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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 7, 1999
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
New York
(State or Other Jurisdiction of Incorporation)
0-21168 13-3253392
(Commission File Number) (IRS Employer Identification Number)
5 East 80th Street, New York, New York 10021
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 717-6544
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ITEM 5. OTHER EVENTS
On June 7, 1999, Chromatics Color Sciences International Inc. (the
"Company") executed a renewable, five-year agreement with Datex-Ohmeda, Inc. and
its Ohmeda medical division ("DO") pursuant to which the Company appointed DO as
the exclusive distributor in the United States of the Company's
Colormate(Registered) Tlc BiliTest(Trade Mark) System for noninvasive monitoring
of bilirubin infant jaundice in the hospital market, the non-consumer home
healthcare market (in which the test is administered solely by a healthcare
professional), the pediatrician, office market and clinics within all such
markets. The agreement also applies to the Company's disposable calibration
standard (Tlc Lensette(Trade Mark)) that is used to calibrate each measurement
taken by the Colormate(Registered) Tlc BiliTest(Trade Mark) System and provides
that the Company will share in the sales revenues for such product. Terms of the
agreement include annual minimum market penetration performance standards and
quantities for both the Colormate(Registered) Tlc BiliTest(Trade Mark) System
and the Tlc calibration standards. In addition, the agreement grants DO
negotiation rights for international marketing and distribution of the Company's
monitoring system for the potential retail market and consumer home healthcare
market where the test is not administered by a healthcare professional, subject
to further required regulatory clearances for commericial use.
Pursuant to Item 601(b)(10) of Regulation S-K promulgated under the
Securities Act of 1933, the Company is filing the agreement as Exhibit 10.1 to
the report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
+10.1 Agreement, dated as of June 7, 1999, between Chromatics Color Sciences
International, Inc. and Datex-Ohmeda, Inc.
99.1 Chromatics Color Sciences International, Inc. Press Release, dated June
9, 1999.
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+ Confidential treatment has been requested with respect to certain portions of
this exhibit, which have been omitted therefrom and have been separately filed
with the Commission.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
By: /s/ Darby S. Macfarlane
Name: Darby S. Macfarlane
Title: Chief Executive Officer
Date: June 18, 1999
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EXHIBIT INDEX
<TABLE>
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Page
<S> <C> <C>
+10.1 Agreement, dated as of June 7, 1999, between Chromatics Color Sciences 5
International, Inc. and Datex-Ohmeda, Inc.
99.1 Chromatics Color Sciences International, Inc. Press Release, dated June
9, 1999.
</TABLE>
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+ Confidential treatment has been requested with respect to certain portions of
this exhibit, which have been omitted therefrom and have been separately filed
with the Commission.
<PAGE>
Exhibit 10.1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE INFORMATION
REPRESENTED BY AN * HEREIN. THE OMITTED INFORMATION HAS BEEN SEPARATELY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION.
AGREEMENT
This Agreement, made as of this 7th day of June, 1999, between
Chromatics Color Sciences International, Inc. ("CCSI"), a New York corporation,
and Datex-Ohmeda, Inc. ("DO"), a Delaware corporation.
W I T N E S S E T H
-------------------
WHEREAS, CCSI is in the business of color science and has developed the
Colormate(Registered) TLc-BiliTest(Trade Mark) System having medical
applications involving the monitoring of newborn bilirubinemia (infant
jaundice);
WHEREAS, Ohmeda Medical ("OM") is a division of DO;
WHEREAS, DO is in the business of marketing and distributing medical
equipment; and
WHEREAS, DO, through its OM division, desires to purchase, market and
distribute, and CCSI desires to supply to DO products for the monitoring of
newborn bilirubinemia (infant jaundice) as described in Attachment A hereto.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
I ATTACHMENTS AND DEFINITIONS
---------------------------
1. Attachments. The following Attachments are attached to this
Agreement and are incorporated herein by this reference:
Attachment A: Product Description
Attachment B: Product Information
Attachment C: Market Factors
Attachment D: Customer Support
2. Definitions.
2.1 "Affiliates" means, as to any party hereunder, any person
or legal entity which directly or indirectly has control, is under control by,
or is under common control with, such party hereunder. The term "control" as
used in this paragraph means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person or legal entity, whether through the ownership of voting securities, by
contract, or otherwise. Any person or legal entity that is not an "affiliate" of
a party hereunder, shall be considered "unaffiliated" with such party hereunder.
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2.2 "Calibration Standard" means, CCSI's disposable
calibration standard (TLc Lensette(Trade Mark)) that is used (single use) to
calibrate each measurement taken by the Device as described in Attachment A
hereto.
2.3 "Charges per Use" means, the charges per use component
described in Attachment A hereto.
2.4 "Device" means, the noninvasive bilirubin measurement
system known as the "Colormate(Registered) TLc-BiliTest(Trade Mark).", as
described in Attachment A hereto. "Device" also includes the LED Device and any
Modified Device following such time when such Modified Device or LED Device is
legally marketable and commercially available for distribution under this
Agreement, all as set forth in Attachment A.
2.5 "DMR" means, the Device Master Record required by FDA
regulations.
2.6 "DO Purchase Price" means, the total price that DO pays
CCSI for the Products as further described in paragraph 5 of Section III and
Attachment A of this Agreement.
2.7 Evaluation Unit" means, a Device delivered by CCSI prior
to the date hereof or during the Initial Transition under a program where an
evaluator pays * for the use over a limited time period (normally 30-60 days) of
such Device and * Calibration Standards, but only if such Device is not
ultimately sold to or placed with the evaluator.
2.8 "Exit Transition" means, those transition considerations
and related transition activities of the parties following termination of this
Agreement, as more fully described in Attachment D hereto (Customer Support).
2.9 "Experimental Unit" means, Products placed by CCSI at its
expense, on a not-for-profit basis, solely for clinical studies, experimental or
educational purposes or for obtaining or compiling data for obtaining any
regulatory clearances and/or approvals with respect to the Products, and only in
cases where Devices are placed and used for non-commercial use and for a limited
period of time as reasonably required by the investigator.
2.10 "Extended Term" means, the potential additional term of
the Agreement as defined in paragraph 1(a) of Section VI.
2.11 "FDA" means, the United States Food and Drug
Administration.
2.12 "Firm Purchase Order" means, a purchase order for
Products that is firm, binding, unchangeable, and non-cancelable even if
delivery under said purchase order is scheduled to occur after termination of
this Agreement; provided, however, that any such purchase order may be canceled
by DO under any of the following circumstances: if the Products covered by the
purchase order are not legally marketable or commercially available; in the
event of a Default by CCSI relating to the delivery (or failure or delay in
delivery) of the Products as defined in paragraph 9(a) of Section III; when
there has been any other Default by CCSI under
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the Agreement that would give rise to a right of termination by DO; or in the
event of a Force Majeure Event that prevents timely delivery of the Products
covered by the Purchase Order and such delivery does not occur within six (6)
months after the occurrence of the Force Majeure Event .
2.13 "Force Majeure Event" means, an event caused by the
elements, acts of God, acts of government, civil or military authority, fires,
floods, epidemics, quarantine restrictions, war, riots, accidents to machinery,
or any other like or different events beyond the control of the party claiming
such Force Majeure Event.
2.14 "Initial Term" means, the initial term of the Agreement
as defined in paragraph 1(a) of Section VI.
2.15 "Initial Transfer Price" means, the initial price paid by
DO to CCSI for the Calibration Standard and the Charges per Use solely during
the first two (2) Performance Years of this Agreement, as set forth in paragraph
5(e)(vii) of Section III and Attachment A.
2.16 "Initial Transition" means, the Initial Sales Start-Up
Transition Items and related transition activities of the parties at the onset
of this Agreement, as more fully described in Attachment D hereto (Customer
Support).
2.17 "Invoice Price" means, DO's selling price to a customer
for a sale of Product as stated on the invoice to such customer, less any
national account or bona fide group purchasing organization rebate or
administrative fees in total not to exceed four percent of the selling price
without CCSI's prior written consent.
2.18 "ISO" means, the International Standards Organization.
2.19 "LED Device" means, a noninvasive bilirubin measurement
system that uses a light emitting diode, as described in Attachment A, which is
currently under development. Following such time when the LED Device is legally
marketable and commercially available for distribution under this Agreement, it
will be considered a Device for purposes of this Agreement.
2.20 "Managed Use" means, the selling structure described in
Attachment A hereto.
2.21 "Marketing and Distribution Plan" means, DO's written
sales, marketing, training, in-servicing and distribution plan relating to the
Products, as shall be agreed to in writing between the parties.
2.22 "Medical International Agreement" means, the agreement
between CCSI and Medical International, Inc. relating to the distribution of
Products.
2.23 "Minimum Transfer Price" means, with respect to any
Product, the minimum price payable by DO to CCSI for such Product, as set forth
in paragraph 7 of Section III and Attachment A hereto.
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2.24 "Modified Device" means, the Device which is modified
with a laptop computer, modem, printer, briefcase system and/or other
modification, as described in Attachment A. Following such time when a Modified
Device is legally marketable and commercially available for distribution under
this Agreement, it will be considered a Device for purposes of this Agreement.
2.25 "Performance Year" means, each 12-month period in which
Annual Minimum Performances and Cumulative Annual Minimum Targeted Market
Performances by DO are required as defined in paragraph 6 of Section III of this
Agreement.
2.26 "Product Components" means, add-on components for
Products as described in Attachment A hereto.
2.27 "Product Information" means, the labeling (as defined by
the FDA) relating to the Products, including the information set forth on
Attachment B hereto.
2.28 "Products" means, the products as described in Attachment
A hereto, including the Device, LED Device and any Modified Device, the
Calibration Standard, the Charges per Use component, and any and all further
upgrades, adaptations, modifications and improvements of and to the Products
adopted or made from time to time; provided, however, that the LED Device, the
Charges per Use component or any Modified Device currently in development shall
not be considered a "Product" until it is legally marketable and commercially
available for distribution under this Agreement as specified in Attachment A
hereto.
2.29 "Product Inspection and Acceptance Location" means, the
place where CCSI provides for manufacturing of the Products.
2.30 "Specifications" means, the written specifications for
and description of the Products as stated in the relevant DMR, and as may be
amended from time to time in accordance with paragraph 3 of Section III of this
Agreement.
2.31 "Subsidiary" means, as to any party hereunder, any
subsidiary that is majority owned or wholly owned by such party hereunder, or
any legal entity over which such party hereunder has control.
2.32 "Targeted Markets" means, the hospital market, the home
healthcare market (wherein the test is administered solely by a healthcare
professional ^ and the pediatrician market, and clinics within all such markets
and which markets exclude the consumer market and the over-the-counter market as
defined by the FDA),
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2.33 "Term" means, the Initial Term plus the Extended Term, if
any.
2.34 "Territory" means, the United States.
II. PRODUCT DEVELOPMENT
-------------------
1. Manufacturing. CCSI shall cause the Products to be manufactured to
conform to the Specifications as set forth in the warranty in paragraph 1 of
Section IV. CCSI shall provide or cause to be provided all technology, labor,
material, tooling and facilities required for the manufacture of the Products in
accordance with the provisions of this Agreement.
2. Labels. CCSI shall be responsible, at its expense, for preparing and
affixing (or caused to be affixed) all labels to be affixed to the Products. DO
shall have the right to approve, in writing, and shall reimburse CCSI for all
costs of art work relating to any and all labels referring to OM, as the
distributor of the Products, to be affixed to the Products such as, but not
limited to, art work layout, silk screens, camera-ready art work, first article
printed labels for all Products, art work for labels, and silk screens for
labels, if such labeling (which is to be affixed to the Products) refers to OM
as the distributor of the Products. Production of such labels to be affixed to
the Products shall not begin until DO provides approval, in writing, of the
first production samples of such labels. During the Initial Transition, the
parties will cooperate to expeditiously obtain such conforming labels (with
regulatory approval) to be affixed to the Products. After the end of the Initial
Transition, CCSI shall not, without DO's written consent, place (or permit to be
placed) any Products in the Targeted Markets within the Territory without labels
affixed to the Products referring to OM as the distributor of the Products and
conforming to label samples approved by DO. As to any Products for the
monitoring of newborn bilirubinemia (infant jaundice) already placed in the
Targeted Markets within the Territory as of the end of the Initial Transition,
the parties agree to cooperate fully with each other to affix or cause to be
affixed such conforming labels to such Products by relabeling in the field by DO
or CCSI sales or in-service personnel as soon as reasonably possible, and to the
extent that DO has its representatives do any such relabeling in the field, DO
shall not charge CCSI for such service. During the Initial Transition, CCSI
shall have its representatives perform such relabeling in connection with site
visits in the ordinary course of business.
3. Patent, Trademark and Copyright Notices. All Products shall bear
and/or be packaged with CCSI's existing and/or future trademarks and trade
dress, labels, copyright and patent notices, licenses and restrictions and any
other notices required by law, and notices that the Products were manufactured
for CCSI. At DO's direction, CCSI will have labels affixed to the Products
referring to OM as the distributor of the Products subject to CCSI's written
approval of design, which approval will not be unreasonably withheld or delayed.
An example of approved labeling is included as part of Attachment B hereto.
Neither party shall use any trademark or service mark not owned by CCSI to
identify or name any Product.
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4. Regulatory Compliance. CCSI shall be solely responsible for and will
use commercially reasonable efforts to identify, obtain and maintain in good
standing, at its sole cost, any and all necessary U.S. governmental and
regulatory approvals, certifications and clearances required for the Products by
U.S. governmental or regulatory entities including, but not limited to, the FDA
and any applicable state and local law and regulation for the monitoring of
newborn bilirubinemia (infant jaundice) applicable to CCSI. CCSI shall be
responsible for ensuring that all Products for the monitoring of newborn
bilirubinemia (infant jaundice) are manufactured in compliance with the
provisions and standards of all applicable U.S., state and local statutes,
regulations and other legal requirements including, but not limited to, the
medical device provisions of the Federal Food, Drug and Cosmetic Act and
regulations promulgated by the FDA relating to clearance for commercial
distribution, labeling and good manufacturing practices.
DO agrees (1) not to change any Product or Product labeling/promotional
advertising material (or to create and disseminate the same) without prior CCSI
approval relating solely to regulatory matters (including clinical accuracy)
and/or CCSI's intellectual property; (2) to maintain compliant files in
accordance with all FDA regulations and requirements and to document and forward
all complaints to CCSI; and (3) to use, promote, distribute and sell the
Products only for the monitoring of newborn bilirubinemia (infant jaundice)
pursuant to paragraph 2 of Section III hereof.
5. Product Recalls or Corrective Actions.
(a) In the event of a voluntary or mandatory recall of
the Products or if CCSI takes any "Corrective Action"
(as defined below) with respect to any of the
Products including, without limitation, because the
Products are believed to violate any provision of
applicable law, CCSI shall bear all costs and
expenses related to such recall or Corrective Action
including, without limitation, expenses or
obligations to third parties, the cost of notifying
customers, costs associated with the shipment of such
recalled or corrected Products from customers to CCSI
or its designee and direct costs related to handling
or correcting the Products (the "Recall/Corrective
Action Costs"). However, if such recall or Corrective
Action is caused by any act or omission by DO or its
subdistributors that is inconsistent with, or a
breach by DO, of its obligations under this
Agreement, including without limitation any
unauthorized changes to the Products or the Product
Information, DO shall bear all such Recall/Corrective
Action Costs relating thereto or arising therefrom.
(b) Both parties shall maintain complete and accurate
records, for such periods as may be required of CCSI
or DO by applicable law, of all the Products for the
monitoring of newborn bilirubinemia (infant jaundice)
placed into distribution by them within the
Territory. The parties shall cooperate fully with
each other in carrying out any Product recall, in
fulfilling all recall obligations under applicable
regulations, and in effecting any Corrective Action
with respect to the Products including,
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without limitation, communications with any
purchasers or end users. Where feasible, but subject
to applicable legal requirements, prior to either
party incurring any Recall/Corrective Action Costs,
the parties will discuss the scope and extent of such
costs.
(c) For purposes of this section, "Corrective Action"
means a field or other action relative to any of the
Products (voluntarily undertaken or as required by
the FDA or other governmental authority) or any field
or other action including mandatory notification,
repair, replacement and refund, safety alert, "cease
distribution and notification" and mandatory recall
action, voluntary recall, market withdrawal, stock
recovery, "device removal or correction," as defined
or understood under FDA law or policy (or those of
other governmental authority) and any other action
necessary to address a product safety or
effectiveness problem and any "enforcement action"
(defined for this purpose as any seizure, injunction,
criminal prosecution, civil penalties and any other
legal or administrative action that the FDA or other
governmental authority can bring against CCSI, DO and
their officers/employees, and/or the Products).
6. Quality Assurance Audits.
(a) DO, at its own expense and at its sole discretion,
shall have reasonable access during regular business
hours, upon prior written notice of not less than ten
(10) business days, to the Product Inspection and
Acceptance Location(s) where the Products are being
manufactured in order to monitor and audit the
manufacturing practices for the Products as necessary
to ensure satisfaction of the regulatory compliance
provisions of this Agreement including FDA QSR and
GMP requirements, and, in accordance with paragraph
10 of Section III, to inspect and accept the Products
prior to shipping. During such audit or inspection
for acceptance, CCSI agrees that either CCSI or its
third-party manufacturer of the Products shall, upon
written request from DO, promptly make available to
DO, for its review but not for copying, the entire
DMR documents, including the master document (as
amended from time to time) redacted to exclude
proprietary information of CCSI and of its
third-party manufacturer not needed for such audit or
inspection, as follows: * CCSI agrees to provide DO
with prior written notice of any change in CCSI's
third-party manufacturer of the Products, which
notice shall identify the name and location of any
such manufacturer.
(b) CCSI, at its own expense and at its sole discretion,
shall have reasonable access during regular business
hours, upon prior written notice of not less than ten
(10) business days, to audit DO's distribution
practices for the Products as necessary to ensure
satisfaction of the regulatory compliance provisions
of this Agreement.
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7. Product Information. The parties will prepare, revise from time to
time, and distribute Product Information in accordance with the provisions of
Attachment B hereto. DO shall not make any unauthorized representation or
warranty regarding the Products without CCSI's prior written consent. DO shall
only distribute the materials covered by this paragraph in connection with the
marketing, distribution, training, service and/or maintenance of the Products.
All Product Information and other written materials relating to the Products
sent to dealers, distributors and end users distributed in the Targeted Markets
within the Territory shall bear CCSI's copyright, trademark and patent notices,
licenses and restrictions as may reasonably be required by CCSI.
III. PURCHASE AND SALE
-----------------
1. CCSI's Supply of Products. CCSI agrees to manufacture and ship or
cause its manufacturing subcontractor to manufacture and ship the Products
ordered by DO under a Firm Purchase Order during the Term of this Agreement in
accordance with the provisions of this Agreement. CCSI will not ship or cause to
be shipped to DO any products that are not legally marketable or not
commercially available.
2. DO's Right and License to Market the Products.
(a) During the Term of this Agreement, and subject to the
terms and conditions hereof, including without
limitation subparagraphs (b) and (c) of this
paragraph 2 of Section III, CCSI hereby grants to DO
the exclusive right and license without the right to
sublicense to use, market, sell and distribute the
Products to dealers, distributors and users in the
Targeted Markets (and, notwithstanding the absence of
the right to sublicense, to and through all sales
and/or distribution channels for or to any and all
such markets) within the Territory solely for use
within the Territory in monitoring newborn
bilirubinemia (infant jaundice); provided, however,
that CCSI may place Experimental Units in the
Targeted Markets within the Territory for use in
monitoring newborn bilirubinemia (infant jaundice)
for clinical studies, for research, for experimental
and educational purposes and to obtain and compile
data for obtaining any regulatory clearances and/or
approvals; and provided, further, however, that
CCSI's activities in support of DO's marketing and
sales of the Products in the Targeted Markets within
the Territory as provided in Attachment D hereto
shall not be deemed a breach of this Agreement. CCSI
shall retain all rights to use, market, sell and
distribute the Products throughout the world for all
uses other than for use in monitoring newborn
bilirubinemia (infant jaundice) and, subject to
paragraph 2(d) of this Section III, CCSI shall retain
all rights to use, market, sell and distribute the
Products for use in monitoring newborn bilirubinemia
(infant jaundice) in any market outside the Territory
and in any market within the Territory other than the
Targeted Markets.
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(b) The limited, exclusive right and license granted to
DO in paragraph 2(a) of this Section III includes a
correspondingly limited, exclusive license (without
the right to sublicense) to use, offer to sell and
sell during the Term of this Agreement under U.S.
patents 5,313,267 and 5,671,735 and under any other
U.S. patent of CCSI that may issue on any Device. No
other right or license, express or implied, is
granted to DO under any other patent or patent
application including, without limitation, any U.S.
patent of CCSI that may issue on the Calibration
Standards, provided, however, that during the Term of
this Agreement, CCSI shall not grant any license
under any U.S. patent of CCSI that may issue on the
Calibration Standards for monitoring newborn
bilirubinemia (infant jaundice) (or any other
calibration standards for monitoring newborn
bilirubinemia (infant jaundice) for use with the
Devices) to any other person to use, offer to sell or
sell Products in the Targeted Markets within the
Territory.
(c) The limited, exclusive right and license granted to
DO in paragraph 2(a) of this Section III includes a
correspondingly limited, exclusive right and license
to use, market, and distribute (but not sell) the
software of the Device ("Software") to end-users of
the Device in the Targeted Markets within the
Territory during the Term of this Agreement. DO may
not and DO may not authorize others to (1) copy the
Software, (2) dissemble, decompile or otherwise
attempt to discern the source code of the Software,
(3) reverse engineer the Software, or (4) modify or
prepare derivative works of the Software. Title to
the Software is not transferable to DO but remains
vested in CCSI. It is understood that a
correspondingly limited lease and license of the
Software will be conveyed by CCSI directly to
end-users of the Software packaged with the Devices
that are marketed and distributed by DO.
(d) CCSI agrees that during the Initial Term of this
Agreement, prior to marketing and/or distributing any
Products for profit, either by itself or through a
distributor or any other third-party representative,
for use in monitoring newborn bilirubinemia (infant
jaundice) in any market outside the Targeted Markets
within the Territory or in any market outside the
Territory, CCSI shall give written notice thereof to
DO and DO shall have the right within thirty (30)
days after receipt of that notice to present to CCSI
its marketing and distribution plan for such market,
it being understood and agreed that nothing in this
Agreement shall obligate CCSI to grant any marketing
and/or distribution right or license to DO in any
markets outside the Territory or in any market within
the Territory other than the Targeted Markets.
(e) DO shall not sell the Products outside of the
Targeted Markets within the Territory or anywhere
outside of the Territory and shall not sell the
Products to any third party that DO knows intends to
divert the Products for use or sale outside of the
Targeted Markets within the Territory or
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anywhere outside of the Territory. CCSI agrees that
it shall not be considered a Default by DO under this
Agreement if a Product is used within the Territory
in a market other than the Targeted Markets, provided
that DO itself does not market, distribute or sell
(or knowingly permit any third party to market,
distribute or sell) such Product for use in such
market. Accordingly, in the event that DO or CCSI
identifies unauthorized marketing or distribution of
Products outside the Targeted Markets within the
Territory (either as a result of information received
from DO or otherwise), DO will cooperate with CCSI
should CCSI deem it necessary to take all reasonably
necessary steps to stop such unauthorized activity,
including where appropriate termination by DO of its
supply of Products to such third party. Likewise, in
the event that DO or CCSI identifies unauthorized
marketing or distribution of Products inside the
Targeted Markets within the Territory by a third
party other than DO or its authorized agents or
subdistributors, CCSI will take all reasonably
necessary steps to stop such unauthorized activity,
including where appropriate termination by CCSI of
its supply of Products to such third party.
3. Product Changes. From time to time CCSI may propose to make, and DO
may request (although CCSI is not obligated to make), changes to the Products
constituting an adaptation, improvement, redesign or modification of the
Products. If CCSI decides to implement a change to the Products that would
require a change to the Product Information it shall notify DO in writing of the
changes proposed (and the proposed date of implementation) at least sixty (60)
days prior to the time CCSI proposes to implement such changes to the Products
and during such sixty (60) day period CCSI will seek input from DO regarding the
proposed changes for purposes of effecting a smooth transition. Notwithstanding
the foregoing, the parties agree that CCSI is working at this time on
modifications to the Products relating to the LED Device, the Modified Devices,
"Charges per Use" components, and software upgrades relating to same, and may
also from time to time make changes to the Products for further regulatory
compliance that do not require a change to the Product Information. In all such
cases, CCSI will give DO sixty (60) days notice, but will not be required to
seek input from DO. Both parties understand that CCSI may make product changes,
some of which may require additional FDA regulatory clearance. Such modified
Device or Product shall not be included under this Agreement as a Modified
Device or Product until it is legally marketable, has all required FDA
regulatory clearance, and is commercially available.
4. Rolling Forecasts and Delivery of the Products.
(a) DO shall submit Firm Purchase Orders with CCSI for
specific quantities of Devices (other than LED
Devices) at the Minimum Transfer Price as set forth
on Attachment A due within 30 days of delivery of
product(s) subject to the DO Purchase Price at a
quarterly reconcilliation if the Products are sold
not less than seven (7) months prior to DO's
requested delivery date. In the event DO submits to
CCSI an additional Firm Purchase Order for such
Devices within seven (7) months after any prior
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Firm Purchase Order, CCSI shall not be obligated to
deliver such Devices to DO until seven (7) months
from the scheduled delivery date relating to the
prior Firm Purchase Order. However, under no
circumstances will CCSI be obligated to accept any
Firm Purchase Order for such Devices if such Firm
Purchase Order is for more than * such Devices to be
delivered following the seven months lead time of
DO's Firm Purchase Order. The foregoing provisions
shall not prevent DO from placing additional orders
for additional quantities of such Devices or
emergency orders for such Devices for delivery in
less than seven (7) months. Subject to paragraph 9 of
Section III, CCSI agrees to use commercially
reasonable efforts to cause its third-party
manufacturer to deliver such Devices on the requested
schedule; provided, however, that the failure to
deliver such Devices on or before the date requested
relating to such Devices ordered under any short term
or emergency purchase order within less than seven
(7) months lead time, shall not be deemed a breach of
this Agreement so long as CCSI exercises such
commercially reasonable efforts.
(b) Within two (2) business days following the date
hereof, DO shall place a Firm Purchase Order with
CCSI for not less than *. Devices at the Minimum
Transfer Price as set forth on Attachment A due
within 30 days of delivery of product(s) subject to
the DO Purchase Price at a quarterly reconcilliation
if the products are sold. Under no circumstances
shall DO be obligated to accept for delivery more
than: (i) a total of * (in the aggregate) of such *
Devices prior to the end of the fourth calendar month
following the date that DO places its Firm Purchase
Order for such initial * Devices (the "Initial Order
Date"), (ii) a total of * (in the aggregate) of such
* Devices prior to the end of the fifth calendar
month following the Initial Order Date, and (iii) the
total * of such Devices (in the aggregate) prior to
the end of the sixth calendar month following the
Initial Order Date. Within two (2) business days
following the date hereof, CCSI shall order all parts
for an additional * Devices (over and above the *
unit order placed by DO to CCSI above), so that a
total of * units will have been ordered with the
third-party manufacturer by such date and all parts
for an additional * units will be available at CCSI's
third-party manufacturer within seven (7) months from
the date of such order so as to improve availability
of Products to DO. As soon as such parts for an
additional * Devices are at CCSI's third-party
manufacturer, CCSI shall notify DO in writing of such
availability and if DO elects to purchase some or all
of such Devices, CCSI shall arrange for delivery of
such Devices to DO within sixty (60) days following
CCSI's receipt of a Firm Purchase Order for any such
Devices from DO.
(c) CCSI and DO will cooperate with each other to
facilitate any transition to the LED Device, and CCSI
will keep DO informed as to the anticipated date when
the LED Device may be legally marketable and
commercially available. Following such time when the
LED Device becomes legally
11
<PAGE>
marketable and commercially available to DO for
distribution, DO shall submit to CCSI a non-binding
rolling forecast (updated by DO every two (2) months
during the First Performance Year and every three (3)
months thereafter) setting forth the anticipated
quantity of LED Devices required by DO for the then
upcoming twelve (12) month period. Such forecasts
shall reflect, as a minimum, the Annual Minimum
Performances for Devices for the applicable
Performance Year listed in paragraph 6 of this
Section III, unless DO determines in good faith that
a smaller forecast is appropriate due to existing
inventory or other market conditions. The lead time
for delivery of the LED Device, prices and lot size
shall be as stated in Attachment A hereto. DO shall
submit Firm Purchase Orders for LED Devices in
accordance with such prices, lead time and lot size
at the Minimum Transfer Price as set forth on
Attachment A due within 30 days of delivery of
products subject to the DO Purchase Price at a
quarterly reconcilliation if the products are sold.
In the event DO submits to CCSI an additional Firm
Purchase Order for LED Devices prior to the
expiration of the lead time applicable to any prior
Firm Purchase Order, CCSI shall not be obligated to
deliver such additional LED Devices to DO except in
accordance with the lead time applicable to such
order. For orders exceeding the forecasted quantity,
CCSI shall advise DO in writing within ten (10) days
of receipt by CCSI of such orders whether CCSI has
accepted such orders. CCSI will use commercially
reasonable efforts to satisfy Firm Purchase Orders
for the LED Device exceeding the forecasted
quantities, but shall not be in breach hereof for its
failure to provide such excess quantities so long as
CCSI exercises such commercially reasonable efforts*.
(d) DO shall submit to CCSI a non-binding rolling
forecast (updated by DO every month) setting forth
the anticipated quantity of Calibration Standards
(or, when legally marketable, Charges per Use)
required by DO for the upcoming twelve (12) month
period. Such forecasts shall reflect, as a minimum,
the Annual Minimum Performances for Calibration
Standards (or, when legally marketable, Charges per
Use) for the applicable Performance Year listed in
paragraph 6 of this Section III, unless DO determines
in good faith that a smaller forecast is appropriate
due to existing inventory or other market conditions.
DO shall submit Firm Purchase Orders not less than
two (2) months prior to DO's requested delivery date
for quantities of Calibration Standards (or, when
legally marketable, the quantities of Charges per
Use) at the Minimum Transfer Price set forth in
Attachment A with the Initial Transfer Price set
forth in Attachment A payable in thirty (30) days
after deivery of products and the DO Purchase Price
due at quarterly reconcilliations if the products are
sold. If the products are not sold, the balance due
for the Minimum Transfer Price is due in 365 days
after delivery of the products to DO. The lead times
for delivery, prices and lot sizes for Calibration
Standards (and, when legally marketable, Charges per
Use) shall be as stated in
12
<PAGE>
Attachment A hereof. For orders exceeding the
forecasted quantity, CCSI shall advise DO in writing
within ten (10) days of receipt by CCSI of such
orders whether CCSI has accepted such orders. CCSI
agrees to maintain a two (2) month inventory of
Calibration Standards and DO agrees to maintain a two
(2) week inventory of Calibration Standards, in each
case based on a moving three (3) month average of
purchases by DO.
(e) CCSI will use commercially reasonable efforts to
satisfy Firm Purchase Orders for the Calibration
Standards or Charges per Use exceeding the forecasted
quantities, but shall not be in breach hereof for its
failure to provide such excess quantities so long as
CCSI exercises such commercially reasonable efforts.
5. Purchase Price.
(a) Subject to the remaining provisions of this Section
III, paragraph 5, the DO Purchase Price for each of
the first two Performance Years shall be equal to the
higher of (i) sixty percent (60%) of the Invoice
Price for the Products or (ii) the Minimum Transfer
Price for each Product set forth on Attachment A
hereto.
(b) The DO Purchase Price after the first two Performance
Years shall be equal to the higher of (i) fifty
percent (50%) of the Invoice Price for the Products,
or (ii) the Minimum Transfer Price for each Product
set forth on Attachment A hereto.
(c) In addition, anytime after the first Performance Year
and prior to the end of the second Performance Year,
upon DO achieving cumulative purchases of *
Calibration Standards and/or Charges per Use and *
Devices, the DO Purchase Price shall be equal to the
higher of (i) fifty percent (50%) of the Invoice
Price for the Products, or (ii) the Minimum Transfer
Price for each such Product set forth on Attachment A
hereto.
(d) The parties agree that DO's initial suggested list
price for the Calibration Standard or Charges per Use
shall not be less than * per Calibration Standard or
Charges per Use, and not less than * per Device, but
DO is free to determine, and from time to time
change, the price it charges for Products.
(e) The Initial Transfer Price, the Minimum Transfer
Price, and/or the DO Purchase Price may not be
changed from that set forth in Attachment A;
provided, however, notwithstanding the foregoing
provisions of paragraph 5 of this Section III and the
purchase price requirements thereunder and under
Attachment A, such purchase prices may change solely
as follows:
(i) *
13
<PAGE>
(ii) *
(iii) *
(iv) *
(v) *
(vi) *
(vii) *
(viii) Notwithstanding any provision in this
Agreement, CCSI has no obligation, at any
time or under any circumstances, without
penalty, to reduce the Initial Transfer
Price or the Minimum Transfer Price
component of the DO Purchase Price for
Calibration Standards or Charges per Use to
below * per unit or to have a pricing
structure for Devices that would differ from
the pricing structure in provisions set
forth in Attachment A.
(f) *
(g) It is the parties' intention that OM will receive the
economic credit (and credit towards its minimums) for
any and all sales or placements of Products (other
than an Experimental Unit and the * for an Evaluation
Unit) by CCSI to customers within the Targeted Market
within the Territory during the Initial Transition.
CCSI will not make any such sales or placements of
Products (other than an Experimental Unit and the *
for an Evaluation Unit) without DO's consent. As to
any and all such sales or placements of Products
(other than an Experimental Unit and the * for an
Evaluation Unit) by CCSI, CCSI shall retain an amount
equal to the DO Purchase Price and shall remit the
balance to DO, such payment to be made within thirty
(30) days following receipt by CCSI of payment of the
invoice in question. DO shall have the right to audit
the books and records of CCSI for the limited
purpose, and only to the extent necessary and
appropriate for DO to verify the accuracy of such
sales and other placements and invoicing and
collections relating thereto, which audit shall take
place during reasonable business hours following
reasonable advance notice to CCSI. DO shall bear the
risk of non-collection from such customers, provided
CCSI uses good faith efforts to collect such amounts,
and provided further, that as to any invoices which
remain unpaid more than 180 days, DO shall only be
obligated to reimburse CCSI the Minimum Transfer
Price for the sales of Products and the prices for
Product Components, Software, Demo Calibration
Standards/Charges per
14
<PAGE>
Use, Evaluation Calibration Standards/Charges per
Use, and Accessories as set forth on Attachment A
reflected on such invoices.
(h) The prices paid by DO to CCSI for Product Components
and Accessories identified in Attachment A hereto
shall be as set forth in Attachment A hereto.
6. Annual Minimum Performances.
(a) The amounts listed on the table below as "Annual
Minimum Performances" are DO's Annual Minimum
Performances for the Initial Term of this Agreement,
provided, however, that DO's failure to reach such
Annual Minimum Performances shall not constitute a
Default by DO under this Agreement. Subject to the
footnotes to the table below, in the event that the
quantity of units of either of the Calibration
Standards/Charges per Use or Devices purchased by DO
as of the expiration of any Performance Year is less
than the Annual Minimum Performances for such
Performance Year in the following table, CCSI shall
have the right, but not the obligation, to terminate
this Agreement in accordance with the following
procedures:
(i) at least sixty (60) days before the end of
any Performance Year in which it appears
that DO is in jeopardy of failing to meet
the Annual Minimum Performances for such
Performance Year, CCSI may give written
notice to DO of CCSI's intent to terminate
this Agreement, which notice shall contain
CCSI's requirements for DO to avoid
termination. Such notice is referred to
herein as the "Advance Notice of
Termination." Within thirty (30) days after
receipt of the Advance Notice of
Termination, DO will inform CCSI whether DO
believes it can meet the requirements to
avoid termination.
(ii) if by the end of such Performance Year in
which CCSI has issued an Advance Notice of
Termination DO still has not met the Annual
Minimum Performances for such Performance
Year, then, unless the parties agree
otherwise, the Agreement will terminate
sixty (60) days after the end of such
Performance Year, and the Exit Transition
will begin.
(iii) if CCSI does not issue a timely Advance
Notice of Termination, i.e., at least sixty
(60) days before the end of the applicable
Performance Year, then DO's failure to meet
the Annual Minimum
15
<PAGE>
Performances for such Performance Year will
not be grounds for termination of the
Agreement by CCSI.
(b) In the event that the quantity of Annual Minimum
Performances for units of either of the Calibration
Standards/Charges per Use or Devices purchased by DO
as of the expiration of any Performance Year is less
than the amount set forth as the Annual Minimum
Performances for such Performance Year in the
following table, DO shall have the right, but not the
obligation, to terminate this Agreement upon giving
CCSI ninety (90) days prior written notice, provided
such notice is given within thirty (30) days after
the expiration of such Performance Year and,
provided, further, that DO's failure to meet such
Annual Minimum Performances for such Performance Year
is not a Default under this Agreement unless such
failure resulted from DO having failed to utilize
commercially reasonable efforts to implement its
Marketing and Distribution Plan for distribution of
the Calibration Standards/Charges per Use and Devices
within the Targeted Markets within the Territory.
(c) In the event either party elects to terminate this
Agreement pursuant to this paragraph 6 of Section
III, then both parties will cooperate with each other
to use commercially reasonable efforts in
implementing the Exit Transition.
ANNUAL MINIMUM PERFORMANCES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Performance Year*** Minimum Performances for Units of Minimum Performances for Units of
Devices*,**, *** Calibration Standards or, when
legally marketable, Charges per
Use*,**,***
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 * *
- -----------------------------------------------------------------------------------------------------------------
2 * *
- -----------------------------------------------------------------------------------------------------------------
3 * *
- -----------------------------------------------------------------------------------------------------------------
4 * *
- -----------------------------------------------------------------------------------------------------------------
5 * *
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*
*
16
<PAGE>
*
*
(d) (i) the amounts listed in the table below
captioned as "Cumulative Annual Minimum
Targeted Market Performances" are DO's
Cumulative Annual Minimum Targeted Market
Performances for the * Performance Years,
provided, however, that DO's failure to
reach such Cumulative Annual Minimum
Targeted Market Performances shall not
constitute a Default by DO under this
Agreement. Subject to the footnotes to the
table below, in the event that the
cumulative quantity of Cumulative Annual
Minimum Targeted Market Performances for
Devices to be sold, leased, or
loaned-for-use placement within a Targeted
Market by DO as of the expiration of any of
the Performance Years * is less than the
cumulative number of such applicable Devices
set forth as the Cumulative Annual Minimum
Targeted Market Performances applicable to
such Targeted Market for such Performance
Year in the following table, and provided DO
has met its Annual Minimum Performances for
such Performance Year, CCSI shall have the
right, but not the obligation, to implement
the "Strategic Remediation" as described in
clause (ii) below, upon giving DO thirty
(30) days prior written notice, provided
that such notice is given within thirty (30)
days after the expiration of such
Performance Year.
(ii) *
CUMULATIVE ANNUAL MINIMUM TARGETED MARKET PERFORMANCES*
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Performance Year** Cumulative Annual Minimum Cumulative Annual Minimum Cumulative Annual Minimum
Performances for Hospital Performances for Home Performances for Pediatrician
Devices Healthcare Devices Devices
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* * * *
- ---------------------------------------------------------------------------------------------------------------
* * * *
- ---------------------------------------------------------------------------------------------------------------
* * * *
- ---------------------------------------------------------------------------------------------------------------
* * * *
- ---------------------------------------------------------------------------------------------------------------
* * * *
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
*No Devices placed by DO with a customer shall be counted or included
as a Device placed by DO for purposes of determining whether DO has satisfied
the Cumulative Annual Minimum Targeted Market Performances for Devices except to
the extent that DO has both (1) paid CCSI, or is not past due on such amounts
then owed,+ for the DO Purchase Price for such Devices (and not just the
applicable demo price) in any Performance Year; and (2) sold, leased or placed
in a loan-for-use placement such Devices into the applicable Targeted Market.
*
+If such payments owed to CCSI by DO are not subsequently paid to CCSI
when due, then retrospectively, CCSI may terminate DO's license for the
applicable Targeted Market if such applicable Cumulative Annual Targeted Market
Minimum Performances are not satisfied.
(e) Notwithstanding the foregoing provisions of this
paragraph 6 of Section III and the Annual Minimum
Performances and/or the Cumulative Annual Minimum
Targeted Market Performances requirements thereunder:
(i) *
(ii) *
(iii) *
7. Terms of Payment. (a) CCSI shall invoice DO for Products,
promptly after Products are shipped to DO, as follows: for all Products other
than Calibration Standards or Charges per Use, Demo Calibration
Standards/Charges per Use and Evaluation Calibration Standards/Charges per Use,
at the Minimum Transfer Price for such Products as set forth in Attachment A
hereto; for Calibration Standards or Charges per Use, at the Minimum Transfer
Price as set forth in Attachment A, provided, however, that the invoice shall
also state separately the Initial Transfer Price payable within 30 days, as
provided for in paragraph 5(e)(vii) of Section III and Attachment A, and the
remainder of the invoiced amount will not be due until the earlier of 365 days
after invoicing or the time when a Reconciled Amount is due pursuant to the
following subparagraph; and for Product Components and Accessories, Software,
Demo Calibration Standards/Charges per Use, and Evaluation Calibration
Standards/Charges per Use, at the prices set forth in Attachment A. Except for
the special provision in the preceding sentence relating to the portion of the
invoice price for Calibration Standards or Charges per Use in excess of the
Initial Transfer Price, DO shall pay all such invoices within thirty (30) days
after receipt of same.
(b) Within thirty (30) days following the close of
each quarter, DO shall calculate the DO Purchase Price as set forth in paragraph
5 of Section III and Attachment A for Products sold, leased or placed in a
loan-for-use placement during such just-completed quarter. DO shall also
calculate the difference between the DO Purchase Price owed to CCSI and the
Minimum Transfer Price stated on the Firm Purchase Order paid to CCSI for
Products other than Calibration Standards/Charges per Use, and the difference
between the DO Purchase Price owed
18
<PAGE>
to CCSI and the Initial Transfer Price or the Minimum Transfer Price stated on
the Firm Purchase Order paid for Calibration Standards/Charges per Use. Each
such difference is referred to herein as a "Reconciled Amount." Within three (3)
business days after completing such calculations, DO shall then remit to CCSI
the net sum of such Reconciled Amounts. DO may deduct any credit due DO from
future balances due to CCSI. With each such quarterly payment, DO shall deliver
to CCSI a quarterly report that includes at least the following information: (i)
Total quantity of each Product sold by DO; (ii)Total amount invoiced for each
Product; and (iii)Total compensation payable to CCSI.
(c) With respect to any Calibration Standard/Charges
per Use that is maintained in inventory by DO for more than one year, DO shall
be obligated to pay to CCSI the balance due between the Minimum Transfer Price
and the Initial Transfer Price stated on the Firm Purchase Order for such
Products. Such payments shall be made 365 days after delivery to DO of such
Products. Once such payment is made, and the Calibration Standard/Charges per
Use is subsequently sold, the Reconciled Amount for such sale shall be the
difference between the DO Purchase Price and the Minimum Transfer Price
previously paid to CCSI. However, to satisfy Annual Minimum Performances or
Annual Minimum Targeted market Performances, DO must have paid CCSI any such
balance due within the Applicable Performance Year.
(d) All payments payable by DO hereunder shall be
paid to CCSI in U.S. dollars by wire transfer or by such other method mutually
agreeable to the parties, to such bank account as CCSI shall designate in
writing (with appropriate wiring instructions, if applicable) within a
reasonable time prior to such due date. DO shall provide CCSI with notice of
each such wire transfer. Any payments received by CCSI shall be applied first to
the satisfaction of any unpaid accrued interest and then to the satisfaction of
any unpaid principal.
(e) In the event that any payment due hereunder is
not made when due, the payment shall accrue interest beginning on the first day
after the payment was due, calculated at the annual rate of the sum of (i) one
percent (1%) plus, (ii) the prime interest rate quoted by Citibank, N.A., New
York, New York, on the date such payment is due, or on the date payment is made,
whichever is higher, the interest being compounded on the last day of each
calendar month; provided that in no event shall said annual rate exceed the
maximum legal interest rate for corporations. Such payment when made shall be
accompanied by all interest accrued. Said interest and the payment and
acceptance thereof shall not negate or waive the right of CCSI or DO to any
other remedy, legal or equitable, to which CCSI or DO may be entitled under this
Agreement because of the delinquency of the payment.
(f) DO shall keep full and accurate books of account
containing all particulars that may be necessary for the purpose of calculating
all payments due to CCSI. Such books of account shall be kept by DO with all
necessary supporting data and shall, for the two (2) years next following the
end of the calendar year to which each shall pertain, be open for audit by an
independent certified accountant selected by CCSI and reasonably acceptable to
DO
19
<PAGE>
upon reasonable notice during normal business hours at CCSI's expense for the
sole purpose of verifying payments or compliance with this Agreement, but in no
event more than once in each calendar year. All information and data offered
shall be used only for the purpose of verifying payments, and any post-audit
claims shall be paid only if made by CCSI within two (2) years after CCSI's
receipt of payment pursuant to this paragraph 7. CCSI shall disclose to DO the
results of the audit and in the event that such audit indicates that in any
calendar year that the payments which should have been paid by DO are at least
ten percent (10%) greater than those which were actually paid by DO, then DO
shall pay the cost of such inspection. In all other instances, CCSI shall be
responsible for such payment. All underpayments and/or overpayments are due and
payable to the respective party within three (3) business days after
computation.
8. Delivery. The Products shall be shipped to DO's place of
destination, as described herein, at CCSI's expense. DO shall be responsible for
obtaining any necessary insurance during this shipment. Title to and risk of
loss of the Products shall pass to DO upon shipment of the Products from CCSI or
CCSI's third-party manufacturer's manufacturing facilities to DO. The place of
destination for all Products purchased by DO shall be a single location in the
U.S. to be designated by DO. CCSI represents that its third-party manufacturer
is obligated to deliver to CCSI at CCSI's request a "Certificate of Conformance"
to Specifications for each Product manufactured by that third-party manufacturer
for CCSI. CCSI agrees to provide delivery of a copy to DO of such a "Certificate
of Conformance" for each Product manufactured by its third-party manufacturer
for CCSI.
9. CCSI Failure to Supply.
(a) Except in connection with and to the extent of a
Force Majeure Event, and subject to paragraph 4 of
this Section III and Attachment A, CCSI shall fail to
cause to be delivered the type and quantity of
Products specified in any Firm Purchase Order (and,
in the case of Firm Purchase Orders exceeding the
forecasted quantity, expressly accepted by CCSI),
delivered in a timely manner, and (i) such failure
shall continue for sixty (60) days following written
notice of such failure from DO, or (ii) such failure
shall occur and continue for at least thirty (30)
days following written notice of such failure from DO
more than three (3) times in any eighteen (18) month
period (provided that only one (1) event shall count
toward such total of three (3) in any three (3) month
period), CCSI shall be deemed to be in Default (which
Default shall not be subject to cure under paragraph
2 of Section VI of this Agreement or otherwise).
Notwithstanding the foregoing, in the event DO
terminates this Agreement, it will cooperate with
CCSI to use commercially reasonable efforts to
implement the Exit Transition.
20
<PAGE>
(b) CCSI shall not be liable in any respect (or be
subject to termination of this Agreement), for any
failure of supply or delay in supply, to the extent
such failure or delay shall have been due to a Force
Majeure Event. Such failure or delay shall not be
deemed a Default by CCSI. In any such case, prompt
written notice shall be given by CCSI to DO of the
existence of such cause and of readiness to resume
performance and CCSI shall use commercially
reasonable efforts to rectify the Force Majeure
Event. It is understood that neither party shall be
required to settle a labor dispute against its will.
(c) *
10. Acceptance. DO shall have the right (but not the obligation) at its
own expense to inspect Products for compliance with the Specifications at the
Product Inspection and Acceptance Location during regular business hours on a
schedule reasonably agreed upon by DO and CCSI. Failure to give written notice
of rejection of the Products prior to the shipment of such Products to DO shall
be deemed to be acceptance of such Products by DO, but shall not constitute a
waiver or release by DO of any of CCSI's product warranties herein, and shall
not be an indication that DO has determined that such warranties are satisfied,
as such Products will be under the warranty of paragraph 1 of Section IV from
the date of shipment to DO. Following receipt of DO's written notice of
rejection of Products prior to shipment to DO, at DO's request, CCSI shall use
commercially reasonable efforts to have available for inspection and shipment to
DO 100% of the necessary replacement (conforming) Products at the Product
Inspection and Acceptance Location within thirty (30) days of receiving such
notice.
11. Customer Support. CCSI and DO shall provide customer support for
the Products as set forth in Attachment D hereto.
IV. COVENANTS, REPRESENTATIONS AND WARRANTIES
-----------------------------------------
1. *
2. Legal Compliance. CCSI agrees to use its best efforts to cause the
manufacture and distribution of the Products to DO to be in compliance with the
provisions of all applicable U.S., state and local statutes, regulations and
other governmental requirements including, but not limited to, the medical
device provisions of the Federal Food, Drug and Cosmetic Act and regulations
promulgated by the FDA relating to clearance for commercial distribution,
labeling and good manufacturing practices.
3. General Representations. CCSI represents and warrants to DO that:
21
<PAGE>
(a) CCSI is a corporation duly organized, validly
existing and in good standing under the laws of the
State of New York and is duly licensed or qualified
to do business as a foreign corporation in each
jurisdiction in which the nature of the business
transacted by it or the character of the property
owned or leased by it makes such licensing or
qualification by it necessary, except to the extent
that such failure to be so licensed or qualified does
not have a material adverse affect on CCSI. CCSI has
all requisite corporate power and authority to own
and operate its properties and to carry on its
business as it is now being conducted and to execute
and deliver this Agreement and to perform its
obligations hereunder.
(b) The execution and delivery by CCSI of this Agreement
and the Confidence Agreement entered into between
CCSI and Ohmeda, Inc. (predecessor of interest to DO)
dated as of October 16, 1998 (the "Confidence
Agreement") and the consummation by it of the other
transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate
action of CCSI. This Agreement and the Confidence
Agreement constitute the legal, valid and binding
obligation of CCSI, enforceable against it in
accordance with their terms, except to the extent
that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws
affecting creditors' rights generally.
(c) The execution and delivery by CCSI of this Agreement
and the Confidence Agreement and the performance of
its obligations hereunder and thereunder does not
violate (i) the Certificate of Incorporation or
By-Laws of CCSI, or (ii) any law, rule, regulation,
judgment, award or decree of any court or other
governmental authority, or (iii) except for the
Medical International Agreement, any note, indenture,
mortgage, agreement or other instrument to which CCSI
is a party, or by which CCSI or any of its properties
or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of
time or both) a default under, any such note,
indenture, mortgage, agreement or other instrument,
or result in the creation or imposition of any lien
of any nature whatsoever upon any of the properties
or assets of CCSI, limited in the case of clauses
(ii) or (iii), to those matters which would have a
material adverse effect on CCSI or the transaction
contemplated hereby. As to the Medical Instruments
Agreement, CCSI represents, warrants and covenants
that it is free to terminate such agreement without
penalty upon thirty (30) days' prior written notice
to Medical Instruments, that it shall immediately
provide such written notice of termination to Medical
Instruments upon execution of this Agreement, such
termination to be effective in thirty (30) days, and
that in the event of any claim by Medical Instruments
against
22
<PAGE>
DO, DO shall be defended, indemnified and held
harmless by CCSI in accordance with the procedures
set forth in paragraph 5 of Section V of this
Agreement.
(d) No material authorization, approval, order, license,
permit, franchise or consent and no material
registration, declaration, notice or filing by or
with any court, administrative agency or other
governmental authority is required for the execution
and delivery by CCSI of this Agreement and the
Confidence Agreement or the consummation by it of the
transactions contemplated hereby and thereby.
(e) The Device and the Calibration Standards have all
necessary FDA clearances and approvals so that OM may
begin distribution of these specific Products
immediately upon execution of this Agreement.
(f) CCSI is not aware of any infringement by a third
party of any of the United States patents identified
in paragraph 2(b) of Section III.
(g) The representations and warranties contained in this
paragraph 3 of Section IV do not contain any untrue
statement of a material fact, or omit to state a
material fact necessary to make the statements
contained therein not misleading.
4. *
5. Marketing and Distribution Efforts. Subject to the second sentence
of paragraph 8 of this Section IV, DO agrees to use commercially reasonable
efforts to implement its Marketing and Distribution Plan for the Targeted
Markets within the Territory and to provide sales, marketing, training,
in-servicing and distribution coverage for the Products in the Targeted Markets
within the Territory. If and when Charges per Use becomes legally marketable and
commercially available, DO may market, sell and distribute Calibration Standards
and/or Charges per Use in such ratios as DO may determine.
6. Marketing Abilities. DO warrants and represents that OM, together
with relevant supporting personnel and resources from DO within the home
healthcare marketing channel, has the ability to provide sales, marketing,
training, in-servicing and distribution coverage for the Products in the
Targeted Markets within the Territory.
7. Training. Subject to the second sentence of paragraph 8 of this
Section IV, DO agrees to provide applicable Product Information in accordance
with Attachment B to DO's representatives and dealers to whom DO distributes the
Products in the Targeted Markets within the Territory and to use commercially
reasonable efforts to ensure, within a reasonable period of
23
<PAGE>
time, that distribution representatives and dealers of DO to whom DO distributes
Products are provided training reasonably equivalent to that which DO provides
to its own sales force, as described in its Marketing and Distribution Plan,
which training includes information regarding in-servicing of customers and end
users.
8. *
9. Records. DO agrees to maintain proper books and records (including
OM's books and records) with respect to the Products, such books and records to
be kept in accordance with sound accounting principles consistent with DO's
ongoing bookkeeping practices so as to accurately reflect DO's sales and revenue
information relating to the Products.
10. Force Majeure. DO shall not be liable in any respect (or be subject
to termination of this Agreement), for delay or failure to perform any of DO's
obligations under this Agreement (including OM's obligations to market and
distribute the Products) to the extent that such failure or delay shall have
been due to a Force Majeure Event. In any such case, prompt notice shall be
given by DO to CCSI of the existence of such cause and of readiness to resume
performance and DO shall use commercially reasonable efforts to rectify such
Force Majeure Event. It is understood that neither party shall be required to
settle a labor dispute against its will.
11. General Representations. DO represents and warrants to CCSI that:
(a) DO is a corporation duly organized, validly existing
and in good standing under the laws of the State of
Delaware and is duly licensed or qualified to do
business as a foreign corporation in each
jurisdiction in which the nature of the business
transacted by it or the character of the property
owned or leased by it makes such licensing or
qualification by it necessary, except to the extent
that such failure to be so licensed or qualified does
not have a material adverse affect on DO. DO has all
requisite corporate power and authority to own and
operate its properties and to carry on its business
as it is now being conducted and to execute and
deliver this Agreement and to perform its obligations
hereunder.
(b) The execution and delivery by DO of this Agreement
and the Confidence Agreement and the consummation by
it of the other transactions contemplated hereby and
thereby have been duly authorized by all necessary
corporate action of DO. This Agreement and the
Confidence Agreement constitute the legal, valid and
binding obligation of DO, enforceable against it in
accordance with their terms, except to the extent
that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws
affecting creditors' rights generally.
24
<PAGE>
(c) The execution and delivery by DO of this Agreement
and the Confidence Agreement and the performance of
its obligations hereunder and thereunder does not
violate (i) the Certificate of Incorporation or
By-Laws of DO, or (ii) any law, rule, regulation,
judgment, award or decree of any court or other
governmental authority, or (iii) any note, indenture,
mortgage, agreement or other instrument to which DO
is a party, or by which DO or any of its properties
or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of
time or both) a default under, any such note,
indenture, mortgage, agreement or other instrument,
or result in the creation or imposition of any lien
of any nature whatsoever upon any of the properties
or assets of DO, limited in the case of clauses (ii)
or (iii), to those matters which would have a
material adverse effect on DO or the transaction
contemplated hereby.
(d) No material authorization, approval, order, license,
permit, franchise or consent and no material
registration, declaration, notice or filing by or
with any court, administrative agency or other
governmental authority is required for the execution
and delivery by DO of this Agreement and the
Confidence Agreement or the consummation by it of the
transactions contemplated hereby and thereby.
(e) OM is a division of DO.
(f) The representations and warranties contained in this
paragraph 11 of Section IV do not contain any untrue
statement of a material fact, or omit to state a
material fact necessary to make the statements
contained therein not misleading.
12. *
25
<PAGE>
13. Other CCSI Covenants.
(a) LED and Modified Devices. CCSI will use its best
efforts to develop a mass manufacturing prototype for
the LED Device within one (1) year of the date of
this Agreement. CCSI will also attempt to obtain FDA
clearance as soon as reasonably possible. If FDA
clearances are obtained for the LED Device, CCSI will
manufacture or cause a third party manufacturer to
manufacture the LED Device for availability to DO
under the terms of this Agreement. CCSI shall use
commercially reasonable efforts to complete work on
the Modified Devices as soon as reasonably possible.
If regulatory, including FDA and UL clearances, are
obtained, CCSI shall manufacture or cause a
third-party manufacturer to manufacture such Devices
for availability to DO under the terms of this
Agreement. Failure to obtain FDA or UL clearances for
such LED Device or Modified Devices will not be a
breach of this Agreement as long as such best efforts
or commercially reasonable efforts required by this
Agreement, respectively as the case may be, are made
by CCSI.
(b) Y2K. The transition to the Year 2000 will not affect
the correct functioning or performance of any date or
time-related functions contained within any Products.
14. DO Subdistributors and Agents. DO shall be entitled to use
subdistributors and/or third-party agents in respect of satisfying its
obligations hereunder regarding solely the marketing, distribution, servicing
and training in respect of the Products. Any such subdistributor or third-party
agent shall only be authorized by DO to market, sell and distribute the Products
in the Targeted Markets within the Territory for use in monitoring newborn
bilirubinemia (infant jaundice) in accordance with DO's license under paragraph
2 of Section III. Any such subdistributor or third-party agent who receives any
information that is specifically and clearly identified or marked by CCSI as
CCSI confidential information (and, if communicated orally, confirmed in a
single written document to DO) with respect to the Products or CCSI, before
receiving such CCSI confidential information from CCSI or DO, shall have signed
a confidentiality form agreement to be prepared by CCSI that will obligate such
subdistributor or third-party agent to protect the CCSI confidential
information. DO will undertake to have this agreement signed and provided to
CCSI, but shall have no obligation to enforce any such agreement, provided,
however, subject to paragraph 7 of Section V, DO will not disclose any CCSI
confidential information to such subdistributor or third-party agent who has not
signed such an agreement. CCSI shall have the right to enforce such agreements
with any such subdistributor and/or third-party agent and shall be a third-party
beneficiary of any further confidentiality agreement between DO and any such
subdistributor and/or third-party agent. The breach by any such subdistributor
and/or third-party agent of its confidentiality obligations hereunder or under
the terms of its appointment as a subdistributor and/or third-party
26
<PAGE>
agent shall not be deemed to be a Default by DO under this Agreement, provided,
however, that DO will cooperate with CCSI should CCSI deem it necessary to take
all reasonably necessary steps to address such breach, including where
appropriate termination by DO of its supply of Products to such subdistributor
and/or third-party agent.
V. INDEMNIFICATION AND CONFIDENTIALITY
-----------------------------------
1. *
2. *
3. *
4. *
5. Defense of Third Party Claims. A party (the "Indemnifying Party")
indemnifying another party (the "Indemnified Party") pursuant to this Agreement
shall have the right, in its discretion and at its election, to assume and
control the defense of any Claim provided that the Indemnifying Party notifies
the Indemnified Party of such election within a reasonable time period under the
circumstances. The Indemnified Party if notified of the Indemnifying Party's
election to do so within such reasonable time frame, will permit the
Indemnifying Party to assume and control the defense of such Claim in the name
of the Indemnified Party in any appropriate administrative or judicial
proceedings and will take whatever actions may be reasonably requested of the
Indemnified Party to permit the Indemnifying Party to conduct such defense and
to settle or to obtain an adjudication of such Claim on the merits, including
the signing of pleadings and other document, if necessary; provided, however,
that the Indemnifying Party shall defend the Claim with counsel reasonably
satisfactory to the Indemnified Party and provide the Indemnified Party with
evidence reasonably satisfactory to the Indemnified Party that the Indemnifying
Party can satisfy the Claim if it is upheld. In addition to the liability for
ultimate settlement or judgment, if any, arising out of any such Claim under
this Agreement, the Indemnifying Party shall be solely responsible for all the
expenses incurred in connection with such defense, regardless of the outcome.
However, the Indemnifying Party shall not be responsible for any expenses,
including attorneys' fees and costs, incurred by the Indemnified Party to
monitor the defense of the Claim by the Indemnifying Party. In the event that
the Indemnifying Party does not elect to assume the defense of any such Claim
under the terms of this Agreement, the Indemnified Party shall be entitled to
conduct such defense, and to settle such Claim (but such settlement, in those
cases where the Indemnifying Party has acknowledged and confirmed its
indemnification obligation, including its obligation to indemnify for any
settlement entered into with its consent, shall be with the consent of the
Indemnifying Party), and the Indemnifying Party's indemnification obligation
under this Agreement shall apply to such defense or settlement.
27
<PAGE>
5. *
7. CCSI Confidential Information. DO acknowledges that all technical,
financial, marketing, or sales information and business plans disclosed by CCSI
to DO relating to the Products, together with any other information designated
as confidential and provided by CCSI to DO hereunder, is confidential
proprietary information and shall remain the exclusive property of CCSI (the
"CCSI Confidential Information"). Except as otherwise expressly provided in this
Agreement, DO shall not disclose or use CCSI Confidential Information for any
purpose other than the performance of its obligations pursuant to, or to enforce
its rights under this Agreement, without the prior written consent of CCSI, and
in no event shall DO use such information to reverse engineer the Products. DO's
obligations under this paragraph 7 of Section V and under the Confidence
Agreement shall survive the termination of each of such agreements.
8. DO Confidential Information. CCSI acknowledges that all technical,
financial, marketing, or sales information and business plans disclosed by DO to
CCSI relating to the Products, together with any other information designated as
confidential and provided by DO to CCSI hereunder is confidential proprietary
information and shall remain the exclusive property of DO (the "DO Confidential
Information"). Except as otherwise expressly provided in this Agreement, CCSI
shall not disclose or use DO Confidential Information for any purpose other than
the performance of its obligations pursuant to, or to enforce its rights under
this Agreement, without the prior written consent of DO. CCSI's obligations
under this paragraph 8 of Section V and under the Confidence Agreement shall
survive the termination of each of such agreements.
9. Exclusions. "CCSI Confidential Information" and "DO Confidential
Information," as those terms are defined above, shall not include information
which:
(a) at the time of disclosure by one party to the other
party was in the public domain;
(b) after disclosure by one party to the other party
becomes part of the public domain by publication or
otherwise, except by breach of this Agreement, or of
the Confidence Agreement;
(c) the receiving party can establish, by clear and
convincing evidence, was in its possession at the
time of disclosure by the other party and was not
acquired, directly or indirectly, from the other
party; or
(d) is received from a third party and, the receiving
party can establish by clear and convincing evidence,
was in that third party's possession at the
28
<PAGE>
time of disclosure by the other party to the
receiving party and was not acquired by the third
party directly or indirectly from the other party.
Proof of the existence of information qualifying under the
exclusions (c) or (d) above shall not be deemed to negate the confidential and
proprietary nature of the information.
10. Required Disclosure. In the event that the receiving party is
requested or becomes legally compelled (by oral questions, interrogatories,
requests for information or documents, subpoena, criminal or civil investigative
demand or similar process) to disclose any confidential information of the other
party (including disclosures to regulatory agencies such as the FDA), the
receiving party will, to the extent it is aware of such fact, provide the other
party with prompt written notice of such requirement prior to any disclosure so
that the other party may seek (with the cooperation of the receiving party) a
protective order or other appropriate remedy against disclosure and/or waive
compliance with the provisions of paragraphs 7 and 8 of this Section V. In the
event that such protective order or other remedy is not obtained, the receiving
party shall furnish only that portion of the confidential information which it
is then legally required to furnish.
11. Return of Confidential Information. Upon termination of this
Agreement for any reason, the parties shall return to each other all
confidential information of the other party, except that each party shall be
entitled to have its legal counsel maintain one archival copy.
12. Injunctive Relief. The parties recognize that damages at law would
be an insufficient remedy in the event of a material breach by a party hereto of
the terms of paragraph 14 of Section IV and paragraphs 7, 8 and 10 of this
Section V and that the other party shall be entitled, upon application to a
court of competent jurisdiction, to seek preliminary (without the posting of a
bond) and permanent injunctive relief to enforce the terms of paragraph 14 of
Section IV and paragraphs 7, 8 and 10 of this Section V. Subject to paragraph 6
of this Section V, nothing contained herein shall be construed as prohibiting
the aggrieved party from pursuing such other remedies as may be available for
such a breach or threatened breach of paragraph 14 of Section IV or paragraphs
7, 8 or 10 of this Section V, including, but not limited to, recovery of
monetary damages.
29
<PAGE>
VI TERM AND TERMINATION
--------------------
1. Term.
(a) The initial term of this Agreement shall begin on the
date of this Agreement and shall end on October 7,
2004 (the "Initial Term"), unless earlier terminated
in a manner expressly permitted hereunder. Subject to
paragraph 1(b) of this Section VI below, in the event
that the Annual Minimum Performances are satisfied
(including purchasing the required quantities) during
each of the applicable Performance Years (subject to
paragraph 6(e) of Section III above), the Initial
Term may be extended at DO's option for an additional
term of five (5) years (the "Extended Term"),
provided, however, that such Extended Term shall not
apply to any Targeted Markets for which DO's rights
to exclusively market and distribute the Products
have been terminated by CCSI (and as of the end of
the Initial Term remains terminated) as a result of
DO having failed to satisfy the Cumulative Minimum
Targeted Market Performances (subject to paragraph
6(e) of Section III above), for each of the
applicable Performance Years.
(b) If DO exercises its option for the Extended Term,
then the Annual Minimum Performances and the
Cumulative Annual Minimum Targeted Market
Performances set forth in the following tables shall
be DO's Annual Minimum Performances and Cumulative
Annual Minimum Targeted Market Performances to be
purchased by DO at the DO Purchase Price from CCSI
and sold by DO within each applicable Performance
Years 6-10; provided, however, that DO's failure to
meet such Annual Minimum Performances and Cumulative
Annual Minimum Targeted Market Performances shall not
constitute a Default by DO under this Agreement.
30
<PAGE>
ANNUAL MINIMUM PERFORMANCES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Performance Year Minimum Performance for Units of Minimum Performances for Units of
Devices Calibration Standards or Charges per Use
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
* * *
- ------------------------------------------------------------------------------------------------------------------
* * *
- ------------------------------------------------------------------------------------------------------------------
* * *
- ------------------------------------------------------------------------------------------------------------------
* * *
- ------------------------------------------------------------------------------------------------------------------
* * *
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE ANNUAL MINIMUM TARGETED MARKET PERFORMANCE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Performance Year Cumulative Annual Minimum Cumulative Annual Minimum Cumulative Annual Minimum
Performance for Hospital Performance for Home Performance for
Devices Healthcare Devices Pediatrician Devices
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* * * *
- -----------------------------------------------------------------------------------------------------------------
* * * *
- -----------------------------------------------------------------------------------------------------------------
* * * *
- -----------------------------------------------------------------------------------------------------------------
* * * *
- -----------------------------------------------------------------------------------------------------------------
* * * *
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*
(c) Notwithstanding any of the foregoing, upon any
termination of this Agreement (other than a wrongful
termination by CCSI or DO in breach of this
Agreement), the parties will cooperate to implement
the Exit Transition.
2. Termination for Default. Subject to paragraph 9(b) of Section III
and paragraph 10 of Section IV, either party may terminate this Agreement by
giving written notice of such termination in the event of a Default by the other
party and such Default has not been cured within thirty (30) days after the
defaulting party has received written notice specifying the Default and
requesting that it be cured. Except as otherwise provided herein, termination of
this Agreement for Default shall not impair the terminating party's other rights
and remedies for such Default.
31
<PAGE>
3. Default. A party shall be in "Default" and shall be deemed to have
committed a material breach of this Agreement if:
(a) it voluntarily files a petition under the federal
Bankruptcy Act or any similar or successor law
relating to bankruptcy, insolvency, arrangement, or
reorganization or under any state bankruptcy or
insolvency act, or admits its insolvency or the
inability to pay its debts, or fails within ninety
(90) days, to gain a discharge or stay of involuntary
proceedings brought for its reorganization,
dissolution, or liquidation, or is adjudged as
bankrupt, or has a trustee or receiver appointed, or
makes an assignment for the benefit of its creditors,
or if there is an attachment, execution, or other
judicial seizure of any material portion of its
assets which is not discharged or stayed within
ninety (90) days; or
(b) it materially breaches any term of this Agreement.
4. *
VII MISCELLANEOUS
-------------
1. *
2. Media Releases. No media releases, public announcements or public
disclosures by either party or its employees relating to this Agreement or the
subject matter of this Agreement, including, without limitation, promotional or
marketing material, shall be made without the prior written approval of the
other party, which approval shall not be unreasonably withheld or delayed,
except to the extent that CCSI or DO (or its parent) is required to make public
disclosure or announcements of any information relating to this Agreement in
accordance with the requirements of applicable securities laws or U.S. generally
accepted accounting principles.
3. Notice. Any notice permitted or required to be given under this
Agreement may be sent by personal delivery, commercial courier service,
facsimile transmission or registered or certified mail, return receipt
requested, properly directed to the recipient at the address set forth below the
party's signature in this Agreement. Notices shall be deemed given as and when
received. Either party may change its address by giving written notice of the
change in the manner provided above for giving notice.
32
<PAGE>
4. Integration; Amendment; Nonwaiver. This Agreement, including all
Attachments, constitutes the entire agreement of the parties with respect to its
subject matter and supersedes and cancels all other prior and contemporaneous
agreements, discussions or representations, whether written or oral with the
exception of the Confidence Agreement between the parties. No modification of
this Agreement shall be enforceable unless reduced to writing and signed by duly
authorized representatives of both parties. Failure of either party, at any
time, to enforce any provision of this Agreement shall not preclude any other or
further enforcement of such provisions or the exercise of any rights. No waiver
of a breach of this Agreement shall be valid unless in writing and signed by the
party against whom enforcement of such waiver is sought.
5. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision. If any provision is deemed invalid or unenforceable, the remainder
shall be construed to give effect to the parties' intent to the extent permitted
by applicable law.
6. Choice of Law. This Agreement shall be governed by and interpreted
according to the laws of the State of New York, and of the U.S. without
reference to their laws relating to conflicts of law, and shall not be governed
or affected by the United Nations Convention for the International Sale of
Goods.
7. Successors and Assigns. This Agreement, and all rights and
obligations hereunder, are personal as to the parties hereto and shall not be
assigned in whole or in part by either of the parties hereto to any other
person, firm or corporation without the prior written consent of the other party
hereto, except that either party may assign this Agreement to a subsidiary
without releasing the assignor from liability hereunder, such assignment to
remain effective so long as the assignee remains a subsidiary of assignor;
provided, however, that if there is a change of control of a majority of the
voting common stock of such party or such assignee, the other party may as its
sole remedy under this paragraph 8 of Section VII terminate this Agreement.
Subject to the foregoing, this Agreement shall be binding upon the respective
successors and assigns of the parties. The foregoing provisions shall not
require that DO obtain consent from CCSI with regard to the appointment or use
of third-party agents, dealers or subdistributors relating to the marketing and
distribution of the Products.
8. Independent Contractor. The relationship between the parties will be
that of independent contractors. Neither party will be or hold itself out as an
employee, agent or franchisee of the other, and neither party will have the
authority to create or assume any obligation, expressed or implied, on behalf of
the other. This Agreement shall not be interpreted or construed as creating or
evidencing any association, joint venture or partnership between the parties or
as imposing any partnership obligations or partnership liability on any party.
33
<PAGE>
9. Survival. The payment obligations under paragraphs 5(f) and 7 of
Section III, paragraphs 1, 3, 11, and 12 of Section IV and Section V of this
Agreement shall survive its expiration or termination for any reason, as shall
any other provisions of this Agreement which by their express terms may
reasonably be construed as surviving its expiration or termination. Expiration
or termination of this Agreement shall not affect either party's obligations to
comply with all legal and regulatory requirements related to the manufacture,
sale or use of Products.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first written above.
CHROMATICS COLOR SCIENCES DATEX-OHMEDA, INC.
INTERNATIONAL, INC.
By /s/ By /s/
-------------------------------- --------------------------------
Name: Darby S. Macfarlane Name: Andrew Krakauer
Title: Chief Executive Officer Title: President of Ohmeda Medical
Address: 5 East 80th Street Address: Ohmeda Medical
New York, New York 10021 9065 Guilford Road
Columbia, Maryland 21046
34
<PAGE>
ATTACHMENT A
PRODUCT DESCRIPTION AND PRICING*
A. PRODUCTS
1. DEVICE (Model 1)
Status: Available now.
This product includes a TLc Bili(Trade Mark)Sensor with a built in calibration
verification standard in the Sensor cap, which is packaged in a durable, soft
carry case, a TLC Touch(Trade Mark) palmtop computer and an RS232 cable.
The TLc Bili(Trade Mark)Sensor is a non-invasive, light weight
Trans-Light-Cutaneous-Bilirubin Monitor. Using optical filter color science
technology, this color measurement instrument flashes a light on the skin and
performs a color measurement to detect the yellow content of the newborn's skin
and provides a numerical result in mg/dl, or u/moles corresponding to the serum
bilirubin within a clinically useful range.
The TLc Touch(Trade Mark) palmtop computer features the TLc Soft(Trade Mark)
program on a Flash Ram card. This Product offers 4 AA batteries for the
TLcBili(Trade Mark) Sensor and 2 AA batteries for the TLc Touch(Trade Mark)
palmtop. This Product includes labels and shipping/packaging, and an Operator's
Manual. This Product is used with the TLc Lensette(Trade Mark) individual
calibration standards packaged in a box of 25 individual TLc Lensette(Trade
Mark) ("the TLc LensPak(Trade Mark)") and is contemplated for use with the
"Charges per Use" component described herein under Optional Upgrades.
Minimum Transfer Price for
Device as described above: *
- --------
* As provided in the Agreement, items currently in development are not
considered "Products" until they are legally marketable and commercially
available for distribution under the Agreement.
Prices in this Attachment A are subject to increase in accordance with
the Price Adjustment provisions in the last Section (Section D) of this
Attachment A. Prices may also be changed as per paragraph 5 of Section III of
the Agreement.
CCSI will not be deemed to be in breach of this Agreement for any
regulatory clearance (including 510K clearances) that is not obtained on any
items currently in development. It is understood that products and items
described in Attachment A shall not be included under this Agreement until they
are legally marketable, have any required FDA or other regulatory clearance, and
are commercially available.
<PAGE>
DO Purchase Price for Device
as described above: The higher of the Minimum Transfer Price
or 60% of Invoice Price in Performance
Years 1 & 2 or 50% of Invoice Price in
Performance Years 3, 4 and 5 of this
Agreement, as per the terms of the
Agreement. e.g. If Invoice Price is
$3000, then DO Purchase Price is:
$1800 (60%) in Performance Years 1 & 2
of the Agreement;
$1500 (50%) in Performance Years 3, 4 &
5 of the Agreement.
Initial invoice to DO to be at Minimum
Transfer Price, adjusted quarterly to DO
Purchase Price as per terms of the
Agreement.
*
1. CALIBRATION STANDARDS
TLc Lensette(Trade Mark) Calibration Standards for single use:
Status: Available now.
TLc Lensette(Trade Mark) Calibration Standards are used to calibrate the Device
before each TLc BiliTest(Trade Mark) System measurement of a patient to ensure
accuracy of the color measurement and includes a protective shield to prevent
cross-contamination between patients. The TLc Lensette(Trade Mark) Calibration
Standards are available packaged 25 per box (TLc LensPak(Trade Mark)).
Initial Transfer Price *
(Only applicable for
Performance Years 1 and 2
after which time the Initial
Transfer Price is the Minimum
Transfer Price)
Minimum Transfer Price *
for TLc Lensette(Trade Mark)
Calibration Standards as
described above:
2
<PAGE>
DO Purchase Price for
TLc Lensette(Trade Mark)
Calibration Standards as
described above: The higher of the Minimum Transfer Price
or 60% of Invoice Price for Performance
Years 1 & 2 or 50% of Invoice Price for
Performance Years 3, 4 & 5 of this
Agreement, as per the terms of the
Agreement.
e.g. If Invoice Price is $10, then DO
Purchase Price is:
$6 (60%) in Performance Years 1 & 2 of
the Agreement;
$5 (50%) in Performance Years 3, 4 & 5
of the Agreement.
Purchase Price for
Demo Calibration Standards: *
Purchase Price for
Evaluation Calibration
Standards: *
*
*
3. LED DEVICE
Status: Not available now. Under Design Controls - availability following such
time as becomes legally marketable as per terms of the Agreement
*
Minimum Transfer Price for
LED Device as
described above: *
DO Purchase Price for LED Device as
described above:
The higher of the Minimum Transfer Price
or 60% of the Invoice Price in
Performance Years 1 & 2 or 50% of the
Invoice Price in Performance Years 3, 4
& 5 of this Agreement, as per the terms
of the Agreement.
e.g. If Invoice Price is $3000, then DO
Purchase Price is:
$1800 (60%) in Performance Years 1 & 2
of the Agreement;
$1500 (50%) in Performance Years 3, 4 &
5 of the Agreement.
3
<PAGE>
Initial invoice to DO to be at Minimum
Transfer Price, adjusted quarterly to DO
Purchase price as per terms of the
Agreement.
*
MODIFIED DEVICES
a. Model 2: Model 1 with Laptop
*
Minimum Transfer Price: *
DO Purchase Price: The higher of the Minimum Transfer Price
or 60% of the Invoice Price in
Performance Years 1 & 2 or 50% of the
Invoice Price in Performance Years 3, 4
& 5 of this Agreement, as per the terms
of the Agreement.
Initial invoice to DO to be at Minimum
Transfer Price, adjusted quarterly to DO
Purchase price as per terms of the
Agreement.
*
a. Model 3: Model 2 with Printer
*
Minimum Transfer Price: *
DO Purchase Price: The higher of the Minimum Transfer Price
or 60% of the Invoice Price in
Performance Years 1 & 2 or 50% of the
Invoice Price in Performance Years 3, 4
and 5 of this Agreement, as per the
terms of the Agreement.
Initial invoice to DO to be at Minimum
Transfer Price, adjusted quarterly to DO
Purchase price as per terms of the
Agreement.
*
c. Model 4: THE COLORMATE(Registered) TLc BRIEFCASE(Trade Mark)
SYSTEM
4
<PAGE>
Minimum Transfer Price
for The Briefcase System
as describe above: *
DO Purchase Price for Device
as described above: The higher of the Minimum Transfer Price
or 60% of the Invoice Price in
Performance Years 1 & 2 or 50% Invoice
Price in Performance Years 3, 4 & 5 of
this Agreement, as per the terms of the
Agreement.
Initial invoice to DO to be at Minimum
Transfer price, to be adjusted quarterly
to DO Purchase Price as per the terms of
the Agreement.
*
5. CHARGES PER USE
Status: Not available now. Available following such time as becomes legally
marketable. Going through design controls. Anticipated availability is within a
few months from the date of signing this Agreement.
*
5. MANAGED USE
Status: Not available now. May be available when agreed to by the parties.
*
7. MODEM/WITH DEVICE MODELS 1,2, OR 3
Status: Not available now. Going through Design Controls. Available following
such time as becomes legally marketable.
*
5
<PAGE>
B. ACCESSORIES
1. Mounting Pole
Status: Available now
*
Transfer Price for Mounting
Pole as described above: *.
*
C. PRODUCT COMPONENTS
1. Laptop Computer
1. Status: Not available now. *
1. Printer
Status: Not available now. *
3. Software of the Device
*
D. Price Adjustments based upon changes in CCSI's Cost Amount
6
<PAGE>
ATTACHMENT B
PRODUCT INFORMATION
<TABLE>
<CAPTION>
- ---------------------------------- ---------------------------------------- --------------------------------------------------
Item/Information Initial Action Ongoing Action
- ---------------------------------- ---------------------------------------- --------------------------------------------------
<S> <C> <C>
Operating Manual CCSI to provide 100 copies for DO's use CCSI creates and revises as required.* CCSI
includes within each product carton, DO to
provide input for upgrading the Manual
Instructions for Use for CCSI to provide 10 copies for DO's use CCSI creates and revises as required.* CCSI
Lensettes & Charge per Use includes within each Lensette box
Product Labels and Licensing CCSI to provide 10 copies for DO's use CCSI creates and revises as required.* CCSI
Folder for Software includes within each Product and software package
Sales Training Manual CCSI to provide 2 copies for DO's use DO to revise as required for all Targeted
Markets with CCSI input and sign off**
Quick Reference Guide CCSI to provide 10 copies for DO's use DO creates/revises as required and supplies
quantities necessary to service all Targeted
Markets with CCSI input and sign off**
Inservice/Training support CCSI to provide 10 copies of existing DO creates/revises as required and supplies
materials materials for DO's use quantities necessary to service all Targeted
Markets with CCSI input and sign off**
Sales support materials such as CCSI to provide one copy of all CCSI to continue to distribute existing
brochures, cost consideration existing material for DO's use literature as per Attachment D until supply runs
etc. out. DO creates/revises as required and
supplies quantities necessary to service all
Targeted Markets with CCSI input and sign off**
Advertising & Promotion CCSI to provide copy of all existing DO creates/revises as required and supplies
Materials such as journal ads, materials for DO's use quantities necessary to service all Targeted
direct mail piece, booth Markets with CCSI input and sign off**
graphics etc.
</TABLE>
*CCSI will promptly provide DO with at least one free copy (complete) of
any revised Operating Manual Instructions for use and/or licensing folder.
**CCSI must review and either sign off or provide specific revisions or
deletions and reasons therefor (within 7 days) on all Product Information,
including but not limited to such Product Information listed above for
distribution in to the field, solely for regulatory and intellectual property
review. This includes all labeling (by FDA definition) and/or
advertising/promotional materials, to the extent that it is a regulatory or
CCSI intellectual property issue. (It is not just for commenting on product
claims, but description, presentation or other statements regarding the
products that implicate regulatory or CCSI intellectual property). Product
Information created or revised by DO will be the subject to analysis or a
documented "No 510(k)" rationale for compliance with FDA 510(k) requirements.
CCSI's approval of any such Product Information shall not be unreasonably
withheld. CCSI shall not have the right to object to, or withhold approval on
style, color or quality of any such information. The purposes of CCSI's review
of Product Information include, without limitation, allowing CCSI to ensure
that (i) CCSI can protect its trademark, logos and other intellectual property
rights on Product Information, (ii) all Product Information including written
materials relating to the Products sent to dealers, distributors and end-users
distributed in the Targeted Markets within the Territory shall bear CCSI's
copyright, trademark and patent notices, licenses and restrictions as may
reasonably be required by CCSI and (iii) CCSI's trademarks shall always be
used in such a manner as to ensure that those trademarks are associated with
CCSI. DO shall only distribute the materials covered by this Attachment B in
connection with the marketing and distribution of Products for use in
monitoring of bilirubinemia (infant jaundice) in the Targeted Markets within
the Territory.
Sample of approved labeling is attached to this Attachment B.
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ATTACHMENT C
------------
EXTERNAL MARKET FACTORS FOR MINIMUMS REVIEW
<PAGE>
ATTACHMENT D
CUSTOMER SUPPORT
I. INITIAL SALES START UP TRANSITION ITEMS
This table contains CCSI services to be provided on behalf of DO while DO is
preparing for sales launch. This transition period is not expected to last
more than sixty (60) days from contract signature but in no event will be
longer than 90 days from date when part configurations/numbers and other
necessary product support information are made available for input into DO's
system.
Goals: (1) provide smooth customer transition from CCSI to Ohmeda Medical
(2) maintain current sales momentum while DO in start up transition.
<TABLE>
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ITEM ACTION
- ----------------------------------------------------- ------------------------------------------------------------------------------
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*
</TABLE>
<PAGE>
II. ONGOING CUSTOMER SUPPORT
SUPPORT TO BE PROVIDED BY DO
*
SUPPORT TO BE PROVIDED BY CCSI
*
SALES AND CLINICAL SUPPORT ACTIVITIES (FIRST TWELVE MONTHS AFTER DATE OF
SIGNING)
*
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III. EXIT TRANSITION CONSIDERATIONS
UPON TERMINATION OF AGREEMENT*
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ITEM ACTION
- ----------------------------------------------- ------------------------------------------------------------------------------------
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*
</TABLE>
*Applies only to termination of Agreement by DO or CCSI (as the case
may be) in accordance with (and not in breach of) the terms of the Agreement.
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<PAGE>
Exhibit 99.1
DATEX-OHMEDA, INC. AND ITS OHMEDA MEDICAL DIVISION
ARE GRANTED EXCLUSIVE U.S. LICENSE FOR DISTRIBUTION
OF CHROMATICS' NON-INVASIVE MONITORING SYSTEM FOR INFANTS
NEW YORK, June 9 /PRNewswire/ -- Chromatics Color Sciences International,
Inc. (Nasdaq: CCSI) and Datex-Ohmeda, Inc. have reached an agreement under which
Datex-Ohmeda, Inc. and its Ohmeda Medical division have been granted the
exclusive license for U.S. sales, marketing and distribution of CCSI's
Colormate(Registered) TLc-BiliTest(Trade Mark) System for monitoring of newborn
bilirubinemia (infant jaundice).
The agreement, which is effective immediately, calls for Datex-Ohmeda,
Inc., a U.S. subsidiary of Instrumentarium Corporation, and its Ohmeda Medical
division to begin nationwide marketing and distribution of the
Colormate(Registered) TLc-Bilitest(Trade Mark) System to hospitals, pediatrician
offices and the non-consumer home healthcare markets where the test is
administered by a healthcare professional.
Terms of the agreement include annual minimum market penetration
performance standards and quantities of both the Colormate(Registered)
TLc-BiliTest(Trade Mark) System and the TLc-Lensette(Trade Mark) calibration
standards to be distributed by Datex-Ohmeda, Inc. through its home healthcare
marketing channels and its Ohmeda Medical division, for which CCSI will share
the revenues. In addition, Datex-Ohmeda, Inc. and Ohmeda Medical have
negotiation rights for international marketing and distribution of the Company's
monitoring system, and for the potential retail market and consumer home
healthcare market where the test is not administered by a healthcare
professional, subject to further required regulatory clearances for commercial
use. "The combination of CCSI's advanced technology and Ohmeda Medical's strong
relationships with the neonatal and home care communities represents a powerful
alliance. This cutting-edge technology will enable us to offer healthcare
professionals a better alternative to a painful invasive procedure," said Ohmeda
Medical President Andy Krakauer. "The Colormate(Registered) TLc-BiliTest(Trade
Mark) System fits perfectly with Ohmeda Medical's extensive infant care product
offerings, including our BiliBlanket(Registered) Plus Phototherapy System for
treatment of infant jaundice. This new noninvasive technology reinforces our aim
to `Make Life a Little Easier' for healthcare providers and, in particular, for
our tiny patients."
Chromatics Chief Executive Officer Darby Macfarlane said, "We have been
very pleased with the reception that the Colormate(Registered)
TLc-BiliTest(Trade Mark) System has received to date from hospitals since we
began distribution this past February. However, we have been eager to reach
agreement with a major distributor who shares our vision of the potential for
this product. Our expectation is that this agreement will
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provide strong marketing and distribution to put our breakthrough infant
jaundice monitor into the hands of the medical community, allowing this new,
FDA-cleared technology to have its effect on the patient management standard of
care in this area of medicine."
The Colormate(Registered) TLc-BiliTest(Trade Mark) System (TLc for tender,
loving care) is the only device with FDA clearance for commercial use being
marketed in the U.S. for pain-free, non-invasive monitoring of
hyperbilirubinemia for babies of all races and all gestational ages--even when
undergoing phototherapy treatment. A study of the device published in
Pediatrics, the publication of the American Academy of Pediatrics, found that
the Colormate(Registered) TLc-BiliTest(Trade Mark) System results correlate
within a clinically useful range to results obtained from current invasive
techniques that involve taking blood from infants--often repeatedly.
Datex-Ohmeda is the core business of Instrumentarium Corporation, an
international healthcare company headquartered in Finland. Datex-Ohmeda, Inc.,
is Instrumentarium's U.S. subsidiary.
Ohmeda Medical is a leading global supplier of infant care products for
critically ill newborns, and suction and oxygen products for hospital-wide use.
Since April 4, 1998, it has formed a separate division within Instrumentarium's
Medical Equipment and Supplies segment; however, it operates under the
Datex-Ohmeda, Inc. legal structure in the United States.
Chromatics Color Sciences is in the business of color science and has
developed technologies and intellectual properties that it believes have medical
applications involving monitoring of certain chromogenic diseases or disorders
such as hyperbilirubinemia in newborns. The Company defines chromogenic diseases
or disorders as those diagnosed or monitored by the coloration of the human
skin, tissue or fluid being affected. Additional medical applications to the
monitoring of hyperbilirubinemia in newborns will require additional clinical
trials and FDA clearances for commercial use.
The Company's technologies and intellectual properties also have other
applications including the scientific color measurement and classification of
human skin and certain color-sensitive consumer products, and in determining the
color compatibility of such skin and product color classification for use in a
variety of industries including the cosmetic, beauty-aid and fashion industries.
Certain of the matters discussed in this announcement contain
forward-looking statements that involve material risks to and uncertainties in
the Company's business that may cause actual results to differ materially from
those anticipated by the statements made herein.
Such risks and uncertainties include, among other things, the availability
of any needed financing, the Company's ability to implement its long range
business plan for various applications for its technologies, the Company's
ability to enter into agreements with marketing and distribution partners, the
impact of competition, the obtaining and maintaining of any necessary regulatory
clearances applicable to applications of the Company's technology, management of
growth and other risks and uncertainties that may be detailed from time to time
in the Company's reports filed with the Securities and Exchange Commission,
including those set forth in its annual report on Form 10-K for the year ended
December 31, 1998, and on Form 10-Q for the quarter ended March 31, 1999.
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