shall have full powers to
issue interim orders.
22.4 CHOICE OF LAW. This Agreement shall be construed, governed by and
interpreted in accordance with the laws of Switzerland.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized officers.
DEBIOTECH S.A. IMED Corp.
Date:May 8, 1995 Date: May 8, 1995
In: Lausanne, Switzerland In: Lausanne, Switzerland
/s/ Frederic Neftel /s/ Joseph W. Kuhn
Name: Frederic Neftel, Name: Joseph W. Kuhn
C.E.O. President
<PAGE>
EXHIBIT 11.1
COMPUTATION OF NET INCOME PER SHARE FOR THE THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1994 1995 1994 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INCOME PER COMMON SHARE ASSUMING NO DILUTION
Income before extraordinary item and dividends and accretion on
mandatorily redeemable preferred stock.......................... $ 1,459 $ 2,406 $ 3,497 $ 5,467
Dividends and accretion on mandatorily redeemable preferred
stock........................................................... (180) (162) (716) (487)
--------- --------- --------- ---------
Income before extraordinary item................................. 1,279 2,244 2,781 4,980
Extraordinary item - gain on early retirement of debt............ 15,177
--------- --------- --------- ---------
Net income applicable to common stock............................ $ 1,279 $ 2,244 $ 2,781 $ 20,157
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common shares outstanding (1)................... 14,069 16,451 14,069 15,500
--------- --------- --------- ---------
--------- --------- --------- ---------
Income per common share assuming no dilution:
Income before extraordinary item................................. $ .09 $ .14 $ .20 $ .32
Extraordinary item - gain on early retirement of debt............ .98
--------- --------- --------- ---------
Net income per common share assuming no dilution................. $ .09 $ .14 $ .20 $ 1.30
--------- --------- --------- ---------
--------- --------- --------- ---------
INCOME PER COMMON SHARE ASSUMING FULL DILUTION
Income before dividends and accretion on mandatorily redeemable
preferred stock................................................. $ 1,459 $ 2,406 $ 3,497 $ 5,467
Dividends and accretion on mandatorily redeemable preferred
stock........................................................... (180) (162) (716) (487)
Add back interest expense, net of tax, on convertible promissory
notes........................................................... 140 152 293 451
--------- --------- --------- ---------
Income before extraordinary item................................. 1,419 2,396 3,074 5,431
Extraordinary item - gain on early retirement of debt............ 15,177
--------- --------- --------- ---------
Net income applicable to common stock............................ $ 1,419 $ 2,396 $ 3,074 $ 20,608
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common shares outstanding prior to conversion of
convertible promissory notes (1)................................ 14,069 16,554 14,069 15,719
Add weighted average shares issued upon conversion of convertible
promissory notes................................................ 11,698 16,565 7,854 16,538
--------- --------- --------- ---------
Weighted average common shares outstanding....................... 25,767 33,119 21,923 32,257
--------- --------- --------- ---------
--------- --------- --------- ---------
Income per common share assuming full dilution:
Income before extraordinary item................................. $ .06 $ .07 $ .14 $ .17
Extraordinary item - gain on early retirement of debt............ .47
--------- --------- --------- ---------
Net income per common share assuming full dilution............... $ .06 $ .07 $ .14 $ .64
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) INCLUDES THE COMMON STOCK EQUIVALENT OF DILUTIVE OPTIONS OUTSTANDING AT THE
END OF EACH PERIOD.
- 96 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted form the
Condensed Consolidated Balance Sheet and Condensed Consolidated Statement
of Operations and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,555
<SECURITIES> 5,516
<RECEIVABLES> 15,031
<ALLOWANCES> (850)
<INVENTORY> 17,164
<CURRENT-ASSETS> 49,183
<PP&E> 29,628
<DEPRECIATION> (16,829)
<TOTAL-ASSETS> 129,804
<CURRENT-LIABILITIES> 22,268
<BONDS> 63,202
<COMMON> 162
7,054
0
<OTHER-SE> 25,539
<TOTAL-LIABILITY-AND-EQUITY> 129,804
<SALES> 82,681
<TOTAL-REVENUES> 83,012
<CGS> 46,595
<TOTAL-COSTS> 46,595
<OTHER-EXPENSES> 26,190
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 6,184
<INCOME-PRETAX> 6,163
<INCOME-TAX> 696
<INCOME-CONTINUING> 5,467
<DISCONTINUED> 0
<EXTRAORDINARY> 15,177
<CHANGES> 0
<NET-INCOME> 20,644
<EPS-PRIMARY> 1.30
<EPS-DILUTED> .64
</TABLE>
