AVAIL MEDICAL PRODUCTS, INC. & KCI MANUFACTURING TOLL MANUFACTURING AGREEMENT
***
Confidential treatment requested on certain portions of this exhibit.
An
unredacted version of this agreement has been filed separately with the
Securities and Exchange Commission.
Exhibit
10.6
AVAIL
MEDICAL PRODUCTS, INC. & KCI MANUFACTURING
This
Toll Manufacturing Agreement (this
"Agreement") is entered into as of December 14, 2007, by and between on the
first part KCI Manufacturing, a company incorporated under the laws of Ireland,
with an address of Athlone Business & ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ("KCI Manufacturing") and on the second part Avail
Medical Products, Inc., a Delaware corporation with principal offices at
1600
▇▇▇▇▇ Fargo Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (collectively
"Avail"). This Agreement will be effective as of November 30, 2007
(the "Effective Date"). Either Avail or KCI Manufacturing may be
referred to herein as a “Party” or collectively as the “Parties.”
WITNESSETH
WHEREAS,
KCI Manufacturing is
the beneficial owner or licensee of certain manufacturing process technology
used in the design and manufacture of negative pressure wound therapy devices,
related disposables and other elements of high quality wound care methods
and
systems;
WHEREAS,
KCI Manufacturing
wishes to have Avail procure raw materials for and on behalf of KCI
Manufacturing (the “Procurement Services”) and perform processing services (the
“Processing Services”) to transform such raw materials into finished products
and Avail wishes to perform the Procurement Services and the Processing Services
for KCI Manufacturing in accordance with the terms of this
Agreement;
NOW,
THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, it is agreed by and between KCI Manufacturing and Avail
(collectively, the "Parties"), for the mutual benefit of Avail and KCI
Manufacturing, as follows:
1. Definitions. It
is understood that words and phrases set out in quotation marks in this
Agreement (often within parentheses) constitute defined terms. Absent
a very clear expression otherwise, the definitions of defined terms of this
Agreement shall be consistent for all purposes of this Agreement, irrespective
of whether inconsistent definitions are given for the same or similar terms
in
other documents. The term "includes" (and conjugates thereof) shall
always be understood to mean "includes, without limitation," (or the like)
unless expressly stated otherwise herein.
|
(a)
|
Affiliate. The
term “Affiliate” means, with respect to a Party, any company, partnership,
joint venture, or other entity that directly or indirectly Controls,
is
Controlled by, or is under common Control with such
Party. “Control” or “Controlled by” shall mean ownership of
fifty percent (50%) or more of the voting stock or the power to
direct or
cause the direction of the management and policies of the controlled
entity, whether through the ownership of voting securities, by
contract or
otherwise.
|
|
(b)
|
Products. The
term "Products" in this Agreement shall mean all sterile disposable
products for use with vacuum assisted wound closure therapy currently
(as
of the Effective Date) being marketed worldwide by KCI Manufacturing,
which are listed as integrated SKUs on Exhibit
A. Raw Materials procured by Avail for and on behalf of
KCI Manufacturing as set forth on Exhibit
B shall
not be considered “Products” as that term is used in this
Agreement. The Products shall not include any new products that
differ from the Products listed on Exhibit
A (i)
in terms of materials or manufacturing processes used, (ii) in
form, fit
or function, or (iii) because they assist in the delivery of vacuum
assisted therapy together with other different therapies (such
new
products being referred to herein as “Different
Products”). Upon mutual written agreement by the Parties,
Different Products may be added to Exhibit
A
(together with any pricing or other information that may be necessary)
and
shall become Products for purposes of this Agreement. The
Parties will cooperate in good faith to make such amendments to
Exhibit
A as
are required to comport with changes to the Product Specifications
(defined hereinafter).
|
|
(c)
|
Product
Specifications. The term “Product Specifications” means any and all
designs, drawings, blueprints, formulations, models, specifications,
quality standards, techniques, processes, performance data, manufacturing
data and procedures, know-how and other technical information relating
to
the design, production/manufacture, packaging and labeling, and/or
operation of the Products, which are provided by KCI Manufacturing
to
Avail for the purpose of producing/manufacturing the Products pursuant
to
this Agreement.
|
|
(d)
|
Raw
Materials. The term "Raw Materials" means all raw
materials and other component parts procured, manufactured, or
used by
Avail in the Processing Services for the Products, as listed on
Exhibit
B. Upon mutual written agreement by the Parties, other
Raw Materials may be added to Exhibit
B
(together with any pricing or other information that may be necessary)
and
shall become “Raw Materials” upon the mutual written agreement of the
Parties. The Parties will cooperate in good faith to make such
amendments to Exhibit
B as
are required to comport with changes to the Product
Specifications.
|
2. License. KCI
Manufacturing hereby grants to Avail, and Avail hereby accepts, a limited,
non-exclusive, non-transferable, royalty-free license to use all patents,
copyrights, designs, trademarks, service marks, trade names, trade dress,
design
rights, data, manufacturing processes, domain names, know-how, trade secrets,
and other proprietary rights owned or licensed by KCI Manufacturing, and
all
applications and registrations therefore, which pertain to the Products or
any
discovery, invention, idea or other concept created, developed or conceived
in
connection with or relating to the Products (the "Intellectual Property
Rights"), in each case for the sole and exclusive purpose of performing the
Processing Services for KCI Manufacturing in accordance with the Product
Specifications and subject to the terms and conditions of this
Agreement. KCI Manufacturing hereby warrants that it holds adequate
and sufficient rights, title or interest to the Intellectual Property Rights
as
necessary to grant the foregoing license to Avail. Any termination of
this Agreement shall immediately terminate all rights granted to Avail by
KCI
Manufacturing.
3. Exclusivity
Period. The Parties agree that there shall exist, under this
Agreement, certain exclusivity between the Parties as regards the Products,
for
the period of time commencing on the Effective Date and, unless this Agreement
is sooner Terminated or Converted With Cause (as defined herein), ceasing
[***]. The Exclusivity Period shall be extended each time the term of
this Agreement is extended in accordance with Section 22. In the
event this Agreement is Terminated or Converted With Cause during the
Exclusivity Period, then the Exclusivity Period shall immediately cease as
of
such termination or conversion.
4. Exclusivity
Terms.
|
(a)
|
Absent
a written contrary agreement between the Parties, which both Parties
represent does not exist as of the Effective Date [***] shall be
deemed
"Exclusive Products." In the event KCI Manufacturing develops
Different Products (as defined in Section 1 above), such Different
Products shall not be Products without express agreement by KCI
Manufacturing designating such Different Products to be
Products. In the Parties’ mutual spirit of goodwill and
cooperation contemplated by this Agreement, unless KCI Manufacturing
is
contractually prevented from doing so by a confidentiality agreement
or
other written agreement that expressly bars KCI Manufacturing from
doing
so, KCI Manufacturing agrees to disclose to Avail the details of
the
Different Products and manufacturing plans for them, and to grant
Avail
the opportunity to submit proposals for the Processing Services
related to
such Different Products in sufficient time prior to KCI Manufacturing’s
commencement of the manufacture thereof, or marketing launch of
the
Different Products by KCI Manufacturing, for Avail to adequately
prepare
and for KCI Manufacturing to analyze such proposal. Throughout
the Exclusivity Period and thereafter for a period of thirty-six
(36)
months, Avail agrees to not manufacture or sell any products or
components
that are either adapted for, or reasonably likely to be used in,
vacuum
assisted wound closure therapy ("Similar Products") to or for any
customer
other than KCI Manufacturing. Moreover, Avail represents and
covenants that each of its managerial, supervisory, development
or
engineering employees involved in the manufacture of Products are
bound or
shall be bound by terms that obligate such employees to not to
be involved
in the production or distribution of Similar Products during the
Exclusivity Period and for a period of thirty-six (36) months thereafter
unless this agreement is terminated by Avail as a result of an
Event of
Default or this Agreement is terminated by KCI Manufacturing without
cause
in which case such period shall be twelve months. Subject to
Section 4(b) below, throughout the Exclusivity Period, KCI Manufacturing
agrees obtain Products exclusively with Avail for Processing
Services.
|
|
(b)
|
Notwithstanding
the foregoing, KCI Manufacturing shall have the right to manufacture
and
commercialize the Products in unlimited quantities and for any
purpose,
conditioned upon [***]. In such event, Avail agrees to continue
providing the Processing Services with respect to all Products
ordered by
KCI Manufacturing. The exercise by KCI Manufacturing of its
rights under this Section 4(b) shall not be deemed a conversion
of this
Agreement under Section 22.
|
5. Procurement
and Processing
Services; Specifications; Passage of Title; Quality.
|
(a)
|
Purchase
of
Procurement Services. Pursuant to the terms and
conditions of this Agreement, KCI Manufacturing hereby engages
Avail to
provide the Procurement Services, for a fee, to procure on behalf
of KCI
Manufacturing the Raw Materials in quantities to be specified by
KCI
Manufacturing. In consideration for the fee paid by KCI
Manufacturing for the purchases set forth in this Section (the
“Procurement Services Fee” and as more fully defined herein) Avail agrees
to: (i) provide such Procurement Services to or for KCI Manufacturing;
(ii) drop-ship the procured Raw Materials to Avail’s Mexican processing
facility in such manner as may be directed by KCI Manufacturing
in
writing; and (iii) thereafter promptly notify KCI Manufacturing
with
confirmation that such Raw Materials have been properly delivered
by Avail
to Avail’s Mexican facilities. The Parties further agree that
title, risk of loss, and insurable interest to the Raw Materials
shall be
transferred to KCI Manufacturing in Mexico when the Raw Materials
are
“Delivered at Frontier” ("DAF", INCOTERMS 2000) to the Mexican frontier
(i.e., both after exiting the territory of the United States and
after
clearing the customs border of the United States) by
Avail. Avail shall arrange for Mexican customs clearance and
pay for transportation from the frontier to Avail’s Mexican processing
facility; all costs incurred by Avail in arranging for Mexican
customs
clearance, including the recordation, creation and reconciliation
of
pedimentos, shall be part of the Procurement Services Fees (as
defined
herein). Once title to the Raw Materials has passed to KCI
Manufacturing, Avail shall have no legal rights to the Raw Materials,
and,
without limitation, shall not pledge the Raw Materials as security
for
debts, liens, tax liens or other encumbrances, and shall not dispose
of
the Raw Materials without the express authorization of KCI
Manufacturing. KCI Manufacturing shall pay Avail for the costs
of any export/import pedimentos assessed against or incurred by
Avail
arising from Avail’s providing the Procurement Services.
|
|
(b)
|
Purchase
of Processing
Services. Pursuant to the terms and conditions of this
Agreement, KCI Manufacturing agrees to pay for and purchase, from
Avail,
Processing Services necessary to transform the Raw Materials delivered
to
Avail’s Mexican processing facility into Products in quantities to be
specified by KCI Manufacturing in accordance with the terms and
conditions
of this Agreement. In consideration for payments made by KCI
Manufacturing for the services as set forth in this Section (the
“Processing Services Fee” and as more fully defined herein), Avail agrees
to (i) provide such Processing Services to KCI Manufacturing in
accordance
with KCI Manufacturing’s Product Specifications; (ii) drop-ship such
Products to the destination specified in writing by the KCI Manufacturing;
and (iii) thereafter, promptly notify KCI Manufacturing with confirmation
that such Products have been properly shipped by Avail. Subject
to the Product Specifications, Avail is hereby authorized to perform
all
acts Avail deems appropriate to render the Processing Services
and perform
its duties under this Agreement without KCI Manufacturing’s prior
approval, unless such approval is otherwise expressly required
under this
Agreement Title to the Raw Materials, work in process and Products
shall
remain with KCI Manufacturing until the Products are shipped by
Avail in
accordance with Section 24 of this Agreement.
|
|
(c)
|
Purchase,
Use and
Maintenance of Equipment.
|
(i) KCI
Equipment. As part of this agreement, and the Parties’
performance hereunder, the Parties agree that certain equipment leased,
owned,
possessed or procured by KCI Manufacturing may be transferred or delivered
to
Avail by KCI Manufacturing solely for purposes of Avail performing the
Processing Services (“KCI
Equipment”). KCI Equipment shall also include any Equipment
acquired by Avail for KCI Manufacturing, at KCI Manufacturing’s cost, during the
term hereof, and of which Avail shall retain possession for purposes of
performing the Processing Services. Equipment acquired by Avail
solely for the purpose of manufacturing Products of KCI Manufacturing shall
be
deemed to be KCI Equipment, subject to the application of this Section.
(ii)
Avail
Equipment. Avail may utilize certain of its equipment owned
and possessed by Avail prior to the Effective Date, or acquired by Avail
during
the term hereof (“Avail
Equipment”). Avail may utilize any Avail Equipment for
manufacture of products for other of Avail’s customers coincident with the use
for manufacturing the Products, unless otherwise agreed in writing.
(iii)
Procurement of
Equipment by Avail. Avail may procure Equipment for or on
behalf of KCI Manufacturing according to specifications provided by KCI
Manufacturing, at the direction of KCI Manufacturing, and subject to
reimbursement from KCI Manufacturing for such procurement; such reimbursement
shall be by direct payment by KCI Manufacturing to Avail, upon invoicing
by
Avail. Upon possession by Avail, the procured Equipment shall be
deemed KCI Equipment, and shall be subject to the terms herein related to
KCI
Equipment.
(iv)
Transfer of KCI
Equipment. In the circumstance that KCI Manufacturing shall
transfer KCI Equipment to Avail as part of the Parties’ performance hereunder,
the Parties shall agree to a written Transfer Plan. A “Transfer Plan” is a
written document, ancillary to but made a part hereof by reference, describing
the specific manner in which Avail may take possession, transfer and place
such
KCI Equipment in operation at Avail’s
facilities Notwithstanding, KCI Manufacturing shall retain
all of its rights in and to the KCI Equipment.
(v)
Use
and Maintenance of KCI
Equipment. Avail shall not use the KCI Equipment for any
purpose other than the Processing Services. Avail shall maintain the
KCI Equipment in good working order by utilizing generally accepted preventive
maintenance processes and procedures. Avail shall be responsible for
damage to or loss of the KCI Equipment while in Avail’s possession, other than
normal wear and tear, arising from Avail’s negligence. KCI
Manufacturing is responsible for (a) any KCI Equipment failures that result
from
KCI Equipment design or malfunction (other than malfunctions caused by Avail’s
failure to maintain the KCI Equipment properly); (b) replacement of any of
the
KCI Equipment during the term hereof for any reason other than the abuse,
mishandling or negligence of Avail; and, (c) for all reasonable costs incurred
by Avail for maintaining the KCI Equipment, and shall remit such costs upon
invoicing by Avail. Avail shall be responsible for the safekeeping,
maintenance and protection of the Equipment while in its possession, including
protection from theft, fire, environmental or other potential means of
destruction.
(vi) Representations
regarding
KCI Equipment. Any of the KCI Equipment utilized by Avail in
rendering the Processing Services, which are transferred to Avail from KCI
Manufacturing, shall perform in accord with representations made in writing
to
Avail by KCI Manufacturing prior to the transfer regarding the condition
and
efficiency of the KCI Equipment transferred. Avail may rely upon such
representations in the pricing of the Processing Services, to the extent
that
such pricing depends upon the conformance of the KCI Equipment to such
representations. If the KCI Equipment does not function in accordance
with such representations, as Avail’s sole remedy for any breach of such
representations, the parties agree to cooperate in good faith to adjust the
pricing an any specified Processing Services impacted by the non-conforming
KCI
Equipment to the extent and in proportion to any lost efficiencies or increased
costs caused by non-conforming KCI Equipment; or otherwise to procure conforming
equipment as described elsewhere in this Agreement. Avail does not
warrant the functionality,
suitability
and operability of any KCI Equipment, whether transferred from KCI Manufacturing
or procured
by Avail on behalf of KCI Manufacturing.
|
(d)
|
Product
Specifications. From time to time during the term of
this Agreement, KCI Manufacturing shall provide Avail with data
and
documents embodying all of the Product Specifications required
for Avail’s
performance of the Processing Services. The term "Product
Specifications" in this Agreement shall mean and include any and
all
designs, drawings, blueprints, formulations, models, specifications,
quality standards, techniques, processes, performance data, manufacturing
data and procedures, know-how and other technical information relating
to
the design, production/manufacture and/or operation of the Products,
which
are provided by KCI Manufacturing to Avail for the purpose of
producing/manufacturing the Products pursuant to this Agreement,
including
any changes to the Products.
|
|
(e)
|
Improvements
and
Modifications. KCI Manufacturing may, in its sole
discretion, advise Avail in writing of changes in the design or
specifications of any of the Products, including the addition of
new
features or capacities (“Improvements and Modifications”) to the Products
that are owned, developed by or licensed to, KCI Manufacturing
during the
term of this Agreement. KCI Manufacturing and Avail shall
jointly determine the feasibility of utilizing such Improvements
and
Modifications in the performance of Processing Services with respect
to
the Products. Avail shall also provide to KCI Manufacturing all
costs which may be incurred by Avail in its implementation of the
proposed
Improvements and Modifications, including both capital costs and
changes
to costs in delivering Processing Services. If the Parties
agree that it is feasible and desirable to use such Improvements
and
Modifications, and KCI Manufacturing accepts the cost changes submitted
by
Avail, then KCI Manufacturing shall provide to Avail: (i) KCI
Manufacturing’s approval of the costs and authorization for Avail to incur
such costs, and (ii) a data package which shall include all of
the Product
Specifications required by Avail to incorporate all such Improvements
and
Modifications into the Products, and thereafter Avail shall utilize
all
such Improvements and Modifications in the performance of the Processing
Services related to the Products. Any Improvements and
Modifications shall be become effective prospectively at such time
as the
Parties agree.
|
|
(f)
|
Deviation
from
Specifications. Avail must give written notice to KCI
Manufacturing and receive approval from KCI Manufacturing prior
to
deviating from the Product Specifications. Such notice shall
provide, in reasonable detail, the reasons for any such
deviation. KCI Manufacturing may direct Avail to deviate from
the Product Specification provided that KCI Manufacturing (i) protects
Avail from any costs incurred as a result of such deviation; and
(ii)
protects Avail from and against the violation of any regulations
or laws
arising from such deviation. To the extent that such deviation
from the Product Specifications constitutes an Improvement and
Modification that results in a reduction in the cost of Processing
Services, then the terms of Section 5(e) shall apply.
|
|
(g)
|
Production. Avail
may employ: (i) its existing processing processes, (ii) adopt KCI
Manufacturing’s manufacturing processes licensed to Avail as part of the
Intellectual Property Rights, or (iii) establish or utilize its
own
production methods ((i) and (iii) collectively being the “Avail Production
Methods”) as the Parties may agree. Avail shall retain all rights and
interests in and to the Avail Production Methods, and grants to
KCI
Manufacturing a perpetual, paid-up, non-exclusive, license to make,
have
made, use, and sell products manufactured using the Avail Production
Methods at no cost to KCI Manufacturing. Such license shall be
sublicensable to affiliates and manufacturers of KCI Manufacturing
for the
purpose of manufacturing products of KCI Manufacturing or such
affiliates. Avail shall not be obligated to produce for or
deliver to KCI Manufacturing any quantity of Products in excess
of the
capacity of the manufacturing equipment used by Avail in providing
the
Processing Services (either KCI Equipment or Avail Equipment) or
in excess
of that which can be accommodated by Avail’s facilities. Other
than as provided in Section 5(c) herein, Avail shall not change
or modify
the Products at any time without KCI Manufacturing’s prior
approval. Avail shall utilize Avail Equipment or KCI Equipment
in a manner suitable to the production of Products that meet the
Product
Specifications. Should Avail identify additional Equipment that
it deems necessary for the proper rendering of Processing Services,
it
shall notify KCI Manufacturing of such need, in writing. Upon
agreement of the Parties that such additional Equipment should
be
procured, Avail shall procure such Equipment which shall be deemed
KCI
Equipment; the procurement of such KCI Equipment shall be handled
in
accord with Section 5(c)(iii).
|
|
(h)
|
Inspection. Upon
at least two (2) days’ prior written notice and during Avail’s regular
hours of business, KCI Manufacturing (or its representatives) shall
have
the right to (a) inspect work in progress to determine the adequacy
of
production methods and equipment employed by Avail; and (b) conduct
spot
inspections of finished Products to verify that the Products have
been
manufactured in accordance with the Product Specifications (collectively,
“Inspections”). Inspections may be conducted only at the
production facilities or the storage facilities of Avail, or at
the point
of loading. All representatives of KCI Manufacturing conducting
above
inspections shall comply with all applicable safety and security
rules of
Avail. Subject to the above conditions and on the written
request of KCI Manufacturing, Avail shall also grant access to
Avail’s
facilities to customers of KCI Manufacturing’s Affiliates (or their
representatives) who wish to carry out an audit of the Avail’s facilities
and the Products (i.e. for the purpose of the certification of
same). If
KCI Manufacturing identifies any shortcomings in Avail’s manufacturing
processes that result in Product being produced by Avail that does
not
meet the Product Specifications, then KCI Manufacturing may issue
a notice
to Avail regarding changes to Avail’s manufacturing processes. Avail shall
implement any changes identified by KCI Manufacturing as changes
necessary, and which can be objectively determined to bring the
Products
into conformance with the Product Specifications. All
representatives of KCI Manufacturing conducting such inspections
shall
comply with all of Avail’s applicable safety and security
rules. Subject to the above conditions and on the request of
KCI Manufacturing, Avail shall also grant access to Avail’s facilities to
customers of KCI Manufacturing’s Affiliates (or their representatives) to
carry out an audit of the Avail’s facilities and the Products (i.e. for
the purpose of the certification of same), provided that KCI Manufacturing
protects Avail from any associated costs incurred.
|
|
(i)
|
Testing. At
its expense, KCI Manufacturing may require Avail to provide samples
of
Products for random testing. The samples may be of finished
Products or of Products at intermediate stages of
production. The finished Products shall be tested by Avail in
accordance with procedures established by the Parties from time
to time,
in a written protocol. To the extent that Avail’s costs
incurred for such testing is not a cost not included in the pricing
structure made a part hereof, then KCI Manufacturing shall reimburse
Avail
for all such costs. KCI Manufacturing shall design all Product
tests and testing equipment, and shall, at its own expense, provide
Avail
with all testing equipment, technical instruction and information
necessary for the performance of Product testing. Such testing
equipment shall be treated as KCI Equipment, unless the Parties
agree
otherwise.
|
|
(j)
|
Processing
Services
Approval. Avail shall obtain written approval and
revised Product Specifications from KCI Manufacturing before commencing
any Processing Services for the production of Products added to
the
listing of Products on Exhibit A as of the Effective Date, or
Products which have been subject to an approved change in the
manufacturing process.
|
|
(k)
|
Product
Orders. From time to time, and as set forth herein, KCI
Manufacturing shall deliver to Avail purchase orders for the Products
in
accord with Section 6 hereof. Avail shall arrange for the
shipment and insurance of such Products, on behalf of and as directed
by
KCI Manufacturing. Orders for Product, including Shipment
Orders, shall placed by KCI Manufacturing and fulfilled by Avail
in accord
with Section 6 herein.
|
|
(l)
|
Title
and Risk of
Loss. Subject to the terms and conditions of this
Agreement, once KCI obtains title and risk of loss to the Raw Materials
pursuant to Section 5(a), KCI Manufacturing shall have and retain
title to
all Raw Materials and Products throughout each stage of production
and at
no time shall any right, title, or interest in the Raw Materials
or
Products vest in or transfer to Avail. KCI Manufacturing shall
bear all risk of loss arising from the manufacture, sale, transportation,
storage, handling, or other use of Products and Raw Materials,
including
all parts, components, and materials comprising the Products, Raw
Materials and components, from any cause whatsoever other than
any loss
resulting from the negligence or willful misconduct of
Avail. Without limiting the generality of the foregoing, KCI
Manufacturing shall bear all risk of loss relating to or arising
from
delinquencies, defaults, insolvencies of suppliers and third-party
claims
relating to the Products and sales thereof.
|
|
(m)
|
Subcontracting. Avail
shall be entitle to subcontract all of its obligations under this
Agreement, and to assign its rights to collect fees from KCI Manufacturing
for such services rendered under a subcontracting arrangement,
to an Avail
subsidiary that is wholly owned and controlled by Avail, provided
that KCI
Manufacturing consents to such subcontracting arrangement and assignment
of rights to receive or collect remuneration. Such consent
shall be in writing and shall not unreasonably be withheld.
|
6. Order
Processing. KCI Manufacturing forecast and shall place orders
for Product in accord with the following:
|
(a)
|
Forecasts. On
a quarterly basis, commencing with the Effective Date, and no later
than
the first day of every succeeding quarter of the term of this Agreement,
KCI Manufacturing shall deliver to Avail a written forecast of
KCI
Manufacturing’s expected requirements (i.e., expected quantities) for: (y)
Raw Materials and components which Avail shall procure in accord
with its
rendering of the Procurement Services (the “Procurement Forecast”). The
Procurement Forecast may be generated by KCI Manufacturing from
a
materials replenishment plan (“MRP”) provided by Avail and (z) finished
Products which Avail shall deliver to KCI Manufacturing as part
of Avail’s
rendering of the Processing Services (the “Processing Forecast”); KCI
Manufacturing may submit revised Procurement Forecasts or Processing
Forecasts at any time during any quarter, before such forecasts
are due
(an “Interim Forecast”); to the extent such Interim Forecasts modify an
extant forecast, Avail shall endeavor in good faith to meet the
request
for such change, but shall not be bound to such Interim Forecast.
|
|
(b)
|
Orders;
Shipment
Orders. Coincident with the quarterly Procurement
Forecast and Processing Forecast, KCI Manufacturing shall submit
purchase
orders to Avail for the rendering of the Processing Services, detailing
the Product which Avail shall deliver to or on behalf of KCI Manufacturing
for the succeeding quarter (three months) (each, an
“Order”). Each Order shall comport with the corresponding
Processing Forecast in the following manner: (i) the first month
of the
Order will reflect the exact quantity contained in the latest Processing
Forecast; (ii) the second month of the Order may vary from the
latest
Processing Forecast by no more than ten (10%) percent; (iii) the
third
month of the Order may vary from the latest Processing Forecast
by no more
than fifteen (15%) percent. From time to time, KCI Manufacturing
shall
issue to Avail an order for the shipping and delivery of Products
to or on
direction of KCI Manufacturing covered by an Order (each, a “Shipment
Order”). Each Shipment Order shall be initiated by or under the
direction of KCI Manufacturing by means of a computerized system
that will
be networked between Avail and KCI Manufacturing;
|
|
(c)
|
Avail’s
Shipment of
Products. Upon initiation of a Shipment Order within the
networked system, Avail shall thereupon ship the ordered Products
as
instructed, provided that the Shipment Order properly comports
with the
corresponding Order as set forth in Section 6(b);
|
|
(d)
|
Avail’s
Confirmation. Promptly upon shipment of the ordered
Products, Avail shall confirm such shipment by means of entering
a
shipment confirmation in the networked system;
|
|
(e)
|
Avail’s
Invoicing. Avail shall invoice KCI Manufacturing as
Avail incurs costs hereunder, as frequently as daily invoicing,
for
payment of Procurement Services Fees and Processing Services Fees
attributable to Products shipped.
|
7. Stock
Levels. Avail agrees to maintain a supply of the
following:
|
(a)
|
Raw
Materials and
components. Avail shall manage inventory of Raw
Materials and components for use in the production of finished
Products
based upon the Procurement Forecast as may be updated in accord
with
Section 6(a);
|
|
(b)
|
Finished
Products. As part of its performance hereunder, Avail
shall manage inventory of finished Product on behalf of KCI Manufacturing
based upon the Processing Forecast as may be updated in accord
with
Section 6(a); Avail shall also manage adequate inventory levels
on all
finished Products for immediate shipment of reasonably forecasted
quantities, with a reasonable amount of added safety stock, as
directed by
KCI Manufacturing and at KCI Manufacturing’s cost (“Product Stock”).
|
|
(c)
|
Product
Stock
Replenishment. For Products destined for delivery within
the continental U.S., the Parties agree that the 3-5-7 Week Stock
Replenishment Rules constitute adequate Products Stock. The
Parties also agree that following an initial stocking level of
eight (8)
weeks of usage, similar replenishment rules will be developed and
implemented for stock destined for delivery outside the continental
U.S.,
adjusted from the U.S. rules to allow for transportation
time. The Parties agree to negotiate in good faith toward
developing such replenishment rules within 90 days of the Effective
Date;
barring agreement on such Rules, Avail shall maintain Product Stock
in
accord with this Section.
|
8. Shipment. Upon
receipt of a Shipment Order, Avail shall timely drop-ship all the Products
listed on the Shipment Order to the site(s) designated in the Shipment Order,
in
the manner indicated in the Shipment Order. For shipments within the
continental U.S., the term "Same-Day Deadline" shall mean three o'clock p.m.,
Pacific Standard Time (3:00 p.m. PST), or such other reasonable deadline
time as
may be agreed in writing between the Parties. For purposes of this Section,
the
term “shipped” or “Shipment” shall mean that Avail has placed the Product
detailed in the Shipment Order with the carrier as designated by KCI
Manufacturing; timing associated with shipping and for determining Avail’s
performance hereunder shall not include time expired following Avail’s placement
of the Product with the carrier. All Products for which a Shipment Order
is
entered into the networked system and received by Avail prior to the Same-Day
Deadline on any given business day shall be shipped that same day by Avail,
in
the manner required. If, on the other hand, a Shipment Order is not
entered into the networked system until after the Same-Day Deadline on any
given
business day, Avail shall not be required to ship the corresponding Products
until the next business day. Avail shall not confirm shipment of any
Products until shipment has actually occurred. Terms of shipment for
international shipments will be agreed to by both Parties prior to initiating
shipments from Avail’s Mexican facility. Each shipment confirmation
shall contain or refer to such information as may be required and as may
be
appropriate for such confirmation to meet the needs of KCI
Manufacturing. KCI Manufacturing shall be responsible for all freight
expenses for Products sent outbound from Avail (or from an Avail agent or
sub-contractor) to KCI Manufacturing customers pursuant to a Shipment
Order. In the event the terms of a purchase order or Shipment Order
are not in accordance with any provisions of this Agreement and Avail has
not so
notified KCI Manufacturing of the nonconformance by the Same-Day Deadline
on the
next business day following Avail's receipt of such an order, then the terms
of
such order shall be deemed accepted by Avail. Avail shall do all
things reasonably required to facilitate processing of purchase orders,
shipments, invoices and confirmations in such manner as may be requested
by KCI
Manufacturing. KCI Manufacturing has the responsibility to pay any
local taxes, including VAT in Europe, on the Products it receives from Avail
when such taxes relate to the transfer of title for the Products.
9. Delivery. Consistent
and predictable on-time delivery of the Products by Avail to KCI Manufacturing
is of fundamental importance to this Agreement. In Section 7, the
Parties have established procedures and protocols to provide for minimum
levels
of finished goods inventory for the Products to be held by Avail. As
part of its performance hereunder, Avail agrees to the following:
|
(a)
|
Manage
levels of both Raw Materials and Products as agreed by the Parties
herein;
|
|
(b)
|
Issue
to KCI Manufacturing written notice of any conditions that will
likely
result in a shortfall in Product inventories (as agreed herein),
and which
arise from: (i) quality of Avail-procured Raw Materials or components;
(ii) changes to Product Specifications. Avail shall issue
notice to KCI Manufacturing within seventy-two (72) hours of identifying
such conditions that are likely to result in shortfalls or delays
in
Product manufacturing or inventories, regardless of when that Product
shortage is likely to occur (such conditions referred to as “Process
Impediments”). Upon receiving notice of a Process Impediment, KCI
Manufacturing shall work with Avail in good faith to implement
corrective
actions to mitigate or eliminate the Process Impediment.
|
10. Preventive
and Corrective
Actions. Irrespective of the foregoing, the Parties shall
negotiate in good faith to create methods of objectively measuring Avail’s
timely performance of its obligations hereunder, to include the
following
|
(a)
|
Avail
shall develop a "Shipping Performance Report" and an "Inventory
Level
Report" reasonably acceptable to KCI Manufacturing that will be
published
monthly by Avail and provided to KCI Manufacturing. The
Shipping Performance Report and the Inventory Level Report shall
include a
rolling six-month average of Avail’s performance, also identifying the
existence and impact of Process Impediments on Avail’s
performance.
|
|
(b)
|
If
the Shipping Performance Report and an Inventory Level Report objectively
identify a consistent negative change in Avail's performance in
Product
production or delivery, KCI shall request and KCI and Avail shall
attend a
meeting to work toward an agreed corrective action, which shall
be a
written agreement. Failing such agreement, KCI Manufacturing
may provide notice of a ninety (90) day cure period as described
in
Section 21.
|
The
provisions of this Agreement regarding the time within which Avail must deliver
the Products are of the essence. If a Shipment Order is within
forecasted quantities and Avail fails to timely ship the ordered Products
within
[***] of the time required herein for shipping, then KCI Manufacturing shall
receive a [***] discount on the price for such Product. KCI
Manufacturing shall also receive [***] the Product is shipped late, although
such discounts shall not exceed an aggregate maximum discount of ten percent
(10%). The terms and conditions set forth in this section are in
addition to and not in lieu of all rights and remedies otherwise provided
by
law.
11. Procurement
Services
Fees.. KCI shall pay the Procurement Services Fee set forth in
Exhibit B for the Procurement Services according to the terms of Section
16. Notwithstanding the foregoing, Exhibit B shall be modified at any
time upon the Parties mutual written agreement to reflect any increases in
the
price of Raw Materials paid by Avail in rendering the Procurement
Services.
12. Processing
Services
Fees. The Processing Services Fee paid to Avail is set forth
on Exhibit A, on a Product-by-Product basis for each SKU (the “Processing
Services Fee”). The Parties agree to cooperate with respect to price
changes to the Processing Services Fee, as described in Section
23. Increases in the Processing Services Fee shall not exceed [***]
over any applicable period, except where any increase in such price is caused
by
a change in the Product Specifications made by KCI Manufacturing.
13. Price
Reductions. At least annually, an no later than the successive
anniversary dates of the Effective Date, the Parties shall jointly review
Procurement Services Fee (and related costs of Raw Materials) and Processing
Services Fee to determine if it the Parties can achieve a reduction in either
or
both such fees in response to changes to design, materials, manufacturing
processes, production volumes or market conditions. This pricing
review will be mutually undertaken in accordance with Section 23 of this
Agreement.
14. Logistics. Avail's
facility in Tijuana, Mexico will be the primary manufacturing site for the
Products.
15. Annual
Payment [***]
For purposes of this Section, a “Contract Year” shall constitute the period
commencing on December 1 of any year during the term hereof and include the
subsequent calendar year. The Initial Contract year shall commence on
December 1, 2007 and end on November 30, 2008. [***]
16. Payment. KCI
Manufacturing shall pay the Procurement Services Fee and Processing Services
Fee
within fifteen (15) days of the receipt of invoice. Invoices shall be
delivered promptly to KCI Manufacturing, Athlone Business & ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ or to such other address as
may be
designated by KCI Manufacturing. KCI Manufacturing shall issue
payment to Avail by means of wire transfer, according the instructions provided
to KCI Manufacturing in writing. Payment shall be deemed as received
upon deposit of funds into Avail’s account.
|
(a)
|
Credit
Limit;
Remedies. Avail reserves the right to establish a credit
limit for outstanding amounts owed and unpaid by KCI Manufacturing
hereunder, and amounts incurred by Avail in performance hereunder
whether
or not yet payable by KCI Manufacturing, whether or not such amounts
are
in arrears (“Credit Limit”). Avail shall establish the Credit
Limit in accord with its ordinary practices, and may consider factors
external to the terms of this Agreement in establishing or revising
the
Credit Limit, including information which KCI Manufacturing may
provide
regarding its financial condition The initial Credit Limit shall
be
established on or before the Effective Date; Avail shall promptly
notify
KCI Manufacturing thereof. Avail may revise the Credit Limit
from time to time in accord with its ordinary practices, and shall
notify
KCI Manufacturing of any revisions. Avail shall be under no
obligation at any time to advise or notify KCI Manufacturing of
any
balance due or amount of credit remaining to KCI Manufacturing
under the
Credit Limit. Avail may suspend or cease its performance
hereunder, in any or every aspect, when KCI Manufacturing’s outstanding
balance exceeds the Credit Limit, and KCI Manufacturing may not
assert any
default by Avail therefor. For purposes of this Section, Avail
may calculate the KCI Manufacturing outstanding balance at any
time as any
and all costs incurred by Avail on behalf of KCI Manufacturing
hereunder
for which Avail shall receive remuneration, but which are not paid
by or
on behalf of KCI Manufacturing.
|
|
(b)
|
No
Waiver. Avail’s failure or election to not seek any
remedy provided in this Section shall not constitute a waiver of
any
rights or remedies contained in this Section, or contained elsewhere
in
this Agreement.
|
17. Product
Quality.
|
(a)
|
Each
lot of Products shipped by Avail will meet the Product Specifications
as
of the date on which the Products are manufactured. No
non-conforming Products will be released to KCI Manufacturing,
or its
customers, without the prior written approval of KCI
Manufacturing.
|
|
(b)
|
Avail
acknowledges that KCI Manufacturing, in reliance upon Avail’s obligation
to inspect and test the Products in accordance with Section 5(h)
herein
and Avail’s warranties hereunder, shall use or sell the Products without
doing any further quality control or inspection.
|
|
(c)
|
Any
container holding the Product when the Product is delivered to
KCI
Manufacturing shall be labeled with the net weight of the Product
contained therein, and the actual weight of the Product contained
in any
container shall comply with applicable laws and
regulations. Avail shall include in each Product’s labeling all
warnings and instructions specified by KCI Manufacturing.
|
|
(d)
|
Avail
shall provide customary product warranties as may be reasonably
agreed
between the Parties.
|
|
(e)
|
KCI
Manufacturing must approve, in writing, any changes that may affect
the
performance of any Products before such changes are made. In
the event that changes are required to correct defects in the Products,
to
enhance the safety or the Products, or to otherwise improve the
quality of
the Products, KCI Manufacturing shall be notified immediately upon
Avail's
recognition of the need for the same, and KCI Manufacturing shall
approve
any such changes and the appropriate validation for such
changes. All Product Specifications changes, including changes
in quality control and manufacturing processes, shall be validated
and
documented by Avail and approved by KCI Manufacturing.
|
|
(f)
|
Avail
shall develop, and KCI Manufacturing shall approve, a Quality Plan
or
Plans applicable to the Products outlining the responsibilities
and
expectations of KCI Manufacturing regarding Quality and Service
Performance Levels for the products. Such quality plans, which
may be amended from time to time at the request of KCI Manufacturing,
[***] shall be of a form and complexity consistent with customary
industry
standards. The Quality Plan or Plans shall be considered
integral to this Agreement and shall govern the responsibilities
of each
Party under this Agreement with respect to quality concerns. The
basis for
Quality Levels for all of the products shall be [***] completed
in the
design and process verification and validation activities for each
of the
products. The [***] framework shall be developed by
Avail and approved by KCI Manufacturing. It is expected that
the products, given their complexity and regulatory classification
status,
will have applicable to each of them a [***] confidence level that
they
are free of defects in workmanship and material. Each shipment
of Products shall be accompanied, where appropriate, by an accurate
certificate of analysis or other mutually agreeable quality control
data
where requested by the customer or preformed as standard business
practice.
|
|
(g)
|
It
is the expectation of the Parties entering this Agreement that
the Quality
and Service levels to be provided by Avail going forward shall
be
consistent with those provided by Avail in the past to Affiliates
of KCI
Manufacturing. The Parties will agree upon a "Quality
Performance Report", similar to quality reports provided by Avail
in the
past to Affiliates of KCI Manufacturing, to be published monthly
by Avail
and in a format acceptable to KCI Manufacturing. A rolling
six-month average of performance levels published in the Quality
Performance Report will be used as the basis for measuring changes
in
Avail's historic quality performance levels. Avail will
cooperate fully with KCI Manufacturing in amending and updating
performance levels and expectations to assure the Products continue
to
meet and exceed the customary Quality and Service expectations
of the
market. Should complaints or other forms of negative quality
events occur at a level or frequency that causes concern to KCI
Manufacturing and are inconsistent with or different from the historical
performance levels of Avail, KCI Manufacturing may request an inspection
and meeting as contemplated in Section 19 of this Agreement. It
will then be the right of KCI Manufacturing to examine all manufacturing
and quality related documentation to assure that Avail is consistently
following the procedures established during the verification and
validation processes to meet product quality expectations. To
the degree that Avail is failing to materially conduct such activities
as
set out above, KCI Manufacturing may provide notice to Avail of
such facts
and provide for the ninety (90) day cure period as described in
Section
21.
|
18. Packaging
and
Labeling. Avail shall label and package the Products in
accordance with the Product Specifications. Avail will ship all
Products under KCI Manufacturing's name. KCI Manufacturing shall
notify Avail of any known damage to the Products within five (5) business
days
of KCI Manufacturing's actual knowledge of such damage, and Avail shall provide
replacements for damaged Products if damage is caused by failure to meet
the
Product Specifications. Absent contrary written instruction by KCI
Manufacturing, the labeling for Products (i) shall bear such trademarks,
logos
and source identifiers as set forth in the Product Specifications ("KCI
Manufacturing Trademarks"), or may be otherwise directed by KCI Manufacturing
in
writing, provided that any additional costs to Avail for such labeling shall
be
borne by KCI Manufacturing; (ii) shall bear such notices as may be required
under applicable laws and regulations, or by KCI Manufacturing or provided
that
any deviations from the Product Specifications regarding packaging or labeling
be handled in accord with Section 5(f)(i); (iii) shall bear the designation
"MADE FOR KCI MANUFACTURING"; and (iv) shall not include any reference to
Avail. Nothing herein, nor any performance hereunder, shall be
construed as a license for Avail to use the KCI Manufacturing Trademarks
in any
manner not expressly stated herein or in written instructions provided by
KCI
Manufacturing.
19. Inspection. Upon
at least two (2) days’ written notice, KCI Manufacturing shall have the right to
inspect all facilities used to manufacture the Products by or for Avail and
to
inspect all documents and records relating to the manufacture and shipment
of
the Products. If KCI Manufacturing identifies concerns or possible
insufficiencies in Avail’s quality control procedures or Avail’s documents or
records, KCI Manufacturing may issue its comments or suggestions regarding
such
allegations to Avail. If such allegations constitute objective
deficiencies by Avail of its covenants, obligations or performance, then
Avail
shall implement corrective actions to any reasonable allegation of material
deficiencies, at Avail’s cost. If KCI Manufacturing’s comments or
suggestions do not relate to deficiency in Avail’s performance of its
obligations, then Avail may implement such suggestions at KCI Manufacturing’s
Avail’s cost, and it shall be treated as a matter subject to Section
25.
20. Returns. KCI
Manufacturing and Avail agree to cooperate in good faith to establish adequate
procedures for processing and evaluating Product returns in a mutually
beneficial manner. Avail agrees to incur all freight and return
expenses for Products returned due to Avail’s failure to conform to the terms of
this Agreement, the Product Specifications or any Order or Shipment
Order.
21. Excessive
Returns. Returns of a Product that arise from the failure of
the Product to meet Product Specifications are considered a quality issue
for
the purposes of this Agreement and will therefore be managed consistent with
Sections 17 and 25 of this Agreement
22. Term
and Termination or
Conversion. The term of this Agreement shall commence on the
Effective Date and shall continue for a period of thirty-six (36) months
thereafter (the "Initial Term"). At the end of the Initial Term, the
term of this Agreement shall automatically extend for an additional twelve
(12)
months (the “Extended Term”) unless either Party has previously delivered to the
other Party a Notice of Termination. On each successive anniversary of the
Effective Date, the term will automatically extend for an additional twelve
(12)
months unless either Party has previously delivered to the other Party a
Voluntary Notice of Termination (as defined herein). A Voluntary
Notice of Termination shall be written notice to the other Party that the
noticing Party intends to terminate this Agreement as provided
herein. Such Voluntary Notice of Termination must be delivered as set
forth herein. Either Party may terminate this Agreement, without cause, upon
providing twenty-four (24) months written notice effective as of the next
anniversary of the Effective Date following transmittal of such notice to
the
other Party (a "Voluntary Notice of Termination"). In addition, KCI
Manufacturing may terminate or convert this Agreement to a non-exclusive
agreement at its sole option, in the event that Avail: (i) materially
breaches this Agreement; (ii) seeks protection from its creditors under the
bankruptcy or insolvency laws of its jurisdiction of incorporation or domicile,
or becomes involuntarily subject to the jurisdiction of a Court under the
bankruptcy or insolvency laws of its jurisdiction of incorporation or domicile;
(iii) fails in a material way to manufacture Products in accordance with
the QSR
of the FDA and in accordance with any and all applicable international
regulations or standards and fails to cure or remedy such situation within
ninety (90) days unless the US FDA, or similar foreign counterpart, requires
action that takes longer than ninety (90) days to execute, in which case
Avail
shall have the time necessary to comply with such regulations or standards;
(iv)
manufactures and/ or distributes of any Product involved in a Class I "recall"
subject to the conditions specified in sections 17 and 25 and
as defined in the
regulations promulgated by the FDA (an "Event of Default"); and (v) failure
to
meet Product shipping or inventory level standards in accordance with Sections
7
and 8, or Product quality standards in accordance with Section
17. Each of the foregoing occurrences (i) through (v) shall
constitute an “Event of Default.” Avail may terminate this Agreement
in the event that KCI Manufacturing (i) materially breaches this Agreement
or
(ii) seeks protection from its creditors under the bankruptcy or insolvency
laws
of its jurisdiction of incorporation; each of the foregoing occurrences,
(i) and
(ii) shall constitute an “Event of Default.” Either Party may elect
to terminate or convert this Agreement if the other Party is not able to
cure an
Event of Default of such other party within thirty (30) days of written notice
of such an Event of Default; such termination shall be deemed a “Termination or
Conversion With Cause” and the Agreement shall be “Terminated or Converted With
Cause.” Only in the event of Termination or Conversion with Cause by KCI
Manufacturing, Avail shall supply Products to KCI Manufacturing at the pricing
in effect as of conversion or termination for a period of one (1) year after
any
conversion or termination of this Agreement (subject to price changes permitted
in this Agreement), and Avail shall make available to KCI Manufacturing a
list
of vendors who supply Product components, and do such things, as may be
reasonably requested by KCI Manufacturing to enable KCI Manufacturing to
manufacture the Products in the same manner as previously manufactured by
Avail. For purposes of this Agreement, the term “conversion” and
“convert” shall mean the conversion of this Agreement to a non-exclusive
agreement. Upon termination of this Agreement, Avail agrees to
deliver to KCI Manufacturing all finished Product produced, acquired or
committed in accordance with outstanding purchase orders and forecasts, in
addition to all Raw Materials in Avail’s possession. The restrictions
on Avail set forth in Section 4 shall survive the termination of this Agreement
as set forth in Section 4.
23. Cooperation. The
Parties agree to cooperate in identifying methods of reducing costs of the
production and delivery of Products. The Parties will split cost
reductions arising from this cooperation on a 50/50 basis, excluding costs
reductions arising from the following: (i) any cost reduction
obtained on P/N M3248406 (Drape), which shall be fully passed to KCI
Manufacturing; and (ii) any cost reduction arising from a capital expenditure
exceeding [***] (a “Capital Cost Reduction”), which shall be enjoyed fully the
Party making the capital expenditure. In regard to a Capital Cost Reduction
opportunity, KCI Manufacturing reserves the election of making such expenditure
and thus securing the resulting cost reduction benefit, if any. KCI
Manufacturing shall make this election, in writing to Avail, within thirty
(30)
days of the Capital Cost Reduction opportunity being defined by a project
cost
and benefit analysis prepared by either or both
Parties. Should KCI Manufacturing fail to timely and
properly so elect, then the Capital Cost Reduction shall be solely Avail’s right
to exercise, which it shall do by written notice to KCI
Manufacturing. The Parties will work together in good faith to agree
upon such other terms and conditions as may be appropriate to achieve each
of
these purposes and objectives. As part of the ongoing cooperation of
the Parties, KCI Manufacturing shall retain the right to approve all suppliers
of material to Avail for use in Products and no change of any current supplier,
shall occur without KCI Manufacturing's approval, which shall not be
unreasonably withheld.
KCI
Manufacturing represents and warrants that it has no knowledge of any fact,
set
of facts or circumstances, which have or could result in a default by Avail
pursuant to this Agreement. The Parties hereto agree that if any
fact, set of facts or circumstances which existed as of the date of this
Agreement related to the regulation of the Products and which would otherwise
have resulted in a default under this Agreement become known subsequent to
the
date of this Agreement that such fact, set of facts of circumstances shall
not
be deemed to be a default pursuant to the terms of this Agreement and the
Parties shall in good faith work to resolve these items.
24. Title
and Risk of Loss for
Products. Title, risk of loss to, and insurable interest in
Products shipped to the United States shall pass when the Products are Delivered
at Frontier by Avail ("DAF", INCOTERMS 2000) to the frontier of the United
States (i.e., both before entering the territory of the United States and
before
entering the customs border of the United States). Products shipped
to Europe, Australia or Singapore shall be delivered Free Carrier ("FCA")
(INCOTERMS 2000) to Avail’s [Mexican warehouse], where the Products shall be
transferred to the common carrier specified by KCI
Manufacturing. Title, risk of loss to, and insurable interest in
Products shipped to Europe, Australia or Singapore shall pass from KCI
Manufacturing to its Affiliate upon delivery to the common
carrier. Products shipped to Canada and Puerto Rico shall be
Delivered Duty Unpaid (“DDU”) (INCOTERMS 2000) to a location specified by KCI
Manufacturing. Title, risk of loss, and insurable interest in
Products shipped to Canada or Puerto Rico shall be transferred from KCI
Manufacturing to its Affiliate upon delivery to the designated port of entry
or
warehouse of such Affiliate. Avail shall not be responsible for
customs clearance, nor shall Avail be responsible for any risk or delay
associated with clearance of Products with and through customs or related
agencies.
25. Warranty. Avail
warrants to KCI Manufacturing that the Products shall be manufactured and
packaged in accordance with the Product Specifications and may otherwise
be
agreed by the Parties in writing, that the Products and related packaging
shall
be of consistent good quality, free from defects in
workmanship. Avail further warrants that all customer-supplied
documentation shall be promptly filed in Avail's master device record for
each
Product. This warranty does not apply to damage caused by
unreasonable neglect, destruction, improper use and improper
care. Avail warrants that all Products distributed in the U.S. shall
be manufactured in accordance with the QSR of the FDA, or any new or revised
standards imposed by that agency, in a facility that is registered with the
FDA. Avail warrants that all Products distributed in Australia,
Canada, Japan or The Netherlands shall be manufactured and distributed in
accordance with all laws, rules and regulations which are applicable to the
manufacture or distribution of the Products in that locale and that such
Products shall be manufactured in a facility which is operated in accordance
with all laws, rules and regulations applicable to a facility utilized to
manufacture such Products in that locale. Avail warrants that the
articles comprising each shipment or other delivery hereafter made by Avail
to,
or to the order of, KCI Manufacturing or its customers, as of the date of
such
shipment or delivery, shall not be adulterated or misbranded within the meaning
of the Federal Food, Drug, and Cosmetic Act (the "Act"), or any other applicable
law, rule or regulation (including applicable foreign laws, rules and
regulations). Avail shall cooperate with KCI Manufacturing to aid KCI
Manufacturing in communicating with or otherwise contacting each customer
with
respect to the safety or efficacy of the Products as requested by KCI
Manufacturing or required by the FDA or any other governmental entity with
appropriate jurisdiction. Each of the Parties shall report to the
other any problems relating to the safety or efficacy of the Products as
soon as
possible after learning of the existence of such problems. Avail
shall abide by all regulations of the FDA applicable to manufacturers of
medical
devices. KCI Manufacturing shall be responsible for compliance with
QSR paragraph 820.198 regarding complaint handling.
The
Product Specifications, as well as all performance and suitability claims
for
each of the products are the responsibility of KCI
Manufacturing. Avail's responsibility is to accurately convert the
aforesaid data into the documents and processes needed to produce the
Products. Any failure of the products to meet regulatory requirements
or to be consistently manufacturable based upon the Product Specifications
is
the sole responsibility of KCI Manufacturing. Any recall of any
product that is a consequence of an error in any of the Product Specifications
is the responsibility of KCI Manufacturing. Obtaining and maintaining
all applicable regulatory approvals and continued compliance for all products
in
all jurisdictions served by KCI Manufacturing or any of its Affiliates shall
be
the responsibly of KCI Manufacturing. KCI Manufacturing shall
indemnify and hold Avail harmless from any cost or expense directly related
to
(i) an error in any of the Product Specifications or (ii) a breach of this
agreement. Avail shall indemnify and hold KCI Manufacturing harmless
from any cost or expense directly related to(i) a breach of a warranty set
forth
in, or provided for, in this Agreement, and (ii) any breach of this
Agreement.
26. Force
Majeure. In the event any delay in performance by either Party
is due to any cause arising from or attributable to acts, events, omissions,
accidents or acts of God, beyond the reasonable control of the Party (including
but not limited to strikes, lock-outs, civil commotion, riots, war, fire,
explosion, storm, flood or earthquakes), the Party so delayed or prevented
shall
be under no liability for loss or injury suffered by the other Party
thereby. In the event that Avail is prevented from meeting the
delivery schedule provided by KCI Manufacturing because of a delay caused
by any
of such acts, Avail shall give KCI Manufacturing written notification of
any
material or indefinite delay due to such causes. In such an event,
KCI Manufacturing may not exercise the remedy set forth in Section 9 hereof,
but
shall (a) instruct Avail that the sales orders affected by such delay are
either
(i) affirmed, and the time for performance is extended for as many days as
such
causes affect deliveries, or (ii) terminated and (b) have the right to access
Product from sources other than Avail with respect to those sales
orders.
27. Insurance. Each
Party shall carry and continue in force a policy of broad form Products
liability insurance for the Products sold hereunder with limits of not less
than
[***] per occurrence and [***] in the aggregate. All such policies
shall provide that each Party shall receive written notice from the insurer
thirty (30) days prior to any cancellation or change in coverage of the policy
of the other Party. Each Party shall provide the other with
appropriate certificates of insurance evidencing such coverage.
28. Compliance
with Law and ISO
Standards. Avail agrees to comply at all times with all U.S.
and foreign federal, state and local laws, rules, and regulations relating
to
the Products during the period of this Agreement. Avail further
agrees to comply with standards imposed by the International Standards
Organization (“ISO”) and related product development process requirements
adopted by KCI Manufacturing. Avail shall tender any documents
required by KCI Manufacturing with respect to ISO certification and/or
compliance with laws, regulations and the like.
29. Power
and
Authority. Each of the Parties represents and warrants to the
other that: (a) it is a legal entity duly formed and validly existing
under applicable law; (b) it has full right, power and authority to enter
into
and perform its respective obligations under this Agreement; (c) this Agreement,
and its performance hereunder, does not conflict with any outstanding contract,
commitment, or arrangement to which it is a Party or is bound; and (d) this
Agreement constitutes a legal, valid and binding obligation of such
Party.
30. No
Liens. Avail represents, warrants, and covenants that the
Products shall be free and clear of all liens and encumbrances of any kind
(collectively, "Liens") at the time of delivery of the Products to the KCI
Manufacturing Affiliate or its customer, whichever occurs first.
31. Indemnity. Avail
and its Affiliates shall defend, indemnify and hold harmless each of KCI
Manufacturing, its Affiliates and their respective directors, officers,
shareholders, customers, employees, and agents, and their respective successors
and assigns, from and against any and all losses, damages, costs and expenses
(including attorneys’ fees) arising out of any and all claims related to any of
the following: (i) the failure of Products to meet the Product
Specifications, (ii) claims that relate to actual Liens encumbering any KCI
Equipment, Raw Materials, Products, and components or works-in-process of
the
Products, (iii) a breach of this Agreement and (iv) Avail's actual or alleged
willful acts or omissions, or gross negligence ("Avail
Fault"). Except in the event and to the extent caused by Avail Fault,
and except in the event and to the extent the Products fail to meet the Product
Specifications as a result of a breach of this Agreement by Avail, KCI
Manufacturing and its Affiliates shall defend, indemnify and hold harmless
each
of Avail, its Affiliates and their respective directors, officers, shareholders,
customers, employees and agents, and their respective successors and assigns,
from and against any and all losses, damages, costs and expenses (including
attorneys' fees) arising out of claims based upon the following, (i) any
use,
distribution or sale of the Products by any third party resulting in an
infringement, or alleged infringement of any copyright, trade secret, trademark,
patent, invention, proprietary information, non-disclosure right or other
statutory or common law right of any person or entity (ii) the failure of
the
Products design to comply with applicable laws or regulations, including
without
limitation, those promulgated by the FDA, (iii) any error in any of the Product
Specifications, (iv) any Products liability or other related claims not related
to the manufacture of the Products, and (v) a material breach of this
Agreement. Except with respect to the matters set forth in this
Section 30, in no event shall either Party be liable for any indirect, special,
incidental or consequential damages (including, without limitation, loss
of
profits, loss of goodwill, interruption of business or other economic loss)
whether such damages are alleged as a result of tortuous conduct or breach
of
contract or otherwise even if the other Party has been advised of the
possibility of such damages. Each of the Parties shall also
indemnify, defend and hold harmless the other Party, the other Party’s
Affiliates and their respective directors, officers, shareholders, customers,
employees, and agents, and their respective successors and assigns, from
and
against any and all losses, damages, costs and expenses (including attorneys’
fees) arising out of any and all claims related to breach of any warranty,
representation or covenant of this Agreement.
32. No
Infringement. KCI Manufacturing represents, warrants and
covenants to Avail that the Products do not infringe upon or otherwise violate
any valid copyright, trade secret, trademark, patent, invention, proprietary
information, non-disclosure right, or other statutory or common law right
of any
person or entity.
33. Assumption
of Obligations
and Liabilities. KCI Manufacturing does not assume any
obligations or liabilities of Avail.
34. Assignment. This
Agreement shall be binding upon, and shall inure to the benefit of, the Parties
and such Affiliates and subsidiaries of KCI Manufacturing as may order Products
hereunder, and their respective permitted successors and assigns. No
assignment or transfer by either Party hereto of its rights and obligations
hereunder shall be valid except on prior written consent (which shall not
be
unreasonably withheld or delayed) of the other Party. At KCI
Manufacturing's option, in the event of an attempted assignment by Avail
to, or
any transaction causing a change of control of Avail with (which shall be
deemed
an assignment hereunder), any third party which KCI Manufacturing considers
to
be a competitor of any Affiliate of KCI Manufacturing, KCI Manufacturing
may
withhold such consent at its sole discretion. KCI Manufacturing
hereby grants its consent to the change of control of Avail as shall occur
in
the forthcoming merger of Avail with and acquisition by Flextronics
International, U.S.A., Inc. Avail hereby consents to any assignment
by KCI Manufacturing to any current or future affiliate of KCI Manufacturing
provided such affiliate agrees in writing to assume all of KCI Manufacturing’s
obligations under this Agreement.
35. Waiver. The
failure of any Party to this Agreement at any time or times to require the
performance of any provisions of this Agreement shall in no manner affect
the
right to enforce such provision. No waiver by any Party to this
Agreement, whether by conduct or otherwise, in any one or more instances,
shall
be deemed or construed either as a further or continuing waiver of any such
provision or breach or as a waiver of any other provision (or of a breach
of any
other provision) of this Agreement.
36. Notices. All
notices permitted or required hereunder shall be deemed sent when deposited
in
the U.S. mail, registered or certified mail, addressed to the Parties at
each of
the following addresses or such other address as a Party may designate in
writing:
|
If
to KCI Manufacturing:
|
If
to Avail:
|
|
KCI
Manufacturing
|
Avail
Medical Products, Inc.
|
|
Athlone
Business & Technology Park
Garrycastle,
Athlone
|
1600
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
|
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
|
Ft.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
Attention: ▇▇▇▇
▇▇▇▇▇▇
Re: V.A.C.
Disposables
|
Attention: President
and C.E.O
With
a copy to
General
Counsel
Avail
Medical Products, Inc.
1600
▇▇▇▇▇ Fargo Tower
▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
|
37. Severability. The
invalidity or unenforceability of any term or provision of this Agreement
shall
not affect the validity or enforceability of this Agreement as a whole or
of any
other term or provision hereof. In lieu of any such invalid or
unenforceable term or provision, the Parties hereto shall negotiate in good
faith to replace the invalid clause or clauses with provisions having similar
business purposes.
38. Entire
Agreement. The terms and conditions contained herein and in
the attachments hereto constitute the entire agreement between the Parties
and
shall supersede all communications, representations, or agreements, either
oral
or written, between the Parties with respect to the subject matter
hereof. No agreement or understanding varying the terms and
conditions hereof shall be binding on either Party hereto unless in writing
and
signed by duly authorized representatives of each Party. Exhibit A is
incorporated in this Agreement as though set forth herein in its
entirety. The terms expressed in Exhibit A may be expanded or
otherwise modified in writing upon mutual agreement signed by each of the
Parties to be bound. Any preprinted terms on preprinted purchase
orders shall supplement the terms of this Agreement only to the extent such
preprinted terms are consistent with the terms of this Agreement. In
the event any such preprinted terms are contradictory, the terms of this
Agreement shall control (absent written agreement signed by each of the
Parties).
39. Applicable
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and the United States without
regard to any conflict of laws provisions. The Parties hereto hereby
agree that the sole and exclusive place of personal jurisdiction and venue
for
resolution of any disputes arising hereunder or related hereto shall be the
applicable federal courts located in San Antonio, Texas.
If
a
dispute arises between the Parties relating to this Agreement, the Parties
shall
resolve the dispute using binding arbitration, which shall include, without
limitation, the following steps:
|
(a)
|
The
aggrieved Party shall provide the other Party with a written request
to
arbitrate along with written notice of the dispute, which shall
identify
the nature of the dispute and its relevant facts;
|
|
(b)
|
The
other Party shall respond to the notice of the dispute within thirty
(30)
days after receipt and assert counterclaims, if any, against the
aggrieved
Party;
|
|
(c)
|
The
Parties shall attempt to agree on the selection of an
arbitrator;
|
|
(d)
|
If
the Parties cannot agree upon an arbitrator, one will be selected
pursuant
to the Commercial Arbitration Rules of the American Arbitration
Association;
|
|
(e)
|
The
costs associated with the selection of an arbitrator will be borne
equally
by both Parties;
|
|
(f)
|
The
decision of the arbitrator shall be final and binding;
|
|
(g)
|
The
arbitrator may award reasonable attorney fees and costs; and
|
|
(h)
|
These
procedures and this Agreement shall be governed by the law of the
State
of Texas
without regard to
its conflict of laws provisions.
|
40. Confidentiality. Each
Party shall maintain in confidence any trade secrets or proprietary information
disclosed to it by the other Party or the other Party's agents or
representatives, including information disclosed prior to the execution of
this
Agreement. This information shall include, but not be limited to,
Product information, trade secrets, customer lists and any other confidential
business information pertaining to or in connection with the business of
the
Parties. This provision shall survive the termination of this
Agreement.
All
confidential information of any of Avail and its Affiliates or KCI Manufacturing
and its Affiliates provided to the other Party hereto in conjunction with
the
performance under this Agreement, whether prior to or subsequent to the
execution of this Agreement, will be considered to be information which is
confidential and proprietary when (i) it pertains to identification of the
customers of the providing Party or its Affiliates, or (ii) when it was provided
prior to the execution of this Agreement and is subject to confidentiality
obligations of the Confidentiality Agreement, or (iii) when the information
is
provided after the execution of this Agreement and is marked in writing as
"CONFIDENTIAL". Such information will hereinafter be referred to as
"Confidential and Proprietary Information," and will be held in confidence,
and
will not be disclosed to third parties or used for any purpose other than
to
fulfill the obligations of this Agreement without prior written consent of
the
providing Party. Confidential and Proprietary Information will not
include information that:
|
(a)
|
is
or becomes publicly available through no act or fault of the receiving
Party;
|
|
(b)
|
is
disclosed to the receiving Party by a third party having the right
to
disclose it;
|
|
(c)
|
is
already known by the receiving Party as shown by its prior written
records
provided the receiving Party provides written notice to the providing
Party thereof promptly after receiving the Confidential and Proprietary
Information; or
|
|
(d)
|
is
required by law to be disclosed.
|
All
obligations of confidentiality and non-disclosure set forth in this Agreement
will survive for a period of three years following the expiration or termination
of this Agreement.
41. Parties
Benefited. This Agreement will be binding and inure to the
benefit of the Parties and KCI Manufacturing’s Affiliates, permitted successors
and assigns. The representations, warranties, covenants, and
undertakings contained in this Agreement are for the sole benefit of the
Parties
hereto and their permitted successors and assigns and such representations,
warranties, covenants, and undertakings will not be construed as conferring
any
rights on any other Party. This Agreement may not be assigned by a
Party to a non-Party without the prior written consent of the other
Parties.
42. No
Agency; Independent
Contractors. KCI Manufacturing and Avail hereby agree that, in
the performance of their respective obligations hereunder, they are and shall
be
independent contractors. Except as expressly provided herein, nothing
in this Agreement shall be construed to (a) constitute either Party as the
agent
of the other Party for any purpose whatsoever; (b) give either Party control
over the day-to-day activities, managerial practices, financial administration
or personnel practices, policies or procedures of the other Party; (c)
constitute Avail to be a legal and contractual representative within the
meaning
of the laws of the jurisdiction of KCI Manufacturing or Avail; (d) allow
Avail
to create or assume obligations on behalf of KCI Manufacturing except as
provided herein; (e) constitute Avail to be a commercial agent within the
meaning of the laws of the jurisdiction of KCI Manufacturing or Avail or
the
equivalent mandatory provisions of public order with respect to commercial
agents in the laws of the various countries within which Avail provides the
Processing Services; or (f) constitute the Parties as franchisor and franchisee,
partners, joint venturers, co-owners or otherwise as participants in a joint
undertaking. Neither Party shall have the power to bind the other
Party to any contract or the performance of any other obligation, or represent
to any third party that it has any right to enter into any binding obligation
on
the other Party’s behalf except as provided in this Agreement or with the prior
written consent of the other Party.
43. Multiple
Counterparts. This Agreement may be executed by facsimile
signature in two or more counterparts, each of which will be deemed an original,
but all of which taken together will constitute one and the same
instrument.
44. Headings. Section
headings have been used in this Agreement but shall not affect the meaning
of
any provision of this Agreement.
[Signature
Page
Follows.]
IN
WITNESS WHEREOF, the
Parties hereto have duly executed this Agreement effective as of the Effective
Date first above written.
|
KCI
MANUFACTURING
By: /s/
▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
|
AVAIL
MEDICAL PRODUCTS, INC.
By: /s/
J. ▇▇▇▇▇▇▇
▇▇▇▇▇
J.
▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|
Title:
Director
|
Title:
President and Chief Executive Officer
|
(Signed
Copy on File)
EXHIBIT
A
PROCESSING
FEE
SCHEDULE
|
Avail
P/N
|
KCI
P/N
|
Product
Description
|
Processing
Fee
|
[***]
EXHIBIT
B
PROCUREMENT
FEE
SCHEDULE
|
Avail
P/N
|
KCI
P/N
|
Product
Description
|
Procurement
Fee
|
[***]