EXHIBIT 10.14
tyco The Ludlow Company LP
------------- [address]
Healthcare
Ludlow
Memorandum of Understanding
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Between Natus Medical Inc. of San Carlos California (Natus) and The Ludlow
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Company LP of Chicopee Massachusetts (Ludlow).
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Natus Medical Inc. and The Ludlow Company LP, the parties, desire to enter
into an agreement. Both parties expect to receive certain benefits from this
agreement and both parties accept obligations as part of this agreement. The
term of this agreement will be five years from date of acceptance by both
parties.
Ludlow agrees to do the following for the benefit of Natus:
1. Supply "one piece molded Ear Couplers" and "Tab" style electrodes to Natus
at pricing per letter from ▇▇▇▇ ▇▇▇▇▇ to ▇▇▇ ▇▇▇▇▇ dated September 18,
2000.
2. Provide design input and manage the design and fabrication of production
tooling at [***] for Natus designed injection molded Ear Coupler parts.
3. Design and have constructed at [***] production equipment to manufacture
finished Natus Ear Coupler assemblies packaged similar to the current
"Colorado Pack."
4. Demonstrate to Natus' satisfaction the ability to manufacture Ear Couplers
at two Ludlow facilities. One facility will be Ludlow's [***] plant which
will be called the Primary Manufacturing Location. An additional location
will be chosen by Ludlow and will be referred to as the Secondary
Manufacturing Location.
5. Give a minimum of six months notice of intention to move manufacturing
locations for Natus products. In this case, manufacturing of Natus
products will not cease at the original location until Natus validates and
qualifies the new location.
6. Warehouse Natus-owned finished goods Ear Coupler inventory at two
locations, one being Ludlow's Huntington Beach facility. If the alternate
site is a Ludlow owned facility, there will be [***] to [***] for this
service, otherwise [***] may [***] its [***] to [***].
7. Provide Natus with a [***] for [***] and [***] that are [***] in
conjunction with [***], those [***] that are under [***] for the [***] of
this agreement. [***] may [***] either increases or decreases on [***],
such as [***], which are beyond [***]. In particular, [***] and only [***]
will be [***].
8. Share [***] as follows: If the [***] is the [***] by both Natus and Ludlow,
each party will [***]. If the [***] is achieved by [***], [***] will [***]
of the [***] and [***] of the [***]. In the case of a proposed [***],
Ludlow will [***] of the individual component [***] but [***] the product.
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[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
Natus agrees to do the following for the benefit of Ludlow:
1. Purchase a combination of foam and molded Ear Coupler/Electrode sets from
Ludlow for the term of this agreement as outlined in the following table:
Minimum Units Purchase
Year Requirement
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Year 2001 [***]
Year 2002 [***]
Year 2003 [***]
Year 2004 [***]
Year 2005 [***]
2. [***] for [***] initiated by Natus after various sign-off stages. These may
include additional [***], equipment, or additional [***] or [***].
3. [***] for [***] in capital equipment and engineering if this agreement is
cancelled by Natus prior to it's expiration, unless the reason for the
cancellation is due to poor quality or delivery, or other reasons that are
controllable by Ludlow. In the event that Natus [***], under this clause,
the [***] will become the [***].
The parties have executed this Memorandum of Understanding on the 7/th/day of
December, 2000.
For: Natus Medical Inc. For: The Ludlow Company LP
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇ ▇▇▇▇▇▇▇
--------------------------------- ----------------------------
Signature Signature
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇ ▇▇▇▇▇▇▇
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Title: Vice President, Operations Title: President
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[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
The Ludlow Company LP
[address]
Tyco / Healthcare / Ludlow
================================================================================
18 September 2000
▇▇▇▇▇▇ ▇▇▇▇▇
Vice President, Operations
Natus Medical Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Dear ▇▇▇:
Estimates for the new Natus ear coupler and electrodes have been completed. The
cost projections are based upon best guess information available at this time.
The cost projections include the cost for a new production line for the ear
couplers utilizing the molded ear coupler and [***] hydrogel. [***] for the
molded ear coupler are also included in the estimate.
Proposed Natus System
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One piece molded ear coupler: $[***] per pair
"Tab" style electrode: $[***] per pouch of three electrodes
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Total cost per procedure: $[***]
Current Natus System
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Foam Ear coupler: $[***] per pair
Snap style electrodes: $[***] per pouch of three electrodes
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Total cost per procedure: $[***]
Moving to the new system would result in a [***]% ($[***]) cost reduction per
patient procedure.
Attached are two spreadsheets detailing the total cost saving to Natus per year
using realistic conversion rates from the current system to the new design over
a five year period. In year five, we project complete conversion to the new
molded design. Total savings over this time period are in excess of $[***].
Of course, a faster rate of conversion would yield great savings sooner.
We look forward to reviewing this proposal and moving forward with the
conversion.
Best Regards,
/s/ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
Director of Sales & Marketing
OEM Medical Products
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[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
Natus Product Conversion to Molded Ear Couplers/Tabs
Annual Total
Foam Foam Annual Molded Molded Molded Annual Total Annual Price Average
Ear Ear Foam Ear Ear Ear Ear Annual Avg Ear Cost of Jelly of Annual Total Cost
Calendar Coupler Coupler Ear Coupler Coupler Coupler Coupler Ear Coupler Jelly Button New Tab Electrode of
Year Qty Cost Coupler Qty Cost Cost Cost Couplers Cost Buttons Cost Tabs Cost Cost Electrodes
-------- ------- ------- ------- ------- ------- ------- ------- -------- ------- ------- ------ ----- ------ --------- ----------
2000 [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
2001 [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
2002 [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
2003 [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
2004 [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
2005 [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]
Total
Calendar Estimated
Year Cost
-------- ---------
2000 [***]
2001 [***]
2002 [***]
2003 [***]
2004 [***]
2005 [***]
Cost Comparison Current Foam Ear Coupler vs. Conversion to Molded Ear Coupler
Average Cost Per Annual Cost Current
Total Study with with Cost Per Annual Cost
Annual Conversion Conversion Study with Per Study
Calendar Ear to Molded to Molded Foam Ear with Current
Year Couplers Ear Coupler Ear Coupler Coupler Ear Coupler Savings
-------- -------- ---------------- ------------ ---------- ------------ -------
2000 [***] [***] [***] [***] [***] [***]
2001 [***] [***] [***] [***] [***] [***]
2002 [***] [***] [***] [***] [***] [***]
2003 [***] [***] [***] [***] [***] [***]
2004 [***] [***] [***] [***] [***] [***]
2005 [***] [***] [***] [***] [***] [***]
Total five year savings [***]
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[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.