<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to______
Commission file number 0-26268
MINIMED INC.
(Exact Name of Registrant as Specified in its Charter)
---------------
Delaware 95-4408171
(State or other jurisdiction of (I.R.S. Employer
incorporated or organization) Identification No.)
12744 SAN FERNANDO ROAD, SYLMAR,
CA 91342 (Address of Principal
Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (818) 362-5958
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
TITLE OF EACH CLASS OUTSTANDING AT NOVEMBER 3, 1998
Common Stock, $.01 par value 13,486,090
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<PAGE> 2
INDEX
MINIMED INC.
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Consolidated Balance Sheets (Unaudited) - January 2, 1998 and October 2, 1998 3
Consolidated Statements of Income (Unaudited) -- Three months and nine months
ended September 26, 1997 and October 2, 1998 4
Consolidated Statements of Cash Flows (Unaudited) -- Nine months ended
September 26, 1997 and October 2, 1998 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II. OTHER INFORMATION 17
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
INDEX TO EXHIBITS 19
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
MINIMED INC.
CONSOLIDATED BALANCE SHEETS
JANUARY 2, 1998 AND OCTOBER 2, 1998
<TABLE>
<CAPTION>
ASSETS
1997 1998
------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................................... $ 22,282,000 $ 14,336,000
Short-term investments ...................................................... 18,713,000 2,239,000
Accounts receivable, net of allowance for doubtful accounts of $6,250,000 and
$5,693,000 at January 2, 1998 and October 2, 1998, respectively ........... 24,661,000 28,813,000
Inventories ................................................................. 10,672,000 15,055,000
Deferred income taxes ....................................................... 5,803,000 8,611,000
Prepaid expenses and other current assets ................................... 1,279,000 3,379,000
------------- -------------
Total current assets ............................................ 83,410,000 72,433,000
LONG-TERM INVESTMENTS ......................................................... 4,118,000 1,569,000
NOTE RECEIVABLE FROM MRG ...................................................... -- 3,600,000
OTHER ASSETS .................................................................. 1,348,000 4,211,000
------------- -------------
LAND, BUILDINGS, PROPERTY AND EQUIPMENT - Net ................................. 16,943,000 28,538,000
------------- -------------
TOTAL ........................................................................ $ 105,819,000 $ 110,351,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable ............................................ $ 2,453,000 $ 275,000
Accounts payable ............................................................ 4,371,000 3,361,000
Accrued salaries and related benefits ....................................... 3,719,000 3,795,000
Accrued sales commissions ................................................... 1,943,000 1,038,000
Accrued warranties .......................................................... 3,498,000 3,558,000
Income taxes payable ........................................................ 276,000 188,000
Other accrued expenses ...................................................... 3,741,000 859,000
------------- -------------
Total current liabilities ........................................ 20,001,000 13,074,000
------------- -------------
Deferred tax liabilities .................................................... 2,007,000 2,282,000
Notes payable ............................................................... 728,000 --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; 40,000,000 shares authorized; 13,260,240 and
13,476,890 shares issued and outstanding as of January 2, 1998
and October 2, 1998, respectively ........................................ 135,000 137,000
Additional capital ......................................................... 73,806,000 78,989,000
Cumulative foreign currency translation .................................... (312,000) (275,000)
Unrealized gain (loss) on marketable securities ............................ 1,371,000 (209,000)
Retained earnings .......................................................... 8,083,000 16,353,000
------------- -------------
Total stockholders' equity ...................................... 83,083,000 94,995,000
------------- -------------
TOTAL ......................................................................... $ 105,819,000 $ 110,351,000
============= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 4
MINIMED INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26, OCTOBER 2,
1997 1998 1997 1998
------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
NET SALES ................................. $ 25,038,000 $ 34,897,000 $ 67,121,000 $ 92,979,000
COST OF SALES ............................. 9,547,000 13,071,000 26,628,000 36,511,000
------------ ------------ ------------ ------------
GROSS PROFIT .............................. 15,491,000 21,826,000 40,493,000 56,468,000
OPERATING EXPENSES:
Selling, general and administrative ..... 10,669,000 14,643,000 28,334,000 37,963,000
Research and development ................ 2,424,000 3,892,000 6,357,000 10,946,000
Research and development contract income -- (1,500,000) -- (4,500,000)
------------ ------------ ------------ ------------
Total operating expenses ...... 13,093,000 17,035,000 34,691,000 44,409,000
------------ ------------ ------------ ------------
OPERATING INCOME .......................... 2,398,000 4,791,000 5,802,000 12,059,000
OTHER INCOME, Including interest income ... 467,000 446,000 983,000 1,172,000
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES ............... 2,865,000 5,237,000 6,785,000 13,231,000
PROVISION FOR INCOME TAXES ................ 986,000 2,020,000 2,349,000 4,961,000
------------ ------------ ------------ ------------
NET INCOME ................................ $ 1,879,000 $ 3,217,000 $ 4,436,000 $ 8,270,000
============ ============ ============ ============
BASIC EARNINGS PER SHARE .................. $ 0.14 $ 0.24 $ 0.35 $ 0.62
============ ============ ============ ============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING . 13,193,000 13,416,000 12,787,000 13,337,000
============ ============ ============ ============
DILUTED EARNINGS PER SHARE ................ $ 0.14 $ 0.23 $ 0.33 $ 0.59
============ ============ ============ ============
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 13,771,000 14,158,000 13,419,000 14,046,000
============ ============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE> 5
MINIMED INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND NINE MONTHS ENDED OCTOBER 2, 1998
<TABLE>
<CAPTION>
1997 1998
------------ ------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................. $ 4,436,000 $ 8,270,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation .......................................... 2,057,000 2,723,000
Deferred income taxes ................................. (2,259,000) (1,564,000)
Changes in operating assets and liabilities:
Accounts receivable, net ............................ 465,000 (4,152,000)
Inventories ......................................... (3,169,000) (7,407,000)
Prepaid expenses and other current assets ........... 145,000 (2,100,000)
Other assets ........................................ (1,309,000) 902,000
Accounts payable .................................... 672,000 (1,010,000)
Income taxes payable ................................ 450,000 3,409,000
Accrued expenses .................................... 684,000 (3,651,000)
------------ ------------
Net cash provided by (used in) operating activities . $ 2,172,000 $ (4,580,000)
============ ============
CASH FLOWS FROM INVESTING ACTIVITIES -
Short-term investments .............................. (5,706,000) 16,473,000
Long-term investments ............................... (2,000,000) --
Acquisition of Dartec A.B ........................... -- (2,625,000)
Issuance of notes receivable ........................ -- (1,140,000)
Purchase of land, buildings, property and equipment . (4,153,000) (14,899,000)
------------ ------------
Net cash used in investing activities ............... $(11,859,000) $ (2,191,000)
============ ============
CASH FLOWS FROM FINANCING ACTIVITIES -
Repayment of notes payable .......................... -- (2,905,000)
Issuance of notes payable ........................... 768,000 --
Proceeds from public offering, net of expenses ...... 22,169,000 --
Proceeds from exercises of warrants ................. 2,600,000 --
Proceeds from stock option exercises ................ 212,000 1,226,000
Proceeds from issuance of common stock under employee
stock plan ....................................... 280,000 467,000
------------ ------------
Net cash provided by (used in) financing activities $ 26,029,000 $ (1,212,000)
============ ============
Effect of cumulative foreign currency translation
adjustment on cash and equivalents ................ (275,000) 37,000
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ......................................... 16,067,000 (7,946,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD .............................................. 10,405,000 22,282,000
------------ ------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD .............................................. $ 26,472,000 $ 14,336,000
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest .............................................. $ 167,000 $ 49,000
Income taxes .......................................... $ 3,596,000 $ 5,421,000
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY - During the nine months
ended October 2, 1998, the Company recorded an unrealized holding loss of
$1,580,000, net of estimated taxes, on marketable securities classified as
long-term investments available for sale. The Company has recognized a reduction
in income taxes payable of $623,000 and $3,497,000 during the nine months ended
September 26, 1997 and October 2, 1998, respectively, related to the exercise of
nonqualified stock options. On September 1, 1998, the Company accepted a $3.6
million note receivable from a related party in conjunction with the sale of
$3.0 million of net implantable pump inventory components and $600,000 of net
implantable pump fixed assets.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE> 6
MINIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND NINE MONTHS ENDED OCTOBER 2, 1998
The fiscal years referenced herein are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR YEAR ENDED
----------- ----------
<S> <C>
1998 January 1, 1999
1997 January 2, 1998
</TABLE>
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of MiniMed Inc.
("MiniMed" or the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
normal, recurring adjustments considered necessary for a fair presentation have
been included. The financial statements should be read in conjunction with the
audited financial statements included in the Annual Report of MiniMed Inc. filed
on Form 10-K with the Securities and Exchange Commission for the year ended
January 2, 1998. The results of operations for the nine months ended October 2,
1998 are not necessarily indicative of the results that may be expected for the
fiscal year ending January 1, 1999.
NOTE 2. INCOME TAXES
Net income and earnings per share reflect income taxes which have been
recorded at the Company's estimated effective tax rate for the year. This
estimated income tax rate has been determined by giving consideration to the
pretax earnings and losses applicable to foreign and domestic tax jurisdictions.
NOTE 3. WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128), basic earnings per share for the three and nine
months ended September 26, 1997 and October 2, 1998, were computed by dividing
net income by weighted average common shares outstanding during the periods
presented. Diluted earnings per share for the periods presented were computed by
dividing net income by weighted average common and common equivalent shares
outstanding, computed in accordance with the treasury stock method. The
computation of basic and diluted EPS is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26, OCTOBER 2,
1997 1998 1997 1998
------------- ----------- ------------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
BASIC EPS COMPUTATION
Numerator:
Net income applicable to common stock ............ $ 1,879,000 $ 3,217,000 $ 4,436,000 $ 8,270,000
----------- ----------- ----------- -----------
Denominator:
Weighted average common shares outstanding ....... 13,193,000 13,416,000 12,787,000 13,337,000
----------- ----------- ----------- -----------
Basic earnings per share ......................... $ 0.14 $ 0.24 $ 0.35 $ 0.62
=========== =========== =========== ===========
DILUTED EPS COMPUTATION
Numerator:
Net income applicable to common stock ............ $ 1,879,000 $ 3,217,000 $ 4,436,000 $ 8,270,000
----------- ----------- ----------- -----------
Denominator:
Weighted average common shares outstanding ....... 13,193,000 13,416,000 12,787,000 13,337,000
Effect of dilutive securities
Stock options ............................... 578,000 742,000 632,000 709,000
----------- ----------- ----------- -----------
Diluted weighted average shares outstanding ...... 13,771,000 14,158,000 13,419,000 14,046,000
----------- ----------- ----------- -----------
Diluted earnings per share ....................... $ 0.14 $ 0.23 $ 0.33 $ 0.59
=========== =========== =========== ===========
</TABLE>
6
<PAGE> 7
MINIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND NINE MONTHS ENDED OCTOBER 2, 1998
NOTE 4. CONSOLIDATED BALANCE SHEET COMPONENTS
Certain balance sheet components are as follows:
<TABLE>
<CAPTION>
JANUARY 2, OCTOBER 2,
1998 1998
------------ ------------
(Unaudited)
<S> <C> <C>
Inventories:
Raw materials ............... $ 5,152,000 $ 4,792,000
Work-in-progress ............ 1,819,000 2,295,000
Finished goods .............. 3,701,000 7,968,000
------------ ------------
Total ....................... $ 10,672,000 $ 15,055,000
============ ============
Property, plant and equipment:
Land, buildings and
improvements .............. $ 10,625,000 $ 12,733,000
Machinery and equipment ..... 8,533,000 16,964,000
Tooling and molds ........... 2,493,000 2,205,000
Furniture and fixtures ...... 1,948,000 4,511,000
------------ ------------
23,599,000 36,413,000
Less accumulated depreciation (6,656,000) (7,875,000)
------------ ------------
Total ....................... $ 16,943,000 $ 28,538,000
============ ============
Other assets:
Technology license .......... $ 197,000 $ 158,000
Inventory components, non
current .................. 999,000 --
Dartec A.B. goodwill ........ -- 2,625,000
Notes receivable ............ -- 1,140,000
Other ....................... 152,000 288,000
------------ ------------
Total ....................... $ 1,348,000 $ 4,211,000
============ ============
</TABLE>
7
<PAGE> 8
MINIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND NINE MONTHS ENDED OCTOBER 2, 1998
NOTE 5. COMPREHENSIVE INCOME
The Company's total comprehensive income was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ----------------------------
SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26, OCTOBER 2,
1997 1998 1997 1998
------------- ----------- ------------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Net income $ 1,879,000 $ 3,217,000 $ 4,436,000 $ 8,270,000
Other comprehensive income (loss):
Foreign currency translation
adjustments 2,000 35,000 (275,000) 37,000
Unrealized loss on securities -- (676,000) -- (2,549,000)
----------- ----------- ----------- -----------
Other comprehensive income (loss),
before tax 2,000 (641,000) (275,000) (2,512,000)
Income tax expense related to items of
other comprehensive income -- 258,000 -- 969,000
----------- ----------- ----------- -----------
Other comprehensive income (loss) 2,000 (383,000) (275,000) (1,543,000)
----------- ----------- ----------- -----------
Total comprehensive income $ 1,881,000 $ 2,834,000 $ 4,161,000 $ 6,727,000
=========== =========== =========== ===========
</TABLE>
NOTE 6. SALE OF IMPLANTABLE INSULIN PUMP ASSETS
On September 1, 1998, the Company sold assets and transferred
technology related to its implantable pump program to Medical Research Group,
LLC ("MRG") and entered into a series of related transactions. MRG was founded
by Alfred E. Mann, founder, Chairman, CEO and largest stockholder of MiniMed.
Mr. Mann continues to hold a substantial equity interest in MRG.
MiniMed sold assets, consisting primarily of inventories and equipment,
to MRG in exchange for a note receivable of approximately $3.6 million. No gain
or loss has been recognized on the sale of these assets. The note receivable is
due and payable in full on December 31, 2003, and accrued interest is payable on
December 31 of each year prior to maturity. The note bears interest at a rate of
7.0% annually. The note is secured by the assets sold to MRG. The Company has
also leased facilities and improvements to MRG at which MRG will carry out its
activities. The obligations of MRG under such lease are guaranteed by Mr. Mann.
Certain employees of the Company involved in the manufacturing operations and
research and development activities related to the implantable pump product line
have become employees of MRG. The Company has been granted exclusive
distribution rights to the implantable pump product line for specific medical
conditions. Pursuant to the distribution agreement, MiniMed will purchase
implantable pump units from MRG at negotiated transfer prices, and must purchase
minimum quantities in order to preserve exclusivity of such rights. The Company
is also responsible for pursuing regulatory approval of the implantable pump for
the treatment of diabetes. The Company has also provided MRG with a working
capital line of credit of $3.0 million, which will bear interest at 7.0%
annually. Any amounts borrowed under the line of credit are due on or before
December 31, 2001 and will be secured by a pledge of MiniMed common stock owned
by Mr. Mann. To date, MRG has not borrowed any funds under this line of credit.
As part of this transaction MRG has also granted MiniMed an option to
acquire exclusive world-wide distribution rights to MRG's long-term glucose
sensor, currently under development, for $30.0 million. The option is
exercisable upon MRG's achievement of certain development milestones. MRG is
attempting to integrate its long-term glucose technology with the implantable
pump. MRG has also agreed to pursue the development of certain improvements to
the electronic design of the implantable pump.
8
<PAGE> 9
MINIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND NINE MONTHS ENDED OCTOBER 2, 1998
NOTE 7. CONTINGENCIES
On September 11, 1996, the Company filed an action against Fimed, Inc.
("Fimed") seeking rescission of a product distribution contract. Subsequent to
the filing of this action, Fimed filed a counterclaim seeking compensatory
damages of approximately $400 million, plus punitive damages. The Company
believes that it has meritorious defenses to the counterclaim asserted by Fimed.
Fact discovery pertaining to the litigation has been largely completed, and
trial has been set to commence May 1999. The Company has been pursuing its
claims and defending against Fimed's claims vigorously.
During 1998, the Company has been undertaking the integration of the
operations of Home Medical Supply, Inc. and its affiliated companies ("HMS")
which the Company acquired in January 1998. In connection with these activities,
the Company discovered certain business practices, relating to charges billed to
the State of Florida for health care services provided through an affiliated
pharmacy, which were implemented by HMS' prior owners and which may potentially
result in liability to the Company. The Company has received no notice of any
action which is pending or threatened against it in connection therewith. The
Company has corrected such practices, notified the State of Florida authorities
of its findings, initiated legal action against the prior owners to seek
indemnification for any such liability and is pursuing other legal remedies. The
amount of liability to the Company, if any, cannot be determined at this time,
although the Company believes that indemnification for such liability would be
available from HMS' prior owners.
The Company has initiated a plan to address the year 2000 issue.
Management estimates that the implementation of the entire plan will be
completed prior to the year 2000, and will cost approximately $500,000.
Management believes that the Company has adequate working capital to fund the
program.
During the normal course of business, the Company may be subject to
litigation involving various business matters. Management believes that an
adverse outcome of any such known matters would not have a material adverse
impact on the Company.
NOTE 8. SUBSEQUENT EVENTS
On October 31, 1998, the Company acquired Diabetes Support Systems,
Inc. ("DSS"), a distributor of diabetes products, including the Company's
products, located in South Florida. The Company purchased substantially all of
the net assets of DSS, with the exclusion of certain liabilities and
contingencies, for $3.2 million in cash and notes payable totaling $1.8 million.
The notes payable bear interest at 6.0% and are due and payable $800,000 on
October 31, 1999 and $1.0 million on October 31, 2000. The Company intends to
integrate DSS with its Florida operations.
On November 5, 1998, the Company and an affiliate of Medtronic, Inc.
("Medtronic") entered into an agreement under which Medtronic is to purchase up
to $30.0 million of MiniMed common stock at $60.00 per share. Under the
arrangement, Medtronic purchased 233,334 shares on November 5, 1998, for
approximately $14.0 million and entered into a second agreement to purchase
266,666 shares for approximately $16.0 million, subject to compliance with the
Hart-Scott-Rodino Antitrust Improvements Act.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of MiniMed should be read in conjunction with the consolidated
financial statements and the related notes thereto incorporated by reference
herein. Any statements released by the Company that are forward looking,
including statements relating to future operating results, product development
and research activities, pharmaceutical product sales, pharmacy restructuring,
regulatory approvals, the impact on the Company of the sale of its implantable
pump assets to MRG, the benefits to be derived from the DSS acquisition, the
ability of the Company to obtain indemnification from HMS' prior owners, the
Company's plans to exercise its option to purchase marketing rights to the MRG
long-term glucose sensor, research and development expenditures, adequacy of
working capital and cash requirements, litigation and other contingencies,
capital expenditures and requirements, manufacturing trends, product and service
offerings, financing of new facilities and Year 2000 compliance issues are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that forward-looking statements
involve risks and uncertainties which may affect the Company's business and
prospects, including changes in economic and market conditions, healthcare
legislation, the ability to obtain licensing and regulatory approvals, progress
in MiniMed's alliances with pharmaceutical companies, the development of
competing drug delivery systems, management of growth, the effective integration
of HMS and DSS into the Company, MRG's ability to effectively develop
implantable pumps and its long-term glucose sensor, the outcome of certain
litigation, and other factors discussed in the Company's filings with the
Securities and Exchange Commission.
GENERAL
Product development has focused upon four product lines: external
insulin pumps and related disposables, implantable insulin pumps, continuous
glucose monitoring systems, and therapy delivery systems for other chronic
medical conditions. Sales and profits to date have been generated primarily
through the sale of external pumps and disposable products used to deliver
insulin for the intensive management of diabetes. With its acquisition of HMS
effective January 2, 1998, the Company's consolidated operating results also
include sales related to the distribution of other diabetes supplies and
pharmaceutical products.
RESULTS OF OPERATIONS
The following table sets forth, for the three and nine month periods ended
October 2, 1998, and September 26, 1997, the percentage relationship to net
sales of certain items in the Company's consolidated statements of income and
the percentage change in the dollar amount of such items on a comparative basis.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------- -----------------------------------
OCTOBER 2, SEPTEMBER 26, % INCREASE OCTOBER 2, SEPTEMBER 26, % INCREASE
1998 1997 (DECREASE) 1998 1997 (DECREASE)
---------- ------------- ---------- ---------- ------------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 39.4% 100.0% 100.0% 38.5%
Cost of sales 37.5 38.1 36.9 39.3 39.7 37.1
----- ----- ----- ----- ----- -----
Gross profit 62.5 61.9 40.9 60.7 60.3 39.5
Operating expenses:
Selling, general and administrative 41.9 42.6 37.2 40.8 42.2 34.0
Research and development 11.2 9.7 60.6 11.8 9.5 72.2
Research and development contract (4.3) 0.0 n/a (4.8) 0.0 n/a
----- ----- ----- ----- ----- -----
Total operating expenses 48.8 52.3 30.1 47.8 51.7 28.0
----- ----- ----- ----- ----- -----
Operating income 13.7% 9.6% 99.8% 12.9% 8.6% 107.8%
===== ===== ===== ===== ===== =====
</TABLE>
10
<PAGE> 11
The following table sets forth domestic and international net sales and
gross profits related to the Company's primary product lines for the three and
nine month periods ended September 26, 1997 and October 2, 1998.
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS % OF NET SALES
----------------------------------------------- ----------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- --------------------- ------------------ -----------------
OCT 2, SEPT 26, OCT 2, SEPT 26, OCT 2, SEPT 26, OCT 2, SEPT 26,
1998 1997 1998 1997 1998 1997 1998 1997
-------- -------- -------- -------- ----- ----- ----- -----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DOMESTIC AND
INTERNATIONAL NET SALES
External pumps and
related disposables
Domestic $ 28,637 $ 18,627 $ 72,965 $ 48,476 82.1% 74.4% 78.5% 72.2%
International 2,688 1,740 7,644 4,820 7.7 6.9 8.2 7.2
-------- -------- -------- -------- ----- ----- ----- -----
Subtotal 31,325 20,367 80,609 53,296 89.8 81.3 86.7 79.4
Other diabetes supplies 1,364 714 4,334 3,960 3.9 2.9 4.7 5.9
Pharmaceutical products 2,065 3,681 7,554 9,203 5.9 14.7 8.1 13.7
Implantable Pumps 143 276 482 662 0.4 1.1 0.5 1.0
-------- -------- -------- -------- ----- ----- ----- -----
Net Sales $ 34,897 $ 25,038 $ 92,979 $ 67,121 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ======== ===== ===== ===== =====
GROSS PROFITS
External pumps and
related disposables $ 21,577 $ 14,999 $ 55,544 $ 38,510 61.8% 59.9% 59.7% 57.4%
Other diabetes supplies 481 264 1,655 1,702 1.4 1.1 1.8 2.5
Pharmaceutical products 62 552 925 1,381 0.2 2.2 1.0 2.1
Implantable pumps (294) (324) (1,656) (1,100) (0.8) (1.3) (1.8) (1.6)
-------- -------- -------- -------- ----- ----- ----- -----
Total $ 21,826 $ 15,491 $ 56,468 $ 40,493 62.6% 61.9% 60.7% 60.4%
======== ======== ======== ======== ===== ===== ===== =====
</TABLE>
NET SALES
Net sales increased 39.4% during the three months ended October 2, 1998
over the three months ended September 26, 1997 to $34,897,000 from $25,038,000,
and 38.5% to $92,979,000 from $67,121,000 from the first nine months of 1997 to
the first nine months of 1998. This sales growth is principally the result of an
increase of 53.8%, or $10,958,000, in the sales volume of external pumps and
related disposables for the third quarter of 1998 over the third quarter of
1997, with sales of these products increasing $27,313,000 or 51.2% for the first
nine months of 1998 over the corresponding period of 1997. Domestic sales of
these products grew 53.7% or $10,010,000 in the third quarter of 1998 compared
to the third quarter of 1997, while international sales increased 54.5% or
$948,000 during the same period. For the first nine months of 1998, domestic and
foreign sales of external pumps and related disposable products increased by
50.5% and 58.6%, respectively, over the comparable period of 1997.
Domestic net sales growth resulted primarily from increased volume of
external pumps and related disposables, with some of the domestic sales growth
attributable to an increase in the average realized sales price of external
pumps. The effective price increase is generally the result of a continued shift
of external pump sales from independent dealers to internal sales, thus
eliminating the discount given to such dealers. International sales of external
pumps and related disposable products grew primarily due to greater sales
volumes of external pumps. The Company has realized a slight decrease in the
average sales price realized on international pump sales as the Company is
expanding its presence in several countries. Domestic and international pricing
for disposable products did not change materially from the first nine months of
1997 to the first nine months of 1998.
Pharmaceutical product sales decreased 43.9% or $1,616,000 to
$2,065,000 in the third quarter of 1998 compared to $3,681,000 in the third
quarter of 1997 and decreased 17.9% or $1,649,000 to $7,554,000 in the first
nine months of 1998 compared to $9,203,000 in the first nine months of 1997.
Pharmacy sales will continue to be lower than 1997 sales as the pharmacy
operations are being restructured to better serve MiniMed's diabetes business.
Such restructuring includes the discontinuation of certain product lines
previously offered by the pharmacy. Sales of other diabetes supplies increased
91.0% or $650,000 to $1,364,000 for the third quarter of 1998 compared to
$714,000 in the 1997 third quarter and have increased by 9.4% or $374,000 to
$4,334,000 during the first nine months of 1998 compared to $3,960,000 in the
comparable period of 1997. The increase in sales of other diabetes supplies for
both the three and nine months ended October 2, 1998 was primarily attributable
to sales from the Company's subsidiary in Sweden. Domestic sales
11
<PAGE> 12
volumes of other diabetes supplies have increased, however, gross profits on
these products have decreased due to pricing pressures.
On October 31, 1998, the Company acquired Diabetes Support Systems,
Inc. ("DSS"), a distributor of the Company's products and other diabetes
supplies located in South Florida (see notes to consolidated financial
statements). The Company believes that the acquisition of DSS will enhance its
internal distribution channels to a broader patient base and provide more
support for sales growth of its core business products and other diabetes
supplies.
Sales of implantable pumps decreased from the third quarter of 1997 to
the third quarter of 1998 and have decreased for the first nine months of 1998
compared to the first nine months of 1997. Regulatory approval for the
implantable pump and special insulin utilized in the implantable system is still
pending. Although the Company received certification for the implantable pump
under the applicable directives issued by the European Union (the "EU") and
received the CE Mark in March 1995 (permitting commercial sale throughout the
EU), separate approval from the EU is required for commercial sale of the
insulin and no assurance can be given as to when such approval will be received,
if at all. The implantable pump and the special insulin remain subject to
regulatory review and approval in the United States. No assurance can be given
when such approvals will be received, if at all.
OPERATING RESULTS
Cost of Sales and Gross Profits--Cost of sales increased 36.9% during
the three months ended October 2, 1998 as compared to the three months ended
September 26, 1997 to $13,071,000 from $9,547,000, and increased 37.1% to
$36,511,000 from $26,628,000 for the nine months ended October 2, 1998 as
compared to the nine months ended September 26, 1997. As a percentage of net
sales, cost of sales in the 1998 third quarter decreased to 37.5% from 38.1% in
the comparable period of 1997, while cost of sales as a percentage of net sales
for the first nine months of 1998 decreased to 39.3% from 39.7% for comparable
period of 1997. Gross margins on external pumps and disposables decreased to
68.9% of such sales during the 1998 third quarter, compared to 73.6% for this
product line during the 1997 third quarter. For the first nine months of 1998
gross margins on external pumps and disposables decreased to 68.9% of such sales
compared to 72.3% for the comparable period in 1997. Year-to-date and quarterly
gross margins on these products were affected by several factors. The Company
has added a disposable product line which is not manufactured in-house,
therefore resulting in lower margins. The Company intends to continue to
purchase and sell various disposable products manufactured by third party
manufacturers and expects to achieve better margins on these products when
certain purchase volumes have been met. In an effort to seed international
growth, the Company has realized a reduction in average external pump sales
prices outside of the United States. Gross margins as a percentage of
corresponding product line sales in 1998 have also decreased for the
pharmaceutical products and other diabetes supplies product lines for the third
quarter of 1998 and on a year-to-date basis as compared to the third quarter and
first nine months of 1997. The reduction in pharmaceutical products gross
margins is the result of the restructuring of the pharmacy operations and
discontinuation of certain pharmaceutical product lines. Other diabetes supplies
gross margins have decreased due to the lower domestic average sales prices
described above.
The Company's gross profits have been adversely impacted by the
implantable pump product line during the nine months ended October 2, 1998 due
to continued limited sales prior to such product's full commercial release. Such
limited sales have inhibited the Company's ability to realize manufacturing
efficiencies on this product line and have caused unfavorable manufacturing
variances. On September 1, 1998, the Company sold assets and transferred
technology related to its implantable pump business to MRG. MRG was founded by
Alfred E. Mann, the Company's founder, Chairman, CEO and largest stockholder.
Mr. Mann continues to hold a substantial equity position in MRG. MRG will assume
all manufacturing and development activity related to the implantable pump (see
notes to consolidated financial statements).
Operating Expenses--Selling, general and administrative expenses
increased 37.2% during the three months ended October 2, 1998 as compared to the
three months ended September 26, 1997 to $14,643,000 from $10,669,000. For the
nine months ended October 2, 1998, selling, general and administrative expenses
12
<PAGE> 13
grew 34.0% to $37,963,000 from $28,334,000 for the nine months ended September
26, 1997. As a percentage of net sales, these expenses decreased to 41.9% and
40.8% during the three and nine month periods ended October 2, 1998 compared to
42.6% and 42.2% for the comparable three and nine month periods ended September
26, 1997. These expenses have decreased as a percentage of sales primarily due
to the Company's increased sales volumes. The overall increase in spending is
also related primarily to the increase in sales activities during such periods.
Research and development expenses grew 60.6% during the three months
ended October 2, 1998 over the three months ended September 26, 1997 to
$3,892,000 from $2,424,000, with research and development expenses increasing
72.2% to $10,946,000 for the first nine months of 1998 compared to $6,357,000
for the first nine months of 1997. As a percentage of sales, research and
development expenses increased to 11.2% during the three months ended October 2,
1998 from 9.7% during the comparable period in 1997, and increased to 11.8% from
9.5% of net sales during the first nine months of 1998 as compared to the first
nine months of 1997. The 1998 increase in research and development costs
resulted from greater resources directed to the development of continuous
glucose monitoring systems, start-up manufacturing operations of the continuous
glucose monitoring systems, future generation external insulin pumps and
disposable products, data communication capabilities for external pumps and
continuous glucose monitoring systems and the Company's joint development
project with Roche Diagnostics/Boehringer Mannheim Corporation. The Company will
realize a reduction in research and development expenses in future periods due
to the sale of assets related to the implantable pump program to MRG (see notes
to consolidated financial statements). However, on an overall basis, research
and development expenses will continue to increase during the fourth quarter of
1998 and during 1999. Future increases in research and development spending are
expected for various continuous glucose monitoring systems and future generation
external pumps and related disposable products for the treatment of diabetes and
other medical conditions as well as other new activities.
The Company filed an application with the Food and Drug Administration
("FDA") for 510(k) clearance for the first continuous glucose monitoring system
for ambulatory use during the fourth quarter of 1997. This application has been
converted to an application for premarket approval which required additional
documentation to be submitted by the Company to the FDA prior to approval of the
first generation of continuous glucose monitoring systems. Substantially all of
such documentation has been submitted to the FDA. The FDA has granted the
Company expedited review status on this product and has completed an audit of
the statistical results obtained in clinical studies and an inspection of the
Company's continuous glucose monitoring systems manufacturing facilities. Future
research and development costs on the continuous glucose monitoring systems
relate to continued refinement of the products prior to regulatory approval,
continued investment in a continuous glucose monitoring systems manufacturing
operation and development of the next generation of continuous glucose
monitoring systems. The Company anticipates that research and development
expenditures for future periods will increase as more of its new technological
innovations approach commercialization. The Company achieved the necessary
milestone on its research and development contract with American Medical
Instruments, Inc., a member of The Marmon Group of Companies, ("AMI"), and
appropriately recognized $1.5 million in research and development contract
revenues during the quarter, recorded as a reduction of operating expenses.
The Company from time to time invests in new and developing
technologies that may provide improvements to the Company's core technology or
that may provide additional applications for the Company's existing technologies
and products. These investments may be in the form of equity investments, loans,
research and development agreements, and strategic alliance or cooperation
agreements. No assurance can be given as to when such investments will provide
useful new technologies or applications, if at all. Such investments may result
in losses that could adversely affect the Company's future earnings and results
of operations.
Other--Other income during the three and nine months ended October 2,
1998 and during the three and nine months ended September 26, 1997 consists
primarily of interest income generated from the Company's cash, cash
equivalents, and short-term investment balances. Other income will fluctuate in
future periods based upon the funds available to the Company for investment.
13
<PAGE> 14
The Company's effective tax rate during the first nine months of 1998
and 1997 has been computed giving consideration to the pretax earnings and
losses applicable to the Company's foreign and domestic tax jurisdictions.
Inflation has not significantly impacted the Company's results of operations for
the past two years.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended October 2, 1998, the Company used cash
in operations of $4,580,000 compared to $2,172,000 provided by operations in the
comparable period in 1997. Cash used in operations increased primarily due to
increased receivables related to sales growth, increased inventory levels
required to support planned sales growth, product introductions and payment of
several current liabilities, including the payment of fiscal 1997 accrued
compensation and the retirement of trade debt owed to several significant
vendors associated with HMS operations. The Company also used $2.6 million of
cash to complete its acquisition of Dartec A.B., a Scandinavian distributor
during the first quarter of 1998. The increase in capital expenditures to
$14,899,000 during the first nine months of 1998 compared to $4,153,000 spent
during the comparable period in 1997, resulted primarily from building
continuous glucose monitoring systems manufacturing capacity, as well as other
building improvements, to support growth, manufacturing expansion, research and
development engineering equipment and information systems requirements. The
Company anticipates that future capital expenditures will continue to increase
to support the Company's new product activities and to build the infrastructure
necessary to accommodate the Company's anticipated growth. The Company also used
cash of $2.9 million to retire bank debt related to HMS operations, with
$275,000 of debt remaining outstanding as of October 2, 1998.
There were no significant equity transactions during the first nine
months of 1998. On November 5, 1998, the Company and Medtronic entered into an
agreement under which Medtronic is to purchase up to $30.0 million of MiniMed
common stock at $60.00 per share. Under the arrangement, on November 5, 1998,
Medtronic purchased 233,334 shares for approximately $14.0 million and entered
into a second agreement to purchase 266,666 shares for approximately $16.0
million, subject to compliance with the Hart-Scott-Rodino Antitrust Improvements
Act. The Company maintains an unsecured line of credit which enables the Company
to borrow up to $10.0 million through January 31, 1999. The Company has not
drawn any funds under such line of credit. The line of credit, if used, bears
interest at an adjustable rate equal to the 30-day commercial paper rate plus
2.15% (7.2% as of October 29, 1998). The Company is also required to maintain
certain cash, net worth and debt covenants under the provisions of this line of
credit. The Company is currently in compliance with all of these covenants.
In the process of integrating certain HMS operations, the Company
discovered certain business practices relating to charges billed to the State of
Florida which were implemented by prior ownership and that may potentially
result in liability. Such billing activities were related to health care
services provided through an affiliated pharmacy. The Company has received no
notice of any action which is pending or threatened against it in connection
therewith. The Company has corrected such practices, notified the State of
Florida of its findings and initiated legal action against the prior owners to
seek indemnification for any such liability. The amount of liability to the
Company, if any, cannot be determined at this time, although the Company
believes that indemnification for such liability would be available from such
prior owners. The Company also is involved in certain other litigation, the
financial impact of which is uncertain. (see notes to consolidated financial
statements.)
Under terms of its research and development contract with AMI, the
Company received $4.5 million during the first nine months of 1998. The Company
also has the right to purchase the technologies developed at prices ranging from
an aggregate of $13.5 million to $19.0 million during certain periods through
July 30, 2002. The Company may alternatively elect to pay royalties on sales of
these products in lieu of purchasing the technologies. The Company has entered
into an agreement by which, among other transactions, the Company has acquired
an option to purchase the exclusive world-wide marketing rights to a long-term
glucose sensor developed by MRG for $30.0 million (see notes to consolidated
financial statements). The Company does not anticipate exercising this option
prior to 2000. In the event that the Company pursues either of these
opportunities, additional capital resources will be required.
14
<PAGE> 15
On October 31, 1998, the Company acquired DSS, a distributor of the
Company's products and other diabetes supplies located in South Florida. The
Company paid $5.0 million consisting of $3.2 million in cash and $1.8 million in
notes payable, $800,000 due in 1999 and $1,000,000 in 2000 for substantially all
of the net assets of DSS. In connection with this acquisition, the Company will
also retire approximately $2.0 million in short-term and long-term debt of DSS
during the 1998 fourth quarter.
The Company plans to develop a new corporate headquarters in Southern
California, not far from the current Sylmar location. Substantial capital
resources will be required to construct and equip this facility, and the Company
is pursuing alternative financing sources in connection therewith. The Company
anticipates that the construction of this facility will be financed under a
synthetic lease, with a separate operating lease on the land for 40-years plus
renewal opportunities.
Management believes that the Company's current level of cash and cash
equivalents, combined with the Company's existing line of credit, will be
sufficient to meet its needs for working capital and capital expenditures for
the next twelve to twenty-four months. However, the requirements for additional
capital and working capital are subject to change and will depend upon numerous
factors, including the level of capital expenditures, research and development
activities and results, competitive and technological developments, health care
reimbursement trends, and the availability for acquisition by the Company of
complementary additional distribution channels, products, and technologies.
During future periods, the Company may require significant amounts of cash to
pursue opportunities and promote continued growth and expansion.
YEAR 2000 COMPLIANCE
The Year 2000 problem ("Y2K") refers to the potential of all
electronic devices containing microprocessors to improperly calculate dates in
and beyond the year 2000. In the second quarter of 1998, the Company formed a
Year 2000 Oversight Committee (the "Committee") to evaluate the company's
position regarding Y2K. The Committee consists of members representing all of
the major operating and administrative departments within the Company including
information technology, facilities, manufacturing, research and development,
regulatory, quality assurance, materials, finance and accounting and legal.
The Committee established an Action Plan Program (the "Plan") to
facilitate the Company's Y2K compliance and minimize the potential effects of
Y2K on the Company's operations. The components of the plan include the
following steps: (1) Assess Y2K compliance of the Company's products; (2)
Inventory Company equipment and software and prioritize according to critical
business functions; (3) Implement Y2K compliance testing and remediation
according to priorities developed; (4) Assess vendor and health care payor
compliance; (5) Develop and implement policies to maintain Y2K compliance going
forward; and (6) Establish contingency plans. A timetable for the completion of
each of these action steps contained in the Plan has been developed by the
Committee. The Committee meets regularly to assess the Company's efforts to
comply with the Plan and to address any outstanding Y2K issues. The Committee is
also responsible for coordinating all communications and responding to all
inquiries relating to Y2K.
The Company has completed its evaluation of all of its current product
offerings. Such evaluation has shown that Y2K will not pose operating problems
for such products. The Company is currently in the process of creating a master
inventory of all equipment and software vulnerable to Y2K and is identifying the
equipment and software attendant to critical business processes. Once this
process is complete, the Company will be in a position to implement remediation
programs to address potential problems that are identified. The Company
currently believes that it will be able to modify, replace, or mitigate its
affected systems in time to avoid any material impact on its operations.
The Company has initiated formal communication with its vendors to
assess their compliance with Y2K. Questionnaires have been developed and are
being distributed to vendors with on site evaluations to be conducted at the
most critical vendors' sites of operations. The Company suspects that its
greatest Y2K risk will be vendor compliance. The Company relies on its vendors
to supply it with its requirements of critical components necessary for the
manufacture of its products. A program to assess the Y2K compliance of insurance
companies, management service organizations, and other third party payors is
also being implemented. The Company is also initiating discussion with its
strategic business partners regarding the
15
<PAGE> 16
state of their Y2K readiness. Once both the internal and external reviews
described above are completed, the Company will be able to design a contingency
plan to address its areas of greatest exposure.
The failure to correct a material Y2K problem could result in an
interruption in, or failure of certain normal business activities. Such failures
or interruptions could materially impact the Company's results of operations,
liquidity and financial position. Due to the general uncertainty inherent in the
Y2K problem, resulting primarily from the uncertainty of the Y2K readiness of
the Company's vendors and suppliers, the Company is unable to determine at this
time whether the consequences of Y2K failures will have a material adverse
impact on the Company. The Plan, implemented by the Committee, is expected to
significantly reduce both the Company's level of uncertainty about the Y2K
problem and the possibility of significant interruptions to the normal
operations.
Management currently believes that the cost of Y2K assessment and
remediation will not be material. The Company estimates that the implementation
of the Plan and remediation activities related to the Company's internal systems
and equipment will cost approximately $500,000. Management currently believes
that the Company has adequate working capital to fund these activities.
Readers are cautioned that forward looking statements contained in
this Year 2000 Compliance section should be read in conjunction with the
Company's cautionary language in the first paragraph of Management's Discussion
and Analysis of Financial Condition and Results of Operations on page 10.
16
<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- --------------------------------------------------------------
<S> <C>
3(ii).1 Amendment to Bylaws of MiniMed Inc.
10.1 Agreement Regarding Implantable Pump Business dated September
1, 1998, by and between Medical Research Group, LLC, a
California limited liability company and MiniMed Inc., a
Delaware corporation.
10.2 Implantable Pump License and Distribution Agreement dated
September 1, 1998, by and between Medical Research Group, LLC,
a California limited liability company and MiniMed Inc., a
Delaware corporation.
10.3 Glucose Sensor Option Agreement dated September 1, 1998, by
and between Medical Research Group, LLC, a California limited
liability company and MiniMed Inc., a Delaware corporation.
10.4 Guarantee of Alfred E. Mann dated September 1, 1998.
27.1 Financial data schedule
</TABLE>
(b) Reports on Form 8-K
None.
17
<PAGE> 18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MiniMed Inc.
Date: November 13, 1998 /s/ KEVIN R. SAYER
----------------------------------
Kevin R. Sayer
Senior Vice President, Finance &
Chief Financial Officer
18
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- --------------------------------------------------------------
<S> <C>
3(ii).1 Amendment to Bylaws of MiniMed Inc.
10.1 Agreement Regarding Implantable Pump Business dated September
1, 1998, by and between Medical Research Group, LLC, a
California limited liability company and MiniMed Inc., a
Delaware corporation.
10.2 Implantable Pump License and Distribution Agreement dated
September 1, 1998, by and between Medical Research Group, LLC,
a California limited liability company and MiniMed Inc., a
Delaware corporation.
10.3 Glucose Sensor Option Agreement dated September 1, 1998, by
and between Medical Research Group, LLC, a California limited
liability company and MiniMed Inc., a Delaware corporation.
10.4 Guarantee of Alfred E. Mann dated September 1, 1998.
27.1 Financial data schedule
</TABLE>
19
<PAGE> 1
Exhibit 3(ii).1
MINIMED INC.
AMENDMENT TO BYLAWS
ADOPTED AUGUST 19, 1998
Section 3.02. Number, Term of Office and Qualifications. The number of
directors shall be eight (8). Directors need not be stockholders. Each
of the Directors of the corporation shall hold office until his
successor shall have been duly elected and shall qualify or until he
shall resign or have been removed in the manner hereafter provided.
<PAGE> 1
Exhibit 10.1
AGREEMENT RE IMPLANTABLE PUMP BUSINESS
This Agreement Re Implantable Pump Business (this "Agreement") is
entered into as of this 1st day of September 1998, between MiniMed Inc. a
Delaware corporation ("MiniMed"), and Medical Research Group, LLC, a California
limited liability company ("MRG").
R E C I T A L S
MiniMed has developed implantable pump systems used for the infusion of
insulin and potentially other drugs in the treatment of diabetes and other
conditions (the "Implantable Pump Business"). The parties now desire that
MiniMed grant to MRG certain rights with respect to the Implantable Pump
Business on the terms set forth in this Agreement.
A G R E E M E N T
1. LICENSE OF TECHNOLOGY. Concurrently with the execution and
delivery of this Agreement, MiniMed and MRG are entering into an Implantable
Pump License and Distribution Agreement by which MiniMed is licensing to MRG
technology relating to the Implantable Pump Business and MRG is granting to
MiniMed certain distribution rights with respect to implantable pump systems.
2. LEASE OF MACHINERY AND EQUIPMENT.
2.1. LEASE. MiniMed hereby leases to MRG, and MRG hereby leases
from MiniMed and acknowledges delivery and acceptance of, the machinery and
equipment related to the Implantable Pump Business more particularly described
in Schedule 2.1 attached to this Agreement. (Such machinery and equipment are
collectively referred to herein as the "Equipment", and the provisions of
Sections 2.1 through 2.11 are referred to herein as the "Equipment Lease.")
2.2. TERM. The term of the Equipment Lease will commence on the
date of this Agreement and continue through December 31, 2008. If the Equipment
is not returned to MiniMed upon the expiration of the term of the Equipment
Lease, the Lease shall be deemed to have been extended on a month-to-month basis
at the rent in effect at the end of the term unless either party has notified
the other in writing thirty (30) days prior to the expiration of the term or of
any monthly period thereafter of its election to terminate the Equipment Lease.
2.3. RENT. MRG agrees to pay to MiniMed as rent for the Equipment
the amounts set forth in Schedule 2.3. Said rents shall be payable monthly in
advance, on or before
<PAGE> 2
the first day of each calendar month, and rent for any fractional month
commencing on the date of this Agreement shall be paid with the rent for the
first full calendar month.
<PAGE> 3
2.4. PURCHASE OF EQUIPMENT. MiniMed will have the right and
option (but not the obligation) to cause MRG to purchase the Equipment
exercisable at any time from July 1, 1998 through December 31, 1999. The
purchase price of the Equipment shall be the amount set forth in Schedule 2.4(A)
for the period in which the purchase is consummated. MiniMed may only exercise
its right to cause the Equipment to be purchased by MRG by delivering written
notice to MRG of its election to do so. Thereafter the purchase and sale of the
Equipment shall be consummated at the principal offices of MiniMed at the time
and on the date specified in the notice given by MiniMed, which in no event
shall be less than 30, nor more than 90 days, after the delivery of the notice
of exercise and in no event shall the time of the consummation of the
transaction be other than during normal business hours on a normal business day.
The purchase price for the Equipment and the inventory to be purchased pursuant
to Section 3.3 shall be paid pursuant to a Secured Promissory Note in the form
of Schedule 2.4(B) attached to this Agreement, which provides for interest at
the rate of 7% per annum, principal due in a lump sum on or before December 31,
2003, and all accrued interest payable annually in arrears commencing December
31, 1998. MRG shall also deliver to MiniMed concurrently with the Secured
Promissory Note its check in the amount of any sales tax payable with respect to
the sale of the Equipment to MRG. The Secured Promissory Note will be secured by
a security interest in the equipment purchased and all replacements thereof
pursuant to a Security Agreement in the form of Schedule 2.4(C) attached to this
Agreement. Against delivery of such Secured Promissory Note and Security
Agreement, MiniMed will deliver to MRG a bill of sale with respect to the
Equipment in the form of Schedule 2.4(D), attached to this Agreement.
2.5. OBLIGATIONS OF MRG WITH RESPECT TO EQUIPMENT. At all times
during the term of the Equipment Lease, MRG shall, at its own cost and expense,
(i) pay all charges and expenses in connection with the operation of the
Equipment and keep the Equipment free and clear of all liens, claims and
encumbrances of any kind; (ii) comply with all laws, ordinances, regulations,
requirements and rules with respect to the use, maintenance and operation of the
Equipment and (iii) make all repairs and replacements and perform all
maintenance required to maintain the Equipment in good condition, reasonable
wear and tear excepted. At all times during the term of the Equipment Lease, MRG
shall use the Equipment properly and only for the purpose for which it was
manufactured, shall not alter or modify the Equipment in any way that will
decrease its value, shall not remove the Equipment from its present location,
part with possession or control of the Equipment or sell, pledge, mortgage or
otherwise encumber the Equipment.
2.6. ABSENCE OF WARRANTIES. MRG ACKNOWLEDGES THAT IT HAS
INSPECTED THE EQUIPMENT, THAT MINIMED MAKES NO REPRESENTATIONS OR WARRANTIES OF
ANY KIND, EXPRESS OR IMPLIED, AS TO THE SUITABILITY, DURABILITY, FITNESS FOR
USE, MERCHANTABILITY, CONDITION, QUALITY OR OTHERWISE OF THE EQUIPMENT AND THAT
MRG IS LEASING THE EQUIPMENT AND, IF MINIMED EXERCISES ITS RIGHT UNDER SECTION
2.4, MRG WILL BE PURCHASING THE EQUIPMENT "AS IS." MINIMED SHALL HAVE NO
OBLIGATION TO INSTALL, ERECT, TEST, ADJUST OR
<PAGE> 4
SERVICE THE EQUIPMENT. NO DEFECT OR UNFITNESS OF THE EQUIPMENT SHALL RELEASE MRG
OF THE OBLIGATION TO PAY RENT OR OF ANY OTHER OBLIGATION UNDER THIS AGREEMENT.
2.7. LOSS, DAMAGE OR DESTRUCTION. MRG shall bear all risk of
loss, damage or destruction of the Equipment during the term of the Equipment
Lease. In the event any of the Equipment is damaged beyond repair, the amount of
rent payable pursuant to Section 2.3 and the amount of the purchase price
referred to in Section 2.4 will remain unchanged.
2.8. INSURANCE. MRG shall during the term of the Lease keep the
Equipment insured against loss or damage by fire, perils commonly covered under
the extended coverage endorsement, malicious mischief and sprinkler leakage to
the extent of the full replacement cost thereof as such cost may vary from time
to time. Unless MiniMed has exercised the right and option to cause MRG to
purchase the equipment pursuant to Section 2.4, such insurance shall be carried
for the mutual benefit and protection of MiniMed and MRG. MRG will have no
obligation pursuant to Section 2.4 to purchase any equipment which is destroyed
prior to such purchase. Amounts collected from such insurance for destruction of
equipment shall be paid to MiniMed who shall be entitled to the portion thereof
equal to MiniMed's book value of the equipment which was destroyed at the time
of its destruction, and MiniMed shall pay the balance of the amount collected to
MRG. In addition, the principal amount of the Secured Promissory Note referred
to in Section 2.4 will be reduced by the amount of such insurance proceeds
retained by MiniMed.. Amounts collected for damage to equipment, at the option
of MRG, will be used by MiniMed to promptly repair the damage or will be
delivered to MRG and MRG will promptly repair the damage, in each case
regardless of whether the insurance proceeds are adequate. Any excess insurance
proceeds paid for damaged equipment and not needed to repair the damage shall be
the property of MRG, and if MiniMed repairs the damage, MiniMed shall promptly
pay such excess to MRG after the repairs have been completed. During the term of
the Equipment Lease, MRG shall also maintain in force for the joint benefit of
MiniMed and MRG property damage and personal liability insurance in customary
form in the amount of $1 million for property damage and $1 million for death or
personal injury in any one accident and $3 million for all accidents in any one
calendar year. MRG shall deliver to MiniMed the policies of insurance or copies
thereof or other evidence satisfactory to MiniMed of such coverage. Each insurer
under such policies shall agree by endorsement upon the policies issued or by
independent instrument to MiniMed that it will give MiniMed 30 days prior
written notice of the effective date of any alteration or cancellation of any
such policy.
2.9. PAYMENT OF TAXES. In addition to the rentals provided for in
Section 2.3, MRG shall pay all sales, use, excise, personal property and ad
valorem taxes on the Equipment. All such taxes shall be paid not later than 30
days prior to the delinquency date thereof. All personal property taxes payable
with respect to the Equipment shall be pro rated between MiniMed and MRG on the
basis of the tax fiscal year of the Government authority collecting such taxes.
<PAGE> 5
2.10. RETURN AND SURRENDER OF EQUIPMENT. Upon the expiration of
the term of the Lease without the Equipment having been purchased by MRG
pursuant to Section 2.5, MRG will surrender possession of the Equipment to
MiniMed at its current location or, if the Equipment is moved, at such location
in Los Angeles County as MiniMed may designate.
2.11. MINIMED RIGHT TO PAY CLAIMS. In the event MRG shall fail to
pay and discharge or cause to be paid and discharged, when due and payable, any
tax, assessment, or other charge on, or in connection with, the Equipment, or
any lien or claim for labor or material used in, or any claim for damages
arising out of, the maintenance, repair, restoration, replacement or use of the
Equipment or any judgment, lien or claim, MiniMed may, at its option, pay any
such tax, assessment, insurance expense, lien, claim, charge or demand or sever
or discharge any action therefor, or judgment thereon. All costs, expenses,
reasonable attorneys' fees and other sums so incurred or paid by MiniMed shall
be paid by MRG to MiniMed upon demand together with interest thereon at the rate
of 7% per annum from the date incurred or paid.
Section 3. SALE OF INVENTORY.
3.1. PURCHASE OF INVENTORY FROM TIME TO TIME. MiniMed will sell
to MRG from time to time as needed during the period from the date of this
Agreement through December 31, 2008 all components for MiniMed's current models
of the implantable pump system which MiniMed presently has in inventory. Such
purchases will be at the prices set forth in Schedule 3.1 attached to this
Agreement and will be payable within 30 days after such components are
transferred from the stockroom or warehouse facilities where they are stored. At
the end of each fiscal month of MiniMed, MiniMed will invoice MRG for inventory
components actually transferred during any such month, and payment therefor
shall be due within 30 days after the issuance of the invoice.
3.2. MANAGEMENT OF INVENTORY. Within 30 days after the date of
this Agreement, MiniMed will establish in its stockroom/warehouse facilities
space dedicated to the implantable pump system inventory. When such space has
been established, MiniMed will notify MRG, and thereafter MRG will manage the
physical inventory and will bear the entire risk of loss thereof. MiniMed will
also provide MRG with access to certain joint use common areas, including
receiving inspection. MRG will insure the inventory against loss or damage by
fire, perils commonly covered by the extended coverage endorsement, malicious
mischief and sprinkler damage to the extent of the full replacement cost thereof
and will carry such insurance for the mutual benefit and protection of MiniMed
and MRG. MRG shall deliver to MiniMed the policies of insurance or copies
thereof or other evidence satisfactory to MiniMed of such coverage. Each insurer
under such policies shall agree by endorsement on the policies issued or by
independent instrument to MiniMed that it will give MiniMed 30 days prior
written notice of the effective date of any alternation or cancellation of any
such policy. The obligations of the parties under this paragraph shall terminate
upon termination or expiration of the term of the Lease entered into pursuant to
Section 5, except that MRG's obligations with respect to insurance shall
terminate as such earlier date as MiniMed exercises its option to
<PAGE> 6
cause MRG to purchase the Equipment pursuant to Section 2.4 and the inventory
pursuant to Section 3.3.
MiniMed will provide MRG with such assistance as MRG may
reasonably request in establishing an inventory tracking system. The parties
acknowledge their understanding and agreement that any such system will be
established in a manner which maintains the independent integrity of MiniMed's
information systems and does not afford MRG personnel access to those systems.
All direct out-of-pocket costs and expenses and a proportional portion of
personnel costs and expenses incurred by MiniMed in connection with assisting
MRG to establish the inventory tracking system will be reimbursed by MRG
promptly upon delivery of written request accompanied by appropriate
documentation with respect to the costs and expenses.
3.3. PURCHASE OF INVENTORY. In the event MiniMed exercises its
right pursuant to Section 2.5 to cause MRG to purchase the Equipment, MRG will
also purchase all of MiniMed's then remaining inventory relating to the
implantable pump system for an amount equal to MiniMed's cost of such inventory,
as reflected in the perpetual inventory system maintained by MiniMed, less a
reserve that the parties have agreed upon for excess and obsolescence equal to
$1 million. The purchase price for the inventory shall be paid in the manner
provided in Section 2.4.
3.4 ABSENCE OF WARRANTIES. MRG ACKNOWLEDGES THAT MINIMED MAKES NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, AS TO THE
SUITABILITY, DURABILITY, FITNESS FOR ANY PURPOSE, MERCHANTABILITY, CONDITION,
QUALITY OR OTHERWISE OF THE INVENTORY AND THAT MRG IS PURCHASING THE INVENTORY
"AS IS." EXCEPT AS PROVIDED IN THIS SECTION 3.4 BELOW, MINIMED SHALL HAVE NO
OBLIGATION TO INSTALL, ERECT, TEST, ADJUST, REPAIR OR TAKE BACK ANY OF THE
INVENTORY. EXCEPT AS PROVIDED IN THIS SECTION 3.4 BELOW, NO DEFECT, LACK OF
MERCHANTABILITY OR SUITABILITY, UNFITNESS FOR ANY PURPOSE OR OTHER CONDITION OR
QUALIY OF THE INVENTORY SHALL RELEASE MRG OF THE OBLIGATION TO PAY ANY AMOUNT OR
PERFORM ANY OBLIGATION UNDER THIS AGREEMENT.
MiniMed will afford MRG the opportunity at all reasonable times
during the 30 calendar days after the date of this Agreement to inspect the
implantable pump inventory. Any items of inventory which are defective or
damaged and as to which such defect or damage is discovered during said 30 day
period will be excluded from any purchase pursuant to Section 3.1 or 3.3. In the
event of a purchase pursuant to Section 3.3 the purchase price will be reduced
by the carrying value of the damaged or defective inventory on the books of
MiniMed immediately prior to the consummation of any such purchase. If the
purchase price has already been consummated at the time the 30 day period
expires, the adjustment shall be made in the balance of the promissory note
delivered pursuant to Section 2.4, effective as of the date of the note, and
MiniMed will sign such acknowledgement or agreement as to the reduction in the
principal balance of the note as MRG may reasonably request.
<PAGE> 7
4. WORKING CAPITAL LOANS.
4.1. LINE OF CREDIT AVAILABLE. MiniMed will make available to MRG
from and after the date of this Agreement a line of credit under which MRG will
have the right to borrow from MiniMed up to an aggregate of $3 million. Such
loans will be made from time to time during the period from the date of this
Agreement through December 31, 2001 provided that MRG is not in material default
under this Agreement as provided in Section 17, none of the Events of Default
referred to the Line of Credit Note (as defined below) has occurred and
sufficient collateral for the loans to be made has been pledged pursuant to the
Pledge Agreement referred to in Section 4.2. Any such requests from MRG shall
specify the amount to be borrowed, which shall be designated in an amount
rounded to the nearest $1,000 and shall not be less than $100,000, and MiniMed
shall cause the funds being borrowed to be wire transferred to MRG's bank
account within three business days after receipt of the written request for the
loan in accordance with wire transfer instructions provided by MRG at or prior
to the time it requested the loan. In no event shall such requests be made more
frequently than once in any one calendar week or twice in any one calendar
month.
4.2. LINE OF CREDIT NOTE. The loans made by MiniMed pursuant to
Section 4.1 shall be evidenced by a promissory note of MRG in the form of
Schedule 4.2(A) hereto (the "Line of Credit Note"), which shall be executed and
delivered by MRG to MiniMed prior to MRG's requesting any loans pursuant to
Section 4.1. The Line of Credit Note provides for such loans to bear interest at
the rate of 7% per annum with all principal and interest being due December 31,
2001 in a single, lump-sum payment. MiniMed is hereby authorized to record in
its books and records and in the schedule annexed to the Line of Credit Note the
date and amount of each loan made by MiniMed. The Line of Credit Note will be
guaranteed by Alfred E. Mann pursuant to a Guarantee in the form of Schedule
4.2(B) hereto (the Guarantee"), which MRG will cause to be executed and
delivered to MiniMed prior to MRG's requesting any loan pursuant to Section 4.1.
The guarantee of Mr. Mann will be secured by a pledge of outstanding shares of
Common Stock of MiniMed pursuant to a Pledge Agreement in the form of Schedule
4.2(C) hereto which MRG will cause to be executed and delivered to MiniMed with
the Guarantee. The Pledge Agreement provides that prior to the date any loan is
to be made by MiniMed pursuant to Section 4.1, Mr. Mann will deliver to MiniMed,
duly endorsed in blank or accompanied by stock powers duly endorsed in blank,
certificates evidencing shares of MiniMed Common Stock having a market value at
least equal to 150% of the aggregate amount then being borrowed plus all
interest which would accrue thereon through December 31, 2001. For this purpose,
"market value" shall mean the average of the closing prices of MiniMed Common
Stock on the first 7 of the last 10 trading days next preceding the date of the
loan requested by MRG pursuant to Section 4.1. Unless such stock certificates
are delivered by Mr. Mann, MiniMed will have no obligation pursuant to Section
4.1 to make any such loan. MRG will not use the proceeds of any such loan to
purchase or carry any "margin stock" within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System.
<PAGE> 8
5. LEASE. Concurrently with the execution and delivery of this
Agreement, MiniMed and MRG are entering into a lease with respect to certain
space in MiniMed's principal facility that is presently being used for the
Implantable Pump Business. At MRG's request and cost MiniMed will provide
maintenance services for this space. The obligations of MRG under the Lease will
be guaranteed by Mr. Mann pursuant to the Guarantee.
6. TRANSITION. Effective on the first business day after the
date of this Agreement, or on any day within 10 business days thereafter at
MiniMed's option, MiniMed will terminate the employ of all of the employees
listed in Schedule 5 to this Agreement, constituting all of MiniMed's employees
who are working full-time in the Implantable Pump Business. Also effective on
that date, MRG will offer employment to all said employees at the same
compensation levels and will give such employees credit for years in service
under MRG's compensation and benefit programs for the period such employees were
employed by MiniMed. All accumulated vacation and ECTO time will be credited to
the employee by MRG; MiniMed will pay MRG a lump sum equal to the value of the
accumulated vacation and ECTO time at the employees' current hourly rate or
salary rate, as the case may be. All stock options granted by MiniMed to such
employees shall be amended within 10 days after the date of this Agreement to
provide that the options shall remain in full force and effect notwithstanding
such termination of employment and will become exercisable at the same times and
with respect to the same numbers of shares as is presently provided in said
agreements, except that all previously existing provisions relating to the
termination of the options in connection with termination of employment of the
employee with MiniMed will be amended to provide that such termination
provisions apply to the termination of employment of the employee with MRG.
MiniMed also agrees, at MiniMed's sole expense, to continue the health insurance
benefits of these employees for a period of at least 30 days beyond the date of
transfer.
MiniMed will also make available for a period of six months after
the date of this Agreement the services of its supervisorial personnel for
shipping, receiving, manufacturing, engineering, stockrooms, materials
management, purchasing, quality assurance and document control, all at no cost
to MRG. During said six-month period, MiniMed will also provide at no cost to
MRG transitional support for the Implantable Pump Business consisting of
accounting, finance, information systems, legal (limited to contractual and
related matters with third parties as they relate to the transferred activities
and business relationship) and payroll. MRG will be responsible for
establishing, at its own cost and expense, information systems for its employees
separate and apart from, and not compromising the separate integrity of,
MiniMed's information systems.
If employees currently performing Reliability and Quality
Engineering functions do not transfer to MRG then, to the extent such employees
remain with MiniMed, MiniMed will provide transitional support for these
functions equivalent to 75% of full time of two employees for the two functions
for a period of three months after the date of this Agreement followed by 25% of
full time of two employees for the functions for the next three months. MRG will
reimburse MiniMed monthly in arrears on the last day of each calendar month for
the
<PAGE> 9
portion of the salary of such employees that is proportional to the time to be
spent (75% or 25%) plus 27 % of such salary.
MiniMed will allow MRG employees to participate in MiniMed's
corporate training program known as "MiniMed University" courses if, as and when
offered by MiniMed, on a basis which does not interfere with the implementation
of the program for MiniMed employees and MiniMed's program with the State of
California Educational Training Panel. MRG shall reimburse MiniMed for that
portion of any costs directly related to these courses that equals the
proportion of the number of MRG employees attending to all employees attending.
7. REPRESENTATIONS AND WARRANTIES OF MINIMED. MiniMed hereby
represents and warrants to MRG as follows:
7.1. POWER AND AUTHORITY. MiniMed is a corporation duly
organized, existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to enter into and carry out the terms
of this Agreement and every other agreement and document specifically referred
to herein to be entered into by it. The execution, performance and delivery of
this Agreement and of such other agreements and documents will not violate or
constitute an event of default (with or without the giving of notice and/or
passage of time) under the terms and provisions of any agreement, document or
instrument to which MiniMed is a party or by which MiniMed is bound or a
violation of any provision of law or any order, judgment or decree to which
MiniMed is subject or by which it is bound. All corporate proceedings required
to be taken by or on behalf of MiniMed to authorize it to enter into this
Agreement and the other agreements and documents specifically referred to herein
have been duly and properly taken. No further consent of any person or entity is
required in connection with the execution and delivery of, or the performance by
MiniMed of its obligations under, this Agreement or any other agreement or
document specifically referred to herein to be entered into by MiniMed.
7.2. TITLE TO EQUIPMENT AND INVENTORY. MiniMed has good and
marketable title to the Equipment and will have, at the time of sale pursuant to
Section 3, good and marketable title to the inventory referred to in Section 3.
8. REPRESENTATIONS AND WARRANTIES OF MRG. MRG hereby represents
and warrants to MiniMed that MRG is a limited liability company duly formed,
existing and in good standing under the laws of the State of California. MRG has
the requisite power and authority to enter into and carry out the terms of this
Agreement and every other agreement and document specifically referred to herein
to be entered into by MRG. The execution, performance and delivery of this
Agreement and of such other agreements and documents will not violate or
constitute an event of default (with or without the giving of notice and/or
passage of time) under the terms and provisions of any agreement, document or
instrument to which MRG is a party or by which MRG is bound or a violation of
any provision of law or any order, judgment or decree to which MRG is subject or
by which it is bound. All proceedings required to be taken by or on behalf of
MRG to authorize it to enter into this Agreement and the other
<PAGE> 10
agreements and documents specifically referred to herein have been duly and
properly taken. No further consent of any person or entity is required in
connection with the execution and delivery of, and the performance by MRG of its
obligations under, this Agreement or any other agreement or documents
specifically referred to herein to be entered into by MRG.
9. NO SOLICITATION OF EMPLOYEES Except as provided in Section 6, for
a period of five years after the date of this Agreement neither MiniMed nor MRG
will actively solicit or induce any employee of the other party to terminate his
or her employment by the other party while such employee is employed by the
other party or within one year after the termination of the employment of the
employee with the other party, whether by the employee or by the other party.
Unless agreed to in writing by the other Party hereto, in the event that either
MiniMed or MRG receives, without solicitation, an application from an employee
of the other party for an open position and the party receiving said application
hires said employee the party hiring the employee will pay the other party a fee
equal to 25% of the employee's annual salary.
10. NOTICES Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given (a) if personally delivered, when so delivered, (b) if mailed,
seventy-two (72) hours after having been placed in the United States mail,
registered or certified, postage prepaid, addressed to the party to whom it is
directed at the address set forth below or (c) if given by telex or telecopier,
when such notice or other communication is transmitted to the telex or
telecopier number specified below and the appropriate answer back or telephonic
confirmation is received:
If to MiniMed:
MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
Attention: General Counsel
Telephone No.: (818) 362-5958
Telecopier No: (818) 367-1460
With a copy to:
Gibson, Dunn and Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Attention: Roy J. Schmidt
Telephone No.: (213) 229-7000
Telecopier No.: (213) 229-7520
If to Medical Research Group, LLC:
Medical Research Group, LLC
12744 San Fernando Road
Sylmar, California 91342
Attention: President
<PAGE> 11
Telephone No.: (818) 362-8084
Telecopier No: (818) 364-2647
<PAGE> 12
With a copy to:
Lyon & Lyon LLP
633 W. Fifth Street, Suite 4700
Los Angeles, California 90071-2066
Attention: Roy L. Anderson, Esq.
Telephone No.: (213) 955-0304
Telecopier No: (213) 955-0440
11. ASSIGNMENT. Neither party shall be entitled to assign its rights
or to delegate its duties under this Agreement, whether by law or otherwise,
without the express written consent of the other party except that either party
may assign this Agreement to (a) a wholly owned subsidiary of said party, or (b)
a third party who acquires either party by merger or acquisition of 80% or more
of the outstanding capital stock of said party, or (c) a third party who
acquires all or substantially all of the assets of either party, so long as the
assignee agrees to assume all of the obligations of said party under this
Agreement.
12. SEVERABILITY. The provisions of this Agreement are severable, and
if any one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions, and any partially
unenforceable provisions to the extent enforceable, shall nevertheless be
binding and enforceable.
13. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements made by MiniMed or MRG in this
Agreement shall survive the date hereof and any investigations, inspections,
examinations or audits made by or on behalf of any party hereto.
14. ENTIRETY. This Agreement constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof, and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, relating to the subject matter of this Agreement, except the Mutual
Nondisclosure Agreement between the parties with an effective date of January 2,
1996 and the Implantable Pump License and Distribution Agreement and the License
Option and Exclusive Marketing Agreement between the parties both dated the date
as this Agreement.
15. AMENDMENT; WAIVER. This Agreement may be amended, modified,
superseded or canceled, and any of the terms and conditions hereof may be
modified, only by a written instrument executed by the parties or, in the case
of a waiver, by the party waiving compliance. No supplement, modification,
waiver or termination of this Agreement shall be valid unless it has been
reduced to writing and executed by the party to be bound thereby. The failure of
a party at any time or from time to time to require performance of any provision
hereof shall in no manner affect the right of such party at a later time to
enforce the same, and no waiver of any nature, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be or considered as a further
or continuing waiver of any other provision of this Agreement.
<PAGE> 13
16. SETTLEMENT OF DISPUTES.
16.1 DISPUTES AND ARBITRATION. Unless the relief sought requires the
granting of equitable relief pursuant to Section 16.1.1, below, any dispute or
controversy (whether based upon the law of torts or of contracts) arising in
connection with this Agreement, including (a) disputes relating to the formation
of this Agreement or the performance, interpretation, enforcement, application
or validity of its provisions, and (b) issues that may be based upon or arise
out of disputes that MRG or MiniMed has with third parties, shall upon the
demand of either party hereto be resolved by arbitration held at Los Angeles,
California, in accordance with the arbitration procedures established by the
Rules of Commercial Arbitration of the American Arbitration Association, except
as otherwise provided herein.
16.1.1 INTERIM COURT RELIEF. If in connection with any such
dispute or controversy either party seeks the issuance of a temporary
restraining order or the granting of preliminary injunctive relief, the court
shall have the right and power to grant the requested relief on a temporary
basis pending the resolution of factual issues by arbitration in accordance with
Section 16.1.2, and to thereafter enforce any award made in such arbitration
proceedings.
16.1.2 CONDUCT OF ARBITRATION. The following principles and
conditions will apply in all arbitration proceedings conducted pursuant to this
Agreement:
A. During the thirty (30) days following the date that the
written notice is given by either party demanding the submission of the dispute
to arbitration, MRG and MiniMed will endeavor to select three independent
arbitrators having no substantial economic or other material relationship with
either MRG or MiniMed. If the issue in dispute involves matters of patents,
licensing or technology, the arbitration panel shall include at least two
persons who are knowledgeable in such matters. If the parties cannot mutually
agree on the three arbitrators within such thirty (30)-day period, then each
party will, within seven (7) days after the expiration of such thirty (30)-day
period, select one independent arbitrator and those two arbitrators shall select
the third independent arbitrator.
B. Discovery of evidence shall be conducted expeditiously by
the parties and in accordance with the general principles embodied in the
California Civil Discovery Act. To the extent that it is necessary, either party
may apply to a court of competent jurisdiction for assistance in obtaining
discovery of evidence for presentation to the arbitrators.
C. The arbitrators shall issue findings of fact and
conclusions of law.
D. The arbitration will be conducted as a case would be
represented to a trial court without a jury. The arbitrators in their discretion
may hear any type of evidence, including hearsay evidence. The arbitrators shall
render a written decision, setting forth their findings of fact and the
principles upon which they relied in making their award and that decision will
be final and binding on the parties.
<PAGE> 14
16.1.3 AWARD BECOMING FINAL. An arbitration award from which an
appeal is not taken within such thirty (30) day period shall be conclusive and
binding on each party and may be enforced by a court of competent jurisdiction.
16.2 COSTS OF ENFORCEMENT. Should any action or proceeding be
necessary to construe or enforce this Agreement or any arbitration award made
pursuant to Section 16.1, above, then the party prevailing in any such action or
proceeding shall be entitled to recover all court costs and reasonable
attorneys' fees, to be fixed by the court and taxed as part of any judgment
entered therein, and the costs and fees incurred in enforcing or collecting any
such judgment.
17. EFFECT OF DEFAULT. No misrepresentation or breach of warranty or
covenant by either party under this Agreement shall excuse the performance of
any obligation of the other party or give the other party the right to terminate
this Agreement unless such default is material to the Agreement taken as a
whole. For this purpose any failure to pay money shall be deemed material if and
only if:
(a) the money is not paid when due and such failure to pay is not
cured within 30 days after delivery of written notice from the other
party of the default; and
(b) the amount involved exceeds $25,000.
For this purpose the Implantable Pump License and Distribution Agreement
referred to in Section 1, the Lease referred to in Section 5 of this Agreement
and the License Option and Contingent Exclusive Marketing Agreement between the
parties dates as of the same date as this Agreement shall be considered
completely separate agreements. No default under any such other documents shall
affect the rights and obligations of the parties under this Agreement, and no
default under this Agreement shall affect the rights and obligations of the
parties under those other documents. Nothing in this Section 17 is intended to
amend or affect in any way the terms of the Secured Promissory Note referred to
in Section 2.4 or the Line of Credit Note.
18. GOVERNING LAW. The validity, construction and interpretation of
this Agreement shall be governed in all respects by the laws of the State of
California applicable to contracts made between residents of that State and to
be performed wholly within that State.
19. HEADINGS. Section and subsection headings are not to be
considered part of this Agreement and are included solely for convenience and
reference and in no way define, limit or describe the scope of this Agreement or
the intent of any provisions hereof.
20. THIRD PARTIES. Nothing in this Agreement, expressed or implied,
is intended to confer upon any person other than MiniMed or MRG any rights or
remedies under or by reason of this Agreement.
<PAGE> 15
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each one of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
22. JURISDICTION.
22.1 ACCEPTANCE OF JURISDICTION. Each party hereto irrevocably submits
to the exclusive jurisdiction of any court of the State of California or the
United States of America sitting in the City of Los Angeles over any suit,
action or proceeding arising out of or relating to this Agreement. Any
arbitration proceedings according to Section 16.1 shall be conducted in the City
of Los Angeles. To the fullest extent it may effectively do so under applicable
law, each party irrevocably waives and agrees not to assert, by way of motion,
as a defense or otherwise, any objection that it may now or hereafter have to
the establishment of the venue of any such suit, action or proceeding brought in
any such court and any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
22.2 ENFORCEMENT OF JUDGMENT. Each party hereto agrees, to the fullest
extent it may effectively do so under applicable law, that a judgment in any
suit, action or proceeding of the nature referred to hereinabove brought in any
such court shall be conclusive and binding upon such person and its successors
and assigns and may be enforced in the courts of the United States of America or
the State of California (or any other courts to the jurisdiction of which such
person is or may be subject) by a suit upon such judgment.
22.3 EFFECT ON ARBITRATION. Nothing in this Section 22 shall be
construed to limit the force or effect of Section 16.
23. ATTORNEYS' FEES. In the event of any litigation or arbitration
arising out of or relating to this Agreement, the prevailing party shall be
entitled to recover its court costs and reasonable attorneys' fees, including
such costs and fees incurred in connection with any appeal or other similar
proceeding.
<TABLE>
<S> <C>
MEDICAL RESEARCH GROUP, LLC, MINIMED INC.
a California limited liability company
By AEM MiniMed Corp., its Managing Member By: /s/ TERRANCE H. GREGG
-------------------------------------
Terrance H. Gregg
By: /s/ ALFRED E. MANN President and Chief Operating Officer
--------------------------------
Alfred E. Mann
President By: /s/ ERIC S. KENTOR
-------------------------------------
Eric S. Kentor
By: /s/ RONALD LEBEL Senior Vice President and
--------------------------------- General Counsel
Ronald Lebel
President, MRG, LLC
</TABLE>
<PAGE> 1
Exhibit 10.2
IMPLANTABLE PUMP LICENSE AND DISTRIBUTION AGREEMENT
This IMPLANTABLE PUMP LICENSE AND DISTRIBUTION AGREEMENT ("Agreement")
is made as of this 1st day of September, 1998 by and between MINIMED INC.
("MiniMed"), a Delaware corporation, and MEDICAL RESEARCH GROUP, LLC ("MRG"), a
California limited liability company, with respect to the following facts:
RECITALS
A. MiniMed has developed and holds available for license or sub-license
programmable implantable insulin pump system technology based, in part, on
technology described and claimed in certain invention disclosures, patent
applications and issued patents owned by MiniMed, Wilson Greatbatch Ltd. and The
Johns Hopkins University, including technology relating to MiniMed's MIP 2001
pump. Some of this technology has been licensed to MiniMed by Wilson Greatbatch
Ltd. and The Johns Hopkins University. MiniMed also has development activities
in process relative to the development of a constant flow implantable pump.
B. MRG is developing and holds available for license or sub-license that
certain long-term glucose sensor system technology based, in part, on technology
described and claimed in certain invention disclosures, patent applications and
issued patents owned by MRG, the Regents of the University of California and the
Alfred E. Mann Foundation (the "Mann Foundation"). Some of this technology has
been licensed or sublicensed to MRG by the Regents of the University of
California and the Mann Foundation.
C. MRG has a staff of professionals experienced in the development of
medical devices and has facilities for the development and testing of such
devices.
D. MRG is developing electronic enhancements for the pump system.
E. MRG has granted MiniMed an option to acquire exclusive marketing
rights in MRG's long-term glucose sensor system technology in the Glucose Sensor
Option Agreement between them dated the same date as this Agreement.
F. MRG desires to obtain certain rights with respect to MiniMed's
implantable pump system business pursuant to an Agreement Re Implantable Pump
Business dated the same date as this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and the
representations, warranties and covenants contained herein, and for other good
and valuable
<PAGE> 2
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS
1.1 AFFILIATE. A Person, including Subsidiaries, that directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, the designated Party, but only for as long as such
control relationship exists. For purposes of this definition, "control" shall
include (a) in the case of a corporation, ownership of more than fifty percent
(50%) of the shares of stock entitled to vote for the election of directors, and
(b) in the case of any other business entity, ownership of more than fifty
percent (50%) of the beneficial interest in capital or profits. 1.2 CONFIDENTIAL
INFORMATION. All information of MRG or MiniMed that (a) is generally not
available from public sources, although information shall not cease to be
Confidential Information if it becomes publicly available as a result of a
breach of this Agreement, and (b) is either designated as Confidential
Information or, is of such nature or is disclosed in such manner that the fact
that it is not publicly available would be obvious to a reasonable person under
the circumstances. 1.3 COVERED APPLICATIONS. Applications of Licensed Products
for which MRG appoints MiniMed as a distributor. These applications may specify
the use of a particular drug, the treatment of a particular condition and/or the
use of drugs manufactured by a particular company. As provided in this Agreement
Covered Applications may be modified from time to time and may be exclusive or
non-exclusive.
1.4 EFFECTIVE DATE. The Effective Date shall be the date of this
Agreement.
1.5 ENHANCED PUMP. An apparatus or system which utilizes Pump
Technology for diabetes or non-diabetes applications or both in conjunction with
Enhancement Technology.
1.6 ENHANCEMENT TECHNOLOGY. Electronic enhancements for Pump
Technology that MRG develops as set forth in Section 4 and any subsequent
Improvements thereto.
1.7 EXCLUDED APPLICATIONS. Applications of Licensed Products
expressly excluded from the Covered Applications pursuant to Section 5.1 and
applications which become Excluded Applications in accordance with the terms of
this Agreement. These applications may specify the use of a particular drug, the
treatment of a particular condition and/or the use of drugs manufactured by a
particular company.
1.8 FDA. The United States Food and Drug Administration or any
successor agency having substantially the same authority.
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<PAGE> 3
1.9 GLUCOSE CONTROLLER. An apparatus or system which utilizes
Glucose Sensing Technology to control an insulin infusion device in a human or
in an animal.
1.10 GLUCOSE MONITOR. Any monitor product utilizing Glucose
Sensing Technology to provide indications of glucose concentration or changes in
glucose concentration in a human or in an animal.
1.11 GLUCOSE SENSING TECHNOLOGY. Technology relating to
implantable glucose sensors intended to be used in vivo in humans or in animals
for a period of at least forty-five days before replacement, including
Improvements thereto.
1.12 GLUCOSE SENSOR OPTION AGREEMENT. The Glucose Sensor Option
Agreement dated the same date as this Agreement by and between MiniMed and MRG.
1.13 IDE. Approval from the FDA to conduct a clinical trial of a
medical device in humans under the Investigational Device Exemption regulations
adopted by the FDA.
1.14 IMPROVEMENT. Any change, addition or deletion in the design,
configuration, formulation, ingredients, components, or software of an apparatus
or system, or in the formulas, processes, procedures, methods or techniques used
in its manufacture, production or assembly that enhances the performance of an
apparatus or system or that makes it quicker, easier or less expensive to
manufacture, assemble, distribute, store, use or dispose of.
1.15 JOHNS HOPKINS RIGHTS. All rights which MiniMed now has to
Technical Information as a result of or relating to any contract or agreement
with The Johns Hopkins University, including but not limited to a License
Agreement which The Johns Hopkins University and Pacesetter Systems, Inc.
entered into on February 13, 1980, the Addenda thereto executed December 1, 1981
and December 8, 1982, the Agreement Constituting Consent to Assignment dated
February 28, 1995, the Amendment to the 1980 License Agreement dated March 8,
1990 and the Novation Agreement made April 29, 1992, by and between The Applied
Physics Laboratories of The Johns Hopkins University and Pacesetter Systems,
Inc. and its successors, Pacesetter Infusion, Ltd. and MiniMed Technologies,
Ltd.
1.16 LICENSED PRODUCTS. Implantable microinfusion pump systems
intended for in vivo use in humans or in animals, including all accessories,
utilizing in whole or in part MiniMed's Pump Technology and/or Improvements
thereof and any Enhancement Technology and/or other technology developed by MRG
and/or Improvements of either of the foregoing that is incorporated into such
Products. Glucose Controllers, Glucose Monitors, Long-Term Glucose Sensors and
the abdominal lead that connects the implantable pump to a Long-Term Glucose
Sensor are not Licensed Products.
1.17 LICENSED PUMP RIGHTS. MiniMed's rights to any patent or
Technology included within MiniMed's Pump Technology.
1.18 LICENSED PUMP SALES. The U.S. dollar amount of gross
revenues from sales of the Licensed Products to Third Parties who are not
Affiliates of MiniMed by MRG or
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<PAGE> 4
any of its Affiliates, excluding any amount paid to MRG or its Affiliates by the
Third Party for transportation; shipping and mailing costs; sales, use or excise
taxes; custom duties; tariffs or insurance and reduced by all amounts refunded,
allowed, credited or discounted with respect to such sales, whether or not the
sale occurred in the same accounting period.
1.19 LIST PRICE The price generally published from time to time
for a product offered for sale in a particular market and in particular
quantities to Third Parties unrelated to either Party who are not sales agents,
sales representatives, dealers or distributors, but instead utilize the product
for themselves or in providing medical care to unrelated persons.
1.20 LONG-TERM GLUCOSE SENSOR. Any sensor, the principal purpose
of which is to detect the presence of, or to measure the quantity of, or any
change in the quantity of, glucose in the body of a human or animal subject that
is intended to be used in vivo with a Licensed Product for at least 45 days
before replacement, including Improvements thereto.
1.21 MANN FOUNDATION RIGHTS. All rights which MRG now has to
Technical Information as a result of or relating to any contract or agreement
involving the Mann Foundation, including but not limited to all rights under a
License Agreement dated February 6, 1996 between MRG and the Mann Foundation, as
amended April 17, 1998.
1.22 MRG'S GLUCOSE SENSING TECHNOLOGY. All rights which MRG now
has and hereafter develops or acquires to Glucose Sensing Technology, including
but not limited to, Mann Foundation Rights and UC Rights as such rights relate
to Glucose Sensing Technology. MRG's Glucose Sensing Technology shall not
include any glucose sensing technology under development, developed or licensed
by MiniMed.
1.23 MINIMED'S PUMP TECHNOLOGY. All rights which MiniMed has to
Pump Technology, including but not limited to, Johns Hopkins Rights and Wilson
Greatbatch Rights, as such rights relate to Pump Technology.
1.24 OPTION. The option granted by MRG to MiniMed to purchase
marketing rights to the Long-Term Glucose Sensor granted pursuant to Section 5.1
of the Glucose Sensor Option Agreement.
1.25 OTHER APPLICATIONS. Applications of Licensed Products which
are not Covered Applications or Excluded Applications. As provided in this
Agreement Other Applications may be modified from time to time.
1.26 PARTY. Either entity that is a signatory to this Agreement.
1.27 PMA. Approval from the FDA to commercially distribute a
medical device under the Pre Market Approval regulations.
1.28 PERSON. Any individual, partnership, association, joint
stock company, joint venture, limited liability company, corporation, trust,
unincorporated organization, other entity or government, or agency or political
subdivision, economic unit or entity thereof,
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<PAGE> 5
including without limitation, each of the Parties to this Agreement and their
respective Affiliates.
1.29 PUMP TECHNOLOGY. Technology relating to implantable infusion
pumps developed or sold by MiniMed, as of the date of this Agreement, including
(i) MiniMed's MIP 2001 pump and successor products, and any subsequent
Improvements thereto, including accessories thereto, and (ii) a constant flow
pump under development by MiniMed.
1.30 REGULATORY APPROVAL. Approval by appropriate authorities to
allow commercial sale of any Licensed Products in a certain country or
countries, for example the FDA PMA or 510(k) approval in the United States.
1.31 RETAINED PHARMACEUTICAL COMPANIES. Those companies listed on
Exhibit 1.31.
1.32 SUBSIDIARIES. Means entities of which a designated Party
owns the equity interests specified in 1.1(a) or (b), either directly or
indirectly through other entities so owned.
1.33 TECHNICAL INFORMATION. Any information reasonably relevant
to the Licensed Products or otherwise pertaining to the design, manufacture,
assembly, production, operation, performance or use of the Licensed Products or
any component of Licensed Products, including but not limited to invention
disclosures, patent applications, issued patents, feasibility study information,
testing and reliability information, specifications, documentation, drawings,
computer programs, software, prototypes, and the like.
1.34 TECHNOLOGY. Any invention, development or Improvement, and
any trade secret, "know-how", manufacturing formula, process, procedure, method
or technique, whether or not patentable, copyrightable or otherwise protectable
by law.
1.35 THIRD PARTY. Any Person other than the legal entities that
are Parties to this Agreement.
1.36 TRANSFER PRICE. The price charged for any product by MRG to
MiniMed.
1.37 UC RIGHTS. All rights which MRG now has to Technical
Information as a result of or relating to any contract or agreement involving
the Regents of the University of California, including the Exclusive License
Agreement for Glucose Sensors and Systems, effective February 28, 1990, U.C.
Agreement Control No. 90-04-0104.
1.38 WILSON GREATBATCH RIGHTS. All rights which MiniMed now has
to Technical Information as a result of or relating to any contract or agreement
involving Wilson Greatbatch Ltd., including but not limited to a License
Agreement and a Supply Agreement, each made as of the 1st day of October, 1993,
and any amendments thereto.
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<PAGE> 6
2. CONFIDENTIAL INFORMATION
2.1 TREATMENT OF CONFIDENTIAL INFORMATION. MiniMed and MRG shall
maintain all Confidential Information disclosed by the other Party pursuant to
or during the performance of this Agreement in strict secrecy and confidence,
and not disclose such Confidential Information to any Third Party, nor make any
use of such Information for its own benefit or gain except as is mutually agreed
between the Parties or is otherwise provided for and permitted under this
Agreement and the Glucose Sensor Option Agreement. No Confidential Information
or materials pertaining to Licensed Products or MiniMed's Pump Technology will
be disclosed to any other Person other than those approved in writing by MiniMed
with respect to Confidential Information disclosed by it to MRG and by MRG with
respect to Confidential Information disclosed by it to MiniMed, except
disclosure to sublicensees, potential distributors and contractors with a need
to know and bound by confidentiality agreements and to the FDA and similar
regulatory agencies of information relative to obtaining regulatory approval.
Nothing in this Section 2.1 shall apply, however, to any disclosure of
Confidential Information that may be required by applicable law, including
without limitation disclosures (to the extent they may be legally required) in
documents filed with the Securities and Exchange Commission and private
placement memoranda used in connection with the sale of securities. MRG
acknowledges its understanding and agreement that as a public company MiniMed
has responsibilities to disclose certain information about its affairs and will
be required to publicly disclose the existence of this Agreement and its
material terms as well as future developments in the portion of its business to
which this Agreement relates. MiniMed likewise acknowledges its understanding
and agreement that MRG may be required to make similar disclosure in connection
with its capital raising efforts.
2.2 REQUESTED DISCLOSURE OF CONFIDENTIAL INFORMATION. In the
event either Party is requested pursuant to, or required by, applicable law or
regulation or by legal process to make any disclosure otherwise prohibited
hereunder, the Party that is required to make disclosure (the "Disclosing
Party") shall, to the extent reasonably practicable, provide the other Party
with prompt notice of such requests or requirements prior to disclosure so that
(a) the other Party may seek an appropriate protective order or other remedy
and/or (b) the Disclosing Party and the other Party can seek in good faith to
consult with the Disclosing Party on the appropriate scope and approach to
disclosure. In the event that such protective order or other remedy is not
obtained, the Disclosing Party shall furnish only that portion of the
Confidential Information which the Disclosing Party reasonably believes may be
legally required and, to the extent reasonably practicable, use reasonable
efforts to obtain confidential treatment for the Confidential Information
disclosed.
2.3 LIMITED RELEASE. MiniMed and MRG shall be released from the
obligations of Sections 2.1 and 2.2 to the extent that any of the disclosed
information: (a) was already part of the public domain at the time of the
disclosure by the other Party or (b) becomes publicly available through no fault
of the receiving Party (but only after and only to the extent that it becomes
publicly available.
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<PAGE> 7
2.4 TERM OF CONFIDENTIALITY. The obligation of MiniMed and MRG to
receive and hold information disclosed by the other Party in confidence, as
required by Section 2.1, shall terminate three (3) years after termination of
this Agreement or ten years after the Effective Date of this Agreement,
whichever is later, except that such obligations shall not terminate as to
Technical Information which constitutes a trade secret until such time as that
information has become publicly available.
3. LICENSE OF PATENT RIGHTS AND MINIMED'S PUMP TECHNOLOGY
3.1 GRANT OF LICENSE. Subject to Section 3.2, MiniMed hereby
grants to MRG and MRG hereby accepts from MiniMed, the worldwide right to
manufacture, cause to be manufactured, promote, sell, market, distribute and use
the Pump Technology, whether or not in conjunction with the Long-Term Glucose
Sensor. The rights granted MRG shall be exclusive except (a) to the extent
MiniMed's rights to the Pump Technology depend upon licenses which do not give
MiniMed exclusive rights, (b) nothing herein shall limit the rights of MiniMed
with respect to any Technology or to license others with respect to Technology
insofar as such rights relate to external infusion pumps or any other
application not constituting an implantable infusion pump and (c) nothing herein
is intended to limit the rights of MiniMed under Section 5 or 8. Notwithstanding
the foregoing, the Wilson Greatbatch Rights are being assigned to MRG pursuant
to the Assignment and Assumption Agreement being executed concurrently with this
Agreement.
3.2 MINIMED'S DISTRIBUTION AND MANUFACTURING RIGHTS.
Notwithstanding anything to the contrary set forth in Section 3.1, MRG agrees
not to engage in any commercial distribution or commercial exploitation of the
Pump Technology or to manufacture any Licensed Product that would violate this
Agreement or MiniMed's rights under Section 5 of this Agreement.
3.3 PROVIDING OF INFORMATION. MiniMed shall provide to MRG access
to all documentation relating to the design, manufacture, testing and regulatory
approval of its implantable pumps.
3.4 ROYALTIES. The license granted pursuant to Section 3.1 shall
be a fully paid-up license with no obligation on the part of MRG to pay
royalties to MiniMed except as follows:
3.4.1 ROYALTIES FOR INSULIN APPLICATIONS. If MiniMed does
not exercise its Option to acquire the worldwide marketing rights to MRG's
Long-Term Glucose Sensor pursuant to the Glucose Sensor Option Agreement or
those rights of MiniMed expire or terminate for any reason or MRG converts
MiniMed's rights under Section 5.1 to Covered Applications to a non-exclusive
basis pursuant to Section 7, then thereafter MRG will pay to MiniMed a royalty
of ten percent (10%) of Licensed Pump Sales from the sale, lease, sublicensing
or other commercial exploitation of Licensed Products that are for the delivery
of insulin during the term of this Agreement until aggregate royalties in the
amount of $5 million
Page 7 of 40
<PAGE> 8
have been paid and thereafter a royalty equal to three percent (3%) of such
Licensed Pump Sales. For purposes of this Section 3.4.1 Licensed Products do not
include the abdominal lead connecting MRG's Long-Term Glucose Sensor to an
implantable pump. Notwithstanding the foregoing, in the event the Licensed
Products include the Enhancement Technology, the applicable royalty rates
pursuant to the preceding sentence will be reduced to five percent (5%) of
Licensed Pump Sales instead of ten percent (10%) and two percent (2%) of
Licensed Pump Sales instead of three percent (3%). Whether or not MRG
establishes separate prices for the Licensed Products and the Long-Term Glucose
Sensor, for purposes of this Section 3.4.1 the portion of total revenues from
Licensed Products distributed together with MRG's Long-Term Glucose Sensor shall
be equal to:
(a) if MiniMed then has List Prices for the Licensed
Product, then MiniMed's applicable List Price;
(b) if (a) does not apply and MRG is then regularly
publishing List Prices for the Licensed Product, then MRG's applicable
List Price but not less than manufacturing cost plus 30% thereof;
(c) whether or not (a) or (b) applies, if MRG sells any
Licensed Product directly to those who utilize the Licensed Products
themselves or in providing medical care to an unrelated person, then the
actual sale prices of such Licensed Products but in no event less than
the manufacturing cost plus 50% thereof.
In no event, however, shall more than 70% of the aggregate revenues received for
the Licensed Product and the Long-Term Glucose Sensor be allocated to the
Licensed Product for purposes of this Section 3.4.1.
3.4.2. ROYALTIES ON EXCLUDED APPLICATIONS. If MRG pursues
commercial development of Licensed Products for any Excluded Applications or for
the Covered Applications referred to in Section 5.1 other than the delivery of
insulin, then MRG will pay to MiniMed a royalty of three percent (3%) of
Licensed Pump Sales during the term of this Agreement from such applications if
the Licensed Products are programmable implantable pump systems that do not use
the Enhancement Technology, two percent (2%) if the Licensed Products are
programmable implantable pump systems that use the Enhancement Technology and
one and one-half percent (1.5%) of such Licensed Pump Sales from Licensed
Products that are constant flow implantable pump systems.
3.4.3 ROYALTIES TO JOHNS HOPKINS AND WILSON GREATBATCH. In
addition to the royalties provided for in Section 3.4.1 MRG shall pay to MiniMed
all royalties relating to all applications payable by MiniMed pursuant to the
agreements relating to the Johns Hopkins Rights and the Wilson Greatbatch Rights
not less than five (5) days prior to the date MiniMed is obligated to pay such
payments to the licensor under those agreements. In addition, MRG will perform
on behalf of MiniMed all of MiniMed's obligations under the agreements, addenda
and amendment evidencing the Johns Hopkins Rights and the Wilson Greatbatch
Rights arising after the date of this Agreement except as otherwise agreed to in
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<PAGE> 9
writing and will not take any action or omit to take any action which would
constitute a default under any such agreement, addendum or amendment.
3.5 EXCLUSIONS. Notwithstanding anything to the contrary
contained in this Section 3.5, in the event any tax is imposed on MRG with
respect to the payment of any royalty set forth in Section 3.4, MRG shall, at
its sole expense, have the right to withhold from such royalty the amount of
such tax actually paid by it; provided, however, that MRG shall execute and
deliver such documents and take such other actions as MiniMed reasonably may
request in connection with disputing such tax or obtaining a credit or refund
thereof.
3.6 PAYMENT
3.6.1 DATES OF PAYMENT. The royalties payable by MRG to
MiniMed pursuant to Section 3.4 shall be paid on or before the forty-fifth
(45th) day following the end of each calendar quarter and shall be computed with
respect to all Licensed Pump Sales during such quarterly period.
3.6.2 DOCUMENTATION. MRG shall deliver to MiniMed,
together with each payment of royalties payable by MRG to MiniMed under Section
3.4, a written statement, verified as to correctness by the Manager or the Chief
Financial Officer of MRG, setting forth for each Licensed Product a detailed
calculation of the amount of royalties then due to MiniMed and such information
as MiniMed reasonably shall require to verify the accuracy of such computation.
3.6.3 CURRENCY OF PAYMENT. All amounts payable by MRG
under Section 3.4 shall be paid in United States dollars; provided, however,
that any such amounts payable with respect to Licensed Products invoiced by MRG
in a currency other than United States dollars shall be converted into United
States dollars at the selling price for such foreign currency published by
Citibank N.A. as the Selling Price for Bank Transfers in the United States for
Payment Abroad at the close of business on the last business day of the calendar
quarter with respect to which such royalty relates.
3.7 LATE FEE. In the event any payment payable by MRG to MiniMed
pursuant to Section 3.4 shall not be paid promptly when due, the unpaid balance
thereof shall bear interest at the lesser of (a) the prime rate of Citibank N.A.
from time to time in effect plus 1% or (b) the maximum rate permitted by
applicable law.
3.8 BOOKS AND RECORDS. MRG shall establish and maintain at its
principal places of business in the United States, or at such other place as to
which MiniMed may consent in writing, true and complete books of account,
records and other data, containing all particulars necessary for an exact
determination of the royalties payable by MRG to MiniMed pursuant to Section
3.4. During the term of this Agreement, and for three (3) years thereafter, MRG
and its employees and agents, including but not limited to, accountants and
attorneys, shall have the right, during normal business hours, on forty-eight
(48) hours prior written notice, to inspect, copy and make extracts from all
such books of account, records and other data to verify the accuracy of any
royalties paid pursuant to Section 3.4, or any statements furnished in
accordance with Section 3.6.2. In the event any examination by MiniMed of MRG's
books and records discloses underpayments to MiniMed of the royalties
theretofore
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<PAGE> 10
actually paid by MRG with respect to such quarter, MRG shall pay to MiniMed such
deficiency plus interest pursuant to Section 3.7, and, if the deficiency exceeds
five percent (5%) for the relevant calendar quarter, MRG shall further reimburse
MiniMed on demand for all of MiniMed's reasonable and documented out-of-pocket
costs and expenses, including, but not limited to, all professional fees,
incurred in connection with any such examination.
4. DEVELOPMENT OF ENHANCEMENT TECHNOLOGY
4.1 SCOPE OF DEVELOPMENT
4.1.1 MRG is developing and shall make commercially
reasonable efforts to complete the development of the Enhancement Technology
contemplated by the specifications referred to in Section 4.1.2 and to
incorporate it into the programmable implantable pump between the Effective Date
and April 30, 1999 (the "Performance Period") in accordance with the terms and
conditions as set forth herein (the "Enhancement Technology Development").
4.1.2 MRG has delivered to MiniMed revised specifications
for the Enhancement Technology.
4.1.3 MRG shall make commercially reasonable efforts to
develop, by January 1, 1999, at MRG's sole expense, a battery in accordance with
the specifications referred to in Section 4.1.2 to this Agreement.
4.1.4 MRG shall perform the Enhancement Technology
Development consistent with MiniMed's design control requirements under ISO 9001
and EN 46001.
4.2 OVERSIGHT COMMITTEE. Upon execution of this Agreement,
MiniMed and MRG shall establish a committee (the "Oversight Committee")
consisting of 4 members comprised of an equal number of representatives from
each of MiniMed and MRG, which representatives shall be subject to the approval
of the other party and such approval will not be unreasonably withheld or
delayed by the other Party. The Oversight Committee shall have the general
responsibility for monitoring the progress of the Enhancement Technology
Development and ensuring that such Development is completed satisfactorily and
that the time set forth herein for completion of the Development is met. The
parties acknowledge and agree, however, that MRG is responsible for using
commercially reasonable efforts to complete the Enhancement Technology and to
incorporate it into the programmable implantable pump in accordance with the
terms of this Agreement.
4.3 REGULATORY APPROVAL. MRG shall make commercially reasonable
efforts to deliver, by April 30, 1999 to MiniMed all information necessary to
comply with FDA regulatory requirements, and the regulatory requirements of any
foreign jurisdiction designated by MiniMed. MiniMed shall use commercially
reasonable efforts to obtain Regulatory Approval of an implantable pump for
insulin delivery incorporating the Enhancement Technology. MRG shall reasonably
cooperate with MiniMed in obtaining such approvals, including cooperation in
connection with clinical trials.
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<PAGE> 11
4.4 REPORTING OF DEVELOPMENT PROGRESS TO THE OVERSIGHT COMMITTEE.
MRG shall inform the Oversight Committee of the progress of the Enhancement
Technology Development in the following manner:
(a) By informal verbal reports to all members of the
Oversight Committee, monthly;
(b) By providing written reports at the reasonable
request of MiniMed, which in no event shall be
required to be delivered more frequently than
every three (3) months.
4.5 OWNERSHIP OF DEVELOPED TECHNOLOGY.
4.5.1 IMPROVEMENTS BY MRG. The Enhancement Technology and
any other Improvements to the Technology, Technical Information or Confidential
Information developed by MRG relating to the Licensed Products during the term
of this Agreement are, as between MRG and MiniMed, owned by MRG. MiniMed may
make use and sell these Improvements without additional royalty to the extent
that they are incorporated into a Licensed Product MiniMed has the right to
make, use or sell under this Agreement.
4.5.2 IMPROVEMENTS BY MINIMED. Any Improvements developed
by MiniMed to the Enhancement Technology or any other Improvements to the
Technology, Technical Information or Confidential Information relating to the
Licensed Products shall be owned by MiniMed; however, MRG will have the right to
make, use and sell the Improvements, and sublicense others to do so, subject to
payment by MRG to MiniMed of a reasonable royalty to be agreed upon by the
parties or, if the Parties cannot agree within a reasonable time, by arbitration
pursuant to Section 28. No such royalty shall be payable, however, with respect
to any Licensed Products including such Improvements sold by MRG to MiniMed.
4.5.3 JOINT IMPROVEMENTS. Any patented Improvement jointly
owned by the Parties shall not be licensed to any Third Party without the
written consent of both parties.
4.5.4 TERM OF LICENSES. Any licenses granted under
Sections 4.5.1 through 4.5.3 will survive until the last of the patents on the
Improvements, if any, which are the subject of the license, which may be a date
after the termination of this Agreement. If there are not such patents or when
the last of such patents expires, any such license will continue for as long as
is legally permissible. MiniMed agrees to assist MRG in filing any patent
applications and obtaining any patents (including execution of assignments and
other documents and instruments necessary or proper) to carry out the provisions
of these Sections.
4.5.5 UNITED STATES PATENT PROTECTION. Should any
Enhancement Technology or the Improvements referred to in Section 4.5.1 through
4.5.3 of this Agreement be reasonably deemed to be suitable for protection under
the patent laws of the United States, then the Party developing the Improvements
shall prepare and file patent application(s) on the
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<PAGE> 12
invention(s) in the United States, and shall bear all of the costs and expenses
associated with obtaining and maintaining such patents. The Party developing the
Improvement shall be identified as the owner in any such patent applications. In
the event the developing Party elects not to seek patent protection on any
invention, the other Party shall have the right to prepare and file patent
application(s) for which all the costs and expenses associated with obtaining
and maintaining such patents shall be borne by such Party and such patents shall
be jointly owned by both Parties.
4.5.6 FOREIGN COUNTRY PATENT PROTECTION. Neither Party
developing Improvements shall be obligated to file for or to obtain patent
protection for any Enhancement Technology or any Improvements referred to in
Section 4.5.1 through 4.5.3 in any foreign country, but if the developing party
does file for or obtain any such patent protection, the developing Party shall
bear all of the costs and expenses associated with obtaining and maintaining
such patent protection. If the developing Party elects not to file for or to
obtain patent protection for any Enhancement Technology or any such Improvements
in any foreign country, then the other Party may elect to file for or to obtain
patent protection for such Enhancement Technology or Improvement, at its sole
expense, and any such patent application or patent obtained therefrom shall be
jointly owned by both parties.
4.5.7 USE OF ENHANCEMENT TECHNOLOGY. Subject to Section 7
and notwithstanding any other provision of this Section 4, MRG has not and will
not license any Enhancement Technology for use in implantable pumps to any Third
Party during the term of this Agreement for a Covered Applications, unless
MiniMed's rights to Covered Applications cease to be exclusive as provided
herein.
5. APPOINTMENT OF MINIMED AS DISTRIBUTOR.
5.1 APPLICATIONS. As of the Effective Date, Covered Applications
will include the use of Licensed Products for delivery of insulin or any other
compound for the treatment of diabetes and for the treatment of HIV and/or AIDS.
Covered Applications shall also include the delivery of medications,
pharmaceuticals or other compounds manufactured, developed or distributed by any
of the Retained Pharmaceutical Companies, except for the treatment of pain,
spasticity, cardiovascular, or otological conditions. As of the Effective Date,
Excluded Applications will include the use of Licensed Products for the
treatment of pain, spasticity, cardiovascular or otological conditions. If
MiniMed's Option to acquire the distribution rights to MRG's Long-Term Glucose
Sensor expires without being exercised, then the use of the Licensed Products
with MRG's Long-Term Glucose Sensor shall cease to be a Covered Application and
shall become an Excluded Application but MiniMed will nonetheless be entitled to
payment of the royalty contemplated by Section 3.4.1. Nothing in this Agreement
shall limit the right of MiniMed to distribute the Licensed Products with
Long-Term Glucose Sensors or any other products offered by parties other than
MRG for the treatment of diabetes or any other Covered Application.
5.2 APPOINTMENT. MRG hereby appoints MiniMed as its exclusive
distributor throughout the world of all Licensed Products now or hereafter
owned, acquired or
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<PAGE> 13
developed by MRG to be used for a Covered Application. Nothing in this Agreement
shall give MiniMed the right to distribute implantable pump systems for any
other application.
5.3 EXCLUSIVITY. During the term set forth in Section 5.5 MRG
will not (a) appoint any other distributor for the Licensed Products to be used
for the Covered Applications, (b) sell, lease or otherwise transfer for
consideration the Licensed Products to any Third Party for distribution for
Covered Applications or (c) itself sell, lease or otherwise commercially exploit
the Licensed Products for Covered Applications (other than pursuant to this
Agreement). During the term of this Agreement MRG will forward to MiniMed all
inquiries received from potential purchasers of the Licensed Products for the
Covered Applications. MRG shall expressly restrict by contract all of its sales
agents, distributors and other third parties from participating in the
commercial distribution of the Licensed Products for the Covered Applications.
If MRG terminates the exclusivity of MiniMed's rights to Covered Applications
pursuant to Section 7, this paragraph will no longer apply.
5.4 SUBDISTRIBUTORS. MiniMed may appoint subdistributors, dealers
or agents for itself with respect to the sale of the Licensed Products for the
Covered Applications. Such subdistributors, dealers or agents of MiniMed shall
have no rights against MRG under this Agreement, and MiniMed shall continue to
be in all respects responsible for compliance with the terms and conditions of
this Agreement with respect to all activities and sales made by any
subdistributors and dealers.
5.5 TERM. The term of MiniMed's rights as distributor of the
Licensed Products (the "Term of the Distribution Rights") will commence on the
date hereof and will continue until December 31, 2003 and shall be deemed to be
extended automatically thereafter on a year-to-year basis unless MiniMed
terminates the Term of the Distribution Rights effective at the end of the
initial term or any time thereafter by giving not less than six (6) months'
prior written notice to MRG. This Agreement is also subject to premature
termination as provided in Section 11.
6. PRICE AND TERMS OF SALE TO MINIMED.
6.1 PRICES UNTIL DECEMBER 31, 2000. From time to time during the
Term of the Distribution Rights, MiniMed will purchase Licensed Products from
MRG by placing written orders therefor using a purchase order in the form of
Exhibit 6(A) attached to this Agreement. For the period from the date of this
Agreement through December 31, 1998, the Transfer Price payable by MiniMed for
the Licensed Products ordered will be $10,800 for a complete implantable pump
system (including a program communicator unit). During the period from January
1, 1999 through December 31, 2000 the Transfer Price payable by MiniMed shall be
MiniMed's List Price (as established by MiniMed) for the Licensed Products less
20%.
6.2 PRICES AFTER DECEMBER 31, 2000. For Licensed Products ordered
after December 31, 2000, the Transfer Price will be equal to the average of
MRG's manufacturing cost (determined in accordance with generally accepted
accounting principles consistently
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<PAGE> 14
applied) and MiniMed's List Price (as established by MiniMed) at the time the
Licensed Products are ordered. In no event, however, will the Transfer Price
exceed MiniMed's List Price less 15% thereof or be less than MRG's manufacturing
cost plus 30%. If no Transfer Price satisfies the foregoing requirements, the
price shall be determined by arbitration in accordance with Section 6.3. For
Licensed Products intended for use with MRG's Long-Term Glucose Sensor, the
price of Licensed Products shall include the related Glucose Controller, Glucose
Monitor and the abdominal lead connecting the sensor to the pump. Abdominal
leads sold separately from Licensed Products as replacements shall have a
Transfer Price to be established by MRG that will not exceed the greater of
$1,000 or 25% of the Transfer Price of the Long-Term Glucose Sensor. Each of the
Parties will afford the other the right to examine its books and records and
cause an audit thereof (at the cost of the examining party) in order to verify
List Price and cost figures. The Parties anticipate that MRG will have achieved
reductions in its manufacturing cost as a result of economies of scale and
reduced costs of components no later than December 31, 2000 and that the Parties
will be better able to project at that time the increase in sales volumes that
is expected to occur. As a result, the Transfer Prices of the Licensed Products
are expected to be substantially less for systems ordered after December 31,
2000 than the price applicable to systems ordered prior to that date.
6.3 ADJUSTMENT IN PRICES. If at anytime after December 31, 2000
either Party believes that the Transfer Price arrangement is materially unfair
to it, the Parties will meet and seek in good faith to agree on revised prices
that are agreeable to both Parties and approximate pricing structures that are
customary for other comparable distribution arrangements involving high
technology products. If the Parties are unable to agree on price, the matter
shall be resolved by arbitration in accordance with Section 28.
6.4 DELIVERY AND PAYMENT. The prices payable by MiniMed shall be
F.O.B. MRG's place of manufacture with export packing to be furnished at MRG's
expense. Payment will be made by MiniMed in United States dollars within thirty
(30) days after shipment. If any invoice is not paid by MiniMed in accordance
with its terms and within thirty (30) days of notice of late payment, MRG may
cancel or delay further shipments until such payment is made. In the event any
payment payable by MiniMed to MRG shall not be paid promptly when due, the
unpaid balance thereof shall bear interest at the lesser of (a) the prime rate
of Citibank N.A. from time to time in effect plus 1% or (b) the maximum rate
permitted by applicable law. All sales will be final, and no returns will be
allowed except as set forth below in Section 12 for products not complying with
MRG's warranty or the inspection specifications. MiniMed shall be responsible
for clearing all Licensed Products through customs and shall pay any and all
taxes or duties imposed by any governmental authority on importation or sale of
the Licensed Products.
6.5 TIME FOR DELIVERY. MiniMed and MRG will cooperate to ensure
that MiniMed receives the quantities of pumps that it requires throughout the
term referred to in Section 11.1. MiniMed will place a firm purchase order with
MRG for the quantity of pumps it requires over the next six month period
following the Effective Date within ten (10) days after the Effective Date.
Promptly after delivery of that purchase order, MiniMed and MRG will meet to
review and agree to MiniMed's initial requirements. Thereafter, commencing on
the
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<PAGE> 15
first day of the third full calendar month commencing after the Effective Date
MiniMed will provide supplemental purchase orders periodically, but at least
every two months, specifying the quantity of pumps MiniMed will require over the
next six month period. MRG will have the right to refuse any purchase order that
would exceed MRG's manufacturing capacity; however MRG may not refuse a purchase
order for a monthly requirement of 10% or less of MiniMed's minimum annual
purchases required to maintain exclusivity as provided in section 7. If
MiniMed's requirements for pumps increase or decrease such that MiniMed would
like to amend these purchase orders MRG will attempt to accommodate those
changes, but MRG may request additional payment from MiniMed beyond the agreed
Transfer Prices if changes to purchase orders increase MRG's costs. Such
additional payment will equal MRG's reasonably estimated additional cost and
will be requested, if at all, within thirty (30) days of MRG's receipt of any
such change. In the event of any disagreement as to whether the additional
charges reflect MRG's costs, the matter shall be settled by arbitration pursuant
to Section 28.
6.6 ADDITIONAL OBLIGATIONS OF MRG. Throughout the term of this
Agreement, MRG will do each of the following:
(a) provide such technical training for MiniMed's
personnel as MiniMed may reasonably request together with copies of all
manuals, product specifications and performance data and other materials
as MiniMed may reasonably request, at MRG's cost and expense (except for
travel cost);
(b) provide all current packaging material for the
Licensed Products;
(c) provide necessary documentation to assist MiniMed in
meeting requirements to register Licensed Products in various
jurisdictions where they are to be sold and to comply with all laws and
regulations applicable to the Licensed Products; and
(d) provide MiniMed with copies of all correspondence with
the FDA and other regulatory authorities after the date of this
Agreement pertaining to the Licensed Products.
6.7 ADDITIONAL OBLIGATIONS OF MINIMED. MiniMed will do each of
the following:
(a) provide to MRG, all current packaging material for the
Licensed Products in MiniMed's possession on the date of this Agreement
or delivered to MiniMed after the date of this Agreement pursuant to
orders placed before the date of this Agreement;
(b) throughout the term of this Agreement provide MRG with
copies of all correspondence with the FDA and other regulatory
authorities after the date of this Agreement pertaining to the Licensed
Products, and
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<PAGE> 16
(c) produce, at MiniMed's expense, the English language
version of all required labeling of implantable pumps using the
Enhancement Technology, including patient and clinician instruction
manuals.
7. MINIMUM PURCHASE REQUIREMENTS.
7.1 REQUIRED MINIMUM PURCHASES. MiniMed agrees to purchase the
following minimum quantities of programmable implantable pump systems for the
calendar year as specified:
<TABLE>
<CAPTION>
Systems Purchased During No. of Systems
------------------------ --------------
<S> <C>
1998 and 1999 433
2000 600
2001 117.5% of the amount of programmable
implantable pump systems purchased during 2000
</TABLE>
7.2 MINIMUM PURCHASES NECESSARY TO KEEP EXCLUSIVE RIGHTS. In
furtherance of the sales and distribution, the Parties agree that if MiniMed
purchases the following minimum quantities of programmable implantable insulin
pump systems in each of the respective calendar years (the "Minimum Sales
Quotas"), its exclusive distribution rights will not be subject to termination
as provided below:
<TABLE>
<CAPTION>
Year Minimum Sales Quotas
---- --------------------
<S> <C>
2002 10% of external insulin pumps actually sold
by MiniMed during 2001
2003 15% of external insulin pumps actually sold
by MiniMed during 2002
2004 and following years 20% of external insulin pumps actually sold
by MiniMed during the preceding year
</TABLE>
7.3 DATES WHEN PUMP SYSTEMS DEEMED PURCHASED. For purposes of
this Section 7, programmable implantable pump systems will be deemed to have
been purchased when they are delivered by MRG to MiniMed or its designee, except
that Licensed Products delivered by MRG at a date later than the delivery date
specified in MiniMed's order will be deemed, solely for purposes of this Section
7, to have been purchased when they should have been delivered. If MiniMed does
not accept any Licensed Products delivered to it in accordance with its right to
do so under this Agreement, such products shall be deemed to have been purchased
for purposes of this Section 7 but MiniMed shall be obligated to accept delivery
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<PAGE> 17
of substitute Licensed Products if the Licensed Products not accepted were
necessary to meet the minimum purchase requirements set forth above, provided
that MiniMed's obligation to accept
such substitute Licensed Products is subject to the condition that MRG deliver
such Licensed Products meeting the requirements of this Agreement within 90 days
after the date MiniMed has declined acceptance of the Licensed Products
previously delivered.
7.4 TERMINATION OF EXCLUSIVE DISTRIBUTION RIGHTS. If MiniMed
fails to purchase the applicable Minimum Sales Quota during the period after
December 31, 2001, MRG's sole and exclusive remedy shall be to terminate the
exclusivity feature of MiniMed's distribution rights under Section 5.1 of this
Agreement (subject to MiniMed's right to pursue arbitration set forth below) by
delivering written notice of its election to do so to MiniMed within one hundred
eighty (180) days after the end of any calendar year in which MiniMed has failed
to purchase the required number of pump systems.
7.4.1 Notwithstanding the preceding paragraph, MiniMed's
exclusive distribution rights shall not be terminated for any calendar year or
longer period referred to below prior to the date (the "One-Year Expiration
Date") of expiration of one year after the first Regulatory Approval in the U.S.
or the EU (by obtaining the CE Mark) of a system in which an MRG fully implanted
Long-Term Glucose Sensor provides a significant portion of the control of
insulin delivery by the Licensed Products if:
(i) MiniMed has purchased one-half of the applicable
Minimum Sales Quota during the year in question or longer period
referred to below, except that for 2002 said one-half amount shall be
deemed to be 1,200 and
(ii) MiniMed has used commercially reasonable efforts
during the year in question to promote and sell the Licensed Products.
7.4.2 For the calendar year in which the One-Year
Expiration Date occurs, the Minimum Sales Quota shall be divided by 365 (rounded
to the nearest one-thousandth) to establish a daily average, and the Minimum
Sales Quota for the fractional calendar year prior to the One-Year Expiration
Date (the daily average multiplied by the number of days in the year prior to
the One Year Expiration Date) shall be added to the Minimum Sales Quota for the
prior calendar year. MRG shall have the right to terminate MiniMed's exclusive
distribution rights for the failure to purchase the Minimum Sales Quota for such
fractional year only if MiniMed has failed to purchase one-half of the combined
Minimum Sales Quota for the combined period as contemplated by 7.4.1(i) above
and it has not used commercially reasonable efforts during the combined period
to promote and sell the Licensed Products as contemplated by 7.4.1(ii) above.
7.4.3 The determination of whether or not MiniMed used
such efforts as required by 7.4.1(ii) above shall be made by arbitration
commenced by MiniMed in accordance with Section 28 except that discovery shall
be limited to 60 days. MiniMed may only commence such an arbitration if it does
so within thirty (30) days after receipt of MRG's written notice of termination
of exclusivity. In the arbitration the arbitrators will determine whether or not
the requirement of 7.4.1(ii) has been met. Pending a final determination,
MiniMed's distribution rights shall continue to be exclusive.
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<PAGE> 18
7.4.4 If MiniMed does not commence such an arbitration or
if the arbitrators determine that the requirement of 7.4.1(ii) above has not
been met, (A) MRG will have the right to distribute pumps through its own sales
organization or to designate other parties as distributors of the Licensed
Products for the Covered Applications on a non-exclusive basis, (B) MiniMed will
have the right to continue to purchase Licensed Products for any Covered
Applications on the terms set forth above and to distribute them throughout the
world on a non-exclusive basis during the balance of the Term of the
Distribution Rights, including any extension thereof, with no minimum purchase
obligations and (C) MiniMed will have right to manufacture the Licensed Products
for the Covered Applications or contract with others to do so provided that it
gives MRG written notice of its intention to do so at least two years before it
commences manufacturing Licensed Products for commercial distribution. If
MiniMed commences manufacturing Licensed Products as provided above, it will be
obligated to pay the royalties as provided in Section 8.1.2 and it will have the
right to use the Technology relating to the Licensed Products as provided in
Section 8.1.2.
7.5 ADJUSTMENTS IN MINIMUM SALES QUOTAS.
7.5.1 If MRG fails to establish the capability to
manufacture Licensed Products in accordance with MiniMed's quality
specifications, meeting the inspection requirements and warranty set forth in
Section 12 and in the quantities and within the delivery times contemplated by
Section 6.5, the Minimum Sales Quotas shall be adjusted so that they begin to
apply for the first full 12 calendar month period when such capability is
established as if that had been 1998 and shall progress as provided above
substituting each such successive twelve calendar month period for each full
calendar year referred to above. In such event, the Minimum Sales Quota for 1998
shall be deemed to be 250 for the full calendar year. For example, if MRG's
manufacturing capability is not established until August 15, 1999, the first
performance period would be the twelve months ended August 31, 2000 and the
Minimum Sales Quota for that period would be 250. The Minimum Sales Quotas for
the twelve months ended August 31, 2001 and 2002 would be 350 and 600, and the
pattern would continue. Minimum Sales Quotas which depend upon the amount of
implantable or external pump systems purchased in particular years shall be
determined based upon the years specified above even though the twelve calendar
month periods for which they will constitute the Minimum Sales Quotas may be
substantially later. For example, if there is a delay of exactly 24 months, in
establishing manufacturing capability, the Minimum Sales Quota for 2003 would be
117.5% of the amount of programmable implantable pump systems purchased in 2000.
Likewise, if MRG loses said manufacturing capability the obligation to meet
Minimum Sales Quotas shall be suspended until such time as either MRG or MiniMed
or a Third Party with whom either of them contracts begins manufacturing and the
Minimum Sales Quota for the first twelve calendar month period thereafter shall
be the same as the Minimum Sales Quota for the calendar year in which MRG lost
the manufacturing capability. The Minimum Sales Quotas for subsequent 12
calendar month periods shall be equal to the Minimum Sales Quotas for the
calendar years subsequent to the year in which manufacturing capability was
lost.
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<PAGE> 19
7.5.2 Likewise, if MRG loses said manufacturing capability
or if MRG fails to deliver, or MiniMed is unable to manufacture or distribute
Licensed Products as a result of an injunction obtained by a Third Party
asserting any right to the Technology associated with the Licensed Products,
then the obligation to meet the Minimum Sales Quota shall be suspended until
such time as either MRG or MiniMed or a Third Party with whom either of them
contracts begins manufacturing or, in the case of the assertion of Third Party
rights to the Technology, the inability of MRG to deliver or MiniMed to
manufacture or distribute Licensed Products is eliminated (as a result of legal
proceedings or otherwise) and such delivery, manufacturing or distribution, as
the case may be, begins. The Minimum Sales Quota for the first twelve calendar
month period commencing thereafter shall be the same as the Minimum Sales Quota
for the calendar year in which Minimum Sales Quotas were suspended. The Minimum
Sales Quota for each subsequent twelve calendar month period shall be equal to
the Minimum Sales Quota for the calendar years subsequent to the year in which
Minimum Sales Quotas were suspended.
7.5.3 If during any calendar year (a) MRG fails to deliver
to MiniMed within the times required by this Agreement, all of the Licensed
Products (determined without regard to the doctrine of substantial performance
and without regard to the 10% requirement set forth in Section 6.5) ordered by
MiniMed for delivery during that year in accordance with the terms of this
Agreement, or not ordered in accordance with the terms of this Agreement but as
to which MRG accepts the order (the "Number of Units Ordered") or (b) any such
Licensed Products delivered during the calendar year fail to meet all of the
requirements of this Agreement (including without limitation those set forth in
Sections 12.1, 12.2 and 14.2), then the Minimum Sales Quota for that calendar
year will be reduced by the number of Licensed Products which are not so
delivered plus those that do not meet such requirements (the "Shortfall"). In
addition, the Minimum Sales Quota for each subsequent calendar year will be
reduced by the percentage that the Shortfall represents of the Number of Units
Ordered. Such reduction shall be made whether or not the Number of Units Ordered
exceeds the 10% limitation set forth in Section 6.5.
7.5.4 In no event shall MiniMed's marketing rights be
converted to non-exclusive rights pursuant to Section 7.4, if the failure of
MiniMed to meet the Minimum Sales Quota for any calendar year is caused by (a)
the failure of MRG to deliver, in accordance with the terms of this Agreement
(and without regard to the doctrine of substantial performance and to the 10%
limitations set forth in Section 6.5), the Number of Units Ordered or (b) the
failure of MRG to establish or maintain the capability to manufacture Licensed
Products or continuously maintain that capability or (c) MiniMed's inability to
manufacture or distribute as a result of an injunction obtained by a Third Party
asserting rights in the Technology associated with the Licensed Products. The
parties acknowledge that in the case of (b) or (c) MiniMed will not be obligated
to place orders for Licensed Products and therefore (b) and (c) will apply even
if (a) does not.
7.5.5 Notwithstanding anything to the contrary above, if
MRG has not developed the Enhancement Technology and incorporated it into
Licensed Products that are available for commercial distribution in the US or
the EU by January 1, 2000, the Minimum
Page 19 of 40
<PAGE> 20
Sales Quota for 2001 and all calendar years thereafter until that requirement is
met shall be the lesser of the amount set forth in Section 7.1 (as adjusted
pursuant to Section 7.5) or 750. Commencing with the first full twelve calendar
month period after that requirement is met the Minimum Sales Quotas shall be
reinstated except that the Minimum Sales Quotas set forth above for 2000 shall
apply to the first 12 calendar month period after the requirement is met and the
Minimum Sales Quotas for 2001 and subsequent years set forth above shall apply
to the second and subsequent 12 calendar month periods. As provided above,
Minimum Sales Quotas which depend upon the amount of implantable or external
pump systems purchased in particular years shall be determined based upon the
amounts for the years specified above even though the 12 calendar month periods
for which those members will constitute Minimum Sales Quotas may be
substantially later.
7.6 MRG'S REGULATORY ACCESS AND INSULIN RIGHTS. In the event MRG
has the right to sell implantable pump systems for insulin, MiniMed shall make
commercially reasonable efforts to allow MRG to make sell and use Licensed
Products under any PMA or similar authority that MiniMed may have, including
access to appropriate clinical data, and shall provide MRG with reference rights
to any PMA or similar approval. MiniMed will also use commercially reasonable
efforts to allow MRG the ability to purchase insulin from MiniMed for
implantable pump use for resale to the extent MiniMed itself has such rights,
either directly from Third Parties or from MiniMed. If MiniMed sells insulin to
MRG the price will be set to be the average of MiniMed's manufacturing or
acquisition cost plus 35%. MRG will reimburse MiniMed for all direct
out-of-pocket costs and expenses incurred pursuant to this Section 7.6.
8. MANUFACTURING AND RIGHTS TO OTHER APPLICATIONS.
8.1 MANUFACTURE OF LICENSED PRODUCTS.
8.1.1 From the date of execution of this Agreement, MRG
shall have the capability to manufacture Licensed Products in accordance with
MiniMed's quality specifications meeting the inspection, requirements and
warranty set forth in Section 12, in the quantities and within the delivery
times contemplated by Section 6.5. If MRG fails to establish the capability to
manufacture Licensed Products in accordance with the requirements of the
preceding sentence or thereafter loses that capability or fails to manufacture
the Licensed Products to be sold to MiniMed as contemplated by this Agreement,
MiniMed will have the right, in addition to all other rights and remedies
MiniMed may have under applicable law, to itself undertake the manufacture of
the Licensed Products for the Covered Applications or contract with others to do
so. Such right may only be exercised by giving written notice to MRG of
MiniMed's intention to do so, and thereafter MRG will have 360 days in which to
cure its failure to perform. Such cure shall be deemed effective only if MRG
manufactures and delivers to MiniMed 80% of the number of units of Licensed
Products which MiniMed had ordered and MRG had failed to deliver and at least
that number of units meets the inspection requirements and warranty referred to
in Section 12. If, however, MRG fails to deliver in any three-year period (based
on the number of days elapsed, not calendar years) 80% or more of the number of
units ordered by MiniMed which meet the inspection requirements and warranty
Page 20 of 40
<PAGE> 21
referred to in Section 12, then there shall be no right to cure and MiniMed may
exercise its right to undertake manufacturing the Licensed Products or contract
with others to do so as provided above.
8.1.2 If MiniMed undertakes to manufacture the Licensed
Products as provided in Section 8.1.1 or Section 7 as a result of its
distribution rights becoming nonexclusive, it will have the right to do so
thereafter throughout the balance of the Term of the Distribution Rights.
MiniMed will, however, pay a royalty to MRG equal to 6% of MiniMed Licensed Pump
Sales from the sale, lease or other commercial exploitation of the Licensed
Products manufactured by it. If, however, at the time MiniMed begins
manufacturing, MRG has not developed the Enhancement Technology and incorporated
it into a commercially available Licensed Product, MiniMed shall not be
obligated to pay the royalty provided above. If MiniMed incorporates any
Technology developed by MRG, including Enhancement Technology which is not
commercially available when MiniMed begins manufacturing, MiniMed will pay MRG a
reasonable royalty but in no event to exceed 6% of MiniMed Licensed Pump Sales
for all such Technology in the aggregate. "MiniMed Licensed Pump Sales" for this
purpose shall have the same meaning as Licensed Pump Sales except that it will
apply to sales by MiniMed and its Affiliates. If MiniMed elects to exercise the
right to manufacture the Licensed Products pursuant to this Agreement, MiniMed
will have the right to use all Technology owned by or licensed to MRG relating
to the Licensed Products for the purpose of manufacturing, distributing and
selling Licensed Products (provided that MiniMed complies with any requisite
obligations owed by MRG under any license to a Third Party), and MRG will
cooperate with MiniMed in providing such technical information and assistance as
MiniMed may reasonably require.
8.1.3 Nothing in this Section 8.1 shall limit or otherwise
affect the rights of MiniMed to recover damages or seek any other right or
remedy MiniMed has against MRG for its failure to manufacture and sell Licensed
Products to MiniMed as provided in this Agreement. In no event shall any failure
or delay in the development or FDA approval of a solution to the existing
compliant catheter problem be considered to be a failure of MRG to establish
manufacturing capability for purposes of this Agreement.
8.2 RIGHTS OF MINIMED TO OTHER APPLICATIONS. At such time as MRG
is ready to commit to pursue the development or evaluation of the Licensed
Products for any Other Application either through a Third Party or its own
direct distribution organization, it will first notify MiniMed in writing and
will not enter into any agreement with any Third Party for any such distribution
or itself undertake any distribution activities for a period of 45 days after
sending such notice. If MRG and MiniMed do not enter into an agreement for
MiniMed to distribute the Licensed Products for the Other Application within the
said 45-day period, MRG shall be completely free to proceed with such
distribution, either through a Third Party or its own direct distribution
organization, and said application shall become an Excluded Application. If,
however, MRG has not entered into a definitive distribution agreement with a
third party or spent or contracted to spend at least $250,000 in establishing
its own distribution organization within six months after the expiration of the
45-day period, MRG will not enter into any distribution agreement with any third
party or commence distribution through its own
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<PAGE> 22
distribution organization without first notifying MiniMed again of its
intention to do so pursuant to this Section 8.2 in order to afford another
opportunity for MiniMed to negotiate an agreement to become the distributor of
the Licensed Products for the Other Applications.
8.2.1 OTHER RIGHTS OF MINIMED TO OTHER APPLICATIONS MiniMed may,
at any time, request that MRG enter into an exclusive or non-exclusive agreement
to distribute pumps for any Other Application that MiniMed does not have rights
to, and MRG agrees to negotiate in good faith to establish an equitable
agreement in regard to such Other Application under which MRG would be an OEM
manufacturer for MiniMed.
8.2.2 OTHER RIGHTS OF MINIMED TO EXCLUDED APPLICATIONS. MiniMed
may, at any time, request that MRG enter into an exclusive or non-exclusive
agreement to distribute pumps for any Excluded Application, and MRG may, at its
sole discretion, negotiate to establish an equitable agreement in regard to such
Excluded Application under which MRG would be an OEM manufacturer for MiniMed.
8.2.3 TERMINATION OF RIGHTS TO OTHER APPLICATIONS. If MiniMed's
rights to Covered Applications are reduced to non-exclusive rights, MiniMed's
rights under Section 8.2 to be notified with respect to Other Applications will
terminate.
9. TRADEMARKS, TRADENAMES AND COPYRIGHTS.
9.1 LIMITED RIGHT TO USE TRADEMARKS AND TRADENAMES. All
trademarks and tradenames developed during the term of this Agreement shall
remain the sole property of the developing Party. MiniMed will have the right to
use its own trademarks and tradenames in connection with the advertising,
promotion, distribution and sale of the Licensed Products and MRG will
incorporate such trademarks and tradenames into the Licensed Products and the
packaging therefor as reasonably requested by MiniMed. During the term of this
Agreement, MiniMed may, in its sole and absolute discretion, use the trademarks
and tradenames of MRG applicable to the Licensed Products, but only in
connection with the advertising, promotion, distribution and sale of the
Licensed Products for the Covered Applications that it purchases from MRG and
provided that it properly uses such trademarks and tradenames. Such use of MRG's
trademarks and tradenames will not give rise to any rights of MiniMed therein.
The design and printing of the packaging will be determined by MiniMed, and
MiniMed will have the responsibility to be sure that all legal requirements with
respect thereto are satisfied. The right to use the MiniMed trademarks and
tradenames by MRG will be only with the written consent of MiniMed and for
Licensed Products for Covered Applications. Upon termination of the exclusivity
of MiniMed's distribution rights, the limited right of MRG to use MiniMed
trademarks and tradenames shall be limited to use in connection with Licensed
Products sold to MiniMed.
9.2 COPYRIGHTS. Any technical manuals relating to the Licensed
Products translated into a language other than English and printed by MiniMed
shall be copyrighted in the name and ownership of MiniMed, with the cost of such
translation and printing to be paid by MiniMed.
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10. REPORTS AND RECORDS.
10.1 MONTHLY REPORTS. On or before the 15th day of each calendar
month during the term of this Agreement, commencing with the first full calendar
month after the month in which this Agreement is executed and delivered, MiniMed
will deliver to MRG a written report setting forth the following:
(a) net sales of Licensed Products in units and MiniMed's
Licensed Pump Sales for the preceding calendar month, and the fiscal
year through end of such preceding months;
(b) the amount of remaining inventory of the Licensed
Products, if any;
(c) any material changes in government regulations known
to MiniMed affecting the importation, sale or use of the Licensed
Products in any jurisdiction where MiniMed is selling the Licensed
Products which has not previously been reported to MRG or is not known
to MRG; and
(d) a brief description of any litigation against MiniMed
relating to the Licensed Products and not previously disclosed to MRG as
well as any material developments in litigation previously disclosed.
For purposes of this Section 10.1, all references to "fiscal
year" refer to the then fiscal year of MiniMed. Net sales and units shall be
those sales invoiced by MiniMed net of returns credited by MiniMed during the
period.
10.2 RECORDS. MiniMed will retain a copy of each invoice
substantiating a sale as well as complete and accurate books of account and
records relating to purchases and sales of the Licensed Products. MiniMed will
provide MRG with such summaries and reports of such information as MRG may
reasonably request that MiniMed prepares for its own purposes. MiniMed shall
retain all invoices, books of account and records relating to purchases, sales
and inventories of the Licensed Products for a period of at least three years or
such longer periods as may be required by law. If MRG so requests, MiniMed shall
offer the records to MRG at no cost prior to disposing of them, except that MRG
will pay the actual costs necessary to retrieve and transport such records.
11. TERM AND TERMINATION
11.1 TERM. Unless otherwise terminated in accordance with Section
11.2, the term of the rights granted by MiniMed to MRG under Section 3.1 shall
continue until the expiration of the last of the patents on the MiniMed Pump
Technology. Thereafter MRG will have a fully paid-up, perpetual license and the
right to sublicense the MiniMed Pump Technology in the expired patents to the
extent MiniMed owns or has the right to license such Technology. In addition MRG
will have the right to continue to have the right to use the MiniMed Pump
Technology and make, use and sell Licensed Products to the extent such
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Technology is patented under other unexpired patents or constitutes a trade
secret, know how or other proprietary Technology and to the extent MiniMed owns
or has the right to license such Technology, provided that MRG pays to MiniMed a
reasonable royalty agreed to by the Parties (which shall not exceed the royalty
rate applicable pursuant to Section 3.4), or, failing such an agreement within a
reasonable time, by arbitration pursuant to Section 28. In determining the
amount of the reasonable royalty the parties acknowledge that the following
facts should be considered: (a) most of the value of the MiniMed Pump Technology
consists of Technology that is not patented, (b) MiniMed and its predecessors
have made very substantial investments in the development of the Technology over
many years and (c) significant value arises from the research and clinical data
relating to the MiniMed Pump Technology which either cannot be re-produced at
all or cannot be re-produced without significant expense and the passage of a
number of years. Nothing in this Section 11.1 shall limit or otherwise affect
the rights of MRG under Section 4.5.2 or 4.5.3.
11.2 TERMINATION FOR CAUSE. Either Party will have the right to
terminate this Agreement upon the occurrence of any of the events specified in
Sections 11.2.1 or 11.2.2. Any such termination may only be made by delivering
notice of intention to terminate to the other party specifying the effective
date of the termination, which shall be not less than thirty (30) days after the
delivery of the notice. Said thirty (30) day period shall be in addition to any
of the cure periods specified in Section 11.2.1.
11.2.1 MATERIAL DEFAULT. The other Party (the "defaulting
party") has failed to perform any material term, condition or obligation to be
performed by it under any of Sections 3 through 16 of this Agreement and such
failure remains uncured after written notice of default, specifying the nature
thereof in reasonable detail, has been given to the defaulting party unless, in
the case of default that does not involve the payment of money, prior to the
expiration of the applicable cure period, the defaulting party has commenced and
thereafter pursues and completes with due diligence those actions necessary to
cure such default within the applicable cure period. The applicable period for
the failure to make any payment due under this Agreement shall be thirty (30)
days, and the applicable cure period for any other default shall be sixty (60)
days but said 60 day cure period shall be subject to extension for a reasonable
period of time if the default is of such nature that it cannot reasonably be
cured with due diligence within sixty (60) days. A default in the payment of
money shall not be deemed material unless the amount thereof exceeds $100,000
and the non-performing Party believes in good faith that it is not legally
obligated to make the payment.
11.2.2 BANKRUPTCY OR INSOLVENCY. The other Party (an
"insolvent party") becomes bankrupt or insolvent or a receiver is appointed for
the business and/or assets of such other Party or an assignment is made by such
other Party for the benefit of its creditors, in each case whether by the
voluntary act or otherwise and, in the case of any such proceeding that is
involuntary, if such proceeding is not terminated within sixty (60) days
thereafter.
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11.3 RIGHTS AND DUTIES UPON TERMINATION. The termination of this
Agreement for any reason shall be without prejudice to the right of either Party
to receive any payments accrued under any provision of this Agreement prior to
the effective date of termination.
11.3.1 SALE OF INVENTORY. In the event of termination of
this Agreement, MRG shall nonetheless have the right for one year after the
effective date of termination to sell the inventory of Licensed Products in its
possession at the time of termination, except, however, that MiniMed shall have
the right but not the obligation to repurchase the Licensed Products in MRG's
inventory, if any, at the Transfer Price then in effect pursuant to Section 6.
11.3.2 EFFECT OF TERMINATION. The termination of this
Agreement for cause shall be without prejudice to (a) the rights of either Party
under Sections 2, 12.2, 14.5 through 14.9, 17, 22, 27, 28 and 33, all of which
shall survive such termination, or (b) any rights or remedies with respect to
defaults arising before such termination.
11.4 RIGHT TO RECOVER DAMAGES. Nothing in this Section 11 is
intended to limit the right of a Party to recover damages for any default of the
other Party, whether or not the nature of the default permits termination of
this Agreement pursuant to this Section 11.
11.5 SEPARATE AGREEMENTS. The Glucose Sensor Option Agreement,
the Agreement Re Implantable Pump Business between the Parties dated the same
date as this Agreement and the Secured Promissory Note and Security Agreement
referred to in Section 2.4, the Line of Credit Note referred to in Section 4.2
and the Lease referred to in Section 5 of the Agreement Re Implantable Pump
Business shall be considered completely separate from this Agreement and not a
part hereof. No default under such other documents shall affect the rights and
obligations of the Parties under this Agreement, and no default under this
Agreement shall affect the rights and obligations of the Parties under those
other documents.
12. INSPECTION, WARRANTY, REMEDIES
12.1 INSPECTION OF LICENSED PRODUCT. MiniMed shall have the right
but not the obligation to conduct inspection tests of Licensed Products to be
shipped to MiniMed at MRG's facility. Licensed Products reasonably rejected by
MiniMed as a result of such inspection shall not be shipped. In the event of any
shortage, damage or discrepancy in or to a shipment of Licensed Products or in
the event any Licensed Product fails to comply with the then current
specification for the Licensed Product, MiniMed will make a written claim within
two months from the date of delivery of the Licensed Products for problems that
are patent (i.e. readily discoverable from a customary physical inspection of
the shipment or MRG's manufacturing records maintained in accordance with
applicable regulatory requirements) and as promptly as practicable after
discovery for latent defects. MiniMed's claim will detail such shortage, damage
or discrepancy or failure and furnish such written evidence or other
documentation as MRG reasonably may deem appropriate. If such shortage, damage
or discrepancy or non-conformity with specifications existed at the time of
delivery of Licensed
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Product at the F.O.B. point, MiniMed may return the Licensed Product to MRG at
MRG's expense except that in no event shall MiniMed be entitled to return any
Licensed Product beyond the expiration date for its use if MRG could have
corrected the problem had it been discovered within two months after delivery.
Upon such return of a Licensed Product and, except as otherwise provided in
Section 7, MRG shall at MiniMed's option, either (a) promptly deliver a
substitute Licensed Product of the same or another acceptable design to MiniMed
in accordance with the delivery procedures set forth herein or (b) refund to
MiniMed MiniMed's cost of the Licensed Product including all costs of shipping,
handling, insurance, import and export taxes and other similar expenses incurred
by MiniMed. In no event shall the provisions of this Section 12.1 limit or
otherwise affect MRG's liability for any breach of the warranty set forth in
Section 12.2 or for indemnification pursuant to Section 14.7 with respect to any
Licensed Product sold or otherwise distributed by MiniMed without knowledge of
any defect, failure to meet specifications, damage or other similar problem. MRG
shall have no liability for incidental or consequential damages, but in no event
shall bodily injury, death or property damage caused by a Licensed Product be
deemed to be incidental or consequential damages.
12.2 LIMITED WARRANTY. MRG warrants to MiniMed that Licensed Products
sold by MRG to MiniMed under this Agreement shall be in conformance with
applicable specifications and shall be free from defects at the time of delivery
of said Licensed Products at the F.O.B. point except that no such warranty is
made with respect to any defect in design of MiniMed's current model of its
implantable pump systems.
12.3 DESIGN DEFECTS In the event that design defects exist in the
MiniMed implantable pump Model 2001, MiniMed and MRG will cooperate to resolve
any such defects. MRG will manage such efforts (if so requested by MiniMed) at
no cost, but MiniMed will pay any direct costs related to such efforts except
with respect to any further changes in design or improvements made by MRG after
the date of this Agreement and unrelated to defects in the current design, if
any.
13. DEFENSE OF TECHNOLOGY
13.1 NOTICE. In the event either Party hereto discovers or
becomes aware of any infringement or possible infringement of, or attack or
threatened attack on, any of the Licensed Pump Rights or rights to the MRG
Enhancement Technology, such Party immediately shall notify the other Party in
reasonable detail of such infringement, possible infringement, attack or
threatened attack. Promptly after such notification, the Parties will consult
with each other as to the course of action to be taken.
13.2 DEFENSE. MiniMed, in its sole discretion and at its sole
cost and expense and with counsel reasonably satisfactory to MRG, shall take any
and all appropriate legal action to defend the Licensed Pump Rights against any
suspected infringement or from any attack or threatened attack; provided,
however, that MRG at all times shall have the right to participate fully in any
such action at its own expense. In the event MiniMed fails within a reasonable
time to initiate appropriate action in connection with any such suspected
infringement, attack or threatened attack which in the reasonable judgment of
MRG adversely affects or might
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adversely affect MRG's rights in, to or under the Licensed Pump Rights, or fails
to pursue such action vigorously once commenced, MRG upon notice to MiniMed
shall have the right, but not the obligation, to initiate or pursue any such
appropriate action in MiniMed's name but at MRG's risk and expense, and MiniMed
shall cooperate fully in any such action. Any judgment, damages, settlement or
award which results from any such action shall be allocated (a) first, to
MiniMed and MRG in proportion and to the extent of the actual costs incurred by
each in connection therewith and (b) thereafter to MiniMed and MRG in proportion
to their actual damages.
13.3 LICENSES OF CONFLICTING TECHNOLOGY. In the event of the
occurrence of any claim that any of the rights granted pursuant to Section 3.1
by MiniMed to MRG conflict with any patent, copyright or other proprietary right
of any Third Party, the Parties hereto shall consult with each other regarding
such claim and the avoidance of the same. In the event the Parties mutually
determine that it is necessary or appropriate that MRG obtain a license from
such Third Party in order for MRG to exercise the rights granted to it
hereunder, the Parties shall use commercially reasonable efforts to obtain such
license on the most favorable terms practicable to MRG. In the event MRG is
required by the terms of such license to pay royalties to such Third Party, MRG
shall have the right to a refund of a portion of the royalties paid hereunder by
MRG in an amount equal to half the royalties paid to such Third Party not
exceeding half the royalties paid to MiniMed under Section 3.
13.4 MRG ENHANCED TECHNOLOGY. MiniMed and MRG shall have rights
with respect to each other that are reciprocal to those specified in Sections
13.2 and 13.3 in the event of any attack or threatened attack of the kind
referred to in those sections against any MRG Enhancement Technology
incorporated into a Licensed Product.
14. MISCELLANEOUS
14.1 QUALITY CONTROL. MiniMed shall follow reasonable quality
control standards with respect to the storage, preservation and use of Licensed
Products purchased under this Agreement.
14.2 GOOD MANUFACTURING PROCEDURES. Licensed Products shall be
manufactured and tested by MRG in accordance with (a) all applicable U.S. laws
and FDA regulations, including but not limited to the FDA's Good Manufacturing
Practice and Quality System regulations in effect at the time of such
manufacture or testing and (b) MiniMed's quality standards and systems from time
to time in effect and applied by MiniMed to all of MiniMed's products which are
of a comparable nature. MiniMed shall have the right, at its expense, to conduct
quality audits of MRG and of the Licensed Products and MRG shall fully cooperate
in all such audits. Each Party shall notify the other Party of any FDA
inspection of its production facilities used to manufacture any Licensed
Products and shall furnish the other Party with copies of any FDA Form 483 or
similar report to the extent that they apply to any Licensed Products or
Long-Term Glucose Sensors.
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14.3 RECORDS AND TRACEABILITY. Each of the Parties hereby
covenants and agrees that during the Term of the Distribution Rights, including
any extensions thereof, and for a minimum period of seven (7) years thereafter,
it shall maintain complete and accurate traceability records for all Licensed
Products that are manufactured and sold under this Agreement, including
pertinent data, research reports, test results, and know-how data, as required
under all applicable FDA regulations and other U.S. or other applicable laws or
regulations then in effect. Each of the Parties hereby covenants, during the
term of this Agreement and for a minimum period of three (3) years thereafter or
such longer period as any regulatory authority may require, to maintain adequate
business and sales records regarding the distribution of all Licensed Products
that are manufactured and sold under this Agreement, including pertinent data,
research reports, test results, and know-how data to meet or exceed all
applicable FDA and other U.S. or other applicable laws or regulations then in
effect. MRG and MiniMed shall give each other access to these records in the
event of an FDA recall or other remedial actions with respect to any product
subject to this Agreement, or for other purposes of the Parties in complying
with applicable regulatory requirements.
14.4 COMPLIANCE WITH LAW. MiniMed and MRG shall each comply with
all federal, state and local laws (and the laws of any foreign jurisdictions in
which the Licensed Products are manufactured or sold) applicable to the
manufacture, sale and/or distribution of the Licensed Products.
14.5 PATENT IDENTIFICATION. MRG will, and will cause its
Affiliates, its sublicensees and their Affiliates to, apply to all Licensed
Products proper patent notice in accordance with U.S. and any foreign statutes
relating to the marking of patented articles.
14.6 MRG'S LIABILITY INSURANCE. Beginning on the earlier of the
date on which the first sale of a Licensed Product manufactured by MRG or an
Affiliate or distributor of MRG is made by MiniMed or an Affiliate or
distributor of MiniMed or the date that any clinical trial sponsored by MiniMed
and using a Licensed Product begins and continuing until the expiration of ten
(10) years from the date on which the last sale by MiniMed of a Licensed Product
occurs, MiniMed shall maintain product liability insurance for the benefit of
MiniMed and MRG as named insureds (containing a Products Contractual Liability
Endorsement covering MRG's obligations under Sections 14.7) on such Licensed
Product in amounts that are consistent with the amount of products liability
insurance that are maintained by MiniMed on similar products sold by MiniMed for
similar or related purposes, but in no event less than Fifteen Million Dollars
($15,000,000). In the event the cost of the products liability insurance
(including the Products Contractual Liability Endorsement) exceeds a reasonable
amount as a result of claims made for bodily injury, death, or property damage
actually or allegedly caused by a Licensed Product, MRG will pay the incremental
cost of the insurance in excess of said reasonable amount (notwithstanding the
first sentence of this Section 14.6). If MiniMed ceases to be the exclusive
distributor of Licensed Products for the Covered Applications for any reason,
the amount of insurance required to be maintained by MiniMed shall be
appropriately reduced to reflect the risk for Licensed Products sold and to be
sold by MiniMed. In the event MiniMed cannot obtain the insurance required by
this Section 14.6 because MiniMed is not the
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manufacturer of the Licensed Products or for any other reason, MRG shall obtain
and maintain such insurance for the benefit of MRG and MiniMed at the cost of
MRG.
14.7 INDEMNITY. MRG shall indemnify, defend and hold harmless
MiniMed and its directors, officers, and employees from, and shall pay any and
all damages, costs, attorneys' fees or fines in excess of the amounts MiniMed
actually recovers under the insurance policy referred to in Section 14.6 or any
other policy maintained by MiniMed or MRG resulting from all claims or liability
for bodily injury, death and/or property damage arising out of any actually or
allegedly defective products sold to MiniMed pursuant to this Agreement or any
actual or alleged negligence or willful misconduct of MRG in carrying out the
terms of this Agreement and shall bear all costs and expenses of defending such
claims (including attorney's fees incurred by MiniMed or the allocable cost of
MiniMed's in-house counsel) in excess of such insurance proceeds. As used in
this Section 14.7 a "defective product" means a product that, at the time of
delivery to MiniMed at the F.O.B. point, does not conform to applicable
specifications or is damaged or has a defect in materials or workmanship or has
a defect in design that does not exist on the date of this Agreement. This
indemnity does not extend to any claim or loss which results from a Licensed
Product causing any other component, device or thing to fail (other than a
Glucose Controller or Glucose Monitor incorporated into an implantable pump and
other than the abdominal lead or the Long-Term Glucose Sensor) or a Licensed
Product failing as a result of use with any such other component, device, thing,
or technology; nor does this indemnity extend to failure of any such other
component, device, thing, or technology to work caused by a Licensed Product
which is properly manufactured.
14.8 INDEMNITY. MiniMed shall indemnify, defend and hold harmless
MRG, its manager and their respective directors, officers and employees from,
and shall pay any and all damages, costs and attorneys fees or fines in excess
of the amounts MRG actually receives under the liability insurance referred to
in Section 14.6 or any policy maintained by MiniMed or MRG resulting from any
claims or liability for bodily injury, death and/or property damage arising out
of the activities, services or other involvement of MiniMed with respect to any
sale or delivery of products sold or otherwise provided by MiniMed and resulting
from or caused by the actual or alleged negligent or willful misconduct of
MiniMed and shall bear all costs of defending such claims (including attorneys'
fees incurred by MRG) as contemplated by Section 14.9.
14.9 THIRD PARTY CLAIMS. The Party indemnified hereunder (the
"Indemnitee") shall promptly notify the indemnifying Party (the "Indemnitor") of
the existence of any claim, demand or other matter involving liabilities to a
Third Party to which the Indemnitor's indemnification obligations would apply
and shall give the Indemnitor a reasonable opportunity to defend the same at its
own expense and with counsel of its own selection (who shall be approved by the
Indemnitee, which approval shall not be unreasonably withheld); provided,
however, that the Indemnitee at all times shall have the right to fully
participate in the defense at its own expense. If the Indemnitor shall fail to
defend within a reasonable time after such notice, the Indemnitee shall have the
right, but not the obligation, to undertake the defense of, and to compromise or
settle (exercising reasonable business judgment), the claim or other matter on
behalf, for the account and at the risk and expense of the Indemnitor. Except as
provided in the preceding sentence, the Indemnitee shall not compromise or
settle the claim or other matter without the prior written consent of the
Indemnitor in each instance. If the claim is
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one that cannot by its nature be defended solely by the Indemnitor, the
Indemnitee shall make available all information and assistance that the
Indemnitor reasonably may request; provided, however, that any associated
expenses shall be paid by the Indemnitor.
15. FDA APPROVAL AND CLINICAL TRIALS
15.1 PMA/NDA FOR DIABETES. MiniMed will use commercially
reasonable efforts to cause a combined PMA and New Drug Approval application
("PMA/NDA") to be filed with the FDA with respect to the Licensed Products and
any related special insulin and to obtain approval of both the Licensed Products
and the related insulin for commercial distribution in the United States. In
that connection, MiniMed will also use commercially reasonable efforts to
conduct all clinical trials reasonably required by the FDA for such approval.
MiniMed will pay all reasonable costs and expenses of obtaining approval of the
PMA/NDA from the FDA, including the cost of the clinical trials, except that MRG
will provide at its expense the number of programmable insulin pump systems
reasonably required for such trials, up to a maximum of 100 as well as Licensed
Product support activities. If MiniMed obtains reimbursement for any such
implantable pump systems provided by MRG, the amount of such reimbursement shall
be allocated equally between MiniMed and MRG. If MiniMed believes that the scope
of any required clinical trials or any other requirements imposed by the FDA are
not commercially reasonable to pursue, MiniMed will have the right to notify MRG
of such determination, and thereafter the parties will consult in good faith as
to the extent to which MRG is willing to bear a portion of the costs. If such
consultation with MRG does not result in an amendment to this Agreement
satisfactory to MiniMed, either Party will have the right to have the matter
resolved by arbitration pursuant to Section 28. The arbitrator(s) shall
determine whether the requirements of the FDA are commercially unreasonable to
pursue and the portion of the cost that is unreasonable. Upon such
determination, MRG shall pay the portion of the cost determined to be
unreasonable as each item of cost is incurred and upon the presentation of
reasonable documentation from MiniMed.
15.2 HIV/AIDS; RETAINED PHARMACEUTICAL COMPANIES. MiniMed will
have the right (but not the obligation) to prepare and file all applications for
approval by the FDA for the commercial distribution of the Licensed Products for
the treatment of HIV and/or for AIDS and for the delivery of any medications,
pharmaceuticals and other compounds developed, manufactured or distributed by
any of the Retained Pharmaceutical Companies, including any clinical trials
relating thereto. MiniMed will pay all reasonable costs and expenses of
obtaining such approvals except that MRG will provide at MRG's expense the
number of programmable insulin pump systems reasonably required for such trials,
up to a maximum of 100 in connection with seeking approval of such applications
in the aggregate. If MiniMed obtains reimbursement for any such implantable pump
systems provided by MRG, MiniMed will pay over to MRG one-half of the amounts
reimbursed promptly after receipt thereof.
15.3 OTHER APPLICATIONS. If MRG and MiniMed do not enter into an
agreement with respect to the distribution by MiniMed of Other Applications
(including neurological and otological applications), then MiniMed will
cooperate with MRG in connection with obtaining FDA approval and comparable
approval from the European Union
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for such Other Applications, including clinical trials, and will provide such
information as is available to MiniMed as MRG reasonably requests. MRG will
reimburse MiniMed for its direct out-of-pocket expenses incurred in providing
such cooperation and/or information. If MRG and MiniMed do enter into an
agreement with respect to Other Applications, their respective obligations with
respect to obtaining FDA and other regulatory approvals will be as set forth in
that agreement.
15.4 TERMINATION OF OBLIGATIONS. MiniMed's obligations under this
Section 15 shall terminate at such time as MiniMed's distribution rights with
respect to Licensed Products are converted to non-exclusive rights.
16. REPRESENTATIONS AND WARRANTIES
16.1 REPRESENTATIONS AND WARRANTIES OF MRG. MRG hereby represents
and warrants to MiniMed that the statements set forth in Sections 16.1 through
16.1.4 hereof are true and correct.
16.1.1 ORGANIZATION AND STANDING. MRG is duly organized,
validly existing and in good standing under the laws of the state of its
organization, with full power and authority to own its property and carry on its
business as now conducted.
16.1.2 AUTHORITY AND ENFORCEABILITY. MRG has the right,
power and authority required for the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby; all authorizations
and approvals have been secured by MRG which are necessary to authorize the
execution, delivery and performance of this Agreement; and this Agreement upon
being duly executed constitutes a legal, valid and binding agreement of MRG and
is enforceable against it in accordance with its terms, excepting only to the
extent that such enforceability may be limited by bankruptcy law or other laws
of general application relating to creditor's rights and subject to the
availability of equitable remedies. The list of record and beneficial owners of
the outstanding equity interests in MRG and the number of units owned by each is
as previously disclosed in writing to MiniMed.
16.1.3 COMPLIANCE WITH THE LAW AND OTHER INSTRUMENTS. The
execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, will not result in the breach of any term or
provision of, or constitute a default under, the Articles of Organization or
Operating Agreement of MRG, as amended to the date hereof, or any statute,
order, judgment, writ, injunction, decree, license, permit, rule or regulation
of any governmental or regulatory body or court, or any indenture, mortgage,
deed of trust or other agreement or instrument to which MRG is a party or by
which it is bound. The execution, delivery and performance of this Agreement by
MRG will not subject MiniMed to any lien, charge or encumbrance nor any tax or
penalty (other than normal income, property and sales and use taxes) arising as
a result of MRG's financial condition, status, previously incurred obligations,
ownership or relationship with other parties.
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16.1.4 INTELLECTUAL PROPERTY RIGHTS. The Enhancement
Technology is not and will not be subject to any encumbrance, lien or claim of
ownership by any Third Party, except for rights that MRG has licensed or intends
to license from Third Parties, for which MRG has (or will have at the time of
sale of Licensed Products to MiniMed) rights to utilize such technology as
required hereunder. To the extent that MRG has licensed or intends to license
Intellectual Property from Third Parties MRG will be responsible for all costs
and obligations related to such licenses. To the best of MRG's knowledge but
without having conducted a patent infringement search, the manufacture, use or
sale of products incorporating the Enhancement Technology will not infringe any
intellectual property rights of any Third Party, except for certain patents and
copyrights that MRG has licensed or will license from third parties and which
MRG has or will have the right to use.
16.2 REPRESENTATIONS AND WARRANTIES OF MINIMED. MiniMed hereby
represents and warrants to MRG that the statements set forth in Section 16.2.1
through 16.2.4 hereof are true and correct.
16.2.1 ORGANIZATION AND STANDING. MiniMed is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation, with full corporate power and authority to own its
property and carry on its business as now conducted.
16.2.2 AUTHORITY AND ENFORCEABILITY. MiniMed has the
right, power and authority required for the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby; all
authorizations and approvals have been secured by MiniMed which are necessary to
authorize the execution, delivery and performance of this Agreement; and upon
being duly executed this Agreement constitutes a legal, valid and binding
agreement of MiniMed and is enforceable against it in accordance with its terms,
excepting only to the extent that such enforceability may be limited by
bankruptcy law or other laws of general application relating to creditor's
rights and subject to the availability of equitable remedies.
16.2.3 COMPLIANCE WITH THE LAW AND OTHER INSTRUMENTS. The
execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, will not result in the breach of any term or
provision of, or constitute a default under, the Certificate of Incorporation or
Bylaws of MiniMed, as amended to the date hereof, or any statute, order,
judgment, writ, injunction, decree, license, permit, rule or regulation of any
governmental or regulatory body or court, or any indenture, mortgage, deed of
trust or other agreement or instrument to which MiniMed is a party or by which
it is bound.
16.2.4 INTELLECTUAL PROPERTY RIGHTS. MiniMed's Pump
Technology is not and will not be subject to any encumbrance, lien or claim of
ownership of any Third Party except for the rights of the licensor of the Johns
Hopkins Rights and the Wilson Greatbatch Rights. To the best of MiniMed's
knowledge but without having conducted a patent infringement search, the
manufacture, use or sale of MiniMed's Pump Technology will not
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infringe any intellectual property rights of any Third Party. MiniMed has not
licensed MiniMed's Pump Technology to any Third Party.
16.2.5 JOHNS HOPKINS AND WILSON GREATBATCH CONTRACTS.
MiniMed's existing agreements with The Johns Hopkins University and the Applied
Physics Laboratories of The Johns Hopkins University with respect to the Johns
Hopkins Rights and its existing agreements with Wilson Greatbatch Ltd with
respect to the Wilson Greatbatch Rights are binding obligations of the parties
and continue to be in effect except as otherwise disclosed by MiniMed to MRG in
writing prior to the execution and delivery of this Agreement; MiniMed has no
actual knowledge of any default by either party to any such agreements in the
performance of its obligations thereunder; to MiniMed's actual knowledge, the
royalty rate payable with respect to the Johns Hopkins Rights is 3.5%. MRG
acknowledges that it has received copies of all such agreements and has had an
opportunity to make such review and perform such inquiry as it considers to be
necessary or desirable with respect to such agreements.
17. LIMITATIONS ON WARRANTIES AND REMEDIES
17.1 LIMITATIONS ON WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN
SECTIONS 12.2 AND 16.1.4, MRG MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, REGARDING THE LICENSED PRODUCTS OR MINIMED'S PUMP TECHNOLOGY, INCLUDING
BUT NOT LIMITED TO (a) THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE, OR (b) ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE
VALIDITY OR SCOPE OF ANY RIGHTS TO TECHNOLOGY, OR (c) ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO THE OWNERSHIP OF ANY TECHNOLOGY, THE LICENSED PRODUCTS
OR MINIMED'S PUMP TECHNOLOGY OR THE INFRINGEMENT BY THE SAME OF ANY PATENT,
COPYRIGHT OR OTHER PROPRIETARY RIGHT OF ANY THIRD PARTY, OR (d) ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO THE ABSENCE OF ANY DEFECT IN THE
LICENSED PRODUCTS.
17.2 LIMITATIONS ON REMEDIES. EXCEPT AS SET FORTH IN SECTION 14.7
AND 16.1.4 IN NO EVENT SHALL MRG BE LIABLE TO MINIMED FOR ANY DAMAGES FOR LOST
PROFITS, LOST SAVINGS OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION
WITH MRG'S MANUFACTURE OF THE LICENSED PRODUCTS EVEN IF MRG HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. DAMAGES FOR PHYSICAL INJURY, DEATH OR PERSONAL
INJURY SHALL NOT CONSTITUTE CONSEQUENTIAL DAMAGES. THE PROVISIONS OF THIS 17.2
SHALL NOT APPLY TO DAMAGES FOR THE INACCURACY OF ANY REPRESENTATION OR WARRANTY
SET FORTH IN SECTIONS 16.1.1` THROUGH 16.1.4.
17.3 REMEDY FOR BREACHES COVERED BY SECTION 17.2. Notwithstanding
Section 17.2, if (a) MRG breaches any obligation under this Agreement for
Page 33 of 40
<PAGE> 34
which lost profits, lost savings or consequential damages would have been
available but for Section 17.2, (b) such breach is material, (c) MRG did not use
commercially reasonable efforts to
perform that obligation and (d) MRG failed to actually and fully perform the
obligation in default within 30 days after MiniMed delivers written notice of
the breach to MRG, then MiniMed will have the right to undertake to manufacture
the Licensed Products for the Covered Applications or contract with others to do
so after asserting such right in a written notice delivered to MRG. Either Party
shall have the right to commence an arbitration in accordance with Section 28 to
determine whether MiniMed has that right under this Section 17.3. The decision
of the arbitrator or arbitrators will be final and binding on the parties.
Pending the arbitration, MiniMed will not be entitled to undertake manufacturing
or contract with others to do so and MRG will continue to have all of its
obligations under this Agrement. If neither party commences an arbitration
within 30 days after MiniMed's written notice referred to above is delivered,
MiniMed will be deemed to have the right to undertake to manufacture the
Licensed Products or contract with others to do so. If MiniMed undertakes to
manufacture Licensed Products or contract with others to do so pursuant to this
Section 17.3, MiniMed shall have no further obligation to purchase Licensed
Products from MRG and the provisions of Section 8.1.2 shall apply.
18. INDEPENDENT CONTRACTORS
18.1 The relationship between MiniMed and MRG under this
Agreement is solely that of independent contractors.
18.2 Neither Party shall have the right to bind the other or to
incur obligations on the other's behalf without the other's prior written
consent in each instance.
19. CONDITION PRECEDENT
The obligation of each of MiniMed and MRG to consummate the
transactions contemplated by this Agreement is conditioned upon, on or prior to
the date of execution of this Agreement, the execution by MiniMed and MRG of the
License Agreement and the Agreement Re Implantable Pump Business referred to in
the Recitals to this Agreement.
20. FORCE MAJEURE
Any Party's delay or failure in performing its obligation under
this Agreement shall be excused to the extent caused by forces beyond that
Party's reasonable control, including, without limitation, the following: war,
floods, earthquakes, other acts of God, industrial disputes, civil disobedience,
strikes, fire, mobilization, changes in governmental regulation or
interpretation, requisition, embargo, restriction and shortage of transport
facilities, fuel, energy or supplies. The unavailability of funds to any Party
to perform any obligation under this Agreement shall not excuse performance
under this Agreement regardless of the reason therefor. Each Party claiming the
benefit of such an excuse agrees to notify the other promptly in writing of any
such delay or failure in performance, and to resume performance as soon as is
reasonably practicable.
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<PAGE> 35
21. NOTICES
Any notice, request, demand or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
(a) if personally delivered, when so delivered, (b) if mailed, seventy-two (72)
hours after having been placed in the United States mail, registered or
certified, postage prepaid, addressed to the Party to whom it is directed at the
address set forth below or (c) if given by telex or telecopier, when such notice
or other communication Is transmitted to the telex or telecopier number
specified below and the appropriate answer back or telephonic, confirmation is
received:
If to MiniMed:
MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
Attention: General Counsel
Telephone No.: (818) 362-5958
Telecopier No: (818) 367-1460
With a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Roy J. Schmidt
Telephone No.: (213) 229-7000
Telecopier No.: (213) 229-7520
If to Medical Research Group, LLC:
Medical Research Group, LLC
12744 San Fernando Road
Sylmar, California 91342
Attention: President
Telephone No.: (818) 362-8084
Telecopier No: (818) 364-2647
With a copy to:
Lyon & Lyon LLP
633 W. Fifth Street, Suite 4700
Los Angeles, California 90071-2066
Attention: Roy L. Anderson, Esq.
Telephone No.: (213) 955-0304
Telecopier No: (213) 955-0440
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<PAGE> 36
22. ASSIGNMENT
Neither Party shall be entitled to assign its rights or to
delegate its duties under this Agreement, whether by law or otherwise, without
the express written consent of the other Party except that either Party may
assign this Agreement to (a) a wholly-owned subsidiary of such Party, or (b) a
Third Party who acquires either Party by merger or consolidation or acquisition
of 80% or more of the outstanding equity interests of said Party (although no
change in the ownership of equity interests of a Party shall be deemed to
constitute an assignment of this Agreement), or (c) a Third Party who acquires
all or substantially all of the assets of either Party relating to the Licensed
Products, so long as the assignee agrees to assume all of the obligations of
said Party under this Agreement. In the event of such an assignment, the party
making the assignment shall remain fully liable for the performance of its
obligations hereunder.
23. SEVERABILITY
The provisions of this Agreement are severable, and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions, and any partially unenforceable
provisions to the extent enforceable, shall nevertheless be binding and
enforceable.
24. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All representations, warranties and agreements made by MiniMed or
MRG in this Agreement shall survive the date hereof and any investigations,
inspections, examinations or audits made by or on behalf of any Party hereto.
25. ENTIRETY
This Agreement constitutes the entire agreement between the Parties
hereto pertaining to the subject matter hereof, and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, relating to the subject matter of this Agreement, except the Mutual
Nondisclosure Agreement between the Parties with an effective date of January 2,
1996, the Glucose Sensor Option Agreement and the Agreement Re Implantable Pump
Business referred to in the Recitals to this Agreement.
26. AMENDMENT; WAIVER
This Agreement may be amended, modified, superseded or canceled,
and any of the terms and conditions hereof may be modified, only by a written
instrument executed by the Parties or, in the case of a waiver, by the Party
waiving compliance. No supplement, modification, waiver or termination of this
Agreement shall be valid unless it has been reduced to writing and executed by
the Party to be bound thereby. The failure of a Party at any time or from time
to time to require performance of any provision hereof shall in no manner affect
the right of such Party at a later time to enforce the same, and no waiver of
any nature, whether by
Page 36 of 40
<PAGE> 37
conduct or otherwise, in any one or more instances, shall be deemed to be or
considered as a further or continuing waiver of any other provision of this
Agreement.
Subject to the restrictions on modification in this Section 26,
to the extent that any provision of this Agreement purports to grant rights or
create obligations that are inconsistent with either: (1) MRG's Mann Foundation
Rights or UC Rights, or (2) MiniMed's Johns Hopkins' Rights or Wilson Greatbatch
Rights (collectively, the "Rights"), the Parties shall meet and confer to bring
such provision in conformity with such Rights.
27. USE OF NAME
Except as provided in Section 9 with respect to trademarks and
tradenames, neither MiniMed nor MRG shall use the name of the other Party or of
any staff member or employee of the other Party or any adaptation thereof in any
advertising, promotion or sales literature in a manner which would constitute an
express or implied endorsement by the other Party or of any staff member or
employee thereof for any commercial product without the prior written consent of
the other Party in each instance.
28. SETTLEMENT OF DISPUTES
28.1 DISPUTES AND ARBITRATION. Unless the relief sought requires
the granting of equitable relief as contemplated by Section 28.1.1, below, any
dispute or controversy (whether or not based upon the law of contracts) arising
between the Parties in connection with this Agreement, including (a) disputes
relating to the formation of this Agreement or the performance, interpretation,
enforcement, application or validity of its provisions, and (b) issues that may
be based upon or arise out of disputes that MRG or MiniMed has with Third
Parties, shall upon the demand of either Party be resolved by arbitration held
at Los Angeles, California, in accordance with the arbitration procedures
established by the Rules of Commercial Arbitration of the American Arbitration
Association, except as otherwise provided herein.
28.1.1 If in connection with any such dispute or
controversy either Party seeks the issuance of a temporary restraining order or
the granting of preliminary injunctive relief, the court shall have the right
and power to grant the requested relief on a temporary basis pending the
resolution of factual issues by arbitration in accordance with Section 28.1.2,
and to thereafter enforce any award made in such arbitration proceedings.
28.1.2 The following principles and conditions will apply
in all arbitration proceedings conducted pursuant to this Agreement:
A. During the thirty (30) days following the date that the
written notice is given by either Party demanding the submission of the dispute
to arbitration, MRG and MiniMed will endeavor to select three independent
arbitrators having no substantial economic or other material relationship with
either MRG or MiniMed. If the issue in dispute involves matters of patents,
licensing or technology, the arbitration panel shall include at least two
persons who are knowledgeable in such matters. If the Parties cannot mutually
agree on
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<PAGE> 38
the three arbitrators within such thirty (30) day period, then each Party will,
within seven (7) days after the expiration of such thirty (30) day period,
select one independent arbitrator and those two arbitrators shall select the
third independent arbitrator within seven (7) days after the selections of the
later of the two to be selected.
B. Discovery of evidence shall be conducted expeditiously
by the Parties and in accordance with the general principles embodied in the
California Civil Discovery Act. To the extent that it is necessary, either Party
may apply to a court of competent jurisdiction for assistance in obtaining
discovery of evidence for presentation to the arbitrators.
C. Except as provided in Section 28.1.3, the arbitrators
shall issue findings of fact and conclusions of law.
D. Except as provided in Section 28.1.3, the arbitration
will be conducted as a case would be represented to a trial court without a
jury. The arbitrators in their discretion may hear any type of evidence,
including hearsay evidence. The arbitrators shall decide the dispute in
accordance with applicable law and shall render a written decision, setting
forth their findings of fact and the conclusions of law upon which they relied
in making their award. The decision of the arbitrators shall be final and
binding on the Parties.
28.1.3 In the case of an arbitration to determine the
adjustment in prices referred to in Section 6.3, the arbitrators shall permit
each of the Parties to submit written and oral information and argument, shall
decide the matter in accordance with the standard set forth in Section 6.3 and
shall issue a written opinion explaining in reasonable detail the basis for
their decision on the adjustment in prices. The decision of the arbitrators will
be final and binding on the Parties.
28.2 COSTS OF ENFORCEMENT. Should any action or proceeding be
necessary to construe or enforce this Agreement, including an arbitration
pursuant to Section 28.1, or any arbitration award made pursuant to Section
28.1, above, then the Party prevailing in any such action or proceeding shall be
entitled to recover all court costs and reasonable attorneys' fees, to be fixed
by the court and taxed as part of any judgment entered therein, and the costs
and fees incurred in enforcing or collecting any such judgment.
29. GOVERNING LAW
The validity, construction and interpretation of this Agreement
shall be governed in all respects by the laws of the State of California
applicable to contracts made by residents of that state and to be performed
wholly within that state.
30. HEADINGS
Section and subsection headings are not to be considered part of
this Agreement and are included solely for convenience and reference and in no
way define, limit or describe the scope of this Agreement or the intent of any
provisions hereof.
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<PAGE> 39
31. THIRD PARTIES
Nothing in this Agreement, expressed or implied, is intended to
confer upon any Person other than MiniMed or MRG any rights or remedies under or
by reason of this Agreement.
32. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each
one of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
33. JURISDICTION
33.1 Each Party hereto irrevocably submits to the exclusive
jurisdiction of any court of the State of California or the United States of
America sitting in the City of Los Angeles over any suit, action or proceeding
arising out of or relating to this Agreement. Any arbitration proceedings
according to Section 28.1 shall be conducted in the County of Los Angeles. To
the fullest extent it may effectively do so under applicable law, each party
irrevocably waives and agrees not to assert, by way of motion, as a defense or
otherwise, any objection that it may now or hereafter have to the establishment
of the venue of any such suit, action or proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
33.2 Each Party hereto agrees, to the fullest extent it may
effectively do so under applicable law, that a judgment in any suit, action or
proceeding of the nature referred to hereinabove brought in any such court shall
be conclusive and binding upon such Person and its successors and assigns and
may be enforced in the courts of the United States of America or the State of
California (or any other courts to the jurisdiction of which such Person is or
may be subject) by a suit upon such judgment.
33.3 Nothing in this Section 33 shall be construed to limit the
force or effect of Section 28.
(Signature Page, located on page 40)
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<PAGE> 40
IN WITNESS WHEREOF, the: Parties hereto have caused this Agreement to be
executed as of the date and year first set forth. above.
MINIMED INC., a Delaware MEDICAL RESEARCH GROUP, LLC, a
corporation California limited liability company
By AEM MiniMed Corp., its Managing
Member
By: /s/ TERRANCE H. GREGG By: /s/ ALFRED E. MANN
----------------------------- -------------------------------
Terrance H. Gregg Alfred E. Mann
President and Chief Operating President
Officer
By: /s/ ERIC S. KENTOR By: /s/ RONALD LEBEL
----------------------------- -------------------------------
Eric S. Kentor Ronald Lebel
Senior Vice President and President, MRG, LLC
General Counsel
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<PAGE> 1
EXHIBIT 10.3
GLUCOSE SENSOR OPTION AGREEMENT
THIS GLUCOSE SENSOR OPTION AGREEMENT ("Agreement") is made as
of this 1st day of September, 1998 by and between MINIMED INC. ("MiniMed"), a
Delaware corporation, and MEDICAL RESEARCH GROUP, LLC ("MRG"), a California
limited liability company, with respect to the following facts:
RECITALS
A. MRG is developing and holds available for license or
sub-license certain long-term glucose sensor system technology based, in part,
on technology described and claimed in certain invention disclosures, patent
applications and issued patents owned by MRG, the Regents of the University of
California and the Alfred E. Mann Foundation for Scientific Research (the "Mann
Foundation"). Some of this technology has been licensed to MRG by the Regents of
the University of California and the Mann Foundation.
B. MiniMed desires to obtain an option to purchase the
worldwide distribution rights with respect to the long-term glucose sensor
technology upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises,
and the representations, warranties and covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS
1.1 AFFILIATE. A Person or entity, including Subsidiaries,
that directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, the designated party, but only
for as long as such control relationship exists. For purposes of this
definition, "control" shall include (a) in the case of a corporation, ownership
of more than fifty percent (50%) of the shares of stock entitled to vote for the
election of directors, and (b) in the case of any other business entity,
ownership of more than fifty percent (50%) of the beneficial interest in capital
or profits.
1.2 CLOSED LOOP SYSTEM. A system that includes an implantable
insulin pump and Long-Term Glucose Sensor in which the Long-Term Glucose Sensor
fully and automatically controls insulin delivery except for possible patient
intervention to indicate a meal.
1.3 CONFIDENTIAL INFORMATION. All information of MRG or
MiniMed that (a) is not generally available from public sources, although
information shall not cease to be Confidential Information if it becomes
publicly available as a result of a breach of this Agreement, and (b) is either
designated as Confidential Information or is of such nature or is
<PAGE> 2
disclosed in such manner that the fact that it is not publicly available would
be obvious to a reasonable person under the circumstance.
1.4 EFFECTIVE DATE. The Effective Date shall be the date of
this Agreement.
1.5 FDA. The United States Food and Drug Administration or any
successor entity having substantially the same authority.
1.6 GLUCOSE CONTROLLER. An apparatus or system which utilizes
Glucose Sensing Technology to control an insulin infusion device in a human or
in an animal.
1.7 GLUCOSE MONITOR. Any monitor product utilizing Glucose
Sensing Technology to provide indications of glucose concentration or changes in
glucose concentration in a human or in an animal.
1.8 GLUCOSE SENSING TECHNOLOGY. Technology relating to
implantable glucose sensors intended to be used in vivo in humans or in animals
for a period of at least forty-five days before replacement, including
Improvements thereto.
1.9 IMPROVEMENT. Any change, addition or deletion in the
design, configuration, formulation, ingredients, components, or software of an
apparatus or system, or in the formulas, processes, procedures, methods or
techniques used in its manufacture, production or assembly, that enhances the
performance of an apparatus or system or that makes it quicker, easier or less
expensive to manufacture, assemble, distribute, store, use or dispose of.
1.10 THE IMPLANTABLE PUMP LICENSE AND DISTRIBUTION AGREEMENT.
The Implantable Pump License and Distribution Agreement dated the same date
hereof by and between MiniMed and MRG.
1.11 JOHNS HOPKINS RIGHTS. All rights which MiniMed now has to
Technical Information as a result of or relating to any contract or agreement
involving The Johns Hopkins University, including but not limited to a License
Agreement which The Johns Hopkins University and Pacesetter Systems, Inc.
entered into on February 13, 1980, any Addendum or Amendment to said License
Agreement and the Novation Agreement made April 29, 1992, by and between the
Applied Physics Laboratories of The Johns Hopkins University, Pacesetter
Infusion, Ltd. and MiniMed Technologies, Ltd.
1.12 LICENSED PRODUCTS. A Target Product which utilizes MRG's
Glucose Sensing Technology, including all accessories therefor and the Long-Term
Glucose Sensor itself. Glucose Controllers and Glucose Monitors used with
Long-Term Glucose Sensors are Licensed Products. They are expected to be
incorporated into the implantable insulin pump, but for purposes of this
Agreement, the implantable pump itself (excluding the Glucose Controller and
Glucose Monitor) is not a Licensed Product.
1.13 LICENSED SENSOR RIGHTS. MRG's rights to any patent or
Technology included within MRG's Glucose Sensing Technology.
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<PAGE> 3
1.14 LIST PRICE The price generally published from time to
time for a product offered for sale in a particular market in particular
quantities to Third Parties unrelated to either Party who are not sales agents,
sales representatives, dealer or distributors, but instead utilize the product
for themselves or in providing medical care to unrelated persons.
1.15 LONG-TERM GLUCOSE SENSOR. Any sensor using MRG's Glucose
Sensor Technology, the principal purpose of which is to detect the presence of,
or to measure the quantity of, or any change in the quantity of, glucose in the
body of a human or animal subject that is intended to be used in vivo with an
implantable microinfusion pump system for at least forty-five days before
replacement, including Improvements and all accessories and components of the
sensor. The lead connecting the Long-Term Glucose Sensor to an implantable pump
is not an accessory or component of the Long-Term Glucose Sensor but is a part
of the implantable pump system.
1.16 MANN FOUNDATION RIGHTS. All rights which MRG now has to
Technical Information as a result of or relating to any contract or agreement
involving the Mann Foundation, including but not limited to all rights under a
License Agreement dated February 6, 1996 between MRG and the Mann Foundation, as
amended April 17, 1998.
1.17 MRG'S GLUCOSE SENSING TECHNOLOGY. All rights which MRG
has and hereafter develops or acquires to Glucose Sensing Technology and
Licensed Products, including but not limited to, Mann Foundation Rights and UC
Rights as such rights relate to Glucose Sensing Technology. MRG's Glucose
Sensing Technology shall not include any glucose sensing technology under
development, developed or licensed by MiniMed.
1.18 PARTY. Either entity that is a signatory to this
Agreement.
1.19 PMA. Approval from the FDA to commercially distribute a
medical device under the Pre Market Approval regulations.
1.20 PERSON. Any individual, partnership, association, joint
stock company, joint venture, limited liability company, corporation, trust,
unincorporated organization, other entity or government, or agency or political
subdivision, economic unit or entity thereof, including, without limitation,
either party to this Agreement and their respective Affiliates.
1.21 REGULATORY APPROVAL. Approval by appropriate authorities
to allow commercial sale of any Licensed Product in a certain country or
countries, for example the FDA PMA approval in the United States.
1.22 TARGET PRODUCT. A Glucose Controller or a Glucose Monitor
utilizing an implantable glucose sensor suitable for use in vivo in humans or
animals for a period of at least forty-five days before replacement.
1.23 TECHNICAL INFORMATION. Any information reasonably
relevant to the Licensed Products or otherwise pertaining to the design,
manufacture, assembly, production, operation, performance or use of the Licensed
Products or any component of Licensed Products, including but not limited to
invention disclosures, patent applications, issued patents,
Page 3 of 34
<PAGE> 4
feasibility study information, testing and reliability information,
specifications, documentation, drawings, computer programs, software,
prototypes, and the like.
1.24 TECHNOLOGY. Any invention, development or Improvement,
and any trade secret, "know-how", manufacturing formula, process, procedure,
method or technique, whether or not patentable, copyrightable or otherwise
protectable by law.
1.25 THIRD PARTY. Any Person other than the legal entities
that are Parties to this Agreement.
1.26 TRANSFER PRICE. The price charged for any product by MRG
to MiniMed.
1.27 UC RIGHTS. All rights which MRG now has to Technical
Information as a result of or relating to any contract or agreement involving
the Regents of the University of California, including the Exclusive License
Agreement for Glucose Sensors and Systems, effective February 28, 1990, U.C.
Agreement Control No. 90-04-0104.
1.28 WILSON GREATBATCH RIGHTS. All rights which MiniMed now
has to Technical Information as a result of or relating to any contract or
agreement involving Wilson Greatbatch Ltd., including but not limited to a
License Agreement and a Supply Agreement, each made as of the 1st day of
October, 1993, and any amendments thereto.
2. DEVELOPMENT OF LONG TERM GLUCOSE SENSOR
2.1 Promptly after the execution and delivery of this
Agreement MRG will continue to use commercially reasonable efforts to diligently
pursue the development of the Long-Term Glucose Sensor, including without
limitations (a) all pre-clinical activity necessary to obtain approval from the
FDA to conduct a clinical trial with respect to a fully implanted version of
MRG's Long-Term Glucose Sensor in humans under the Investigational Device
Exemption regulations adopted by the FDA (with commercially reasonable support
from MiniMed's regulatory personnel), and (b) commencement of such a study in
humans by the earliest reasonable date (the "Long-Term Glucose Sensor
Development"). The period from the Effective Date until the commencement of the
clinical trial is referred to herein as the Performance Period.
2.2 MONITORING OF DEVELOPMENT. Promptly after the execution
and delivery of this Agreement MiniMed and MRG will each designate two
representatives who will meet at least monthly so that MiniMed can monitor the
development of the Long-Term Glucose Sensor. MRG will cooperate with the MiniMed
representatives in good faith and will provide all information regarding the
status of the development of the Long-Term Glucose Sensor as MiniMed may
reasonably request, whether at the meetings of the representatives referred to
above and at any other time.
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<PAGE> 5
3. CONFIDENTIAL INFORMATION
3.1 TREATMENT OF CONFIDENTIAL INFORMATION. MiniMed and MRG
shall maintain all Confidential Information disclosed by the other Party
pursuant to or during the performance of this Agreement in strict secrecy and
confidence, and not disclose such Confidential Information to any Third Party,
nor make any use of such information and Technology for its own benefit or gain
except as is mutually agreed between the Parties or as otherwise provided for
and permitted under this Agreement or the Implantable Pump License and
Distribution Agreement. No Confidential Information or materials pertaining to
Licensed Products, MRG's Glucose Sensing Technology or MiniMed's Pump Technology
will be supplied to any other Person other than those approved in writing by
MiniMed with respect to MiniMed's Confidential Information and by MRG with
respect to MRG's Confidential Information, except disclosure to sublicensees,
and contractors with a need to know and bound by confidentiality agreements, and
to the FDA and similar regulatory agencies of information relative to obtaining
regulatory approval. Confidential Information may also be supplied by MRG to
proposed distributors if the Option expires without being exercised, if MiniMed
repudiates the Option before it expires or if the Option is exercised and
thereafter MRG reasonably believes, based on the quantity of Licensed Products
ordered or purchased by MiniMed, that MRG will have the right to convert
MiniMed's distribution rights to non-exclusive rights pursuant to Section 6.6.2
or terminate them pursuant to Section 6.6.3. Nothing in this Section 3 shall
apply, however, to any disclosure that may be required by applicable law,
including without limitation disclosures in documents filed with the Securities
and Exchange Commission and in private placement memoranda used in connection
with the sale of securities. MRG acknowledges its understanding and agreement
that as a public company MiniMed has responsibilities to disclose certain
information about its affairs and will be required to publicly disclose the
existence of this Agreement and its material terms as well as future
developments in the portion of its business to which this Agreement relates.
MiniMed likewise acknowledges its understanding and agreement that MRG may be
required to make similar disclosure in connection with its capital raising
efforts.
3.2 REQUESTED DISCLOSURE OF CONFIDENTIAL INFORMATION. In the
event either Party is requested pursuant to, or required by, applicable law or
regulation or by legal process to make any disclosure otherwise prohibited
hereunder, the Party that is required to make disclosure (the "Disclosing
Party") shall, to the extent reasonably practicable, provide the other Party
with prompt notice of such requests or requirements prior to disclosure so that
(a) the other Party may seek an appropriate protective order or other remedy
and/or (b) the Disclosing Party and the other Party can seek in good faith to
consult with the Disclosing Party on the appropriate scope and approach to
disclosure. In the event that such protective order or other remedy is not
obtained, the Disclosing Party shall furnish only that portion of the
Confidential Information which the Disclosing Party reasonably believes may be
legally required to disclose and, to the extent reasonably practicable, to use
reasonable efforts to obtain confidential treatment for the Confidential
Information disclosed.
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<PAGE> 6
3.3 LIMITED RELEASE. MiniMed and MRG shall be released from
the obligations of Section 3.1 to the extent that any of the disclosed
information: (a) was already publicly available at the time of the disclosure by
the other Party or (b) becomes publicly available through no fault of the
receiving Party (but only after and only to the extent that it becomes publicly
available).
3.4 TERM OF CONFIDENTIALITY. The obligation of MiniMed and MRG
to receive and hold information disclosed by the other Party in confidence, as
required by Section 3.1, shall terminate three (3) years after termination of
this Agreement or ten years after the Effective Date of this Agreement,
whichever is later, except that such obligations shall not terminate as to
Technical Information which constitutes a trade secret until such time as that
information has become publicly available.
4. [INTENTIONALLY OMITTED]
5. OPTION FOR EXCLUSIVE MARKETING AGREEMENT
5.1 GRANT OF OPTION. MRG hereby grants MiniMed the right and
option (the "Option") to purchase the exclusive worldwide distribution rights
with respect to the Long-Term Glucose Sensor and all other Licensed Products
pursuant to the terms and conditions set forth in Section 6 (the "Exclusive
Marketing Agreement"). The Option shall only be exercisable within 90 days after
any fully implantable version of the Long-Term Glucose Sensor is first
successfully implanted in human patients under an approved Investigational
Device Exemption granted by the FDA or under approval of the relevant regulatory
authority for the European Union. The Long-Term Glucose Sensor will be deemed to
have been successfully implanted if for a period of at least thirty days it
works continuously as designed, is not subject to being explanted and produces
data that correlates to plasma glucose levels determined using accepted
laboratory instruments or capillary glucose levels determined using conventional
monitors, in either case, to the extent of at least 85%. The 90-day period
within which the option must be exercised shall commence with the date of
implant and shall include the thirty days referred to above. Said 90-day period
to exercise the Option shall be extended by one day for each day after any such
implant until MRG notifies MiniMed of the implant and one day for each day after
the thirty days referred to above before MRG reports to MiniMed in writing on
the results relevant to determining that the implant was successful. The fact
that MiniMed's exclusive rights to distribute implantable pump systems may have
become non exclusive under the Implantable Pump License and Distribution
Agreement shall not affect MiniMed's right to exercise the Option and obtain the
exclusive distribution rights referred to above.
5.2 EXERCISE OF OPTION. The Option may be exercised by MiniMed
only by delivering written notice of its election to exercise within the 90 day
period referred to in Section 5.1 (as that period may be extended pursuant to
Section 5.1).
5.3 PURCHASE PRICE. The purchase price payable for the
exclusive worldwide distribution rights with respect to the Long-Term Glucose
Sensor and all the Licensed Products
Page 6 of 34
<PAGE> 7
will be $30 million. The purchase price shall be payable within thirty (30) days
after delivery of the notice of exercise pursuant to Section 5.2.
5.4 AVAILABILITY OF INFORMATION. MRG shall make reasonable
efforts to keep MiniMed informed on a current basis of all facts and events
relating to the Long-Term Glucose Sensor specifications, schedules and trial
results which would be regarded as important to a reasonable and prudent person
holding the right to exercise the Option in deciding whether or not to exercise
(although not necessarily determinative in that decision).
5.5 PROHIBITION ON GRANTING LICENSES TO LICENSED SENSOR RIGHTS
DURING OPTION. MRG shall not license any of the Licensed Sensor Rights to any
Third Party prior to the expiration of the Option without it having been
exercised or after exercise of the Option, except that MRG may grant licenses to
utilize the Licensed Sensor Rights after MiniMed's distribution rights are
converted to non-exclusive rights pursuant to Section 6.6.2, such rights are
terminated pursuant to Section 6.6.3 or to the extent consented to in writing by
MiniMed prior to the date of this Agreement.
5.6 EFFECTIVE DATE OF EXCLUSIVE MARKETING AGREEMENT. Section 6
shall not become effective if the notice of exercise is not given by MiniMed
prior to the expiration of the Option or if MiniMed fails to pay the purchase
price as required by Section 5.3.
6. CONTINGENT EXCLUSIVE MARKETING AGREEMENT
The provisions of this Section 6 shall commence to apply if
and when the Option is exercised and MiniMed pays the purchase price to MRG.
6.1 CONTINGENT GRANT OF MARKETING RIGHTS. Subject to the
foregoing condition, MRG hereby grants to MiniMed the exclusive worldwide
marketing rights to promote, sell, market, distribute and use the Long-Term
Glucose Sensor and all other Licensed Products for the Exclusive Marketing
Agreement Term, subject to a limited reversion to non-exclusivity or termination
pursuant to Section 6.6 of this Agreement.
6.2 THE EXCLUSIVE MARKETING AGREEMENT TERM. The "Exclusive
Marketing Agreement Term" shall begin when and if MRG receives written
notification of MiniMed's exercise of the Option as provided in Section 5.2 and
payment of the purchase price as provided in Section 5.3, and shall continue
perpetually thereafter unless terminated.
6.3 EXCLUSIVITY. Except as provided in Sections 6.6.2 and
6.6.3 of this Agreement, MRG shall have no right to grant to any Third Party the
right to promote, sell, market, distribute or use the Long-Term Glucose Sensor
or any other Licensed Product anywhere in the world during the Exclusive
Marketing Agreement Term, and, except as provided in Sections 6.6.2 and 6.6.3,
MRG will not sell or distribute the Long-Term Glucose Sensor or any other
Licensed Product during the Exclusive Marketing Agreement Term except so as to
fulfill its obligations to MiniMed under this Agreement.
Page 7 of 34
<PAGE> 8
6.4 PURCHASE OF LONG-TERM GLUCOSE SENSORS.
6.4.1 TRANSFER PRICES. Once the Long-Term Glucose
Sensor is ready for production and MRG can lawfully sell such a device to
MiniMed, MRG shall sell to MiniMed Long-Term Glucose Sensors at a Transfer Price
equal to
(a) for sales to customers located in the U.S., the greater of
the US Minimum Transfer Price established by MRG or
sixty-five percent (65%) of the List Price of such
Long-Term Glucose Sensors as determined by MiniMed and
(b) for sales to customers located in each respective market
outside of the U.S., the greater of the OUS Minimum
Transfer Price established by MRG or fifty-five percent
(55%) of the List Price of such Long-Term Glucose Sensors
as determined by MiniMed
and upon such other terms and conditions as are customary and mutually agreed
upon. Until 24 months after regulatory approval for sale in the US, the US
Minimum Transfer Price shall not exceed Twenty Six Hundred Dollars ($2,600.00).
Until 24 months after regulatory approval for sale in the EU or any other OUS
jurisdiction reasonably agreeable to MRG and MiniMed the OUS Minimum Transfer
Price shall not exceed Twenty Five Hundred Dollars ($2,500.00). Glucose
Controllers and Glucose Monitors are not included in the Transfer Price of the
Long-Term Glucose Sensors and are included in the Transfer Price of implantable
insulin pump systems pursuant to the Implantable Pump License and Distribution
Agreement. The lead connecting the Long-Term Glucose Sensor to an implantable
pump likewise is not included in the Transfer Price of the Long-Term Glucose
Sensor, is included in the price of the implantable pump system when sold with
that system and is priced separately when sold separately as provided in the
Implantable Pump License and Distribution Agreement.
6.4.2 MANUFACTURING. Within a reasonable time after
MiniMed obtains Regulatory Approval for a Licensed Product from the FDA or any
regulatory authorities of another jurisdiction approved by MiniMed, MRG will
establish the capability to manufacture the Long-Term Glucose Sensor and the
other Licensed Products meeting the then current specifications and the warranty
set forth in Section 6.19 in the quantities and within the delivery times
contemplated by this Agreement. If MRG fails to establish the capability to
manufacture the Long-Term Glucose Sensor or any of the other Licensed Products
in accordance with the requirements of the preceding sentence or thereafter
loses that capability or fails to manufacture the Long-Term Glucose Sensors or
the Licensed Products to be sold to MiniMed as contemplated by Section 6.4.2.1,
then MiniMed shall have the right, in accordance with Section 6.4.3, to itself
undertake the manufacture of the Long-Term Glucose Sensor and the other Licensed
Products or contract with others to do so. Such right may only be exercised by
giving written notice to MRG of MiniMed's intention to do so, and thereafter MRG
will have 180 days in which to cure its failure to perform. Such cure shall be
deemed effective only if MRG manufactures and delivers to MiniMed in accordance
with the requirements of this Agreement that number of Long-Term Glucose Sensors
and other Licensed Products which
Page 8 of 34
<PAGE> 9
MiniMed has ordered and MRG has failed to deliver and at least 80% of such
products that meet the specification and warranty requirements referred to
above.
6.4.2.1 ORDERS FOR LICENSED PRODUCTS.
MiniMed and MRG will cooperate to ensure that MiniMed receives the quantities of
Long-Term Glucose Sensors and other Licensed Products that it requires.
Immediately upon obtaining the first regulatory approval referred to in Section
6.4.2 (or before, at MiniMed's option) MiniMed will place a firm purchase order
with MRG for the quantity of Long-Term Glucose Sensors and other Licensed
Products it requires over the next six month period. MiniMed and MRG will meet
to review and agree to MiniMed's initial requirements. Thereafter, MiniMed will
provide supplemental purchase orders periodically, but at least every two
months, specifying the quantity of Long-Term Glucose Sensors and other Licensed
Products MiniMed will require over the next six month period. MRG will have the
right to refuse any purchase order that would exceed MRG's manufacturing
capacity if that order exceeds, for any given six month period, more that 115%
of the number of Long-Term Glucose Sensors or other Licensed Products purchased
in the previous six month period. If MiniMed's requirements for Long-Term
Glucose Sensors or other Licensed Products change such that MiniMed would like
to amend these purchase orders MRG will attempt to accommodate those changes,
but MRG may request additional payment from MiniMed beyond the agreed Transfer
Prices to reflect any actual increases in MRG's costs. In the event of any
disagreement as to whether the additional charges reflect actual increases in
MRG's costs, the matter shall be settled by arbitration pursuant to Section 18.
6.4.3. MANUFACTURE BY MINIMED. If MiniMed undertakes
to manufacture the Long-Term Glucose Sensor and other Licensed Products under
the provisions of Section 6.4.2, it will have the right to do so thereafter
throughout the Exclusive Marketing Agreement Term provided that it complies with
the following conditions: (1) MiniMed shall be required to pay a royalty to MRG
equal to 8% of MiniMed's Long-Term Glucose Sensor sales from the sale, lease or
other commercial exploitation of the Long-Term Glucose Sensors manufactured by
it; (2) MiniMed shall be required to comply with all requisite obligations of a
sublicensee arising after MiniMed undertakes to manufacture under the Exclusive
License Agreement for Glucose Sensors and Systems with the Regents of the
University of California effective February 28, 1990, U.C. Agreement Control No.
90-04-0104 and the License Agreement dated February 6, 1996 between MRG and the
Mann Foundation, including the payment of any royalties or other compensation
with respect to Long-Term Glucose Sensors manufactured by MiniMed under the
present terms of such licenses or any revised terms agreed upon after the date
hereof which are more favorable to MiniMed and (3) MiniMed shall not take any
action or omit to take any action which would constitute a default of a
sublicense under any such agreement. "Long-Term Glucose Sensor Sales" for this
purpose shall mean the U.S. dollar amount of gross sales of Long-Term Glucose
Sensors and other Licensed Products of MiniMed or any of its Affiliates,
excluding amounts collected for any transportation, shipping and mailing costs;
sales, use or excise taxes; customs, duties, tariffs or insurance and after
subtracting all amounts refunded, allowed, credited or discounted with respect
to Long-Term Glucose Sensors. If MiniMed elects to exercise the right to
manufacture the Long-Term Glucose Sensors and other Licensed Products pursuant
to this Agreement, MiniMed will have the right to use all Technology owned or
licensed by MRG relating to the Long-Term Glucose
Page 9 of 34
<PAGE> 10
Sensor and the other Licensed Products for the purpose of manufacturing,
distributing and selling Long-Term Glucose Sensors and the other Licensed
Products provided that MiniMed complies with the requirements of (2) above and
any requisite obligations owed by MRG under any other license to a Third Party,
including the payment of any royalties. MRG will cooperate with MiniMed in
providing technical information and assistance as MiniMed may reasonably require
to manufacture Long-Term Glucose Sensors and other Licensed Products. If MiniMed
manufactures the Long-Term Glucose Sensor and other Licensed Products the
provisions of Sections 6.5 and 6.6 will continue to apply.
6.5 ABILITY TO SET LIST PRICE. MiniMed shall have the sole
authority to establish List Prices for the Long Term Glucose Sensor.
6.5.1 ADJUSTMENT IN PRICES. If at anytime after
December 31, 2000 either Party believes that the Transfer Price arrangement for
the Long-Term Glucose Sensor is materially unfair to it, the Parties will meet
and seek in good faith to agree on revised prices that are agreeable to both
Parties and approximate pricing structures that are customary for other
comparable distribution arrangements involving high technology products. If the
Parties are unable to agree on price, the matter shall be resolved by
arbitration in accordance with Section 18.
6.6 PERFORMANCE REQUIREMENTS. For MiniMed to maintain
exclusivity of its marketing rights granted under this Exclusive Marketing
Agreement for the two separate geographic segments of (a) sales to customers
located in the United States and (b) sales to customers located in any country
other than the United States ("OUS"), MiniMed must satisfy both of the following
requirements:
(i) MiniMed shall satisfy the minimum purchase
requirements set forth in Section 7.1 of the Implantable Pump
License and Distribution Agreement (but only to the extent
required to preserve its exclusive distribution rights
thereunder) for each full calendar year commencing after it
exercises the Option, whether or not its exclusive
distribution rights under that Agreement have become
non-exclusive, and
(ii) After the Long-Term Glucose Sensor and the other
related Licensed Products are commercially available as part
of a Closed Loop System, MiniMed must purchase that number of
Long-Term Glucose Sensors in each calendar year equal to the
combined total of the US and the OUS "Minimum Purchase
Requirements" determined as provided below.
The Minimum Purchase Requirement for each of the US and the OUS shall be
determined by multiplying the number of implantable pump systems sold by MiniMed
in the relevant jurisdiction (US or OUS) in each Annual Period by the applicable
percentage in the table below for that Annual Period. The Minimum Purchase
Requirements will be determined separately for the US and the OUS but the two
separate amounts shall be combined for purposes of (ii) above. Long-Term Glucose
Sensors that are sold as replacements for patients already having implanted
pumps with sensors will count towards the Minimum Purchase Requirements.
Page 10 of 34
<PAGE> 11
Each Annual Period in the table below is measured for sales to
customers located in the U. S. from the first day of the month following the
latest of the date the Exclusive Marketing Agreement becomes effective, the end
of the Performance Period (as defined in Section 2.1) or the date of the first
Regulatory Approval of a Long-Term Glucose Sensor and the other related Licensed
Products for use with an approved implantable pump system in a Closed Loop
System for sales to customers located in the US. Each Annual Period in the
following table is measured for OUS sales from the first day of the month
following the latest of the date the Exclusive Marketing Agreement becomes
effective, the end of the Performance Period referred to above or the date of
first Regulatory Approval of a Long-Term Glucose Sensor and the other related
Licensed Products for use with an approved implantable pump system in a Closed
Loop System in the EU. Each such year referred to in the following table,
whether applicable to sales in the United States or OUS sales, is referred to in
this Agreement as an "Annual Period."
<TABLE>
<CAPTION>
MINIMUM PERCENTAGE
ANNUAL PERIOD FOR U.S. AND OUS
------------- ------------------
<S> <C>
First Year 40%
Second Year 50%
Third Year 60%
Fourth Year 70%
Fifth Year 80%
Each Year Thereafter 90%
</TABLE>
6.6.1 DETERMINATION OF PURCHASE REQUIREMENTS. The
Minimum Purchase Requirements will be measured at the end of each relevant
calendar year as follows:
(a) Because the Annual Periods in the table in
Section 6.6 are intended to be 365-day periods from the date of
Regulatory Approval (366 days for leap years), which will not
necessarily be calendar years, an "Average Annual Percentage" for each
calendar year will be determined based on the average monthly
percentage for each Annual Period in the table. The average monthly
percentage for each Annual Period will be calculated by dividing the
applicable Minimum Percentage in the table by 12. Thus the average
monthly percentage for the first Annual Period (the First Year in the
table in Section 6.6) will be 3.33% and the average monthly percentage
for the second Annual Period (the Second Year in the table) will be
4.167%. If Regulatory Approval is obtained on any day other than the
first day of a calendar month, the first Annual Period will be deemed
to commence on the first day of the next full calendar month.
(b) For each calendar year the Average Annual Percentage will
be equal to the sum of the monthly average percentages for each month
of the calendar year calculated as provided in (a) above. For example,
if the first Regulatory Approval referred to in Section 6.6 is
obtained in the US on March 20, 2005, the period from March 20, 2005
to March 31, 2005 will be disregarded and the average monthly
percentage for the months from April 2005 through March 2006 will be
3.33%. The
Page 11 of 34
<PAGE> 12
average monthly percentage for the months from April 2006 to March 2007
will be 4.167%. Therefore the Average Annual Percentage for calendar
year 2006 will be the sum of the average monthly percentages for
January through March 2006 at 3.33% per month plus the average monthly
percentages for April through December 2006 at 4.167%, or a total of
47.5%.
(c) The total number of pump systems sold in the US
or the OUS, as the case may be, during each calendar year (both those
which include and do not include Long-Term Glucose Sensors) will then
be multiplied by the Average Annual Percentage for that calendar year,
and the resulting product will be the Minimum Purchase Requirement for
the US or the OUS, as the case may be, for that calendar year.
(d) There will be no Minimum Purchase Requirement for
any fractional calendar year after the first Regulatory Approval in the
US or for any fractional calendar year after the first Regulatory
Approval in the first jurisdiction in the OUS where Regulatory Approval
is obtained. For example, if the first Regulatory Approval in the US is
obtained on April 1, 2005, there will be no Minimum Purchase
Requirement for the US for the calendar year 2005 and the Minimum
Purchase Requirement for 2006 will be 47.5% calculated as provided in
(c) above.
(e) Although any fractional calendar year after the
first Regulatory Approval in the first jurisdiction in the OUS where
Regulatory Approval is obtained will be disregarded, fractional years
after the first Regulatory Approval in any other OUS jurisdictions will
not be disregarded. Moreover, pump systems sold in those subsequent OUS
jurisdictions will be included in the calculation of the Minimum
Purchase Requirement for the OUS commencing with the first day of the
first full calendar month after Regulatory Approval is obtained in each
such jurisdiction (or commencing on the day Regulatory Approval is
obtained if it is obtained on the first day of a calendar month).
(f) The Average Annual Percentage applicable to the
OUS will depend upon the date of the first Regulatory Approval in the
first OUS jurisdiction where such approval is obtained as provided in
(d) above notwithstanding the fact that Regulatory Approval for other
jurisdictions may be obtained in subsequent years. For example, if
Regulatory Approval in the EU is obtained on April 1, 2005 and
Regulatory Approval for Japan is obtained on July 1, 2007, pump systems
sold in Japan on and after July 1, 2007 will be included in the
calculation of the Minimum Purchase Requirement for the OUS for
calendar year 2007 and subsequent years and the Average Annual
Percentage applicable to all pump sales in the EU and Japan combined
for calendar year 2007 would be 57.5%, the same Average Annual
Percentage determined pursuant to (b) above that would apply to the OUS
if Regulatory Approval had not been obtained in Japan.
(g) In calculating the Minimum Percentage Requirement
for the OUS, sales of pump systems in all OUS jurisdictions for which
the first Regulatory Approval described in Section 6.6 has not been
obtained will be disregarded. Thus, in the
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<PAGE> 13
calculation in (c) above sales of implantable pumps (both those which
include and do not include a Long-Term Glucose Sensor) in OUS
jurisdictions other than the EU and Japan would be disregarded
(assuming Regulatory Approval in any such other jurisdiction has not
been obtained).
(h) The EU shall be treated as a single jurisdiction
for purposes of calculating OUS Minimum Purchase Requirements unless at
some future date countries then having a majority of the population of
all countries presently constituting the EU do not accept the concept
of a single Regulatory Approval for all such countries.
(i) If Regulatory Approval is obtained and then
suspended or revoked in any jurisdiction, pump systems sold to
customers located in that jurisdiction, both those which include and do
not include a Long-Term Glucose Sensor, will be disregarded in the
calculation of Minimum Purchase Requirements until Regulatory Approval
is reinstated. If Regulatory Approval is suspended or revoked in the
US, (A) there shall be no Minimum Purchase Requirement for the US until
Regulatory Approval is reinstated, (B) the calculation of that Minimum
Purchase Requirement for the period after reinstatement shall be made
in the manner contemplated by (c) above and (C) the Minimum Percentages
in the table in Section 6.6 used to calculate the Average Annual
Percentage will be based upon the date of obtaining the first
Regulatory Approval without regard to any such suspension or revocation
unless the period of suspension or revocation exceeds six months. In
that event (X) the Minimum Percentage used for calculating the Average
Annual Percentage for the calendar year in which reinstatement occurs
will be the Minimum Percentage that was in effect for the Annual Period
during which the suspension or revocation occurred, (Y) such Minimum
Percentage shall remain in effect for 12 full calendar months after
Regulatory Approval is reinstated and (Z) all increases in the Minimum
Percentage shall occur at the beginning of the next succeeding 12
calendar month periods.
(j) Likewise, if Regulatory Approval in the EU is
suspended or revoked, the Minimum Purchase Requirements for the OUS
will be suspended and reinstated in the manner contemplated by (i)
above. If Regulatory Approval is suspended or revoked for any OUS
jurisdiction other than the EU, there shall be no effect on the Minimum
Purchase Requirement for the OUS except that sales of pump systems,
both those including and not including Long-Term Glucose Sensors, to
customers located in that jurisdiction will be disregarded in the
calculation until Regulatory Approval is reinstated.
An example of the application of Section 6.6 and this Section
6.6.1 is attached to this Agreement.
6.6.2 LOSS OF EXCLUSIVE RIGHTS. If during the
Exclusive Marketing Agreement Term purchases made in any calendar year by
MiniMed from MRG for the U.S. and OUS combined do not equal at least the
combined Minimum Purchase Requirements for the US and the OUS specified in
Section 6.6 and 6.6.1 for such calendar year and provided MRG can continue to
supply the quantities of Long-Term Glucose Sensors and the other related
Licensed Products set forth in Section 6.6.1 and is not otherwise in material
default of this Agreement, MRG shall have the absolute right to convert
MiniMed's marketing rights to a non-exclusive basis, unless within thirty (30)
days after the end of such Annual Period MiniMed pays to MRG such sum as is
representative of one-half of the Transfer Price of the quantity of Long-Term
Glucose Sensors which would need to be purchased by MiniMed to bring the total
minimum quantity for such calendar year up to at least such combined Minimum
Purchase Requirements for the US and the OUS. In no event shall MiniMed's
marketing rights be converted to a non-exclusive basis or terminated if the
failure of MiniMed to purchase the required number of Long-Term Glucose Sensors
is caused by the failure of MRG to provide, in accordance with the requirements
of this Agreement (determined without regard to the doctrine of substantial
Page 13 of 34
<PAGE> 14
performance and without regard to the 115% limitation set forth in Section
6.4.2.1), Long-Term Glucose Sensors or other Licensed Products which have been
ordered by MiniMed.
If MRG fails to establish the capability to
manufacture Licensed Products and MiniMed exercises its right set forth in
Section 6.4.2 to itself undertake such manufacture or contract with others to do
so, the Minimum Purchase Requirements set forth in Section 6.6.1 shall be
adjusted so that they begin to apply for the first twelve calendar month period
commencing after such capability is established as if that had been the First
Year in the table set forth in Section 6.6 and shall progress as provided in the
table substituting each such successive twelve calendar month period for each
calendar year referred to in Section 6.6.1.
Likewise, if MRG loses said manufacturing capability
or if MRG fails to deliver or MiniMed is unable to manufacture or distribute
Long-Term Glucose Sensors as a result of the assertion by a Third Party of any
right to the Technology associated with the Long-Term Glucose Sensor, then the
obligation to meet the Minimum Purchase Requirements shall be suspended until
such time as either MRG or MiniMed or a Third Party with whom either of them
contracts begins manufacturing or, in the case of the assertion of Third Party
rights to the Technology, the inability of MRG to deliver or MiniMed to
manufacture or distribute Long-Term Glucose Sensors is eliminated (as a result
of legal proceedings or otherwise) and such delivery, manufacturing or
distribution, as the case may be, begins. The Minimum Purchase Requirements for
the first twelve calendar month period commencing thereafter shall be the same
as the Minimum Purchase Requirements for the calendar year in which any such
suspension occurred. The Minimum Purchase Requirements for each subsequent
twelve calendar month period shall be equal to the Minimum Purchase Requirement
for the calendar years subsequent to the year in which any such suspension
occurred.
If during any calendar year (a) MRG fails to deliver
to MiniMed within the times required by this Agreement, all of the Long-Term
Glucose Sensors (determined without regard to the 115% limitation set forth in
Section 6.4.2.1 and the doctrine of substantial performance) ordered by MiniMed
for delivery during that calendar year in accordance with the terms of this
Agreement, or not ordered in accordance with the terms of this Agreement but as
to which MRG accepts the order (the "Number of Sensors Ordered") or (b) any such
sensors delivered during the calendar year fail to meet all of the requirements
of this Agreement (including without limitation those set forth in Sections
6.12, 6.18 and 6.19), then the Minimum Purchase Requirement for that calendar
year will be reduced by the number of Long-Term Glucose Sensors which are not so
delivered plus those that do not meet such requirements (the "Shortfall"). In
addition, the Minimum Purchase Requirement for each subsequent calendar year
will be reduced by the percentage that the Shortfall represents of the Number of
Sensors Ordered. Such reduction shall be made whether or not the Number of
Sensors Ordered exceeds the 115% limitation set forth in Section 6.4.2.1.
In no event shall MiniMed's marketing rights be
converted to non-exclusive rights pursuant to this Section 6.6.2, nor shall such
rights be terminated pursuant to Section 6.6.3 if the failure of MiniMed to meet
the Minimum Purchase Requirement for any calendar year is caused by (a) the
failure of MRG to deliver, in accordance with the terms of this Agreement (and
without regard to the 115% limitation set forth in Section 6.4.2.1 and
Page 14 of 34
<PAGE> 15
determined without regard to the doctrine of substantial performance), the
Number of Sensors Ordered or (b) the failure of MRG to establish or maintain the
capability to manufacture Long-Term Glucose Sensors or continuously maintain
that capability or (c) the assertion of Third Party rights in the Technology
associated with the Long-Term Glucose Sensor. The parties acknowledge that in
the case of (b) or (c) MiniMed will not be obligated to place orders for
Long-Term Glucose Sensors and therefore (b) and (c) will apply even if (a) does
not.
6.6.3 TERMINATION OF RIGHTS. If during the Exclusive
Marketing Agreement Term purchases made in any two consecutive calendar years by
MiniMed from MRG for each market segment have not met or exceeded the combined
Minimum Purchase Requirements for the US and the OUS, or if MiniMed shall sell
any Target Product that does not include a Long-Term Glucose Sensor purchased
from MRG, MRG shall have the absolute right to terminate the Exclusive Marketing
Agreement by payment to MiniMed of the amount of one-half of the purchase price
set forth in Section 5.3 less one-half of any amount previously paid to MiniMed
under Section 6.9.3.
6.6.4 SATISFACTION OF MINIMUM PURCHASE REQUIREMENTS.
If during the Exclusive Marketing Agreement Term purchases made in any calendar
year by MiniMed from MRG for the U.S. and OUS geographic segments equal or
exceed the combined Minimum Purchase Requirements for those segments specified
in the above table for such Annual Period, MiniMed shall be deemed to have
satisfied its obligations under Sections 6.6 and 6. 1 for such calendar year.
6.6.5 RIGHT TO SELL INVENTORY. In the event of
termination of the marketing rights under this Agreement pursuant to Section
6.6.3, MiniMed shall nonetheless have the right for one year from the effective
date of termination to sell the inventory of Long Term Sensors and other
Licensed Products in its possession at the time of termination, except, however,
that MRG shall have the right but not the obligation to repurchase the Long Term
Sensors and other Licensed Products in MiniMed's inventory at the price paid by
MiniMed to MRG for purchase of such products.
6.6.6 NOTICE OF TERMINATION. To be effective MRG may
exercise its right to terminate the Exclusive Marketing Agreement or its
exclusivity only if it elects to do so by delivering written notice to MiniMed
within one hundred eighty (180) days after the end of the calendar year for
which the required combined Minimum Purchase Requirements for the US and the OUS
have not been met and MiniMed has failed to pay the amounts necessary to avoid
any such termination.
6.6.7 OBLIGATIONS AFTER TERMINATION. In the event of
termination of the Exclusive Marketing Rights or the reduction of marketing
rights to non-exclusive rights under this Agreement, MiniMed shall make
commercially reasonable efforts to allow MRG to make and sell Licensed Products
and/or implantable insulin pumps for use with a Long-Term Glucose Sensor under
any PMA or similar authority that MiniMed may have, including access to
appropriate clinical data, and shall provide MRG with reference rights to any
PMA or similar approval.
Page 15 of 34
<PAGE> 16
6.7 PAYMENT. The purchase price payable by MiniMed to MRG
pursuant to Section 6.4 shall be F.O.B. MRG's place of manufacture. Payment will
be made by MiniMed in United States dollars within thirty (30) days after
shipment. If any invoice is not paid by MiniMed in accordance with its terms and
within thirty (30) days of notice of late payment, MRG may cancel or delay
further shipments until such payment is made. All sales will be final, and no
returns will be allowed except as set forth below in Section 6.18 for products
not complying with MRG's warranty or the inspection specifications. In the event
any payment payable by MiniMed to MRG pursuant to Section 6.4 shall not be paid
promptly when due, the unpaid balance thereof shall bear interest at the lesser
of (a) prime lending rate of Citibank N.A. from time to time in effect plus 1%
or (b) maximum rate permitted by applicable law.
6.8 [INTENTIONALLY OMITTED]
6.9 DEFENSE OF TECHNOLOGY.
6.9.1 In the event either Party hereto discovers or
becomes aware of any infringement or possible infringement of, or attack or
threatened attack on, any of the Licensed Sensor Rights, such Party immediately
shall notify the other Party of the details of such infringement, possible
infringement, attack or threatened attack. Promptly after such notification, the
Parties will consult with each other as to the course of action to be taken.
6.9.2 MRG, in its sole discretion and at its sole
cost and expense and with counsel, reasonably satisfactory to MiniMed, shall
take any and all appropriate legal action to defend the Licensed Sensor Rights
against any suspected infringement or from any attack or threatened attack;
provided, however, that MiniMed at all times shall have the right to participate
fully in any such action at its own expense. In the event MRG fails within a
reasonable time to initiate appropriate action in connection with any such
suspected infringement, attack or threatened attack which in the reasonable
judgment of MiniMed adversely affects or might adversely affect MiniMed's rights
in, to or under the Licensed Sensor Rights, or fails to pursue such action
vigorously once commenced, MiniMed upon notice to MRG shall have the right, but
not the obligation, to initiate or pursue any such appropriate action in MRG's
name but at MiniMed's risk and expense and MRG shall cooperate fully in any such
action. Any judgment, damages, settlement or award which results from any such
action shall be allocated (a) first, to MRG and MiniMed in proportion and to the
extent of the actual costs incurred by each in connection therewith, and (b)
thereafter, to MRG and MiniMed in proportion to their actual damages.
6.9.3 In the event of the occurrence of any claim
that any of the rights granted hereunder by MRG to MiniMed conflict with any
patent, copyright or other proprietary right of any Third Party, the Parties
hereto shall consult with each other regarding such claim and the avoidance of
the same. In the event the Parties mutually determine that it is necessary or
appropriate that MiniMed obtain a license from such Third Party in order for
MiniMed to exercise the rights granted to it hereunder, the Parties shall use
their best efforts to obtain such license on the most favorable terms
practicable to MiniMed. In the event MiniMed is required by the terms of such
license to pay royalties to such Third Party, MiniMed shall have the right
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<PAGE> 17
to a refund of a portion of the Purchase Price paid hereunder by MiniMed in an
amount equal to one half of the royalties paid to such Third Party up to a
maximum of fifteen million dollars.
6.10 QUALITY CONTROL. MiniMed shall follow reasonable quality
control standards established by MRG with respect to the storage, preservation
and use of the Long-Term Glucose Sensors purchased under this Agreement.
6.11 FDA APPROVAL AND CLINICAL TRIALS.
6.11.1 MiniMed will use commercially reasonable
efforts to cause an appropriate application to be filed with the FDA for
approval of the Long-Term Glucose Sensor and other Licensed Products for
commercial distribution and to obtain such approval in the United States. In
that connection, MiniMed will also use commercially reasonable efforts to
conduct all clinical trials reasonably required by the FDA for such approval.
The cost of obtaining and maintaining such regulatory approvals shall be borne
equally by MiniMed and MRG. The results of these efforts shall be made available
to MRG to the extent reasonably practicable and at MRG's expense. MRG shall
reimburse MiniMed for its share of such cost from time to time within 30 days of
each request for reimbursement by MiniMed accompanied by reasonable
documentation of the costs to be reimbursed. Any amount not paid within the
thirty (30) day period will bear interest at the lesser of (a) prime rate of
Citibank N.A. from time to time in effect plus one percent or (b) the maximum
rate permitted by applicable law. The value (determined at the established
Transfer Prices) of implantable pumps, Long-Term Glucose Sensors and accessories
and other Licensed Products provided by MRG for the support of the regulatory
approvals will be credited towards MRG's share of the regulatory costs. MRG will
cooperate with MiniMed in connection with obtaining FDA approval of the
Long-Term Glucose Sensor and other Licensed Products, including cooperation with
clinical trials and will provide to MiniMed such information as it possesses and
MiniMed reasonably requests in connection with obtaining FDA approval on such
clinical trials or both.
6.11.2 MiniMed will also have the right at its own
expense to apply for and obtain regulatory approval for commercial distribution
of the Long-Term Glucose Sensor and other Licensed Products in foreign
countries, and MRG will cooperate in such efforts.
6.11.3 MiniMed will provide MRG information on the
protocols and results obtained in MiniMed's trials of MiniMed's glucose sensors;
such information will constitute MiniMed's Confidential Information pursuant to
this Agreement.
6.11.4 MiniMed's obligations under this Section 6.11
shall terminate at such time as MiniMed's marketing rights with respect to the
Long-Term Glucose Sensor are converted to non-exclusive rights pursuant to
Section 6.6.2 or are terminated pursuant to Section 6.6.3 without first being
converted to non-exclusive rights.
6.12 GOOD MANUFACTURING PROCEDURES. Long-Term Glucose Sensors
and other Licensed Products shall be manufactured and tested by MRG in
accordance with all applicable U.S. laws and FDA regulations, including but not
limited to the FDA's Good Manufacturing Practice and Quality System regulations
in effect at the time of such manufacture or testing and MiniMed's quality
standards from time to time in effect. MiniMed
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<PAGE> 18
shall have the right, at its expense, to conduct quality audits of MRG and of
the Licensed Products, and MRG shall fully cooperate in all such activities. MRG
shall notify MiniMed of any FDA inspection of its production facilities used to
manufacture any Long-Term Glucose Sensors or other Licensed Products and shall
furnish MiniMed with copies of any FDA Form 483 or similar report to the extent
that they apply to any or Long Term Glucose Sensors or other Licensed Products.
6.13 RECORDS AND TRACEABILITY. Each of the Parties hereby
covenants and agrees that during the Exclusive Marketing Agreement Term and any
renewals thereof, and for a minimum period of seven years thereafter, it shall
each maintain complete and accurate traceability records for all Long-Term
Glucose Sensors and other Licensed Products that are manufactured and sold under
this Exclusive Marketing Agreement, including pertinent data, research reports,
test results, and know-how data, as required under all applicable FDA
regulations and other U.S. or other applicable laws or regulations then in
effect. Each of the Parties hereby covenants during the term of this Exclusive
Marketing Agreement and any renewals thereof and for a minimum period of three
(3) years thereafter or such longer period as may be required by law, to
maintain adequate business and sales records regarding the distribution of all
Long-Term Glucose Sensors and other Licensed Products, including pertinent data,
research reports, test results, and know-how data to meet or exceed all
applicable FDA and other U.S. or other applicable laws or regulations then in
effect. MRG and MiniMed each shall give each other access to these records in
the event of an FDA recall of any product subject to this Exclusive Marketing
Agreement, or for other purposes of the Parties in complying with applicable
Regulatory requirements.
6.14 COMPLIANCE WITH LAW. MiniMed and MRG shall each comply
with all federal, state and local laws (and the laws of any foreign
jurisdictions in which the Licensed Products are manufactured or sold)
applicable to the manufacture, sale and/or distribution of the Licensed Products
to the extent that each of them engages in any such activities. MiniMed shall
procure and maintain all necessary permits, consents, and qualifications
necessary for it to market and distribute the Licensed Products.
6.15 MiniMed warrants and covenants to MRG that:
6.15.1 MARKETING ACTIVITIES. MiniMed shall (a)
maintain adequate warehouses, inventory and other facilities and (b) shall train
and equip sufficient staff to promote, sell and distribute the Licensed Products
in a commercially reasonable manner.
6.15.2 MARKET INTRODUCTION AND TRADE PRESENTATIONS.
MiniMed shall be responsible for and shall bear the cost and expense of all
advertising, trade show exhibits, advertising and user training with respect to
the marketing of the Licensed Products.
6.15.3 PATENT IDENTIFICATION. MiniMed will, and will
cause its Affiliates, its sublicensees and their Affiliates to apply to all
Licensed Products proper patent notice in accordance with U.S. and any foreign
statutes relating to the marking of patented articles.
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6.15.4 MINIMED'S LIABILITY INSURANCE. Beginning on
the date on which the first sale of a Licensed Product is made by MiniMed or an
Affiliate or distributor of MiniMed and continuing until the expiration of ten
(10) years from the date on which the last sale of a Licensed Product occurs,
MiniMed shall maintain product liability insurance (containing a Products
Contractual Liability Endorsement covering MiniMed's obligations under Section
6.15.5) on such Licensed Product in amounts that are consistent with the amount
of products liability insurance that are maintained by MiniMed on similar
products sold by MiniMed for similar or related purposes, but in no event less
than Fifteen Million Dollars ($15,000,000). MRG shall be named as an additional
insured in each policy of insurance required to be maintained by MiniMed
hereunder. In the event the cost of the products liability insurance (including
the Products Contractual Liability Endorsement) exceeds a reasonable amount as a
result of claims made relating to any failure of the Long-Term Glucose Sensor to
perform in accordance with applicable specifications (whether as a result of a
defect or otherwise), MRG will pay the incremental cost of the insurance in
excess of said reasonable amount (notwithstanding the first sentence of this
Section 6.15.4). If MiniMed ceases to be the exclusive distributor of Licensed
Products for any reason, the amount and coverage of insurance required to be
maintained by MiniMed shall be appropriately reduced to cover and reflect the
risk for Licensed Products sold and to be sold by MiniMed. In the event MiniMed
cannot obtain the insurance required by this Section 6.15.4 because MiniMed is
not the manufacturer of the Licensed Products or for any other reason not
involving fault by MiniMed, MRG shall obtain and maintain such insurance for the
benefit of MRG and MiniMed at the cost of MRG.
6.15.5 INDEMNITY. MiniMed shall indemnify, defend and
hold harmless MRG and its manager, directors, officers, and employees from, and
shall pay any and all damages, costs, attorneys' fees or fines in excess of the
amounts MRG actually recovers under the insurance policy referred to in Section
6.15.4 or any other policy maintained by MiniMed or MRG resulting from all
claims or liability for bodily injury, death and/or property damage arising out
of the activities, services, or other involvement of MiniMed with respect to any
sale or delivery of products sold or otherwise provided by MRG resulting from or
caused by the actual or alleged negligence or willful misconduct of MiniMed and
shall bear all costs and expenses of defending such claims (including attorney's
fees incurred by MRG as contemplated by Section 6.17).
6.15.6 REGULATORY APPROVALS. MiniMed shall use
commercially reasonable efforts to (a) obtain all Regulatory Approvals necessary
to market the Licensed Products at the earliest reasonable date inside United
States, in the European Union and in such other jurisdictions as MiniMed may
reasonably determine, in exercise of its business discretion and, (b) as soon as
it is legally permitted to do so, to promote, market, sell and distribute the
Licensed Products during the Exclusive Marketing Agreement Term; provided,
however, that, notwithstanding anything contained in this Agreement to the
contrary, MRG's sole remedy for breach of MiniMed's obligations under (b) above
shall be conversion of MiniMed's marketing rights to a non-exclusive basis or
termination of said marketing rights as elsewhere provided. MiniMed's
obligations under this Section 6.15 shall terminate at such time as MiniMed's
marketing rights with respect to the Long-Term Glucose Sensor are converted to
non-exclusive rights pursuant to Section 6.6.2.
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6.16 INDEMNITY. MRG shall indemnify, defend and hold harmless
MiniMed and its directors, officers and employees from, and shall pay any and
all damages, costs and attorneys fees in excess of the amounts MiniMed actually
recovers under the liability insurance required by Section 6.15.4 or any other
policy maintained by MiniMed or MRG, resulting from all claims and liability for
bodily injury, death and/or property damage arising out of any actually or
allegedly defective products sold to MiniMed pursuant to this Agreement or any
actual or alleged negligence or misconduct of MRG in carrying out the terms of
this Agreement and shall bear all costs and expenses of defending such claims
(including attorneys' fees incurred by MiniMed or the allocable cost of
MiniMed's in-house counsel). This indemnity does not extend to any claim or loss
which results from the Long Term Glucose Sensor causing any other component,
device or thing (other than an implantable pump system or other Licensed Product
sold by MRG) to fail or the Long Term Glucose Sensor failing as a result of use
with any such other component, device, thing, or technology; nor does this
indemnity extend to failure of any other such component, device, thing, or
technology to work caused by a Long Term Glucose Sensor which is not improperly
manufactured. As used in this Section 6.16 "defective product" means the product
does not conform to applicable specifications or has a defect in materials or
workmanship or design or is damaged at the time of delivery to MiniMed at the
F.O.B. point. This indemnity does not extend to any claim or loss which results
from a Licensed Product causing any other component, device or thing to fail
(other than another Licensed Product or any component thereof and other than the
implantable pump system or any component thereof for which the Licensed Product
was designed) or a Licensed Product failing as a result of use with any such
other component, device, thing or technology, nor does this indemnity extend to
failure of any such other component, device or thing or technology to work
caused by a Licensed Product which is properly manufactured.
6.17 THIRD PARTY CLAIMS. The Party indemnified hereunder (the
"Indemnitee") shall promptly notify the indemnifying Party (the "Indemnitor") of
the existence of any claim, demand or other matter involving liabilities to a
Third Party to which the Indemnitor's indemnification obligations would apply
and shall give the Indemnitor a reasonable opportunity to defend the same at its
own expense and with counsel of its own selection (who shall be approved by the
Indemnitee, which approval shall not be unreasonably withheld); provided,
however, that the Indemnitee at all times shall have the right to fully
participate in the defense at its own expense. If the Indemnitor shall fail to
defend within a reasonable time after such notice, the Indemnitee shall have the
right, but not the obligation, to undertake the defense of, and to compromise or
settle (exercising reasonable business judgment), the claim or other matter on
behalf, for the account and at the risk and expense of the Indemnitor. Except as
provided in the preceding sentence, the Indemnitee shall not compromise or
settle the claim or other matter without the prior written consent of the
Indemnitor in each instance. If the claim is one that cannot by its nature be
defended solely by the Indemnitor, the Indemnitee shall make available all
information and assistance that the Indemnitor reasonably may request; provided,
however, that any associated expenses shall be paid by the Indemnitor.
6.18 INSPECTION OF LONG-TERM GLUCOSE SENSORS. MiniMed shall
conduct any incoming inspection tests not later than forty-five (45) days from
the date of receipt of the Licensed Products at the shipping address to which
MiniMed has requested delivery of such
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Licensed Products. Licensed Products not rejected by MiniMed by written notice
to MRG within such period shall be deemed accepted, with the exception of
Licensed Products with latent defects that are not readily observable by
MiniMed. In the event of any shortage, damage or discrepancy in or to a shipment
of Licensed Products or in the event any Licensed Products fail to comply with
the then current specifications for the Licensed Products, MiniMed shall report
promptly such shortage, damage or discrepancy or failure to MRG and furnish such
written evidence or other documentation as MRG reasonably may deem appropriate.
If such shortage, damage or discrepancy or non-conformity with specifications
existed at the time of delivery of Licensed Products at the F.O.B. point,
MiniMed may return the Licensed Products to MRG at MRG's expense, and MRG shall
at MRG's option either (a) promptly deliver substitute Licensed Products of the
same or another acceptable design to MiniMed in accordance with the delivery
procedures set forth herein, or (b) refund to MiniMed the cost of the Licensed
Products, including all costs of shipping, handling, insurance, import and
export taxes and other similar costs incurred by MiniMed.
6.19 WARRANTY. MRG warrants to MiniMed that Licensed Products
sold by MRG to MiniMed under this Agreement shall be in conformance with
applicable specifications and shall be free from defects at the time of delivery
at the F.O.B. point.
6.20 REMEDIES FOR BREACH OF WARRANTY. In the event that any
Licensed Product manufactured or sold by MRG to MiniMed under this Agreement
fails to comply with the limited warranty provided for in Section 6.19 and
MiniMed delivers notice of such noncompliance to MRG, within six (6) months of
the delivery of such Licensed Product to MiniMed or within six (6) months of
MiniMed's discovery of any latent defects in a Licensed Product that are not
readily observable by MiniMed, MRG will, unless the Licensed Product defect is
the result of any act of MiniMed, at MRG's option, either (a) correct such
failure by suitable repair or replacement at its own expense or (b) refund to
MiniMed the cost of the Licensed Product, including all costs of shipping,
handling, insurance, import and export taxes and other similar costs incurred by
MiniMed; however, MRG shall have no liability whatsoever for incidental or
consequential damages but in no event shall bodily injury, death or property
damage caused by a Licensed Product be deemed to be incidental or consequential
damages.
6.21 REPRESENTATIONS REGARDING INTELLECTUAL PROPERTY RIGHTS.
MRG represents that MRG's Glucose Sensing Technology is not and will not be
subject to any encumbrance, lien or claim of ownership of any Third Party except
for the rights of the licensors of the Mann Foundation Rights and the UC Rights.
To the best of MRG's knowledge but without having conducted a patent
infringement search, the manufacture, use or sale of MRG's Glucose Sensing
Technology will not infringe any intellectual property rights of any Third
Party. MRG has not licensed MRG's Glucose Sensing Technology to any Third Party.
The agreements giving rise to the Mann Foundation Rights and the UC Rights are
in full force and effect except as previously described by MRG to MiniMed in
writing. MRG will indemnify, defend and hold harmless MiniMed and its directors,
officers and employees from, and shall pay one half of any and all damages,
costs and attorneys' fees (including allocable costs of in house counsel)
arising out of or relating to, any claim that any of the Licensed Products
infringes any patent, trade secret or other proprietary right of a Third Party
except that
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in no event shall MRG be obligated to pay more than $15,000,000 in the aggregate
for all such indemnification, including any payments by MRG under Section 6.9.3.
6.21.1 MINIMED'S INTELLECTUAL PROPERTY RIGHTS. If the
present design of any part of a Licensed Product infringes any current or future
MiniMed patent, trade secret or other proprietary rights, MiniMed hereby grants
to MRG a non-exclusive, fully paid, royalty free license to use those patent
rights in the manufacture, sale and use of Licensed Products except for such
rights as are licensed to MiniMed by a Third Party. If the present design of any
MiniMed product now being commercially distributed or in development, including
without limitation MiniMed's short-term glucose sensor, infringes any MRG
current or future patents, trade secret or other proprietary right, MRG hereby
grants to MiniMed a non-exclusive, fully paid, royalty-fee license to use those
rights in the manufacture, sale and use of such products except for such rights
as are licensed to MRG by a Third Party.
6.22 LIMITATIONS ON WARRANTIES AND REMEDIES
6.22.1 LIMITATIONS ON WARRANTIES. EXCEPT AS EXPRESSLY
SET FORTH IN SECTION 6.19 or 6.21, MRG MAKES NO REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, REGARDING THE LICENSED PRODUCTS, INCLUDING, BUT NOT LIMITED
TO, (a) THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, OR (b) ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE VALIDITY OR
SCOPE OF ANY PATENT RIGHTS, OR (c) ANY REPRESENTATION OR WARRANTY WITH RESPECT
TO THE OWNERSHIP OF ANY TECHNOLOGY OR THE LICENSED PRODUCTS OR THE INFRINGEMENT
BY THE SAME OF THE PATENT, COPYRIGHT OR OTHER PROPRIETARY RIGHT OF ANY THIRD
PARTY, OR (d) ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE ABSENCE OF ANY
DEFECT IN THE LICENSED PRODUCTS.
6.22.2 LIMITATIONS ON REMEDIES. EXCEPT AS SET FORTH IN SECTION
6.16 and 6.21, IN NO EVENT SHALL MRG BE LIABLE TO MINIMED FOR ANY DAMAGES FOR
LOST PROFITS, LOST SAVINGS OR OTHER CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN
CONNECTION WITH MRG'S MANUFACTURE OF THE LICENSED PRODUCTS, EVEN IF MRG HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. DAMAGES FOR PHYSICAL INJURY, DEATH
OR PERSONAL INJURY SHALL NOT CONSTITUTE CONSEQUENTIAL DAMAGES. THE PROVISIONS OF
THIS 6.22.2 SHALL NOT APPLY TO DAMAGES FOR THE INACCURACY OF ANY REPRESENTATION
OR WARRANTY SET FORTH IN SECTIONS 13.1.1 THROUGH 13.1.3.
6.22.3 REMEDY FOR BREACHES COVERED BY SECTION 6.22.2.
Notwithstanding Section 6.22.2, if (a) MRG breaches any obligation under this
Agreement for which lost profits, lost savings or consequential damages would
have been available but for Section 6.22.2, (b) such breach is material, (c) MRG
did not use commercially reasonable efforts to perform that obligation and (d)
MRG failed to actually and fully perform the obligation in default within 30
days after MiniMed delivered written notice of the breach to
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MRG, then MiniMed will have the right to undertake to manufacture the Licensed
Products or contract with others to do so after asserting such right in a
written notice delivered to MRG. Either party will have the right to commence an
arbitration in accordance with Section 18 to determine whether MiniMed has that
right under this Section 6.22.3. The decision of the arbitrator or arbitrators
will be final and binding on the parties. Pending the arbitration, MiniMed will
not be entitled to undertake manufacturing or contract with others to do so and
MRG will continue to have all of its obligations under this Agreement. If
neither party commences an arbitration within 30 days after MiniMed's written
notice referred to above is delivered, MiniMed will be deemed to have the right
to undertake to manufacture the Licensed Products or contract with others to do
so. If MiniMed undertakes to manufacture Licensed Products pursuant to this
Section 6.22.3, MiniMed shall have no further obligation to purchase Licensed
Products from MRG and the provisions of Section 6.4.3 shall apply.
6.23 TERMINATION. MiniMed may terminate the Exclusive
Marketing Agreement or Section 6.3 with respect to exclusivity at its sole
discretion by giving MRG written notice of its intention to terminate,
specifying the date of termination. The Exclusive Marketing Agreement shall be
subject to termination by MRG only as provided in Sections 6.6.2, 6.6.3 or 8.
6.24 TRADEMARKS. All trademarks and tradenames developed
during the terms of this Agreement shall remain the sole property of the
developing Party. MiniMed will have the right to use its own trademarks and
tradenames in connection with the advertising, promotion, distribution and sale
of the Licensed Products. MRG will incorporate such trademarks and tradenames
into the Licensed Products and the packaging therefor as reasonably requested by
MiniMed. During the term of this Agreement MiniMed may, in its sole and absolute
discretion, use the trademarks and tradenames of MRG applicable to the Licensed
Products, but only in connection with the advertising, promotion and sale of the
Licensed Products that it purchases from MRG and provided that it properly uses
such trademarks and tradenames. Such use of MRG's trademarks and tradenames will
not give rise to any rights of MiniMed therein. The design and printing of the
packaging will be determined by MiniMed, and MiniMed will have the
responsibility to be sure that all legal requirements with respect thereto are
satisfied. The right to use the MiniMed trademarks and tradenames by MRG will be
only with the written consent of MiniMed and for Licensed Products. Upon
termination of the exclusivity of MiniMed Distribution Rights, the limited right
of MRG to use MiniMed's trademarks and tradenames shall be limited to use in
connection with Licensed Products sold to MiniMed.
6.25 IMPROVEMENTS TO INTELLECTUAL PROPERTY.
6.25.1 IMPROVEMENTS BY MRG. Any Improvements to the
Technology, Technical Information or Confidential Information developed by MRG
related to the Licensed Products during the term of this Agreement are, as
between MRG and MiniMed, owned by MRG.
6.25.2. IMPROVEMENTS BY MINIMED. Any Improvements to
the Technology, Technical Information or Confidential Information developed by
MiniMed
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relating to Licensed Products shall be owned by MiniMed; however, MRG will have
the right to make, use and sell the Improvements and sublicense others to do so,
subject to the payment by MRG to MiniMed of a reasonable royalty to be agreed
upon by the parties or, if the parties cannot agree within a reasonable time, by
arbitration pursuant to Section 18.
6.25.3 JOINT IMPROVEMENTS. Any patented Improvement
jointly owned by the Parties shall not be licensed to any Third Party without
the written consent of both parties.
6.25.4 TERM OF LICENSES; PATENTS. Any licenses
granted under Sections 6.25.1 through 6.25.3 shall survive until the last to
expire of the patents on the Improvements, if any, which are the subject of the
license, which may be a date after the termination of this Agreement. If there
are no such patents or when the last of any such patents expires, any such
license will continue for as long as is legally permissible. MiniMed agrees to
assist MRG in filing any patent applications and obtaining any patents
(including execution of assignments and other documents and instruments
necessary and proper) to carry out the provisions of these sections.
7. INDEPENDENT CONTRACTORS
7.1 The relationship between MiniMed and MRG under this
Agreement is solely that of independent contractors.
7.2 Neither Party shall have the right to bind the other or to
incur obligations on the other's behalf without the other's prior written
consent in each instance.
8. TERMINATION
8.1 TERMINATION FOR CAUSE. Either Party will have the right to
terminate this Agreement upon the occurrence of any of the events specified in
Sections 8.1.1 through 8.1.3. Any such termination may only be made by
delivering notice of intention to terminate to the other Party specifying the
effective date of the termination which shall be not less than thirty (30) days
after delivery of the notice. Said thirty (30) days shall be in addition to any
of the cure periods specified in Sections 8.2.1:
8.1.1 MATERIAL DEFAULT. The other Party (herein, a
"defaulting party") has failed to perform any material term, condition or
obligation to be performed by it under Section 5 or 6 of this Agreement and such
failure remains uncured after written notice of default, specifying the nature
thereof in reasonable detail, has been given to the defaulting party unless, in
the case of a default that does not involve the payment of money, prior to the
expiration of the applicable cure period, the defaulting party has commenced and
thereafter pursues and completes with due diligence those actions necessary to
cure such default within the applicable cure period. The applicable cure period
for the failure to pay money shall be thirty (30) days and the applicable cure
period for any other default shall be sixty (60) days, but said 60-day period
shall be subject to extension for a reasonable period of time if the default is
of such nature that it cannot reasonably be cured with due diligence with sixty
(60) days. A default in the payment of money shall not be deemed material unless
the amount thereof
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exceeds $100,000. In the event of a default under any provision of this
Agreement other than Sections 5 and 6, the Agreement may not be terminated as a
remedy therefor, but the non-defaulting Party will have all other rights and
remedies under applicable law, including without limitation the recovery of
damages.
8.1.2 EARLY TERMINATION OF IMPLANTABLE PUMP LICENSE
AND DISTRIBUTION AGREEMENT. Prior to MiniMed's exercise of the Option pursuant
to Section 6.1 of this Agreement, MRG shall be entitled to terminate this
Agreement if the Implantable Pump License and Distribution Agreement is not or
is no longer effective or ceases to be legally binding or enforceable as to
MiniMed, except as a result of termination by MiniMed in accordance with the
Implantable Pump License and Distribution Agreement.
8.1.3 BANKRUPTCY OR INSOLVENCY. The other Party (an
"insolvent party") becomes bankrupt or insolvent or a receiver is appointed for
the business and/or assets of such other Party or an assignment is made by such
other Party for the benefit of its creditors, in each case whether by the
voluntary act or otherwise and, in the case of any such proceeding that is
involuntary, if such proceeding is not terminated within sixty (60) days
thereafter.
8.2 RIGHTS AND DUTIES UPON TERMINATION. The termination of
this Agreement for any reason shall be without prejudice to the right of either
Party to receive any payments accrued under any provision of this Agreement
prior to the effective date of termination.
8.2.1 SURVIVAL OF CERTAIN OBLIGATIONS. The
termination of this Agreement for cause shall be without prejudice to (a) the
rights of either Party under Sections 3, 6.13, 6.15.5, 6.16, 6.17, 6.19, 6.20,
6.21, 6.21.1, 6.24, 6.25, 8.2, 11, 17, 18, and 23 or (b) any remedies which such
Party may then or thereafter acquire.
8.3 SEPARATE AGREEMENTS. The Implantable Pump License and
Distribution Agreement, the Agreement Re Implantable Pump Business between the
Parties dated the same date as this Agreement and the Secured Promissory Note
and Security Agreement referred to in Section 2.4, the Line of Credit Note
referred to in Section 4.2 and the Lease referred to in Section 5 of the
Agreement Re Implantable Pump Business shall be considered completely separate
from this Agreement and not a part hereof. No default under such other documents
shall affect the rights and obligations of the Parties under this Agreement, and
no default under this Agreement shall affect the rights and obligations of the
Parties under those other documents, except as provided in Section 8.1.2.
9. FORCE MAJEURE
9.1 Any Party's delay or failure in performing its obligation
under this Agreement shall be excused to the extent caused by forces beyond that
Party's reasonable control, including, without limitation, the following: war,
floods, earthquakes, other acts of God, industrial disputes, civil disobedience,
strikes, fire, mobilization, changes in governmental regulation or
interpretation, requisition, embargo, restriction and shortage of transport
facilities, fuel, energy or supplies. The unavailability of funds to any Party
to perform any obligation under this Agreement shall not excuse performance
under this Agreement regardless of the reason therefor.
9.2 Each Party claiming the benefit of such an excuse agrees
to notify the other promptly in writing of any such delay or failure in
performance, and to resume performance as soon as is reasonably practicable.
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<PAGE> 26
10. NOTICES
Any notice, request, demand or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
(a) if personally delivered, when so delivered, (b) if mailed, seventy-two (72)
hours after having been placed in the United States mail, registered or
certified, postage prepaid, addressed to the Party to whom it is directed at the
address set forth below or (c) if given by telex or telecopier, when such notice
or other communication is transmitted to the telex or telecopier number
specified below and the appropriate answer back or telephonic confirmation is
received:
If to MiniMed:
MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
Attention: General Counsel
Telephone No.: (818) 362-5958
Telecopier No: (818) 367-1460
With a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 91423
Attention: Roy J. Schmidt
Telephone No.: (213) 229-7000
Telecopier No: (213) 229-7520
If to Medical Research Group, LLC:
Medical Research Group, LLC
12744 San Fernando Road
Sylmar, California 91342
Attention: President
Telephone No.: (818) 362-8084
Telecopier No: (818) 364-2647
With a copy to:
Lyon & Lyon LLP
633 W. Fifth Street, Suite 4700
Los Angeles, California 90071-2066
Attention: Roy L. Anderson, Esq.
Telephone No.: (213) 955-0304
Telecopier No: (213) 955-0440
Page 26 of 34
<PAGE> 27
11. ASSIGNMENT
Neither Party shall be entitled to assign its rights or to
delegate its duties under this Agreement, whether by law or otherwise, without
the express written consent of the other Party except that either Party may
assign this Agreement to (a) a wholly owned subsidiary of said Party, or (b) a
Third Party who acquires either Party by merger or acquisition of 80% or more of
the outstanding capital stock of said Party (although no change in the ownership
of equity interests of said Party shall be deemed to constitute an assignment of
this Agreement), or (c) a Third Party who acquires all or substantially all of
the assets of either Party, so long as the assignee agrees to assume all of the
obligations of said Party under this Agreement. In the event of such an
assignment the Party making the assignment shall remain fully liable for the
performance of its obligations hereunder.
12. SEVERABILITY
The provisions of this Agreement are severable, and if any one
or more provisions may be determined to be illegal or otherwise unenforceable,
in whole or in part, the remaining provisions, and any partially unenforceable
provisions to the extent enforceable, shall nevertheless be binding and
enforceable.
13. REPRESENTATIONS AND WARRANTIES
13.1 REPRESENTATIONS AND WARRANTIES OF MRG. MRG hereby
represents and warrants to MiniMed that the statements set forth in Sections
13.1.1 through 13.1.3 hereof are true and correct.
13.1.1 ORGANIZATION AND STANDING. MRG is duly
organized, validly existing and in good standing under the laws of the state of
its organization, with full power and authority to own its property and carry on
its business as now conducted.
13.1.2 AUTHORITY AND ENFORCEABILITY. MRG has the
right, power and authority required for the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby; all
authorizations and approvals have been secured by MRG which are necessary to
authorize the execution, delivery and performance of this Agreement; and this
Agreement upon being duly executed constitutes a legal, valid and binding
agreement of MRG and is enforceable against it in accordance with its terms,
excepting only to the extent that such enforceability may be limited by
bankruptcy law or other laws of general application relating to creditor's
rights and subject to the availability of equitable remedies.
13.1.3 COMPLIANCE WITH THE LAW AND OTHER INSTRUMENTS.
The execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, will not result in the breach of any term or
provision of, or constitute a default under, the Articles of Organization or
Operating Agreement of MRG amended to the date hereof, or any statute, order,
judgment, writ, injunction, decree, license, permit, rule or regulation of any
governmental or regulatory body, or any mortgage, deed of trust or other
agreement or instrument to which MRG is a party or by which it is bound. The
execution, delivery and performance of this Agreement by MRG will not subject
MiniMed to any lien,
Page 27 of 34
<PAGE> 28
charge or encumbrance nor any tax or penalty (other than normal income, property
and sales and use taxes) arising as a result of MRG's financial condition,
status, previously incurred obligations, ownership or relationship with other
parties.
13.2 REPRESENTATIONS AND WARRANTIES OF MINIMED. MiniMed hereby
represents and warrants to MRG that the statements set forth in Sections 13.2.1
through 13.2.3 hereof are true and correct.
13.2.1 ORGANIZATION AND STANDING. MiniMed is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, with full corporate power and authority
(corporate and other) to own its property and carry on its business as now
conducted.
13.2.2 AUTHORITY AND ENFORCEABILITY. MiniMed has the
right, power and authority required for the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby; all
authorizations and approvals (corporate and other) have been secured by MiniMed
which are necessary to authorize the execution, delivery and performance of this
Agreement; and upon being duly executed this Agreement constitutes a legal,
valid and binding agreement of MiniMed and is enforceable against it in
accordance with its terms, excepting only to the extent that such enforceability
may be limited by bankruptcy law or other laws of general application relating
to creditor's rights and subject to the availability of equitable remedies.
13.2.3 COMPLIANCE WITH THE LAW AND OTHER INSTRUMENTS.
The execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, will not result in the breach of any term or
provision of, or constitute a default under, the Certificate of Incorporation or
Bylaws of MiniMed, as amended to the date hereof, or any statute, order,
judgment, writ, injunction, decree, license, permit, rule or regulation of any
governmental or regulatory body, or any indenture, mortgage, deed of trust or
other agreement or instrument to which MiniMed is a party or by which it is
bound.
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All representations, warranties and agreements made by MiniMed
or MRG in this Agreement shall survive the date hereof and any investigations,
inspections, examinations or audits made by or on behalf of any Party hereto.
15. ENTIRETY
This Agreement constitutes the entire agreement between the
Parties hereto pertaining to the subject matter hereof, and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, relating to the subject matter of this Agreement, except the Mutual
Nondisclosure Agreement between the Parties with an effective date of January 2,
1996, the Implantable Pump License and Distribution Agreement and the Agreement
Re Implantable Pump Business between the Parties dated the same day as this
Agreement.
Page 28 of 34
<PAGE> 29
16. AMENDMENT; WAIVER
This Agreement may be amended, modified, superseded or
canceled, and any of the terms and conditions hereof may be modified, only by a
written instrument executed by the Parties or, in the case of a waiver, by the
Party waiving compliance. No supplement, modification, waiver or termination of
this Agreement shall be valid unless it has been reduced to writing and executed
by the Party to be bound thereby. The failure of a Party at any time or from
time to time to require performance of any provision hereof shall in no manner
affect the right of such Party at a later time to enforce the same, and no
waiver of any nature, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or considered as a further or continuing waiver
of any other provision of this Agreement.
Subject to the restrictions on modification in this Section
16, to the extent that any provision of this Agreement purports to grant rights
or create obligations that are inconsistent with either: (1) MRG's Mann
Foundation Rights or UC Rights, or (2) MiniMed's Johns Hopkins' Rights or Wilson
Greatbatch Rights (collectively, the "Rights"), the Parties shall meet and
confer to bring such provision in conformity with such Rights.
17. USE OF NAME
Except as provided in Section 6.24, neither MiniMed nor MRG
shall use the name of the other Party or of any staff member or employee of the
other Party or any adaptation thereof in any advertising, promotion or sales
literature in a manner which would constitute an express or implied endorsement
by the other Party or of any staff member or employee thereof for any commercial
product without the prior written consent of the other Party in each instance.
18. SETTLEMENT OF DISPUTES
18.1 DISPUTES AND ARBITRATION. Unless the relief sought
requires the granting of equitable relief pursuant to Section 18.1.1, below, any
dispute or controversy (whether based upon the law of torts or of contracts)
arising in connection with this Agreement, including (a) disputes relating to
the formation of this Agreement or the performance, interpretation, enforcement,
application or validity of its provisions, and (b) issues that may be based upon
or arise out of disputes that MRG or MiniMed has with Third Parties, shall upon
the demand of either Party be resolved by arbitration held at Los Angeles,
California, in accordance with the arbitration procedures established by the
Rules of Commercial Arbitration of the American Arbitration Association, except
as otherwise provided herein.
18.1.1 If in connection with any such dispute or
controversy either Party seeks the issuance of a temporary restraining order or
the granting of preliminary injunctive relief, the court shall have the right
and power to grant the requested relief on a temporary basis pending the
resolution of factual issues by arbitration in accordance with Section 18.1.2,
and to thereafter enforce any award made in such arbitration proceedings.
18.1.2 The following principles and conditions will
apply in all arbitration proceedings conducted pursuant to this Agreement:
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<PAGE> 30
A. During the thirty (30) days following the date
that the written notice is given by either Party demanding the submission of the
dispute to arbitration, MRG and MiniMed will endeavor to select three
independent arbitrators having no substantial economic or other material
relationship with either MRG or MiniMed. If the issue in dispute involves
matters of patents, licensing or technology, the arbitration panel shall include
at least two persons who are knowledgeable in such matters. If the Parties
cannot mutually agree on the three arbitrators within such thirty (30)-day
period, then each Party will, within seven (7) days after the expiration of such
thirty (30)-day period, select one independent arbitrator and those two
arbitrators shall select the third independent arbitrator.
B. Discovery of evidence shall be conducted
expeditiously by the Parties and in accordance with the general principles
embodied in the California Civil Discovery Act. To the extent that it is
necessary, either Party may apply to a court of competent jurisdiction for
assistance in obtaining discovery of evidence for presentation to the
arbitrators.
C. Except as provided in Section 6.5.1, the
arbitrators shall issue findings of fact and conclusions of law.
D. The arbitration will be conducted as a case would
be represented to a trial court without a jury. The arbitrators in their
discretion may hear any type of evidence, including hearsay evidence. The
arbitrators shall decide the dispute in accordance with applicable law and
render a written decision, setting forth their findings of fact and the
principles upon which they relied in making their award. The decision of the
arbitrators shall be final and binding on the Parties.
18.1.3 In the case of an arbitration to determine the
adjustment on prices referred to in Section 6.5.1, the arbitrators shall permit
each of the Parties to submit written and oral information and argument, shall
decide the matter in accordance with the standard set forth in Section 6.5.1 and
shall issue a written opinion explaining in reasonable detail the basis for
their decision on the adjustment in prices. The decision of the arbitrators
shall be final and binding on the Parties.
18.2 COSTS OF ENFORCEMENT. Should any action or proceeding be
necessary to construe or enforce this Agreement or any arbitration award made
pursuant to Section 18.1, above, then the Party prevailing in any such action or
proceeding shall be entitled to recover all court costs and reasonable
attorneys' fees, to be fixed by the court and taxed as part of any judgment
entered therein, and the costs and fees incurred in enforcing or collecting any
such judgment.
19. GOVERNING LAW
The validity, construction and interpretation of this
Agreement shall be governed in all respects by the laws of the State of
California applicable to contracts made and to be performed wholly within that
State.
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<PAGE> 31
20. HEADINGS
Section and subSection headings are not to be considered part
of this Agreement and are included solely for convenience and reference and in
no way define, limit or describe the scope of this Agreement or the intent of
any provisions hereof.
21. THIRD PARTIES
Nothing in this Agreement, expressed or implied, is intended
to confer upon any Person other than MiniMed or MRG any rights or remedies under
or by reason of this Agreement.
22. COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each one of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
23. JURISDICTION
23.1 Each Party hereto irrevocably submits to the exclusive
jurisdiction of any court of the State of California or the United States of
America sitting in the City of Los Angeles over any suit, action or proceeding
arising out of or relating to this Agreement. Any arbitration proceedings
according to Section 18.1 shall be conducted in the City of Los Angeles. To the
fullest extent it may effectively do so under applicable law, each Party
irrevocably waives and agrees not to assert, by way of motion, as a defense or
otherwise, any objection that it may now or hereafter have to the establishment
of the venue of any such suit, action or proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
23.2 Each Party hereto agrees, to the fullest extent it may
effectively do so under applicable law, that a judgment in any suit, action or
proceeding of the nature referred to hereinabove brought in any such court shall
be conclusive and binding upon such Person and its successors and assigns and
may be enforced in the courts of the United States of America or the State of
California (or any other courts to the jurisdiction of which such Person is or
may be subject) by a suit upon such judgment.
23.4 Nothing in this Section 23 shall be construed to limit
the force or effect of Section 18.
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<PAGE> 32
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be executed as of the date and year first set forth above.
MINIMED INC., a Delaware MEDICAL RESEARCH GROUP, LLC, a California
corporation limited liability company
By AEM MiniMed Corp., its Managing Member
By: /s/ TERRANCE H. GREGG By: /s/ ALFRED E. MANN
------------------------------- ----------------------------------
Terrance H. Gregg Alfred E. Mann
President and Chief President
Operating Officer
By: /s/ ERIC S. KENTOR By: /s/ RONALD LEBEL
------------------------------- ----------------------------------
Eric S. Kentor Ronald Lebel
Senior Vice President and President, MRG, LLC
General Counsel
Page 32 of 34
<PAGE> 33
EXAMPLE OF APPLICATION OF SECTIONS 6.6 AND 6.6.1
1. Assume the first Regulatory Approval referred to in Section
6.6 outside of the United States is obtained in the EU on November 20, 2003.
This means that the First Year in the table in Section 6.6 for the OUS begins
December 1, 2003 and ends November 30, 2004.
2. Assume that the first Regulatory Approval referred to in
Section 6.6 in the United States occurs on March 7, 2005. This means that the
First Year in the table in Section 6.6 for the US begins April 1, 2005 and ends
March 31, 2006.
3. Assume the first Regulatory Approval in Japan is obtained
on July 1, 2007. Assume that no Regulatory Approvals are obtained in any other
jurisdiction and no Regulatory Approvals are suspended or revoked.
4. Since the period from November 20, 2003 to December 31,
2003 is less than a full year, there shall be no Minimum Purchase Requirement
for the OUS for calendar year 2003. Likewise there will be no Minimum Purchase
Requirement for the US for calendar years 2003 through 2005.
5. The Average Annual Percentage for the OUS for calendar year
2004 will be equal to the sum of (i) 3.33% (the average monthly percentage for
the period from December 2003 through November 2004) multiplied by 11 plus (ii)
4.167% (the average monthly percentage for December 2004, or 40.83%. The Minimum
Purchase Requirement for the OUS for calendar year 2004 will equal 40.83% of the
total number of pump systems sold to customers located in the EU during that
calendar year. Only pump systems sold to customers in the EU (with and without
Long-Term Glucose Sensors) are included in the calculation.
6. The Average Annual Percentage for calendar year 2005 for
the OUS will be 50.83% calculated as provided in 5 above. The Minimum Purchase
Requirement for the OUS for calendar year 2005 will equal 50.83% of the total
number of pump systems sold in the EU during that calendar year.
7. The Average Annual Percentage for the OUS for the calendar
year 2006 will be 60.83% calculated as provided in 5 above. The Minimum Purchase
Requirement for the OUS for calendar year 2006 will equal 60.83% of the number
of total number of pump systems sold in the EU during that calendar year. The
Average Annual Percentage for the US for calendar year 2006 will be 47.50%
calculated as provided in 5 above. The Minimum Purchase Requirement for the US
for calendar 2006 will equal 47.5% of the total number of pump systems sold in
the US during that calendar year.
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<PAGE> 34
8. The Average Annual Percentage for the OUS for calendar year
2007 will be 70.83%. The Minimum Purchase Requirement for the OUS for calendar
year 2007 will equal 70.83% of the total number of pump systems sold in the EU
during the full calendar year plus the number of pump systems sold in Japan for
the period from July 1, 2007 to December 31, 2007. The Average Annual Percentage
for the US for calendar year 2007 will be 57.5%, and the Minimum Purchase
Requirement for that calendar year will equal 57.5% of the total number of pump
systems sold in the US during that calendar year.
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<PAGE> 1
EXHIBIT 10.4
GUARANTY
THIS GUARANTY, dated as of 1st day of September, 1998 (as amended from
time to time, the "Guaranty"), is entered into by ALFRED E. MANN, an individual
("Guarantor"), in favor of MINIMED INC., a Delaware corporation ("Beneficiary").
R E C I T A L S
A. Beneficiary intends to enter into a Master Agreement (the "Master
Agreement") with Medical Research Group, LLC , a California limited liability
company (the "Obligor") providing for Beneficiary and Obligor to execute an
Agreement Re Implantable Pump Business, an Implantable Pump License and
Distribution Agreement and a Glucose Sensor Option Agreement, all relating to
the transfer of Beneficiary's business activities relating to implantable pump
systems to Obligor (the "Implantable Pump Documents").
B. Guarantor is the owner of a substantial equity interest in Obligor
and is entering into this Guaranty at the request of the Obligor as an
inducement to Beneficiary to enter into the Master Agreement and the Implantable
Pump Documents.
A G R E E M E N T
1. Guaranty. Guarantor unconditionally guaranties the performance in
full of all of the following (the "Obligations"):
1.1 the obligations of Obligor pursuant to the representations and
warranties set forth in the last sentence of Section 16.1.3 of the
Implantable Pump License and Distribution Agreement and Section 13.3 of
the Glucose Sensor Option Agreement, as well as the obligations of Obligor
to compensate Beneficiary for any loss, cost, liability, obligation or
expense (including reasonable attorney's fees) arising out of or relating
to the inaccuracy of those representations and warranties, and
1.2 the payment of all amounts and the performance of all
obligations of Obligor under and in connection with the Lease of
facilities to be entered into by Obligor with Beneficiary pursuant to
Section 5 of the Agreement Re Implantable Pump Business concurrently with
the execution and delivery of that Agreement (the "Lease"), and
1.3 the payment of all losses, costs, liabilities, obligations and
expenses (including court costs and reasonable attorneys' fees) arising
out of or relating to the failure of the Obligor to perform any such
obligations in 1.1 and 1.2, including interest that would have accrued on
any amount referred to in 1.1, 1.2 or this 1.3. but for the commencement
of a case under Title 11 of the United States Code or any successor
statute (the "Bankruptcy Code") or any other law governing insolvency,
bankruptcy, reorganization, liquidation or similar proceeding.
Beneficiary hereby accepts this Guaranty, and this Guaranty shall
constitute notice to Guarantor of such acceptance.
<PAGE> 2
All payments under this Guaranty shall be made free and clear of any
and all deductions, withholdings and setoffs. All references to the Obligor in
this Guarantee shall include (a) Medical Research Group, LLC, whether acting on
behalf of itself or any estate created by the commencement of a case under Title
11 of the United Sates Code or any successor statute (the "Bankruptcy Code") or
any other insolvency, bankruptcy, reorganization or liquidation proceeding and
(b) any trustee under the Bankruptcy Code, liquidator, sequestrator or receivor
of Medical Research Group, LLC or any other Obligor referred to in this sentence
of any or their respective properties and (c) any similar person appointed
pursuant to any law generally governing insolvency, bankruptcy, reorganization,
liquidation or like proceeding and (d) any other person or entity who becomes
obligated to perform any of the Obligations for any reason, including without
limitation, assignment or assumption of the Obligations or any merger or other
reorganization or dissolution of Medical Research Group, LLC.
2. Nature of Guaranty. This is an unconditional guaranty of the
Obligations, including any and all Obligations which are modified, renewed,
comprised or restructured from time to time. This Guaranty may not be revoked
and shall not otherwise terminate unless and until all of the Obligations have
been indefeasibly paid and performed in full. The parties acknowledge and agree
that the liability of Guarantor hereunder is independent of and not in
consideration of or contingent upon the liability of the Obligor or any other
guarantor and a separate action or actions may be brought and prosecuted against
any guarantor, whether or not any action is brought or prosecuted against the
Obligor or any guarantor or whether the Obligor or any other guarantor is joined
in any such action or actions. To the extent that performance of this Guaranty
or the Obligations requires the payment of money, this Guaranty shall be
construed as a guaranty of payment (and not merely of collection). By this
Guaranty the Guarantor guaranties the performance and payment of the Obligations
without regard to:
2.1 the legality, validity or enforceability of the Master
Agreement, the Implantable Pump Documents or the Lease or any other
document entered into in connection therewith, any of the Obligations or
the obligations of Guarantor under this Guaranty;
2.2 any defense (other than performance), set-off or counterclaim
that may at any time be available to the Obligor or Guarantor against the
Beneficiary; or
2.3 any other circumstance whatsoever (with or without notice to or
knowledge of Guarantor or the Obligor), whether or not similar to any of
the foregoing, that constitutes, or might be construed to constitute, an
equitable or legal discharge of the Obligor or Guarantor, in bankruptcy or
in any other instance.
Any payment by the Obligor or any other guarantor or other circumstance
that operates to toll any statute of limitations applicable to such party shall
also operate to toll the statute of limitations applicable to the Guarantor.
When making any demand hereunder (including by commencement or continuance of
any legal proceeding), the Beneficiary may, but shall be under no obligation to,
make a similar demand on the Obligor and all or any of any other guarantors, and
any failure by the Beneficiary to make any such demand shall not relieve
Guarantor of his obligations hereunder.
Beneficiary may bring and prosecute a separate action against Guarantor
to enforce its liabilities under this Guaranty, whether or not any action is
brought against the
2
<PAGE> 3
Obligor or any other person and whether or not the Obligor or any other person
is joined in any such action or actions. Nothing shall prohibit Beneficiary from
exercising its rights against Guarantor, the Obligor, the security, if any, for
the Obligations, and any other persons simultaneously, jointly and/or severally.
Guarantor shall be bound by each and every ruling, order and judgment obtained
by Beneficiary against the Obligor in respect of the Obligations, whether or not
Guarantor is a party to the action or proceeding in which such ruling or
judgment is issued or rendered.
3. Authorization. Guarantor authorizes Beneficiary, without notice to
or further assent by Guarantor, and without affecting Guarantor's liability
hereunder (regardless of whether any subrogation, reimbursement, indemnification
or other similar right that Guarantor may have or any other right or remedy of
Guarantor is extinguished or impaired as a result), from time to time to:
3.1 permit the Obligor to increase or create Obligations, or
terminate, release, compromise, subordinate, extend, accelerate or
otherwise change the Obligations or any part thereof, or otherwise amend
the terms and conditions of the Master Agreement, the Implantable Pump
Documents or the Lease or any related document or any provision thereof;
3.2 declare a default in respect of any of the Obligations and
exercise in such manner and order as it elects in its sole discretion,
fail to exercise, waive, suspend, terminate or suffer expiration of, any
of the remedies or rights of the Beneficiary against the Obligor or
Guarantor in respect of any Obligations;
3.3 foreclose or enforce or realize upon (pursuant to judicial
foreclosure, power of sale or any other means) any security for any of the
Obligations even though (a) recourse may not thereafter be had against the
Obligor for any deficiency or (b) Beneficiary fails to pursue any such
recourse which might otherwise be available or by way of deficiency
judgment following judicial foreclosure or otherwise;
3.4 release or settle with the Obligor and/or Guarantor in respect
of this Guaranty or the Obligations;
3.5 accept partial payments on the Obligations and apply any and all
payments or recoveries from the Obligor to such of the Obligations as the
Beneficiary may elect in its sole discretion, whether or not such
Obligations are secured or guaranteed;
3.6 refund at any time, at Beneficiary's sole discretion, any
payments or recoveries received by Beneficiary in respect of any
Obligations; and
3.7 otherwise deal with the Obligor or any other Guarantor as
Beneficiary may elect in its sole discretion.
4. Certain Waivers. Guarantor waives:
4.1 the right arising under California Civil Code Sections 2845 and
2849 or otherwise to require the Beneficiary to proceed against the
Obligor or any other guarantor, to proceed against or exhaust security for
the Obligations, or to pursue any other remedy in the Beneficiary's power
whatsoever and the right to have
3
<PAGE> 4
property of the Obligor or any other guarantor first applied to the
discharge of the Obligations or applied in any particular order;
4.2 all rights and benefits under Section 2809 of the California
Civil Code and any other provision of applicable law purporting to reduce
a guarantor's obligations in proportion to the obligation of the principal
or providing that the obligation of a surety or guarantor must neither be
larger nor in other respects more burdensome than that of the principal;
4.3 the benefit of any statute of limitations affecting the
Obligations or Guarantor's liability hereunder and of Section 359.5 of the
California Code of Civil Procedure;
4.4 any requirement of marshaling or any other principle of election
of remedies and all rights and defenses arising out of an election of
remedies by Beneficiary.
4.5 any right to assert against Beneficiary any defense (legal or
equitable), set-off, counterclaim and other right that Guarantor may now
or any time hereafter have against the Obligor or any other Obligor;
4.6 presentment, demand for payment or performance (including
diligence in making demands hereunder), notice of dishonor or
nonperformance, protest, acceptance and notice of acceptance of this
Guaranty, and all other notices of any kind, including (i) notice of the
existence, creation or incurrence of new or additional Obligations, (ii)
notice of any action taken or omitted by Beneficiary in reliance hereon,
(iii) notice of any default by the Obligor in the performance or payment
of any of the Obligations (including without limitation under the
circumstances contemplated by California Civil Code Section 2808 when such
notice might otherwise be required), notice of any default by Guarantor in
the performance or payment of obligations under this Guarantee and notice
of any other default by the Obligor or Guarantor whatsoever, (iv) notice
that any portion of the Obligations is due, (iv) notice of any action
against the Obligor or any other Obligor, or any enforcement or other
action with respect to any Collateral, or the assertion of any right of
Beneficiary hereunder;
4.7 all defenses that at any time may be available to Guarantor by
virtue of any valuation, stay, moratorium or other law now or hereafter in
effect;
4.8 any rights, defenses and other benefits Guarantor may have under
Section 2810 of the California Civil Code or any other provision of
applicable law purporting to limit or eliminate the liability of Guarantor
if the Obligor is not liable (as a result of physical disability or
otherwise) at the time of the execution of the Master Agreement, the
Implantable Pump Documents, the Lease or this Guaranty and/or the
incurrence of any other Obligations, or the liability of the Obligor
thereafter ceases for any reason other than performance and payment in
full of the Obligations.
4.9 any rights, defenses and other benefits Guarantor may have under
Section 2839 of the California Civil Code or any other provision of
applicable law purporting to exonerate Guarantor for anything other than
performance or payment in full of all of the Obligations.
4
<PAGE> 5
4.10 without limiting the generality of the foregoing or any other
provision hereof, all rights and benefits under California Civil Code
Sections 2810, 2819, 2839, 2845, 2848, 2849, 2850 or 3433.
Without limiting the generality of any other provision of this
Guaranty, Guarantor waives all rights and defenses arising out of an election of
remedies even though that election of remedies, such as nonjudicial foreclosure
with respect to security for the Obligations or any of them, has destroyed
Guarantor's rights of subrogation and reimbursement against the Obligor by
operation of Section 580d of the Code of Civil Procedure or otherwise.
5. Subrogation; Certain Agreements.
5.1 GUARANTOR WAIVES ANY AND ALL RIGHTS OF SUBROGATION, INDEMNITY,
CONTRIBUTION OR REIMBURSEMENT, AND ANY AND ALL BENEFITS OF AND RIGHTS TO
ENFORCE ANY POWER, RIGHT OR REMEDY THAT BENEFICIARY MAY NOW OR HEREAFTER
HAVE IN RESPECT OF THE OBLIGATIONS AGAINST THE OBLIGOR AND ANY AND ALL
OTHER RIGHTS AND CLAIMS (AS DEFINED IN THE BANKRUPTCY CODE) GUARANTOR MAY
HAVE AGAINST THE OBLIGOR, UNDER APPLICABLE LAW OR OTHERWISE, AT LAW OR IN
EQUITY, BY REASON OF ANY PERFORMANCE OR ANY PAYMENT HEREUNDER, UNLESS AND
UNTIL THE OBLIGATIONS SHALL HAVE BEEN PERFORMED OR PAID IN FULL. Without
limitation, Guarantor shall exercise no voting rights, shall file no
claim, and shall not participate or appear in any bankruptcy or insolvency
case involving the Obligor with respect to the Obligations unless and
until all the Obligations shall have been performed or paid in full. If,
notwithstanding the foregoing, any amount shall be paid to Guarantor on
account of any such rights at any time, such amount shall be held in trust
for the benefit of the Beneficiary and shall forthwith be paid to the
Beneficiary to be applied to the Obligations, whether matured, unmatured,
absolute or contingent.
5.2 Guarantor assumes the responsibility for being and keeping
himself informed of the financial condition of the Obligor and any other
guarantor and of all other circumstances bearing upon the risk of
nonpayment of the Obligations that diligent inquiry would reveal, and
agrees that Beneficiary shall have no duty to advise Guarantor of
information regarding such condition or any such circumstances.
6. Bankruptcy No Discharge.
6.1 Without limiting Section 2, this Guaranty shall not be
discharged or otherwise affected by any bankruptcy, reorganization or
similar proceeding commenced by or against the Obligor or any other
guarantor, including (i) any discharge of, or bar or stay against
enforcing, all or any part of the Obligations in or as a result of any
such proceeding, whether or not assented to by Beneficiary, (ii) any
disallowance of all or any portion of Beneficiary's claim for repayment of
the Obligations, (iii) any use of cash or other collateral in any such
proceeding, (iv) any agreement or stipulation as to adequate protection in
any such proceeding, (v) any failure by Beneficiary to file or enforce a
claim against the Obligor or any other guarantor or his estate in any
bankruptcy or reorganization case, (vi) any amendment, modification, stay
or cure of the Beneficiary's rights that may occur in any such proceeding,
(vii) any election by Beneficiary under Section 1111(b)(2) of the
5
<PAGE> 6
Bankruptcy Code, or (viii) any borrowing or grant of a lien under Section
364 of the Bankruptcy Code. Guarantor understands and acknowledges that by
virtue of this Guaranty, it has specifically assumed any and all risks of
any such proceeding with respect to the Obligor and any other guarantor.
6.2 Notwithstanding anything to the contrary herein contained, this
Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any performance or payment, or any part thereof, of any
or all of the Obligations is rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be restored or
returned by Beneficiary in connection with any bankruptcy, reorganization
or similar proceeding involving the Obligor, Guarantor or otherwise, if
the proceeds of any collateral are required to be returned by Beneficiary
under any such circumstances, or if Beneficiary elects to return any such
payment or proceeds or any part thereof in its sole discretion, all as
though such payment had not been made or such proceeds not been received.
Without limiting the generality of the foregoing, if prior to any such
rescission, invalidation, declaration, restoration or return, this
Guaranty shall have been canceled or surrendered, this Guaranty shall be
reinstated in full force and effect, and such prior cancellation or
surrender shall not diminish, discharge or otherwise affect the
obligations of Guarantor in respect of the amount of the affected payment
or application of proceeds (or such lien or collateral).
7. Subordination.
7.1 Guarantor hereby absolutely subordinates, both in right of
payment and in time of payment, any and all present or future obligations
and liabilities of the Obligor to Guarantor ("Subordinated Debt") to the
prior performance and payment in full of the Obligations, whether or not
such Subordinated Debt constitutes or arises out of any subrogation,
reimbursement, contribution, indemnity or similar right attributable to
this Guaranty. If, whether or not at Beneficiary's request, Guarantor
shall receive, prior to performance or payment in full of all Obligations,
payment of any sum from the Obligor upon any Subordinated Debt, any such
sum shall be received by Guarantor as trustee for Beneficiary and shall
forthwith be paid over to Beneficiary on account of the Obligations,
without reducing or affecting in any manner the liability of Guarantor
under this Guaranty.
7.2 Guarantor shall file in any bankruptcy or reorganization or
similar proceeding in which the filing of claims is required by any
provision of applicable law, all claims that Guarantor may have against
the Obligor relating to any Subordinated Debt. If Guarantor does not file
any such claim, Beneficiary (or its nominee) as attorney-in-fact for
Guarantor is hereby authorized to do so in the name of Guarantor.
Guarantor agrees that, in connection with any such proceeding, he shall
not contest or oppose the treatment of claims of the Beneficiary in any
plan of reorganization or otherwise and he shall vote any claims that
exist by virtue of this Guaranty or the Subordinated Debt in connection
with any plans of reorganization or otherwise, as may be requested by the
Beneficiary.
7.3 Guarantor hereby grants Beneficiary a power of attorney for the
purposes set forth in this Section 7. Such power of attorney is coupled
with an interest and cannot be revoked.
6
<PAGE> 7
8. Representations and Warranties. Guarantor makes the following
representations and warranties, all of which shall survive until termination of
this Guaranty pursuant to Section 2.
8.1 Binding Effect, No Conflict, Etc. This Guaranty has been duly
executed and delivered by Guarantor and is the legal, valid and binding
obligation of Guarantor, enforceable against him in accordance with its
terms, except as enforcement may be limited by equitable principles and by
bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to creditors' rights generally. The execution, delivery and
performance by Guarantor of this Guaranty and the consummation of the
transactions contemplated hereby, do not and will not conflict with,
result in a breach of or constitute (or, with the giving of notice or
lapse of time, or both, would constitute) a default under, or require the
approval or consent of any person or entity (including any governmental
entity) pursuant to, any contractual obligation of the Guarantor or
violate any provision of applicable law binding on the Guarantor. No
approval, consent, permit or other authorization is required by any
governmental agency or court in connection with the execution, delivery
and performance by the Guarantor of this Guaranty or the consummation of
transactions contemplated hereby or to ensure the legality, validity or
enforceability hereof or thereof.
8.2 Financial Benefit. Guarantor hereby acknowledges and warrants
that he has derived or expects to derive a financial advantage from the
execution and delivery of the Master Agreement, the Implantable Pump
Documents and the Lease and that the execution and delivery of this
Guaranty is intended to, and does, constitute an inducement to Beneficiary
to enter into the those Documents.
8.3 Review of Documents; Understanding with Respect to Waivers.
Guarantor hereby acknowledges that he has copies of and is fully familiar
with the Master Agreement, the Implantable Pump Documents and the Lease
and each other document entered into by Obligor in connection therewith.
Guarantor warrants and agrees that each waiver set forth in this Guaranty
is made with Guarantor's full knowledge of its significance and
consequences and after opportunity to consult with counsel of its own
choosing and that, under the circumstances, each such waiver is reasonable
and should not be found contrary to public policy or law.
9. Expenses. Guarantor shall pay to the Beneficiary any and all costs
and expenses (including reasonable attorneys' fees and expenses), that
Beneficiary may incur in connection with the exercise or enforcement of any of
the rights, powers or remedies of Beneficiary under this Guaranty or applicable
law. All such amounts and all other amounts payable hereunder shall be payable
on demand, together with interest at a rate equal to the lesser of (i) the
Citibank N.A. prime rate from time to time in effect plus 1% (based on a year of
365 or 366 days, as the case may be), or (ii) the maximum rate allowed by
applicable law, from and including the due date to and excluding the date of
payment.
10. Amendments and Other Modifications. No amendment of any provision
of this Guaranty (including a waiver thereof or consent relating thereto) shall
be effective unless the same shall be in writing and signed by Beneficiary. Any
waiver or consent relating to any provision of this Guaranty shall be effective
only in the specific instance and for the specific purpose for which given. No
notice to or demand on Guarantor in any case shall entitle Guarantor to any
other or further notice or demand in similar or other circumstances.
7
<PAGE> 8
11. Cumulative Remedies; Failure or Delay. The rights and remedies
provided for under this Guaranty are cumulative and are not exclusive of any
rights and remedies that may be available to Beneficiary under applicable law or
otherwise. No failure or delay on the part of Beneficiary in the exercise of any
power, right or remedy under this Guaranty shall impair such power, right or
remedy or shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude other or further exercise
of such or any other power, right or remedy.
12. Notices, Etc. All notices and other communications under this
Guaranty shall be in writing and shall be personally delivered or sent by
prepaid courier, by overnight, registered or certified mail (postage prepaid),
or by telecopy or telegram, and shall be deemed given when received by the
intended recipient thereof. Unless otherwise specified in a notice given in
accordance with the foregoing provisions of this Section, all notices and other
communications shall be given to the parties hereto at their respective
addresses (or to their respective or telecopier numbers) indicated on Schedule
13.
13. Successors and Assigns. This Guaranty and each amendment hereof
shall be binding upon and, subject to the next sentence, inure to the benefit of
Guarantor, Beneficiary and their respective successors and assigns and the
executor, administrator or other personal representative of Guarantor and his
heirs and other successors as a result of his death. The benefit of this
Guaranty shall automatically pass with any assignment by Beneficiary of the
Obligations (or any portion thereof), to the extent of such assignment. In
connection with any assignment Beneficiary may disclose to any person or entity
all documents and information that Beneficiary has relating to Guarantor and
this Guaranty, whether furnished by Obligor, Guarantor or otherwise. Guarantor
further agrees that Beneficiary may disclose such documents and information to
the Obligor and any other guarantors of the Obligations.
14. Execution in Counterparts. This Guaranty may be executed in any
number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Guaranty.
15. Complete Agreement. This Guaranty, together with the schedule
hereto, is intended by the parties as the final expression of their agreement
regarding the subject matter hereof and as a complete and exclusive statement of
the terms and conditions of such agreement, superseding all prior discussions,
negotiations, understandings and agreements.
IN WITNESS WHEREOF, the parties hereto have duly executed this Guaranty
as of the date set forth above.
By: /s/ ALFRED E. MANN
-------------------------------
Alfred E. Mann
8
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0
0
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