CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions Of This Agreement Which Have Been Redacted Are Marked
With Brackets ("[***]"). The Omitted Material Has Been Filed Separately With The
Securities And Exchange Commission.
Exhibit 2.3
SUPPLY & LICENSE AGREEMENT
THIS Agreement ("Agreement") is effective as of the 12th day of July, 1999
("Effective Date"), by and between Isolyser Company, Inc., a Georgia
corporation, having its principal place of business at 4320 International Blvd.,
Norcross, Georgia 30093 ("Isolyser") and Allegiance Healthcare Corporation, a
Delaware corporation, having its principal place of business at 1500 Waukegan
Road, McGaw Park, Illinois 60085 and its Affiliates (collectively referred to as
"Allegiance"). "Affiliates" means a direct or indirect subsidiary of Allegiance
Healthcare Corporation or its parent company, Allegiance Corporation.
BACKGROUND:
WHEREAS, Isolyser has developed proprietary rights in the manufacture and
sale of certain products which it sells under the OREX(R) trademark (the
"OREX(R) Products") all of which are manufactured from Isolyser's proprietary
degradable polyvinyl alcohol ("PVA") or novel dispersal polymers ("NDP")
material which can be dissolved and then disposed via normal sanitary sewer
systems ("Material"); and
WHEREAS, Isolyser is also the owner of the trademarks ENVIROGUARD and OREX,
for water soluble fabrics and products made therefrom ("Trademarks"), for which
registrations or applications for registrations of said Trademarks have been
filed in various jurisdictions; and
WHEREAS, Isolyser is also the owner of certain Patents (as hereinafter
defined); and
WHEREAS, Isolyser wishes to expand its commercial opportunities through the
manufacture and sale of the Material to Allegiance and by licensing to
Allegiance the Patents and Trademarks relating to the right to make, use,
distribute, sell and dispose healthcare products made from the Material
("Products"); and
WHEREAS, Allegiance desires to distribute and sell the Products under the
Trademarks and Patents and to practice the methods of disposal as described in
the Patents on the Products as Allegiance may deem appropriate; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Allegiance and Isolyser hereby agree as follows:
1.TERM AND EXTENSIONS
1.1. TERM
Unless otherwise terminated earlier by the parties, the initial term of
this Agreement shall begin on the Effective Date and end the earlier of: (1)
three years from the date on which all necessary regulatory approvals are
obtained to sell at least forty (40) product codes made by Allegiance from the
Material or (2) three years and nine months after the Effective Date (the
"Term").
1.2. EXTENSION OF AGREEMENT
This term may be extended by mutual agreement of the parties. In the event
of a change of control of Isolyser during the Term of this Agreement, the
Agreement shall be automatically extended under its current terms for a period
of three years following the date of such change of control during the extension
period, Allegiance's right to the Material shall be non-exclusive and Allegiance
shall have the right to purchase up to an additional 100 million square yards of
Material over and above the amount of Material that Allegiance is entitled to
purchase prior to the extension period under the same terms and conditions of
this Agreement. For purposes of the foregoing, "change of control" shall mean
the acquisition of more than 50% of the outstanding capital stock of Isolyser or
the purchase of all or substantially all the assets of Isolyser by a person or
entity or group that is not currently an affiliate of Isolyser.
2.PATENT PROVISIONS
2.1. PATENT
2.1.1. PATENT LICENSE FOR PRODUCTS.
Isolyser grants to Allegiance a worldwide exclusive license to
make, use and sell Products embodying or made in accordance with the
inventions claimed in the Patents within and for healthcare
applications. "Products" shall include any healthcare device made from
the Material or an improvement of the Material, including but not
limited to blow molded, injection molded and case extrusion substances
that are dissolvable and are made using PVA or NDP ("Improvements").
"Patents" shall include all patents owned or controlled by Isolyser
relating to the Material and shall include, but not be limited to, the
patents listed in Exhibit 1 together with any patents which may issue
upon any pending applications, continuations, continuations-in-part,
divisions, reissues, reexaminations, or renewals of any such patents,
as well as any patents which may issue on Improvements. The price
terms of Improvements under the Agreement shall be negotiated by the
parties.
2.1.2. PATENT LICENSE FOR MATERIALS
Isolyser grants to Allegiance a worldwide exclusive royalty free
license for the Term, and any extension thereof, to use the Patents to
make Material or have Material made if Isolyser is unable to meet
Allegiance's requirements. Allegiance shall exercise the foregoing
license only if during any calendar month Isolyser is unable to supply
Material in an amount at least equal to the amount supplied in the
preceding calendar month and Isolyser is unable to supply Material in
such amount during each of the two following calendar months.
Notwithstanding the foregoing, in the event that Isolyser is unable to
meet Allegiance's requirements because of the failure of Isolyser's
suppliers to supply Material to Isolyser or because of demand by
Allegiance in excess of Isolyser's productive capacity, Allegiance
shall not be entitled to exercise its rights under the foregoing
license until six months after written notice from Allegiance to
Isolyser of Isolyser's failure to satisfy the requirements of
Allegiance. If Isolyser has identified an alternative source of
Materials and is satisfying Allegiance's requirements as provided
above within such six month period, Allegiance shall not be permitted
to exercise its rights under the foregoing license.
2.1.3. RIGHT OF FIRST REFUSAL
Isolyser shall submit to Allegiance specifications and, where
possible, samples of any and all Improvements to the Products which
Isolyser may conceive or reduce to practice during the term of this
Agreement. Within ninety (90) days after such submission, Allegiance
may acquire rights to such Improvements by advising Isolyser in
writing that Allegiance is electing to have such Improvements included
within the definition of Products and by entering into an agreement
with Isolyser negotiated at the time which is determined to benefit
both parties and maintains a mutually profitable relationship. In the
event Allegiance does not elect to distribute such new Products,
Isolyser shall have the right to sell those Products as it deems fit
in its sole discretion on terms and conditions no more favorable than
those offered to Allegiance under this section. It being understood
that no up-front license fee shall be required to be paid by
Allegiance.
2.2. TRADEMARK LICENSE
2.2.1. LICENSE GRANT
Isolyser grants to Allegiance a worldwide exclusive license to
the Trademarks for use in conjunction with the Products and
Improvements for healthcare applications, subject to the provisions of
this Agreement.
2.2.2. RESERVATION OF RIGHTS IN TRADEMARKS
The Trademarks are acknowledged by Allegiance to be the exclusive
property of Isolyser. Allegiance agrees that the use of any Trademark
by Allegiance anywhere in the world shall inure to the benefit of
Isolyser. If Allegiance determines that a trademark registration is
desirable in any country, it will so advise Isolyser who may proceed
to seek the appropriate trademark protection in such country, in its
sole discretion.
[***]- CONFIDENTIAL TREATMENT REQUESTED
2.3. NO REPRESENTATIONS
The Patent and Trademark licenses shall be effective worldwide. However,
Isolyser does not represent that it has patent or trademark rights in any
particular country and Isolyser is not obligating itself by this Agreement to
seek such rights in any country.
2.4. NON-TRANSFERABLE
These licenses shall be non-transferable by Allegiance and shall not be
subject to sublicenses, without the express written permission of Isolyser,
except that there shall be an implied sub-license to any purchaser of Products
to use such products for their intended purpose and except as part of an
assignment not prohibited by Section 5.3.
2.5. ROYALTIES
2.5.1. DISSOLUTION ROYALTY
Allegiance shall pay Isolyser or its designee a dissolution
royalty of [***] of the Net Sales Price of the Products for all
Products which are dissolved by or on behalf of Allegiance's customers
("Royalty"), provided that Isolyser shall provide documentation to
Allegiance regarding the dissolution of such Products in a form
acceptable to Allegiance. The term "Net Sales Price" means the total
receipts by Allegiance from the sale of the Product(s) less all
freight, sales or use taxes, trade discounts, returns and allowances
granted in lieu of returns. In the event the Product is sold as a
component of a kit or other assembly of product, the Net Sales Price
for such Products shall be the average Net Sales Price during the same
calendar quarter for the Product when sold alone or as not part of a
kit.
2.5.2. REPORTS AND RECORDS
Allegiance shall provide Isolyser with tracing reports of sales
of Products by Allegiance. Allegiance shall keep records showing the
sales or other disposition of Products under licenses granted herein
in sufficient detail to enable the Royalties payable hereunder by
Allegiance to be determined, and further agrees to permit such records
to be examined by Isolyser to the extent necessary to verify the
accuracy of the calculation of the Royalty payments above, such
examination to be made at the expense of Isolyser by any certified
public accountant appointed by Isolyser who shall be reasonably
acceptable to Allegiance, provided such certified public accountant
executes a confidentiality agreement covering such books and records.
Such examination shall occur not more than once in any twelve month
period during normal business hours.
2.6. USE OF TRADEMARKS
2.6.1. CONFUSINGLY SIMILAR MARKS
Allegiance shall not use any trademark, mark, name or symbol in
conjunction with the Products which may be confusingly similar to the
Trademarks and shall not use the Trademarks in any manner which could
affect the validity of their registration or Isolyser's exclusive
ownership thereof. Allegiance shall not make or permit any removal or
modification of any Trademarks placed by Isolyser on Products or
associated literature, media, drawings and manuals.
2.6.2. TRADEMARK INFRINGEMENT
If, as a result of the use of the Trademarks, Allegiance, or any
of Allegiance's customers should be charged with trademark
infringement, Allegiance shall immediately notify Isolyser after
Allegiance receives notice of such charge and Isolyser will assume the
defense and expense of any proceedings instituted pursuant to such
charge. Allegiance shall not institute proceedings for infringement of
the Trademarks in its own name. Allegiance agrees to assist Isolyser
when requested in such defense or protection of the Trademarks.
Isolyser will reimburse Allegiance for out-of-pocket expenses. If any
misuse of the Trademarks comes to the Allegiance's attention, it shall
promptly notify Isolyser and cooperate with Isolyser in trying to
correct such misuse.
2.6.3. MISLEADING CLAIMS
Allegiance shall not make any false, exaggerated, or misleading
claim or statement relating to the Products or the performance of the
Materials. If such claims or statements are made by Allegiance,
Allegiance, upon the request of Isolyser, shall discontinue
immediately any use, display, advertising or promotion of the
Trademark for the Products in conjunction with such false or
misleading claims.
2.6.4. QUALITY ASSURANCE
Allegiance shall permit a designated representative of Isolyser
to periodically visit the manufacturing and warehousing facilities of
Allegiance which manufacture or store the Products, or any other
entity to whom Allegiance has contracted all or a part of the
manufacture of the Products hereunder, for the sole purpose to allow
Isolyser to inspect the quality of the Products in the course of
manufacture or in storage; provided such representative executes a
confidentiality agreement and visits during normal business hours
after reasonable notice.
2.7. INTELLECTUAL PROPERTY RIGHTS AND OBLIGATIONS
2.7.1. ISOLYSER RIGHTS
Nothing in this Agreement shall be construed as:
(a) a warranty or representation by Isolyser as to the validity
of any Patent;
(b) a warranty or representation that any Product made, used, or
sold under any license granted in this Agreement is or will
be free from infringement of the patents of third parties;
(c) A requirement that Isolyser shall file any patent
application, secure any patent or maintain any patent in
force; or
(d) An obligation to bring or prosecute actions or suits against
third parties for infringement.
2.7.2. WARRANTY
Notwithstanding the foregoing, Isolyser warrants that the
Material as manufactured by Isolyser or its disposal by dissolution in
accordance with written guidelines set forth by Isolyser does not to
Isolyser's knowledge infringe the intellectual property rights of any
third party.
2.7.3. PATENT MARKING
Allegiance agrees to observe the reasonable written requirements
of Isolyser with respect to the marking of Products with the word
'Patent' followed by the specific number or numbers of the Patent or
Patents indicated by Isolyser in writing to be applicable to the
Products or its disposal.
2.8. INFRINGEMENT
2.8.1. INFRINGEMENT BY ALLEGIANCE
Allegiance shall give Isolyser prompt notice of each claim or
allegation that the manufacture, use, or sale of the Product(s)
constitutes an infringement of a patent or patents owned by others.
Isolyser shall defend such claims and allegations at its expense and
shall indemnify Allegiance against any and all liabilities, costs or
expenses arising in connection therewith. If Isolyser does not
undertake within thirty (30) days of such notice to defend such claim
or allegation, Allegiance shall have the right to retain all of the
Royalties otherwise payable to Isolyser, provided Allegiance uses such
Royalties to pay for or defray the costs of defending each claim or
allegation, including the costs of settling or satisfying the claim or
allegation. During the defense of such claims or allegations,
Allegiance shall submit written reports to Isolyser, showing payments
accruing to Isolyser and the expenses of defending against the claims
or allegations of infringement. Upon termination of all proceedings
involving such claims or allegations, Allegiance shall remit the
balance, if any, of the Royalties accrued but not yet paid to Isolyser
and not spent by Allegiance under the terms of this provision. In the
event of any infringement claim or allegation as provided above, upon
the request of Isolyser, Allegiance will cooperate with the defense of
such claim or allegation.
2.8.2. SETTLEMENT OF CLAIM OF INFRINGEMENT
If the settling or satisfying of any claim or allegation of
patent infringement requires the payment by Allegiance to a third
party of any amounts, including royalties for manufacture, use, or
sale of the Product(s), Allegiance shall be entitled to deduct the
amounts so paid to a third party from the Royalties due Isolyser under
this Agreement.
2.8.3. INFRINGEMENT BY THIRD PARTY
Upon learning of the infringement of a Patent by third parties,
Allegiance shall inform Isolyser in writing of that fact and shall
supply Isolyser with any evidence available pertaining to the
infringement. Isolyser may at its own expense take whatever steps are
necessary to stop the infringement and recover damages therefore, and
shall be entitled to retain all damages so recovered. If Isolyser does
not undertake within thirty (30) days of such notice to enforce the
Patent against the infringement, Allegiance shall have the right to
take whatever action it deems appropriate in Isolyser=s name or in its
own name to enforce the Patent, to retain all of the Royalties
otherwise payable to Isolyser, and to use such Royalties to pay for or
defray the costs of enforcing the Patent against the infringement by
third parties. During proceedings relating to the enforcement of the
Patent, Allegiance shall submit written reports, showing payments
accruing to Isolyser and the expenses of enforcing the Licensed Patent
against the infringement by third parties. Upon termination of all
proceedings involving such claims or allegations, Allegiance shall
remit the balance, if any, of the payments accrued but not yet paid to
Isolyser. The monetary recovery, if any, shall be shared by Isolyser
and Allegiance in the same ratio as they have shared the expenses of
the Licensed Patent enforcement.
3.PROMOTION OF THE PRODUCTS
3.1. ALLEGIANCE PROMOTION
Allegiance may promote the Trademarks in conjunction with the Products.
Such promotions may include activities such as participating in trade shows and
educational seminars. Allegiance agrees to use reasonable commercial efforts to
maintain marketing/sales employees, trained in the marketing and selling of the
Products, who are charged with, among other things, building a market for the
Products.
3.2. PRODUCT INTRODUCTIONS
Allegiance shall market the Products as environmentally friendly, solutions
based products to the extent such claims are supported by appropriate regulatory
approvals and substantiating data. Allegiance agrees that it will employ
reasonable business diligence to introduce within six (6) months from the
Effective Date of this Agreement, forty (40) product codes fabricated from the
Material. Allegiance agrees to use its commercially reasonable business efforts,
to the extent supported by appropriate regulatory approvals, to promote the
environmental and waste disposal benefits of the Material as part of its
on-going sales and marketing strategies. Upon request of Allegiance, Isolyser
shall use commercially reasonable business efforts to actively support
Allegiance's efforts through resources which are either internally or externally
based. Allegiance will reimburse Isolyser for any costs including salaries,
fees, equipment and travel expense incurred by Isolyser in connection with such
actions provided that such costs or expenditures were approved in writing by
Allegiance.
3.3. JOINT DEVELOPMENT AND COMMERCIALIZATION COMMITTEE
Allegiance and Isolyser shall each appoint three members of an eight-member
Joint Development and Commercialization Committee ("JDCC"). The JDCC shall meet
at least twice a year at sites alternating between Allegiance and Isolyser to
discuss and resolve issues related to the development, marketing, promotion and
commercialization of the Products. The initial members of the JDCC for
Allegiance and Isolyser shall be as follows:
FOR Allegiance: FOR Isolyser:
Susan Harley Mike Mabry
John Behm Martin Paugh
Dave Wagner Frank Stanton
Additional marketing individual to be Wendy Slattery
designated by Allegiance
3.4. PLANS
The JDCC will develop an operating plan and a sales and marketing plan
regarding the Products in the U.S. within sixty (60) days from the Effective
Date of this Agreement. Additionally, a world-wide healthcare market plan will
also be developed within sixty (60) days from the Effective Date of this
Agreement. These plans shall be attached as exhibits to this Agreement after
they have been developed. Allegiance will attempt to provide a 90 day rolling
forecast that will be reviewed and approved by the JDCC. Further, it is
understood that Allegiance may request discussions regarding opportunities for
Allegiance to market products made from the Materials in non-healthcare markets
in addition to the Products covered under this Agreement.
3.5. GOVERNMENTAL APPROVAL
Isolyser shall use commercially reasonable business efforts to gain
approval or consent for disposal of the Products via normal sanitary sewer
systems from the Federal, state/provincial and local regulatory and
environmental bodies, including publicly-owned treatment works, in all of the
United States and Canada. In addition, Isolyser shall use commercially
reasonable business efforts to gain approval or consent for the disposal of the
Products via normal sanitary sewer systems in all European Community countries
and Japan. Isolyser covenants that it already has the necessary approvals or
consents for each of the agencies listed in Exhibit 7 and that it has listed in
Exhibit 7 any locations which it has determined that such disposal is not
allowed. The efforts of Isolyser under this Section 3.5 shall be at the sole
cost and expense of Isolyser.
3.6. GPO ACCEPTANCE
Allegiance will use commercially reasonable business efforts to initiate
GPO acceptance and distribution of the Products.
3.7. ISOLYSER EXPERTISE
Isolyser agrees that it has and shall diligently maintain its expertise for
PVA and NDP materials and will continue to use such expertise to identify
applications for technology and works within the healthcare and other markets to
create materials that will become the basis for environmentally friendly
healthcare products. Also, Isolyser will continue to develop and improve,
through methodologies it deems appropriate and advisable, its waste water
expertise and processor integration technology, and sales and service to support
the expansion of the business base.
3.8. ALLEGIANCE EXPERTISE
Allegiance agrees that it has expertise in the conversion of non-woven roll
stock into medical and industrial garments, surgical drapes and general apparel
as well as expertise in injection molding and general assembly of medical
devices formed from various types of plastic. Allegiance will continue to use
and improve upon its sales and marketing expertise and strategies for the
development of global marketplace opportunities for products made from the
Materials both existing and to be developed. It is understood that, at present,
there is no firm obligation of either party to expand this Agreement's
application to markets or for products not specifically agreed to.
[***]- CONFIDENTIAL TREATMENT REQUESTED
3.9. NEW PRODUCTS
Subject to Section 3.8, Isolyser agrees to discuss with Allegiance
opportunities for Allegiance to market the Products in non-healthcare markets.
In the event the parties agree to add additional markets to this Agreement, the
parties shall use commercially reasonable efforts to promote and gain approval
for the new products in the new market.
4.MANUFACTURING AND SALES PROVISIONS
4.1. MANUFACTURING FOR ALLEGIANCE
Isolyser shall manufacture and/or supply Material in accordance with
the Specifications set forth in Exhibit 2 to Allegiance ("Specifications").
4.2. PRICES
The prices for the Material shall be $[***] per square yard f.o.b. shipping
point. Allegiance will use reasonable efforts to purchase a [***] product mix
between gown and drape Material. Allegiance will work with Isolyser to attempt
to lower the basis weight of surgical drapes to reduce isolyser's costs. The
cost for purchase exceeding [***] shall be subject to negotiation and agreement
between the parties.
4.2.1. PRICE INCREASES
Isolyser will not increase its prices during the Term of the
Agreement.
4.3. ALLEGIANCE'S DUTIES
4.3.1. PURCHASE EXISTING INVENTORY
Allegiance agrees to purchase Isolyser's existing inventory of
Material ("Isolyser Inventory"), which inventory is described on
Exhibit 4 hereto, during the first nine (9) months of the Term.
Allegiance shall not be obligated to purchase Isolyser Inventory to
the extent it has a cost to Allegiance in excess of two million
dollars ($2,000,000). Allegiance will use commercially reasonable
business efforts to sell the Isolyser Inventory to Allegiance
customers during the first nine months of this Agreement. To the
extent that Allegiance is not able to sell such Isolyser Inventory
during this time period, Isolyser agrees to repurchase any unsold
Isolyser Inventory held by Allegiance 120 days after Allegiance begins
to sell Products under its own 510(k). Isolyser shall purchase such
remaining Isolyser Inventory from Allegiance at Allegiance's original
cost from Isolyser as specified in Exhibit 4. Purchases under this
Section 4.3.1 are not credited against the obligation of Allegiance
under Section 4.3.2.
[***]- CONFIDENTIAL TREATMENT REQUESTED
4.3.2. REQUIREMENTS AND MINIMUM PURCHASE AMOUNT
Allegiance shall purchase its requirements for a dissolvable
material made from PVA for use in the healthcare field solely from
Isolyser during the Term and any extended term of this Agreement.
Allegiance's requirements shall include a minimum of [***] ("Minimum
Purchase Amount") during the Term of this Agreement; provided Isolyser
has not materially breached this Agreement. Isolyser will seek to
obtain the dissolution approvals specified in Exhibit 7 within 9
months of the Effective Date (18 months in the case of Japan). If any
of the pending approvals are not obtained with such time frames, the
Minimum Purchase Amount will be reduced by three times the amount
specified for each applicable pending approval. If any potential
customer of Allegiance would have to pay an extra fee or surcharge for
disposal of the Products because of the composition of the Products,
the Minimum Purchase Amount shall be reduced by a reasonable estimate
of the total sales amount for Products that could have been sold to
each such customer. In addition, if Isolyser or any of its Affiliates
shall fail to perform in any material manner any of its obligations to
any of Allegiances customers with respect to the disposal of Products
or if any disposal facilities operated or managed by Isolyser or any
of its Affiliates shall fail in any material manner to operate at
anticipated levels, then the Minimum Purchase Amount shall be reduced
by an amount equal to the estimated "normal" purchases of Products by
the affected customer minus the actual purchases by such customer. Any
ORE(R) Products included as a component of any kits/packs shall be
credited toward the Minimum Purchase Amount. In the event Allegiance
purchases less than the Minimum Purchase Amount, Isolyser's sole
remedy shall be to convert this Supply and License Agreement to a
nonexclusive agreement.
4.3.3. SUBMIT ORDERS
Allegiance shall submit its orders for the Minimum Purchase
Amount of Materials during the Term of this Agreement on its standard
purchase order form, a copy of which is attached hereto as Exhibit 5,
the terms and conditions of which are made a part hereof to the extent
consistent with the terms set out in the body of the Agreement.
4.3.4. PAYMENT
Allegiance shall pay for such orders on Allegiance's standard
terms of payment: net thirty (30) days.
4.3.5. INSTRUCTION
Allegiance shall provide instruction to its customers in the use
of the Materials in accordance with Material information provided by
Isolyser.
4.4. ISOLYSER'S DUTIES
Isolyser shall:
4.4.1. SHIP PRODUCT
ship promptly Allegiance's orders for Materials at a service
level of 98% for the requested delivery date;
4.4.2. REPLACEMENT MATERIAL
replace any defective Material manufactured by Isolyser and
provided under this Agreement at no cost to Allegiance or Allegiance's
customer;
4.4.3. ADVERTISING
furnish Allegiance, at no cost, reasonable quantities to be
specified between the parties in the JDCC of Isolyser's literature,
and customer instruction manuals relating to the Materials and furnish
Allegiance, upon written request and at no cost, suitable copy and
camera-ready artwork for use by Allegiance in advertising and
cataloging;
4.4.4. SAMPLES
provide Allegiance, at no cost, reasonable quantities to be
specified between the parties in the JDCC of sample Materials;
4.4.5. TECHNICAL SUPPORT
provide technical support to the sales effort of Allegiance's
sales force by providing and maintaining training materials and
education where necessary, and providing the technical knowledge of
the Materials to assist Allegiance's sales representatives in the
service of the Materials and Products;
4.4.6. ACCESS TO RECORDS
provide access to and use by Allegiance of only those records,
studies, data and other documents associated with the product
development and manufacturing by Isolyser of Products from Material
that will assist Allegiance in obtaining any necessary regulatory
approval required by Allegiance to sell the Products or to support an
advertising or similar challenge to marketing claims; and
4.4.7. 510(K) SUPPORT
grant Allegiance the right to reference certain records, studies,
data and other documents associated with the product development and
manufacturing of Isolyser products made from Material as is necessary
for Allegiance to file its own 510(k) application or applications for
Products manufactured from Material.
4.5. MATERIAL WARRANTIES
Isolyser warrants that all Materials shipped are free from defects in
workmanship and materials, are fit for their intended purposes, and conform to
the Specifications (or conform to any samples provided to Allegiance). Isolyser
shall bear responsibility for all costs associated with warranty services,
including any freight charges on Materials or Products which do not conform to
the warranties set forth herein. Isolyser shall issue credit for all Materials
or Products returned to Allegiance or returned by customers to Allegiance which
do not conform to the warranties set forth herein and provide Allegiance with
written reports of evaluation of such Materials or Products.
4.6. CONFIDENTIALITY
Any written or verbal information which either party provides to the other
and identifies as "confidential" will be held in confidence by the receiving
party and will not be used for any purpose other than to further the
relationship between the parties under this Agreement. The foregoing
confidentiality obligation shall not apply if the receiving party can
demonstrate that such information: (i) was, at the time of disclosure to it, in
the public domain; (ii) after disclosure to it, is published or otherwise
becomes part of the public domain through no fault of the receiving party; (iii)
was in the possession of the receiving party at the time of disclosure to it
without being subject to an obligation of confidentiality; (iv) was received
after disclosure to it from a third person who had a lawful right to disclose
such information to it; (v) was independently developed by or on behalf of the
receiving party by employees or authorized subcontractors who at no time were
provided with access to confidential information of the disclosing party; (vi)
was required to be disclosed to any governmental body having jurisdiction over
Allegiance or Isolyser or their affiliates or any of their respective clients;
or (vii) that disclosure is necessary by reason of legal, accounting or
regulatory requirements beyond the reasonable control of the receiving party.
4.7. INDEMNIFICATION AND INSURANCE
4.7.1. INDEMNIFICATION
Isolyser shall indemnify and defend Allegiance against all
claims, liabilities, losses and expenses (including attorneys' fees)
arising out of the manufacture, use or disposal of any Material or
Product or allegedly caused by Isolyser's manufacture, or the use or
disposal of any Material or Product, except to the extent any personal
injury, death or property damage arose from any negligence of
Allegiance in manufacture/handling of the Material or any
misrepresentation by Allegiance concerning the Material's
characteristics, or proper manner of usage. It is understood and
agreed that Allegiance=s use of advertising, training and other
materials provided by Isolyser shall not constitute misrepresentations
by Allegiance hereunder. In the event that any such claims,
liabilities, or losses are expressly found not to be caused by the
manufacture, use, or disposal of any Material, Allegiance shall
reimburse Isolyser for amounts paid by Isolyser under this
indemnification provision.
4.7.2. INSURANCE
Isolyser shall take out and maintain general comprehensive
liability insurance covering each occurrence of bodily injury and
property damage in an amount of not less than Three Million Dollars
($3,000,000) combined single limit with endorsements for: (i) products
and completed operations; (ii) blanket contractual liability (deleting
any exclusion for Materials and completed operations liability); and
(iii) broad form vendor's liability. Isolyser will immediately furnish
to Allegiance a certificate of insurance issued by the carrier
evidencing the foregoing endorsements, coverages and limits, and
stating that such insurance shall not be cancelable without at least
thirty (30) days' prior written notice to Allegiance.
4.8. REGULATORY MATTERS
4.8.1. CONTINUING GUARANTY
Isolyser agrees to execute and comply with the provisions of the
Allegiance Continuing Guaranty, a copy of which is attached hereto as
Exhibit 6, the terms and conditions of which are made a part hereof to
the extent consistent with the terms set out in the body of this
Agreement.
4.8.2. PRODUCT RECALL
In the event Allegiance or Isolyser recalls any of the Materials
manufactured by Isolyser or Products containing Materials sold or
distributed by Allegiance because the Materials, including Materials
included in Products, are believed to violate any provision of
applicable law, Isolyser shall bear all costs and expenses of such
recall, including, without limitation, expenses or obligations to
third parties, the cost of notifying customers and costs associated
with the shipment of recalled Material or Products containing
Materials from customers to Allegiance or Isolyser. Allegiance shall
maintain complete and accurate records, for such periods as may be
required by applicable law, of all the Materials or Products
containing Materials sold by it. The parties will cooperate fully with
each other in effecting any recall of the Materials or Products
containing Materials, including communications with any purchasers or
users.
4.8.3. CUSTOMER COMPLAINT REPORTING
Isolyser shall be responsible for notifying the appropriate
federal, state and local authorities of any customer complaints or
other occurrences regarding the Materials which are required to be so
reported. Allegiance shall provide Isolyser with any information it
receives regarding such occurrences.
4.8.4. ACCESS
Isolyser agrees to permit a duly authorized representative of
Allegiance to enter and inspect, during normal business hours, the
establishments in which any of the Materials are manufactured,
packaged, labeled or held solely in order to determine whether said
Materials are being manufactured, packaged, labeled or held in
conformity with the terms of this Agreement, (provided such
representative executes an appropriate confidentiality agreement and
visits during normal business hours after reasonable notice) and
further agrees to provide Allegiance with such documents as it may
reasonably require to determine whether the Materials are being
manufactured, packaged, labeled or held in accordance with the
provisions of this Agreement.
5.GENERAL PROVISIONS
5.1. TERMINATION
5.1.1. BREACH
If either party breaches any of the terms of this Agreement, the
non-breaching party shall give the breaching party written notice of
breach and a reasonable opportunity to cure such breach. If the
breaching party fails to cure such breach after written notice and a
reasonable opportunity to cure which in any event shall not be more
than 60 days, then the non-breaching party shall have the right to
terminate this Agreement. If Allegiance is the breaching party, then
during such cure period Isolyser reserves the right, without prejudice
to any other legal rights or remedies, to require the Allegiance to
immediately suspend use of the Trademarks upon Isolyser's written
notice of suspension. The suspension shall terminate if and when
Allegiance cures the breach. In the event Isolyser terminates this
Agreement due to a material breach of the Agreement by Allegiance,
Allegiance shall not sell a dissolvable PVA product in the healthcare
market during the remaining Term.
5.1.2 [INTENTIONALLY OMITTED].
5.1.3. BANKRUPTCY
Allegiance shall have the right to terminate this Agreement
immediately if Isolyser is dissolved, generally fails to pay or admits
in writing its inability generally to pay its debts as they become due
or is liquidated or ceases for a period of at least sixty (60) days to
conduct business in the ordinary course; makes a general assignment,
arrangement, or composition agreement with or for the benefit of its
creditors; or files a petition in bankruptcy or institutes any action
under federal or state law for the relief of debtors or seeks or
consents to the appointment of an administrator, receiver, custodian,
or similar official, in each case for the dissolution, liquidation or
wind up of its business and not for reconstruction or reorganization
(or has such a petition or action filed against it and such petition
action or appointment is not dismissed or stayed within sixty (60)
days).
5.1.4. 60 DAYS' NOTICE
Allegiance shall have the right to terminate this Agreement upon
sixty (60) days' written notice to Isolyser if Isolyser, upon being
duly notified of a third party's claim for patent infringement or a
third party's manufacture, use, or sale of the Product(s) in the
Territory, does not undertake to defend such claim or take appropriate
action to enforce its Patent.
5.1.5. INVENTORY
Upon termination of this Agreement by either party, Allegiance
shall have the right to use its remaining inventory of Material to
manufacture Products and to sell its remaining stock of Product(s)
provided that Allegiance shall offer Isolyser the first right of
repurchase. The Trademark License granted in 2.2.1 will continue until
all remaining stock of Products is sold.
5.1.6. EFFECTS OF TERMINATION
Upon any termination of this Agreement pursuant to this Section
5.1 all obligations of the parties hereunder shall cease except
obligations with respect to Material sold prior to the time of such
termination including payment and delivery obligations.
5.2. OTHER DISTRIBUTORS--WARRANTY AND INDEMNIFICATION
Isolyser warrants that it has no other distributors for the Products in the
healthcare market during the term of this Agreement. Isolyser shall indemnify
Allegiance for all damages, costs and expenses, including attorneys' fees,
resulting from any claims from any prior distributors of Isolyser of the
Products relating to the rights granted to Allegiance by Isolyser to sell the
Products.
5.3. ASSIGNMENT
This Agreement may not be assigned by either party hereto without the
consent of the other party, except to the transferee of or successor to
substantially all of the business of such party to which this Agreement relates
which transferee or successor shall expressly assume in writing all of the
obligations of the assigning party under this Agreement.
5.4. INTERPRETATION
5.4.1. GOVERNING LAW
The parties agree that all provisions of this Agreement, and any
questions concerning its construction and interpretation, shall be
governed by the laws of the State of Illinois.
5.4.2. PRIOR AGREEMENTS
This Agreement supersedes any and all previous agreements,
written or oral, between the parties relating to the subject matter
hereof.
5.4.3. AMENDMENTS
No amendment or modification of the terms of this Agreement shall
be binding upon either party unless reduced to writing and signed by
Isolyser and Allegiance.
5.5. NOTICES
All notices, reports and payments made pursuant to this Agreement shall be
addressed to the president with a copy to the general counsel of each party at
the address set forth in the first paragraph of this Agreement unless notice of
a different address is supplied by either party to the other. All notices,
requests and other communications hereunder shall be in writing and shall be
deemed to have been duly given at the time of receipt if delivered by hand or
mailed registered or certified mail, return receipt requested with postage
prepaid, addressed to the President at the address above stated.
5.6. DISPUTE RESOLUTION
5.6.1. ESCALATION
The parties agree that they will attempt to settle any claim or
controversy arising out of this Agreement through good faith
negotiations in the spirit of mutual cooperation between business
executives with authority to resolve the controversy. Each party shall
designate an employee who will be the initial contact for resolving
disputes. Each party shall raise any questions, claim or controversy
with the designated employee of the other party. The designated
employees will work together to resolve the relevant issue in a manner
that meets the interests of both parties, or until the issue is
referred to designated officers of the parties as set forth below in
this Section 5.6.1. The employees initially designated by each party
for purposes of this Section are as follows:
ISOLYSER: Migo Nalbantyan
ALLEGIANCE: Mike Hudson
The parties may change such designation by giving notice of such
change pursuant to Section 5.5 of this Agreement. If the designated
employees are unable to resolve any claim or controversy, prior to
taking action as provided in Section 5.6.2, the parties shall first
submit such claim or controversy to the appropriate general counsel or
appropriate legal representative of each party for resolution, and if
such general counsel or appropriate legal representative are unable to
resolve such claim or controversy, either party may request that their
respective chief executive officers, or their respective delegees,
attempt to resolve the dispute. The officers or delegees to whom any
such claim or controversy is submitted as provided above shall attempt
to resolve the dispute through good faith negotiations over a
reasonable period, not to exceed 30 days in the aggregate unless
otherwise agreed. Such 30 day period shall be deemed to commence on
the date of a notice from either party describing the particular claim
or controversy.
5.6.2. ARBITRATION
Any dispute that is not resolved by negotiations pursuant to
Section 5.6.1 will, upon the written request of either party, be
resolved by binding arbitration administered by American Arbitration
Association in accordance with the Commercial Arbitration Rules of the
American Arbitration Association by a panel of three arbitrators who
are qualified in the field of healthcare products. Such arbitrator
shall determine a schedule for determination of such dispute,
establish the scope of discovery and establish the length of hearings
that is reasonable under the circumstances. Such arbitrator shall
determine the dispute in accordance with this Agreement and the
substantive rules of law and the rules regarding admissibility of
evidence (but not the rules of procedure) that would be applied by a
federal court sitting in Illinois. The arbitration shall take place in
Nashville, Tennessee. Notwithstanding any choice of law provision
included in this Agreement, the United States Arbitration Act, 9
U.S.C. Sections 1-16 shall govern the interpretation and enforcement
of this arbitration provision. Judgment upon the award rendered by the
arbitrator may be entered by any court having jurisdiction. Where this
Agreement provides for future agreement by the parties, failure to
reach such agreement shall not constitute a dispute subject to the
provisions of this Section 5.6.2 except as expressly provided
otherwise.
5.6.3. INJUNCTIVE RELIEF
Either party may, without inconsistency with this Section 5.6,
apply to any court having jurisdiction hereof and seek provisional,
injunctive or other equitable relief as necessary to prevent serious
and irreparable injury to such party or to others. The parties
acknowledge that this contract evidences a transaction involving
interstate commerce. The use of arbitration procedures will not be
construed under the doctrine of laches, waiver or estoppel to affect
adversely either party's right to assert any claim or defense.
5.7 FORCE MAJEURE
If performance by either party (the "Performing Party") of any service or
obligation under this Agreement is prevented, restricted, delayed or interfered
with by reason of labor disputes, strikes, acts of God, floods, lightning,
severe weather, shortages of materials, rationing utility or communication
failures, failure or delay in receiving electronic data, earthquakes, war,
revolution, civil commotion, acts of public enemies, blockade, embargo, or any
law, order, proclamation, regulation, ordinance, demand or requirement having
legal effect of any government or any judicial authority or representative of
any such government, or any other act or omission whatsoever, whether similar or
dissimilar to those referred to in this clause, which are beyond the reasonable
control of such Performing Party, then such Performing Party shall be excused
from such performance to the extent that (i) such cause, and the resulting
prevention, restriction, delay or interference, were beyond the reasonable
control of such Performing Party; and (ii) such Performing Party took all
reasonable steps to prevent and mitigate such cause, and the resulting
prevention, restriction, delay or interference. Notwithstanding the foregoing,
if any prevention, restriction, delay or interference under this Section 5.7 of
any material service or obligation of Isolyser continues for at least 60 days,
then Allegiance by written notice to Isolyser may terminate its obligations
under Section 4.3.2 without further obligation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the day and due first written
above.
ISOLYSER COMPANY
By:________________________________
Its:_______________________________
ALLEGIANCE HEALTHCARE
CORPORATION
By:________________________________
Its:_______________________________
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