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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 6, 1999
DIAMETRICS MEDICAL, INC.
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(Exact name of registrant as specified in its charter)
Minnesota 0-21982 41-1663185
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(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification No.)
2658 Patton Road, Roseville, Minnesota 55113
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(Address of principal executive offices)
Registrant's telephone number, including area code: (651) 639-8035
Not Applicable
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(Former name or former address, if changed since last report)
Page 1 of 4 Pages
Exhibit Index Appears on Page 4
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Item 5. Other Events.
On June 7, 1999, Diametrics Medical, Inc. (the "Company") and
Hewlett-Packard Company ("HP") announced that HP had signed an exclusive
worldwide agreement (the "Distribution Agreement") to market, sell and
distribute the Company's Paratrend(R) and Neotrend(TM) continuous blood-gas
monitoring systems and the IRMA(R)SL point-of-care blood analysis system. Under
the terms of the Distribution Agreement, the Company will transfer full
responsibility for marketing, sales and distribution for these products to HP.
The initial term of the Distribution Agreement is three and a half years, with
the option for extensions.
Concurrently with the execution of the Distribution Agreement, HP agreed to
acquire $9.5 million of the Company's common stock at $7.00 per share, with
warrants to purchase 452,381 shares of common stock at $8.40 per share. The
Company's Board of Directors has granted HP the right to acquire additional
shares of the Company's stock on the open market or in block transactions,
subject to limitations of the Minnesota Control Share Acquisition Act. In
addition, the Company's Board has agreed not to implement a shareholder-rights
plan for a period of three years and has agreed to certain conditions for sale
of the Company and the issuance of the Company's stock for a two-year period. HP
will also be entitled to representation on the Company's Board of Directors.
The foregoing is a summary of certain terms and conditions of the
Distribution Agreement, the agreement to purchase common stock and the warrant,
is not intended to be complete and is qualified by reference to the definitive
Distribution Agreement, Common Stock Purchase Agreement and Stock Purchase
Warrant and the Company and HP's joint press release describing the agreements,
which are filed as Exhibits 99.1, 99.2, 99.3 and 99.4, respectively, to this
Form 8-K, and which are hereby incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
Exhibit No. Description
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99.1* Distribution Agreement, dated June 6, 1999, between
Diametrics Medical, Inc. and Hewlett Packard Company
99.2 Common Stock Purchase Agreement, dated June 6, 1999,
between Diametrics Medical, Inc. and Hewlett Packard
Company
99.3 Stock Purchase Warrant, dated effective as of June 28,
1999
99.4 Joint Press Release of Diametrics Medical, Inc. and
Hewlett Packard Company, dated June 7, 1999
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* Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended,
confidential portions of Exhibit 99.1 have been deleted and filed
separately with the Securities and Exchange commission pursuant to a
request for confidential treatment.
Page 2 of 4 Pages
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 23, 1999
DIAMETRICS MEDICAL, INC.
By: /s/ Laurence L. Betterley
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Laurence L. Betterley
Chief Financial Officer
Page 3 of 4 Pages
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INDEX TO EXHIBITS
Exhibit No. Description
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99.1* Distribution Agreement, dated June 6, 1999, between Diametrics
Medical, Inc. and Hewlett Packard Company
99.2 Common Stock Purchase Agreement, dated June 6, 1999, between
Diametrics Medical, Inc. and Hewlett Packard Company
99.3 Stock Purchase Warrant, dated effective as of June 28, 1999
99.4 Joint Press Release of Diametrics Medical, Inc. and Hewlett
Packard Company, dated June 7, 1999
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* Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended,
confidential portions of Exhibit 99.1 have been deleted and filed
separately with the Securities and Exchange commission pursuant to a
request for confidential treatment.
Page 4 of 4 Pages
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Exhibit 99.1
DISTRIBUTION AGREEMENT
THIS IS AN AGREEMENT (the "Agreement"), made as of this 6th day of June,
1999 (the "Effective Date"), by and among Diametrics Medical Incorporated, a
Minnesota corporation having its principal place of business at 2658 Patton
Road, St. Paul, Minnesota 55113 ("COMPANY") and Hewlett Packard or its successor
in a planned reorganization, a Delaware corporation, having its principal place
of business at 3000 Hanover Street, Palo Alto, California 94303 ("DISTRIBUTOR").
WITNESSETH:
WHEREAS, COMPANY develops, manufactures (or has manufactured), sells and
distributes point of care medical diagnostic products for blood analysis,
including certain continuous and intermittent monitoring products which include
diagnostic probes and cartridges and related hardware and accessories for
monitoring certain components of blood; and,
WHEREAS, DISTRIBUTOR and its subsidiaries develop, manufacture and
distribute patient monitoring systems and other medical products throughout the
world; and
WHEREAS, COMPANY seeks to sell certain of its products to DISTRIBUTOR for
distribution on a worldwide basis, and DISTRIBUTOR desires to purchase such
products sold by COMPANY for distribution and resale as a stand-alone system or
an option to or an element of DISTRIBUTOR's products, and
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and subject to the terms and conditions set forth herein below,
DISTRIBUTOR and COMPANY agree as follows:
ARTICLE 1. Definitions
The following terms, when used herein with initial capital letters, shall
have the following respective meanings:
1.1 Acceptance. Indication by DISTRIBUTOR that, upon inspection or deemed
acceptance by DISTRIBUTOR as set forth in Section 4.8, the Products conform to
an agreed upon test procedure which shall be based upon the Product
specifications and labeling and FDA and EU specifications applicable to such
Product.
1.2 Accessories. Those accessories for the Intermittent Monitoring
Products, having the specifications set forth on Exhibit 1.2 (as may be changed
from time to time as provided herein) and those accessories for the Continuous
Monitoring Products, having the specifications set forth on Exhibit 1.4 (as may
be changed from time to time as provided herein) (and including Improved
Products thereof).
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1.3 Affiliate. Any person, firm, corporation or other legal entity which
controls, is controlled by or is under common control with COMPANY or
DISTRIBUTOR.
1.4 Calibrators. The calibrator portion of the Continuous Monitoring
Products, having the specifications set forth on Exhibit 1.4 (as may be changed
from time to time as provided herein) (and including Improved Products thereof).
1.5 Cartridges. The cartridge portion of the Intermittent Monitoring
Products, having the specifications set forth on Exhibit 1.2 (as may be changed
from time to time as provided herein) (and including Improved Products thereof).
1.6 Competing Product. (a) With respect to the Continuous Monitoring
Products, any in-vivo or ex-vivo blood analysis products within the Field that
compete directly with the Continuous Monitoring Products in humans, and (b) with
respect to the Intermittent Monitoring Products, any in vitro blood analysis
products for critical care and emergency care applications that compete directly
with the Intermittent Monitoring Products in humans.
1.7 Confidential Information. Information of any kind and form, whether
technical or business, which a Party hereto holds in confidence and regards as
valuable, but only when treated by the disclosing Party as set forth in Article
12.
1.8 Continuous Monitoring Products. Those continuous monitoring products
(including Improved Products) sold by COMPANY for use in the applicable Field
and currently marketed under the trademarks ParaTrend(R), NeoTrend(TM) and
TrendCare(TM), consisting of the Sensors, Calibrators, Monitors, Patient Data
Module and Accessories including the manuals, labeling, packaging and package
inserts for such Continuous Monitoring Products. The Continuous Monitoring
Products expressly exclude the NeoCath products in their oxygen-only form as of
the Effective Date; the NeoCath product will only be distributed to existing
NeoCath product users and will not be changed or enhanced without DISTRIBUTOR's
consent.
1.9 Effective Date. June 6, 1999
1.10 Exclusivity Period. The period starting on June 6, 1999, during which
DISTRIBUTOR has the exclusive right hereunder to distribute the Products in the
Field, until such period terminates or expires as provided herein.
1.11 Extension Term. The extension term or terms of this Agreement, as
described in Section 11.1.
1.12 Field. (a) With respect to the Continuous Monitoring Products,
intra-vascular monitoring of biochemical and physiological parameters in humans.
The Field excludes all other uses or applications, including without limitation,
all applications in the central nervous system (i.e. the cranial cavity or the
spinal column) and all monitoring in tissue and fluids other than blood, and (b)
with respect to the Intermittent Monitoring Products, in vitro analysis of blood
in humans.
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1.13 Fiscal Quarter or FQ. With respect to any Fiscal Year, the periods
November 1 through the following January 31 ("FQ1"), February 1 though the
following April 30 ("FQ2"), May 1 though the following July 31 ("FQ3"), and
August 1 though the following October 31 ("FQ4").
1.14 Fiscal Year or FY. The period from November 1 through the following
October 31of the applicable year.
1.15 Gross Margin. DISTRIBUTOR's average selling price for the Products to
third parties, as determined in accordance with DISTRIBUTOR's accounting
practices and procedures, consistently applied, less the prices actually paid by
DISTRIBUTOR to COMPANY for such Products (including shipping, handling and
import duties thereon), for the relevant Fiscal Quarters. In the case of
international sales, Gross Margin does not include the Uplift, as defined below.
In the event that Products are sold or bundled by DISTRIBUTOR or its Affiliates
along with other products and/or services at a package price, or are transferred
without or for reduced consideration, the Gross Margin shall be allocated on an
equitable and pro rata basis with such other products and/or services.
1.16 IDMS Software. The software portions of the Intermittent Monitoring
Products, having the specifications set forth on Exhibit 1.2 (as may be changed
from time to time as provided herein) (and including Improved Products thereof).
1.17 Improved Products.
(a) Any Product that incorporates (a) any on-going improvements,
modifications or enhancements, such as bug fixes, which are developed by COMPANY
pursuant to Section 7.3 or (b) any improvements, modifications or enhancements
to the current platform for IRMA and TrendCare, such as new interfaces or new
measurement parameters, such as glucose, lactate or electrolytes, for the
Continuous Monitoring Products, or new electrochemical measurements or new
modules for the Intermittent Monitoring Products which are developed by COMPANY,
and
(b) any new generation continuous or intermittent blood analysis product
for use in the Field (e.g. a new platform (such as thick/thin films), new
measurement methodology (such as electrochemical or optical measurement), or
separate platform, methodology, application, intellectual property or Product in
the Field acquired from a third party) that is developed or acquired by COMPANY
during the Exclusivity Period and the development or acquisition of which is
funded at least (***) percent (***) by DISTRIBUTOR as provided in Section 7.1.
1.18 Initial Term. The initial term of this Agreement, as described in
Section 11.1.
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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1.19 Intermittent Monitoring Products. Those intermittent monitoring
products (including Improved Products) sold by COMPANY for use in the applicable
Field and currently marketed under the trademark IRMA(R), and consisting of the
IRMA Analyzer, Cartridges, Accessories, IDMS Software, and Modules (such as the
SureStep Pro Blood Glucose Module) including the manuals, labeling, packaging
and package inserts for such Intermittent Monitoring Products.
1.20 IRMA Analyzers. The analyzer portion of the Intermittent Monitoring
Products, having the specifications set forth on Exhibit 1.2 (as may be changed
from time to time as provided herein) (and including Improved Products thereof).
1.21 Minimum Purchase Requirement. The aggregate minimum dollar amount of
Products to be purchased by DISTRIBUTOR in the applicable Fiscal Year, as set
forth on Exhibit 1.21.
1.22 Modules. The module portion of the Intermittent Monitoring Products
(such as the SureStep Pro Blood Glucose Module), having the specifications set
forth on Exhibit 1.2 (as may be changed from time to time as provided herein)
(and including Improved Products thereof).
1.23 Monitors. The monitor portion of the Continuous Monitoring Products,
having the specifications set forth on Exhibit 1.4 (as may be changed from time
to time as provided herein) (and including Improved Products thereof).
1.24 New Products. Any new generation continuous monitoring product or
intermittent blood analysis product for use in the Field (a) which is not a
Product or an Improved Product, (b) which is developed or acquired by COMPANY
during the Exclusivity Period, and (c) the development or acquisition of which
is not funded at least (***) percent (***%) by DISTRIBUTOR as provided in
Section 7.1. All COMPANY products in the Field are either Products, Improved
Products or New Products. New Products shall be subject to Section 7.4.
1.25 Party. Either DISTRIBUTOR or COMPANY, as the case may be.
1.26 Patient Data Module. The patient data module portion of the Continuous
Monitoring Products, having the Specifications set forth on Exhibit 1.4 (as may
be changed from time to time as provided herein) (and including Improved
Products thereof).
1.27 Products. The Continuous Monitoring Products and Intermittent
Monitoring Products, collectively.
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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1.28 Regulatory Approval. Applications for permission or clearance and
permissions, clearances or approvals from local and national governments, if
required in any country or jurisdiction, to market, and sell Products.
1.29 Sensors. The disposable sensor portion of the Continuous Monitoring
Products, having the specifications set forth on Exhibit 1.4 (as may be changed
from time to time as provided herein) (and including Improved Products thereof).
1.30 Transition Period. The period from the Effective Date through October
31, 1999 (or such earlier date as the Parties may mutually agree).
1.31 Uplift. An accounting mechanism employed by DISTRIBUTOR to approximate
the costs for the following elements in intracorporate transfers between
DISTRIBUTOR and its international Affiliates, as consistently applied pursuant
to DISTRIBUTOR's internal accounting procedures:
Shipment/freight
Differential insurance
Differential in higher discounts
Import duty
Tax differentials
Quote validity extension
Currency hedging
Other differentials to standard terms and conditions
ARTICLE 2. Appointment
2.1 Appointment. Subject to the terms and conditions of this Agreement,
COMPANY hereby appoints DISTRIBUTOR as its sole and exclusive worldwide
distributor of the Products and Improved Products for use in the applicable
Field commencing on the Effective Date, during the Exclusivity Period, and
COMPANY appoints DISTRIBUTOR as its non-exclusive worldwide distributor of
Sensors and Cartridges and Improved Sensors and Improved Cartridges for use in
the Field for the periods and on the terms provided in Sections 11.2 11.3 and
11.4, and DISTRIBUTOR hereby accepts such appointment.
2.2 Restrictions on Distribution. During the term of this Agreement,
DISTRIBUTOR shall not sell or distribute for resale outside of or for use
outside of the Field, any of the Products.
2.3 Exclusivity.
(a) Commencing on the Effective Date and until termination of the
Exclusivity Period, DISTRIBUTOR will not, directly or indirectly (through any
Affiliate or third party or otherwise), actively distribute, market, advertise,
promote, sell, lease or solicit the sale, distribution or lease of any Competing
Products, or authorize, encourage or induce any person or entity to do any of
the foregoing. As used herein the term "active" shall mean that DISTRIBUTOR
shall not list such Competing Product on its price list, and that DISTRIBUTOR
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shall not incentivize its sales force or Subdistributors with respect to such
Competing Product, nor count such sale of Competing Product against the sales
quotas of its patient monitoring or point of care diagnostic sales force.
Notwithstanding the foregoing, DISTRIBUTOR shall be permitted to distribute (i)
the (***) as per Exhibit 2.3(a) attached hereto and (ii) the (***), as modified
from time to time, for (***) as per Exhibit 2.3(a) attached hereto.
Notwithstanding the foregoing, if a customer so requests, DISTRIBUTOR may
provide a Competing Product; provided that DISTRIBUTOR shall use reasonable
efforts to inform COMPANY of such transaction and that DISTRIBUTOR does not
incentivize its sales force or Subdistributors with respect to such Competing
Products nor count such sales of Competing Products against the sales quotas of
its sales force. In most cases, the Competing Product will be sold as an item in
a larger purchase which includes DISTRIBUTOR's monitoring products and the
Parties intend that such bundling of Competing Products shall occur infrequently
and shall not be a significant portion of DISTRIBUTOR's business in the Field.
In addition, DISTRIBUTOR may sell, and DISTRIBUTOR intends to sell, the Products
to customers who request them for use with other manufacturers' products and to
third parties who desire to bundle the Products with their own products.
(b) Commencing on the Effective Date and until termination of the
Exclusivity Period, COMPANY shall not, directly or indirectly (through any
Affiliate or third party or otherwise), license its technology for the
development of integrated modules of the Products with patient monitors,
ventilators, anesthesia machines, cardiology products and / or emergency care
products other than DISTRIBUTOR products, unless the Parties mutually agree
otherwise in writing. Notwithstanding the foregoing, COMPANY shall be entitled
to complete the development of the interface, but not the integration, of the
Products with those of (***) as set forth in Exhibit 2.3(b). Nothing herein
shall be deemed to restrict COMPANY from licensing or providing third parties
(a) its communications protocols for the Products to allow such third parties to
connect their products with the Products or (b) its technology for use outside
of the Field.
2.4 Subdistributors and Manufacturer's Representatives. DISTRIBUTOR may
appoint sub-distributors, sales agents, manufacturer's representatives and the
like (collectively, "Subdistributors") to promote, distribute and sell the
Products in the Field. DISTRIBUTOR shall be entitled to use its standard forms
of distribution agreement for such Subdistributors; provided however, that
DISTRIBUTOR shall at all times remain responsible for performance of all of its
obligations under this Agreement and shall take appropriate corrective actions
to bring its Subdistributors into full compliance with this Agreement. If
COMPANY has actual knowledge of improper acts or omissions on the part of such
Subdistributors, it will use reasonable efforts to inform DISTRIBUTOR of such
acts or omissions; however such obligation shall not relieve DISTRIBUTOR of any
of its obligations under this Agreement with respect to such Subdistributors.
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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2.5 Exclusive Appointment. Except during the Transition Period as expressly
set forth in Section 3.3, COMPANY shall not, (i) during the Exclusivity Period
sell or distribute into or sell or distribute for resale into or for use in the
Field any Product or Improved Product to any person or entity other than
DISTRIBUTOR nor shall it (ii) enter into any agreement with any other person or
entity pursuant to which COMPANY shall agree to supply any such Product or
Improved Product for sale or use (or any such Product which is, to COMPANY's
knowledge, likely to be sold) in the Field during the Exclusivity Period and
COMPANY shall take appropriate action against any person or entity who does sell
or use any Product or Improved Product into or in the Field. In addition, except
during the Transition Period as expressly set forth in Section 3.3, during the
Exclusivity Period, if COMPANY desires to license or transfer (other than as
provided in Section 13.6) the technology contained in the Products or its
Improved Products to any person or entity other than DISTRIBUTOR for use in the
Field, COMPANY and DISTRIBUTOR shall discuss and evaluate such potential license
or technology transfer, and COMPANY shall not so license or transfer such
technology without the prior written consent of DISTRIBUTOR, not to be
unreasonably withheld. For the avoidance of doubt, the Parties acknowledge and
agree that at any time COMPANY may sell and distribute any continuous monitoring
product or intermittent monitoring product for use solely outside of the Field.
2.6 Alliance Managers and Meetings. Within thirty (30) days after the
Effective Date, each Party shall appoint an individual, reasonably acceptable to
the other Party, to facilitate communications between the Parties relating to
the Products and the relationship contemplated herein. Such individuals shall
meet not less than semi-annually to discuss the manufacture, marketing and
distribution of the Products as contemplated hereunder. In addition, DISTRIBUTOR
shall provide COMPANY (a) within thirty (30) days after the end of each Fiscal
Year, a summary report of its marketing and distribution activities and
expenditures with respect to the Products during such Fiscal Year and (b) at
least ninety (90) days in advance of the first day of each Fiscal Year, a
summary presentation of its proposed activities and marketing and promotional
budget for such Fiscal Year.
ARTICLE 3. Marketing and Distribution of Products.
3.1 General Obligation. During the Exclusivity Period, DISTRIBUTOR shall
diligently market, promote, sell and distribute the Products in the Field on a
worldwide basis. During FY1999 and FY2000 (provided the Exclusivity Period has
not been terminated), DISTRIBUTOR shall expend (including out-of-pocket
expenses) an aggregate minimum of $(***) (including amounts paid by DISTRIBUTOR
for (i) COMPANY's sales expenses during the transition period, pursuant to
Section 3.3(b), (ii) sales and marketing programs and training and education
materials, pursuant to Section 3.5, and (iii) market development, pursuant to
Section 3.8) for the sales channel, market development, business development,
market communication, technical marketing and sales support dedicated to the
Products). DISTRIBUTOR shall discuss its marketing strategy, positioning and
tactics for the Products with COMPANY on a regular basis and no less than
semi-annually.
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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3.2 Minimum Purchase Requirements. Subject to the terms of this Agreement,
DISTRIBUTOR shall purchase the Minimum Purchase Requirements for the Products.
If DISTRIBUTOR fails to purchase the applicable Minimum Purchase Requirement for
the Products during the applicable Fiscal Year, such failure shall be a material
breach of DISTRIBUTOR's obligations under this Agreement and COMPANY shall
provide DISTRIBUTOR written notice of such breach. In the event that DISTRIBUTOR
fails to cure such material breach by purchasing any shortfall or paying COMPANY
for such shortfall within (***) days of such notice, COMPANY may, in its sole
discretion and effective on written notice to DISTRIBUTOR, convert DISTRIBUTOR's
rights hereunder to non-exclusive in accordance with Section 11.2, in which case
the Exclusivity Period shall be deemed to have expired.
3.3 Transition to DISTRIBUTOR.
(a) The Parties acknowledge that COMPANY has existing distributors of the
Products in various countries; a complete list of such distributors and the
territories and Products to which they are restricted is attached hereto as
Exhibit 3.3(a) (the "COMPANY Distributors"). COMPANY shall use reasonable
efforts, at its own expense, to terminate the COMPANY Distributors' rights to
distribute the Products no later than November 1, 1999; provided that at
DISTRIBUTOR's written request that must be received by COMPANY on or before
October 1, 1999, COMPANY may instead transfer and assign to DISTRIBUTOR certain
of such distribution relationships, subject to the consent of the applicable
COMPANY Distributor, or maintain such distribution relationships after November
1, 1999. Prior to any such termination, transfer or assignment, COMPANY will use
reasonable efforts, to enforce against any such COMPANY Distributors any
contractual territorial restrictions on sales of the Products by such COMPANY
Distributors; the expenses of such enforcement efforts shall be shared equally
by the Parties. COMPANY agrees to indemnify and hold harmless DISTRIBUTOR from
any claims or damages which may be asserted by any such COMPANY Distributor on
account of such termination or enforcement.
(b) During the Transition Period, DISTRIBUTOR will bear $(***) of COMPANY's
sales costs with respect to the Products, as specified on Exhibit 3.4. Such
amount shall be paid in two equal installments on or before(***) business days
after the Effective Date and (***), 1999.
(c) COMPANY shall (i) credit against DISTRIBUTOR's Minimum Purchase
Requirements all sales of the Products by COMPANY, through its U.S. and
international sales organization and the COMPANY Distributors, after (***),
1999, at the pricing set forth in Section 5.3 and (ii) compensate DISTRIBUTOR
for the difference between the price COMPANY receives and the purchase prices
for such sales at the pricing set forth on Section 5.3 and less shipping and
handling expenses incurred by COMPANY. The amounts set forth in (ii) above
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*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
8
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shall be provided in the form of a credit against future purchases of Products
by DISTRIBUTOR. An example of the treatment of such sales is set forth on
Exhibit 3.3(c). If DISTRIBUTOR cannot recognize revenue on such sales under its
accounting practices and procedures, COMPANY shall credit against DISTRIBUTOR's
Minimum Purchase Requirements all such sales by COMPANY at the price COMPANY
receives.
(d) On or before November 1, 1999, DISTRIBUTOR will assume responsibility
for COMPANY's U.S. and international sales function for the Products in the
Field based on an agreed transition plan; provided that DISTRIBUTOR has the
right to determine, in its sole discretion, which of COMPANY sales personnel
shall be offered employment with DISTRIBUTOR. During the Transition and
Exclusivity Periods, COMPANY will use reasonable efforts to provide DISTRIBUTOR
with lists and information regarding Company's customers for the Products in its
possession and, to the extent feasible, in the possession of COMPANY
Distributors.
(e) The Parties acknowledge that due to DISTRIBUTOR's pre-existing
obligations under its distribution agreement with (***), DISTRIBUTOR cannot
commence marketing or distributing the Intermittent Monitoring Products until
August 1, 1999.
3.4 Sales Force. DISTRIBUTOR will provide sales and clinical specialist
personnel with responsibility to market, sell, distribute and support the sale
and distribution of the Products in the Field, and to support DISTRIBUTOR's
distribution channel.
3.5 Training and Education. DISTRIBUTOR will develop all sales and
marketing support programs and education materials for the Products, consistent
with its training and transition plan. COMPANY shall be entitled to review and
comment on DISTRIBUTOR'S initial training and transition plan in advance of
implementation. COMPANY shall provide to DISTRIBUTOR its training materials for
the Products, which DISTRIBUTOR may use for its training. At its own expense and
subject to its resource constraints, COMPANY will work with DISTRIBUTOR to
develop comprehensive training programs for DISTRIBUTOR's sales representatives,
Subdistributors, clinical specialists and customers and will actively assist in
training DISTRIBUTOR trainers, who will then train such sales representatives,
Subdistributors, clinical specialists and customers. DISTRIBUTOR shall provide a
similar level of training and support to DISTRIBUTOR's sales representatives,
Subdistributors, clinical specialists and customers as DISTRIBUTOR provides with
respect to its other products and customers. Training will include special
instructions regarding storage and use of Products.
3.6 Marketing Materials. Subject to Section 6.2, DISTRIBUTOR will develop
all promotional materials for the Products, and will provide reasonable
quantities of the same to COMPANY. DISTRIBUTOR will, from time to time, provide
such materials to COMPANY, for its review and comment, and will consult with
COMPANY on such materials. DISTRIBUTOR will market the Products under the
ParaTrend(R), NeoTrend(TM), TrendCare(TM) and
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
9
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IRMA(R) trademarks, as applicable. The Products and their labeling shall include
the names of COMPANY and DISTRIBUTOR as specified in Section 6.2.
3.7 Trademarks. COMPANY hereby grants DISTRIBUTOR, its Affiliates, its
Subdistributors, permitted successors and assigns, and DISTRIBUTOR hereby
accepts and agrees to, a limited, non-exclusive, non-transferable, and worldwide
license to use the COMPANY Trademarks (as defined below) on the Products, and
otherwise use the COMPANY Trademarks in connection with and in sales and
promotional literature relating to Products, in accordance with the terms of
this Agreement. DISTRIBUTOR shall follow COMPANY's written standards and
specifications for trademark usage, in using the COMPANY Trademarks hereunder,
the current version of which is attached hereto as Exhibit 3.7. Ownership of the
COMPANY Trademarks used in the marketing and sales of Products shall be and
remain with COMPANY, and all use of such trademarks shall inure to COMPANY's
benefit. DISTRIBUTOR agrees not to adopt or make use of any confusingly similar
marks. A list of COMPANY's registered and pending trademarks used in connection
with the Products is attached as Exhibit 3.7 (the "COMPANY Trademarks"). COMPANY
may add to or delete from the list of COMPANY Trademarks or change its written
standards and specifications for trademark usage upon ninety (90) days prior
written notice, in which event DISTRIBUTOR shall modify its training,
educational, marketing, sales and promotional materials for the Products, and
other usage of the COMPANY Trademarks, to reflect such changes, pursuant to a
mutually agreed transition plan. Unless the Parties otherwise agree, all
reasonable out-of-pocket costs of such changes shall be borne by COMPANY. If any
deletion or change of any COMPANY Trademark by COMPANY hereunder directly and
materially impacts DISTRIBUTOR's ability to meet the Minimum Purchase
Requirements, the parties shall determine, in good faith, a reasonable and
appropriate reduction in the Minimum Purchase Requirements. From time to time,
at COMPANY's request, DISTRIBUTOR will supply samples of its usage of the
COMPANY Trademarks for conformity to COMPANY's standards and specifications, and
shall promptly comply with any alterations reasonably requested by COMPANY.
3.8 Market Development. DISTRIBUTOR will conduct marketing evaluations and
outcome studies of the Products to demonstrate the usability of the Products in
the Field and to generate peer-reviewed clinical papers which support the sale
of the Products in the Field.
3.9 Product Inventory. DISTRIBUTOR and COMPANY shall each maintain its
inventory of the Products in accordance with all labeled instructions.
3.10 Sales and Marketing Assistance. During the Exclusivity Period, if
DISTRIBUTOR requires the assistance of COMPANY personnel in activities or
matters related to the distribution of the Products in the Field that is not
contemplated or provided for herein, COMPANY agrees to use reasonable efforts to
furnish such personnel to DISTRIBUTOR subject to COMPANY's resource constraints,
e.g., providing personnel to assist DISTRIBUTOR in major trade shows. COMPANY
shall have the right to market, but not sell, the Products as part of its
overall promotion of its product lines, and during the Exclusivity Period, for
use in the Field only in coordination and consultation with DISTRIBUTOR and only
if it acknowledges that DISTRIBUTOR is the exclusive, world-wide distributor of
the Products in the Field, as
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contemplated herein, provided that, except during the Transition Period as
expressly provided in Section 3.3, COMPANY forwards all Product purchase orders,
inquiries and leads in the Field to DISTRIBUTOR. DISTRIBUTOR will be entitled to
pursue these sales as set forth in this Agreement. COMPANY and DISTRIBUTOR
consult with each other and shall coordinate such marketing with DISTRIBUTOR
during the semi-annual alliance meetings.
3.11 License of Product Software. The parties acknowledge that any software
or other proprietary portion of the Products (including without limitation the
IDMS Software) is licensed, and not sold, to DISTRIBUTOR and any end user
customers, and that such license shall be pursuant to DISTRIBUTOR's customary
license terms used for DISTRIBUTOR's software or proprietary products as are in
effect from time to time, the current U.S. version of which is attached hereto
as Exhibit 3.11. If DISTRIBUTOR revises such license terms, it shall, from time
to time, provide COMPANY with a copy of such revised terms.
ARTICLE 4. Product Manufacture and Supply.
4.1 Manufacture. COMPANY shall manufacture the Products in accordance with
the applicable specifications and in accordance with the FDA, EU and all
applicable regulations. Attached hereto as Exhibit 4.1 is DISTRIBUTOR's Supplier
Certification Process, which the Parties shall use reasonable efforts to
implement during the Transition Period.
4.2 Initial Purchase Orders. Within (***) business days of the Effective
Date, DISTRIBUTOR shall issue to COMPANY a firm, binding purchase order for at
least $(***) of Products, for shipment and/or transfer of ownership on or before
(***). COMPANY acknowledges receipt of an additional purchase order (P.O.
#29D3005780) for $(***) of Products and DISTRIBUTOR acknowledges receipt of a
shipment from COMPANY with respect to such purchase order, which shipment is
subject to confirmation and acceptance by DISTRIBUTOR.
4.3 Forecasts and Subsequent Purchase Orders.
(a) Within (***) days of the Effective Date and then at least (***) days
before the beginning of each Fiscal Quarter beginning with FQ1 of FY 2000,
DISTRIBUTOR shall issue to COMPANY a written (***) month forecast of its
purchase of the Products, the first (***) months of which shall be binding with
respect to the aggregate numbers of Products ordered, by month, by product
(e.g., Continuous Monitoring Product or Intermittent Monitoring Product) and by
category (e.g., Sensors, Calibrators, Monitors, Patient Data Modules and
Accessories, for Continuous Monitoring Products, and Accessories, Cartridges (by
Cartridge type), IDMS Software and IRMA Analyzers, for Intermittent Monitoring
Products) and the last (***) months of which shall be for COMPANY's planning
purposes and shall be DISTRIBUTOR's non-binding good faith estimate of its
requirements during such period. DISTRIBUTOR agrees that its actual, binding
orders for the (***) months in the next (***) shall not deviate from the
quantities forecasted for those months in DISTRIBUTOR's immediately preceding
forecast for those
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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months by more than plus or minus (***) percent (***%) for Sensors or
Cartridges, and (***) percent (***%) for all other categories of Products, if
COMPANY has met the previous quarter's deliveries against purchase orders
submitted in accordance with the terms of this Agreement and has eliminated any
uncanceled accumulated delivery shortfall from any previous quarters.
DISTRIBUTOR may, from time to time, issue additional purchase orders for amounts
in excess of its binding forecast; however, such additional purchase orders
shall be subject to COMPANY's acceptance. Forecasts shall state the overall
quantities of Sensors, Monitors, Calibrators, Patient Data Module and
Accessories for Continuous Monitoring Products, and Accessories, Cartridges,
Modules, IDMS Software and IRMA Analyzers, for Intermittent Monitoring Products,
to be purchased by DISTRIBUTOR during each month. If forecasts exceed the
reasonable production capabilities of COMPANY, COMPANY may reject the forecast,
and the Parties shall mutually agree on how the forecast will be revised, and
Minimum Purchase Requirements will be revised if such reduced forecast impacts
DISTRIBUTOR's ability to achieve Minimum Purchase Requirements.
(b) DISTRIBUTOR shall issue written purchase orders for the Products at
least (***) days prior to the proposed shipping date for Monitors, Patient Data
Modules and Calibrators for the Continuous Monitoring Products, and for
Accessories, Modules, IDMS Software, Cartridges and IRMA Analyzers for
Intermittent Monitoring Products and (***) days prior to the proposed shipping
date for Sensors. Such purchase orders shall be consistent with DISTRIBUTOR's
binding forecast; provided, however, that DISTRIBUTOR shall be entitled to
change the phasing and mix of the Products (e.g., NeoTrend and ParaTrend);
provided that such changes are made prior to such (***) and (***) day lead
times, as applicable.
(c) DISTRIBUTOR will use reasonable efforts in generating quarterly
forecasts and in placing orders for Products to minimize unusual fluctuations
between months and Fiscal Quarters and to facilitate orderly increases in
production requirements for the Products, and COMPANY will likewise be mindful
of the unpredictability of regulatory approvals and actions, as well as customer
demands, and will use reasonable efforts to accommodate any rush orders or
cancellations due to unexpected regulatory actions or customer requests.
4.4 COMPANY Supply Obligation. COMPANY will use reasonable efforts to meet
DISTRIBUTOR's properly forecasted requirements for Products in a timely fashion.
Specifically, excluding the initial purchase orders under Section 4.2 and
subject to COMPANY's acceptance of DISTRIBUTOR forecasts under Section 4.3,
should COMPANY fail to supply (***) percent (***%) of dollar amounts of
Calibrators, Continuous Monitoring Products or Intermittent Monitoring Products
ordered by DISTRIBUTOR, in the aggregate, under firm purchase orders for a
rolling (***) consecutive month period (e.g., the total value of Calibrators
delivered during (***) consecutive month period pursuant to orders for delivery
during same (***) consecutive month period is less than (***)% of total value of
Calibrators ordered for delivery during same (***) month period) and should
COMPANY fail to cure such failure within
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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thirty (30) days of receipt of written notice thereof from DISTRIBUTOR, as its
sole remedies, (a) during the Exclusivity Period, DISTRIBUTOR shall be excused
from its Minimum Purchase Requirements in any amount equal to the shortfall
(plus any Requirements which are rendered unnecessary because of the shortfall)
attributable to COMPANY's failure to supply, and (b) DISTRIBUTOR may cancel its
purchase order for the shortfall amount (plus any amount for Products which are
rendered unnecessary because of the shortfall) by giving COMPANY prompt written
notice of such cancellation. COMPANY shall subsequently use commercially
reasonable efforts to supply any shortfall amounts which are not so canceled.
If, during the Exclusivity Period, COMPANY fails to supply at least (***)
percent (***%), in dollar amounts, of Calibrators, Continuous Monitoring
Products or Intermittent Monitoring Products ordered by DISTRIBUTOR, in the
aggregate, under firm purchase orders in any (***) consecutive Fiscal Quarters,
Section 4.11 shall apply. In the event of a shortage of the Products or any
component thereof, COMPANY shall allocate Products in a reasonable manner so as
to support DISTRIBUTOR as a distributor of the Products, and in any event, such
allocation shall not be less than on a pro rata basis based on DISTRIBUTOR's
orders and orders placed by third parties with respect to the relevant period.
COMPANY and DISTRIBUTOR shall establish a Manufacturing Council which will meet
upon request by DISTRIBUTOR not more than monthly by phone and quarterly in
person to discuss and monitor any manufacturing and manufacturing capacity
issues. COMPANY will diligently monitor its supply chain and its production
processes and will promptly inform DISTRIBUTOR of any anticipated interruption
or inability to supply Products to DISTRIBUTOR to meet its forecasts or its
firm, binding purchase orders, in order to permit DISTRIBUTOR to assess the
manufacturing situation, to inform its sales and planning personnel to attempt
to adjust for such shortfall, and to advise and assist COMPANY, at COMPANY's
expense in its efforts to minimize or avert such interruption in or inability to
supply Products. Notwithstanding the above, if DISTRIBUTOR has issued firm,
binding purchase orders for Products to be delivered in any Fiscal Year equal to
or greater than its Minimum Purchase Requirements for that Fiscal Year,
DISTRIBUTOR shall not be deemed to have failed to meet its Minimum Purchase
Requirements for that Fiscal Year if COMPANY has failed to deliver Products
sufficient to meet the Minimum Purchase Requirements.
4.5 Purchase Order Forms. DISTRIBUTOR shall be entitled to use its then
current standard purchase order for purchases of the Products hereunder. In the
event of a conflict between the terms of any such purchase order and the terms
of this Agreement, the terms of this Agreement shall govern. Additional terms
will be subject to mutual prior written agreement. A copy of DISTRIBUTOR's
current U.S. form, Revision S is attached hereto as Exhibit 4.5.
4.6 Promotional Activities. To the extent reasonably feasible and in any
event at the semi-annual alliance meetings, DISTRIBUTOR shall advise COMPANY of
any major sales or promotional activities which DISTRIBUTOR believes may have an
effect upon orders. This provision does not change DISTRIBUTOR's obligations
under Sections 4.2 and 4.3, above.
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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4.7 Delivery. All Product deliveries shall be made by COMPANY F.O.B.
COMPANY's manufacturing facility ( High Wykcombe, England, UK, for Continuous
Monitoring Products, and Roseville, MN for Intermittent Monitoring Products).
Title and risk of loss shall pass to DISTRIBUTOR at the time of tender by
COMPANY at COMPANY's facility to the carrier designated by DISTRIBUTOR. Upon
delivery to DISTRIBUTOR's designated carrier, DISTRIBUTOR will assume title and
risk of loss, and will be responsible for transportation, and, if applicable,
export of Products from the country of manufacture and shall be entitled to any
duty drawback for which the Products qualify. COMPANY shall provide DISTRIBUTOR,
upon DISTRIBUTOR's reasonable request and at DISTRIBUTOR's expense, reasonable
substantiation and assistance with respect to such duty drawbacks. The pricing
for the Products excludes, and DISTRIBUTOR shall pay, all shipping, handling and
insurance costs and other costs of transporting for the Products after delivery
to the F.O.B. point.
4.8 Product Inspection and Acceptance. Prior to the end of the Transition
Period, the Parties shall agree to acceptance test procedures for the Products
which shall be based on the applicable specifications and in accordance with the
FDA, EU and other applicable regulations. DISTRIBUTOR may, at its option,
inspect either on COMPANY's premises or at DISTRIBUTOR's or the Subdistributor's
or end user's facility each lot of Products to be delivered to it by COMPANY and
may reject Acceptance with respect to any Products which fail such acceptance
test. DISTRIBUTOR shall give COMPANY at least fourteen (14) days notice of its
intention to inspect at COMPANY's premises. In the event that such inspection
shall occur at COMPANY's premises, such inspection shall be as follows (at
DISTRIBUTOR's option):
1. By DISTRIBUTOR personnel;
2. By a mutually agreed upon third party; or
3. By DISTRIBUTOR acceptance in writing of COMPANY's quality
control report (including final test results to be
performed by COMPANY under the agreed acceptance test
procedures) for the production of the Products.
If DISTRIBUTOR elects to inspect at COMPANY's premises, DISTRIBUTOR shall do so
within five (5) days of the day the Products are ready for inspection (provided
DISTRIBUTOR has received adequate notice of the day of availability). If
DISTRIBUTOR does not inspect at COMPANY's premises, DISTRIBUTOR shall accept or
reject each lot of Products within ten (10) business days of (i) receipt at the
final destination or, (ii) if applicable, with respect to Products scheduled for
delivery to another location, receipt of a notice of the Products' availability
for inspection and transfer. In the event of rejection, DISTRIBUTOR shall inform
COMPANY of its reasons in writing of the specific basis which the Product fails
to meet the acceptance procedure, and, if requested by COMPANY, DISTRIBUTOR will
discuss in good faith how to best resolve any difference of opinion between the
Parties as to whether or not such Products are in fact within such
specifications. Any Product for which COMPANY does not receive a written
rejection in accordance with this Section 4.8 shall be deemed to be Accepted.
Subject to Sections 4.4, 4.11, and 6.5, DISTRIBUTOR's sole remedy for rejection
of such Products pursuant to this Section 4.8 shall be replacement of such
Products by COMPANY.
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4.9 Demonstration Samples. COMPANY shall supply to DISTRIBUTOR mutually
agreed quantities of Sensors and Cartridges, to be used as demonstrators and
samples, at a discounted price as set forth in Exhibit 5.3. These quantities
will be included as part of the forecast to be submitted pursuant to Section
4.3, and shall be credited against the Minimum Purchase Requirements hereunder.
4.10 Manufacturing Transfer. The parties agree to evaluate the feasibility
of transferring to DISTRIBUTOR the manufacturing of the IRMA Analyzer and
TrendCare Monitor, and if such transfer is deemed feasible, to negotiate in good
faith the terms of a customary and reasonable technology transfer and license
agreement.
4.11 Failure to Supply.
(a) Notwithstanding the provisions of Section 13.4, in the event that
during the Exclusivity Period, COMPANY shall be unable or unwilling or has
failed for any reason (including as a result of the bankruptcy or insolvency of
COMPANY to the extent permitted by law) to deliver to DISTRIBUTOR with at least
(***) percent (***%), in dollar amounts, of Calibrators, Continuous Monitoring
Products, or Intermittent Monitoring Products ordered by DISTRIBUTOR, in the
aggregate, pursuant to firm, binding purchase orders in any (***) consecutive
Fiscal Quarters in accordance with Section 4.4 hereof (a "Failure to Supply"),
then, upon ninety (90) days written notice from DISTRIBUTOR, if COMPANY has
failed to cure the breach during such ninety (90) day period, which cure may
include the use of a third party manufacturer of Products that has satisfied the
DISTRIBUTOR's Supplier Certification Process, DISTRIBUTOR may make and have made
the Product or Products causing the Failure to Supply (the "Licensed Products")
in order to supply its own requirements and the requirements of its Affiliates
and Subdistributors for such Licensed Products until termination of the license
as provided in Section 4.11(b) below (such time period, a "License Period").
COMPANY shall be deemed to have cured such Failure to Supply if, during such
cure period, it supplies (i) the shortfall between the amount actually delivered
to DISTRIBUTOR and such (***)% level, and (ii) at least (***)% of the applicable
Products (e.g., Calibrators, Continuous Monitoring Products or Intermittent
Monitoring Products) ordered by DISTRIBUTOR pursuant to firm, binding purchase
orders for delivery during the cure period and otherwise due for shipment to
DISTRIBUTOR during such cure period. On or before May 1, 2000, COMPANY shall
deliver to a third party escrow agent, reasonably acceptable to DISTRIBUTOR, and
COMPANY shall update from time to time thereafter, a complete manufacturing
documentation package, sufficient in detail and extent to allow a manufacturer
of DISTRIBUTOR's qualifications to manufacture Products. Such materials shall be
released to DISTRIBUTOR in the event of a Failure to Supply, which Failure is
not cured by COMPANY as provided in this Section 4.11(a).
(b) If DISTRIBUTOR exercises its rights to manufacture under this Section
4.11, DISTRIBUTOR shall have no obligation to purchase the Licensed Products
from COMPANY; provided however that if so requested by DISTRIBUTOR, COMPANY
shall
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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continue to supply the Licensed Products at volumes consistent with COMPANY's
then current capacity, and at the pricing set forth on Exhibit 5.3.
(c) COMPANY hereby grants to DISTRIBUTOR a worldwide license, which license
shall be non-transferable except for the limited right to grant sublicenses to
its Affiliates or third parties reasonably acceptable to COMPANY, under the
COMPANY Technology in the Field, to make and have made the Licensed Products in
order to supply its own requirements and the requirements of its Affiliates and
Subdistributors for such Licensed Products; provided that the license granted
hereunder shall be effective only during License Periods and provided further
that DISTRIBUTOR shall not exercise its rights under this License other than
during such License Periods. Such license shall be exclusive during the
Exclusivity Period, and if the Licensed Products include Sensors or Cartridges,
shall be non-exclusive beginning at the conclusion of the Exclusivity Period and
continuing for the applicable period set forth in Article 11. DISTRIBUTOR (or
its Affiliate or third party manufacturer, if any) shall pay to COMPANY a
royalty equal to (***) percent (***%) of Net Sales of Licensed Products
manufactured by or for DISTRIBUTOR under this Section 4.11. In the event of such
Failure to Supply, COMPANY shall make available to DISTRIBUTOR or such Affiliate
or third party manufacturer access to all and any other technical materials,
information and techniques necessary or helpful for DISTRIBUTOR to manufacture
products, including to procure required raw materials or produce or arrange an
alternative supplier of Product, and to provide advice and consultation in
connection therewith. COMPANY shall reimburse DISTRIBUTOR for any out-of-pocket
costs and expenses (including without limitation reasonable attorneys' fees)
reasonably incurred by DISTRIBUTOR to enforce COMPANY's obligations under this
Section 4.12(c).
(d) As used herein, (i) the term "Company Technology" shall mean any
patents, trade marks and know how owned and controlled by COMPANY which cover
the manufacture, maintenance and upgrade of the applicable Products in the Field
and (ii) the term "Net Sales" shall mean the gross revenues received from the
sale of applicable Products to independent third parties during the applicable
period less (A) discounts and rebates, (B) credits or allowances granted upon
claims or returns, (C) freight charges paid for delivery and (D) taxes and other
governmental charges levied on or measured by the invoiced amount, and (E) any
Uplift customarily applied to transfers between international Affiliates of
DISTRIBUTOR.
(e) The License Period shall continue, until the earlier of (i) any
contractual obligations that DISTRIBUTOR has assumed in connection with
producing the same or obtaining such substitute source of supply shall have
terminated, or (ii) (***) days following the date on which COMPANY demonstrates
to DISTRIBUTOR's reasonable satisfaction its ability to fully resume its supply
obligations in accordance with Section 4.4. If COMPANY so resumes manufacture
and supply of the applicable Products to DISTRIBUTOR, it shall reimburse
DISTRIBUTOR for those reasonable costs actually incurred by DISTRIBUTOR to start
up manufacture of the applicable Products. Consistent with sound business
practices, DISTRIBUTOR will use reasonable efforts to minimize such start up
costs and prior to
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
16
<PAGE>
establishing any alternative manufacture capacity for the Products hereunder,
shall use reasonable efforts, consistent with urgency of the situation, at
COMPANY's expense, to bring COMPANY's existing manufacturing capability into
compliance with this Agreement.
(f) If DISTRIBUTOR exercises its rights to manufacture under this Section
4.11 , COMPANY shall consider allowing joint or combined manufacturing
arrangements with COMPANY's distributors for the Licensed Products outside of
the Field.
(g) The Minimum Purchase Requirements shall be reduced in the applicable
Fiscal Year or Years to equitably reflect the lost sales attributable to
COMPANY's Failure to Supply.
(h) In the event of merger, consolidation, reorganization or sale of
substantially all of the assets of COMPANYor if any individual, group or entity
either acquires (***) percent (***%) of the outstanding shares of COMPANY's
voting securities or obtains through election, appointment or other means, a
majority of the directors of COMPANY, all references herein to "(***) percent
(***%)" shall be deemed to be changed to "(***) percent (***%)" effective with
the first (***) consecutive full Fiscal Quarters after the closing date of such
transaction.
(i) The provisions of this Section 4.11 shall constitute COMPANY's entire
liability and DISTRIBUTOR's sole and exclusive remedy for a Failure to Supply
except to the extent such Failure to Supply is attributable to an intentional or
willful act or omission by COMPANY or to its gross negligence.
ARTICLE 5. Royalties, Product Purchases and Payments.
5.1 Prepaid Royalty. Within five (5) business days of the Effective Date,
DISTRIBUTOR shall pay to COMPANY, as prepaid royalties on sales of the
Continuous Monitoring Products for FY1999 and FY2000, the amount of $(***) in
immediately available funds by electronic wire transfer to an account designated
by COMPANY. Such prepaid royalties shall be non-refundable and, except as
provided in Section 5.2, shall not be credited against the purchase price
payable by DISTRIBUTOR under Section 5.3 or any other amounts owing hereunder,
including, without limitation, the Minimum Purchase Requirements.
5.2 Running Royalties. Starting in FY2001, DISTRIBUTOR shall pay to COMPANY
a running royalty of (***) percent (***%) of Gross Margin on the Continuous
Monitoring Products, until DISTRIBUTOR has paid an aggregate royalty of $(***)
(including pre-paid royalties paid under Section 5.1); thereafter DISTRIBUTOR
shall pay to COMPANY a running royalty of (***) percent (***%) of Gross Margin
on the Continuous Monitoring Products. Such royalty shall be payable within
(***) days of the end of the FQ2 and FQ4 of each Fiscal Year during the
Exclusivity Period of this Agreement (including any Extension Term) for the
immediately preceding (***) month period. At such time, DISTRIBUTOR shall also
provide
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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<PAGE>
COMPANY with a written royalty statement, setting forth the sales of the
Products during such Fiscal Quarters, the calculation of the Gross Margin and
royalties thereon. Such royalties shall be non-refundable and shall not be
credited against the purchase price payable by DISTRIBUTOR under Section 5.3 or
any other amounts owing hereunder, including, without limitation, the Minimum
Purchase Requirements.
5.3 Product Prices.
(a) The prices for Products to be paid by DISTRIBUTOR hereunder shall be as
provided in Exhibit 5.3.
(b) Consistent with sound business practices, COMPANY agrees to use
commercially reasonable efforts to seek to reduce overall Product cost. The
Parties intend, and the pricing set forth on Exhibit 5.3 assumes, that COMPANY
will reduce its costs through proactive efforts to include process improvement,
component cost reductions and certain anticipated manufacturing efficiencies.
DISTRIBUTOR agrees to provide assistance and information to assist COMPANY in
achieving manufacturing cost reductions and efficiencies, where appropriate, and
if COMPANY achieves such cost reductions and efficiencies, beyond the cost
reductions and efficiencies already factored into the Product pricing set forth
on Exhibit 5.3, the Parties shall discuss in good faith appropriate reductions
in the prices for the applicable Products so as to share in such reductions.
Notwithstanding the foregoing, the Parties agree that the first $(***) of cost
reductions achieved on the Analyzer of the Intermittent Monitoring Products
shall be allocated to COMPANY.
(c) The prices set forth on Exhibit 5.3 shall remain in effect until (***).
Thereafter, the prices may be adjusted on a Product-by-Product basis effective
on (***) of the applicable Fiscal Year (starting with (***)) to reflect actual
increases or decreases (which decreases are beyond the cost reductions and
efficiencies already factored into the Product pricing set forth on Exhibit 5.3
or achieved with assistance and information provided by DISTRIBUTOR, as
contemplated in Section 5.3(b)), if any, in COMPANY's manufacturing costs since
the most recent price increase (or the initial price, as the case may be);
provided that in no event shall any price adjustment for a particular Product be
greater than (***) since the most recent price increase (or the initial price,
as the case may be). COMPANY shall give DISTRIBUTOR at least ninety (90) days
written notice of such increase, and upon DISTRIBUTOR's request, shall provide
reasonable evidence of such actual increases in COMPANY's manufacturing costs.
5.4 Terms of Payment. All royalties shall be payable as set forth in
Sections 4.11(c), 5.1, 5.2, 7.1 and 7.6. All payments for Products shall be due
and payable within (***) days of the invoice date therefore. DISTRIBUTOR shall
make all payments in immediately available funds to the location and in the
manner designated by COMPANY from time to time. A late fee shall be paid by
DISTRIBUTOR on any amount not received by COMPANY when due at a rate of
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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(***)% per month on all unpaid amounts, or the maximum rate permitted by law,
whichever is less. As between the Parties, DISTRIBUTOR shall be responsible for
all taxes relating to Products (except for taxes on COMPANY's net income). All
payments to COMPANY hereunder shall be made by wire transfer to an account
designated by COMPANY.
5.5 Audit.
(a) DISTRIBUTOR shall at all times maintain complete and accurate books and
records relating to its sales of the Products, the Gross Margin thereon, and the
calculation of any royalty payments hereunder, its investment in market
development pursuant to Section 3.1, and its funding of research and development
pursuant to Sections 7.1 and 7.2. DISTRIBUTOR shall permit a third party major
accounting firm designated by COMPANY who has signed a confidentiality agreement
that is as protective of DISTRIBUTOR as the confidentiality provisions agreed to
by the Parties in this Agreement, to examine and audit records relevant to the
foregoing during reasonable business hours upon five (5) days prior written
notice, but no more than once in any twelve (12) month period. Such audit right
shall survive termination or expiration of this Agreement for a period of one
(1) year.
(b) COMPANY shall at all times maintain complete and accurate books and
records relating to its manufacturing costs and research and development
expenses related to projects funded or co-funded by DISTRIBUTOR pursuant to
Section 7.1. COMPANY shall permit a third party major accounting firm designated
by DISTRIBUTOR who has signed a confidentiality agreement that is as protective
of COMPANY as the confidentiality provisions agreed to by the Parties in this
Agreement, to examine and audit records relevant to the foregoing during
reasonable business hours upon five (5) days prior written notice, but no more
than once in any twelve (12) month period. Such audit right shall survive
termination or expiration of this Agreement for a period of one (1) year.
ARTICLE 6. Regulatory Matters
6.1 Regulatory Approvals. The Parties shall cooperate to develop a mutually
agreed regulatory strategy for the Products. COMPANY will retain all rights to
and ownership of all Regulatory Approvals for the Products, and will grant to
DISTRIBUTOR a right of reference to its regulatory submissions and technical
files, including, without limitation, those Regulatory Approvals listed on
Exhibit 6.1, as necessary to fulfill its obligations hereunder. COMPANY will
maintain FDA and EU regulatory approvals for the Products. During the
Exclusivity Period, the Parties shall mutually agree on any additional countries
in which Regulatory Approvals for the Products will be sought. During the
Exclusivity Period, COMPANY will be responsible for obtaining such additional
Regulatory Approvals, provided that if requested by COMPANY or if required by
local law, DISTRIBUTOR will obtain and maintain any additional regulatory
approvals necessary for the sale or use of the Products, in COMPANY's name and
COMPANY's expense. After the Exclusivity Period, upon COMPANY's request,
DISTRIBUTOR shall use commercially reasonable efforts to assist COMPANY's
efforts to transfer or assign to COMPANY all regulatory registrations and sales
and/or marketing authorizations held by DISTRIBUTOR required to enable COMPANY
to sell the Products. DISTRIBUTOR's
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assistance shall be limited to executing required documents after review and
providing information required to effect the transfer or assignment. All
incremental out-of-pocket costs associated with such transfer or assignment
shall be borne by COMPANY. Notwithstanding COMPANY's obligations hereunder,
DISTRIBUTOR will make reasonable efforts to inform COMPANY from time to time of
relevant regulatory changes to the extent it is aware of such changes and
COMPANY's interest in them.
6.2 Product Inserts and Labeling. During the Exclusivity Period, COMPANY
shall be responsible for the text and regulatory compliance of all package
labels and Product inserts used in connection with the Products; provided after
the Transition Period, DISTRIBUTOR shall have the opportunity to review and
comment on all such documents prior to their implementation. During the
Exclusivity Period, DISTRIBUTOR shall develop all sales and promotional
literature for the Products, subject to compliance with approved Product claims
and labeling; provided that, DISTRIBUTOR will use reasonable efforts to provide
such literature to COMPANY for its review and comment prior to its
implementation. COMPANY agrees that all labels and labeling shall prominently
identify DISTRIBUTOR as the distributor of the Products if permitted by law and
in a format to be mutually agreed by the Parties (except for Products shipped
during the Transition Period). All labels and labeling shall also prominently
identify COMPANY as the manufacturer of the Products if permitted by law. In
addition, during the Exclusivity Period, all Monitors and IRMA Analyzers and all
packaging for the Sensors, Calibrators and Cartridges shall be printed, embossed
or engraved to prominently identify DISTRIBUTOR, if permitted by law and in a
format to be mutually agreed by the Parties and consistent with the
DISTRIBUTOR's policies for use of its trademarks (except for Products shipped
during the Transition Period). For purposes of this Agreement the terms "label"
and "labeling" shall have the meanings set forth in Sections 201(k) and 201(m)
respectively of the U.S. Federal Food, Drug and Cosmetics Act.
6.3 Localization. DISTRIBUTOR shall translate and COMPANY shall implement
the translations by modifying each Product's documentation and labeling and
translating all Monitor and Analyzer screens and displays, into those languages,
as the parties may mutually agree or as specified on Exhibit 6.3, by the end of
the Transition Period so that they comply with the local regulatory requirements
for sale and clinical use in certain countries. Additional languages shall be
subject to mutual agreement of the Parties. DISTRIBUTOR shall also translate all
required technical Product literature including operator manuals, service
manuals, and labeling into the following languages (in addition to those set
forth on Exhibit 6.3): Dutch and Chinese (Simple & Traditional). COMPANY shall
pay fifty percent (50%) of the out-of-pocket translation expenses. DISTRIBUTOR
shall select the translators and the Parties shall agree on budgets for
translations. The Parties' respective rights and obligations under this Section
6.3 shall terminate upon termination or expiration of the Exclusivity Period.
6.4 Product Reporting. COMPANY will maintain MDR and other product
performance monitoring systems for the Products. In addition to its obligations
under Section 5.5, DISTRIBUTOR shall cooperate with COMPANY in connection with
its obligations under this Section 6.4 and provide to COMPANY, on a timely basis
to permit COMPANY to fulfill its regulatory obligations, the necessary reports
relating to complaints and product performance
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issues relating to the Products. Upon reasonable request by COMPANY, DISTRIBUTOR
shall promptly make such reports (on behalf of COMPANY, if appropriate) directly
to the appropriate regulatory authorities. In addition, DISTRIBUTOR shall
maintain sales and service records to assist it in locating Products for the
purpose of implementing recalls and other corrective actions. If COMPANY
implements a recall or corrective action in accordance with Section 6.5,
DISTRIBUTOR shall provide such location information to COMPANY unless
DISTRIBUTOR implements such recall or corrective action itself. In addition,
within thirty (30) days after the Effective Date, the Parties shall establish an
appropriate notification, consultation and escalation procedure, to be used
during the Exclusivity Period, for adverse events relating to the Products,
which procedure will permit either Party to take actions consistent with its own
regulatory guidelines and criteria, if the Parties cannot mutually agree on a
course of action or if the notifying Party is unable to contact the appropriate
senior management of the other Party through the notification process.
DISTRIBUTOR and COMPANY shall each be responsible for bearing their own costs
associated with all product tracking, complaint analyses and related
evaluations.
6.5 Product Recalls.
(a) Within thirty (30) days of the Effective Date, the Parties shall
establish a mutually agreeable procedure for communicating and consulting with
each other with respect to any recall issues with respect to the Products. If
either Party believes that a recall of any Product is desirable or required by
law, it shall promptly notify the other Party. The Parties shall then discuss
reasonably and in good faith whether such recall is appropriate or required and
the manner in which any mutually agreed recall shall be handled. This Section
6.5 shall not limit the obligations of either Party under law with respect to
recall of Products required by law or properly mandated by governmental
authority. Voluntary recalls shall be conducted by mutual agreement (with such
agreement not to be unreasonably withheld) provided that if mutual agreement is
not reached, either Party may individually conduct the voluntary recall in
question in a manner consistent with its own regulatory guidelines and criteria.
COMPANY shall bear all costs and expenses of any voluntary recall of any
Products and shall reimburse DISTRIBUTOR for the reasonable, out-of-pocket costs
incurred by DISTRIBUTOR as a result of such recall, including the replacement
cost of any Products affected thereby, unless (i) such recall is unjustified and
neither requested nor classified as a recall by a governmental agency or delegee
or (ii) the cause or basis of such recall is attributable to a condition, fact
or action that constitutes a breach by DISTRIBUTOR of any of its obligations
hereunder in which case DISTRIBUTOR will be liable for the costs and expenses of
such recall, and shall reimburse COMPANY for the reasonable, out-of-pocket costs
incurred by COMPANY as a result of such recall, including the replacement cost
of any Product affected thereby. The Parties shall cooperate fully with each
other in effecting any recall of the Products pursuant to this Section 6.5,
including communications with any customers or to the public. Notwithstanding
the foregoing, DISTRIBUTOR shall not have the right to recall the Products
without COMPANY's prior written consent after the termination or expiration of
the Exclusivity Period.
(b) If any governmental agency having jurisdiction (including without
limitation the FDA) shall request or order any corrective action with respect to
Products supplied hereunder, including any Product recall, customer notice,
restriction, corrective action or market
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action or any Product change, COMPANY shall bear the costs and expenses of such
corrective action and shall reimburse DISTRIBUTOR for the reasonable,
out-of-pocket costs incurred by DISTRIBUTOR as a result of such corrective
action, including the replacement cost of any Products affected thereby, unless
the cause or basis of such corrective action is attributable to a condition,
fact or action that constitutes a breach by DISTRIBUTOR of any of its
obligations hereunder, in which case, DISTRIBUTOR shall bear the costs and
expenses of such corrective action, and shall reimburse COMPANY for the
reasonable out-of-pocket costs incurred by COMPANY as a result of such action,
including the replacement cost of any Product affected thereby.
(c) In the event of any recall or corrective action hereunder, the Minimum
Purchase Requirements shall be adjusted appropriately to account for such
interruption (unless (i) such recall is unjustified and neither requested nor
classified as a recall by a governmental agency or delegee or (ii) the cause or
basis of such corrective action is attributable to a condition, fact or action
that constitutes a breach by DISTRIBUTOR of any of its obligations hereunder).
ARTICLE 7. Research and Development, New Products.
7.1 Collaboration.
(a) During the Exclusivity Period, the Parties shall work together to
identify, prioritize and collaborate on research and development projects for
new features and improvements to the Products in the Field ("R&D Projects"),
such as integrated modules, improved interfaces for the Monitors and Analyzers
and additional measurement parameters for the Sensors and Cartridges. In order
to implement such R&D collaboration, the Parties shall establish an R&D
committee (the "R&D Committee") to be comprised of two (2) representatives of
each Party. Such R&D Committee shall meet within three (3) months after the
Effective Date, and at least quarterly thereafter, to develop appropriate R&D
Projects for the Products. The R&D Committee shall select and prioritize such
R&D projects and establish appropriate milestones. The Parties shall provide
technical assistance and advice, as well as funding estimates, with respect to
such Projects. COMPANY and DISTRIBUTOR shall commit to delivering products
according to the agreed R&D plan (the "R&D Plan"). If COMPANY materially fails
to meet the R&D Plan (other than due to acts or omissions of DISTRIBUTOR), and
such failure has a reasonably demonstrated impact on DISTRIBUTOR's ability to
meet the Minimum Purchase Requirements hereunder, the Parties shall discuss in
good faith appropriate reductions in the Minimum Purchase Requirements.
(b) During the Exclusivity Period, COMPANY shall promptly inform DISRIBUTOR
in writing of all research and development it anticipates or undertakes, either
alone or in conjunction with another party, and of any products or intellectual
property it may acquire which may have utility in the Field and DISTRIBUTOR
shall have the opportunity to fund or co-fund any such development or
acquisition as provided herein. The Parties may decide to develop or market a
new generation of continuous or intermittent blood analysis products for use in
the Field (e.g, a new platform (such as thick/thin films), or new measurement
methodology (such as electrochemical vs. optical measurement) or to acquire a
separate platform,
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methodology, application, intellectual property or Products in the Field from a
third party. If such development or acquisition is co-funded by DISTRIBUTOR on
at least a (***) percent ((***)%) basis with COMPANY, such products shall be
deemed to be Improved Products hereunder, provided that revised pricing for such
Improved Products, if any, shall be mutually agreed by the Parties prior to
commercialization. DISTRIBUTOR shall be entitled to contribute cash and/or
headcount to meet such co-funding level, in amounts to be mutually agreed by the
Parties on a project-by-project basis. If DISTRIBUTOR decides not to fund or
co-fund such development or acquisition on at least a (***)% basis, such product
shall be deemed to be a New Product hereunder and subject to Section 7.4. The
Parties shall, from time to time, discuss changes in funding budgets during the
course of any such R&D Project so that DISTRIBUTOR does not inadvertently lose
the opportunity to co-fund such Project at the minimum level hereunder to retain
its rights under this Section 7.1(b) with respect to such developments. However,
a product or a development shall not lose its status as an Improved Product due
to a cost overrun to the extent such overrun is attributable to COMPANY and
DISTRIBUTOR was not informed on a timely basis that such overrun was going to
occur. If DISTRIBUTOR elects to fund less than (***)% of any project, or if a
project incurs a cost overrun and DISTRIBUTOR does not fund at least (***)% of
the overrun, the funds contributed by DISTRIBUTOR towards that project shall be
counted in calculating DISTRIBUTOR's offer with respect to such product under
Section 7.4.
(c) All other R&D Projects undertaken pursuant to this Section 7.1 shall be
co-funded by DISTRIBUTOR, as provided in Section 7.2. All Improved Products
resulting from such projects shall be deemed to be Products hereunder; provided
that revised pricing for such Improved Products, if any, shall be mutually
agreed by the Parties prior to commercialization.
(d) If COMPANY commercializes, other than through DISTRIBUTOR, any
invention, copyrightable material or trade secrets made or conceived or acquired
pursuant to an R&D Project conducted by COMPANY (an "Incremental Improvement"),
and provided that DISTRIBUTOR funded at least (***) percent (***%) of the
applicable R&D Project or acquisition cost, COMPANY shall pay DISTRIBUTOR a
royalty of (i) (***) percent of the Net Sales received by COMPANY with respect
to the sales of the product by COMPANY containing the Incremental Improvement,
if such product is sold on a stand-alone basis, and (ii) (***) percent (***%) of
the aggregate Net Sales (including integrated (e.g. lactate measurement added to
a blood gas cartridge) products and components) received by COMPANY with respect
to the sales of such a product, if such product is sold on an integrated basis
with other products or components, (a) for any such sales in the Field occurring
after the end of the Exclusivity Period, and (b) for any such sales outside the
Field occurring during the term of the Agreement and thereafter. Such royalties
shall be payable semi-annually within (***) days of the end of the FQ2 and FQ4.
Such royalty obligation shall terminate on the later of (i) the last to expire
of the patents covering such Incremental Improvement, or (ii) (***) years from
the first commercial sale of such Incremental Improvement. In addition,
DISTRIBUTOR shall receive a perpetual, royalty-free and non-
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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exclusive license under such invention or trade secret to use the Incremental
Improvement in the Field. As used herein, the term "Net Sales" shall mean the
gross revenues received from the sale of such products to independent third
parties during the applicable period less (A) discounts and rebates, (B) credits
or allowances granted upon claims or returns, (C) freight charges paid for
delivery and (D) taxes and other governmental charges levied on or measured by
the invoiced amount.
7.2 Research and Development Funding. During the Exclusivity Period,
DISTRIBUTOR shall provide to COMPANY funding for all R&D Projects in the Field,
in such amounts as the Parties may mutually agree and consistent with COMPANY's
funding estimates, but in no event shall such funding be less than $(***) in
cash payment to COMPANY on or before the following dates: (***) business days
after the Effective Date, and (***). Thereafter DISTRIBUTOR shall make its
payments in advance, in two semi-annual installments of $(***) each, on (***)
and (***) of each succeeding Fiscal Year commencing on (***). Such minimum
payments will only be applied to identified R&D projects and will "count" in
calculating the (***)% funding requirement set forth herein.
7.3 On-going Research and Development. COMPANY shall provide, at its own
expense, reasonable on-going research and development to maintain and improve
the Products, such as bug fixes, access devices and introducers, subject to
COMPANY's resource constraints. All Improved Products resulting from such
on-going research and development shall be deemed to be Products hereunder;
provided that revised pricing for such Improved Products, if any, shall be
mutually agreed by the Parties prior to commercialization.
7.4 Right of First Refusal for New Products. If, at any time during the
Exclusivity Period, COMPANY develops or acquires any New Products and desires to
distribute and sell such New Products in the Field or to appoint a third party
to do so in any country or COMPANY acquires technology with applicability in the
Field ("New Technology") and desires to license such technology in the Field,
then DISTRIBUTOR shall have a right of first refusal with respect to the right
to distribute such New Product in the Field in such countries, or license such
technology in the Field, as provided herein. During the Exclusivity Period,
COMPANY shall not consummate a proposed distribution agreement with any third
party with respect to the distribution of any New Product in the Field or a
license agreement with any third party for the use of such technology in the
Field, without first giving prompt notice thereof to DISTRIBUTOR in writing (the
"Notice") specifying the pricing, terms, conditions and other material
provisions of such proposed agreement. In the event that DISTRIBUTOR elects to
consummate a proposed agreement upon the same pricing, terms, conditions and
other material provisions as specified in the Notice (or terms more favorable to
COMPANY than those set forth in the Notice), DISTRIBUTOR shall have (***) days
following receipt of the Notice to so notify COMPANY and the Parties shall
thereafter use their reasonable best efforts to finalize the negotiation and
execution of such a proposed agreement within (***) days following the receipt
of such reply notification from DISTRIBUTOR. In the event that DISTRIBUTOR does
not elect to enter into
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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the proposed transaction within such (***) day notice period or the Parties fail
to execute an agreement within such (***) day period, COMPANY may enter into an
agreement with respect to the proposed transaction on terms that are, in the
aggregate, not less favorable to COMPANY than the terms specified by COMPANY in
the Notice, however, that if the pricing, terms, conditions and other material
provisions of the proposed agreement are modified to be, in the aggregate, less
favorable to COMPANY than were specified in the Notice to DISTRIBUTOR, then
COMPANY shall give a new Notice to DISTRIBUTOR and comply with the right of
first refusal set forth herein for an additional (***) day period following the
receipt of such new Notice. The provisions of this Section 7.4 shall not apply
if DISTRIBUTOR is in breach of any of its material obligations hereunder. In
addition, if the New Products are Competing Products, Section 2.3(b) and Section
2.5 shall not apply with respect to such New Products and the Parties shall
negotiate in good faith appropriate reductions, if any, in the Minimum Purchase
Requirements.
7.5 Improvements. DISTRIBUTOR shall use reasonable efforts to provide
timely information and assistance to Affiliates, Subdistributors and customers
in upgrading Products as any Improved Products become available hereunder.
7.6 License to COMPANY Technology. COMPANY hereby grants to DISTRIBUTOR a
worldwide, royalty-free (except as provided below) license to use, in the Field,
the COMPANY Technology so long as DISTRIBUTOR buys core elements of the
Technology (optical subassembly for Continuous Monitoring Products, cartridge
reading subassembly for Intermittent Monitoring Products) from the Company (as
defined below) for the sole purpose of integrating the Monitors and Analyzers
(and the measurements taken therewith) into DISTRIBUTOR's patient monitoring,
cardiology and emergency care products in the Field. The purchase of these
subassemblies may be replaced by a royalty of (***)% of the average sales price
(less Uplift, freight and duties thereon) of the resulting incremental blood
analyte measurement portion of the resulting product if DISTRIBUTOR ceases the
purchase of subassembly core elements from COMPANY. Such license shall be sole
during the Exclusivity Period and non-exclusive for the (***) years following
the expiration of the Exclusivity Period.
ARTICLE 8. Warranties.
8.1 Intellectual Property Representation and Warranty. COMPANY warrants to
DISTRIBUTOR that on the Effective Date, it has not received formal notice of any
alleged infringement or violation of valid patents, copyrights, trade marks,
mask works or trade secrets of any third party. Attached as Exhibit 8.1 is a
list of COMPANY's current patent portfolio with respect to the Products.
8.2 Product Warranty. COMPANY warrants to DISTRIBUTOR that the Products at
the time of their delivery by COMPANY to DISTRIBUTOR (i) shall meet the agreed
applicable specifications attached hereto as Exhibits 1.2 and 1.3 (as may be
changed from time to time as provided herein), which shall be no less than the
published specifications and documentation as
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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of the date thereof and subject to Section 4.1, DISTRIBUTOR's Supplier
Certification guidelines; (ii) shall have been manufactured in accordance with
all laws and regulations applicable to their manufacture in those jurisdictions
in which DISTRIBUTOR is distributing the Products (provided that DISTRIBUTOR
gives COMPANY at least ninety (90) days written notice of any jurisdictions in
addition to those listed on Exhibit 6.1); (iii) shall be new or newly
manufactured; and (iv) shall be of good and merchantable title, free of liens
and encumbrances, (v) shall be "Y2K" compliant, as that term is defined on
DISTRIBUTOR's external website on the Effective Date, and (vi) that, as of the
Effective Date clearance or permission to sell the Products has been obtained in
those countries as set forth in Exhibit 6.1. COMPANY shall promptly, at
COMPANY's sole option, replace, repair or make a purchase price (in the amount
paid by DISTRIBUTOR to COMPANY) refund for any of such Products proved to be
non-conforming, provided that written notice and reasonable documented evidence
of each warranty claim and the fact that the failure occurred during the
warranty period is received by COMPANY within thirty (30) days after the
expiration thereof. COMPANY will have the right to verify such non-conformance.
Such replacement, repair or refund shall be DISTRIBUTOR's sole remedy hereunder.
Unless otherwise agreed by the Parties, the warranty period under this Section
8.2 for (a) any Sensor shall be the stated shelf life as set forth on the label
for such Product, not to be less than ten (10) months from the date of shipment
to DISTRIBUTOR; (b) any Cartridge shall be the stated shelf life as set forth on
the label for such Product, not to be less than three (3) months from the date
of shipment to DISTRIBUTOR; (c) any Monitor or Calibrator of any Continuous
Monitoring Product, or any Accessory or IRMA Analyzer of any Intermittent
Monitoring Product covered hereunder shall expire on the date eighteen (18)
months after the date of shipment of such item to DISTRIBUTOR; and (d) any IDMS
Software shall expire on the date forty-five (45) days after the date of
delivery of such software to DISTRIBUTOR's customer. The warranty period for any
Improved Products shall be mutually agreed by the Parties. If requested by
COMPANY, DISTRIBUTOR shall return the non-conforming Product to COMPANY at the
time of submission of the warranty claim therefor. DISTRIBUTOR agrees to provide
COMPANY sufficient notice of additional countries in which it intends to
distribute the Products to permit COMPANY to meet its obligations under
subsection (ii) of this Section 8.2.
8.3 Warranty Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN SECTIONS 8.1 AND
8.2, COMPANY MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESSED OR IMPLIED,
INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
8.4 Customer Complaints, Warranty and Out-of-Warranty Repair. DISTRIBUTOR
will be responsible for handling customer complaints regarding the Products and
other product performance issues with customers. COMPANY will provide reasonable
assistance to DISTRIBUTOR in resolving customer complaints. COMPANY will accept
the return of any Products that do not conform to the warranties set forth in
Section 8.2, and will repair or replace any such defective Product (or refund
DISTRIBUTOR's purchase price) as provided in Section 8.2. DISTRIBUTOR agrees to
maintain an inventory of Products (other than Sensors and Cartridges) to meet
its on-going repair obligations; provided that COMPANY agrees to maintain a
reasonable inventory of Products (other than Sensors and Cartridges) to support
significant
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Product warranty issues. As between COMPANY and DISTRIBUTOR, DISTRIBUTOR will be
responsible for providing its customers with such replacement Products for use
while such defective Products are being repaired or replaced. COMPANY will also
provide out-of-warranty repair service on all hardware components of the
Products, on the terms set forth on Exhibit 8.2 for a period not to exceed seven
(7) years after last production run of the DISTRIBUTOR (or such longer period as
may be required by local laws). The Parties agree to discuss, in good faith, the
feasibility of DISTRIBUTOR providing warranty repair service for the Monitors
and Calibrators of the Continuous Monitoring Products and IRMA Analyzers of the
Intermittent Monitoring Products, at its warranty depots or in the field, on
mutually agreed terms.
8.5 Customer Warranties. DISTRIBUTOR shall be entitled to warrant the
Products to its customers on terms it deems appropriate; provided that
DISTRIBUTOR shall bear any expenses it may incur with respect to such
warranties, to the extent that such warranties exceed the scope or term of the
express warranties made by COMPANY hereunder.
ARTICLE 9: Intellectual Property
9.1 Ownership of Intellectual Property
(a) All inventions and trade secrets made, conceived or acquired by COMPANY
and all inventions and trade secrets made or conceived pursuant to Sections 7.1,
7.2 and 7.3, and the intellectual property related thereto, shall be the
exclusive property of COMPANY. COMPANY will pay all expenses relating to the
securing and maintaining of appropriate intellectual property protection with
respect to such inventions.
(b) All inventions and trade secrets made, conceived or acquired by
DISTRIBUTOR, and the intellectual property related thereto, will be the
exclusive property of DISTRIBUTOR and that DISTRIBUTOR will pay all expenses
relating to the securing and maintaining of appropriate intellectual property
protection with respect to such inventions.
(c) In the event that personnel of COMPANY and DISTRIBUTOR jointly
participate in an invention or trade secret, such invention or trade secret, and
the intellectual property related thereto shall be owned jointly by the Parties.
Determination of inventorship shall be made in accordance with U.S. patent laws.
The Parties shall jointly share in the expenses of obtaining intellectual
property protection of any joint invention.
ARTICLE 10: INDEMNIFICATION
10.1 Trademark Indemnification. COMPANY shall defend, indemnify and hold
DISTRIBUTOR harmless from liability based on a claim of trademark infringement,
unfair competition, or any other basis for liability arising from DISTRIBUTOR's
use of any COMPANY Trademark as licensed hereunder and consistent with the terms
hereof. DISTRIBUTOR shall promptly notify COMPANY in writing of the pendency of
such claim within fifteen (15) days of becoming aware of such claim; provided,
however that failure to give notice within such time period shall not relieve
COMPANY of its obligations hereunder unless
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such failure results in material prejudice to COMPANY's rights with respect to
such claim. DISTRIBUTOR shall thereafter reasonably cooperate with COMPANY in
the defense of such claim, but at the expense of COMPANY and shall permit
COMPANY to assume control over the defense and/or settlement of such claim. If
COMPANY becomes aware of a threat of action based on trademark infringement,
unfair competition, or any other liability due to use of the trademark in a
particular country, then with sixty (60) days written notice COMPANY may
terminate the trademark license with respect to that particular country. This
Section states COMPANY's entire liability, and DISTRIBUTOR's sole remedy for
trademark infringement and is lieu of all other warranties, express or implied.
10.2 Indemnification by COMPANY. COMPANY shall defend, indemnify and hold
DISTRIBUTOR harmless from liability to the extent such liability is based upon a
third party claim that Products in the form supplied by COMPANY to DISTRIBUTOR
and used consistent with the documentation supplied by COMPANY infringe any
patent or other intellectual property right of any third Parties. DISTRIBUTOR
shall promptly notify COMPANY in writing of the pendency of such claim within
fifteen (15) days of becoming aware of such claim; provided, however that
failure to give notice within such time period shall not relieve COMPANY of its
obligations hereunder unless such failure results in material prejudice to
COMPANY's rights with respect to such claim. DISTRIBUTOR shall thereafter
reasonably cooperate with COMPANY in the defense of such claim, but at the
expense of COMPANY, and shall permit COMPANY to assume control over the defense
and/or settlement of such claim. In the event that Product is held to infringe
any patent or other intellectual property right of any party covered by the
foregoing indemnity, COMPANY shall either (i) obtain for DISTRIBUTOR a license
to such right, (ii) modify the infringing Products so that they no longer
infringe or (iii) replace the infringing Product with a non-infringing Product
which performs the same functions as the infringing Product or if COMPANY is
unable to effect any of the foregoing remedies, COMPANY shall refund to
DISTRIBUTOR the relevant purchase price actually paid by DISTRIBUTOR for such
Products and, in such event, the Parties shall discuss in good faith appropriate
and equitable adjustments to the terms of this Agreement, if any. This Section
states COMPANY's entire liability, and DISTRIBUTOR's sole remedy for
infringement of intellectual property rights and is in lieu of all other
warranties, express or implied. DISTRIBUTOR shall cease distribution in any
country in which COMPANY requests DISTRIBUTOR to do so due to a challenge in
that country based upon patent right of a third party (and the Minimum Purchase
Requirements shall be adjusted accordingly). COMPANY shall have no obligation
under this Article 10 if and to the extent that such claim arises from: (i)
compliance by COMPANY with DISTRIBUTOR's specifications, if any, (ii)
modification of the Products other than by COMPANY or modifications expressly
authorized by COMPANY, (iii) combination of the Products with products other
than those supplied from COMPANY, and the alleged infringement or
misappropriation would not have occurred but for such compliance, modification
or combination, or (iv) used in a way other than intended by COMPANY. COMPANY
shall not have any obligation with respect to a claim if it has provided
DISTRIBUTOR with changes that would have avoided the problem and the changes are
not fully implemented (at COMPANY's cost) within a reasonable time frame,
provided that the changes do not materially adversely affect functionality or
performance and that DISTRIBUTOR is notified of the problem the changes avoid.
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10.3 Indemnification. Except as specifically provided in Sections 10.1 and
10.2, nothing herein shall be construed to limit the Parties' respective rights
to and obligations of indemnification and contribution which may be available to
them at law.
ARTICLE 11. Term and Termination.
11.1 Term. This Agreement shall become effective upon the Effective Date
hereof and, unless terminated earlier pursuant to this Article 11, shall expire
on October 31, 2002 (the "Initial Term"). Thereafter, the term of this Agreement
may be extended, on a term-by-term basis, for up to three (3) additional three
(3) year periods (each, an "Extension Term") as follows: (a) if DISTRIBUTOR has
met its Minimum Purchase Requirements ( including by making a shortfall purchase
or payment as provided in Section 3.2) during the then current term (either the
Initial Term or an Extension Term); Distributor is not otherwise in material
breach of this Agreement, and DISTRIBUTOR's rights hereunder have not been
converted to non-exclusive for any reason, DISTRIBUTOR shall have the option, in
its sole discretion, to extend the term of this Agreement for the next Extension
Term by giving COMPANY of written notice of its intention to extend the term of
this Agreement, assuming that DISTRIBUTOR meets the criteria set forth above at
the end of the then current term, which notice shall be given not later than
three (3) months prior to the end of the then current term, or (b) the Parties
may mutually agree to extend the term of this Agreement for an additional
Extension Term, subject, in each case, to agreement on appropriate Minimum
Purchase Requirements for such Extension Term, to be negotiated in good faith by
the Parties. If the Parties are unable to agree on such Minimum Purchase
Requirements for an Extension Term, the Minimum Purchase Requirements shall be
calculated according to the formula in Exhibit 1.14, namely, the Minimum
Purchase Requirement in any given year shall be equal to the prior year's actual
purchases (excluding amounts which are purchased solely to cure shortfall), plus
(***) percent (***%) of such actual purchases, but in no event shall such
Minimum Purchase Requirements be less than (***).
11.2 Termination of Exclusivity Period for Failure to Meet Minimum Purchase
Requirements.
(a) As provided in Section 3.2, COMPANY may terminate the Exclusivity
Period for failure by DISTRIBUTOR to meet the Minimum Purchase Requirements
after notice and an opportunity to cure as set forth in Section 3.2. In such
event, DISTRIBUTOR shall pay COMPANY on demand (i) for any remaining Minimum
Purchase Requirements (and take delivery of such Product, if DISTRIBUTOR so
chooses) for the Initial Term of this Agreement, if such failure occurs with
respect to the Minimum Purchase Requirements of any Fiscal Year during the
Initial Term, or (ii) for any remaining Minimum Purchase Requirements (and take
delivery of such Product, if DISTRIBUTOR so chooses) for such Fiscal Year during
any Extension Term and (***) percent (***%) of the Minimum Purchase Requirements
for the following
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
29
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Fiscal Year. In addition, DISTRIBUTOR shall reimburse COMPANY for any
out-of-pocket costs and expenses (including without limitation reasonable
attorneys' fees) reasonably incurred by COMPANY to enforce DISTRIBUTOR's
obligations under this Section 11.2(a). Such amounts shall constitute
DISTRIBUTOR's entire liability, and COMPANY's sole and exclusive remedy, with
respect to such failure to meet the Minimum Purchase Requirements hereunder.
(b) In addition, DISTRIBUTOR's exclusive rights to distribute the Products
hereunder shall cease and the Exclusivity Period shall be deemed to be
terminated; provided, however, that so long as DISTRIBUTOR has paid amounts
owing to COMPANY under Section 11.2(a), DISTRIBUTOR shall be entitled to
purchase Sensors and Cartridges from COMPANY (or its third party manufacturer,
if any) on a non-exclusive basis for resale in the Field for a period of two (2)
years from such termination, at non-discriminatory prices for non-exclusive
distributors. During such non-exclusive period, it is not DISTRIBUTOR's
intention to sell Sensors and Cartridges to customers who have not purchased
Products from Distributor; however, the Parties acknowledge that DISTRIBUTOR
cannot, consistent with good DISTRIBUTOR business practices, distinguish between
its customers for this purpose and DISTRIBUTOR shall not be in breach of the
terms of this Section 11.2(b) for such sales; provided that if DISTRIBUTOR
becomes aware that it is selling Sensors or Cartridges to customers who have not
purchased Products from DISTRIBUTOR, it shall so notify COMPANY, and COMPANY (or
its distributor) shall have the opportunity to sell Sensors and Cartridges to
such customer, and DISTRIBUTOR will use reasonable efforts to assign to COMPANY
or its designee any long-term supply contract for Sensors and Cartridges, with
such a customer. DISTRIBUTOR shall inform its sales channel of its intention not
to sell Sensors and Cartridges to customers who have not purchased Products from
DISTRIBUTOR.
(c) In addition, DISTRIBUTOR shall enable COMPANY to connect the Products
into and with DISTRIBUTOR's then current products and to ensure on-going
compatibility with such products for a period of two (2) years from such
expiration; provided that COMPANY supplies the necessary information for
DISTRIBUTOR to maintain such connectivity and compatibility, and that
DISTRIBUTOR shall be obligated to so modify or change its products only if the
changes are not major, or if DISTRIBUTOR desires to make changes that are major.
COMPANY shall supply such information to DISTRIBUTOR in sufficient time for
DISTRIBUTOR to make such changes to its products so that they will be available
to end users at the same time as COMPANY's changed products. In addition,
COMPANY shall have the non-exclusive right to purchase DISTRIBUTOR's COMPANY
integrated modules for a period of two (2) years from such termination, at
prices to be mutually agreed. Upon expiration of such two (2) year period, this
Agreement shall terminate.
11.3 Termination of Exclusivity Period for Other Material Breaches.
(a) The Parties acknowledge that their respective rights and obligations,
with respect to (i) failure to supply are set forth in Sections 4.4 and 4.11
(except for any Failure to Supply attributable to an intentional or willful or
grossly negligent act or omission by COMPANY) and (ii) failure to meet the
Minimum Purchase Requirements are set forth in Section 11.2. In the event of any
other material default by a Party of a material obligation
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hereunder to which such Party was entitled, including, but not limited to,
failure to pay any material moneys due from one Party to the other Party
excepting amounts as to which there is a legitimate dispute, upon written notice
to the defaulting Party, which termination shall be effective ninety (90) days
(except that with respect to any amount that is not subject to a good faith
dispute, termination shall be effective if such amount is not paid within 10
days of notice thereof) after such notice of default is given, unless the
default shall be cured by the defaulting Party with such ninety (90) day period,
or (ii) to the extent permitted by U.S. bankruptcy law immediately upon written
notice in the event of the bankruptcy or insolvency of the other Party.
Notwithstanding the foregoing, DISTRIBUTOR shall have a ten (10) day cure period
for any breach of its obligations under Sections 4.2, 5.1 and 7.2 to pay for
Products ordered, or to make certain payments within five (5) business days of
the Effective Date.
(b) In addition, DISTRIBUTOR's exclusive rights to distribute the Products
hereunder shall cease and the Exclusivity Period shall be deemed to be
terminated; provided, however, that DISTRIBUTOR shall be entitled to purchase
Sensors and Cartridges from COMPANY (or its third party manufacturer, if any),
at the then current prices, on a non-exclusive basis for resale in the Field for
a period of two (2) years from such termination (in the case of termination for
COMPANY's breach) or one (1) year from such termination (in the case of
termination for DISTRIBUTOR's breach), at non-discriminatory prices for
non-exclusive distributors. During such non-exclusive period, it is not
DISTRIBUTOR's intention to sell Sensors and Cartridges to customers who have not
purchased Products from Distributor; however, the Parties acknowledge that
DISTRIBUTOR cannot, consistent with good DISTRIBUTOR business practices,
distinguish between its customers for this purpose and DISTRIBUTOR shall not be
in breach of the terms of this Section 11.3(b) for such sales; provided that if
DISTRIBUTOR becomes aware that it is selling Sensors or Cartridges to customers
who have not purchased Products from DISTRIBUTOR, it shall so notify COMPANY,
and COMPANY (or its distributor) shall have the opportunity to sell Sensors and
Cartridges to such customer, and DISTRIBUTOR will use reasonable efforts to
assign to COMPANY or its designee any long-term supply contract for Sensors and
Cartridges, with such a customer. DISTRIBUTOR shall inform its sales channel of
its intention not to sell Sensors and Cartridges to customers who have not
purchased Products from DISTRIBUTOR.
(c) In addition, DISTRIBUTOR shall enable COMPANY to connect the Products
into and with DISTRIBUTOR's then current products and to ensure on-going
compatibility with such products for a period of two (2) years from such
expiration; provided that COMPANY supplies the necessary information for
DISTRIBUTOR to maintain such connectivity and compatibility, and that
DISTRIBUTOR shall be obligated to so modify or change its products only if the
changes are not major, or if DISTRIBUTOR desires to make changes that are major.
COMPANY shall supply such information to DISTRIBUTOR in sufficient time for
DISTRIBUTOR to make such changes to its products so that they will be available
to end users at the same time as COMPANY's changed products. In addition,
COMPANY shall have the non-exclusive right to purchase DISTRIBUTOR's COMPANY
integrated modules for a period of two (2) years from such termination, at
prices to be mutually agreed. Upon expiration of such two (2) year period, this
Agreement shall terminate.
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<PAGE>
11.4 Expiration of Exclusivity Period.
(a) Upon any expiration of the Exclusivity Period (including, without
limitation expiration of the Initial Term or any Extension Term in which
DISTRIBUTOR does not renew the Term as provided in Section 11.1), DISTRIBUTOR
shall cease to be the exclusive distributor of the Products and the Exclusivity
Period shall be deemed to be terminated, provided, however, that DISTRIBUTOR
shall be entitled to purchase Sensors and Cartridges from COMPANY (or its third
party manufacturer, if any), on a non-exclusive basis for resale in the Field
only to customers who have purchased DISTRIBUTOR's Intermittent and Continuous
Monitoring Products prior to such expiration or DISTRIBUTOR's blood analysis
module prior to such expiration or during the non-exclusive period set forth
herein, for a period of two (2) years from such expiration, at
non-discriminatory prices for non-exclusive distributors. During such
non-exclusive period, it is not DISTRIBUTOR's intention to sell Sensors and
Cartridges to customers who have not purchased Products from Distributor;
however, the Parties acknowledge that DISTRIBUTOR cannot, consistent with good
DISTRIBUTOR business practices, distinguish between its customers for this
purpose and DISTRIBUTOR shall not be in breach of the terms of this Section
11.4(a) for such sales; provided that if DISTRIBUTOR becomes aware that it is
selling Sensors or Cartridges to customers who have not purchased Products from
DISTRIBUTOR, it shall so notify COMPANY, and COMPANY (or its distributor) shall
have the opportunity to sell Sensors and Cartridges to such customer, and
DISTRIBUTOR will use reasonable efforts to assign to COMPANY or its designee any
long-term supply contract for Sensors and Cartridges, with such a customer.
DISTRIBUTOR shall inform its sales channel of its intention not to sell Sensors
and Cartridges to customers who have not purchased Products from DISTRIBUTOR.
For avoidance of doubt, such two (2) year non-exclusive period shall not be in
addition to any non-exclusive period provided under Sections 11.2 and 11.3.
(b) In addition, DISTRIBUTOR shall enable COMPANY to connect the Products
into and with DISTRIBUTOR's then current products and to ensure on-going
compatibility with such products for a period of two (2) years from such
expiration; provided that COMPANY supplies the necessary information for
DISTRIBUTOR to maintain such connectivity and compatibility, and that
DISTRIBUTOR shall be obligated to so modify or change its products only if the
changes are not major, or if DISTRIBUTOR desires to make changes that are major.
COMPANY shall supply such information to DISTRIBUTOR in sufficient time for
DISTRIBUTOR to make such changes to its products so that they will be available
to end users at the same time as COMPANY's changed products. In addition,
COMPANY shall have the non-exclusive right to purchase DISTRIBUTOR's COMPANY
integrated modules for a period of two (2) years from such termination, at
prices to be mutually agreed. Upon expiration of such two (2) year period, this
Agreement shall terminate.
11.5 No Prejudice. Termination of this Agreement for any reason shall be
without prejudice to COMPANY's right to receive all payments accrued and unpaid
on the effective date of termination and shall not release either party hereto
from any liability which at such time has already accrued or which thereafter
accrues from a breach or default prior to such expiration or
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<PAGE>
termination. Except as expressly provided herein, all of the parties' rights and
remedies hereunder are cumulative and non-exclusive.
11.6 Surviving Obligations. No termination or expiration of this Agreement
shall affect or discharge any obligations, rights, disclaimers, conditions or
limitations of either Party which arose prior to the effective date of such
termination. In addition, Sections 5.4, 5.5, 7.1 (with respect to COMPANY's
royalty obligation thereunder), 8.3, and Articles 9 (Intellectual Property), 10
(Indemnification), 11 (Term and Termination), 12 (Confidentiality) and 13
(Miscellaneous) and any Sections necessary to give effect to this Article 11
shall survive any termination or expiration of this Agreement.
11.7 Cooperation in the Unwinding. During the period immediately preceding
and following any expiration or termination of this Agreement, the Parties will
use reasonable efforts to cooperate with each other in the unwinding of the
relationship established herein. This cooperation shall include cooperation in
supporting existing customers. In addition, the Parties agree to be mindful of
each other's good name and reputation in such unwinding.
ARTICLE 12: Confidentiality
12.1 Non-Use and Non-Disclosure. Each Party acknowledges and agrees that
all the other Party's Confidential Information is confidential to the disclosing
Party. Each Party shall take the same reasonable measures as it uses to protect
its own confidential information from the unauthorized disclosure or misuse to
protect the other Party's Confidential Information from unauthorized disclosure
or misuse, including without limitation, any disclosure by its employees,
agents, contractors, permitted sublicensees, or consultants of the other Party's
Confidential Information. As used herein, the term reasonable measures shall
mean at least those measures a Party applies to the protection of its own
Confidential Information and the term misuse shall mean use for any purpose
other than as permitted or required hereunder.
12.2 Marking. To be entitled to protection as Confidential Information, all
COMPANY or DISTRIBUTOR documents containing that Party's Confidential
Information shall be appropriately and clearly marked as "Proprietary,"
"Secret," "Confidential," or other words to similar effect. If a disclosure of
Confidential Information is made orally, as in a meeting, the disclosing Party
shall indicate the nature of that information at the time of its disclosure and
shall confirm such designation in writing within ten (10) days of the date of
such disclosure to the receiving Party.
12.3 Exclusions. Information shall not be considered Confidential
Information hereunder if it:
(a) was already in the possession of the receiving Party prior to its
receipt from the disclosing Party;
(b) is, or becomes, part of the public knowledge or literature through no
fault, act or omission of the receiving Party, provided, Proprietary Product
Information shall not be
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<PAGE>
deemed to have entered the public domain by reason of its having been filed with
any regulatory authority; provided the disclosing Party has taken advantage of
any procedures available to protect confidentiality, including FOIA marking and
protective orders;
(c) is, or becomes, available to the receiving Party from a source other
than the disclosing Party, which source has rightfully obtained the same
information and has no obligation of confidentiality to the disclosing Party
with respect to it;
(d) is made available on an unrestricted basis by the disclosing Party to a
third party unaffiliated with the disclosing Party; or
(e) is required to be revealed pursuant to law or requirements of any
securities exchange on which a Party's shares are listed and traded, provided,
however, the receiving Party which is under any such requirement of law shall
give reasonable notice to the disclosing Party of such requirement and shall
cooperate with the disclosing Party, at the disclosing Party's expense in
reasonable legal efforts to limit or mitigate any such revelation so as to
preserve the proprietary nature of any Confidential Information contained
therein.
12.4 Duration; Surviving Obligation. This Article 12 shall be deemed to
cover and include any non-public information disclosed by a Party to the other
during the course of their negotiations of this Agreement, whether or not marked
or indicated as provided in Section 12.2. Each Party's obligations of non-use
and non-disclosure of the other Party's Confidential Information shall apply
during the term of this Agreement and shall also survive for a period of five
(5) years after its termination for any reason.
12.5 Confidentiality of this Agreement. The terms of this Agreement itself
shall be deemed to be Confidential Information hereunder. In the event that a
Party is required to disclose the content of this Agreement pursuant SEC
requirements or requirements of any securities exchange on which a Party's share
are listed and traded, such Party shall use its reasonable efforts to obtain
confidential treatment of at least the following portions of the Agreement: (i)
financial terms (such as all dollar amounts and price terms), (ii) quantities
(such as Minimum Purchase Requirements) and (iii) time periods (such as times
relating to Exclusivity Period or term).
ARTICLE 13. Miscellaneous.
13.1 Compliance with Laws. The Parties agree to comply with all applicable
statutes, laws, ordinances, rules and regulations relating to their respective
obligations hereunder, including without limitation, the Foreign Corrupt
Practices Act and export control laws.
13.2 Disclaimer of Consequential Damages. EXCEPT AS OTHERWISE PROVIDED
BELOW, AND NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, AS
BETWEEN THE PARTIES, NEITHER PARTY SHALL BE LIABLE OR OBLIGATED UNDER ANY
SECTION OF THIS AGREEMENT OR UNDER CONTRACT, NEGLIGENCE, STRICT LIABILITY OR
OTHER LEGAL OR EQUITABLE THEORY FOR
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ANY INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, SPECIAL OR PUNITIVE DAMAGES. THE
LIMITATIONS IN THIS SECTION 13.2 SHALL NOT APPLY TO BREACHES OF ARTICLE 12
(CONFIDENTIALITY) OR TO ANY RECALL OF THE PRODUCTS INITIATED BY EITHER PARTY
WITHOUT THE EXPRESS WRITTEN CONSENT OF THE OTHER PARTY (EXCLUDING RECALLS
REQUESTED OR ORDERED BY THE FDA OR OTHER APPLICABLE REGULATORY AGENCY). Amounts
incurred by a Party pursuant to Section 6.5 shall not be deemed to be
incidental, consequential, exemplary, special or punitive damages hereunder.
13.3 Status. No agency, partnership or joint venture is hereby established.
Neither COMPANY nor DISTRIBUTOR shall enter into, or incur, or hold itself out
to third parties as having authority to enter into or to incur on behalf of any
other Party any contractual obligations, expenses or liabilities whatsoever.
13.4 Excused Delay. The untimely performance of any obligations arising
hereunder by any Party will be excused, and such delay of performance shall not
constitute breach, or grounds for termination or prejudice of any rights
hereunder, if the delay of performance is a result of circumstances or
occurrences beyond the reasonable control of the Party whose performance is
excused hereunder ("Force Majeure"), provided that such Party (i) shall
immediately notify the other of any such anticipated delay and its expected
duration and (ii) shall immediately resume performance after the cause of delay
is removed, and (iii) shall during such delay be reasonably diligent in avoiding
further delay. Without limiting the generality of circumstances or occurrences
beyond the reasonable control of a Party, examples of such circumstances or
occurrences are strikes, shortages of power, materials or transportation, acts
of government or of God, sabotage or insurrection. Notwithstanding the above,
the suffering by one Party of any actual and material delay greater than one
hundred eighty (180) days in any one year period (or any material delay which is
reasonably expected to exceed 270 days in any one year period) shall be grounds
for termination (without cause or penalty) by the other Party.
13.5 Notices. All notices, reports or demands to be given by either Party
to the other under the provisions of this Agreement shall be forwarded, charges
prepaid, by express mail or reputable overnight courier service, or may be
telexed or transmitted by facsimile, properly addressed to the respective
Parties as follows:
If to DISTRIBUTOR: Hewlett-Packard Company
Medical Products Group
ATT: General Manager, Patient Monitoring Division
3000 Minuteman Rd.
Andover, MA 01810
With copies to: Hewlett Packard Company
Legal Department
3000 Minuteman Road
Andover, MA 01810
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<PAGE>
If to COMPANY: Diametrics Medical Incorporated
2658 Patton Road
St. Paul, MN 55113
With copies to: Dorsey & Whitney
Attention: Kenneth L. Cutler
220 South Sixth Street
Minneapolis, MN 55402-1498
or to such address or addresses the Parties hereto may designate for such
purposes during the term hereof. Notices given hereunder if actually received
shall be deemed given upon the tenth day after mailing and on the day after
dispatch if given by telex or facsimile transmission.
13.6 Binding Effect and Assignment. The Parties acknowledge and agree that
DISTRIBUTOR is intending to reorganize as two separate corporate entities and
that this Agreement shall be assigned to the measurement company to be created
thereby. During the term of this Agreement, the rights of either Party under
this Agreement shall not be assigned nor shall the performance of either Party's
duties hereunder be delegated, without the other Party's written consent (which
shall not be unreasonably withheld) except that, without the other Party's prior
consent, either Party may assign this Agreement (i) to an Affiliate that is an
affiliate as of the date of execution of this Agreement or (ii) to an Affiliate
whose assets consist entirely of the assets of an Affiliate or Affiliates that
were Affiliates as of the date of execution of this Agreement or (iii) in
connection with a merger, consolidation, reorganization or sale of substantially
all of its assets; provided, however, that COMPANY shall notify DISTRIBUTOR (the
"Sale Date") in the event of merger, consolidation, reorganization or sale of
substantially all of assets of COMPANY or if any individual, group or entity
either acquires thirty three percent (33%) of the outstanding shares of
COMPANY's voting securities or obtains through election, appointment or other
means, a majority of the directors of COMPANY, and (a) DISTRIBUTOR shall have
the right to terminate this Agreement by written notice to COMPANY not later
than ninety (90) days from the Sale Date, such termination to take effect on the
nine (9) month anniversary of the Sale Date, unless the Parties agree in writing
to the contrary; and (b) COMPANY shall have the right to terminate this
Agreement by written notice to DISTRIBUTOR not later than ninety (90) days from
the Sale Date, such termination to take effect, unless the Parties otherwise
agree in writing to the contrary, on the later of (1) the nine (9) month
anniversary of the Sale Date or (2) the expiration of the Initial Term or the
first Extension Term, provided that DISTRIBUTOR duly exercises its right to
extend the Term for an Extension Term at the end of the Initial Term, as
provided in Section 11.1. In the event that this Agreement is terminated
pursuant to this Section 13.6, Section 11.4 shall apply and the Parties shall
use all reasonable efforts to ensure a smooth transition that takes into account
the interests of end users and minimizes any negative impact on the reputation
or financial status of the Parties as a result of such termination. No sale,
assignment or other transfer of any rights of a Party hereunder shall be
effective unless the purchaser, assignee or transferee assumes such Party's
obligations under this Agreement. Any assignment shall not relieve the assigning
Party of its responsibility for its obligations hereunder.
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<PAGE>
13.7 Dispute Resolution.
(a) For any dispute or claim arising out of or relating to this Agreement,
of breach hereof, the Parties, prior to filing any action as provided herein,
shall in good faith first negotiate towards a written resolution of such dispute
or claim for a period not to exceed twenty (20) days from the date of receipt of
a Party's request for such negotiation. Such negotiations shall be conducted by
managers of each Party who have full authorization to finally resolve any such
dispute or claim. Notwithstanding the foregoing, each Party expressly reserves
the right to seek interim or temporary judicial relief, without limitation, any
injunction or other preliminary relief from a court of competent jurisdiction.
(b) The Parties agree to consider appropriate forms of alternative dispute
resolution (including non-binding mediation, arbitration and conciliation) for
any dispute arising out of or relating to this Agreement.
13.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the United States and the State of Delaware,
excluding its choice of law rules. The Parties consent to the jurisdiction of
the state and federal courts of Delaware.
13.9 Severability. If any provision or provisions of this Agreement shall
be determined to be unenforceable, then the Parties shall in good faith
negotiate for a substitute provision addressing the same subject matter as the
unenforceable provision(s) as may then be considered to be enforceable,
provided, however, if no substitute provision can be formulated which shall be
accepted by the Parties as enforceable, this Agreement shall nonetheless
continue in full force and effect with the unenforceable provision(s) stricken
here from. In such case the applicable law shall apply with regard to
unenforceable and/or void provisions.
13.10 Headings and Authorship. The Article headings set forth in this
Agreement are intended only as a convenience and shall not be given any effect
to interpret the provisions of this Agreement. This Agreement shall be deemed to
have been written jointly by the Parties.
13.11 Waiver. The failure or delay of either Party to enforce at any time
any provision hereof shall not be construed to be a waiver of such provision or
of the right thereafter to enforce each and every provision. No waiver by either
Party to this Agreement, either express or implied, of any breach of any term,
condition, or obligation of this Agreement, shall be construed as a waiver of
any subsequent term, condition, or obligation of this Agreement. Nor shall the
performance of any act of mitigation, such as allocation of Product, or
adjustment of milestones be deemed a waiver of any prior or subsequent breach of
this Agreement. In the event of a breach of any provision of this Agreement, the
facts and circumstances of said breach shall be considered in determining
whether said breach and provision are material. No waiver shall be effective
unless it is made in writing, executed by both Parties, and refers expressly to
this Agreement.
13.12 Dollar Denomination. Unless otherwise specified all amounts stated in
this Agreement as payable in U.S. Dollars shall not be subject to currency
exchange adjustments.
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13.13 Entire Agreement and Modification. This Agreement, including all
Exhibits hereto, sets forth the entire agreement between Parties with respect to
the subject matter hereof and as such, supersedes all prior and contemporaneous
negotiations, agreements, representations, understandings and commitments with
respect thereto and shall take precedence over all terms, conditions and
provisions on any purchase order form, or order acknowledgment, or order release
purporting to address the same subject matter. This Agreement shall not be
released, discharged, changed or modified in any manner except by a writing
signed by the duly authorized officers or agents of each Party hereto, which
writing shall make specific reference to this Agreement and shall express the
plan or intention to modify same.
13.14 Authority. Each of the signatories below expressly represents that
he/she has the authority to sign this Agreement on behalf of his/her Company to
bind his/her Company to all of the terms and conditions of this Agreement.
13.15 Publicity. Neither party hereto shall originate any publicity, news
release, or other announcement, written or oral, whether to the public press,
the trade, DISTRIBUTOR's or COMPANY's customers or otherwise, relating to this
Agreement, or to performance hereunder or the existence of an arrangement
between the parties without the prior written approval of the other party
hereto, not to be unreasonably withheld, or as provided in Sections 12.3(e) and
12.5.
13.16 Insurance. The Parties shall maintain during the entire term of this
Agreement, including extensions, insurance adequate to cover any reasonably
anticipated claims that may arise hereunder.
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IN WITNESS WHEREOF, DISTRIBUTOR and COMPANY have executed this Agreement by
their respective duly authorized officers or representatives as of the day first
above written.
COMPANY DISTRIBUTOR
By: /s/ Hans-Gunter Hohmann By: /s/ David T. Giddings
----------------------------- -------------------------------
Title: General Manager Title: Chairman, President and
-------------------------- Chief Executive Officer
----------------------------
Date: June 6, 1999 Date: June 6, 1999
-------------------------- ----------------------------
Schedule of Exhibits:
Exhibit 1.2 Intermittent Monitoring Product Specifications
Exhibit 1.4 Continuous Monitoring Product Specifications
Exhibit 1.14 Minimum Purchase Requirements
Exhibit 2.3(a) Transition of HP Sales from (***) to COMPANY Intermittent
Monitoring Products
Exhibit 2.3 (b) Integration with (***) Exhibit 3.3(a) COMPANY Distributors
Exhibit 3.3(c) Compensation to DISTRIBUTOR
Exhibit 3.4 Payment for COMPANY Sales Organization
Exhibit 3.7 COMPANY Trademarks
Exhibit 3.11 DISTRIBUTOR's Standard Software License Terms
Exhibit 4.1 DISTRIBUTOR Supplier Certification Guidelines
Exhibit 4.5 DISTRIBUTOR Purchase Order Form
Exhibit 5.3 Product Pricing
Exhibit 6.1 Regulatory Approvals
Exhibit 6.3 Localization
Exhibit 8.1 Patent Portfolio
Exhibit 8.4 Out-of-Warranty Repair Terms (to be completed within
15 days of the Effective Date)
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
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<PAGE>
Exhibit 1.2
Intermittent Monitoring Product Specifications
(Specifications are Subject to change during the term of the Agreement)
IRMA(R) SL Series 2000 Blood Analysis System
(***)
If COMPANY changes the specifications for the Intermittent Monitoring Products
or changes the design of, or manufacturing process for the Intermittent
Monitoring Products in a way that affects the electrical performance, the
mechanical form, fit or function, or the software compatibility of such
Intermittent Monitoring Products (an "Engineering Change"), COMPANY shall
provide DISTRIBUTOR reasonable notice of such Engineering Change and provide
evaluation samples, and other information, at DISTRIBUTOR's reasonable request,
and DISTRIBUTOR shall have the right to review and approve such Engineering
Changes prior to their implementation, such approval not to be unreasonably
withheld. COMPANY and DISTRIBUTOR will discuss an appropriate sharing of
potential upgrade costs, if any, resulting from such Engineering Changes.
Distributor may request changes to the Products by submitting a written request
for such change to COMPANY. COMPANY shall respond to DISTRIBUTOR within 30 days
with a quotation indicating the price, effect on production, and other factors
involved in the change. Unless the Parties agree in writing upon such change, it
shall not be made; provided that COMPANY's consent to changes requested by
DISTRIBUTOR shall not be unreasonably withheld.
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
Exhibit 1.4
Continuous Monitoring Product Specifications
(Specifications are Subject to change during the term of the Agreement)
1. Neotrend
(***)
2. Paratrend 7
(***)
3. TrendCare Satellite Monitor
(***)
4. TrendCare calibrator
(***)
5. TrendCare Patient Data Module
(***)
If COMPANY changes the specifications for the Continuous Monitoring Products or
changes the design of, or manufacturing process for the Continuous Monitoring
Products in a way that affects the electrical performance, the mechanical form,
fit or function, or the software compatibility of such Continuous Monitoring
Products (an "Engineering Change"), COMPANY shall provide DISTRIBUTOR reasonable
notice of such Engineering Change and provide evaluation samples and other
information, at DISTRIBUTOR's reasonable request, and DISTRIBUTOR shall have the
right to review and approve such Engineering Changes prior to their
implementation, such approval not to be unreasonably withheld. COMPANY and
DISTRIBUTOR will discuss an appropriate sharing of potential upgrade costs, if
any, resulting from such Engineering Changes.
Distributor may request changes to the Products by submitting a written request
for such change to COMPANY. COMPANY shall respond to DISTRIBUTOR within 30 days
with a quotation indicating the price, effect on production, and other factors
involved in the change. Unless the Parties agree in writing upon such change, it
shall not be made; provided that COMPANY's consent to changes requested by
DISTRIBUTOR shall not be unreasonably withheld.
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
Exhibit 1.14
Minimum Purchase Requirements
Year: FY1999 FY2000
Minimum $(***) (***)
Purchase
Requirement
The Minimum Purchase Requirement for each subsequent Fiscal Year shall be
equal to the actual purchases of Products made by DISTRIBUTOR from COMPANY
during the immediately prior Fiscal Year ("Actual Purchases"), plus (***)
percent (***%) of such Actual Purchases, but in no event shall the Minimum
Purchase Requirement for such subsequent Fiscal Year be less than the Minimum
Purchase Requirement for the immediately preceding Fiscal Year. For the purposes
of determining the Actual Purchases in a given Fiscal Year, all purchases
actually made in such Fiscal Year shall be included, and any shortfall payment
or purchase made thereafter pursuant to Section 3.2 shall be excluded from such
Actual Purchases and shall not be counted toward the Minimum Purchase
Requirement for the Fiscal Year in which such shortfall payment or purchase is
actually made.
* Orders for Products booked by COMPANY as of (***), 1999 will count toward the
Minimum Purchase Requirements for fiscal year 1999.
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
Exhibit 2.3
A. Transition of DISTRIBUTOR Sales from (***) to COMPANY Intermittent
Monitoring Products
(***)
B. (***) Relationship
(***)
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
Exhibit 3.3 (a)
COMPANY Distributors
Territory is limited to country or countries indicated; Products are
limited to those indicated.
(***)
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
Exhibit 3.3(c)
Compensation to Distributor
EXAMPLE
(1) (2) (3)
NET CREDIT
SALES AGAINST PAYMENT DUE
AMOUNT MINIMUM DISTRIBUTOR
------ ------- -----------
Company sells 100 Paratrend
Sensors at $(***) each $(***) $(***) $(***)
Less freight/handling (***)(4)
-----
Net Payment to Distributor $(***)(5)
-----
(1) Equals amount invoiced Customer for the Product, excluding cost recovery
type charges (ie. taxes and freight). In addition, if disposables are uplifted
to pay for equipment, the uplift will be excluded from the payment due
DISTRIBUTOR, unless DISTRIBUTOR has purchased the equipment or receivable
related to the uplift from the COMPANY. It is the intent of the Parties that
DISTRIBUTOR will purchase such equipment and receivables, a list of which will
be provided by the COMPANY to the DISTRIBUTOR within 15 days after the Effective
Date.
(2) Equals units sold, multiplied by the transfer price of $(***).
(3) Equals the difference between the amount invoiced to the Customer, less the
credit against the minimum, less shipping and handling charges (see (1) for
uplift exclusion).
(4) Using an estimated freight amount of $(***) and handling charge of (***)%.
Actual freight may vary depending on Customer location and will not be billed to
Distributor if billed to Customer.
(5) Payment could be in the form of a cash payment or credit against future
purchases/outstanding receivable balances.
NOTE: If the sales price is less than the transfer price, no payment will be due
to Distributor.
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
Exhibit 3.4
Payment for COMPANY Sales Organization
<TABLE>
<CAPTION>
NUMBER OF COST PER 1/2 YEAR
POSITIONS HEADCOUNT EXTENDED COST
--------- --------- -------------
<S> <C> <C> <C>
INTERNATIONAL:
(Sales manager, sales specialists, product
specialists, clinical support specialists,
customer support, advertising and promotion) (***) $(***) (***)
AMERICAS:
(Area sales managers, account managers,
clinical specialists, inservice specialists,
product specialists, customer support,
advertising and promotion) (***) $(***) (***)
---- ----- -----
Total Funded by DISTRIBUTOR (***) $(***)
---- -----
</TABLE>
NOTE: Excludes product samples (see Exhibit 5.3) and depreciation of demo/eval
units, which will be owned by DISTRIBUTOR. In addition to the costs above, the
COMPANY will bear any general and administrative costs to support the sales
function.
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
Exhibit 3.7
COMPANY Trademarks and Usage Guidelines
Paratrend 7(R)
Paratrend 7+(TM)
Neotrend(TM)
TrendCare(TM)
IRMA(R) SL
<PAGE>
Exhibit 3.11
DISTRIBUTOR's Standard Software License Terms
(already provided)
<PAGE>
Exhibit 4.1
DISTRIBUTOR's Supplier Certification Guidelines
(***)
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
Exhibit 4.5
DISTRIBUTOR Purchase Order Form
<PAGE>
Exhibit 5.3
Product Pricing
CONTINUOUS MONITORING PRODUCTS:
- -------------------------------------------------------------------------------
Annual Sensor Unit Volumes
- -------------------------------------------------------------------------------
Less Than Greater
Sensors 20k 20k-30k 30k-75k 75k-150k 150k-250k Than 250k
- -------------------------------------------------------------------------------
Neotrend $(***) $(***) $(***) $(***) $(***) $(***)
Paratrend $(***) $(***) $(***) $(***) $(***) $(***)
- -------------------------------------------------------------------------------
Hardware & Accessory Pricing:
Item Description Price
- -------------------------------------------------------------------------------
Trendcare Senior Monitoring System $(***)
Trendcare Satellite System $(***)
Complete with Monitor, Patient Data
Module and Thermal Printer Paper (2 rolls).
Calibration System with Gas Pack. $(***)
Patient Data Module $(***)
Calibration Gas Pack (3 Cylinders) $(***)
Average Life 6 Months
Thermal Printer Paper (2 Rolls) $(***)
Dummy Load $(***)
Power Cable:
United States $(***)
UK/Europe $(***)
- -------------------------------------------------------------------------------
Refurbished Equipment Pricing:
Item Description Price
- -------------------------------------------------------------------------------
Senior Monitoring System $(***)
Satellite System $(***)
Calibration System $(***)
NOTE: There is an additional (***)% discount on refurbished equipment greater
than 24 months old.
INTERMITTENT MONITORING PRODUCTS:
- ---------------------------------
<TABLE>
<CAPTION>
CARTRIDGE PRICING: ANNUAL VOLUME
-------------
Less Than Greater
1M 1-3M 3-5M 5-10M 10-15M 15-20M Than 20M
--------- ---- ---- ----- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
SINGLE-USE
PRICE PER CARTRIDGE $(***) (***) (***) (***) (***) (***) (***)
</TABLE>
MINIMUM ANNUAL VOLUME
---------------------
20K 75K 100K 150K 200K 250K
--- --- ---- ---- ---- ----
MULTI-USE PRICE:
PER TEST $(***) (***) (***) (***) (***) (***)
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
PER CARTRIDGE $(***) (***) (***) (***) (***) (***)
TESTS PER CARTRIDGE (***) (***) (***) (***) (***) (***)
Pricing for multi-use cartridges is dependent upon volume for that cartridge,
volume of single-use cartridges purchased and cartridge test size.
- --------------------------------------------------------------------------------
Hardware and Accessories Pricing:
Item Description Price
- --------------------------------------------------------------------------------
IRMA SL 2000 Analyzer
with battery charger, 2 batteries and modem $(***)
IRMA SL 2000 Analyzer
with battery charger & 2 batteries, without modem $(***)
Refurbished IRMA SL 2000 Analyzer $(***)
SureStep Pro Glucose module $(***)
IDMS Software Package $(***)
Includes: 3.5" Diskettes, User Manual
RJ45 Cable, RJ45/D89 PC Adapter
EQC Cartridge $(***)
Battery Pack $(***)
Battery Charger/Power Supply $(***)
AC Adaptor $(***)
Carrying Bag Assembly $(***)
Cord, Battery Charger $(***)
Thermal Paper (5 rolls) $(***)
Prices shown are minimum prices. If DISTRIBUTOR achieves an aggregate Gross
Margin on the Products, excluding the IRMA Analyzer for the first 18 months of
this Agreement, in excess of (***)% over the Initial Term of the Agreement or in
any year subsequent to the Initial Term, DISTRIBUTOR and the COMPANY will share
equally in the excess for such Initial Term or subsequent year. During the first
18 months of this Agreement, if DISTRIBUTOR's Gross Margin on the IRMA Analyzer
exceeds (***)%, all of such excess will paid back to the COMPANY up to an amount
equal to $(***) per analyzer sold, after which, any remaining such excess will
be shared equally by the Parties. Payments due to the COMPANY related to excess
Gross Margin on the IRMA Analyzer will be determined and made every months (***)
after the Effective Date of this Agreement.
Sensors and Cartridges will be invoiced to DISTRIBUTOR at price levels based on
DISTRIBUTOR's initial annual volume forecast for a Fiscal Year. At the end of
the Fiscal Year, COMPANY will determine what prices should have applied based on
actual sensor purchase volumes. DISTRIBUTOR will be reimbursed or invoiced for
the difference between the pricing based on forecast volumes and the pricing
based on actual volumes, multiplied by the actual volumes purchased in the
Fiscal Year.
COMPANY will sell DISTRIBUTOR up to (***) sensors, (***) single-use cartridges
and (***) multi-use cartridges per year for evaluations at a (***)% discount to
the agreed upon transfer price for years 1999-2001. In addition, COMPANY will
provide expired or rejected Sensors and Cartridges to DISTRIBUTOR free of
charge, except for shipping charges, on a limited basis as availability permits.
All used equipment supplied to DISTRIBUTOR shall carry standard (new product)
warranty terms and shall be updated to latest revision by COMPANY.
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
Exhibit 6.1
Regulatory Approvals
Continuous Monitoring Products:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
P7 EC P7FL P7 + Neotrend TrendCare TrendCare TrendCare
Senior Satellite Calibrator
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Europe CE Cleared Cleared Cleared Cleared Certified Certified Certified
May 98 May 98 May 98 May 98 Nov 97 Nov 97 Dec 98
CE 01845 CE 01845 CE 01845 CE 01845
- -------------------------------------------------------------------------------------------------------------------
USA Cleared Cleared Cleared Cleared Cleared Cleared Cleared
Jan 91 Nov 97 Sept 97 Dec 97 Sept 97 Sept 97 Pending audit
K901548 K953893 K970906 K972314 K970906 K970906
- -------------------------------------------------------------------------------------------------------------------
Japan Cleared Not filed Cleared Not filed Cleared Not filed Not filed
Jan 94 Feb 98 Feb 98
- -------------------------------------------------------------------------------------------------------------------
Australia Cleared Submitted Not filed Submitted Submitted Submitted Submitted
April 94 Jan 99 pending Jan 99 pending Jan 99 pending Jan 99 pending Jan 99 pending
clearance clearance clearance clearance clearance
- -------------------------------------------------------------------------------------------------------------------
China Not filed Submitted Not filed Not filed Submitted Not filed Not filed
Sept 98 Sept 98
- -------------------------------------------------------------------------------------------------------------------
Taiwan Cleared Not filed Not filed Not filed Cleared Not filed Not filed
May 98 May 98
- -------------------------------------------------------------------------------------------------------------------
Thailand Submitted Not filed Not filed Not filed Submitted Not filed Not filed
Nov 97 Nov 97
- -------------------------------------------------------------------------------------------------------------------
Israel Not filed Submitted Submitted Submitted Submitted Submitted Not filed
July 98 July 98 July 98 July 98 July 98
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 6.1 (continued)
World Wide Market for
IRMA Blood Analysis System and Cartridges April 28,1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Series Combo BG H3 H5
2000 Cartridge
Analyzer Blood Gas Electrolytes + Electrolytes +
Cartridge Hct Hct + BUN/Cl
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
USA + + + + +
- -----------------------------------------------------------------------------------------
Europe CE + + + + X
- -----------------------------------------------------------------------------------------
Argentina + + + + +
- -----------------------------------------------------------------------------------------
Australia + + + + +
- -----------------------------------------------------------------------------------------
Bolivia + + + + +
- -----------------------------------------------------------------------------------------
Brazil + + + + +
- -----------------------------------------------------------------------------------------
Canada + + + + +
- -----------------------------------------------------------------------------------------
China + + + + +
- -----------------------------------------------------------------------------------------
Columbia + + + + +
- -----------------------------------------------------------------------------------------
Equador + + + + +
- -----------------------------------------------------------------------------------------
Greece + + + + +
- -----------------------------------------------------------------------------------------
Hong Kong + + + + +
- -----------------------------------------------------------------------------------------
Japan + + + + +
- -----------------------------------------------------------------------------------------
Jordan + + + + +
- -----------------------------------------------------------------------------------------
Korea + + + + +
- -----------------------------------------------------------------------------------------
Kuwait + + + + +
- -----------------------------------------------------------------------------------------
Netherlands + + + + +
Antilles
- -----------------------------------------------------------------------------------------
Panama + + + + +
- -----------------------------------------------------------------------------------------
Paraguay + + + + +
- -----------------------------------------------------------------------------------------
Peru + + + + +
- -----------------------------------------------------------------------------------------
Puerto Rico + + + + +
- -----------------------------------------------------------------------------------------
Turkey + + + + +
- -----------------------------------------------------------------------------------------
U.A.E. + + + + +
- -----------------------------------------------------------------------------------------
Uraguay + + + + +
- -----------------------------------------------------------------------------------------
Venezuela + + + + +
- -----------------------------------------------------------------------------------------
</TABLE>
+ - Cleared for market and distributor in place.
X - Cleared for market with the exception of France which will require reagent
licensure.
<PAGE>
Exhibit 6.3
Localization Languages
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
IRMA(R)SL with Glucose SOFTWARE MANUALS PACKAGE LABELS INSERVICE VIDEO
Module
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GERMAN X X X
- --------------------------------------------------------------------------------------------------------
ENGLISH X X X X
- --------------------------------------------------------------------------------------------------------
SPANISH X X X X
- --------------------------------------------------------------------------------------------------------
FRENCH X X X
- --------------------------------------------------------------------------------------------------------
ITALIAN X X X
- --------------------------------------------------------------------------------------------------------
SWEDISH X X X
- --------------------------------------------------------------------------------------------------------
GREEK
- --------------------------------------------------------------------------------------------------------
JAPANESE
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
P7 EC P7FL P7 + Neotrend TrendCare TrendCare
Senior/Satellite Calibrator
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
English Insert complete Insert complete Multilingual Insert Complete Complete Complete
Insert complete
- --------------------------------------------------------------------------------------------------------------------------------
German Not translated Insert translated Multilingual Insert translated Complete Not yet
pending Insert complete pending verification translated
verification
- --------------------------------------------------------------------------------------------------------------------------------
French Not translated Insert translated Multilingual Insert translated Translated pending Not yet
pending Insert complete pending verification verification translated
verification
- --------------------------------------------------------------------------------------------------------------------------------
Italian Not translated Insert translated Multilingual Insert translated Complete Not yet
pending Insert complete pending verification translated
verification
- --------------------------------------------------------------------------------------------------------------------------------
Swedish Not translated Insert translated Multilingual Insert translated Complete Not yet
pending Insert complete pending verification translated
verification
- --------------------------------------------------------------------------------------------------------------------------------
Spanish Not translated Insert translated Multilingual Insert translated Translated pending Not yet
pending Insert complete pending verification verification translated
verification
- --------------------------------------------------------------------------------------------------------------------------------
Greek Not translated Insert translated Not translated Insert translated Translated pending Not translated
pending pending verification verfication
verification
- --------------------------------------------------------------------------------------------------------------------------------
Japanese Not translated Not translated Not translated Not translated Not translated Not translated
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Product labels are available in the following languages for all products:
English, German, French, Italian, Swedish, and Spanish
Japanese is available for P7 Electrochemical and P7 +
<PAGE>
Exhibit 8.1
PATENT PORTFOLIO FOR NEOTREND AND PARATREND
<TABLE>
<CAPTION>
Optical Transmitter Optical Waveguide Multiparameter
Title and Reflector Solid State Sensors Sensors Sensor Apparatus
- ----- ------------- ------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
(***) (***) (***) (***) (***)
</TABLE>
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
Exhibit 8.1 (continued)
COMPANY Technology
Patent List - Intermittent Testing Platform Technology
Diametrics Medical, Inc. April, 1999
Patent US Patent # Date of Issue
- -------------------------------------------------------------------------------
(***) (***) (***)
Patents for most of the above technologies have also been applied for, or have
been granted, in several foreign countries.
- --------
*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
<PAGE>
Exhibit 8.4
Out-of-Warranty Repair Terms
[To be provided within 15 days of the Effective Date]
<PAGE>
Exhibit 99.2
COMMON STOCK
PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this "Agreement") is made this 6th
day of June 1999 (the "Effective Date"), by and between Diametrics Medical,
Inc., a Minnesota corporation, with its principal place of business at 2658
Patton Road, Roseville, Minnesota 55113 (the "Company"), and Hewlett-Packard
Company (the "Purchaser").
BACKGROUND
----------
A. The Company desires to sell 1,357,143 shares of its common stock
("Common Stock") and a warrant (in substantially the form of Exhibit A hereto)
to purchase 452,381 shares of its Common Stock and the Purchaser desires to
purchase the same, each on the terms and subject to the conditions set forth
herein.
B. The Company and the Purchaser are concurrently executing a Distribution
Agreement (the "Distribution Agreement").
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser
hereby agree as follows:
Section 1. Authorization and Issuance of the Securities. Subject to the
terms and conditions of this Agreement, the Company has authorized the issuance
and delivery to the Purchaser of 1,357,143 shares of its Common Stock (the
"Shares") and a warrant to purchase in the aggregate an additional 452,381
shares of its Common Stock (the "Warrants) in substantially the form of Exhibit
A hereto.
Section 2. Agreement to Sell and Purchase the Securities. At the Closing,
the Company will sell to the Purchaser, and the Purchaser will acquire from the
Company, for a purchase price of $9,500,000 (the "Price"), the Shares and the
Warrants.
Section 3. Closing and Delivery.
3.1 Closing. The closing of the purchase and sale of the Shares and the
Warrants pursuant to this Agreement (the "Closing") shall be held as soon as
practicable after the satisfaction or waiver of all other conditions to Closing
set forth in Sections 8 and 9 hereof, at the offices of Dorsey & Whitney LLP,
200 South Sixth Street, Minneapolis, Minnesota 55402, or on such other date and
place as may be agreed to by the Company and the Purchaser. The date upon which
the Closing occurs is herein referred to as the "Closing Date".
<PAGE>
3.2 Delivery of the Shares and the Warrants. At the Closing, the Company
shall deliver to the Purchaser an executed stock certificate registered in the
name of the Purchaser, or in such nominee name as designated by the Purchaser,
representing the Shares purchased by the Purchaser, together with an executed
Warrant registered in the name of the Purchaser, representing the number of
shares of Common Stock issuable upon the exercise of the Warrant. Also at the
Closing, the Purchaser shall pay to the Company the Price.
Section 4. Representations and Warranties of the Company. Except as set
forth on the Schedule of Exceptions attached hereto as Exhibit B, the Company
hereby represents and warrants as of the date hereof to the Purchaser as
follows:
4.1 Organization and Standing. Each of the Company and its Subsidiary (as
hereinafter defined in this Section 4.1) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its organization, has full corporate power and authority to own
or lease its properties and conduct its business as presently conducted, and is
duly qualified as a foreign corporation and is in good standing in all
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes qualification necessary (except
where the failure to be so qualified would not have a material adverse effect on
the business, properties, financial condition or results or operations of the
Company or its Subsidiary). Other than Diametrics Medical, Ltd., formerly known
as Biomedical Sensors, Ltd., (the "Subsidiary"), the Company has no subsidiaries
or equity interest in any other entity.
4.2 Corporate Power; Authorization. The Company has all requisite corporate
power, and has taken all requisite corporate action, to execute and deliver this
Agreement and the Warrants, to sell and issue the Shares and the Warrants, to
issue the shares issuable upon exercise of the Warrants (the "Warrant Shares")
and to carry out and perform all of its obligations hereunder and thereunder.
Each of this Agreement and the Warrants constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting the enforcement of creditors' rights
generally, (ii) as limited by equitable principles generally, and (iii) as
rights to indemnity or contributions hereunder may be limited by federal or
state securities laws or principles of public policy. The execution and delivery
of this Agreement and the Warrants do not, and the performance of this Agreement
and the Warrants and the compliance with the provisions hereof and thereof and
the issuance, sale and delivery of the Shares, the Warrants and the Warrant
Shares by the Company will not, conflict with, or result in a breach or
violation of the terms, conditions or provisions of, or constitute a default
under, or result in the creation or imposition of any lien pursuant to the terms
of, the Articles of Incorporation or Bylaws of the Company or any statute, law,
rule or regulation applicable to the Company or its Subsidiary, or any state or
federal order, judgment or decree applicable to the Company or its Subsidiary,
or any indenture, mortgage, lease or other agreement or instrument to which the
Company or its Subsidiary or any of the properties of such person is subject,
except such as would not have a material adverse effect on the business,
properties, financial condition or results of operations of the Company or its
Subsidiary.
2
<PAGE>
4.3 Issuance and Delivery of the Shares and Warrant Shares; Grant of the
Warrants. The Shares, when issued and paid for in compliance with the provisions
of this Agreement, will be validly issued, fully paid and nonassessable and
issued in compliance with all applicable federal and state securities laws.
Further, the Shares, when issued and paid for in compliance with the provisions
of this Agreement, will not be subject to preemptive, co-sale, right of first
refusal or any other similar rights of the shareholders of the Company or any
liens or encumbrances. In addition, the Warrant Shares when issued and paid for
in accordance with the terms of the Warrants will be validly issued, fully paid
and nonassessable, and will not be subject to preemptive, co-sale, right of
first refusal or any other similar rights of the shareholders of the Company or
any liens or encumbrances, other than those created by the Purchaser or arising
under federal or state securities laws. The Company has not granted any
registration rights which are still in effect with respect to its securities
other than the registration rights set forth herein. Issuance of the Shares, the
Warrants and the Warrant Shares or any of them does not and will not constitute
a default under or give rise to a right of termination, cancellation,
restriction or acceleration of any right or obligation of the Company or its
Subsidiary or a loss of any benefit to which the Company or its Subsidiary is
entitled under any provision of any agreement, contract or other instrument
binding upon or applicable to the Company or its Subsidiary or any of the
properties, assets, licenses, franchises, permits or other similar
authorizations of either of them.
4.4 SEC Documents; Financial Statements. The Company has filed in a timely
manner all documents that it was required to file with the Securities and
Exchange Commission ("SEC") under Sections 13, 14(a) and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), during the 36 months
preceding the date of this Agreement. As of their respective filing dates (or,
if amended, when amended), all documents filed by the Company with the SEC,
whether under the Exchange Act or under the Securities Act of 1933, as amended
(the "Securities Act"), during such 36-month period (the "SEC Documents")
complied in all material respects with the requirements of the Exchange Act or
the Securities Act, as the case may be. None of the SEC Documents as of their
respective dates contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company and
its Subsidiary included in the SEC Documents (the "Financial Statements") comply
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto. The
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied and fairly present the consolidated
financial position of the Company and its Subsidiary at the dates thereof and
the results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring adjustments
and the absence of footnotes). There is no material liability or commitment of
the Company or its Subsidiary that is required to be reflected in the Financial
Statements which is not reflected in the most recent Financial Statements except
commitments made since the date of such Financial Statements in the ordinary
course of business. There have not been any changes in the assets, liabilities,
financial condition or operations of the Company or its Subsidiary from those
reflected in the most recent Financial Statements, except changes in the
ordinary course of business that have not had and are not reasonably expected to
have a
3
<PAGE>
material adverse effect on the business, properties, financial condition or
results of operations of the Company or its Subsidiary.
4.5 Intellectual Property. (a) Each of the Company and its Subsidiary has
sufficient title and ownership of all material patents, patent rights,
inventions, trademarks, service marks, copyrights, trade secrets, proprietary
rights, processes and know-how (collectively, "Intellectual Property") owned or
used by it or that are necessary for the conduct of its business as presently
conducted and believes it can obtain, on commercially reasonable terms, any
additional rights necessary for its business as proposed to be conducted, and
the Intellectual Property does not, and will not, conflict with or constitute an
infringement of the rights of others;
(b) There are no outstanding options, licenses (whether to or from the
Company) or agreements of any kind relating to the Intellectual Property
described in paragraph (a) of this Section 4.5 or granting rights to any other
person to manufacture, license, produce, assemble, market or sell products or
services derived or derivable from the Intellectual Property of the Company or
its Subsidiary, nor is the Company or its Subsidiary bound by or a party to any
options, licenses or agreements of any kind with respect to the Intellectual
Property of any other person or entity;
(c) Neither the Company nor its Subsidiary has received any communications
alleging that such person or any of its employees has violated or infringed or,
by conducting its business as proposed, would violate or infringe, any of the
Intellectual Property of any other person or entity;
(d) Neither the Company nor its Subsidiary is aware that any of its
employees is obligated under any contract (including licenses, covenants, or
commitments of any nature) or other agreement, or subject to any judgment,
decree, or order of any court or administrative agency, that would interfere
with the use of such employee's best efforts to promote the interests of the
Company or its Subsidiary with respect to the Intellectual Property of the
Company or its Subsidiary or otherwise or that would conflict with the business
of the Company or its Subsidiary as proposed to be conducted; and
(e) Neither the execution nor delivery of this Agreement, nor the carrying
on of the business of the Company or its Subsidiary by the employees of such
person, nor the conduct of the business of the Company or its Subsidiary as
proposed, will, to the Company's knowledge, conflict with or result in a breach
of the terms, conditions, or provisions of, or constitute a default under, any
contract, covenant, or instrument under which any of such employees is now
obligated. The Company does not believe it is or will be necessary to utilize
any inventions of any of the employees of the Company or its Subsidiary (or
people such person currently intends to hire) made prior to their employment by
such person.
4.6 Properties. The Company and its Subsidiary have good and valid title to
all of the properties and assets reflected as owned by the Company or its
Subsidiary in the Financial Statements, free and clear of all material liens,
mortgages (statutory or otherwise), security interests, pledges, claims or
encumbrances except those, if any, disclosed in the Financial
4
<PAGE>
Statements. The Company and its Subsidiary hold their leased properties under
valid and binding leases, with such exceptions as are not materially significant
in relation to the business of the Company or its Subsidiary. The Company and
its Subsidiary own or lease all of such properties as are necessary to its
operations as now conducted.
4.7 Capitalization. The authorized capital stock of the Company consists of
35,000,000 shares of Common Stock and 5,000,000 shares of preferred stock. There
are 24,176,205 shares of Common Stock and no shares of Preferred Stock
outstanding as of the Effective Date, and, excluding the exercise of vested
options and warrants outstanding at the discretion of the holder thereof and
shares purchased through the Company's existing employee stock purchase plan,
immediately prior to the Closing, 24,176,205 shares of Common Stock and no
shares of Preferred Stock will be outstanding. The certificates evidencing the
Shares and the Warrant Shares will be in due and proper legal form and will be
duly authorized for issuance by the Company. All of the issued and outstanding
securities of the Company have been duly authorized and validly issued, are
fully paid and nonassessable, have been issued in compliance with federal, state
and other applicable laws and were issued without violation of any preemptive,
co-sale or other right. Except as otherwise disclosed in the SEC Documents and
in the Financial Statements, there is no outstanding option, warrant, agreement
or other right calling for the issuance or redemption of, and there is no
commitment, plan or arrangement to issue or redeem, any securities of the
Company. The Company does not have any binding agreement with respect to the
acquisition or purchase of the securities of or owned by any person or entity or
the acquisition of the business, assets or liabilities of any person or entity,
and the Company does not have any agreement or understanding with respect to the
disposition or sale of its business, or any of its material assets or property.
4.8 Litigation. There is no pending or, to the Company's knowledge,
threatened, action, suit or other proceeding to which the Company or its
Subsidiary is a party or to which the property or assets of the Company or its
Subsidiary is subject which might result in a material adverse effect on the
business, properties, financial condition or results of operations of the
Company or its Subsidiary.
4.9 No Defaults. Neither the Company nor its Subsidiary is in violation or
default of any provisions of its Articles of Incorporation or Bylaws, or any
organizational documents, or in breach with respect to any provision of any
agreement, judgment, decree, order, mortgage, deed of trust, lease franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound which violation, default or breach
would have a material adverse effect on the business, properties, financial
condition or results of operations of the Company or its Subsidiary, and there
does not exist any state of facts which constitutes an event of default on the
part of the Company or its Subsidiary as defined in such documents or which,
with notice or lapse of time or both, would constitute such an event of default.
4.10 Material Agreements. Each of the Company and its Subsidiary is a party
to all agreements that are necessary for the conduct of the business of such
person as presently conducted and all such agreements are currently in effect.
Neither the Company nor its Subsidiary is in breach of any provision of any such
agreement where such breach would have a
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material adverse effect on the business, properties, financial condition or
results of operations of the Company or its Subsidiary.
4.11 Governmental Consents; Compliance with Law. No consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state, or local governmental authority
on the part of the Company is required in connection with the consummation of
the transactions contemplated by this Agreement except for (i) any filings
required by state securities laws and (ii), if required, the filing of a
notification and report form under the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). Each of the Company and
its Subsidiary is conducting business in compliance in all material respects
with all applicable laws, rules and regulations of the jurisdictions in which it
is conducting business, including but not limited to, all applicable local,
state and federal environmental laws and regulations.
4.12 Insurance. Each of the Company and its Subsidiary maintains insurance
of the types and in the amounts generally deemed adequate for its business
covering all risks customarily insured against, all of which insurance is in
full force and effect.
4.13 Investment Company. The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
4.14 Taxes. Each of the Company and its Subsidiary has filed all necessary
federal, state, local, and foreign income and franchise tax returns and has paid
or accrued all taxes shown as due thereon except for such taxes as are being
contested in good faith, and the Company has no knowledge of any tax deficiency
which has been or might be asserted or threatened against the Company or its
Subsidiary which would have a material adverse effect on the business,
properties, financial condition or results of operations of the Company or its
Subsidiary.
4.15 Listing. The Company's Common Stock is traded on The Nasdaq National
Market.
4.16 Broker's Fee. The Company represents that there are no brokers or
finders entitled to compensation by the Company or its Subsidiary in connection
with any of the transactions referred to or contemplated hereby, and shall
indemnify the Purchaser for any such fees for which the Company or its
Subsidiary is responsible.
4.17 Business Combination Act. As contemplated by Minnesota Statutes,
Section 302A.673, the Company has formed a committee composed of all of the
Board's disinterested directors, which Committee has approved the acquisition of
Common Stock to be made pursuant to this Agreement on the Closing Date and
thereafter in the open market, in private purchases or otherwise, and,
accordingly, Section 302A.673 does not impose any limitation of a "business
combination" between the Company and the Purchaser.
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4.18 Disclosure. No representation or warranty of the Company contained in
this Agreement or in the Schedule of Exceptions or in any bring-down certificate
requested to be delivered to the Purchaser at Closing contains or will contain
any untrue statement of a material fact or omit to state a material fact
required to make the statements therein not misleading.
Section 5. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants as of the date hereof to the Company as follows:
5.1 Investment Purposes.
(a) The Purchaser acknowledges that the Shares and the Warrants are being
issued in reliance upon the exception from the registration requirements of the
Securities Act provided by Section 4(2) thereof and as such the Shares and the
Warrants will be "restricted securities" within the meaning of Rule 144.
(b) The Purchaser is acquiring the Shares and the Warrants pursuant to this
Agreement in the ordinary course of its business and for its own account for
investment only and with no present intention of distributing any of such Shares
or Warrants or any arrangement or understanding with any other persons regarding
the distribution of such Shares or Warrants except in each case as conforms with
all applicable requirements of the Securities Act, applicable blue sky laws and
all rules and regulations promulgated thereunder.
(c) The Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the securities purchased hereunder
except in compliance with the Securities Act, applicable blue sky laws, and the
rules and regulations promulgated thereunder.
(d) The Purchaser has, in connection with its decision to acquire the
Shares and the Warrants, relied with respect to the Company and its affairs
solely upon the SEC Documents and the other information delivered to the
Purchaser by the Company as described in Section 4.4 above and the
representations and warranties of the Company contained herein.
(e) The Purchaser is an "accredited investor" within the meaning of Rule
501 of Regulation D promulgated under the Securities Act.
(f) The Purchaser has full right, power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated hereby and
has taken all necessary action to authorize the execution, delivery and
performance of this Agreement. Upon the execution and delivery of this Agreement
by the Purchaser, this Agreement shall constitute a valid and binding obligation
of the Purchaser, enforceable in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting the enforcement of creditors' rights
generally, (ii) as limited by equitable principles generally, including any
specific performance, and (iii) as to those provisions of Section 10 relating to
indemnity or contribution.
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5.2 No Advice. The Purchaser understands that nothing in this Agreement or
any other materials presented to the Purchaser in connection with the
acquisition of the Shares and the Warrants constitutes legal, tax or investment
advice to the Purchaser. The Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Shares and the Warrants.
5.3 Restriction on Transfer. The Purchaser understands that: (a) other than
to a person directly or indirectly controlling, controlled by, or in common
control with, the Purchaser (any such person, an "Affiliate"), neither the
Shares nor the Warrants will be transferable in the absence of a registration
under the Securities Act or an exemption therefrom or in the absence of
compliance with any term of this Agreement; (b) the Company may provide stop
transfer instructions to its transfer agent with respect to the Shares and the
Warrants in order to enforce the restrictions contained in this Section 5.3 and
(c) each certificate representing Shares shall be in the name of the Purchaser
and shall bear substantially the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY ONLY BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE
DISPOSED OF BY PURCHASER IF SUBSEQUENTLY REGISTERED UNDER THE SECURITIES
ACT AND REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE OR OTHER
SECURITIES LAWS, UNLESS THE COMPANY DETERMINES THAT EXEMPTION FROM SUCH
REGISTRATION REQUIREMENT IS AVAILABLE."
5.4 Broker's Fee. The Purchaser represents that there are no brokers or
finders entitled to compensation by the Purchaser in connection with any of the
transactions referred to herein or contemplated hereby, and shall indemnify the
Company for any such fees for which the Purchaser is responsible.
Section 6. Covenants of the Parties.
6.1 Access to Information. For a period beginning on the Effective Date and
continuing until the Closing, the Company shall afford to the Purchaser and its
agents and representatives full access, at reasonable times and in a reasonable
manner, to all of its premises, facilities, properties, books and records and
shall make its directors, officers, agents reasonably available to confer with
the Purchaser and its agents and representatives. The Purchaser shall have the
right to make copies, extracts and summaries of all such reports, books, records
and information, subject, however, to any obligations of the Company to any
other persons. The Company shall notify the Purchaser of any material change in
the business of the Company or in its operations or properties, or of any
governmental complaints, investigations or hearings (or communications
indicating the same may be contemplated) or of the institution, continuation or
threat of any litigation involving the Company or any affiliate of the Company
or any of its assets, and will keep the Purchaser informed of such events.
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6.2 Maintenance of Listing. For so long as the Company is obligated to
register Registrable Securities as provided in Section 10, the Company will use
its reasonable best efforts to maintain its listing on The Nasdaq National
Market or a national securities exchange, as defined in the Exchange Act.
6.3 Filings. The parties shall consult and fully cooperate with and provide
assistance to each other in preparing and filing as soon as practicable all
consents, approvals and authorizations necessary or advisable to be made or
obtained from any third party or governmental agency in order to consummate the
transactions contemplated hereby.
6.4 Purchase Right. During the period ending on the date two years after
the Closing Date (the "Two-Year Period"), the Company shall not issue any
additional shares of Common Stock or preferred stock (other than pursuant to (1)
employee/director compensation plan(s), including options, approved by a
majority of the independent directors of the Company, (2) options, warrants and
convertible debt outstanding on the Effective Date, (3) warrants granted in
connection with commercially standard credit/financing arrangements approved by
a majority of the board of directors and exercisable, in aggregate, into no more
than the number of shares representing 5% of the outstanding Common Stock on the
Effective Date and (4) after complying with the provisions of Sections 6.7 and
6.8, lock-up or option agreements in connection with a definitive acquisition
agreement referred to in Section 6.7 and 6.8) unless (A) the Purchaser has first
been offered (subject to the preemptive rights of the "Purchasers" under the
Preferred Stock Purchase Agreement referred to in Section 9.6 to maintain their
pro rata ownership in the Company) the right to purchase such shares (i) under
terms and conditions at least as favorable to the Purchaser as those proposed to
be offered to any third party or (ii) if such shares are proposed to be sold in
an underwritten public offering, under terms and conditions at least as
favorable to the Purchaser as those proposed to be offered in the public
offering and (B) the Purchaser does not accept such offer within ten-business
days after the date of such offer. In addition, during the Two-Year Period the
Company shall not without the Purchaser's consent issue additional shares of
Common Stock or preferred stock to any person (other than the Purchaser) in an
amount which would, when aggregated with the Common Stock or preferred stock
owned by such person, provide such person with more than 20% of the fully
diluted voting power of the Company. For the purposes of this Agreement, (i)
"voting power" means the ownership of shares of capital stock of the Company
entitling the holder to vote for the election of directors generally, (ii) any
calculation of the percentage of "voting power" shall be based (both in the
numerator and denominator) on the number of shares possessing such voting power
actually outstanding without regard to warrants, options or convertible
securities and (iii) any calculation of the percentage of "fully diluted voting
power" shall be based (both in the numerator and denominator) on the number of
shares possessing such voting power that would be outstanding giving effect to
the exercise or conversion of warrants, options and convertible securities.
6.5 Open Market Purchases. The Purchaser shall have the right to increase
its ownership in the Company through open market transactions or in block
transactions from existing shareholders, subject to applicable provisions of the
Minnesota Business Corporation Act, Minnesota Statutes, Chapter 302A. To the
extent the Company opts out of the provisions of Minnesota Statutes, Section
302A.671 ("Control Share Acquisition Act") with respect to any
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shareholder or potential shareholder of the Company, the Company shall similarly
and at the same time opt out with respect to the Purchaser.
6.6 Change of Control. During the period ending three years after the
Closing Date, and so long as the Purchaser owns at least three percent of the
voting power of the Company, the Company shall not implement any shareholder
rights plan or poison pill.
6.7 Non-solicitation. During the Two-Year Period, the Company shall not
seek or encourage any Takeover Proposal from any person other than the Purchaser
unless the Company's board of directors in good faith has determined, after
receiving the advice of a nationally recognized investment bank and the
Company's outside legal counsel, that there has been a sustained and substantial
deterioration in the Company's business that requires the Company's board of
directors to seek a sale of the business because the Company lacks any other
practical alternative (a "Required Sale Situation"). For purposes of this
Agreement, "Takeover Proposal" means any proposal for a merger (other than a
reincorporation or reorganization which does not change the outstanding
ownership of the Company) or business combination of the Company or any of its
Subsidiaries or any proposal or offer to acquire in any manner, directly or
indirectly, a 33% or greater equity interest in, a 33% or greater portion of the
voting securities of, or a 33% or greater portion of the assets of the Company
and its Subsidiaries taken as a whole. If a Takeover Proposal (the "First
Proposal") is presented during a Required Sale Situation, the Company shall
provide the Purchaser with the details of the First Proposal (including price,
terms and the identity of the offeror) and ten-business days to respond with a
counter proposal before the Company may accept the First Proposal or enter into
any lock-up/break-up agreement with respect thereto. If the Purchaser agrees to
meet the First Proposal (as to price and terms) within such initial ten-business
day period, then the Company may, for an additional ten-business day period
thereafter, solicit a superior proposal (based on price and terms) (the "Second
Proposal") to the First Proposal. In the event that a Second Proposal is
presented within such second ten-business day period, the Company shall provide
the Purchaser with the details of the Second Proposal (including price, terms
and the identity of the offeror). The Company may not accept such Second
Proposal (or enter into any lock-up/break-up agreement with respect thereto)
during an additional ten-business day period. If the Purchaser offers a superior
proposal (based on price and terms) to the Second Proposal (the "Topping Bid")
within such third ten-business day period, the Company shall enter into a
definitive acquisition agreement with the Purchaser on the basis of such Topping
Bid, which definitive agreement shall not provide for a "superior
offer/fiduciary out" and shall require, at the Purchaser's election, a
shareholder vote even in the face of a subsequent competing offer, unless
otherwise prohibited by law. If the Purchaser fails to offer a Topping Bid
within such third ten-business day period, the Company may accept the Second
Proposal. If the Company is permitted to accept a First Proposal or a Second
Proposal but fails to consummate the transaction contemplated thereby within 180
days after it is permitted to accept such Proposal, the provisions of this
Section 6.7 shall be once again complied with ab initio. Any definite
acquisition agreement entered into pursuant to the First Proposal or the Second
Proposal need not provide for a "superior offer/fiduciary out" and may require a
shareholder vote even in the face of a subsequent competing offer, unless
otherwise prohibited by law.
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6.8 Third-Party Unsolicited Offer. If during the Two-Year Period a person
other than the Purchaser presents the Company with any unsolicited Takeover
Proposal (the "First Proposal"), the Company shall provide the Purchaser with
the details of the First Proposal (including price, terms and the identity of
the offeror) and ten-business days to respond with a counter proposal before the
Company may accept the First Proposal or enter into any lock-up/break-up
agreement with respect thereto. If the Purchaser agrees to meet the First
Proposal (as to price and terms) within such initial ten-business day period,
then the Company may, for an additional ten-business day period thereafter,
solicit a superior proposal (based on price and terms) (the "Second Proposal")
to the First Proposal. In the event that a Second Proposal is presented within
such second ten-business day period, the Company shall provide the Purchaser
with the details of the Second Proposal (including price, terms and the identity
of the offeror). The Company may not accept such Second Proposal (or enter into
any lock-up/break-up agreement) during an additional ten-business day period. If
the Purchaser offers a superior offer (based on price and terms) to the Second
Proposal (the "Topping Bid") within such third ten-business day period, the
Company shall enter into a definitive acquisition agreement (including
appropriate lock-up/break-up agreement) with the Purchaser on the basis of such
Topping Bid and such agreement shall not provide for a "superior offer/fiduciary
out" and shall require, at the Purchaser's election, a shareholder vote even in
the face of a subsequent competing offer, unless otherwise prohibited by law. If
the Purchaser fails to offer a Topping Bid within such third ten-business day
period, the Company may accept the Second Proposal. If the Company is permitted
to accept a First Proposal or a Second Proposal but fails to consummate the
transaction contemplated thereby within 180 days after it is permitted to accept
such Proposal, the provisions of this Section 6.8 shall be once again complied
with ab initio. Any definite acquisition agreement entered into pursuant to the
First Proposal or the Second Proposal need not provide for a "superior
offer/fiduciary out" and may require a shareholder vote even in the face of a
subsequent competing offer, unless otherwise prohibited by law.
6.9 Break-Up Fee/Termination. If the Purchaser agrees to meet a First
Proposal under Section 6.7 or 6.8 above (but does not provide a Topping Bid) and
the Company enters into a definitive acquisition agreement with a third party
within 180 days of the expiration of the Two-Year Period, the Company shall pay
the Purchaser 3% of the value of the transaction. The provisions of Section 6.7
and 6.8 shall terminate and be of no further force unless the Purchaser owns 14%
of the voting power of the Company by the close of business on November 30,
2000.
6.10 Governance. The number of directors comprising the Company Board of
Directors shall be not less than seven and not more than nine. The Purchaser
shall be entitled to nominate one director to the Company's Board of Directors,
except that such right shall be suspended to the extent the Purchaser's
ownership falls below 3% of the voting power of the Company and in that event
the Purchaser shall cause any director so nominated and elected to resign. At
any time the Purchaser obtains 18% of the voting power of the Company, the
Purchaser shall be entitled to nominate one additional director to the Company's
Board of Directors, except such right shall be suspended to the extent the
Purchaser's ownership falls below 18% of the voting power of the Company because
of the sale of Common Stock owned by it or is otherwise falls below 15% of the
voting power of the Company and in that event the Purchaser shall cause one of
its two directors so nominated and elected to resign. As long as the
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Purchaser holds Common Stock having at least 18% of the voting power of the
Company, the Purchaser shall be entitled to nominate that number of directors
(rounded to the nearest whole) proportionate to its voting power in the Company.
So long as 20% or more of the Company's voting power is owned by persons who are
not affiliates of the Company or the Purchaser, the Company shall have at least
three independent directors. If the Purchaser is entitled to nominate one or
more directors, the board of directors of the Company shall use its reasonable
best efforts to cause such nominee(s) to be elected to the board of directors.
Section 7. Survival of Representations, Warranties and Agreements;
Indemnification.
7.1 Survival. Notwithstanding any investigation made by any party to this
Agreement, all covenants, agreements, representations and warranties made by the
Company and the Purchaser herein and in the certificates for the securities
delivered pursuant hereto shall survive the execution of this Agreement, the
delivery to the Purchaser of the certificates representing the Shares and the
Warrants, and the payment thereof, until the fifth anniversary of the Closing
Date, except for the representations set forth in Section 4.2, 4.7 and 4.16 and
the representations set forth in the first three sentences of Section 4.3, which
shall survive indefinitely, and the representations as to taxes set forth in
Section 4.14, which shall survive for the longer of (i) the fifth anniversary of
the Closing Date and (ii) the period expiring 90 days after the expiration of
the period during which a claim by the applicable taxing authority for a
deficiency or other tax adjustment would not be barred by the statute of
limitations applicable to such taxes (any such period an "Indemnity Period").
7.2 Purchaser's Right to Indemnification. Subject to the provisions of this
Section 7, the Company hereby agrees to indemnify and hold harmless the
Purchaser and the employees, agents, directors, officers, equity holders,
successors, predecessors, assigns and affiliates of any of them (collectively,
the "Purchaser Indemnified Parties") from and against (i) any and all losses,
obligations, liabilities, damages, claims, deficiencies, costs and expenses
(including, but not limited to, the amount of any settlement entered into
pursuant hereto and all reasonable legal and other expenses incurred in
connection with the investigation, prosecution or defense of the matter but
excluding consequential damages) (collectively, "Claims"), which may be asserted
against or sustained or incurred by the Purchaser Indemnified Parties in
connection with, arising out of, or relating to (A) any breach or alleged breach
of any of the representations, warranties, agreements and covenants made by the
Company herein or in any certificate or other document delivered to any
Purchaser Indemnified Party by or on behalf of the Company in connection with
this Agreement; or (B) any false, incorrect or misleading representation or
warranty made by or on behalf of the Company herein or in any certificate or
other document delivered to any Purchaser Indemnified Party by or on behalf of
the Company in connection with this Agreement; and (ii) any and all costs and
expenses (including, but not limited to, reasonable legal expenses) incurred by
any Purchaser Indemnified Party in connection with the enforcement of its rights
under this Agreement. No claim for indemnification pursuant to this Section 7
may be commenced after the relevant Indemnity Period; provided, however, that
claims made within such Indemnity Period shall survive to the extent of the
Claim covered thereby until such Claim is finally determined and, if applicable,
paid. The parties to this Agreement acknowledge that
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such indemnification provisions apply only with respect to the Shares, the
Warrants, the Warrant Shares and the shares of Common Stock issued or issuable
as dividends on, or other distributions with respect to the Shares, the Warrants
and the Warrant Shares; and any other security issued or issuable in exchange
for, or in replacement of, the Shares, the Warrants and the Warrant Shares.
7.3 Procedure for Claims.
(a) Promptly, but in any event within 10 days after obtaining knowledge of
any claim or demand which may give rise to, or could reasonably give rise to, a
claim for indemnification hereunder (an "Indemnification Claim"), the Purchaser,
to the extent it desires to be indemnified for any Claims for any such claim or
demand, shall give written notice to the Company of such Indemnification Claim
("Notice of Claim"). A Notice of Claim shall be given with respect to all
Indemnification Claims; provided, however, that the failure to give a timely
Notice of Claim to the Company shall not relieve the Company from any liability
that it may have to the Purchaser Indemnified Parties hereunder to the extent
that the Company is not prejudiced by such failure. The Notice of Claim shall
set forth the amount (or a reasonable estimate) of the loss, damage or expense
suffered, or which may be suffered, by the Purchaser Indemnified Party as a
result of such Indemnification Claim and the aggregate amount of all
Indemnification Claims to date and a brief description of the facts giving rise
to such Indemnification Claim. The Purchaser shall furnish to the Company such
information (in reasonable detail) as the Purchaser may have with respect to
such Indemnification Claim (including copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the same).
(b) If the claim or demand set forth in the Notice of Claim is a claim or
demand asserted by a third party (a "Third Party Claim"), the Company shall have
fifteen days (or such shorter period (but not less than ten days) if any answer
or other response or filing with respect to the pleadings served by the third
party is required prior to the fifteenth day) after the date of receipt by the
Company of the Notice of Claim (the "Notice Date") to notify the Purchaser in
writing of the election by the Company to defend the Third Party Claim on behalf
of the Purchaser Indemnified Parties.
(c) If the Company elects to defend a Third Party Claim on behalf of the
Purchaser Indemnified Parties, the Purchaser shall make available to the Company
and its agents and representatives all records and other materials in the
Purchaser's possession which are reasonably required in the defense of the Third
Party Claim and the Company shall pay any expenses payable in connection with
the defense of the Third Party Claim as they are incurred (whether incurred by
the Purchaser or the Company).
(d) If the Company has assumed control of the defense, the Company may
contest or settle the Third Party Claim on such terms as the Company may choose,
provided, however, that the Company will not have the right, without the prior
written consent of the Purchaser, to settle any such claim if such settlement
(i) arises from or is part of any criminal action, suit or proceeding (ii)
contains a stipulation to, confession of judgment with respect to, or
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admission or acknowledgment of, any liability or wrongdoing on the part of any
Purchaser Indemnified Party, (iii) relates to any foreign federal, state or
local tax matters, (iv) provides for injunctive relief, or other relief other
than damages, which is binding on any Purchaser Indemnified Party, (v) does not
fully release all Purchaser Indemnified Parties with respect to the relevant
Third Party Claim or (vi) has any res judicata or collateral estoppel effect
that could be adverse to any Purchaser Indemnified Party.
(e) If the Company elects to defend a Third Party Claim, the Purchaser
Indemnified Parties shall have the right to participate in the defense of the
Third Party Claim, at the Purchaser Indemnified Parties' expense (and without
the right to indemnification for such expense under this Agreement); provided,
however, that the reasonable fees and expenses of counsel retained by the
Purchaser Indemnified Parties shall be at the expense of the Company if (A) the
use of the counsel chosen by the Company to represent the Purchaser Indemnified
Parties would present such counsel with a conflict of interest; (B) the parties
to such proceeding include both Purchaser Indemnified Parties and the Company
and there may be legal defenses available to Purchaser Indemnified Parties which
are different from or additional to those available to the Company; (C) within
ten days after being advised by the Company of the identity of counsel to be
retained to represent the Purchaser Indemnified Parties, the Purchaser
Indemnified Party affected by such claim shall have objected to the retention of
such counsel for valid reasons (which shall be stated in a written notice to the
Company), and the Company shall not have retained different counsel reasonably
satisfactory to the Purchaser Indemnified Party; or (iv) the Company shall
authorize the Purchaser Indemnified Parties to retain separate counsel at the
expense of the Company.
(f) If the Company elects to defend a Third Party Claim, and does not
defend a Third Party Claim in good faith, the Purchaser Indemnified Parties
shall have the right, in addition to any other right or remedy it may have
hereunder, at the sole and exclusive expense of the Company, to defend such
Third Party Claim; provided, however, that such expenses shall be payable by the
Company only if and when such Third Party Claim becomes payable.
(g) The Purchaser shall cooperate with the Company in the defense of Third
Party Claims. Subject to the foregoing, (i) the Purchaser Indemnified Parties
shall not have any obligation to participate in the defense of or to defend any
Third Party Claim and (ii) the Purchaser Indemnified Parties' defense of or
participation in the defense of any Third Party Claim shall not in any way
diminish or lessen the right to indemnification as provided in this Section 7.
Section 8. Conditions to Company's Obligations at the Closing. The
Company's obligation to complete the transactions contemplated by this Agreement
shall be subject to the following conditions to the extent not waived by the
Company:
8.1 Receipt of Payment. The Company shall have received payment from the
Purchaser, by check or wire transfer, of immediately available funds in the full
amount of $9,500,000.
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8.2 Consents and Approvals. Any consents, waivers, clearances, approvals
and authorizations of regulatory or governmental bodies (including, without
limitation, the expiration or termination of the waiting period under the HSR
Act) and other persons that are necessary in connection with the consummation of
the transactions contemplated by this Agreement shall have been obtained.
8.3 Representations and Warranties Correct. The representations and
warranties made by the Purchaser in Section 5 shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date.
Section 9. Conditions to the Purchaser's Obligation at the Closing. The
Purchaser's obligation to complete the transactions contemplated at Closing by
this Agreement shall be subject to the following conditions to the extent not
waived by the Purchaser:
9.1 Delivery of Shares. The Company shall have delivered to the Purchaser
stock certificates representing the Shares in accordance with the terms of
Section 3.2.
9.2 Warrants. The Company shall have executed and delivered Warrants to the
Purchaser in accordance with the terms of Section 3.2.
9.3 Consents and Approvals. Any consents, waivers, clearances, approvals
and authorizations of regulatory or governmental bodies and other persons that
are necessary in connection with the consummation of the transactions
contemplated by this Agreement shall have been obtained.
9.4 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 4 shall be true and correct in all
material respects (except with respect to representations and warranties that
are qualified as to materiality or material adverse effect, which
representations and warranties shall be true and correct in all respects) when
made and as of the Closing Date or any other date, if a representation or
warranty specifically refers to such other date, and the Purchaser shall have
received a certificate signed by the chief executive officer and chief financial
officer of the Company, or such other officers of the Company as agreed upon by
the parties hereto, that each of such representations and warranties is true and
correct in all material respects (except with respect to representations and
warranties that are qualified as to materiality or material adverse effect,
which representations and warranties shall be true and correct in all respects)
on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date, and that such party has performed and complied with all of its obligations
under this Agreement which are to be performed or complied with on or prior to
the Closing Date.
9.5 Certificate as to Absence of Material Adverse Effect. The Purchaser
shall have received a certificate signed by a duly authorized officer of the
Company certifying that, since the date of the Company's most recent filing with
the SEC, there have not been any changes in the assets, liabilities, financial
condition or operations of the Company or its Subsidiary, except changes in the
ordinary course of business that have not had and are not expected to have a
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material adverse effect on the business, properties, financial condition or
results of operations of the Company or its Subsidiary.
9.6 Waiver of Right of Investment. The Purchaser shall have received
evidence that the Company has received written waivers pursuant to the Preferred
Stock Purchase Agreement dated January 30, 1997, between the Company and the
"Purchasers" listed on Schedule A thereto sufficient to waive all rights to
invest under Section 7.5 thereof with respect to the transactions contemplated
by this Agreement (including without limitation the issuance of the Shares, the
Warrants and the Warrant Shares).
9.7 Opinion of Counsel. Purchaser shall receive an opinion of Dorsey &
Whitney LLP as to the matters set forth on Exhibit D.
9.8 Closing Papers. The Purchaser shall have received the following,
addressed to it and in form and substance reasonably satisfactory to it:
(a) certified copies of the resolutions adopted by the Board of Directors
of the Company authorizing the execution, delivery and performance of this
Agreement, the issuance of the Shares, the Warrants and each of the other
agreements, instruments and transactions contemplated hereby, together with
certified copies of the resolutions adopted by a committee of disinterested
members of the Board of Directors approving the same and dated prior to the
Effective Date;
(b) certified copies of the Articles of Incorporation and By-laws of each
of the Company and its Subsidiary as in effect on the Closing Date; and
(c) a certificate of the Secretary of the Company dated the Closing Date,
as to the incumbency and signatures of the officers executing this Agreement and
all instruments executed pursuant hereto.
9.9 Certain Agreements. The shareholders of the Company listed on Exhibit C
shall have entered into letter agreements with the Purchaser substantially in
the form of Exhibit C-1, which letters shall provide that such shareholders
shall enter into agreements with Purchaser that provide that when Purchaser owns
shares representing 12% or more of the voting power of the Company, they will
not transfer "in block" any shares, warrants, options or convertible securities
in the Company (except to their majority controlled financial investor
affiliates) unless they have first offered the Purchaser the right to purchase
such shares, warrants, options or convertible securities under terms and
conditions no less favorable to the Purchaser than as proposed to be offered to
any third party. For purposes of the preceding sentence, "in block" shall mean
(1) shares, warrants, options or convertible securities representing 5% or more
of the fully diluted voting power of the Company and (2) with respect to
transferees who (prior to the proposed transfer) are 5% shareholders, shares,
warrants, options or convertible securities representing the lower of 3% of the
fully diluted voting power of the Company or that amount which would cause such
transferee to hold more than 9% of the fully diluted voting power of the
Company. The agreements shall also provide that if Purchaser sells or otherwise
transfers shares of the Company
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such that its voting power represents less than 12% of the voting power of the
Company or if the Purchaser is diluted such that its voting power represents
less than 10% of the voting power of the Company, then such transfer
restrictions shall be suspended. Fully diluted voting power shall have the
meaning provided in Section 6.4.
Section 10. Registration of the Shares; Compliance with the Securities Act.
10.1 Definitions. As used in this Section 10, the following terms shall
have the following meanings:
(a) "Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(c) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws.
(d) "Registrable Securities" shall mean (i) the Shares, (ii) the Warrant
Shares, (iii) other shares of the Company purchased by Purchaser so long as
Purchaser is deemed an affiliate of the Company and provided that such shares
shall only be deemed Registrable Securities if they are included in a
registration statement together with at least 33-1/3% of the Shares, and (iv)
stock issued in respect of the stock referred to in (i), (ii) or (iii) as a
result of a stock split, stock dividend, recapitalization or combination.
Notwithstanding the foregoing, Registrable Securities shall not include
otherwise Registrable Securities (i) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, (ii)
sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof or (iii) the
registration rights associated with such securities have been terminated
pursuant to Section 10.9 of this Agreement.
(e) "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations thereunder, all as the
same shall be in effect at the time.
10.2 Requested Registration.
(a) If the Company shall receive from the Purchaser a written request that
the Company effect any registration with respect to not less than 33-1/3% of the
issued and outstanding Registrable Securities held by the Purchaser, the Company
shall as soon as practicable use its reasonable best efforts to register
(including, without limitation, the execution of an undertaking to file
post-effective amendments and any other governmental requirements)
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all Registrable Securities which the Purchaser requests to be registered;
provided, that the Company shall not be obligated to file a registration
statement pursuant to this Section 10.2 (i) prior to two years from the Closing
Date; (ii) within 12 months of a prior request under this Section 10.2; (iii)
within 120 days following the effective date of any registered offering of the
Company's securities to the general public in which the Purchaser shall have
been able effectively to register all Registrable Securities as to which
registration shall have been requested by the Purchaser; (iv) in any
registration having an aggregate offering price (before deduction of
underwriting discounts and expenses of sale) of less than $7,500,000; or (v)
after the Company has effected three such registrations pursuant to this Section
10.2; provided, however, that the Company shall be required to effect only one
such registration to a transferee (other than an affiliated entity), after
permitted transfer of this Agreement, pursuant to Section 12.6.
The Company shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as practical, but in any event
within 90 days after receipt of the request of the Purchaser, and shall use
reasonable best efforts to have such registration statement promptly declared
effective by the Commission whether or not all Registrable Securities requested
to be registered can be included; provided, however, that if the Company shall
furnish to the Purchaser a certificate signed by the President of the Company
stating that in the good-faith judgment of the Board of Directors it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed within such 90-day period and it is therefore essential to
defer the filing of such registration statement, the Company shall have an
additional period of not more than 90 days after the expiration of the initial
90-day period within which to file such registration statement; provided, that
during such time the Company may not file a registration statement for
securities to be issued and sold for its own account.
(b) If the Purchaser intends to distribute the Registrable Securities
covered by its request by means of an underwriting, it shall so advise the
Company as a part of its request. In that event, if so requested in writing by
the Company, the Purchaser shall negotiate with an underwriter selected by the
Company with regard to the underwriting of such requested registration. The
Company and the Purchaser shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 10.2, if the
managing underwriter advises the Purchaser in writing that marketing factors
require a limitation of the number of shares to be underwritten, the Company
shall so advise the Purchaser, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
reduced accordingly; provided, however, that securities to be included in such
registration statement as a result of piggyback registration rights as well as
any securities to be offered by the Company shall be excluded from the
registration statement prior to the exclusion of any Registrable Securities held
by the Purchaser.
10.3 Piggyback Registration.
(a) If at any time or from time to time the Company shall determine to
register any of its securities, for its own account or the account of any of its
shareholders, other than a registration relating solely to employee benefit
plans, or a registration relating solely to an SEC
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Rule 145 transaction, a transaction relating solely to the sale of debt or
convertible debt instruments or a registration on any form (other than Form S-1,
S-2 or S-3, or their successor forms) which does not include substantially the
same information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will (i) give to the
Purchaser written notice thereof as soon as practicable prior to filing the
registration statement and (ii) include in such registration and in any
underwriting involved therein all the Registrable Securities (except that only
Shares and Warrant Shares may be included during the two years following the
Closing) specified in a written request, made within 15 days after receipt of
such written notice from the Company by the Purchaser, except as set forth in
subsection 10.3(b).
(b) If the registration is for a registered public offering involving an
underwriting, the Company shall so advise the Purchaser as a part of the written
notice given pursuant to Section 10.3(a). In such event, the right of the
Purchaser to registration pursuant to this Section 10.3 shall be conditioned
upon the Purchaser's participation in such underwriting and the inclusion of the
Purchaser's Registrable Securities in the underwriting. The Purchaser and the
Company shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 10.3, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the number of
Registrable Securities to be included in the registration and underwriting.
10.4 Expenses of Registration. All expenses incurred in connection with the
registrations pursuant to Sections 10.2 and 10.3, including without limitation
all registration, filing and qualification fees, printing expenses, fees and
disbursements of counsel for the Company and expenses of any special audits of
the Company's financial statements incidental to or required by such
registration, shall be borne by the Company, except that the Company shall not
be required to pay underwriters' fees, discounts or commissions relating to
Registrable Securities or fees of a separate legal counsel of the Purchaser.
10.5 Registration Procedures. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep the Purchaser
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense the Company will:
(a) keep such registration pursuant to Sections 10.2 and 10.3 continuously
effective for a period of 120 days, or, in each case, such reasonable period
necessary to permit the Purchaser to complete the distribution described in the
registration statement relating thereto, whichever first occurs;
(b) promptly prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act, and to keep such registration statement effective for that period of time
specified in Section 10.5(a);
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(c) furnish such number of prospectuses and other documents incident
thereto as the Purchaser from time to time may reasonably request;
(d) use reasonable best efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction, at the earliest possible moment;
(e) register or qualify such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as the Purchaser or
underwriter reasonably requires (except that the Company shall not be required
to go register or qualify in any jurisdiction in which it would be required to
execute a general consent to service of process), and keep such registration or
qualification effective during the period set forth in Section 10.5(a);
(f) cause all Registrable Securities covered by such registrations to be
listed on each securities exchange, including NASDAQ, on which similar
securities issued by the Company are then listed;
(g) cause its accountants to issue to the underwriter, if any, comfort
letters and updates thereof, in customary form and covering matters of the type
customarily covered in such letters with respect to underwritten offerings;
(h) enter into such customary agreements (including underwriting agreements
in customary form) and take all such other actions as the Purchaser reasonably
requests in order to expedite or facilitate the disposition of such Registrable
Securities;
(i) make available for inspection by Purchaser, any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney, accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors,
employees and independent accountants to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
(j) if the offering is underwritten, at the request of the Purchaser
furnish (i) an opinion of counsel representing the Company for the purposes of
such registration, addressed to the underwriters, stating that such registration
statement has become effective under the Securities Act and that (A) to the best
knowledge of such counsel, no stop order suspending the effectiveness thereof
has been issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (B) the registration
statement, the related prospectus and each amendment or supplement thereof
comply as to form in all material respects with the requirements of the
Securities Act (except that such counsel need not express any opinion as to
financial statements or other financial data contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the underwriters and
(ii) a letter from the independent public accountants retained by the Company,
addressed to the underwriters and to
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such seller, stating that they are independent public accountants within the
meaning of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business days
prior to the date of such letter) with respect to such registration as such
underwriters reasonably may request; and
(k) notify the Purchaser at any time a prospectus covered by such
registration statement is required to be delivered under the Securities Act, of
the happening of any event of which it has knowledge as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
Notwithstanding any other provision of this Section 10, (i) the Company shall
not be required to file a registration statement during any period that such
filing is not permitted and (ii) the Purchaser shall suspend any sale of
Registrable Securities at the request of the Company for a period not exceeding
90 days.
10.6 Indemnification.
(a) In the event of a registration of any of the Registrable Securities
under the Securities Act pursuant to Sections 10.2 or 10.3, the Company will
indemnify and hold harmless the Purchaser, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls the Purchaser
or underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which the Purchaser,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities were registered under the Securities
Act, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act or any state securities law applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, and will reimburse the Purchaser, each of its officers,
directors and partners, and each person controlling the Purchaser, each such
underwriter and each person who controls any such underwriter, for any
reasonable legal and any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage or liability arises out of or is based
on any untrue statement or omission based upon written
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information furnished to the Company by an instrument duly executed by the
Purchaser or underwriter specifically for use therein.
(b) The Purchaser will indemnify and hold harmless the Company, each of its
directors and officers, each underwriter, if any, of the Company's securities
covered by such a registration statement, each person who controls the Company
and each underwriter within the meaning of the Securities Act, against all
claims, losses, expenses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such directors, officers, partners, persons or underwriters for any
reasonable legal or any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by the Purchaser specifically for
use therein; provided, however, the total amount for which the Purchaser, its
officers, directors and partners, and any person controlling the Purchaser,
shall be liable under this Section 10.6(b) shall not in any event exceed the
aggregate proceeds received by the Purchaser from the sale of Registrable
Securities in such registration.
(c) Each party entitled to indemnification under this Section 10.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claims as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder, unless such failure resulted in actual detriment to
the Indemnifying Party. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
(d) Notwithstanding the foregoing, to the extent that the provisions on
indemnification contained in the underwriting agreement entered into among the
Purchaser, the Company and the underwriters in connection with the underwritten
public offering are in conflict with the foregoing provisions, the provisions in
the underwriting agreement shall be controlling as to the Registrable Securities
included in the public offering.
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(e) If the indemnification provided for in this Section 10.6 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other hand in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount the Purchaser shall be obligated to
contribute pursuant to this Section 10.6(e) shall be limited to an amount equal
to the proceeds to the Purchaser of the Restricted Securities sold pursuant to
the registration statement which gives rise to such obligation to contribute
(less the aggregate amount of any damages which the Purchaser has otherwise been
required to pay in respect of such loss, claim, damage, liability or action or
any substantially similar loss, claim, damage, liability or action arising from
the sale of such Restricted Securities).
(f) The indemnification provided by this Section 10.6 shall be a continuing
right to indemnification and shall survive the registration and sale of any
securities by any Person entitled to indemnification hereunder and the
expiration or termination of this Agreement.
10.7 Lockup Agreement. The Purchaser agrees in connection with any
registration of the Company's securities (whether or not the Purchaser is
participating in such registration), upon the request of the Company and the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time from the effective
date of such registration as the Company and the underwriters may reasonably
specify.
10.8 Information by the Purchaser. The Purchaser included in any
registration shall promptly furnish to the Company such information regarding
the Purchaser and the distribution proposed by the Purchaser as the Company may
request in writing and as shall be required in connection with any registration
referred to herein.
10.9 Termination of Rights.
(a) The rights of the Purchaser to cause the Company to register securities
under Sections 10.2 or 10.3 shall terminate at such time as the Purchaser is
able to dispose of all of its Registrable Securities in one three-month period
pursuant to the provisions of Rule 144.
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(b) Notwithstanding the provisions of Section 10.9(a), all rights of the
Purchaser under this Agreement shall terminate at 5:00 P.M. Central time on the
date five years after the Closing Date.
10.10 Covenants Relating to Rule 144. The Company will file reports in
compliance with the Securities Exchange Act of 1934, as amended, and comply with
all rules and regulations of the Commission applicable to the use of Rule 144.
Section 11. Notices.
All notices, requests, consents and other communications hereunder shall be
in writing, shall be sent by confirmed facsimile or mailed by first-class
registered or certified airmail, or nationally recognized overnight express
courier, postage prepaid, and shall be deemed given when so sent in the case of
facsimile transmission, or when so received in the case of mail or courier, and
addressed as follows:
if to the Company, to:
Diametrics Medical, Inc.
2658 Patton Road
St. Paul Minnesota 55113
Attention: David T. Giddings, Chairman, CEO and President
Phone: (612) 639-8035
Fax: (612) 638-1197
with a copy to:
Dorsey & Whitney LLP
220 South 6th Street
Minneapolis, Minnesota 55402
Attention: Kenneth Cutler, Esq.
Phone: (612) 340-2740
Fax: (612) 340-8738
if to the Purchaser, to:
Hewlett-Packard Company
3000 Hanover Street
Mail Stop 20 BT
Palo Alto, California 94304
Attention: Director, Corporate Development
Phone: (650) 857-1501
Fax: (650) 852-8342
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with a copy to:
Hewlett-Packard Company
3000 Hanover Street
Mail Stop BQ
Palo Alto, California 94304
Attention: General Counsel
Phone: (650) 857-1501
Fax: (650) 857-4392
Any change of an address set forth in this Section 11 may be accomplished by
means of a notice sent in accordance with the terms of this Section 11.
Section 12. Miscellaneous.
12.1 Waivers and Amendments. Neither this Agreement nor any provision
hereof may be changed, waived, discharged, terminated, modified or amended
except upon the written consent of the Company and the Purchaser.
12.2 Sections; Headings; Dollar Amounts. Unless otherwise specified, all
references in this Agreement to "Sections" shall be to Sections of this
Agreement. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement. All currency referred to herein shall be in U.S. dollars.
12.3 Severability. In case any provision contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
12.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota as applied to contracts
entered into and performed entirely in Minnesota by Minnesota residents, without
regard to conflicts of law principles.
12.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties. Delivery of an executed counterpart by facsimile
shall be the same as delivery of an original counterpart.
12.6 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, that only the rights with respect to Section 10 may be assigned as an
entirety only to the transferee of the Shares, the Warrants and the Warrant
Shares. Without limiting the foregoing, the Purchaser shall have the right to
assign prior to Closing the right to purchase the Shares and Warrants to an
affiliated entity.
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12.7 Entire Agreement. This Agreement and other documents delivered
pursuant hereto, including the exhibits, constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
12.8 Payment of Fees and Expenses. Each of the Company and the Purchaser
shall bear its own expenses and legal fees incurred on its behalf with respect
to this Agreement and the transactions contemplated hereby. If any action at law
or in equity is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
DIAMETRICS MEDICAL, INC.
By David T. Giddings
-----------------------------------
Name: David T. Giddings
Title: Chairman, President and Chief
Executive Officer
HEWLETT-PACKARD COMPANY
By John B. Whelan
-------------------------------------
Name: John B. Whelan
Title: Business Development Manager
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EXHIBIT 99.3
DIAMETRICS MEDICAL, INC.
STOCK PURCHASE WARRANT
THE WARRANTS EVIDENCED HEREBY AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE OFFERED OR SOLD WITHOUT REGISTRATION UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE UNDER SUCH ACT OR THE RULES OR REGULATIONS PROMULGATED
THEREUNDER.
June 28, 1999
WARRANT
To Subscribe for and Purchase Common Stock of Diametrics Medical, Inc.
VOID AFTER 5:00 P.M., MINNEAPOLIS, MINNESOTA TIME, ON AUGUST 4,
2003, OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M.,
MINNEAPOLIS TIME, ON THE IMMEDIATELY PRECEDING BUSINESS DAY
This certifies that, for valuable consideration, receipt of which is hereby
acknowledged, Hewlett-Packard Company, and permitted successors and assigns
("Holder") is entitled to purchase from Diametrics Medical, Inc. a Minnesota
corporation (the "Company") up to and including 452,381 fully paid and
nonassessable shares (the "Number of Shares") of the common stock of the
Company, $.01 par value (the "Common Stock"), on the terms set forth herein at
an exercise price per share equal to $8.40 (the "Purchase Price"). The Number of
Shares and the Purchase Price may be adjusted from time to time as described in
this Warrant.
1. Exercise.
1.1 Time for Exercise. This Warrant may be exercised in whole or in part at
any time, and from time to time, during the period commencing on the date of
this Warrant and expiring on August 4, 2003.
1.2 Manner of Exercise. This Warrant shall be exercised by delivering it to
the Company with the exercise form duly completed and signed, specifying the
number of shares as to which the Warrant is being exercised at that time (the
"Exercise Number"). The Holder shall simultaneously deliver to the Company cash
or a certified check or wire transfer in an amount equal to the Exercise Number
multiplied by the Purchase Price, and the Holder shall be entitled to receive
the full Exercise Number of shares of Common Stock.
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1.3 Effective Date of Exercise. Promptly (but in any case within ten
business days) after any exercise, the Company shall deliver to the Holder (a)
duly executed certificates in the name or names specified in the exercise notice
representing the aggregate number of shares issuable upon such exercise, and (b)
if this Warrant is exercised only in part, a new Warrant of like tenor
exercisable for the balance of the Number of Shares. Such certificates shall be
deemed to have been issued, and the person receiving them shall be deemed to be
a holder of record of such shares, as of the close of business on the date the
actions required in Section 1.2 shall have been completed or, if on that date
the stock transfer books of the Company are closed, as of the next business day.
2. Transfer of Warrants and Stock.
2.1 Transfer Restrictions. This Warrant shall be freely transferable by the
Holder in accordance with the terms hereof; provided, however, that neither this
Warrant nor the securities issuable upon its exercise may be sold, transferred
or pledged unless the Company shall have been supplied with reasonably
satisfactory evidence that such transfer is not in violation of the Securities
Act of 1933, as amended (the "Securities Act"), and any applicable state
securities laws. The Company may place a legend to that effect on this Warrant,
any replacement Warrant and each certificate representing shares issuable upon
exercise of this Warrant. Subject to the satisfaction of this condition only,
this Warrant shall be freely transferable by the Holder.
2.2 Manner of Transfer. Upon delivery of this Warrant to the Company with
the assignment form duly completed and signed, the Company will promptly (but in
any case within five (5) business days) execute and deliver to each transferee
and, if applicable, the Holder, Warrants of like tenor evidencing the rights (a)
of the transferee(s) to purchase the Number of Shares specified for each in the
assignment forms, and (b) of the Holder to purchase any untransferred portion,
which in the aggregate shall equal the number of Shares of the original Warrant.
If this Warrant is properly assigned in compliance with Section 2, it may be
exercised by an assignee without having a new Warrant issued.
2.3 Loss, Destruction of Warrant Certificates. Upon receipt of (a) evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and (b) except in the case of mutilation, an indemnity
or security reasonably satisfactory to the Company, the Company will promptly
(but in any case within five (5) business days) execute and deliver a
replacement Warrant of like tenor representing the right to purchase the same
Number of Shares.
3. Cost of Issuances. The Company shall pay all expenses, transfer taxes and
other charges payable in connection with the preparation, issuance and delivery
of stock certificates or replacement Warrants, except for any transfer tax or
other charge imposed as a result of (a) any issuance of certificates in any name
other than the name of the Holder, or (b) any transfer of the Warrant. The
Company shall not be required to issue or deliver any Stock certificate or
Warrant until it receives reasonably satisfactory evidence that any such tax or
other charge has been paid by the Holder.
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4. Anti-Dilution Provisions. If any of the following events occur at any time
hereafter during the life of this Warrant, then the Purchase Price and the
Number of Shares immediately prior to such event shall be changed as described
in order to prevent dilution:
4.1 Dividends; Stock Splits Etc. In case the Company shall (a) pay a
dividend in shares of Common Stock or make a distribution in shares of Common
Stock, (b) subdivide or reclassify its outstanding shares of Common Stock into a
greater number of shares, or (c) combine or reclassify its outstanding shares of
Common Stock into a smaller number of shares, the Number of Shares purchasable
upon the exercise of this Warrant immediately prior thereto shall be adjusted so
that the Number of Shares purchasable upon exercise of this Warrant shall be
determined by multiplying the Number of Shares theretofore purchasable upon the
exercise of this Warrant by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately following such action
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately prior thereto. Such adjustment shall be made whenever
any event listed above shall occur and shall become effective immediately after
the record date in the case of a dividend and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. If the Company declares a dividend in money on its Common
Stock and at substantially the same time offers its Stockholders a right to
purchase new shares of Common Stock or of capital stock of any other class from
the proceeds of such dividend, or for an amount substantially equal to such
dividend, all shares of Common Stock or of capital stock of any other class so
issued shall for purposes hereof be deemed issued as a Stock dividend.
4.2 Issuance of Rights or Warrants to Holders. In case the Company shall
issue rights, options or warrants to all holders of its shares of Common Stock
entitling them (for a period expiring within 45 days after the record date
therefor) to subscribe for or purchase shares of Common Stock at a price per
share which is lower at the record date mentioned below than the then Current
Market Price per share of Common Stock (as hereinafter defined), the Number of
Shares thereafter purchasable upon the exercise of this Warrant shall be
determined by multiplying the Number of Shares theretofore purchasable upon
exercise of this Warrant by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on such record date plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares which the aggregate
offering price of the total number shares of Common Stock so offered would
purchase at the then Current Market Price per share of Common Stock. For
purposes of this Section 4.2, the issuance of rights, options or warrants to
subscribe for or purchase securities convertible into Common Stock shall be
deemed to be the issuance of rights, options or warrants to purchase the Common
Stock into which such securities are convertible at an aggregate offering price
equal to the aggregate offering price of such securities plus the minimum
aggregate amount (if any) payable upon conversion of such securities into Common
Stock.
4.3 Merger; Consolidation; Sale of Assets. In case of (a) the consolidation
or the merger of the Company, (b) the sale of all or substantially all of the
properties and assets of the Company to any Person, (c) any capital
reorganization by the Company, or (d) any voluntary or
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involuntary dissolution, liquidation, or winding up of the Company, this Warrant
shall, after any such event, entitle the Holder to receive upon exercise the
number of shares of Stock or other securities or property (including cash) of
the Person (if applicable) resulting from such event, which the holder of
securities deliverable upon exercise of this Warrant (at the time of such event)
would have been entitled to receive upon such event; and in any such case the
provisions of Section 4 with respect to the rights and interests thereafter of
the holders of this Warrant shall be appropriately adjusted so as to be
applicable, as nearly as practicable, to any shares of Stock or other securities
or any property (including cash) thereafter deliverable upon exercise of this
Warrant. The Person resulting from such sale or consolidation or surviving such
merger or to which such sale shall be made shall execute and deliver to the
Holder a supplemental agreement as provided in Section 6.5 below. Any adjustment
pursuant to this Section 4.3 which shall be approved in good faith by the Board
of Directors of the Company pursuant to a resolution delivered to the Holder
shall be conclusive for all purposes hereof. For the purposes of this Agreement
"person" means any individual, partnership, firm, corporation, limited liability
company or partnership, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
4.4 Other Distributions. In case the Company shall distribute to all
holders of its shares of Common Stock shares of Stock other than Common Stock or
evidences of its indebtedness or assets (excluding cash dividends or
distributions payable out of consolidated earnings or retained earnings and
dividends or distributions referred to in Section 4.1 above) or rights, options,
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding those referred to in
Section 4.2 above), then in each case the Number of Shares thereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the Number of Shares theretofore purchasable upon the exercise of this Warrant,
by a fraction of which the numerator shall be the Current Market Price per share
of Common Stock on the record date mentioned below in this Section 4.4 plus the
then fair value (as reasonably determined by the Board of Directors of the
Company in good faith, whose determination shall be conclusive absent manifest
error, irrespective of the accounting treatment thereof) of the portion of the
shares of Stock other than Common Stock or assets or evidences of indebtedness
so distributed or of such subscription rights, options or warrants, or of such
convertible or exchangeable securities applicable to one share of Common Stock,
and of which the denominator shall be the Current Market Price per share of
Common Stock on such record date. Such adjustment shall be made whenever any
such distribution is made, and shall become effective immediately after the
record date for the determination of Stockholders entitled to receive such
distribution.
4.5 Additional Adjustment of Purchase Price. Whenever the Number of Shares
purchasable upon the exercise of this Warrant is adjusted, as provided herein,
the Purchase Price payable upon exercise of this Warrant shall be adjusted by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the Number of Shares purchasable upon
the exercise of this Warrant immediately prior to such adjustment, and of which
the denominator shall be the Number of Shares so purchasable immediately
thereafter.
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4.6 No De Minimis Adjustments. No adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or decrease of at
least 1% in such price; provided, however, that any adjustments which by reason
of this Section 4.6 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 4.6 shall be made to the nearest one-twentieth of a cent or to the
nearest one-hundredth of a share, as the case may be.
4.7 Treasury Shares. For the purpose of Section 4, shares of Common Stock
or other securities held in the treasury of the Company shall not be deemed to
be outstanding, and the sale or other deposition of any shares of Common Stock
or other securities held in the treasury of the Company shall be deemed an
issuance thereof.
4.8 Corporate Action. Before taking any action which would cause an
adjustment reducing the Purchase Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of this Warrant, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Purchase Price.
4.9 Independent Public Accountants. The certificate of a "Big Five" firm of
independent public accountants selected by the Board of Directors of the Company
shall be conclusive evidence of the correctness of any computation made under
Section 4.
4.10 Notice of Certain Events. In case at any time prior to the expiration
date of this Warrant:
(i) the Company shall declare a dividend (or any other distribution)
on the Common Stock (other than a dividend in cash out of retained
earnings); or
(ii) the Company shall authorize the granting to the holders of Common
Stock of rights or warrants to subscribe for or purchase any shares of
stock of any class or of any other rights; or
(iii) there shall be any reclassification of the Common Stock of the
Company (other than a subdivision or combination of its outstanding Common
Stock); or
(iv) there shall be any capital reorganization by the Company; or
(v) there shall be a consolidation or merger involving the Company or
sale of all or substantially all of the Company's property and assets
(except a merger or other reorganization in which the Company shall be the
surviving corporation or a consolidation, merger or sale with a
wholly-owned subsidiary); or
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(vi) there shall be voluntary or involuntary dissolution, liquidation
and winding up by the Company or dividend or distribution to holders of
Common Stock (other than the customary cash and stock dividends); or
(vii) any other action shall occur which would give rise to an
adjustment to the Purchase Price or the Number of Shares hereunder, then in
any one or more of said cases, the Company shall cause to be delivered to
the Holder, at the earliest practicable time (and, in any event, not less
than 25 days before any record date or other date set for definitive
action), notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or such reorganization, sale, consolidation, merger, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also set forth such facts as shall indicate the effect of such action
(to the extent such effect may be known at the date of such notice) on the
Purchase Price and the kind and amount of the shares of stock and other
securities and property deliverable upon exercise of this Warrant. Such
notice shall also specify the date, if known, as of which the holders of
record of the Common Stock shall participate in said dividend, distribution
or subscription rights or shall be entitled to exchange their shares of the
Common Stock for securities or other property (including cash) deliverable
upon such reorganization, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event
of voluntary or involuntary dissolution, liquidation, or winding up of the
Company, other than dissolution, liquidation or winding up following a
consolidation or merger of the Company with or into, or sale of
substantially all of its assets to, another corporation, the rights to
exercise this Warrant shall terminate).
4.11 Other Securities Adjustments. If as a result of Section 4, a Holder is
entitled to receive any securities other than Common Stock upon exercise of this
Warrant, the number and purchase price of such securities shall thereafter be
adjusted from time to time in the same manner as provided pursuant to Section 4
for Common Stock. The allocation of purchase price between various securities
shall be made in writing by the Board of Directors of the Company in good faith
at the time of the event by which the holder became entitled to receive new
securities, and a copy sent to the Holder.
4.12 Notices of Adjustments. When any adjustment is required to be made
under Section 4, the Company shall promptly (a) determine such adjustments, (b)
prepare and retain on file a statement describing in reasonable detail the
method used in arriving at the adjustment; and (c) cause a copy of such
statement, together with any agreement required by Section 6.5, to be mailed to
the Holder within 10 days after the date on which the circumstances giving rise
to such adjustment occurred.
4.13 Computations and Adjustments. Upon each computation of an adjustment
under this Section 4, the Purchase Price shall be computed to the nearest cent
and the Number of Shares shall be calculated to the next highest whole share.
However, the fractional amount shall be used in calculating any future
adjustments. No fractional shares of Common Stock shall be issued in connection
with the exercise of this Warrant, but the Company shall, in the case of the
final
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exercise under this Warrant, make a cash payment for any fractional shares based
on the Current Market Price of the Common Stock on the date of exercise.
Notwithstanding any changes in the Purchase Price or the Number of Shares, this
Warrant, and any Warrants issued in replacement or upon transfer thereof, may
continue to state the initial Purchase Price and the Number of Shares.
Alternatively, the Company may elect to issue a new Warrant or Warrants of like
tenor for the additional shares of Common Stock purchasable hereunder or, upon
surrender of the existing Warrant, to issue a replacement Warrant evidencing all
the Warrants to which the Holder is entitled after such adjustments.
4.14 Exercise Before Payment Date. In the event that this Warrant is
exercised after the record date for any event requiring an adjustment, but prior
to the actual event, the Company may elect to defer payment of the adjusted
amount to the Holder until the actual event occurs; provided, however, that the
Company shall deliver a due bill or other appropriate instrument to the Holder
transferable to the same extent as the other securities issuable on exercise
evidencing the Holder's right to receive such additional amount upon the
occurrence of the event requiring such adjustment.
4.15 Current Market Price. "Current Market Price" for the Common Stock on
any given date means (a) the closing price on the previous trading day for the
Common Stock on the principal stock exchange on which the Common Stock is traded
(or, in the case of issuances of stock options with an exercise price equal to
fair market value on the date of grant pursuant to the terms of a plan, such
date) or (b) if not so traded, the closing price (or, if no closing price is
available, the average of the bid and asked prices) for such date on the NASDAQ
if the Common Stock is listed on the NASDAQ or (c) if not listed on any exchange
or quoted on the NASDAQ, such value as may be determined in good faith by the
Company's Board of Directors, which determination shall be conclusively binding
on the parties.
5. Redemption.
5.1 Redemption at Company's Option. The Company may, upon 30 days prior
written notice (the "Redemption Notice") to the Holder, redeem all, but not less
than all of the Warrants granted hereunder that have not been exercised before
the date referred to in Section 5.2(d) at a redemption price of $0.05 per
Warrant (the "Redemption Price"), so long as the Current Market Price (as
defined in Section 4.15(a) and (b) above) is greater than the following prices
(the "Target Prices") for any period of 20 consecutive trading days preceding
the date the Redemption Notice is given:
TIME PERIOD TARGET PRICE
----------- ------------
August 4, 1999-- August 4, 2000 $12.10
August 5, 2000-- August 4, 2001 $14.52
August 5, 2001-- August 4, 2002 $17.42
August 5, 2002-- August 4, 2003 $20.90
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The date fixed for redemption of this Warrant is referred to herein as the
"Redemption Date."
5.2 Redemption Notice. The Redemption Notice shall specify (a) the
Redemption Price, (b) the Redemption Date, (c) the place where this Warrant
shall be delivered and the Redemption Price paid, and (d) that the right to
exercise the Warrant shall terminate at 5:00 p.m. (Minneapolis time) on the
business day immediately preceding the Redemption Date. No failure to mail such
notice nor any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption except as to a Holder (I) to
whom notice was not mailed (ii) whose notice was defective.
5.3 Failure to Exercise. Any right to exercise this Warrant shall terminate
at 5:00 p.m. (Minneapolis time) on the business day immediately preceding the
Redemption Date. On and after the Redemption Date, the Holder shall have no
further rights except to receive, upon surrender of this Warrant, the Redemption
Price.
5.4 Surrender of Warrant. From and after the Redemption Date, the Company
shall, at the place specified in the Redemption Notice, upon presentation and
surrender to the Company by or on behalf of the Holder of the Warrant to be
redeemed, deliver or cause to be delivered to or upon the written order of the
Holder a sum in cash equal to the Redemption Price of this Warrant. From and
after the Redemption Date and upon the deposit or setting aside by the Company
of a sum sufficient to redeem this Warrant, it shall expire and become void and
all rights hereunder, except the right to receive payment of the Redemption
Price, shall cease.
5.5 Adjustments. If the shares of Common Stock are subdivided or combined
into a greater or smaller number of shares of Common Stock, the Target Prices
shall be proportionally adjusted by the ratio which the total number of shares
of Common Stock outstanding immediately prior to such event bears to the total
number of shares of Common Stock to be outstanding immediately after such event.
6. Covenants. The Company agrees that:
6.1 Reservation of Stock. During the period in which this Warrant may be
exercised, the Company will reserve sufficient authorized but unissued
securities to enable it to satisfy its obligations on exercise of this Warrant
and shall use its reasonable best efforts to cause all shares of Common Stock
issued upon the exercise of this Warrant to be listed on any exchanges on which
the Common Stock is then listed. If at any time the Company's authorized
securities shall not be sufficient to allow the exercise of this Warrant, the
Company shall take such corporate action as may be necessary to increase its
authorized but unissued securities to be sufficient for such purpose;
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6.2 No Liens, etc. All securities that may be issued upon exercise of this
Warrant will, upon issuance, be validly issued, fully paid, nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, and
shall be listed on any exchanges on which that class of securities is listed;
6.3 Furnish Information. During the term of this Warrant, the Company will
promptly deliver to the Holder copies of all financial statements, reports and
proxy statements which the Company shall have sent to its stockholders
generally;
6.4 Stock and Warrant Transfer Books. Except upon dissolution, liquidation
or winding up or for ordinary holidays and weekends, the Company will not at any
time close its stock or warrant transfer books so as to result in preventing or
delaying the exercise or transfer of this Warrant; and
6.5 Merger; Consolidation or Sale of Assets of the Company. Except in the
case of a merger or consolidation where the consideration is payable entirely in
cash or obligations, the Company will not merge or consolidate with or into any
Person, or sell or otherwise transfer its property, assets and business
substantially as an entirety to a successor Person, unless the Person resulting
from such merger or consolidation (if not the Company), or such successor
Person, shall expressly assume, by supplemental agreement reasonably
satisfactory in form to the then Majority Holders (as defined below) and
executed and delivered to the Holder, the due and punctual performance and
observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company. "Majority Holders", as of any date, shall
mean the holders of this Warrant (or replacement warrants issued pursuant
hereto) and of the substantially similar warrants issued contemporaneously
herewith pursuant to the Common Stock Purchase Agreement (or replacement
warrants issued pursuant thereto) who together have rights to exercise such
warrants for a majority of the Warrant Shares (as defined in the Common Stock
Purchase Agreement).
7. Status of Holder.
7.1 Not a Stockholder. Unless the Holder exercises this Warrant in writing,
the Holder shall not be entitled to any rights (a) as a stockholder of the
Company with respect to the shares as to which the Warrant is exercisable
including, without limitation, the right to vote or receive dividends or other
distributions, or (b) to receive any notice of any proceedings of the Company
except as otherwise provided in this Warrant.
7.2 Limitation of Liability. Unless the Holder exercises this Warrant in
writing, the Holder's rights and privileges hereunder shall not give rise to any
liability for the Purchase Price or as a stockholder of the Company, whether to
the Company or its creditors.
8. Registration Rights. The shares purchasable upon exercisable of this Warrant
shall be Registerable Securities as defined in Section 10.1 of the Common Stock
Purchase Agreement.
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9. General Provisions.
9.1 Complete Agreement; Modifications. This Warrant and any documents
referred to herein or executed contemporaneously herewith constitute the
parties' entire agreement with respect to the subject matter hereof and
supersede all agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. The Warrant may not be amended, altered or modified except by a writing
signed by the parties.
9.2 Cooperation. Each party hereto agrees to execute any and all further
documents and writings and to perform such other reasonable actions which may be
or become necessary or expedient to effectuate and carry out this Warrant.
9.3 Notices. All notices under this Warrant shall be in writing and shall
be delivered by personal service or telecopy or certified mail return receipt
requested (if such service is not available, then by first class mail), postage
prepaid, to such address as may be designated from time to time by the relevant
party, and which shall initially be:
(a) If to the Company:
Diametrics Medical, Inc.
2658 Patton Road
Roseville, Minnesota 55113
Attention: Chief Financial Officer
Telecopy: (612) 639-8459
With a copy to:
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Kenneth Cutler
Telecopy: (612) 340-8738
(b) If to the Holder:
Hewlett-Packard Company
3000 Hanover Street, Mail Stop 20BT
Palo Alto, California 94304
Attention: Director, Corporate Development
Phone: (650) 857-1501
Fax: (650) 852-8342
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With a copy to:
Hewlett-Packard Company
3000 Hanover Street, Mail Stop BQ
Palo Alto, California 94304
Attention: General Counsel
Phone: (650) 857-1501
Fax: (650) 857-4392
Any notice sent by certified mail shall be deemed to have been given
three days after the date on which it is mailed. All other notices shall be
deemed given when received. No objection may be made to the manner of delivery
of any notice actually received in writing by an authorized agent of a party.
9.4 No Third-Party Benefits; Successors and Assigns. None of the provisions
of this Warrant shall be for the benefit of, or enforceable by, any third-party
beneficiary. Except as provided herein to the contrary, this Warrant shall be
binding upon and inure to the benefit of the parties, their respective
successors and permitted assigns.
9.5 Governing Law. This Warrant concerns a Minnesota corporation, and all
questions with respect to the Warrant and the rights and liabilities of the
parties will be governed by the laws of Minnesota regardless of the choice of
law provisions of Minnesota or any other jurisdiction.
9.6 Waivers Strictly Construed. With regard to any power, remedy or right
provided herein or otherwise available to any party hereunder (a) no waiver or
extension of time shall be effective unless expressly contained in a writing
signed by the waiving party; and (b) no alteration, modification or impairment
shall be implied by reason of any previous waiver, extension of time, delay or
omission in exercise, or other indulgence.
9.7 Severability. The validity, legality or enforceability of the remainder
of this Warrant shall not be affected even if one or more of its provisions
shall be held to be invalid, illegal or unenforceable in any respect.
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9.8 Attorneys' Fees. Should any litigation or arbitration be commenced
(including any proceedings in a bankruptcy court) between the parties hereto or
their representatives concerning any provisions of this Warrant or the rights
and duties of any person or entity hereunder the party or parties prevailing in
such proceeding shall be entitled, in addition to such other relief as may be
granted, to the attorneys' fees and court costs incurred by reason of such
litigation.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
effective as of June 28, 1999.
DIAMETRICS MEDICAL, INC.
By: /s/ Laurence L. Betterley
---------------------------------
Title: Senior Vice President and
Chief Financial Officer
---------------------------------
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ASSIGNMENT FORM
FOR VALUE RECEIVED, __________________________________ hereby sells,
assigns and transfers to the transferee named below the rights to purchase
______________ of the Number of Shares under this Warrant, together with all
rights, title and interest therein. The rights to purchase the remaining Number
of Shares shall remain the property of the undersigned.
Dated: _____________________
[NAME OF HOLDER]
By_________________________________
Name ______________________________
(Please Print)
Address:_______________________
_______________________
_______________________
Employer Identification Number, Social
Security Number or other identifying
number:
______________________________________
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EXERCISE FORM
To Be Executed Upon Exercise Of Warrant
The undersigned hereby exercises the Warrant with regard to ___________
shares of Common Stock and herewith makes payment of the purchase price in full.
The undersigned requests that certificate(s) for such shares and the Warrant for
any unexercised portion of this Warrant be issued to the Holder.
Dated:_______________________________
[NAME OF HOLDER]
By_________________________________
Name ______________________________
(Please Print)
Address:_______________________
_______________________
_______________________
Employer Identification Number, Social
Security Number or other identifying
number:
______________________________________
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Exhibit 99.4
HP AND DIAMETRICS ANNOUNCE EXCLUSIVE
WORLDWIDE MARKETING AND DISTRIBUTION AGREEMENT
Strategic Alliance to Expand Point-of-care Diagnostics Market to Include
Continuous Monitoring Systems
FLORENCE, Italy, June 7, 1999 -- Hewlett-Packard Company (NYSE: HWP), the
worldwide leader in acute-care patient monitoring, and Diametrics Medical, Inc.
(NASDAQ/NM: DMED), a leading point-of-care testing and continuous blood-gas
monitoring company, today announced that HP has signed an exclusive worldwide
agreement to market, sell and distribute Diametrics' Paratrend(R) and
Neotrend(TM) continuous blood-gas monitoring systems and the IRMA(R) SL
point-of-care blood-testing system. The announcement was made here during the
International Federation Clinical Chemistry and Laboratory Medicine WorldLab `99
trade show.
Under the terms of the agreement, Diametrics will transfer full
responsibility for marketing, sales and distribution for these products to HP,
with the transfer to be completed by Nov. 1, 1999. Diametrics' products will be
sold through HP's worldwide patient-monitoring sales force, and a network of
distributors and dealers (excluding countries where existing agreements take
precedence). The initial term of the agreement is three and a half years, with
the option for extensions.
As part of the agreement, HP will commit to minimum product sales, market
development and product royalty payments. The two companies will fund joint R&D
efforts for new-product development for the continuous monitoring and for
intermittent-testing product lines.
HP will acquire $9.5M of Diametrics common stock at $7 per share and
receive warrants to purchase 452,381 shares of common stock at $8.40 per share.
The Diametrics Board of Directors has granted HP the right to acquire additional
shares of Diametrics stock on the open market or in block transactions, subject
to the limitations of the Minnesota Control Share Acquisition Act. In addition,
the Diametrics Board has agreed not to implement a shareholder-rights plan for a
period of three years and has agreed to certain restrictions on sale of the
company and the issuance of its stock for a two-year period. HP will also be
entitled to representation on Diametrics Board of Directors.
"Having HP as a partner will dramatically expand our ability to broadly
commercialize our products on a worldwide basis," said David T. Giddings,
president and chief executive officer of Diametrics. "HP's reputation,
technology and market leadership makes it the ideal
<PAGE>
partner for us. With HP's support, we can bring the benefits of our combined
systems and solutions to clinicians who need vital patient information at the
point-of-care."
"This new alliance extends our ability to offer our customers a wider
choice of diagnostic tools that complement our traditional products and
strengthens our presence in the developing point-of-care market," said Cynthia
Danaher, vice president and general manager of HP's Medical Products Group.
"Biochemical testing at the patient's side is a burgeoning new area in
healthcare with applications across the entire patient-care spectrum for a
continuous cycle of care -- from acute, to out of hospital and even the home."
Paratrend and Neotrend are the only FDA cleared multiparameter
intra-arterial sensors on the market today that provide continuous monitoring of
blood gases in critically ill adult, pediatric and neonatal patients. A small
fiber-optic sensor is placed in the radial, femoral or umbilical artery to
continuously measure acidity, carbon dioxide, and oxygen levels and temperature.
The IRMA SL Systems Series 2000 portable blood-testing system provides
fast, accurate results for a number of time critical tests performed at the
patient's bedside, including blood gases, electrolytes, hematocrit and glucose.
Glucose testing is provided using the Lifescan SureStep-Pro Blood Glucose
Module. All test results are provided on-screen in about 90 seconds.
Integration of measurement data to HP's Viridia CMS and Viridia 24/26
patient monitors will be made through a VueLink interface. The VueLink interface
connects third-party instruments to HP's monitors directly.
About Diametrics Medical, Inc.
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Diametrics Medical, Inc. is a leader in critical care technology. The
company is dedicated to creating solutions that improve the quality of health
care delivery through products and services that provide immediate, accurate and
cost-effective time critical blood and tissue analysis. Additional information
is available at the company's Web site, www.diametrics.com.
About HP's Medical Products Group
- ---------------------------------
HP's Medical Products is a worldwide leader of acute-care patient
monitoring, cardiovascular ultrasound imaging and clinical-information systems
for critical care; as well as services, support and supplies for the healthcare
industry. The group has 5,400 employees and had revenues of more than $1.3
billion in its 1998 fiscal year. Information about HP Medical Products Group can
be found at the company's Web site, www.hp.com/go/healthcare.
About HP
- --------
<PAGE>
Hewlett-Packard Company -- a leading global provider of computing and
imaging solutions and services for business and home -- is focused on
capitalizing on the opportunities of the Internet and the proliferation of
electronic services.
HP had computer-related revenue of $39.5 billion in its 1998 fiscal year.
HP plans to launch a new company consisting of its industry-leading
test-and-measurement, semiconductor products, chemical-analysis and medical
businesses. These businesses represented $7.6 billion of HP's total revenue in
fiscal 1998. With leading positions in multiple market segments, this
technology-based company will focus on opportunities such as communications and
life sciences.
HP has 123,000 employees worldwide and had total revenue of $47.1 billion
in its 1998 fiscal year. Information about HP, its products and the company's
Year 2000 program can be found on the World Wide Web at http://www.hp.com.
# # #
Statements regarding the company's expectations about new and existing products,
future financial performance and other forward looking statements are subject to
various risks and uncertainties, including without limitation, demand and
acceptance of new and existing products, technological advances and product
obsolescence, competitive factors and the availability of capital to finance
growth. These and other risks are discussed in greater detail in the company's
filings with the Securities and Exchange Commission.
SureStep is a trademark of LifeScan, a Johnson & Johnson company
