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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 7, 1999
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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 63 pages
Exhibit Index located on page 4
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EXPLANATORY NOTE
This Current Report on Form 8-K/A-2 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: January 28, 2000
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EXHIBIT INDEX
Document Page No.
+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.
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Exhibit 10.1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE
INFORMATION MARKED HEREIN
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(R) 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(R) TLc-BiliTestTM.", 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
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circumstances: if the Products covered by the purchase order are not
legally marketable or commercially available; in the event of a Default by
CCSI relating to the delivery (or failure or delay in delivery) of the
Products as defined in paragraph 9(a) of Section III; when there has been
any other Default by CCSI under 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 categories, 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 the
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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
15
<PAGE>
manufacturer, CCSI shall notify DO in writing of such
availability and if DO elects to purchase some or all of
such Devices, CCSI shall arrange for delivery of such
Devices to DO within sixty (60) days following CCSI's
receipt of a Firm Purchase Order for any such Devices
from DO.
(c) CCSI and DO will cooperate with each other to facilitate
any transition to the LED Device, and CCSI will keep DO
informed as to the anticipated date when the LED Device
may be legally marketable and commercially available.
Following such time when the LED Device becomes legally
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 with its third party manufacturer, CCSI agrees
to use commercially reasonable efforts to explore
alternative arrangements with other third-party
manufacturers that may be able to offer comparable
pricing together with more favorable delivery,
acceptance and other standard terms and conditions that
are more consistent with typical commercial practice
without causing any delay in Product delivery or lesser
quality of Products or regulatory standards. At DO's
request, CCSI will permit DO to play an active role to
assist CCSI in identifying and assist CCSI in
negotiating with such other third-party manufacturers.
16
<PAGE>
(d) DO shall submit to CCSI a non-binding rolling forecast
(updated by DO every month) setting forth the
anticipated quantity of Calibration Standards (or, when
legally marketable, Charges per Use) required by DO for
the upcoming twelve (12) month period. Such forecasts
shall reflect, as a minimum, the Annual Minimum
Performances for Calibration Standards (or, when legally
marketable, Charges per Use) for the applicable
Performance Year listed in paragraph 6 of this Section
III, unless DO determines in good faith that a smaller
forecast is appropriate due to existing inventory or
other market conditions. DO shall submit Firm Purchase
Orders not less than two (2) months prior to DO's
requested delivery date for quantities of Calibration
Standards (or, when legally marketable, the quantities
of Charges per Use) at the Minimum Transfer Price set
forth in Attachment A with the Initial Transfer Price
set forth in Attachment A payable in thirty (30) days
after 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
17
<PAGE>
cumulative purchases of [*] Calibration Standards and/or
Charges per Use and [*] Devices, the DO Purchase Price
shall be equal to the higher of (i) fifty percent (50%)
of the Invoice Price for the Products, or (ii) the
Minimum Transfer Price for each such Product set forth
on Attachment A hereto.
(d) The parties agree that DO's initial suggested list price
for the Calibration Standard or Charges per Use shall
not be less than [*] per Calibration Standard or Charges
per Use, and not less than [*] per Device, but DO is
free to determine, and from time to time change, the
price it charges for Products.
(e) The Initial Transfer Price, the Minimum Transfer Price,
and/or the DO Purchase Price may not be changed from
that set forth in Attachment A; provided, however,
notwithstanding the foregoing provisions of paragraph 5
of this Section III and the purchase price requirements
thereunder and under Attachment A, such purchase prices
may change solely as follows:
(i) The DO Purchase Price for Demo Calibration
Standards/Charges per Use (as defined herein) and
the Purchase Price for Evaluation Calibration
Standards or Charges per Use (also as defined
herein) shall be as described in Attachment A
hereto. Demo Calibration Standards/Charges per Use
are used solely by DO's sales personnel,
sub-distributors or in-servicers to demonstrate
the Products or train others to operate the
Products. DO will not [*] Demo Calibration
Standards/Charges per Use. Evaluation Calibration
Standards/Charges per Use are non- Demo
Calibration Standards/Charges per Use that are
provided to DO's potential customers for
evaluating Devices. Evaluation Calibration
Standards/Charges per Use may be used by customers
for evaluation purposes only. DO will not [*]
Evaluation Calibration Standards/Charges per Use
and will provide Evaluation Calibration
Standards/Charges per Use [*]. DO will not bundle
Evaluation 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 to reduce the Minimum
Transfer Price component of the DO Purchase Price
in specific instances for higher volume type sales
to one or more accounts and for sales to large
accounts where the price of the Calibration
Standards or Charges per Use is needed to be less
than [*] per Calibration Standard or Charge per
Use to close such sale. In such event, the parties
agree to cooperate together to determine the
appropriate reduction in the Minimum
18
<PAGE>
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.
(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 should be less than [*] per unit (or once
below [*] as DO believes that such selling price
should be further reduced from time to time below
the previous selling price), as verified by a
large number (at least 10) of substantial
customers in specific Targeted Markets, then DO
can require CCSI to negotiate in good faith to
determine any appropriate reduction 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 to reduce the
Initial Transfer Price or the Minimum Transfer
Price component of the DO Purchase Price for
Calibration Standards or Charges per Use to below
[*] per unit 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 any appropriate change to the Minimum
Transfer Price for Calibration Standards based
upon the past six month average selling price
being over [*] per unit of Calibration Standards
sold by DO.
(vi) It is the intent of the parties that any
pricing adjustment for Products occurring under
any of the foregoing provisions under clauses (ii)
(iii), (iv) and/or (v) of this paragraph 5(e) of
Section III shall preserve a [*] margin of the
Invoice Price to DO and [*] of Invoice Price as
the DO Purchase Price to CCSI in the
19
<PAGE>
first two Performance Years and [*] margin of the
Invoice Price to DO and [*] of 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 shall be set initially
at [*] per Calibration Standard/Charges per Use,
as set forth in Attachment A. However, if the
Minimum Transfer Price should ever be reduced to
[*] or less, then the Initial Transfer Price shall
thereafter be equal 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 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 that market conditions are
such that the market price for Products is less than the
Minimum Transfer Price 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, to elect to repurchase all
of DO's inventory of Products at the price paid by DO
for such inventory. DO will not sell such Products at a
price below the Minimum Transfer Price or the Initial
Transfer Price, as the case may be, unless CCSI elects
not to repurchase the inventory. If CCSI elects to
repurchase the inventory, it will make payment to DO
within sixty (60) days after CCSI's receipt 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
20
<PAGE>
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 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.
21
<PAGE>
(a) The amounts listed on the table below as "Annual Minimum
Performances" are DO's Annual Minimum Performances for
the Initial Term of this Agreement, provided, however,
that DO's failure to reach such Annual Minimum
Performances shall not constitute a Default by DO under
this Agreement. Subject to the footnotes to the table
below, in the event that the quantity of units of either
of the Calibration Standards/Charges per Use or Devices
purchased by DO as of the expiration of any Performance
Year is less than the Annual Minimum Performances for
such Performance Year in the following table, CCSI shall
have the right, but not the obligation, to terminate
this Agreement in accordance with the following
procedures:
(i) at least sixty (60) days before the end of any
Performance Year in which it appears that DO is in
jeopardy of failing to meet the Annual Minimum
Performances for such Performance Year, CCSI may
give written notice to DO of CCSI's intent to
terminate this Agreement, which notice shall
contain CCSI's requirements for DO to avoid
termination. Such notice is referred to herein as
the "Advance Notice of Termination." Within thirty
(30) days after receipt of the Advance Notice of
Termination, DO will inform CCSI whether DO
believes it can meet the requirements to avoid
termination.
(ii) if by the end of such Performance Year in which
CCSI has issued an Advance Notice of Termination
DO still has not met the Annual Minimum
Performances for such Performance Year, then,
unless the parties agree otherwise, the Agreement
will terminate sixty (60) days after the end of
such Performance Year, and the Exit Transition
will begin.
(iii) if CCSI does not issue a timely Advance Notice of
Termination, i.e., at least sixty (60) days before
the end of the applicable Performance Year, then
DO's failure to meet the Annual Minimum
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
22
<PAGE>
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 [*] [*]
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 (and not just the applicable demo price, if any) 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 (and not just the applicable demo price, if any) 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
(and not just the applicable demo price, if any) in any Performance Year (and DO
has the option (but not the obligation) of prepaying any or all such amounts)
shall count towards the Annual Minimum Performances for such Performance Year
even if such Products have not been shipped to or received by DO in such
Performance Year, provided, however, that as to any such prepayment, 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 prepayment 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 determination of the final DO
Purchase Price for such Products, because they have not yet been sold to
customers, DO shall not be deemed to be past due 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 still count towards the Annual Minimum
Performances.+
***For purposes of calculating whether DO has satisfied its Annual Minimum
Performances, the initial Performance Year shall be considered to commence on
the date that is four (4) months after the date hereof (the "Four-Month Date")
and concluding sixteen (16) months after the date hereof. Thereafter, each
subsequent Performance Year shall be considered to commence on the anniversary
date of the Four-Month Date 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
23
<PAGE>
Term). However, any and all Calibration Standards/Charges per Use (excluding
Demo Calibration Standards/Charges per Use and Evaluation Calibration Standards
or Charges per Use) and Devices purchased by DO during the initial four (4)
months 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 third, fourth
and fifth 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 3, 4 or 5 is less than the
cumulative number of such applicable Devices set
forth as the Cumulative Annual Minimum Targeted
Market Performances applicable to such Targeted
Market for such Performance Year in the following
table, and provided DO has met its Annual Minimum
Performances for such Performance Year, CCSI shall
have the right, but not the obligation, to
implement the "Strategic Remediation" as described
in clause (ii) below, upon giving DO thirty (30)
days prior written notice, provided that such
notice is given within thirty (30) days after the
expiration of such Performance Year.
(ii) 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
six (6) month marketing plan designed to improve
sales in the subject Targeted Market. The parties
shall agree upon the six (6) month marketing plan
within thirty (30) days of the strategic meeting
and the six (6) month plan shall commence upon
agreement of such plan. The plan shall contain
targeted market performances (the "Remediation
Goals") to be achieved during the six (6) month
plan that shall not exceed what would be a pro
rata portion of the Cumulative Annual Minimum
Targeted Market Performances that would otherwise
be applicable during the period of such six (6)
month plan and the shortfall of the preceding
year's performance. If actual sales and placement
of Devices during the period of such six (6) month
plan do not achieve the Remediation Goals, DO will
still have until the end of the then-current
Performance Year
24
<PAGE>
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 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 considered to commence on the date that is four (4) months after the date
hereof (the "Four-Month Date") and concluding sixteen (16) months after the date
hereof. Thereafter, each subsequent Performance Year shall be considered to
commence on the anniversary date of the Four-Month Date 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 placed in a loan-for-use placement
by DO (other than as a demo or replacement unit for which DO has not paid the DO
Purchase Price (and not just the demo price, if any) to CCSI) during the initial
four (4) months 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 are subject to
reduction, as may be appropriate, if sales of the
Products within the Territory or any applicable
Targeted Market (as the case may be) are impaired
as a result of the existence of one or more of the
25
<PAGE>
factors set forth in Attachment C hereto. The
parties agree to cooperate with each other in good
faith to determine the appropriate minimum
performance requirements 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 (subject to all prior footnotes
hereunder) 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 Performance Year. All
Annual Minimum Performances, as such may be
adjusted pursuant to this subparagraph (e), must
be satisfied by the end of the Initial Term, or
the Initial Term of this Agreement shall expire;
and
(iii) No more frequently than once each Performance
Year, if DO believes that any of the assumptions
underlying the Annual Minimum Performances and/or
the Cumulative Annual Minimum Targeted Market
Performances (including any assumptions about
market size or market penetration for any of the
Targeted Markets) have been shown to be not
accurate, 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
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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.
(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.
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(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.
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)
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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 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
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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 eighteen (18) months 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 inbound freight charges but including outbound freight
charges), and within a reasonable period of time not to exceed thirty-five (35)
days, repair or replace (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 repair or replacement 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
repair/replacement 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 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 90 days 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
replacement 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 replacement 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
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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, 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
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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 any other product for the
noninvasive measurement or detection of newborn bilirubinemia (infant jaundice),
nor will DO permit any of DO's Affiliates to do so, and (ii) CCSI shall not
directly or indirectly market, sell or distribute the Products or any other
product for the monitoring of newborn bilirubinemia (infant jaundice), or
treatment of same using photo-elevtive equipment 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 knowingly permit any
third party to directly or indirectly market, sell or distribute the Products in
the Targeted Markets within the Territory for use in monitoring newborn
bilirubinemia (infant jaundice), 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 for use in monitoring newborn
bilirubinemia (infant jaundice). 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) for the monitoring of newborn bilirubinemia (infant jaundice) 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
for use in the monitoring of newborn bilirubinemia (infant jaundice) in the
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Targeted Markets within the Territory. DO and DO's Affiliates may market, sell
and distribute (a) other stand-alone products for the invasive measurement or
detection of newborn bilirubinemia (infant jaundice), provided, however, that
the marketing, sales and distribution of any product for such invasive
measurement or detection is conducted by personnel other than personnel
conducting the marketing, sales and distribution of the Products, and (b) other
products that use invasive detection techniques for an array of conditions
including newborn bilirubinemia (infant jaundice), 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 equivalent
product, 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 (i) its OM division, and (ii) its home
healthcare marketing channel (and with CCSI's acknowledgment and agreement that
OM 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
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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 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
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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 [*] or more on an annualized basis of DO's total annual sales 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 DO shall
assign to CCSI DO's right to sue for and recover on DO's claims for past,
present and future damages against 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 and
the parties shall share in the sum total of any monetary recovery, or settlement
agreed to in good faith by both parties, 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 [*] or more percent
of annual sales requirement is not met.
The foregoing provisions also shall apply (i) to any infringement action
that CCSI chooses to bring where the infringing sales do not meet the [*] or
more of annual sales requirements; 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
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that the [*] or more of annual sales requirement shall not be applicable to such
declaratory judgment. DO shall not charge any third-party, directly or
indirectly, with infringement of any CCSI patent so as to create a case or
controversy permitting that third-party to bring such a declaratory judgment
action.
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 agreement. CCSI shall have the right to enforce such agreements
with any such
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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.
3. CCSI Intellectual Property Indemnification. CCSI shall indemnify,
defend and hold DO, its officers, directors, shareholders and employees harmless
from and against
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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 where the Indemnifying Party has acknowledged and confirmed its
indemnification obligation, including its obligation to indemnify for any
settlement entered into with its
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<PAGE>
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 special, incidental, consequential, indirect or punitive
damages. Without limiting the generality of the foregoing
sentence, DO shall not be liable to CCSI for any consequential
damages 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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<PAGE>
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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<PAGE>
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
<TABLE>
<CAPTION>
Performance Year Minimum Performance for Units Minimum Performances
of Devices for Units of Calibration
Standards or Charges per Use
<S> <C> <C>
6 [*] [*]
7 [*] [*]
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
8 [*] [*]
9 [*] [*]
10 [*] [*]
</TABLE>
CUMULATIVE ANNUAL MINIMUM TARGETED MARKET PERFORMANCE
Performance Year Cumulative Annual Minimum Performance for Hospital Devices
Cumulative Annual Minimum Performance for Home Healthcare Devices Cumulative
Annual Minimum Performance for Pediatrician 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 be the higher of [*] or the Minimum Transfer Price 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
pre-payments or adding Products to inventory; (vi)[*]; (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, or placed on loan for use within
each Performance Year; and (viii) prices for Demo Calibration Standards/Charges
per Use and Evaluation 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 foregoing minimums are not achievable, 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 reach a new
set of minimums. 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.
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2. Termination for Default. Subject to paragraph 9(b) of Section III and
paragraph 10 of Section IV, either party may terminate this Agreement by giving
written notice of such termination in the event of a Default by the other party
and such Default has not been cured within thirty (30) days after the defaulting
party has received written notice specifying the Default and requesting that it
be cured. Except as otherwise provided herein, termination of this Agreement for
Default shall not impair the terminating party's other rights and remedies for
such Default.
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 directly with third-party manufacturers
under contract with CCSI for the manufacture 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 shall remit to such third-party manufacturer
the amount that such third-party manufacturer would ordinarily
receive from CCSI for the manufacture of such Products under
CCSI's agreement with its third-party manufacturer. 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 terminate its agreement with its third-party
manufacturer, DO has the right to require CCSI either, at
CCSI's option, (i) to begin direct manufacturing of Products
itself, or (ii) to select and
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<PAGE>
negotiate in good faith a contract with a new U.S. based
third-party manufacturer 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, at least
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 new U.S. based
third-party manufacturer for the LED Device is finalized, DO
shall have the right to match the terms and conditions of such
contract and assume responsibility for the manufacture of the
LED Device on such 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 being obligated to use such manufacturer.
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 commercial general liability insurance policies
(i) that, in the aggregate, shall provide coverage, including products liability
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 coverage for Claims arising
within the Territory. In addition, CCSI and DO shall each maintain an excess
liability 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.
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<PAGE>
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 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.
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<PAGE>
9. Survival. The payment obligations under paragraphs 5(f) and 7 of
Section III, paragraphs 1, 3, 11, and 12 of Section IV and Section V of this
Agreement shall survive its expiration or termination for any reason, as shall
any other provisions of this Agreement which by their express terms may
reasonably be construed as surviving its expiration or termination. Expiration
or termination of this Agreement shall not affect either party's obligations to
comply with all legal and regulatory requirements related to the manufacture,
sale or use of Products.
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<PAGE>
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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<PAGE>
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: [*]/unit in lots of up to [*] for first [*]
units purchased under Firm Purchase Orders.
Thereafter, price to be equal to CCSI Cost
Amount in lots of up to [*]. (Note: Upon
DO's request from time to time, CCSI will
provide price quotations for quantities less
than [*]) to be adjusted quarterly to the DO
Purchase Price if sold.
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 Price is the Minimum Transfer Price)
(Only applicable for
Performance Years 1 and 2 after
which time the Initial Transfer Minimum Transfer Price
for TLc Lensette(trademark)
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Calibration Standards as [*] in lot volumes as specified below for
described above: Performance Years 1 and 2, subject to
change as per the terms of the Agreement
to be adjusted quarterly to the DO
Purchase Price if sold.
[*] in lot volumes as specified below for
Performance Years 1 & 2 to be adjusted
quarterly to the DO Purchase Price if
sold. [*] in lot volumes as specified
below for Performance Years 3, 4 & 5 to
be adjusted quarterly to the DO Purchase
Price if sold.
Price for Performance Years 1 & 2 or 50%
DO Purchase Price for of Invoice Price for Performance Years 3,
TLc Lensette(trademark) Calibration 4 & 5 of this Agreement, as per the terms
Standards as described above: 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.
[*] unit in lot volumes as specified
below for the first [*] such units, and
[*] for units in excess of [*].
Purchase Price for Demo
Calibration Standards:
[*] for the first [*] units per
Performance Year, and [*] for units in
excess of [*] in any Performance Year,
provided there is an equal
Purchase Price for Evaluation
Calibration Standards:
The higher of the Minimum
Transfer Price or 60% of Invoice
50
<PAGE>
number of Calibration
Standards/Charges per Use that
are purchased by DO at the
same time as such excess
Evaluation 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, subject
to DO Purchase Price
reconciliation.
The Initial Invoice to DO to
be at the Purchase Price
subject to paragraph 7 of
Section III.
Lot volumes: [*] to [*] units, for demo units and also for the non-demo
units, but not to exceed [*] 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.
[*]. The working engineering prototype for this Product including all FDA
required design controls. If FDA clearances are then obtained and other QSR
requirements are instituted and obtained for the LED Device; CCSI will
manufacture or cause a third party manufacturer to manufacture the LED Device
under the terms of this Agreement. [*] This model includes labels,
shipping/packaging and an Operator's Manual.
Minimum Transfer Price for
LED Device as described
above: If the [*] of parts and manufacture for
the LED Device (the "Cost Amount") is
greater than [*] in lots of [*], the
Minimum Transfer price is the higher of
[*] or (ii) the Cost Amount. If the Cost
Amount is [*] or less in lots of [*], the
Minimum Transfer Price is the
51
<PAGE>
Cost Amount [*] of such Cost Amount. This
Minimum Transfer Price is applicable to
lot volume [*] of in Performance Years
[*] of this Agreement, but only following
such time as it becomes legally
marketable and commercially available and
is adjusted quarterly to the DO Purchase
Price if sold.
DO Purchase Price for LED
Device as described above: The higher of the Minimum Transfer Price
or 60% of the Invoice Price in
Performance Years 1 & 2 or 50% of the
Invoice Price in Performance Years 3, 4 &
5 of this Agreement, as per the terms of
the Agreement. e.g. If Invoice Price is
$3000, then DO Purchase Price is: $1800
(60%) in Performance Years 1 & 2 of the
Agreement: $1500 (50%) in Performance
Years 3, 4 & 5 of the Agreement;
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
Status: Not available now. (Going through UL approvals now). Will be available
when legally marketable.
The Laptop Modified Device consists of a Model 1 Device bundled with the laptop
accessory, as described below.
Minimum Transfer Price: [*] per unit (plus tax and shipping to
CCSI) for first [*] units in lots of [*]
(must be ordered as part of Model 1 [*]
lot volume) and adjusted quarterly to DO
Purchase Price if sold.
DO Purchase Price:
52
<PAGE>
Thereafter, price to be
determined based on [*] for
laptop computer in lots of
[*], with lower prices
available for larger lot sizes
(must be ordered as part of
Model 1 [*] lot volume).
(Note: Upon DO's request from
time to time, CCSI will
provide price quotations for
quantities between [*]).
The higher of the Minimum
Transfer Price or 60% of the
Invoice Price in Performance
Years 1 & 2 or 50% of the
Invoice Price in Performance
Years 3, 4 & 5 of this
Agreement, as per the terms of
the Agreement.
Initial invoice to DO to be at
Minimum Transfer Price,
adjusted quarterly to DO
Purchase price as per terms of
the Agreement.
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
Status: Not available now. Going through Design Controls. Will be available when
legally marketable. Has been through some UL testing/needs to finish.
[*]
Minimum Transfer Price: [*] per unit plus tax and shipping for
first [*] units in lots of [*] (must be
ordered as part of Model 1 [*] lot
volume) adjusted quarterly to DO Purchase
Price if sold. Thereafter, price to be
determined based on [*] for laptop
computer and printer, in lots of [*],
with lower prices available for larger
lot sizes (must be ordered as part of
Model 1 [*] lot volume).
DO Purchase Price: The higher of the Minimum Transfer Price
or 60% of the Invoice Price in
Performance Years 1 & 2 or
53
<PAGE>
50% of the Invoice Price in Initial invoice to DO to be at Minimum
Performance Years 3, 4 and 5 Transfer Price, adjusted quarterly to DO
of this Agreement, as per the Purchase Price as per terms of the
terms of the Agreement. Agreement.
Lead time (following such time as becomes legally marketable and
commercially available): [*] in quantities of [*].
c. Model 4: THE COLORMATE(R) TLc BRIEFCASE(trademark) SYSTEM
Status: Not available now. Going through Design Controls. Available following
such time as becomes legally marketable.
The TLc Briefcase(trademark) System includes [*] This model includes labels,
shipping/packaging and an Operator's Manual.
Minimum Transfer Price for
The Briefcase System as
described above: [*] per unit in lots of [*] plus tax and
shipping to CCSI adjusted quarterly to DO
Purchase Price if sold.
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 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
54
<PAGE>
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.
The "Charges per Use" is the Charges per Use component defined [*] that would be
applicable under the terms and conditions of this Agreement for [*]" In the
event that a "Charges per Use" component defined herein is ordered from CCSI by
DO as a "Charges per Use" and the applicable [*] subject to DO Purchase Price
quarterly reconciliation,[*]
The Charges per Use component would have a [*] In the event this Charges per Use
component is ordered,[*]
DO Initial Transfer Price: [*] and adjusted quarterly to DO Purchase
Price if sold.
DO Minimum Purchase Price: [*] and adjusted quarterly to DO Purchase
Price if sold.
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
55
<PAGE>
Status: Not available now. May be available when agreed to by the parties.
The "Managed Use" is a potential selling structure wherein the Device and
"Charges per Use" or a variation of "Charges per Use" would be used as follows:
The Device would include [*] as defined in "Charges Per Use", but the
Calibration Standards provided to DO with the Device would be ones used [*] and
the Lensettes(trademark) supplied to DO [*] ordered by DO would be [*]. The
Minimum Transfer Price and the DO Purchase Price structure (including DO and
CCSI margins) would be the same as the Charges per Use [*]
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.
The modem is a component for the Device which allows transfer of certain data
[*] from the Device to another computer by standard modem technology. At this
time CCSI plans to include this component with the Device [*]. However, if
during the design phase there is more than the planned cost per Device, then
CCSI will inform OM of such event. First [*] (per unit) of the planned modem
cost to be paid by CCSI.
B. ACCESSORIES
1. Mounting Pole
Status: Available now
OM can purchase at Transfer Price from CCSI at CCSI cost of [*] plus tax and
shipping in [*] lot volume a custom pole with wheels for mounting of the Device
or the Device with Laptop [*].
Transfer Price for Mounting
Pole as described above: [*] of CCSI Cost Amount plus
tax and shipping.
Lead time (now): [*] for [*] lot volume Mounting Poles.
C. PRODUCT COMPONENTS
1. Laptop Computer
56
<PAGE>
Status: Not available now. (Going through UL approvals now). Available following
such time as becomes legally marketable.
DO can purchase at transfer price following such time as legally marketable from
CCSI an [*] laptop computer for use with the Device as a Product Component,
which will be delivered with the original manufacturer's warranty but not CCSI's
warranty.
Transfer Price for laptop
as described above: [*] per unit for first [*] units in lots
of [*]. Therefore, price to be equal to
[*] of CCSI Cost Amount for laptop
computer, in lots of [*], plus tax and
shipping. (Note: Upon DO's request from
time to time CCSI will provide price
quotations for quantities between [*])
Lead time (following such time as becomes legally marketable and
commercially available): [*] for [*] lot volume of laptop computers.
Note: A [*] laptop will be available when legally marketable but takes [*] to go
through UL. Same terms and conditions will apply and CCSI will notify OM on
progress.
2. Printer
Status: Not available now. Going through Design Controls. Available following
such time as becomes legally marketable. Has been through some UL testing/needs
to finish. Printer is [*] for use when legally marketable with the [*].
DO can purchase printer when legally marketable at Transfer Price from CCSI in
lots of [*] units, which will be delivered with the original manufacturer's
warranty but not CCSI's warranty.
Transfer Price for Printer
as described above: Transfer Price to be equal to[*] of CCSI
Cost Amount for printer, in lots of [*],
plus tax and shipping. Current Transfer
Price is [*] plus tax and shipping.
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 the
CCSI Cost Amount, which CCSI currently estimates to be [*].
D. Price Adjustments based upon changes in CCSI's Cost Amount
57
<PAGE>
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) changes in the CCSI Cost Amount (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 evidence of such
change in Cost amount and provided further that:
(i) there will be no price change to Calibration Standards or Charges
per Use based upon changes in Cost amount; provided, however, that
following the Initial Term of the 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 CCSI's Cost amount for same, provided that such price
increase does not result in a minimum Transfer Price or DO Purchase
Price greater than [*] of DO's Invoice 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 change in Cost Amount;
(iii) CCSI's transfer price to DO for Product Components and Accessories
shall never exceed [*] of CCSI's Cost Amount 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 never
exceed of CCSI's Cost Amount during the Initial Term of this
Agreement.
(iv) All price changes based upon changes in cost Amount 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 any change in a Cost Amount.
58
<PAGE>
PURCHASE
Attachment 2 ORDER
[*]
SHOW OUR ORDER NUMBER ON ALL INVOICES, PACKAGES SHIPPING PAPERS AND
CORRESPONDENCE
<TABLE>
<CAPTION>
PURCHASE ORDER NO. CHANGE ORDER NO. DATES ISSUED PAGE
S
T H T
O I O
P
FOB SHIP Mass. Tax Exempt
VIA / / YES #000-089-100 / / NO
<S> <C> <C> <C> <C> <C> <C> <C>
LINE QUANTITY U/M P/N/DWG/ REV DESCRIPTION DUE DATE UNIT PRICE AMOUNT
TOTAL
/ / DRAWINGS ENCLOSED / / CONFIRMING ORDER TO:
AUTHORIZED SIGNATURE
</TABLE>
59
<PAGE>
Attachment 3
Pricing for Section 1 of Attachment 1
Chromatics Color Sciences Inc
<TABLE>
<CAPTION>
Estimated Estimated
Item No.: Description Mat'l Cost Labor Cost Comments
<S> <C> <C> <C> <C> <C>
1 [*] n/a assumed to be supplied by CCSI
2 [*] n/a assumed to be supplied by CCSI
3 [*] [*] build, test & inspect
3a [*] n/a assumed to be supplied by CCSI
3b [*] $[*] per [*]
3c [*] $[*] per [*], -[*] or almond was priced
3d [*] $[*]
3e [*] $[*]
3f [*] $[*]
3g [*] $[*]
3h [*] $[*]
[*] [*] build or assemble, kit, test & inspect
[*] Unknown
5 [*]
5a [*] $[*] [*]
5b [*] [*] Program, verify, label & inspect
5c [*] $[*]
6 [*] n/a
7 [*] n/a Assumed to be supplied by CCSI
8 [*] $[*] [*] Assembly & inspect, there will be a one time charge of
$[*] to [*] for tooling to produce the [*]
9 [*] $[*]
Total: $[*] [*]
Material Material O/H Labor Lab O/H Total Margin Transfer Price
$[*] $[*] $[*] $[*] $[*] $[*] $[*]
</TABLE>
Other Items:
1 The cost to transact an order, including both order entry and shipping
will be a $[*] flat rate.
2 Current FedEx shipping costs, for [*], for all of the US is $[*]
overnight, $[*] next day and $[*] 2nd day.
3 NOVA requires [*] days from receipt of order for the 1st delivery.
4 Incoming inspection costs for CCSI supplied materials will be charged
at $[*] per hour, we estimate that the time will be [*] to [*] hours
per line item per lot.
Extended Warranty Cost: The cost of extending the warranty to [*] from NOVA's
[*] warranty period will be [*]% of NOVA's selling/transfer price of each
Product to CCSI.
60
<PAGE>
Attachment 3
Pricing for Section 2 of Attachment 1
Pricing Method
NOVA will use the following method to price [*] Units to CCSI
Calculation of standard cost
- - ----------------------------
Actual Material Cost Plus
Material overhead rate - Currently [*]% Plus
Labor cost (hours x $[*] (current rate)) Plus
Labor overhead rate - Currently [*]%
Equals
Total Standard Cost
Note for year one only, NOVA will bid on smaller quantities and will use a
margin of [*]%
Price depends on volume:
Units per year Margin
-------------- ------
[*] No bid
[*] [*]%
[*] [*]%
[*] [*]%
<TABLE>
<CAPTION>
Example Example Example
Cost ($) Cost ($)
-------- --------
<S> <C> <C>
Material Cost (key item) [*] [*]
[*]% material overhead* [*] [*]
Labor cost ([*] hours @ $[*]/hr) [*] [*]
[*]% labor overhead* [*] [*]
Standard Cost $[*] $[*]
------------- ---- ----
</TABLE>
Based on our current forecast, we expect our [*] to be [*] next year. These
numbers reflect our current forecast.
<TABLE>
<CAPTION>
Year 2 Forward Price if Standard Price if Standard
Units per year Margin Cost is $[*] Cost is $[*]
- - -------------- ------ ------------ ------------
<S> <C> <C> <C>
[*] no bid no bid ([*]) no bid ([*])
[*] [*]% [*] [*]
[*] [*]% [*] [*]
[*] [*]% [*] [*]
--- ---- --- ---
</TABLE>
Note: Example assumes constant materials cost. [*].
Extended Warranty Cost:
The cost of extending the warranty to [*] from NOVA's [*] warranty period will
be [*]% of NOVA's selling/transfer price of each Product to CCSI.
61
<PAGE>
ATTACHMENT B
PRODUCT INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Item/Information Initial Action Ongoing Action
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Manual CCSI to provide 100 copies for DO's CCSI creates and revises as required. CCSI includes within
use each 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
Lensettes & Charge per Use use each Lensette box
- ------------------------------------------------------------------------------------------------------------------------------------
Product Labels and Licensing CCSI to provide 10 copies for DO's CCSI creates and revises as required. CCSI includes within
Folder for Software use each 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
use input and sign off**
- ------------------------------------------------------------------------------------------------------------------------------------
Quick Reference Guide CCSI to provide 10 copies for DO's DO creates/revises as required and supplies quantities
use necessary 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
materials use necessary to service all Targeted Markets with CCSI input and
sign off**
- ------------------------------------------------------------------------------------------------------------------------------------
Sales support materials such as CCSI to provide one copy of all CCSI to continue to distribute existing literature as per
brochures, cost consideration existing material for DO's use Attachment D until supply runs out. DO creates/revises as
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 existing DO creates/revises as required and supplies quantities
Materials such as journal ads, materials for DO's use necessary to service all Targeted Markets with CCSI input and
direct mail piece, booth sign off**
graphics etc.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*CCSI will promptly provide DO with at least one free copy (complete) of
any revised Operating Manual Instructions for use and/or licensing folder.
**CCSI must review and 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.
Sample of approved labeling is attached to this Attachment B.
59
<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(R) TLc
BiliTest(trademark) System (or any Upgraded Device or LED Device when
commercially available and legally marketable) and there is no reasonable
method to transmit the [*] for a patient to the pediatricians' offices or
the home healthcare market agency locations necessary to input such [*]
information.
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. Private or government insurance reimbursement 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, into the
consumer home healthcare market within the Territory (e.g. where the test
is not solely administered by a healthcare professional).
8. If a third party markets or distributes a product in any Targeted Market
within the Territory that both parties agree constitutes an infringement
of CCSI's intellectual property right(s) 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.
60
<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; CCSI to attempt to close sales
on Evaluation until CCSI to provide information sharing and updates to DO
- ------------------------------------------------------------------------------------------------------------------------------------
Customer Demos & Inservice CCSI to continue demo, DO to pay for Lensettes on new demo orders (i.e.,
excluding demos currently with customers), with DO approval (and processed
through DO ordering and shipping)
- ------------------------------------------------------------------------------------------------------------------------------------
Customer Evaluation Units CCSI to continue 30-60 day Evaluation program (both for existing and new
Evaluation units) supplied by DO
- ------------------------------------------------------------------------------------------------------------------------------------
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, Sales & Technical CCSI to provide trainer(s) at its expense at up to six (6) regional sales
Support Personnel meetings (1 1/2 days each) DO to organize and pay for regional sales
meetings. CCSI will provide at its expense trainers for one training session
in Columbia, Maryland for 2-5 days DO's sales and Marketing administration.
- ------------------------------------------------------------------------------------------------------------------------------------
Product Support to launch in OM System CCSI to provide a copy of Configurations and Part Numbers, Prices, Clinical
Articles & 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 one-page test (no graphics) letter that is jointly
developed.
- ------------------------------------------------------------------------------------------------------------------------------------
Direct Mail Piece CCSI will format, add DO's name to mail piece & obtain printing costs. DO to
Mailer already developed & four color separated (black assume cost to print, label & mail. CCSI will handle response calls and
plate changes only required.) refer calls to DO when DO is ready.
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------------------------
Demo Inventory to Reps CCSI reps have [*] existing demo units. DO to purchase or deduct from their
[*] demo units.
- ------------------------------------------------------------------------------------------------------------------------------------
Demo Inventory to Hospitals CCSI to provide Lensettes for hospital evaluation and DO pay for Lensettes
with an approved plan from DO.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
61
<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 repair/replacement 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 demos and demo Lensettes 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 10 person
team of sales and clinical specialists at [*]: provided, however that in
providing such support, no member of such 10 person team shall be obligated to
spend, in the aggregate, more than [*] overnight hotel nights or more than [*]
in air travel, in a 12 month period. If any member of such 10 person team
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.
62
<PAGE>
III. EXIT TRANSITION CONSIDERATIONS
UPON TERMINATION OF AGREEMENT*
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
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 inventory is exhausted 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 [*]
in gross margin [*], 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 [*] in gross margin on [*] placement, then CCSI must either
promptly pay DO an amount equal to difference between (A)[*] on such specific
placement and (B) [*] or (2) permit DO to continue to sell [*] for use with such
specific placement (and if equested by DO, CCSI shall continue to supply DO with
[*]) until DO receives [*] in gross margin on such specific placement. Upon DO's
receipt of such payment form CCSI or such [*] gross margin (as the case may be),
then DO's ownership rights in such Device shall be transferred to CCSI at no cost to
CCSI.
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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.
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Customer Notice - within 30 days Depends on inventory decision. In all cases DO & CCSI will jointly decide content
of notification
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Customer Transition DO to provide CCSI with Customer List, Sales history, Technical call history, DO
will refer all calls regarding product to CCSI
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Marketing Efforts Literature, Advertising, DO marketing efforts will cease immediately, except that DO shall have the right to
Conventions, Sales training , Direct Mails market as necessary to sell off inventory. CCSI will have the right to purchase any
available literature at DO cost and utilize such literature bearing DO logos. If
requested, DO will continue to provide technical support during the Exit Transition
(up to six months) at its standard rates for service, to be billed to and paid by
CCSI. CCSI will label DO literature to indicate the change in distribution, if used.
CCSI will pay for reprints.
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Technical Support DO will refer customer calls to CCSI.
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Regulatory Support DO will perform any regulatory action legally required by DO under applicable law.
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</TABLE>
*Applies only to termination of Agreement by DO or CCSI (as the case may
be) in accordance with (and not in breach of ) the terms of the Agreement.
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