SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
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 001-1296
ZEVEX INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)
DELAWARE 87-0462807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4314 ZEVEX Park Lane, Salt Lake City, Utah 84123
(Address of principal executive offices and zip code)
(801) 264-1001
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) 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 by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act) Yes No [ X ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of October 20, 2004, the
Company had outstanding 3,400,964 shares of common stock, par value $0.001 per
share.
ZEVEX INTERNATIONAL, INC.
FORM 10-Q
For the Three Months Ended September 30, 2004
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements:
Consolidated Condensed Balance Sheets as of September 30, 2004 and
December 31, 2003 4
Consolidated Condensed Statements of Operations for the three
and nine months ended September 30, 2004 and 2003 5
Consolidated Condensed Statements of Cash Flows for the nine
months ended September 30, 2004 and 2003 6
Consolidated Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
PART I
FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-Q
- -------------------------------------------------------------------------------
ZEVEX International, Inc. ("ZEVEX" or the "Company") files herewith balance
sheets of ZEVEX as of September 30, 2004, and December 31, 2003, and the related
statements of operations and cash flows for the respective three month and nine
month periods ended September 30, 2004 and 2003. In the opinion of ZEVEX'
management, the financial statements reflect all adjustments, all of which are
normal recurring adjustments, necessary to fairly present the financial
condition of ZEVEX for the interim periods presented. The financial statements
included in this report on Form 10-Q should be read in conjunction with the
audited financial statements of ZEVEX and the notes thereto included in the
Annual Report of ZEVEX on Form 10-K for the year ended December 31, 2003.
ZEVEX INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2004 2003
ASSETS (unaudited)
-------------- ------------
Current assets
Cash and cash equivalents $ 853,960 $ 668,089
Designated cash for sinking fund payment on industrial
development bond 70,804 95,277
Accounts receivable, net of allowance for doubtful
accounts of $155,000 and $185,000 3,301,580 3,830,341
Other receivable 35,500 1,200,000
Inventories 3,896,336 4,114,567
Marketable securities 64,900 88,000
Income taxes receivable - 442,548
Prepaid expenses and other current assets 24,965 115,457
Total current assets 8,248,045 10,554,279
Property and equipment, net 4,461,970 4,799,120
Patents, trademarks and other intangibles, net 329,573 330,277
Goodwill, net 4,048,264 4,048,264
Other assets - 145
Total assets $ 17,087,852 $19,732,085
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,346,656 $ 1,540,700
Other accrued liabilities 557,076 525,071
Deferred revenue 14,043 538,770
Income taxes payable 3,615 -
Bank line of credit - 1,810,970
Current portion of industrial development bond 100,000 100,000
Current portion of other long-term debt 52,528 50,430
Current portion of capital leases - 122,950
Total current liabilities 2,073,918 4,688,891
Industrial development bond 1,200,000 1,300,000
Other long-term debt 779,946 819,608
Stockholders' equity
Common stock; $.001 par value, 10,000,000
authorized shares, 3,440,197 issued and 3,400,964
outstanding at September 30, 2004 and December 31, 2003 3,440 3,440
Additional paid in capital 16,290,452 16,290,452
Unrealized gain on marketable securities 6,517 3,067
Treasury stock, 39,233 shares (at cost) at
September 30, 2004 and December 31, 2003 (89,422) (89,422)
Accumulated deficit (3,176,999) (3,283,951)
Total stockholders' equity 13,033,988 12,923,586
Total liabilities and stockholders' equity $ 17,087,852 $19,732,085
ZEVEX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004 2003
(unaudited) (unaudited) (unaudited) (unaudited
---------------------------------- -------------- --------------
--------------------------------- -------------- ---------------
Revenue:
Product sales $ 5,187,253 $ 5,906,271 $ 17,180,510 $ 17,946,058
Engineering services 152,153 219,486 591,597 1,657,676
Total revenue 5,339,406 6,125,757 17,772,107 19,603,734
Cost of sales 3,517,818 4,185,993 11,193,467 12,192,402
Gross profit 1,821,588 1,939,764 6,578,640 7,411,332
Operating expenses:
General and administrative 844,959 817,508 3,003,933 2,786,377
Selling and marketing 862,362 1,185,378 2,404,812 3,386,161
Research and development 427,711 474,430 993,354 1,382,473
Total operating expenses 2,135,032 2,477,316 6,402,099 7,555,011
Operating (loss) income (313,444) (537,552) 176,541 (143,679)
Other income (expense):
Interest and other income 10,120 967 14,976 7,213
Interest expense (25,254) (54,519) (114,807) (238,289)
(Loss) income before income taxes (328,578) (591,104) 76,710 (374,755)
Benefit for income taxes 33,857 183,776 30,242 116,756
Net (loss) income $(294,721) $(407,328) $ 106,952 $ (257,999)
Basic net (loss) income per share $ (0.09) $ (0.12) $ 0.03 $ (0.08)
Weighted average shares outstanding 3,400,964 3,400,964 3,400,964 3,400,964
Diluted net (loss) income per share $ (0.09) $ (0.12) $ 0.03 $ (0.08)
Diluted weighted average shares outstanding 3,400,964 3,400,964 3,473,602 3,400,964
ZEVEX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended
September 30, September 30,
2004 2003
(unaudited) (unaudited)
---------------- ---------------
---------------- ---------------
Cash flows from operating activities
Net (loss) income $ 106,952 $ (257,999)
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 641,713 1,200,182
Deferred income taxes - (120,565)
Realized gain on marketable securities (2,729)
Changes in operating assets and liabilities
Designated cash for sinking fund payment
on industrial development bond 24,473 23,721
Accounts receivable 528,761 352,922
Inventories 218,231 819,874
Prepaid expenses and other assets 153,731 147,570
Accounts payable (194,044) (370,317)
Accrued and other liabilities 32,005 (24,030)
Deferred revenue (412,024) -
Income taxes receivable/payable 446,163 3,808
Net cash provided by operating activities 1,543,232 1,775,166
Cash flows from investing activities
Purchase of property and equipment (286,128) (497,265)
Additions of patents and trademarks (17,731) (43,553)
Redemption of available-for-sale marketable securities 29,279
Proceeds from other receivable from sale of business 988,703 -
Net cash provided by (used in) investing activities 714,123 (540,818)
Cash flows from financing activities
Principal payments on capital lease and long-term debt (160,514) (850,770)
Payments on business and product line acquisition debt - (1,738,970)
Payments on industrial development bond (100,000) (100,000)
Net (payments on) proceeds from bank line of credit (1,810,970) 1,687,965
Net cash used in financing activities (2,071,484) (1,001,775)
Net increase in cash and cash equivalents 185,871 232,573
Cash and cash equivalents at beginning of period 668,089 -
Cash and cash equivalents at end of period $ 853,960 $ 232,573
ZEVEX INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
The Company, through its divisions and subsidiaries, engages in the business of
designing, manufacturing and distributing medical devices. The Therapeutics
division manufactures and markets enteral nutrition delivery devices. The
Applied Technology division designs and manufactures advanced medical components
and systems for medical technology companies. Until December 31, 2003 when it
was sold, the Physical Evaluation division manufactured and marketed
industry-leading physical evaluation testing systems.
On December 31, 2003, the Company completed the sale of its Physical Evaluation
business. The transaction was accomplished by the sale of all the issued and
outstanding capital stock of JTech Medical Industries, Inc., ("JTech"), a wholly
owned subsidiary of the Company. The transaction was effected by a Stock
Purchase Agreement (the "Stock Purchase Agreement") dated December 31, 2003 by
and between the Company and a former employee, officer and director of the
Company (see Note 3).
For additional information regarding the Company, refer to its 2003 Annual
Report on SEC Form 10-K.
Principles of Consolidation
The consolidated financial statements as of September 30, 2004 include the
accounts of ZEVEX International, Inc. (the Company) and its wholly owned
operating subsidiary ZEVEX, Inc. For the period ended September 30, 2003, the
consolidated statement of operations also included the accounts of the Company's
wholly owned operating subsidiary, JTech. As discussed above and in Note 3,
JTech was sold effective December 31, 2003. All significant intercompany
balances and transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information along with the instructions to Form 10-Q. Accordingly, certain
information and footnote disclosures normally included in complete financial
statements have been condensed or omitted. These financial statements should be
read in conjunction with the financial statements and footnotes thereto included
in the Company's 2003 Annual Report on SEC Form 10-K.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary for a fair presentation have been
included. The results of operations for interim periods may not be indicative of
the results of operations to be expected for a full year.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
Stock Based Compensation
The Company follows the intrinsic value method of accounting as prescribed by
APB No. 25 to account for employee stock options. No stock-based employee
compensation cost has been recorded in net income, as all options granted had an
exercise price equal to or greater than the market value of the underlying
common stock on the date of grant.
Had compensation expense for options under the Company's two stock-based
compensation plans been determined based on the fair value of the options at the
grant dates for awards under those plans consistent with SFAS No. 123, the
Company's net income and earnings per share would have been adjusted to the pro
forma amounts for the three months and nine months ended September 30 as
indicated below:
Three months ended Nine months ended
------------------------------- --------------------------------
Sept. 30, 2004 Sept. 30, 2003 Sept. 30, 2004 Sept. 30, 2003
--------------- --------------- ---------------- ---------------
Net (loss) income as reported $ (294,721) $ (407,328) $ 106,952 $ (257,999)
Less: Stock compensation expense determined
under the fair value method, net of related
tax effects 155,336 82,873 439,704 265,352
--------------- --------------- ---------------- ---------------
--------------- --------------- ---------------- ---------------
Pro forma net loss $ (450,057) $ (490,201) $ (332,752) $ (523,351)
=============== =============== ================ ===============
=============== =============== ================ ===============
(Loss) earnings per share:
Basic - as reported $ (.09) $ (.12) $ .03 $ (.08)
Basic - pro forma $ (.13) $ (.14) $ (.10) $ (.15)
Diluted - as reported $ (.09) $ (.12) $ .03 $ (.08)
Diluted - pro forma $ (.13) $ (.14) $ (.10) $ (.15)
2. Debt
The Company maintains a line of credit arrangement with a financial institution.
The line was reduced from $6 million to $3 million on March 10, 2004. The line
of credit matures on May 29, 2005. The line of credit is collateralized by
accounts receivable and inventory and bears interest at the prime rate, which
was 4.750% at September 30, 2004 and 4% on December 31, 2003. The Company's
balance on its line of credit was $0 at September 30, 2004 and $1,810,970 at
December 31, 2003. Under the line of credit agreement, the Company is restricted
from declaring cash dividends. In addition, the Company's line of credit
contains certain financial covenants. As of September 30, 2004, the Company was
in compliance with these financial covenants.
On April 18, 2001, the Company entered into a Term Loan Agreement with a bank
for the amount of $1,000,000. The agreement is secured by the Company's
manufacturing facility. The note was due on May 15, 2003. The Term Loan
Agreement which was renegotiated effective May 15, 2003, is now due May 15, 2008
and is being amortized over a thirteen-year term, at an interest rate of 5.4%.
The Company owed $832,474 on the Term Loan Agreement at September 30, 2004.
3. Related Party Transactions
On December 31, 2003, the Company completed the sale of its Physical Evaluation
business. The transaction was accomplished through the sale of all the issued
and outstanding capital stock of JTech, previously a wholly owned subsidiary of
the Company. The transaction was effected by a Stock Purchase Agreement dated
December 31, 2003 by and between the Company and Mr. Leonard C. Smith, a former
employee, officer and director of the Company, for a purchase price of $1.2
million, which was recorded as an "other receivable" at December 31, 2003. Cash
of $1,129,500 was received on January 15, 2004, $35,000 was received on June 11,
2004, with the remainder to be paid when the Company satisfies certain
obligations to JTech as set forth in the Stock Purchase Agreement. Such
obligations include the requirement to deliver inventory, upon completion of
production, and certain other equipment. Deferred revenue of $324,000 was
recorded related to these obligations, of which approximately $196,000 was
recognized in the first quarter 2004 in product sales in the consolidated
statement of operations and of which approximately $113,000 was recorded in
other income offset by associated costs of $113,000. Additionally, pursuant to
the Stock Purchase Agreement, the Company may receive additional payments from
the purchaser based upon specifically identified JTech product sales in 2004 and
2005.
4. Comprehensive Income
For the three months September 30, 2004, the Company had a comprehensive loss of
$295,821 and had comprehensive income $111,352 for the nine months ended
September 30, 2004. For the three months and nine months ended September 30,
2003, the Company did not have any additional elements of comprehensive income.
Therefore, comprehensive loss equaled net loss.
5. Inventories
Inventories consist of the following:
September 30, 2004 December 31, 2003
-------------------------------------------------
Materials $ 2,223,657 $ 2,144,926
Work in progress 307,389 504,921
Finished goods, including completed subassemblies 1,365,290 1,464,720
-------------------------------------------------
$ 3,896,336 $ 4,114,567
=================================================
6. Net Income (Loss) Per Common Share
Basic net income (loss) per common share is calculated by dividing net income
for the period by the weighted-average number of the Company's common shares
outstanding.
Diluted net income (loss) per common share includes the dilutive effect of
options in the weighted-average number of the Company's common shares
outstanding as calculated using the treasury stock method. For the three months
ended September 30, 2004 and September 30, 2003, 802,500 option shares and
710,450 option shares, respectively, were not included because they were
antidilutive. For the nine months ended September 30, 2004 and September 30,
2003, 296,500 option shares and 710,450 option shares, respectively, were not
included because they were antidilutive.
7. Business Segments
Through December 31, 2003 the Company operated in three business segments:
Therapeutics, Physical Evaluation, and Applied Technology. The Therapeutics
segment includes the manufacture and sale of feeding pumps, and disposable sets
used by patients who require direct gastrointestinal nutrition therapy (also
called enteral feeding). The Physical Evaluation segment included the
manufacture and sale of stand-alone and computerized products that measure
isolated muscle strength, joint range of motion and sensation. In the Applied
Technology segment, the Company provides design and manufacturing services to
medical device companies who, in turn, sell the Company's components and systems
under private labels or incorporate them into their products. The Company
evaluates the performance of the segments through gross profit, less selling and
marketing expenses, and research and development expenses (or contribution
margin). The Company does not allocate general and administrative expenses by
segment. General and administrative expenses are included in Corporate and
Unallocated amounts indicated below.
On December 31, 2003, the Company completed the sale of its Physical Evaluation
business (See Note 3).
Segment information for the three months ended September 30, 2004 (in thousands)
follows:
Corporate
Physical Applied and
Therapeutics Evaluation Technology Unallocated Total
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Revenue $ 2,986 n/a $ 2,353 $ -- $ 5,339
Cost of sales 1,948 n/a 1,570 -- 3,518
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Gross profit 1,038 n/a 783 -- 1,821
Selling and marketing 776 n/a 86 -- 862
Research and development 389 n/a 39 -- 428
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Contribution margin (loss) (127) n/a 658 -- 531
General and administrative -- n/a -- 845 845
Other (income)/expenses -- n/a -- 15 15
Benefit for income taxes -- n/a -- (34) (34)
-------------
-------------
Net loss $ (295)
=============
=============
Total assets $ 461 n/a $ 4,048 $ 12,579 $ 17,088
=============== =============== =============== ============== =============
Included in the segment assets disclosed above are specifically identified fixed
assets and goodwill. All assets other than those specifically identified fixed
assets and goodwill are included in Corporate and Unallocated. The only
specifically identified fixed assets include nutritional pumps and tooling,
which are included in the Therapeutics segment. All other fixed assets are used
jointly by the segments. Goodwill represents approximately $4,048,000 in Applied
Technology.
Segment information for the three months ended September 30, 2003 (in thousands)
follows:
Corporate
Physical Applied and
Therapeutics Evaluation Technology Unallocated Total
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Revenue $ 2,686 $ 834 $ 2,606 $ -- $ 6,126
Cost of sales 1,871 284 2,031 -- 4,186
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Gross profit 815 550 575 -- 1,940
Selling and marketing 688 394 103 -- 1,185
Research and development 155 246 74 -- 475
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Contribution margin (loss) (28) (90) 398 -- 280
General and administrative -- -- -- 817 817
Other (income)/expenses -- -- -- 54 54
Benefit for income tax -- -- -- (184) (184)
-------------
-------------
Net loss $ (407)
=============
=============
Total assets $ 2,811 $ 5,199 $ 4,048 $ 14,965 $ 27,023
=============== =============== =============== ============== =============
Included in the segment assets disclosed above are specifically identified fixed
assets and goodwill. Goodwill represents approximately $842,000 in Therapeutics,
$5,199,000 in Physical Evaluation, and $4,048,000 in Applied Technology.
Segment information for the nine months ended September 30, 2004 (in thousands)
follows:
Corporate
Physical Applied and
Therapeutics Evaluation Technology Unallocated Total
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Revenue $ 9,347 n/a $ 8,425 $ -- $ 17,772
Cost of sales 5,833 n/a 5,360 -- 11,193
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Gross profit 3,514 n/a 3,065 -- 6,579
Selling and marketing 2,146 n/a 259 -- 2,405
Research and development 628 n/a 365 -- 993
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Contribution margin 740 n/a 2,441 -- 3,181
General and administrative -- n/a -- 3,004 3,004
Other (income)/expenses -- n/a -- 100 100
Benefit for income taxes -- n/a -- (30) (30)
-------------
-------------
Net income $ 107
=============
=============
Segment information for the nine months ended September 30, 2003 (in thousands)
follows:
Corporate
Physical Applied and
Therapeutics Evaluation Technology Unallocated Total
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Revenue $ 9,567 $ 2,440 $ 7,597 $ -- $ 19,604
Cost of sales 6,284 919 4,989 -- 12,192
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Gross profit 3,283 1,521 2,608 -- 7,412
Selling and marketing 1,904 1,170 311 -- 3,386
Research and development 475 686 222 -- 1,383
--------------- --------------- --------------- -------------- -------------
--------------- --------------- --------------- -------------- -------------
Contribution margin 904 (335) 2,075 -- 2,643
General and administrative -- -- -- 2,786 2,786
Other (income)/expenses -- -- -- 231 231
Benefit for income tax -- -- -- (116) (116)
-------------
-------------
Net loss $ (258)
=============
=============
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") and other parts of this Form 10-Q contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). In some cases, such forward-looking
statements may be identified by the use of words such as "estimate," "believe,"
"project," "anticipate" and similar expressions, together with other discussion
of future trends or results, are intended to identify forward-looking
statements. Such statements, which include our statements about the level of
anticipated expenses during 2004 and our liquidity position are subject to
certain risks and uncertainties, including those discussed below that could
cause actual results to differ materially from those projected. These
forward-looking statements speak only as of the date hereof and we disclaim any
obligation to update them. All of these forward-looking statements are based on
estimates and assumptions made by our management, which although believed to be
reasonable, are inherently uncertain and difficult to predict. Therefore, undue
reliance should not be placed upon such estimates. There can be no assurance
that the benefits anticipated in these forward-looking statements will be
achieved. The following important factors, among others, could cause us not to
achieve the benefits contemplated herein, or otherwise cause our results of
operations to be adversely affected in future periods: (i) continued or
increased competitive pressures from existing competitors and new entrants; (ii)
unanticipated costs related to our growth and operating strategies; (iii) loss
or retirement of key members of management; (iv) increase in interest rates of
our cost of borrowing, or a default under any material debt agreement; (v)
adverse state or federal legislation or regulation that increases the cost of
compliance, or adverse findings by a regulator with respect to existing
operations; (vi) loss of customers; (vii) inability to achieve future sales;
(viii) the unavailability of sufficient funds for operations or capital
expenditures; and (ix) inability to introduce new products as planned. Many of
such factors are beyond our control. Please refer to our SEC Form 10-K for the
fiscal year ended December 31, 2003 for additional cautionary statements.
Overview
Through our divisions and subsidiaries, we engage in the business of designing,
manufacturing, and distributing medical devices. Our Therapeutics division
manufactures and markets enteral nutrition delivery devices. Our Applied
Technology division designs and manufactures advanced medical components and
systems for original equipment manufacturers ("OEM's"). Until its sale on
December 31, 2003, our Physical Evaluation division manufactured and marketed
industry-leading physical evaluation testing systems. Please refer to Note 7 of
the Unaudited Consolidated Financial Statements for discussion of our business
segments.
Our Therapeutics division products include ambulatory enteral feeding pumps and
related disposable sets for mobile patients, as well as stationary enteral
feeding pumps and disposable sets. We entered the home health care segment of
the enteral nutrition delivery market in 1996 with the introduction of the
EnteraLite(R) ambulatory enteral feeding pump, which continues to gain
acceptance due to its superior mobility and state-of-the-art features. We
believe that by improving the convenience of nutrition delivery, the
EnteraLite(R) can contribute to better clinical outcomes and improved quality of
life for enteral patients. Domestic sales of our EnteraLite(R) product line grew
by approximately 16% in the third quarter of 2004, and 8% during the first nine
months of 2004, compared to the third quarter and first nine months of 2003.
At the time of the 1998 acquisition of the Nutrition Medical line of stationary
enteral feeding pumps and the 2000 acquisition of the Nestle USA, Inc. enteral
nutrition delivery business, we intended to aggressively expand into the
long-term care market for enteral feeding delivery products. As a result of
continued downward competitive pricing pressure in this market segment, our
revenue in the stationary enteral feeding pump business decreased by
approximately $90,000, or 10% during the third quarter of 2004 and $500,000, or
19% during the first nine months of 2004, compared to the third quarter and
first nine months of 2003.
Since 1987, we have been a contract manufacturer providing design and
manufacturing services to medical companies who sell our components and systems
under private label, primarily incorporating our core technologies of
ultrasound, fluid delivery, and optoelectronics. This business is conducted
through our Applied Technology division. Applied Technology division revenue
decreased 10% during the third quarter of 2004, but has increased 11% during the
first nine months of 2004, compared to the third quarter and first nine months
of 2003.
Last year, in response to the changing marketplaces of our business segments, we
evaluated our business opportunities and refocused on our core market offerings
of ambulatory enteral feeding and our specialized contract manufacturing
services. We adopted a lean manufacturing philosophy, including the transition
from batch processing to continuous flow production, developed a business model
with market development strategies designed to capitalize on profitable business
opportunities, and we sold the Physical Evaluation business in December 2003.
The sale of our Physical Evaluation business was accomplished by the sale of all
the issued and outstanding capital stock of JTech Medical Industries, Inc. our
wholly-owned operating subsidiary. The transaction was effected by a Stock
Purchase Agreement dated December 31, 2003 by and between us and Mr. Leonard C.
Smith, a former employee, officer and director of ZEVEX. Please refer to Note 3
in the Unaudited Consolidated Financial Statements for discussion of the sale.
On July 22, 2004, we executed several strategic agreements with Numico Trading
B.V., a Netherlands corporation ("NTBV"), and Nutricia International B.V., a
Netherlands corporation ("Nutricia", and, together with "NTBV", "Numico").
Nutricia and NTBV are wholly-owned subsidiaries of Royal Numico N.V., a
Netherlands corporation, which is a world leader in the manufacturing and
marketing of clinical nutrition products and related equipment and accessories.
Under the terms of these agreements, Numico will become the exclusive
distributor of certain ZEVEX enteral feeding pumps in over thirty countries,
including parts of Africa, Asia, Australia, Europe, The Pacific Rim, and South
America (the "Territory"). Also, we will become the exclusive manufacturer and
supplier to Numico of all clinical nutrition delivery pumps and accessories that
are or will be commercialized and placed or sold by Numico within the Territory.
We also entered into a maintenance and service agreement where we will become
the exclusive authorized service provider for repair and maintenance services
for certain enteral feeding pumps that are placed, sold, or distributed by
Numico in parts of the Territory. The term of these agreements are perpetual
but, may be terminated at any time on or after January 1, 2008, by either party
by giving notice to the other party of its intention to do so. After such notice
these agreements shall terminate two years from the date of such notice. We
anticipate that the combined impact of the distribution, manufacturing and
service components of these agreements will increase revenue by more than $7.0
million annually, beginning in the second half of 2005. Accordingly, we expect
to receive approximately $3.5 million in revenue from these agreements in 2005,
and more than $7.0 million in revenue from these agreements in the following
years.
Results of Operations
Revenue for the Applied Technology and Therapeutics divisions increased by 1%
during the third quarter of 2004, compared to the third quarter of 2003. Revenue
for these two divisions was $5,339,406 during the third quarter of 2004,
compared to $5,292,093 for the third quarter of 2003. These comparisons do not
include revenue from the Physical Evaluation division, which was sold on
December 31, 2003. Revenue in the third quarter of 2003 from the Physical
Evaluation division was $833,664.
The increase in revenue over last year's third quarter, excluding the Physical
Evaluation business, is largely due to an 11% increase in the Therapeutic
division revenue. Specifically, the EnteraLite(R) portable feeding pump and
disposable set revenue in this division increased 16%. Also, our international
Therapeutics revenue increased approximately $100,000 during the quarter. This
growth more than offset an 11% decrease in stationary disposable set revenue for
the quarter. Applied Technology division revenue decreased nearly 10% during the
third quarter of 2004, compared to the third quarter of 2003. An increase of
more than $240,000 in medical systems revenue was offset by a decline in revenue
generated by surgical handpieces and sensors. The decrease in surgical handpiece
and sensor revenue was due to a temporary delay in orders from three customers
who order those products.
Revenue for the Applied Technology and Therapeutics divisions increased 4%, to
$17,772,107 during the first nine months of 2004, compared to $17,163,902 for
the first nine months of 2003. This comparison does not include revenue from the
Physical Evaluation division, which was sold on December 31, 2003. Revenue in
the first nine months of 2003 from the Physical Evaluation division was
$2,439,832.
The increase in revenue over last year's first nine months, excluding the
Physical Evaluation business, is largely due to an 11% increase in Applied
Technology division revenue. Specifically, surgical handpiece and sensor revenue
increased 9%, and medical systems revenue increased by approximately $1,700,000
for the first nine months of 2004. These increases more than offset lower
engineering revenue, as certain programs have now moved from engineering to
manufacturing. Approximately $255,000 of Applied Technology systems revenue
growth during this period was generated by the sale of products manufactured for
JTech, the Physical Evaluation business that was sold at year-end under a Stock
Purchase Agreement. Within the Therapeutics division, EnteraLite feeding pump
and disposable set revenue increased 8%, but this growth only partially offset a
19% decrease in stationary disposable set revenue and a 12% decrease in
international Therapeutics products revenue. These decreases are primarily
related to the continued downward competitive pricing and a slowdown in orders
from our international distributors. Overall, sales for the Therapeutics
division declined approximately 2% during the first nine months of 2004,
compared the first nine months of 2003.
Applied Technology contract manufactured products generated 44% of total revenue
during the third quarter of 2004, and sales of our proprietary Therapeutics
products generated 56% of revenue during the third quarter. Excluding revenue
from the Physical Evaluation business which has been sold, Applied Technology
revenue was 49% of total revenue for the third quarter of 2003 and our
proprietary Therapeutics products generated 51% of revenue. If sales from the
Physical Evaluation division were included in this comparison, proprietary
product revenue would have been 57% of total revenue and Applied Technology
revenue would have been 43% of total revenue in the third quarter of 2003.
During the third quarters of 2004 and 2003, no single customer accounted for
over 10% of our revenue.
Applied Technology contract manufactured products generated 47% of total revenue
during the first nine months of 2004, and sales of our proprietary Therapeutics
products generated 53% of revenue during the first nine months. Excluding
revenue from the Physical Evaluation business which has been sold, Applied
Technology revenue was 44% of total revenue for the first nine months of 2003
and our proprietary Therapeutics products generated 56% of revenue. If sales
from the Physical Evaluation division were included in this comparison,
proprietary product revenue would have been 61% of total revenue and Applied
Technology revenue would have been 39% of total revenue in the first nine months
of 2003. During the first nine months of 2004 and 2003, no single customer
accounted for over 10% of our revenue.
Our gross profit as a percentage of revenue was approximately 34% for the third
quarter of 2004, compared to 32% for the third quarter of 2003. For the first
nine months of 2004, gross profit as a percentage of revenue was approximately
37% compared to 38% for the first nine months of 2003. We attribute the changes
in gross profit percentage from 2004 to 2003 to differences in the product mix
delivered during the third quarter and first nine months of the year. Please
refer to Note 7 of the Unaudited Consolidated Financial Statements for
discussion of our business segments including gross profit and the Company's
definition of contribution margin.
Depreciation and amortization expenses decreased to $214,502 in the third
quarter 2004 from $392,023 in the third quarter of 2003, and $641,713 in the
first nine months 2004 from $1,200,182 in the first nine months of 2003. The
decrease is primarily due to the impairment loss recorded on assets in 2003,
resulting in a subsequent decline in depreciation expense.
Selling, general and administrative expenses decreased during the third quarter
of 2004 to $1,707,321, as compared to $2,002,886 for the third quarter of 2003,
and decreased during the first nine months of 2004 to $5,408,745, as compared to
$6,172,538 for the first nine months of 2003. The decrease is primarily related
to the reduction in personnel from the sale of the Physical Evaluation business,
although the decrease was partially offset in the second and third quarters of
2004 by non-recurring legal expenses incurred in the amount of approximately
$90,000 during the third quarter and $340,000 for the first nine months of 2004,
for the negotiations and drafting of the strategic distribution, manufacturing,
and services agreements with Royal Numico N.V. We invested $427,711 in the
research and development of new products during the third quarter of 2004,
compared to $474,430, which included $187,388 from the Physical Evaluation
division in the third quarter of 2003. For the nine months ended September 30,
2004, we invested $993,354 in research and development, compared to $1,382,473
which include $512,483 from the Physical Evaluation division for the nine months
ended September 30, 2003. The decrease in research and development cost is
primarily due to the elimination of product developments costs related to the
Physical Evaluation division sold in 2003. We are continuing our efforts to
develop and introduce new proprietary products and are currently planning at
least one new product introduction in early 2005. Additionally, we are investing
in proprietary component technologies for our contract manufacturing business.
We expect research and development costs to be approximately 6% of revenue
during 2004.
The Company had an operating loss of $313,578, 6% of revenue in the third
quarter of 2004, compared to an operating loss of $537,552, 9% of revenue in the
third quarter of 2003, and operating income of $176,541, 1% of revenue in the
first nine months of 2004, compared to an operating loss of $143,679, 1% of
revenue in the first nine month of 2003 due to the factors described above. The
Company had a net loss of $294,721, 6% of revenue in the third quarter of 2004,
compared to a net loss of $407,328, 7% of revenue in the third quarter of 2003.
During the first nine months of 2004 net income increased to $106,952, 1% of
revenue, compared to a net loss of $257,999, 1% of revenue in the first nine
months of 2003. The increase in net income during 2004, as compared to 2003, is
due to the factors noted above, as well as a decrease in interest expense, as
the Company has reduced its debt during the past year, the reduction in research
and development costs, and the recognition of certain deferred tax assets (see
below).
We had an income tax benefit of $33,857 in the third quarter of 2004, compared
to an income tax benefit of $183,776 for the third quarter of 2003, and an
income tax benefit of $30,242 for the first nine months of 2004, compared to an
income tax benefit of $116,756 for the first nine months of 2003.
At September 30, 2004 and December 31, 2003, we had net current deferred tax
assets of $0. Realization of our gross deferred tax assets is dependent on our
ability to generate taxable income in the year the assets are realized. Under
FAS 109 Accounting for Income Taxes, guidance has been issued relating to
cumulative losses in recent years. Under this guidance, when there is a
cumulative pretax loss for financial reporting for the current and two preceding
years and a company does not have objective planning strategies designed to
realize its deferred tax assets, generally no deferred tax asset should be
recognized. In following this guidance management established a full valuation
allowance for all deferred tax assets in 2003. We are allowed to realize a
portion of the valuation allowance as we have taxable income.
The majority of the income tax benefit in the third quarter and the first nine
months of 2004 is a result of an income tax refund that was originally provided
for as part of the deferred tax asset valuation allowance. Through the third
quarter of 2003, we did not have a full deferred tax asset valuation allowance
because we believed our taxable future income would be sufficient to realize our
deferred tax asset. Therefore, we recognized a tax benefit for the taxable loss
generated in the third quarter and nine months of 2003.
As of September 30, 2004, our backlog of customer orders was $3,929,000,
compared to $6,069,000 on September 30, 2003. We estimate that approximately 60%
of the backlog will be shipped before December 31, 2004. Our backlog is for
contract manufacturing only and can be significantly affected by the timing of
annual or semi-annual purchase orders placed by our customers. During the past
year, several of our Applied Technology customers have adopted lean
manufacturing philosophies, which results in the elimination of large,
advance-notice purchase orders and replacement with just-in-time, frequent
kanban deliveries. While more efficient for the supply chain, this can greatly
reduce our backlog figures.
Liquidity and Capital Resources
Our primary sources of liquidity have consisted of cash flow from operations,
borrowings under our revolving line of credit and other financial arrangements
described below. In prior years, we also have increased working capital through
the issuance of stock and we may do so in the future.
Cash flows provided by operating activities for the first nine months of 2004
were $1,543,232, compared to $1,775,166 for the first nine months of 2003. In
the first nine months of 2004, cash provided by operating activities was
primarily associated with net income, our continued reduction in inventories,
our improved collection procedures, and the collection of income tax receivable,
partially offset by decreases in deferred revenue and accounts payable. In the
first nine months of 2003, cash provided by operating activities was primarily
associated with our continued reduction in inventories as we continued to
stream-line our purchasing and manufacturing processes and our improved
collection procedures, offset by decreases in accounts payable.
Our working capital at September 30, 2004 was $6,174,127, compared to $6,877,022
at September 30, 2003. The portion of working capital represented by cash at
such dates was $853,960 and $232,573 respectively. The ratio of current assets
to current liabilities increased to 3.98 at September 30, 2004, from 2.80 at
September 30, 2003.
We have a $3,000,000 open line of credit arrangement with a financial
institution. The line of credit matures on May 29, 2005, is collateralized by
accounts receivable and inventories, and bears interest at the financial
institution's prime rate, 4.5% at September 30, 2004 and 4.0% at December 31,
2003. We owed $0 on the line of credit at September 30, 2004 and $1,810,970 at
December 31, 2003. We expect to renew the line of credit before its expiration.
On March 15, 2001, we entered into a Secured Financing Agreement with a bank for
the amount of $1,500,000. The agreement was secured by our existing base of
enteral feeding pumps, which were purchased from Nestle and are now manufactured
by us. The proceeds from this agreement were used to reduce our line of credit
balance. This agreement had a 36-month term, was due on February 15, 2004, and
bore interest at a rate of 8.24%. We paid off the financing agreement in March
2003, primarily using proceeds from our line of credit in the amount of
$589,998.
On April 18, 2001, we entered into a Term Loan Agreement with a bank for the
amount of $1,000,000. This agreement is secured by our manufacturing facility.
The proceeds from the Term Loan Agreement were used to reduce the balance on our
line of credit. The agreement was originally due on May 15, 2003. The Term Loan
Agreement which was renegotiated effective May 15, 2003, is now due May 15, 2008
and is being amortized over a thirteen-year term at an interest rate of 5.4%. We
owed $832,474 on the Term Loan Agreement at September 30, 2004.
In 1997, we completed construction of our new 51,000 square foot headquarters
and manufacturing facility. The cost of this undertaking was $2,591,177. In
1996, we negotiated a $2.0 million Industrial Development Bond ("IDB") to
finance this construction. As of September 30, 2004, the remaining principal
balance on the IBD was $1,300,000. During the first nine months of 2004, the
interest paid monthly ranged from 1.06% to 1.57% (APR).
In conjunction with certain 1998 business acquisitions, we issued convertible
debentures in the aggregate amount of $5,447,188. The final payments on these
debentures were made in January 2003 in the amount of $788,970 and in March 2003
in the amount of $950,000, primarily using proceeds from our line of credit.
Purchases of leasehold improvements to our facilities, tooling and new
engineering, production and testing equipment totaled $286,128 for the first
nine months of 2004, compared to $497,265 for the first nine months of 2003. We
expect to spend approximately $250,000 during the remainder of 2004 for
additional manufacturing equipment and software, for normal replacement of aging
equipment, and manufacturing tooling related to our proprietary products.
Our expected principal liquidity requirements are working capital, investments
in capital expenditures, and debt reduction. We believe our sources of liquidity
are sufficient for operations during the coming twelve months. These sources
include our projected cash from operations and, if necessary, draws from our
existing revolving line of credit.
Off Balance Sheet Items
We have no off-balance sheet items.
Critical Accounting Policies and Estimates
In response to the SEC's Release numbers 33-8040 "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies" and 33-8056, "Commission
Statement about Management's Discussion and Analysis of Financial Condition and
Results of Operations," we have identified the following critical accounting
policies that affect the more significant judgments and estimates used in the
preparation of the consolidated financial statements. The preparation of the
consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires us to make estimates and
judgments that affect our reported amounts of assets and liabilities, revenues
and expenses, and related disclosures. Our significant accounting policies are
included in our Annual Report on Form 10-K for the year ended December 31, 2003.
We evaluate our estimates and judgments on an on-going basis. We base our
estimates on historical experience and on assumptions that we believe to be
reasonable under the circumstances. Our experience and assumptions form the
basis for our judgments about the carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results may vary from what
we anticipate and different assumptions or estimates about the future could
change our reported results. We believe the following accounting policies are
the most critical to us, in that they are material to the portrayal of our
financial statements and they require our most difficult, subjective, or complex
judgments in the preparation of our consolidated financial statements:
Allowance for Doubtful Accounts
As a general policy, collateral is not required for accounts receivable;
however, we periodically monitor the need for an allowance for doubtful accounts
based upon expected collections of accounts receivable, historical bad debt
rates, and specific identification of uncollectible accounts. Based on these
factors, we record an allowance to provide for accounts that we believe may not
be ultimately collectable. Additionally, customers' financial condition and
credit worthiness are regularly evaluated. Historically losses on collections
have not been material.
Product and Inventory Obsolescence
Rapid change and technological innovation characterize the marketplace for
medical products. As a result, we and our customers are subject to the risk of
product and inventory obsolescence, whether from prolonged development,
government approval cycles, or the development of improved products or processes
by competitors. In addition, the marketplace could conclude that the task for
which a customer's medical product was designed is no longer an element of a
generally accepted diagnostic or treatment regimen. Accordingly, we write down
inventory that we believe is in excess or obsolete. Inventories are stated at
the lower of cost or market; cost is determined using the first-in, first-out
method.
Sales Returns and Warranty
We record a provision for estimated sales returns and allowances and warranty
reserve on products we have sold. These estimates are based on historical sales
returns and warranty expenses and other known factors. If the historical data we
use to calculate these estimates does not properly reflect future returns and
warranty expenses, revenue could be overstated or understated and expenses could
be understated or overstated.
Revenue Recognition
We recognize revenue from products sold directly to end customers when
persuasive evidence of an arrangement exists, the price is fixed and
determinable, shipment is made and title has passed, and collectibility is
reasonably assured. If such criteria are not met, revenue is deferred.
Contracts to perform engineering design and product development services are
generally performed on a time and materials basis. Revenue generally is
recognized as milestones are achieved.
We accounted for revenue from software transactions pursuant to SOP No. 97-2,
Software Revenue Recognition, as amended by SOP No. 98-4 and SOP No. 98-9. SOP
No. 97-2 requires that revenue recognized from software arrangements be
allocated to each element of the arrangement based on the relative fair values
of the elements, such as software products, upgrades, enhancements,
post-contract customer support, installation, or training. Under SOP No. 97-2,
the determination of fair value is based on objective evidence, which is
specific to the vendor. If such evidence of fair value for each element of the
arrangement does not exist, all revenue from the arrangement is deferred until
such time that evidence of fair value does exist or until all elements of the
arrangement are delivered. As of December 31, 2003, we sold our Physical
Evaluation business and no longer sell software or related services.
Impairment
We have made acquisitions in the past that included a significant amount of
fixed assets, goodwill, and other intangible assets. The cost of the acquired
companies was allocated first to identifiable assets based on estimated fair
values. Intangible assets consist of goodwill, contracts, patents, and licenses.
Effective in 2002, goodwill is no longer amortized but is subject to an annual
(or, under certain circumstances, more frequent) impairment test, based on a
comparison of the carrying value of the goodwill and the fair value of the
respective business unit. Other intangible assets continue to be amortized over
their useful lives and also will be subject to an impairment test. Estimated
fair value is typically less than values based on undiscounted operating
earnings because fair value estimates include a discount factor in valuing
future cash flows. There are many assumptions and estimates underlying the
determination of an impairment loss. Another estimate using different, but still
reasonable, assumptions could produce a significantly different result.
Therefore, impairment losses could be recorded in the future. We completed our
annual impairment test as required by FAS 142, no impairment was indicated.
Currently, we assess the impairment of fixed assets and identifiable intangibles
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. Factors we consider important that could trigger an
impairment review include the following:
o A significant underperformance relative to expected historical or projected
future operating results; o A significant change in the manner of how we use the
acquired asset or the strategy for our overall business; o A significant
negative industry or economic trend.
When we determine that one or more of the above indicators of impairment exist,
we evaluate the carrying amounts of the affected assets. The evaluation, which
involves significant management judgment, is based on various analyses including
cash flow and profitability projections. To the extent such projections indicate
that future undiscounted cash flows are not sufficient to recover the carrying
amounts of the related long-lived assets, the carrying amount of the underlying
assets will be reduced, with the reduction charged to expense, so that the
carrying amount is equal to fair value, primarily based on future discounted
cash flows, using a discount rate determined by management to be commensurate
with the risk inherent in our current business model.
Net intangible assets and goodwill amounted to approximately $4.4 million as of
September 30, 2004. Net fixed assets amounted to approximately $4.5 million as
of September 30, 2004.
Income Taxes
Income taxes are recorded based on the liability method, which requires
recognition of deferred tax assets and liabilities based on differences between
financial reporting and tax bases of assets and liabilities measured using
enacted tax rates and laws that are expected to be in effect when the
differences are expected to reverse. A valuation allowance is recorded to reduce
our deferred tax asset to an amount that is more likely than not to be realized,
as determined based on our analyses of projected taxable income, including tax
strategies available to generate future taxable income. Our analyses of future
taxable income are subject to a wide range of variables, many of which involve
our estimates, and therefore our deferred tax asset may not be ultimately
realized. As of September 30, 2004 a full valuation has been recorded for all
deferred tax assets.
Other
As part of a nationwide investigation into billing practices associated with
enteral nutrition delivery products, particularly in regard to billing practices
for pumps and disposable delivery sets, on July 2, 2001, the U.S. Office of
Inspector General (OIG), served a subpoena on the ZEVEX, Inc. subsidiary.
According to published reports, the investigation involved most manufacturers,
distributors and health care service providers in the United States enteral pump
industry and similar subpoenas were served on many of those parties. The
subpoena requested documents relating to our enteral pump customers, marketing
and billing practices. We responded to the subpoena. Since October of 2001 we
have not been contacted further by the OIG, although we understand the
investigation is proceeding and we intend to cooperate with the investigation
when contacted again. At this time we are uncertain as to any future impact this
investigation will have on our operations or financial position.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
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For quantitative and qualitative disclosures about market risk affecting ZEVEX,
see Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of
our Annual Report on Form 10-K for the fiscal year ended December 31, 2003,
which is incorporated herein by reference. Our exposure to market risk has not
changed materially since December 31, 2003.
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ITEM 4. CONTROLS AND PROCEDURES
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Our management, including our CEO and CFO, has evaluated the effectiveness of
our "disclosure controls and procedures" (the controls and other procedures for
recording, processing, summarizing, and reporting on a timely basis the
information required to be disclosed in the periodic reports that we file with
the U.S. Securities and Exchange Commission) as of the end of the third quarter.
Based on that evaluation, and subject to the limitations noted below, our
management concluded that our disclosure controls and procedures are effective
to ensure that material information about us and our subsidiaries is made known
to management by others in our company on a timely basis for preparation of our
periodic reports. While we believe our disclosure controls and procedures are
effective, we note that controls and procedures, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the controls and procedures are met. There are inherent
limitations, including the possibility that judgments in decision-making can be
faulty, that breakdowns can occur because of a simple error or mistake, or that
a person may circumvent the controls. Also, because of the inherent limitations
in a cost-effective control system, misstatements due to error or fraud may
occur and not be detected.
There has been no change in our internal control over financial reporting that
occurred during the third fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
PART II
OTHER INFORMATION
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
The following exhibits are attached hereto or are incorporated herein
by reference as indicated in the table below:
Exhibit Location if other
No. Title of Document than attached hereto
------ ----------------- --------------------
3.01* Certificate of Incorporation Amendment No. 1 to Form S-1,
filed October 24, 1997
3.02* Amended Bylaws March 31, 2002 Form 10-Q
filed May 10, 2002
10.31# Flocare 800 Manufacturing Agreement between
ZEVEX International, Inc. and Royal Numico,
dated July 20, 2004.
10.32# Supply Agreement between ZEVEX International, Inc.
and Royal Numico, dated July 20, 2004.
10.33# Disposal Set Components Supply Agreement between
ZEVEX International, Inc. and Royal Numico,
dated July 20, 2004.
10.34# License Agreement between ZEVEX International, Inc.
and Royal Numico, dated July 20, 2004.
10.35# License Agreement between ZEVEX International, Inc.
and Royal Numico, dated July 20, 2004.
10.36# Maintenance and Service Agreement between
ZEVEX International, Inc. and Royal Numico,
dated July 20, 2004.
31.01 Rule 13a-14(a)/15d-14(a)
Certification of Chief Executive Officer
31.02 Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer
32.01 Section 1350 Certification of Chief Executive Officer
32.02 Section 1350 Certification of Chief Financial Officer
(b) Reports on Form 8-K.
On October 26, 2004, a Form 8-K was filed to disclose
financial results for the third quarter 2004.
# Application has been made to the Securities and Exchange Commission to seek
confidential treatment of certain portions of this exhibit under Rule 406 of the
Securities Act of 1933 or Rule 24(b)-2 under the Securities Exchange Act of
1934. Omitted material for which confidential treatment has been requested has
been filed separately with the Securities and Exchange Commission.
* Denotes exhibits specifically incorporated in this Form 10-Q by reference to
other filings of the Company pursuant to the provisions of Securities and
Exchange Commission Rule 12b-32 and Regulation S-K. These documents are located
under File No. 001-10287 at, among other locations, the Securities and Exchange
Commission, Public Reference Branch, 450 5th St., N.W., Washington, D.C. 20549.
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SIGNATURES
- -------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZEVEX INTERNATIONAL, INC.
Dated: November 12, 2004
By /s/ David J. McNally
--------------------------
David J. McNally, CEO
(Chief Executive Officer)
By /s/ Phillip L. McStotts
------------------------------
Phillip L. McStotts, Secretary
(Principal Financial Officer)
CONFIDENTIAL INFORMATION OF ZEVEX International, Inc.
[*Confidential treatment has been requested as to certain portions of this
document. Each such portion, which has been omitted herein and replaced with an
asterisk [***], has been filed separately with the Securities and Exchange
Commission.]
Exhibit 10.31
FLOCARE 800 PUMP MANUFACTURING AGREEMENT
THIS FLOCARE 800 PUMP MANUFACTURING AGREEMENT (this "Agreement") is
entered into as of July 20, 2004, by and between NUMICO TRADING B.V., a
Netherlands corporation with its principal offices at Numico Beech Avenue 54-80,
1119PW, Schiphol-Rijk, The Netherlands ("Numico"), NUTRICIA INTERNATIONAL B.V.,
a Netherlands corporation with its principal offices at Numico Beech Avenue
54-80, 1119PW, Schiphol-Rijk, The Netherlands ("Nutricia", and, together with
Numico, "Customer"), and ZEVEX INTERNATIONAL, INC., a Delaware corporation, with
its principal offices at 4314 ZEVEX Park Lane, Salt Lake City, Utah
("Supplier").
RECITALS
A. Numico and Nutricia are wholly-owned subsidiaries of Royal Numico
N.V. ("Royal Numico"), which is a world leader in the manufacturing and
marketing of clinical nutrition products and related equipment and accessories.
B. Nutricia is a world leader in the manufacture and marketing of
clinical nutrition products.
C. Numico specializes in the procurement of raw materials, packaging
materials and fully-finished products for use in the Nutricia clinical nutrition
business.
D. Supplier is engaged in the business of developing, manufacturing and
marketing clinical nutrition delivery devices and accessories.
E. The parties desire that Supplier manufacture and supply to Customer
Nutricia Flocare 800 Pumps, a pump that is currently manufactured by Nutricia,
all in accordance with the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and for other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions. Capitalized terms not otherwise defined herein shall bear the
respective meanings given to them below:
"Adjusted Minimum Purchase Commitment" shall mean the Minimum
Purchase Commitment for Flocare 800 Pumps, as adjusted pursuant to
Section 5(c)(ii) below.
"Bankruptcy Event" means that, with respect to an entity, such
entity shall (a) make a general assignment for the benefit of creditors
or an agent authorized to liquidate its assets, (b) become the subject
of bankruptcy or insolvency proceedings or other proceedings for relief
under any bankruptcy or other law for the relief of debtors, where,
with respect to an involuntary petition in bankruptcy, the petition
shall not have been stayed within thirty (30) days, (c) apply to a
court for the appointment of a receiver or custodian for substantially
all of its assets or properties, with or without consent, and such
receiver is not discharged within thirty (30) days after appointment,
or (d) adopt a plan of complete liquidation of its assets.
"CE Mark" shall mean an indication that a product complies
with the essential requirements of applicable directives and that the
product has been subject to conformity assessment procedures as
provided in the directives.
"Change of Control of Customer" means (i) any transaction as a
result of which any person or entity becomes the "beneficial owner" (as
defined in Rule 13d-3 of the U.S. Securities and Exchange Act of 1934),
directly or indirectly, of securities of any of Numico or Nutricia,
representing more than 50% of the total voting power of any of their
then outstanding voting securities; or (ii) the sale, transfer or other
disposition of all or substantially all of the assets of any of Numico
or Nutricia; in either case where the new controlling party would
materially benefit from a failure of Supplier's business; provided,
however, that a transaction shall not constitute a Change of Control if
its sole purpose is to change the state of incorporation of Numico or
Nutricia (as applicable) or to create a holding company that will be
owned in substantially the same proportions by the persons who held the
securities of Numico or Nutricia (as applicable) immediately before
such transaction.
"Change of Control of Supplier" means (i) any transaction as a
result of which any person or entity is the "beneficial owner" (as
defined in Rule 13d-3 of the U.S. Securities and Exchange Act of 1934),
directly or indirectly, of securities of the Supplier representing more
than 50% of the total voting power represented by the Supplier's then
outstanding voting securities; or (ii) the sale, transfer or other
disposition of all or substantially all of Supplier's assets; in either
case where the new controlling party would materially benefit from
Customer's failure in the clinical nutrition market; provided, however,
that a transaction shall not constitute a Change of Control (x) if its
sole purpose is to change the state of Supplier's incorporation or to
create a holding company that will be owned in substantially the same
proportions by the persons who held Supplier's securities immediately
before such transaction, or (y) if a then current officer or director
of Supplier is the new controlling party or is a member of the group or
entity that is the new controlling party; provided, however, that the
new controlling party would not materially benefit from Customer's
failure in the clinical nutrition market.
"Commercially Reasonable Efforts" shall mean those efforts
that a reasonably prudent business person would make under similar
circumstances, including entering into contractual arrangements in
appropriate circumstances.
"Customer Intellectual Property" shall mean the Customer
Trademarks (as defined Section 13(b)(i)) and the Product Rights.
"Customer Trademarks" shall have the meaning set forth in
Section 13(b)(i).
"Flocare 800 Pump" shall mean the Nutricia Flocare 800 Pumps
manufactured by Supplier pursuant to this Agreement.
"Flocare [***] Pump" shall mean ZEVEX's [***] Pump, as it has
been customized for Customer.
"[***] Disposable Set Components License Agreement" means that
certain License Agreement for the [***] Disposable Set Components of
even date herewith between the parities.
"[***] Disposable Set Components Supply Agreement" means that
certain [***] Disposable Set Components Supply Agreement of even date
herewith between the parities.
"[***] Pump License Agreement" means that certain License
Agreement for the Flocare [***] Pump of even date herewith between the
parties.
"[***] Pump Supply Agreement" means the [***] Pump Supply
Agreement of even date herewith between Customer and Supplier.
"Initial Product Prices" means the prices at which Supplied
Products shall be sold by Supplier to Customer or its affiliates, which
will be calculated and determined in accordance with the formulas set
forth in Exhibit A hereto.
"Maintenance and Service Agreement" means that certain
Maintenance and Service Agreement of even date herewith between the
parties.
"Material Costs" shall mean the actual purchase cost incurred
by Supplier for any parts or materials necessary to manufacture the
Supplied Products.
"Maximum Monthly Product Amount" means the maximum number of
units of the Supplied Products that Customer may require Supplier to
manufacture and supply in a particular month, as set forth in Exhibit
B, but which may be adjusted pursuant to Section 7(d)(iii)(5) below.
"MicroMax Pump" shall mean the Nutricia MicroMax Pump.
"Minimum Purchase Commitment" means the obligation of Customer
to purchase in each calendar year during the Term the minimum number of
units of the Flocare 800 Pump set forth in Exhibit C.
"Product Specifications" means the manufacturing and
functional specifications for each Supplied Product to which such
specifications apply, as set forth in Exhibit D hereto.
"Product Rights" means (i) all and any part or element of any
technical documentation, memoranda, records, notes, data, processes,
specifications, standards, and procedures, designs, techniques,
technologies, concepts, methods, sketches, drawings, know-how, flow
charts, reference materials, bills of materials, embodiments, work
product, works-in progress (whether or not each respective element is
complete), materials (in each case, whether or not reduced to tangible
form), relating to the Supplied Products, and (ii) any and all (a)
modifications, derivatives, alterations, improvements, enhancements or
successors thereof, whether developed by or on behalf of Customer or
Supplier, and (b) patents, copyrights, trademarks, service marks, trade
dress, know-how, proprietary or confidential information (including
trade secrets) and other intellectual or industrial property rights of
any kind (whether or not reduced to tangible form) included in,
pertaining to, or associated with, all of the foregoing; provided,
however, that Product Rights shall not include any Supplier
Intellectual Property.
"Related Agreements" means the [***] Pump Supply Agreement,
the Disposable Set Components Supply Agreement, the [***] Pump License
Agreement, the Disposable Set Components License Agreement, and the
Maintenance and Service Agreement.
"Supplied Products" means the Flocare 800 Pumps and any New
Products added to this Agreement pursuant to Section 5(d) below.
"Supplier's Facility" means Supplier's manufacturing facility
located at 4314 ZEVEX Park Lane, Salt Lake City, Utah, 84123.
"Supplier Intellectual Property" shall mean the Pre-Owned or
Nonspecific Technology and Manufacturing Processes (as defined in
Section 13(c) below).
"Territory" shall mean the countries designated in the following chart:
------------------------------------------------------------------------ ---------------------------------------------
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Bulgaria, Czech Republic, Hungary, Poland,
The Netherlands, Norway, Portugal, Spain, Italy, Latvia, Russia, Slovakia, Ukraine,
Luxembourg, Sweden, Switzerland, United Kingdom United Arab Emirates, Turkey,
------------------------------------------------------------------------ ---------------------------------------------
------------------------------------------------------------------------ ---------------------------------------------
Australia, New Zealand China, Indonesia, Malaysia, Taiwan
------------------------------------------------------------------------ ---------------------------------------------
------------------------------------------------------------------------ ---------------------------------------------
Argentina, Brazil South-Africa
------------------------------------------------------------------------ ---------------------------------------------
2. Effective Date and Term. The term of this Agreement shall begin on July
20, 2004 (the "Effective Date"), and shall thereafter be perpetual (the
"Term"); provided that at any time on or after January 1, 2008, either
party may give notice to the other of its intention, for any reason,
not to extend the Term of this Agreement, and, if such notice is given,
the term of this Agreement shall expire two years from the date of such
notice, unless it is earlier terminated pursuant to Section 15 below.
3. Appointment of Supplier. Subject to the other provisions of this
Agreement, Customer hereby appoints Supplier, and Supplier hereby
accepts such appointment, as the exclusive manufacturer and supplier of
Flocare 800 Pumps to Customer in the Territory.
4. Certain Mutual Obligations.
(a) Development of Transition Plan for Supplied Products. Within thirty
(30) days after the Effective Date, the parties will work together in
good faith to develop a plan for transitioning all manufacturing
functions relating to the Flocare 800 Pump to Supplier within twelve
(12) months of the Effective Date. Such plan shall address in detail
such issues as the transition of component suppliers from Customer to
Supplier, assistance with regulatory matters, etc.
(b) Development of Contingency Plan. Within 30 days of the Effective Date,
the parties will work together in good faith to develop a contingency
plan to ensure continuity of supply regardless of adverse actions by
Supplier or Supplier's suppliers. This plan will be reviewed and
updated at Quarterly Meetings (as defined in Section 7(f)(ii) below).
5. Certain Customer Obligations.
(a) Customer will establish and maintain a Declaration of Conformity on
Supplied Products to establish the CE Mark for the Supplied Products,
establishing Nutricia Medical Devices B.V. (Schiphol Boulevard, 261
1118 BH, Schiphol Airport, The Netherlands) as the legal manufacturer
of the Supplied Products in the Territory.
(b) Customer will only place or sell in the Territory clinical nutrition
pumps, [***] Pump Accessories (as defined in the [***] Pump Agreement),
and [***] Disposable Sets (as defined in the [***] Pump Agreement) made
from components that it has purchased from Supplier under this
Agreement and/or the [***] Pump Agreement; provided, however, that:
(i) if Customer is unable to place and/or sell the Supplied Products in any
country of the Territory due to the failure to obtain or maintain
governmental regulatory approval of such Supplied Products, then
Customer may obtain from other manufacturers and/or suppliers, and
place or sell in that country, clinical nutrition pumps, related
accessories, and disposable sets with similar functionality to the
Supplied Products, but only until Customer is allowed to place and/or
sell the Supplied Products in that country;
(ii) if Customer receives a written request from one of its customers
explicitly requiring Customer to provide clinical nutrition pumps other
than the Flocare 800 Pump or the Flocare [***] Pump, then Customer may
purchase the other clinical nutrition pumps so required from a
supplier/manufacturer other than Supplier if Customer promptly provides
written notice to Supplier of its intent to do so; and
(iii) Customer may continue to obtain from parties other than Supplier and
provide to its customers disposable sets for the Flocare 800 Pumps,
MicroMax Pumps, and Nutromat Pumps.
(c) Purchase Commitment.
(i) Minimum Purchase Commitment; Adjusted Minimum Purchase Commitment.
----------------------------------------------------------------------
Customer agrees to purchase the Adjusted Minimum Purchase Commitment
of the Flocare 800 Pump in each calendar year during the Term beginning
January 1, 2005. If Customer fails to purchase the Adjusted Minimum
Purchase Commitment of Flocare 800 Pumps on or before December 15th
of any given calendar year during the Term (beginning with the
calendar year that commences January 1, 2005), then Customer shall
pay to Supplier fifty U.S. dollars (US $50) in immediately
available funds for each Flocare 800 Pump by which Customer was short
of the Adjusted Minimum Purchase Commitment for that calendar year.
Such fees will be invoiced by Supplier to Customer on or before
December 31st of the year to which they apply, and Customer will
pay such fees within 90 days of the end of the month in which they are
invoiced. If Customer timely pays in full any payment arising under
the previous sentence, then such payment will be deemed to fully
satisfy Customer's obligations with respect to the Minimum
Purchase Commitment of Supplied Products for that calendar year.
In that case, Customer's failure to fulfill its Minimum Purchase
Commitment of Supplied Products for that calendar year will not
thereafter be deemed a breach of this Agreement, and, if it was
previously deemed a breach, such breach will be deemed cured by such
full and timely payment.
(ii) Adjustment of Minimum Purchase Commitment. For each Flocare [***] Pump
in excess of the number set forth on Exhibit E that Customer purchases
from Supplier pursuant to the [***] Pump Supply Agreement during any
given calendar year of the term, the Minimum Purchase Commitment of
Supplied Products hereunder for that year shall be reduced by one. The
Minimum Purchase Commitment, as adjusted pursuant to this Section
5(c)(ii) shall be referred to herein as the "Adjusted Minimum Purchase
Commitment."
(d) New Products. By mutual written agreement, the parties may, from time
to time, add to this Agreement additional products (each a "New
Product"), including the MicroMax Pump, to be manufactured and supplied
by Supplier under the terms and conditions hereof. Pricing and other
specific terms for any such additional products shall be mutually
agreed upon between the parties.
(e) Regulatory Approvals. Customer will use Commercially Reasonable Efforts
to maintain regulatory approvals of the Supplied Products in each
country within the Territory.
6. Certain Supplier Obligations.
(a) Manufacturing Practices and Standards.
(i) Compliance with Standards and Specifications. Supplier represents and
warrants that it has an established standard operating procedure
("SOP") for the manufacture and supply of the Supplied Products and
that such SOP contains operating standards or procedures that are at
least as good as those prevailing in the industry for a comparable
supplier. Supplier will manufacture the Supplied Products according to
(1) the Product Specifications applicable to the Supplied Products, (2)
Supplier's SOP, and (3) standards of European Council Directive
93/42/EEC of 14 June 1993 concerning medical devices. This Section
6(a)(i) is not intended to limit Supplier's obligation to indemnify
Customer under Section 16(a).
(ii) Changes in Manufacturing Processes, Materials, or Components.
(1) Changes Initiated by Supplier. During the Term of this Agreement,
Supplier may propose to incorporate new technology or improve
manufacturing processes by providing prior notice to Customer;
provided, however, that Customer must approve, in its discretion, any
such changes before Supplier may implement them.
(2) Changes Initiated by Customer. Customer may propose changes to the
Product Specifications or the general manufacturing process from
time-to-time by submitting to Supplier a written engineering change
request ("ECR"). With respect to each ECR submitted by Customer,
Supplier shall determine and advise Customer in writing if the proposed
change is acceptable. No changes to the Product Specifications or
significant change to the manufacturing process shall be made without
the prior approval of both parties hereto, which shall be evidenced by
their signatures on the final ECR. All costs associated with an ECR,
including scrapping of existing component inventory or rework costs,
shall be borne by Customer and shall be agreed to in writing by the
parties prior to implementing any change. Non-urgent ECRs shall be
processed by Supplier within ten (10) working days, and acceptance or
rejection of the request shall be acknowledged by Supplier within that
time. In the event that Customer considers the ECR urgent, notice of
such urgency shall be made at the time of request to Supplier, and the
parties shall agree on a priority for the ECR. To expedite the
implementation of approved, urgent ECRs, it may be necessary for
Supplier to use redlined drawings and/or documentation to initiate the
change. However, the use of any redlined drawings or documents for
manufacturing purposes shall be permitted only upon the written
approval of Customer.
(iii) Packaging. Customer will provide Supplier with finished artwork to be
used by Supplier in producing the Supplied product packaging which
shall be subject, in all cases, to the final approval of Customer.
(b) Inspection and Documents; Audits.
(i) Inspections by Customer.
------------------------
Supplier shall permit Customer or its agents, during reasonable
business hours and upon at least two weeks advance notice, access to
inspect Supplier's facility where the Supplied Products are
manufactured, handled, stored, or tested, as well as records relating
to the manufacture, storage, handling, or testing of the Supplied
Products. Customer shall conduct such inspection in a manner as to
minimize disruption of Supplier's ongoing operations, and
Supplier shall reasonably assist Customer with such inspections.
Supplier hereby acknowledges and agrees that Customer's right to
inspect Supplier's facilities to ensure such compliance does not in
any way limit Customer's rights and that any failure by Customer
to exercise such right(s) shall not be held against Customer for
any reason whatsoever and shall not diminish or constitute a waiver
of Supplier's responsibility for the proper performance of its duties
and obligations hereunder.
(ii) Inspections by Government Authorities. Supplier shall extend the same
inspection privileges set forth in Section 6(b)(i) to agents of the FDA
or other governmental authorities as required by law. Supplier shall
notify Customer within five (5) working days of any such inspection
related to the Supplied Products. In addition, Supplier shall provide
Customer with copies of any and all inspection reports relating to the
manufacture of the Supplied Products from the FDA or other relevant
governmental authority within five (5) working days of receipt of such
reports.
(iii) Documents and Records. Upon request by Customer, Supplier shall furnish
Customer with complete and accurate information and copies of documents
necessary for Customer to: (1) provide Customer assurance that the
Supplied Products were manufactured and supplied in accordance with
this Agreement and in compliance with applicable Laws (as hereinafter
defined), (2) enable Customer to ensure that the Supplied Products
comply with the labeling claims made for the Supplied Products, (3)
secure all required governmental licenses, registrations or approvals
for the Supplied Products, and (4) respond to all governmental
inquiries or requests.
(iv) Important Changes or Events. Supplier shall immediately inform Customer
of any event or circumstance, including but not limited to, a Change of
Control of Supplier, or an adverse change in the financial status of
Supplier or its affiliated companies that may prejudice Supplier's
ability to comply with any of its undertakings in this Agreement, and,
particularly, that may affect its manufacture and supply of the
Supplied Products, its capacity to meet the Maximum Monthly Product
Amount, or any other matter that materially and adversely affects the
ability of Supplier to perform its obligations under this Agreement.
(v) No Waiver. Supplier acknowledges and agrees that Customer shall have
the right, upon request, to confirm or verify that Supplier is in
compliance with Section 6 hereof including the right to inspect
Supplier's facilities pursuant to Section 6(b)(i) hereof to ensure such
compliance.
(c) No Conflicts. Supplier exclusively shall manufacture, package, and
supply the Supplied Products for Customer to sell or place in
accordance with Customer's specifications and the terms and conditions
contained herein.
(d) Subcontractors; Suppliers and Distributors; Manufacturing Location.
(i) Subcontractors. Supplier shall not subcontract with any third parties
for the manufacture of the Supplied Products without the prior written
approval of Customer, which approval shall not be unreasonably
withheld. If such approval is given by Customer, Supplier shall exert
Commercially Reasonable Efforts to ensure that such subcontractors
(including suppliers and distributors) comply with the necessary
manufacturing requirements relating to the manufacture of the Supplied
Products.
(ii) Suppliers. Supplier will exert Commercially Reasonable Efforts to
assist Customer in gaining access and documentation from any supplier
used by Supplier in performing its obligations hereunder. Supplier will
exert Commercially Reasonable Efforts to prevent its suppliers from
supplying to any party other than Supplier (1) any patented components
used in the Supplied Products, or (2) any components of the Supplied
Products that are unique to the Supplied Products.
(iii) Manufacturing Location. Supplier will manufacture and package the
Supplied Products at Supplier's Facility.
7. Ordering, Supplying, and Rejecting Supplied Products.
(a) Ordering Supplied Products. All Supplied Products shall be ordered
through written Customer call-offs, as described in Section 7(d) below.
(b) Terms and Conditions. The terms and conditions of this Agreement will
apply to each call-off or shipment by Supplier hereunder, regardless of
the terms and conditions of the terms stated on Supplier's invoice. The
terms and conditions of Customer's form of purchase order or other
business forms will not apply to any order notwithstanding Supplier's
acknowledgment or acceptance of such call-off or shipment.
(c) Cancellation of Call-Offs by Supplier. Supplier reserves the right to
cancel any call-offs placed by Customer as set forth above, or to
refuse or delay shipment thereof, if Customer (i) fails to make any
payment when due as provided herein or under the terms of payment set
forth in any invoice or otherwise agreed to by Supplier and Customer,
or (ii) otherwise fails to comply in all material respects with the
terms and conditions of this Agreement and fails to cure such
non-compliance within 60 days from the date Supplier notifies Customer
of such failure to comply. No such cancellation, refusal or delay will,
by itself, be deemed a termination or breach of this Agreement by
Supplier.
(d) Supplying Supplied Products.
(i) Forecasts for Supplied Products.
---------------------------------
Customer shall provide Supplier by the tenth (10th) calendar day
of each month during the Term a rolling, twelve-month forecast of the
number of product units of Supplied Products that it anticipates
Supplier will be required to ship pursuant to Customer's
call-offs in each month of such forecast (the "Rolling Forecast").
Supplier shall use the Rolling Forecast to plan capacity and order
raw materials and component parts to support forecast projections.
The new Rolling Forecast provided in any given month (the "Current
Month's Rolling Forecast") may increase or decrease the forecasted
shipments by Supplier provided by Customer during the prior month (the
"Prior Month's Rolling Forecast"); provided, however, that the
Current Month's Rolling Forecast may not (1) revise the forecasted
quantities to be shipped for the month in which it is submitted from
the forecast for that month contained in the Prior Month's Rolling
Forecast, (2)increase by more than thirty percent (30%) the
forecasted quantities to be shipped for the next full calendar month
after the current month, as compared to the forecasted quantities
to be shipped for that month as contained in the Prior Month's Rolling
Forecast, or (3) increase by more than one hundred percent (100%)
the forecasted quantities to be shipped for the second full calendar
month after the current month, as compared to the forecasted
quantities to be shipped for that month as contained in the Prior
Month's Rolling Forecast.
(ii) Inventory, Components, and Raw Materials.
-------------------------------------------
Supplier shall maintain sufficient inventory and components to
guarantee and minimize Supplier's lead times and to fulfill Customer's
call-off requirements on a timely basis, such that the Supplied
Products will be finished and ready for shipment on, or immediately
before, the delivery date as set forth on the related call-off.
Supplier shall acquire all raw and packaging materials (e.g.,
inventory, packaging components, parts, labels, inputs, and other
materials necessary for the manufacture, supply, and delivery of
Supplied Products) solely from manufacturers and suppliers that meet
industry standards of acceptability and comply fully with all Laws
(as hereinafter defined). Supplier may purchase and maintain up to a
six (6) month supply of raw materials and component parts necessary
for the manufacture and supply of the Supplied Products according
to the 12-month forecast. If Supplier so elects, Supplier shall
sell to Customer and Customer shall buy any such raw materials and
component parts that are not used by Supplier in accordance with the
12-month forecast, referred to in the previous sentence, within nine
(9) months from the date they are received by Supplier at Supplier's
standard cost plus [***]. To assist Supplier in determining the
need for such items, Customer will use Commercially Reasonable
Efforts to apprise Supplier of significant developments, such as
market conditions, customer demand, and sales forecasts, which may
occur with respect to its business as it relates to its requirements
for Supplied Products.
(iii) Call-Offs and Shipment.
(1) Lead Times for Shipment. Subject to the limitations on quantity set
forth in Section 7(d)(iii)(2) below, Supplier shall ship the Supplied
Products that Customer orders by call-off on or before the shipping
dates requested by Customer in such call-off; provided, however, that
Supplier will not be obligated to ship products any sooner than two
weeks after it receives a call-off for such products from Customer,
regardless of any language to the contrary in such call-off.
(2) Quantities to be Shipped. Supplier will ship ordered quantities of
Supplied Products in accordance with Customer call-offs, so long as the
called-off quantities do not exceed the lesser of (A) 120% of the
current month's forecasted requirements (as contained in the most
current Rolling Forecast) and (B) the Maximum Monthly Product Amount.
(3) Efforts to Fulfill Customer's Lead Times and Quantity Needs. If
called-off quantities and shipment dates for Supplied Products do not
comply with the quantity or lead-time limitations set forth in Sections
7(d)(iii)(1) and (2) above, Supplier will nonetheless exert
Commercially Reasonable Efforts to fulfill such call-offs in as timely
a manner as reasonably possible; provided, however, that no penalty for
late or partial delivery shall apply to any such call-offs.
(4) Modification and Cancellation of Call-Offs by Customer. The quantity of
Supplied Products to be shipped pursuant to a call-off may be reduced
or cancelled by Customer no less than three (3) days prior to the
required shipment date without penalty. If Customer cancels a call-off
less than three (3) days prior to the shipment date, Customer shall
reimburse all costs reasonably and actually incurred by Supplier in
connection with such call-off, but such reimbursement shall never
exceed the purchase price of the product units that were cancelled, as
referred to in the call-off. Such costs shall be submitted by Supplier
to Customer within ten (10) working days after the cancellation. Any
such reimbursement shall be determined based on the actual cost of the
specific materials required to be purchased, if any, for the canceled
call-off if said materials are covered within the scope of the
call-off, provided that no alternative use for such materials can be
found by mutual agreement of the parties. Customer may increase the
quantity of Supplied Products ordered pursuant to a particular call-off
by up to 20%, without any attendant change to the shipment date, if
Customer submits such a request to Supplier in writing and such request
is received by Supplier no less than one week prior to the originally
requested shipment date.
(5) Changes to Maximum Monthly Product Amount. During each Quarterly
Meeting, the parties will review and consider the sufficiency of the
Maximum Monthly Product Amount. If the parties mutually agree that an
increase in the Maximum Monthly Product Amount is warranted based on
the demand for the Supplied Products, then the Maximum Monthly Product
Amount will thereafter be adjusted upward, effective as of the date
mutually agreed by the parties.
(iv) Shipment. All Supplied Products purchased by Customer hereunder will be
shipped Ex Works (as defined in INCOTERMS 2000, International Chamber
of Commerce), at Supplier's Facility. Customer will be responsible for
and will pay all shipping, freight and insurance charges associated
with the shipping of the products.
(v) Title/Risk of Loss. Title to the Supplied Products purchased by
Customer and all risk of loss or damage will pass to Customer when the
products are delivered to a shipper at Supplier's Facility. Customer
shall bear the risk of loss or damage in transit.
(vi) Partial Shipments.
------------------
Unless Customer clearly advises Supplier to the contrary in
writing, Supplier may make partial shipments on account of Customer's
orders, to be separately invoiced and paid for when due; provided,
however, that if the aggregate price of shipping any called-off
shipment is higher than the cost would have been if the entire
shipment had been shipped at once, then Supplier will reimburse
Customer for the difference in shipping cost, and provided further
that all such partial shipments are received by the date on which
the total shipment is due under the applicable call-off. Failure to
ship all shipments required under a call-off shall constitute a
Call-Off Breach under Section 17. Delay in delivery of any
shipment shall not relieve Customer of its obligation to accept the
remaining deliveries.
(vii) Failure to Fulfill Call-Off or Purchase Order.
(1) Notice. Supplier will notify Customer immediately of any real or
anticipated delays that could impact the supply of Supplied Products or
the ability of Supplier to fulfill its obligations under this Agreement
including, but not limited to, component supply or labor shortages, or
events which involve health, safety, building code, or regulatory
issues or violations. Supplier shall, in the event of lost production
time for any reason, except through the fault of Customer, give
Customer first priority from among Supplier's other customers in making
up production schedules.
(2) Effect.
------
Without prejudice to Customer's other rights hereunder, if Supplier
is unable to fulfill any Customer call-off with respect to Supplied
Products as to quantity or time of shipment (assuming the applicable
lead times and quantity limitations are satisfied), then Supplier
will be subject to a penalty with respect to the relevant call-off or
purchase order of 0.5% of the invoice price of that portion of the
call-off or purchase order that is actually late in shipment for every
day that the shipment date of the Supplied Products ordered pursuant
to that call-off or purchase order is late; provided, however, that
the aggregate penalty under this section for late shipment with
respect to any call-off or purchase order will be capped at 20% of the
total purchase price for such portion of the call-off or purchase
order. In any event, the penalties set forth herein will apply only
to call-offs and/or portions of call-offs representing quantities of
the original call-off up to the applicable Maximum Monthly Product
Amounts for Supplied Products ordered during any calendar month during
the Term (i.e., no penalty under this section will apply to call-offs
or portions of call-offs during a calendar month that exceed the
applicable Maximum Monthly Product Amount for the Supplied Products).
(e) Rejecting Nonconforming Supplied Products.
(i) Defective Supplied Products.
-----------------------------
Customer will have no obligation to inspect incoming shipments of
Supplied Products received from Supplier. However, if after
receiving a shipment of Supplied Products, Customer reasonably
determines that any Supplied Product or an entire lot of Supplied
Products delivered by Supplier fails to meet the Product
Specifications, and/or any other requirements and other specifications
established or agreed to from time to time by Customer, and/or any
other terms and conditions of this Agreement (the "Defective
Products"), Customer shall notify Supplier after discovery of the
defect. All Defective Products, other than any Defective Products
(or any portions thereof) retained by Customer for testing,
evaluating or sampling, shall, at Customer's option, but not
earlier than five (5) business days after notification to Supplier
by Customer in writing, be returned to Supplier, at Supplier's
expense, after Customer has obtained a return merchandise
authorization number from Supplier for such products. Supplier shall
promptly repair or replace, at Supplier's sole discretion, all
Defective Products returned to Supplier. If Supplier receives any
written notice of Defective Products, Supplier shall, at Supplier's
expense, ship replacement or repaired Supplied Products to the
destination designated by Customer as soon as reasonably possible
after receipt of such notice, provided that Supplier shall use its
best efforts to make any such shipment ready for shipment within five
(5) business days after receiving returned Defective Products. In the
event that Supplier fails to do so, Customer may treat such failure
as a Call-Off Breach pursuant to Section 17. Notwithstanding the
foregoing, neither Customer's failure to discover Defective Products
nor any of the provisions set forth herein for dealing with Defective
Products shall prejudice or affect Customer's other rights or
remedies under this Agreement or under applicable Law (as hereinafter
defined), including Customer's rights to have Defective Products
repaired or replaced under the Product Warranties set forth in this
Agreement.
(ii) Shortfall.
---------
A "Shortfall" shall occur if Customer reasonably determines that
there is either (A) a shortfall in the quantity of Supplied Products
delivered by Supplier pursuant to a call-off, and/or (B) any
shipment of Supplied Products delivered by Supplier pursuant to a
call-off contains Supplied Products that have defects that are
manifest and easily visible to the naked eye ("Visually Defective
Products"). Customer shall notify Supplier of any Shortfall within
five (5) business days of the date the shipment is received by
Customer at Customer's distribution center in Zoetermeer. Visually
Defective Products shall be returned to Supplier at Supplier's
expense, and Supplier shall repair or replace them and redeliver them
to Customer in the same manner as Defective Products under Section
7(e)(i) above. In the case of a Shortfall in quantity, Supplier shall
ship a quantity of Supplied Products that are not Defective Products
and/or Visually Defective Products to the destination designated by
Customer to fulfill the entire Call-Off as soon as is reasonably
possible, provided that Supplier shall use its best efforts to make
any such shipment ready for shipment within five (5) business days
after receiving notification of such Shortfall in quantity. Any
Shortfall that is identified by Customer and is communicated in
writing by Customer to Supplier within five (5) business days of
Customer's receipt of a shipment at Customer's distribution center
in Zoetermeer shall be deemed a Call-Off Breach under Section 17.
If Customer does not notify Supplier of a Shortfall within five (5)
business days of Customer's receipt of a shipment at Customer's
distribution center in Zoetermeer, a Call-Off Breach shall not
be deemed to have occurred, and Customer shall retain, without
limitation, all its other rights and remedies conferred under this
Agreement and the Related Agreements.
(f) Ongoing Communication and Business Review.
(i) Designated Representative. Each party agrees to designate one
individual within such party's organization to serve as such party's
primary point of contact and representative (the "Designated
Representative") in such party's relationship and communications with
the other party as contemplated in this Agreement. These Designated
Representatives shall also involve other appropriate operational,
strategic, technical, and regulatory personnel in such communications.
(ii) Quarterly Meetings.
------------------
The parties agree to hold a face-to-face meeting at a minimum of once
each calendar quarter during the Term for such duration as the parties
agree in good faith is necessary to address the various issues
that may arise relating to the performance of the parties under this
Agreement (the "Quarterly Meetings"). The location of the Quarterly
Meetings shall alternate between Supplier's Facility and a
Customer facility in Europe. The parties shall formulate in advance
of each meeting a written agenda of material items that each party
proposes should be considered together in the meeting, which
agenda may include such items as on-time delivery, capacity planning,
customer complaints, device master record review, performance
forecasting, product development, market feedback and trends
(including competitor activity), corrective action requests review,
contingency plan review, product training and support, and sales
review. The parties shall make a reasonable effort to have the
Designated Representative present at each Quarterly Meeting, as
well as such other individuals as would be appropriate in light of
the agenda for the meeting. Each party shall bear all of its own
costs and expenses associated with its participation in the
Quarterly Meeting. The parties' respective rights to request and
receive information hereunder will not be affected or limited by any
subject or matter discussed or planned to be discussed at any Quarterly
Meeting.
(g) Warranty. Supplier warrants, for a period of twelve (12) months from
the date of shipment from Supplier to Customer or any of Customer's
distributors, resellers, or customers, as the case may be, that each
Supplied Product shall be free from defects in materials, components,
and workmanship and shall conform to the Product Specifications (the
"Product Warranty"), under the following terms and conditions:
(i) Supplier must be notified in writing of the alleged defect(s) during
the term of the warranty; and
(ii) Supplier's warranty shall be voided in the event a Supplied Product is
subject to abuse, accident, alteration, modification, tampering,
misuse, or the unauthorized repair or service by anyone other than
Supplier (other than service permitted or required to be performed by
the user as explained in a Supplier-approved operator's manual for such
product).
(h) No Other Warranties. Supplier provides no warranties hereunder except
as stated in this Agreement. THE WARRANTIES STATED IN THIS AGREEMENT
AND THE RELATED AGREEMENTS ARE EXCLUSIVE AND EXPRESSLY IN LIEU OF ALL
OTHER EXPRESS OR IMPLIED WARRANTIES. Furthermore, the warranties
provided in this Agreement run only to Customer and not to Customer's
customers or end users.
(i) Supplier Obligations for Breach of Warranty. Supplier's obligation with
respect to Supplied Products that it has supplied to Customer hereunder
that fail to meet the Product Warranty set forth in Section 7(g) above
shall be to repair or replace such Supplied Products, as set forth in
greater detail in the Maintenance and Service Agreement. The remedies
available to Customer thereunder for the failure of Supplied Products
to comply with the Product Warranty set forth in Section 7(g) above
will be the sole and exclusive remedies available to Customer under
such Product Warranty. This Section 7(i) is not intended to limit
Supplier's obligation to indemnify Customer for certain third-party
products liability claims as described in Section 16(a)(i).
(j) Warranty Claims. Concurrently with the execution of this Agreement, the
parties will enter into the Maintenance and Service Agreement that will
provide for the following: (i) reporting of product defects, (ii) the
process for responding to warranty claims, and (iii) the process for
repairing or replacing damaged or defective Supplied Products.
8. Planning and Conduct of Business.
(a) Suitable Inventory and Premises. At all times throughout the Term of
this Agreement, Customer will maintain at least a four-week supply of
Supplied Products on hand in one or more of its facilities. If at any
time Customer's inventory of Supplied Products on hand is depleted
below a projected four-week supply of such products, then Customer will
promptly order sufficient additional Supplied Products to restore its
inventory levels to a four-week supply. In addition, throughout the
Term of this Agreement, Customer will maintain adequate inventory
levels of the Supplied Products for demonstration and training
purposes.
(b) Conduct of Business. Each of Supplier and Customer will promote the
business and company of the other in a manner that reflects favorably
on the other, and each will avoid deceptive, misleading, or unethical
business practices that are likely to be detrimental to the other, its
business, or the general public.
(c) Market Information and Planning. Each of Supplier and Customer will
advise the other promptly after they receive information concerning the
market for clinical nutrition delivery devices and will, from
time-to-time, consult with each other with respect to market
conditions, sales forecasting, product planning, and promotional
activities; provided that neither party will be obligated to disclose
any such information to the other if doing so would be a breach of such
party's obligations to a third party to maintain the confidentiality of
such information.
(d) Compliance with U.S. Export Laws. Customer understands that the
Supplied Products are restricted by the United States Government from
export to certain countries, and Customer agrees that it will not sell
the Supplied Products in any way that will violate any of the export
control laws or regulations of the United States ("U.S. Export Control
Laws"). Supplier will inform Customer from time to time about
applicable U.S. Export Control Laws and prohibited countries. Customer
will provide to Supplier such documentation and certifications as may
be required for compliance with the export control laws of the United
States.
(e) Governmental Approvals. If any approval with respect to this Agreement,
or the registration thereof, shall be required at any time during the
term of this Agreement, with respect to giving legal effect to the
Agreement in a particular geographic location in which the Supplied
Products are to be placed or sold, or with respect to compliance with
exchange regulations or other requirements so as to assure the right of
remittance abroad of U.S. dollars, Customer shall immediately take
whatever steps may be necessary in this respect, and any charges
incurred in connection therewith shall be for the account of Customer.
Customer shall keep Supplier currently informed of its efforts in this
regard.
9. Inspections, Records, and Reporting.
(a) Deliveries and Inventories. In the Quarterly Meetings, Customer will
provide to Supplier information about Customer's deliveries of Supplied
Products. In addition, upon either party's request, the other party
will provide to the requesting party information about the providing
party's inventory levels of Supplied Products and such other
information as the requesting party may reasonably request.
(b) Reports of Alleged Claims. Customer shall notify Supplier in writing of
any claim or proceeding involving advertisement or distribution of the
Supplied Products by Customer, including claims asserting infringement
of any intellectual property rights by the Supplied Products, within
ten (10) days after Customer learns of such claim or proceeding.
Customer shall also report promptly to Supplier all claimed or
suspected product defects relating to the Supplied Products.
(c) Maintenance of Records. Customer shall maintain during and two (2)
years beyond the life of the Flocare 800 Pumps its records, contracts
and accounts relating to the distribution of the Flocare 800 Pumps, and
shall permit examination thereof by authorized representatives of
Supplier (i) in connection with any recall under Section 18 or (ii)
after any written request by Supplier that is based on a reasonable
determination by Supplier that it has need to verify the accuracy of
information or reports previously provided to Supplier by Customer.
With respect to sales to end users of the Flocare 800 Pumps, Customer
shall track and require its dealers to track the location of pumps sold
or placed with end users. Customer and each of its dealers shall
maintain a record of pump location by serial number, location, and
telephone/fax contact.
10. Supplier's Obligations.
(a) Compliance with Laws. Supplier shall comply, and shall ensure that the
storage, manufacture, packaging, labeling, supply, and delivery of
Supplied Products or any components thereof, materially comply with
applicable U.S. laws, regulations, rules, and orders (collectively,
"Laws"), and shall make such adjustments as may be necessary to effect
and maintain such compliance throughout the Term. Without limiting the
generality of the foregoing, (i) Supplier's facilities shall comply
with all product safety, sanitation, and environmental Laws, (ii) all
Supplied Products shall be clearly and accurately labeled and packaged
in the manner requested by Customer and otherwise as required by all
Laws, and (iii) Supplier acknowledges that it is familiar with the
Foreign and Corrupt Practices Act of the United States and agrees that
it shall at all times comply with such act in carrying out and
performing its duties under this Agreement.
(b) Approvals. Supplier shall obtain, at its sole expense, all
governmental, administrative, and other approvals, licenses, permits,
and other authorizations and registrations necessary for the operation
and conduct of its business, including without limitation, the
manufacture and supply of the Supplied Products.
(c) Obtain Inventory. Supplier shall obtain all inventory, equipment,
employees, facilities, and any other item necessary in order to assure
that Supplier has, and will have, the ability to perform its
obligations hereunder in accordance with the terms and conditions
hereof.
11. Price and Payment Terms.
(a) Prices. Customer shall pay Supplier for the Supplied Products at the
Initial Product Prices. With respect to all Supplied Products, the
Initial Product Prices shall remain unchanged until December 31, 2005.
Beginning on January 1, 2006, and thereafter, the Initial Product
Prices for the Supplied Products (or the Product Prices, as the case
may be) may be increased by Supplier on an annual basis, based on the
formula set forth in Exhibit A. The Product Price increases for the
Supplied Products shall also be increased by Supplier by a percentage
not to exceed any proportional increase in the ElectroMedical Apparatus
Manufacturing PCU334510334510 Index published by the U.S. Department of
Labor, Bureau of Labor Statistics (the "ElectroMedical Apparatus
Index"), referenced back twelve (12) months prior to the effective date
of such price change (such prices, as adjusted, the "Product Prices").
Notwithstanding the schedule for increases in the Product Prices set
forth herein, the Product Prices may increase from time to time due to
changes in the Supplied Products implemented by the parties under
Section 6(a)(ii)(2), as set forth therein. The Product Prices
(including the Initial Product Prices) shall include the cost of all
materials, but do not include shipping costs, taxes, charges, tariffs,
and duties, which shall be paid by Customer.
(b) Cost Savings. Supplier will exert Commercially Reasonable Efforts to
reduce the costs of obtaining the materials and labor used in
manufacturing of Supplied Products. To the extent that cost savings are
actually realized from such efforts, the cost savings shall be split
equally between the parties as set forth herein. These cost savings
shall be determined by comparing the new cost of materials and labor to
the costs that formed the basis for the applicable Initial Product
Prices, with reliance on appropriate supporting data. These cost
savings shall be shared by reducing the Initial Product Prices by an
amount equal to one half of the cost savings.
(c) Payment Terms. Supplier shall provide an invoice to Customer based on
the actual amount of Supplied Products shipped to Customer or its
designee(s). Customer shall cause payment for the Supplied Products
purchased from Supplier under the terms of this Agreement to be made no
later than ninety (90) days from the end of the month in which the
product was shipped. Late payments will be subject to a 1.5% penalty
per month. All payments will be made via wire transfer in United States
currency.
12. Representations and Warranties.
(a) Supplier's Representations and Warranties. Supplier hereby represents
and warrants to Customer that:
(i) It has the full power, capacity, and right to enter into this
Agreement;
(ii) All corporate action necessary to authorize Supplier to enter into this
Agreement and be legally bound by its terms has been taken;
(iii) Prior to purchase of Supplied Products by Customer hereunder, Supplier
will own title to those Supplied Products free and clear of liens and
encumbrances;
(iv) It knows of no pending or threatened action in law or in equity which
adversely affects the rights granted herein, and it knows of no basis
for any of the foregoing;
(v) To the knowledge of Supplier, neither the execution and delivery of
this Agreement nor compliance with the obligations of Supplier
hereunder, will violate any law or regulation, or any order or decrees
of any court or government instrumentality;
(vi) Neither the execution and delivery of this Agreement nor compliance
with the obligations of Supplier hereunder, will conflict with, or
result in the breach of, or constitute a default under, any contract,
agreement, instrument or judgment to which Supplier or any officer,
director, employee or controlling person of Supplier is a party, or
which is or purports to be binding upon any of the foregoing persons;
and
(vii) No action, approval, or consent, including, but not limited to, any
action, approval, or consent by any federal, state, municipal, or other
governmental agency, commission, board, bureau, or instrumentality is
necessary in order to constitute this Agreement as a valid, binding,
and enforceable obligation of Supplier in accordance with its terms.
(b) Customer's Representations and Warranties. Customer hereby represents
and warrants that:
(i) It has the full power, capacity, and right to enter into this
Agreement;
(ii) All corporate action necessary to authorize Customer to enter into this
Agreement and be legally bound by its terms has been taken;
(iii) It knows of no pending or threatened action in law or in equity which
adversely affects the rights granted herein, and it knows of no basis
for any of the foregoing;
(iv) To the knowledge of Customer, neither the execution and delivery of
this Agreement nor compliance with the obligations of Customer
hereunder, will violate any law or regulation, or any order or decrees
of any court or government instrumentality;
(v) Neither the execution and delivery of this Agreement nor compliance
with the obligations of Customer hereunder, will conflict with, or
result in the breach of, or constitute a default under, any contract,
agreement, instrument or judgment to which Customer or any officer,
director, employee or controlling person of Customer is a party, or
which is or purports to be binding upon any of the foregoing persons;
(vi) No action, approval, or consent, including, but not limited to, any
action, approval, or consent by any federal, state, municipal, or other
governmental agency, commission, board, bureau, or instrumentality is
necessary in order to constitute this Agreement as a valid, binding,
and enforceable obligation of Customer in accordance with its terms.;
and
(vii) The Flocare 800 Pump was designed in accordance with IEC 60601-1,
Medical electrical equipment - Part 1: General requirements for safety;
and IEC 60601-2, Medical electrical equipment - Part 1-2: General
requirements for safety - Collateral standard: Electromagnetic
compatibility - Requirement and tests (the "Design Requirements"), and,
in its current form, the design for the Flocare 800 Pump is compliant
with the Design Requirements and the Product Specifications.
13. Intellectual Property.
(a) Manufacturing License. Customer hereby grants to Supplier the exclusive
right and license to manufacture the Supplied Products under all
Product Rights for the Supplied Products. The Product Rights shall not
be used by Supplier for any purpose other than the manufacture of
Supplied Products to be produced for Customer by Supplier pursuant to
this Agreement. The foregoing licenses of the Product Rights shall
terminate upon the termination for any reason of this Agreement.
Supplier acknowledges that the Product Rights are owned by Customer and
Supplier shall make no claim of ownership or license to such Product
Rights at any time.
(b) Trademark Licenses.
(i) Customer hereby grants to Supplier, throughout the term of
this Agreement, a limited, exclusive, non-transferable,
royalty-free license solely to use the trademarks, service marks,
trade names, and logos owned by or licensed to Customer (the
"Customer Trademarks") in labeling and packaging the Supplied
Products for Customer for the remainder of the Term only and not
thereafter, and at all times subject to Customer's specifications
and the terms and conditions of this Agreement. Supplier hereby agrees
that Customer Trademarks shall only be affixed to the Supplied
Products. Supplier shall have no rights to use Customer Trademarks
other than for purposes of labeling and packaging Supplied Products
pursuant to this Agreement, which labeling and packaging shall be in
the form and substance previously approved in writing by Customer.
Supplier agrees to submit copies of the proposed manner, use, and
layout of Customer Trademarks for approval by Customer, in
Customer's sole and absolute discretion, prior to Supplier using
Customer Trademarks as set forth herein. Supplier shall not use
Customer Trademarks in advertising or promotional campaigns or
otherwise, or use any confusingly similar names, marks, or logos, in
any manner that, in Customer's sole and absolute discretion, may be
inconsistent with Customer's public image or be misleading or
harmful to Customer. Supplier acknowledges and agrees that Customer
Trademarks are owned exclusively by, or licensed by third parties
to, Customer and that Supplier has neither acquired nor shall
acquire any rights therein. Supplier shall not assert or claim
any rights over Customer Trademarks nor contest same or challenge the
validity thereof. The term "exclusive," as used in this Section
13(b)(i) shall mean that Customer and Supplier will be the only parties
entitled to use the Customer Trademarks as set forth above. The term
"exclusive," as used in this Section 13(b)(i) shall not constitute or
impose any limitation on the manner in which Customer may use or
license the Customer Trademarks in connection with any product other
than the Supplied Products. Notwithstanding the license granted
herein, the Customer Trademarks shall remain the property of Customer.
(c) Retention of Rights. Customer shall retain whatever exclusive or
non-exclusive rights or licenses it may have with respect to all
Product Rights relating to the Supplied Products. Specifically, unless
otherwise specifically agreed between Supplier and Customer in writing,
all inventions conceived, developed, reduced to practice or created by
Supplier or its employees, consultants or agents in the course of
Supplier's services for Customer hereunder will be owned by Customer
("Customer Intangibles"); provided, however that Supplier shall retain
ownership and all rights of the Supplier Confidential Information and
all "Pre-Owned or Nonspecific Technology and Manufacturing Processes,"
which shall be defined as follows: Supplier's proprietary electronic
technology and processes and know-how and assembly and manufacturing
processes, technology and know-how, including such technology and
know-how either (i) developed or acquired by Supplier prior to the
execution of this Agreement, or (ii) developed or acquired by Supplier
after such date where such development or acquisition was not within
the scope of the Supplied Product, or Supplier's services under this
Agreement and was not developed with the use (in whole or in part) of
any of Customer's Confidential Information. In furtherance of the
foregoing, Supplier will promptly disclose to Customer all Customer
Intangibles and Supplier hereby assigns to Customer all of Supplier's
right, title, and interest in and to Customer Intangibles. Each party
will take all further actions, including, without limitation, execution
and delivery of assignments and other documents, reasonably requested
by a party, at the requesting party's expense, all in order to enable
such party to protect the same and perfect its legal rights in the
Customer Intangibles or Supplier Pre-Owned or Nonspecific Technology
and Manufacturing Processes, as applicable, and ownership thereof by
whatsoever legal means such party deems reasonably appropriate.
(d) Disclosure of Manufacturing Information. Customer shall disclose to
Supplier without charge all technical information and know-how
possessed by Customer related to the design, process, operations, raw
materials, and other components used in the production of Supplied
Products, and the methods and apparatus used to enable Supplier to
manufacture such Supplied Products at the capacities, in the
quantities, with the quality, and otherwise in accordance with the
provisions of this Agreement. Supplier shall use all such information
and data solely for the purpose of performing its obligations
hereunder. Customer shall promptly disclose to Supplier in writing
improvements in the design, process and operations resulting from
ongoing research and development in the manufacture of Supplied
Products to be manufactured by Supplier for Customer. All such later
information disclosed by Customer to Supplier shall be treated as
Customer's Confidential Information in accordance with the terms of
this Agreement.
(e) Customer Tooling. Supplier shall procure, at Customer's expense, such
special tooling, molds, dies and equipment as shall be identified and
agreed upon by Customer and Supplier (the "Customer Tooling"). The
tooling specifications and cost shall in each case be subject to
Customer's prior written approval. Customer shall pay within 10 days of
receipt of invoice from Supplier an amount equal to the first deposit
charge for each tooling item required by Supplier's tooling supplier.
Remaining amounts for Customer tooling will be paid by Customer within
30 days of receipt of invoice. Supplier shall provide Customer with
third party invoices for such Customer Tooling to verify the amounts to
be reimbursed. Customer shall have and retain ownership of all Customer
Tooling and drawing, sketches, and similar items utilized by Supplier
in performing its manufacturing and other obligations hereunder.
Ownership by Customer of any patent, or rights with respect to such
patent, in any way relating to the Supplied Products shall be and
remain with Customer. Supplier shall be responsible for periodic
maintenance of Customer Tooling and for any costs associated with
damage to the production tooling caused by Supplier's negligence,
normal wear and tear excluded; replacement costs associated with new or
additional Customer Tooling will be the responsibility of Customer.
Customer Tooling shall be delivered to Customer promptly upon
termination of this Agreement and payment in full by Customer of all
amounts due Supplier pursuant to this Agreement.
(f) Representations and Warranties regarding Intellectual Property.
Customer represents and warrants that:
(i) Customer is the sole legal and beneficial owner of the Customer
Intellectual Property.
(ii) To the best knowledge of Customer, none of the Customer Intellectual
Property infringes or is alleged to infringe upon any patents or other
intellectual property rights of any third party.
(g) Notice of Infringement.
(i) Supplier shall promptly notify Customer of any actual or apparent
infringement of Customer Intellectual Property of which Supplier
becomes aware. Customer may, at its sole option and expense, prosecute
any suit it deems necessary or appropriate to protect any of Customer's
rights to Customer Intellectual Property from and against infringement
by third parties anywhere in the world and Supplier shall cooperate
fully with Customer in connection with any such action.
(ii) Customer shall promptly notify Supplier of any actual or apparent
infringement of Supplier Intellectual Property of which Customer
becomes aware. Supplier may, at its sole option and expense, prosecute
any suit it deems necessary or appropriate to protect any of Supplier's
rights to Supplier Intellectual Property from and against infringement
by third parties anywhere in the world and Customer shall cooperate
fully with Supplier in connection with any such action.
14. Confidential Information.
(a) Confidential and Proprietary Information.
(i) Supplier Obligations with respect to Customer Confidential Information.
----------------------------------------------------------------------
Supplier agrees to hold all confidential information of Customer
and its affiliated companies, including without limitation, any
information relating to Customer's and its affiliates' business
operations, price lists, manufacturing data, marketing information
strategies, customer or product lists, research and development
information and all other information disclosed by Customer or its
affiliates to Supplier ("Customer Confidential Information"), in
strict confidence and not to use any of the foregoing commercially
for its own benefit or that of anyone else nor for the purpose of
developing or improving a product or method for anyone except Customer.
Supplier agrees to limit dissemination of and access to Customer
Confidential Information only to the persons within Supplier's
organization and Supplier's affiliated organizations, including
their respective third party contractors, subcontractors,
manufacturers and business partners, and then only to those persons
who have a need for access thereto, and who have entered into a
restrictive agreement prohibiting such personnel from doing anything
with respect to Customer Confidential Information that Supplier
would itself be prohibited from doing under this Agreement.
Notwithstanding anything to the contrary herein, Supplier may make
such disclosures as necessary in connection with the preparation,
filing, and dissemination of its filings with the U.S. Securities and
Exchange Commission (e.g., 10-Ks, 10-Qs, and 8-Ks) and/or other
disclosures as required by applicable law; provided, however, that it
shall first notify Customer of any such disclosure in order that
the parties may seek appropriate confidential treatment for
information they deem to be confidential.
(ii) Customer Obligations with respect to Supplier Confidential Information.
----------------------------------------------------------------------
Customer agrees to hold all confidential information of Supplier
and its affiliated companies, including without limitation, any
information relating to Supplier's and its affiliates' business
operations, price lists, manufacturing data, marketing information
strategies, customer or product lists, research and development
information, and all other information disclosed by Supplier or its
affiliates to Customer ("Supplier Confidential Information"), in
strict confidence and not to use any of the foregoing commercially
for its own benefit or that of anyone else. Customer agrees to limit
dissemination of and access to Supplier Confidential Information
only to the persons within Numico, Royal Numico, and Nutricia, and
their affiliates, their respective third party contractors,
subcontractors, manufacturers and business partners, and then only
to those persons who have a need for access thereto, and who have
entered into a restrictive agreement prohibiting such personnel from
doing anything with respect to Supplier Confidential Information and
such information that Customer would itself be prohibited from doing
under this Agreement. Notwithstanding anything to the contrary
herein, Customer may make such disclosures as necessary in
connection with the preparation, filing, and dissemination of
disclosures as required by applicable law; provided, however,
that it shall first notify Supplier of any such disclosure in
order that the parties may seek appropriate confidential treatment for
information they deem to be confidential.
(b) Use of Confidential Information of Other Parties. Each party
represents, warrants, and covenants that it will not use in the course
of its performance under this Agreement, or disclose to the other
parties hereto, any confidential or proprietary information of any
third party (including competitors of the other parties) without the
prior written consent of the party to whom such confidential or
proprietary information belongs.
(c) Disclosure does not constitute a License. Neither the execution of this
Agreement nor the disclosure of any confidential or proprietary
information by one party to the other hereunder shall be construed as
granting to the recipient of such information, by implication or
otherwise, any right in, or license to, other than expressly contained
herein, any present or future proprietary information, patent,
trademark, copyright invention, now or hereinafter, owned or controlled
by the disclosing party. Each party will be authorized to use the other
party's confidential information that is disclosed hereunder only for
such purposes as are expressly contemplated by this Agreement.
(d) Notice of Unauthorized Disclosure. If either party becomes aware of any
unauthorized disclosure of the other party's confidential information,
it will immediately notify the other party of such unauthorized
disclosure and will take all reasonable steps to mitigate the potential
harm associated with such unauthorized disclosure.
(e) Survival. The provisions regarding Confidential Information shall
survive the termination or expiration of this Agreement, except that
such obligations shall not limit Customer's rights under the Related
Agreements.
15. Termination.
(a) Termination Events.
(i) Upon a Bankruptcy Event of Customer, Customer shall notify Supplier
thereof within one (1) business day thereof. Supplier may elect to
terminate the Agreement by giving written notice to Customer within
thirty (30) days of that notice.
(ii) Upon a Change of Control of Customer, Customer shall notify Supplier
thereof within one (1) business day of the public announcement thereof.
Thereafter, Supplier may elect to terminate the Agreement by giving
notice to Customer within thirty (30) days of the public announcement
of the Change of Control of Customer.
(iii) Upon the failure of Customer to pay to Supplier monies when due by
Customer to Supplier hereunder or under any of the Related Agreements,
Supplier may give notice to Customer of such non-payment. Thereafter,
if Customer fails to pay such monies to Supplier within five (5)
business days of such notice, then the Agreement shall terminate on
that 5th business day. If Customer pays the monies due to Supplier
within those five (5) business days, then this Agreement shall not
terminate.
(iv) Upon a material breach of this Agreement by Customer, Supplier may
give notice to Customer of such material breach. If Customer fails
to cure such material breach within sixty (60) days of such
notice, then this Agreement may be terminated by Supplier at any
time during the period that begins on the sixtieth (60th) day
following such notice and ends on the ninetieth (90th) day following
such notice (the "Supplier Termination Period") by giving written
notice of such termination to Customer before the expiration of
the Supplier Termination Period. Supplier's failure to terminate
this Agreement during the Supplier Termination Period will constitute
a waiver of Supplier's rights to terminate this Agreement by
reason of the applicable material breach, but will not constitute a
waiver of Supplier's other rights and remedies under this Agreement,
or a waiver of future similar breaches.
(v) Upon a Bankruptcy Event of Supplier, Supplier shall notify Customer
thereof within one (1) business day thereof. Customer may elect to
terminate the Agreement by giving written notice to Supplier within
thirty (30) days of that notice.
(vi) Upon a Change of Control of Supplier, Supplier shall notify Customer
thereof within one (1) business day of the public announcement thereof.
Thereafter, Customer may elect to terminate the Agreement by giving
notice to Supplier within thirty (30) days of the public announcement
of the Change of Control of Supplier.
(vii) Upon a material breach of this Agreement by Supplier, Customer
may give notice to Supplier of such material breach. If Supplier
cures such material breach within sixty (60) days following such
notice, then this Agreement shall not terminate by reason of that
breach. If Supplier fails to cure such material breach within sixty
(60) days of such notice, then this Agreement may be terminated by
Customer at any time during the period that begins on the sixtieth
(60th) day following such notice and ends on the ninetieth (90th)
day following such notice (the "Customer Termination Period") by
giving written notice of such termination to Supplier before the
expiration of the Customer Termination Period. Customer's failure
to terminate this Agreement during the Customer Termination Period
will constitute a waiver of Customer's rights to terminate this
Agreement by reason of the applicable material breach, but will not
constitute a waiver of Customer's other rights and remedies under this
Agreement, or a waiver of future similar breaches.
(viii) At any time after January 1, 2008, Customer may terminate this
Agreement by giving two-years notice pursuant to Section 2 above.
(ix) At any time after January 1, 2008, Supplier may terminate this
Agreement by giving two-years notice pursuant to Section 2 above.
(x) This Agreement shall terminate if Customer sends a notice of
termination of this Agreement due to Supplier's failure to fulfill a
call-off pursuant to the "Termination Remedy" described in Section
17(c)(iii) below.
(xi) This Agreement shall terminate upon termination of the [***] Pump
Supply Agreement.
(xii) Upon termination of the [***] Pump License Agreement pursuant to
Section 5(b)(iv) thereof, this Agreement shall terminate
contemporaneously with the termination of the [***] Pump License
Agreement.
(xiii) Upon termination of the [***] Pump Supply Agreement pursuant to Section
16(a)(iv) thereof, this Agreement shall terminate contemporaneously
with the termination of the [***] Pump Supply Agreement.
(xiv) Upon an uncured material breach of the Disposable Set Components Supply
Agreement by Customer, Supplier may terminate this Agreement.
(xv) Upon an uncured material breach of the Disposable Set Components
License Agreement by Customer, Supplier may terminate this Agreement.
(xvi) Upon termination of the Disposable Set Components Supply Agreement
pursuant to Sections 15(a)(i), (ii) or (iii) thereof, this Agreement
shall terminate contemporaneously with the termination of the
Disposable Set Components Supply Agreement.
(xvii) Upon termination of the Disposable Set Components License Agreement
pursuant to Sections 5(b)(i), (ii) or (iii) thereof, this Agreement
shall terminate contemporaneously with the termination of the
Disposable Set Components License Agreement.
(b) Effect of Termination, Expiration or Non-Renewal.
(i) Purchase of Inventory.
(1) Following the termination of this Agreement due to a Bankruptcy Event
of Customer pursuant to Section 15(a)(i) above, or due to the Change of
Control of Customer pursuant to Section 15(a)(ii) above, or due to the
failure of Customer to pay monies to Supplier hereunder pursuant to
Section 15(a)(iii) above, or due to a material breach of the Agreement
by Customer pursuant to Section 15(a)(iv) above, then, within thirty
(30) days of any such termination, Customer shall purchase all of
Supplier's inventory of finished Supplied Products and all of
Supplier's inventory of custom components for the Supplied Products;
provided, however, that Customer shall not be required to purchase such
inventories to the extent that they exceed Customer's forecasted
requirements hereunder for ninety (90) days following the termination
date.
(2) Following the termination of the Agreement under the provisions of
Section 17(c)(iii), due to a Bankruptcy Event of Supplier pursuant to
Section 15(a)(v) above, or due to the Change of Control of Supplier
pursuant to Section 15(a)(vi) above, or due to a material breach of the
Agreement by Supplier pursuant to Section 15(a)(vii) above, then,
within thirty (30) days of such termination, Customer may elect to
purchase all or any portion of Supplier's inventory of finished
Supplied Products and Supplier's inventory of custom components for the
Supplied Products. If Customer elects to purchase less than all of
these inventories, then Supplier, at its expense, shall destroy the
remaining inventories of the custom components of the Supplied Products
whether or not these components have already been incorporated into
finished Supplied Products. Supplier may use for its own purposes all
the remaining components of the Supplied Products that are not custom
components for the Supplied Products.
(ii) Return of Materials Upon Termination.
--------------------------------------
Upon termination, expiration or non-renewal of this Agreement,
each party shall return to the other party all materials and
documents containing confidential and proprietary information,
including any copies or extracts thereof, and shall erase any copies
thereof contained in any electronic or other memory device.
Supplier shall also return to Customer all Customer Tooling,
drawings, sketches, and similar items utilized by Supplier in
performing its manufacturing obligations hereunder. In addition,
at that time each party shall immediately cease and desist from using
any confidential or proprietary information of the other parties
hereto for any purpose whatsoever. Each party will certify to the
other, within thirty (30) days after any such termination, expiration,
or non-renewal of this Agreement, that it has complied with this
Section 15(b)(ii), and, upon request by the other party, will provide
reasonable evidence of such compliance.
(c) Neither party in exercising its rights to terminate this Agreement in
accordance with the terms and conditions hereof shall incur any
liability whatsoever for any damage, loss or expense of any kind
suffered or incurred by the other (or for any compensation to the
other) arising from or incident to any such termination (except if such
termination is for a material breach of this Agreement), expiration or
non-renewal, whether or not the terminating party is aware of any such
damage loss or expense. Any termination hereof shall not impair any
rights nor discharge any obligations which have accrued to the parties
as of the effective date of such termination.
16. Indemnification; Insurance.
(a) Supplier's Indemnification. Supplier shall indemnify, defend and hold
Customer, its affiliates, and their respective officers, directors,
employees and agents (each, a "Supplier Indemnified Party"), harmless
from and against any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties, reasonable attorneys' fees, costs of
investigation and any legal or other expenses or costs ("Losses")
incurred or suffered by any Supplier Indemnified Party arising out of,
in connection with or resulting from any claim, allegation or judgment
as to: (i) any third party product liability claim resulting from a
manufacturing defect in any Supplied Product, (ii) any violation or
infringement by Supplier upon any common law or statutory intellectual
property rights of any third party that arises from or relates to
Supplier Intellectual Property, or (iii) any inaccuracy or breach in
any of Supplier's representations and warranties under this Agreement;
provided, however, that Supplier shall have no obligation to indemnify
Customer for any Losses to the extent such Losses are caused by any
negligent or willful act or omission of Customer. The rights of
Customer and obligations of Supplier relating to any failure of any
Supplied Product to comply with the Product Warranty set forth in
Section 7(g) above are described in the Maintenance and Service
Agreement and in Section 7(i) above and nothing in this Section 16(a)
will apply to or affect such rights and obligations.
(b) Customer's Indemnification. Customer agrees to indemnify, defend and
hold harmless Supplier, its affiliates, and their respective officers,
directors, employees and agents (each, a "Customer Indemnified Party")
from and against any and all Losses (as defined in Section 16(a) above)
incurred or suffered by any Customer Indemnified Party arising out of,
in connection with or resulting from any claim, allegation or judgment
as to: (i) any third party product liability claim relating to an
Supplied Product other than any such claim that is based upon a
manufacturing defect, (ii) any violation or infringement by Customer
upon any common law or statutory intellectual property rights of any
third party that arises from or relates to Customer Intellectual
Property, or (iii) any inaccuracy or breach in any of Customer's
representations and warranties under this Agreement; provided, however,
that Customer shall have no obligation to indemnify Supplier for any
Losses to the extent such Losses are caused by any negligent or willful
act or omission of Supplier. Further, with respect to rights of
Supplier under Section 16(b)(ii) above, Customer shall provide, at its
own cost, non-infringing replacements for the infringing portions of
Customer Intellectual Property of equivalent quality and effect, or
obtain at its own cost the necessary licenses from third parties to
allow Supplier to continue to manufacture and supply the Supplied
Products as contemplated by the parties under this Agreement.
(c) Indemnification Procedure for Matters Involving Third Parties.
(i) If any third party notifies any party hereto (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against the other party hereto (the
"Indemnifying Party") under Section 16(a) or 16(b) (as applicable),
then the Indemnified Party shall promptly notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) that the Indemnifying Party is prejudiced
thereby.
(ii) Any Indemnifying Party will have the obligation to assume the defense
of the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party at any time within 15 days after
the Indemnified Party has given notice of the Third Party Claim;
provided, however, that the Indemnifying Party must conduct the defense
of the Third Party Claim actively and diligently thereafter in order to
preserve its rights in this regard; and provided further that the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim.
(iii) So long as the Indemnifying Party has assumed and is conducting
the defense of the Third Party Claim in accordance with Section
16(c)(ii) above, (A) the Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnified Party (which shall not be unreasonably withheld) unless
the judgment or proposed settlement involves only the payment of
money damages by one or more of the Indemnifying Parties and does
not impose an injunction or other equitable relief upon the
Indemnified Party and (B) the Indemnified Party will not consent
to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnifying Party (which shall not be unreasonably withheld).
(iv) If the Indemnifying Party does not assume and conduct the defense of
the Third Party Claim in accordance with Section 16(c)(ii) above,
however, (A) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it reasonably may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent
from, any Indemnifying Party in connection therewith) and (B) the
Indemnifying Party will remain responsible to indemnify the Indemnified
Party under Section 16(a) or 16(b) (as applicable).
(d) Indemnification Procedure for Matters not Involving Third Parties. A
claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification
is sought.
(e) Insurance.
(i) Supplier shall maintain in full force and effect throughout the Term,
at its sole cost and expense, insurance with financially sound and
established reputable insurers of the type and quantity (and with such
risk retention) generally maintained by the companies of established
repute in Supplier's line of business, such insurance to include,
without limitation, products liability insurance and general liability
insurance each, in an amount no less than ten million U.S. dollars
(U.S. $10,000,000.00) per occurrence. Supplier shall upon request
provide Customer with a copy of any documentation relating to any such
insurances. Supplier shall have Customer named as an additional
insured beneficiary, with Customer able to claim thereunder as primary
beneficiary and without offset or deduction whatsoever as a result of
any insurance obtained by Customer, and shall contain a waiver of
subrogation by the respective insurance carrier against Customer's and
its affiliates' insurance carrier, with respect to Supplier's
obligations under this Agreement.
(ii) Customer shall maintain in full force and effect throughout the Term,
at its sole cost and expense, insurance with financially sound and
established reputable insurers of the type and quantity (and with such
risk retention) generally maintained by the companies of established
repute in Customer's line of business, such insurance to include,
without limitation, products liability insurance and general liability
insurance each, in an amount no less than ten million U.S. dollars
(U.S. $10,000,000.00) per occurrence. Customer shall upon request
provide Supplier with a copy of any documentation relating to any such
insurances. Customer shall have Supplier named as an additional
insured beneficiary, with Supplier able to claim thereunder as primary
beneficiary and without offset or deduction whatsoever as a result of
any insurance obtained by Supplier, and shall contain a waiver of
subrogation by the respective insurance carrier against Supplier's and
its affiliates' insurance carrier, with respect to Customer's
obligations under this Agreement.
(f) Limitations on Supplier's Liability. SUPPLIER'S MAXIMUM LIABILITY TO
CUSTOMER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY CUSTOMER
UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR
PRODUCT LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED
$1,000,000; PROVIDED, HOWEVER, THAT SUPPLIER'S MAXIMUM LIABILITY TO
CUSTOMER FOR DAMAGES, IF ANY, RELATING TO CLAIM(S) MADE BY CUSTOMER
THAT ARISE OUT OF THE SAME FACTS AND CIRCUMSTANCES, WHETHER SUCH
CLAIM(S) ARE MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS, SHALL IN NO EVENT EXCEED $1,000,000. SUPPLIER'S MAXIMUM
LIABILITY TO CUSTOMER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S)
MADE BY CUSTOMER FOR INDEMNIFICATION FOR A PRODUCT LIABILITY CLAIM BY A
THIRD PARTY SHALL IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE
PROCEEDS AVAILABLE TO SUPPLIER WITH RESPECT TO SUCH CLAIM, WHETHER SUCH
CLAIM IS MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS.
(g) Limitations on Customer's Liability. CUSTOMER'S MAXIMUM LIABILITY TO
SUPPLIER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY SUPPLIER
UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR
PRODUCT LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED
$1,000,000; PROVIDED, HOWEVER, THAT CUSTOMER'S MAXIMUM LIABILITY TO
SUPPLIER FOR DAMAGES, IF ANY, RELATING TO CLAIM(S) MADE BY SUPPLIER
THAT ARISE OUT OF THE SAME FACTS AND CIRCUMSTANCES, WHETHER SUCH
CLAIM(S) ARE MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS, SHALL IN NO EVENT EXCEED $1,000,000. CUSTOMER'S MAXIMUM
LIABILITY TO SUPPLIER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S)
MADE BY SUPPLIER FOR INDEMNIFICATION FOR A PRODUCT LIABILITY CLAIM BY A
THIRD PARTY SHALL IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE
PROCEEDS AVAILABLE TO CUSTOMER WITH RESPECT TO SUCH CLAIM, WHETHER SUCH
CLAIM IS MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS.
(h) No Consequential Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF
THE BREACHING PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES
IN ADVANCE. The parties intend this limitation in this Section 16(h) to
apply to the following events, among other events: (i) any claim for
consequential damages suffered by the non-breaching party (as opposed
to any third party) arising out of any claim by a third party for
either product liability or infringement of intellectual property ,
(ii) any breach by either party of its representations under this
agreement, (iii) any non-performance or mal-performance by either party
under this Agreement, or (iv) the termination or expiration of this
Agreement by either party. Such incidental or consequential damages
shall include, but shall not be limited to, loss of goodwill, loss of
prospective profits, loss of revenue, or damages on account of any
investment, expenditure, or commitment that is made by either party in
reliance upon this Agreement. This limitation in this Section 16(h) is
not intended by the parties to prevent Customer, for example, from
recovering from Supplier, in an indemnification claim made under
Section 16(a)(i), the full amount that it has been required to pay to a
third party in connection with a product liability claim brought by
such third party against Customer, including such incidental or
consequential damages as may be allowed by law under that claim by that
third party. This limitation in this Section 16(h) is, nevertheless,
intended to prevent the non-breaching party from receiving from the
breaching party, in an indemnification claim under Section 16(a) or
16(b), incidental or consequential losses or damages that have been
incurred by the non-breaching party (as opposed to any third party),
such as lost profits, that may arise from or relate to any event under
this Agreement.
17. Failure to Supply.
(a) Failure to Fulfill a Call-Off. If, at any time after the
first anniversary of the Effective Date, Supplier fails to supply Supplied
Products to Customer in accordance with any call-off made under the terms and
conditions of this Agreement (a "Call-Off Breach"), then (i) Supplier will have
a period of one (1) year within which to cure that Call-Off Breach in the manner
described in this Section 17, and (ii) Customer will have such additional rights
as provided in this Section 17. The date of the Call-Off Breach shall be the
last day on which Supplier could have fulfilled the call-off on a timely basis
under the other terms and conditions of this Agreement other than those in this
Section 17.
(b) Determination of Customer Demand Requirements. On or
before the thirtieth (30th) day following a Call-Off Breach, Customer shall (i)
have made a reasonable, good faith determination of Customer's anticipated
demand from its customers for the particular Supplied Product that was the
subject of that particular Call-Off Breach (the "Customer Demand"), and (ii)
have notified Supplier in writing of Customer's determination of the Customer
Demand. Such determination shall be based on Customer's existing back orders for
such Supplied Product calling for delivery within eighty-one (81) days after the
Call-Off Breach. Upon the request of Supplier, Customer will provide Supplier
with reasonable evidence of such back orders.
(i) If Customer reasonably determines in good faith
that Customer could meet its Customer Demand for such Supplied Product
either (A) out of its own inventory of such product, and/or (B) by
receiving from Supplier some lesser number of such product than was
called for by the relevant call-off, then Customer will waive in
writing that portion of the quantity of the relevant call-off that
exceeds the Customer Demand.
(ii) If Customer reasonably determines in good faith
that Customer cannot meet its Customer Demand for such Supplied Product
either (A) out of its own inventory of such product, and/or (B) by
receiving from Supplier some lesser number of such product than was
called for by the relevant call-off, then no portion of the quantity
order under the relevant call-off will be waived.
(c) Effect of Continuing Call-Off Breach on Manufacture and
Supply of Supplied Pumps. Subject to Supplier's right to cure any Call-Off
Breach as provided in this Section 18, Supplier shall have the following rights:
(i) If, as of the end of the sixtieth (60th) day
after a Call-Off Breach, Supplier has been unable to cure the Call-Off
Breach by supplying the quantities of products necessary to fulfill the
relevant call-off (as modified by any waiver of any portion of that
call-off pursuant to Section 17(b) above), then, during the ensuing
fifteen (15) days, Customer may choose to invoke the "Non-Exclusivity
Remedy" (defined below) by providing written notice to Supplier. If
Customer elects this remedy, it shall become effective immediately upon
such notice. If, as of the end of one (1) year after the Call-Off
Breach, Supplier has been unable to cure the Call-Off Breach, as
provided in Section 18(d)(iii) below, Customer may choose to invoke the
"Termination Remedy" (defined below) by providing written notice to
Supplier.
(ii) Under the "Non-Exclusivity Remedy," if invoked
pursuant to subsection 17(c)(i) above, those terms of this Agreement
applicable to the manufacture and supply of the Supplied Products,
including but not limited to the appointment of Supplier as the
exclusive manufacturer of such products and the Minimum Purchase
Commitment for such Supplied Products, will be suspended. Upon such
suspension, Customer will be allowed to sell and/or place within the
Territory clinical nutrition pumps that it obtains from sources other
than Supplier, notwithstanding the limitations imposed by Section 5(c)
above or elsewhere in this Agreement. This non-exclusivity shall last
until (i) this Agreement terminates under any of the provisions of
Section 15(a) above or subsection 17(c)(iii) below (as applicable) or
(ii) Supplier cures the Call-Off Breach as permitted under Section
17(d). Upon a termination of this Non-Exclusivity Remedy pursuant to
subsection 17(d)(ii) below, Customer may continue to obtain clinical
nutrition pumps from sources other than Supplier for a reasonable time
thereafter, which period shall not exceed sixty (60) days from the date
the Non-Exclusivity Remedy is so terminated. Thereafter, Supplier will
once again be the exclusive manufacturer of the Supplied Products under
this Agreement.
(iii) Under the "Termination Remedy," if Supplier
fails to cure a Call-Off Breach within one (1) year from the date of
such breach (as provided in this Section 17), then, notwithstanding any
prior election of remedy by Customer as permitted above, Customer may
upon written notice to Supplier terminate this Agreement immediately
upon lapse of such one-year period.
(d) Means of Cure. Supplier may cure any Call-Off Breach under
any of the following alternative means of cure, in which event the Call-Off
Breach shall be deemed cured for all purposes, and Supplier's right to the
Non-Exclusivity Remedy or the Termination Remedy, as applicable, shall
terminate:
(i) Supplier may cure a Call-Off Breach if, at any
time on or before the end of the sixtieth (60th) day following the
Call-Off Breach, Supplier delivers to Customer that number of Supplied
Products identified by Customer in its determination of Customer
Demand.
(ii) Supplier may cure a Call-Off Breach if, any time
after the sixtieth (60th) day following the Call-Off Breach, but on or
before the end of the one-hundred and twentieth (120th) day following
the Call-Off Breach, Supplier provides reasonable evidence and
certifies in writing to Customer that Supplier has made a good-faith,
reasonable determination that Supplier is again capable of producing
the Supplied Products at the forecasted levels that were in effect as
of the date of the applicable Call-Off Breach.
(iii) Supplier may cure a Call-Off Breach if, at any
time after the one-hundred and twentieth (120th) day following the
Call-Off Breach, but on or before the end of the date one (1) year
following the Call-Off Breach, Supplier (A) provides reasonable
evidence and certifies in writing to Customer that Supplier has made a
good-faith, reasonable determination that Supplier is again capable of
producing the Supplied Products at the forecasted levels that were in
effect as of the date of the applicable Call-Off Breach, and (B)
obtains a release of Customer from all future liabilities and
obligations of any kind or nature arising under Replacement Contracts
(defined below) from the date that Supplier cures the Call-Off Breach
pursuant to Section 17(d). "Replacement Contracts" means such
contract(s) as Customer reasonably enters into with one or more third
parties in order to obtain the products necessary to replace the
Supplied Products not provided by Supplier (A) that may always be
terminated by Customer without penalty upon no more than one (1) year's
notice, and (B) that require Customer to purchase quantities of the
applicable Supplied Products that do not exceed Customer's reasonable
forecasts for such products during the period of the contract. Customer
agrees to cooperate with Supplier in Supplier's efforts to obtain such
releases.
(e) Failure to Fulfill a Call-Off due to Supply Chain Failure.
Notwithstanding the foregoing, no Call-Off Breach shall be deemed to have
occurred if Supplier's inability to timely fulfill a call-off is due to
Supplier's inability to obtain from its suppliers a sufficient supply of
materials, components, and/or subassemblies for the Supplied Products (such
failure being a "Supply Chain Failure"). In such instance, those terms of this
Agreement applicable to the manufacture and supply of the Supplied Products for
which a Supply Chain Failure has occurred will be suspended. Upon such
suspension, Customer will be allowed to sell and/or place within the Territory
clinical nutrition pumps and related accessories that it obtains from sources
other than Supplier, notwithstanding the limitations imposed by Section 5(c)
above or elsewhere in this Agreement. This non-exclusivity shall last until (i)
this Agreement terminates under any of the provisions of Section 15(a) above or
(ii) Supplier cures the Supply Chain Failure as permitted under Section 17(f).
Upon a termination of this suspension pursuant to subsection 17(f)(ii) below,
Customer may continue to obtain clinical nutrition pumps from sources other than
Supplier for a reasonable time thereafter, which period shall not exceed sixty
(60) days from the date the suspension of exclusivity provided under this
Section 17(e) terminates. Thereafter, Supplier will once again be the exclusive
manufacturer of the Supplied Products under this Agreement.
(f) Means of Cure of Supply Chain Failure. Supplier may cure
any Supply Chain Failure under any of the following alternative means of cure:
(i) Supplier may cure a Supply Chain Failure if, at
any time on or before the end of the sixtieth (60th) day following the
Supply Chain Failure, Supplier delivers to Customer that number of
Supplied Products identified by Customer in its determination of
Customer Demand.
(ii) Supplier may cure a Supply Chain Failure if, any
time after the sixtieth (60th) day following the Supply Chain Failure,
but on or before the end of the one-hundred and twentieth (120th) day
following the Supply Chain Failure, Supplier provides reasonable
evidence and certifies in writing to Customer that Supplier has made a
good-faith, reasonable determination that Supplier is again capable of
producing the Supplied Products at the forecasted levels that were in
effect as of the date of the applicable Supply Chain Failure.
(iii) Supplier may cure a Supply Chain Failure if, at
any time after the one-hundred and twentieth (120th) day following the
Supply Chain Failure, but on or before the end of the date one (1) year
following the Supply Chain Failure, Supplier (A) provides reasonable
evidence and certifies in writing to Customer that Supplier has made a
good-faith, reasonable determination that Supplier is again capable of
producing the Supplied Products at the forecasted levels that were in
effect as of the date of the applicable Supply Chain Failure, and (B)
obtains a release of Customer from all future liabilities and
obligations of any kind or nature arising under Replacement Contracts
(as defined in Section 17(d)(iii) above) from the date that Supplier
proposes to cure the Supply Chain Failure.
18. Recall and Regulatory Obligations.
(a) Product Recalls. Customer will conduct (with the reasonable cooperation of
Supplier) and pay the costs and expenses associated with any mandatory recall of
any Supplied Products required by any governmental agency; provided, however,
that Supplier will pay all such costs if the recall is due to a manufacturing
defect. In addition, Supplier will conduct (with the reasonable cooperation of
Customer) and pay the costs and expenses associated with any voluntary recall of
any Supplied Product that Supplier reasonably approves based on a manufacturing
defect that results in (i) safety risks to users of such Supplied Product, (ii)
failure of such Supplied Product to meet the Product Specifications applicable
to that Supplied Product, or (iii) failure to conform to any of the standards
and specifications set forth in Section 6(a)(i). Customer has the sole authority
to unilaterally recall any Supplied Products due to other reasons, but in such
event will both conduct the recall (with the reasonable cooperation of Supplier)
and pay all costs and expenses associated with such recall.
(b) Regulatory Compliance. Customer shall be responsible, at its own expense for
complying with all applicable national, state, regional and local laws and
regulations in performing its duties hereunder and in any of its dealings with
respect to the Supplied Products, including all regulatory activities necessary
to maintain the Supplied Products' CE Mark and other regulatory approvals
applicable to the Supplied Products.
19. Survival. Any provision of this Agreement which contemplates performance or
the existence of rights or obligations after the expiration, non-renewal, or
termination of this Agreement shall expressly survive such expiration,
non-renewal, or termination of this Agreement and shall be binding upon the
party or parties obligated thereby in accordance with the terms of this
Agreement, subject to any limitations expressly set forth in this Agreement.
20. Amendment or Waiver. This Agreement cannot be changed orally, and no
modification of this Agreement shall be recognized nor have any effect, unless
the writing in which it is set forth is signed by Customer and Supplier, nor
shall any waiver of any of the provisions of this Agreement be effective unless
in writing and signed by the party to be charged therewith. The failure of
either party to enforce, at any time or for any period of time, the provisions
hereof, or the failure of either party to exercise any option herein shall not
be construed as a waiver of such provision or option and shall in no way affect
that party's right to enforce such provisions or exercise such option. No waiver
of any provision hereof shall be deemed a waiver of any succeeding breach of the
same or any other provisions of this Agreement.
21. Dispute Resolution; Governing Law; Injunctive Relief.
(a) Negotiations. The parties agree that they will attempt in good faith to
resolve any controversy, claim, dispute or question between them arising out of
or relating to this Agreement, including the construction or application of this
Agreement, promptly by negotiations between the parties, beginning with
discussions between the Designated Representatives. If a controversy or claim
should arise, the Designated Representatives of the parties, as well as other
appropriate representatives, will meet at least once and will attempt to resolve
the matter. Either of the Designated Representatives may request the other to
meet within fourteen (14) days, at a mutually agreed time and place.
(b) Mediation. If the matter has not been resolved within thirty (30) days of
this meeting, the controversy or claim shall be submitted to non-binding
mediation by a mediator chosen from names of mediators furnished by JAMS or
American Arbitration Association. The mediation shall occur in New York City,
New York, U.S.A.
(c) Litigation. In the event that differences concerning matters covered by this
Agreement arise that are not resolved by mutual agreement via negotiations or
mediation as described above, the parties agree that any action or proceeding
arising out of or relating to this Agreement shall be heard and decided by a
non-jury bench trial in New York City, New York, U.S.A. Each party hereto
irrevocably submits to the jurisdiction of the appropriate state court covering
New York City, New York, U.S.A., and each party hereby irrevocably agrees that
all claims in respect of any such action or proceeding must be brought and/or
defended in such court; provided, however, that matters which are under the
exclusive jurisdiction of the Federal courts shall be brought in the Federal
District Court covering New York City, New York, U.S.A.
(d) Governing Law. The provisions of this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, U.S.A.
(excluding any conflict of law rule or principle that would refer to the laws of
another jurisdiction and the U.N. Convention on Contracts for the International
Sales of Goods). EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY
JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
(e) Injunctive Relief. Each of the parties acknowledge and agree that the other
parties will be damaged irreparably if certain provisions of this Agreement
(specifically including the obligations of confidentiality set forth in Section
14 herein) are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, notwithstanding any other provision in this
Agreement the damaged party shall have the right to pursue a claim for
injunctive relief, damages and attorneys' fees in any court of competent
jurisdiction for the other party's breach of any covenant, agreement or
obligation, in addition to any other relief available to them under this
Agreement or under applicable law.
(f) Fees. The parties shall equally split the fees of any mediation, but in any
arbitration or permissible legal proceedings, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and other disbursements in
addition to any other relief to which such party may be entitled.
22. Counterparts. This Agreement may be executed in multiple counterparts, which
taken together shall constitute one instrument and each of which shall be
considered an original for all purposes.
23. Notices. Any and all notices permitted or required to be given hereunder
shall be deemed duly given: (i) upon actual delivery, if delivery is by hand;
(ii) upon delivery by overnight express courier (i.e. DHL or FedEx); or (iii)
upon facsimile transmission, so long as the original is then sent by overnight
express courier delivery. Each such notice shall be sent to the respective party
at the address indicated below:
If to ZEVEX: ZEVEX International Inc.
4314 ZEVEX Park Lane
Salt Lake City, Utah 84123
Attn: Chairman and CEO
Fax: (801) 264-1051
with a copy to the CFO
at the same address.
If to Numico: Numico Trading B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Luc Volatier, V.P. of
Purchasing Worldwide
Fax: 31206586159
If to Nutricia: c/o Nutricia International B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Rob Heutink, V.P.
Manufacturing and Supply,
Emerging Markets
Fax: 31206586884
or such other address or facsimile number as any of the persons designated above
may have specified in a notice or communication duly given to the other
designated person as provided herein.
24. Binding Effect; Non-Assignability. This Agreement shall be binding upon and
enforceable against the parties hereto and their respective successors and
permitted assigns. Neither party shall assign or subcontract (except as
expressly allowed hereunder) its rights and obligations under this Agreement
without the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that either party may assign this
Agreement to an affiliate of such party.
25. Relationship of the Parties. The parties are and at all times shall be
deemed to be independent contractors and shall be wholly responsible for the
goods supplied and services performed under this Agreement. Nothing contained
herein shall be construed as creating the relationship of employer/employee or
principal/agent. Each party shall assume full responsibility for the actions of
its employees as related to the party's obligations under this Agreement.
Neither party to this agreement is hereby constituted an agent of the other for
any purpose and neither party has the authority to assume or create any
obligation, or to make any representation, warranty or guarantee for the other,
except as expressly granted or made in this agreement.
26. Force Majeure. Neither party shall be responsible or liable for any default
in performance of this Agreement arising directly or indirectly from any cause
beyond such party's control, including fire, flood, earthquake, acts of God, war
(declared or undeclared), enemy action, embargo, strike, governmental order,
proclamation or regulation, accident, explosion, riot, insurrection, or
expropriation of the property by government authority (each such event a "Force
Majeure Event"). If a Force Majeure Event occurs, the parties will exert
reasonable efforts (including, without limitation, utilizing, as and where
appropriate, the contingency plan developed by the parties pursuant to Section
4(b) above) to mitigate the impact of such Force Majeure Event on the business
arrangements of the parties set forth in this Agreement and to otherwise carry
out the intent and accomplish the objectives of this Agreement.
27. Exhibits and Schedules. Any exhibit or schedule attached hereto is made a
part hereof and is fully incorporated herein by reference.
28. Entire Agreement. This Agreement contains the sole and complete
understanding of the parties related to its subject matter, and supersedes all
oral or written agreements concerning this subject matter made prior to the date
of this Agreement.
29. Remedies Not Exclusive. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy will be cumulative and will be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies will not
constitute a waiver of the right to pursue other available remedies.
30. Partial Invalidity. If any provision of this Agreement is adjudged to be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired, and
the parties shall use their best efforts to substitute a valid, legal, and
enforceable provision which, insofar as practical, implements the purposes of
this Agreement.
31. Language; Interpretation. The language controlling the construction and
interpretation of this Agreement shall be English. Section headings are included
solely for convenience and shall not constitute a part hereof. Unless the
context otherwise requires, words importing the singular shall be deemed to
import the plural and vice versa.
32. Third Party Beneficiaries. No person or entity shall be a third-party
beneficiary of this Agreement, except that Supplier acknowledges and agrees that
its obligations under the Product Warranty set forth in Section 7(g) above shall
be deemed as commitments to all affiliates of Customer as third-party
beneficiaries.
33. Media Relations. Each of Customer and Supplier agree that during the Term
each will not, and will cause its affiliates not to, disparage each other or
release commercially sensitive information about each other in any oral,
written, or electronic public statements (including without limitation in any
securities filing with the U.S. Securities and Exchange Commission) concerning
any matters relating to or arising from this Agreement.
IN WITNESS WHEREOF, the parties enter into this Agreement effective as
of the Effective Date.
ZEVEX INTERNATIONAL, INC.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
NUTRICIA INTERNATIONAL, B.V.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
NUMICO TRADING B.V.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
EXHIBIT A
PRODUCT PRICES
Initial Product Price for Flocare 800 Pump. The Initial Product Price for the
Flocare 800 Pump will be calculated using the following formula:
[***]
Labor hours may not exceed [***] per pump.
EXHIBIT B
MAXIMUM MONTHLY PRODUCT AMOUNT
The Maximum Monthly Product Amount for the Flocare 800 Pump is [***] units.
EXHIBIT C
MINIMUM PURCHASE COMMITMENT
The Minimum Purchase Commitment for Flocare 800 Pumps is [***] units.
EXHIBIT D
PRODUCT SPECIFICATIONS
The Product Specifications for the Flocare 800 are documented in Nutricia
Medical Devices Device Master Record, document number [***].
EXHIBIT E
ADJUSTMENT OF MINIMUM PURCHASE COMMITMENT
The minimum annual purchase commitment for Flocare [***] Pumps under the [***]
Pump Agreement is [***] units.
CONFIDENTIAL INFORMATION OF ZEVEX International, Inc.
[*Confidential treatment has been requested as to certain portions of this
document. Each such portion, which has been omitted herein and replaced with an
asterisk [***], has been filed separately with the Securities and Exchange
Commission.]
Exhibit 10.32
ZEVEX [***] PUMP SUPPLY AGREEMENT
THIS ZEVEX [***] PUMP SUPPLY AGREEMENT (this "Agreement") is entered
into as of July 20, 2004, by and between NUMICO TRADING B.V., a Netherlands
corporation with its principal offices at Numico Beech Avenue 54-80, 1119PW,
Schiphol-Rijk, The Netherlands ("Numico"), NUTRICIA INTERNATIONAL B.V., a
Netherlands corporation with its principal offices at Numico Beech Avenue 54-80,
1119PW, Schiphol-Rijk, The Netherlands ("Nutricia", and, together with Numico,
"Customer"), and ZEVEX INTERNATIONAL, INC., a Delaware corporation, with its
principal offices at 4314 ZEVEX Park Lane, Salt Lake City, Utah ("Supplier").
RECITALS
A. Numico and Nutricia are wholly-owned subsidiaries of Royal Numico
N.V., a Netherlands corporation ("Royal Numico"), which is a world leader in the
manufacturing and marketing of clinical nutrition products and related equipment
and accessories.
B. Nutricia is a world leader in the manufacture and marketing of
clinical nutrition products.
C. Numico specializes in the procurement of raw materials, packaging
materials and fully-finished products for use in the Nutricia clinical nutrition
business.
D. Supplier is engaged in the business of developing, manufacturing and
marketing clinical nutrition delivery devices and accessories.
E. The parties desire to enter into a relationship in which Supplier
will manufacture and supply to Customer, and Customer will commercialize within
the Territory, the [***] Products described herein, in accordance with the terms
and conditions of this Agreement.
F. Supplier has previously developed the ZEVEX [***] Pump, which is
considered by both parties to be superior in technology, features, and
performance to other pumps currently offered within the Territory, and which has
been customized as the "Flocare [***] Pump" at Supplier's expense to meet
Customer's needs.
G. The Flocare [***] Pump manufactured and supplied by Supplier
hereunder is intended to be an essential support of Nutricia's marketing of its
clinical nutrition products.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and for other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions. Capitalized terms not otherwise defined herein shall bear the
respective meanings given to them below:
"Bankruptcy Event" means that, with respect to an entity, such
entity shall (a) make a general assignment for the benefit of creditors
or an agent authorized to liquidate its assets, (b) become the subject
of bankruptcy or insolvency proceedings or other proceedings for relief
under any bankruptcy or other law for the relief of debtors, where,
with respect to an involuntary petition in bankruptcy, the petition
shall not have been stayed within thirty (30) days, (c) apply to a
court for the appointment of a receiver or custodian for substantially
all of its assets or properties, with or without consent, and such
receiver is not discharged within thirty (30) days after appointment,
or (d) adopt a plan of complete liquidation of its assets.
"CE Mark" shall mean an indication that a product complies
with the essential requirements of applicable directives and that the
product has been subject to conformity assessment procedures as
provided in the directives.
"Change of Control of Customer" means (i) any transaction as a
result of which any person or entity becomes the "beneficial owner" (as
defined in Rule 13d-3 of the U.S. Securities and Exchange Act of 1934),
directly or indirectly, of securities of any of Numico or Nutricia,
representing more than 50% of the total voting power of any of their
then outstanding voting securities; or (ii) the sale, transfer or other
disposition of all or substantially all of the assets of any of Numico
or Nutricia; in either case where the new controlling party would
materially benefit from a failure of Supplier's business; provided,
however, that a transaction shall not constitute a Change of Control if
its sole purpose is to change the state of incorporation of Numico or
Nutricia (as applicable) or to create a holding company that will be
owned in substantially the same proportions by the persons who held the
securities of Numico or Nutricia (as applicable) immediately before
such transaction.
"Change of Control of Supplier" means (i) any transaction as a
result of which any person or entity is the "beneficial owner" (as
defined in Rule 13d-3 of the U.S. Securities and Exchange Act of 1934),
directly or indirectly, of securities of the Supplier representing more
than 50% of the total voting power represented by the Supplier's then
outstanding voting securities; or (ii) the sale, transfer or other
disposition of all or substantially all of Supplier's assets; in either
case where the new controlling party would materially benefit from
Customer's failure in the clinical nutrition market; provided, however,
that a transaction shall not constitute a Change of Control (x) if its
sole purpose is to change the state of Supplier's incorporation or to
create a holding company that will be owned in substantially the same
proportions by the persons who held Supplier's securities immediately
before such transaction, or (y) if a then current officer or director
of Supplier is the new controlling party or is a member of the group or
entity that is the new controlling party; provided, however, that the
new controlling party would not materially benefit from Customer's
failure in the clinical nutrition market.
"Commercially Reasonable Efforts" shall mean those efforts
that a reasonably prudent business person would make under similar
circumstances, including entering into contractual arrangements in
appropriate circumstances.
"Customer Demand" shall mean Customer's reasonable, good faith
determination of Customer's anticipated demand from its customers for a
[***] Pump Product that was the subject of a Call-off Breach, an IP
Failure, or a Supply Chain Failure.
"Customer Intellectual Property" shall mean Customer Funded
Product Improvements and Customer Trademarks.
"Customer Trademarks" shall have the meaning set forth in
Section 14(b).
"Flocare 800 Pump Manufacturing Agreement" means that certain
Flocare 800 Pump Manufacturing Agreement of even date herewith between
the parties.
"Flocare [***] Pump" shall mean ZEVEX's [***] Pump, as it has
been customized for Customer hereunder.
"[***] Disposable Set Components License Agreement" means that
certain License Agreement for the [***] Disposable Set Components of
even date herewith between the parities.
"[***] Disposable Set Components Supply Agreement" means that
certain [***] Disposable Set Components Supply Agreement of even date
herewith between the parities.
"[***] Disposable Set Components" means individual components
of the [***] Disposable Sets described in Exhibit A.
"[***] Disposable Sets" means disposable sets for use with the
Flocare [***] Pumps.
"[***] Products" shall mean the Flocare [***] Pumps, the [***]
Pump Accessories, the [***] Pump Kits, and the [***] Disposable Set
Components.
"[***] Pump Accessories" means individual accessories to be
used with the Flocare [***] Pumps, including AC adapters/chargers, pole
clamps, nurse calls, operator's manuals, and carry packs described in
Exhibit B; provided, however, that in its discretion Customer may
purchase carry packs other than the type manufactured by Supplier for
use with [***] Products from other manufacturers or suppliers.
"[***] Pump Kit" means one unit each of the Flocare [***] Pump
and the charger, pole clamp, and operator's manual for use with that
pump, all to be provided as a bundled unit.
"[***] Pump License Agreement" means that certain License
Agreement for the Flocare [***] Pump of even date herewith between the
parties.
"[***] Pump Products" means the Flocare [***] Pump, the [***]
Pump Accessories and the [***] Pump Kits.
"Initial Product Prices" means the prices at which [***]
Products shall be sold by Supplier to Customer or its affiliates, which
will be calculated and determined in accordance with the formulas and
terms set forth in Exhibit C hereto.
"Know-How" shall have the meaning given to that term in the
[***] Pump License Agreement.
"Maintenance and Service Agreement" means that certain
Maintenance and Service Agreement of even date herewith between the
parties.
"Maximum Monthly Product Amount" means the maximum number of
units of [***] Pump Kits that Customer may require Supplier to
manufacture and supply in a particular month, which shall initially be
the amount set forth on Exhibit D, but which may be adjusted pursuant
to Section 7(d)(iii)(5) below.
"Minimum Purchase Commitment" means the obligation of Customer
to purchase in each calendar year during the Term the minimum number of
units of [***] Pump Kits set forth on Exhibit E.
"Patents" shall have the meaning given to that term in the
[***] Pump License Agreement.
"Product Specifications" means the technical, manufacturing,
and functional specifications for the [***] Products set forth in
Exhibit F hereto.
"Related Agreements" means the Flocare 800 Pump Manufacturing
Agreement, the Disposable Set Components Supply Agreement, the [***]
Pump License Agreement, the Disposable Set Components License
Agreement, and the Maintenance and Service Agreement.
"Supplier's Facility" means Supplier's manufacturing facility
located at 4314 ZEVEX Park Lane, Salt Lake City, Utah, 84123.
"Supplier Intellectual Property" means the Know-How, and the
Patents, as well as (i) the [***] Trademarks, all (ii) copyrights
(registered and unregistered) and copyrightable works and registrations
and applications for registration thereof, (iii) mask works and
registrations and applications for registration thereof, (iv) computer
software, data, data bases and documentation thereof, (v) other
intellectual property rights and (vi) copies and tangible embodiments
thereof (in whatever form or medium) which relate to the [***]
Products.
"Supplier Trademarks" shall have the same meaning as the term
"[***] Trademarks" is given in the [***] Pump License Agreement.
"Territory" shall mean the countries designated in the
following chart:
---------------------------------------------------------- ------------------------------------------------
Austria, Belgium, Denmark, Finland, France, Germany, Bulgaria, Czech Republic, Hungary,
Greece, Ireland, Italy, Latvia, Luxembourg, Poland, Russia,
Switzerland, United Kingdom Slovakia, Ukraine, United Arab
The Netherlands, Norway, Portugal, Spain, Sweden, Emirates, Turkey
---------------------------------------------------------- ------------------------------------------------
---------------------------------------------------------- ------------------------------------------------
Australia, New Zealand China, Indonesia, Malaysia, Taiwan
---------------------------------------------------------- ------------------------------------------------
---------------------------------------------------------- ------------------------------------------------
Argentina, Brazil South Africa
---------------------------------------------------------- ------------------------------------------------
"ZEVEX [***] Products" means Supplier's [***] Pump,
accessories, disposable sets, and disposable set components without the
customizations made for Customer hereunder.
2. Effective Date and Term. The term of this Agreement shall begin on July
20, 2004 (the "Effective Date"), and shall thereafter be perpetual (the
"Term"); provided that at any time on or after January 1, 2008, either
party may give notice to the other of its intention for any reason not
to extend the Term of this Agreement, and, if such notice is given, the
term of this Agreement shall expire two years from the date of such
notice, unless it is earlier terminated pursuant to Section 16 below.
3. Appointment of Supplier. Subject to the other provisions of this
Agreement, Customer hereby appoints Supplier, and Supplier hereby
accepts such appointment, as the exclusive manufacturer and supplier to
Customer of all clinical nutrition delivery pumps and accessories,
including the [***] Products, that are or will be commercialized and
placed or sold by Customer within the Territory, in accordance with the
terms and conditions of this Agreement; provided, however, that the
parties acknowledge and agree that the efforts of Customer to phase out
the MicroMax Pumps pursuant to Section 5(d)(ii) below will be expressly
allowed.
4. Certain Mutual Obligations.
(a) Development of Start-Up Plan for [***] Products. Within thirty (30)
days after the Effective Date, the parties will work together in good
faith to develop a plan to prepare to accept orders for the [***]
Products within ninety (90) days of the Effective Date.
(b) Development of Contingency Plan. Within 30 days of the Effective Date,
the parties will work together in good faith to develop a contingency
plan to ensure continuity of supply in the event of adverse actions by
Supplier or Supplier's suppliers. This plan will be reviewed and
updated at Quarterly Meetings (as defined in Section 7(f)(ii) below).
(c) Notification of Intent to Enter into New Geographical Markets. Supplier
will notify Customer if Supplier determines to supply ZEVEX [***]
Products into any geographic market other than North America and/or the
Territory. Customer will notify Supplier if Customer determines to sell
or provide [***] Products into any geographic market other than the
Territory. Upon such notification, Supplier will offer Customer the
opportunity to increase the Minimum Purchase Commitment in return for
adding the contemplated new geographical market to the Territory.
(d) Provision of Certain Financial Information. Throughout the Term of this
Agreement, each party will provide its financial information to the
other in the same form and at approximately the same time that such
information is made available to the public through normal channels of
regulatory disclosure (such as disclosure in a 10-K, 10-Q, or 8-K filed
with the U.S. Securities and Exchange Commission).
5. Certain Customer Obligations.
(a) Customer covenants and agrees to use Commercially Reasonable Efforts to
ensure that the [***] Products it purchases pursuant to this Agreement
will only be placed or sold for use or further resale within the
Territory, and that it will have no rights to commercialize, place or
sell the [***] Products anywhere outside of the Territory, including,
without limitation, in North America.
(b) Customer will execute and file a Declaration of Conformity on [***]
Products to establish the CE Mark for the [***] Pump Products in the
Territory, establishing Nutricia Medical Devices B.V. (Schiphol
Boulevard, 261 1118 BH, Schiphol Airport, The Netherlands), or such
other affiliated entity of Customer as Customer may desire, as the
legal manufacturer of the [***] Pump Products in the Territory.
(i) If Customer is unable to place and/or sell the [***] Products in any
country of the Territory due to the failure to obtain or maintain
governmental regulatory approval of such [***] Products, then Customer
may obtain from other manufacturers and/or suppliers, and place or sell
in that country, clinical nutrition pumps and related accessories with
similar functionality to the [***] Products, but only until Customer is
allowed to place and/or sell such products in that country.
(c) Subject to the other terms and conditions of this Agreement, Customer
will only place or sell in the Territory clinical nutrition pumps and
[***] Pump Accessories made from components that it has purchased from
Supplier under this Agreement and/or the Flocare 800 Pump Manufacturing
Agreement; provided, however, that:
(i) if Customer's ability to place or sell [***] Products into a particular
country within the Territory is impeded during any continuous sixty
(60) day period by infringements or alleged infringements by the
Supplier Intellectual Property on the intellectual property of one or
more third parties (an "IP Failure"), then Customer may obtain from
other manufacturers and/or suppliers, and place or sell in that country
in the Territory, clinical nutrition pumps and related accessories with
similar functionality to the [***] Products, provided, however,
Supplier may cure any IP Failure under any of the following alternative
means of cure:
(1) Supplier may cure an IP Failure if, at any time on or before the end of
the sixtieth (60th) day following the IP Failure, Supplier delivers to
Customer that number of [***] Products identified by Customer in its
determination of Customer Demand that do not create an IP Failure.
(2) Supplier may cure an IP Failure if, any time after the sixtieth (60th)
day following the IP Failure, but
on or before the end of the one-hundred and twentieth (120th) day
following the IP Failure, Supplier provides reasonable evidence and
certifies in writing to Customer that Supplier has durably resolved
the issue that created the IP Failure and is again capable of
producing the [***] Products at the forecasted levels that were in
effect as of the date of the applicable IP Failure.
(3) Supplier may cure an IP Failure if, at any time after the one-hundred
and twentieth (120th) day
following the IP Failure, but on or before the end of the date one
(1) year following the IP Failure, Supplier (A) provides reasonable
evidence and certifies in writing to Customer that Supplier has
durably resolved the issue that created the IP Failure and is again
capable of producing the [***] Products at the forecasted levels that
were in effect as of the date of the applicable IP Failure, and (B)
obtains a release of Customer from all future liabilities and
obligations of any kind or nature arising under Replacement Contracts
(as defined in Section 18(d)(iii) below) from the date that Supplier
proposes to cure the IP Failure.
(ii) if Customer receives a written request from one of its customers
explicitly requiring Customer to provide clinical nutrition pumps other
than the Flocare 800 Pump or the Flocare [***] Pump, then Customer may
obtain the other clinical nutrition pumps so required from a
supplier/manufacturer other than Supplier if Customer promptly provides
written notice to Supplier of its intent to do so.
(d) Purchase Commitment; Transition.
(i) Minimum Purchase Commitment.
-----------------------------
Customer agrees to purchase the Minimum Purchase Commitment of the
[***] Pump Kits in each calendar year during the Term, beginning
January 1, 2005. If Customer fails to purchase the Minimum
Purchase Commitment of [***] Pump Kits on or before December 15th
of any given calendar year during the Term, then Customer shall pay
to Supplier [***] U.S. dollars (US $[***]) in immediately available
funds for each [***] Pump Kit by which Customer was short of the
Minimum Purchase Commitment for that calendar year. Such fees will
be invoiced by Supplier to Customer on or before December 31st of
the year to which they apply, and Customer will pay such fees within
90 days of the end of the month in which they are invoiced. If
Customer timely pays in full any payment arising under the
previous sentence, then such payment will be deemed to fully satisfy
Customer's obligations with respect to the Minimum Purchase
Commitment of [***] Pump Kits for that calendar year. In that case,
Customer's failure to fulfill its Minimum Purchase Commitment of
[***] Pump Kits for that calendar year will not thereafter be deemed
a breach of this Agreement, and, if it was previously deemed a
breach, such breach will be deemed cured by such full and timely
payment. The parties acknowledge and agree that other than the $[***]
per pump payment described above in this Section 5(d)(i), no royalty
payments under the [***] Pump License Agreement or other payments
will be due with respect to any shortfall in the Minimum Purchase
Commitment. The Minimum Purchase Commitment shall be suspended
for the duration of any Call-Off Breach, as defined in Section
18. In the event the Call-Off Breach is cured by Supplier pursuant
to Section 18(d), the Minimum Purchase Commitment shall be reduced
on a pro rata basis based upon the length of time the Call-Off Breach
existed before Supplier cured the Call-Off Breach pursuant to
Section 18(d).
(ii) Adjustment to Minimum Purchase Commitment.
--------------------------------------------
In the event that Customer is unable to place and/or sell into any
country in the Territory the [***] Pump Kits because such placement
or sale would either (A) be prohibited by applicable law or other
governmental or regulatory authority, or (B) likely result in a
material risk to Customer of claims of infringement of
third-party intellectual property rights, Customer may request a
reduction in the Minimum Purchase Commitment. To request such
reduction, Customer shall provide Supplier with a reasonably detailed
written description of the applicable legal prohibition and/or
material risk of infringement and evidence of the portion of the
Minimum Purchase Requirement that Customer previously documented
for the country or countries in question. Supplier and Customer will
thereafter cooperate for at least thirty (30) days to negotiate a
mutually agreeable level of reduction and the effects, if any, to the
prices of the [***] Pump Products. The negotiations will be based
on the reduction in the number of [***] Pump Kits needed by
Customer due to the legal prohibition and/or material risk of
infringement. If such mutual agreement is not reached, the Minimum
Purchase Commitment shall remain unchanged. If the Flocare 800
Pump Manufacturing Agreement is terminated by Supplier under
Section 15(a)(iv) thereof, or by Customer under Section 15(a)
(viii) thereof, the Minimum Purchase Commitment shall be increased by
[***] units per calendar year.
(iii) Phase Out of MicroMax Pumps.
-----------------------------
Beginning on the Effective Date, Customer will begin phasing out
its MicroMax Pumps by immediately terminating marketing efforts
for the MicroMax Pumps and reducing the number of accepted orders
for MicroMax Pumps. In addition, Customer will exert Commercially
Reasonable Efforts to obtain all necessary registrations of the
Flocare [***] Pumps in each country within the Territory. The exact
timing of the phase out and replacement of the MicroMax Pumps by the
Flocare [***] Pumps will depend upon (A) the current stocks of
MicroMax Pumps in the market as of the Effective Date of this
Agreement, (B) the results of technical validation and market
tests relating to the Flocare [***] Pumps, and (C) Supplier's ability
to provide sufficient Flocare [***] Pumps to meet Customer orders
hereunder, and (D) the bureaucratic registration process in each
country in the Territory. In any event, Customer will use
Commercially Reasonable Efforts to cease accepting orders for MicroMax
Pumps no later than December 31, 2004; provided, however, that if
Customer has exerted Commercially Reasonable Efforts to obtain
registration of the Flocare [***] Pumps in each country within the
Territory but such registration has not been obtained due to
bureaucratic processes within any countries within the Territory,
then Customer may continuing accepting orders for MicroMax Pumps in
any such countries until registration of the Flocare [***] Pumps has
been obtained in such countries.
(e) Regulatory Approvals. Customer will use Commercially Reasonable Efforts
to obtain regulatory approvals of the [***] Products in each country
within the Territory within six (6) months of the Effective Date of
this Agreement.
(f) No Re-deployment. Customer will not, directly or indirectly, re-deploy
(place or sell) used Flocare [***] Pumps outside the Territory, and
this provision shall survive termination of this Agreement.
6. Certain Supplier Obligations.
(a) Manufacturing Practices and Standards.
(i) Compliance with Standards and Specifications.
------------------------------------------------
Supplier represents and warrants that it has an established
standard operating procedure ("SOP") for the manufacture and supply
of the [***] Products and that such SOP contains operating
standards or procedures that are at least as good as those
prevailing in the industry for a comparable supplier. Supplier has
designed and will manufacture the [***] Products according to (1)
the Product Specifications applicable to the [***] Products, (2)
Supplier's SOP, and (3) the standards established by the FDA for
current Good Manufacturing Practices, as established by the FDA for
current Good Manufacturing Practices, as specified in 21 CFR
ss.820 Quality System Regulations; 21 CFR ss.807 Established
Registration and Device Listing for Manufacturers of
Devices; 21 CFR ss.803 Medical Device Reporting; 21 CFR ss.801
Medical Devices Reports of Corrections and Removals; the Federal
Food, Drug and Cosmetic Act, as amended; ISO 13485 Medical
Devices - Quality management systems - Requirements for regulatory
purposes; European Council Directive 93/42/EEC of 14 June 1993
concerning medical devices; IEC 601-1, Medical electrical
equipment - Part 1: General requirements for safety; and IEC 601-1-2,
Medical electrical equipment - Part 1-2: General requirements
for safety - Collateral standard: Electromagnetic compatibility -
Requirements and tests. This Section 6(a)(i) is not intended to limit
Supplier's obligations to indemnify Customer under Section 17(a).
(ii) Changes in Manufacturing Processes, Materials, or Components.
(1) Changes Initiated by Supplier. During the Term of this Agreement,
Supplier shall have the right to make such changes as may be reasonably
necessary to incorporate new technology or improve manufacturing
processes by providing prior notice to Customer; provided, however,
that if such changes (A) modify in any material fashion the [***]
Products (as determined by Supplier in its reasonable discretion), or
(B) change any of the suppliers and/or components listed in Exhibit G,
then Supplier shall notify Customer and shall refrain from making any
such changes without the prior written consent of Customer, which
consent may not be unreasonably withheld.
(2) Changes Initiated by Customer. Customer may propose changes to the
Product Specifications or the general manufacturing process from
time-to-time by submitting to Supplier a written engineering change
request ("ECR"). Changes requested by Customer which are necessary in
order to make any [***] Product comply with any of the standards set
forth in Section 6(a)(i) or with the laws and regulations of any
jurisdiction within the Territory, shall not be considered to be an ECR
and shall be made promptly by Supplier at no charge to Customer;
provided, that if any such change resulting from the requirements of
the laws and regulations of any jurisdiction within the Territory is
economically impractical (as determined in Supplier's reasonable
discretion), then such change will be considered to be an ECR. With
respect to each ECR submitted by Customer, Supplier shall determine and
advise Customer in writing if the proposed change is acceptable. No
changes to the Product Specifications or significant change to the
manufacturing process shall be made without the prior approval of both
parties hereto, which shall be evidenced by their signatures on the
final ECR. All costs associated with an ECR, including scrapping of
existing component inventory or rework costs, shall be borne by
Customer and shall be agreed to in writing by the parties prior to
implementing any change. Non-urgent ECRs shall be processed by Supplier
within ten (10) working days, and acceptance or rejection of the
request shall be acknowledged by Supplier within that time. In the
event that Customer considers the ECR urgent, notice of such urgency
shall be made at the time of request to Supplier, and the parties shall
agree on a priority for the ECR. To expedite the implementation of
approved, urgent ECRs, it may be necessary for Supplier to use redlined
drawings and/or documentation to initiate the change. However, the use
of any redlined drawings or documents for manufacturing purposes shall
be permitted only upon the written approval of Customer.
(iii) Packaging. Customer will provide Supplier with finished artwork to be
used by Supplier in producing the Supplied product packaging which
shall be subject, in all cases, to the final approval of Customer.
(b) Inspection and Documents; Audits.
(i) Inspections by Customer.
-----------------------
Supplier shall permit Customer or its agents, during reasonable
business hours and upon at least two weeks advance notice, access
to inspect Supplier's facility where the [***] Products are
manufactured, handled, stored, or tested, as well as records
relating to the manufacture, storage, handling, or testing of the
[***] Products. Customer shall conduct such inspection in a manner
as to minimize disruption of Supplier's ongoing operations, and
Supplier shall reasonably assist Customer with such inspections.
Supplier hereby acknowledges and agrees that Customer's right to
inspect Supplier's facilities to ensure such compliance does not in
any way limit Customer's rights and that any failure by Customer to
exercise such right(s) shall not be held against Customer for any
reason whatsoever and shall not diminish or constitute a waiver of
Supplier's responsibility for the proper performance of its duties
and obligations hereunder.
(ii) Inspections by Government Authorities. Supplier shall extend the same
inspection privileges set forth in Section 6(b)(i) to agents of the FDA
or other governmental authorities as required by law. Supplier shall
notify Customer within five (5) working days of any such inspection
related to the [***] Products or ZEVEX [***] Products. In addition,
Supplier shall provide Customer with copies of any and all inspection
reports relating to the manufacture of the [***] Products or ZEVEX
[***] Products from the FDA or other relevant governmental authority
within five (5) working days of receipt of such reports.
(iii) Documents and Records. Upon request by Customer, Supplier shall furnish
Customer with complete and accurate information and copies of documents
necessary for Customer to: (A) provide Customer assurance that the
[***] Products were manufactured and supplied in accordance with this
Agreement and in compliance with applicable Laws, (B) enable Customer
to ensure that the [***] Products comply with the labeling claims made
for the [***] Products, (C) secure all governmental licenses,
registrations or approvals for the [***] Products as required by
applicable laws in the Territory, and (D) respond to all governmental
inquiries or requests.
(iv) Important Changes or Events. Supplier shall immediately inform Customer
of any event or circumstance, including but not limited to, a Change of
Control of Supplier, or an adverse change in the financial status of
Supplier or its affiliated companies that may directly or indirectly
prejudice Supplier's ability to comply with any of its undertakings in
this Agreement, and, particularly, that may affect its manufacture and
supply of the [***] Products, its capacity to meet the Maximum Monthly
Product Amount, or any other matter that materially and adversely
affects the ability of Supplier to perform its obligations under this
Agreement.
(v) No Waiver. Supplier acknowledges and agrees that Customer shall have
the right, upon request, to confirm or verify that Supplier is in
compliance with Section 6 hereof including the right to inspect
Supplier's facilities pursuant to Section 6(b)(i) hereof to ensure such
compliance.
(c) No Conflicts. Supplier exclusively shall manufacture, package, and
supply the [***] Products for Customer to sell or place within the
Territory in accordance with Customer's specifications and the terms
and conditions contained herein. During the term of this Agreement,
Supplier will not supply or sell any [***] Products or ZEVEX [***]
Products into the Territory, but Supplier may supply or sell or place
any of its other clinical nutrition delivery pumps, disposable sets and
accessories into the Territory so long as such clinical nutrition
delivery pumps do not incorporate Supplier's patented or patent-pending
technologies (other than the LifeGuard(R) anti-free flow protection
technology and the EnteraLite(R) pole clamp) that are embodied in the
ZEVEX [***] Products or the [***] Products.
(d) Subcontractors; Suppliers and Distributors; Manufacturing Location.
(i) Subcontractors. Supplier shall not subcontract with any third parties
for the manufacture of the [***] Products without the prior written
approval of Customer, which approval shall not be unreasonably
withheld. If such approval is given by Customer, Supplier shall exert
Commercially Reasonable Efforts to ensure that such subcontractors
(including suppliers and distributors) comply with the necessary
manufacturing requirements relating to the manufacture of the [***]
Products.
(ii) Suppliers and Distributors.
(1) Suppliers. Supplier will exert Commercially Reasonable Efforts to
assist Customer in gaining access and documentation from any supplier
used by Supplier in performing its obligations hereunder. Supplier will
exert Commercially Reasonable Efforts to prevent its suppliers from
supplying to any party other than Supplier (A) any patented components
used in the [***] Products, or (B) any components of the [***] Products
that are unique to the [***] Products.
(2) Distributors. Supplier will exert Commercially Reasonable Efforts to
prevent its distributors from directly or indirectly selling or placing
any ZEVEX [***] Products into the Territory.
(iii) Manufacturing Location. Supplier will manufacture and package the [***]
Products at Supplier's Facility.
7. Ordering, Supplying, and Rejecting [***] Pump Products.
(a) Ordering [***] Products. All [***] Pump Products shall be ordered
through written Customer call-offs, as described in Section 7(d),
below.
(b) Terms and Conditions. The terms and conditions of this Agreement will
apply to each call-off or shipment by Supplier hereunder, regardless of
the terms stated on Supplier's invoice. The terms and conditions of
Customer's form of purchase order or other business forms will not
apply to any order notwithstanding Supplier's acknowledgment or
acceptance of such call-off or shipment.
(c) Cancellation of Call-Offs by Supplier. Supplier reserves the right to
cancel any call-offs placed by Customer as set forth above, or to
refuse or delay shipment thereof, if Customer (i) fails to make any
payment when due as provided herein or under the terms of payment set
forth in any invoice or otherwise agreed to by Supplier and Customer,
or (ii) otherwise fails to comply in all material respects with the
terms and conditions of this Agreement and fails to cure such
non-compliance within sixty (60) days from the date Supplier notifies
Customer of such failure to comply. No such cancellation, refusal or
delay will, by itself, be deemed a termination or breach of this
Agreement by Supplier.
(d) Supplying [***] Pump Products.
(i) Forecasts for [***] Pump Kits.
-----------------------------
Customer shall provide Supplier by the tenth (10th) calendar day of
each month during the Term a rolling, twelve-month forecast of the
number of product units of [***] Pump Kits and [***] Pump Accessories
that Customer anticipates that Supplier will be required to ship
pursuant to Customer's call-offs in each month of such forecast
(the "Rolling Forecast"). Supplier shall use the Rolling Forecast
to plan capacity and order raw materials and component parts to
support forecast projections. The new Rolling Forecast provided
in any given month (the "Current Month's Rolling Forecast") may
increase or decrease the forecasted shipments by Supplier provided by
Customer during the prior month (the "Prior Month's Rolling Forecast");
provided, however, that the Current Month's Rolling Forecast may
not (1) revise the forecasted quantities to be shipped for the
month in which it is submitted from the forecast for that month
contained in the Prior Month's Rolling Forecast, (2) increase by more
than thirty percent (30%) the forecasted quantities to be shipped
for the next full calendar month after the current month, as compared
to the forecasted quantities to be shipped for that month as
contained in the Prior Month's Rolling Forecast, or (3) increase by
more than one hundred percent (100%) the forecasted quantities to be
shipped for the second full calendar month after the current month,
as compared to the forecasted quantities to be shipped for that
month as contained in the Prior Month's Rolling Forecast.
(ii) Inventory, Components, and Raw Materials.
-----------------------------------------
Supplier shall maintain sufficient inventory of [***] Products
(no less than four weeks' anticipated supply) and components to
guarantee and minimize Supplier's lead times and to fulfill
Customer's call-off requirements on a timely basis, such that the
[***] Products will be finished and ready for shipment on, or
immediately before, the delivery date as set forth on the related
call-off. Supplier shall acquire all raw and packaging materials
(e.g., inventory, packaging components, parts, labels, inputs,
and other materials necessary for the manufacture, supply, and
delivery of [***] Products) solely from manufacturers and suppliers
that meet industry standards of acceptability and comply fully
with all Laws (as hereinafter defined). Supplier may purchase and
maintain up to a six (6) month supply of raw materials and component
parts necessary for the manufacture and supply of the [***] Products
according to the 12-month forecast. If Supplier so elects, Supplier
shall sell to Customer and Customer shall purchase any such raw
materials and component parts that are not used by Supplier in
accordance with the 12-month forecast referred to in the previous
sentence within nine (9) months from the date they are received by
Supplier at Supplier's standard cost plus [***]. To assist
Supplier in determining the need for such items, Customer will
use Commercially Reasonable Efforts to apprise Supplier of significant
developments, such as market conditions, customer demand, and sales
forecasts, which may occur with respect to its business as it
relates to its requirements for [***] Products.
(iii) Call-Offs and Shipment.
(1) Lead Times for Shipment. Subject to the limitations on quantity set
forth in Section 7(d)(iii)(2) below, Supplier shall ship the [***] Pump
Products that Customer orders by call-off on or before the shipping
dates requested by Customer in such call-off; provided, however, that
Supplier will not be obligated to ship [***] Pump Products any sooner
than two weeks after it receives a call-off for such [***] Pump
Products from Customer, regardless of any language to the contrary in
such call-off.
(2) Quantities to be Shipped. Supplier will ship ordered quantities of
[***] Pump Products in accordance with Customer call-offs, so long as
the called-off quantities do not exceed the lesser of (A) 120% of the
current month's forecasted requirements (as contained in the most
current Rolling Forecast) and (B) the Maximum Monthly Product Amount.
(3) Efforts to Fulfill Customer's Lead Times and Quantity Needs. If
called-off quantities and shipment dates for [***] Pump Products do not
comply with the quantity or lead-time limitations set forth in Sections
7(d)(iii)(1) and (2) above, Supplier will nonetheless exert
Commercially Reasonable Efforts to fulfill such call-offs in as timely
a manner as reasonably possible; provided, however, that no penalty for
late or partial delivery shall apply to any such call-offs.
(4) Modification and Cancellation of Call-Offs by Customer. The quantity of
[***] Pump Products to be shipped pursuant to a call-off may be reduced
or cancelled by Customer no less than three (3) days prior to the
required shipment date without penalty. If Customer cancels a call-off
less than three (3) days prior to the shipment date, Customer shall
reimburse all costs reasonably and actually incurred by Supplier in
connection with such call-off, but such reimbursement shall never
exceed the purchase price of the product units that were cancelled, as
referred to in the call-off. Such costs shall be submitted by Supplier
to Customer within ten (10) working days after the cancellation. Any
such reimbursement shall be determined based on the actual cost of the
specific materials required to be purchased, if any, for the canceled
call-off if said materials are covered within the scope of the
call-off, provided that no alternative use for such materials can be
found by mutual agreement of the parties. Customer may increase the
quantity of [***] Pump Products ordered pursuant to a particular
call-off by up to 20%, without any attendant change to the shipment
date, if Customer submits such a request to Supplier in writing and
such request is received by Supplier no less than one week prior to the
originally requested shipment date.
(5) Changes to Maximum Monthly Product Amount. During each Quarterly
Meeting, the parties will review and consider the sufficiency of the
Maximum Monthly Product Amount. If the parties mutually agree that an
increase in the Maximum Monthly Product Amount is warranted based on
the demand for the [***] Pump Products, then the Maximum Monthly
Product Amount will thereafter be adjusted upward, effective as of the
date mutually agreed by the parties.
(iv) Shipment. All [***] Pump Products purchased by Customer hereunder will
be shipped Ex Works (as defined in INCOTERMS 2000, International
Chamber of Commerce), at Supplier's Facility. Customer will be
responsible for and will pay all shipping, freight and insurance
charges associated with the shipping of the products.
(v) Title/Risk of Loss. Title to the [***] Pump Products purchased by
Customer and all risk of loss or damage will pass to Customer when the
products are delivered to a shipper at Supplier's Facility. Customer
shall bear the risk of loss or damage in transit.
(vi) Partial Shipments.
------------------
Unless Customer clearly advises Supplier to the contrary in writing,
Supplier may make partial shipments on account of Customer's orders,
to be separately invoiced and paid for when due; provided however,
that if the aggregate price of shipping any called-off shipment is
higher than the cost would have been if the entire shipment had been
shipped at once, then Supplier will reimburse the Customer for the
difference in shipping cost, and provided further that all such
partial shipments are received by the date on which the total
shipment is due under the applicable call-off. Failure to ship
all shipments required under a call-off shall constitute a Call-Off
Breach under Section 18. Delay in delivery of any shipment shall not
relieve Customer of its obligation to accept the remaining deliveries.
(vii) Failure to Fulfill Call-Off.
(1) Notice.
------
Supplier will notify Customer immediately, of any real or
anticipated delays that could impact the supply of [***] Pump
Products or the ability of Supplier to fulfill its
obligations under this Agreement including, but not
limited to, component supply or labor shortages, or events
which involve health, safety, building code, or
regulatory issues or violations. Supplier shall, in the
event of lost production time for any reason, except
through the fault of Customer, give Customer first
priority from among Supplier's other customers in making
up production schedules.
(2) Effect.
------
Without prejudice to any other rights of Customer under this
Agreement, if Supplier is unable to fulfill any Customer
call-off with respect to [***] Pump Products as to quantity
or time of shipment (assuming the applicable lead times and
quantity limitations are satisfied), then Supplier will
be subject to a penalty with respect to the relevant
call-off of 0.5% of the invoice price of that portion of
the call-off that is actually late in shipment for every
business day that the shipment date of the [***] Pump
Products ordered pursuant to that call-off is late;
provided, however, that the aggregate penalty under this
section for late shipment with respect to any call-off
will be capped at 20% of the total purchase price for such
portion of the call-off. In any event, the penalties set
forth herein will apply only to call-offs and/or portions of
call-offs representing quantities of the original call-off
up to the applicable Maximum Monthly Product Amounts for
[***] Pump Kits ordered during any calendar month during the
Term (i.e., no penalty under this section will apply to
call-offs or portions of call-offs during a calendar month
that exceed the applicable Maximum Monthly Product Amount
for the [***] Pump Kits).
(e) Rejecting Nonconforming [***] Pump Products.
(i) Defective [***] Pump Products.
------------------------------
Customer will have no obligation to inspect incoming shipments of
[***] Pump Products received from Supplier. However, if after
receiving a shipment of [***] Pump Products, Customer reasonably
determines that any [***] Pump Product or an entire lot of [***]
Pump Products delivered by Supplier fails to meet the Product
Specifications, and/or any other requirements and other
specifications established or agreed to from time to time by
Customer, and/or any other terms and conditions of this Agreement
(the "Defective Products"), Customer shall notify Supplier after
discovery of the defect. All Defective Products, other than any
Defective Products (or any portions thereof)retained by Customer for
testing, evaluating or sampling, shall, at Customer's option, but
not earlier than five (5) business days after notification to
Supplier by Customer in writing, be returned to Supplier, at
Supplier's expense, after Customer has obtained a return merchandise
authorization number from Supplier for such products. Supplier
shall promptly repair or replace, at Supplier's sole discretion,
all Defective Products returned to Supplier. If Supplier receives
any written notice of Defective Products, Supplier shall, at
Supplier's expense, ship replacement or repaired [***] Pump
Products to the destination designated by Customer as soon as
reasonably possible after receipt of such notice, provided that
Supplier shall use its best efforts to make any such shipment ready
for shipment within five (5) business days after receiving returned
Defective Products. In the event that Supplier fails to do so,
Customer may treat such failure as a Call-Off Breach pursuant
to Section 18. Notwithstanding the foregoing, neither Customer's
failure to discover Defective Products nor any of the provisions set
forth herein for dealing with Defective Products shall prejudice or
affect Customer's other rights or remedies under this Agreement
or under applicable Law (as hereinafter defined), including
Customer's rights to have Defective Products repaired or replaced
under the Product Warranties set forth in this Agreement.
(ii) Shortfall. A
---------
"Shortfall" shall occur if Customer reasonably determines that
there is either (A) a shortfall in the quantity of [***] Pump
Products delivered by Supplier pursuant to a call-off, and/or
(B) any shipment of [***] Pump Products delivered by Supplier
pursuant to a call-off contains [***] Pump Products that have defects
that are manifest and easily visible to the naked eye ("Visually
Defective Products"). Customer shall notify Supplier of any
Shortfall within five (5) business days of the date the shipment is
received by Customer at Customer's distribution center in
Zoetermeer. Visually Defective Products shall be returned to
Supplier at Supplier's expense, and Supplier shall repair or
replace them and redeliver them to Customer in the same manner as
Defective Products under Section 7(e)(i) above. In the case of a
Shortfall in quantity, Supplier shall ship a quantity of [***] Pump
Products that are not Defective Products and/or Visually
Defective Products to the destination designated by Customer to
fulfill the entire Call-Off as soon as is reasonably possible,
provided that Supplier shall use its best efforts to make any such
shipment ready for shipment within five (5) business days after
receiving notification of such Shortfall in quantity. Any
Shortfall that is identified by Customer and is communicated in
writing by Customer to Supplier within five (5) business days of
Customer's receipt of a shipment at Customer's distribution center in
Zoetermeer shall be deemed a Call-Off Breach under Section 18. If
Customer does not notify Supplier of a Shortfall within five (5)
business days of Customer's receipt of a shipment at Customer's
distribution center in Zoetermeer, a Call-Off Breach shall not be
deemed to have occurred, and Customer shall retain, without
limitation, all its other rights and remedies conferred under this
Agreement and the Related Agreements.
(f) Ongoing Communication and Business Review.
(i) Designated Representative. Each party agrees to designate one
individual within such party's organization to serve as such party's
primary point of contact and representative (the "Designated
Representative") in such party's relationship and communications with
the other party as contemplated in this Agreement. These Designated
Representatives shall also involve other appropriate operational,
strategic, technical, and regulatory personnel in such communications.
(ii) Quarterly Meetings.
-------------------
The parties agree to hold a face-to-face meeting at a minimum of once
each calendar quarter during the Term for such duration as the
parties agree in good faith is necessary to address the various issues
that may arise relating to the performance of the parties under
this Agreement (the "Quarterly Meetings"). The location of the
Quarterly Meetings shall alternate between Supplier's Facility
and a Customer facility in the Territory. The parties shall
formulate in advance of each meeting a written agenda of material
items that each party proposes should be considered together in the
meeting, which agenda may include such items as on-time
delivery, capacity planning, customer complaints, device master
record review, performance forecasting, product development, market
feedback and trends (including competitor activity), corrective
action requests review, contingency plan review, product training and
support, and sales review. The parties shall make a reasonable
effort to have the Designated Representative present at each
Quarterly Meeting, as well as such other individuals as would be
appropriate in light of the agenda for the meeting. Each party
shall bear all of its own costs and expenses associated with its
participation in the Quarterly Meeting. The parties' respective
rights to request and receive information hereunder will not be
affected or limited by any subject or matter discussed or planned to
be discussed at any Quarterly Meeting.
(g) Warranty. Supplier warrants, for a period of 12 months from the date of
shipment from Supplier to Customer or any of Customer's distributors,
resellers, or customers, as the case may be, that each [***] Product,
other than the Flocare [***] Pump, to which a 24 month period shall
apply, shall be free from defects in materials, components, design, and
workmanship, shall conform to the Product Specifications, and shall be
fit for the purpose of delivering the (i) Nutrison Standard, (ii)
Nutrison Concentrated, (iii) Nutrison Multi-fibre, (iv) Nutrison
Protein Plus Multi-fibre, and (v) Nutrison Low Energy enteral nutrition
solutions currently produced by Nutricia (collectively the "Product
Warranties"), under the following terms and conditions:
(i) Supplier must be notified in writing of the alleged defect(s) during
the term of the warranty; and
(ii) Supplier's warranty shall be voided in the event an [***] Product is
subject to abuse, accident, alteration, modification, tampering,
misuse, or the unauthorized repair or service by anyone other than
Supplier (other than service permitted or required to be performed by
the user as explained in a Supplier-approved operator's manual for such
product).
(h) No Other Warranties. Supplier provides no warranties hereunder except
as stated in this Agreement. THE WARRANTIES STATED IN THIS AGREEMENT
AND THE RELATED AGREEMENTS ARE EXCLUSIVE AND EXPRESSLY IN LIEU OF ALL
OTHER EXPRESS OR IMPLIED WARRANTIES. Furthermore, the warranties
provided in this Agreement run only to Customer and not to Customer's
customers or end users.
(i) Supplier Obligations for Breach of Warranty. Supplier's obligation with
respect to [***] Products that it has supplied to Customer hereunder
that fail to comply with the Product Warranties set forth in Section
7(g) above shall be to repair or replace such [***] Products, as set
forth in greater detail in the Maintenance and Service Agreement. The
remedies available to Customer thereunder for the failure of [***]
Products to comply with the Product Warranties set forth in Section
7(g) above will be the sole and exclusive remedies available to
Customer under such Product Warranties. This Section 7(i) is not
intended to limit Supplier's obligation to indemnify Customer for
certain third party products liability claims as described in Section
17(a)(i).
(j) Warranty Claims. Concurrently with the execution of this Agreement, the
parties will enter into the Maintenance and Service Agreement that will
provide for the following: (i) reporting of product defects, (ii) the
process for responding to warranty claims, and (iii) the process for
repairing or replacing damaged or defective [***] Products.
8. Commercialization of [***] Products.
(a) Commercialization.
(i) Commercialization Efforts by Customer. Customer will have the exclusive
right and obligation to use Commercially Reasonable Efforts to
commercialize the [***] Products within the Territory as the highly
preferred option for users of clinical nutrition pumps and delivery
systems.
(ii) Training of Customer's Sales Representatives.
------------------------------------------------
Supplier will provide training to Customer's sales
representatives as set forth in this Section 8. As to training held
at Supplier's Facility, Supplier will provide training to
Customer's sales representatives up to twice yearly at Supplier's
cost; provided, however, that Customer will pay all travel and
related expenses for its sales representatives who attend the
training. As to training held at a location other than Supplier's
Facility, Supplier will provide training to Customer's sales
representatives no more than once quarterly at a location designated
by Customer, and Customer will pay Supplier's costs (including
business class travel and related expenses, as well as an hourly fee
of $100 per hour, per person for personnel conducting the
training) associated with such training.
(iii) Promotional Materials. Supplier and Customer will cooperate to develop
appropriate promotional materials for the [***] Products (including
manuals, promotional claims, etc.). Customer will translate all [***]
Product related manuals, materials, and product labeling into the
languages of the Territory.
(b) Suitable Inventory and Premises. At all times throughout the Term of
this Agreement, Customer will maintain at least a four-week supply of
[***] Pump Products on hand in one or more of its facilities located
within the Territory for placement or sale in the Territory. If at any
time Customer's inventory of [***] Pump Products on hand is depleted
below a projected four-week supply of such products, then Customer will
promptly order sufficient additional [***] Pump Products to restore its
inventory levels to a four-week supply. In addition, throughout the
Term of this Agreement, Customer will maintain adequate inventory
levels of the [***] Pump Products for demonstration and training
purposes.
(c) Conduct of Business. Each of Supplier and Customer will promote the
business and company of the other in a manner that reflects favorably
on the other, and each will avoid deceptive, misleading, or unethical
business practices that are likely to be detrimental to the other, its
business, or the general public.
(d) Market Information and Planning. Each of Supplier and Customer will
advise the other promptly after they receive information concerning the
market for clinical nutrition delivery devices (both within and outside
the Territory) and will, from time-to-time, consult with each other
with respect to market conditions, sales forecasting, product planning,
and promotional activities; provided that neither party will be
obligated to disclose any such information to the other if doing so
would be a breach of such party's obligations to a third party to
maintain the confidentiality of such information.
(e) Compliance with U.S. Export Laws. Customer understands that the [***]
Products are restricted by the United States Government from export to
certain countries, and Customer agrees that it will not sell the [***]
Products in any way that will violate any of the export control laws or
regulations of the United States ("U.S. Export Control Laws"). Supplier
will inform Customer from time to time about applicable U.S. Export
Control Laws and prohibited countries. Customer will provide to
Supplier such documentation and certifications as may be required for
compliance with the export control laws of the United States.
(f) Governmental Approvals. If any approval with respect to this Agreement,
or the registration thereof, shall be required at any time during the
term of this Agreement, with respect to giving legal effect to the
Agreement in the Territory, or with respect to compliance with exchange
regulations or other requirements so as to assure the right of
remittance abroad of U.S. dollars, Customer shall immediately take
whatever steps may be necessary in this respect, and any charges
incurred in connection therewith shall be for the account of Customer.
Customer shall keep Supplier currently informed of its efforts in this
regard.
9. Inspections, Records, and Reporting.
(a) Deliveries and Inventories. In the Quarterly Meetings, Customer will
provide to Supplier information about Customer's deliveries of [***]
Pump Products within the Territory. In addition, upon either party's
request, the other party will provide to the requesting party
information about the providing party's inventory levels of [***] Pump
Products and such other information as the requesting party may
reasonably request.
(b) Reports of Alleged Claims. Customer shall notify Supplier in writing of
any claim or proceeding involving advertisement or distribution of the
[***] Pump Products by Customer, including claims asserting
infringement of any intellectual property rights by Supplier
Intellectual Property or the [***] Pump Products, within ten (10) days
after Customer learns of such claim or proceeding. Customer shall also
report promptly to Supplier all claimed or suspected product defects
relating to the [***] Pump Products. Supplier shall notify Customer in
writing of any claim or proceeding involving advertisement or
distribution of ZEVEX [***] Products by Supplier outside of the
Territory, including claims asserting infringement of any intellectual
property rights by Supplier Intellectual Property or ZEVEX [***]
Products, within ten (10) days after Supplier learns of such claim or
proceeding. Supplier shall also report promptly to Customer all claimed
or suspected product defects relating to the ZEVEX [***] Products.
(c) Maintenance of Records. Customer shall maintain during and two (2)
years beyond the life of the Flocare [***] Pumps its records, contracts
and accounts relating to the distribution of the Flocare [***] Pumps,
and shall permit examination thereof by authorized representatives of
Supplier (i) in connection with any recall under Section 18 or (ii)
after any written request by Supplier that is based on a reasonable
determination by Supplier that it has need to verify the accuracy of
information or reports previously provided to Supplier by Customer.
With respect to sales to end users of the Flocare [***] Pumps, Customer
shall track and require its dealers to track the location of pumps sold
or placed with end users. Customer and each of its dealers shall
maintain a record of pump location by serial number, location, and
telephone/fax contact. At each Quarterly Meeting, Customer will provide
to Supplier a written report of the quantities of [***] Products placed
in each country within the Territory during the prior quarter.
10. New Product Development.
(a) Innovation. Beginning on or after January 1, 2005, Supplier will exert
efforts to investigate, discuss, and/or develop improvements with
respect to the [***] Products and/or new enteral feeding pumps,
disposable sets, or accessories that are advancements from the [***]
Products (each such improvement an "Innovation") by (i) discussing
product innovation at least annually in one of the Quarterly Meetings
with Customer and (ii) budgeting and maintaining sufficient marketing
resources, as determined in Supplier's reasonable discretion, to
support the discussions required by subsection 10(a)(i). Unless
otherwise explicitly agreed in a writing signed by both Customer and
Supplier, Supplier will own all right, title to and interest in any
Innovations and Customer hereby assigns any right, title to, and
interest in such Innovations to Supplier. If the parties mutually
determine that an Innovation is Commercially Viable (as defined below),
then Supplier shall spend annually, in the aggregate, on research and
development efforts relating to such Innovation and any other
Innovations deemed to be Commercially Viable under this section, up to
2% of the gross revenues generated under this Agreement during the same
fiscal year (the "Invested Amount"). Supplier will be obligated to
spend the Invested Amount on such research and development efforts from
the date the parties both approve the project until the date that
Supplier determines in good faith that the project is complete or that
it should be abandoned. The Invested Amount shall be calculated in each
of Supplier's fiscal years or a portion thereof from the beginning to
the end of the project. For purposes of this Agreement "Commercially
Viable" shall mean both (x) the recapture of the Invested Amount by
Supplier within the first two years from the date of commercialization
of the project and (y) a projected return on investment to Supplier of
at least 10% annually over the life of the project.
(b) Supplier Funded Product Improvements. Supplier will exert Commercially
Reasonable Efforts to improve the [***] Products, and to develop new
enteral feeding pumps, disposable sets, and accessories that are
advancements from the [***] Products (each such improvement a "Supplier
Funded Product Improvement"). All intellectual property and other
rights associated with any Supplier Funded Product Improvement will
belong to Supplier; provided, however, that Supplier will provide to
Customer a first right to commercialize such Supplier Funded Product
Improvements in the Territory.
(c) Customer Funded Product Improvements. Customer will not make
improvements to the [***] Products without Supplier's prior written
consent. Customer may hire Supplier to make improvements to the [***]
Products, on terms that are mutually acceptable to Customer and
Supplier, but in any event the costs and expenses associated with such
improvements will be paid for by Customer (each such improvement a
"Customer Funded Product Improvement"). Any such Customer Funded
Product Improvements will be owned by Customer; provided, however, that
Supplier will have an option to license such improvements from
Customer, without the payment of any royalties therefore, for purpose
of manufacturing and selling of such Customer Funded Product
Improvements, alone or in combination with other products, outside of
the Territory.
(d) Jointly Developed Product Improvements. If the parties agree to jointly
develop and fund improvements to the [***] Products and/or the ZEVEX
[***] Products (each such improvement a "Jointly Developed Product
Improvement"), then the parties will jointly own such Jointly Developed
Product Improvements on such terms and conditions to which they
mutually agree. In any event, such agreement will provide that (i)
Supplier will have a license to manufacture, use, and sell such Jointly
Developed Product Improvement, alone or in combination with other
products, in geographic areas outside of the Territory, and (ii)
Customer will have a license to use or sell such Jointly Developed
Product Improvement, alone or in combination with other products,
inside of the Territory.
11. Supplier's Obligations.
(a) Compliance With Laws. Supplier shall comply, and shall ensure that the
storage, manufacture, packaging, labeling, supply, and delivery of
[***] Products or any components thereof, materially comply with
applicable U.S. laws, regulations, rules, and orders (collectively,
"Laws"), and shall make such adjustments as may be necessary to effect
and maintain such compliance throughout the Term. Without limiting the
generality of the foregoing, (i) Supplier's facilities shall comply
with all product safety, sanitation, and environmental Laws, (ii) all
[***] Products shall be clearly and accurately labeled and packaged in
the manner requested by Customer and otherwise as required by all Laws,
and (iii) Supplier acknowledges that it is familiar with the Foreign
and Corrupt Practices Act of the United States and agrees that it shall
at all times comply with such Act in carrying out and performing its
duties under this Agreement.
(b) Approvals. Supplier shall obtain, at its sole expense, all
governmental, administrative, and other approvals, licenses, permits,
and other authorizations and registrations necessary for the operation
and conduct of its business, including without limitation, the
development, manufacture, and supply of the [***] Products.
(c) Necessary Inventory, Equipment, etc. Supplier shall obtain all
inventory, equipment, employees, facilities, and any other item
necessary in order to assure that Supplier has, and will have, the
ability to perform its obligations hereunder in accordance with the
terms and conditions hereof.
12. Price and Payment Terms.
(a) Prices. Customer shall pay Supplier for the [***] Pump Products at the
Initial Product Prices. With respect to all [***] Pump Products other
than the [***] Pump Kits, the Initial Product Prices shall remain
unchanged during the first twelve (12) months after the Effective Date.
After such initial twelve (12) month period, the Initial Product Prices
for [***] Pump Products other than the [***] Pump Kits may be increased
by Supplier on an annual basis. Price increases for the [***] Pump
Accessories may be increased by Supplier by a percentage not to exceed
any proportional increase in the ElectroMedical Apparatus Manufacturing
PCU334510334510 Index published by the U.S. Department of Labor, Bureau
of Labor Statistics (the "ElectroMedical Apparatus Index"), referenced
back twelve (12) months prior to the effective date of such price
change. Prices for the [***] Pump Kits shall be fixed for five years
from the Effective Date. After such five (5) year period, the price for
the [***] Pump Kits may be increased by Supplier by a percentage not to
exceed any proportional increase in the ElectroMedical Apparatus Index,
referenced back twelve (12) months prior to the effective date of such
price change. The product prices, including the Initial Product Prices,
for all [***] Pump Products shall include the cost of all materials,
but do not include shipping costs, taxes, charges, tariffs, and duties,
all of which shall be paid by Customer.
(b) Cost Savings. Supplier will exert Commercially Reasonable Efforts to
reduce the costs of obtaining the materials used in manufacturing of
[***] Pump Accessories. To the extent that cost savings are actually
realized from such efforts, the cost savings shall be split equally
between the parties as set forth herein. These cost savings shall be
determined by comparing the new cost of materials to the costs that
formed the basis for the applicable Initial Product Prices, with
reliance on appropriate supporting data. These cost savings shall be
shared by reducing the Initial Product Prices by an amount equal to one
half of the cost savings.
(c) Payment Terms. Supplier shall provide an invoice to Customer based on
the actual amount of [***] Pump Products shipped to Customer or its
designee(s). Customer shall cause payment for the [***] Pump Products
purchased from Supplier under the terms of this Agreement to be made no
later than ninety (90) days from the end of the month in which the
product was shipped. Late payments will be subject to a 1.5% penalty
per month. All payments will be made via wire transfer in United States
currency.
13. Representations and Warranties.
(a) Supplier's Representations and Warranties. Supplier hereby represents
and warrants to Customer that:
(i) It has the full power, capacity, and right to enter into this
Agreement;
(ii) All corporate action necessary to authorize Supplier to enter into this
Agreement and be legally bound by its terms has been taken;
(iii) Prior to purchase of [***] Products by Customer hereunder, Supplier
will own title to those [***] Products free and clear of liens and
encumbrances;
(iv) It knows of no pending or threatened action in law or in equity which
adversely affects the rights granted herein, and it knows of no basis
for any of the foregoing;
(v) To the knowledge of Supplier, neither the execution and delivery of
this Agreement nor compliance with the obligations of Supplier
hereunder, will violate any law or regulation, or any order or decrees
of any court or government instrumentality;
(vi) Neither the execution and delivery of this Agreement nor compliance
with the obligations of Supplier hereunder, will conflict with, or
result in the breach of, or constitute a default under, any contract,
agreement, instrument or judgment to which Supplier or any officer,
director, employee or controlling person of Supplier is a party, or
which is or purports to be binding upon any of the foregoing persons;
and
(vii) No action, approval, or consent, including, but not limited to, any
action, approval, or consent by any federal, state, municipal, or other
governmental agency, commission, board, bureau, or instrumentality is
necessary in order to constitute this Agreement as a valid, binding,
and enforceable obligation of Supplier in accordance with its terms.
(b) Customer's Representations and Warranties. Customer hereby represents
and warrants that:
(i) It has the full power, capacity, and right to enter into this
Agreement;
(ii) All corporate action necessary to authorize Customer to enter into this
Agreement and be legally bound by its terms has been taken;
(iii) It knows of no pending or threatened action in law or in equity which
adversely affects the rights granted herein, and it knows of no basis
for any of the foregoing;
(iv) To the knowledge of Customer, neither the execution and delivery of
this Agreement nor compliance with the obligations of Customer
hereunder, will violate any law or regulation, or any order or decrees
of any court or government instrumentality;
(v) Neither the execution and delivery of this Agreement nor compliance
with the obligations of Customer hereunder, will conflict with, or
result in the breach of, or constitute a default under, any contract,
agreement, instrument or judgment to which Customer or any officer,
director, employee or controlling person of Customer is a party, or
which is or purports to be binding upon any of the foregoing persons;
and
(vi) No action, approval, or consent, including, but not limited to, any
action, approval, or consent by any federal, state, municipal, or other
governmental agency, commission, board, bureau, or instrumentality is
necessary in order to constitute this Agreement as a valid, binding,
and enforceable obligation of Customer in accordance with its terms.
14. Intellectual Property.
(a) Ownership of Product Rights/Intellectual Property Rights. Supplier has
and will retain all right, title to, and interest in Supplier
Intellectual Property; provided, however, that Supplier has provided
certain rights with respect to the Supplier Intellectual Property to
Customer under the [***] Pump License Agreement. Customer has and will
retain all right, title to, and interest in Customer Intellectual
Property.
(b) Use of Trademarks. Customer hereby grants to Supplier, throughout the
term of this Agreement, a limited, exclusive, non-transferable,
royalty-free license solely to use the trademarks, service marks, trade
names, and logos owned by or licensed to Customer (the "Customer
Trademarks") in labeling and packaging the [***] Products for Customer
for the remainder of the Term only and not thereafter, and at all times
subject to Customer's specifications and the terms and conditions of
this Agreement. Supplier hereby agrees that Customer Trademarks shall
only be affixed to the [***] Products. Supplier shall have no rights to
use Customer Trademarks other than for purposes of labeling and
packaging [***] Products pursuant to this Agreement, which labeling and
packaging shall be in the form and substance previously approved in
writing by Customer. Supplier agrees to submit copies of the proposed
manner, use, and layout of Customer Trademarks for approval by
Customer, in Customer's sole and absolute discretion, prior to Supplier
using Customer Trademarks as set forth herein. Supplier shall not use
Customer Trademarks in advertising or promotional campaigns or
otherwise, or use any confusingly similar names, marks, or logos, in
any manner that, in Customer's sole and absolute discretion, may be
inconsistent with Customer's public image or be misleading or harmful
to Customer. Supplier acknowledges and agrees that Customer Trademarks
are owned exclusively by, or licensed by third parties to, Customer and
that Supplier has neither acquired nor shall acquire any rights
therein. Supplier shall not assert or claim any rights over Customer
Trademarks nor contest same or challenge the validity thereof. The term
"exclusive," as used in this Section 14(b) shall mean that Customer and
Supplier will be the only parties entitled to use the Customer
Trademarks as set forth above. The term "exclusive," as used in this
Section 14(b) shall not constitute or impose any limitation on the
manner in which Customer may use or license the Customer Trademarks in
connection with any product other than the [***] Products, whether such
products are sold or placed inside or outside of the Territory.
Notwithstanding this license, Customer Trademarks shall remain the
property of Customer.
(c) Representations and Warranties regarding Intellectual Property.
Supplier represents and warrants that:
(i) Supplier is the sole legal and beneficial owner of the Supplier
Intellectual Property.
(ii) To the best knowledge of Supplier, none of Supplier's Intellectual
Property infringes or is alleged to infringe upon any patents or other
intellectual property rights of any third party.
(iii) All utility patents held by Supplier in the United States with respect
to the [***] Products have been applied for in the United States, the
European Community, Switzerland, China and Japan. With respect to
Supplier Trademarks, the [***] word mark, the [***] logo design, and
the ZEVEX word mark have either been filed or the filing process has
been initiated in the United States, the European Community,
Switzerland, China, and Japan.
(d) Nationalization of Patents. Supplier will use Commercially Reasonable
Efforts to nationalize its patents relating to the [***] Products in
the following countries in the Territory: United Kingdom, Germany,
France, Italy, Benelux, Austria, and China.
(e) Notice of Infringement.
(i) Supplier shall promptly notify Customer of any actual or apparent
infringement of Customer Intellectual Property of which Supplier
becomes aware. Customer may, at its sole option and expense, prosecute
any suit it deems necessary or appropriate to protect any of Customer's
rights to Customer Intellectual Property from and against infringement
by third parties anywhere in the world and Supplier shall cooperate
fully with Customer in connection with any such action.
(ii) Customer shall promptly notify Supplier of any actual or apparent
infringement of Supplier Intellectual Property of which Customer
becomes aware. Supplier may, at its sole option and expense, prosecute
any suit it deems necessary or appropriate to protect any of Supplier's
rights to Supplier Intellectual Property from and against infringement
by third parties anywhere in the world and Customer shall cooperate
fully with Supplier in connection with any such action.
15. Confidential Information.
(a) Confidential and Proprietary Information.
(i) Disclosure to Customer of Manufacturing File for [***] Products.
Promptly following the execution of this Agreement by the parties,
Supplier will provide Customer with such information relating to the
[***] Products as will be necessary for Customer to obtain the CE Mark
and comply with other applicable laws and regulations relating to the
[***] Products and the transactions contemplated by this Agreement.
(ii) Supplier Obligations with respect to Customer Confidential Information.
----------------------------------------------------------------------
Supplier agrees to hold all confidential information of Customer and
its affiliated companies, including without limitation, any
information relating to Customer's and its affiliates' business
operations, price lists, manufacturing data, marketing information
strategies, customer or product lists, research and development
information and all other information disclosed by Customer or its
affiliates to Supplier ("Customer Confidential Information"), in
strict confidence and not to use any of the foregoing commercially for
its own benefit or that of anyone else nor for the purpose of
developing or improving a product or method for anyone except
Customer. Supplier agrees to limit dissemination of and access
to Customer Confidential Information only to the persons within
Supplier's organization and Supplier's affiliated organizations,
including their respective third party contractors, subcontractors,
manufacturers and business partners, and then only to those persons
who have a need for access thereto, and who have entered into a
restrictive agreement prohibiting such personnel from doing
anything with respect to Customer Confidential Information that
Supplier would itself be prohibited from doing under this
Agreement. Notwithstanding anything to the contrary herein,
Supplier may make such disclosures as necessary in connection with
the preparation, filing, and dissemination of its filings with the
U.S. Securities and Exchange Commission (e.g., 10-Ks, 10-Qs, and
8-Ks) and/or other disclosures as required by applicable law;
provided, however, that it shall first notify Customer of any such
disclosure in order that the parties may seek appropriate confidential
treatment for information they deem to be confidential.
(iii) Customer Obligations with respect to Supplier Confidential Information.
----------------------------------------------------------------------
Customer agrees to hold all confidential information of Supplier and
its affiliated companies, including without limitation, any
information relating to Supplier's and its affiliates' business
operations, price lists, manufacturing data, marketing information
strategies, customer or product lists, research and development
information, and all other information disclosed by Supplier or its
affiliates to Customer ("Supplier Confidential Information"), in
strict confidence and not to use any of the foregoing commercially for
its own benefit or that of anyone else. Customer agrees to limit
dissemination of and access to Supplier Confidential Information
only to the persons within Royal Numico, Numico and Nutricia, and
their affiliates, and their respective third party contractors,
subcontractors, manufacturers and business partners, and then only to
those persons who have a need for access thereto, and who have
entered into a restrictive agreement prohibiting such personnel
from doing anything with respect to Supplier Confidential
Information and such information that Customer would itself be
prohibited from doing under this Agreement. Notwithstanding
anything to the contrary herein, Customer may make such
disclosures as necessary in connection with the preparation, filing,
and dissemination of disclosures as required by applicable law;
provided, however, that it shall first notify Supplier of any such
disclosure in order that the parties may seek appropriate
confidential treatment for information they deem to be
confidential.
(b) Use of Confidential Information of Other Parties. Each party
represents, warrants, and covenants that it will not use in the course
of its performance under this Agreement, or disclose to the other
parties hereto, any confidential or proprietary information of any
third party (including competitors of the other parties) without the
prior written consent of the party to whom such confidential or
proprietary information belongs.
(c) Disclosure does not constitute a License. Neither the execution of this
Agreement nor the disclosure of any confidential or proprietary
information by one party to the other hereunder shall be construed as
granting to the recipient of such information, by implication or
otherwise, any right in, or license to, other than expressly contained
herein, any present or future proprietary information, patent,
trademark, copyright invention, now or hereinafter, owned or controlled
by the disclosing party. Each party will be authorized to use the other
party's confidential information that is disclosed hereunder only for
such purposes as are expressly contemplated by this Agreement.
(d) Notice of Unauthorized Disclosure. If either party becomes aware of any
unauthorized disclosure of the other party's confidential information,
it will immediately notify the other party of such unauthorized
disclosure and will take all reasonable steps to mitigate the potential
harm associated with such unauthorized disclosure.
(e) Survival. The provisions regarding Confidential Information shall
survive the termination or expiration of this Agreement, except that
such obligations shall not limit Customer's rights under the Related
Agreements.
16. Termination.
(a) Termination Events.
(i) Upon a Bankruptcy Event of Customer, Customer shall notify Supplier
thereof within one (1) business day thereof. Supplier may elect to
terminate the Agreement by giving written notice to Customer within
thirty (30) days of that notice.
(ii) Upon a Change of Control of Customer, Customer shall notify Supplier
thereof within one (1) business day of the public announcement thereof.
Thereafter, Supplier may elect to terminate the Agreement by giving
written notice to Customer within thirty (30) days of the public
announcement of the Change of Control of Customer.
(iii) Upon the failure of Customer to pay to Supplier monies when due by
Customer to Supplier under any of this Agreement or the Related
Agreements, Supplier may give notice to Customer of such non-payment.
Thereafter, if Customer fails to pay such monies to Supplier within
five (5) business days of such notice, then this Agreement shall
terminate on that 5th business day. If Customer pays the monies due to
Supplier within those five (5) business days, then this Agreement shall
not terminate.
(iv) Upon a material breach of this Agreement by Customer, Supplier
may give notice to Customer of such material breach. If Customer
fails to cure such material breach within sixty (60) days of such
notice, then this Agreement may be terminated by Supplier at any
time during the period that begins on the sixtieth (60th) day
following such notice and ends on the ninetieth (90th) day following
such notice(the "Supplier Termination Period") by giving written
notice of such termination to Customer before the expiration of the
Supplier Termination Period. Supplier's failure to terminate this
Agreement during the Supplier Termination Period will constitute
a waiver of Supplier's rights to terminate this Agreement by
reason of the applicable breach, but will not constitute a waiver
of Supplier's other rights and remedies under this Agreement, or a
waiver of future similar breaches.
(v) Upon a Bankruptcy Event of Supplier, Supplier shall notify Customer
thereof within one (1) business day thereof. Customer may elect to
terminate the Agreement by giving written notice to Supplier within
thirty (30) days of that notice.
(vi) Upon a Change of Control of Supplier, Supplier shall notify Customer
thereof within one (1) business day of the public announcement thereof.
Thereafter, Customer may elect to terminate the Agreement by giving
notice to Supplier within thirty (30) days of the public announcement
of the Change of Control of Supplier.
(vii) Upon a material breach of this Agreement by Supplier, Customer
may give notice to Supplier of such material breach. If Supplier
cures such material breach within sixty (60) days following such
notice, then this Agreement shall not terminate by reason of that
material breach. If Supplier fails to cure such material breach
within sixty (60) days of such notice, then this Agreement may be
terminated by Customer at any time during the period that begins on the
sixtieth (60th) day following such notice and ends on the ninetieth
(90th) day following such notice (the "Customer Termination
Period") by giving written notice of such termination to Supplier
before the expiration of the Customer Termination Period.
Customer's failure to terminate this Agreement during the Customer
Termination Period will constitute a waiver of Customer's rights
to terminate this Agreement by reason of the applicable
material breach, but will not constitute a waiver of Customer's
other rights and remedies under this Agreement, or a waiver of future
similar breaches.
(viii) At any time after January 1, 2008, Customer may terminate this
Agreement by giving two-years notice pursuant to Section 2 above.
(ix) At any time after January 1, 2008, Supplier may terminate this
Agreement by giving two-years notice pursuant to Section 2 above.
(x) Customer sends a notice of termination of this Agreement due to
Supplier's failure to fulfill a call-off pursuant to the "Termination
Remedy" described in Section 18(c)(iv) below.
(xi) In the event Supplier commences a voluntary proceeding under Title 11
of the Unites States Code (the "Bankruptcy Code") and/or is adjudicated
a debtor in an involuntary case under the Bankruptcy Code, and
subsequently requests authority of the Bankruptcy Court to reject this
Agreement pursuant to Section 365(a) of the Bankruptcy Code, the
rejection of this Agreement, when effective, shall constitute a breach
permitting Customer to terminate this Agreement. Notwithstanding any
other provision to the contrary contained herein or in the Related
Agreements, such breach and termination shall have no effect upon the
Related Agreements or upon the rights of the parties under those
agreements.
(xii) Upon termination of the [***] Pump License Agreement pursuant to
Section 5(b)(iv) thereof, this Agreement shall terminate
contemporaneously with the termination of the [***] Pump License
Agreement.
(xiii) Upon an uncured material breach of the Disposable Set Components Supply
Agreement by Customer, Supplier may terminate this Agreement.
(xiv) Upon an uncured material breach of the Disposable Set Components
License Agreement by Customer, Supplier may terminate this Agreement.
(xv) Upon termination of the Disposable Set Components Supply Agreement
pursuant to Sections 15(a)(i), (ii) or (iii) thereof, this Agreement
shall terminate contemporaneously with the termination of the
Disposable Set Components Supply Agreement.
(xvi) Upon termination of the Disposable Set Components License Agreement
pursuant to Sections 5(b)(i), (ii) or (iii) thereof, this Agreement
shall terminate contemporaneously with the termination of the
Disposable Set Components License Agreement.
(b) Effect of Termination, Expiration, or Non-Renewal.
(i) Purchase of Inventory.
(1) Following the termination of this Agreement due to a Bankruptcy Event
of Customer pursuant to Section 16(a)(i) above, or due to the Change of
Control of Customer pursuant to Section 16(a)(ii) above, or due to the
failure of Customer to pay monies to Supplier hereunder pursuant to
Section 16(a)(iii) above, or due to a material breach of the Agreement
by Customer pursuant to Section 16(a)(iv) above, then, within thirty
(30) days of any such termination, Customer shall purchase all of
Supplier's inventory of finished [***] Pump Products and all of
Supplier's inventory of custom components for the [***] Pump Products;
provided, however, that Customer shall not be required to purchase such
inventories to the extent that they exceed Customer's forecasted
requirements hereunder for ninety (90) days following the termination
date. Supplier acknowledges and agrees that Customer will be entitled
to sell or place within the Territory any [***] Pump Products that
Customer purchases pursuant to this Section 16(b)(i)(1).
(2) Following the termination of the Agreement due to a failure of Supplier
to fulfill call-offs pursuant to Section 16(a)(x) (with reference to
Section18(c)(iv)), due to a Bankruptcy Event of Supplier pursuant to
Section 16(a)(v) above, or due to the Change of Control of Supplier
pursuant to Section 16(a)(vi) above, or due to a material breach of the
Agreement by Supplier pursuant to Section 16(a)(vii) above, then,
within thirty (30) days of such termination, Customer may elect to
purchase all or any portion of Supplier's inventory of finished [***]
Pump Products and Supplier's inventory of custom components for the
[***] Pump Products. If Customer elects to purchase less than all of
these inventories, then Supplier, at its expense, shall destroy the
remaining inventories of the custom components of the [***] Pump
Products whether or not these components have already been incorporated
into finished [***] Pump Products. Supplier may use for its own
purposes all the remaining components of the [***] Pump Products that
are not custom components for the [***] Pump Products.
(ii) Return of Materials Upon Termination.
-------------------------------------
Upon termination, expiration, or non-renewal of this Agreement,
each party shall return to the other party all materials and
documents containing confidential and proprietary information,
including any copies or extracts thereof, and shall erase any copies
thereof contained in any electronic or other memory device. In
addition, at that time each party shall immediately cease and
desist from using any confidential or proprietary information of the
other parties hereto for any purpose whatsoever. Each party will
certify in writing to the other, within thirty (30) days after any
such termination, expiration, or non-renewal of this Agreement,
that they have complied with this Section 16(b)(ii), and, upon
request by the other party, will provide reasonable evidence of
such compliance. Nothing herein shall operate to limit any rights
Customer has under the [***] Pump License Agreement.
(c) Neither party in exercising its rights to terminate this Agreement in
accordance with the terms and conditions hereof shall incur any
liability whatsoever for any damage, loss or expense of any kind
suffered or incurred by the other (or for any compensation to the
other) arising from or incident to any such termination (except if such
termination is for a material breach of this Agreement), expiration or
non-renewal, whether or not the terminating party is aware of any such
damage loss or expense. Any termination hereof shall not impair any
rights nor discharge any obligations which have accrued to the parties
as of the effective date of such termination.
17. Indemnification; Insurance.
(a) Supplier's Indemnification. Supplier shall indemnify, defend and hold
Customer, its affiliates, and their respective officers, directors,
employees and agents (each, a "Supplier Indemnified Party"), harmless
from and against any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties, reasonable attorneys' fees, costs of
investigation and any legal or other expenses or costs ("Losses")
incurred or suffered by any Supplier Indemnified Party arising out of,
in connection with or resulting from any claim, allegation or judgment
as to: (i) any third party product liability claim relating to any
[***] Product, (ii) any violation or infringement by Supplier upon any
common law or statutory intellectual property rights of any third party
that arises from or relates to Supplier Intellectual Property and the
[***] Pump Products, or (iii) any inaccuracy or breach in any of
Supplier's representations and warranties under this Agreement;
provided, however, that Supplier shall have no obligation to indemnify
Customer for any Losses to the extent such Losses are caused by any
negligent or willful act or omission of Customer. With respect to
Section 17(a)(ii) above, Supplier shall provide, at its own cost,
non-infringing replacements for the infringing portions of the [***]
Pump Products of equivalent quality and effect, or obtain at its own
cost the necessary licenses from third parties to allow Customer to
continue to market, sell, distribute, and promote the [***] Pump
Products as contemplated by the parties under this Agreement. The
rights of Customer and obligations of Supplier relating to any failure
of any [***] Product to comply with the Product Warranties set forth in
Section 7(g) above are described in the Maintenance and Service
Agreement and in Section 7(i) above.
(b) Customer's Indemnification. Customer agrees to indemnify, defend and
hold harmless Supplier, its affiliates, and their respective officers,
directors, employees and agents (each, a "Customer Indemnified Party")
from and against any and all Losses (as defined in Section 17(a) above)
incurred or suffered by any Customer Indemnified Party arising out of,
in connection with or resulting from any claim, allegation or judgment
as to: (i) any violation or infringement by Customer upon any common
law or statutory intellectual property rights of any third party that
arises from or relates to Customer Intellectual Property, or (ii) any
inaccuracy or breach in any of Customer's representations and
warranties under this Agreement; provided, however, that Customer shall
have no obligation to indemnify Supplier for any Losses to the extent
such Losses are caused by any negligent or willful act or omission of
Supplier. Further, with respect to rights of Supplier under Section
17(b)(i) above, Customer shall provide, at its own cost, non-infringing
replacements for the infringing portions of Customer Intellectual
Property of equivalent quality and effect, or obtain at its own cost
the necessary licenses from third parties to allow Supplier to continue
to manufacture and supply the [***] Pump Products as contemplated by
the parties under this Agreement.
(c) Indemnification Procedure for Matters Involving Third Parties.
(i) If any third party notifies any party hereto (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against the other party hereto (the
"Indemnifying Party") under Section 17(a) or 17(b) (as applicable),
then the Indemnified Party shall promptly notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) that the Indemnifying Party is prejudiced
thereby.
(ii) Any Indemnifying Party will have the obligation to assume the defense
of the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party at any time within 15 days after
the Indemnified Party has given notice of the Third Party Claim;
provided, however, that the Indemnifying Party must conduct the defense
of the Third Party Claim actively and diligently thereafter in order to
preserve its rights in this regard; and provided further that the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim.
(iii) So long as the Indemnifying Party has assumed and is conducting the
defense of the Third Party Claim in accordance with Section 17(c)(ii)
above, (A) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) unless the
judgment or proposed settlement involves only the payment of
money damages by one or more of the Indemnifying Parties and does
not impose an injunction or other equitable relief upon the
Indemnified Party and (B)the Indemnified Party will not consent to
the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnifying Party (which shall not be unreasonably withheld).
(iv) If the Indemnifying Party does not assume and conduct the defense of
the Third Party Claim in accordance with Section 17(c)(ii) above,
however, (A) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it reasonably may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent
from, any Indemnifying Party in connection therewith) and (B) the
Indemnifying Party will remain responsible to indemnify the Indemnified
Party under Section 17(a) or 17(b) (as applicable).
(d) Indemnification Procedure for Matters not Involving Third Parties. A
claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification
is sought.
(e) Insurance.
(i) Supplier shall maintain in full force and effect throughout the Term,
at its sole cost and expense, insurance with financially sound and
established reputable insurers of the type and quantity (and with
such risk retention) generally maintained by the companies of
established repute in Supplier's line of business, such insurance to
include, without limitation, products liability insurance and general
liability insurance each, in an amount no less than ten million U.S.
dollars (U.S. $10,000,000.00) per occurrence. Supplier shall upon
request provide Customer with a copy of any documentation relating to
any such insurances. Supplier shall have Customer named as an
additional insured beneficiary, with Customer able to claim thereunder
as primary beneficiary and without offset or deduction whatsoever as a
result of any insurance obtained by Customer, and shall contain a
waiver of subrogation by the respective insurance carrier against
Customer's and its affiliates' insurance carrier, with respect to
Supplier's obligations under this Agreement.
(ii) Customer shall maintain in full force and effect throughout the Term,
at its sole cost and expense, insurance with financially sound and
established reputable insurers of the type and quantity (and with
such risk retention) generally maintained by the companies of
established repute in Customer's line of business, such insurance to
include, without limitation, products liability insurance and general
liability insurance each, in an amount no less than ten million U.S.
dollars (U.S. $10,000,000.00) per occurrence. Customer shall upon
request provide Supplier with a copy of any documentation relating to
any such insurances. Customer shall have Supplier named as an
additional insured beneficiary, with Supplier able to claim thereunder
as primary beneficiary and without offset or deduction whatsoever as a
result of any insurance obtained by Supplier, and shall contain a
waiver of subrogation by the respective insurance carrier against
Supplier's and its affiliates' insurance carrier, with respect to
Customer's obligations under this Agreement.
(f) Limitations on Supplier's Liability. SUPPLIER'S MAXIMUM LIABILITY TO
CUSTOMER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY CUSTOMER
UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR
PRODUCT LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED
$1,000,000; PROVIDED, HOWEVER, THAT SUPPLIER'S MAXIMUM LIABILITY TO
CUSTOMER FOR DAMAGES, IF ANY, RELATING TO CLAIM(S) MADE BY CUSTOMER
THAT ARISE OUT OF THE SAME FACTS AND CIRCUMSTANCES, WHETHER SUCH
CLAIM(S) ARE MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS, SHALL IN NO EVENT EXCEED $1,000,000. SUPPLIER'S MAXIMUM
LIABILITY TO CUSTOMER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S)
MADE BY CUSTOMER FOR INDEMNIFICATION FOR A PRODUCT LIABILITY CLAIM BY A
THIRD PARTY SHALL IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE
PROCEEDS AVAILABLE TO SUPPLIER WITH RESPECT TO SUCH CLAIM, WHETHER SUCH
CLAIM IS MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS.
(g) Limitations on Customer's Liability. CUSTOMER'S MAXIMUM LIABILITY TO
SUPPLIER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY SUPPLIER
UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR
PRODUCT LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED
$1,000,000; PROVIDED, HOWEVER, THAT CUSTOMER'S MAXIMUM LIABILITY TO
SUPPLIER FOR DAMAGES, IF ANY, RELATING TO CLAIM(S) MADE BY SUPPLIER
THAT ARISE OUT OF THE SAME FACTS AND CIRCUMSTANCES, WHETHER SUCH
CLAIM(S) ARE MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS, SHALL IN NO EVENT EXCEED $1,000,000. CUSTOMER'S MAXIMUM
LIABILITY TO SUPPLIER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S)
MADE BY SUPPLIER FOR INDEMNIFICATION FOR A PRODUCT LIABILITY CLAIM BY A
THIRD PARTY SHALL IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE
PROCEEDS AVAILABLE TO CUSTOMER WITH RESPECT TO SUCH CLAIM, WHETHER SUCH
CLAIM IS MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS.
(h) No Consequential Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF
THE BREACHING PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES
IN ADVANCE. The parties intend this limitation in this Section 17(h) to
apply to the following events, among other events: (i) any claim for
consequential damages suffered by the non-breaching party (as opposed
to any third party) arising out of any claim by a third party for
either product liability or infringement of intellectual property ,
(ii) any breach by either party of its representations under this
agreement, (iii) any non-performance or mal-performance by either party
under this Agreement, or (iv) the termination or expiration of this
Agreement by either party. Such incidental or consequential damages
shall include, but shall not be limited to, loss of goodwill, loss of
prospective profits, loss of revenue, or damages on account of any
investment, expenditure, or commitment that is made by either party in
reliance upon this Agreement. This limitation in this Section 17(h) is
not intended by the parties to prevent Customer, for example, from
recovering from Supplier, in an indemnification claim made under
Section 17(a)(i), the full amount that it has been required to pay to a
third party in connection with a product liability claim brought by
such third party against Customer, including such incidental or
consequential damages as may be allowed by law under that claim by that
third party. This limitation in this Section 17(h) is, nevertheless,
intended to prevent the non-breaching party from receiving from the
breaching party, in an indemnification claim under Section 17(a) or
17(b), incidental or consequential losses or damages that have been
incurred by the non-breaching party (as opposed to any third party),
such as lost profits, that may arise from or relate to any event under
this Agreement.
18. Failure to Fulfill Call-Offs.
(a) Failure to Fulfill a Call-Off. If, at any time after
January 1, 2005, Supplier fails to fulfill call-offs of the [***] Pump Products
to Customer in accordance with any call-off made under the terms and conditions
of this Agreement (a "Call-Off Breach"), then (i) Supplier will have a period of
one (1) year within which to cure that Call-Off Breach in the manner described
in this Section 18, and (ii) Customer will have such additional rights as
provided in this Section 18. The date of the Call-Off Breach shall be the last
day on which Supplier could have fulfilled the call-off on a timely basis under
the other terms and conditions of this Agreement other than those in this
Section 18.
(b) Determination of Customer Demand Requirements. On or
before the thirtieth (30th) day following a Call-Off Breach, Customer shall (i)
have made a reasonable, good faith determination of its Customer Demand, and
(ii) have notified Supplier in writing of Customer's determination of the
Customer Demand. Such determination shall be based on Customer's existing back
orders for such [***] Product calling for delivery within eighty-one (81) days
after the Call-Off Breach. Upon the request of Supplier, Customer will provide
Supplier with reasonable evidence of such back orders.
(i) If Customer reasonably determines in good faith
that Customer could meet its Customer Demand for such [***] Product
either (A) out of its own inventory of such product, and/or (B) by
receiving from Supplier some lesser number of such product than was
called for by the relevant call-off, then Customer will waive in
writing that portion of the quantity of the relevant call-off that
exceeds the Customer Demand.
(ii) If Customer reasonably determines in good faith
that Customer cannot meet its Customer Demand for such [***] Product
either (A) out of its own inventory of such product, and/or (B) by
receiving from Supplier some lesser number of such product than was
called for by the relevant call-off, then no portion of the quantity
order under the relevant call-off will be waived.
(c) Effect of Continuing Call-Off Breach on Manufacture and
Supply of [***] Pump Products. Subject to Supplier's right to cure any Call-Off
Breach as provided in this Section 18, Customer shall have the following rights:
(i) If, as of the end of the sixtieth (60th) day
after a Call-Off Breach, Supplier has been unable to cure the Call-Off
Breach by supplying the quantities of products necessary to fulfill the
relevant call-off (as modified by any waiver of any portion of that
call-off pursuant to Section 18(b) above), then, during the ensuing
fifteen (15) days, Customer may choose to invoke either or both of the
"Manufacturing Remedy" (defined below) or of the "Non-Exclusivity
Remedy" (defined below) by providing written notice to Supplier of its
election to invoke such remedy(ies). Such initial election of
remedy(ies) or later change in election shall become effective
immediately upon such notice. If, as of the end of one (1) year after
the Call-Off Breach, Supplier has been unable to cure the Call-Off
Breach, as provided in Section 18(d)(iii) below, Customer may choose to
invoke the "Termination Remedy" (defined below) by providing written
notice to Supplier.
(ii) Under the "Manufacturing Remedy," if invoked
pursuant to subsection 18(c)(i) above, those terms of this Agreement
applicable to the manufacture and supply of the [***] Pump Products,
including but not limited to the appointment of Supplier as the
exclusive manufacturer of such products and the Minimum Purchase
Commitment, will be suspended. Upon such suspension, Customer will be
entitled to manufacture the [***] Pump Products under the terms of the
separate [***] Pump License Agreement. This suspension shall last only
until (i) this Agreement terminates under any of the provisions of
Section 16(a) above or Section 18(c)(iv) below (as applicable) or (ii)
Supplier cures the Call-Off Breach as permitted under Section 18(d).
Upon a termination of this Manufacturing Remedy pursuant to subsection
18(d)(ii) below, Customer may continue to manufacture or have
manufactured the [***] Pump Products for a reasonable time thereafter,
which period shall not exceed sixty (60) days from the date the
Manufacturing Remedy is so terminated. Thereafter, Supplier will once
again be the exclusive manufacturer of the [***] Pump Products under
this Agreement.
(iii) Under the "Non-Exclusivity Remedy," if invoked
pursuant to subsection 18(c)(i) above, those terms of this Agreement
applicable to the manufacture and supply of the [***] Pump Products,
including but not limited to the appointment of Supplier as the
exclusive manufacturer of such products and the Minimum Purchase
Commitment, will be suspended. Upon such suspension, Customer will be
allowed to sell and/or place within the Territory clinical nutrition
pumps and accessories that it obtains from sources other than Supplier,
notwithstanding the limitations imposed by Section 5(c) above or
elsewhere in this Agreement. This non-exclusivity shall last until (i)
this Agreement terminates under any of the provisions of Section 16(a)
above or subsection 18(c)(iv) below (as applicable) or (ii) Supplier
cures the Call-Off Breach as permitted under this Section 18(d). Upon a
termination of this Non-Exclusivity Remedy pursuant to subsection
18(d)(ii) below, Customer may continue to obtain clinical nutrition
pumps from sources other than Supplier for a reasonable time
thereafter, which period shall not exceed sixty (60) days from the date
the Non-Exclusivity Remedy is so terminated. Thereafter, Supplier will
once again be the exclusive manufacturer of the [***] Pump Products
under this Agreement.
(iv) Under the "Termination Remedy," if Supplier
fails to cure a Call-Off Breach within one (1) year from the date of
such breach (as provided in this Section 18), then, notwithstanding any
prior election of remedy by Customer as permitted above, Customer may,
upon written notice to Supplier, terminate this Agreement, immediately
upon lapse of such one-year period. Such termination shall have no
effect on any of the Related Agreements, and Customer shall have the
right to exercise all of its rights thereunder.
(d) Means of Cure. Supplier may cure any Call-Off Breach under
any of the following alternative means of cure, in which event the Call-Off
Breach shall be deemed cured for all purposes, and Supplier's right to the
Manufacturing Remedy, the Non-Exclusivity Remedy, or the Termination Remedy, as
applicable, shall terminate:
(i) Supplier may cure a Call-Off Breach if, at any
time on or before the end of the sixtieth (60th) day following the
Call-Off Breach, Supplier delivers to Customer that number of [***]
Pump Products identified by Customer in its determination of Customer
Demand.
(ii) Supplier may cure a Call-Off Breach if, any time
after the sixtieth (60th) day following the Call-Off Breach, but on or
before the end of the one-hundred and twentieth (120th) day following
the Call-Off Breach, Supplier provides reasonable evidence and
certifies in writing to Customer that Supplier has made a good-faith,
reasonable determination that Supplier is again capable of producing
the [***] Pump Products at the forecasted levels that were in effect as
of the date of the applicable Call-Off Breach.
(iii) Supplier may cure a Call-Off Breach if, at any
time after the one-hundred and twentieth (120th) day following the
Call-Off Breach, but on or before the end of the date one (1) year
following the Call-Off Breach, Supplier (A) provides reasonable
evidence and certifies in writing to Customer that Supplier has made a
good-faith, reasonable determination that Supplier is again capable of
producing the [***] Pump Products at the forecasted levels that were in
effect as of the date of the applicable Call-Off Breach, and (B)
obtains a release of Customer from all future liabilities and
obligations of any kind or nature arising under Replacement Contracts
(defined below) from the date that Supplier proposes to cure the
Call-Off Breach. "Replacement Contracts" means such contract(s) as
Customer reasonably enters into with one or more third parties in order
to obtain the products necessary to replace the [***] Pump Products not
provided by Supplier (A) that may always be terminated by Customer
without penalty upon no more than one (1) year's notice, and (B) that
require Customer to purchase quantities of the applicable [***] Pump
Products that do not exceed Customer's reasonable forecasts for such
products during the period of the contract. Customer agrees to
cooperate with Supplier in Supplier's efforts to obtain such releases.
(e) Failure to Fulfill a Call-Off due to Supply Chain Failure.
Notwithstanding the foregoing, no Call-Off Breach shall be deemed to have
occurred if Supplier's inability to timely fulfill a call-off is due to
Supplier's inability to obtain from its suppliers a sufficient supply of
materials, components, and/or subassemblies for the [***] Pump Products (such
failure being a "Supply Chain Failure"). In such instance, those terms of this
Agreement applicable to the manufacture and supply of the [***] Pump Products
for which a Supply Chain Failure has occurred will be suspended. Upon such
suspension, Customer will be allowed to sell and/or place within the Territory
clinical nutrition pumps and accessories that it obtains from sources other than
Supplier, notwithstanding the limitations imposed by Section 5(c) above or
elsewhere in this Agreement. This non-exclusivity shall last until (i) this
Agreement terminates under any of the provisions of Section 16(a) above or (ii)
Supplier cures the Supply Chain Failure as permitted under Section 18(f). Upon a
termination of this suspension pursuant to subsection 18(f)(ii) below, Customer
may continue to obtain clinical nutrition pumps from sources other than Supplier
for a reasonable time thereafter, which period shall not exceed sixty (60) days
from the date the suspension of exclusivity provided under this Section 18(e)
terminates. Thereafter, Supplier will once again be the exclusive manufacturer
of the [***] Pump Products under this Agreement.
(f) Means of Cure of Supply Chain Failure. Supplier may cure
any Supply Chain Failure under any of the following alternative means of cure:
(i) Supplier may cure a Supply Chain Failure if, at
any time on or before the end of the sixtieth (60th) day following the
Supply Chain Failure, Supplier delivers to Customer that number of
[***] Pump Products identified by Customer in its determination of
Customer Demand.
(ii) Supplier may cure a Supply Chain Failure if, any
time after the sixtieth (60th) day following the Supply Chain Failure,
but on or before the end of the one-hundred and twentieth (120th) day
following the Supply Chain Failure, Supplier provides reasonable
evidence and certifies in writing to Customer that Supplier has made a
good-faith, reasonable determination that Supplier is again capable of
producing the [***] Pump Products at the forecasted levels that were in
effect as of the date of the applicable Supply Chain Failure.
(iii) Supplier may cure a Supply Chain Failure if, at
any time after the one-hundred and twentieth (120th) day following the
Supply Chain Failure, but on or before the end of the date one (1) year
following the Supply Chain Failure, Supplier (A) provides reasonable
evidence and certifies in writing to Customer that Supplier has made a
good-faith, reasonable determination that Supplier is again capable of
producing the [***] Pump Products at the forecasted levels that were in
effect as of the date of the applicable Supply Chain Failure, and (B)
obtains a release of Customer from all future liabilities and
obligations of any kind or nature arising under Replacement Contracts
(as defined in Section 18(d)(iii) above) from the date that Supplier
proposes to cure the Supply Chain Failure.
19. Recall and Regulatory Obligations.
(a) Product Recalls. Supplier will conduct (with the reasonable cooperation of
Customer) and pay the costs and expenses associated with any mandatory recall of
any [***] Products required by any governmental agency (other than recalls
relating to product labeling). In addition, Supplier will conduct (with the
reasonable cooperation of Customer) and pay the costs and expenses associated
with any voluntary recall of any [***] Product that Supplier reasonably approves
based on (i) safety risks to users of such [***] Product, or (ii) failure of
such [***] Product to meet the Product Specifications applicable to that [***]
Product, or (iii) failure to conform to any of the standards and specifications
set forth in Section 6(a)(i). Customer has the sole authority to unilaterally
recall any [***] Products due to other reasons, but in such event will both
conduct the recall (with the reasonable cooperation of Supplier) and pay all
costs and expenses associated with such recall.
(b) Notice of Other Recalls. Supplier will promptly notify Customer of any
recall of any clinical nutrition delivery product manufactured by Supplier other
than the [***] Products. Customer will promptly notify Supplier of any recall of
any clinical nutrition pump or disposable set manufactured, sold, or placed by
Customer other than the [***] Products.
(c) Regulatory Compliance. Customer shall be responsible, at its own expense for
complying with all applicable national, state, regional and local laws and
regulations in performing its duties hereunder and in any of its dealings with
respect to the [***] Products, including all regulatory activities necessary to
maintain the [***] Products' CE Mark and other regulatory approvals within the
Territory.
20. New Products. By mutual written agreement, the parties may, from time to
time, add to this Agreement additional products to be manufactured and supplied
by Supplier under the terms and conditions hereof. Pricing and other specific
terms for any such additional products shall be mutually agreed upon between the
parties. This provision shall not apply to Supplier Funded Product Improvements,
which shall be made available to Customer under Section 10(b).
21. Survival. Any provision of this Agreement which contemplates performance or
the existence of rights or obligations after the expiration, non-renewal, or
termination of this Agreement shall expressly survive such expiration,
non-renewal, or termination of this Agreement and shall be binding upon the
party or parties obligated thereby in accordance with the terms of this
Agreement, subject to any limitations expressly set forth in this Agreement.
22. Amendment or Waiver. This Agreement cannot be changed orally, and no
modification of this Agreement shall be recognized nor have any effect, unless
the writing in which it is set forth is signed by Customer and Supplier, nor
shall any waiver of any of the provisions of this Agreement be effective unless
in writing and signed by the party to be charged therewith. The failure of
either party to enforce, at any time or for any period of time, the provisions
hereof, or the failure of either party to exercise any option herein shall not
be construed as a waiver of such provision or option and shall in no way affect
that party's right to enforce such provisions or exercise such option. No waiver
of any provision hereof shall be deemed a waiver of any succeeding breach of the
same or any other provisions of this Agreement.
23. Dispute Resolution; Governing Law; Injunctive Relief.
(a) Negotiations. The parties agree that they will attempt in good faith to
resolve any controversy, claim, dispute or question between them arising out of
or relating to this Agreement, including the construction or application of this
Agreement, promptly by negotiations between the parties, beginning with
discussions between the Designated Representatives. If a controversy or claim
should arise, the Designated Representatives of the parties, as well as other
appropriate representatives, will meet at least once and will attempt to resolve
the matter. Either of the Designated Representatives may request the other to
meet within fourteen (14) days, at a mutually agreed time and place.
(b) Mediation. If the matter has not been resolved within thirty (30) days of
this meeting, the controversy or claim shall be submitted to non-binding
mediation by a mediator chosen from names of mediators furnished by JAMS or
American Arbitration Association. The mediation shall occur in New York City,
New York, U.S.A.
(c) Litigation. In the event that differences concerning matters covered by this
Agreement arise that are not resolved by mutual agreement via negotiations or
mediation as described above, the parties agree that any action or proceeding
arising out of or relating to this Agreement shall be heard and decided by a
non-jury bench trial in New York City, New York, U.S.A. Each party hereto
irrevocably submits to the jurisdiction of the appropriate state court covering
New York City, New York, U.S.A., and each party hereby irrevocably agrees that
all claims in respect of any such action or proceeding must be brought and/or
defended in such court; provided, however, that matters which are under the
exclusive jurisdiction of the Federal courts shall be brought in the Federal
District Court covering New York City, New York, U.S.A.
(d) Governing Law. The provisions of this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, U.S.A.
(excluding any conflict of law rule or principle that would refer to the laws of
another jurisdiction and the U.N. Convention on Contracts for the International
Sales of Goods). EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY
JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
(e) Injunctive Relief. Each of the parties acknowledge and agree that the other
parties will be damaged irreparably if certain provisions of this Agreement
(specifically including the obligations of confidentiality set forth in Section
15 herein) are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, notwithstanding any other provision in this
Agreement the damaged party shall have the right to pursue a claim for
injunctive relief, damages and attorneys' fees in any court of competent
jurisdiction for the other party's breach of any covenant, agreement or
obligation, in addition to any other relief available to them under this
Agreement or under applicable law.
(f) Fees. The parties shall equally split the fees of any mediation, but in any
arbitration or permissible legal proceedings, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and other disbursements in
addition to any other relief to which such party may be entitled.
24. Counterparts. This Agreement may be executed in multiple counterparts, which
taken together shall constitute one instrument and each of which shall be
considered an original for all purposes.
25. Notices. Any and all notices permitted or required to be given hereunder
shall be deemed duly given: (i) upon actual delivery, if delivery is by hand;
(ii) upon delivery by overnight express courier (i.e. DHL or FedEx); or (iii)
upon facsimile transmission, so long as the original is then sent by overnight
express courier delivery. Each such notice shall be sent to the respective party
at the address indicated below:
If to ZEVEX: ZEVEX International Inc.
4314 ZEVEX Park Lane
Salt Lake City, Utah 84123
Attn: Chairman and CEO
Fax: (801) 264-1051
with a copy to the CFO
at the same address.
If to Numico: Numico Trading B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Luc Volatier, V.P. of
Purchasing Worldwide
Fax: 31206586159
If to Nutricia: c/o Nutricia International B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Rob Heutink, V.P.
Manufacturing and Supply,
Emerging Markets
Fax: 31206586884
or such other address or facsimile number as any of the persons designated above
may have specified in a notice or communication duly given to the other
designated person as provided herein.
26. Binding Effect; Non-Assignability. This Agreement shall be binding upon and
enforceable against the parties hereto and their respective successors and
permitted assigns. Neither party shall assign or subcontract (except as
expressly allowed hereunder) its rights and obligations under this Agreement
without the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that either party may assign this
Agreement to an affiliate of such party.
27. Relationship of the Parties. The parties are and at all times shall be
deemed to be independent contractors and shall be wholly responsible for the
goods supplied and services performed under this Agreement. Nothing contained
herein shall be construed as creating the relationship of employer/employee or
principal/agent. Each party shall assume full responsibility for the actions of
its employees as related to the party's obligations under this Agreement.
Neither party to this agreement is hereby constituted an agent of the other for
any purpose and neither party has the authority to assume or create any
obligation, or to make any representation, warranty or guarantee for the other,
except as expressly granted or made in this agreement.
28. Force Majeure. Neither party shall be responsible or liable for any default
in performance of this Agreement arising directly or indirectly from any cause
beyond such party's control, including fire, flood, earthquake, acts of God, war
(declared or undeclared), enemy action, embargo, strike, governmental order,
proclamation or regulation, accident, explosion, riot, insurrection, or
expropriation of the property by government authority (each such event a "Force
Majeure Event"). If a Force Majeure Event occurs, the parties will exert
reasonable efforts (including, without limitation, utilizing, as and where
appropriate, the contingency plan developed by the parties pursuant to Section
4(b) above) to mitigate the impact of such Force Majeure Event on the business
arrangements of the parties set forth in this Agreement and to otherwise carry
out the intent and accomplish the objectives of this Agreement.
29. Exhibits and Schedules. Any exhibit or schedule attached hereto is made a
part hereof and is fully incorporated herein by reference.
30. Entire Agreement. This Agreement contains the sole and complete
understanding of the parties related to its subject matter, and supersedes all
oral or written agreements concerning this subject matter made prior to the date
of this Agreement.
31. Remedies Not Exclusive. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy will be cumulative and will be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies will not
constitute a waiver of the right to pursue other available remedies.
32. Partial Invalidity. If any provision of this Agreement is adjudged to be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired, and
the parties shall use their best efforts to substitute a valid, legal, and
enforceable provision which, insofar as practical, implements the purposes of
this Agreement.
33. Language; Interpretation. The language controlling the construction and
interpretation of this Agreement shall be English. Section headings are included
solely for convenience and shall not constitute a part hereof. Unless the
context otherwise requires, words importing the singular shall be deemed to
import the plural and vice versa.
34. Third Party Beneficiaries. No person or entity shall be a third-party
beneficiary of this Agreement, except that Supplier acknowledges and agrees that
its obligations under the product warranties set forth in Section 7(g) above
shall be deemed as commitments to all affiliates of Customer as third-party
beneficiaries.
35. Media Relations. Each of Customer and Supplier agree that during the Term
each will not, and will cause its affiliates not to, disparage each other or
release commercially sensitive information about each other in any oral,
written, or electronic public statements (including without limitation in any
securities filing with the U.S. Securities and Exchange Commission) concerning
any matters relating to or arising from this Agreement.
IN WITNESS WHEREOF, the parties enter into this Agreement effective as
of the Effective Date.
ZEVEX INTERNATIONAL, INC.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
NUTRICIA INTERNATIONAL, B.V.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
NUMICO TRADING B.V.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
EXHIBIT A
[***] DISPOSABLE SET COMPONENTS
ZEVEX Part Number Description
[***] [***] Pump LIM Segment [***] [***] [***] Pump Cassette
EXHIBIT B
[***] PUMP ACCESSORIES
ZEVEX Part Number Description
[***] Flocare [***] AC Adapter/Charger
[***] Flocare [***] Pole Clamp
[***] Flocare [***] Nurse Call
[***] ZEVEX Custom [***] Carry Pack
[***] Operator's Manual for Flocare [***] (Western Europe)
[***] Operator's Manual for Flocare [***] +(Western Europe)
[***] Operator's Manual for Flocare [***] Paediatric
(Western Europe)
[***] Operator's Manual for Flocare [***] (UK - Export)
[***] Operator's Manual for Flocare [***] + (UK - Export)
[***] Operator's Manual for Flocare [***] Paediatric
(UK - Export)
EXHIBIT C
INITIAL PRODUCT PRICES
Product Pricing for [***] Pump Kits:
The Initial Product Price for each [***] Pump Kit will be [***] (U.S.
Dollars), which includes [***] under this Agreement and a [***] royalty
payment under the [***] Pump License Agreement.
Product Pricing for individual [***] Pump Accessories:
The Initial Product Price for individual [***] Pump Accessories will be
calculated using the following formula:
[***] x Manufacturing Cost = Initial Product Price for such [***] Pump Accessory
ZEVEX Initial
Part Number Description Manufacturing Cost
- ----------- ----------- ------------------
[***] Battery Pack [***]
[***] Door, Flocare [***], individually packaged [***]
[***] Door, Flocare [***] +, individually packaged [***]
[***] Door, Flocare [***] Paediatric, individually packaged [***]
[***] Flocare [***] AC Adapter/Charger, individually packaged [***]
(Plug must also be purchased)
[***] Plug, UK [***]
[***] Plug, Euro [***]
[***] Plug, Australian [***]
[***] Plug, IEC 320 [***]
[***] Flocare [***] Pole Clamp, individually packaged [***]
[***] units per year minimum annual purchase
quantity)
[***] Flocare [***] Nurse Call [***] [***] units per year
minimum annual purchase quantity)
[***] ZEVEX Custom [***] Carry Pack [***]
[***] Operator's Manual for Flocare [***] (Western Europe) [***]
[***] Operator's Manual for Flocare [***] + (Western Europe) [***]
[***] Operator's Manual for Flocare [***] Paediatric (Western Europe) [***]
[***] Operator's Manual for Flocare [***] (UK - Export) [***]
[*** Operator's Manual for Flocare [***] + (UK - Export) [***]
[***1 Operator's Manual for Flocare [***] Paediatric (UK - Export) [***]
For purposes of this Agreement, "Manufacturing Cost" will be the price paid by
Supplier to its supplier for such [***] Pump Accessory, when no assembly is
required by Supplier.
EXHIBIT D
MAXIMUM MONTHLY PRODUCT AMOUNT
The Maximum Monthly Product Amount for the [***] Pump Kits is [***] units per
calendar month.
EXHIBIT E
MINIMUM PURCHASE COMMITMENT
The Minimum Purchase Commitment for [***] Pump Kits is [***]
units per calendar year.
EXHIBIT F
PRODUCT SPECIFICATIONS
The product specifications for the [***] Products are documented in the Flocare
[***] Enteral Feeding Pump User Requirements, ZEVEX document number [***] and
Flocare [***] Enteral Feeding Pump Nurse Call User Requirements, ZEVEX document
number [***].
EXHIBIT G
CRITICAL COMPONENTS AND SUPPLIERS
ZEVEX
Part Number Description Supplier
- ----------- ----------- --------
[***] Housing, Bottom, [***] Pump [***]
[***] Housing, Top, Flocare [***] [***]
[***] Housing, Top, Flocare [***] +/Paediatric [***]
[***] Cover, Flocare [***] [***]
[***] Cover, Flocare [***] + [***]
[***] Cover, Flocare [***] Paediatric [***]
[***] Motor [***]
[***] Flocare [***] AC Adapter/Charger [***]
CONFIDENTIAL INFORMATION OF ZEVEX International, Inc.
[*Confidential treatment has been requested as to certain portions of this
document. Each such portion, which has been omitted herein and replaced with an
asterisk [***], has been filed separately with the Securities and Exchange
Commission.]
Exhibit 10.33
[***] DISPOSABLE SET COMPONENTS SUPPLY AGREEMENT
THIS [***] DISPOSABLE SET COMPONENTS SUPPLY AGREEMENT (this
"Agreement") is entered into as of July 20, 2004, by and between NUMICO TRADING
B.V., a Netherlands corporation with its principal offices at Numico Beech
Avenue 54-80, 1119PW, Schiphol-Rijk, The Netherlands ("Numico"), NUTRICIA
INTERNATIONAL B.V., a Netherlands corporation with its principal offices at
Numico Beech Avenue 54-80, 1119PW, Schiphol-Rijk, The Netherlands ("Nutricia",
and, together with Numico, "Customer"), and ZEVEX INTERNATIONAL, INC., a
Delaware corporation, with its principal offices at 4314 ZEVEX Park Lane, Salt
Lake City, Utah ("Supplier").
RECITALS
A. Numico and Nutricia are wholly-owned subsidiaries of Royal Numico
N.V., a Netherlands corporation ("Royal Numico"), which is a world leader in the
manufacturing and marketing of clinical nutrition products and related equipment
and accessories.
B. Nutricia is a world leader in the manufacture and marketing of
clinical nutrition products.
C. Numico specializes in the procurement of raw materials, packaging
materials and fully-finished products for use in the Nutricia clinical nutrition
business.
D. Supplier is engaged in the business of developing, manufacturing and
marketing clinical nutrition delivery devices and accessories.
E. The parties desire to enter into a relationship in which Supplier
will manufacture and supply to Customer, and Customer will commercialize within
the Territory, the [***] Disposable Set Components described herein, in
accordance with the terms and conditions of this Agreement.
F. Supplier has previously developed the ZEVEX [***] Pump, which is
considered by both parties to be superior in technology, features, and
performance to other pumps currently offered within the Territory, and which has
been customized as the "Flocare [***] Pump" at Supplier's expense to meet
Customer's needs.
G. Customer desires to purchase and Supplier is willing to manufacture
and supply [***] Disposable Set Components for use with the Flocare [***] Pumps.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and for other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions. Capitalized terms not otherwise defined herein shall bear the
respective meanings given to them below:
"Bankruptcy Event" means that, with respect to an entity, such
entity shall (a) make a general assignment for the benefit of creditors
or an agent authorized to liquidate its assets, (b) become the subject
of bankruptcy or insolvency proceedings or other proceedings for relief
under any bankruptcy or other law for the relief of debtors, where,
with respect to an involuntary petition in bankruptcy, the petition
shall not have been stayed within thirty (30) days, (c) apply to a
court for the appointment of a receiver or custodian for substantially
all of its assets or properties, with or without consent, and such
receiver is not discharged within thirty (30) days after appointment,
or (d) adopt a plan of complete liquidation of its assets.
"CE Mark" shall mean an indication that a product complies
with the essential requirements of applicable directives and that the
product has been subject to conformity assessment procedures as
provided in the directives.
"Change of Control of Supplier" means (i) any transaction as a
result of which any person or entity is the "beneficial owner" (as
defined in Rule 13d-3 of the U.S. Securities and Exchange Act of 1934),
directly or indirectly, of securities of the Supplier representing more
than 50% of the total voting power represented by the Supplier's then
outstanding voting securities; or (ii) the sale, transfer or other
disposition of all or substantially all of Supplier's assets; in either
case where the new controlling party would materially benefit from
Customer's failure in the clinical nutrition market; provided, however,
that a transaction shall not constitute a Change of Control (x) if its
sole purpose is to change the state of Supplier's incorporation or to
create a holding company that will be owned in substantially the same
proportions by the persons who held Supplier's securities immediately
before such transaction, or (y) if a then current officer or director
of Supplier is the new controlling party or is a member of the group or
entity that is the new controlling party; provided, however, that the
new controlling party would not materially benefit from Customer's
failure in the clinical nutrition market.
"Commercially Reasonable Efforts" shall mean those efforts
that a reasonably prudent business person would make under similar
circumstances, including entering into contractual arrangements in
appropriate circumstances.
"Confidentiality Breach by Customer" means a material breach
by Customer of (i) Section 14 of this Agreement, (ii) Section 15 of the
[***] Pump Supply Agreement, (iii) Section 4 of the [***] Pump License
Agreement, and/or (iv) Section 4 of the [***] Disposable Set Components
License Agreement.
"Customer Intellectual Property" shall have the meaning given
it in the [***] Pump Supply Agreement.
"Exclusivity Breach by Customer" means a material breach by
Customer of (i) Sections 5(a) and/or 5(c) of this Agreement, (ii)
Sections 5(a), 5(c) and/or 5(f) of the [***] Pump Supply Agreement,
(iii) Section 2 of the [***] Pump License Agreement, and/or (iv)
Section 2 of the [***] Disposable Set Components License Agreement.
"Flocare 800 Pump Manufacturing Agreement" means that certain
Flocare 800 Pump Manufacturing Agreement of even date herewith between
the parties.
"Flocare [***] Pump" shall mean ZEVEX' [***] Pump, as it has
been customized for Customer.
"[***] Disposable Set Components" means the following
individual components of the [***] Disposable Sets: (1) the [***] Pump
LIM Segment - Lilac [***], and (2) the [***] Pump Cassette [***].
"[***] Disposable Set Components License Agreement" means that
certain License Agreement for the [***] Disposable Set Components.
"[***] Disposable Sets" means disposable sets for use with the
Flocare [***] Pumps.
"[***] Products" shall mean the Flocare [***] Pump, [***] Pump
Accessories and [***] Disposable Set Components (i.e., the [***] LIM
Pump Segment and [***] Cassette).
"[***] Pump Accessories" means individual accessories to be
used with the Flocare [***] Pumps, including AC adapters/chargers, pole
clamps, nurse calls, operator's manuals, and carry packs described in
the [***] Pump Supply Agreement.
"[***] Pump License Agreement" shall have the meaning given it
in Section 14(b)(ii) below.
"[***] Pump Supply Agreement" means the [***] Pump Supply
Agreement of even date herewith between the parties.
"Initial Product Prices" means the prices at which [***]
Disposable Set Components shall be sold by Supplier to Customer or its
affiliates, which will be calculated and determined in accordance with
the formulas and terms set forth in Exhibit A hereto.
"Know-How" shall have the same meaning as that term is given
in the [***] Disposable Set Components License Agreement.
"Maintenance and Service Agreement" means that certain
Maintenance and Service Agreement of even date herewith between the
parties.
"Patents" shall have the same meaning as that term is given in
the [***] Disposable Set Components License Agreement.
"Product Specifications" means the technical, manufacturing,
and functional specifications for the [***] Disposable Set Components
set forth in [***] and [***].
"Related Agreements" means the Flocare 800 Pump Manufacturing
Agreement, the [***] Disposable Set Components License Agreement, the
[***] Pump Supply Agreement, the [***] Pump License Agreement, and the
Maintenance and Service Agreement.
"Supplier's Facility" means Supplier's manufacturing facility
located at 4314 ZEVEX Park Lane, Salt Lake City, Utah, 84123.
"Supplier Intellectual Property" means the Know-How, and the
Patents, as well as (i) the [***] Trademarks, all (ii) copyrights
(registered and unregistered) and copyrightable works and registrations
and applications for registration thereof, (iii) mask works and
registrations and applications for registration thereof, (iv) computer
software, data, data bases and documentation thereof, (v) other
intellectual property rights and (vi) copies and tangible embodiments
thereof (in whatever form or medium) which relate to the [***]
Disposable Set Components.
"Supplier Termination Period" means a thirty (30) day period
that begins on the sixtieth (60th) day following notice by Supplier to
Customer of a Confidentiality Breach by Customer, an Exclusivity Breach
by Customer, or any other material breach by Customer, as applicable.
"Supplier Trademarks" shall have the same meaning as the term
"[***] Trademarks" is given in the [***] Disposable Set Components
License Agreement.
"Territory" shall mean the countries designated in the
following chart:
---------------------------------------------------------- ------------------------------------------------
Austria, Belgium, Denmark, Finland, France, Germany, Bulgaria, Czech Republic, Hungary,
Greece, Ireland, Italy, Latvia, Luxembourg, The Poland, Russia, Slovakia, Ukraine,
Netherlands, Norway, Portugal, Spain, Sweden, United Arab Emirates, Turkey
Switzerland, United Kingdom
---------------------------------------------------------- ------------------------------------------------
---------------------------------------------------------- ------------------------------------------------
Australia, New Zealand China, Indonesia, Malaysia, Taiwan
---------------------------------------------------------- ------------------------------------------------
---------------------------------------------------------- ------------------------------------------------
Argentina, Brazil South-Africa
---------------------------------------------------------- ------------------------------------------------
"ZEVEX [***] Disposable Set Components" means Supplier's [***]
Disposable Set Components used with the ZEVEX [***] Pump, without the
customizations made for Customer in order to facilitate the use of such
components with the Flocare [***] Pump.
"ZEVEX [***] Products" means Supplier's [***] Pump,
accessories, disposable sets, and ZEVEX [***] Disposable Set Components
without any customizations made for Customer.
2. Effective Date and Term. The term of this Agreement shall
begin on July 20, 2004 (the "Effective Date"), and shall end
on the earlier of (i) the tenth anniversary of the date upon
which the [***] Pump Supply Agreement is terminated, or (ii)
the date that no Flocare [***] Pump placed or sold by Customer
is in service (the "Term"); provided that at any time on or
after January 1, 2008, Customer may give notice to Supplier of
its intention for any reason to terminate this Agreement, and,
if such notice is given, the term of this Agreement shall
expire two years from the date of such notice, unless it is
earlier terminated pursuant to Section 15 below.
3. Appointment of Supplier. Subject to the other provisions of
this Agreement, Customer hereby appoints Supplier, and
Supplier hereby accepts such appointment, as the exclusive
manufacturer and supplier to Customer of [***] Disposable Set
Components, in accordance with the terms and conditions of
this Agreement.
4. Certain Mutual Obligations.
(a) Development of Start-Up Plan for [***] Disposable Set
Components. Within thirty (30) days after the Effective Date,
the parties will work together in good faith to develop a plan
to prepare to accept orders for the [***] Disposable Set
Components within ninety (90) days of the Effective Date.
(b) Development of Contingency Plan. Within 30 days of the
Effective Date, the parties will work together in good faith
to develop a contingency plan to ensure continuity of supply
in the event of adverse actions by Supplier or Supplier's
suppliers. This plan will be reviewed and updated at Quarterly
Meetings (as defined in Section 7(f)(ii) below).
(c) Provision of Certain Financial Information. Throughout the
Term of this Agreement, each party will provide its financial
information to the other in the same form and at approximately
the same time that such information is made available to the
public through normal channels of regulatory disclosure (such
as disclosure in a 10-K, 10-Q, or 8-K filed with the U.S.
Securities and Exchange Commission).
5. Certain Customer Obligations.
(a) Customer covenants and agrees to use Commercially Reasonable
Efforts to ensure that the [***] Disposable Set Components
and/or [***] Disposable Sets will only be placed or sold for
use or further resale within the Territory, and that it will
have no rights to commercialize, place or sell [***]
Disposable Set Components and/or [***] Disposable Sets
anywhere outside of the Territory, including, without
limitation, in North America.
(b) Customer will execute and file a Declaration of Conformity on
[***] Disposable Sets to establish the CE Mark for the [***]
Disposable Sets in the Territory, establishing Nutricia
HealthCare S.A. (Rue Pra de Plan, CH 1618 Chatel-St.-Denis,
Switzerland), or such other affiliated entity of Customer as
Customer may desire, as the legal manufacturer of the [***]
Disposable Sets in the Territory.
(c) Subject to the other terms and conditions of this Agreement,
Customer will only sell in the Territory [***] Disposable Sets
made from components that it has purchased from Supplier under
this Agreement. Customer will only sell [***] Disposable Sets
for use with Flocare [***] Pumps that it has placed with or
sold to its customers within the Territory.
(d) Regulatory Approvals. Customer will use Commercially
Reasonable Efforts to obtain regulatory approvals of the [***]
Disposable Sets in each country within the Territory within
six (6) months of the Effective Date of this Agreement.
6. Certain Supplier Obligations.
(a) Manufacturing Practices and Standards.
(i) Compliance with Standards and Specifications.
------------------------------------------------
Supplier represents and warrants that it has an established
standard operating procedure ("SOP") for the manufacture and supply
of the [***] Disposable Set Components and that such SOP contains
operating standards or procedures that are at least as good as those
prevailing in the industry for a comparable supplier. Supplier has
designed and will manufacture the [***] Disposable Set Components
according to (1) the Product Specifications applicable to the [***]
Disposable Set Components, (2) Supplier's SOP, and (3) the standards
established by the FDA for current Good Manufacturing Practices, as
established by the FDA for current Good Manufacturing Practices, as
specified in 21 CFR ss.820 Quality System Regulations; 21 CFR ss.807
Established Registration and Device Listing for Manufacturers of
Devices; 21 CFR ss.803 Medical Device Reporting; 21 CFR ss.801
Medical Devices Reports of Corrections and Removals; the Federal
Food, Drug and Cosmetic Act, as amended; ISO 13485 Medical Devices
- Quality management systems - Requirements for regulatory
purposes; and European Council Directive 93/42/EEC of 14 June 1993
concerning medical devices. This Section 6(a)(i) is not
intended to limit Supplier's obligations to indemnify Customer under
Section 16(a).
(ii) Changes in Manufacturing Processes, Materials, or Components.
(1) Changes Initiated by Supplier. During the Term of this
Agreement, Supplier shall have the right to make such changes
as may be reasonably necessary to incorporate new technology
or improve manufacturing processes by providing prior notice
to Customer; provided, however, that if such changes (A)
modify in any material fashion the [***] Disposable Set
Components (as determined by Supplier in its reasonable
discretion), or (B) change any of the suppliers and/or
components listed in Exhibit B, then Supplier shall notify
Customer and shall refrain from making any such changes
without the prior written consent of Customer, which consent
may not be unreasonably withheld.
(2) Changes Initiated by Customer. Customer may propose changes to
the Product Specifications or the general manufacturing
process from time-to-time by submitting to Supplier a written
engineering change request ("ECR"). Changes requested by
Customer which are necessary in order to make any [***]
Disposable Set Component comply with any of the standards set
forth in Section 6(a)(i) or with the laws and regulations of
any jurisdiction within the Territory, shall not be considered
to be an ECR and shall be made promptly by Supplier at no
charge to Customer; provided, that if any such change
resulting from the requirements of the laws and regulations of
any jurisdiction within the Territory is economically
impractical (as determined in Supplier's reasonable
discretion), then such change will be considered to be an ECR.
With respect to each ECR submitted by Customer, Supplier shall
determine and advise Customer in writing if the proposed
change is acceptable. No changes to the Product Specifications
or significant change to the manufacturing process shall be
made without the prior approval of both parties hereto, which
shall be evidenced by their signatures on the final ECR. All
costs associated with an ECR, including scrapping of existing
component inventory or rework costs, shall be borne by
Customer and shall be agreed to in writing by the parties
prior to implementing any change. Non-urgent ECRs shall be
processed by Supplier within ten (10) working days, and
acceptance or rejection of the request shall be acknowledged
by Supplier within that time. In the event that Customer
considers the ECR urgent, notice of such urgency shall be made
at the time of request to Supplier, and the parties shall
agree on a priority for the ECR. To expedite the
implementation of approved, urgent ECRs, it may be necessary
for Supplier to use redlined drawings and/or documentation to
initiate the change. However, the use of any redlined drawings
or documents for manufacturing purposes shall be permitted
only upon the written approval of Customer.
(iii) Packaging. Customer will provide Supplier with finished
artwork to be used by Supplier in producing the product
packaging for [***] Disposable Sets which shall be subject, in
all cases, to the final approval of Customer.
(b) Inspection and Documents; Audits.
(i) Inspections by Customer.
-----------------------
Supplier shall permit Customer or its agents, during reasonable
business hours and upon at least two weeks advance notice, access
to inspect Supplier's facility where the [***] Disposable Set
Components are handled, stored, or tested, as well as records
relating to the manufacture, storage, handling, or testing of the
[***] Disposable Set Components. Customer shall conduct such
inspection in a manner as to minimize disruption of Supplier's
ongoing operations, and Supplier shall reasonably assist Customer
with such inspections. Supplier hereby acknowledges and agrees
that Customer's right to inspect Supplier's facilities to ensure
such compliance does not in any way limit Customer's rights and that
any failure by Customer to exercise such right(s) shall not be held
against Customer for any reason whatsoever and shall not diminish or
constitute a waiver of Supplier's responsibility for the proper
performance of its duties and obligations hereunder.
(ii) Inspections by Government Authorities. Supplier shall extend
the same inspection privileges set forth in Section 6(b)(i) to
agents of the FDA or other governmental authorities as
required by law. Supplier shall notify Customer within five
(5) working days of any such inspection related to [***]
Disposable Set Components or ZEVEX [***] Products. In
addition, Supplier shall provide Customer with copies of any
and all inspection reports relating to the manufacture of
[***] Disposable Set Components or ZEVEX [***] Products from
the FDA or other relevant governmental authority within five
(5) working days of receipt of such reports.
(iii) Documents and Records.
----------------------
Upon request by Customer, Supplier shall furnish Customer with
complete and accurate information and copies of documents necessary
for Customer to: (A) provide Customer assurance that the [***]
Disposable Set Components were manufactured and supplied in
accordance with this Agreement and in compliance with applicable
Laws, (B) enable Customer to ensure that the [***] Disposable
Set Components comply with the labeling claims made for [***]
Disposable Set Components,(C) secure all governmental licenses,
registrations or approvals for the [***] Disposable Set Components
as required by applicable laws in the Territory, and (D) respond
to all governmental inquiries or requests.
(iv) Important Changes or Events. Supplier shall immediately inform
Customer of any event or circumstance, including but not
limited to, a Change of Control of Supplier, or an adverse
change in the financial status of Supplier or its affiliated
companies that may directly or indirectly prejudice Supplier's
ability to comply with any of its undertakings in this
Agreement, and, particularly, that may affect its manufacture
and supply of the [***] Disposable Set Components, its
dedicated production quantity capacity, or any other matter
that materially and adversely affects the ability of Supplier
to perform its obligations under this Agreement.
(v) No Waiver. Supplier acknowledges and agrees that Customer
shall have the right, upon request, to confirm or verify that
Supplier is in compliance with Section 6 hereof including the
right to inspect Supplier's facilities pursuant to Section
6(b)(i) hereof to ensure such compliance.
(c) No Conflicts. During the term of this Agreement, Supplier will
not supply or sell any [***] Disposable Set Components, [***]
Disposable Sets, ZEVEX [***] Disposable Set Components, or
ZEVEX [***] Disposable Sets into the Territory, but Supplier
may supply or sell or place any of its other disposable sets
into the Territory so long as such disposable sets do not
incorporate Supplier's technologies under the Patents other
than the LifeGuard(R) anti-free flow protection technology.
(d) Subcontractors; Suppliers and Distributors; Manufacturing
Location.
(i) Subcontractors. Supplier shall exert Commercially Reasonable
Efforts to ensure that its subcontractors comply with the
necessary manufacturing requirements relating to the
manufacture of the [***] Disposable Set Components.
(ii) Suppliers and Distributors.
(1) Suppliers. Supplier will exert Commercially Reasonable Efforts
to assist Customer in gaining access and documentation from
any supplier used by Supplier in performing its obligations
hereunder. Supplier will exert Commercially Reasonable Efforts
to prevent its suppliers from supplying [***] Disposable Set
Components to any party other than Supplier.
(2) Distributors. Supplier will exert Commercially Reasonable
Efforts to prevent its distributors from directly or
indirectly selling any ZEVEX [***] Disposable Set Components
into the Territory.
7. Ordering, Supplying, and Rejecting [***] Disposable Set
Components.
(a) Ordering [***] Disposable Set Components. Beginning as of the
date that the production tools for the [***] Disposable Set
Components become ready, which is currently projected to take
place in September 2004 for cassettes and January 2005 for LIM
segments, in addition to the other provisions of this
Agreement, the following procedures shall apply to Customer's
ordering and purchasing of, and Supplier's manufacture, sale,
and delivery of, [***] Disposable Set Components:
(i) Customer will provide Supplier with non-binding
annual estimates for its anticipated purchases of [***] Disposable Set
Components. Supplier shall use each such forecast to plan capacity and
order raw materials and component parts to support those forecasts.
Pricing for the [***] Disposable Set Components will be based on the
pricing formula for such components set forth in Exhibit A, as applied
based on the Supplier's manufacturing costs for the [***] Disposable
Set Components as affected by the estimated annual requirements.
Customer's annual estimate will indicate Supplier is selling parts to
Customer Ex-Works from Supplier's source of manufacture. Supplier will
request that Customer provide a new annual estimate of annual
requirements at least 3 months before the end of a pending annual
period. Supplier will continue to maintain availability of bins of
components through the end of the pending annual period. Customer must
provide a new annual estimate at least 2 months before the end of a
pending annual period. At each Quarterly Meeting of the parties, the
parties will discuss the estimated volume of [***] Disposable Set
Components to be purchased by Customer during that year and will
mutually agree to any revisions to that estimate. Thereafter, the
parties may mutually agree to any adjustments to the pricing for the
[***] Disposable Set Components based on the pricing formula contained
in the [***] Pump Supply Agreement, as applied to any adjustment to
Supplier's manufacturing costs for the [***] Disposable Set Components
resulting from the adjustments to the estimated annual requirements.
Notwithstanding the pricing adjustments made throughout any calendar
year as set forth above, within thirty (30) days following the
conclusion of each calendar year, the parties will compare (a) the
amount determined by applying the pricing formula for the [***]
Disposable Set Components to the aggregate actual manufacturing costs
for the [***] Disposable Set purchased by Customer during that year
(the "Actual Aggregate Price"), to (b) the aggregate amount actually
invoiced to Customer for [***] Disposable Set Components during that
calendar year (the "Actual Payments"). If the Actual Aggregate Price is
greater than the Actual Payments, then Customer will pay the difference
to Supplier within thirty (30) days. If the Actual Aggregate Price is
less than the Actual Payments, then Supplier will pay the difference to
Customer within thirty (30) days.
(ii) Supplier will ship parts to Customer in fixed
quantities referred to as "Bin Quantities". Bin Quantities shall be
agreed to by Supplier and Customer.
(iii) Customer will make a call-off via email to
Supplier each time a new shipment is required. All call-offs made under
this Agreement will be confirmed by the Supplier to Customer via email
within 1 business day.
(iv) Supplier agrees to manage the delivery
performance and part quality of Supplier's manufacturing sources to
meet the terms of the Agreement.
(v) Customer shall notify Supplier immediately when
Customer's demand for the current annual period is expected to exceed
the current estimate.
(vi) Supplier will be responsible for all finished
goods inventory (FGI) at Supplier or Supplier's sources as well as
specially ordered raw materials. FGI will not exceed the agreed upon
two-bin quantity size for each part. Raw material inventory at the
Supplier or Supplier's sources will at all times be adequate to support
the Customer's requirements.
(vii) Current lead-time is seven (7) days. Lead Time
is defined as the time from receipt of a call-off from Customer until
arrival of the parts at the Port of Entry to Shanghai, PRC, using air
freight. The Supplier will advise Customer immediately should there be
a change in lead-time.
(viii) The Supplier will hold two bin quantities
worth of FGI at all times for Customer.
(ix) Customer will designate the freight carrier and
method for all call-offs to Customer.
(x) Initial Bin Quantities are hereby set at [***]
pcs per bin for all referenced part numbers (above).
(xi) A change in Bin Quantities will require 30 days notice.
(b) Terms and Conditions. The terms and conditions of this Agreement will
apply to each call-off or shipment by Supplier hereunder, regardless of
the terms stated on Supplier's invoice. The terms and conditions of
Customer's form of purchase order or other business forms will not
apply to any order notwithstanding Supplier's acknowledgment or
acceptance of such call-off or shipment.
(c) Cancellation of Call-Offs by Supplier. Supplier reserves the right to
cancel any call-offs placed by Customer as set forth above, or to
refuse or delay shipment thereof, if Customer (i) fails to make any
payment when due as provided herein or under the terms of payment set
forth in any invoice or otherwise agreed to by Supplier and Customer,
or (ii) otherwise fails to comply in all material respects with the
terms and conditions of this Agreement and fails to cure such
non-compliance within 60 days from the date Supplier notifies Customer
of such failure to comply. No such cancellation, refusal or delay will,
by itself, be deemed a termination or breach of this Agreement by
Supplier.
(d) Supplying [***] Disposable Set Components.
(i) Components, and Raw Materials.
-------------------------------
Supplier shall acquire all raw and packaging materials solely
from manufacturers and suppliers that meet industry standards of
acceptability and comply fully with all Laws(as hereinafter defined).
Supplier may purchase and maintain up to a six (6) month supply
of raw materials and component parts necessary for the manufacture
and supply of the [***] Disposable Set Components according to the
12-month estimates. If Supplier so elects, Supplier shall sell to
Customer and Customer shall purchase any such raw materials and
component parts that are not used by Supplier in accordance with the
12-month estimate referred to in the previous sentence within nine
(9) months from the date they are received by Supplier at Supplier's
standard cost plus [***]. To assist Supplier in determining the
need for such items, Customer will use Commercially Reasonable
Efforts to apprise Supplier of significant developments, such as
market conditions, customer demand, and sales forecasts, which may
occur with respect to its business as it relates to its requirements
for [***] Disposable Set
Components.
(ii) Shipment. All [***] Disposable Set Components purchased by Customer
hereunder will be shipped Ex Works (as defined in INCOTERMS 2000,
International Chamber of Commerce), at Supplier's Facility (or, as
applicable, at the facility of Supplier's subcontractor(s) for such
[***] Disposable Set Components). Customer will be responsible for and
will pay all shipping, freight and insurance charges associated with
the shipping of the products.
(iii) Title/Risk of Loss. Title to the [***] Disposable Set Components
purchased by Customer and all risk of loss or damage will pass to
Customer when the products are delivered to a shipper at Supplier's
Facility (or, as applicable, at the facility of Supplier's
subcontractor(s) for such [***] Disposable Set Components). Customer
shall bear the risk of loss or damage in transit.
(iv) Partial Shipments.
------------------
Unless Customer clearly advises Supplier to the contrary in writing,
Supplier may make partial shipments on account of Customer's orders,
to be separately invoiced and paid for when due; provided however,
that if the aggregate price of shipping any called-off shipment is
higher than the cost would have been if the entire shipment had been
shipped at once, then Supplier will reimburse the Customer for the
difference in shipping cost, and provided further that all such
partial shipments are received by the date on which the total
shipment is due under the applicable call-off. Failure to ship
all shipments required under a call-off shall constitute a Call-Off
Breach under Section 17. Delay in delivery of any shipment shall not
relieve Customer of its obligation to accept the remaining deliveries.
(v) Notice and Effect of Delays in Shipment.
(1) Notice.
------
Supplier will notify Customer immediately, of any real or
anticipated delays that could impact the supply of [***]
Disposable Set Components or the ability of Supplier to
fulfill its obligations under this Agreement including,
but not limited to, component supply or labor shortages,
or events which involve health, safety, building code, or
regulatory issues or violations. Supplier shall, in the
event of lost production time for any reason, except
through the fault of Customer, give Customer first
priority from among Supplier's other customers in making
up production schedules.
(2) Effect.
------
Without prejudice to any other rights of Customer under this
Agreement, if Supplier is unable to fulfill any Customer
call-off with respect to [***] Disposable Set Components as
to quantity or time of shipment (assuming the applicable
lead times and quantity limitations are satisfied),
then Supplier will be subject to a penalty with respect to the
relevant call-off of 0.5% of the invoice price of that
portion of the call-off that is actually late in shipment for
every business day that the shipment date of the products
ordered pursuant to that call-off is late; provided,
however, that the aggregate penalty under this section for
late shipment with respect to any call-off will be capped at
20% of the total purchase price for such portion of
the call-off.
(e) Rejecting Nonconforming [***] Disposable Set Components.
(i) Defective [***] Disposable Set Components.
---------------------------------------------
Customer will have no obligation to inspect incoming shipments of
[***] Disposable Set Components received from Supplier. However,
if after receiving a shipment of [***] Disposable Set Components,
Customer reasonably determines that any [***] Disposable Set
Component or an entire lot of [***] Disposable Set Components
delivered by Supplier fails to meet the Product Specifications, and/
or any other requirements and other specifications established or
agreed to from time to time by Customer, and/or any other terms
and conditions of this Agreement (the "Defective Products"),
Customer shall notify Supplier after discovery of the defect. All
Defective Products, other than any Defective Products (or any
portions thereof) retained by Customer for testing, evaluating or
sampling, shall, at Customer's option, but not earlier than five
(5) business days after notification to Supplier by Customer in
writing, be returned to Supplier, at Supplier's expense, after
Customer has obtained a return merchandise authorization number
from Supplier for such products. Supplier shall promptly repair
or replace, at Supplier's sole discretion, all Defective
Products returned to Supplier. If Supplier receives any written notice
of Defective Products, Supplier shall, at Supplier's expense, ship
replacement or repaired [***] Disposable Set Components to the
destination designated by Customer as soon as reasonably possible
after receipt of such notice, provided that Supplier shall use
its best efforts to make any such shipment ready for shipment
within five (5) business days after receiving returned Defective
Products. In the event that Supplier fails to do so, Customer may
treat such failure as a Call-Off Breach pursuant to Section 17.
Notwithstanding the foregoing, neither Customer's failure to
discover Defective Products nor any of the provisions set forth herein
for dealing with Defective Products shall prejudice or affect
Customer's other rights or remedies under this Agreement or under
applicable Law (as hereinafter defined), including Customer's
rights to have Defective Products repaired or replaced under the
Product Warranties set forth in this Agreement.
(ii) Shortfall.
---------
A "Shortfall" shall occur if Customer reasonably determines that
there is either (A) a shortfall in the quantity of [***] Disposable
Set Components delivered by Supplier pursuant to a call-off, and/
or (B) any shipment of [***] Disposable Set Components delivered by
Supplier pursuant to a call-off contains [***] Disposable Set
Components that have defects that are manifest and easily visible
to the naked eye ("Visually Defective Products"). Customer shall
notify Supplier of any Shortfall within five (5) business days of
the date Visually Defective Products are received by Customer at
Customer's manufacturing facility in Wuxi, China or Chatel,
Switzerland. Visually Defective Products shall be returned to
Supplier at Supplier's expense, and Supplier shall repair or
replace them and redeliver them to Customer in accordance with
Section 7(e)(i) above. In the case of a Shortfall in quantity,
Supplier shall ship a quantity of [***] Disposable Set Components
that are not Defective Products and/or Visually Defective Products
to the destination designated by Customer to fulfill the entire
Call-Off as soon as is reasonably possible, provided that Supplier
shall use its best efforts to make any such shipment ready for
shipment within five (5) business days after Supplier's receipt of
notification of such Shortfall in quantity from Customer. In the
case of a Shortfall due to Visually Defective Products, Supplier
shall ship a quantity of [***] Disposable Set Components that are
not Defective Products and/or Visually Defective Products to the
destination designated by Customer to fulfill the entire Call-Off as
soon as is reasonably possible, provided that Supplier shall use its
best efforts to make any such shipment ready for shipment within
five (5) business days after Supplier's receipt of the returned
Visually Defective Products. Any Shortfall that is identified by
Customer and is communicated in writing by Customer to Supplier
within five (5) business days of Customer's receipt of a shipment
shall be deemed a Call-Off Breach under Section 17. If Customer does
not notify Supplier of a Shortfall within five (5) business days of
a shipment, a Call-Off Breach shall not be deemed to have occurred,
and Customer shall retain, without limitation, all its other
rights and remedies conferred under this Agreement.
(f) Ongoing Communication and Business Review.
(i) Designated Representative. Each party agrees to designate one
individual within such party's organization to serve as such party's
primary point of contact and representative (the "Designated
Representative") in such party's relationship and communications with
the other party as contemplated in this Agreement. These Designated
Representatives shall also involve other appropriate operational,
strategic, technical, and regulatory personnel in such communications.
(ii) Quarterly Meetings.
-------------------
The parties agree to hold a face-to-face meeting at a minimum of once
each calendar quarter during the Term for such duration as the
parties agree in good faith is necessary to address the various issues
that may arise relating to the performance of the parties under
this Agreement (the "Quarterly Meetings"). The location of the
Quarterly Meetings shall alternate between Supplier's Facility
and a Customer facility in the Territory. The parties shall
formulate in advance of each meeting a written agenda of material
items that each party proposes should be considered together in the
meeting, which agenda may include such items as on-time
delivery, capacity planning, customer complaints, device master
record review, performance forecasting, product development, market
feedback and trends (including competitor activity), corrective
action requests review, contingency plan review, product training and
support, and sales review. The parties shall make a reasonable
effort to have the Designated Representative present at each
Quarterly Meeting, as well as such other individuals as would be
appropriate in light of the agenda for the meeting. Each party
shall bear all of its own costs and expenses associated with its
participation in the Quarterly Meeting. The parties' respective
rights to request and receive information hereunder will not be
affected or limited by any subject or matter discussed or planned to
be discussed at any Quarterly Meeting.
(g) Warranty. Supplier warrants, for a period of 12 months from the date of
shipment from Supplier to Customer or any of Customer's distributors,
resellers, or customers, as the case may be, that each [***] Disposable
Set Component supplied hereunder shall be free from defects in
materials, components, design, and workmanship, shall conform to the
Product Specifications, and shall be fit for the purpose of delivering
the (i) Nutrison Standard, (ii) Nutrison Concentrated, (iii) Nutrison
Multi-fibre, (iv) Nutrison Protein Plus Multi-fibre, and (v) Nutrison
Low Energy enteral nutrition solutions currently produced by Nutricia
(collectively the "Product Warranties"), under the following terms and
conditions:
(i) Supplier must be notified in writing of the alleged defect(s) during
the term of the warranty; and
(ii) Supplier's warranty shall be voided in the event an [***] Disposable
Set Component is subject to abuse, accident, alteration, modification,
tampering, or misuse.
(h) No Other Warranties. Supplier provides no warranties under this
Agreement except as expressly stated herein. THE WARRANTIES EXPRESSLY
STATED IN THIS AGREEMENT ARE EXCLUSIVE TO THIS AGREEMENT AND ARE
EXPRESSLY IN LIEU OF ANY IMPLIED WARRANTIES. Furthermore, the
warranties provided in this Agreement run only to Customer and not to
Customer's customers or end users.
(i) Supplier Obligations for Breach of Warranty. Supplier's obligation with
respect to [***] Disposable Set Components that it has supplied to
Customer hereunder that fail to comply with the Product Warranties set
forth in Section 7(g) above shall be to repair or replace such [***]
Disposable Set Components. The remedies available to Customer pursuant
to the previous sentence for the failure of [***] Disposable Set
Components to comply with the Product Warranties set forth in Section
7(g) above will be the sole and exclusive remedies available to
Customer under such Product Warranties. This Section 7(i) is not
intended to limit Supplier's obligation to indemnify Customer for
certain third party products liability claims as described in Section
16(a)(i).
(j) Warranty Claims. Concurrently with the execution of this Agreement, the
parties will enter into the Maintenance and Service Agreement that will
provide for the following: (i) reporting of product defects, (ii) the
process for responding to warranty claims, and (iii) the process for
repairing or replacing damaged or defective [***] Disposable Set
Components.
8. Commercialization of [***] Disposable Sets.
(a) Commercialization.
(i) Commercialization Efforts by Customer. Customer will have the exclusive
right and obligation to use Commercially Reasonable Efforts to
commercialize the [***] Disposable Sets for use with Flocare [***]
Pumps within the Territory.
(ii) Promotional Materials. Supplier and Customer will cooperate to develop
appropriate promotional materials for the [***] Disposable Sets
(including manuals, promotional claims, etc.). Customer will translate
all manuals, materials, and product labeling relating to the [***]
Disposable Sets into the languages of the Territory.
(b) Suitable Inventory and Premises. At all times throughout the Term of
this Agreement, Customer will maintain at least a four-week supply of
[***] Disposable Set Components on hand in one or more of its
facilities located within the Territory for sale in the Territory. If
at any time Customer's inventory of [***] Disposable Set Components on
hand is depleted below a projected four-week supply of such products,
then Customer will promptly order sufficient additional [***]
Disposable Set Components to restore its inventory levels to a
four-week supply. In addition, throughout the Term of this Agreement,
Customer will maintain adequate inventory levels of the [***]
Disposable Set Components for demonstration and training purposes.
(c) Conduct of Business. Each of Supplier and Customer will promote the
business and company of the other in a manner that reflects favorably
on the other, and each will avoid deceptive, misleading, or unethical
business practices that are likely to be detrimental to the other, its
business, or the general public.
(d) Market Information and Planning. Each of Supplier and Customer will
advise the other promptly after they receive information concerning the
market for clinical nutrition delivery devices (both within and outside
the Territory) and will, from time-to-time, consult with each other
with respect to market conditions, sales forecasting, product planning,
and promotional activities; provided that neither party will be
obligated to disclose any such information to the other if doing so
would be a breach of such party's obligations to a third party to
maintain the confidentiality of such information.
(e) Compliance with U.S. Export Laws. Customer understands that the [***]
Disposable Set Components are restricted by the United States
Government from export to certain countries, and Customer agrees that
it will not sell [***] Disposable Sets or [***] Disposable Set
Components in any way that will violate any of the export control laws
or regulations of the United States ("U.S. Export Control Laws").
Supplier will inform Customer from time to time about applicable U.S.
Export Control Laws and prohibited countries. Customer will provide to
Supplier such documentation and certifications as may be required for
compliance with the export control laws of the United States.
(f) Governmental Approvals. If any approval with respect to this Agreement,
or the registration thereof, shall be required at any time during the
term of this Agreement, with respect to giving legal effect to the
Agreement in the Territory, or with respect to compliance with exchange
regulations or other requirements so as to assure the right of
remittance abroad of U.S. dollars, Customer shall immediately take
whatever steps may be necessary in this respect, and any charges
incurred in connection therewith shall be for the account of Customer.
Customer shall keep Supplier currently informed of its efforts in this
regard.
9. Inspections, Records, and Reporting.
(a) Deliveries and Inventories. In the Quarterly Meetings, Customer will
provide to Supplier information about Customer's deliveries of [***]
Disposable Sets within the Territory. In addition, upon either party's
request, the other party will provide to the requesting party
information about the providing party's inventory levels of [***]
Disposable Set Components and such other information as the requesting
party may reasonably request.
(b) Reports of Alleged Claims. Customer shall notify Supplier in writing of
any claim or proceeding involving advertisement or distribution of the
[***] Disposable Sets by Customer, including claims asserting
infringement of any intellectual property rights by Supplier
Intellectual Property or the [***] Disposable Set Components, within
ten (10) days after Customer learns of such claim or proceeding.
Customer shall also report promptly to Supplier all claimed or
suspected product defects relating to the [***] Disposable Set
Components. Supplier shall notify Customer in writing of any claim or
proceeding involving advertisement or distribution of ZEVEX [***]
Products by Supplier outside of the Territory, including claims
asserting infringement of any intellectual property rights by Supplier
Intellectual Property or ZEVEX [***] Products, within ten (10) days
after Supplier learns of such claim or proceeding. Supplier shall also
report promptly to Customer all claimed or suspected product defects
relating to the ZEVEX [***] Products.
(c) Maintenance of Records. Customer shall maintain records, contracts and
accounts relating to the distribution of [***] Disposable Sets and
shall permit examination thereof by authorized representatives of
Supplier (i) in connection with any recall under Section 18 or (ii)
after any written request by Supplier that is based on a reasonable
determination by Supplier that it has need to verify the accuracy of
information or reports previously provided to Supplier by Customer. At
each Quarterly Meeting, Customer will provide to Supplier a written
report of the quantities of [***] Disposable Sets sold in each country
within the Territory during the prior quarter.
10. Supplier's Obligations.
(a) Compliance With Laws. Supplier shall comply, and shall ensure that the
storage, manufacture, packaging, labeling, supply, and delivery of
[***] Disposable Set Components or any components thereof, materially
comply with applicable U.S. laws, regulations, rules, and orders
(collectively, "Laws"), and shall make such adjustments as may be
necessary to effect and maintain such compliance throughout the Term.
Without limiting the generality of the foregoing, (i) Supplier's
facilities shall comply with all product safety, sanitation, and
environmental Laws, (ii) all [***] Disposable Set Components shall be
clearly and accurately labeled and packaged in the manner requested by
Customer and otherwise as required by all Laws, and (iii) Supplier
acknowledges that it is familiar with the Foreign and Corrupt Practices
Act of the United States and agrees that it shall at all times comply
with such Act in carrying out and performing its duties under this
Agreement.
(b) Approvals. Supplier shall obtain, at its sole expense, all
governmental, administrative, and other approvals, licenses, permits,
and other authorizations and registrations necessary for the operation
and conduct of its business, including without limitation, the
development, manufacture, and supply of the [***] Disposable Set
Components.
(c) Necessary Inventory, Equipment, etc. Supplier shall obtain all
inventory, equipment, employees, facilities, and any other item
necessary in order to assure that Supplier has, and will have, the
ability to perform its obligations hereunder in accordance with the
terms and conditions hereof.
11. Price and Payment Terms.
(a) Prices. Customer shall pay Supplier for the [***] Disposable Set
Components at the Initial Product Prices. The Initial Product Prices
shall remain unchanged during the first twelve (12) months after the
Effective Date. After such initial twelve (12) month period, the
Initial Product Prices for [***] Disposable Set Components may be
increased by Supplier on an annual basis. Price increases with respect
to the [***] Disposable Set Components will be based on cost increases,
as contemplated by the formula set forth in Exhibit A. Supplier will
notify Customer of cost increases that affect the [***] Disposable Set
Components and will provide to Customer such information and documents
received by Supplier from Supplier's suppliers that relates to any such
cost increases. The product prices, including the Initial Product
Prices, for [***] Disposable Set Components shall include the cost of
all materials, but do not include shipping costs, taxes, charges,
tariffs, and duties, all of which shall be paid by Customer.
(b) Cost Savings. Supplier will exert Commercially Reasonable Efforts to
reduce the costs of obtaining the materials used in manufacturing of
[***] Disposable Set Components. To the extent that cost savings are
actually realized from such efforts, the cost savings shall be split
equally between the parties as set forth herein. These cost savings
shall be determined by comparing the new cost of materials to the costs
that formed the basis for the applicable Initial Product Prices, with
reliance on appropriate supporting data. These cost savings shall be
shared by reducing the Initial Product Prices by an amount equal to one
half of the cost savings.
(c) Payment Terms. Supplier shall provide an invoice to Customer based on
the actual amount of [***] Disposable Set Components shipped to
Customer or its designee(s). Customer shall cause payment for the [***]
Disposable Set Components purchased from Supplier under the terms of
this Agreement to be made no later than ninety (90) days from the end
of the month in which the product was shipped. Late payments will be
subject to a 1.5% penalty per month. All payments will be made via wire
transfer in United States currency.
12. Representations and Warranties.
(a) Supplier's Representations and Warranties. Supplier hereby represents
and warrants to Customer that:
(i) It has the full power, capacity, and right to enter into this
Agreement;
(ii) All corporate action necessary to authorize Supplier to enter into this
Agreement and be legally bound by its terms has been taken;
(iii) Prior to purchase of [***] Disposable Set Components by Customer
hereunder, Supplier will own title to such [***] Disposable Set
Components free and clear of liens and encumbrances;
(iv) It knows of no pending or threatened action in law or in equity which
adversely affects the rights granted herein, and it knows of no basis
for any of the foregoing;
(v) To the knowledge of Supplier, neither the execution and delivery of
this Agreement nor compliance with the obligations of Supplier
hereunder, will violate any law or regulation, or any order or decrees
of any court or government instrumentality;
(vi) Neither the execution and delivery of this Agreement nor compliance
with the obligations of Supplier hereunder, will conflict with, or
result in the breach of, or constitute a default under, any contract,
agreement, instrument or judgment to which Supplier or any officer,
director, employee or controlling person of Supplier is a party, or
which is or purports to be binding upon any of the foregoing persons;
and
(vii) No action, approval, or consent, including, but not limited to, any
action, approval, or consent by any federal, state, municipal, or other
governmental agency, commission, board, bureau, or instrumentality is
necessary in order to constitute this Agreement as a valid, binding,
and enforceable obligation of Supplier in accordance with its terms.
(b) Customer's Representations and Warranties. Customer hereby represents
and warrants that:
(i) It has the full power, capacity, and right to enter into this
Agreement;
(ii) All corporate action necessary to authorize Customer to enter into this
Agreement and be legally bound by its terms has been taken;
(iii) It knows of no pending or threatened action in law or in equity which
adversely affects the rights granted herein, and it knows of no basis
for any of the foregoing;
(iv) To the knowledge of Customer, neither the execution and delivery of
this Agreement nor compliance with the obligations of Customer
hereunder, will violate any law or regulation, or any order or decrees
of any court or government instrumentality;
(v) Neither the execution and delivery of this Agreement nor compliance
with the obligations of Customer hereunder, will conflict with, or
result in the breach of, or constitute a default under, any contract,
agreement, instrument or judgment to which Customer or any officer,
director, employee or controlling person of Customer is a party, or
which is or purports to be binding upon any of the foregoing persons;
and
(vi) No action, approval, or consent, including, but not limited to, any
action, approval, or consent by any federal, state, municipal, or other
governmental agency, commission, board, bureau, or instrumentality is
necessary in order to constitute this Agreement as a valid, binding,
and enforceable obligation of Customer in accordance with its terms.
13. Intellectual Property.
(a) Ownership of Product Rights/Intellectual Property Rights. Supplier has
and will retain all right, title to, and interest in Supplier
Intellectual Property; provided, however, that Supplier has provided a
license to Customer with respect to the Supplier Intellectual
Property--namely, the [***] Disposable Set Components License
Agreement. Customer has and will retain all right, title to, and
interest in Customer Intellectual Property.
(b) Representations and Warranties regarding Intellectual Property.
Supplier represents and warrants that: (i) Supplier is the sole legal
and beneficial owner of the Supplier Intellectual Property.
(ii) To the best knowledge of Supplier, none of Supplier's Intellectual
Property infringes or is alleged to infringe upon any patents or other
intellectual property rights of any third party.
(iii) All utility patents held by Supplier in the United States with respect
to the [***] Disposable Set Components have been applied for in the
United States, the European Community, Switzerland, China and Japan.
With respect to Supplier Trademarks, the [***] word mark, the [***]
logo design, and the ZEVEX word mark have either been filed or the
filing process has been initiated in the United States, the European
Community, Switzerland, China, and Japan.
(c) Nationalization of Patents. Supplier will use Commercially Reasonable
Efforts to nationalize its patents relating to the [***] Disposable Set
Components in the following countries in the Territory: United Kingdom,
Germany, France, Italy, Benelux, Austria, and China.
(d) Notice of Infringement.
(i) Supplier shall promptly notify Customer of any actual or apparent
infringement of Customer Intellectual Property of which Supplier
becomes aware. Customer may, at its sole option and expense, prosecute
any suit it deems necessary or appropriate to protect any of Customer's
rights to Customer Intellectual Property from and against infringement
by third parties anywhere in the world and Supplier shall cooperate
fully with Customer in connection with any such action.
(ii) Customer shall promptly notify Supplier of any actual or apparent
infringement of Supplier Intellectual Property of which Customer
becomes aware. Supplier may, at its sole option and expense, prosecute
any suit it deems necessary or appropriate to protect any of Supplier's
rights to Supplier Intellectual Property from and against infringement
by third parties anywhere in the world and Customer shall cooperate
fully with Supplier in connection with any such action.
14. Confidential Information.
(a) Confidential and Proprietary Information.
(i) Disclosure to Customer of Manufacturing File for [***] Disposable Set
Components. Promptly following the execution of this Agreement by the
parties, Supplier will provide Customer with such information relating
to the [***] Disposable Set Components as will be necessary for
Customer to obtain the CE Mark and comply with other applicable laws
and regulations relating to the [***] Disposable Sets and the
transactions contemplated by this Agreement.
(ii) Supplier Obligations with respect to Customer Confidential Information.
----------------------------------------------------------------------
Supplier agrees to hold all confidential information of Customer and
its affiliated companies, including without limitation, any
information relating to Customer's and its affiliates' business
operations, price lists, manufacturing data, marketing information
strategies, customer or product lists, research and development
information and all other information disclosed by Customer or its 3.
affiliates to Supplier ("Customer Confidential Information"), in
strict confidence and not to use any of the foregoing commercially for
its own benefit or that of anyone else nor for the purpose of
developing or improving a product or method for anyone except
Customer. Supplier agrees to limit dissemination of and access
to Customer Confidential Information only to the persons within
Supplier's organization and Supplier's affiliated organizations,
including their respective third party contractors, subcontractors,
manufacturers and business partners, and then only to those persons
who have a need for access thereto, and who have entered into a
restrictive agreement prohibiting such personnel from doing
anything with respect to Customer Confidential Information that
Supplier would itself be prohibited from doing under this
Agreement. Notwithstanding anything to the contrary herein,
Supplier may make such disclosures as necessary in connection with
the preparation, filing, and dissemination of its filings with the
U.S. Securities and Exchange Commission (e.g., 10-Ks, 10-Qs, and
8-Ks) and/or other disclosures as required by applicable law;
provided, however, that it shall first notify Customer of any such
disclosure in order that the parties may seek appropriate confidential
treatment for information they deem to be confidential.
(iii) Customer Obligations with respect to Supplier Confidential Information.
----------------------------------------------------------------------
Customer agrees to hold all confidential information of Supplier and
its affiliated companies, including without limitation, any
information relating to Supplier's and its affiliates' business
operations, price lists, manufacturing data, marketing information
strategies, customer or product lists, research and development
information, and all other information disclosed by Supplier or its
affiliates to Customer ("Supplier Confidential Information"), in
strict confidence and not to use any of the foregoing commercially for
its own benefit or that of anyone else. Customer agrees to limit
dissemination of and access to Supplier Confidential Information
only to the persons within Royal Numico, Numico, and Nutricia, and
their affiliates, and their respective third party contractors,
subcontractors, manufacturers and business partners, and then
only to those persons who have a need for access thereto, and who
have entered into a restrictive agreement prohibiting such
personnel from doing anything with respect to Supplier
Confidential Information and such information that Customer would
itself be prohibited from doing under this Agreement.
Notwithstanding anything to the contrary herein, Customer may
make such disclosures as necessary in connection with the
preparation, filing, and dissemination of disclosures as required
by applicable law; provided, however, that it shall first notify
Supplier of any such disclosure in order that the parties may seek
appropriate confidential treatment for information they deem
to be confidential.
(b) Use of Confidential Information of Other Parties. Each party
represents, warrants, and covenants that it will not use in the course
of its performance under this Agreement, or disclose to the other
parties hereto, any confidential or proprietary information of any
third party (including competitors of the other parties) without the
prior written consent of the party to whom such confidential or
proprietary information belongs.
(c) Disclosure does not constitute a License. Neither the execution of this
Agreement nor the disclosure of any confidential or proprietary
information by one party to the other hereunder shall be construed as
granting to the recipient of such information, by implication or
otherwise, any right in, or license to, other than expressly contained
herein, any present or future proprietary information, patent,
trademark, copyright invention, now or hereinafter, owned or controlled
by the disclosing party. Each party will be authorized to use the other
party's confidential information that is disclosed hereunder only for
such purposes as are expressly contemplated by this Agreement.
(d) Notice of Unauthorized Disclosure. If either party becomes aware of any
unauthorized disclosure of the other party's confidential information,
it will immediately notify the other party of such unauthorized
disclosure and will take all reasonable steps to mitigate the potential
harm associated with such unauthorized disclosure.
(e) Survival. The provisions regarding Confidential Information shall
survive the termination or expiration of this Agreement, except that
such obligations shall not limit Customer's rights under the [***]
Disposable Set Components License Agreement.
15. Termination.
(a) Termination Events.
(i) Upon the failure of Customer to pay to Supplier monies when due by
Customer to Supplier hereunder and/or under any of the Related
Agreements, Supplier may give notice to Customer of such non-payment.
Thereafter, if Customer fails to pay such monies to Supplier within
five (5) business days of such notice, then this Agreement shall
terminate on that 5th business day. If Customer pays the monies due to
Supplier within those five (5) business days, then this Agreement shall
not terminate.
(ii) Upon a Confidentiality Breach by Customer, then Supplier may
give notice to Customer of such Confidentiality Breach. If
Customer fails to cure such Confidentiality Breach within sixty (60)
days of such notice, then this Agreement may be terminated by
Supplier at any time during the applicable Supplier Termination
Period. Supplier's failure to terminate this Agreement during
the Supplier Termination Period will constitute a waiver of
Supplier's rights to terminate this Agreement by reason of the
applicable Confidentiality Breach, but will not constitute a waiver
of Supplier's other rights and remedies under this Agreement (or other
applicable Related Agreement, if any), or a waiver of future
similar breaches.
(iii) Upon an Exclusivity Breach by Customer, then Supplier may give notice
to Customer of such Exclusivity Breach. If Customer fails to cure such
Exclusivity Breach within sixty (60) days of such notice, then this
Agreement may be terminated by Supplier at any time during the
applicable Supplier Termination Period. Supplier's failure to terminate
this Agreement during the Supplier Termination Period will constitute a
waiver of Supplier's rights to terminate this Agreement by reason of
the applicable Confidentiality Breach, but will not constitute a waiver
of Supplier's other rights and remedies under this Agreement (or other
applicable Related Agreement, if any), or a waiver of future similar
breaches.
(iv) Upon a material breach of this Agreement by Customer other than any
of the material breaches described in Sections 15(a)(i)-(iii) above
that occurs after any termination of the [***] Pump Supply Agreement,
then Supplier may give notice to Customer of such material breach.
If Customer fails to cure such material breach within sixty (60)
days of such notice, then this Agreement may be terminated by Supplier
at any time during the applicable Supplier Termination Period.
Supplier's failure to terminate this Agreement during the Supplier
Termination Period will constitute a waiver of Supplier's rights
to terminate this Agreement by reason of the applicable breach,
but will not constitute a waiver of Supplier's other rights and
remedies under this Agreement, or a waiver of future similar breaches.
(v) Upon a Bankruptcy Event of Supplier, Supplier shall notify Customer
thereof within one (1) business day thereof. Customer may elect to
terminate the Agreement by giving written notice to Supplier within
thirty (30) days of that notice.
(vi) Upon a Change of Control of Supplier, Supplier shall notify Customer
thereof within one (1) business day of the public announcement thereof.
Thereafter, Customer may elect to terminate the Agreement by giving
notice to Supplier within thirty (30) days of the public announcement
of the Change of Control of Supplier.
(vii) Upon a material breach of this Agreement by Supplier, Customer
may give notice to Supplier of such material breach. If Supplier
cures such material breach within sixty (60) days following such
notice, then this Agreement shall not terminate by reason of that
breach. If Supplier fails to cure such material breach within sixty
(60) days of such notice, then this Agreement may be terminated by
Customer at any time during the period that begins on the sixtieth
(60th) day following such notice and ends on the ninetieth (90th)
day following such notice (the "Customer Termination Period") by
giving written notice of such termination to Supplier before the
expiration of the Customer Termination Period. Customer's failure
to terminate this Agreement during the Customer Termination Period
will constitute a waiver of Customer's rights to terminate this
Agreement by reason of the applicable breach, but will not constitute
a waiver of Customer's other rights and remedies under this Agreement,
or a waiver of future similar breaches.
(viii) At any time after January 1, 2008, Customer may terminate this
Agreement by giving two-years notice pursuant to Section 2 above.
(ix) Customer sends a notice of termination of this Agreement due to
Supplier's failure to fulfill a call-off pursuant to the "Termination
Remedy" described in Section 17(c)(iv) below.
(x) In the event Supplier commences a voluntary proceeding under Title
11 of the United States Code (the "Bankruptcy Code") and/or is
adjudicated a debtor in an involuntary case under the Bankruptcy
Code, and subsequently requests authority of the Bankruptcy Court
to reject this Agreement pursuant to Section 365(a) of the
Bankruptcy Code, the rejection of this Agreement, when effective,
shall constitute a breach permitting Customer to terminate this
Agreement. Notwithstanding any other provision to the contrary
contained herein or in the [***] Disposable Set Components License
Agreement, such breach and termination shall have no effect upon the
[***] Disposable Set Components License Agreement or upon the rights
of the parties under that agreement.
(b) Effect of Termination, Expiration, or Non-Renewal; Effect of Bankruptcy
Event of Customer.
(i) Purchase of Inventory.
(1) Following the termination of this Agreement pursuant to Section
15(a)(i) above due to the failure of Customer to pay monies to
Supplier, pursuant to Section 15(a)(ii) due to a Confidentiality Breach
by Customer, pursuant to Section 15(a)(iii) due to an Exclusivity
Breach by Customer, or pursuant to Section 15(a)(iv) due to a material
breach of this Agreement by Customer, then, within thirty (30) days of
any such termination, Customer shall purchase all of Supplier's
inventory of finished custom [***] Disposable Set Components; provided,
however, that Customer shall not be required to purchase such
inventories to the extent that they exceed Customer's forecasted
requirements hereunder for ninety (90) days following the termination
date. Supplier acknowledges and agrees that Customer will be entitled
to sell within the Territory any [***] Disposable Set Components that
Customer purchases pursuant to this Section 15(b)(i)(1).
(2) Following the termination of the Agreement due to a failure of Supplier
to fulfill call-offs pursuant to Section 15(a)(ix) (with reference to
Section17(c)(iv)), due to a Bankruptcy Event of Supplier pursuant to
Section 15(a)(v) above, or due to the Change of Control of Supplier
pursuant to Section 15(a)(vi) above, or due to a material breach of the
Agreement by Supplier pursuant to Section 15(a)(vii) above, then,
within thirty (30) days of such termination, Customer may elect to
purchase all or any portion of Supplier's inventory of finished [***]
Disposable Set Components allocated to Customer in accordance with the
estimates called for by Section 7(a) and Supplier's inventory of custom
components for [***] Disposable Set Components. If Customer elects to
purchase less than all of these inventories, then Supplier, at its
expense, shall destroy the remaining inventories of custom [***]
Disposable Set Components. Supplier may use for its own purposes all
the remaining components of the [***] Disposable Set Components that
are not custom [***] Disposable Set Components.
(ii) Return of Materials Upon Termination.
-------------------------------------
Upon termination, expiration, or non-renewal of this Agreement,
each party shall return to the other party all materials and
documents containing confidential and proprietary information,
including any copies or extracts thereof, and shall erase any copies
thereof contained in any electronic or other memory device. In
addition, at that time each party shall immediately cease and
desist from using any confidential or proprietary information of the
other parties hereto for any purpose whatsoever. Each party will
certify in writing to the other, within thirty (30)days after any
such termination, expiration, or non-renewal of this Agreement,
that they have complied with this Section 15(b)(ii), and, upon
request by the other party, will provide reasonable evidence of
such compliance. Nothing herein shall operate to limit any
rights Customer has under the [***] Disposable Sets Components
License Agreement.
(iii) Effect of Bankruptcy Event of Customer. In the event of a Bankruptcy
Event of Customer, Customer shall notify Supplier thereof within one
(1) business day thereof. Thereafter, all payment terms for [***]
Disposable Set Components will be "Cash on Delivery."
(c) Neither party in exercising its rights to terminate this Agreement in
accordance with the terms and conditions hereof shall incur any
liability whatsoever for any damage, loss or expense of any kind
suffered or incurred by the other (or for any compensation to the
other) arising from or incident to any such termination (except if such
termination is for a material breach of this Agreement), expiration or
non-renewal, whether or not the terminating party is aware of any such
damage loss or expense. Any termination hereof shall not impair any
rights nor discharge any obligations which have accrued to the parties
as of the effective date of such termination.
16. Indemnification; Insurance.
(a) Supplier's Indemnification. Supplier shall indemnify, defend and hold
Customer, its affiliates, and their respective officers, directors,
employees and agents (each, a "Supplier Indemnified Party"), harmless
from and against any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties, reasonable attorneys' fees, costs of
investigation and any legal or other expenses or costs ("Losses")
incurred or suffered by any Supplier Indemnified Party arising out of,
in connection with or resulting from any claim, allegation or judgment
as to: (i) any third party product liability claim relating to any
[***] Disposable Set Components other than product liability claims
arising from Customer's manufacture of [***] Disposable Sets, (ii) any
violation or infringement by Supplier upon any common law or statutory
intellectual property rights of any third party that arises from or
relates to Supplier Intellectual Property and the [***] Disposable Set
Components, or (iii) any inaccuracy or breach in any of Supplier's
representations and warranties under this Agreement; provided, however,
that Supplier shall have no obligation to indemnify Customer for any
Losses to the extent such Losses are caused by any negligent or willful
act or omission of Customer. With respect to Section 16(a)(ii) above,
Supplier shall provide, at its own cost, non-infringing replacements
for the infringing portions of the [***] Disposable Set Components of
equivalent quality and effect, or obtain at its own cost the necessary
licenses from third parties to allow Customer to continue to market,
sell, distribute, and promote the [***] Disposable Set Components as
contemplated by the parties under this Agreement. The rights of
Customer and obligations of Supplier relating to any failure of any
[***] Disposable Set Component to comply with the Product Warranties
set forth in Section 7(g) above are described in the Maintenance and
Service Agreement and in Section 7(i) above.
(b) Customer's Indemnification. Customer agrees to indemnify, defend and
hold harmless Supplier, its affiliates, and their respective officers,
directors, employees and agents (each, a "Customer Indemnified Party")
from and against any and all Losses (as defined in Section 16(a) above)
incurred or suffered by any Customer Indemnified Party arising out of,
in connection with or resulting from any claim, allegation or judgment
as to: (i) any third party product liability claim arising from
Customer's manufacture of [***] Disposable Sets, (ii) any violation or
infringement by Customer upon any common law or statutory intellectual
property rights of any third party that arises from or relates to
Customer Intellectual Property, or (iii) any inaccuracy or breach in
any of Customer's representations and warranties under this Agreement;
provided, however, that Customer shall have no obligation to indemnify
Supplier for any Losses to the extent such Losses are caused by any
negligent or willful act or omission of Supplier. Further, with respect
to rights of Supplier under Section 16(b)(ii) above, Customer shall
provide, at its own cost, non-infringing replacements for the
infringing portions of Customer Intellectual Property of equivalent
quality and effect, or obtain at its own cost the necessary licenses
from third parties to allow Supplier to continue to manufacture and
supply the [***] Disposable Set Components as contemplated by the
parties under this Agreement.
(c) Indemnification Procedure for Matters Involving Third Parties.
(i) If any third party notifies any party hereto (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against the other party hereto (the
"Indemnifying Party") under Section 16(a) or 16(b) (as applicable),
then the Indemnified Party shall promptly notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) that the Indemnifying Party is prejudiced
thereby.
(ii) Any Indemnifying Party will have the obligation to assume the defense
of the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party at any time within 15 days after
the Indemnified Party has given notice of the Third Party Claim;
provided, however, that the Indemnifying Party must conduct the defense
of the Third Party Claim actively and diligently thereafter in order to
preserve its rights in this regard; and provided further that the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim.
(iii) So long as the Indemnifying Party has assumed and is conducting the
defense of the Third Party Claim in accordance with Section 16(c)(ii)
above, (A) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) unless the
judgment or proposed settlement involves only the payment of
money damages by one or more of the Indemnifying Parties and does
not impose an injunction or other equitable relief upon the
Indemnified Party and (B) the Indemnified Party will not consent to
the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent
of the Indemnifying Party (which shall not be unreasonably withheld).
(iv) If the Indemnifying Party does not assume and conduct the defense of
the Third Party Claim in accordance with Section 16(c)(ii) above,
however, (A) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it reasonably may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent
from, any Indemnifying Party in connection therewith) and (B) the
Indemnifying Party will remain responsible to indemnify the Indemnified
Party under Section 16(a) or 16(b) (as applicable).
(d) Indemnification Procedure for Matters not Involving Third Parties. A
claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification
is sought.
(e) Insurance.
(i) Supplier shall maintain in full force and effect throughout the Term,
at its sole cost and expense, insurance with financially sound and
established reputable insurers of the type and quantity (and with
such risk retention) generally maintained by the companies of
established repute in Supplier's line of business, such insurance to
include, without limitation, products liability insurance and general
liability insurance each, in an amount no less than ten million U.S.
dollars (U.S. $10,000,000.00) per occurrence. Supplier shall upon
request provide Customer with a copy of any documentation relating to
any such insurances. Supplier shall have Customer named as an
additional insured beneficiary, with Customer able to claim thereunder
as primary beneficiary and without offset or deduction whatsoever as a
result of any insurance obtained by Customer, and shall contain a
waiver of subrogation by the respective insurance carrier against
Customer's and its affiliates' insurance carrier, with respect to
Supplier's obligations under this Agreement.
(ii) Customer shall maintain in full force and effect throughout the Term,
at its sole cost and expense, insurance with financially sound and
established reputable insurers of the type and quantity (and with
such risk retention) generally maintained by the companies of
established repute in Customer's line of business, such insurance to
include, without limitation, products liability insurance and general
liability insurance each, in an amount no less than ten million U.S.
dollars (U.S. $10,000,000.00) per occurrence. Customer shall upon
request provide Supplier with a copy of any documentation relating to
any such insurances. Customer shall have Supplier named as an
additional insured beneficiary, with Supplier able to claim thereunder
as primary beneficiary and without offset or deduction whatsoever as a
result of any insurance obtained by Supplier, and shall contain a
waiver of subrogation by the respective insurance carrier against
Supplier's and its affiliates' insurance carrier, with respect to
Customer's obligations under this Agreement.
(f) Limitations on Supplier's Liability. SUPPLIER'S MAXIMUM LIABILITY TO
CUSTOMER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY CUSTOMER
UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR
PRODUCT LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED
$1,000,000; PROVIDED, HOWEVER, THAT SUPPLIER'S MAXIMUM LIABILITY TO
CUSTOMER FOR DAMAGES, IF ANY, RELATING TO CLAIM(S) MADE BY CUSTOMER
THAT ARISE OUT OF THE SAME FACTS AND CIRCUMSTANCES, WHETHER SUCH
CLAIM(S) ARE MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS, SHALL IN NO EVENT EXCEED $1,000,000. SUPPLIER'S MAXIMUM
LIABILITY TO CUSTOMER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S)
MADE BY CUSTOMER FOR INDEMNIFICATION FOR A PRODUCT LIABILITY CLAIM BY A
THIRD PARTY SHALL IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE
PROCEEDS AVAILABLE TO SUPPLIER WITH RESPECT TO SUCH CLAIM, WHETHER SUCH
CLAIM IS MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS.
(g) Limitations on Customer's Liability. CUSTOMER'S MAXIMUM LIABILITY TO
SUPPLIER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY SUPPLIER
UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR
PRODUCT LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED
$1,000,000; PROVIDED, HOWEVER, THAT CUSTOMER'S MAXIMUM LIABILITY TO
SUPPLIER FOR DAMAGES, IF ANY, RELATING TO CLAIM(S) MADE BY SUPPLIER
THAT ARISE OUT OF THE SAME FACTS AND CIRCUMSTANCES, WHETHER SUCH
CLAIM(S) ARE MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS, SHALL IN NO EVENT EXCEED $1,000,000. CUSTOMER'S MAXIMUM
LIABILITY TO SUPPLIER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S)
MADE BY SUPPLIER FOR INDEMNIFICATION FOR A PRODUCT LIABILITY CLAIM BY A
THIRD PARTY SHALL IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE
PROCEEDS AVAILABLE TO CUSTOMER WITH RESPECT TO SUCH CLAIM, WHETHER SUCH
CLAIM IS MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS.
(h) No Consequential Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF
THE BREACHING PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES
IN ADVANCE. The parties intend this limitation in this Section 16(h) to
apply to the following events, among other events: (i) any claim for
consequential damages suffered by the non-breaching party (as opposed
to any third party) arising out of any claim by a third party for
either product liability or infringement of intellectual property, (ii)
any breach by either party of its representations under this agreement,
(iii) any non-performance or mal-performance by either party under this
Agreement, or (iv) the termination or expiration of this Agreement by
either party. Such incidental or consequential damages shall include,
but shall not be limited to, loss of goodwill, loss of prospective
profits, loss of revenue, or damages on account of any investment,
expenditure, or commitment that is made by either party in reliance
upon this Agreement. This limitation in this Section 16(h) is not
intended by the parties to prevent Customer, for example, from
recovering from Supplier, in an indemnification claim made under
Section 16(a)(i), the full amount that it has been required to pay to a
third party in connection with a product liability claim brought by
such third party against Customer, including such incidental or
consequential damages as may be allowed by law under that claim by that
third party. This limitation in this Section 16(h) is, nevertheless,
intended to prevent the non-breaching party from receiving from the
breaching party, in an indemnification claim under Section 16(a) or
16(b), incidental or consequential losses or damages that have been
incurred by the non-breaching party (as opposed to any third party),
such as lost profits, that may arise from or relate to any event under
this Agreement.
17. Failure to Fulfill Call-Offs.
(a) Failure to Fulfill a Call-Off. If, at any time after March
1, 2005, Supplier fails to fulfill call-offs of the [***] Disposable Set
Components to Customer in accordance with any call-off made under the terms and
conditions of this Agreement (a "Call-Off Breach"), then (i) Supplier will have
a period of one (1) year within which to cure that Call-Off Breach in the manner
described in this Section 17, and (ii) Customer will have such additional rights
as provided in this Section 17. The date of the Call-Off Breach shall be the
last day on which Supplier could have fulfilled the call-off on a timely basis
under the other terms and conditions of this Agreement other than those in this
Section 17.
(b) Determination of Customer Demand Requirements. On or
before the thirtieth (30th) day following a Call-Off Breach, Customer shall (i)
have made a reasonable, good faith determination of Customer's anticipated
demand from its customers for the [***] Disposable Set Components (the "Customer
Demand"), and (ii) have notified Supplier in writing of Customer's determination
of the Customer Demand. Such determination shall be based on Customer's existing
back orders for [***] Disposable Set Components calling for delivery within
eighty-one (81) days after the Call-Off Breach. Upon the request of Supplier,
Customer will provide Supplier with reasonable evidence of such back orders.
(i) If Customer reasonably determines in good faith
that Customer could meet its Customer Demand for [***] Disposable Set
Components either (A) out of its own inventory of such product, and/or
(B) by receiving from Supplier some lesser number of such product than
was called for by the relevant call-off, then Customer will waive in
writing that portion of the quantity of the relevant call-off that
exceeds the Customer Demand.
(ii) If Customer reasonably determines in good faith
that Customer cannot meet its Customer Demand for [***] Disposable Set
Components either (A) out of its own inventory of such product, and/or
(B) by receiving from Supplier some lesser number of such product than
was called for by the relevant call-off, then no portion of the
quantity order under the relevant call-off will be waived.
(c) Effect of Continuing Call-Off Breach on Manufacture and
Supply of [***] Disposable Set Components. Subject to Supplier's right to cure
any Call-Off Breach as provided in this Section 17, Customer shall have the
following rights:
(i) If, as of the end of the sixtieth (60th) day
after a Call-Off Breach, Supplier has been unable to cure the Call-Off
Breach by supplying the quantities of products necessary to fulfill the
relevant call-off (as modified by any waiver of any portion of that
call-off pursuant to Section 17(b) above), then, during the ensuing
fifteen (15) days, Customer may choose to invoke either or both of the
"Manufacturing Remedy" (defined below) or of the "Non-Exclusivity
Remedy" (defined below) by providing written notice to Supplier of its
election to invoke such remedy(ies). Such initial election of
remedy(ies) or later change in election shall become effective
immediately upon such notice. If, as of the end of one (1) year after
the Call-Off Breach, Supplier has been unable to cure the Call-Off
Breach, as provided in Section 17(d)(iii) below, Customer may choose to
invoke the "Termination Remedy" (defined below) by providing written
notice to Supplier.
(ii) Under the "Manufacturing Remedy," if invoked
pursuant to subsection 17(c)(i) above, the terms of this Agreement
appointing Supplier as the exclusive manufacturer of the [***]
Disposable Set Components will be suspended. Upon such suspension,
Customer will be entitled to manufacture the [***] Disposable Set
Components under the terms of the separate [***] Disposable Set
Components License Agreement between the parties of even date herewith.
This suspension shall last only until (i) this Agreement terminates
under any of the provisions of Section 15(a) above or Section 17(c)(iv)
below (as applicable) or (ii) Supplier cures the Call-Off Breach as
permitted under Section 17(d). Upon a termination of this Manufacturing
Remedy pursuant to subsection 17(d)(ii) below, Customer may continue to
manufacture or have manufactured the [***] Disposable Set Components
for a reasonable time thereafter, which period shall not exceed sixty
(60) days from the date the Manufacturing Remedy is so terminated.
Thereafter, Supplier will once again be the exclusive manufacturer of
the [***] Disposable Set Components under this Agreement.
(iii) Under the "Termination Remedy," if Supplier
fails to cure a Call-Off Breach within one (1) year from the date of
such breach (as provided in this Section 17), then, notwithstanding any
prior election of remedy by Customer as permitted above, Customer may,
upon written notice to Supplier, terminate this Agreement immediately
upon lapse of such one-year period. Such termination shall have no
effect on the separate [***] Disposable Set Components License
Agreement, and Customer shall have the right to exercise all of its
rights thereunder.
(d) Means of Curing a Call-Off Breach. Supplier may cure any
Call-Off Breach under any of the following alternative means of cure, in which
event the Call-Off Breach shall be deemed cured for all purposes, and,
Supplier's right to the Manufacturing Remedy or the Termination Remedy, as
applicable, shall terminate:
(i) Supplier may cure a Call-Off Breach if, at any
time on or before the end of the sixtieth (60th) day following the
Call-Off Breach, Supplier delivers to Customer that number of [***]
Disposable Set Components identified by Customer in its determination
of Customer Demand.
(ii) Supplier may cure a Call-Off Breach if, any time
after the sixtieth (60th) day following the Call-Off Breach, but on or
before the end of the one-hundred and twentieth (120th) day following
the Call-Off Breach, Supplier provides reasonable evidence and
certifies in writing to Customer that Supplier has made a good-faith,
reasonable determination that Supplier is again capable of producing
the [***] Disposable Set Components at the forecasted levels that were
in effect as of the date of the applicable Call-Off Breach.
(iii) Supplier may cure a Call-Off Breach if, at any
time after the one-hundred and twentieth (120th) day following the
Call-Off Breach, but on or before the end of the date one (1) year
following the Call-Off Breach, Supplier (A) provides reasonable
evidence and certifies in writing to Customer that Supplier has made a
good-faith, reasonable determination that Supplier is again capable of
producing the [***] Disposable Set Components at the forecasted levels
that were in effect as of the date of the applicable Call-Off Breach,
and (B) obtains a release of Customer from all future liabilities and
obligations of any kind or nature arising under Replacement Contracts
(defined below) from the date that Supplier proposes to cure the
Call-Off Breach. "Replacement Contracts" means such contract(s) as
Customer reasonably enters into with one or more third parties in order
to obtain the products necessary to replace the [***] Disposable Set
Components not provided by Supplier (A) that may always be terminated
by Customer without penalty upon no more than one (1) year's notice,
and (B) that require Customer to purchase quantities of the [***]
Disposable Set Components that do not exceed Customer's reasonable
forecasts for such products during the period of the contract. Customer
agrees to cooperate with Supplier in Supplier's efforts to obtain such
releases.
(e) Failure to Fulfill Call-Off due to Supply Chain Failure.
Notwithstanding the foregoing, no Call-Off Breach shall be deemed to have
occurred if Supplier's inability to timely fulfill a call-off is due to the
inability of Supplier's subcontractors to obtain a sufficient supply of
materials for the applicable [***] Disposable Set Component(s) (such failure, a
"Supply Chain Failure"). In such instance, the terms of this Agreement
appointing Supplier as the exclusive manufacturer of the [***] Disposable Set
Component(s) for which a Supply Chain Failure has occurred will be suspended.
Upon such suspension, Customer will be entitled to manufacture and sell in the
Territory for use with Flocare [***] Pumps that it has sold or placed in the
Territory the applicable [***] Disposable Set Components under the terms of the
separate [***] Disposable Set Components License Agreement between the parties
of even date herewith. This suspension shall last only until (i) this Agreement
terminates under any of the provisions of Section 15(a) above or (ii) the
Supplier cures the applicable Supply Chain Failure as permitted under Section
17(f). Upon a cure of such Supply Chain Failure under subsection 17(f)(ii)
below, Customer may continue to manufacture or have manufactured the [***]
Disposable Set Components for a reasonable time thereafter, which period shall
not exceed sixty (60) days from the date of such cure. Thereafter, Supplier will
once again be the exclusive manufacturer of the [***] Disposable Set Components
under this Agreement.
(f) Means of Curing a Supply Chain Failure. Supplier may cure
a Supply Chain Failure under any of the following alternative means of cure, in
which event, the Supply Chain Failure shall be deemed cured for all purposes and
Supplier's right to the remedy set forth in Section 17(e) for a Supply Chain
Failure shall terminate:
(i) Supplier may cure a Supply Chain Failure if, at
any time on or before the end of the sixtieth (60th) day following the
Supplier Chain Failure, Supplier delivers to Customer that number of
[***] Disposable Set Components identified by Customer in its
determination of Customer Demand.
(ii) Supplier may cure a Supply Chain Failure if, any
time after the sixtieth (60th) day following the Supply Chain Failure,
but on or before the end of the one-hundred and twentieth (120th) day
following the Supply Chain Failure, Supplier provides reasonable
evidence and certifies in writing to Customer that Supplier has made a
good-faith, reasonable determination that Supplier is again capable of
producing the [***] Disposable Set Components at the forecasted levels
that were in effect as of the date of the applicable Supply Chain
Failure.
(iii) Supplier may cure a Supply Chain Failure if, at
any time after the one-hundred and twentieth (120th) day following the
Supply Chain Failure, but on or before the end of the date one (1) year
following the Supply Chain Failure, Supplier (A) provides reasonable
evidence and certifies in writing to Customer that Supplier has made a
good-faith, reasonable determination that Supplier is again capable of
producing the [***] Disposable Set Components at the forecasted levels
that were in effect as of the date of the applicable Supply Chain
Failure, and (B) obtains a release of Customer from all future
liabilities and obligations of any kind or nature arising under
Replacement Contracts (as defined in Section 17(d)(iii) above) from the
date that Supplier proposes to cure the Supply Chain Failure.
18. Recall and Regulatory Obligations.
(a) Product Recalls. Supplier will conduct (with the reasonable cooperation of
Customer) and pay the costs and expenses associated with any mandatory recall of
any [***] Disposable Set Components required by any governmental agency (other
than recalls relating to product labeling). In addition, Supplier will conduct
(with the reasonable cooperation of Customer) and pay the costs and expenses
associated with any voluntary recall of [***] Disposable Set Components that
Supplier reasonably approves based on (i) safety risks to users of the [***]
Disposable Set Components, or (ii) failure of [***] Disposable Set Components to
meet the Product Specifications, or (iii) failure to conform to any of the
standards and specifications set forth in Section 6(a)(i). Customer has the sole
authority to unilaterally recall any [***] Disposable Set Components due to
other reasons, but in such event will both conduct the recall (with the
reasonable cooperation of Supplier) and pay all costs and expenses associated
with such recall.
(b) Notice of Other Recalls. Supplier will promptly notify Customer of any
recall of any clinical nutrition delivery product manufactured by Supplier other
than the [***] Disposable Set Components. Customer will promptly notify Supplier
of any recall of any clinical nutrition pump or disposable set manufactured,
sold, or placed by Customer other than the [***] Disposable Set Components.
(c) Regulatory Compliance. Customer shall be responsible, at its own expense for
complying with all applicable national, state, regional and local laws and
regulations in performing its duties hereunder and in any of its dealings with
respect to the [***] Disposable Set Components, including all regulatory
activities necessary to maintain the [***] Disposable Sets' CE Mark and other
regulatory approvals within the Territory.
19. Survival. Any provision of this Agreement which contemplates performance or
the existence of rights or obligations after the expiration, non-renewal, or
termination of this Agreement shall expressly survive such expiration,
non-renewal, or termination of this Agreement and shall be binding upon the
party or parties obligated thereby in accordance with the terms of this
Agreement, subject to any limitations expressly set forth in this Agreement.
20. Amendment or Waiver. This Agreement cannot be changed orally, and no
modification of this Agreement shall be recognized nor have any effect, unless
the writing in which it is set forth is signed by Customer and Supplier, nor
shall any waiver of any of the provisions of this Agreement be effective unless
in writing and signed by the party to be charged therewith. The failure of
either party to enforce, at any time or for any period of time, the provisions
hereof, or the failure of either party to exercise any option herein shall not
be construed as a waiver of such provision or option and shall in no way affect
that party's right to enforce such provisions or exercise such option. No waiver
of any provision hereof shall be deemed a waiver of any succeeding breach of the
same or any other provisions of this Agreement.
21. Dispute Resolution; Governing Law; Injunctive Relief.
(a) Negotiations. The parties agree that they will attempt in good faith to
resolve any controversy, claim, dispute or question between them arising out of
or relating to this Agreement, including the construction or application of this
Agreement, promptly by negotiations between the parties, beginning with
discussions between the Designated Representatives. If a controversy or claim
should arise, the Designated Representatives of the parties, as well as other
appropriate representatives, will meet at least once and will attempt to resolve
the matter. Either of the Designated Representatives may request the other to
meet within fourteen (14) days, at a mutually agreed time and place.
(b) Mediation. If the matter has not been resolved within thirty (30) days of
this meeting, the controversy or claim shall be submitted to non-binding
mediation by a mediator chosen from names of mediators furnished by JAMS or
American Arbitration Association. The mediation shall occur in New York City,
New York, U.S.A.
(c) Litigation. In the event that differences concerning matters covered by this
Agreement arise that are not resolved by mutual agreement via negotiations or
mediation as described above, the parties agree that any action or proceeding
arising out of or relating to this Agreement shall be heard and decided by a
non-jury bench trial in New York City, New York, U.S.A. Each party hereto
irrevocably submits to the jurisdiction of the appropriate state court covering
New York City, New York, U.S.A., and each party hereby irrevocably agrees that
all claims in respect of any such action or proceeding must be brought and/or
defended in such court; provided, however, that matters which are under the
exclusive jurisdiction of the Federal courts shall be brought in the Federal
District Court covering New York City, New York, U.S.A.
(d) Governing Law. The provisions of this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, U.S.A.
(excluding any conflict of law rule or principle that would refer to the laws of
another jurisdiction and the U.N. Convention on Contracts for the International
Sales of Goods). EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY
JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
(e) Injunctive Relief. Each of the parties acknowledge and agree that the other
parties will be damaged irreparably if certain provisions of this Agreement
(specifically including the obligations of confidentiality set forth in Section
15 herein) are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, notwithstanding any other provision in this
Agreement the damaged party shall have the right to pursue a claim for
injunctive relief, damages and attorneys' fees in any court of competent
jurisdiction for the other party's breach of any covenant, agreement or
obligation, in addition to any other relief available to them under this
Agreement or under applicable law.
(f) Fees. The parties shall equally split the fees of any mediation, but in any
arbitration or permissible legal proceedings, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and other disbursements in
addition to any other relief to which such party may be entitled.
22. Counterparts. This Agreement may be executed in multiple counterparts, which
taken together shall constitute one instrument and each of which shall be
considered an original for all purposes.
23. Notices. Any and all notices permitted or required to be given hereunder
shall be deemed duly given: (i) upon actual delivery, if delivery is by hand;
(ii) upon delivery by overnight express courier (i.e., DHL or FedEx); or (iii)
upon facsimile transmission, so long as the original is then sent by overnight
express courier. Each such notice shall be sent to the respective party at the
address indicated below:
If to ZEVEX: ZEVEX International Inc.
4314 ZEVEX Park Lane
Salt Lake City, Utah, USA 84123
Attn: Chairman and CEO
Fax: (801) 264-1051
with a copy to the CFO
at the same address.
If to Numico: Numico Trading B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Luc Volatier, V.P. of
Purchasing Worldwide
Fax: 31206586159
If to Nutricia: c/o Nutricia International B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Rob Heutink, V.P.
Manufacturing and Supply,
Emerging Markets
Fax: 31206586884
or such other address or facsimile number as any of the persons designated above
may have specified in a notice or communication duly given to the other
designated person as provided herein.
24. Binding Effect; Non-Assignability. This Agreement shall be binding upon and
enforceable against the parties hereto and their respective successors and
permitted assigns. Neither party shall assign or subcontract (except as
expressly allowed hereunder) its rights and obligations under this Agreement
without the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that either party may assign this
Agreement to an affiliate of such party.
25. Relationship of the Parties. The parties are and at all times shall be
deemed to be independent contractors and shall be wholly responsible for the
goods supplied and services performed under this Agreement. Nothing contained
herein shall be construed as creating the relationship of employer/employee or
principal/agent. Each party shall assume full responsibility for the actions of
its employees as related to the party's obligations under this Agreement.
Neither party to this agreement is hereby constituted an agent of the other for
any purpose and neither party has the authority to assume or create any
obligation, or to make any representation, warranty or guarantee for the other,
except as expressly granted or made in this agreement.
26. Force Majeure. Neither party shall be responsible or liable for any default
in performance of this Agreement arising directly or indirectly from any cause
beyond such party's control, including fire, flood, earthquake, acts of God, war
(declared or undeclared), enemy action, embargo, strike, governmental order,
proclamation or regulation, accident, explosion, riot, insurrection, or
expropriation of the property by government authority (each such event a "Force
Majeure Event"). If a Force Majeure Event occurs, the parties will exert
reasonable efforts (including, without limitation, utilizing, as and where
appropriate, the contingency plan developed by the parties pursuant to Section
4(b) above) to mitigate the impact of such Force Majeure Event on the business
arrangements of the parties set forth in this Agreement and to otherwise carry
out the intent and accomplish the objectives of this Agreement.
27. Exhibits and Schedules. Any exhibit or schedule attached hereto is made a
part hereof and is fully incorporated herein by reference.
28. Entire Agreement. This Agreement contains the sole and complete
understanding of the parties related to its subject matter, and supersedes all
oral or written agreements concerning this subject matter made prior to the date
of this Agreement.
29. Remedies Not Exclusive. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy will be cumulative and will be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies will not
constitute a waiver of the right to pursue other available remedies.
30. Partial Invalidity. If any provision of this Agreement is adjudged to be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired, and
the parties shall use their best efforts to substitute a valid, legal, and
enforceable provision which, insofar as practical, implements the purposes of
this Agreement.
31. Language; Interpretation. The language controlling the construction and
interpretation of this Agreement shall be English. Section headings are included
solely for convenience and shall not constitute a part hereof. Unless the
context otherwise requires, words importing the singular shall be deemed to
import the plural and vice versa.
32. Third Party Beneficiaries. No person or entity shall be a third-party
beneficiary of this Agreement, except that Supplier acknowledges and agrees that
its obligations under the product warranties set forth in Section 7(g) above
shall be deemed as commitments to all affiliates of Customer as third-party
beneficiaries.
33. Media Relations. Each of Customer and Supplier agree that during the Term
each will not, and will cause its affiliates not to, disparage each other or
release commercially sensitive information about each other in any oral,
written, or electronic public statements (including without limitation in any
securities filing with the U.S. Securities and Exchange Commission) concerning
any matters relating to or arising from this Agreement.
IN WITNESS WHEREOF, the parties enter into this Agreement effective as
of the Effective Date.
ZEVEX INTERNATIONAL, INC.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
NUTRICIA INTERNATIONAL, B.V.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
NUMICO TRADING B.V.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
EXHIBIT A
INITIAL PRODUCT PRICES
Product Pricing for [***] Disposable Set Components:
The Initial Product Price for each [***] Disposable Set Component will
be calculated using the following formula:
[***] x Manufacturing Cost = Initial Product Price for such [***]
[***] Disposable Set Component
Provided, however, that the Initial Product Price will be
deemed to include a royalty fee of [***] for each LIM Segment
and [***] for each cassette, as set forth in the [***]
Disposable Set Components License Agreement.
ZEVEX Annual Initial
Part Number Description Purchase Quantity Manufacturing Cost
- ----------- ----------- ----------------- ------------------
[***] [***] Pump LIM Segment [***] [***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***] Pump Cassette [***] [***]
[***] [***]
[***] [***]
[***] [***]
For purposes of this Agreement, "Manufacturing Cost" will be the price paid by
Supplier to its supplier for such [***] Disposable Set Component when no
assembly is required by Supplier.
EXHIBIT B
CRITICAL COMPONENTS AND SUPPLIERS
ZEVEX
Part Number Description Supplier
- ----------- ----------- --------
[***] [***] Pump LIM Segment [***] [***]
[***] [***] Pump Cassette [***]
CONFIDENTIAL INFORMATION OF ZEVEX International, Inc.
[*Confidential treatment has been requested as to certain portions of this
document. Each such portion, which has been omitted herein and replaced with an
asterisk [***], has been filed separately with the Securities and Exchange
Commission.]
Exhibit 10.34
LICENSE AGREEMENT FOR THE
[***] DISPOSABLE SET COMPONENTS
THIS LICENSE AGREEMENT FOR THE [***] DISPOSABLE SET COMPONENTS (this
"Agreement") is entered into as of July 20, 2004 (the "Effective Date"), by and
between NUMICO TRADING B.V., a Netherlands corporation with its principal
offices at Numico Beech Avenue 54-80, 1119PW, Schiphol-Rijk, The Netherlands
("Numico"), NUTRICIA INTERNATIONAL B.V., a Netherlands corporation with its
principal offices at Numico Beech Avenue 54-80, 1119PW, Schiphol-Rijk, The
Netherlands ("Nutricia", and, together with Numico, "Licensee"), and ZEVEX
INTERNATIONAL, INC., a Delaware corporation, with its principal offices at 4314
ZEVEX Park Lane, Salt Lake City, Utah ("Licensor").
RECITALS
A. Numico and Nutricia are subsidiaries of Royal Numico, N.V., a
Netherlands corporation ("Royal Numico"), which is a world leader in the
manufacturing and marketing of clinical nutrition products and related equipment
and accessories.
B. Nutricia is a world leader in the manufacture and marketing of
clinical nutrition products.
C. Numico specializes in the procurement of raw materials, packaging
materials and fully-finished products for use in the Nutricia clinical nutrition
business.
D. Licensor is engaged in the business of developing, manufacturing and
marketing clinical nutrition delivery devices and accessories, including the
[***] Disposable Set Components (as defined below), which are the subject of
this Agreement.
E. The parties desire that Licensor license the manufacturing rights to
the [***] Disposable Set Components to Licensee in accordance with the terms and
conditions of this Agreement.
F. Of even date with this Agreement, the parties have entered into that
certain [***] Pump Supply Agreement (as defined below), whereby Licensee has
appointed Licensor as the exclusive manufacturer of the [***] Disposable Set
Components and certain other Licensor products.
G. Of even date with this Agreement, the parties have entered into that
certain Flocare 800 Pump Agreement (as defined below), whereby Licensee has
appointed Licensor as the exclusive manufacturer of Licensee's Flocare 800 pump.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and for other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions. Capitalized terms not otherwise defined herein shall bear the
respective meanings given to them below:
"Affiliate" of a party shall mean any corporation or other
business entity controlling, controlled by, or under common control
with such party.
"Bankruptcy Event" means that, with respect to an entity,
such entity shall (a) make a general assignment for the benefit of
creditors or an agent authorized to liquidate its assets, (b) become
the subject of bankruptcy or insolvency proceedings or other
proceedings for relief under any bankruptcy or other law for the relief
of debtors, where, with respect to an involuntary petition in
bankruptcy, the petition shall not have been stayed within thirty (30)
days, (c) apply to a court for the appointment of a receiver or
custodian for substantially all of its assets or properties, with or
without consent, and such receiver is not discharged within thirty (30)
days after appointment, or (d) adopt a plan of complete liquidation of
its assets.
"CE Mark" shall mean an indication that a product complies
with the essential requirements of applicable European Union directives
and that the product has been subject to conformity assessment
procedures as provided in the directives.
"Change of Control of Licensee" means (i) any transaction as a
result of which any person or entity becomes the "beneficial owner" (as
defined in Rule 13d-3 of the U.S. Securities and Exchange Act of 1934),
directly or indirectly, of securities of any of Numico, or Nutricia,
representing more than 50% of the total voting power of any of their
then outstanding voting securities; or (ii) the sale, transfer or other
disposition of all or substantially all of the assets of any of Numico,
or Nutricia; in either case where the new controlling party would
materially benefit from a failure of Licensor's business; provided,
however, that a transaction shall not constitute a Change of Control if
its sole purpose is to change the state of incorporation of Numico, or
Nutricia (as applicable) or to create a holding company that will be
owned in substantially the same proportions by the persons who held the
securities of Numico, or Nutricia (as applicable) immediately before
such transaction.
"Change of Control of Licensor" means (i) any transaction as a
result of which any person or entity is the "beneficial owner" (as
defined in Rule 13d-3 of the U.S. Securities and Exchange Act of 1934),
directly or indirectly, of securities of the Licensor representing more
than 50% of the total voting power represented by the Licensor's then
outstanding voting securities; or (ii) the sale, transfer or other
disposition of all or substantially all of Licensor's assets; in either
case where the new controlling party would materially benefit from
Licensee's failure in the clinical nutrition market; provided, however,
that a transaction shall not constitute a Change of Control if its sole
purpose is to change the state of Licensor's incorporation or to create
a holding company that will be owned in substantially the same
proportions by the persons who held Licensor's securities immediately
before such transaction, or (y) if a then current officer or director
of ZEVEX is the new controlling party or is a member of the group or
entity that is the new controlling party provided, however, that, the
new controlling party would not materially benefit from Licensee's
failure in the clinical nutrition market.
"Commercially Reasonable Efforts" shall mean those efforts
that a reasonably prudent business person would make under similar
circumstances, including entering into contractual arrangements in
appropriate circumstances.
"Confidentiality Breach by Licensee" means a material breach
by Licensee of (i) Section 4 of this Agreement (ii) Section 15 of the
[***] Pump Supply Agreement, (iii) Section 4 of the [***] Pump License
Agreement, and/or (iv) Section 14 of the [***] Disposable Set
Components Supply Agreement.
"[***] Disposable Set Components" means the [***] LIM Pump
Segment and [***] Cassette components of the [***] Disposable Sets as
defined more thoroughly in the [***] Pump Supply Agreement.
"[***] Disposable Set Components Supply Agreement" means that
certain [***] Disposable Set Proprietary Components Supply Agreement of
even date herewith between the parities.
"Exclusivity Breach by Licensee" means a material breach by
Licensee of (i) Section 2 of this Agreement (ii) Sections 5(a), 5(c)
and/or 5(f) of the [***] Pump Supply Agreement, (iii) Section 2 of the
[***] Pump License Agreement, (iv) Sections 5(a) and/or 5(c) of the
[***] Disposable Set Components Supply Agreement, and/or (v) Section
5(b) of the Flocare 800 Pump Agreement.
"Flocare 800 Pump Agreement" means that certain Flocare 800
Pump Manufacturing Agreement of even date herewith between the parties.
"Flocare [***] Pump" means ZEVEX's [***] Pump as defined in
the [***] Pump Supply Agreement.
"[***] Intellectual Property" means the Know-How, and the
Patents, as well as all (i) the [***] Trademarks, (ii) copyrights
(registered and unregistered) and copyrightable works and registrations
and applications for registration thereof, (ii) mask works and
registrations and applications for registration thereof, (iii) computer
software, data, data bases and documentation thereof, (iv) other
intellectual property rights and (v) copies and tangible embodiments
thereof (in whatever form or medium) which relate to the [***]
Disposable Set Components.
"[***] Pump License Agreement" means that certain License
Agreement for the Flocare [***] Pump of even date herewith between the
parties.
"[***] Pump Supply Agreement" means that certain [***] Pump
Supply Agreement of even date herewith between the parties.
"[***] Trademarks" means all trademarks, service marks, trade
dress, trade names, logos and corporate names and registrations and
applications for registration thereof, together with all of the
goodwill associated therewith, and all other devices used by Licensor
to distinguish the [***] Disposable Set Components, including, but not
limited to, the trademarks, service marks, trade names, and logos
listed on Exhibit A hereto.
"Know-How" means all trade secrets and other confidential
information, including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), the Product Specifications,
know-how, research and development information, drawings,
specifications, designs, plans, proposals, technical data, supplier
lists and information, design input information relating to tooling,
molds, dies, and unpublished research and development information
owned, controlled by, or in the possession of Licensor on the Effective
Date of this Agreement or which later come into the possession of
Licensor that are necessary or helpful in the production of the [***]
Disposable Set Components and that Licensor has the right to provide to
Licensee; provided, however, that Know-How shall not include either (i)
manufacturing and production processes and techniques, and (ii)
customer lists. A list of documents containing Know-How to be
transferred to Licensee is attached hereto as Exhibit B.
"Maintenance and Service Agreement" means that certain
Maintenance and Service Agreement of even date herewith between the
parties.
"Patents" means (i) all patents, patent applications, patent
disclosures and inventions, including those described in Exhibit C,
which relate to the [***] Disposable Set Components; (ii) any
continuations, continuations-in-part, divisions, reissues, substitutes,
extensions of any of the foregoing; and/or (iii) new Licensor patent
applications and resulting patents which relate to the [***] Disposable
Set Components and/or the patents listed on Exhibit C hereto.
"Product Specifications" means the technical, manufacturing,
and functional specifications for the [***] Disposable Set Components,
as set forth on Exhibit D hereto.
"Related Agreements" means the [***] Pump Supply Agreement,
the [***] Disposable Set Components Supply Agreement, the [***] Pump
License Agreement, the Flocare 800 Pump Agreement, and the Maintenance
and Service Agreement.
"Licensor Termination Period" means a thirty (30) day period
that begins on the sixtieth (60th) day following notice by Licensor to
Licensee of a Confidentiality Breach by Licensee, an Exclusivity Breach
by Licensee, or any other material breach by Licensee, as applicable.
"Territory" means the countries designated in the following
chart:
------------------------------------------------------ -----------------------------------------
Austria, Belgium, Denmark, Finland, France, Bulgaria, Czech Republic,
Germany, Greece, Ireland, Italy, Latvia, Hungary, Poland, Russia,
Luxembourg, The Netherlands, Norway, Portugal, Slovakia, Ukraine, United
Spain, Sweden, Switzerland, United Kingdom Arab Emirates, Turkey
------------------------------------------------------ -----------------------------------------
------------------------------------------------------ -----------------------------------------
Australia, New Zealand China, Indonesia,
Malaysia, Taiwan
------------------------------------------------------ -----------------------------------------
------------------------------------------------------ -----------------------------------------
Argentina, Brazil South-Africa
------------------------------------------------------ -----------------------------------------
2. License
(a) License Grant. Subject to all the other terms and condition in this
Agreement, Licensor hereby grants Licensee and its Affiliates a
perpetual, irrevocable license to fully exploit and exercise all of the
rights in and to the [***] Intellectual Property for the manufacture of
the [***] Disposable Set Components for placement, sale and/or use with
the Flocare [***] Pump by the Licensee's customers in the Territory.
This license includes, but is not limited to, the following rights:
(i) The right to make, use, sell, license, distribute, offer for sale, and
import the [***] Disposable Set Components in the Territory.
(ii) The right to use the [***] Trademarks in the Territory in conjunction
with the [***] Disposable Set Components, including the right to use
the [***] Trademarks in connection with Licensee's own trademarks
and in composite trademarks consisting of elements of the [***]
Trademarks combined with elements of Licensee's trademarks. The
license to use the [***] Trademarks hereunder shall be considered to be
supplemental to Licensee's license rights to the other [***]
Intellectual Property under this Agreement within the meaning of
Section 365(n)(4(B) of the United States Bankruptcy Code. Licensee
shall exercise this right consistent with Licensor's prevailing
trademark usage guidelines. Licensee shall not use any other names,
marks, or logos, in any manner that is confusingly similar to the [***]
Trademarks. Licensee acknowledges and agrees that the [***] Trademarks
are owned exclusively by Licensor and that Licensee has neither
acquired nor shall acquire any rights therein. Licensee shall not
assert or claim any rights over the [***] Trademarks nor contest same
or challenge the validity thereof.
(iii) The right to sublicense to any other party any of the rights granted to
Licensee hereunder, including the right to authorize other parties to
make, use, sell, license, distribute, offer for sale, and import the
[***] Disposable Set Components and use the [***] Trademarks in the
Territory, including the right to use the [***] Trademarks in
connection with Licensee's own trademarks and in composite trademarks
consisting of elements of the [***] Trademarks combined with elements
of Licensee's trademarks.
(b) Exclusivity. The foregoing rights shall be exclusive to Licensee within
the Territory. Licensee has no rights to the [***] Intellectual
Property for any purpose other than as expressly provided in this
Agreement or for any purpose outside of the Territory. Further,
Licensor shall retain all rights to use the [***] Intellectual Property
within the Territory for products not involving enteral feeding pump
disposable sets.
(c) Know-How Transfer. Within thirty (30) days from the Effective Date,
Licensor shall disclose and transfer to a mutually-acceptable escrow
agent all of the Know-How and other [***] Intellectual Property by
delivering to such escrow agent documents fully disclosing the Know-How
and other [***] Intellectual Property that is necessary or helpful for
Licensee to manufacture the [***] Disposable Set Components, including
written instructions to Licensor's suppliers giving such suppliers
permission to provide materials necessary for the manufacture of the
[***] Disposable Set Components, notwithstanding any preexisting
exclusivity arrangements such suppliers may have with Licensor. (the
"Escrow Materials"). Licensee shall have the right to review all Escrow
Materials deposited into escrow to assure the sufficiency of such
materials, and if Licensee is not assured of such sufficiency, Licensor
shall deposit such additional materials as Licensee may reasonably
request. Prior to such transfer, the parties agree to complete and
execute an escrow agreement mutually acceptable to the parties and to
the escrow agent. The escrow agreement will provide for the initial
release to Licensee of those Escrow Materials necessary or helpful for
Licensee to obtain all required regulatory approvals for the use and
sale of the [***] Disposable Set Components in the Territory. The
escrow agent will release these Escrow Materials upon the reasonable
request of Licensee. The escrow agreement will provide for the release
of the remaining Escrow Materials to Licensee upon the termination of
the [***] Disposable Set Components Supply Agreement in the event that
this Agreement remains in full force and effect. In connection with the
foregoing releases of the Escrow Materials, Licensor shall make
reasonably available to Licensee the appropriate Licensor personnel to
assist Licensee in implementing the Know-How and practicing the license
granted hereunder. All transfer of Know-How will be in the form of
written documentation or verbal communications from Licensor's staff to
Licensee's staff. To the extent practicable, all written documentation
shall be marked as "Confidential Trade Secrets of ZEVEX International."
(d) Quality Assurance Standards. In order for Licensee to maintain its
license hereunder, Licensee agrees that any [***] Disposable Set
Components that are not manufactured by Licensor bearing the [***]
Trademarks will meet the Quality Assurance Standards to be agreed upon
by the parties and attached hereto as Exhibit E (the "Quality Assurance
Standards"), so as to protect Licensor's goodwill pertaining to the
[***] Trademarks. Should Licensor at any time reasonably determine that
Licensee is not manufacturing [***] Disposable Set Components bearing
the [***] Trademarks in accordance with the Quality Assurance
Standards, Licensor may declare this Agreement in material breach under
the termination provisions in Section 5 hereof.
3. License Royalty on [***] Disposable Set Components
(a) Base Royalty. Licensee agrees to pay Licensor a royalty on each
component comprising the [***] Disposable Set Components (specifically,
either the LIM Pump Segment or the [***] Cassette) manufactured by
Licensee, including those components manufactured by Licensor under the
[***] Disposable Set Components Supply Agreement, or by a subcontract
manufacturer, at the per unit royalty rate for each component indicated
in the attached Exhibit F. A component shall be deemed completed when
its is commercially usable, regardless of whether it has been packaged
for commercial use or sale, and regardless of Licensee's intended use
of such component. No royalty shall be due on any products that are
discarded or scrapped during the manufacturing process.
(b) Penalty Royalty. If the [***] Disposable Set Components Supply
Agreement is terminated by Licensee for Licensor's failure to supply
products under Section 17 of the [***] Disposable Set Components Supply
Agreement, Licensee agrees to pay Licensor a royalty on each completed
disposable set that includes one of each of the components comprising
the [***] Disposable Set Components manufactured by Licensee, including
those products manufactured by a subcontract manufacturer, at the per
unit royalty rate indicated in the attached Exhibit G. A disposable set
shall be deemed completed when its is commercially usable, regardless
of whether it has been packaged for commercial use or sale, and
regardless of Licensee's intended use of such disposable set. No
royalty shall be due on any products that are discarded or scrapped
during the manufacturing process.
(c) Payment of Royalty. While the [***] Disposable Set Components Supply
Agreement is in force and effect, the royalty payable hereunder shall
be invoiced by Licensor and paid by Licensee in conjunction with
Licensee's payment for the manufacture of the [***] Disposable Set
Components in accordance with the payment terms of the [***] Disposable
Set Components Supply Agreement. If the [***] Disposable Set Components
Supply Agreement is no longer in force and effect, the royalty payable
hereunder shall be paid within forty-five (45) days after the end of
each calendar quarter, by wire transfer in United States currency.
Notwithstanding any terms, to the contrary in this Agreement, in the
event of a Bankruptcy Event of Licensee, Licensee shall notify Licensor
thereof within one (1) business day thereof. Thereafter, all payments
by Licensee for any [***] Disposable Set Components will be "Cash On
Delivery". These quarterly royalty payments shall be subject to a 1.5%
penalty per month if received beyond the due date.
(d) Recordkeeping and Reports. Licensee shall keep full and accurate
records and books of account of all particulars necessary for
calculating the amounts of royalties due to Licensor hereunder. With
each royalty payment, Licensee agrees to submit to Licensor a written
report showing the number of [***] Disposable Set Components
manufactured in the quarter and the calculation of the royalty paid.
(e) Audit Right. Licensor shall have the right, as described in this
Section 3(d) to audit the books and records of Licensee for the sole
purpose of determining whether Licensee has paid to Licensor the full
amount of the royalties that are due to Licensor hereunder. Licensor
may conduct such audit either by its employees or by independent
contractors, who shall maintain the confidentiality of the information
that they may review in the course of the audit. Licensor may conduct
such an audit at reasonable times no more than twice in any calendar
year. Licensor may conduct such an audit both during the Term of this
Agreement and for a period of two (2) years following the termination
of this Agreement. Licensor shall give Licensee at least ten (10)
business days' prior written notice of such audit. During such audit,
Licensee shall open its books and records to Licensor that are related
to the purpose of the audit. During such audit, Licensee shall also
make available to Licensor the appropriate personnel of Licensee, who
may be interviewed by Licensor in connection with the audit. Any
adjustment in the amount due to Licensor on account of overpayment or
underpayment of royalties shall be made at the next date when royalty
payments are due under the Agreement. Licensor shall pay the expenses
of the audit; provided, however, if there is an underpayment in the
royalties, which exceeds two percent (2%) of the actual royalties paid
Licensor during the period of time that is covered by the audit, then
Licensee shall reimburse Licensor for all costs incurred by Licensor in
conducting such audit.
4. Confidentiality
(a) Confidential and Proprietary Information.
(i) Licensor Obligations with Respect to Licensee Confidential Information.
----------------------------------------------------------------------
Licensor agrees to hold all confidential information of Licensee and
its affiliated companies, including without limitation, any information
relating to Licensee's and its affiliates' business operations, price
lists, manufacturing data, marketing information strategies, customer
or product lists, research and development information and all other
information disclosed by Licensee or its affiliates to Licensor
("Licensee Confidential Information"), in strict confidence and not to
use any of the foregoing commercially for its own benefit or that of
anyone else nor for the purpose of developing or improving a product or
method for anyone except Licensee. Licensor agrees to limit
dissemination of and access to Licensee Confidential Information only
to the persons within Licensor's organization and Licensor's affiliated
organizations and their respective third party contractors,
subcontractors, manufacturers and business partners who have a need for
access thereto, and who have entered into a restrictive agreement
prohibiting such personnel from doing anything with respect to Licensee
Confidential Information that Licensor would itself be prohibited from
doing under this Agreement. Notwithstanding anything to the contrary
herein, Licensor may make such disclosures as necessary in connection
with the preparation, filing, and dissemination of its filings with the
U.S. Securities and Exchange Commission (e.g., 10-Ks, 10-Qs, and 8-Ks)
and/or other disclosures as required by applicable law; provided,
however, that it shall first notify Licensee of any such disclosure in
order that the parties may seek appropriate confidential treatment for
information they deem to be confidential.
(ii) Licensee Obligations with Respect to Licensor Confidential Information.
----------------------------------------------------------------------
Licensee agrees to hold all confidential information of Licensor and
its affiliated companies, including without limitation, any information
relating to Licensor's and its affiliates' business operations, price
lists, manufacturing data, marketing information strategies, customer
or product lists, research and development information, and all other
information disclosed by Licensor or its affiliates to Licensee
("Licensor Confidential Information"), in strict confidence and not to
use any of the foregoing commercially for its own benefit or that of
anyone else. Licensee agrees to limit dissemination of and access to
Licensor Confidential Information only to the persons within Numico,
Royal Numico and Nutricia, and their affiliates, and their respective
third party contractors, subcontractors, manufacturers and business
partners who have a need for access thereto, and who have entered into
a restrictive agreement prohibiting such personnel from doing anything
with respect to Licensor Confidential Information and such information
that Licensee would itself be prohibited from doing under this
Agreement. Notwithstanding anything to the contrary herein, Licensee
may make such disclosures as necessary in connection with the
preparation, filing, and dissemination of disclosures as required by
applicable law; provided, however, that it shall first notify Licensor
of any such disclosure in order that the parties may seek appropriate
confidential
treatment for information they deem to be confidential.
(b) Use of Confidential Information of Other Parties. Each party
represents, warrants, and covenants that it will not use in the course
of its performance under this Agreement, or disclose to the other
parties hereto, any confidential or proprietary information of any
third party (including competitors of the other parties) without the
prior written consent of the party to whom such confidential or
proprietary information belongs.
(c) Disclosure Does Not Constitute a License. Neither the execution of this
Agreement nor the disclosure of any confidential or proprietary
information by one party to the other hereunder shall be construed as
granting to the recipient of such information, by implication or
otherwise, any right in, or license to, other than expressly contained
herein, any present or future proprietary information, patent,
trademark, copyright invention, now or hereinafter, owned or controlled
by the disclosing party. Each party will be authorized to use the other
party's confidential information that is disclosed hereunder only for
such purposes as are expressly contemplated by this Agreement.
(d) Notice of Unauthorized Disclosure. If either party becomes aware of any
unauthorized disclosure of the other party's confidential information,
it will immediately notify the other party of such unauthorized
disclosure and will take all reasonable steps to mitigate the potential
harm associated with such unauthorized disclosure.
(e) Survival. The provisions regarding Confidential Information shall
survive the termination or expiration of this Agreement.
5. Term and Termination
(a) Effective Date and Term. The term of this Agreement shall begin on July
20, 2004 (the "Effective Date"), and shall end on the earlier of (i)
the tenth anniversary of the date upon which the [***] Disposable Set
Components Supply Agreement is terminated, or (ii) the date that no
Flocare [***] Pump placed or sold by Licensee is in service (the
"Term"); provided that at any time on or after January 1, 2008,
Licensee may give notice to Licensor of its intention for any reason to
terminate this Agreement, and, if such notice is given, the term of
this Agreement shall expire two years from the date of such notice,
unless it is earlier terminated pursuant to Section 5 below.
(b) Termination by Licensor. This Agreement may be terminated by Licensor
prior to the end of the Term as follows:
(i) Upon the failure of Licensee to pay to Licensor monies due by Licensee
to Licensor hereunder, and/or any of the Related Agreements, whether
such failure occurs prior to or following the initiation of any United
States or foreign country bankruptcy or insolvency proceeding, Licensor
may give notice to Licensee of such non-payment. Thereafter, if
Licensee fails to pay such monies to Licensor within five (5) business
days of such notice, then Licensor may elect to terminate the Agreement
on that 5th business day or on such later date so elected by Licensor.
If Licensee pays the monies due to Licensor within those five (5)
business days, then this Agreement shall not terminate.
(ii) Upon a Confidentiality Breach by Licensee, then Licensor may give
notice to Licensee of such Confidentiality Breach. If Licensee fails
to cure such Confidentiality Breach within sixty (60) days of such
notice, then this Agreement may be terminated by Licensor at any time
during the applicable Licensor Termination Period. Licensor's failure
to terminate this Agreement during the Licensor Termination Period will
constitute a waiver of Licensor's rights to terminate this Agreement by
reason of the applicable Confidentiality Breach, but will not
constitute a waiver of Licensor's other rights and remedies under this
Agreement (or other applicable Related Agreement, if any), or a waiver
of future similar breaches.
(iii) Upon an Exclusivity Breach by Licensee, then Licensor may give notice
to Licensee of such Exclusivity Breach. If Licensee fails to cure such
Exclusivity Breach within sixty (60) days of such notice, then this
Agreement may be terminated by Licensor at any time during the
applicable Licensor Termination Period. Licensor's failure to terminate
this Agreement during the Licensor Termination Period will constitute a
waiver of Licensor's rights to terminate this Agreement by reason of
the applicable Confidentiality Breach, but will not constitute a waiver
of Licensor's other rights and remedies under this Agreement (or other
applicable Related Agreement, if any), or a waiver of future similar
breaches.
(iv) Upon a material breach of this Agreement other than any of the material
breaches described in Sections 5(b)(i)-(iii) above that occurs after
any termination of the [***] Pump Supply Agreement, then Licensor
may give notice to Licensee of such material breach. If Licensee fails
to cure such material breach within sixty (60) days of such notice,
then this Agreement may be terminated by Licensor at any time during
the applicable Licensor Termination Period. Licensor's failure to
terminate this Agreement during the Licensor Termination Period will
constitute a waiver of Licensor's rights to terminate this Agreement by
reason of the applicable breach, but will not constitute a waiver of
Licensor's other rights and remedies under this Agreement, or a waiver
of future similar breaches.
(c) Termination by Licensee. This Agreement may be terminated by Licensee
prior to the end of the Term as follows:
(i) Upon a Bankruptcy Event of Licensor, Licensor shall notify Licensee
thereof within one (1) business day thereof, and Licensee may elect to
terminate the Agreement by giving written notice to Licensor within
thirty (30) days of that notice.
(ii) Upon a Change of Control of Licensor, Licensor shall notify Licensee
thereof within one (1) business day of the public announcement thereof,
and Licensee may elect to terminate the Agreement by giving notice to
Licensor within thirty (30) days of the public announcement.
(iii) Upon a material breach of this Agreement by Licensor, Licensee may give
notice to Licensor of such material breach. If Licensor fails to cure
such material breach within sixty (60) days of such notice, then this
Agreement may be terminated by Licensee at any time during the period
that begins on the sixtieth (60th) day following such notice and ends
on the ninetieth (90th) day following such notice (the "Licensee
Termination Period") by giving written notice of such termination to
Licensor before the expiration of the Licensee Termination Period.
Licensee's failure to terminate this Agreement during the Licensee
Termination Period will constitute a waiver of Licensee's rights to
terminate this Agreement by reason of the applicable breach, but will
not constitute a waiver of Licensee's other rights and remedies under
this Agreement.
(iv) If Licensee terminates the [***] Disposable Set Components Supply
Agreement pursuant to Section 15(a)(viii) of the [***] Disposable Set
Components Supply Agreement, Licensor may give notice to Licensee of
its intention to terminate this Agreement, and, if such notice is
given, this Agreement shall terminate at the same time as the [***]
Disposable Set Components Supply Agreement. Once a notice of
termination has been given by a party pursuant to this subparagraph,
such notice shall be irrevocable except by mutual consent of the
parties.
(d) Cross-Termination. This Agreement shall terminate automatically and
immediately upon the termination of the [***] Disposable Set Components
Supply Agreement for any reason other than one of the following
reasons:
(i) Upon a "Bankruptcy Event of Supplier" in Section 15(a)(v) of the [***]
Disposable Set Components Supply Agreement.
(ii) Upon a "Change of Control of Supplier" in Section 15(a)(vi) of the
[***] Disposable Set Components Supply Agreement.
(iii) Upon a "Failure to Fulfill Call-Off" in Section 15(a)(ix) of the [***]
Disposable Set Components Supply Agreement, where such failure to
fulfill involves the [***] Disposable Set Components licenses under
this Agreement (as opposed to other products also covered under the
[***] pump Agreement).
(iv) In the event Licensor commences a voluntary proceeding under Title 11
of the United States Code (the "Bankruptcy Code") and/or is adjudicated
a debtor in an involuntary case under the Bankruptcy Code pursuant to
Section 15(a)(x) of the [***] Disposable Set Components Supply
Agreement.
(v) Termination by Customer (as defined in the [***] Disposable Set
Components Supply Agreement) pursuant to Section 15(a)(vii) of the
[***] Disposable Set Components Supply Agreement arising out of a
material breach of that agreement by Supplier.
(e) Effect of Termination. Upon the termination of this Agreement, Licensee
agrees to immediately cease using the [***] Intellectual Property and
manufacturing the [***] Disposable Set Components in any manner and for
any purpose; provided, however, that Licensee shall have the right to
use or sell any fully manufactured [***] Disposable Set Components that
it has on hand on the date of termination that meet the Quality
Assurance Standards and shall pay applicable royalties thereon. No
termination of this Agreement shall affect the rights of Licensor to
accrued royalties due and owing as of the date of termination and to
statements of account with any royalty payment that is made after the
termination date. Additionally, Licensor shall have the continuing
right to conduct audits as provided in Section 3(d) herein.
(f) Return of Materials Upon Termination. Upon termination, expiration or
non-renewal of this Agreement, if applicable, each party shall return
to the other party all materials and documents containing confidential
and proprietary information, including any copies or extracts thereof,
and shall erase any copies thereof contained in any electronic or other
memory device. In addition, at that time each party shall immediately
cease and desist from using any confidential or proprietary information
of the other parties hereto for any purpose whatsoever. Each party will
certify in writing to the other, within thirty (30) days after any such
termination, expiration, or non-renewal of this Agreement that they
have complied with this Section 5(f).
(g) No Liability for Termination. Neither party in exercising its rights to
terminate this Agreement in accordance with the terms and conditions
hereof shall incur any liability whatsoever for any damage, loss or
expense of any kind suffered or incurred by the other (or for any
compensation to the other) arising from or incident to any such
termination (except if such termination is for a material breach of
this Agreement), expiration or non-renewal, whether or not the
terminating party is aware of any such damage, loss or expense. Any
termination hereof shall not impair any rights nor discharge any
obligations which have accrued to the parties as of the effective date
of such termination.
6. Representation and Warranties
(a) Licensor's Representations and Warranties. Licensor hereby represents
and warrants to Licensee that:
(i) It has the full power, capacity, and right to enter into this
Agreement;
(ii) All corporate action necessary to authorize Licensor to enter into this
Agreement and be legally bound by its terms has been taken;
(iii) It knows of no pending or threatened action in law or in equity which
adversely affects the rights granted herein, and it knows of no basis
for any of the foregoing;
(iv) To the knowledge of Licensor, neither the execution and delivery of
this Agreement nor compliance with the obligations of Licensor
hereunder, will violate any law or regulation, or any order or decrees
of any court or government instrumentality;
(v) To the knowledge of Licensor, neither the execution and delivery of
this Agreement nor compliance with the obligations of Licensor
hereunder, will conflict with, or result in the breach of, or
constitute a default under, any contract, agreement, instrument or
judgment to which Licensor or any officer, director, employee or
controlling person of Licensor is a party, or which is or purports to
be binding upon any of the foregoing persons;
(vi) No action, approval, or consent, including, but not limited to, any
action, approval, or consent by any federal, state, municipal, or other
governmental agency, commission, board, bureau, or instrumentality is
necessary in order to constitute this Agreement as a valid, binding,
and enforceable obligation of Licensor in accordance with its terms;
(vii) Licensor is the sole legal and beneficial owner of the [***]
Intellectual Property;
(viii) To the knowledge of Licensor, none of the [***] Intellectual Property
infringes or is alleged to infringe upon any patents or other
intellectual property rights of any third party;
(ix) All utility Patents have been applied for in the United States, the
European Community, Switzerland, China and Japan; and
(x) The [***] Trademarks have either been filed or the filing process has
been initiated in the United States, the European Community,
Switzerland, China, and Japan.
(xi) The Know-How comprises all trade secrets and other confidential
information, including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), the Product Specifications,
know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications,
designs, plans, proposals, technical data, supplier lists and
information, and unpublished research and development information that
are necessary or helpful in the production of the [***] Disposable Set
Components; provided, however, that the Know-How does not include
either (i) manufacturing and production processes and techniques, or
(ii) customer lists.
(b) Licensee's Representations and Warranties. Licensee hereby represents
and warrants to Licensor that:
(i) It has the full power, capacity, and right to enter into this
Agreement;
(ii) All corporate action necessary to authorize Licensee to enter into this
Agreement and be legally bound by its terms has been taken;
(iii) It knows of no pending or threatened action in law or in equity which
adversely affects the rights granted herein, and it knows of no basis
for any of the foregoing;
(iv) To the knowledge of Licensee, neither the execution and delivery of
this Agreement nor compliance with the obligations of Licensee
hereunder, will violate any law or regulation, or any order or decrees
of any court or government instrumentality;
(v) Neither the execution and delivery of this Agreement nor compliance
with the obligations of Licensee hereunder, will conflict with, or
result in the breach of, or constitute a default under, any contract,
agreement, instrument or judgment to which Licensee or any officer,
director, employee or controlling person of Licensee is a party, or
which is or purports to be binding upon any of the foregoing persons;
and
(vi) No action, approval, or consent, including, but not limited to, any
action, approval, or consent by any federal, state, municipal, or other
governmental agency, commission, board, bureau, or instrumentality is
necessary in order to constitute this Agreement as a valid, binding,
and enforceable obligation of Licensee in accordance with its terms.
7. Indemnification.
(a) Licensor's Indemnification. Licensor shall indemnify, defend and hold
Licensee, its affiliates, and their respective officers, directors,
employees and agents (each, a "Licensor Indemnified Party"), harmless
from and against any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties, reasonable attorneys' fees, costs of
investigation and any legal or other expenses or costs ("Losses")
incurred or suffered by any Licensor Indemnified Party arising out of,
in connection with or resulting from any claim, allegation or judgment
as to: (i) any violation or infringement by Licensor upon any common
law or statutory intellectual property rights of any third party that
arises from or relates to [***] Intellectual Property and the [***]
Disposable Set Components, (ii) any third party product liability claim
resulting from a design defect of the [***] Disposable Set Component
(except that, so long as the [***] Disposable Set Components Supply
Agreement is in effect, product warranty claims shall be limited to the
remedies set forth in Section 7(i) of the [***] Pump Supply Agreement),
or (iii) any inaccuracy or breach in any of Licensor's representations
and warranties under this Agreement; provided, however, that Licensor
shall have no obligation to indemnify Licensee for any Losses to the
extent such Losses are caused by any negligent or willful act or
omission of Licensee; and further provided that no indemnification
shall be available to Licensee under Section 7(a)(i) or (ii) hereof
while the [***] Disposable Set Components Supply Agreement is in
effect. With respect to Section 7(a)(i) above, Licensor shall provide,
at its own cost, non-infringing replacements for the infringing
portions of the [***] Disposable Set Components of equivalent quality
and effect, or obtain at its own cost the necessary licenses from third
parties to allow Licensee to continue to market, sell, distribute, and
promote the [***] Disposable Set Components as contemplated by the
parties under this Agreement.
(b) Licensee's Indemnification. Licensee agrees to indemnify, defend and
hold harmless Licensor, its affiliates, and their respective officers,
directors, employees and agents (each, a "Licensee Indemnified Party")
from and against any and all Losses (as defined in Section 7(a) above)
incurred or suffered by any Licensee Indemnified Party arising out of,
in connection with or resulting from any claim, allegation or judgment
(i) as to any inaccuracy or breach in any of Licensee's representations
and warranties under this Agreement; provided, however, that Licensee
shall have no obligation to indemnify Licensor for any Losses to the
extent such Losses are caused by any negligent or willful act or
omission of Licensor, or (ii) any third party product liability claim
resulting from a manufacturing defect in the [***] Disposable Set
Component.
(c) Indemnification Procedure for Matters Involving Third Parties.
(i) If any third party notifies any party hereto (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against the other party hereto (the
"Indemnifying Party") under Section 7(a) or 7(b) (as applicable), then
the Indemnified Party shall promptly notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) that the Indemnifying Party is prejudiced
thereby.
(ii) Any Indemnifying Party will have the obligation to assume the defense
of the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party at any time within 15 days after
the Indemnified Party has given notice of the Third Party Claim;
provided, however, that the Indemnifying Party must conduct the defense
of the Third Party Claim actively and diligently thereafter in order to
preserve its rights in this regard; and provided further that the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim.
(iii) So long as the Indemnifying Party has assumed and is conducting the
defense of the Third Party Claim in accordance with Section 7(c)(ii)
above, (A) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnified Party (which
shall not be unreasonably withheld) unless the judgment or proposed
settlement involves only the payment of money damages by one or more of
the Indemnifying Parties and does not impose an injunction or other
equitable relief upon the Indemnified Party and (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (which shall not be
unreasonably withheld).
(iv) If the Indemnifying Party does not assume and conduct the defense of
the Third Party Claim in accordance with Section 7(c)(ii) above,
however, (A) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it reasonably may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent
from, any Indemnifying Party in connection therewith) and (B) the
Indemnifying Party will remain responsible to indemnify the Indemnified
Party under Section 7(a) or 7(b) (as applicable).
(d) Indemnification Procedure for Matters not Involving Third Parties. A
claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification
is sought.
(e) Limitations on Licensor's Liability. LICENSOR'S MAXIMUM LIABILITY TO
LICENSEE, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY LICENSEE
UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR
PRODUCT LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED
$1,000,000; PROVIDED, HOWEVER, THAT LICENSOR'S MAXIMUM LIABILITY TO
LICENSEE FOR DAMAGES, IF ANY, RELATING TO CLAIM(S) MADE BY LICENSEE
THAT ARISE OUT OF THE SAME FACTS AND CIRCUMSTANCES, WHETHER SUCH
CLAIM(S) ARE MADE UNDER THIS AGREEMENT, AND OR ANY OF THE RELATED
AGREEMENTS, SHALL IN NO EVENT EXCEED $1,000,000. LICENSOR'S MAXIMUM
LIABILITY TO LICENSEE, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S)
MADE BY LICENSEE FOR INDEMNIFICATION FOR A PRODUCT LIABILITY CLAIM BY A
THIRD PARTY SHALL IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE
PROCEEDS AVAILABLE TO LICENSOR WITH RESPECT TO SUCH CLAIM, WHETHER SUCH
CLAIM IS MADE UNDER THIS AGREEMENT, AND OR ANY OF THE RELATED
AGREEMENTS
(f) Limitations on Licensee's Liability. LICENSEE'S MAXIMUM LIABILITY TO
LICENSOR, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY LICENSOR
UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR
PRODUCT LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED
$1,000,000; PROVIDED, HOWEVER, THAT LICENSEE'S MAXIMUM LIABILITY TO
LICENSOR FOR DAMAGES, IF ANY, RELATING TO CLAIM(S) MADE BY LICENSOR
THAT ARISE OUT OF THE SAME FACTS AND CIRCUMSTANCES, WHETHER SUCH
CLAIM(S) ARE MADE UNDER THIS AGREEMENT, AND OR ANY OF THE RELATED
AGREEMENTS, SHALL IN NO EVENT EXCEED $1,000,000. LICENSEE'S MAXIMUM
LIABILITY TO LICENSOR, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S)
MADE BY LICENSOR FOR INDEMNIFICATION FOR A PRODUCT LIABILITY CLAIM BY A
THIRD PARTY SHALL IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE
PROCEEDS AVAILABLE TO LICENSEE WITH RESPECT TO SUCH CLAIM, WHETHER SUCH
CLAIM IS MADE UNDER THIS AGREEMENT, AND OR ANY OF THE RELATED
AGREEMENTS. IN NO EVENT SHALL THE LIMITATIONS SET FORTH IN THIS SECTION
7(f) LIMIT OR EXCUSE ANY OBLIGATION OF LICENSEE TO PAY THE ROYALTIES
DUE HEREUNDER.
(g) No Consequential Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF
THE BREACHING PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES
IN ADVANCE. The parties intend this limitation in this Section 7(g) to
apply to the following events, among other events: (i) any claim for
consequential damages suffered by the non-breaching party (as opposed
to any third party) arising out of any claim by a third party for
either product liability or infringement of intellectual property, (ii)
any breach by either party of its representations under this agreement,
(iii) any non-performance or mal-performance by either party under this
Agreement, or (iv) the termination or expiration of this Agreement by
either party. Such incidental or consequential damages shall include,
but shall not be limited to, loss of goodwill, loss of prospective
profits, loss of revenue, or damages on account of any investment,
expenditure, or commitment that is made by either party in reliance
upon this Agreement. This limitation in this Section 7(g) is not
intended by the parties to prevent Licensee, for example, from
recovering from Licensor , in an indemnification claim made under
Section 7(a)(ii), the full amount that it has been required to pay to a
third party in connection with a product liability claim brought by
such third party against Licensee, including such incidental or
consequential damages as may be allowed by law under that claim by that
third party. This limitation in this Section 7(g) is, nevertheless,
intended to prevent the non-breaching party from receiving from the
breaching party, in an indemnification claim under Section 7(a) or
7(b), incidental or consequential losses or damages that have been
incurred by the non-breaching party (as opposed to any third party),
such as lost profits, that may arise from or relate to any event under
this Agreement.
(h) Licensor's Insurance. Licensor shall maintain in full force and effect
throughout the Term, at its sole cost and expense, insurance with
financially sound and established reputable insurers of the type and
quantity (and with such risk retention) generally maintained by the
companies of established repute in Licensor's line of business, such
insurance to include, without limitation, products liability insurance
and general liability insurance each, in an amount no less than ten
million U.S. dollars (U.S. $10,000,000.00) per occurrence. Licensor
shall, upon request, provide Licensee with a copy of any documentation
relating to any such insurances. Licensor shall have Licensee named as
an additional insured beneficiary, with Licensee able to claim
thereunder as primary beneficiary and without offset or deduction
whatsoever as a result of any insurance obtained by Licensee, and shall
contain a waiver of subrogation by the respective insurance carrier
against Licensee's and its affiliates' insurance carrier, with respect
to Licensor's obligations under this Agreement.
(i) Licensee's Insurance. Licensee shall maintain in full force and effect
throughout the Term, at its sole cost and expense, insurance with
financially sound and established reputable insurers of the type and
quantity (and with such risk retention) generally maintained by the
companies of established repute in Licensee's line of business, such
insurance to include, without limitation, products liability insurance
and general liability insurance each, in an amount no less than ten
million U.S. dollars (U.S. $10,000,000.00) per occurrence. Licensee
shall, upon request, provide Licensor with a copy of any documentation
relating to any such insurances. Licensee shall have Licensor named as
an additional insured beneficiary, with Licensor able to claim
thereunder as primary beneficiary and without offset or deduction
whatsoever as a result of any insurance obtained by Licensor, and shall
contain a waiver of subrogation by the respective insurance carrier
against Licensor's and its affiliates' insurance carrier, with respect
to Licensee's obligations under this Agreement.
8. Intellectual Property
(a) Ownership of Product Rights/Intellectual Property Rights. Licensor has
and will retain all right, title to, and interest in [***] Intellectual
Property.
(b) Nationalization of Patents. Licensor will use Commercially Reasonable
Efforts to nationalize the Patents in the following countries in the
Territory: United Kingdom, Germany, France, Italy, Belgium, Luxembourg,
The Netherlands, Austria, and China.
(c) Notice of Infringement. Licensee shall promptly notify Licensor of any
actual or apparent infringement of [***] Intellectual Property of which
Licensee becomes aware. Licensor may, at its sole option and expense,
prosecute any suit it deems necessary or appropriate to protect any of
Licensor's rights to [***] Intellectual Property from and against
infringement by third parties anywhere in the world and Licensee shall
cooperate fully with Licensor in connection with any such action.
9. New Product Development.
(a) Innovation. Licensor will exert efforts to investigate, discuss, and/or
develop improvements with respect to the [***] Disposable Set
Components and/or new disposable sets that are advancements from the
[***] Disposable Set Components (each such improvement an "Innovation")
by (i) discussing product innovation at least annually in one of the
Quarterly Meetings (as defined in Section 9(f) below) with Licensee and
(ii) budgeting and maintaining sufficient marketing resources, as
determined in Licensor's reasonable discretion, to support the
discussions required by subsection 9(a)(i). Unless otherwise explicitly
agreed in a writing signed by both Licensee and Licensor, Licensor will
own all right, title to and interest in any Innovations and Licensee
hereby assigns any right, title to, and interest in such Innovations to
Licensor. If the parties mutually determine that an Innovation is
Commercially Viable (as defined below), then Licensor shall spend
annually, in the aggregate, on research and development efforts
relating to such Innovation and any other Innovations deemed to be
Commercially Viable under this section, up to 2% of the gross revenues
generated under this Agreement during the same fiscal year (the
"Invested Amount"). Licensor will be obligated to spend the Invested
Amount on such research and development efforts from the date the
parties both approve the project until the date that Licensor
determines in good faith that the project is complete or that it should
be abandoned. The Invested Amount shall be calculated in each of
Licensor's fiscal years or a portion thereof from the beginning to the
end of the project. For purposes of this Agreement "Commercially
Viable" shall mean both (x) the recapture of the Invested Amount by
Licensor within the first two years from the date of commercialization
of the project and (y) a projected return on investment to Licensor of
at least 10% annually over the life of the project.
(b) Licensor Funded Product Improvements. Licensor will exert Commercially
Reasonable Efforts to improve the [***] Disposable Set Components, and
to develop new disposable sets that are advancements from the [***]
Disposable Set Components (each such improvement a "Licensor Funded
Product Improvement"). All intellectual property and other rights
associated with any Licensor Funded Product Improvement will belong to
Licensor; provided, however, that Licensor will provide to Licensee a
first right to commercialize such Licensor Funded Product Improvements
in the Territory.
(c) Licensee Funded Product Improvements. Licensee cannot make improvements
to the [***] Disposable Set Components without Licensor's prior written
consent. Licensee may hire Licensor to make improvements to the [***]
Disposable Set Components, on terms that are mutually acceptable to
Licensee and Licensor, but in any event the costs and expenses
associated with such improvements will be paid for by Licensee (each
such improvement a "Licensee Funded Product Improvement"). Any such
Licensee Funded Product Improvements will be owned by Licensee;
provided, however, that Licensor will have an option to license such
improvements from Licensee, without the payment of any royalties
therefore, for the purpose of manufacturing and selling of such
Licensee Funded Product Improvements, alone or in combination with
other products, outside of the Territory.
(d) Jointly Developed Product Improvements. If the parties agree to jointly
develop and fund improvements to the [***] Disposable Set Components
(each such improvement a "Jointly Developed Product Improvement"), then
the parties will jointly own such Jointly Developed Product
Improvements on such terms and conditions to which they mutually agree.
In any event, such agreement will provide that (i) Licensor will have a
license to manufacture, use, and sell such Jointly Developed Product
Improvement, alone or in combination with other products, in geographic
areas outside of the Territory, and (ii) Licensee will have a license
to use or sell such Jointly Developed Product Improvement, alone or in
combination with other products, inside of the Territory.
(e) Termination of Innovation and Product Improvements Obligations. The
obligations of the Licensor under Section 9 shall terminate upon a
termination of the [***] Disposable Set Components Supply Agreement for
any reason, including a termination only with respect to the
manufacturing of the [***] Disposable Set Components .
(f) Designated Representative. Each party agrees to designate one
individual within such party's organization to serve as such party's
primary point of contact and representative (the "Designated
Representative") in such party's relationship and communications with
the other party as contemplated in this Agreement. These Designated
Representatives shall also involve other appropriate operational,
strategic, technical, and regulatory personnel in such communications.
(g) Quarterly Meetings. The parties agree to hold a face-to-face meeting at
a minimum of once each calendar quarter during the Term for such
duration as the parties agree in good faith is necessary to address the
various issues that may arise relating to the performance of the
parties under this Agreement (the "Quarterly Meetings"). The location
of the Quarterly Meetings shall alternate between Licensor's Facility
and a Licensee facility in the Territory. The parties shall formulate
in advance of each meeting a written agenda of material items that each
party proposes should be considered together in the meeting. The
parties shall make a reasonable effort to have the Designated
Representative present at each Quarterly Meeting, as well as such other
individuals as would be appropriate in light of the agenda for the
meeting. Each party shall bear all of its own costs and expenses
associated with its participation in the Quarterly Meeting. The
parties' respective rights to request and receive information hereunder
will not be affected or limited by any subject or matter discussed or
planned to be discussed at any Quarterly Meeting.
10. Survival. Any provision of this Agreement which contemplates
performance or the existence of rights or obligations after the
expiration, non-renewal, or termination of this Agreement shall
expressly survive such expiration, non-renewal, or termination of this
Agreement and shall be binding upon the party or parties obligated
thereby in accordance with the terms of this Agreement, subject to any
limitations expressly set forth in this Agreement.
11. Amendment or Waiver. This Agreement cannot be changed orally, and no
modification of this Agreement shall be recognized nor have any effect,
unless the writing in which it is set forth is signed by Licensor and
Licensee, nor shall any waiver of any of the provisions of this
Agreement be effective unless in writing and signed by the party to be
charged therewith. The failure of either party to enforce, at any time
or for any period of time, the provisions hereof, or the failure of
either party to exercise any option herein shall not be construed as a
waiver of such provision or option and shall in no way affect that
party's right to enforce such provisions or exercise such option. No
waiver of any provision hereof shall be deemed a waiver of any
succeeding breach of the same or any other provisions of this
Agreement.
12. Dispute Resolution; Governing Law; Injunctive Relief.
(a) Negotiations. The parties agree that they will attempt in good faith to
resolve any controversy, claim, dispute or question between them
arising out of or relating to this Agreement, including the
construction or application of this Agreement, promptly by negotiations
between the parties. If a controversy or claim should arise,
appropriate representatives of the parties will meet at least once and
will attempt to resolve the matter. Either party may request the other
to meet within fourteen (14) days, at a mutually agreed time and place.
(b) Mediation. If the matter has not been resolved within thirty (30) days
of this meeting, the controversy or claim shall be submitted to
non-binding mediation by a mediator chosen from names of mediators
furnished by JAMS or the American Arbitration Association. The
mediation shall occur in New York City, New York, U.S.A.
(c) Litigation. In the event that differences concerning matters covered by
this Agreement arise that are not resolved by mutual agreement via
negotiations or mediation as described above, the parties agree that
any action or proceeding arising out of or relating to this Agreement
shall be heard and decided by a non-jury bench trial in New York City,
New York, U.S.A. Each party hereto irrevocably submits to the
jurisdiction of the appropriate state court covering New York City, New
York, U.S.A., and each party hereby irrevocably agrees that all claims
in respect of any such action or proceeding must be brought and/or
defended in such court; provided, however, that matters which are under
the exclusive jurisdiction of the Federal courts shall be brought in
the Federal District Court covering New York City, New York, U.S.A.
(d) Governing Law. The provisions of this Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
U.S.A. (excluding any conflict of law rule or principle that would
refer to the laws of another jurisdiction and the U.N. Convention on
Contracts for the International Sales of Goods). EACH PARTY HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT
MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR
PROCEEDING ARISING HEREUNDER.
(e) Injunctive Relief. Each of the parties acknowledge and agree that the
other parties will be damaged irreparably if any of the provisions of
this Agreement (specifically including the obligations of
confidentiality set forth in Section 4 herein) are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, notwithstanding any other provision in this Agreement the
damaged party shall have the right to pursue a claim for injunctive
relief, damages and attorneys' fees in any court of competent
jurisdiction for the other party's breach of any covenant, agreement or
obligation, in addition to any other relief available to them under
this Agreement or under applicable law.
(f) Fees. The parties shall equally split the fees of any mediation, but in
any arbitration or permissible legal proceedings, the prevailing party
shall be entitled to reasonable attorneys' fees, costs and other
disbursements in addition to any other relief to which such party may
be entitled.
13. Counterparts. This Agreement may be executed in multiple counterparts,
which taken together shall constitute one instrument and each of which
shall be considered an original for all purposes.
14. Notices. Any and all notices permitted or required to be given
hereunder shall be deemed duly given: (i) upon actual delivery, if
delivery is by hand; (ii) upon delivery by overnight express courier
(i.e., DHL or FedEx); or (iii) upon facsimile transmission, so long as
the original is then sent by overnight express courier. Each such
notice shall be sent to the respective party at the address indicated
below:
If to ZEVEX: ZEVEX International Inc.
4314 ZEVEX Park Lane
Salt Lake City, Utah 84123
Attn: Chairman and CEO
Fax: (801) 264-1051
with a copy to the CFO
at the same address.
If to Numico: Numico Trading B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Luc Volatier, V.P. of
Purchasing Worldwide
Fax: 31206586159
If to Nutricia: c/o Nutricia International B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Rob Heutink, V.P.
Manufacturing and Supply,
Emerging Markets
Fax: 31206586884
or such other address or facsimile number as any of the persons designated above
may have specified in a notice or communication duly given to the other
designated person as provided herein.
15. Binding Effect; Non-Assignability. This Agreement shall be binding upon and
enforceable against the parties hereto and their respective successors and
permitted assigns. Neither party shall assign or subcontract (except as
expressly allowed hereunder) its rights and obligations under this Agreement
without the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that either party may assign this
Agreement to an affiliate of such party.
16. Relationship of the Parties. The parties are and at all times shall be
deemed to be independent contractors and shall be wholly responsible for the
goods supplied and services performed under this Agreement. Nothing contained
herein shall be construed as creating the relationship of employer/employee or
principal/agent. Each party shall assume full responsibility for the actions of
its employees as related to the party's obligations under this Agreement.
Neither party to this agreement is hereby constituted an agent of the other for
any purpose and neither party has the authority to assume or create any
obligation, or to make any representation, warranty or guarantee for the other,
except as expressly granted or made in this Agreement.
17. Force Majeure. Neither party shall be responsible or liable for any default
in performance of this Agreement arising directly or indirectly from any cause
beyond such party's control, including fire, flood, earthquake, acts of God, war
(declared or undeclared), enemy action, embargo, strike, governmental order,
proclamation or regulation, accident, explosion, riot, insurrection, or
expropriation of the property by government authority (each such event a "Force
Majeure Event"). If a Force Majeure Event occurs, the parties will exert
reasonable efforts to mitigate the impact of such Force Majeure Event on the
business arrangements of the parties set forth in this Agreement and to
otherwise carry out the intent and accomplish the objectives of this Agreement.
18. Exhibits and Schedules. Any exhibit or schedule attached hereto is made a
part hereof and is fully incorporated herein by reference.
19. Entire Agreement. This Agreement contains the sole and complete
understanding of the parties related to its subject matter, and supersedes all
oral or written agreements concerning this subject matter made prior to the date
of this Agreement. The [***] Disposable Set Components Supply Agreement and the
Flocare 800 Pump Agreement are not superceded by this Agreement, but to the
extent that any terms of this Agreement relating to the licensing of the [***]
Intellectual Property conflict with such agreements, this Agreement shall
control.
20. Remedies Not Exclusive. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy will be cumulative and will be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies will not
constitute a waiver of the right to pursue other available remedies.
21. Bankruptcy Provisions. It is intended by the parties to this Agreement that
in the event of Licensor's bankruptcy filing under the United States Bankruptcy
Code ("Bankruptcy Code'), this Agreement shall be treated as an executory
contract under which Licensor is a licensor of intellectual property under
Section 365(n) of the Bankruptcy Code, and that Licensee shall have all the
rights to which licensees of intellectual property are entitled to under such
section. This Agreement is an integrated agreement, and all provisions of this
agreement which are not directly related to the license of intellectual property
are intended to be supplementary to the intellectual property license granted
hereunder, within the meaning of Section 365(n)(4)(B) of the Bankruptcy Code.
22. Language; Interpretation. The language controlling the construction and
interpretation of this Agreement shall be English. Section headings are included
solely for convenience and shall not constitute a part hereof. Unless the
context otherwise requires, words importing the singular shall be deemed to
import the plural and vice versa.
23. Third Party Beneficiaries. No person or entity shall be a third-party
beneficiary of this Agreement.
24. Media Relations. Each of Licensor and Licensee agrees that during the Term
each will not, and will cause its affiliates not to, disparage each other or
release commercially sensitive information about each other in any oral,
written, or electronic public statements (including without limitation in any
securities filing with the U.S. Securities and Exchange Commission) concerning
any matters relating to or arising from this Agreement.
IN WITNESS WHEREOF, the parties enter into this Agreement effective as
of the Effective Date.
ZEVEX INTERNATIONAL, INC.
By:
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Name:
------------------------------------------------
Title:
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NUTRICIA INTERNATIONAL, B.V.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
NUMICO TRADING, B.V.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
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Exhibit A
[***] Trademarks
[***]
Exhibit B
Know-How
The [***] Disposable Sets Know-How is documented in the following ZEVEX Device
Master Records:
- ---------------------------------------- --------------------------------------
Device Master Record Number Description
- ---------------------------------------- --------------------------------------
- ---------------------------------------- --------------------------------------
[***] Cassette, [***]
- ---------------------------------------- --------------------------------------
- ---------------------------------------- --------------------------------------
[***] Silicone Pump Segment, [***]
- ---------------------------------------- --------------------------------------
Exhibit C
Patents
[***]
Exhibit D
Product Specifications
The product specifications for the [***] Disposable Sets are documented in the
Flocare [***] Enteral Feeding Pump User Requirements, ZEVEX document number
[***].
Exhibit E
Quality Assurance Standards
Licensee must maintain a Quality System that complies with all of the provisions
of the European Union Medical Device Directive (MDD), 12 July 1993, 93/42/EEC,
Annex II, EC Declaration of Conformity (Full quality assurance system).
Exhibit F
Royalties
The royalty is [***] for each completed LIM Segment and [***] for each completed
cassette.
Exhibit G
Penalty Royalty
The penalty royalty is [***] for each completed LIM Segment and [***] for each
completed cassette.
CONFIDENTIAL INFORMATION OF ZEVEX International, Inc.
[*Confidential treatment has been requested as to certain portions of this
document. Each such portion, which has been omitted herein and replaced with an
asterisk [***], has been filed separately with the Securities and Exchange
Commission.]
Exhibit 10.35
LICENSE AGREEMENT FOR THE FLOCARE [***] PUMP
THIS LICENSE AGREEMENT FOR THE FLOCARE [***] PUMP (this "Agreement") is
entered into as of July 20, 2004 (the "Effective Date"), by and between NUMICO
TRADING B.V., a Netherlands corporation with its principal offices at Numico
Beech Avenue, 54-80, 1119PW, Schiphol-Rijk, The Netherlands ("Numico"), NUTRICIA
INTERNATIONAL B.V., a Netherlands corporation with its principal offices at
Numico Beech Avenue 54-80, 1119PW, Schiphol-Rijk, The Netherlands ("Nutricia",
and, together with Numico, "Licensee"), and ZEVEX INTERNATIONAL, INC., a
Delaware corporation, with its principal offices at 4314 ZEVEX Park Lane, Salt
Lake City, Utah ("Licensor").
RECITALS
A. Numico and Nutricia are subsidiaries of Royal Numico, N.V., a
Netherlands corporation ("Royal Numico"), which is a world leader in the
manufacturing and marketing of clinical nutrition products and related equipment
and accessories.
B. Nutricia is a world leader in the manufacture and marketing of
clinical nutrition products.
C. Numico specializes in the procurement of raw materials, packaging
materials and fully-finished products for use in the Nutricia clinical nutrition
business.
D. Licensor is engaged in the business of developing, manufacturing and
marketing clinical nutrition delivery devices and accessories, including the
[***] Products (as defined below), which are the subject of this Agreement.
E. The parties desire that Licensor license the manufacturing rights to
the [***] Products to Licensee in accordance with the terms and conditions of
this Agreement.
F. Of even date with this Agreement, the parties have entered into that
certain [***] Pump Supply Agreement (as defined below), whereby Licensee has
appointed Licensor as the exclusive manufacturer of the [***] Products.
G. Of even date with this Agreement, the parties have entered into that
certain Flocare 800 Pump Agreement (as defined below), whereby Licensee has
appointed Licensor as the exclusive manufacturer of Licensee's Flocare 800 pump.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and for other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions. Capitalized terms not otherwise defined herein shall bear the
respective meanings given to them below:
"Affiliate" of a party shall mean any corporation or other
business entity controlling, controlled by, or under common control
with such party.
"Bankruptcy Event" means that, with respect to an entity, such
entity shall (a) make a general assignment for the benefit of creditors
or an agent authorized to liquidate its assets, (b) become the subject
of bankruptcy or insolvency proceedings or other proceedings for relief
under any bankruptcy or other law for the relief of debtors, where,
with respect to an involuntary petition in bankruptcy, the petition
shall not have been stayed within thirty (30) days, (c) apply to a
court for the appointment of a receiver or custodian for substantially
all of its assets or properties, with or without consent, and such
receiver is not discharged within thirty (30) days after appointment,
or (d) adopt a plan of complete liquidation of its assets.
"CE Mark" shall mean an indication that a product complies
with the essential requirements of applicable European Union directives
and that the product has been subject to conformity assessment
procedures as provided in the directives.
"Change of Control of Licensee" means (i) any transaction as a
result of which any person or entity becomes the "beneficial owner" (as
defined in Rule 13d-3 of the U.S. Securities and Exchange Act of 1934),
directly or indirectly, of securities of any of Numico, or Nutricia,
representing more than 50% of the total voting power of any of their
then outstanding voting securities; or (ii) the sale, transfer or other
disposition of all or substantially all of the assets of any of Numico,
or Nutricia; in either case where the new controlling party would
materially benefit from a failure of Licensor's business; provided,
however, that a transaction shall not constitute a Change of Control if
its sole purpose is to change the state of incorporation of Numico, or
Nutricia (as applicable) or to create a holding company that will be
owned in substantially the same proportions by the persons who held the
securities of Numico, or Nutricia (as applicable) immediately before
such transaction.
"Change of Control of Licensor" means (i) any transaction as a
result of which any person or entity is the "beneficial owner" (as
defined in Rule 13d-3 of the U.S. Securities and Exchange Act of 1934),
directly or indirectly, of securities of the Licensor representing more
than 50% of the total voting power represented by the Licensor's then
outstanding voting securities; or (ii) the sale, transfer or other
disposition of all or substantially all of Licensor's assets; in either
case where the new controlling party would materially benefit from
Licensee's failure in the clinical nutrition market; provided, however,
that a transaction shall not constitute a Change of Control if its sole
purpose is to change the state of Licensor's incorporation or to create
a holding company that will be owned in substantially the same
proportions by the persons who held Licensor's securities immediately
before such transaction, or (y) if a then current officer or director
of ZEVEX is the new controlling party or is a member of the group or
entity that is the new controlling party, provided, however, that, the
new controlling party would not materially benefit from Licensee's
failure in the clinical nutrition market.
"Commercially Reasonable Efforts" shall mean those efforts
that a reasonably prudent business person would make under similar
circumstances, including entering into contractual arrangements in
appropriate circumstances.
"Flocare 800 Pump Agreement" means that certain Flocare 800
Pump Manufacturing Agreement of even date herewith between the parties.
"Flocare [***] Pump" means ZEVEX's [***] Pump, as it has been
customized for Licensee as set forth in the Product Specifications.
"[***] Disposable Set Components License Agreement" means that
certain License Agreement for the [***] Disposable Set Components of
even date herewith between the parities.
"[***] Disposable Set Components Supply Agreement" means that
certain [***] Disposable Set Components Supply Agreement of even date
herewith between the parities.
"[***] Intellectual Property means the Know-How, and the
Patents, as well as all (i) the [***] Trademarks, (ii) copyrights
(registered and unregistered) and copyrightable works and registrations
and applications for registration thereof, (ii) mask works and
registrations and applications for registration thereof, (iii) computer
software, data, data bases and documentation thereof, (iv) other
intellectual property rights and (v) copies and tangible embodiments
thereof (in whatever form or medium) which relate to the [***]
Products.
"[***] Products" shall mean the Flocare [***] Pumps, the [***]
Pump Accessories, the [***] Pump Kits, and the [***] Disposable Set
Components.
"[***] Pump Accessories" means individual accessories to be
used with the Flocare [***] Pumps, including AC adapters/chargers, pole
clamps, nurse calls, operator's manuals, and carry packs as defined
more thoroughly in the [***] Pump Supply Agreement.
"[***] Pump Kit" means one unit each of the Flocare [***] Pump
and the charger, pole clamp, and operator's manual for use with that
pump, all to be provided as a bundled unit.
"[***] Pump Products" means the Flocare [***] Pump, the [***]
Pump Accessories and the [***] Pump Kits.
"[***] Pump Supply Agreement" means that certain [***] Pump
Supply Agreement of even date herewith between the parties.
"[***] Trademarks" means all trademarks, service marks, trade
dress, trade names, logos and corporate names and registrations and
applications for registration thereof, together with all of the
goodwill associated therewith, and all other devices used by Licensor
to distinguish the [***] Products, including, but not limited to, the
trademarks, service marks, trade names, and logos listed on Exhibit A
hereto.
"Know-How" means all trade secrets and other confidential
information, including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), the Product Specifications,
know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications,
designs, plans, proposals, technical data, supplier lists and
information, design input information relating to tooling, molds, dies
and unpublished research and development information owned, controlled
by, or in the possession of Licensor on the Effective Date of this
Agreement or which later come into the possession of Licensor that are
necessary or helpful in the production of the [***] Pump Products and
that Licensor has the right to provide to Licensee; provided, however,
that Know-How shall not include customer lists. A list of documents
containing Know-How to be transferred to Licensee is attached hereto as
Exhibit B.
"Maintenance and Service Agreement" means that certain
Maintenance and Service Agreement of even date herewith between the
parties.
"Patents" means (i) all patents, patent applications, patent
disclosures and inventions, including those described in Exhibit C,
which relate to the [***] Products; (ii) any continuations,
continuations-in-part, divisions, reissues, substitutes, extensions of
any of the foregoing; and/or (iii) new Licensor patent applications and
resulting patents which relate to the [***] Products and/or the patents
listed on Exhibit C hereto.
"Product Specifications" means the technical, manufacturing,
and functional specifications for the [***] Products, as set forth on
Exhibit D hereto.
"Related Agreements" means the Flocare 800 Pump Manufacturing
Agreement, the Disposable Set Components Supply Agreement, the [***]
Pump Supply Agreement, the Disposable Set Components License Agreement,
and the Maintenance and Service Agreement.
"Territory" means the countries designated in the following
chart:
------------------------------------------------------ -----------------------------------------
Austria, Belgium, Denmark, Finland, France, Germany, Bulgaria, Czech Republic,
Greece, Ireland, Italy, Latvia, Luxembourg, The Hungary, Poland, Russia,
Netherlands, Norway, Portugal, Spain, Sweden, Slovakia, Ukraine, United
Switzerland, United Kingdom Arab Emirates, Turkey
------------------------------------------------------ -----------------------------------------
------------------------------------------------------ -----------------------------------------
Australia, New Zealand China, Indonesia,
Malaysia, Taiwan
------------------------------------------------------ -----------------------------------------
------------------------------------------------------ -----------------------------------------
Argentina, Brazil South-Africa
------------------------------------------------------ -----------------------------------------
"ZEVEX [***] Products" means Licensor's own, original version
of the [***] enteral nutrition delivery pump, together with its
accessories and disposable sets, without the customizations made for
Licensee pursuant to the Product Specifications and pursuant to the
[***] Pump Supply Agreement and the [***] Disposable Set Components
Supply Agreement.
2. License
(a) License Grant. Subject to all the other terms and condition in this
Agreement, Licensor hereby grants Licensee and its Affiliates a
perpetual, irrevocable license to fully exploit and exercise all of the
rights in and to the [***] Intellectual Property for the manufacture of
the [***] Pump Products for use or sale in the Territory. This license
includes, but is not limited to, the following rights:
(i) The right to make, use, sell, license, distribute, offer for sale, and
import the [***] Pump Products in the Territory.
(ii) The right to use the [***] Trademarks in the Territory in conjunction
with the [***] Pump Products, including the right to use the [***]
Trademarks in connection with Licensee's own trademarks and in
composite trademarks consisting of elements of the [***] Trademarks
combined with elements of Licensee's trademarks. The license to use
the [***] Trademarks hereunder shall be considered to be supplemental
to Licensee's license rights to the other [***] Intellectual Property
under this Agreement within the meaning of Section 365(n)(4(B) of the
United States Bankruptcy Code. Licensee shall exercise this right
consistent with Licensor's prevailing trademark usage guidelines.
Licensee shall not use any other names, marks, or logos, in any manner
that is confusingly similar to the [***] Trademarks. Licensee
acknowledges and agrees that the [***] Trademarks are owned exclusively
by Licensor and that Licensee has neither acquired nor shall acquire
any rights therein. Licensee shall not assert or claim any
rights over the [***] Trademarks nor contest same or challenge the
validity thereof.
(iii) The right to sublicense to any other party any of the rights granted to
Licensee hereunder, including the right to authorize other parties to
make, use, sell, license, distribute, offer for sale, and import the
[***] Pump Products and use the [***] Trademarks in the Territory,
including the right to use the [***] Trademarks in connection with
Licensee's own trademarks and in composite trademarks consisting of
elements of the [***] Trademarks combined with elements of Licensee's
trademarks.
(b) Exclusivity. The foregoing rights shall be exclusive to Licensee within
the Territory. Licensee has no rights to the [***] Intellectual
Property for any purpose other than as expressly provided in this
Agreement or for any purpose outside of the Territory. Further,
Licensor shall retain all rights to use the [***] Intellectual Property
within the Territory for products not involving [***] pumps or [***]
pump accessories.
(c) Know-How Transfer. Within thirty (30) days from the Effective Date,
Licensor shall disclose and transfer to a mutually-acceptable escrow
agent all of the Know-How and other [***] Intellectual Property by
delivering to such escrow agent documents fully disclosing the Know-How
and other [***] Intellectual Property that is necessary or helpful for
Licensee to manufacture the [***] Pump Products (the "Escrow
Materials"), including written instructions to Licensor's suppliers
giving such suppliers permission to provide materials necessary for the
manufacture of the [***] Pump Products, notwithstanding any preexisting
exclusivity arrangements such suppliers may have with Licensor.
Licensee shall have the right to review all Escrow Materials deposited
into escrow to assure the sufficiency of such materials, and if
Licensee is not assured of such sufficiency, Licensor shall deposit
such additional materials as Licensee may reasonably request. Prior to
such transfer, the parties agree to complete and execute an escrow
agreement mutually acceptable to the parties and to the escrow agent.
The escrow agreement will provide for the initial release to Licensee
of those Escrow Materials necessary or helpful for Licensee to obtain
all required regulatory approvals for the use and sale of the [***]
Pump Products in the Territory. The escrow agent will release these
Escrow Materials upon the reasonable request of Licensee. The escrow
agreement will provide for the release of the remaining Escrow
Materials to Licensee upon the termination of the [***] Pump Supply
Agreement in the event that this Agreement remains in full force and
effect. In connection with the foregoing releases of the Escrow
Materials, Licensor shall make reasonably available to Licensee the
appropriate Licensor personnel to assist Licensee in implementing the
Know-How and practicing the license granted hereunder. All transfer of
Know-How will be in the form of written documentation or verbal
communications from Licensor's staff to Licensee's staff. To the extent
practicable, all written documentation shall be marked as "Confidential
Trade Secrets of ZEVEX International."
(d) Quality Assurance Standards. In order for Licensee to maintain its
license hereunder, Licensee agrees that any [***] Pump Products that
are not manufactured by Licensor and which bear the [***] Trademarks
will meet the Quality Assurance Standards to be agreed upon by the
parties and attached hereto as Exhibit E (the "Quality Assurance
Standards"), so as to protect Licensor's goodwill pertaining to the
[***] Trademarks. Should Licensor at any time reasonably determine that
Licensee is not manufacturing [***] Pump Products bearing the [***]
Trademarks in accordance with the Quality Assurance Standards, Licensor
may declare this Agreement in material breach under the termination
provisions in Section 5 hereof.
3. License Royalty on [***] Pump Products
(a) Base Royalty. Licensee agrees to pay Licensor a royalty on each [***]
Pump Product manufactured by Licensee, including those products
manufactured by Licensor under the [***] Pump Supply Agreement, or by a
subcontract manufacturer, at the per unit royalty rate indicated in the
attached Exhibit F. An [***] Pump Product shall be deemed manufactured
when its manufacture is complete and the [***] Pump Product is
commercially usable, regardless of whether it has been packaged for
commercial use or sale, and regardless of Licensee's intended use of
such [***] Pump Product. No royalty shall be due on any [***] Pump
Products that are discarded or scrapped during the manufacturing
process.
(b) Penalty Royalty. If the [***] Pump Supply Agreement is terminated by
Licensee for Licensor's failure to supply products under Section 18 of
the [***] Pump Supply Agreement, then Licensee agrees to pay Licensor a
royalty on each [***] Pump Product manufactured by Licensee, including
those products manufactured by a subcontract manufacturer, at the per
unit royalty rate indicated in the attached Exhibit G. An [***] Pump
Product shall be deemed manufactured when its manufacture is complete
and the [***] Pump Product is commercially usable, regardless of
whether it has been packaged for commercial use or sale, and regardless
of Licensee's intended use of such [***] Pump Product. No royalty shall
be due on any [***] Pump Products that are discarded or scrapped during
the manufacturing process.
(c) Payment of Royalty. While the [***] Pump Supply Agreement is in force
and effect, the royalty payable hereunder shall be invoiced by Licensor
and paid by Licensee in conjunction with Licensee's payment for the
manufacture of the [***] Pump Products in accordance with the payment
terms of the [***] Pump Supply Agreement. If the [***] Pump Supply
Agreement is no longer in force and effect, the royalty payable
hereunder shall be paid within forty-five (45) days after the end of
each calendar quarter, by wire transfer in United States currency.
These quarterly royalty payments shall be subject to a 1.5% penalty per
month if received beyond the due date.
(d) Recordkeeping and Reports. Licensee shall keep full and accurate
records and books of account of all particulars necessary for
calculating the amounts of royalties due to Licensor hereunder. With
each royalty payment, Licensee agrees to submit to Licensor a written
report showing the number of [***] Pump Products manufactured in the
quarter and the calculation of the royalty paid.
(e) Audit Right. Licensor shall have the right, as described in this
Section 3(d) to audit the books and records of Licensee for the sole
purpose of determining whether Licensee has paid to Licensor the full
amount of the royalties that are due to Licensor hereunder. Licensor
may conduct such audit either by its employees or by independent
contractors, who shall maintain the confidentiality of the information
that they may review in the course of the audit. Licensor may conduct
such an audit at reasonable times no more than twice in any calendar
year. Licensor may conduct such an audit both during the Term of this
Agreement and for a period of two (2) years following the termination
of this Agreement. Licensor shall give Licensee at least ten (10)
business days' prior written notice of such audit. During such audit,
Licensee shall open its books and records to Licensor that are related
to the purpose of the audit. During such audit, Licensee shall also
make available to Licensor the appropriate personnel of Licensee, who
may be interviewed by Licensor in connection with the audit. Any
adjustment in the amount due to Licensor on account of overpayment or
underpayment of royalties shall be made at the next date when royalty
payments are due under the Agreement. Licensor shall pay the expenses
of the audit; provided, however, if there is an underpayment in the
royalties which exceeds two percent (2%) of the actual royalties paid
Licensor during the period of time that is covered by the audit, then
Licensee shall reimburse Licensor for all costs incurred by Licensor in
conducting such audit.
4. Confidentiality
(a) Confidential and Proprietary Information.
(i) Licensor Obligations with Respect to Licensee Confidential Information.
----------------------------------------------------------------------
Licensor agrees to hold all confidential information of Licensee and
its affiliated companies, including without limitation, any information
relating to Licensee's and its affiliates' business operations, price
lists, manufacturing data, marketing information strategies, customer
or product lists, research and development information and all other
information disclosed by Licensee or its affiliates to Licensor
("Licensee Confidential Information"), in strict confidence and not to
use any of the foregoing commercially for its own benefit or that of
anyone else nor for the purpose of developing or improving a product or
method for anyone except Licensee. Licensor agrees to limit
dissemination of and access to Licensee Confidential Information only
to the persons within Licensor's organization and Licensor's affiliated
organizations and their respective third party contractors,
subcontractors, manufacturers and business partners who have a need for
access thereto, and who have entered into a restrictive agreement
prohibiting such personnel from doing anything with respect to
Licensee Confidential Information that Licensor would itself be
prohibited from doing under this Agreement. Notwithstanding anything
to the contrary herein, Licensor may make such disclosures as necessary
in connection with the preparation, filing, and dissemination of its
filings with the U.S. Securities and Exchange Commission (e.g., 10-Ks,
10-Qs, and 8-Ks) and/or other disclosures as required by applicable
law; provided, however, that it shall first notify Licensee of any such
disclosure in order that the parties may seek appropriate confidential
treatment for information they deem to be confidential.
(ii) Licensee Obligations with Respect to Licensor Confidential Information.
----------------------------------------------------------------------
Licensee agrees to hold all confidential information of Licensor and
its affiliated companies, including without limitation, any information
relating to Licensor's and its affiliates' business operations, price
lists, manufacturing data, marketing information strategies, customer
or product lists, research and development information, and all other
information disclosed by Licensor or its affiliates to Licensee
("Licensor Confidential Information"), in strict confidence and not to
use any of the foregoing commercially for its own benefit or that of
anyone else. Licensee agrees to limit dissemination of and access to
Licensor Confidential Information only to the persons within Numico,
Royal Numico and Nutricia, and their affiliates, and their respective
third party contractors, subcontractors, manufacturers and business
partners who have a need for access thereto, and who have entered into
a restrictive agreement prohibiting such personnel from doing anything
with respect to Licensor Confidential Information and such information
that Licensee would itself be prohibited from doing under this
Agreement. Notwithstanding anything to the contrary herein, Licensee
may make such disclosures as necessary in connection with the
preparation, filing, and dissemination of disclosures as required by
applicable law; provided, however, that it shall first notify Licensor
of any such disclosure in order that the parties may seek appropriate
confidential treatment for information they deem to be confidential.
(b) Use of Confidential Information of Other Parties. Each party
represents, warrants, and covenants that it will not use in the course
of its performance under this Agreement, or disclose to the other
parties hereto, any confidential or proprietary information of any
third party (including competitors of the other parties) without the
prior written consent of the party to whom such confidential or
proprietary information belongs.
(c) Disclosure Does Not Constitute a License. Neither the execution of this
Agreement nor the disclosure of any confidential or proprietary
information by one party to the other hereunder shall be construed as
granting to the recipient of such information, by implication or
otherwise, any right in, or license to, other than expressly contained
herein, any present or future proprietary information, patent,
trademark, copyright invention, now or hereinafter, owned or controlled
by the disclosing party. Each party will be authorized to use the other
party's confidential information that is disclosed hereunder only for
such purposes as are expressly contemplated by this Agreement.
(d) Notice of Unauthorized Disclosure. If either party becomes aware of any
unauthorized disclosure of the other party's confidential information,
it will immediately notify the other party of such unauthorized
disclosure and will take all reasonable steps to mitigate the potential
harm associated with such unauthorized disclosure.
(e) Survival. The provisions regarding Confidential Information shall
survive the termination or expiration of this Agreement, except that
such obligations shall not limit Licensee's rights under the Related
Agreements.
5. Term and Termination
(a) Term. The term of this Agreement shall begin on the Effective Date and
shall thereafter be perpetual (the "Term"); provided, however, that the
Term shall end (i) upon one of the events of termination set forth in
the following Sections 5(b), 5(c) and 5(d), or (ii) upon the mutual
consent of the parties hereto.
(b) Termination by Licensor. This Agreement may be terminated by Licensor
prior to the end of the Term as follows:
(i) Upon a Bankruptcy Event of Licensee, Licensee shall notify Licensor
thereof within one (1) business day thereof, and Licensor may elect to
terminate the Agreement by giving written notice to Licensee within
thirty (30) days of that notice.
(ii) Upon a Change of Control of Licensee, Licensee shall notify Licensor
thereof within one (1) business day of the public announcement thereof,
and Licensor may elect to terminate the Agreement by giving notice to
Licensee within thirty (30) days of the public announcement of the
Change of Control of Licensee.
(iii) Upon the failure of Licensee to pay to Licensor monies when due by
Licensee to Licensor under any of this Agreement or the Related
Agreements, Licensor may give notice to Licensee of such non-payment.
Thereafter, if Licensee fails to pay such monies to Licensor within
five (5) business days of such notice, then this Agreement shall
terminate on that 5th business day. If Licensee pays the monies due to
Licensor within those five (5) business days, then this Agreement shall
not terminate.
(iv) Upon a material breach of this Agreement by Licensee, Licensor may give
notice to Licensee of such breach. If Licensee fails to cure such
breach within sixty (60) days of such notice, then this Agreement may
be terminated by Licensor at any time during the period that begins on
the sixtieth (60th)day following such notice and ends on the ninetieth
(90th) day following such notice (the "Licensor Termination Period") by
giving written notice of such termination to Licensee before the
expiration of the Licensor Termination Period. Licensor's failure to
terminate this Agreement during the Licensor Termination Period will
constitute a waiver of Licensor's rights to terminate this Agreement
by reason of the applicable breach, but will not constitute a waiver of
Licensor's other rights and remedies under this Agreement, or a waiver
of future similar breaches.
(v) If Licensor terminates the [***] Pump Supply Agreement pursuant to
Section 16(a)(ix) of the [***] Pump Supply Agreement, Licensor may give
notice to Licensee of its intention to terminate this Agreement, and,
if such notice is given, this Agreement shall terminate at the same
time as the [***] Pump Supply Agreement. Once a notice of termination
has been given by a party pursuant to this subparagraph, such notice
shall be irrevocable except by mutual consent of the parties.
(vi) Upon termination of the [***] Pump Supply Agreement pursuant to Section
16(a)(iv) thereof, this Agreement shall terminate contemporaneously
with the termination of the [***] Pump License Agreement.
(vii) Upon an uncured material breach of the Disposable Set Components Supply
Agreement by Licensee, Licensor may terminate this Agreement.
(viii) Upon an uncured material breach of the Disposable Set Components
License Agreement by Licensee, Licensor may terminate this Agreement.
(ix) Upon termination of the Disposable Set Components Supply Agreement
pursuant to Sections 15(a)(i), (ii) or (iii) thereof, this Agreement
shall terminate contemporaneously with the termination of the
Disposable Set Components Supply Agreement.
(x) Upon termination of the Disposable Set Components License Agreement
pursuant to Sections 5(b)(i), (ii) or (iii) thereof, this Agreement
shall terminate contemporaneously with the termination of the
Disposable Set Components License Agreement.
(c) Termination by Licensee. This Agreement may be terminated by Licensee
prior to the end of the Term as follows:
(i) Upon a Bankruptcy Event of Licensor, Licensor shall notify Licensee
thereof within one (1) business day thereof, and Licensee may elect to
terminate the Agreement by giving written notice to Licensor within
thirty (30) days of that notice.
(ii) Upon a Change of Control of Licensor, Licensor shall notify Licensee
thereof within one (1) business day of the public announcement thereof,
and Licensee may elect to terminate the Agreement by giving notice to
Licensor within thirty (30) days of the public announcement.
(iii) Upon a material breach of this Agreement by Licensor, Licensee may give
notice to Licensor of such material breach. If Licensor fails to cure
such material breach within sixty (60) days of such notice, then this
Agreement may be terminated by Licensee at any time during the period
that begins on the sixtieth (60th) day following such notice and ends
on the ninetieth (90th) day following such notice (the "Licensee
Termination Period") by giving written notice of such termination to
Licensor before the expiration of the Licensee Termination Period.
Licensee's failure to terminate this Agreement during the Licensee
Termination Period will constitute a waiver of Licensee's rights to
terminate this Agreement by reason of the applicable material breach,
but will not constitute a waiver of Licensee's other rights and
remedies under this Agreement.
(iv) If Licensee terminates the [***] Pump Supply Agreement pursuant to
Section 16(a)(viii) of the [***] Pump Supply Agreement, this Agreement
shall terminate at the same time as the [***] Pump Supply Agreement.
(d) Cross-Termination. This Agreement shall terminate automatically and
immediately upon the termination of the [***] Pump Supply Agreement for
any reason other than one of the following reasons:
(i) Upon a "Bankruptcy Event of Supplier" in Section 16(a)(v) of the [***]
Pump Supply Agreement.
(ii) Upon a "Change of Control of Supplier" in Section 16(a)(vi) of the
[***] Pump Supply Agreement.
(iii) Upon a "Failure to Fulfill Call-Off" in Section 16(a)(x) of the [***]
Pump Supply Agreement where such failure to fulfill involves the [***]
Pump Products.
(iv) Upon termination of the [***] Pump Supply Agreement under Section 16(a)
(xi) of the [***] Pump Supply Agreement.
(e) Effect of Termination. Upon the termination of this Agreement, Licensee
agrees to immediately cease using the [***] Intellectual Property and
manufacturing the [***] Pump Products in any manner and for any
purpose; provided, however, that Licensee shall have the right to use
or sell any fully manufactured [***] Pump Products that it has on hand
on the date of termination that meet the Quality Assurance Standards
and shall pay applicable royalties thereon. No termination of this
Agreement shall affect the rights of Licensor to accrued royalties due
and owing as of the date of termination and to statements of account
with any royalty payment that is made after the termination date.
Additionally, Licensor shall have the continuing right to conduct
audits as provided in Section 3(d) herein.
(f) Return of Materials Upon Termination. Upon termination, expiration or
non-renewal of this Agreement, if applicable, each party shall return
to the other party all materials and documents containing confidential
and proprietary information, including any copies or extracts thereof,
and shall erase any copies thereof contained in any electronic or other
memory device. In addition, at that time each party shall immediately
cease and desist from using any confidential or proprietary information
of the other parties hereto for any purpose whatsoever. Each party will
certify in writing to the other, within thirty (30) days after any such
termination, expiration, or non-renewal of this Agreement, that they
have complied with this Section 5(f).
(g) No Liability for Termination. Neither party in exercising its rights to
terminate this Agreement in accordance with the terms and conditions
hereof shall incur any liability whatsoever for any damage, loss or
expense of any kind suffered or incurred by the other (or for any
compensation to the other) arising from or incident to any such
termination (except if such termination is for a material breach of
this Agreement), expiration or non-renewal, whether or not the
terminating party is aware of any such damage, loss or expense. Any
termination hereof shall not impair any rights nor discharge any
obligations which have accrued to the parties as of the effective date
of such termination.
6. Representation and Warranties
(a) Licensor's Representations and Warranties. Licensor hereby represents
and warrants to Licensee that:
(i) It has the full power, capacity, and right to enter into this
Agreement;
(ii) All corporate action necessary to authorize Licensor to enter into this
Agreement and be legally bound by its terms has been taken;
(iii) It knows of no pending or threatened action in law or in equity which
adversely affects the rights granted herein, and it knows of no basis
for any of the foregoing;
(iv) To the knowledge of Licensor, neither the execution and delivery of
this Agreement nor compliance with the obligations of Licensor
hereunder, will violate any law or regulation, or any order or decrees
of any court or government instrumentality;
(v) To the knowledge of Licensor, neither the execution and delivery of
this Agreement nor compliance with the obligations of Licensor
hereunder, will conflict with, or result in the breach of, or
constitute a default under, any contract, agreement, instrument or
judgment to which Licensor or any officer, director, employee or
controlling person of Licensor is a party, or which is or purports to
be binding upon any of the foregoing persons;
(vi) No action, approval, or consent, including, but not limited to, any
action, approval, or consent by any federal, state, municipal, or other
governmental agency, commission, board, bureau, or instrumentality is
necessary in order to constitute this Agreement as a valid, binding,
and enforceable obligation of Licensor in accordance with its terms;
(vii) Licensor is the sole legal and beneficial owner of the [***]
Intellectual Property;
(viii) To the knowledge of Licensor, none of the [***] Intellectual Property
infringes or is alleged to infringe upon any patents or other
intellectual property rights of any third party;
(ix) All utility Patents have been applied for in the United States, the
European Community, Switzerland, China and Japan; and
(x) The [***] Trademarks have either been filed or the filing process has
been initiated in the United States, the European Community,
Switzerland, China, and Japan.
(xi) The Know-How comprises all trade secrets and other confidential
information, including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), the Product Specifications,
know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications,
designs, plans, proposals, technical data, supplier lists and
information, and unpublished research and development information that
are necessary or helpful in the production of the [***] Products;
provided, however, that Know-How does not include customer lists.
(b) Licensee's Representations and Warranties. Licensee hereby represents
and warrants to Licensor that:
(i) It has the full power, capacity, and right to enter into this
Agreement;
(ii) All corporate action necessary to authorize Licensee to enter into this
Agreement and be legally bound by its terms has been taken;
(iii) It knows of no pending or threatened action in law or in equity which
adversely affects the rights granted herein, and it knows of no basis
for any of the foregoing;
(iv) To the knowledge of Licensee, neither the execution and delivery of
this Agreement nor compliance with the obligations of Licensee
hereunder, will violate any law or regulation, or any order or decrees
of any court or government instrumentality;
(v) Neither the execution and delivery of this Agreement nor compliance
with the obligations of Licensee hereunder, will conflict with, or
result in the breach of, or constitute a default under, any contract,
agreement, instrument or judgment to which Licensee or any officer,
director, employee or controlling person of Licensee is a party, or
which is or purports to be binding upon any of the foregoing persons;
and
(vi) No action, approval, or consent, including, but not limited to, any
action, approval, or consent by any federal, state, municipal, or other
governmental agency, commission, board, bureau, or instrumentality is
necessary in order to constitute this Agreement as a valid, binding,
and enforceable obligation of Licensee in accordance with its terms.
7. Indemnification.
(a) Licensor's Indemnification. Licensor shall indemnify, defend and hold
Licensee, its affiliates, and their respective officers, directors,
employees and agents (each, a "Licensor Indemnified Party"), harmless
from and against any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties, reasonable attorneys' fees, costs of
investigation and any legal or other expenses or costs ("Losses")
incurred or suffered by any Licensor Indemnified Party arising out of,
in connection with or resulting from any claim, allegation or judgment
as to: (i) any violation or infringement by Licensor upon any common
law or statutory intellectual property rights of any third party that
arises from or relates to [***] Intellectual Property and the [***]
Pump Products, (ii) any third party product liability claim resulting
from a design defect of the [***] Pump Product, or (iii) any inaccuracy
or breach in any of Licensor's representations and warranties under
this Agreement; provided, however, that Licensor shall have no
obligation to indemnify Licensee for any Losses to the extent such
Losses are caused by any negligent or willful act or omission of
Licensee; and further provided that no indemnification shall be
available to Licensee under Section 7(a)(i) or (ii) hereof while the
[***] Pump Supply Agreement is in effect. With respect to Section
7(a)(i) above, Licensor shall provide, at its own cost, non-infringing
replacements for the infringing portions of the [***] Pump Products of
equivalent quality and effect, or obtain at its own cost the necessary
licenses from third parties to allow Licensee to continue to market,
sell, distribute, and promote the [***] Pump Products as contemplated
by the parties under this Agreement.
(b) Licensee's Indemnification. Licensee agrees to indemnify, defend and
hold harmless Licensor, its affiliates, and their respective officers,
directors, employees and agents (each, a "Licensee Indemnified Party")
from and against any and all Losses (as defined in Section 7(a) above)
incurred or suffered by any Licensee Indemnified Party arising out of,
in connection with or resulting from any claim, allegation or judgment
(i) as to any inaccuracy or breach in any of Licensee's representations
and warranties under this Agreement; provided, however, that Licensee
shall have no obligation to indemnify Licensor for any Losses to the
extent such Losses are caused by any negligent or willful act or
omission of Licensor, or (ii) any third party product liability claim
resulting from a manufacturing defect in the [***] Pump Product.
(c) Indemnification Procedure for Matters Involving Third Parties.
(i) If any third party notifies any party hereto (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against the other party hereto (the
"Indemnifying Party") under Section 7(a) or 7(b) (as applicable), then
the Indemnified Party shall promptly notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) that the Indemnifying Party is prejudiced
thereby.
(ii) Any Indemnifying Party will have the obligation to assume the defense
of the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party at any time within fifteen (15)
days after the Indemnified Party has given notice of the Third Party
Claim; provided, however, that the Indemnifying Party must conduct the
defense of the Third Party Claim actively and diligently thereafter in
order to preserve its rights in this regard; and provided further that
the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim.
(iii) So long as the Indemnifying Party has assumed and is conducting the
defense of the Third Party Claim in accordance with Section 7(c)(ii)
above, (A) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnified Party
(which shall not be unreasonably withheld) unless the judgment or
proposed settlement involves only the payment of money damages by one
or more of the Indemnifying Parties and does not impose an injunction
or other equitable relief upon the Indemnified Party and (B) the
Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without
the prior written consent of the Indemnifying Party (which shall not be
unreasonably withheld).
(iv) If the Indemnifying Party does not assume and conduct the defense of
the Third Party Claim in accordance with Section 7(c)(ii) above,
however, (A) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it reasonably may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent
from, any Indemnifying Party in connection therewith) and (B) the
Indemnifying Party will remain responsible to indemnify the Indemnified
Party under Section 7(a) or 7(b) (as applicable).
(d) Indemnification Procedure for Matters not Involving Third Parties. A
claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification
is sought.
(e) Limitations on Licensor's Liability. LICENSOR'S MAXIMUM LIABILITY TO
LICENSEE, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY LICENSEE
UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR
PRODUCT LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED
$1,000,000; PROVIDED, HOWEVER, THAT LICENSOR'S MAXIMUM LIABILITY TO
LICENSEE FOR DAMAGES, IF ANY, RELATING TO CLAIM(S) MADE BY LICENSEE
THAT ARISE OUT OF THE SAME FACTS AND CIRCUMSTANCES, WHETHER SUCH
CLAIM(S) ARE MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS, SHALL IN NO EVENT EXCEED $1,000,000. LICENSOR'S MAXIMUM
LIABILITY TO LICENSEE, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S)
MADE BY LICENSEE FOR INDEMNIFICATION FOR A PRODUCT LIABILITY CLAIM BY A
THIRD PARTY SHALL IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE
PROCEEDS AVAILABLE TO LICENSOR WITH RESPECT TO SUCH CLAIM, WHETHER SUCH
CLAIM IS MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS.
(f) Limitations on Licensee's Liability. LICENSEE'S MAXIMUM LIABILITY TO
LICENSOR, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY LICENSOR
UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR
PRODUCT LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED
$1,000,000; PROVIDED, HOWEVER, THAT LICENSEE'S MAXIMUM LIABILITY TO
LICENSOR FOR DAMAGES, IF ANY, RELATING TO CLAIM(S) MADE BY LICENSOR
THAT ARISE OUT OF THE SAME FACTS AND CIRCUMSTANCES, WHETHER SUCH
CLAIM(S) ARE MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS, SHALL IN NO EVENT EXCEED $1,000,000. LICENSEE'S MAXIMUM
LIABILITY TO LICENSOR, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S)
MADE BY LICENSOR FOR INDEMNIFICATION FOR A PRODUCT LIABILITY CLAIM BY A
THIRD PARTY SHALL IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE
PROCEEDS AVAILABLE TO LICENSEE WITH RESPECT TO SUCH CLAIM, WHETHER SUCH
CLAIM IS MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED
AGREEMENTS.
(g) No Consequential Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF
THE BREACHING PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES
IN ADVANCE. The parties intend this limitation in this Section 7(g) to
apply to the following events, among other events: (i) any claim for
consequential damages suffered by the non-breaching party (as opposed
to any third party) arising out of any claim by a third party for
either product liability or infringement of intellectual property ,
(ii) any breach by either party of its representations under this
agreement, (iii) any non-performance or mal-performance by either party
under this Agreement, or (iv) the termination or expiration of this
Agreement by either party. Such incidental or consequential damages
shall include, but shall not be limited to, loss of goodwill, loss of
prospective profits, loss of revenue, or damages on account of any
investment, expenditure, or commitment that is made by either party in
reliance upon this Agreement. This limitation in this Section 7(g) is
not intended by the parties to prevent Licensee, for example, from
recovering from Licensor, in an indemnification claim made under
Section 7(a)(i), the full amount that it has been required to pay to a
third party in connection with a product liability claim brought by
such third party against Licensee, including such incidental or
consequential damages as may be allowed by law under that claim by that
third party. This limitation in this Section 7(g) is, nevertheless,
intended to prevent the non-breaching party from receiving from the
breaching party, in an indemnification claim under Section 7(a) or
7(b), incidental or consequential losses or damages that have been
incurred by the non-breaching party (as opposed to any third party),
such as lost profits, that may arise from or relate to any event under
this Agreement.
(h) Licensor's Insurance. Licensor shall maintain in full force and effect
throughout the Term, at its sole cost and expense, insurance with
financially sound and established reputable insurers of the type and
quantity (and with such risk retention) generally maintained by the
companies of established repute in Licensor's line of business, such
insurance to include, without limitation, products liability insurance
and general liability insurance each, in an amount no less than ten
million U.S. dollars (U.S. $10,000,000.00) per occurrence. Licensor
shall, upon request, provide Licensee with a copy of any documentation
relating to any such insurances. Licensor shall have Licensee named as
an additional insured beneficiary, with Licensee able to claim
thereunder as primary beneficiary and without offset or deduction
whatsoever as a result of any insurance obtained by Licensee, and shall
contain a waiver of subrogation by the respective insurance carrier
against Licensee's and its affiliates' insurance carrier, with respect
to Licensor's obligations under this Agreement.
(i) Licensee's Insurance. Licensee shall maintain in full force and effect
throughout the Term, at its sole cost and expense, insurance with
financially sound and established reputable insurers of the type and
quantity (and with such risk retention) generally maintained by the
companies of established repute in Licensee's line of business, such
insurance to include, without limitation, products liability insurance
and general liability insurance each, in an amount no less than ten
million U.S. dollars (U.S. $10,000,000.00) per occurrence. Licensee
shall, upon request, provide Licensor with a copy of any documentation
relating to any such insurances. Licensee shall have Licensor named as
an additional insured beneficiary, with Licensor able to claim
thereunder as primary beneficiary and without offset or deduction
whatsoever as a result of any insurance obtained by Licensor, and shall
contain a waiver of subrogation by the respective insurance carrier
against Licensor's and its affiliates' insurance carrier, with respect
to Licensee's obligations under this Agreement.
8. Intellectual Property
(a) Ownership of Product Rights/Intellectual Property Rights. Licensor has
and will retain all right, title to, and interest in [***] Intellectual
Property.
(b) Nationalization of Patents. Licensor will use Commercially Reasonable
Efforts to nationalize the Patents in the following countries in the
Territory: United Kingdom, Germany, France, Italy, Benelux, Austria,
and China.
(c) Notice of Infringement. Licensee shall promptly notify Licensor of any
actual or apparent infringement of [***] Intellectual Property of which
Licensee becomes aware. Licensor may, at its sole option and expense,
prosecute any suit it deems necessary or appropriate to protect any of
Licensor's rights to [***] Intellectual Property from and against
infringement by third parties anywhere in the world and Licensee shall
cooperate fully with Licensor in connection with any such action.
9. New Product Development.
(a) Innovation. Licensor will exert efforts to investigate, discuss, and/or
develop improvements with respect to the [***] Products and/or new
enteral feeding pumps or accessories that are advancements from the
[***] Products (each such improvement an "Innovation") by (i)
discussing product innovation at least annually in one of the Quarterly
Meetings (as defined in Section 9(f) below) with Licensee and (ii)
budgeting and maintaining sufficient marketing resources, as determined
in Licensor's reasonable discretion, to support the discussions
required by subsection 9(a)(i). Unless otherwise explicitly agreed in a
writing signed by both Licensee and Licensor, Licensor will own all
right, title to and interest in any Innovations and Licensee hereby
assigns any right, title to, and interest in such Innovations to
Licensor. If the parties mutually determine that an Innovation is
Commercially Viable (as defined below), then Licensor shall spend
annually, in the aggregate, on research and development efforts
relating to such Innovation and any other Innovations deemed to be
Commercially Viable under this section, up to 2% of the gross revenues
generated under this Agreement during the same fiscal year (the
"Invested Amount"). Licensor will be obligated to spend the Invested
Amount on such research and development efforts from the date the
parties both approve the project until the date that Licensor
determines in good faith that the project is complete or that it should
be abandoned. The Invested Amount shall be calculated in each of
Licensor's fiscal years or a portion thereof from the beginning to the
end of the project. For purposes of this Agreement "Commercially
Viable" shall mean both (x) the recapture of the Invested Amount by
Licensor within the first two years from the date of commercialization
of the project and (y) a projected return on investment to Licensor of
at least 10% annually over the life of the project.
(b) Licensor Funded Product Improvements. Licensor will exert Commercially
Reasonable Efforts to improve the [***] Products, and to develop new
enteral f feeding pumps and accessories that are advancements from the
[***] Products (each such improvement a "Licensor Funded Product
Improvement"). All intellectual property and other rights associated
with any Licensor Funded Product Improvement will belong to Licensor;
provided, however, that Licensor will provide to Licensee a first right
to commercialize such Licensor Funded Product Improvements in the
Territory.
(c) Licensee Funded Product Improvements. Licensee cannot make improvements
to the [***] Products without Licensor's prior written consent.
Licensee may hire Licensor to make improvements to the [***] Products,
on terms that are mutually acceptable to Licensee and Licensor, but in
any event the costs and expenses associated with such improvements will
be paid for by Licensee (each such improvement a "Licensee Funded
Product Improvement"). Any such Licensee Funded Product Improvements
will be owned by Licensee; provided, however, that Licensor will have
an option to license such improvements from Licensee, without the
payment of any royalties therefore, for the purpose of manufacturing
and selling of such Licensee Funded Product Improvements, alone or in
combination with other products, outside of the Territory.
(d) Jointly Developed Product Improvements. If the parties agree to jointly
develop and fund improvements to the [***] Products and/or the ZEVEX
[***] Products (each such improvement a "Jointly Developed Product
Improvement"), then the parties will jointly own such Jointly Developed
Product Improvements on such terms and conditions to which they
mutually agree. In any event, such agreement will provide that (i)
Licensor will have a license to manufacture, use, and sell such Jointly
Developed Product Improvement, alone or in combination with other
products, in geographic areas outside of the Territory, and (ii)
Licensee will have a license to use or sell such Jointly Developed
Product Improvement, alone or in combination with other products,
inside of the Territory.
(e) Termination of Innovation and Product Improvements Obligations. The
obligations of the Licensor under Section 9 shall terminate upon a
termination of the [***] Pump Supply Agreement for any reason.
(f) Designated Representative. Each party agrees to designate one
individual within such party's organization to serve as such party's
primary point of contact and representative (the "Designated
Representative") in such party's relationship and communications with
the other party as contemplated in this Agreement. These Designated
Representatives shall also involve other appropriate operational,
strategic, technical, and regulatory personnel in such communications.
(g) Quarterly Meetings. The parties agree to hold a face-to-face meeting at
a minimum of once each calendar quarter during the Term for such
duration as the parties agree in good faith is necessary to address the
various issues that may arise relating to the performance of the
parties under this Agreement (the "Quarterly Meetings"). The location
of the Quarterly Meetings shall alternate between Licensor's Facility
and a Licensee facility in the Territory. The parties shall formulate
in advance of each meeting a written agenda of material items that each
party proposes should be considered together in the meeting. The
parties shall make a reasonable effort to have the Designated
Representative present at each Quarterly Meeting, as well as such other
individuals as would be appropriate in light of the agenda for the
meeting. Each party shall bear all of its own costs and expenses
associated with its participation in the Quarterly Meeting. The
parties' respective rights to request and receive information hereunder
will not be affected or limited by any subject or matter discussed or
planned to be discussed at any Quarterly Meeting.
10. Survival. Any provision of this Agreement which contemplates
performance or the existence of rights or obligations after the
expiration, non-renewal, or termination of this Agreement shall
expressly survive such expiration, non-renewal, or termination of this
Agreement and shall be binding upon the party or parties obligated
thereby in accordance with the terms of this Agreement, subject to any
limitations expressly set forth in this Agreement.
11. Amendment or Waiver. This Agreement cannot be changed orally, and no
modification of this Agreement shall be recognized nor have any effect,
unless the writing in which it is set forth is signed by Licensor and
Licensee, nor shall any waiver of any of the provisions of this
Agreement be effective unless in writing and signed by the party to be
charged therewith. The failure of either party to enforce, at any time
or for any period of time, the provisions hereof, or the failure of
either party to exercise any option herein shall not be construed as a
waiver of such provision or option and shall in no way affect that
party's right to enforce such provisions or exercise such option. No
waiver of any provision hereof shall be deemed a waiver of any
succeeding breach of the same or any other provisions of this
Agreement.
12. Dispute Resolution; Governing Law; Injunctive Relief.
(a) Negotiations. The parties agree that they will attempt in good faith to
resolve any controversy, claim, dispute or question between them
arising out of or relating to this Agreement, including the
construction or application of this Agreement, promptly by negotiations
between the parties. If a controversy or claim should arise,
appropriate representatives of the parties will meet at least once and
will attempt to resolve the matter. Either party may request the other
to meet within fourteen (14) days, at a mutually agreed time and place.
(b) Mediation. If the matter has not been resolved within thirty (30) days
of this meeting, the controversy or claim shall be submitted to
non-binding mediation by a mediator chosen from names of mediators
furnished by JAMS or the American Arbitration Association. The
mediation shall occur in New York City, New York, U.S.A.
(c) Litigation. In the event that differences concerning matters covered by
this Agreement arise that are not resolved by mutual agreement via
negotiations or mediation as described above, the parties agree that
any action or proceeding arising out of or relating to this Agreement
shall be heard and decided by a non-jury bench trial in New York City,
New York, U.S.A. Each party hereto irrevocably submits to the
jurisdiction of the appropriate state court covering New York City, New
York, U.S.A., and each party hereby irrevocably agrees that all claims
in respect of any such action or proceeding must be brought and/or
defended in such court; provided, however, that matters which are under
the exclusive jurisdiction of the Federal courts shall be brought in
the Federal District Court covering New York City, New York, U.S.A.
(d) Governing Law. The provisions of this Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
U.S.A. (excluding any conflict of law rule or principle that would
refer to the laws of another jurisdiction and the U.N. Convention on
Contracts for the International Sales of Goods). EACH PARTY HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT
MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR
PROCEEDING ARISING HEREUNDER.
(e) Injunctive Relief. Each of the parties acknowledge and agree that the
other parties will be damaged irreparably if any of the provisions of
this Agreement (specifically including the obligations of
confidentiality set forth in Section 4 herein) are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, notwithstanding any other provision in this Agreement the
damaged party shall have the right to pursue a claim for injunctive
relief, damages and attorneys' fees in any court of competent
jurisdiction for the other party's breach of any covenant, agreement or
obligation, in addition to any other relief available to them under
this Agreement or under applicable law.
(f) Fees. The parties shall equally split the fees of any mediation, but in
any arbitration or permissible legal proceedings, the prevailing party
shall be entitled to reasonable attorneys' fees, costs and other
disbursements in addition to any other relief to which such party may
be entitled.
13. Counterparts. This Agreement may be executed in multiple counterparts,
which taken together shall constitute one instrument and each of which
shall be considered an original for all purposes.
14. Notices. Any and all notices permitted or required to be given
hereunder shall be deemed duly given: (i) upon actual delivery, if
delivery is by hand; (ii) upon delivery by overnight express courier
(i.e. DHL or FedEx); or (iii) upon facsimile transmission, so long as
the original is then sent by overnight express courier delivery. Each
such notice shall be sent to the respective party at the address
indicated below:
If to ZEVEX: ZEVEX International Inc.
4314 ZEVEX Park Lane
Salt Lake City, Utah 84123
Attn: Chairman and CEO
Fax: (801) 264-1051
with a copy to the CFO
at the same address.
If to Numico: Numico Trading B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Luc Volatier, V.P. of
Purchasing Worldwide
Fax: 31206586159
If to Nutricia: c/o Nutricia International B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Rob Heutink, V.P.
Manufacturing and Supply,
Emerging Markets
Fax: 31206586884
or such other address or facsimile number as any of the persons designated above
may have specified in a notice or communication duly given to the other
designated person as provided herein.
15. Binding Effect; Non-Assignability. This Agreement shall be binding upon and
enforceable against the parties hereto and their respective successors and
permitted assigns. Neither party shall assign or subcontract (except as
expressly allowed hereunder) its rights and obligations under this Agreement
without the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that either party may assign this
Agreement to an affiliate of such party.
16. Relationship of the Parties. The parties are and at all times shall be
deemed to be independent contractors and shall be wholly responsible for the
goods supplied and services performed under this Agreement. Nothing contained
herein shall be construed as creating the relationship of employer/employee or
principal/agent. Each party shall assume full responsibility for the actions of
its employees as related to the party's obligations under this Agreement.
Neither party to this agreement is hereby constituted an agent of the other for
any purpose and neither party has the authority to assume or create any
obligation, or to make any representation, warranty or guarantee for the other,
except as expressly granted or made in this Agreement.
17. Force Majeure. Neither party shall be responsible or liable for any default
in performance of this Agreement arising directly or indirectly from any cause
beyond such party's control, including fire, flood, earthquake, acts of God, war
(declared or undeclared), enemy action, embargo, strike, governmental order,
proclamation or regulation, accident, explosion, riot, insurrection, or
expropriation of the property by government authority (each such event a "Force
Majeure Event"). If a Force Majeure Event occurs, the parties will exert
reasonable efforts to mitigate the impact of such Force Majeure Event on the
business arrangements of the parties set forth in this Agreement and to
otherwise carry out the intent and accomplish the objectives of this Agreement.
18. Exhibits and Schedules. Any exhibit or schedule attached hereto is made a
part hereof and is fully incorporated herein by reference.
19. Entire Agreement. This Agreement contains the sole and complete
understanding of the parties related to its subject matter, and supersedes all
oral or written agreements concerning this subject matter made prior to the date
of this Agreement. The [***] Pump Supply Agreement and the Flocare 800 Pump
Agreement are not superceded by this Agreement, but to the extent that any terms
of this Agreement relating to the licensing of the [***] Intellectual Property
conflict with such agreements, this Agreement shall control.
20. Remedies Not Exclusive. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy will be cumulative and will be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies will not
constitute a waiver of the right to pursue other available remedies.
21. Bankruptcy Provisions. It is intended by the parties to this Agreement that
in the event of Licensor's bankruptcy filing under the United States Bankruptcy
Code ("Bankruptcy Code'), this Agreement shall be treated as an executory
contract under which Licensor is a licensor of intellectual property under
Section 365(n) of the Bankruptcy Code, and that Licensee shall have all the
rights to which licensees of intellectual property are entitled to under such
section. This Agreement is an integrated agreement, and all provisions of this
agreement which are not directly related to the license of intellectual property
are intended to be supplementary to the intellectual property license granted
hereunder, within the meaning of Section 365(n)(4)(B) of the Bankruptcy Code.
22. Language; Interpretation. The language controlling the construction and
interpretation of this Agreement shall be English. Section headings are included
solely for convenience and shall not constitute a part hereof. Unless the
context otherwise requires, words importing the singular shall be deemed to
import the plural and vice versa.
23. Third Party Beneficiaries. No person or entity shall be a third-party
beneficiary of this Agreement.
24. Media Relations. Each of Licensor and Licensee agrees that during the Term
each will not, and will cause its affiliates not to, disparage each other or
release commercially sensitive information about each other in any oral,
written, or electronic public statements (including without limitation in any
securities filing with the U.S. Securities and Exchange Commission) concerning
any matters relating to or arising from this Agreement.
IN WITNESS WHEREOF, the parties enter into this Agreement effective as
of the Effective Date.
ZEVEX INTERNATIONAL, INC.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
NUTRICIA INTERNATIONAL, B.V.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
NUMICO TRADING B.V.
By:
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
Exhibit A
[***] Trademarks
[***]
Exhibit B
Know-How
The [***] Products Know-How is documented in the following ZEVEX Device Master
Records:
- ---------------------------------------- --------------------------------------------------
Device Master Record Number Description
- ---------------------------------------- --------------------------------------------------
- ---------------------------------------- --------------------------------------------------
[***] Flocare [***] Enteral Feeding Pump, Western Europe
- ---------------------------------------- --------------------------------------------------
- ---------------------------------------- --------------------------------------------------
[***] Flocare [***] + Enteral Feeding Pump, Western Europe
- ---------------------------------------- --------------------------------------------------
- ---------------------------------------- --------------------------------------------------
[***] Flocare [***] Paediatric Enteral Feeding Pump, Western Europe
- ---------------------------------------- --------------------------------------------------
- ---------------------------------------- --------------------------------------------------
[***] Flocare [***] Enteral Feeding Pump, UK/Export
- ---------------------------------------- --------------------------------------------------
- ---------------------------------------- --------------------------------------------------
[***] Flocare [***] + Enteral Feeding Pump, UK/Export
- ---------------------------------------- --------------------------------------------------
- ---------------------------------------- --------------------------------------------------
[***] Flocare [***] Paediatric Enteral Feeding Pump, UK/Export
- ---------------------------------------- --------------------------------------------------
- ---------------------------------------- --------------------------------------------------
[***] Flocare [***] Nurse Call
- ---------------------------------------- --------------------------------------------------
Exhibit C
Patents
[***]
Exhibit D
Product Specifications
The product specifications for the [***] Products are documented in the Flocare
[***] Enteral Feeding Pump User Requirements, ZEVEX document number [***] and
Flocare [***] Enteral Feeding Pump Nurse Call User Requirements, ZEVEX document
number [***].
Exhibit E
Quality Assurance Standards
Licensee must maintain a Quality System that complies with all of the provisions
of the European Union Medical Device Directive (MDD), 12 July 1993, 93/42/EEC,
Annex II, EC Declaration of Conformity (Full quality assurance system).
Exhibit F
Royalties
The royalty is [***] per Flocare [***] Pump.
Exhibit G
Penalty Royalty
The penalty royalty is [***] per Flocare [***] Pump.
CONFIDENTIAL INFORMATION OF ZEVEX International, Inc.
[*Confidential treatment has been requested as to certain portions of this
document. Each such portion, which has been omitted herein and replaced with an
asterisk [***], has been filed separately with the Securities and Exchange
Commission.]
Exhibit 10.36
MAINTENANCE AND SERVICE AGREEMENT
THIS MAINTENANCE AND SERVICE AGREEMENT (this "Agreement") is entered
into as of July 20, 2004, by and between NUMICO TRADING B.V., a Netherlands
corporation with its principal offices at Numico Beech Avenue 54-80, 1119PW,
Schiphol-Rijk, The Netherlands ("Numico"), NUTRICIA INTERNATIONAL B.V., a
Netherlands corporation with its principal offices at Numico Beech Avenue 54-80,
1119PW, Schiphol-Rijk, The Netherlands ("Nutricia", and, together with Numico,
"Customer"), and ZEVEX INTERNATIONAL, INC., a Delaware corporation, with its
principal offices at 4314 ZEVEX Park Lane, Salt Lake City, Utah ("ZEVEX").
RECITALS
A. Numico, a wholly-owned subsidiary of Royal Numico, N.V., a
Netherlands corporation ("Royal Numico"), specializes in the procurement of raw
materials, packaging materials, and fully finished products for use in Royal
Numico's numerous businesses, including the clinical nutrition business.
B. Nutricia, a wholly-owned subsidiary of Royal Numico, is a world
leader in the manufacture and marketing of clinical nutrition products and
related equipment and accessories.
C. ZEVEX is engaged in the business of developing, manufacturing,
providing service activities, and marketing clinical nutrition delivery devices
and accessories.
D. ZEVEX and the Customer are parties to an [***] Pump Supply Agreement
and a Flocare 800 Manufacturing Agreement, both of even date herewith, pursuant
to which the parties have agreed that ZEVEX shall manufacture and exclusively
supply to the Customer clinical nutrition delivery pumps and accessories in the
Territory (as defined below), including the Flocare [***] Pump, and the
ZEVEX-Manufactured Flocare 800 Pump, upon the terms and subject to the
conditions set forth therein.
E. The parties have agreed that ZEVEX shall provide repair services,
maintenance services, and technical support activities for the Flocare [***]
Pumps, ZEVEX-Manufactured Flocare 800 Pumps, Flocare 800 Pumps, Nutromat Pumps,
and MicroMax Pumps sold or placed by Customer in the Territory in accordance
with the terms and conditions of this Agreement.
F. The parties have agreed, that if requested by Customer and upon the
approval of ZEVEX, ZEVEX shall provide certain technical support and service to
third party manufactured pumps, as requested by the Customer.
AGREEMENT
NOW, THEREFORE, the parties, in consideration of the premises and the
mutual covenants and agreements contained herein, and intending to become
legally bound, hereby agree as follows:
1. Definitions
"Actual Service Volume" means the actual number of Nutricia Pumps which
ZEVEX has serviced and invoiced the Customer during an applicable calendar
quarter during the Term.
"Affiliate" of a party shall mean any corporation or other business
entity controlling, controlled by, or under common control with such party.
"Bankruptcy Event" means that, with respect to an entity, such entity
shall (a) make a general assignment for the benefit of creditors or an agent
authorized to liquidate its assets, (b) become the subject of bankruptcy or
insolvency proceedings or other proceedings for relief under any bankruptcy or
other law for the relief of debtors, where, with respect to an involuntary
petition in bankruptcy, the petition shall not have been stayed within thirty
(30) days, (c) apply to a court for the appointment of a receiver or custodian
for substantially all of its assets or properties, with or without consent, and
such receiver is not discharged within thirty (30) days after appointment, or
(d) adopt a plan of complete liquidation of its assets.
"Change of Control of Customer" means (i) any transaction as a result
of which any person or entity becomes the "beneficial owner" (as defined in Rule
13d-3 of the U.S. Securities and Exchange Act of 1934), directly or indirectly,
of securities of Numico or Nutricia, representing more than 50% of the total
voting power of any of their then outstanding voting securities; or (ii) the
sale, transfer or other disposition of all or substantially all of the assets of
Numico or Nutricia; in either case where the new controlling party would
materially benefit from a failure of ZEVEX's business; provided, however, that a
transaction shall not constitute a Change of Control if its sole purpose is to
change the state of incorporation of Numico, or Nutricia (as applicable) or to
create a holding company that will be owned in substantially the same
proportions by the persons who held the securities of Numico or Nutricia (as
applicable) immediately before such transaction.
"Change of Control of ZEVEX" means (i) any transaction as a result of
which any person or entity becomes the "beneficial owner" (as defined in Rule
13d-3 of the U.S. Securities and Exchange Act of 1934), directly or indirectly,
of securities of ZEVEX representing more than 50% of the total voting power
represented by ZEVEX's then outstanding voting securities; or (ii) the sale,
transfer or other disposition of all or substantially all of ZEVEX's assets; in
either case where the new controlling party would materially benefit from
Customer's failure in the clinical nutrition market; provided, however, that a
transaction shall not constitute a Change of Control (x) if its sole purpose is
to change the state of ZEVEX's incorporation or to create a holding company that
will be owned in substantially the same proportions by the persons who held
ZEVEX's securities immediately before such transaction, or (y) if a then current
officer or director of ZEVEX is the new controlling party or is a member of the
group or entity that is the new controlling party, provided, however, that, the
new controlling party would not materially benefit from Customer's failure in
the clinical nutrition market.
"Commercially Reasonable Efforts" shall mean those efforts that a
reasonably prudent business person would make under similar circumstances,
including entering into contractual arrangements in appropriate circumstances.
"Confidentiality Breach by Customer" means a material breach by
Customer of (i) Section 12 of this Agreement, (ii) Section 15 of the [***] Pump
Supply Agreement, (iii) Section 4 of the [***] Pump License Agreement, (iv)
Section 4 of the Disposable Set Components License Agreement, and/or (v) Section
14 of the [***] Disposable Set Components Supply Agreement.
"Customer-Manufactured Pumps" shall mean the Flocare 800 Pump, the
Nutromat Pump, and the MicroMax Pump.
"End User" shall mean patients, physicians, home healthcare companies,
long-term care facilities, hospitals and other individuals or businesses that
use or provide clinical nutrition delivery products and services directly to
patients.
"Exclusivity Breach by Customer" means a material breach by Customer of
(i) Section 2 of this Agreement, (ii) Sections 5(a), 5(c) and/or 5(f) of the
[***] Pump Supply Agreement, (iii) Section 2 of the [***] Pump License
Agreement, (iv) Section 2 of the [***] Disposable Set Components License
Agreement, and/or (v) Sections 5(a) and/or 5(c) of the [***] Disposable Set
Components Supply Agreement.
"Flocare [***] Pump" shall mean the ZEVEX [***] Pump customized and
manufactured by ZEVEX for the Customer under the [***] Pump Supply Agreement of
even date herewith between the parties.
"Flocare 800 Pump" shall mean the Flocare 800 Pump manufactured by the
Customer.
"Flocare 800 Pump Manufacturing Agreement" means that certain Flocare
800 Pump Manufacturing Agreement of even date herewith between the parties.
"[***] Disposable Set Components License Agreement" means that certain
License Agreement for the [***] Disposable Set Components of even date herewith
between the parties.
"[***] Disposable Set Components Supply Agreement" means that certain
[***] Disposable Set Components Supply Agreement of even date herewith between
the parities.
"[***] Pump License Agreement" means that certain [***] Pump License
Agreement of even date herewith between the parties.
"[***] Pump Supply Agreement" means that certain [***] Pump Supply
Agreement of even date herewith between the parties.
"Know-How" means all Repair Guidelines, Maintenance Guidelines, product
specifications, technical data, supplier lists and other information owned by,
or in the possession of ZEVEX on the Effective Date of this Agreement, or which
later come into the possession of ZEVEX that are necessary or helpful in
providing the Services to the Flocare [***] Pump.
"Loaded Material Cost" has the meaning set forth in Exhibit A.
"Maintenance Guidelines" means all documentation, specifications,
policies, and procedures regarding routine maintenance of any Nutricia Pump
which is provided by the original manufacturer of such Nutricia Pump.
"Maintenance Services" shall have the meaning given to it in Section
4(b).
"Manufacturing Agreements" shall mean the [***] Pump Supply Agreement,
and Flocare 800 Pump Manufacturing Agreement of even date therewith between the
parties.
"Material Costs" shall mean the actual purchase cost incurred by ZEVEX
for any parts or materials (including Spare Parts) necessary to perform the
Services on any particular Nutricia Pump.
"MicroMax Pump" shall mean the MicroMax Pump manufactured by the
Customer.
"Nutricia Pumps" shall mean the Flocare [***] Pump, the
ZEVEX-Manufactured Flocare 800 Pump, the Flocare 800 Pump, the Nutromat Pump,
and the MicroMax Pump.
"Nutromat Pump" shall mean the Nutromat Pump manufactured by the
Customer.
"Operational Costs" shall mean the sum of the actual facility, social,
and local operational costs of the ZEVEX Service Center for each calendar
quarter, including administrative overhead costs incurred, which are directly
allocable to the Services performed by ZEVEX under this Agreement.
"Projected Service Volume" means the number of Nutricia Pumps which
Customer anticipates tendering to ZEVEX for Service during each calendar quarter
during the Term, determined in accordance with Section 6(c) of this Agreement.
"Projected Operational Costs" shall have the meaning given to it in
Section 8(c).
"Quarterly Meetings" shall have the meaning given to it in Section
16(b).
"Repair Guidelines" means all documentation, specifications, policies,
and procedures regarding repair of any Nutricia Pump that is provided by the
original manufacturer of such Nutricia Pump.
"Repair Services" shall have meaning given to it in Section 4(c).
"Related Agreements" means the Flocare 800 Pump Manufacturing
Agreement, the Disposable Set Components License Agreement, the [***] Pump
Supply Agreement, the [***] Pump License Agreement, and the [***] Disposable Set
Components Supply Agreement.
"Services" shall mean the Maintenance Services and the Repair Services.
"Service Price" means the price at which each Nutricia Pump shall be
repaired or maintained by ZEVEX, as calculated and determined in accordance with
the formula and terms set forth on Exhibit A hereto.
"Services Warranty" shall mean the warranty set forth in Section 10(a).
"Spare Parts" shall have the meaning given to it in Section 7(a).
"Term" shall have the meaning given to it in Section 13(a).
"Territory" shall mean the countries designated in the following chart:
- ------------------------------------------------------------ ---------------------------------------------------------
Austria, Belgium, Denmark, Finland, France, Germany, Bulgaria, Czech Republic, Hungary, Poland, Russia,
Greece, Ireland, Italy, Latvia, Luxembourg, The Slovakia, Ukraine, United Arab Emirates, Turkey
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland,
United Kingdom
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
Australia, New Zealand China, Indonesia, Malaysia, Taiwan
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
Argentina, Brazil South Africa
- ------------------------------------------------------------ ---------------------------------------------------------
"Third Party" shall mean any third party selected by ZEVEX to perform
the obligations under this Agreement in accordance with the terms and conditions
of this Agreement.
"Third-Party Service Organizations" shall have the meaning given to it
in Section 2(b).
"Tools" shall have the meaning given to it in Section 6(b).
"T&D Programs" shall have the meaning given to it in Section 6(b).
"Vendors" shall have the meaning given to it in Section 7(d).
"ZEVEX" shall be deemed to include ZEVEX, as defined in the preamble
and/or Affiliates of ZEVEX permitted to perform Services pursuant to this
Agreement.
"ZEVEX-Manufactured Flocare 800 Pump" shall mean the Flocare 800 Pump
manufactured by ZEVEX for the Customer under the Flocare 800 Pump Manufacturing
Agreement of even date therewith between the parties.
"ZEVEX-Manufactured Pumps" shall mean the Flocare [***] Pump, and
ZEVEX-Manufactured Flocare 800 Pump.
"ZEVEX Termination Period" means a thirty (30) day period that begins
on the sixtieth (60th) day following notice by ZEVEX to Customer of a
Confidentiality Breach by Customer, an Exclusivity Breach by Customer, or any
other material breach by Customer, as applicable.
"ZEVEX Facility" shall mean ZEVEX's manufacturing facility at 4314
ZEVEX Park Lane, Salt Lake City, UT 84123.
"ZEVEX Service Center" shall have the meaning given to it in Section
3(a).
"ZEVEX Warranty" shall mean any warranty provided by ZEVEX under any of
the Manufacturing Agreements.
2. Appointment of ZEVEX as Service Provider.
(a) Appointment as Service Provider. Customer hereby appoints ZEVEX,
and ZEVEX hereby accepts such appointment, as the exclusive authorized service
provider for repair and maintenance services (the "Services") for the Nutricia
Pumps that are placed, sold, or distributed by Customer and its Affiliates in
the Territory.
(b) Exclusivity. ZEVEX will provide the Services for the Nutricia Pumps
that are placed or sold in the Territory. Customer and its Affiliates will
obtain the Services exclusively from ZEVEX, and not from any or other service
organizations other than the third-party service organizations listed on Exhibit
B (the "Third-Party Service Organizations"). Customer will phase out its use of
Third-Party Service Organizations pursuant to the terms of Section 6(d) below.
End Users of the Nutricia Pumps shall be prohibited in any way from performing
the Services themselves or through third parties, unless Customer and ZEVEX have
agreed in advance and in writing upon the nature and extent of such Services
that may be performed and are satisfied that the requisite standards and
training have been implemented. The performance of such Services shall
invalidate any ZEVEX Warranty, Services Warranty, or any other warranty
hereunder or under the Manufacturing Agreements. Customer will immediately
inform its Customer Affiliates that ZEVEX will be the Customer's exclusive
authorized provider of Services, which notice will provide instructions as to
how and where repair inquiries are to be made. ZEVEX shall provide appropriate
training and Service instructions, at Customer's expense, for those End Users
that Customer designates, and ZEVEX agrees in writing, to provide Services.
3. ZEVEX Service Center
(a) ZEVEX Service Center. ZEVEX shall initially provide the Services at
the ZEVEX Facility, and shall subsequently provide the Services at a service
center to be operated, controlled, and owned by ZEVEX in Thames Valley Corridor
in the United Kingdom (the "ZEVEX Service Center"). ZEVEX will use Commercially
Reasonable Efforts to open the ZEVEX Service Center for operation in the United
Kingdom by December 31, 2004. ZEVEX shall consult with Customer in establishing
the size of the ZEVEX Service Center, the required tooling, and staff resources.
The ZEVEX Service Center may be relocated only upon mutual consent of ZEVEX and
Customer, who each agree to discuss any potential relocation in good faith in
order to minimize Operational Costs.
(b) Inspection Rights. Customer, or Customer's designated agents, shall
have the right, from time to time, upon two (2) weeks' notice and during
business hours, to inspect and/or perform a general quality assurance review of
the ZEVEX Service Center, inventory storage areas, and all other places relating
to the performance of ZEVEX's duties hereunder. Customer shall conduct such
inspection in a manner as to minimize disruption of ZEVEX's ongoing operations,
and ZEVEX shall reasonably assist Customer with such inspections. ZEVEX will use
Commercially Reasonable Efforts to correct any non-compliance with applicable
Repair Guidelines, Maintenance Guidelines, or regulatory standard identified by
Customer in writing to ZEVEX arising from any such inspection and/or quality
audit made.
(c) Additional Service Centers. After January 1, 2006, ZEVEX may
establish additional ZEVEX Service Centers in the Territory upon the prior
written consent of Customer, and such consent shall not be unreasonably
withheld.
4. Services to be Provided by ZEVEX
(a) Procedure for Providing Services. Customer shall ship Nutricia
Pumps that require Services to ZEVEX with documentation indicating whether each
pump is being tendered for Maintenance Services or Repair Services.
(b) Maintenance Services For those Nutricia Pumps that arrive with
documentation indicating that the pumps are being tendered for Maintenance
Services, ZEVEX shall perform maintenance services on the Nutricia Pumps (the
"Maintenance Services") in accordance with the manufacturer's Maintenance
Guidelines. For the ZEVEX-Manufactured Pumps, ZEVEX shall perform the
Maintenance Services in accordance with ZEVEX's own Maintenance Guidelines. For
the Customer-Manufactured Pumps, ZEVEX shall perform the Maintenance Services in
accordance with Customer's Maintenance Guidelines.
(c) Repair Services. For those Nutricia Pumps that arrive with
documentation indicating that the pumps are being tendered for Repair Services,
ZEVEX shall repair the Nutricia Pumps (the "Repair Services") in accordance with
the manufacturer's Repair Guidelines for each of the Nutricia Pumps. Such
documentation shall include all the necessary information for ZEVEX to determine
whether the Nutricia Pumps are covered by either the ZEVEX Warranty or another
manufacturer's warranty. For the ZEVEX-Manufactured Pumps, ZEVEX shall perform
the Repair Services in accordance with ZEVEX's own Repair Guidelines. For the
Customer-Manufactured Pumps, ZEVEX shall perform the Repair Services in
accordance with Customer's Repair Guidelines. If ZEVEX determines that a
Nutricia Pump cannot be repaired, or is economically infeasible to repair, ZEVEX
shall communicate the specific reasons therefor to Customer within ten (10)
business days from the receipt of the Nutricia Pump. For all such irreparable
ZEVEX-Manufactured Pumps that are covered by a ZEVEX Warranty, ZEVEX shall
provide Customer with a new replacement for the irreparable pump pursuant to the
terms and conditions of the ZEVEX Warranty. ZEVEX shall remove all irreparable
pumps from circulation and dismantle such irreparable pumps, unless otherwise
instructed in writing by Customer.
(d) Use of Spare Parts in Providing the Services. ZEVEX shall perform
all Services using new Spare Parts, and shall not use any refurbished or
reconditioned Spare Parts.
(e) Sale of Spare Parts to Customer's Affiliates, Third-Party Service
Organizations and End Users. ZEVEX, and not Customer, shall have the right to
sell Spare Parts to Customer Affiliates, Third-Party Service Organizations, and
End Users as set forth herein. ZEVEX shall not supply Spare Parts to Customer
Affiliates, Third-Party Service Organizations or End Users without the prior
written approval of Customer. Within thirty (30) days of the Effective Date,
Customer shall provide ZEVEX with a written list of Customer's Affiliates and
Third-Party Service Organizations (the "Pre-approved List"), which Pre-approved
List shall constitute Customer's approval to supply Spare Parts to Customer
Affiliates and Third-Party Service Organizations. The Customer may update the
Pre-approved List from time to time in its discretion. The price of the Spare
Parts that ZEVEX may sell to Customer Affiliates, Third-Party Service
Organizations and End Users shall be equal to [***] times ZEVEX's Material
Costs.
(f) Subcontracting Services. ZEVEX may not subcontract the Services to
a Third Party without the prior written consent of Customer, which shall not be
unreasonably withheld. ZEVEX shall ensure that the terms and conditions of the
appointment and performance of any Third Party shall be consistent with ZEVEX's
duties and obligations hereunder, including quality and price.
5. ZEVEX'S Obligations
(a) Services Lead Time. ZEVEX shall use Commercially Reasonable Efforts
to complete each repair and ship the Nutricia Pumps back to Customer within ten
(10) business days of the later of (i) the receipt of the Nutricia Pumps or (ii)
any required approval from Customer to perform Services.
(b) Performance of Services. ZEVEX shall use Commercially Reasonable
Efforts to perform the Services hereunder in accordance with service performance
standards set forth on Exhibit C. All Services shall be performed by ZEVEX in a
manner consistent with relevant medical device industry standards. All Services
shall be performed such that all Nutricia Pumps Serviced by ZEVEX shall be
returned to Customer, subject to normal wear and tear, in a condition
functionally equivalent to the intended condition of such pumps when originally
manufactured.
(c) Compliance with Laws. ZEVEX shall comply, and shall ensure that the
Services, storage, installation, and delivery of Nutricia Pumps comply fully
with any and all laws, regulations, rules, and orders (including, without
limitation, those relating to public health and welfare in any and all
jurisdictions applicable to or affecting ZEVEX's obligations hereunder
(collectively, "Laws")), and shall make such adjustments as may be necessary to
effect and maintain such compliance throughout the Term. Without limiting the
generality of the foregoing, (i) the ZEVEX Facility, the ZEVEX Service Center,
and all Third Parties shall comply with all product safety, sanitation, and
environmental Laws, and (ii) ZEVEX acknowledges that it is familiar with the
Foreign Corrupt Practices Act of the United States and agrees that it shall at
all times comply with such Act in carrying out and performing its duties under
this Agreement.
(d) Approvals. ZEVEX shall obtain, at its sole expense, all
governmental, administrative, and other approvals, licenses, permits, and other
authorizations and registrations necessary for the operation and conduct of its
business, including without limitation, providing Services for the Nutricia
Pumps.
(e) Documents and Records. ZEVEX shall keep, maintain, and back-up
records in an electronic data format regarding all Services performed under this
Agreement, including, but not limited to, Services performed, materials used,
number of Nutricia Pumps in process, and when and where the Nutricia Pumps were
shipped. At the Quarterly Meetings, ZEVEX shall furnish Customer with records
detailing information about repair history, complaint data, and failure data of
the Nutricia Pumps for the previous calendar quarter, as well as repair history,
complaint data, and failure data for other [***] products manufactured by ZEVEX.
(f) Complaint Investigations. ZEVEX shall investigate and report to
Customer on specific complaints as reasonably requested in writing by Customer.
(g) Improvement of Services. ZEVEX shall use Commercially Reasonable
Efforts to periodically review and improve upon the manner in which the Services
are performed. ZEVEX shall report on such efforts at the Quarterly Meetings.
(h) Maintenance of Capacity. ZEVEX shall ensure that the ZEVEX Facility
and/or ZEVEX Service Center shall have and be provided with all necessary means,
infrastructure, and resources to enable the ZEVEX Facility and/or ZEVEX Service
Center to fully perform the Services and the other terms and conditions of this
Agreement. ZEVEX will inform Customer of any event or circumstance, including,
but not limited to, a Change of Control of ZEVEX, or an adverse change in the
financial status of ZEVEX or any of its Affiliates, that may, directly or
indirectly, affect ZEVEX's ability to fully perform its obligations under this
Agreement.
(i) Consent of Customer for Sale/Transfer of ZEVEX Service Center.
Prior to any sale, transfer, or disposal of the ZEVEX Service Center or a
transfer of control thereof to any Third Party, ZEVEX shall obtain the consent
of the Customer.
(j) Know-How Transfer. On or before the date the ZEVEX Service Center
becomes operational, ZEVEX will reduce the Know-How to written form. Within
thirty (30) days from the date the ZEVEX Service Center becomes operational,
ZEVEX shall disclose and transfer to a mutually-acceptable escrow agent all
documents fully disclosing the Know-How that is necessary or helpful for
Customer to provide Services for the Flocare [***] Pump, and written
instructions to such suppliers giving them permission to provide Customer the
materials necessary or helpful to provide Services for the Flocare [***] Pump,
notwithstanding any preexisting exclusivity arrangements such supplier may have
with ZEVEX (the "Escrow Materials"). Customer shall have the right to review all
Escrow Materials deposited into escrow to assure the sufficiency of such
materials, and if Customer is not assured of such sufficiency, ZEVEX shall
deposit such additional materials as Customer may reasonably request. Prior to
such transfer, the parties agree to complete and execute an escrow agreement
mutually acceptable to the parties and to the escrow agent. The escrow agreement
will provide for the release of the Escrow Materials to Customer upon the
termination of this Agreement. In connection with the foregoing releases of the
Escrow Materials, ZEVEX shall make reasonably available to Customer the
appropriate ZEVEX personnel to assist Customer in implementing the Know-How and
providing Services for the Flocare [***] Pump. All transfer of Know-How will be
in the form of written documentation or verbal communications from ZEVEX's staff
to Customer's staff. To the extent practicable, all written documentation shall
be marked as "Confidential Trade Secrets of ZEVEX International."
6. Customer's Obligations.
(a) Training of ZEVEX Personnel by Customer. Upon the reasonable
request of ZEVEX, Customer shall conduct training courses at the Customer's
facility in the Netherlands to the extent necessary to train ZEVEX personnel to
perform the Services on the Customer-Manufactured Pumps. Customer shall provide
two such training sessions, for not more than ten (10) ZEVEX personnel without
charge to ZEVEX. ZEVEX shall be responsible for all of its own expenses in
attending the training sessions, including but not limited to travel, lodging,
and per diem expenses. The time schedule of such training and other details
shall be determined in advance by agreement between the parties hereto. Customer
shall, upon receiving ZEVEX 's request for training, make reasonable efforts to
provide such training to ZEVEX personnel in accordance with the time schedule
given by ZEVEX. Customer shall provide copies of all necessary materials to each
trainee. Upon the prior written approval of Customer, and any of Customer's
employees who participate in such training courses, ZEVEX may record any or all
training courses on video tape and, upon Customer's review and approval of its
contents, ZEVEX may reproduce and distribute such video tape strictly for
ZEVEX's internal use to provide the Services.
(b) Diagnostic Tools. Customer shall physically transfer to ZEVEX (but
retain title) such (i) special tools, test equipment and measuring instruments
("Tools") and (ii) test and diagnostic programs ("T&D Programs") that are used
or can be used in performing the Services on the Customer-Manufactured Pumps.
ZEVEX shall use such Tools and T&D Programs supplied hereunder solely for its
performance of the Services on the ZEVEX-Manufactured Flocare 800 Pump and the
Customer-Manufactured Pumps, and for no other purposes, unless the Services
shall be subcontracted by ZEVEX to an Third-Party in which case the Third Party
may use the Tools and T&D Programs for the purpose of providing the Services on
the ZEVEX-Manufactured Flocare 800 Pump and Customer-Manufactured Pumps. ZEVEX
shall not copy, reproduce, modify, disclose, or otherwise make available to any
other person, all or any part of the T&D Programs and Tools. Notwithstanding the
foregoing, ZEVEX may copy all or any part of the T&D Programs, in printed or
machine-readable form, for any purposes mutually agreed upon by Customer and
ZEVEX. ZEVEX shall have the right to make the material and information referred
to in this Section 6(b) available to a Third Party pursuant to an appropriate
confidentiality agreement. ZEVEX will be responsible for the calibration,
repair, maintenance, and validation of the Tools, as well as all costs of
replacing the Tools. All such costs and expenses incurred by ZEVEX shall be
added to the calculation of the Operating Costs.
(c) Projected Service Volume. During the first calendar quarter of the
Term, beginning January 1, 2005, and ending March 31, 2005, the Projected
Service Volume shall be [***] Nutricia Pumps. Thereafter, Customer shall
determine the number of Nutricia Pumps it anticipates tendering to ZEVEX for
Service during the next calendar quarter, and shall notify ZEVEX of such number
by the 15th day of the month that immediately follows the end of that calendar
quarter (e.g., notice by April 15th for the quarter ended March 31st). Upon
giving such notice, the Projected Service Volume shall immediately be adjusted,
and that adjusted number shall be used in determining the Service Price in all
subsequent invoices that ZEVEX sends to Customer until the next such notice
provided to ZEVEX by Customer.
(d) Phase Out of Third-Party Service Organizations. Customer will not
renew or extend any contract with any Third-Party Service Organization, or
contract with any new services organizations to provide Services for the
Nutricia Pumps after the Effective Date of this Agreement. However, upon the
written mutual consent of ZEVEX and Customer, Customer may extend any existing
contracts with any Third-Party Service Organizations in order to maintain an
ability to provide the Services until the ZEVEX Service Center is fully
operational or to the extent necessary to maintain any warranty or
indemnification rights Customer has from such Third-Party Service Organizations.
(e) Technical Support and Assistance by Customer. At the request of
ZEVEX, Customer will use Commercially Reasonable Efforts to provide technical
support and other assistance to ZEVEX in connection with the start up of
Services at the ZEVEX Service Center in accordance with the terms of this
Agreement. Customer shall provide such technical support and assistance at no
cost to ZEVEX.
(f) End User Contact, Complaint Handling and Vigilance Reporting.
Customer shall be responsible for all contact with End Users, complaint handling
and vigilance reporting related to the Nutricia Pumps. ZEVEX will use
Commercially Reasonable Efforts to provide Customer with information for
vigilance reporting.
(g) No Inspection upon Receipt of Nutricia Pump by Customer. Customer
shall have no obligation to inspect the Nutricia Pumps upon completion of any
Services or upon return of the Nutricia Pumps to Customer.
7. Spare Parts
(a) Spare Part Inventory. ZEVEX shall purchase from Vendors and
maintain in stock such quantities of components and sub-assemblies of Nutricia
Pumps ("Spare Parts"), as necessary to prevent an out-of-stock situation. ZEVEX
shall store Spare Parts in a suitable, dry, and clean premise. Customer shall
have the right, upon reasonable notice to ZEVEX, to audit and review ZEVEX's
inventory of Spare Parts to determine whether inventory levels are appropriate
given the types of Services being performed and the Service Volume.
(b) Transfer of Existing Customer-Manufactured Pump Part Inventory.
Within thirty (30) days of the operational date of the ZEVEX Service Center,
Customer shall begin shipping at no cost to ZEVEX, Customer's owned inventory of
Spare Parts for the Customer-Manufactured Pumps to the ZEVEX Service Center, and
shall provide in writing to ZEVEX an inventory of such Spare Parts, including
part numbers, descriptions of Spare Parts, and quantities. When Spare Parts are
required to perform Services for Nutricia Pumps, ZEVEX shall use Spare Parts
obtained from Customer under this section to the extent appropriate and
available. ZEVEX shall use Spare Parts obtained from other sources only if
appropriate Spare Parts are not available from the inventory of Spare Parts
provided by Customer under this section. No Spare Parts obtained by ZEVEX from
Customer under this section shall be used to repair ZEVEX-Manufactured Pumps
that are covered by a ZEVEX Warranty. When calculating the Service Price for any
particular Service provided hereunder, the Material Costs attributed to Spare
Parts used by ZEVEX that were obtained under this section shall be zero.
(c) Customer-Manufactured Pump Spare Parts Identification. Customer
shall make available to ZEVEX a complete list of Spare Parts for the
Customer-Manufactured Pumps, arranged according to Customer's part numbers.
Customer-Manufactured Pump Spare Parts shall be of the same quality as the
original parts installed in the Customer-Manufactured Pumps at the time of
manufacture.
(d) Spare Part Vendors. Customer shall provide a list to ZEVEX of all
third party vendors from whom Customer is currently purchasing Spare Parts
("Vendors"). Customer will exert Commercially Reasonable Efforts to assist ZEVEX
in purchasing the Spare Parts directly from the Vendors, on the same terms and
conditions that Customer is currently purchasing the Spare Parts from the
Vendors.
8. Price and Payment Terms; Shipping and Title.
(a) Service Prices. Services performed by ZEVEX or any Third Party on
any ZEVEX-Manufactured Pump that is covered by a ZEVEX Warranty shall be
performed at no charge to Customer. Customer shall pay ZEVEX for all other
Services at the Service Price, provided, however, that: (i) ZEVEX shall provide
a reasonably detailed explanation explaining why any Services performed on a
ZEVEX-Manufactured Pump is not covered by a ZEVEX Warranty, and (ii) the Loaded
Material Cost charged by ZEVEX for any Services on any Nutricia Pump shall not,
without Customer's written approval being received by ZEVEX prior to the
performance of the Services, exceed [***] Euros (the "Loaded Material Cost
Threshold"). ZEVEX shall provide written notice to Customer requesting such
approval within ten (10) business days of receipt of the Nutricia Pump ("Loaded
Material Cost Threshold Notice"). In the Quarterly Meeting immediately prior to
December 31, 2005, ZEVEX and the Customer shall discuss in good faith any
proposal to alter the Loaded Material Cost Threshold. The Service Price shall
include any national, state, or local sales, use, value added or other taxes,
customs duties, charges, or similar fees, which ZEVEX may be required to pay or
collect.
(b) Review of Service Prices. At the Quarterly Meeting immediately
prior to December 31, 2005, the parties shall discuss in good faith any
proposals to alter the manner in which the Service Prices are calculated, with
the objective of establishing a fixed pricing mechanism for the remainder of the
Term and for each specific Service to be provided. In considering such
proposals, the parties will take into account the social and Operational Costs
(including administrative costs) for prior periods, previous volumes of Nutricia
Pumps serviced, and anticipated future volumes of Nutricia Pumps to be serviced.
If the parties agree on a fixed pricing mechanism for the remainder of the Term
and for each specific Service to be provided, the parties agree that no later
than forty-five (45) days prior to the expiration of each calendar year during
the Term, commencing with the period ending December 31, 2005, ZEVEX shall
provide Customer, in writing, any proposed adjustment to the Material Costs and
Operational Costs applicable to the Nutricia Pumps for the next succeeding year.
Such adjustments shall be substantiated by ZEVEX in a breakdown (with the
support of independent documentation), and with line by line items as required
by Customer. Such breakdown shall include, without limitation, a complete list
of all materials requirements, cost of labor, social and operational costs, and
proposed purchase prices of the Spare Parts, as well as any other item, on an
"open-book" basis, as necessary to enable the Customer to verify the relevance
and scale of any price adjustments to the Material Costs and Operational Costs.
The parties shall negotiate in good faith to adjust the Material Costs and
Operational Costs as appropriate each calendar year during the Term.
(c) Effect of Cost Increases and Decreases. Notwithstanding anything to
the contrary in this Agreement, the following paragraph shall only apply until
ZEVEX and Customer have reached agreement on a fixed pricing mechanism. During
the period, in each instance, that begins on the first (1st) day of each
calendar quarter and ends on the fifteenth (15th) day of each calendar quarter
during the Term (each an "Adjustment Period"). ZEVEX shall provide Customer, in
writing, notice of any anticipated adjustments to the Material Costs and
Operational Costs applicable to the Nutricia Pumps for the then-current quarter,
which adjustments shall become effective, for purposes of calculating the
Service Prices to be charged by ZEVEX during that quarter, on the earlier of the
date of such notice or the day following the expiration of the Adjustment
Period. For the initial calendar quarter, "Projected Operational Costs" shall be
[***] Euros. Thereafter, "Projected Operational Costs" upon which the Service
Prices shall be based for the then-current quarter shall be calculated by
dividing the Operational Costs from the just-concluded quarter by the Actual
Service Volume from the just-concluded quarter and then multiplying the result
by the Projected Service Volume for the then-current quarter. The Projected
Service Volume upon which the Service Prices shall be based for the then-current
quarter shall be determined in accordance with Section 6(c) above. Until such
adjustments are effective, Service Prices will be calculated based on the
Projected Operational Costs and the Projected Service Volume applicable during
the just-concluded quarter. Adjustments to Material Costs and Projected
Operational Costs shall be substantiated by ZEVEX in a breakdown (with the
support of independent documentation), and with line by line items as required
by Customer. Such breakdown shall include, without limitation, a complete list
of all materials requirements, costs of labor, social and operational costs, and
proposed purchase prices of the Spare Parts, as well as any other item, on an
"open-book" basis, as necessary to enable the Customer to verify the relevance
and scale of any price adjustments to the Material Costs and Projected
Operational Costs. If ZEVEX actually provides Services for [***] or more
Nutricia Pumps in any given calendar quarter, then the Actual Operational Costs
Ratio (as defined in Exhibit A) shall not exceed [***] Euros.
(d) Cost Savings. ZEVEX will exert Commercially Reasonable Efforts to
reduce the Material Costs and Operational Costs used in providing the Services
hereunder. To the extent that cost savings are actually realized from such
efforts, the cost savings shall be split equally between the parties as set
forth herein. These cost savings shall be determined by comparing the new
Material Costs and Operational Costs with the then-current Material Costs and
Operational Costs provided to Customer by ZEVEX during the most recent Quarterly
Meeting. Cost savings realized as a result of the transfer of the Services to a
Third Party pursuant to Section 4(f) or a relocation of the ZEVEX Service Center
pursuant to Section 3(a) will not be considered a "cost savings" under this
Section 8(d).
(e) Quarterly Adjusting Payments. During the Adjustment Period
following the conclusion of each calendar quarter during the Term, ZEVEX and
Customer shall make the following determinations:
(i) The "Aggregate Billed Service Price" shall be calculated
by determining the total dollar value charged by ZEVEX to Customer for Service
of the Nutricia Pumps during that prior quarter.
(ii) The "Aggregate Adjusted Service Price" shall be
calculated by determining the aggregate of the Adjusted Service Prices for all
Nutricia Pumps serviced during the applicable quarter using the formula set
forth on Exhibit A.
If the Aggregate Billed Service Price is less than the Aggregate Adjusted
Service Price, then ZEVEX shall send an invoice to Customer for the difference
on or before the twentieth (20) day of the month that immediately follows the
end of the applicable quarter. Customer shall pay the invoiced amount to ZEVEX
in immediately available funds by the end of the month that immediately follows
the end of such calendar quarter. If the Aggregate Billed Service Price is
greater than the Aggregate Adjusted Service Price, then ZEVEX shall credit to
Customer the amount of the difference on the next invoice (or multiple invoices,
as applicable) sent by ZEVEX to Customer. In connection with the determinations
required by this Section 8(e), ZEVEX will substantiate its actual Material Costs
and Operational Costs in a breakdown (with the support of independent
documentation), and with line by line items as required by Customer. Such
breakdown shall include, without limitation, a complete list of all materials
requirements, costs of labor, social and operational costs, and proposed
purchase prices of the Spare Parts, as well as any other item, on an "open-book"
basis, as necessary to enable the Customer to verify such Material Costs and
Operational Costs.
(f) Shipping Charges and Title; Risk of Loss.
(i) Customer shall pay all inbound shipping and insurance
costs to the ZEVEX Facility or the ZEVEX Service Center for the
Nutricia Pumps.
(ii) ZEVEX shall pay all outbound shipping and insurance costs
from the ZEVEX Facility or the ZEVEX Service Center for the
ZEVEX-Manufactured Pumps that are covered by a ZEVEX Warranty and for
all Nutricia Pumps that are covered by the Services Warranty. The
outbound shipment of the ZEVEX-Manufactured Pumps and for all Nutricia
Pumps that are covered by the Services Warranty to Customer or its
Affiliates shall be shipped DDP (as defined in INCOTERMS 2000,
International Chamber of Commerce).
(iii) Customer shall pay all outbound shipping and insurance
costs from the ZEVEX Facility or the ZEVEX Service Center for all
Nutricia Pumps other than the ZEVEX-Manufactured Pumps that are covered
by a ZEVEX Warranty and for all Nutricia Pumps that are covered by the
Services Warranty. Such costs shall be added to the Service Price by
ZEVEX and invoiced directly to Customer. The outbound shipment of all
Nutricia Pumps other than the ZEVEX-Manufactured Pumps that are covered
by a ZEVEX Warranty and for all Nutricia Pumps that are covered by the
Services Warranty shall be shipped Ex Works (as defined in INCOTERMS
2000, International Chamber of Commerce).
(iv) Subject to and in accordance with the terms and
conditions of this Agreement, ZEVEX shall deliver all Nutricia Pumps
free and clear of all liens and encumbrances, and upon delivery by
ZEVEX to Customer, or Customer's designee(s), Customer, or its
designee(s), as the case may be, shall acquire good title free from all
liens and encumbrances.
(g) ZEVEX Credits.
(i) For each ZEVEX-Manufactured Pump for which ZEVEX performs
Services covered by a ZEVEX Warranty, and for each Nutricia Pump for
which the ZEVEX Service Center or Affiliates performs Services covered
by the Services Warranty, ZEVEX will issue a credit to Customer of
[***]Euros. This credit shall be applied on a quarterly basis to the
Quarterly Adjusting Payments.
(ii) Within thirty (30) days after the Effective Date,
Customer and ZEVEX agree to evaluate the [***]Euro credit described
above and make appropriate adjustments to such credit upon the mutual
agreement of the parties, it being understood that the purpose of the
credit is to fully offset Customer's direct incurred costs for shipping
and insuring such Nutricia Pumps. Customer and ZEVEX thereafter shall
review and evaluate the credit at the Quarterly Meetings as well as
mutually agree to make the appropriate adjustments that are mutually
agreed upon by the Customer and ZEVEX.
(h) Payment Terms.
(i) For all Services other than Services covered by a ZEVEX
Warranty or the Services Warranty, ZEVEX shall provide Customer with an
invoice upon shipment of the Nutricia Pumps.
(ii) Customer shall cause payment for the Services provided by
ZEVEX under the terms of this Agreement to be made no later than ninety
(90) days from the end of the month the Nutricia Pumps where shipped by
ZEVEX. Late payments will be subject to a 1.5% penalty per month.
(i) Payment Location. All payments shall be made to ZEVEX at the
address or bank designated by ZEVEX in cash or by wire transfer of Euros.
9. Representations and Warranties.
(a) ZEVEX's Representations and Warranties. ZEVEX hereby represents and
warrants to Customer that:
(i) It has the full power, capacity, and right to enter into
this Agreement;
(ii) All corporate action necessary to authorize ZEVEX to
enter into this Agreement and be legally bound by its terms has been
taken;
(iii) It knows of no pending or threatened action in law or in
equity, which adversely affects the rights granted herein; and it knows
of no basis for any of the foregoing;
(iv) To the knowledge of ZEVEX, neither the execution and
delivery of this Agreement nor compliance with the obligations of ZEVEX
hereunder, will violate any law or regulation, or any order or decrees
of any court or government instrumentality;
(v) Neither the execution and delivery of this Agreement nor
compliance with the obligations of ZEVEX hereunder, will conflict with,
or result in the breach of, or constitute a default under, any
contract, agreement, instrument or judgment to which ZEVEX or any
officer, director, employee or controlling person of ZEVEX is a party,
or which is or purports to be binding upon any of the foregoing
persons; and
(vi) No action, approval, or consent, including, but not
limited to, any action, approval, or consent by any federal, state,
municipal, or other governmental agency, commission, board, bureau, or
instrumentality is necessary in order to constitute this Agreement as a
valid, binding, and enforceable obligation of ZEVEX in accordance with
its terms.
(vii) The Know-How comprises all the Repair Guidelines,
Maintenance Guidelines, product specifications, technical data,
supplier lists and other information that are necessary or helpful in
providing the Services to the Flocare [***] Pump.
(b) Customer's Representations and Warranties. Customer hereby
represents and warrants to ZEVEX that:
(i) It has the full power, capacity, and right to enter into
this Agreement;
(ii) All corporate action necessary to authorize Customer to
enter into this Agreement and be legally bound by its terms has been
taken;
(iii) It knows of no pending or threatened action in law or in
equity, which adversely affects the rights granted herein;
(iv) Neither the execution and delivery of this Agreement nor
compliance with the obligations of Customer hereunder, will violate any
law or regulation, or any order or decrees of any court or government
instrumentality;
(v) To the knowledge of Customer and its Affiliates, the
technology used in the Customer-Manufactured Pumps does not interfere
with, infringe upon, misappropriate, or otherwise violate any
technology rights of any third parties, and Customer and its Affiliates
have not ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or
violation.
(vi) The Maintenance Guidelines and Repair Guidelines for the
Customer-Manufactured Pumps provided to ZEVEX by Customer are true,
correct and accurate and such Repair Guidelines and Maintenance
Guidelines contain all documentation, specifications, policies, and
procedures regarding the routine maintenance and repair of the
Customer-Manufactured Pumps.
(vii) Neither the execution and delivery of this Agreement nor
compliance with the obligations of Customer hereunder, will conflict
with, or result in the breach of, or constitute a default under, any
contract, agreement, instrument or judgment to which Customer or any
officer, director, employee or controlling person of Customer is a
party, or which is or purports to be binding upon any of the foregoing
persons; and
(viii) No action, approval, or consent, including, but not
limited to, any action, approval, or consent by any federal, state,
municipal, or other governmental agency, commission, board, bureau, or
instrumentality is necessary in order to constitute this Agreement as a
valid, binding, and enforceable obligation of Customer in accordance
with its terms.
10. Services Warranty.
(a) ZEVEX warrants that the Customer-Manufactured Pumps Serviced by
ZEVEX will be free from defects in material and workmanship (parts and labor)
that were provided in connection with the Services for a period of ninety (90)
days after delivery to Customer or its Affiliates. ZEVEX warrants that the
ZEVEX-Manufactured Pumps serviced by ZEVEX will be free from defects in material
and workmanship (parts and labor) that were provided in connection with the
Services for a period of ninety (90) days after delivery to Customer or its
Affiliates, or the remaining term of the ZEVEX Warranty, whichever is greater.
(b) Limitation on Service Warranty and Damages. Except for the Service
Warranty and the other express warranties made by ZEVEX in this Agreement, ZEVEX
makes no express or implied warranties hereunder with respect to the Nutricia
Pumps as serviced hereunder, including, but in no way limited to, any warranty
of condition, merchantability, or fitness for a particular use, or with respect
to the value, profitability, or marketability of such Nutricia Pumps as serviced
hereunder. THE WARRANTIES STATED IN THIS AGREEMENT AND THE RELATED AGREEMENTS
ARE EXCLUSIVE AND EXPRESSLY IN LIEU OF ALL OTHER EXPRESS OR IMPLIED WARRANTIES.
The remedies provided herein are the Customer's exclusive remedies for breach of
the Service Warranty. This Section 10(b) is not intended to limit ZEVEX's
obligation to indemnify Customer for certain third party products liability
claims as described in Section 14(a)(i).
11. Design and Service Documents
Within thirty (30) calendar days after the Effective Date, Customer
shall deliver to ZEVEX a complete and up-to-date set of (i) drawings for the
Customer-Manufactured Pumps provided, however, that Customer will provide the
drawings for the Nutromat Pump within sixty (60) days after the Effective Date;
(ii) Customer's Repair Guidelines and Maintenance Guidelines for the
Customer-Manufactured Pumps and any other information that might be needed by
ZEVEX in performing the Maintenance Services or the Repair Services for the
Customer-Manufactured Pumps; and (iii) contact information of Vendors.
12. Confidential Information
(a) Confidential and Proprietary Information.
(i) ZEVEX Obligations with respect to Customer Confidential
Information. ZEVEX agrees to hold all confidential information of
Customer and its Affiliates, including without limitation, any
information relating to Customer's and its affiliates' business
operations, price lists, manufacturing data, marketing information
strategies, customer or product lists, research and development
information and all other information disclosed by Customer or its
affiliates to ZEVEX ("Customer Confidential Information"), in strict
confidence and not to use any of the foregoing commercially for its own
benefit or that of anyone else nor for the purpose of developing or
improving a product or method for anyone except Customer. ZEVEX agrees
to limit dissemination of and access to Customer Confidential
Information only to the persons within ZEVEX's immediate organization
and the ZEVEX Service Center, and their respective third party
contractors, subcontractors, manufacturers and business partners who
have a need for access thereto, and who have entered into a restrictive
agreement prohibiting such personnel from doing anything with respect
to Customer Confidential Information that ZEVEX would itself be
prohibited from doing under this Agreement. Notwithstanding anything to
the contrary herein, ZEVEX may make such disclosures as necessary in
connection with the preparation, filing, and dissemination of its
filings with the U.S. Securities and Exchange Commission (e.g., 10-Ks,
10-Qs, and 8-Ks) and/or other disclosures as required by applicable
law; provided, however, that it shall first notify Customer of any such
disclosure in order that the parties may seek appropriate confidential
treatment for information they deem to be confidential.
(ii) Customer Obligations with respect to ZEVEX Confidential
Information. Customer agrees to hold all confidential information of
ZEVEX and its Affiliates, including without limitation, any information
relating to ZEVEX and its affiliates' business operations, price lists,
manufacturing data, marketing information strategies, service data,
customer or product lists, research and development information, and
all other information disclosed by ZEVEX or its affiliates to Customer
("ZEVEX Confidential Information"), in strict confidence and not to use
any of the foregoing commercially for its own benefit or that of anyone
else. Customer agrees to limit dissemination of and access to ZEVEX's
Confidential Information only to the persons within Numico, Royal
Numico and Nutricia and their Affiliates, and their respective third
party contractors, subcontractors, manufacturers and business partners
who have a need for access thereto, and who have entered into a
restrictive agreement prohibiting such personnel from doing anything
with respect to ZEVEX's Confidential Information and such information
that Customer would itself be prohibited from doing under this
Agreement. Notwithstanding anything to the contrary herein, Customer
may make such disclosures as necessary in connection with the
preparation, filing, and dissemination of disclosures as required by
applicable law; provided, however, that it shall first notify ZEVEX of
any such disclosure in order that the parties may seek appropriate
confidential treatment for information they deem to be confidential.
(b) Use of Confidential Information of Other Parties. Each party
represents, warrants, and covenants that it will not use in the course of its
performance under this Agreement, or disclose to the other parties hereto, any
confidential or proprietary information of any third party (including
competitors of the other parties) without the prior written consent of the party
to whom such confidential or proprietary information belongs.
(c) Disclosure Does Not Constitute a License. Neither the execution of
this Agreement nor the disclosure of any confidential or proprietary information
by one party to the other hereunder shall be construed as granting to the
recipient of such information, by implication or otherwise, any right in, or
license to, other than expressly contained herein, any present or future
proprietary information, patent, trademark, copyright invention, now or
hereinafter, owned or controlled by the disclosing party. Each party will be
authorized to use the other party's confidential information that is disclosed
hereunder only for such purposes as are expressly contemplated by this
Agreement.
(d) Notice of Unauthorized Disclosure. If either party becomes aware of
any unauthorized disclosure of the other party's confidential information, it
will immediately notify the other party of such unauthorized disclosure and will
take all reasonable steps to mitigate the potential harm associated with such
unauthorized disclosure.
(e) Survival. The provisions regarding Confidential Information shall
survive the termination or expiration of this Agreement, except that such
obligations shall not limit Customer's rights under the [***] Pump License
Agreement.
13. Term and Termination
(a) Effective Date and Term. The term of this Agreement shall begin on
July 20, 2004 (the "Effective Date"), and shall thereafter be perpetual (the
"Term"); provided that beginning on January 1, 2008, either party may give
notice to the other of its intention not to extend the Term of this Agreement,
and, if such notice is given, the term of this Agreement shall expire, at the
earliest, two years from the date of such notice. Once a notice of termination
has been given by a party pursuant to this Section 13(a), such notice shall be
irrevocable except by mutual consent of the parties.
(b) Termination Events.
(i) Upon a Bankruptcy Event of Customer, Customer shall notify
ZEVEX thereof within one (1) business day thereof. ZEVEX may elect to
terminate the Agreement by giving written notice to Customer within
thirty (30) days of that notice.
(ii) Upon a Change of Control of Customer, Customer shall
notify ZEVEX thereof within one (1) business day of the public
announcement thereof. Thereafter, ZEVEX may elect to terminate the
Agreement by giving notice to Customer within ninety (90) days after
the public announcement of the Change of Control of Customer.
(iii) Upon the failure of Customer to pay to ZEVEX monies when
due by Customer to ZEVEX hereunder and/or under any of the Related
Agreements, ZEVEX may give notice to Customer of such non-payment.
Thereafter, if Customer fails to pay such monies to ZEVEX within five
(5) business days of such notice, then this Agreement shall terminate
on that 5th business day. If Customer pays the monies due to ZEVEX
within those five (5) business days, then this Agreement shall not
terminate.
(iv) Upon a Confidentiality Breach by Customer, then ZEVEX may
give notice to Customer of such Confidentiality Breach. If Customer
fails to cure such Confidentiality Breach within sixty (60) days of
such notice, then this Agreement may be terminated by ZEVEX at any time
during the applicable ZEVEX Termination Period. ZEVEX's failure to
terminate this Agreement during the ZEVEX Termination Period will
constitute a waiver of ZEVEX's rights to terminate this Agreement by
reason of the applicable Confidentiality Breach, but will not
constitute a waiver of ZEVEX's other rights and remedies under this
Agreement (or other applicable Related Agreement, if any), or a waiver
of future similar breaches.
(v) Upon an Exclusivity Breach by Customer, then ZEVEX may
give notice to Customer of such Exclusivity Breach. If Customer fails
to cure such Exclusivity Breach within sixty (60) days of such notice,
then this Agreement may be terminated by ZEVEX at any time during the
applicable ZEVEX Termination Period. ZEVEX's failure to terminate this
Agreement during the ZEVEX Termination Period will constitute a waiver
of ZEVEX's rights to terminate this Agreement by reason of the
applicable Confidentiality Breach, but will not constitute a waiver of
ZEVEX's other rights and remedies under this Agreement (or other
applicable Related Agreement, if any), or a waiver of future similar
breaches.
(vi) Upon a material breach of this Agreement by Customer
other than any of the material breaches described in Sections
13(b)(iii)-(v) above, then ZEVEX may give notice to Customer of such
material breach. If Customer fails to cure such material breach within
sixty (60) days of such notice, then this Agreement may be terminated
by ZEVEX at any time during the applicable ZEVEX Termination Period.
ZEVEX's failure to terminate this Agreement during the ZEVEX
Termination Period will constitute a waiver of ZEVEX's rights to
terminate this Agreement by reason of the applicable breach, but will
not constitute a waiver of ZEVEX's other rights and remedies under this
Agreement, or a waiver of future similar breaches.
(vii) Upon a Bankruptcy Event of ZEVEX, ZEVEX shall notify
Customer thereof within one (1) business day thereof. Customer may
elect to terminate the Agreement by giving written notice to ZEVEX
within thirty (30) days of that notice.
(viii) Upon a Change of Control of ZEVEX, ZEVEX shall notify
Customer thereof within one (1) business day of the public announcement
thereof. Thereafter, Customer may elect to terminate the Agreement by
giving notice to ZEVEX within ninety (90) days of the public
announcement of the Change of Control of ZEVEX.
(ix) Upon a material breach of this Agreement by ZEVEX,
Customer may give notice to ZEVEX of such material breach. If ZEVEX
cures such material breach within sixty (60) days following such
notice, then this Agreement shall not terminate by reason of that
breach. If ZEVEX fails to cure such material breach within sixty (60)
days of such notice, then this Agreement may be terminated by Customer
at any time during the period that begins on the sixtieth (60th) day
following such notice and ends on the ninetieth (90th) day following
such notice (the "Customer Termination Period") by giving written
notice of such termination to ZEVEX before the expiration of the
Customer Termination Period. Customer's failure to terminate this
Agreement during the Customer Termination Period will constitute a
waiver of Customer's rights to terminate this Agreement by reason of
the applicable breach, but will not constitute a waiver of Customer's
other rights and remedies under this Agreement, or a waiver of future
similar breaches.
(x) Upon the effective date of termination of either the [***]
Pump Supply Agreement of even date herewith or the Flocare 800
Manufacturing Agreement, or the [***] Disposable Set Components Supply
Agreement of even date herewith, this Agreement may be terminated
thereafter by ZEVEX by giving ninety (90) days' prior written notice.
(xi) At any time after January 1, 2008, Customer may terminate
this Agreement pursuant to Section 13(a) above.
(xii) At any time after January 1, 2008, ZEVEX may terminate
this Agreement pursuant to Section 13(a) above.
(c) Effect of Material Breach by ZEVEX. If a material breach of the
Agreement by ZEVEX occurs due to the inability of ZEVEX to provide the Services
hereunder and Customer elects not to terminate the Agreement pursuant to Section
13(b)(ix), Customer may contract with an outside third party to provide the
Services in the interim while ZEVEX cures such material breach. Upon the curing
of such material breach ZEVEX will resume providing the Services hereunder.
(d) Return of Materials Upon Termination. In the event of any
termination, expiration or non-renewal of this Agreement for any reason
whatsoever, within thirty (30) days after the expiration or the termination of
this Agreement, (i) the parties shall promptly return to one another all
property and other materials of the other party in their respective possession
and/or control, including all media (and copies thereof) containing confidential
information and proprietary information of the parties including, without
limitation, all marketing materials, copies and extracts thereof, lists,
placement records, service records, and shall erase any copies thereof contained
in any electronic or other memory device, (ii) ZEVEX shall promptly return all
Tools and T&D Programs used in performing the Services on the
Customer-Manufactured Pumps, and (iii) ZEVEX shall provide a list to Customer
identifying the Vendors which ZEVEX used to purchase the Spare Parts. If ZEVEX
or Customer terminates this Agreement for any reason, Customer shall purchase
Spare Parts remaining in ZEVEX's possession at ZEVEX's actual Material Costs for
such Spare Parts, provided, however, that the quantity of Spare Parts is
consistent with the amount consumed in the prior six (6) months. Each party will
certify in writing to the other, within thirty (30) days after any such
termination, expiration, or non-renewal of this Agreement that they have
complied with this Section 13(d).
(e) Provision of Services After Termination. Upon termination of this
Agreement, the Know-How shall be released from escrow to Customer. Customer
shall thereafter have the non-exclusive, perpetual right to provide Services for
Flocare [***] Pumps that have been placed in commerce or use by Customer within
the Territory. ZEVEX hereby grants to Customer all licenses or rights which may
be necessary in order for Customer to provide such Services, and agrees to take
all actions reasonably requested by Customer in order to memorialize Customer's
right to provide such Services for the ZEVEX-Manufactured Pumps on a
non-exclusive basis within the Territory. Customer's right to provide Services
for the ZEVEX-Manufactured Pumps shall include the right for Customer to
authorize any third party to provide such Services on behalf of Customer.
(f) No Liability Upon Termination. Neither party in exercising its
rights to terminate this Agreement in accordance with the terms and conditions
hereof shall incur any liability whatsoever for any damage, loss or expense of
any kind suffered or incurred by the other (or for any compensation to the
other) arising from or incident to any such termination (except if such
termination is for a material breach of this Agreement), expiration or
non-renewal, whether or not the terminating party is aware of any such damage
loss or expense. Any termination hereof shall not impair any rights nor
discharge any obligations, that have accrued to the parties as of the effective
date of such termination.
(g) Services Provided by ZEVEX Upon Termination. After the termination
of this Agreement, upon the reasonable request of Customer, ZEVEX shall conduct
training courses to the extent necessary to train Customer personnel to perform
the Services on the Nutricia Pumps at the ZEVEX Service Center selected by
Customer. ZEVEX shall provide two such training sessions, for not more then ten
(10) Customer personnel without charge to Customer. Customer shall be
responsible for all of its own expenses in attending the training sessions,
including but not limited to travel, lodging, and per diem expenses. The time
schedule of such training and other details shall be determined in advance by
agreement between the parties hereto. ZEVEX shall, upon receiving Customer's
request for training, make reasonable efforts to provide such training to
Customer personnel in accordance with the time schedule given by Customer. ZEVEX
shall provide copies of all necessary materials to each trainee.
14. Indemnification; Insurance.
(a) ZEVEX's Indemnification. ZEVEX shall indemnify, defend and hold
Customer, its affiliates, and their respective officers, directors, employees
and agents (each, a "ZEVEX Indemnified Party"), harmless from and against any
and all claims, demands, losses, costs, expenses, obligations, liabilities,
damages, recoveries and deficiencies, including interest, penalties, reasonable
attorneys' fees, costs of investigation and any legal or other expenses or costs
("Losses") incurred or suffered by any ZEVEX Indemnified Party arising out of,
in connection with or resulting from any claim, allegation or judgment as to:
(i) any third party product liability claim relating to the Services provided
hereunder, or which arise, in whole or in part, due to ZEVEX's defective
performance of the Services hereunder, (ii) any violation or infringement by
ZEVEX upon any common law or statutory intellectual property rights of any third
party that arises from or relates to the Services provided to the Flocare [***]
Pump, or (iii) any inaccuracy or breach in or any failure to observe or perform
any of ZEVEX's covenants, obligations, representations, and warranties under
this Agreement; provided, however, that ZEVEX shall have no obligation to
indemnify Customer for any Losses to the extent such Losses are caused by any
negligent or willful act or omission of Customer.
(b) Customer's Indemnification. Customer agrees to indemnify, defend
and hold ZEVEX, its affiliates, and their respective officers, directors,
employees and agents (each, a "Customer Indemnified Party") harmless from and
against any and all Losses (as defined in Section 14(a) above) incurred or
suffered by any Customer Indemnified Party arising out of, in connection with or
resulting from any claim, allegation or judgment as to: (i) any inaccuracy or
breach in or of or any failure to observe or perform any of Customer's
covenants, representations, warranties or obligations under this Agreement, (ii)
any third party product liability or defect claim (other than to the extent
wholly caused by or attributed to the acts or omissions of ZEVEX in providing
the Services) in the Customer-Manufactured Pumps, (iii) the improper labeling,
promotion or use of the Nutricia Pumps by Customer or its respective employees
or agents, (iv) the violation or infringement of any trademark, trade dress or
other intellectual property right relating to the Customer-Manufactured Pumps,
or (v) other specifications or materials selected by Customer provided, however,
that Customer shall have no obligation to indemnify ZEVEX for any Losses to the
extent such Losses are caused by any negligent or willful act or omission of
ZEVEX.
(c) Indemnification Procedure for Matters Involving Third Parties.
(i) If any third party notifies any party hereto (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against the other
party hereto (the "Indemnifying Party") under Section 14(a) or 14(b)
(as applicable), then the Indemnified Party shall promptly notify the
Indemnifying Party thereof in writing; provided, however, that no delay
on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) that the Indemnifying
Party is prejudiced thereby.
(ii) Any Indemnifying Party shall have the obligation to
assume the defense of the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party at any time within
fifteen (15) days after Indemnified Party has given notice of the Third
Party Claim; provided, however, that the Indemnifying Party must
conduct the defense of the Third Party Claim actively and diligently
thereafter in order to preserve its rights in this regard; and provided
further that the Indemnified Party may retain separate co-counsel at
its sole cost and expense and participate in the defense of the Third
Party Claim.
(iii) So long as the Indemnifying Party has assumed and is
conducting the defense of the Third Party Claim in accordance with
Section 14(c)(ii) above, (A) the Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnified Party (which shall not be unreasonably withheld) unless the
judgment or proposed settlement involves only the payment of money
damages by one or more of the Indemnifying Parties and does not impose
an injunction or other equitable relief upon the Indemnified Party and
(B) the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (which
shall not be unreasonably withheld).
(iv) If the Indemnifying Party does not assume and conduct the
defense of the Third Party Claim in accordance with Section 14(c)(ii)
above, however, (A) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain
any consent from, any Indemnifying Party in connection therewith) and
(B) the Indemnifying Party will remain responsible to indemnify the
Indemnified Party under Section 14(a) or 14(b) (as applicable).
(d) Indemnification Procedure for Matters not Involving Third Parties.
A claim for indemnification for any matter not involving a third-party claim may
be asserted by notice to the party from whom indemnification is sought.
(e) ZEVEX General Liability Insurance. ZEVEX shall maintain, in full
force and effect throughout the Term, at their sole cost and expense, insurance
with financially sound and established reputable insurers of the type and
quantity (and with such risk retention) generally maintained by the companies of
established repute in the medical device business, such insurance to include,
without limitation, products liability insurance and general liability insurance
each, in an amount no less than ten million U.S. dollars (U.S. $10,000,000.00)
per occurrence. ZEVEX shall upon request provide Customer with a copy of any
documentation relating to any such insurance. ZEVEX shall have Customer named as
an additional insured beneficiary, with Customer able to claim thereunder as
primary beneficiary and without offset or deduction whatsoever as a result of
any insurance obtained by Customer, and shall contain a waiver of subrogation by
the respective insurance carrier against Customer's and its affiliates'
insurance carrier, with respect to ZEVEX's obligations under this Agreement.
(f) Customer General Liability Insurance. Customer shall maintain, in
full force and effect throughout the Term, at their sole cost and expense,
insurance with financially sound and established reputable insurers of the type
and quantity (and with such risk retention) generally maintained by the
companies of established repute in the nutritional products line of business,
such insurance to include, without limitation, products liability insurance and
general liability insurance each, in an amount no less than ten million U.S.
dollars (U.S. $10,000,000.00) per occurrence. Customer shall upon request
provide ZEVEX with a copy of any documentation relating to any such insurance.
Customer shall have ZEVEX named as an additional insured beneficiary, with ZEVEX
able to claim thereunder as primary beneficiary and without offset or deduction
whatsoever as a result of any insurance obtained by ZEVEX, and shall contain a
waiver of subrogation by the respective insurance carrier against ZEVEX`s and
its affiliates' insurance carrier, with respect to Customer's obligations under
this Agreement.
15. Limitations on Liability
(a) Limitations on ZEVEX's Liability. ZEVEX'S MAXIMUM
LIABILITY TO CUSTOMER, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY
CUSTOMER UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR
PRODUCT LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED
$1,000,000; PROVIDED, HOWEVER, THAT ZEVEX'S MAXIMUM LIABILITY TO CUSTOMER FOR
DAMAGES, IF ANY, RELATING TO CLAIM(S) MADE BY CUSTOMER THAT ARISE OUT OF THE
SAME FACTS AND CIRCUMSTANCES, WHETHER SUCH CLAIM(S) ARE MADE UNDER THIS
AGREEMENT, AND/OR ANY OF THE RELATED AGREEMENTS, SHALL IN NO EVENT EXCEED
$1,000,000. ZEVEX'S MAXIMUM LIABILITY TO CUSTOMER, IF ANY, FOR DAMAGES RELATING
TO ANY CLAIM(S) MADE BY CUSTOMER FOR INDEMNIFICATION FOR A PRODUCT LIABILITY
CLAIM BY A THIRD PARTY SHALL IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE
PROCEEDS AVAILABLE TO ZEVEX WITH RESPECT TO SUCH CLAIM, WHETHER SUCH CLAIM IS
MADE UNDER THIS AGREEMENT, AND/OR ANY OF THE RELATED AGREEMENTS.
(b) Limitations on Customer's Liability CUSTOMER'S MAXIMUM
LIABILITY TO ZEVEX, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY ZEVEX
UNDER THIS AGREEMENT (OTHER THAN CLAIM(S) FOR INDEMNIFICATION FOR PRODUCT
LIABILITY CLAIM(S) BY A THIRD PARTY) SHALL IN NO EVENT EXCEED $1,000,000;
PROVIDED, HOWEVER, THAT CUSTOMER'S MAXIMUM LIABILITY TO ZEVEX FOR DAMAGES, IF
ANY, RELATING TO CLAIM(S) MADE BY ZEVEX THAT ARISE OUT OF THE SAME FACTS AND
CIRCUMSTANCES, WHETHER SUCH CLAIM(S) ARE MADE UNDER THIS AGREEMENT, AND/OR ANY
OF THE RELATED AGREEMENTS, SHALL IN NO EVENT EXCEED $1,000,000. CUSTOMER'S
MAXIMUM LIABILITY TO ZEVEX, IF ANY, FOR DAMAGES RELATING TO ANY CLAIM(S) MADE BY
ZEVEX FOR INDEMNIFICATION FOR A PRODUCT LIABILITY CLAIM BY A THIRD PARTY SHALL
IN NO EVENT EXCEED THE AMOUNT OF THE INSURANCE PROCEEDS AVAILABLE TO CUSTOMER
WITH RESPECT TO SUCH CLAIM, WHETHER SUCH CLAIM IS MADE UNDER THIS AGREEMENT,
AND/OR ANY OF THE RELATED AGREEMENTS.
(c) Consequential and Other Damages. IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF
THE BREACHING PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES IN
ADVANCE. The parties intend this limitation in this Section 15(c) to apply to
the following events, among other events: (i) any claim for consequential
damages suffered by the non-breaching party (as opposed to any third party)
arising out of any claim by a third party for either product liability or
infringement of intellectual property, (ii) any breach by either party of its
representations under this agreement, (iii) any non-performance or
mal-performance by either party under this Agreement, or (iv) the termination or
expiration of this Agreement by either party. Such incidental or consequential
damages shall include, but shall not be limited to, loss of goodwill, loss of
prospective profits, loss of revenue, or damages on account of any investment,
expenditure, or commitment that is made by either party in reliance upon this
Agreement. This limitation in this Section 15(c) is not intended by the parties
to prevent Customer, for example, from recovering from ZEVEX, in an
indemnification claim made under Section 14(a)(i), the full amount that it has
been required to pay to a third party in connection with a product liability
claim brought by such third party against Customer, including such incidental or
consequential damages as may be allowed by law under that claim by that third
party. This limitation in this Section 15(c) is, nevertheless, intended to
prevent the non-breaching party from receiving from the breaching party, in an
indemnification claim under Section 14(a) or 14(b), incidental or consequential
losses or damages that have been incurred by the non-breaching party (as opposed
to any third party), such as lost profits, that may arise from or relate to any
event under this Agreement.
16. Designated Representative; Quarterly Meetings
(a) Designated Representative. Each party shall designate one
individual within such party's organization to serve as such party's primary
point of contact and representative (the "Designated Representative") in such
party's relationship and communications with the other party as contemplated in
this Agreement. These Designated Representatives shall also involve other
appropriate operational, technical, strategic, and regulatory personnel in such
communications.
(b) Quarterly Meetings. The parties shall hold a face-to-face meeting
at a minimum of once each calendar quarter during the Term as necessary to
address the various issues that may arise relating to the performance of the
parties under this Agreement (the "Quarterly Meetings"). The location of the
Quarterly Meetings shall alternate between the ZEVEX Facility or ZEVEX Service
Center and a Customer facility in the Territory. The parties shall formulate in
advance of each meeting a written agenda of material items that each party
proposes should be considered together in the meeting, which agenda may include
such items as repair history, complaint data, failure data trends, and
corrective action requests review. The parties shall make Commercially
Reasonable Efforts to have the Designated Representative present at each
Quarterly Meeting, as well as such other individuals as would be appropriate in
light of the agenda for the meeting. Each party shall bear all of its own costs
and expenses associated with its participation in the Quarterly Meetings. The
parties' respective rights to request and receive information hereunder will not
be affected or limited by any subject or matter discussed or planned to be
discussed at any Quarterly Meeting.
17. Miscellaneous
(a) Survival. Any provision of this Agreement which contemplates
performance or the existence of rights or obligations after the expiration,
non-renewal, or termination of this Agreement shall expressly survive such
expiration, non-renewal, or termination of this Agreement and shall be binding
upon the party or parties obligated thereby in accordance with the terms of this
Agreement, subject to any limitations expressly set forth in this Agreement.
(b) New Products. By mutual written agreement, the parties may, from
time to time, add to this Agreement additional products to be serviced by ZEVEX
under the terms and conditions hereof. Pricing and other specific terms for any
such additional products shall be mutually agreed upon between the parties.
(c) Amendment or Waiver. This Agreement cannot be changed orally, and
no modification of this Agreement shall be recognized nor have any effect,
unless the writing in which it is set forth is signed by Customer and ZEVEX, nor
shall any waiver of any of the provisions of this Agreement be effective unless
in writing and signed by the party to be charged therewith. The failure of
either party to enforce, at any time or for any period of time, the provisions
hereof, or the failure of either party to exercise any option herein shall not
be construed as a waiver of such provision or option and shall in no way affect
that party's right to enforce such provisions or exercise such option. No waiver
of any provision hereof shall be deemed a waiver of any succeeding breach of the
same or any other provisions of this Agreement.
(d) Dispute Resolution; Governing Law; Injunctive Relief.
(i) Negotiations. The parties agree that they will attempt in
good faith to resolve any controversy, claim, dispute, or question
between them arising out of or relating to this Agreement, including
the construction or application of this Agreement, promptly by
negotiations between the parties, beginning with discussions between
the Designated Representatives. If a controversy or claim should arise,
the Designated Representatives of the parties, as well as other
appropriate representatives, will meet at least once and will attempt
to resolve the matter. Either of the Designated Representatives may
request the other to meet within fourteen (14) days, at a mutually
agreed time and place.
(ii) Mediation. If the matter has not been resolved within
thirty (30) days of this meeting, the controversy or claim shall be
submitted to non-binding mediation by a mediator chosen from names of
mediators furnished by JAMS or the American Arbitration Association.
The mediation shall occur in New York City, New York, U.S.A.
(iii) Litigation. In the event that differences concerning
matters covered by this Agreement arise that are not resolved by mutual
agreement via negotiations or mediation as described above, the parties
agree that any action or proceeding arising out of or relating to this
Agreement shall be heard and decided by a non-jury bench trial in New
York City, New York, U.S.A. Each party hereto irrevocably submits to
the jurisdiction of the appropriate state court covering New York City,
New York, U.S.A., and each party hereby irrevocably agrees that all
claims in respect of any such action or proceeding must be brought
and/or defended in such court; provided, however, that matters which
are under the exclusive jurisdiction of the Federal courts shall be
brought in the Federal District Court covering New York City, New York,
U.S.A.
(iv) Governing Law. The provisions of this Agreement shall be
governed by and construed in accordance with the laws of the State of
New York, U.S.A. (excluding any conflict of law rule or principle that
would refer to the laws of another jurisdiction and the U.N. Convention
on Contracts for the International Sales of Goods). EACH PARTY HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT
MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION,
OR PROCEEDING ARISING HEREUNDER.
(v) Injunctive Relief. Each of the parties acknowledge and
agree that the other parties will be damaged irreparably if certain
provisions of this Agreement (specifically including the obligations of
confidentiality set forth in Section 12 herein) are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, notwithstanding any other provision in this Agreement the
damaged party shall have the right to pursue a claim for injunctive
relief, damages and attorneys' fees in any court of competent
jurisdiction for the other party's breach of any covenant, agreement or
obligation, in addition to any other relief available to them under
this Agreement or under applicable law.
(vi) Fees. The parties shall equally split the fees of any
mediation, but in any arbitration or permissible legal proceedings, the
prevailing party shall be entitled to reasonable attorneys' fees, costs
and other disbursements in addition to any other relief to which such
party may be entitled.
(e) Counterparts. This Agreement may be executed in multiple
counterparts, which taken together shall constitute one instrument and each of
which shall be considered an original for all purposes.
(f) Notices. Any and all notices permitted or required to be given
hereunder shall be deemed duly given: (i) upon actual delivery, if delivery is
by hand; (ii) upon delivery by overnight express courier (i.e., DHL or FedEx);
or (iii) upon facsimile transmission, so long as the original is then sent by
overnight express courier. Each such notice shall be sent to the respective
party at the address indicated below:
If to ZEVEX: ZEVEX International Inc.
4314 ZEVEX Park Lane
Salt Lake City, Utah, USA 84123
Attn: Chairman and CEO
Fax: (801) 264-1051
with a copy to the CFO
at the same address.
If to Numico: Numico Trading B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Luc Volatier, V.P. of
Purchasing Worldwide
Fax: 31206586159
If to Nutricia: Nutricia International B.V.
Numico Beech Avenue 54-80
1119 PW Schiphol-Rijk
The Netherlands
Attn: Rob Heutink, V.P.
Manufacturing, and Supply,
Emerging Markets
Fax: 31206586884
or such other address or facsimile number as any of the persons designated above
may have specified in a notice or communication duly given to the other
designated person as provided herein.
(g) Binding Effect; Non-Assignability. This Agreement shall be binding
upon and enforceable against the parties hereto and their respective successors
and permitted assigns. Neither party shall assign or subcontract (except as
expressly allowed hereunder) its rights and obligations under this Agreement
without the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that either party may assign this
Agreement to an Affiliate of such party.
(h) Relationship of the Parties. The parties are and at all times shall
be deemed to be independent contractors and shall be wholly responsible for the
goods supplied and services performed under this Agreement. Nothing contained
herein shall be construed as creating the relationship of employer/employee or
principal/agent. Each party shall assume full responsibility for the actions of
its employees as related to the party's obligations under this Agreement.
Neither party to this agreement is hereby constituted an agent of the other for
any purpose and neither party has the authority to assume or create any
obligation, or to make any representation, warranty or guarantee for the other,
except as expressly granted or made in this Agreement.
(i) Force Majeure. Neither party shall be responsible or liable for any
default in performance of this Agreement arising directly or indirectly from any
cause beyond such party's control, including fire, flood, earthquake, acts of
God, war (declared or undeclared), enemy action, embargo, strike, governmental
order, proclamation or regulation, accident, explosion, riot, insurrection, or
expropriation of the property by government authority (each such event a "Force
Majeure Event"). If a Force Majeure Event occurs, the parties will exert
Commercially Reasonable Efforts to mitigate the impact of such Force Majeure
Event on the business arrangements of the parties set forth in this Agreement
and to otherwise carry out the intent and accomplish the objectives of this
Agreement.
(j) Exhibits and Schedules. Any exhibit or schedule attached hereto is
made a part hereof and is fully incorporated herein by reference.
(k) Entire Agreement. This Agreement contains the sole and complete
understanding of the parties related to its subject matter, and supersedes all
oral or written agreements concerning this subject matter made prior to and
after to the date of this Agreement.
(l) Remedies Not Exclusive. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy will be cumulative and will be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies will not
constitute a waiver of the right to pursue other available remedies.
(m) Partial Invalidity. If any provision of this Agreement is adjudged
to be invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired, and the parties shall use their best efforts to substitute a valid,
legal, and enforceable provision which, insofar as practical, implements the
purposes of this Agreement.
(n) Language; Interpretation. The language controlling the construction
and interpretation of this Agreement shall be English. Section headings are
included solely for convenience and shall not constitute a part hereof. Unless
the context otherwise requires, words importing the singular shall be deemed to
import the plural and vice versa.
(o) Third Party Beneficiaries. No person or entity shall be a
third-party beneficiary of this Agreement, except that ZEVEX acknowledges and
agrees that its obligations under the Services Warranty set forth in Section
10(a) above shall be deemed as commitments to all Affiliates of Customer as
third-party beneficiaries.
(p) Media Relations. Each of Customer and ZEVEX agree that during the
Term each will not, and will cause its affiliates not to, disparage each other
or release commercially sensitive information about each other in any oral,
written, or electronic public statements (including without limitation in any
securities filing with the U.S. Securities and Exchange Commission) concerning
any matters relating to or arising from this Agreement.
IN WITNESS WHEREOF, the parties enter into this agreement effective as of the
Effective Date.
ZEVEX INTERNATIONAL, INC.
By:
-----------------------------------------------------------
Name:
---------------------------------------------------------
Title:
--------------------------------------------------------
NUTRICIA INTERNATIONAL, B.V.
By:
-----------------------------------------------------------
Name:
---------------------------------------------------------
Title:
--------------------------------------------------------
NUMICO TRADING B.V.
By:
-----------------------------------------------------------
Name:
---------------------------------------------------------
Title:
--------------------------------------------------------
Exhibit A
SERVICE PRICE AND ADJUSTED SERVICE PRICE
Service Price:
The Service Price for the Nutricia Pumps will be calculated using the following
formula:
Operational Costs Ratio = (Projected Operational Costs)/(Projected Service
Volume)
Loaded Material Cost = Material Costs x [***]
Service Price (per Nutricia Pump) = [***]
Example (for illustration purpose only):
Operational Costs= [***]
Service Volume= [***] Nutricia Pumps
Material Costs= [***]
[***]
Adjusted Service Price:
The Adjusted Service Price for the Nutricia Pumps will be calculated using the
following formula:
Actual Operational Costs Ratio = (Operational Costs)/(Actual Service Volume)*
Loaded Material Cost = Material Costs x [***]
Adjusted Service Price (per Nutricia Pump) = [***]
*Notwithstanding anything to the contrary herein, if the Actual Service Volume
during a particular calendar quarter is equal to or greater than [***] then the
Actual Operational Costs Ratio shall not exceed [***] Euros.
Note:
As of the Effective Date, the cost of ZEVEX Part Number [***] that is used in
the [***] Flocare Pump will be [***] This amount will be added to the other
material costs in the above formula.
Exhibit B
THIRD-PARTY SERVICE ORGANIZATIONS
[***]
This is a Non-exhaustive list (not all affiliates are listed, though the major
ones are). Some contracts were in negotiation process and thus expiration dates
may slightly vary. The final data shall be validated within 30 days after
contract signature.
Exhibit C
SERVICE PERFORMANCE
Performance will be measured and reported based on the following metrics:
o Lead-time servicing (maximum 10 working days),
o Lead-time transport (in/outgoing), (maximum 2 working days)
o Performed activities (to be reported regularly)
o Materials Used (to be reported regularly)
o Quality control supplied materials (incoming good inspection), (to be reported
regularly)
o ZEVEX audits & complaint handling (to be reported regularly),
o Quality control during / after servicing of the pumps (max QC rejection -
rework level 1%)
o Internal audits & reviews (to be reported regularly)
o Number and nature of determinations that ZEVEX-Manufactured Pumps are not
covered by a ZEVEX Warranty
o Number and nature of refusals to provide Services
o Recurrence and volume of similar or identical breakdowns requiring repairs
o Quantity of, and intervals between, a Service being performed upon a
particular Nutricia Pump and the return of the same Nutricia Pump for the same
or different Services.
The above list is not all-inclusive, additional metrics may be added or deleted
upon the mutual agreement of the parties.
Exhibit 31.01
CERTIFICATION OF CHIEF EXECUTIVE OFFICER,
AS REQUIRED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.
I, David J. McNally, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ZEVEX International,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I, are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Dated: November 12, 2004
By /s/ David J. McNally
--------------------------
David J. McNally, CEO
(Chief Executive Officer)
Exhibit 31.02
CERTIFICATION OF CHIEF FINANCIAL OFFICER,
AS REQUIRED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.
I, Phillip L. McStotts, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ZEVEX International,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I, are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Dated: November 12, 2004
By /s/ Phillip L. McStotts
-----------------------------
Phillip L. McStotts, CFO
(Chief Financial Officer)
EXHIBIT 32.01
CERTIFICATION OF CHIEF EXECUTIVE OFFICER,
AS REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
I, David J. McNally, hereby certify pursuant to 18 U.S.C. Section 1350 adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
(i) The accompanying quarterly report on Form 10-Q for the quarter
ended September 30, 2004, fully complies with the requirements of Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
(ii) The information contained in such report fairly presents, in all
material respects, the financial condition and results of operations of ZEVEX
International, Inc.
Dated: November 12, 2004
By /s/ David J. McNally
David J. McNally, CEO
(Chief Executive Officer)
This certification accompanies the above-described Report on Form 10-Q pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the
extent required by such Act, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.
EXHIBIT 32.02
CERTIFICATION OF CHIEF FINANCIAL OFFICER,
AS REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
I, Phillip L. McStotts, hereby certify pursuant to 18 U.S.C. Section 1350
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
(i) The accompanying quarterly report on Form 10-Q for the quarter
ended September 30, 2004, fully complies with the requirements of Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
(ii) The information contained in such report fairly presents, in all
material respects, the financial condition and results of operations of ZEVEX
International, Inc.
Dated: November 12, 2004
By /s/ Phillip L. McStotts
Phillip L. McStotts, CFO
(Chief Financial Officer)
This certification accompanies the above-described Report on Form 10-Q pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the
extent required by such Act, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.