PRODUCT SUPPLY AND DISTRIBUTION AGREEMENT
BETWEEN
CYGNUS, INC.
AND
YAMANOUCHI PHARMACEUTICAL CO., LTD.
DATED
JULY 14, 1996
TABLE OF CONTENTS
PAGE
1. DEFINITIONS............................................................. 2
2. Grant of Distributorship................................................ 5
2.1. Exclusive Distributorship........................................ 5
2.2. Minor Improvement Product........................................ 6
2.3. Major Improvement Product........................................ 8
2.4. Meetings to Discuss Product Development.......................... 11
2.5. Right to Use Subdistributors..................................... 11
2.6. Sales Only in the Territory...................................... 12
3. Product Registration.................................................... 12
4. Obligations of Cygnus................................................... 14
4.1. Regulatory Submissions........................................... 14
4.2. Supply of Product................................................ 14
4.3. Quantity: Forecasts.............................................. 14
4.4. Delivery......................................................... 16
4.5. Acceptance and Rejection of Product in Case of Nonconformity..... 16
4.6. Inability to Supply.............................................. 16
4.7. Sample Products.................................................. 16
4.8. Technical Support................................................ 16
4.9. No Duty to Deliver if Product Terminated......................... 17
5. Obligations of Yamanouchi............................................... 17
5.1. General Obligations of Yamanouchi................................ 17
5.2. Korea............................................................ 17
5.3. Long Range Forecasts............................................. 18
5.4. Adjustments of Long Range Forecast, Quantity Forecast and Firm
Order............................................................ 18
5.5. Non-achievement of Long Range Forecast........................... 18
5.6. Marketing Obligations............................................ 18
5.7. Purchasing Requirements.......................................... 20
6. Payments................................................................ 20
6.1. Milestone Payments............................................... 20
6.2. Product Related Payments......................................... 20
6.3. Currency Conversion.............................................. 21
6.4. Payment Terms.................................................... 21
6.5. Taxes and Duties................................................. 21
7. Records and Audit Rights................................................ 22
8. Non-Competition......................................................... 23
i.
9. Adverse Reaction........................................................ 23
10. Export Law.............................................................. 23
11. Term and Termination.................................................... 24
11.1. Term............................................................. 24
11.2. Termination by Either Party for Cause............................ 24
11.3. Termination for Unsatisfactory Results........................... 25
11.4. Effect of Termination; Survivability of Certain Provisions....... 26
11.5. Termination Not Sole Remedy...................................... 27
12. Product Warranty and Warranty Disclaimers............................... 27
12.1. Cygnus Warranty.................................................. 27
13. Insurance............................................................... 28
14. Ownership............................................................... 29
14.1. Ownership........................................................ 29
14.2. Use of Non-Clinical and Clinical Data............................ 29
15. Confidentiality......................................................... 30
16. Trademarks.............................................................. 30
16.1. Trademark Registration........................................... 30
16.2. No Rights in Trademarks, Trade Names, Logos or Designations...... 31
16.3. After Termination or Expiration.................................. 32
17. Patent and Trademark Indemnification.................................... 32
17.1. Cygnus' Patent and Copyright Indemnity........................... 32
17.2. Limitation of Indemnity.......................................... 34
17.3. Settlement....................................................... 34
18. Limited Liability....................................................... 34
19. Infringement by Third Parties........................................... 35
20. Manufacturing in the Event of Bankruptcy................................ 35
21. General................................................................. 36
21.1. Amendment and Waiver............................................. 36
21.2. Governing Law and Legal Actions.................................. 36
21.3. Arbitration...................................................... 37
21.4. Headings......................................................... 38
21.5. Notices.......................................................... 38
21.6. Entire Agreement................................................. 38
21.7. Severability..................................................... 38
21.8. Basis of Bargain................................................. 38
ii.
21.9. Relationship of Parties.......................................... 38
21.10. Assignment....................................................... 39
21.11. Publicity and Press Releases..................................... 39
21.12. Force Majeure.................................................... 39
21.13. Remedies......................................................... 39
SCHEDULE A MILESTONE PAYMENTS
EXHIBIT A INITIAL GLUCOSE MONITORING PRODUCT
iii.
PRODUCT SUPPLY AND DISTRIBUTION AGREEMENT
This Product Supply and Distribution Agreement (the "Agreement")
is entered as of July ___, 1996 (the "Effective Date") by and between Cygnus,
Inc. ("Cygnus"), a Delaware corporation, with its principal place of business
at 400 Penobscot Drive, Redwood City, California 94063, and Yamanouchi
Pharmaceutical Co., Ltd. ("Yamanouchi"), a Japanese corporation, with its
principal place of business at 3-11, Nihonbashi-honcho 2-chome, Chuo-ku, Tokyo
103, Japan.
WHEREAS, Cygnus is a leading developer of non-invasive glucose
monitoring systems and Cygnus owns (or is otherwise licensed or entitled to)
certain Proprietary Rights (defined below) relating to the Products (defined
below);
WHEREAS, Cygnus and Yamanouchi desire to commercially introduce the
Products in the Territory (defined below);
WHEREAS, Yamanouchi has the capabilities and expertise to market,
sell and distribute the Products in the Territory and Cygnus desires to maximize
the long-term sales of the Products by developing new Products suitable for the
market in the Territory in cooperation with Yamanouchi; and
WHEREAS, Cygnus and Yamanouchi are prepared to enter into a supply
and distribution agreement on the terms and conditions set forth below;
NOW THEREFORE, in consideration of the mutual promises, undertakings
and covenants herein expressed, the parties agree as follows:
1.
[*CONFIDENTIAL TREATMENT REQUESTED*]
1. DEFINITIONS.
1.1. "Affiliate Company" shall mean any company, corporation, or
other business entity which owns or controls directly or indirectly, or is under
common control with Cygnus or Yamanouchi, or which Cygnus or Yamanouchi owns or
controls directly or indirectly by ownership of fifty percent (50%) or more of
the outstanding voting stock of such corporation or business entity.
1.2. "Calculation Period" shall mean each of the following half
year periods: April 1 through September 30 and October 1 through March 31.
1.3. "Component Products" shall mean with respect to any Initial
Glucose Monitoring Product and Improved Glucose Monitoring Product, such
products, parts or replacement components capable of sale or sold individually
to consumers and including the Glucopad and the sensors described in Exhibit A.
1.4. "Contract Year" shall be for the first Contract Year, that
annual period commencing on the first day of First Commercial Sale of the
Initial Glucose Monitoring Product system in any country in the Territory.
Subsequent Contract Years shall be annual periods commencing on the
anniversaries of the first Contract Year.
1.5. "Delivery Date" shall mean a date for which delivery of a
Product is properly requested in a purchase order.
1.6. "First Commercial Sale" shall mean, as to each Product, the
first commercial sale by Yamanouchi.
1.7. "Fully Burdened Development Cost" of a Product means the
following direct and indirect costs (as determined in accordance with generally
accepted
2.
[*CONFIDENTIAL TREATMENT REQUESTED*]
accounting principles ("GAAP")), to the extent specifically attributable to an
Improved Glucose Monitoring Product: *
1.8. "Improved Glucose Monitoring Products" shall mean (i) any and
all systems for glucose monitoring which is based upon iontophoresis technology,
except the Initial Glucose Monitoring Product system, and (ii) any Component
Products thereof.
1.9. "Initial Glucose Monitoring Products" shall mean the glucose
monitoring system and any Component Product thereof described and listed in
Exhibit A as first approved for sale in the United States. * For each such
change, * the modified version and any Component Product thereof shall be deemed
the "Initial Territory Glucose Monitoring Product."
1.10. "Know-How" shall mean all know-how, techniques, trade
secrets, practices, procedures, processes, inventions, methods, data, skill,
experience, technology, test data, including but not limited to nonclinical
data, special ability and information, including but not limited to improvements
thereof relating to each Product.
1.11. "Long Range Forecast" shall have the meaning set forth in
Section 5.3 of this Agreement.
1.12. "Major Improvement Product" shall mean any Improved Glucose
Monitoring Product which (i) embodies or offers a substantial change in function
or performance from existing Products, or (ii) incorporates any additional
patent or patentable invention which has not been employed in any existing
Product, or (iii) needs a clinical trial to obtain U.S regulatory approval for
sale in the U.S. As used herein, a substantial change in function or
performance will be deemed to exist for an entire product and the components
thereof if such improvement exists in a major component
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[*CONFIDENTIAL TREATMENT REQUESTED*]
thereof, notwithstanding the absence of such improvements in the other
components of the product system. Mere cosmetic or superficial changes do not
constitute a substantial improvement in function or performance.
1.13. "Manufacturing Cost" means the aggregate of the following (as
determined in accordance with generally accepted accounting principles): both
direct and indirect costs specifically attributable to *
1.14. "Market Research" shall mean, with respect to each Product,
market research to determine, among other things, market size, price, Product
requirements and other appropriate market data.
1.15. "Minor Improvement Product" shall mean any Improved Glucose
Monitoring Product that is not a Major Improvement Product.
1.16. "Non-Invasive Product" shall mean a glucose monitoring
product that does not require sample extraction that penetrates the skin (other
than an existing Product) for management of diabetes in humans.
1.17. "Payment Report" shall mean the report for every Calculation
Period described in Section 6.2.3 of this Agreement.
1.18. "Product Launch" for a country shall mean the date such
Product has received all necessary approvals and the first commercial sale of
such Product has occurred in such country.
1.19. "Products" shall mean (i) any Initial Glucose Monitoring
Product, (ii) any Improved Glucose Monitoring Product included in this Agreement
pursuant to Sections 2.2 and 2.3 of this Agreement, and (iii) any Component
Product.
4.
[*CONFIDENTIAL TREATMENT REQUESTED*]
1.20. "Proprietary Rights" shall mean all rights with respect to
all patented or patentable material, including singularly or in groups, or
subgroups, any component or ingredient thereof, medical, clinical, toxicological
or other scientific data or information relating to the Products or the
manufacture of the Products, trademarks, copyrights or copyrightable material,
any Know-How and all business, technical and financial information disclosed by
one party hereunder to the other. Such Proprietary Rights shall be deemed the
confidential property of the disclosing party.
1.21. "Qualified Subdistributors" shall be a medical-device or
pharmaceutical manufacturer or distributor of medical devices within the
Territory selling to the same classes of customer within the Territory as
Yamanouchi within the Territory.
1.22. "Submission" shall mean the filing of all materials specified
by applicable governmental statutes and/or regulations as necessary to obtain
approval for commercial sale within a particular country.
1.23. "Territory" shall mean Japan and Korea.
1.24. "Total Net Sales" for a period means *
1.25. "U.S. Regulatory Submission" shall mean a 510K or PMA
submission (whichever the U.S. Food and Drug Administration determines to be
applicable) to the U.S. Food and Drug Administration.
2. GRANT OF DISTRIBUTORSHIP.
2.1. EXCLUSIVE DISTRIBUTORSHIP. Subject to the terms and
conditions of this Agreement and during the term hereof, Cygnus grants
Yamanouchi an exclusive distributorship of the Products in the Territory.
5.
[*CONFIDENTIAL TREATMENT REQUESTED*]
2.2. MINOR IMPROVEMENT PRODUCT. If either Cygnus or Yamanouchi
desire that a Minor Improvement Product be developed, either may make a written
proposal (the "Proposal") to the other.
2.2.1. In the event either party wishes to make a Proposal it
shall set forth (1) a description and proposed specifications of the product,
(ii) if the Proposal is made by Cygnus, an estimate of the Fully Burdened
Development Cost and details of the conditions for and amounts of milestone
payments and (iii) a schedule for development. The party receiving the Proposal
may accept or reject the Proposal. If, within * of sending of the
Proposal, the receiving party has not provided notice in writing either
(i) accepting the Proposal or (ii) offering a counter Proposal, the Proposal
shall be deemed rejected. If the parties reach agreement, which must be
evidenced in writing, and which must include express agreement upon the
(i) description and proposed specifications; (ii) details of the conditions for
and amounts of milestone payments totaling * and (iii) schedule for development,
such Minor Improvement Product shall become a Product under this Agreement to be
developed by Cygnus. Failure to reach such agreement within * of the
giving of the first notice with respect to the Proposal shall be deemed a
rejection of the Proposal. Yamanouchi shall make all milestone payments when
due as provided in the agreement between the parties for such Minor Improvement
Product. * All rights and obligations with respect to such accepted Minor
Improvement Product shall be as provided in this Agreement for any Product.
Cygnus shall have the right to make, have made, use, sell and to grant rights to
any such accepted Minor Improvement Product outside the Territory. In the event
the Proposal is rejected, Cygnus and Yamanouchi shall be prohibited during the
6.
[*CONFIDENTIAL TREATMENT REQUESTED*]
term of the Agreement from directly or indirectly manufacturing, distributing or
offering for sale such Minor Improvement Product in the Territory and/or
contracting with, licensing to or forming a venture with any third party for the
purpose of manufacturing, selling, promoting, distributing or otherwise offering
such Minor Improvement Product in the Territory; PROVIDED, HOWEVER there shall
be no such restrictions upon Cygnus outside the Territory.
2.2.2. Yamanouchi may elect to terminate the development
work for any Minor Improvement Product as set forth below by providing
written notice of termination to Cygnus. In the event, Yamanouchi can
demonstrate (i) that following completion of Cygnus' development work on a
Minor Improvement Product, the Minor Improvement Product has actually failed
to meet the agreed upon specifications and that such failure substantially
and materially impairs the commercial value of the Minor Improvement Product;
(ii) that following actual payment * or (iii) that Cygnus has actually failed
to meet the deadline for completion of development and that the additional
time required to complete development will substantially and materially
impair the commercial value of the Minor Improvement Product, Yamanouchi may
give notice of termination for cause ("Termination for Cause"). In the event
of Termination for Cause * Upon Cygnus' determination that it has developed
a product which reasonably meets the agreed upon specifications, Cygnus shall
give notice of completion to Yamanouchi. Yamanouchi's right to give notice
of termination shall expire within * of receipt of such notice. Upon the
expiration of such * period, Yamanouchi shall be required to use reasonable
efforts to obtain regulatory approval (if required) and launch the Minor
Improvement Product as soon as reasonably practicable.
7.
[*CONFIDENTIAL TREATMENT REQUESTED*]
2.2.3. Cygnus may elect to terminate development work for any
Minor Improvement Product if it in good faith determines that there is a
substantial risk that (i) it will be unable to meet the agreed upon
specifications or * (iii) that it will be unable to meet the agreed upon
schedule for development. In such event, Cygnus may give Yamanouchi notice in
writing terminating the project to develop such Minor Improvement Product.
Following notice of termination, *
2.2.4. In the event either Yamanouchi or Cygnus terminate a
Minor Improvement Product development project, Cygnus and Yamanouchi shall be
prohibited during the term of the Agreement from directly or indirectly
manufacturing, distributing or offering for sale such Minor Improvement Product
in the Territory and/or contract licensing with, licensing to, or forming a
venture with any third party for the purpose of manufacturing, selling,
promoting, distributing or otherwise offering such Minor Improvement Product in
the Territory; PROVIDED, HOWEVER, there shall be no such restriction upon Cygnus
outside the Territory.
2.2.5. In the event that Yamanouchi has launched a Minor
Improvement Product in the Territory and Cygnus launches a product outside the
Territory, which is identical in each and every respect with the launched Minor
Improvement Product, *
2.3. MAJOR IMPROVEMENT PRODUCT. If either party wishes to
develop, manufacture or sell a Major Improvement Product, it may make a written
proposal (the "Proposal") therefor to the other. Any such Proposal shall set
forth the following: (i) a description and proposed specification of the
product; (ii) if the Proposal is made by Cygnus, * payments with conditions for
each payment and the amount thereof (each
8.
[*CONFIDENTIAL TREATMENT REQUESTED*]
payment conceived to be made in advance of performing the development work
contemplated thereunder and in an amount estimated to cover *; and (iii) a
schedule for development. In the event Cygnus has already commenced a Major
Improvement Product as of the Effective Date of the Agreement, Cygnus shall
make a Proposal in the first meeting set forth in Section 2.4 and in such
case the Proposal shall set forth * in addition to items (i) through (iii)
above. Following the making of any such Proposal, the receiving party shall
have * from the sending of the Proposal to either (i) give written notice of
acceptance or (ii) offer a counter-Proposal. If notice of acceptance or a
counter-Proposal is not given within the * the Proposal shall be deemed
rejected. If the parties reach agreement, which must be evidenced in writing
and which must include agreement upon the (i) description and proposed
specifications; and (ii) the details of the conditions for and the amounts of
* and (iii) a schedule for development. Such Major Improvement Product shall
become a Product under this Agreement to be developed by Cygnus. Failure to
reach such agreement within * of the giving of the first notice with respect
to the Proposal, shall be deemed a rejection of the Proposal.
2.3.1. In the event a Proposal given under the above
Section 2.3 is accepted, Yamanouchi shall make all milestone payments when due
as provided in the agreement between the parties. * All rights and obligations
with respect to such accepted Major Improvement Product shall be as provided for
any Product in this Agreement. Cygnus shall have the right to make, have made,
use, sell and to grant rights to any such accepted Major Improvement Product
outside the Territory.
9.
[*CONFIDENTIAL TREATMENT REQUESTED*]
2.3.2. Either party may terminate a Major Improvement Product
by giving notice thereunder. In the event of termination, Yamanouchi shall be
obligated to pay * through the date of notice of termination. Cygnus shall
submit an invoice following notice of termination showing * In the event of
termination by Cygnus, if Cygnus recommences work on the terminated Major
Improvement Product, it shall make a new Proposal therefor under Section 2.3.
2.3.3. In the event that a Proposal is rejected or deemed
rejected, or the development project is terminated by Yamanouchi under
Section 2.3.2, Cygnus shall be free itself, or with a third party to develop,
manufacture, distribute or sell or otherwise exploit the Major Improvement
Product (and all future modifications to or evolutions thereof) within or
outside the Territory. PROVIDED, HOWEVER, with respect to a rejected or deemed
rejected Proposal or a Major Improvement Product for which development was
terminated by Yamanouchi under Section 2.3.2, if Cygnus receives a proposal or
offer from a third-party to sell, distribute or otherwise exploit such Major
Improvement Product in the Territory, Cygnus shall give notice thereof to
Yamanouchi, prior to concluding a binding agreement with the third-party. Such
notice shall set forth all monetary consideration to be received under the
proposal or offer from the third-party and the amount of Cygnus' Fully Burdened
Development Cost incurred to date and Cygnus' estimate of the Fully Burdened
Development Cost to complete development. Upon receipt of such notice,
Yamanouchi shall have * to make a "Qualifying Offer." A "Qualifying Offer"
shall be equal to * In the event Cygnus elects to distribute such previously
rejected or deemed rejected Major Improvement Product in the Territory itself or
through wholesalers, Cygnus shall give notice thereof to Yamanouchi, who shall
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[*CONFIDENTIAL TREATMENT REQUESTED*]
have * to make a Qualifying Offer. A Qualifying Offer where Cygnus is to
distribute itself or through wholesalers must be equal to * In the event
Cygnus elects to distribute such previuosly rejected or deemed rejected Major
Improvement Product in the Territory itself or through wholesalers, Cygnus
shall give notice thereof to Yamanouchi who shall have * to make a Qualifying
Offer. A Qualifying Offer where Cygnus is to distribute itself or through
wholesalers must be equal to * In the event Yamanouchi shall fail to make a
Qualifying Offer fully meeting the requirements set forth in this section
within * of the receipt of notice by Yamanouchi, in the case of a proposal by
a third-party, Cygnus shall be free to conclude an agreement with respect to
such Major Improvement Product or, in the case of distribution itself or with
wholesalers, to commence such activity.
2.4. MEETINGS TO DISCUSS PRODUCT DEVELOPMENT. The parties shall
meet every six months, or more often by agreement of both parties, to discuss
product development. In such meetings, the parties may discuss the concepts of
new products, estimated budgets for the development thereof and the timing of
Launch.
2.5. RIGHT TO USE SUBDISTRIBUTORS. Yamanouchi may submit a
request to Cygnus that Yamanouchi be allowed to utilize Qualified
Subdistributors. Such request must be accompanied by a consent on the part of
the proposed Qualified Subdistributor to be bound by all of the terms of this
Agreement including the audit provisions set forth in Section 7. Such request
shall not become effective without Cygnus' prior written approval which shall
not be unreasonably withheld; PROVIDED, HOWEVER, that no approval is required in
the event that Yamanouchi designates an Affiliate Company as a Qualified
Subdistributor. Notwithstanding the giving of consent to a Qualified
Subdistributor hereunder, Yamanouchi shall remain directly and primarily
obligated to Cygnus with respect to Products received and sold by any Qualified
Subdistributor including all payments, forecasts and marketing obligations.
11.
[*CONFIDENTIAL TREATMENT REQUESTED*]
2.6. SALES ONLY IN THE TERRITORY. Yamanouchi shall market, sell
and distribute the Products only to persons or entities taking delivery in and
located in the Territory.
3. PRODUCT REGISTRATION.
3.1. Yamanouchi shall be responsible, at its sole cost and
expense, for * Yamanouchi shall use its reasonable efforts to make its
Submission in each country in the Territory on the Initial Territory Glucose
Monitoring Product or any Improved Glucose Monitoring Product included in this
Agreement as soon as reasonably possible; PROVIDED, HOWEVER, in the case of the
Initial Territory Glucose Monitoring Product, Yamanouchi shall use reasonable
efforts to make its Submission no later than an estimated target date set in
notice to Cygnus to be provided by Yamanouchi within * of execution of this
Agreement, which date shall be established by Yamanouchi after its consultation
with regulatory agencies in the Territory. To the extent that approval must be
obtained or application made for any governmental or insurance reimbursement
plan, Yamanouchi shall use reasonable efforts to obtain such reimbursement rate
in an amount designed to maximize Total Net Sales, and in no event less than the
amount established for existing glucose monitoring products. Yamanouchi shall
promptly submit copies of all documentation related to each application and
registration (including regulatory approvals) to Cygnus for its use and review.
3.2. Cygnus shall cooperate with Yamanouchi in Yamanouchi's
Submission in the countries within the Territory by providing such materials as
may otherwise be in existence and as are necessary to Yamanouchi's Submission.
*
12.
[*CONFIDENTIAL TREATMENT REQUESTED*]
3.3. In the event that Cygnus believes Yamanouchi is not using
reasonable efforts to perform any of its responsibilities with respect to
registration or approval as set forth in Section 3.1 above and that such failure
has or may cause a delay with respect to Product Launch or regulatory approval
of such Product or any Product relating to such Proprietary Information, Cygnus
shall provide written notice thereof to Yamanouchi. Upon the giving of such
written notice, Yamanouchi shall have * to explain to Cygnus in writing the
cause of the delay. If the delay is caused by Yamanouchi's failure to use
reasonable efforts to perform any of the foregoing responsibilities, then:
(i) Cygnus shall be free to terminate Yamanouchi's rights to such Product upon *
prior written notice, and Cygnus shall be free to fully exploit without approval
or accounting, all of the information (including but not limited to the Market
Research) developed by or supplied to Cygnus hereunder with respect to such
terminated Product, and (ii) Yamanouchi shall for the immediately following *
from the date the termination becomes effective refrain from developing,
acquiring, marketing or working with others to develop or market any Non-
Invasive products intended or designed to compete, or that would be competitive
with the terminated Products.
3.4. Yamanouchi shall use reasonable efforts to launch any Product
* after receiving regulatory approval to commercially sell such Product and, if
applicable, obtaining the governmental or insurance reimbursement for the
Product. In the event Yamanouchi fails to reasonably launch any Product within
such * period, Cygnus, at its sole option and discretion, in addition to any
other remedy hereunder, may elect to terminate the distributorship rights for
such a Product and for such a country upon * written notice to Yamanouchi. Such
termination shall occur without reimbursement for
13.
[*CONFIDENTIAL TREATMENT REQUESTED*]
any costs or expenses incurred by Yamanouchi or refund of payments made. Any
payments accrued as of the date of such termination shall remain payable to
Cygnus according to the terms of this Agreement.
4. OBLIGATIONS OF CYGNUS.
4.1. REGULATORY SUBMISSIONS. Cygnus shall be solely responsible
for any U.S. Regulatory Submission required for each Product. Cygnus shall keep
Yamanouchi reasonably informed of the progress with respect to the
U.S. Regulatory Submission. With respect to the Initial Glucose Monitoring
Product, Cygnus further agrees as soon as reasonably practicable to provide
Yamanouchi with necessary information to enable Yamanouchi to evaluate Cygnus'
U.S. Submission. If Cygnus has not otherwise reported during a calendar
quarter, Yamanouchi may make * for information during the * and Cygnus shall
reply concerning the U.S. Regulatory Submission.
4.2. SUPPLY OF PRODUCT. Cygnus, within the limitations contained
in this Section 4, agrees to supply to Yamanouchi such quantities of each
Product as Yamanouchi has ordered in conformity with the provisions of this
Agreement.
4.3. QUANTITY: FORECASTS.
4.3.1. Yamanouchi shall deliver to Cygnus (i) at least * the
First Commercial Sale of such Product is projected to occur, a forecast of
Yamanouchi's quantity requirements for such Product for the calendar quarter in
which the First Commercial Sale of such Product is projected to occur and
(ii) at least * prior to the calendar * in which the First Commercial Sale
of such Product is projected to occur, Yamanouchi's firm order including
Delivery Dates for such Product * (which shall be subject to agreement by
Cygnus, which agreement shall not be unreasonably withheld)
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[*CONFIDENTIAL TREATMENT REQUESTED*]
and a good faith forecast of its quantity requirements for such Product for the
next * provided that such forecasts shall not materially deviate from the
forecast of sales provided in the Long Range Forecast. Thereafter, Yamanouchi
shall deliver to Cygnus at or prior to the end of each * Yamanouchi's firm
order, including Delivery Dates for such Product for the * following * and a
forecast of its quantity requirements for such Product for the next * provided
that no forecasts or orders need be given for any period after the term of this
Agreement. If a required forecast or order * is not timely submitted for a
Product, the immediately preceding forecast for that * shall become the
new forecast or order; if there is no preceding forecast for a *, the
forecast or order for the immediately preceding * shall become the
forecast or order.
4.3.2. For each * forecast of each Product, the quantity of
any Product forecasted for delivery in the first of the * forecasted shall be
not less than * or more than * of the most recent previous forecast for such *.
4.3.3. The total quantity of each Product ordered by
Yamanouchi for delivery in any calendar * for which an order is required may not
be less than * of Yamanouchi's most recent forecast of its requirements for such
Product for such *. In addition, Cygnus will not be obligated to supply more
than * of Yamanouchi's most recent forecast of its requirements for such Product
for such *. If a firm order for * of Yamanouchi's most recent forecast of its
requirements for such Product for such calendar * Cygnus and Yamanouchi will
discuss in good faith the additional quantity which Cygnus will be able to
supply consistent with its other obligations, and Yamanouchi will adjust its
order accordingly.
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[*CONFIDENTIAL TREATMENT REQUESTED*]
4.3.4. Yamanouchi's forecasts and orders shall reflect its
good faith expectations of customer demand and Yamanouchi shall act in a
commercially reasonable manner to schedule orders to avoid creating production
capacity problems for Cygnus.
4.4. DELIVERY. All Products delivered by Cygnus to Yamanouchi
shall be * Cygnus shall use reasonable commercial efforts to deliver Product on
the applicable Delivery Dates as set forth in each firm order and shall arrange
*
4.5. ACCEPTANCE AND REJECTION OF PRODUCT IN CASE OF NONCONFORMITY.
No less than * prior to the date of the First Commercial Sale of the Initial
Glucose Monitoring Products, * shall agree on the acceptance criteria and
procedures and upon the manner for return of the Product rejected thereunder.
The parties have already agreed that shipped Product shall have * of its
official life remaining * upon receipt by Yamanouchi.
4.6. INABILITY TO SUPPLY. In the event that Cygnus expects an
inability to supply any Product continuously for more than * due to force
majeure or other reasons, Cygnus shall immediately notify Yamanouchi, and both
parties hereto shall consult with each other with respect to responses. In the
event that both parties agree upon the manufacture of the Product by Yamanouchi,
Cygnus shall cooperate therefor.
4.7. SAMPLE PRODUCTS. Cygnus shall provide sample Product to
Yamanouchi at *
4.8. TECHNICAL SUPPORT. Cygnus shall provide *
16.
[*CONFIDENTIAL TREATMENT REQUESTED*]
4.9. NO DUTY TO DELIVER IF PRODUCT TERMINATED. Cygnus shall be
under no obligation to deliver any Product if Yamanouchi's rights to such
Product shall have been terminated for any reason.
5. OBLIGATIONS OF YAMANOUCHI.
5.1. GENERAL OBLIGATIONS OF YAMANOUCHI. Subject to the terms and
conditions of this Agreement, Yamanouchi shall use reasonable efforts to perform
from time to time the Market Research necessary to ensure the successful
commercialization of the Products in the Territory. Yamanouchi shall *
5.2. KOREA. Yamanouchi shall have until * to give written notice
to Cygnus stating its intention to distribute Product in Korea. Prior to * the
parties shall meet to discuss any modifications required for the Product to
comply with or meet governmental regulations or market customs for Korea and the
costs thereof. If Yamanouchi fails to give timely written notice, it shall be
deemed to have relinquished all rights under this Agreement to Korea and Korea
shall immediately cease to be a Territory hereunder. If Yamanouchi decides to
distribute Product in Korea, it must proceed under the terms and conditions of
this Agreement. Yamanouchi shall then employ reasonable efforts to submit an
application for registration or approval of the Product in Korea and,
thereafter, to launch the Products as soon as reasonably practicable. The
parties hereby agree to discuss any changes to this Agreement which are
appropriate for the country. All such changes shall be in the form of a written
request if Yamanouchi intends to distribute Product in Korea.
17.
[*CONFIDENTIAL TREATMENT REQUESTED*]
5.3. LONG RANGE FORECASTS. With respect to each country within
the Territory, at least * prior to the beginning of the second Contract Year,
Yamanouchi shall supply Cygnus with *
5.4. ADJUSTMENTS OF LONG RANGE FORECAST, QUANTITY FORECAST AND
FIRM ORDER. In the event that (i) the timing of the governmental approval and,
if any, the listing on the governmental reimbursement plan are different from
the good faith estimate by Yamanouchi, (ii) market conditions materially change
due to the changes in laws or governmental relations or due to the launch of
competitive products, or (iii) any government in any country in the Territory
orders or instructs the discontinuation of or any other restriction on the sales
of any Product, due to the discovery of unexpected defects in the Products, both
parties hereto shall consult with each other and, if necessary, shall adjust the
Long Range Forecast fixed pursuant to Section 5.3, and the quantity forecasts
and firm orders as fixed under Section 4.3.
5.5. NON-ACHIEVEMENT OF LONG RANGE FORECAST. At or following the
end of * in the event that Yamanouchi's annual Total Net Sales in any country in
the Territory fall below * of the Long Range Forecast for such country in the
Territory for that year, the parties hereto shall have a meeting to discuss in
good faith how to increase sales.
5.6. MARKETING OBLIGATIONS. Yamanouchi, for itself and for its
Qualified Subdistributors approved pursuant to Section 2.4, agrees to conduct
reasonable sales and promotion activities. In addition, Yamanouchi, for itself
and for its Qualified Subdistributors represents, warrants and agrees:
18.
[*CONFIDENTIAL TREATMENT REQUESTED*]
(i) to use reasonable efforts to successfully market, sell
and support the Products throughout the Territory on a continuing basis and
to comply with good business practices and all laws and regulations
relevant to the regulatory authorities in each country in the Territory
where any Product is sold;
(ii) to use reasonable efforts to substantially and
continuously commercially distribute and sell each of the Products after
the first regulatory approval to do so and, if any, the first listing on
the governmental reimbursement plan for each such Product or, where no
regulatory approval or listing is required, after the First Commercial Sale
of such Products;
(iii) to use reasonable efforts to achieve the Long Range
Forecasts set forth in Section 5.3;
(iv) to keep Cygnus informed as to any problems encountered
with any of the Products and any resolutions arrived at for those problems,
and to communicate promptly to Cygnus any and all modifications, design
changes or improvements of any of the Products suggested by any customer,
employee or agent;
(v) not to make any claims, representations or warrants
directly or indirectly to any third party about the Products except as
expressly agreed upon by the parties in writing prior thereto; PROVIDED,
HOWEVER, that Yamanouchi may conduct promotional activities to consumers
based upon information and material provided by Cygnus to Yamanouchi or
those acquired by Yamanouchi within the Territory;
19.
[*CONFIDENTIAL TREATMENT REQUESTED*]
(vi) to maintain and provide Cygnus with all sales and
other information which is useful in monitoring sales progress on a
country-by-country basis and with which Yamanouchi is able to provide to
Cygnus;
(vii) to the extent that Yamanouchi obtains or generates
such records, to keep for * year period after termination of this Agreement
records of all Product sales and customers, including complaints or reports
sufficient to adequately administer a recall of any of the Products and to
fully cooperate in any decision to recall, retrieve and/or replace such
Product.
5.7. PURCHASING REQUIREMENTS. Subject to the terms and conditions
of this Agreement, Yamanouchi, for itself and for its Qualified Subdistributors,
agrees to purchase all of its Product requirements from Cygnus.
6. PAYMENTS.
6.1. MILESTONE PAYMENTS. Yamanouchi shall pay the amounts set
forth in Schedule A in accordance with the milestone dates set forth therein. *
6.2. PRODUCT RELATED PAYMENTS. In addition to the payments
specified in Section 6.1 above, Yamanouchi shall pay Cygnus the following:
6.2.1. PURCHASE PRICE. Yamanouchi shall be obligated to pay
Cygnus *
6.2.2. ESTIMATED PURCHASE PRICE. Yamanouchi shall pay and
Cygnus shall receive from Yamanouchi, *
6.2.3. PAYMENT REPORT. Within * days following the end of
each Calculation Period, Yamanouchi shall prepare a report in accordance with
GAAP (the "Payment Report") showing the following (i) the calculation of Total
Net Sales in *
20.
[*CONFIDENTIAL TREATMENT REQUESTED*]
(ii) the number of units of each Product sold on a country-by-country basis
during the Calculation Period, (iii) the aggregate Estimated Purchase Price paid
for all Products sold in such period * and (v) the calculation of the Estimated
Purchase Payment for the next Calculation Period.
6.2.4. RECONCILIATION. For each Calculation Period, in the
event that * of the Total Net Sales in local currencies exceeds the aggregate
Estimated Purchase Price paid for all Products sold during such period
(converted to local currencies at the exchange rate(s) in effect on the date(s)
each Estimated Purchase Price payment was made, and accounted on a first-in,
first-out basis), Yamanouchi shall *
6.2.5. PRICE DISCUSSION. In the event that * of Total Net
Sales for a Calculation Period falls below * of the aggregate Manufacturing Cost
of the Products sold during such period, then the parties hereto shall promptly
meet to discuss in good faith the willingness of the respective parties to *
6.3. CURRENCY CONVERSION. Conversion from foreign currency to
U.S. Dollars will be determined as of an applicable date based on the rate at
which Japanese yen or Korean won, as applicable, may be purchased with U.S.
Dollars at *
6.4. PAYMENT TERMS. All payments under this Agreement are *
unless otherwise expressly provided herein. All such payments to Cygnus shall
be made in U.S. dollars in the United States or other country designated by
Cygnus. Late payments shall bear a late fee at the lower of: * or (ii) the
maximum rate allowed by law.
6.5. TAXES AND DUTIES. All payments to Cygnus under this
Agreement are * In the event of any such withholding, the parties agree to
confer regarding other measures to minimize such withholding.
21.
[*CONFIDENTIAL TREATMENT REQUESTED*]
7. RECORDS AND AUDIT RIGHTS.
7.1. Among other things, Yamanouchi and any Qualified
Subdistributor shall keep complete and accurate records reflecting all
information necessary or useful in verifying the accuracy of each Payment
Report. Cygnus shall have the right to hire an independent certified public
accountant to inspect all the above required records (who shall agree in writing
to keep all information confidential except as needed to disclose any discovered
discrepancies); PROVIDED, such audit: (i) is conducted during normal business
hours, (ii) is conducted * (unless a discrepancy is discovered in favor of the
auditing party), (iii) * shall bear the full cost and expense of such audit, *
Regardless of the amount of discrepancy discovered, all discrepancies (and
interest thereon) shall be immediately due and payable. In addition, Cygnus
shall at its own expense have the right, at its option, upon reasonable notice
to Yamanouchi, during normal business hours and * to inspect any promotional
materials then in use by Yamanouchi or any sales and/or marketing practices of
Yamanouchi.
7.2. Among other things, Cygnus shall keep complete and accurate
records reflecting all information necessary or useful in verifying the accuracy
of each Fully Burdened Development Cost and Manufacturing Cost. Yamanouchi
shall have the right to hire an independent certified public accountant to
inspect all the above required records (who shall agree in writing to keep all
information confidential except as needed to disclose any discovered
discrepancies); PROVIDED, such audit: (i) is conducted during normal business
hours, (ii) is conducted * (unless a discrepancy is discovered in favor of the
auditing party), (iii) * shall bear the full cost and expense of such audit, *
22.
[*CONFIDENTIAL TREATMENT REQUESTED*]
Regardless of the amount of discrepancy discovered, all discrepancies (and
interest thereon) shall be immediately due and payable.
8. NON-COMPETITION.
8.1. Except as provided below, during the term hereof Yamanouchi
shall be prohibited from each of the following acts with respect to any form of
Non-Invasive Product:
(i) directly or indirectly manufacturing, distributing or
offering for sale any Non-Invasive Products, other than the Products
contemplated in this Agreement, within the Territory; and
(ii) contracting with or forming a venture with any third
party for the purpose of manufacturing, selling, promoting, distributing or
otherwise offering any Non-Invasive Products, other than the Products
contemplated in this Agreement, for sale within the Territory, or assisting
in any of the foregoing acts.
9. ADVERSE REACTION. Each party hereto shall immediately notify the
other party of any adverse or unexpected reaction or results or any actual or
potential government action relevant to any of the Products. If Cygnus requests
in writing for good cause (e.g., safety reasons), both parties hereto shall in
good faith discuss the necessary counter-measures, including but not limited to
suspension of distribution of any of the Products. In the event that the
governmental agency in the Territory orders or instructs, or both parties agree
upon, the recall of any Product, the costs for such recall shall be borne by *
10. EXPORT LAW. Both parties hereto shall, in cooperation with each
other, comply with all export laws and restrictions and regulations of the
Department of
23.
[*CONFIDENTIAL TREATMENT REQUESTED*]
Commerce or any other United States or foreign agency or authority, and agree
not to export, or allow the export or reexport of any Cygnus Proprietary Rights
or Products or any direct product thereof in violation of any such restrictions,
laws or regulations, or, without obtaining all necessary approvals and
authorizations therefrom. Yamanouchi shall assist Cygnus in obtaining any
necessary licenses and/or exemptions with respect to the export from the U.S. of
all material or items, including but not limited to, any material or items
deliverable by Cygnus, to any location and shall demonstrate to Cygnus
compliance with all applicable laws and regulations prior to delivery thereof by
Cygnus.
11. TERM AND TERMINATION.
11.1. TERM. Unless terminated earlier as provided below or
elsewhere in this Agreement, with respect to each Product this Agreement shall
have a term extending from the Effective Date to the later of: (i) the
expiration of the last patent relating to the Products for the use or sale of
such Product in any country in the Territory or (ii) fifteen (15) years from the
date of the First Commercial Sale of such Product; PROVIDED, HOWEVER that unless
either party gives the other notice of termination twelve (12) months prior to
the expiration date of the original term hereof, this Agreement shall be
automatically extended for three (3) years. Thereafter, this Agreement shall be
further extended for an additional three (3) years unless either party gives the
other party notice of termination twelve (12) months prior to the expiration
date of such extension.
11.2. TERMINATION BY EITHER PARTY FOR CAUSE. This Agreement
(including any rights to any Product hereunder) may be terminated by a party for
cause immediately upon the occurrence of any of the following events:
24.
[*CONFIDENTIAL TREATMENT REQUESTED*]
(i) if the other party ceases to do business, or otherwise
terminates its business operations;
(ii) if the other party shall fail to promptly secure or
renew any license, registration, permit, authorization or approval
necessary for the conduct of its business in the manner contemplated by
this Agreement or in the Territory, or if any such license, registration,
permit, authorization or approval is revoked or suspended and not
reinstated within sixty (60) days;
(iii) if the other party materially breaches any provision
of this Agreement and fails to cure such breach within * in the case of a
failure to pay as provided for in Sections 2.2, 2.3 and 6, and immediately
in the case of a breach of Section 15) of notice describing the breach; or
(iv) if the other party shall seek protection under any
bankruptcy, receivership, trust deed, creditors arrangement, composition or
comparable proceeding, or if any such proceeding is instituted against the
other (and not dismissed within *
11.3. TERMINATION FOR UNSATISFACTORY RESULTS. In the event either
party determines that it is receiving an unsatisfactory financial return under
the Agreement, it may notify the other in writing that it desires a meeting to
discuss its dissatisfaction. Upon the giving of such notice, the parties shall
meet promptly but in no event later than * days after giving of notice. If
there is no agreement on a solution within * days of the commencement of
negotiations or the deadline for commencing negotiations, the party giving
notice may elect, in its sole discretion, to give written notice of termination.
In the case of Cygnus, it shall be deemed to receive a satisfactory financial
return so long
25.
[*CONFIDENTIAL TREATMENT REQUESTED*]
as the aggregate Purchase Price for all Products sold during the most recent
Calculation Period is * of the aggregate applicable Manufacturing Cost for the
Product Sold during such Period. Notice of termination shall become effective *
of the notice. * following the date of notice of such termination under this
Section 11.3, if Cygnus offers to a distributor in the Territory selling to the
same tier of customers as Yamanouchi has sold prior to termination Products
covered by the Agreement at a price equal to or less than the Purchase Price
being paid by Yamanouchi during the Calculation Period immediately preceding the
date of notice of such termination, Yamanouchi shall have a * right of first
refusal on the terms offered to such other distributor. If Yamanouchi has given
notice of termination pursuant to this Section 11.3, then it is prohibited from
selling any Non-Invasive Products in the Territory for * from the effective date
of the termination.
11.4. EFFECT OF TERMINATION; SURVIVABILITY OF CERTAIN PROVISIONS.
The following provisions shall survive the termination of this Agreement:
(i) the last sentence of Section 3.4, (ii) Sections 5.6(iv) and (vii),
(iii) payment obligations accrued or earned under Section 6, (iv) Section 12.1,
(v) Section 14.1, (vi) Section 15, (vii) Sections 16.2 and 16.3,
(viii) Section 17, and (ix) Section 18. Each party shall promptly return all
Proprietary Information of the other (and all copies and abstracts thereof) that
it is not entitled to use under the surviving terms of this Agreement. Upon
termination, Yamanouchi shall promptly deliver all of its customer lists related
to the Product to Cygnus and shall promptly transfer to Cygnus all Product
regulatory submissions, regulatory approvals and clinical data used to support
any regulatory approval. Termination of this Agreement with respect to a
particular Product in a particular
26.
[*CONFIDENTIAL TREATMENT REQUESTED*]
country shall have the same effect as termination of this entire Agreement,
but with respect to the applicable Product and country only.
11.5. TERMINATION NOT SOLE REMEDY. Termination is not the sole
remedy under this Agreement and, whether or not termination is effected, all
other remedies shall remain available.
12. PRODUCT WARRANTY AND WARRANTY DISCLAIMERS.
12.1. CYGNUS WARRANTY. Cygnus warrants only to Yamanouchi that the
Products, when shipped to Yamanouchi by Cygnus, from the time of delivery to
Yamanouchi to the end of the official life of the Products (as established by
Cygnus), shall conform in all material respects to the applicable Product
specifications as then in effect. Cygnus shall establish the terms of the
warranty that may be given to end-users, consistent with the Product
specifications. Yamanouchi shall write packaging, packaging inserts or other
materials to be given to end-users which refer or relate to any end-user
warranty consistent with the terms established by Cygnus. In such event,
Yamanouchi may distribute such consistent written warranty materials with the
Products to end-users. In the event that Product delivered to a customer or end
user is found, prior to the end of the official life of the Product (as
established by Cygnus), not to conform in a material respect to warranty,
established as provided above and Yamanouchi may replace the non-conforming
Product from Yamanouchi's inventory. Upon notice of such replacement from
Yamanouchi's inventory, Cygnus shall either refund to Yamanouchi the Purchase
Price paid by Yamanouchi for the replacement Product or ship replacement Product
to Yamanouchi. Such warranty does not apply to units that have been mishandled,
mistreated or used or maintained or stored other than in conformity
27.
[*CONFIDENTIAL TREATMENT REQUESTED*]
with Cygnus' instructions. YAMANOUCHI'S SOLE AND EXCLUSIVE REMEDY FOR ANY
BREACH OF THE FOREGOING WARRANTY SHALL BE REPLACEMENT BY CYGNUS OF THE NON-
CONFORMING GOODS, OR, AT CYGNUS' OPTION, REFUND TO YAMANOUCHI OF THE FULL
PURCHASE PRICE PAID BY YAMANOUCHI. EXCEPT FOR THE FOREGOING WARRANTIES, CYGNUS
DOES NOT WARRANT THE MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
PRODUCTS OR PERFORMANCE OF THE PRODUCTS OR NONINFRINGEMENT BY THE PRODUCTS; DOES
NOT MAKE ANY WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO PRODUCTS,
SPECIFICATIONS, SUPPORT, SERVICE OR ANYTHING ELSE AND DOES NOT MAKE ANY WARRANTY
TO YAMANOUCHI'S CUSTOMERS OR AGENTS. CYGNUS HAS NOT AUTHORIZED ANYONE TO MAKE
ANY REPRESENTATION OR WARRANTY OTHER THAN AS PROVIDED ABOVE.
13. INSURANCE.
13.1. During the Term, as defined in Section 11 above, and if
coverage is on a claims made basis, for a period after the Term reasonably
calculated to cover the legal time for which a claim for injury might be brought
for Product sold during the Term, the parties will jointly purchase and maintain
in full force and effect, with a responsible insurance carrier, a comprehensive
product liability insurance policy naming both parties as insureds. Details
with respect to such insurance, including the sharing of premium, shall be
agreed between the parties no later than six months prior to the First
Commercial Sale of the Initial Glucose Monitoring Product.
28.
[*CONFIDENTIAL TREATMENT REQUESTED*]
14. OWNERSHIP.
14.1. OWNERSHIP. As between the parties and with respect to any
inventions conceived and reduced to practice during the Term hereof or within *
each party will be the sole owner of the intellectual property rights in any
invention of which only its employees and its third party contractors are
inventors and each party will jointly own the intellectual property rights in
all inventions of which both parties employees or contractors are joint
inventors, except that intellectual property rights with respect to inventions
relating to the Products, iontophoresis, or reverse iontophoresis regardless of
the identity of the inventor, will be solely owned by Cygnus. Nothing herein
shall be interpreted or construed to grant to Yamanouchi any rights or interest
in the Proprietary Rights (other than the distributorship rights granted
hereunder) owned by Cygnus or to which Cygnus is otherwise entitled under this
Agreement or otherwise. Any assignments necessary to accomplish the foregoing
are hereby made and each party will execute such further documents as may be
reasonably requested by the other with respect thereto. Jointly owned
inventions may be exploited and non-exclusively licensed to third parties by
Cygnus without accounting to or further approval of Yamanouchi. Neither party
will be obligated under this Agreement to obtain intellectual property licenses
from third parties.
14.2. USE OF NON-CLINICAL AND CLINICAL DATA. Each party hereto
shall provide the other party with a copy of all data of any nonclinical and
clinical studies of any Product in its possession for which disclosure is not
otherwise barred by contract and shall permit the other to use it for Submission
or promotion of the Products during the term hereof.
29.
[*CONFIDENTIAL TREATMENT REQUESTED*]
15. CONFIDENTIALITY. Each party agrees that all proprietary information
it obtains from the other ("Proprietary Information") is the confidential
property of the disclosing party. Except as expressly allowed in this Agreement
and except that Yamanouchi and Cygnus may make disclosures in connection with
regulatory matters (provided that the parties shall confer in advance and
mutually agree on the extent of such disclosures), the receiving party shall
hold in confidence and not use or disclose any Proprietary Information of the
disclosing party and shall similarly bind its employees in writing. The
receiving party shall not be obligated under this Section 15 beyond * after the
termination of this Agreement or (b) with respect to information the receiving
party can document:
(i) is or has become readily publicly available through no
fault of the receiving party or its employees or agents; or
(ii) is received from a third party lawfully in possession
of such information and lawfully empowered to disclose such information and
provided the receiving party abides by all restrictions imposed by such
third party; or
(iii) was rightfully in the possession of the receiving
party prior to its disclosure by the other party provided the receiving
party abides by all restrictions imposed on its possession of such
information.
16. TRADEMARKS.
16.1. TRADEMARK REGISTRATION. Cygnus represents that it has
registered the trademarks "Glucowatch" and "Glucopad" in the U.S. Cygnus
agrees to maintain such registered trademarks. In the event the foregoing marks
are not available in the Territory or, upon the advice of Yamanouchi, Cygnus
deems it inadvisable to use either
30.
[*CONFIDENTIAL TREATMENT REQUESTED*]
of those marks in a country in the Territory, Cygnus may make additional
registrations. Cygnus shall be the sole owner of all such trademarks. In the
event Cygnus elects to use a previously registered trademark of Yamanouchi, the
parties shall negotiate an agreement for the transfer of ownership of such mark
to Cygnus and the amount of consideration to be paid to Yamanouchi for such
transfer. For each Product in each country, Cygnus may specify in writing which
of its trademarks are to be used for the Product. Upon receiving such
specification, Yamanouchi shall employ the designated trademark on the product,
product packaging and all promotional materials. For each such use, such
designated mark shall be the most prominent mark utilized for the article,
package or promotional material. Cygnus hereby grants Yamanouchi an exclusive
license to use such trademarks in the Territory in connection with the sale of
the Products. Yamanouchi shall submit exemplars of such proposed form of use,
including any Yamanouchi marks to be employed, to Cygnus for Cygnus' review and
approval and shall be deemed to have granted Cygnus a nonexclusive limited
license during the term of this Agreement as to any country in the Territory for
use in furtherance of this Agreement.
16.2. NO RIGHTS IN TRADEMARKS, TRADE NAMES, LOGOS OR DESIGNATIONS.
Yamanouchi acknowledges that it has paid no consideration for the use of Cygnus'
trademarks, trade names, logos and designations, and nothing contained in this
Agreement shall give Yamanouchi any right, title or interest in or to any of
such trademarks, trade names, logos or designations. Yamanouchi acknowledges
that Cygnus owns and retains all proprietary rights in all of its trademarks,
trade names, logos and designations; and agrees that it will not at any time
during or after the Term assert or
31.
[*CONFIDENTIAL TREATMENT REQUESTED*]
claim any interest or do anything that might adversely affect the validity or
enforceability of any trademark, trade names, logo or designation belonging to
Cygnus. Yamanouchi agrees that it will not affix any Cygnus mark to any product
other than a Product.
16.3. AFTER TERMINATION OR EXPIRATION. Upon expiration or
termination of this Agreement (whether in whole or as to one or more countries),
each party will forthwith cease (in the terminated country or countries only, in
the case of a partial termination) all display, advertising and use of the
trademark, trade names, logos and designations of the other party and will not
thereafter use, advertise or display any name, mark or logo that is, or any part
of which is, similar to or confusing with any such designation associated with
any Product, except to the extent necessary to sell any Products remaining in
inventory after termination of this Agreement, not to exceed *,
provided that the use of such trademarks, trade names, logos and designations is
otherwise in accordance with this Agreement.
17. PATENT AND TRADEMARK INDEMNIFICATION.
17.1. CYGNUS' PATENT AND COPYRIGHT INDEMNITY.
17.1.1. If Yamanouchi receives a claim that any of the
Products infringe upon a valid patent, copyright, or any other intellectual
property, Yamanouchi will notify Cygnus promptly in writing and give Cygnus all
necessary information and assistance. Yamanouchi hereby grants Cygnus the
exclusive authority to evaluate, defend and settle any such claim as it deems
appropriate; Cygnus, at its own expense and option, may then (i) settle or
defend against such claim, (ii) procure for Yamanouchi the right to such
Products, (iii) replace or modify the Products to avoid infringement,
(iv) recall the Product from any country in the Territory, or (v) do any
combination of the foregoing;
32.
[*CONFIDENTIAL TREATMENT REQUESTED*]
PROVIDED, HOWEVER that Cygnus hereby agrees to use reasonable efforts to
minimize the impact of its actions on Yamanouchi's ability to market, sell and
distribute the Products. Provided such timely notice has been given by
Yamanouchi, should any court of competent jurisdiction hold such Product to be
infringing, Cygnus will pay any final judgment against Yamanouchi and expenses,
including attorneys fees reasonably incurred by Yamanouchi, provided such
expenses were consented to, in advance, by Cygnus arising from such infringement
and, if the use of such Product is enjoined, Cygnus shall take the actions
described in (ii) above. If such option is not available, Cygnus may request
Yamanouchi to recall the Product from such country within the Territory, and
shall refund the purchase price paid under Section 6 less a reasonable amount of
depreciation and, if any, the cost of recall.
17.1.2. The indemnity in Section 17.1 will not apply to any
claim arising out of compliance with Yamanouchi's specifications, or arising out
of the incorporation of any other hardware or software in the Products, the
manner in which the Products are combined with each other or any other products,
or from a modification of the Products alter delivery by Cygnus. Cygnus'
obligations hereunder shall not apply to any infringement occurring after
Yamanouchi has received notice alleging the infringement unless Cygnus has given
Yamanouchi written permission for such continuing infringement.
17.1.3. Notwithstanding any other provisions hereof, Cygnus
shall not be liable for any claim based on Yamanouchi's use of the Products as
shipped after Cygnus has informed Yamanouchi of modifications or changes in the
Products required
33.
[*CONFIDENTIAL TREATMENT REQUESTED*]
to avoid such claims and offered to implement those modifications or changes, if
such claim would have been avoided by implementation of Cygnus' suggestions.
17.1.4. THE FOREGOING IS GIVEN TO YAMANOUCHI SOLELY FOR ITS
BENEFIT AND IN LIEU OF, AND CYGNUS DISCLAIMS, ALL OTHER WARRANTIES OF
NONINFRINGEMENT WITH RESPECT TO THE PRODUCTS.
17.2. LIMITATION OF INDEMNITY. The indemnity provisions in this
Section 17.2 shall not apply (i) if the claim is found to be based upon the
recklessness or willful action or inaction of the party seeking indemnification
(the "Indemnified Party"), or (ii) if the Indemnified Party fails to give the
party from whom indemnification is sought (the "Indemnifying Party") prompt
notice of any claim it receives and such failure materially prejudices the
Indemnifying Party, or (iii) unless the Indemnifying Party is given the
opportunity to approve in writing any settlement, which approval shall not be
unreasonably withheld.
17.3. SETTLEMENT. In no event shall the indemnified party be
entitled to settle any of the above mentioned claims without the consent of the
indemnifying party.
18. LIMITED LIABILITY. NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT
OR OTHERWISE, CYGNUS SHALL NOT BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF
THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL
OR EQUITABLE THEORY, FOR ANY AMOUNTS IN EXCESS OF * OF THE AGGREGATE OF THE
AMOUNTS ACTUALLY RECEIVED BY CYGNUS
34.
[*CONFIDENTIAL TREATMENT REQUESTED*]
HEREUNDER (INCLUDING THE PAYMENTS RECEIVED PURSUANT TO SECTIONS 2.2, 2.3 AND 6).
19. INFRINGEMENT BY THIRD PARTIES. Cygnus shall have the sole right and
option, at its sole and absolute discretion, to file and maintain lawsuits in
its own name for infringement by third parties of any Cygnus' patents,
trademarks or other Proprietary Rights and occurring in the Territory licensed
hereunder. Yamanouchi shall, at the request of Cygnus, give Cygnus all
reasonable assistance and cooperation in any such proceedings. Notwithstanding
any of Cygnus' elections hereunder, or the results or outcomes thereof,
Yamanouchi's obligation to make payments to Cygnus under this Agreement shall be
unaffected. In the event that Yamanouchi's market share of the Products is
adversely affected by such third party infringement, Cygnus shall not be
obligated to offset any payments made hereunder. Notwithstanding any decision
on the part of Cygnus to forego bringing or continuing to prosecute any suit,
claim or litigation, Yamanouchi shall not have the right to bring, file or
litigate any claim for infringement by third parties of any Proprietary Rights
of Cygnus occurring in the Territory licensed hereunder.
20. MANUFACTURING IN THE EVENT OF BANKRUPTCY. In the event (i) Cygnus
files, by its own initiative, a petition in bankruptcy or is placed in a
bankruptcy proceeding and (ii) is substantially unable to supply Product ordered
in accord with Section 4 for a commercially substantial period of time,
Yamanouchi may give notice of intent to manufacture. If Cygnus is unable within
* of receipt of such notice to offer reasonable assurances of its ability to
resume supply in conformity with Section 4, Yamanouchi shall be granted a
license to make or have made Product under this Agreement. With respect
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[*CONFIDENTIAL TREATMENT REQUESTED*]
to Products manufactured under such license, Yamanouchi shall be required to
make payments * of Total Net Sales for all the Products sold less the
aggregate Yamanouchi Substitute Manufacturing Cost for such Products;
PROVIDED, HOWEVER, such payment shall in no event be less than * of the
aggregate Yamanouchi Substitute Manufacturing Cost for the Products. * The
foregoing license shall terminate * days after the giving of notice by Cygnus
(or on behalf of Cygnus) that it is able to resume supply in accordance with
this Agreement.
21. GENERAL.
21.1. AMENDMENT AND WAIVER. Except as otherwise expressly provided
herein, any provision of this Agreement may be amended and the observance of any
provision of this Agreement may be waived (either generally or in any particular
instance and either retroactively or prospectively) only with the written
consent of the parties. However, it is the intention of the parties that this
Agreement be controlling over additional or different terms of any purchase
order, confirmation, invoice or similar document, even if accepted in writing by
both parties, and that waivers and amendments shall be effective only if made by
non-pre-printed agreements clearly understood by both parties to be an amendment
or waiver. The failure of either party to enforce its rights under this
Agreement at any time for any period shall not be construed as a waiver of such
rights.
21.2. GOVERNING LAW AND LEGAL ACTIONS. This Agreement shall be
interpreted and enforced in accordance with the laws of the State of California
and the
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[*CONFIDENTIAL TREATMENT REQUESTED*]
United States of America without regard to conflicts of law provisions thereof
and without regard to the United Nations Convention on Contracts for the
International Sale of Goods. The sole jurisdiction and venue for actions
related to the subject matter hereof shall be the California state or U.S.
federal courts having within their jurisdiction the location of Cygnus'
principal place of business. Both parties consent to the jurisdiction of such
courts. In any action or proceeding to enforce rights under this Agreement, the
prevailing party shall be entitled to recover costs and attorneys' fees.
21.3. ARBITRATION. Any dispute arising out of Sections 2, 3, 5, 6
or 11 of this Agreement will be settled by binding arbitration (which
arbitration shall be binding for purposes of this Agreement only) as follows:
(a) plaintiff shall file an Opening Brief with the Judicial Arbitration and
Mediation Service ("JAMS"), with a copy to defendant, which brief shall set
forth the basis for such claims, (b) either party may request a list of five (5)
independent retired judge arbitrators from JAMS in San Francisco) thereafter,
within ten (10) days of the receipt of such list, each may strike two (2) names
from the list; failure to timely submit notice of the striking of names shall be
deemed acceptance of the entire list, (c) if more than one name remains, the
arbitrator shall be selected from the remaining names by JAMS, (d) defendant
will have thirty (30) days after receipt of plaintiff's Opening Brief to submit
its case in writing to the arbitrator, (e) the arbitrator shall have * the
conclusion of the hearing, in which to render a decision, and (g) such
arbitration shall be informal and need not conform to JAMS or other established
procedures. Unless otherwise agreed to by the parties, arbitration will take
place in San Francisco, California.
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21.4. HEADINGS. Headings and captions are for convenience only and
are not to be used in the interpretation of this Agreement.
21.5. NOTICES. Notices under this Agreement shall be sufficient
only if in writing and personally delivered, delivered by a major commercial
rapid delivery courier service or mailed by certified or registered mail, return
receipt requested to a party at its addresses first set forth herein or as
amended by notice pursuant to this Section 20.5, to the attention of the
President in the case of Cygnus and to the attention of the President in the
case of Yamanouchi. If not received sooner, notice by mail shall be deemed
received * after deposit in the U.S. or Japan mails.
21.6. ENTIRE AGREEMENT. This Agreement supersedes all proposals,
oral or written, all negotiations, conversations, or discussions between or
among parties relating to the subject matter of this Agreement and all past
dealing or industry custom.
21.7. SEVERABILITY. If any provision of this Agreement is held to
be illegal or unenforceable, that provision shall be limited or eliminated to
the minimum extent necessary so that this Agreement shall otherwise remain in
full force and effect and enforceable.
21.8. BASIS OF BARGAIN. Each party recognizes and agrees that the
warranty disclaimers and liability and remedy limitations in this Agreement are
material bargained for basis of this Agreement and that they have been taken
into account and reflected in determining the consideration to be given by each
party under this Agreement and in the decision by each party to enter into this
Agreement.
21.9. RELATIONSHIP OF PARTIES. The parties hereto expressly
understand and agree that the other is an independent contractor in the
performance of each and
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[*CONFIDENTIAL TREATMENT REQUESTED*]
every part of this Agreement, is solely responsible for all of its employees and
agents and its labor costs and expenses arising in connection therewith.
21.10. ASSIGNMENT. This Agreement and the rights and obligations
hereunder are not transferable or assignable without the prior written consent
of the parties hereto, except for rights to payment and except to an Affiliate
Company or to a person or entity who acquires all or substantially all of the
assets or business of a party, whether by sale, merger or otherwise.
21.11. PUBLICITY AND PRESS RELEASES. Except to the extent necessary
under applicable laws or for ordinary marketing purposes, the parties agree that
no press releases or other publicity relating to the substance of the matters
contained herein shall be made without joint approval. A press release
announcing this Agreement shall be jointly developed and released by the
parties.
21.12. FORCE MAJEURE. No liability or loss of rights hereunder
shall result to either party from delay or failure in performance (other than
payment) caused by force majeure, that is, circumstances beyond the reasonable
control of the party affected thereby, including, without limitation, acts of
God, fire, flood, war, government action, compliance with laws or regulations,
strikes, lockouts or other serious labor disputes, or shortage of or inability
to obtain material or equipment.
21.13. REMEDIES. Except as otherwise expressly stated in this
Agreement, the rights and remedies of a party set forth herein with respect to
failure of the other to comply with the terms of this Agreement (including,
without limitation, rights of full termination of this Agreement) are not
exclusive, the exercise thereof shall not constitute
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[*CONFIDENTIAL TREATMENT REQUESTED*]
an election of remedies and the aggrieved party shall in all events be entitled
to seek whatever additional remedies may be available in law or in equity.
CYGNUS, INC.
By: /S/ GARY W. CLEARY
------------------
Name: GARY W. CLEARY
--------------
Title: CHAIRMAN AND CHIEF TECHNICAL
----------------------------
OFFICER
-------
YAMANOUCHI PHARMACEUTICAL
CO., LTD.
By: /S/ MASAYOSHI ONODA
-------------------
Name: MASAYOSHI ONODA
---------------
Title: PRESIDENT AND CHIEF OPERATING
-----------------------------
OFFICER
------
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SCHEDULE A
MILESTONE PAYMENTS
Product and Amount of Payment by
MILESTONE DATE YAMANOUCHI TO CYGNUS
- - Effective Date *
- - Upon written notice by Yamanouchi to Cygnus of its *
decision to obtain the right to distributorship
within * after receipt of the U.S. Regulatory
Submission material filed by Cygnus with the FDA for
the Initial Glucose Monitoring Product
In the event that Yamanouchi notifies Cygnus that
it does not intend to accept distributorship, or if
Yamanouchi fails to send written notice within the
* period, this Agreement shall automatically terminate, *
- - Upon first U.S. or Japanese registration *
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TOTAL *
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[*CONFIDENTIAL TREATMENT REQUESTED*]
EXHIBIT A
INITIAL GLUCOSE MONITORING PRODUCT
1. Glucopad
2. Glucowatch
3. Glucowatch biosensor
4. Rechargeable batteries, type AAA
5. Battery recharger
A-1