Exhibit 10.2
Information from this exhibit has been
omitted and filed separately with the
Securities and Exchange Commission
AMENDED AND RESTATED
SALES DISTRIBUTION AGREEMENT
for
TESTING SYSTEM
for
GLUCOSE IN HUMANS
between
LIFESCAN, INC.
and
SELFCARE, INC.
as of June 7, 1999
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND REVISIONS TO GLUCOSE SYSTEM.....................................................1
1.1 Commercialization of Officinal Glucose System...................................................1
1.2 510(k) Notifications............................................................................1
1.3 Definitions.....................................................................................1
1.4 Specifications..................................................................................3
ARTICLE II SUPPLY OF LS PRODUCTS...........................................................................4
2.1 Supply of LS Products...........................................................................4
2.2 Supply Exclusivity..............................................................................5
2.3 Safely Stock....................................................................................5
2.4 Forecasts and Purchase Orders...................................................................6
ARTICLE III CAPACITY PLANNING...............................................................................7
3.1 Capacity Plan Concepts..........................................................................7
3.2 Proposed and Binding Capacity Plan Definitions..................................................7
3.3 Base Capacity...................................................................................7
3.4 Capital Requirements Notices....................................................................9
3.5 Acceptance and Rejection of Capital Requirements Notices........................................9
3.6 Credit for Capital Expenditure Make-up Payments................................................10
3.7 Cooperation Regarding Capital Expenditure Make-up Payments.....................................11
3.8 Sales Shortfall Payments.......................................................................12
ARTICLE IV MARKET DEVELOPMENT RIGHTS......................................................................13
4.1 Initial Sales Restrictions.....................................................................13
4.2 Reserved Marketing Rights......................................................................13
4.3 Failure to Purchase Yearly Minimum.............................................................14
4.4 Yearly Minimums................................................................................15
4.5 Termination of Section 4.1(c) Restriction......................................................17
4.6 Introduction of Competing Electrochemical System...............................................17
4.7 Novel Glucose Systems..........................................................................18
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARTIES......................................................18
ARTICLE VI PRICE..........................................................................................18
6.1 LS Products Other Than LS Strips...............................................................19
6.2 Base Strip Prices..............................................................................19
6.3 Payment in Local Currency for LS Strips........................................................20
6.4 Adjustment Based on LS Resale Price............................................................20
6.5 Adjustment Based on Selfcare Profitability.....................................................20
(i)
ARTICLE VII FAILURE BY SELFCARE TO SUPPLY........................................................................20
7.1 Definitions Relating to Self-help Licensing....................................................20
7.2 License on Supply Default......................................................................21
7.3 Communications Following Force Majeure.........................................................21
7.4 Rights Following Force Majeure.................................................................22
7.5 Restoration of Supply by Selfcare..............................................................22
7.6 Terms, Royalties...............................................................................22
7.7 Cooperation....................................................................................23
7.8 Exclusive Remedy...............................................................................23
7.9 Business Interruption Insurance................................................................23
ARTICLE VIII CERTAIN COVENANTS..................................................................................24
8.1 LifeScan Covenants.............................................................................24
8.2 Selfcare Covenants.............................................................................24
8.3 Indemnification................................................................................25
ARTICLE IX AGREEMENTS REGARDING TECHNOLOGY......................................................................26
9.1 Infringement of Selfcare's Technology..........................................................26
9.2 U.S. and European Patent Convention Patent Conflicts...........................................26
9.3 Patent Conflicts in Other Countries............................................................27
9.4 Technical Information Necessary for Marketing..................................................27
ARTICLE X MISCELLANEOUS.........................................................................................27
10.1 Invoicing. Shipping and Payment................................................................27
10.1 Product Warranties.............................................................................28
10.2 Agreement Term.................................................................................29
10.3 Termination....................................................................................29
10.4 Miscellaneous..................................................................................29
ARTICLE XI DEVELOPMENT PLAN.....................................................................................30
11.1 Additional LS Products.........................................................................30
11.2 Milestone......................................................................................30
ARTICLE XII CREDIT FACILITY.....................................................................................30
12.1 Initial Loan...................................................................................30
12.2 Additional Loans...............................................................................31
12.3 Use of Funds...................................................................................32
12.4 Repayment of Loan..............................................................................33
ARTICLE XIII CONFIDENTIAL INFORMATION...........................................................................33
13.1 Confidential Information.......................................................................33
(ii)
ARTICLE I
DEFINITIONS AND REVISIONS TO GLUCOSE SYSTEM
1.1 COMMERCIALIZATION OF ORIGINAL GLUCOSE SYSTEM. LifeScan and Selfcare
acknowledge that pursuant to the Original Sales Distribution Agreement, they
commercialized the 1996 System and that for purposes of the Master Agreement,
they agreed that the "Glucose System" meant the 1996 Glucose System, as the same
may have been or may be modified with the written approval of LifeScan or
pursuant to Section 3.5 from the Master Agreement. The parties note that
payments made and required to be made by LifeScan under the Master Agreement and
the payment for surrender and conversion of the Convertible Promissory Notes by
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Development Corporation pursuant to the Investment Agreement
were governed by the definition of Glucose System set forth in those Agreements.
The parties do not intend to duplicate the requirement of such payments and such
payment, surrender and conversion based on the definition of Glucose System set
forth in the Master Agreement and the Investment Agreement. Selfcare and
LifeScan anticipate agreeing in the future to make changes from time to time in
the specification for the Glucose System or Glucose Systems covered by this
Distribution Agreement. LS Product produced by Selfcare for LifeScan which
deviates from the required specification in minor respects or which does not yet
comply with agreed changes shall be deemed to comply with the requirements of
this Agreement so long as such LS Product meets applicable regulatory
requirements and is accepted for purchase by LifeScan. In such a case the
provisions of Article VII shall not apply based solely on any such minor
deviations.
1.2 510(k) NOTIFICATIONS. Selfcare shall prepare a draft 510(k)
Notification with respect to each Glucose System developed or sold under this
Distribution Agreement and Section 3.5 of the Master Agreement will apply to
each such 510(k) Notification. Selfcare and LifeScan anticipate agreeing in the
future to make changes from time to time in the specifications for the such
Glucose Systems. An LS Product produced by Selfcare for LifeScan which deviates
from the required specification in minor respects or which does not yet comply
with agreed changes shall be deemed to comply with the requirements of this
Distribution Agreement and the applicable specifications so long as such LS
Product meets applicable regulatory requirements and is accepted for purchase by
LifeScan for commercial sale. In such a case the provisions of Article VII shall
not apply based solely on any such minor deviations.
1.3 DEFINITIONS. The following terms have the meanings indicated or
referred to below, Other capitalized terms used herein and not defined herein
have the meanings ascribed thereto in the Master Agreement.
"Additional Loan"- See Section 12.2
"Base Strip Prices" - See Section 6.2.
"Binding Capacity Plan" - See Section 3.2.
Restated Distribution Agreement in Word as executed 3
"Capital Expenditure Make-up Payment" - See Section 3.5.
"Capital Requirements Notice" - See Section 3.4.
"Commercial Quantities" of LS Products shall mean such amount of LS Products as
is specified pursuant to Section 2.3 for a fully committed product launch (and
not merely, for example, a market testing phase).
"Compatible Product" means any Instrument, Test Strip or Related Component which
is designed to be used with LS Instruments or LS Strips, or, in the case of Test
Strips, which is capable of providing a test result with any one or more LS
Instruments, whether or not designed for such use.
"Credit Agreement" shall mean the Credit Agreement between LifeScan and Selfcare
in the form of Exhibit C hereto.
"Credit Year"- see Section 3.6.
"Event of Default" shall have the meaning set forth in the Credit Agreement.
"Force Majeure" means any act of God, accident, explosion, fire, storm,
earthquake, flood, drought, peril of the sea, riot, embargo, war or foreign,
federal, state or municipal order of general application, seizure (other than as
a result of non-compliance of the seized materials with applicable regulatory
requirements), requisition or allocation, any failure or delay of
transportation, shortage of or inability to obtain supplies, equipment, fuel or
labor or any other circumstances or event beyond the reasonable control of the
party relying upon such circumstance or event. For purposes of clarification,
poor operating results or financial condition not resulting from an event
described in the prior sentence shall not constitute events of Force Majeure.
"Glucose System"- See Preamble.
"Initial Loan" - See Section 12.1
"LS Instrument" - See Section 2.1.
"LS Products" - See Section 2.1.
"LS Strip" - See Section 2.1.
"Market Introduction" means any of (i) any sales, (ii) giveaways or (iii)
pre-sale promotional advertising by LifeScan or any such activities by an
Affiliate of LifeScan, in each case, continuing for more than 30 days after the
date on which Selfcare gives notice of such activities to LifeScan.
Restated Distribution Agreement in Word as executed 4
"Novel Glucose System" shall mean a Glucose System that lacks either (i) the
need to use a Test Strip, or (ii) measurement of an in vitro fluid sample.
"Payment Year" - see Section 3.6.
"Person" means any individual, corporation, partnership or other
entity.
"Product Expansion Loan" - see Section 3.8.
"Project A/Project B/Project C" shall mean each of those certain
Glucose Systems having the respective specifications set forth in Schedule 4.4.
"Proposed Capacity Plan" - See Section 3.2.
"SC Note" - See Section 12. 1 (b).
"Strip-Based System" means a Glucose System that employs Test Strips.
"Test Strip" means, for purposes of this Distribution Agreement and the
Master Agreement, a single-use disposable electrochemical sensor which (i) is
designed to be used in conjunction with an Instrument for obtaining test results
from an in-vitro fluid sample and (ii) constitutes or is contained in a
disposable component of a Glucose System [OMITTED].
"Yearly Minimum" - See Section 4.4.
1.4 SPECIFICATIONS. (a) The parties shall employ diligent efforts in
good faith to discuss and agree upon specifications for each of Project A,
Project B and Project C within the timeframes set forth below:
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PROJECT TARGET DATE FOR AGREEMENT
UPON SPECIFICATIONS
---------------------------------------------------------------------
A one month after the date hereof
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B three months after the date hereof
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C five months after the date hereof
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(b) If the parties are unable to agree upon all or any
material element of the specifications for an LS Product described above by the
stated Target Date, the dates for satisfaction of conditions with respect to
such product set forth in Sections 2.3(b), 4.4 and 11.2, as appropriate, shall
be delayed by the same amount of time. In a case where the parties are unable to
agree upon all or any material part of such specifications within 10 days after
the irrelevant Target Date, each party shall by the date 20 days after such
Target Date submits proposal for such specification or for such material element
in dispute to dispute resolution
Restated Distribution Agreement in Word as executed 5
pursuant to Section 6.2 of the Master Agreement and the disputed specification
or material element shall be finally determined through such process with the
following exception. For purposes of these disputes, each party shall submit to
the arbitrator such party's proposal for such specification or material element
and the arbitrator shall be required to select one party's entire version or the
other's without change within 30 days after the date required for submission of
such proposals. The proposal thus selected shall be binding for all purposes
under this Distribution Agreement.
ARTICLE II
SUPPLY OF LS PRODUCTS
2.1 SUPPLY OF LS PRODUCTS. Selfcare and LifeScan agree that, after
Selfcare has given notice to LifeScan that it is prepared to commence commercial
production of LS Products and thereafter during the term of this Distribution
Agreement, LifeScan shall have the right to purchase from Selfcare on the terms
and conditions set forth herein and resell the LS Products. LS Products shall be
manufactured by or at the direction of Selfcare for purchase and resale by
LifeScan under this Distribution Agreement. LS Products shall not be resold by
LifeScan except (i) under a brand name and trade dress that is proprietary to
LifeScan or an Affiliate, or (ii) on a private label basis under a brand name
and trade dress that is proprietary to any Person which is not ah LS Established
Person.
"LS Products" means Instruments, Test Strips and Related Components, in
each case which meet the applicable specifications for (i) the 1996 System,
Project A, Project B, or Project C or (ii) any other Strip-Based System which
LifeScan has agreed to purchase from Selfcare and Selfcare has agreed to supply
to LifeScan, and in each case shall include without limitation improvements,
enhancements and changes thereto and may include without limitation one or more
complete Glucose Systems.
"LS Instruments" means Instruments which meet the applicable
specifications for the 1996 System, Project A, Project B, or Project C or any
other Strip-Based System which LifeScan has agreed to purchase from Selfcare and
Selfcare has agreed to supply to LifeScan.
"LS Strips" means Test Strips which meet the applicable specifications
for (i) the 1996 System, Project A, Project B, or Project C or (ii) any other
Strip-Based System which LifeScan has agreed to purchase from Selfcare and
Selfcare has agreed to supply to LifeScan.
"LS Established Person" means any Person which had, prior to its first
purchase from LifeScan of LS Products or other glucose in humans measurement
devices, more than $100,000,000 in annual worldwide sales in the market for home
use testing of glucose in humans.
2.2 SUPPLY EXCLUSIVITY. Except as permitted by Article VII, during the
term of this Distribution Agreement, neither LifeScan nor any Affiliate of
LifeScan shall purchase from any supplier other than Selfcare any Compatible
Product.
Restated Distribution Agreement in Word as executed 6
2.3 SAFETY STOCK. (a) For LS Strips commercially distributed on the
date hereof and, at and after January 1, 2002, for LS Instruments commercially
distributed on the date hereof, Selfcare shall maintain at its facilities an
inventory of LS Products in finished final packaged form available to deliver to
LifeScan sufficient to satisfy the greater of (i) two (2) times the average
monthly purchases by LifeScan over the most recent past six (6) months, or (ii)
two (2) times the monthly average of LifeScan's committed orders over the most
recent past six (6) months.
(b) For types of LS Products first commercially distributed by
LifeScan after the date hereof:
(i) LifeScan shall provide notice to Selfcare of the
amount of such LS Products it shall require for such
commercial launch of such LS Products. LifeScan shall
provide such notice not later than [OMITTED] in the
case of Project A, not later than [OMITTED] in the
case of Project B, and not later than [OMITTED] in
the case of Project C, and for other such LS
Products, not later than six months prior to the date
on which LifeScan and Selfcare agree to begin
distribution of such LS Products in Commercial
Quantities; and
(ii) Selfcare shall provide such Commercial Quantities of
such LS Products by such date and shall have
available in finished goods inventory from and after
January 1, 2002 a safety stock of such LS Products
equal to or exceeding the then next two months'
forecasted purchases of such LS Products by LifeScan.
(c) In the event that LifeScan shall not have timely specified
the amount designated as Commercial Quantities of an LS Product, Selfcare may
reasonably determine such amount of such LS Product.
(d) Except as otherwise permitted by this paragraph or as
LifeScan may otherwise consent, Selfcare shall not fail to maintain an amount of
safety stock of LS Products at least equal to that required under paragraphs (a)
and (b) above. A failure by Selfcare to observe the requirements of paragraph
(a) or (b) above with respect to an LS Product shall not constitute a breach of
the provisions of such paragraph, (i) for the first 12 months after initial
distribution of such LS Product in Commercial Quantities, and (ii) for the first
six months after commencement of sale to LifeScan by Selfcare of commercial
quantities of such LS Product for which the specifications have changed to a
significant extent, provided that in both such cases Selfcare is exercising
reasonable commercial efforts to maintain the quantities of such LS Product
required by such paragraph. If LifeScan shall so direct, Selfcare shall arrange
to maintain the safety stock of LS Instruments described in the previous
sentence in the form of component parts at the manufacturer. LifeScan shall
purchase on a "first-in, first-out" basis the minimum quantity of such safety
stock of LS Products that meet the applicable specifications therefor that are
maintained pursuant to paragraphs (a) and (b) above.
Restated Distribution Agreement in Word as executed 7
(e) The parties anticipate that from time to time LS Products
in commercial distribution will be changed and improved as the parties discuss
and agree upon changes to the respective specifications therefor. Within a
reasonable period prior to and at the time when the parties agree to such
changes, it will be necessary to adjust production to change over from LS
Products with the prior specifications to LS Products having the new
specifications. In the event that any such agreed change in specifications is
not a result of a safety issue or material deficiency in the performance of an
LS Product, each party shall use reasonable commercial efforts to accommodate
the commercial needs and requests of the other in adjusting binding orders,
forecasts, inventories and production schedules to produce appropriate amounts
of the LS Products with the new specifications and to end, or if the parties
shall so agree to curtail, production of LS Products with the prior
specifications as soon as reasonably practicable. In the event that any such
agreed change in specifications is a result of a safety issue or material
deficiency in the performance of an LS Product, each party shall use diligent
efforts in good faith to adjust binding orders, forecasts, inventories and
production schedules to produce appropriate amounts of the LS Products with the
new specifications and to end, or if the parties so agree to curtail, production
of LS Products with the prior specifications as soon as reasonably practicable,
and in any event within the timeframe if any required under applicable laws and
governmental regulations.
2.4 FORECASTS AND PURCHASE ORDERS. On or prior to June 30, September
30, December 31 and March 31 of each year, LifeScan shall provide Selfcare with
a written forecast of LifeScan's purchase requirements with respect to LS
Products to be purchased by it during the next twelve (12) months. The amount of
LS Products forecasted to be purchased by LifeScan in the first six months
covered by such forecast shall constitute a firm order for such LS Products. If
the amount of LS Products forecasted in the first three months of such forecast
period differs from that set forth in the prior quarterly forecast, such changed
amount shall constitute an offer to Selfcare to amend the prior period's
purchase order. Such offer shall, however, be deemed to have been rejected
unless accepted by Selfcare by notice within five days after receipt. With
respect to the fourth, fifth and sixth month covered by such forecast, the
amounts of LS Products set forth in such forecast shall constitute a purchase
order for LS Products to be delivered during such months. LifeScan's forecast of
its purchase requirements for the second half of each such 12-month period shall
be advisory only.
ARTICLE III
CAPACITY PLANNING
3.1 CAPACITY PLAN CONCEPTS. From time to time LifeScan may, pursuant to
this Article III, submit forecasts, referred to as Proposed Capacity Plans, to
Selfcare for the purpose of establishing the volumes of LS Products which, if
subsequently ordered by LifeScan and not delivered by Selfcare, will under
certain circumstances entitle LifeScan to exercise certain rights under its
Self-help License pursuant to Article VII. If such forecasts for LS Strips
exceeds certain levels, Selfcare shall be entitled, pursuant to this Article
III, to require LifeScan to make certain payments, referred to as Capital
Expenditure Make-up
Restated Distribution Agreement in Word as executed 8
Payments, if LifeScan confirms its volume projections and thereafter its orders
fall short by certain amounts. It is not the intention of the parties to permit
any such Capital Expenditure Make-up Payments with respect to the additional
capacity Selfcare intends to create through the Product Expansion Loans referred
to in Section 3.8 as and when such additional capacity becomes available.
3.2 PROPOSED AND BINDING CAPACITY PLAN DEFINITIONS. "Proposed Capacity
Plan" means, for any calendar year and for any LS Products, the amount thereof,
stated in terms of an average monthly purchase requirement, forecast in good
faith by LifeScan to be ordered for delivery during such calendar year in a
written projection of which LifeScan has given Selfcare notice as required
below. LifeScan shall deliver Proposed Capacity Plans to Selfcare one year prior
to the commencement of the calendar year to which they apply. Proposed Capacity
Plans must be explicitly identified with bold print in the cover letter or
transmittal form transmitting the document, and on each page of the document
proposed to constitute the Proposed Capacity Plan, as a"Proposed Capacity Plan
pursuant to the Sales Distribution Agreement for Testing System for Glucose in
Humans."
"Binding Capacity Plan" means with respect to any calendar year (i) in
the case of LS Strips, the Proposed Capacity Plan for such calendar year unless
Selfcare has given a Capital Requirements Notice in response to it which has not
been accepted by LifeScan, in which event the Binding Capacity Plan for such
calendar year for LS Strips shall be such other amount as LifeScan and Selfcare
shall agree and in the absence of any such agreement, the Yearly Minimum for
such calendar year pursuant to Section 4.4 and (ii) in the case of any other LS
Products, the Proposed Capacity Plan for such calendar year.
3.3 BASE CAPACITY.
(a) If Selfcare shall provide the notice described in Section
3.8(a), the Capital Requirements Notice provided for under Section 3.4(b) shall
be rescinded and "Base Capacity" shall mean with respect to a Proposed Capacity
Plan for a calendar year, the greater of (i) the highest Binding Capacity Plan
for any then-prior calendar year with respect to which Selfcare has given a
Capital Requirements Notice which has been accepted by LifeScan and (h) the
amount set forth as follows:
Restated Distribution Agreement in Word as executed
9
------------------------------------------------------------------------------------------------------------
YEAR NUMBER OF LS STRIPS PER MONTH
------------------------------------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------------------------------------
Thereafter [OMITTED] of the number of LS Strips
purchased by LifeScan during the 12
calendar month period preceding the date of
delivery of such Proposed Capacity Plan
divided by 12, provided that the resulting
Base Capacity does not exceed [OMITTED]
[OMITTED] LS Strips per Month
------------------------------------------------------------------------------------------------------------
Upon reaching or exceeding purchases of [OMITTED] of the number of LS Strips
[OMITTED] LS Strips per Month purchased by LifeScan during the 12
calendar month period preceding the date of
delivery of such Proposed Capacity Plan
divided by 12
------------------------------------------------------------------------------------------------------------
(b) If Selfcare shall not provide the notice described in
Section 3.8(a), "Base Capacity" means with respect to a Proposed Capacity Plan
for a calendar year, the greater of (i) the highest Binding Capacity Plan for
any then-prior calendar year with respect to which Selfcare has given a Capital
Requirements Notice which has been accepted by LifeScan and (ii) the amount set
forth as follows:
------------------------------------------------------------------------------------------------------------
YEAR NUMBER OF LS STRIPS PER MONTH
------------------------------------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------------------------------------
Thereafter [OMITTED] of the number of LS Strips
purchased by LifeScan during the 12
calendar month period preceding the date
of delivery of such Proposed Capacity Plan
divided by 12
------------------------------------------------------------------------------------------------------------
Restated Distribution Agreement in Word as executed 10
3.4 CAPITAL REQUIREMENTS NOTICES.
(a) If the average monthly purchase requirement for LS Strips
projected by LifeScan in its Proposed Capacity Plan for a calendar year exceeds
the applicable Base Capacity, Selfcare may give written notice (a "Capital
Requirements Notice") to LifeScan within sixty (60) days after receipt of such
Proposed Capacity Plan, indicating the capital expenditures that Selfcare
reasonably estimates in good faith that it will need to make in order to meet
LifeScan's projected demand. Any such Capital Requirements Notice must be based
upon calculations that assume that all incremental additional manufacturing
capacity purchased with the proceeds of the Product Expansion Loans referred to
in Section 3.8 would be dedicated to the requirements of LifeScan. If Selfcare
fails to deliver a Capital Requirements Notice to LifeScan with respect to a
Proposed Capacity Plan, it shall become a Binding Capacity Plan and Selfcare
shall not be entitled to require LifeScan to make Capital Expenditure Make-up
Payments pursuant to Section 3.5 with respect to such Binding Capacity Plan.
(b) From and after the date hereof:
(i) LifeScan shall be deemed to have provided to Selfcare
under Section 3.5 a Proposed Capacity Plan for
[OMITTED] LS Strips for the year 2001; and
(ii) Selfcare shall be deemed to have given and LifeScan
to have accepted a Capital Requirements Notice in the
amount of Two Million Five Hundred Thousand British
Pounds Sterling (2,500,000 f) with respect to such
plan, which shall constitute a Binding Capacity Plan
for purposes of Section 3.5.
(c) The Proposed Capacity Plan, the Capital Requirements
Notice and the acceptance thereof provided for in paragraph (b) of this Section
shall be deemed rescinded and of no force or effect if Selfcare shall have
provided the notice described in Section 3.8(a).
3.5 ACCEPTANCE AND REJECTION OF CAPITAL REQUIREMENTS NOTICES. If
LifeScan does not accept a Capital Requirements Notice by giving notice to
Selfcare within 30 days after receipt thereof, such Capital Requirements Notice
shall be deemed rejected. If Selfcare gives a Capital Requirements Notice and it
is rejected, Selfcare shall not be required to supply more LS Strips in the
calendar year to which the Capital Requirements Notice relates than the greater
of (i) the applicable Yearly Minimum or (ii) the maximum amount Selfcare can
economically produce without incurring capital expenditures other than those
necessary to maintain existing capacity. Such a rejected Proposed Capacity Plan
in response to which such Capital Requirements Notice was given shall not be
effective for any purpose hereunder. If LifeScan accepts a Capital Requirements
Notice given in response to a Proposed Capacity Plan for a calendar year by
notice to Selfcare, such Proposed Capacity Plan shall become a Binding Capacity
Plan and if LifeScan thereafter fails to order for delivery during such calendar
year at least 90% of the number of strips projected to be purchased by LifeScan
in such Binding Capacity Plan, then LifeScan shall make a payment (a "Capital
Expenditure Make-up
Restated Distribution Agreement in Word as executed 11
Payment") to Selfcare, promptly after written demand therefor, in an amount
determined by the following formula:
CEMP = Cap Ex X (Required - - Actual -)/Required -
where,
CEMP = Capital Expenditure Make-up Payment with respect to a
calendar year
Cap Ex = the lesser of the capital expenditures estimated
by Selfcare in its Capital Requirements Notice or the
actual capital expenditures made by Selfcare to
increase LS Strip production capacity in response to
the Binding Capacity Plan for such calendar year
Required - = the amount by which 90% of the Binding Capacity Plan
for the calendar year at issue exceeds, in the case
of calendar years through 2002, the Base Capacity for
such year and in the case of calendar years
thereafter, the total number of LS Strips projected
to be purchased by LifeScan in the Binding Capacity
Plan for the calendar year prior to the year at issue
Actual A the amount by which LifeScan's total
purchases of LS Strips in the applicable Current Year
exceeds, in the case of calendar years through 2002,
the Base Capacity for such year and in the case of
calendar years thereafter, the total number of LS
Strips projected to be purchased by LifeScan in the
Binding Capacity Plan for the calendar year prior to
the year at issue
For example with respect to a calendar year after 2002, if the Binding
Capacity Plan for the prior year is [OMITTED] the Binding Capacity Plan for the
calendar year at issue is [OMITTED] Selfcare gives and LifeScan accepts a
Capital Requirements Notice starting that Selfcare will be required to make
capital expenditures of [OMITTED] to meet such increased demand and actually
spends somewhat more, and LifeScan's actual purchases in the year at issue are
[OMITTED] LifeScan will be obligated to make a Capital Expenditure Make-up
Payment of [OMITTED] calculated as follows:
Cap Ex = [OMITTED]
Required - = [OMITTED]
Actual - = [OMITTED]
CEMP
3.6 CREDIT FOR CAPITAL EXPENDITURE MAKE-UP PAYMENTS. If LifeScan makes
a Capital Expenditure Make-up Payment with respect to purchases of LS Strips for
a calendar year (the "Payment Year"), then in each following calendar year
thereafter (a "Credit Year") in which LifeScan purchases more LS Strips than it
did in any prior year commencing with the year with respect to which such
Capital Expenditure Make-up Payment was required, LifeScan shall
Restated Distribution Agreement in Word as executed 12
be entitled to a credit against payments next due for LS Strips purchased
thereafter. The amount of any such credit shall equal the amount by which such
Capital Expenditure Make-up Payment exceeds the amount which would have been
required had LifeScan's purchases of LS Strips in the Payment Year been equal to
its purchases in the Credit Year, reduced by any credits taken with respect to
any prior Credit Years.
For example, continuing the example in Section 3.5, if in the first
year after LifeScan makes the Capital Expenditure Make-up Payment of [OMITTED]
LifeScan's purchases of LS Strips are [OMITTED] LifeScan shall be entitle to a
credit calculated as follows:
Cap Ex = [OMITTED]
Required - = [OMITTED]
Actual - = [OMITTED]
CEMP = [OMITTED]
Credit = [OMITTED]
If in the second ear after LifeScan makes the Capital Expenditure
Make-up Payment of [OMITTED] LifeScan's purchases of LS Strips are [OMITTED]
LifeScan shall be entitled to a credit calculated as follows:
Cap Ex = [OMITTED]
Required - = [OMITTED]
Actual - = [OMITTED]
CEMP = [OMITTED]
Credit = Difference in payment - prior credit or [OMITTED]
3.7 COOPERATION REGARDING CAPITAL EXPENDITURE MAKE-UP PAYMENTS.
LifeScan acknowledges that its obligation to make Capital Expenditure Make-up
Payments is intended in part to facilitate financing which Selfcare may seek for
the purpose of obtaining capital to expand its production capacity of LS Strips
to meet LifeScan's demand. Prior to disclosing to any potential source of
financing other than a bank, insurance company, pension fund or other
institutional lender, any of the terms of any Transaction Agreement, however,
Selfcare shall require that such potential source of financing agree to be
subject to confidentiality obligations that are substantially equivalent to
those binding upon Selfcare under Article V of the Master Agreement. LifeScan
agrees to permit an assignment of Selfcare's rights to such payment to finance
such capital expenditures and to deliver such further instruments as Selfcare or
a proposed source of financing may reasonably require to obtain any such
financing, including an agreement not to exercise any right of set off against
any assignee of the right to receive Capital Expenditure Make-up Payments
providing financing to Selfcare. LifeScan shall not, however, be required to
incur any out-of-pocket expense or otherwise waive any right or claim against
Selfcare.
Restated Distribution Agreement in Word as executed 13
3.8 SALES SHORTFALL PAYMENTS.
(a) At any time on or prior to the date 190 days after the
date hereof, Selfcare may elect to avail itself of the benefits of paragraph (b)
of this Section by giving notice to LifeScan of a financial institution of
recognized standing (the "Bank") which Selfcare has asked to provide financing
to Selfcare in reliance on the provisions of this Section 3.8. Any such
financings (together with any refinancings thereof that do not increase the
aggregate principal amount outstanding) shall constitute "Product Expansion
Loans". Selfcare anticipates that its manufacturing capacity for LS Strips shall
be increased as described in Schedule 3.8 as a result of the Product Expansion
Loans. In order to induce the Bank to advance the Product Expansion Loans to
Selfcare, Selfcare may assign to the Bank its rights under this Section 3.8.
(b) In the event that LifeScan shall fail for any calendar
quarter after 1999 to purchase and pay for at least the respective Target Amount
of LS Strips for such calendar quarter set forth below, LifeScan shall pay over
to Selfcare, or at the direction of Selfcare, directly to such holder of the
loan or to an agent of such holder, as Selfcare may designate in order to obtain
Product Expansion Loans, within 15 days after the end of such calendar quarter
an amount calculated as follows:
[OMITTED] multiplied by the difference, if positive, of (i)
the applicable Target Amount of LS Strips for the then-prior
calendar quarter, less (ii) actual purchases of LS Strips by
LifeScan with respect to such calendar quarter.
------------------------------------------------------------------------------
YEAR/QUARTER TARGET AMOUNT OF LS STRIPS
------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------
Notwithstanding the foregoing, no such payment by LifeScan need be made for a
calendar quarter where aggregate purchases of LS Strips by LifeScan for such
calendar year to date meet or exceed the aggregate of the Target Amounts for the
calendar quarters ending with the calendar quarter at issue. For purposes only
of the payment requirement set forth in this paragraph, no reduction in the
required amounts of purchases of LS Strips shall be made except in cases in
which the failure to manufacture or deliver such LS Strips arises or results
Restated Distribution Agreement in Word as executed 14
from (i) the willful breach by Selfcare of a term or condition of this
Distribution Agreement, or (ii) an event or condition covered by Selfcare's
business interruption insurance.
(c) Selfcare shall cause the Bank to issue to LifeScan a
notice promptly and in any event within ten business days after the Product
Expansion Loans have been repaid. Upon and after repayment of the Product
Expansion Loans, LifeScan shall recover the aggregate amount, if any, paid under
paragraph (b) by deducting from the invoice price of each LS Strip purchased by
LifeScan the amount of 0.0125 British Pounds Sterling until such aggregate
amount has been repaid in full. Notwithstanding anything to the contrary set
forth herein, Selfcare shall repay to LifeScan any amount outstanding under this
paragraph and theretofore unpaid upon the earliest of (i) three years after the
date of repayment of the Product Expansion Loans, or (ii) the date of
termination of this Distribution Agreement for any reason, or (iii) an Event of
Default shall have occurred under the SC Note. Any such repayment under the
previous sentence shall be in cash by wire transfer to the account of LifeScan
provided by notice to Selfcare.
ARTICLE IV
MARKET DEVELOPMENT RIGHTS
4.1 INITIAL SALES RESTRICTIONS. As an inducement to LifeScan to invest
the monies and management resources necessary to develop the market for LS
Products, Selfcare agrees that, except as provided in Sections 4.2, 4.3, 4.4,
4.5, 4.6 and 4.7, neither Selfcare nor any of its Affiliates shall, to the
extent such restrictions are permitted by applicable law, sell anywhere in the
world other than to LifeScan:
(a) Compatible Products, or
(b) Complete System Products; or
(c) Test Strips.
4.2 RESERVED MARKETING RIGHTS. No term of this Distribution Agreement
shall prohibit Selfcare or any of its Affiliates from:
(a) manufacturing and selling Test Strips which are not
Compatible Products where (i) the Test Strips are designed to be used with a
meter or other system which (A) is manufactured by or for a third party, and (B)
together with related Test Strips manufactured by or for such third party, have
been distributed commercially in either the United States or the European Union
for at least two years, and (ii) such sales of Test Strips are made to
wholesalers, to retail outlets, to health maintenance organizations or similar
managed care organizations or directly to consumers; and
(b) performing its existing contractual obligations, all of
which are described or copies of which are set forth in Schedule 4.2, to
manufacture and sell Test Strips for
Restated Distribution Agreement in Word as executed 15
measuring glucose in humans designed to be used, and usable, only with
Instruments not manufactured or sold by Selfcare, provided, however, that
Selfcare shall not voluntarily renew or extend any such contractual obligation
or any other arrangement it may have with third par-ties, written or oral,
formal or informal, to the extent that Selfcare's performance of its obligations
thereunder would constitute a breach of its obligations under this Distribution
Agreement if such obligations had been originally entered into after the date
hereof. This provision is in no way intended to cause or induce Selfcare to
violate any current contractual obligation with a third party binding upon
Selfcare.
By way of clarification, Test Strips that satisfy the requirements of
paragraph (a) of this Section for one type or model of Instrument manufactured
by or for a third party may also be distributed and sold for use with other
types or models of Instruments manufactured by or for such third party. None of
the foregoing, however, shall constitute a license or permission of use under
any patent, patent application or other intellectual property rights owned or
used by or licensed to LifeScan or JJDC or any of their Affiliates.
4.3 FAILURE TO PURCHASE YEARLY MINIMUM. (a) If LifeScan shall fail to
purchase the applicable Yearly Minimum of LS Strips with respect to a calendar
year, the restrictions set forth in Sections 4.1(b) and 4.1(c) shall terminate
and thereafter Selfcare shall be free to sell Complete System Products and Test
Strips, in each of the foregoing cases, other than Compatible Products anywhere
in the world, but shall not sell Complete System Products to or through an
Established Person. On or before January 31 of each calendar year, LifeScan
shall be entitled to order LS Strips and pay for such LS Strips at the time of
placing an order for the purpose of satisfying its Yearly Minimum purchase
requirements for the previous calendar year. LifeScan may elect, by giving
notice to such effect to Selfcare not later than March 1 of each year, to have
the purchases made during the prior January counted, in whole or in part, as
purchases in the prior year. LS Strips shall be deemed to be "Purchased" for
purposes of the preceding sentence only when paid for by LifeScan, regardless of
whether they have been delivered. Selfcare shall not be obligated to deliver LS
Strips ordered pursuant to this Section 4.3 sooner than it is able to do so
exercising commercially reasonable efforts. To the extent that the failure of
LifeScan to purchase any portion of a Yearly Minimum of such LS Strips arises or
results from an event of Force Majeure or a failure by Selfcare to fulfill its
obligations under the terms of this Distribution Agreement, LifeScan shall be
excused from any obligation to purchase and pay for such portion.
(a) In the event that LifeScan fails to purchase the
applicable Yearly Minimum of LS Strips and LifeScan is not excused from such
obligation pursuant to paragraph (a) of this Section, the aggregate principal
amount of the Initial Loan and any Additional Loans shall be reduced by an
amount calculated as follows:
0.00937 British Pounds Sterling multiplied by the difference,
if positive, of (i) the Yearly Minimum for LS Strips for the
then-prior calendar year required pursuant to Section 4.4(b),
as modified by paragraphs (a), (c), (d) and (e) of Section
4.4, less (ii) actual orders for LS Strips by LifeScan with
respect to such
Restated Distribution Agreement in Word as executed 16
calendar year (including without limitation any such orders
through January 31 of the then-current calendar year that are
counted toward the Yearly Minimum for the prior calendar year
pursuant to Section 4.3 and excluding any such orders through
January 31 of the prior calendar year that were included
toward minimum purchases for the next-prior calendar year).
4.4 YEARLY MINIMUMS.
(a) The Yearly Minimums of LS Strips set forth in this Section
are dependent upon satisfaction of the following conditions (collectively, the
"Conditions"), as scheduled, for each of Project A, Project B and Project C: (i)
receipt by Selfcare of approval of an appropriate 510(k) Notification for each
such LS Product to permit commercial distribution in the United States, and (ii)
manufacture and delivery to LifeScan by Selfcare of at least the required
minimum Commercial Quantities of such products. If Selfcare shall fail to meet
any one or more of such conditions for Project A, Project B and/or Project C,
the Yearly Minimums set forth in paragraph (b) below shall be reduced as
provided in paragraphs (c), (d) and/or (e) below respectively. Any such
reduction of Yearly Minimums for LS Strips for delay with respect to more than
one project shall be cumulative up to the aggregate applicable Yearly Minimum
for LS Strips.
(b) The Yearly Minimum of LS Strips shall be the applicable
amount indicated in the following table (subject to adjustment as otherwise
provided in this Section):
------------------------------------------------------------------------------------------------------
YEAR NUMBER OF LS STRIPS
------------------------------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------------------------------
[OMITTED] [OMITTED]
------------------------------------------------------------------------------------------------------
[OMITTED] and each year [OMITTED] of the number of LS Strips purchased from Selfcare
thereafter during the prior year, provided, however, that if Market
Introduction has occurred anywhere in the world with respect
to any home use test system not provided by Selfcare which is
designed to measure glucose in humans and is based on a
technology other than reflectance or non-electrochemical
visually-read techniques, the applicable percentage shall be
[OMITTED] instead of [OMITTED].
------------------------------------------------------------------------------------------------------
(c) If the Conditions with respect to Project A shall not have
been satisfied (other than resulting from a failure of performance by LifeScan):
Restated Distribution Agreement in Word as executed 17
(i) by [OMITTED] but are satisfied by [OMITTED] the
Yearly Minimums of LS Strips shall be reduced for the years
[OMITTED] and [OMITTED] by [OMITTED] and [OMITTED]
respectively, which reduction amounts shall be pro rated
according to the ratio of (A) the number of days elapsed
between [OMITTED] and the date on which all conditions with
respect to Project A shall have been satisfied to (B) the
number of days between [OMITTED] and [OMITTED];
(ii) by [OMITTED] but are satisfied by [OMITTED], the
Yearly Minimums of LS Strips shall be reduced (without any
proration) for the years [OMITTED] and [OMITTED] by [OMITTED],
[OMITTED] and [OMITTED], respectively; or
(iii) by [OMITTED], the yearly Minimums of LS Strips
shall be reduced (without any proration) for the years
[OMITTED], [OMITTED] and [OMITTED] by [OMITTED], [OMITTED] and
[OMITTED], respectively.
(d) If the Conditions with respect to Project B shall not have
been satisfied (other than resulting from a failure of performance by LifeScan):
(i) by [OMITTED] but are satisfied by [OMITTED] the
Yearly Minimums of LS Strips shall be reduced for the years
[OMITTED] and [OMITTED] by [OMITTED] and [OMITTED]
respectively, which reduction amounts shall be pro rated
according to the ratio of (A) the number of days elapsed
between [OMITTED] and the date on which all Conditions with
respect to Project B shall have been satisfied to (B) the
number of days between [OMITTED] and [OMITTED];
(ii) by [OMITTED] but are satisfied by [OMITTED] the
Yearly Minimums of LS Strips shall be reduced (without any
proration) for the years [OMITTED] and [OMITTED] by [OMITTED]
and [OMITTED], respectively; or
(iii) by [OMITTED] the Yearly Minimums of LS Strips
shall be reduced (without any proration) for the years
[OMITTED] and [OMITTED] by [OMITTED] and [OMITTED],
respectively.
(e) If the Conditions with respect to Project C shall not have
been satisfied (other than resulting from a failure of performance by LifeScan):
(i) by [OMITTED], but are satisfied by [OMITTED], the
Yearly Minimums of LS Strips shall be reduced for the years
[OMITTED] and [OMITTED] by [OMITTED] and [OMITTED]
respectively, which reduction amounts shall be pro rated
according to the ratio of (A) the number of days elapsed
between [OMITTED] and the date on which all Conditions with
respect to Project C shall have been satisfied to (B) the
number of days between [OMITTED] and [OMITTED];
Restated Distribution Agreement in Word as executed 18
(ii) by [OMITTED], but are satisfied by [OMITTED],
the Yearly Minimums will be reduced (without any proration)
for the years [OMITTED] and [OMITTED] by [OMITTED] and
[OMITTED], respectively; or
(iii) by [OMITTED], the Yearly Minimums of LS Strips
shall be reduced (without any proration) for the years
[OMITTED] and [OMITTED] by [OMITTED] and [OMITTED],
respectively.
(f) In no event shall the application of paragraphs (c), (d)
and (e) above reduce the Yearly Minimum for any calendar year below [OMITTED].
4.5 TERMINATION OF SECTION 4.1(c) RESTRICTION. The restriction set
forth in Section 4.1(c) shall terminate and Selfcare shall be free to sell Test
Strips, other than Compatible Products, anywhere in the world after the last to
occur of the following:
(i) December 31, 2002;
(ii) the date as of which Selfcare shall have repaid
the aggregate principal amount of the Initial Loan and of any
Additional Loans and all interest accrued and unpaid thereon;
and
(iii) March 1 of a year after 2002 following a
calendar year with respect to which the total revenues
(including without limitation amounts credited to such
calendar year pursuant to Section 4.3 and excluding any such
amounts through January 31 of the prior calendar year that
were included toward minimum purchases for the next-prior or
calendar year pursuant to Section 4.3) received by Selfcare
and its Affiliates from LifeScan shall not have been at least
the greater of (A) [OMITTED] with at least 75% of the amount
arising from the sale of Test Strips), or (B) 80% of the
amount of purchases of LS Products by LifeScan for the prior
calendar year (with at least 75% of such amount arising from
the sale of Test Strips).
4.6 INTRODUCTION OF COMPETING ELECTROCHEMICAL SYSTEM.
(a) If there is a Market Introduction on or before December
31, 1999 anywhere in the world by LifeScan or any Affiliate of LifeScan of any
electrochemical testing system designed to be capable of home use to measure
glucose in humans and which is not supplied by Selfcare, then all restrictions
set forth in Section 4.1 shall terminate.
(b) If such Market Introduction occurs during the years 2000
or 2001, the restriction set forth in Section 4.1(b) and Section 4.1(c) shall
terminate and thereafter Selfcare shall be free to sell Complete System Products
and/or Test Strips, in each case other than Compatible Products, anywhere in the
world.
Restated Distribution Agreement in Word as executed 19
4.7 NOVEL GLUCOSE SYSTEMS. The parties agree that Section 3.1 of the
Master Agreement shall continue in full force and effect but that the definition
of "Novel Glucose System" shall be as set forth in this Distribution Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARTIES
5.1 Selfcare represents and warrants as follows:
(a) Selfcare has full power to execute, deliver and perform
this Distribution Agreement, the Credit Agreement and the SC Note.
(b) The Distribution Agreement has been, and, when executed
and delivered, the SC Note and the Credit Agreement will be, duly executed and
delivered by Selfcare and is, or in the case of the SC Note and the Credit
Agreement will be, the legal, valid and binding obligation of Selfcare,
enforceable in accordance with its terms, subject as to enforcement of remedies
to applicable bankruptcy, insolvency, and reorganization laws and to moratorium
and similar laws from time to time in effect. The execution, delivery and
performance of this Distribution Agreement has been, and the execution, delivery
and performance of the Credit Agreement and the SC Note will be upon their
delivery, duly authorized by all necessary corporate action of Selfcare.
Schedule 4.2 sets forth Selfcare's obligations described in Section 4.2(b),
correctly and completely with respect to the identity of all contracting
parties, and correctly with respect to the substance of such agreements except
for material excised in order to maintain the confidentiality of certain
technical information not relevant to this Distribution Agreement.
5.2 LifeScan represents and warrants as follows:
(a) LifeScan has full power to execute, deliver and perform
this Distribution Agreement and the Credit Agreement.
(b) The Distribution Agreement has been and, when executed and
delivered, the Credit Agreement will be, duly executed and delivered by LifeScan
and is, or in the case of the Credit Agreement will be, the legal, valid and
binding obligation of LifeScan, enforceable in accordance with its terms,
subject as to enforcement of remedies to applicable bankruptcy, insolvency, and
reorganization laws and to moratorium and similar laws from time to time in
effect. The execution, delivery and performance of this Distribution Agreement
has been, and the execution, delivery and performance of the Credit Agreement
will be, upon its delivery, duly authorized by all necessary corporate action of
LifeScan.
ARTICLE VI
PRICE
Restated Distribution Agreement in Word as executed 20
6.1 LS PRODUCTS OTHER THAN LS STRIPS. The base price for LS Products
other than LS Strips purchased by LifeScan hereunder shall be as set forth in
Schedule 6.1 hereto for the LS Products described therein. The base price for LS
Products other than those described in Schedule 6.1 and LS Strips purchased by
LifeScan hereunder shall be the cost at which such LS Products would be valued,
on a "first-in, first-out" basis under United States generally accepted
accounting principles but including appropriate allocations of overhead, for
reporting on the audited balance sheet of Selfcare at the end of the accounting
period in which such LS Product is manufactured. Selfcare shall be entitled to
select from time to time such accounting period not longer than a calendar year
as it may elect for the purpose of this Section 6.1 so long as in changing
accounting periods, no cost item shall be taken into account more than once.
Unless LifeScan otherwise requests, Selfcare will contract for products other
than LS Strips solely in U.S. Dollars. If Selfcare is permitted to contract for
products other than LS Strips in a currency other than U.S. Dollars, pricing for
LS Products pursuant to Section 6.1 shall be calculated based on the currencies
in which such costs are incurred by Selfcare and shall be converted to U.S.
Dollars at the prices at which such currencies could be purchased with U.S.
Dollars prevailing at the time Selfcare prepares invoices for such LS Products.
6.2 BASE STRIP PRICES. In each calendar year, the base price per LS
Strip (the "Base Strip Prices") purchased by LifeScan hereunder shall depend on
the annualized total number of LS Strips of all types sold by Selfcare and
purchased by LifeScan during such year, as set forth below, subject to reduction
as provided in this Section 6.2:
---------------------------------------------------------------------------------------------------
Number of Test Strips Price per strip in British Price per strip in U.S. Dollar
Purchased During Such Pounds Sterling
Calendar Year (on an
annualized basis)
---------------------------------------------------------------------------------------------------
Fewer than [OMITTED] [OMITTED] [OMITTED]
---------------------------------------------------------------------------------------------------
[OMITTED] to [OMITTED] [OMITTED] [OMITTED]
---------------------------------------------------------------------------------------------------
[OMITTED] to [OMITTED] [OMITTED] [OMITTED]
---------------------------------------------------------------------------------------------------
[OMITTED] to [OMITTED] [OMITTED] [OMITTED]
---------------------------------------------------------------------------------------------------
[OMITTED] to [OMITTED] [OMITTED] [OMITTED]
---------------------------------------------------------------------------------------------------
[OMITTED] to [OMITTED] [OMITTED] [OMITTED]
---------------------------------------------------------------------------------------------------
[OMITTED] to [OMITTED] [OMITTED] [OMITTED]
---------------------------------------------------------------------------------------------------
[OMITTED] to or more [OMITTED] [OMITTED]
---------------------------------------------------------------------------------------------------
*This price shall be reduced by an additional [OMITTED] British Pounds
Sterling (or [OMITTED] if paid in U.S. Dollars) for each calendar quarter during
which LifeScan has at least a [OMITTED] market share in the United States of
sales of Test Strips similar to LS Strips. Markets are shall be determined by
reference to a report of IMS Market Services or other similar vendor of
recognized national reputation agreed upon by the parties.
The price to be paid by LifeScan for LS Strips ordered in any year
shall be the applicable Base Strip Price (adjusted through the date of invoicing
as provided in Section 6.4,
Restated Distribution Agreement in Word as executed 21
Section 6.5, Section 11.2 and Section 12.4). Prices invoiced by Selfcare during
each calendar year shall be based upon annualized estimates of purchases of LS
Strips for each 12-month period beginning on the date hereof and on each annual
anniversary of such date. Adjustments in payments for LS Strips shall be made by
the parties within 30 days after the later of (i) the close of each calendar
year based on the quantities of LS Strips actually purchased, or, (ii) if
applicable, the date of any adjustment to such purchases for such calendar year
required pursuant to Section 4.3. If Test Strips are provided in a disposable
component [OMITTED] the disposable component shall be provided by Selfcare at no
additional charge. If Test Strips are provided in a reusable component, such
reusable component shall constitute a Related Component and shall be priced in
accordance with Section 6. 1.
6.3 PAYMENT IN LOCAL CURRENCY FOR LS STRIPS. LifeScan will be invoiced
in Pounds Sterling and pay in Pounds Sterling for LS Strips which have
production costs in Pounds Sterling. LifeScan will be invoiced in U.S. Dollars
and pay in U.S. Dollars for LS Strips which have production cost in U.S.
Dollars. If Selfcare manufactures outside of United Kingdom and United States,
it will not be protected on currency fluctuations unless LifeScan otherwise
agrees.
6.4 ADJUSTMENT BASED ON LS RESALE PRICE. Each calendar year (a "Price
Year") the strip prices shall be increased (but never decreased) in proportion
to the increase, if any, in the LS Resale Price from (i) the calendar year
beginning two years prior to such Price Year to (ii) the calendar year beginning
one year prior to such Price Year provided that if the LS Resale Price shall
decrease from one calendar year to the next, the LS Resale Price shall be deemed
to have remained at the level in effect prior to such decrease until thereafter
exceeded.
"LS Resale Price" means the weighted average world-wide net price at
which LifeScan resells LS Strips.
6.5 ADJUSTMENT BASED ON SELFCARE PROFITABILITY. If the sale of LS
Strips to LifeScan on the pricing terms provided in this Distribution Agreement
ceases to be profitable for Selfcare, the parties agree that in lieu of the
price otherwise applicable under this Distribution Agreement, the price for LS
Strips shall be such amount as gives Selfcare a commercially reasonable profit.
The Parties agree to negotiate in good faith with regard to any such price
adjustment. The determination of the amount of such profit shall include
comparison with other Selfcare product lines as well as other similar OEM
arrangements, and shall take into account reasonable allocations of Selfcare's
overhead but shall exclude any payments of principal or interest on any loans,
including without limitation the Product Expansion Loans. If Selfcare claims
that it is entitled to a pricing adjustment under this Section 6.5, LifeScan
shall be entitled to audit Selfcare's books and records to the extent necessary.
to verify Selfcare's claims with regard to its profitability.
Restated Distribution Agreement in Word as executed 22
ARTICLE VII
FAILURE BY SELFCARE TO SUPPLY
7.1 DEFINITIONS RELATING TO SELF-HELP LICENSING. "Required Amount"
means, with respect to any calendar year, the lesser of (i) the amount of LS
Product ordered by LifeScan for delivery during such period or (ii) the amount
of product forecast to be ordered by LifeScan for delivery during such calendar
year, in the Binding Capacity Plan, in each case calculated ratably on a monthly
basis.
A "Supply Default" shall occur if:
(a) Selfcare fails to ship to LifeScan on a cumulative basis
during any period of four consecutive calendar months (the "First Period") the
Required Amount of any LS Products for such First Period; and
(b) after notice of such failure by LifeScan to Selfcare,
Selfcare fails, during the course of the four consecutive calendar months
immediately following such notice (the "Second Period"), to ship to LifeScan an
amount of such LS Products equal to the lesser of (i) the amount of such product
for which LifeScan requests delivery during the Second Period and (ii) the sum
of the Required Amount for the Second Period and the short fall in Selfcare's
deliveries of such product from the Required Amount during the First Period.
"Self-help License" means a nonexclusive license on the terms set forth
in this Article VII of Selfcare's rights in patents and know-how used in making,
using or selling the LS Products as to which either a Supply Default has
occurred or Selfcare's production capabilities have been affected by Force
Majeure, whichever is applicable, to make, use and sell such LS Products for so
long as Selfcare fails to supply the Required Amount of such LS Products. Any
such license shall permit LifeScan to authorize others to make any such LS
Products exclusively for LifeScan so long as such parties agree to terms to
protect the confidentiality of Selfcare's Confidential Information that are
substantially equivalent to those set forth in Article V of the Master
Agreement. In no event, however, shall LifeScan be entitled to authorize any
Person other than Persons which are Affiliates of LifeScan, for so long as they
remain Affiliates, to print Test Strips.
7.2 LICENSE ON SUPPLY DEFAULT. Selfcare hereby grants to LifeScan a
Self-help License, but LifeScan shall not exercise any right under such license
unless and until Selfcare shall have acknowledged, or an arbitrator pursuant to
Section 6.2 of the Master Agreement, shall have determined (i) that a Supply
Default shall have occurred other than as a result of Force Majeure or (ii) that
the conditions to the exercise by LifeScan of its rights under the Self-help
License pursuant to Section 7.3 or 7.4 have been satisfied.
7.3 COMMUNICATIONS FOLLOWING FORCE MAJEURE. If Selfcare becomes aware
that as a result of Force Majeure, a Supply Default is likely to occur, Selfcare
will give notice to LifeScan indicating the extent to which its capability of
supplying LS Products has been
Restated Distribution Agreement in Word as executed 23
affected, together with an estimate of the time anticipated for Selfcare to
restore its manufacturing capability in order to meet the applicable Binding
Capacity Plan. If such period is less than eight (8) months from the date of the
occurrence of the Force Majeure, Selfcare shall diligently attempt to restore
its production capabilities and LifeScan shall not be entitled to exercise any
of its rights under the Self-help License. If Selfcare estimates that it will
take more than eight (8) months from the date of the occurrence of the Force
Majeure to restore such manufacturing capability, LifeScan may, if it determines
in good faith that it could build an alternative manufacturing capability for
the affected LS Products in a shorter time frame, give notice (a "Supply Timing
Notice") to such effect to Selfcare within thirty (30) days after receipt of
Selfcare's estimate. Within thirty (30) days after receipt of such notice,
Selfcare shall elect whether to reduce its estimate to the period estimated by
LifeScan to build such capability, and failing to give a notice, shall be deemed
to have elected not to alter its estimate.
7.4 RIGHTS FOLLOWING FORCE MAJEURE. If LifeScan has given a Supply
Timing Notice and Selfcare fails to elect to reduce its estimate to the period
estimated by LifeScan to build its own capability, or if following the
occurrence of a Force Majeure affecting the supply of LS Products, Selfcare
fails diligently to attempt to re-establish its supply capabilities, LifeScan
shall be permitted to exercise all of its rights under the Self-help License. If
Selfcare elects to reduce its estimate to meet LifeScan's estimated time to
start a supply of the affected LS Product and thereafter fails within a time
period equal to one hundred and fifteen percent (115%) of the period from the
occurrence of the Force Majeure until the revised estimated date to have
production capability restored, to restore such production capability and resume
supply of LS Products to LifeScan in the Required Amount, then (i) LifeScan
shall be entitled to exercise its rights under the Self-help License, and (ii)
Selfcare will, if it elects to commence resupplying such product, supply without
charge LS Product in an amount equal to the average monthly portion of the
Required Amount of such LS Product in effect during the time Selfcare was
rebuilding its production facilities, multiplied by the number of months which
Selfcare estimated if Would take to rebuild.
7.5 RESTORATION OF SUPPLY BY SELFCARE. If LifeScan is permitted
pursuant to this Article VII to exercise its rights under the Self-help License,
Selfcare shall no longer be required to supply the LS Product with respect to
which LifeScan has become so permitted. Selfcare, however, shall be entitled to
restart supplying such LS Products as provided in this Section 7.5. If after
LifeScan has become entitled to exercise its rights under the Self-help License
pursuant to this Article VII, LifeScan expends funds in order to establish a
production capability as permitted by such license, then, except as provided
below in this Section 7.5, Selfcare must, in order to require LifeScan to
discontinue establishment of or use of such production capability and restart
purchases of the affected LS Products from Selfcare, agree to reimburse LifeScan
with the amount it has expended on equipment, personnel and other out of-pocket
costs (collectively, "Self-help Costs") in establishing such production
capability, such reimbursement to be in eight (8) equal quarterly payments
commencing three (3) months after Selfcare restarts supplying LifeScan. If
LifeScan has become entitled to exercise its rights under the Self-help License
pursuant to this Article VII and fails to establish a supply capability
sufficient to meet the applicable Required Amount within 115 % of the period
Restated Distribution Agreement in Word as executed 24
specified in LifeScan's Supply Timing Notice, then LifeScan shall not be
entitled to reimbursement of its Self-help Costs if Selfcare elects to restart
supply of the applicable LS Products.
7.6 TERMS, ROYALTIES. Any LS Products produced by LifeScan pursuant to
the Self-help License granted hereby must be sold by it only in the manner
provided for in Section 2.1 hereof and otherwise in accordance with all of the
terms of this Distribution Agreement. LifeScan shall not pay for such LS
Products in accordance with Article VI but rather shall pay a royalty to
Selfcare equal to: (1) with respect to LS Products other than LS Strips, 5.0% of
LifeScan's gross sales revenue of such LS Products sold, net of returns,
discounts and allowances, and (1i) with respect to LS Strips, the greater of (x)
5.0% of LifeScan's gross sales revenue of LS Strips sold, net of returns,
discounts and allowances or (y) on a per strip basis, Selfcare's average per
strip gross margin for the calendar year immediately preceding the date on which
the conditions giving rise to LifeScan's night to exercise its Self-help License
occur; provided that, in the event that Selfcare willfully failed to deliver the
requisite amount of LS Strips, then such royalty shall be the amount specified
in clause (x), even if the amount specified in clause (y) is greater.
7.7 COOPERATION. Pursuant to the Self-help License, LifeScan shall have
the right to receive from Selfcare the tangible embodiment of the information
and intellectual property licensed under the Self-help License, including
without limitation copies of all specifications, drawings, notebooks and bills
of materials, such assistance as LifeScan may reasonably require in its exercise
of rights under such Self-help License, including, without limitation, providing
LifeScan with appropriate know-how and training in the manufacture of LS
Products. It is the intention of LifeScan and Selfcare that the Self-help
License constitutes a license of intellectual property as defined in Title 11,
U.S. Code, and that LifeScan receive all of the benefits of Section 365(n) of
the Bankruptcy Code (or successor statute or provision) with respect to such
license. Further, all rights, powers and remedies of LifeScan provided herein
are in addition to and not in substitution for any and all other rights, powers
and remedies now or hereafter existing at law or in equity (including without
limitation Title 11, U.S. Code) in the event of a filing of a petition for
relief by or with respect to Selfcare under such Title 11 (or successor
statute). LifeScan will reimburse Selfcare's reasonable and necessary
out-of-pocket expenses incurred in connection with such assistance. Such license
and any communications pursuant thereto is subject to the confidentiality
provisions set forth in the Master Agreement. Except as contemplated by the
definition of Self-help License, LifeScan shall not grant sublicenses of the
license granted to it pursuant to this Article VII.
7.8 EXCLUSIVE REMEDY. The exercise by LifeScan of its rights under the
Self-help License shall be the sole and exclusive remedy for failure of Selfcare
to supply LS Product, unless such failure was willful on the part of Selfcare,
in which case LifeScan shall have the benefit of any additional remedy to which
it may be entitled by law.
7.9 BUSINESS INTERRUPTION INSURANCE. If Selfcare shall have made the
election described in Section 3.8(a) hereof, then from the date of such election
through December 31,
Restated Distribution Agreement in Word as executed 25
2003, Selfcare shall maintain business interruption insurance for its operations
with a responsible insurance carrier in amounts as are commercially reasonable
for similarly-situated businesses, and in any event, in an amount no less than
sufficient to pay the amount that would have been payable by LifeScan but for
the provisions of clause (ii) of the last sentence of Section 3.8(b) hereof.
Selfcare shall provide to LifeScan within five days after request therefor a
certificate of insurance evidencing such coverage or a copy of the policy of
business interruption insurance then in force.
ARTICLE VIII
CERTAIN COVENANTS
8.1 LIFESCAN COVENANTS. LifeScan agrees that it will:
(a) Keep Selfcare apprised of the development by LifeScan of
marketing plans and strategies for the sale of LS Products and allow Selfcare
the opportunity to comment on same and meet with officers and staff in charge of
such plans and strategies. LifeScan shall report at least quarterly, and shall
report reasonably promptly after request by Selfcare, information regarding LS
Products sales, performance, returns and warranty problems.
(b) Sell LS Products only in compliance with and to the extent
permitted by applicable law and the applicable product specifications. LifeScan
shall communicate to Selfcare information it learns about the effect of, the
introduction of or any amendment or change of interpretation of any law,
statute, regulation, order or ordinance applicable in any jurisdiction in which
LifeScan sells or markets LS Products which may relate to the manufacturing,
labeling or packaging of LS Products.
(c) Not act in any way that would give the impression that it
has the authority to bind Selfcare in any respect whatsoever.
(d) Not make any oral or written representations or claims
which are inconsistent to any material extent with the specifications, operating
instructions, warranties, or representations given or made by Selfcare with
respect to LS Products.
(e) Promptly give written notice to Selfcare of any breach of
a provision hereof by LifeScan of which it may become aware or of any sales,
giveaways or pre-sale promotional advertising by LifeScan or, to the extent that
the president of LifeScan becomes aware thereof, any such activities by an
Affiliate of LifeScan, anywhere in the world with respect to any home use test
system not provided by Selfcare which is designed to measure glucose. in humans
and is based on a technology other than reflectance or non-electrochemical
visually-read techniques.
Restated Distribution Agreement in Word as executed 26
8.2 SELFCARE COVENANTS. Selfcare agrees that it will:
(a) Comply with the terms of any approval from the FDA which
are required in order to manufacture and sell to LifeScan LS Products. Selfcare
shall communicate to LifeScan information it learns about the effect of, the
introduction of or any amendment or change of interpretation of any law,
statute, regulation, order bearing on the FDA Clearance for LS Products.
(b) Not act in any way that would give the impression that it
has authority to bind LifeScan in any respect whatsoever.
(c) Except as may be required by applicable law, not make any
public announcements for the purpose of selling LS Products to parties other
than LifeScan stating that LS Products are manufactured by Selfcare or directly
comparing LS Products with other products manufactured by Selfcare.
(d) Promptly give written notice to LifeScan of any breach by
Selfcare hereunder of which it may become aware.
8.3 INDEMNIFICATION.
(a) Selfcare shall indemnify and hold harmless LifeScan and
its Affiliates and their officers, directors and employees from and against any
and all claims, losses, damages, judgments, costs, awards, expenses (including
reasonable attorneys' fees) and liabilities of every kind (collectively,
"Losses") arising directly out of or resulting directly from any breach by
Selfcare of any of its warranties, guarantees, representations, obligations or
covenants contained herein.
(b) LifeScan shall indemnify and hold harmless Selfcare and
its Affiliates and their officers, directors and employees from and against any
and all Losses arising directly out of or resulting directly from any breach by
LifeScan of any of its warranties, guarantees, representations, obligations or
covenants contained herein.
(c) Each indemnified party agrees to give the indemnifying
party proper written notice of any matter upon which such indemnified party
intends to base a claim for indemnification (an "Indemnity Claim") under Article
8. The indemnifying party shall have the right to participate jointly with the
indemnified party in the indemnified party's defense, settlement or other
disposition of any Indemnity Claim. With respect to any Indemnity Claim relating
solely to the payment of money damages and which would not result in the
indemnified party's becoming subject to injunctive or other equitable relief or
otherwise adversely affect the business of the indemnified party in any manner,
and as to which the indemnified party shall have acknowledged in writing the
obligation to indemnify the indemnified party hereunder, the indemnifying party
shall have the sole right to defend, settle or otherwise dispose of such
Indemnity Claim, on such terms as the indemnifying party, in its
Restated Distribution Agreement in Word as executed 27
sole discretion, shall deem appropriate, provided that the indemnifying party
shall provide reasonable evidence of its ability to pay any damages claimed and
with respect to any such settlement shall have obtained the written release of
the indemnified party from the Indemnity Claim. The indemnifying party shall
obtain the written consent of the indemnified party, which shall not be
unreasonably withheld, prior to ceasing to defend, settling or otherwise
disposing of any Indemnity Claim if as a result thereof the indemnified party
would become subject to injunctive or other equitable relief or the business of
the indemnified party would be adversely affected in any manner.
(d) Each party shall maintain comprehensive general liability
insurance in an aggregate amount of at least $20,000,000 with such insurers and
upon such terms as are reasonably acceptable to the other party, listing such
party as a named insured under the policy and requiring that such party receive
thirty (30) days' prior written notice from the insurer prior to the
cancellation or diminution of coverage under such policy.
(e) This Section 8.3 shall survive any termination of this
Agreement.
ARTICLE IX
AGREEMENTS REGARDING TECHNOLOGY
9.1 INFRINGEMENT OF SELFCARE'S TECHNOLOGY. LifeScan and Selfcare shall
each notify, the other as soon as practicable after it becomes aware of any
infringement by a third party of, or unlawful use by a third party of,
Selfcare's proprietary technology. Either party may prosecute and defend any
action or proceeding which it deems necessary in connection with any
infringement by a third party of a patent-protected technology incorporated in
LS Products. Any and all damages recovered in any such action shall first be
applied to pay all costs and expenses of any such action. Any remaining recovery
shall be shared by both parties in accordance with the damage sustained by each
as a result of such infringement. If the recovery in any such action is not
sufficient to pay any and all costs of such action or proceeding, such costs
shall become entirely by the parties which incurred them. In any such case, the
party initiating the prosecution shall afford the other party an opportunity to
be involved in all proceedings.
9.2 U.S. AND EUROPEAN PATENT CONVENTION PATENT CONFLICTS. Selfcare
agrees to defend, at its own expense, and to pay all costs and damages awarded
against LifeScan based on, any and all claims by third parties arising from
actual or alleged infringement by LS Products of any U.S. patent or patent
issued by a participant in the European Patent Convention; provided that
Selfcare's obligation to pay such costs and damages under this Section 9.2 shall
not apply to the extent that such actual or alleged infringement arises out of
modifications to LS Products made by LifeScan; and provided that Selfcare's
obligation to pay such costs and damages shall be subject to and limited by the
following provisions of this Section 9.2. In the event that LifeScan receives a
claim or notice of a claim that is or may be subject to indemnification under
this Section 9.2, LifeScan shall (i) give Selfcare prompt written notice of such
claim or notice of claim, (ii) cooperate with Selfcare at Selfcare's
Restated Distribution Agreement in Word as executed 28
expense in every reasonable manner in the defense of such claim, and (iii)
permit Selfcare to assume and control the defense thereof at Selfcare's cost and
expense,, provided that LifeScan shall have the right, at its option and at its
expense, to participate in the defense of such claim through counsel of its own
choosing. If infringement is held to exist, or if either party determines that a
finding of infringement is likely, the parties agree to discuss in good faith
alternative arrangements under which the liability of the parties could be
reduced, including possible revisions to the infringing material so as to make
it non-infringing, or arranging to procure for LifeScan the right to continue
using the infringing material to the extent permitted by this Distribution
Agreement, provided that neither party shall be obligated to agree to any
particular alternative arrangements under this sentence and neither party shall
have any liability for failing to agree upon any such alternative arrangements.
Notwithstanding anything else in this Distribution Agreement, if LifeScan is not
enjoined from selling LS Products as a result of any actual infringement of a
U.S. patent or patent issued by a participant in the European Patent Convention,
Selfcare's liability to LifeScan under this Section 9.2 shall be limited to
future amounts payable by LifeScan to Selfcare hereunder in respect of purchases
of LS Products, and shall be collected by LifeScan solely by set-off against
such amounts as they accrue, provided that if there exist any unpaid amounts due
under this Section 9.2 at the termination of this Distribution Agreement,
Selfcare shall be required to pay such amount in cash up to the amount of its
liability under this Section 9.2 upon such termination.
9.3 PATENT CONFLICTS IN OTHER COUNTRIES. At least sixty (60) days prior
to commencement of the sale of LS Products outside of the United States and
countries which are participants in the European Patent Convention, LifeScan
shall give notice to Selfcare indicating that it plans to commence the sale of
LS Products in such a country. Following such notice, Selfcare will arrange for
a search of patent conflicts in each such country and, after completion of such
search, notify LifeScan whether it is prepared to expand the provisions of
Section 9.2 to apply to such country's patents. If LifeScan gives a notice
contemplated by this Section 9.3 and Selfcare fails thereafter to notify
LifeScan that it is prepared to expand the application of Section 9.2 to apply
to the patents of such country, then LifeScan shall not sell LS Products in such
country and the minimum purchase obligations of LifeScan pursuant to Section 4.4
shall be equitably adjusted.
9.4 TECHNICAL INFORMATION NECESSARY FOR MARKETINg. Selfcare shall
furnish to LifeScan any technical information or instructions necessary for the
marketing of LS Product. LifeScan acknowledges and agrees that all such
technical information communicated by Selfcare to LifeScan shall be the
exclusive property of Selfcare and shall be deemed to be "Confidential
Information" within the meaning of Article V of the Investment Agreement.
LifeScan further acknowledges and recognizes that Selfcare claims exclusive
ownership of its proprietary technology relating to the Glucose System and
further undertakes that it will not represent that it has any title to or right
of ownership in such technology.
Restated Distribution Agreement in Word as executed 29
ARTICLE X
MISCELLANEOUS
10.1 INVOICING. SHIPPING AND PAYMENT.
(a) Selfcare shall advise LifeScan of relevant addresses for
orders. All LS Products supplied are F.O.B. Selfcare's warehouse facilities as
they may be from time to time. LifeScan shall bear all risk of loss or damage to
LS Products after loading on board the carrier at the F.O.B. point or after
delivery to LifeScan at the F.O.B. point. LifeScan shall be liable for all
shipping, air freight, insurance, handling charges and other transportation fees
and tariffs and any other impost imposed by any government or instrumentality,
except for any such measured by the net income of Selfcare.
(b) Except as otherwise provided in Section 6.3, payments for
LS Instruments shall be made in U.S. Dollars by LifeScan to Selfcare for each
shipment of LS Instruments not later than thirty (30) days after the date of the
invoice therefor which shall not be earlier than the date of shipping by
Selfcare, hereof except that in the case of purchase prices which cannot be
determined until a later date (e.g., the cost of certain LS Instruments based on
a GAAP Inventory cost, the cost of LS Strips based on annual purchases), the
parties shall agree on an estimated cost, which LifeScan shall remit in
accordance with the requirements of this paragraph, and appropriate adjustments
shall be promptly made after determination of the definitive purchase prices.
Payments shall be by check drawn on the regular account of LifeScan.
(c) Except as otherwise provided in Section 6.3, payments for
LS Products other than LS Instruments shall be made in British Pounds Sterling
or in such currency as the parties may agree by LifeScan to Selfcare for each
shipment of such LS Products not later than thirty (30) days after the date of
the invoice therefor which shall not be earlier than the date of shipping by
Selfcare.
(d) Affiliates of LifeScan identified by notice to Selfcare
shall be permitted to order LS Products under this Distribution Agreement. Such
purchases shall be deemed those of LifeScan for all purposes hereunder.
10.2 PRODUCT WARRANTIES. Selfcare represents and warrants to LifeScan
that all LS Product supplied in connection with this Distribution Agreement
shall be of merchantable quality, fit for the purpose intended by this
Distribution Agreement and free from defects in material and workmanship and
shall be manufactured and provided by Selfcare (i) in accordance and conformity
with any applicable FDA Clearance, or in the absence of thereof, in accordance
with the definition of the Glucose System and (ii) in compliance with all
applicable federal, state or municipal statutes, laws, rules or regulations,
including those relating to the environment, food or drugs and occupational
health and safety. Without limiting the foregoing, Selfcare represents and
warrants that it shall comply with all present and future statutes, laws,
ordinances and regulations relating to the manufacture, assembly and supply of
Restated Distribution Agreement in Word as executed 30
LS Products being provided hereunder, including, without limitation, those
enforced by the FDA (including compliance with good manufacturing practices).
Further, Selfcare shall make no changes: (i) that require a filing with or
notice to the FDA or other relevant governmental health regulatory authorities,
or (ii) that Selfcare believes would be material to the raw materials,
components, vendors or methods of manufacture of any LS Product, without in
either of the foregoing cases the prior consent of LifeScan, such consent not to
be unreasonably withheld. In the event that any LS Products, upon delivery, do
not conform as aforesaid, LifeScan's remedy shall be limited to the repair or
replacement (at Selfcare's option) of such nonconforming LS Products within a
reasonable period of time. In no event shall Selfcare be liable for indirect,
consequential or money damages, whether in contract, tort or otherwise. LifeScan
agrees that it will deal directly with its customers concerning warranty matters
relating to LS Products, and Selfcare will not be required to participate in
such dealings.
10.3 AGREEMENT TERM. The term of this Distribution Agreement shall
commence on the date hereof and shall remain in effect through December 31,
2010. The term of this Distribution Agreement may be extended by LifeScan for an
additional term or terms of five years by notice to Selfcare not less than six
months prior to the scheduled end of the term including without limitation any
renewal term, provided that for each of the three years prior to the end of such
term the number of LS Strips purchased by LifeScan from Selfcare shall have
increased by an average annual rate of at least 10% over the then prior 36 month
period.
10.4 TERMINATION.
(e) This Distribution Agreement shall remain in effect as
stated in Section 10.3, PROVIDE, HOWEVER, that either party may terminate this
Distribution Agreement upon the occurrence of any of the following:
(i) the other party makes a general assignment for
the benefit of creditors, is insolvent, shall have been
adjudicated a bankrupt, shall have filed a voluntary petition
for bankruptcy or for reorganization or effectuated a plan or
other similar arrangement with creditors, shall have filed
against it proceedings for an adjudication in bankruptcy or
reorganization, or shall have applied for or permitted the
employment of a receiver or trustee or custodian for any of
its property or assets;
(ii) there is by the other party a material default,
breach or failure to perform any of the obligations,
warranties or representations set forth in this Distribution
Agreement, and such default, breach or failure to perform
shall continue for a period of thirty (30) days after notice
thereof from the other party;
Restated Distribution Agreement in Word as executed 31
(iii) nonpayment of any sums due from the other party
hereunder within thirty (30) days after such sums become due
and payable, after reasonable means have been employed to
collect such sums; or
(iv) the Yearly Minimum pursuant to Section 4.4 for
any full calendar year after [OMITTED] is less than [OMITTED]
Test Strips, other than as a result of a failure of
performance by Selfcare.
10.5 MISCELLANEOUS.
(f) This Distribution Agreement is one of the Transaction
Agreements that are subject to the terms and conditions set forth in the Master
Agreement.
(g) Any obligations incurred or amounts owed under Articles
11, VIII or IX or Section 10.1 or 10.2 of the Original Distribution Agreement
prior to the date hereof shall continue in force until satisfied.
(h) Notwithstanding anything to the contrary set forth in any
Transaction Agreement, LifeScan may assign to the Affiliate that makes the loans
provided for under Article XII all or any portion of its rights and duties under
this Distribution Agreement.
ARTICLE XI
DEVELOPMENT PLAN
11.1 ADDITIONAL LS PRODUCTS. Selfcare shall begin promptly after the
date hereof to develop the products described in Schedule 4.4. The
specifications for each such system set forth in such Schedule shall be subject
to such amendments, modifications and additions as may be requested by LifeScan
from time to time subject to the consent of Selfcare, such consent not to be
unreasonably withheld. Selfcare shall consider in good faith each such
amendment, modification and addition requested by LifeScan. Where Selfcare
concludes that adoption of a particular amendment, modification or addition to a
Specification would have a material likelihood of resulting in a delay in
satisfying the relevant conditions by dates set forth in Section 2.3(b)(i),
Section 4.4 and/or Section 11.2, Selfcare shall notify LifeScan of that and may
decline to adopt such amendment, modification or addition unless or until the
parties shall agree upon a mutually-acceptable extension of such dates to
account for such expected delay.
11.2 MILESTONES. In the event that (i) the Conditions with respect to
Project A shall not have been satisfied by [OMITTED] or (ii) the Conditions with
respect to Project B shall not have been satisfied by [OMITTED] or (iii) the
Conditions with respect to Project C shall not have been satisfied by [OMITTED]
LifeScan may increase the rate of repayment of the Initial Loan and any
Additional Loans by deducting from the invoice price of each LS Strip [OMITTED]
per LS Strip for each such project as to which such conditions shall not have
been satisfied, but any such increased repayment under this Section shall not
exceed [OMITTED] per LS Strip in the aggregate.
Restated Distribution Agreement in Word as executed 32
ARTICLE XII
CREDIT FACILITY
12.1 INITIAL LOAN.
(a) Upon satisfaction by Selfcare of the conditions described
in paragraph (b) of this Section, LifeScan shall advance to Selfcare or to an
Affiliate designated by Selfcare a loan in the principal amount of Six Million
Two Hundred Fifty Thousand British Pounds Sterling ( 6,250,000 E) (the "Initial
Loan") by wire transfer to the account of Selfcare as follows:
If Selfcare requests that payment be made directly to Selfcare, to:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
ABA #: ▇▇▇-▇▇▇-▇▇▇ Account #: 11463 7164
Account Name: Selfcare, Inc.
Otherwise, payment shall be made to Inverness Medical, Ltd., its Affiliate, to:
The Royal Bank of Scotland
▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇
Account No: ▇▇▇▇▇▇▇▇
Sort Code: 83-06-08
Account Name: Inverness Medical, Ltd.
(b) The conditions to the Initial Loan shall be as follows:
(i) the representations and warranties of Selfcare
set forth in Article V of this Distribution Agreement shall be
true and correct on and as of the date of such loan as if made
on such date;
(ii) Selfcare shall have provided to LifeScan a
certificate in the form of Exhibit A from the President and
the Chief Financial Officer of Selfcare dated as of the date
of such loan;
(iii) Selfcare shall have executed and delivered to
LifeScan the Credit Agreement in the form of Exhibit B hereto
and a note in the form of Exhibit C hereto (the "SC Note")
dated the date of such loan.
Restated Distribution Agreement in Word as executed 33
12.2 ADDITIONAL LOANS.
(a) (i) Within ten days after the receipt by Selfcare of FDA
Clearance with respect to the LS Product that meets the specifications set forth
under the heading "Project A" in Schedule 4.4 (as they may be amended pursuant
to Section 11. 1 above), LifeScan shall advance to Selfcare the amount of
2,031,250 British Pounds Sterling.
(ii) Within ten days after the commencement by
LifeScan of sales in the United States of Commercial
Quantities of an LS Product that meets the specifications set
forth under the heading "Project A" in Schedule 4.4 (as they
may be amended pursuant to Section 11. 1 above) and
satisfaction of the conditions set forth in paragraph (c) of
this Section, LifeScan shall advance to Selfcare the amount of
Two Million Thirty-one Thousand Two Hundred Fifty British
Pounds Sterling (2,0 3 1,2 5 0 f).
(b) (i) Within ten days after the receipt by Selfcare of FDA
Clearance with respect to the LS Product that meets the specifications set forth
under the heading "Project, B" in Schedule 4.4 (as they may be amended pursuant
to Section 11. 1 above), LifeScan shall advance to Selfcare the amount of Two
Million Thirty-one Thousand Two Hundred Fifty British Pounds Sterling (2,031,250
L).
(ii) Within ten days after the commencement by
LifeScan of sales in the United States of Commercial
Quantities of an LS Product that meets the specifications set
forth under the heading "Project B" in Schedule 4.4 (as they
may be amended pursuant to Section 11. 1 above) and
satisfaction of the conditions set forth in paragraph (c) of
this Section, LifeScan shall advance to Selfcare the amount of
Two Million Thirty-one Thousand Two Hundred Fifty British
Pounds Sterling (2,031,250 L).
(c) The conditions to each of the additional loans described
in paragraphs (a) and (b) of this Section shall be as follows:
(i) the representations and warranties of Selfcare
set forth in Article IV of the Master Agreement shall be true
and correct in all material respects on and as of the date of
such additional loan as if made on the date such additional
loan shall be made and there shall not then be in existence a
default, or an event or condition which with notice or the
passage of time or both would constitute a material default,
by Selfcare under any Transaction Agreement;
(ii) Selfcare shall have provided to LifeScan a
certificate in the form of Exhibit A from the President and
the Chief Financial Officer of Selfcare dated as of the date
of such loan; and
Restated Distribution Agreement in Word as executed 34
(iii) Selfcare shall have executed and delivered to
LifeScan the SC Note.
(d) Each amount advanced pursuant to paragraphs (a), (b) and
(c) above shall be an "Additional Loan" and, collectively, the "Additional
Loans". LifeScan shall provide the amount of each Additional Loan that may be
required to be made under this Section 12.2 by wire transfer to the account of
Selfcare in accordance with the instructions provided under Section 12.1 above
or as otherwise directed in writing by notice of Selfcare to LifeScan.
12.3 USE OF FUNDS.
(a) Selfcare may expend not more than [OMITTED] the proceeds
of the Initial Loan for [OMITTED].
(b) The remaining aggregate proceeds of the Initial Loan and
any additional loans shall be used exclusively in pursuit of the development
program described in Article XI above.
12.4 REPAYMENT OF LOAN.
(a) The aggregate principal amount of the Initial Loan and any
additional loans shall be repaid by deducting 0.0125 British Pounds Sterling
from the invoice price of each LS Strip purchased from Selfcare at and after the
date of such Initial Loan until such Initial Loan and any such additional loans
and all accrued interest have been paid in full. Upon any failure by Selfcare to
make a payment of interest when due, the amount of such interest shall be added
to the principal of such loans and the invoice price of each LS Strip shall be
reduced by an additional 0.0125 British Pounds Sterling until payment of such
interest (and any interest accrued on such amount).
(b) Upon the first to occur of (i) the date of termination of
this Distribution Agreement for any reason, (ii) an Event of Default shall have
occurred under the SC Note, or (iii) the fifth annual anniversary of the date of
this Distribution Agreement, the then-outstanding aggregate principal amount of
the Initial Loan and any Additional Loans, together with any accrued and unpaid
interest thereon, shall be immediately due and payable in cash by wire transfer
to the account of LifeScan provided by notice to Selfcare.
ARTICLE XIII
CONFIDENTIAL INFORMATION
13.1 CONFIDENTIAL INFORMATION. During the term of this Distribution
Agreement, Selfcare shall not disclose to a third party other than LifeScan and
its Affiliates any confidential information or trade secrets of Selfcare or
LifeScan applicable to the design, manufacture, marketing, sale or use of LS
Products or of other products for the measurement
Restated Distribution Agreement in Word as executed 35
of glucose in humans, if such disclosure is for the purpose of enabling such
third party to make or market any product which Selfcare itself would not be
permitted to make or market under the terms of this Agreement.
IN WITNESS WHEREOF, Selfcare and LifeScan have executed this
Distribution Agreement on the day first above written.
Selfcare, Inc.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: CEO
LifeScan, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: W W President
Restated Distribution Agreement in Word as executed 36