1
[INFORMATION FROM THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]
EXHIBIT 10.57
SALES DISTRIBUTION AGREEMENT
FOR
TESTING SYSTEM
FOR
BLOOD GLUCOSE
BETWEEN
LIFESCAN, INC.
AND
SELFCARE, INC.
AS OF OCTOBER 9, 1996
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND REVISIONS TO GLUCOSE SYSTEM.....................................................1
1.1 Revisions to Glucose System............................................................1
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1.2 Definitions............................................................................2
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ARTICLE II
SUPPLY OF LS PRODUCTS...........................................................................3
2.1 Supply of LS Products..................................................................3
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2.2 Supply Exclusivity.....................................................................3
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ARTICLE III
CAPACITY PLANNING...............................................................................4
3.1 Capacity Plan Concepts.................................................................4
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3.2 Proposed and Binding Capacity Plan Definitions.........................................4
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3.3 Base Capacity..........................................................................4
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3.4 Capital Requirements Notices...........................................................5
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3.5 Acceptance and Rejection of Capital Requirements Notices...............................5
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3.6 Credit for Capital Expenditure Make-up Payments........................................6
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3.7 Cooperation Regarding Capital Expenditure Make-up Payments.............................7
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ARTICLE IV
MARKET DEVELOPMENT RIGHTS.......................................................................7
4.1 Initial Sales Restrictions.............................................................7
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4.2 Reserved Marketing Rights..............................................................8
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4.3 Failure to Purchase Yearly Minimum.....................................................8
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4.4 Yearly Minimums:.......................................................................8
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4.5 Introduction of Competing Electrochemical System......................................10
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4.6 Notice................................................................................10
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ARTICLE V
REQUIRED PURCHASE OF LS PRODUCTS...............................................................11
ARTICLE VI
PRICE..........................................................................................11
6.1 LS Products Other Than LS Strips......................................................11
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6.2 Base Strip Prices.....................................................................11
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6.3 Payment in Local Currency for LS Strips...............................................12
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6.4 Adjustment Based on LS Resale Price...................................................12
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(i)
3
6.5 Adjustment Based on Selfcare Profitability............................................13
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ARTICLE VII
FAILURE BY SELFCARE TO SUPPLY..................................................................13
7.1 Definitions Relating to Self-help Licensing...........................................13
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7.2 License on Supply Default.............................................................14
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7.3 Communications Following Force Majeure................................................14
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7.4 Rights Following Force Majeure........................................................14
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7.5 Restoration of Supply by Selfcare.....................................................15
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7.6 Terms, Royalties......................................................................15
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7.7 Cooperation...........................................................................15
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7.8 Exclusive Remedy......................................................................16
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ARTICLE VIII
CERTAIN COVENANTS..............................................................................16
8.1 LifeScan Covenants....................................................................16
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8.2 Selfcare Covenants....................................................................17
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8.3 Authorization.........................................................................17
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8.4 Indemnification.......................................................................17
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ARTICLE IX
AGREEMENTS REGARDING TECHNOLOGY................................................................19
9.1 Infringement of Selfcare's Technology.................................................19
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9.2 U.S. and European Patent Convention Patent Conflicts..................................19
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9.3 Patent Conflicts in Other Countries...................................................20
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9.4 Technical Information Necessary for Marketing.........................................20
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ARTICLE X
MISCELLANEOUS..................................................................................20
10.1 Invoicing, Shipping and Payment.......................................................20
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10.2 Product Warranties....................................................................21
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10.3 Agreement Term........................................................................21
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10.4 Termination...........................................................................21
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10.5 Miscellaneous.........................................................................22
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Schedules
1.1 Description of Glucose System
4.4 Inventory Target
(ii)
4
SALES DISTRIBUTION AGREEMENT
----------------------------
FOR A TESTING SYSTEM FOR
BLOOD GLUCOSE
This Distribution Agreement is made as of October 9, 1996 by and between
Selfcare, Inc., a Delaware corporation ("Selfcare"), and LifeScan, Inc., a
California corporation ("LifeScan"). This Distribution Agreement is entered into
pursuant to the Master Agreement dated as of November 10, 1995 (the "Master
Agreement") by and among Selfcare, LifeScan and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Development
Corporation, a New Jersey corporation and relates to a home-use testing system
for measuring the concentration of blood glucose.
In consideration of the mutual covenants contained herein, and in
accordance with the terms of the Master Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS AND REVISIONS TO GLUCOSE SYSTEM
1.1 REVISIONS TO GLUCOSE SYSTEM. LifeScan and Selfcare intend to
commercialize a different home use testing system for measuring the
concentration of blood glucose than that described in Schedule 1.1 to the Master
Agreement and hereby agree that for purposes of this Agreement, "Glucose System"
means the electrochemical blood glucose testing system described in Schedule 1.1
to this Agreement, as the same may be modified with the written approval of
LifeScan or pursuant to Section 3.5 of 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 continue to be 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 shall prepare a draft 510(k) Notification with
respect to the Glucose System and Section 3.5 of the Master Agreement will apply
to it such 510(k) Notification. Selfcare and LifeScan anticipate agreeing in the
future to make changes from time to time in the specification for the Glucose
System. 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.
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1.2 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.
"Base Strip Prices" - See Section 6.2.
"Binding Capacity Plan" - See Section 3.2.
"Capital Expenditure Make-up Payment" - See Section 3.5.
"Capital Requirements Notice" - See Section 3.4.
"Compatible Products" - See Section 2.2.
"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.
"Glucose System" - See Section 1.1.
"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)
presale 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.
"Person" means any individual, corporation, partnership or other entity.
"Proposed Capacity Plan" - See Section 3.2.
"Yearly Minimum" - See Section 4.4.
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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 following products (collectively,
"LS Products"): (i) Instruments ("LS Instruments"), (ii) Test Strips ("LS
Strips") designed to be used with LS Instruments, and (iii) Related Components,
which in each case meet the specifications for the Glucose System. 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 an LS Established
Person.
"LS Established Person" means any Person which had, prior to its first
purchase from LifeScan of LS Products or other blood glucose measurement
devices, more than $100,000,000 in annual worldwide sales in the market for home
use testing of blood glucose.
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.
"Compatible Product" means any Instrument, Test Strip or Related Component which
is designed to be used with LS Instruments or LS Strips.
2.3 SAFETY STOCK. Commencing one (1) year after the first date as of which
LifeScan requests delivery of LS Products, Selfcare will exercise reasonable
efforts to maintain an inventory of LS Products available to deliver to LifeScan
sufficient to satisfy the greater of (i) two (2) times the average monthly
purchases by LifeScan over the past six (6) months, or (ii) 1.75 times the
monthly average of LifeScan's committed orders at the time.
2.4 FORECASTS AND PURCHASE ORDERS. On or prior to December 31, March 31 and
June 30 and September 30 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
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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 Payments, if LifeScan confirms its volume projections and
thereafter its orders fall short by certain amounts.
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 BLOOD
GLUCOSE."
"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. "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) in the case of calendar years 1997 through 2001, the Yearly Minimum set
forth in Section 4.4 with respect to such calendar year, and for 2002 and
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CONFIDENTIAL TREATMENT
years thereafter, 115% of the LS Strips purchased by LifeScan during the 12-
calendar month period preceding the date of delivery of such Proposed Capacity
Plan, in each case stated on an average monthly basis.
3.4 CAPITAL REQUIREMENTS NOTICES. 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. 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.
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 and the 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 XXX 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 Payment") to Selfcare, promptly after written demand
therefor, in an amount determined by the following formula:
CEMP = Cap Ex x (Required [DELTA] -Actual [DELTA] ) / Required [DELTA]
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
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CONFIDENTIAL TREATMENT
Required [DELTA]= the amount by which XXX of the Binding Capacity Plan
for the calendar year at issue exceeds, in the case of
calendar years through 2001, 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 [DELTA]= the amount by which LifeScan's total purchases of LS
Strips in the applicable Current Year exceeds, in the
case of calendar years through 2001, 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 2001, if the Binding
Capacity Plan for the prior year is XXXXXXXXXXX, the Binding Capacity Plan for
the calendar year at issue is XXXXXXXXXXX, Selfcare gives and LifeScan accepts a
Capital Requirements Notice starting that Selfcare will be required to make
capital expenditures of XXXXXXXXXX to meet such increased demand and actually
spends somewhat more, and LifeScan's actual purchases in the year at issue are
XXXXXXXXXXX, LifeScan will be obligated to make a Capital Expenditure Make-up
Payment of XXXXXXXXXXX calculated as follows:
Cap Ex = XXXXXXXXXX
Required [DELTA]= (XXX x XXXXXXXXXXX) - XXXXXXXXXXX, or XXXXXXXXXXX
Actual [DELTA]= XXXXXXXXXXX - XXXXXXXXXXX or XXXXXXXXXXX
CEMP = XXXXXXXXXX x (XXXXXXXXXXX - XXXXXXXXXXX) / XXXXXXXXXX
or XXXX of XXXXXXXXXX or XXXXXXXXXXX
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 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 XXXXXXXXXXX,
LifeScan's purchases of LS Strips are XXXXXXXXXXX, LifeScan shall be entitled to
a credit calculated as follows:
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
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CONFIDENTIAL TREATMENT
Cap Ex = XXXXXXXXXX
Required [DELTA]= XXXXXXXXXXX
Actual [DELTA]= XXXXXXXXXXX - XXXXXXXXXXX or XXXXXXXXXXX
CEMP = XXXXXXXXXX x XXXXXXXXXXXX - XXXXXXXXXXXX / XXXXXXXXXX
or XXXX of XXXXXXXXXX or XXXXXXXXXXX
Credit = XXXXXXXXXXX - XXXXXXXXXXX or XXXXXXXXXXX
If in the second year after LifeScan makes the Capital Expenditure Make-up
Payment of XXXXXXXXXXX LifeScan's purchases of LS Strips are XXXXXXXXXXX,
LifeScan shall be entitled to a credit calculated as follows:
Cap Ex = XXXXXXXXXX
Required [DELTA]= XXXXXXXXXXX
Actual [DELTA]= XXXXXXXXXXX - XXXXXXXXXXX or XXXXXXXXXXX
CEMP = XXXXXXXXXX x XXXXXXXXXXXX - XXXXXXXXXXXX / XXXXXXXXXXX
or XXXX of XXXXXXXXXX or XXXXXXXXXX
Credit = Difference in payment - prior credit or
XXXXXXXXXXXX - XXXXXXXXXX) - XXXXXXXXXXX or XXXXXXXXXX.
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.
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 4.3, 4.4 and 4.5, Selfcare
shall not, to the extent such restrictions are permitted by applicable law:
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
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CONFIDENTIAL TREATMENT
(a) sell Compatible Products other than to LifeScan anywhere in the
world; or
(b) sell Complete System Products other than to LifeScan anywhere in
the world.
4.2 RESERVED MARKETING RIGHTS. No term of this Agreement shall prohibit
Selfcare from manufacturing and selling without restriction Test Strips for
measuring blood glucose designed to be used, and usable without an additional
electronic component not supplied by Selfcare, only with Instruments not
manufactured or sold by Selfcare. The foregoing, however, shall not 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. Following any failure by LifeScan
to purchase the applicable Yearly Minimum of LS Strips with respect to a
calendar year, the restriction set forth in Section 4.1(b) shall terminate and
thereafter Selfcare shall be free to sell Complete System Products 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.
4.4 YEARLY MINIMUMS:
(a) If Selfcare obtains FDA Clearance of the Glucose System by June 1,
1997 and has delivered to LifeScan the quantities of LS Product shown on
Schedule 4.4 (or such lesser volumes as LifeScan has ordered for delivery
on or prior to such date), the "Yearly Minimum" of LS Strips for the
succeeding calendar years shall be the applicable amount indicated in the
following table:
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Year Yearly Minimum
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1997 XXXXXXXXXX
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1998 XXXXXXXXXX
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MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
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1999 XXXXXXXXXXX
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2000 XXXXXXXXXXX
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2001 XXXXXXXXXXX
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2002 and XX% of the number of LS Strips purchased from Selfcare during the
each year prior year; provided, however, that if Market Introduction has
thereafter occurred anywhere in the world with respect to any home use test
system not provided by Selfcare which is designed to measure blood
glucose and is based on a technology other than reflectance or non-
electrochemical visually-read techniques, the applicable percentage
shall be XXX% instead of XX%.
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(b) If by January 31, 1998, Selfcare shall have obtained FDA Clearance
of the Glucose System and shall have delivered the quantities of LS
Products stated in Schedule 4.4 (or such lesser volumes as LifeScan has
ordered for delivery on or prior to such date), then the Yearly Minimum of
LS Strips shall be the applicable amount indicated in the following table
(subject to adjustment as provided in Section 4.4(c) hereof):
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Year Yearly Minimum
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1997 XXXX
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1998 XXXXXXXXXXXX
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1999 XXXXXXXXXXXX
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2000 XXXXXXXXXX
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2001 XXXXXXXXXXX
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2002 XXXXXXXXXXXXX
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2003 and XX% of the number of LS Strips purchased from Selfcare during the
each year prior year; provided, however, that if Market Introduction has
thereafter occurred anywhere in the world with respect to any home use test
system not provided by Selfcare which is designed to measure blood
glucose and is based on a technology other than reflectance or non-
electrochemical visually-read techniques, the applicable percentage
shall be XXX% instead of XX%.
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MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
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(c) If the Clearance/Delivery Date, as defined below, occurs after
June 1, 1997 and before January 31, 1998, then the Yearly Minimums for each
calendar year commencing 1998 shall be the weighted average of the amounts
shown in the table in Section 4.4(a) and the amounts shown in the table in
Section 4.4(b), with the weighting of the amounts shown in the table in
Section 4.4(a) based on the number of days from the Clearance/Delivery Date
until January 31, 1998, and the weighting of the amounts shown in the table
in Section 4.4(b) based on the number of days between June 1, 1997 until
the Clearance/Delivery Date. The Clearance/Delivery Date shall be the date
on which the following two conditions are satisfied: (i) Selfcare has
obtained FDA Clearance for the Glucose System and (ii) Selfcare has
delivered to LifeScan the quantity of LS Products stated in Schedule 4.4 or
such lesser amount as LifeScan shall have ordered for delivery through the
date on which Selfcare obtains FDA clearance for the Glucose System.
(d) If the Clearance/Delivery Date is after January 31, 1998, then the
Yearly Minimum of LS Strips shall be as provided in Section 4.4(b) except
that the dates shall be extended as agreed by LifeScan and Selfcare and, if
they cannot agree, as determined by arbitration pursuant to Section 6.2 of
the Master Agreement, and the fixed numbers of LS Strips shall be reduced
as agreed by LifeScan and Selfcare and, if they cannot agree, determined by
arbitration pursuant to Section 6.2 of the Master Agreement.
4.5 INTRODUCTION OF COMPETING ELECTROCHEMICAL SYSTEM. If there is Market
Introduction on or before December 31, 2001 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 the blood glucose and which is not supplied by
Selfcare, then:
(a) If such Market Introduction occurs on or before December 31, 1999
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) shall terminate and thereafter
Selfcare shall be free to sell Complete System Products other than
Compatible Products anywhere in the world.
4.6 NOTICE. LifeScan will give notice to Selfcare of any actions by
LifeScan or any of its Affiliates of which the President of LifeScan becomes
aware which are relevant to the restrictions applicable to Selfcare pursuant to
Article IV.
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CONFIDENTIAL TREATMENT
ARTICLE V
REQUIRED PURCHASE OF LS PRODUCTS
If Selfcare has obtained FDA Clearance of the Glucose System after November
1, 1996 and before June 1, 1997, LifeScan agrees to purchase and pay for a
minimum of XXXXXXXXXX LS Strips in 1998 and XXXXXXXXXX LS Strips in 1999. If
Selfcare has not obtained FDA Clearance of the Glucose System by June 1, 1997,
LifeScan may elect, by giving notice to Selfcare on or before the earlier of (i)
the date which is sixty (60) days after Selfcare has obtained FDA Clearance of
the Glucose System and (ii) April 1, 1998, to have the minimum purchase
obligations set forth in the preceding sentence appropriately reduced and the
amount of such reduction determined by agreement of the parties, or failing such
agreement, by arbitration pursuant to Section 6.2 of the Master Agreement. If
LifeScan fails to make such election, such minimum purchase obligations shall
remain unchanged.
ARTICLE VI
PRICE
6.1 LS PRODUCTS OTHER THAN LS STRIPS. The base price for LS Products other
than LS Strips purchased by LifeScan hereunder shall be the cost at which such
LS Products would be valued, on a FIFO 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 Products 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 data 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 purchased by LifeScan during such year, as
set forth below, subject to reduction as provided in this Section 6.2:
MATERIAL OMITTED AND FILED SEPARATELY
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CONFIDENTIAL TREATMENT
---------------------------------------------------------------------------------------------------
Number of Test Strips Purchased Price per strip in Price per strip in
During Such Calendar Year Pounds Sterling U.S. Dollars
(on an annualized basis)
---------------------------------------------------------------------------------------------------
Fewer than XXXXXXXXXXX ▇▇▇▇▇ ▇▇▇▇▇
XXXXXXXXXXX to XXXXXXXXXXX ▇▇▇▇▇ ▇▇▇▇▇
XXXXXXXXXXX to XXXXXXXXXXX ▇▇▇▇▇ ▇▇▇▇▇
XXXXXXXXXXX to XXXXXXXXXXX ▇▇▇▇▇ ▇▇▇▇▇
XXXXXXXXXXX to XXXXXXXXXXX ▇▇▇▇▇ ▇▇▇▇▇
XXXXXXXXXXX to XXXXXXXXXXX ▇▇▇▇▇ ▇▇▇▇▇
XXXXXXXXXXX or more ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------------------------------------------------------------------
Each of the base prices per strip set forth above shall be decreased by $XXXX,
for the prices stated in U.S. Dollars, and XXXXX Pounds Sterling for the prices
stated in Pounds Sterling, for the remainder of the term of this Distribution
Agreement if LifeScan pays to Selfcare $XXXXXXXXX and enters into a Distribution
Agreement with respect to the first System to be offered to LifeScan pursuant to
Section 3.2 of the Master Agreement. The price to be paid by LifeScan for LS
Strips ordered in any year shall be the applicable Base Strip Price adjusted as
provided in Sections 6.4 and 6.5 through the date of invoicing.
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
cost 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 price at which
LifeScan resells LS Strips.
MATERIAL OMITTED AND FILED SEPARATELY
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6.5 ADJUSTMENT BASED ON SELFCARE PROFITABILITY. If the sale of LS
Strips to LifeScan on the pricing terms provided in this Agreement ceases to be
profitable for Selfcare, the parties agree that in lieu of the price otherwise
applicable under this 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. 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.
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
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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 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 it would take to rebuild.
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CONFIDENTIAL TREATMENT
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
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:
(i) with respect to LS Products other than LS Strips, XXX% of LifeScan's gross
sales revenue of such LS Products sold, net of returns, discounts and
allowances, and (ii) with respect to LS Strips, the greater of (x) XXX% 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 right 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
MATERIAL OMITTED AND FILED SEPARATELY
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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 VI.
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.
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.
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(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 presale 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 blood
glucose and is based on a technology other than reflectance or
non-electrochemical visually-read techniques.
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 AUTHORIZATION. Each party hereto represents that it has full power to
execute, deliver and perform this Distribution Agreement and that this
Distribution Agreement has been duly executed and delivered by such party and is
the legal, valid and, assuming due execution by the other parties hereto,
binding obligation of such party, enforceable against such party in accordance
with its terms, subject as to enforcement of remedies to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally. The execution, delivery and performance of this Distribution
Agreement has been duly authorized by all necessary corporate action of such
party.
8.4 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
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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 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 8.4 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
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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 be borne 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 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
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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.
ARTICLE X
MISCELLANEOUS
10.1 INVOICING, SHIPPING AND PAYMENT. 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.
Except as otherwise provided in Section 6.3, payments for LS Products shall be
made in U.S. Dollars by LifeScan to Selfcare for each shipment of LS Products
not later than thirty (30) days after the date of the invoice therefore which
shall not be earlier than the date of shipping by Selfcare, except that in the
case of purchase prices which cannot be determined until a later date (e.g., the
cost of 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 within such 30-day period, 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.
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
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CONFIDENTIAL TREATMENT
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 LS Products being provided hereunder, including, without
limitation, those enforced by the FDA (including compliance with good
manufacturing practices). 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.
10.4 TERMINATION. This Distribution Agreement shall remain in effect as
stated in Section 10.3, PROVIDED, HOWEVER, that either party may terminate this
Distribution Agreement upon the occurrence of any of the following:
(a) 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;
(b) 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; or
(c) 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.
(d) the Yearly Minimum pursuant to Section 4.4 for any full calendar
year after 2001 is less than XXXXXXXXXX Test Strips.
10.5 MISCELLANEOUS. This Distribution Agreement is one of the Transaction
Agreements that are subject to the terms and conditions set forth in the Master
Agreement.
MATERIAL OMITTED AND FILED SEPARATELY
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IN WITNESS WHEREOF, Selfcare and LifeScan have executed this Distribution
Agreement on the day first above written.
Selfcare, Inc.
By:
--------------------------------
Name:
Title:
LifeScan, Inc.
By:
--------------------------------
Name:
Title:
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