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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
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June 7, 1999
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
New York
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(State or other jurisdiction of incorporation)
0-21168 13-3253392
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(Commission File Number) (IRS Employer Identification Number)
5 East 80th Street, New York, New York 10021
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 717-6544
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Page 1 of 59 pages
Exhibit Index located on page 4
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EXPLANATORY NOTE
This Current Report on Form 8-K/A amends and restates in their entirety the
text of Item 7 of the Company's Current Report on Form 8-K and
Exhibit 10.1 thereto filed with the Securities and Exchange Commission
on June 18, 1999.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits:
+10.1 Agreement, dated as of June 7, 1999, between the Company and
Datex-Ohmeda, Inc.
+ 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
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Name: Darby S. Macfarlane
Title: Chief Executive Officer
Date: November 19, 1999
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EXHIBIT INDEX
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Document Page No.
<S> <C> <C>
+ 10.1 Agreement, dated as of June 7, 1999, between the Company and
Datex-Ohmeda, Inc. 5
+ 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.
</TABLE>
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Exhibit 10.1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR
THE INFORMATION REPRESENTED BY AN ASTERISK [*]
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(Trademark) 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
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"affiliate" of a party hereunder, shall be considered "unaffiliated" with such
party hereunder.
2.2 "Calibration Standard" means, CCSI's disposable
calibration standard (TLc Lensette(Trademark)) 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(Trademark).", 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
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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 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 (4%) 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.
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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.
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.
2.33 "Term" means, the Initial Term plus the Extended Term, if
any.
2.34 "Territory" means, the United States.
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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.
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
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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, 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
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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: the exclusion of the detailed
description of parts specifications for Light
Emitting Diodes, * for Light Emitting Diodes, optical
filters, light sources, calibration color standards,
verification color standards and integrated circuit
boards, and the specific description in all software
documentation (including the Technical File and
Design Control documentation) of the algorithms,
mathematical formulas or equations, or any other
computations or specific descriptions of software
code where the specific descriptions are related to
the color measurement, the skin color * the
adjustments for skin coloration (including under
phototherapy) baseline skin coloration, measurement
of proprietary standards, computation of spectral
data, computation of * data, conversion formulas for
spectral and * data, equations for power source, *
equations, site computations, * signals and *
parameters. CCSI agrees to provide DO with prior
written notice of any change in CCSI's third-party
manufacturer of
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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.
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
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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.
(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
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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 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.
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(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 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
15
<PAGE>
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 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.
Unless it violates CCSI's existing agreement *, CCSI
agrees to use commercially reasonable efforts to
explore * that may be able to offer * together with
more favorable *, acceptance and other standard terms
and conditions that are more consistent with typical
commercial practice without causing any * or
regulatory standards. At DO's request, CCSI will
permit DO to play an active role to assist CCSI in
identifying and assist CCSI *.
(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
16
<PAGE>
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 delivery 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 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
17
<PAGE>
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) The DO Purchase Price for * Calibration
Standards/Charges per Use (as defined herein) and the
Purchase Price for * Calibration Standards or Charges
per Use (also as defined herein) shall be as
described in Attachment A hereto. * Calibration
Standards/Charges per Use are used solely by DO's
sales personnel, sub-distributors or in-servicers *
the Products or * to operate the Products. DO will
not * Calibration Standards/Charges per Use. *
Calibration Standards/Charges per Use are *
Calibration Standards/Charges per Use that are
provided to DO's * Devices. * Calibration
Standards/Charges per Use may be used by * for *
purposes only. DO will not sell * Calibration
Standards/Charges per Use and will provide *
Calibration Standards/Charges per Use *. DO will not
* Calibration Standards/Charges per Use for sale with
any other product.
(ii) As and when requested by DO from time to time,
CCSI shall have an obligation to negotiate in good
faith with DO * the Minimum Transfer Price component
of the DO Purchase Price in specific instances *
where the price of the Calibration Standards or
Charges per Use is needed * per Calibration Standard
or Charge per Use to close such sale. In such event,
the parties agree to cooperate together to determine
the * in the Minimum Transfer Price component of the
DO Purchase Price and sales structure for such sales
as they may happen from time to time. Such
negotiations shall be conducted, and such
determination shall be made within thirty (30) days,
by and between OM's senior sales and marketing
executive and CCSI's senior sales and marketing
executive.
18
<PAGE>
(iii) As and when requested by either of the parties
from time to time, CCSI and DO shall cooperate
together to determine the appropriate marketing and
DO Purchase Price for placement of the Products under
a managed use program as the same may exist in the
future or change from time to time.
(iv) As and when requested by DO from time to time,
in the event at any time during the Term of this
Agreement that DO believes in good faith that the
selling price to be charged by DO to its customers
for the Calibration Standard or Charges per Use *, as
DO believes that such * should be * from time to time
*), as verified by a large number (at least * in
specific Targeted Markets, then DO can require CCSI
to negotiate in good faith to determine * in the
Minimum Transfer Price component of the DO Purchase
Price for Calibration Standards and Charges per Use
(but in no event is CCSI obligated * the Initial
Transfer Price or the Minimum Transfer Price
component of the DO Purchase Price for Calibration
Standards or Charges per Use * per unit as set forth
in Attachment A). Such negotiations shall be
conducted, and such determination shall be made
within sixty (60) days, by and between OM's senior
sales and marketing executive and CCSI's senior sales
and marketing executive.
(v) As and when requested by CCSI from time to time,
CCSI and DO shall cooperate together to determine *
the Minimum Transfer Price for Calibration Standards
* per unit of Calibration Standards sold by DO.
(vi) It is the intent of the parties * under clauses
(ii) (iii), (iv) and/or (v) of this paragraph 5(e) of
Section III shall preserve a * the Invoice Price to
DO and * Invoice Price as the DO Purchase Price to
CCSI in * and * the Invoice Price to DO and * Invoice
Price as the DO Purchase Price to CCSI thereafter,
including any Extended Term.
(vii) The Initial Transfer Price for Calibration
Standards/Charges per Use * per Calibration
Standard/Charges per Use, as set forth in Attachment
A. However, if the Minimum Transfer Price should ever
be *, then the Initial Transfer Price shall
thereafter * to the Minimum Transfer Price.
(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
19
<PAGE>
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) If at any time DO believes * for such Products or the
Initial Transfer Price for Calibration
Standards/Charges per Use, it will so notify CCSI,
and CCSI shall have the right but not the obligation,
within fifteen (15) days after receipt of such
notice, * all of DO's inventory of Products * for
such inventory. DO will not sell such Products * the
Minimum Transfer Price or the Initial Transfer Price,
as the case may be, unless CCSI elects not to *. If
CCSI elects to *, it will * to DO within sixty (60)
days after CCSI's * of the inventory.
(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 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.
(i) In all instances where a price for a Product other
than Calibration Standards/Charges per Use is subject
to change based on cost to
20
<PAGE>
CCSI or is to be determined by reference to a cost
incurred by CCSI (the "Cost Amount"), the reference
shall mean CCSI's direct out-of-pocket payments to
third-party vendors for parts, materials, direct
labor, related incoming inspections, manufacturing
and assembly charges, regulatory charges, and
shipping, but not any research and development
expenditures for the Products or overhead expenses of
CCSI, and in all cases as shown on invoices received
from third-party vendors and paid (or to be paid in
the ordinary course) by CCSI. DO shall have the right
to audit the books and records of CCSI at DO's
expense for the limited purpose, and only to the
extent necessary and appropriate for DO to verify the
computation of such Cost Amounts, which audit shall
take place during reasonable business hours following
reasonable advance notice to CCSI, but in no event
more than once for each increase in Cost Amount. DO
shall also have the right to suggest ways to reduce
such Cost Amounts, either through alternative sources
for parts and materials, alternative third-party
manufacturers, or direct manufacture by CCSI or DO.
Unless it violates CCSI's existing agreement with its
third-party manufacturer, at DO's request, CCSI will
permit DO to play an active role assisting CCSI in
identifying and assisting CCSI in negotiating with
such other third-party manufacturers. CCSI agrees to
consider such suggestions in good faith but shall
have no obligation to implement any such suggestion,
provided, however, CCSI shall have a continuing good
faith obligation to minimize Cost Amounts,
considering all business factors involved.
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
21
<PAGE>
"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 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 Minimum Performances for Units of
- ------------------- Units of Devices*,**, *** Calibration Standards or, when legally
------------------------- marketable, Charges per Use*,**,***
-----------------------
<S> <C> <C>
1 * *
2 * *
3 * *
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C>
4 * *
5 * *
</TABLE>
*In the event the number of Devices or Calibration Standards (or, when
legally marketable, Charges per Use) purchased*** by DO from CCSI in any
Performance Year exceeds the number of Devices or Calibration Standards (or,
when legally marketable, Charges per Use) set as the Annual Minimum Performances
for such Performance Year, such excess of units purchased*** by DO shall be
rolled over on a cumulative basis as follows. First, such excess shall be rolled
over and counted against the Annual Minimum Performance for the subsequent
Performance Year. Second, if DO's purchases*** in such subsequent Performance
Year (including and counting any excess rolled over from the prior Performance
Year) shall exceed the Annual Minimum Performance for such subsequent
Performance Year, the excess shall again be rolled over to the next succeeding
Performance Year and shall be included and counted against the Annual Minimum
Performance for such succeeding Performance Year. This process shall continue
from each Performance Year to the next.
**No Calibration Standards/Charges per Use or Devices shall be counted
or included as a Calibration Standard/Charges per Use or Device purchased by DO
for purposes of determining whether DO has satisfied the Annual Minimum
Performances for Calibration Standards/Charges per Use or Devices except to the
extent that DO has paid CCSI, or is not past due on such amounts then owed,+ for
the DO Purchase Price * for such Calibration Standards/Charges per Use or
Devices. The amount of Calibration Standards (and, when legally marketable,
Charges per Use) purchased by DO at the DO Purchase Price * in any Performance
Year*** shall be combined and counted together towards satisfying DO's Annual
Minimum Performances for Units of Calibration Standards/Charges per Use in such
Performance Year. Any Products for which DO has paid the DO Purchase Price, or
is not past due on such amounts then owed+ for the DO Purchase Price * in any
Performance Year (and DO has the option (but not the obligation) * the Annual
Minimum Performances for such Performance Year *, provided, however, that as to
any such *, CCSI has been paid at least the Minimum Transfer Price for Products,
in such Performance Year (subject to any subsequent reconciliation for the DO
Purchase Price owed to CCSI, if applicable+). Any * by DO does not mitigate DO's
obligation to use commercially reasonable efforts to market and sell Products as
per the terms of this Agreement. It is understood and agreed that for Products
purchased in a Performance Year for which there has been no * for such Products,
because they have not yet *, DO shall not be deemed to be * with respect to the
portion of the DO Purchase Price that may be in excess of the Minimum Transfer
Price for Products, and such purchases * the Annual Minimum Performances.+
***For purposes of calculating whether DO has satisfied its Annual
Minimum Performances, the initial Performance Year shall be * and * after the
date hereof. Thereafter, each subsequent Performance Year shall be considered to
commence on the anniversary date of the * and concluding twelve (12) months
after that anniversary date (such that the end of the fifth Performance Year
shall be deemed to conclude at the end of the Initial Term). However, any and
all Calibration Standards/Charges per Use (* Calibration Standards/Charges per
Use and * Calibration Standards or Charges per Use) and Devices purchased by DO
during the * of this Agreement shall count towards DO's Annual Minimum
Performance for the initial Performance Year.
+If such payments owed to CCSI by DO are not subsequently paid to CCSI
when due, then retrospectively, CCSI may terminate this Agreement if such
applicable Annual Minimum Performances are not satisfied.
(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
23
<PAGE>
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) Following DO's receipt of CCSI's thirty (30) day
written notice to implement the "Strategic
Remediation," the parties shall come together for a
strategic meeting for the purpose of devising a *
marketing plan designed to * in the subject Targeted
Market. The parties shall agree upon the * marketing
plan within thirty (30) days of the strategic meeting
and the * plan shall commence upon agreement of such
plan. The plan shall contain * (the "Remediation
Goals") to be achieved during * plan that shall not *
what would be a * of the Cumulative Annual Minimum
Targeted Market Performances that would * during the
period of such six (6) month plan and the * of the
preceding year's performance. If actual sales and
placement of Devices during the period of such * plan
do not achieve the Remediation Goals, DO will still
have until * to meet the Cumulative Annual Minimum
Targeted Market Performances applicable to such
then-current Performance Year. If DO still has not
achieved the Cumulative Annual Minimum Targeted
Market Performances by the end of such Performance
Year, then CCSI shall have the right but not the
obligation to terminate DO's license in such Targeted
Market (and DO shall be relieved from any obligation
or responsibility to market or distribute Devices in
such Targeted Market through its OM division and
otherwise).
CUMULATIVE ANNUAL MINIMUM TARGETED MARKET
PERFORMANCES*
<TABLE>
<CAPTION>
Performance Year** Cumulative Annual Cumulative Annual Cumulative Annual
Minimum Performances Minimum Performances Performances for
for Hospital Devices for Home Healthcare Pediatrician Devices
<S> <C> <C> <C>
X * * *
X * * *
3 * * *
4 * * *
5 * * *
</TABLE>
*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
24
<PAGE>
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.
**For purposes of calculating whether DO has satisfied its Cumulative
Annual Minimum Targeted Market Performances, the initial Performance Year shall
be * and concluding * after the date hereof. Thereafter, each subsequent
Performance Year shall be considered to commence on the anniversary date of *
and concluding twelve (12) months after that anniversary date (such that the end
of the fifth Performance Year shall be deemed to conclude at the end of the
Initial Term). However, any and all Devices sold, leased or * by DO * for which
DO has not paid the DO Purchase Price (*) to CCSI) during the * of this
Agreement shall count towards DO's Cumulative Annual Minimum Targeted Market
Performances for the initial Performance Year.
+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) The Annual Minimum Performances and/or the
Cumulative Annual Minimum Targeted Market
Performances requirements *, if sales of the
Products within the Territory or any
applicable Targeted Market (as the case may
be) * as a result of the existence of one or
more of the factors set forth in Attachment
C hereto. The parties agree to cooperate
with each other in good faith to determine
the * for the current or future Performance
Year in which such cooperation is undertaken
for the Products in such case or cases,
including if necessary, a formal conference
that will take place among four individuals,
two representatives designated by the
president or CEO of each party, at least one
of whom shall be a senior sales or marketing
executive;
(ii) During the Initial Term of this Agreement,
in the event that DO satisfies its Annual
Minimum Performances for the first two (2)
Performance Years hereunder but then
subsequently fails to satisfy the Annual
Minimum Performances for Performance Years 3
or 4 (each a "Sub Performance Year"), DO
shall be entitled to the next additional
Performance Year (a "Grace Period Year") to
cure any such failure, meaning that CCSI
shall not have the right to terminate this
Agreement on the basis of DO having failed
to satisfy the Annual Minimum Performances
for Performance Year 3 or 4 unless and until
by the close of the next Performance Year
immediately following such Sub Performance
Year DO shall have failed to purchase *
enough Product to satisfy both the Annual
Minimum Performances for the Grace Period
Year and the shortfall by which DO had
failed to satisfy the Annual Minimum
Performances for the immediately preceding
Sub
25
<PAGE>
Performance Year. All Annual Minimum
Performances, *; and
(iii) No more frequently than *, if DO believes
that any of the * the Annual Minimum
Performances and/or the Cumulative Annual
Minimum Targeted Market Performances * have
been shown to *, DO may request that CCSI
revisit the Annual Minimum Performances
and/or the Cumulative Annual Minimum
Targeted Market Performances. CCSI agrees to
consider such request but shall be under no
obligation under this subparagraph to agree
to any specific change in the Annual Minimum
Performances and/or the Cumulative Annual
Minimum Targeted Market Performances.
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 to CCSI and either 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.
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(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 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.
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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.
(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) In the event that CCSI is unable to satisfy DO's
requirements for Products (whether or not caused by a
Force Majeure Event), CCSI shall allocate any
available supply of Products to DO *. In addition,
the parties recognize that, depending on the success
of DO's efforts, DO may experience insufficient
supplies of Products, possibly due to CCSI's failure
to supply due to a Force Majeure Event or for any
other reason (other than DO's failure to order
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Product within the required lead times hereunder in
quantities which, had such orders been filled on a
timely basis by CCSI, would have provided DO with
adequate quantities of Product necessary for DO to
satisfy its Annual Minimum Performances and
Cumulative Annual Minimum Target Market Performances
for the applicable period in question), but also even
if all allowable orders are being placed and filled
on a timely basis. In any such event, DO shall have
the right during such periods of insufficient
supplies to curtail its marketing and distribution
activities to match the availability of Products, and
such curtailment should not be deemed a Default by
DO.
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. Product Warranty. CCSI warrants that the Products shall be free from
defects in material and workmanship and will conform to the Specifications
(which among other things include that the manufacture, assembly, labeling and
packaging of the Products have been performed under the regulatory standards of
FDA QSR and GMP), in each case for a period of * from the date of shipment to DO
of Products hereunder. If any Product so shipped, or replacement part for the
Product during the Product's warranty period, does not conform as aforesaid,
CCSI will, at its sole cost and expense (excluding reimbursement of * charges
but including * charges), and within a reasonable period of time not to exceed
thirty-five (35) days, * (at the choice of CCSI) such non-conforming Product, or
replacement part. The foregoing warranty does not extend to normal wear and
tear, damage caused by the end user, Product misused or modified in a manner not
authorized by the Specifications of the Product or by CCSI, or Product repaired
by persons other than CCSI or its authorized manufacturers. Subject to the
provisions of Section V below, it is understood and agreed by the parties herein
that such * shall be the exclusive remedy for DO with respect to a breach of
this warranty, and that a breach of this warranty shall not be considered a
Default provided that CCSI timely complies with the * remedy specified above. It
is also understood and agreed that such warranty for any Devices shall be
immediately void and of no further force and effect if the Device is not
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calibrated with the Calibration Standard (TLc-Lensette(Trademark)). CCSI
warrants that the medium upon which the Software is provided by CCSI to DO shall
be free from defects in material and workmanship under normal use for a period
of * from the date of DO's receipt thereof. Subject to the provisions of Section
V below, it is understood and agreed that DO's exclusive remedy for breach by
CCSI of this limited warranty shall be * of any defective medium within fifteen
(15) days following its return to CCSI and that a breach of this warranty shall
not be considered a Default provided that CCSI timely complies with such *
remedy. Except as expressly stated herein, CCSI disclaims all warranties,
whether express or implied, with respect to the Products, including, without
limitation, any warranties of merchantability or fitness for a particular
purpose.
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:
(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,
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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 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. Non-Compete Covenants. During the Term of this Agreement, (i) DO
shall not directly or indirectly market, sell or distribute *, nor will DO
permit any of DO's Affiliates to do so, and (ii) CCSI shall not directly or
indirectly market, sell or distribute *, in the Targeted Markets within the
Territory, except as may be expressly provided otherwise herein, nor will CCSI
permit any of its Affiliates to do so, nor will CCSI
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knowingly permit any third party to directly or indirectly market, sell or
distribute the Products in the Targeted Markets within the Territory*, nor will
CCSI sell the Products to any third party that CCSI knows intends to divert the
Products for use or sale in the Targeted Markets within the Territory*. Without
limiting the generality of CCSI's obligation under clause (ii) of this
paragraph, CCSI specifically agrees that if at any time during the Term of this
Agreement it markets, sells or distributes any product (including any device
and/or calibration standard or other disposable) * in a market within the
Territory other than the Targeted Markets, or authorizes any third party to do
so, CCSI shall take all reasonably necessary steps, including without limitation
labeling, product design, regulatory approvals, and/or distributor training, to
prevent such products from being sold into or marketed * in the Targeted Markets
within the Territory. DO and DO's Affiliates may market, sell and distribute *,
provided, however, that the marketing, sales and distribution of any product for
such * is conducted by personnel other than personnel conducting the marketing,
sales and distribution of the Products, and (b) other products that *, provided
that (i) DO may not develop or introduce such a product to the market, (ii) DO
believes that it must offer such a product or products to be competitive, and
(iii) an *, taking into account all aspects of medical, commercial and
regulatory factors, is not available from CCSI.
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 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. DO's Performance by OM. The legal parties to this Agreement are CCSI
and DO, each of which shall be liable for its non-performance of all of its
obligations under this Agreement, subject to the limitation of liability set
forth in paragraph 6 of Section V of this Agreement. However, notwithstanding
the foregoing or any other provision hereunder to the contrary, DO shall have no
obligation hereunder (and is not expected) to utilize any of its marketing or
distribution personnel or resources in the performance of any of its obligations
under this Agreement other than *, and (ii) its home healthcare
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marketing channel (and with CCSI's acknowledgment and agreement that * may, but
is not obligated to, assume management of that home healthcare marketing channel
at some time in the future).
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.
(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
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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. Third Party Infringement. In the event of infringement of any CCSI
U.S. Patent on the Device or on the Calibration Standard by a third-party whose
infringing sales in the Targeted Markets within the Territory for use in
monitoring newborn bilirubinemia (infant jaundice) constitute or, in the good
faith judgment of the parties and as agreed to by them, highly probably will
constitute * of these Products in the Targeted Markets within the Territory: (a)
CCSI and DO shall jointly bring and actively prosecute a civil action against
the infringing third-party; or, at DO's election made before the bringing of any
civil action and made within thirty (30) days of receiving notice of CCSI's
intent to file such an action, (b) CCSI shall bring a civil action in CCSI's
name alone or in the name of both CCSI and DO against the infringing third-party
and * that infringing third-party relating to such infringement and CCSI shall
bear all of the expenses of such civil action and retain all of the monetary
recovery in that civil action. If DO elects option (a) above, CCSI shall be
responsible at its expense for and control the preparation and trial by counsel
of its choice of the patent liability issues of validity, enforceability and
infringement and the damage issues of CCSI's damage claim and DO shall be
responsible at its expense for and control the preparation and trial by counsel
of its choice of the damage issues of DO's damage claim *, in that action, after
reimbursement of the expenses (other than internal costs) incurred in that
action by the parties, with CCSI's share being * and DO's share being *. If DO
elects option (b) above, DO shall cooperate reasonably with CCSI in such action
at CCSI's request and expense. Nothing herein shall preclude CCSI from brining a
civil action against such infringing third-party notwithstanding that the * is
not met.
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The foregoing provisions also shall apply (i) to any infringement
action that CCSI chooses to bring where the infringing sales do not meet the *;
and (ii) to a counterclaim for patent infringement in the event of a declaratory
judgment action being commenced by such a third-party infringer, except that the
* or more of annual sales requirement shall not be applicable to such
declaratory judgment. *.
Each party shall promptly give notice to the other of any such
infringement or threatened infringement which shall at any time come to either
party's knowledge.
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
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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 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. CCSI General Indemnification. CCSI shall indemnify, defend and hold
DO, its officers, directors, shareholders and employees harmless from and
against any and all claims, demands, actions, and suits ("Claims") made or
brought by third parties (unaffiliated with DO) for any resulting losses,
liabilities, damages, injuries, fines, penalties, costs and expenses, including,
without limitation, court costs and reasonable fees of attorneys and other
professionals and experts retained for trial and on appeal where the Claim is
based on (i) any material breach by CCSI of the warranties set forth herein (or
the warranties made or approved by CCSI, if any, set forth in the Product
Information) or any material breach by CCSI in the observance or performance of
any of its obligations pursuant to this Agreement or the Confidence Agreement,
(ii) the negligent handling of the Products by CCSI, (iii) defects of the
Products in design, manufacture, materials or workmanship, (iv) any incorrect or
inadequate warning labels or written instructions relating to the use, handling
or function of the Products that accompany the Products when shipped, or (v) any
other Claim based on any theory of product liability not falling within clauses
(i) through (iv) other than one arising out of or based upon DO's negligent,
reckless or willful misconduct. DO shall give CCSI prompt written notice of any
such Claim.
2. DO General Indemnification. DO shall indemnify, defend and hold
CCSI, its officers, directors, shareholders and employees harmless from and
against any and all Claims made or brought by third parties (unaffiliated with
CCSI) for any resulting losses, liabilities, damages, injuries, fines,
penalties, costs and expenses, including, without limitation, court costs and
reasonable fees of attorneys and other professionals and experts retained for
trial and on appeal, where the Claim is based on (i) any material breach by DO
of the warranties set forth herein or any material breach by DO in the
observance or performance of any of its obligations pursuant to this Agreement
and the Confidence Agreement, (ii) claims whether written or oral made by DO or
its subdistributors or third-party agents relating to the Products in its
advertising, publicity, promotion, distribution or sale of the Products where
such claims were outside the scope of the Product Information made or approved
by CCSI and not otherwise made or approved in writing by CCSI, (iii) the
negligent handling of the Products by DO, or (iv) failure by DO or any of its
subdistributors or third party agents who market the Products to comply with
applicable FDA regulatory requirements. CCSI shall give DO prompt written notice
of any such Claim.
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3. CCSI Intellectual Property Indemnification. CCSI shall indemnify,
defend and hold DO, its officers, directors, shareholders and employees harmless
from and against any and all Claims made or brought by third parties
(unaffiliated with DO) arising out of or relating to any infringement or claim
of infringement of patents, trademarks, copyrights, or trade secrets by (i) any
Products, (ii) any portion of any labeling affixed to any Products at CCSI's
request, (iii) trade marks or service marks owned or used by CCSI to name or
identify itself or any of its products, including the Products, (iv) any
operating manuals, instructions for use or licensing folder for software used in
connection with the Products that accompany the Products when shipped, and/or
(v) any portion of any advertising, publicity or promotional material published
by or at CCSI's request (but not as to any trademarks or service marks owned or
used by DO or its subdistributors or third party agents to name or identify
itself or any of its products other than the Products). DO shall give CCSI
prompt written notice of any such Claim.
4. DO Intellectual Property Indemnification. DO shall indemnify, defend
and hold CCSI, its officers, directors, shareholders and employees harmless from
and against any and all Claims made or brought by third parties (unaffiliated
with CCSI) arising out of or relating to infringement or claim of infringement
of trademarks or copyrights by (i) any of DO's products other than the Products,
(ii) any portion of any labeling affixed to any Products at DO's request, (iii)
trade marks or service marks owned or used by DO to name or identify itself or
any of DO's products (other than the Products), (iv) any portion of any
advertising, publicity or promotional material published by or at DO's request
(but not as to any trademarks or service marks owned or used by CCSI to name or
identify itself or any of its products, including the Products). CCSI shall give
DO prompt written notice of any such Claim.
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
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<PAGE>
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.
6. Damages.
(a) Except as provided in subparagraph (b) of this
paragraph 6 of Section V, neither party shall be
liable to the other party for *. Without limiting the
generality of the foregoing sentence, DO shall not be
liable to CCSI * for DO's failure to successfully
market and distribute the Products.
(b) A party shall not be entitled to rely upon or receive
the benefit of the limitation on damages set forth in
subparagraph (a) of this paragraph 6 of Section V if
such party: (i) terminates this Agreement or the
license for any Targeted Market prior to the
expiration thereof, other than as termination is
expressly permitted by this Agreement in paragraph 6
of Section III or paragraph 2 of Section VI, or
violates the Agreement with respect to DO's option
for the Extended Term as provided in paragraph 1 of
Section VI; (ii) violates its respective non-compete
covenant as set forth in paragraph 4 of Section IV;
or (iii) violates its obligation to protect the other
party's Confidential Information, as set forth in
paragraph 14 of Section IV, paragraphs 7, 8, and 10
of this Section V, and in the Confidence Agreement.
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.
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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 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
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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.
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.
ANNUAL MINIMUM PERFORMANCES
Performance Year Minimum Performance for Units Minimum Performances
of Devices for Units of Calibration
Standards or Charges per Use
6 * *
7 * *
8 * *
9 * *
10 * *
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CUMULATIVE ANNUAL MINIMUM TARGETED MARKET PERFORMANCE
Performance Year Cumulative Annual Cumulative Annual Cumulative Annual
Minimum Performance Minimum Performance Minimum Performance
for Hospital Devices for Home Healthcare for Pediatrician
Devices Devices
6 * * *
7 * * *
8 * * *
9 * * *
10 * * *
All terms and conditions of this Agreement, including all explanatory
footnotes contained in paragraph 6 of Section III, shall apply during the
Extended Term except as follows: (i) there shall be no opportunity for Strategic
Remediation under paragraph 6(d) of Section III; (ii) there shall be no Grace
Period Years under paragraph 6(e)(ii) of Section III; (iii) the Minimum Transfer
Price for Calibration Standards/Charges per Use at the beginning of Performance
Year 6 shall * in effect at the end of Performance Year 5, provided, however,
that the provisions of paragraph 5(e) of Section III shall continue to apply to
such Minimum Transfer Price; (iv) DO purchases in excess of the Annual Minimum
Performance for any Performance Year shall not be carried over and applied to a
subsequent Performance Year on a cumulative basis; (v) Annual Minimum
Performances may not be satisfied through * Products * (vii) there shall be
annual termination rights by CCSI if Annual Minimum Performances or Cumulative
Annual Targeted Market Minimum Performances are not paid in full by DO to CCSI
within each Performance Year and sold, leased, * within each Performance Year;
and (viii) prices for * Calibration Standards/Charges per Use and * Calibration
Standards/Charges per Use will be reestablished by CCSI for Performance Years
6-10.
If DO wishes to exercise its option for the Extended Term but in good
faith believes that any of the *, DO shall so notify CCSI at least ninety (90)
days before the end of the Initial Term. Thereafter, the parties will negotiate
in good faith and attempt to *. If no agreement can be reached before the end of
the Initial Term, the Agreement shall terminate and the Exit Transition shall
begin.
(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
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herein, termination of this Agreement for Default shall not impair the
terminating party's other rights and remedies for such Default.
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. Direct Purchases.
(a) In the event of a Default defined in paragraph 9 of
Section III by CCSI relating to the delivery (or
failure or delay in delivery) of the Products (a
"Delivery Breach"), DO shall have the irrevocable
right and license, but not the obligation, to
purchase Products * of the Products at the DO
Purchase Price under relevant terms of this Agreement
until such time as the occurrence or condition that
gave rise to such Delivery Breach has been remedied
to DO's and CCSI's reasonable satisfaction. In such
event, DO shall pay the DO Purchase Price less a
reasonable administration fee to CCSI and CCSI * the
amount that such third-party manufacturer would *
from CCSI for * such Products under CCSI's *. Any
such Products purchased by DO would count towards
the satisfaction of DO's applicable Annual Minimum
Performances and Cumulative Annual Minimum Targeted
Market Performances.
(b) In the event of a Delivery Breach of the kind that
allows CCSI the right to *, at CCSI's option, (i) to
begin * of Products itself, or (ii) to select and
negotiate in good faith a contract with * that is FDA
compliant and ISO 9001/EN 46001 or ISO 9002/EN 46002
certified as required (reasonably satisfactory to DO
and CCSI) to manufacture the Products for CCSI on
terms and conditions substantially equivalent to
CCSI's agreement with its third-party manufacturer, *
until such time as the occurrence or condition that
gave rise to such Delivery Breach has been remedied
to DO's reasonable satisfaction. Before the contract
with any * is finalized, DO shall have the right to
match the terms and conditions of such contract and
assume responsibility for the manufacture * on such
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<PAGE>
further terms and conditions relating to protection
for CCSI's manufacturing needs in the event of
termination of this Agreement as will be mutually
agreed upon by the parties and DO shall, in good
faith, revise any relevant terms of this Agreement in
accordance with DO being the third party
manufacturer. CCSI shall have the right to verify
that such manufacturer can specifically comply with
FDA requirements and ISO 9001/EN 46001 or ISO 9002/EN
46002 requirements, as required relative to the
manufacture of the Products before *.
VII. MISCELLANEOUS
1. Insurance. Within thirty (30) days of the effective date of this
Agreement, and throughout the Term of this Agreement thereafter, CCSI and DO
shall each maintain one or more * insurance policies (i) that, in the aggregate,
shall provide coverage, *, of not less than * per occurrence and * aggregate,
and (ii) that, in the aggregate, shall have a maximum deductible of * per
occurrence and * aggregate. The policies shall be issued by an insurance company
with a minimum Best's rating of A-XII or an equivalent rating from a nationally
recognized credit rating agency. Each policy shall provide an * arising within
the *. In addition, CCSI and DO shall each maintain an * policy of no less than
*. CCSI and DO shall provide each other with evidence that none of its insurance
policies for the foregoing insurance may be modified or terminated without the
carrier providing at least thirty (30) days prior written notice to both parties
hereunder except for ten (10) days notice prior to cancellation for non-payment
of premiums. Upon request, CCSI and DO shall annually exchange certificates of
insurance evidencing compliance with the provisions of this paragraph.
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.
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
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<PAGE>
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.
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.
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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 By
---------------------------------- -------------------------------
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
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ATTACHMENT A
PRODUCT DESCRIPTION AND PRICING*
A. PRODUCTS
1. DEVICE (Model 1)
Status: Available now.
This product incudes a TLc Bili(Trademark)Sensor with a built in calibration
verification standard in the Sensor cap, which is packaged in a durable, soft
carry case, a TLC Touch(Trademark) palmtop computer and an RS232 cable.
The TLcBili(Trademark)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(Trademark) palmtop computer features the TLc Soft(Trademark)
program on a Flash Ram card. This Product offers 4 AA batteries for the
TLcBili(Trademark)Sensor and 2 AA batteries for the TLc Touch(Trademark)
palmtop. This Product includes labels and shipping/packaging, and an Operator's
Manual. This Product is used with the TLc Lensette(Trademark) individual
calibration standards packaged in a box of 25 individual TLc Lensette(Trademark)
("the TLc LensPak(Trademark)") and is contemplated for use with the "Charges per
Use" component described herein under Optional Upgrades.
- ----------
*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 charged 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.
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Minimum Transfer Price for
Device as described above: * in lots of up to * for first * units
purchased under Firm Purchase Orders.
Thereafter, price *. (Note: Upon DO's request
from time to time, CCSI will provide price
quotations for quantities less than *.
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.
Lead Time = * in lots of up to * (not to exceed * as per the Agreement)
2. CALIBRATION STANDARDS
TLc Lensette(Trademark) Calibration Standards for single use:
Status: Available now.
TLc Lensette (Trademark) Calibration Standards are used to calibrate the Device
before each TLc BiliTest(Trademark) 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(Trademark) Calibration
Standards are available packaged 25 per box (TLc LensPak(Trademark)).
Initial Transfer Price
(Only applicable for Minimum Transfer Price
Performance Years 1 and 2 after for TLc Lensette(Trademark)
which time the Initial Transfer Calibration Standards as
Price is the Minimum Transfer described above:
Price)
* in lot volumes as specified
below for Performance Years 1
and 2, *.
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* in lot volumes as specified DO Purchase Price for
below for Performance Years 1 TLc Lensette(Trademark) Calibration
& 2 * in lot volumes as specified Standards as described above:
below for Performance Years 3,
4 & 5 *.
Purchase Price for Demo Calibration
Standards:
Purchase Price for Evaluation
Calibration Standards:
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 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.
* in lot volumes as specified below for
the first * such units, and * for units
in excess of *
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* for the first * units per
Performance Year, and * for * in
any Performance Year, provided
there is an equal number of
Calibration Standards/Charges per
Use that are purchased by DO at
the same time as * Calibration
Standards are purchased the
Initial Transfer Price during
Performance Years 1 and 2 and at
the Minimum Transfer Price for
Years 3, 4 and 5 *.
The Initial Invoice to DO to be
at the Purchase Price subject to
paragraph 7 of Section III.
Lot volumes: *, but *
units per month.
Lead time: * for * lot
volumes.
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: *
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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;
Initial invoice to DO to be at
Minimum Transfer Price, adjusted
quarterly to DO Purchase price as
per terms of the Agreement.
Lead time (following such time as becomes legally marketable and
commercially available): Approximately * in lots of *.
4. 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
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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.
Lead time (following such time as becomes legally marketable and
commercially available): Same lead time as Model 1 Device, except Laptop as
component available with * lead time in quantities of *.
b. Model 3: Model 2 with Printer
*
Minimum Transfer 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.
DO Purchase Price:
Lead time (following such time as becomes legally marketable and
commercially available): Same lead time as Model 2 Device, except printer as
component available with * lead time in quantities of *.
c. Model 4: THE COLORMATE(Registered) TLc BRIEFCASE(Trademark)
SYSTEM
*
Minimum Transfer Price for
The Briefcase System as
described 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 and 5
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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.
Lead time (following such time as becomes legally marketable and
commercially available): * in quantities of *.
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.
*
DO Initial Transfer Price: *
DO Minimum Purchase Price: *
DO Purchase Price: *
Lead time (following such time as becomes legally marketable and
commercially available): Same lead time as Device when ordered with a Device and
* lead time when * is ordered separately from Device.
6. 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.
52
<PAGE>
*
B. ACCESSORIES
1. Mounting Pole
Status: Available now
OM can purchase at Transfer Price from CCSI * plus tax and shipping * volume a
custom pole with wheels for mounting of the Device or the Device with Laptop *.
Transfer Price for Mounting
Pole as described above: * plus tax and shipping.
Lead time (now): * for * Mounting Poles.
C. PRODUCT COMPONENTS
1. Laptop Computer
Status: Not available now. *
*
2. Printer
Status: Not available now. *
*
Lead time (following such time as becomes legally marketable and
commercially available): * for * lot volume for printers.
3. Software of the Device
CCSI will supply replacement * containing the Software of the Device at *, which
CCSI currently estimates to be *.
D. Price Adjustments based upon changes in CCSI's Cost Amount
Unless otherwise expressly indicated in writing to the contrary, all
prices in this Attachment A are subject to change based upon (and only to the
extent of) * (as such term is defined in the Agreement) for that Product,
Product Component or Accessory (as the case may be), provided that CCSI has
provided reasonably satisfactory * and provided further that:
(i) there will be no price change to Calibration Standards or
Charges per Use based upon *; provided, however, that
following the Initial Term of the
53
<PAGE>
Agreement CCSI may, upon 30 days' prior written notice to DO,
increase the price of Calibration Standards and charges per
Use based upon (and only to the extent of) changes in * for
same, provided that such price increase does not result in a
minimum Transfer Price or DO Purchase Price * for such
Calibration Standards and/or Charges per Use;
(ii) CCSI may not increase the Minimum Transfer Price or DO
Purchase Price for the first * Devices (Model 1) purchased by
DO under one or more Firm Purchase Orders (issued by DO under
paragraph 4(a) of Section III of the Agreement) based upon any
*;
(iii) CCSI's transfer price to DO for Product Components and
Accessories shall * of * during the Initial Term of this
Agreement and, as to the replacement * containing the Software
of the Devices, CCSI's transfer price to DO shall * during the
Initial Term of this Agreement.
(iv) All price changes based upon * shall take effect upon written
notice from CCSI to DO and shall apply to Firm Purchase Orders
issued after DO's receipt of such notice from CCSI. CCSI shall
provide such notice within five (5) business days after
becoming aware of *.
54
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT B
PRODUCT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Item/Information Initial Action Ongoing Action
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Manual CCSI to provide 100 copies for DO's CCSI creates and revises as required. CCSI includes within each
use product carton, DO to provide input for upgrading the Manual.
- ------------------------------------------------------------------------------------------------------------------------------------
Instructions for Use for CCSI to provide 10 copies for DO's CCSI creates and revises as required. CCSI includes within each
Lensettes & Charge per Use use Lensette box
- ------------------------------------------------------------------------------------------------------------------------------------
Product Labels and Licensing CCSI to provide 10 copies for DO's CCSI creates and revises as required. CCSI includes within each
Folder for Software use Product and software package.
- ------------------------------------------------------------------------------------------------------------------------------------
Sales Training Manual CCSI to provide 2 copies for DO's DO to revise as required for all Targeted Markets with CCSI input
use and sign off**
- ------------------------------------------------------------------------------------------------------------------------------------
Quick Reference Guide CCSI to provide 10 copies for DO's DO creates/revises as required and supplies quantities necessary
use to service all Targeted Markets with CCSI input and sign off**
- ------------------------------------------------------------------------------------------------------------------------------------
Inservice/Training support CCSI to provide 10 copies for DO's DO creates/revises as required and supplies quantities necessary
materials use to service all Targeted Markets with CCSI input and sign off**
- ------------------------------------------------------------------------------------------------------------------------------------
Sales support materials such CCSI to provide one copy of all CCSI to continue to distribute existing literature as per
as brochures, cost existing material for DO's use Attachment D until supply runs out. DO creates/revises as
consideration etc. required and supplies quantities necessary to service all
Targeted Markets with CCSI input and sign off**
- ------------------------------------------------------------------------------------------------------------------------------------
Advertising & Promotion CCSI to provide copy of all DO creates/revises as required and supplies quantities necessary
Materials such as journal existing materials for DO's use to service all Targeted Markets with CCSI input and sign off**
ads, direct mail piece,
booth graphics etc.
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
*CCSI will promptly provide DO with at least one free copy (complete) of any revised Operating Manual Instructions for use
and/or licensing folder.
</FN>
<FN>
**CCSI must review and enter 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 Target Markets within the Territory.
</FN>
</TABLE>
Sample of approved labeling is attached to this Attachment B.
55
<PAGE>
ATTACHMENT C
EXTERNAL MARKET FACTORS FOR MINIMUMS REVIEW
1. One or more Firm Purchase Orders is issued by DO in compliance with the
lots sizes, lead times and other requirements under Attachment A and
Products are not delivered as per the terms of such Firm Purchase
Order(s), causing Product shortages.
2. A new prevention or cure for the condition of newborn bilirubinemia
(infant jaundice), other than phototherapy treatment currently in use,
is marketed or there is another accepted, legally marketed medical
practice which eliminates or restricts the need to measure or monitor
bilirubinemia.
3. The FDA clearance for * by CCSI for the Colormate(Registered) TLc
BiliTest(Trademark) System (or any Upgraded Device or LED Device when
commercially available and legally marketable) and *.
4. The use, sale or distribution of the Device or the Calibration Standard
(or any other Product that becomes commercially available and legally
marketable), is precluded or restricted by applicable law, product
recall or other Corrective Action in any Targeted Markets within the
Territory.
5. * for the use of the Calibration Standards or Charges per Use is
precluded or restricted and such preclusion or restriction (as the case
may be) cannot be or is not solved in a timely manner (i.e., within
sixty (60) days of DO's request to CCSI) by an appropriate reduction in
the DO Purchase Price for the Calibration Standards/Charges per Use in
the affected Targeted Markets.
6. If DO loses its right under paragraph 6(d) of Section III of the
Agreement to distribute Products in one or more Targeted Markets within
the Territory, then the Annual Minimum Performances will be reduced
accordingly.
7. If CCSI (or one of its other distributors) markets any product which is
the same or substantially similar to any of the Products, *.
8. If a third party markets or distributes a product in any Targeted
Market within the Territory that both parties agree * relating to any
Product which have impaired sales.
9. If CCSI is unable to provide quantities of Product in any Performance
Year equal to DO's Annual Minimum Performances for such Performance
Year but not limited to monthly volume restriction or lot size
limitation other than minimum lot sizes when DO has submitted
reasonable rolling forecasts for such quantities within lead times for
Products as set forth in Attachment A.
56
<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>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ITEM ACTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Selling Activities CCSI to continue selling activities as usual; * until CCSI to provide information sharing and
updates to DO
- ------------------------------------------------------------------------------------------------------------------------------------
Customer * & Inservice CCSI to continue *, DO to pay for * currently with customers), with DO approval (and
processed through DO ordering and shipping)
- ------------------------------------------------------------------------------------------------------------------------------------
Customer * Units CCSI to continue 30-60 day Evaluation program *
- ------------------------------------------------------------------------------------------------------------------------------------
Lead Processing CCSI to continue present practice
- ------------------------------------------------------------------------------------------------------------------------------------
Invoicing CCSI provides invoicing during transition. DO will take on invoicing prior to end of
transition.
- ------------------------------------------------------------------------------------------------------------------------------------
Technical Support CCSI to continue present practice
- ------------------------------------------------------------------------------------------------------------------------------------
Loaner Pool CCSI to Manage/DO to provide
- ------------------------------------------------------------------------------------------------------------------------------------
Literature CCSI to continue sending existing literature to customers until stock is depleted. DO to
provide literature when available. At DO's option and expense. DO may reprint CCSI
literature.
- ------------------------------------------------------------------------------------------------------------------------------------
Support personnel for conventions DO to provide booth/CCSI to assist with staffing
- ------------------------------------------------------------------------------------------------------------------------------------
Training of Ohmeda Marketing, * DO to organize and pay for regional sales meetings. CCSI will provide at its expense
Sales & Technical Support trainers for one training session in Columbia, Maryland for 2-5 days DO's sales and
Personnel Marketing administration.
- ------------------------------------------------------------------------------------------------------------------------------------
Product Support to launch in CCSI to provide a copy of Configurations and Part Numbers, Prices, Clinical Articles &
OM System Training Book Master.
- ------------------------------------------------------------------------------------------------------------------------------------
Customer Transition Letter CCSI will provide DO with the Data Base of customers. DO will contact customers to
inform them that DO is exclusive distributor. DO will pay for printing and mailing of *
letter that is jointly developed.
- ------------------------------------------------------------------------------------------------------------------------------------
Direct Mail Piece CCSI will format, add DO's name *. DO to assume cost to *. CCSI will handle response
Mailer already developed & four calls and refer calls to DO when DO is ready.
color separated (black plate
changes only required.)
- ------------------------------------------------------------------------------------------------------------------------------------
Sales Rep Hand-Off CCSI reps will hand-off customer lists, issues, opportunities, pending sales, etc., to DO sales
team at the regional training or earlier.
- ------------------------------------------------------------------------------------------------------------------------------------
* Inventory to Reps CCSI reps have *. DO to purchase or deduct *.
- ------------------------------------------------------------------------------------------------------------------------------------
* Inventory to Hospitals CCSI to provide * and DO pay for * with an approved plan from DO.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
II. ONGOING CUSTOMER SUPPORT
SUPPORT TO BE PROVIDED BY DO
Full sales and customer support activities:
o Lead qualification and processing
o Order entry
o Stocking and shipping
o Customer in service on site
o Billing and receivable
o Maintaining and processing *
o First-line trouble-shooting/clinical support "on call program" *
o Recording and tracking return goods
o First line technical/clinical support *
SUPPORT TO BE PROVIDED BY CCSI
o Providing warranty and non-warranty * services through 3rd party
contract manufacturer
o Processing leads and requests for information to DO
o Delivering Products on a timely basis
o Second stage technical support
o Sell parts/accessories to DO
SALES AND CLINICAL SUPPORT ACTIVITIES (FIRST TWELVE MONTHS AFTER DATE OF
SIGNING)
CCSI will assist DO to maximize their selling efforts int he Targeted Markets as
stated in the marketing plan objectives. This effort will be coordinated with
senior marketing and sales management of CCSI and DO's OM Division. Initial
support will focus on technical training and selling assistance to bring DO
sales and clinical team to level of expertise necessary for success (DO to
control use of * and * that DO is expected to pay for). Follow up support will
be geared toward driving the business primarily * and expanding market
penetration. Examples of such support are:
o Management review of overall objectives and goals for targeting
accounts, inservicing, and sales of devices
o Assist DO regional managers with targeting accounts
o Make sales calls/presentations (independent of local reps) to key
neonatal and pediatric groups
o Work with local reps to make sales calls, assist in closing key
accounts
o Work with Corporate account managers to call on Corporate Accounts
o Assist with in servicing for key accounts (including independent of
local reps)
o Will assist in attending trade shows and trade show activities
o Cooperate with educational activities with DO Clinical Specialists
o Marketing support for DO marketing activities and Strategy development
The foregoing sales and clinical support shall be provided by CCSI's *:
provided, however that in providing such support, no member of such * shall be
obligated to spend, in the aggregate, more than * or more than *, in a 12 month
period. If any member of such * exceeds these maximums, it will be at CCSI's
expense but CCSI has no obligation to exceed those maximums. CCSI sales and
marketing team shall continue to remain employees of CCSI and shall officially
report solely to the General Manager/VP Sales and marketing of CCSI.
58
<PAGE>
<TABLE>
<CAPTION>
III. EXIT TRANSITION CONSIDERATIONS
UPON TERMINATION OF AGREEMENT*
- ------------------------------------------------------------------------------------------------------------------------------------
ITEM ACTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Inventory CCSI may at CCSI's option purchase all inventory back at DO cost. If CCSI does not purchase all
DO inventory DO shall have the right to sell in the targeted market until * and to continue to *.
As to Devices placed with end users DO *. DO shall have the right to receive the anticipated
benefit from sales of Lensettes Charges per Use to such customers as follows:
If as of the termination of the Agreement, DO shall have received at least * placement, then
DO's ownership rights in such Device shall be transferred to CCSI at no cost to CCSI. If as of
the termination of the Agreement, DO shall have received less than *, then CCSI must either
promptly pay DO an amount equal to difference between * on such specific placement and (B) * or
(2) permit DO to continue to sell * with such specific placement * until DO receives * on such
specific placement. Upon * (as the case may be), then DO's ownership rights in such Device shall
be transferred to CCSI at no cost to CCSI.
- ------------------------------------------------------------------------------------------------------------------------------------
Customer Invoicing DO will have the right to collect on outstanding invoices, fill orders and invoice and collect
for any new sales which occur after the termination if CCSI does not purchase inventory.
- ------------------------------------------------------------------------------------------------------------------------------------
Customer Notice - within 30 days Depends on inventory decision. In all cases DO & CCSI will jointly decide content of notification
- ------------------------------------------------------------------------------------------------------------------------------------
Customer Transition DO to provide CCSI with Customer List, Sales history, Technical call history, DO will refer all
calls regarding product to CCSI
- ------------------------------------------------------------------------------------------------------------------------------------
Marketing Efforts Literature, DO marketing efforts will cease immediately, *. CCSI will have the right to purchase any
Advertising, Conventions, available literature at DO cost and utilize such literature bearing DO logos. If requested, DO
Sales training , Direct Mails will continue to provide technical support during the Exit Transition *. CCSI will label DO
literature to indicate the change in distribution, if used. CCSI will pay for reprints.
- ------------------------------------------------------------------------------------------------------------------------------------
Technical Support DO will refer customer calls to CCSI.
- ------------------------------------------------------------------------------------------------------------------------------------
Regulatory Support DO will perform any regulatory action legally required by DO under applicable law.
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
*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.
</FN>
</TABLE>
59
