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EXHIBIT 10.(sss)
EXECUTION COPY
DISTRIBUTION AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of February 14,
1999 (the "Effective Date"), by and between GUIDANT CORPORATION, an Indiana
corporation, and its Affiliates ("Guidant"), having its place of business at
1360 O'Brien Drive, Menlo Park, California 94025, and THORATEC LABORATORIES
CORPORATION, a California corporation ("Thoratec"), having a place of business
at 6035 Stoneridge Drive, Pleasanton, California 94588.
RECITALS
A. Thoratec is engaged in the business of developing the Products (as
defined below), and Guidant is in the business of developing, manufacturing and
distributing medical devices; and
B. The parties desire that Guidant act as an exclusive independent
distributor of the Products within the Territory (as defined below) under the
terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth below, the parties agree as follows:
1. Definitions.
1.1 "Affiliate" means any company or entity that controls, is
controlled by or is under common control with, a party to this Agreement.
1.2 "Confidential Information" includes, but is not limited to,
trade secrets, discoveries, ideas, concepts, know-how, techniques, designs,
specifications, drawings, diagrams, data, business activities and operations,
customer lists, reports, studies and other technical and business information.
1.3 "Effective Date" means the date first set forth above.
1.4 "Initial Term" means the period beginning with the Effective
Date and ending four (4) years from the date of approval for marketing and sale
in the United States by the Federal Food and Drug Administration (FDA).
1.5 "Initial Territory" means worldwide other than the United
States and Japan.
THE SYMBOL '[***]' IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION
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1.6 "Milestone Date" means the date on which Thoratec meets all
of the Milestones.
1.7 "Milestones" means the clinical requirements set forth in
Section 2.3 relating to approval for distribution of the Products within the
United States.
1.8 "Minimum Purchase Requirement" shall mean for each year
during the term of this Agreement the minimum quantity of units of the graft
Products that Guidant is required to purchase as provided in Section 3.3 of this
Agreement.
1.9 "Other Graft Products" means any and all vascular graft
products (other than the Products) that may be used in the vasculature (not to
include coronary arterial grafting) that Thoratec may develop, manufacture,
license, or otherwise acquire during the term of this Agreement.
1.10 "Product" means each of Thoratec's devices, products or
technology, currently or hereafter developed or otherwise acquired by Thoratec,
that is part of Thoratec's Vectra(TM) vascular access graft product line which
includes grafts for vascular access for hemodialysis and associated tunnelers,
and any improvements, enhancements or line extensions thereto.
1.11 "Territory" means worldwide (including the United States)
but excluding Japan.
2. Appointment of Guidant.
2.1 Appointment. Thoratec hereby appoints Guidant as the
exclusive distributor of the Products within the Initial Territory, and subject
to Section 2.3, within the United States. During the term of this Agreement,
Thoratec will not appoint or authorize any other distributor or sales
representative to make sales of all or any part of the Products within the
Territory. Guidant shall have the right during the term of this Agreement to
represent to the public that it is an authorized independent distributor of the
Products within the Territory.
2.2 Independent Contractor. Guidant is and at all times shall be
an independent contractor in all matters relating to this Agreement. Guidant and
its employees are not agents of Thoratec for any purposes and have no power or
authority to bind or commit Thoratec in any way.
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2.3 Clinical Milestones. Upon Thoratec's achievement of the
following Milestones, and subject to Section 3.7, Guidant shall have exclusive
distribution rights with respect to the Products in the United States. Thoratec
agrees to use commercially reasonable best efforts to achieve all of the
following Milestones:
2.3.1 Receipt for 510(k) approval of the Product as a
vascular access device for hemodialysis under the current investigational device
exemption ("IDE") protocol as of the Effective Date.
2.3.2 IDE clinical trial data as submitted to the FDA
shall demonstrate the Product to have less bleeding during surgery and improved
times to hemostasis after dialysis cannulation, as compared to the control graft
(ePTFE).
2.3.3 IDE clinical trial data as submitted to the FDA
shall demonstrate at least statistical equivalence to the control graft in terms
of patency measurements (mean time to first thrombosis and total incidence of
thrombosis).
2.3.4 Approved labeling of the Product to include the
ability to access for dialysis within 72 hours of implantation.
3. Guidant's Duties. Guidant shall introduce, promote the sale of,
solicit and obtain orders for Products from customers in accordance with the
terms of this Agreement. In particular, Guidant agrees as follows:
3.1 Personnel. Guidant shall make the Products available to
Guidant's Cardiac & Vascular Surgery Group's vascular sales representatives in
the Territory. Such representatives may, at Guidant's sole option and
discretion, market and sell other products in addition to the Products.
3.2 Forecast. Guidant shall prepare and submit to Thoratec on or
before the date that is thirty (30) days after the Effective Date and on or
before the first day of each calendar quarter during the term of this Agreement
a rolling six (6) month sales forecast of the number of units of each Product
that Guidant expects to purchase during each month of that time period. Guidant
agrees that, unless otherwise agreed by both parties, the forecast for each
quarterly period (other than the first forecast) shall be no greater than two
times the forecast for the previous quarter. For each such forecast, 100% of the
forecast for the first three months shall be binding, and 50% of the forecast
for the fourth through sixth months shall be binding, whether or not such
forecasts are in excess
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of the Minimum Purchase Requirements. Other than the foregoing, all forecasts
and estimates are provided by Guidant to Thoratec for planning purposes only.
3.3 Minimum Purchase Requirements.
3.3.1 For the Initial Territory. During calendar year
1999, Guidant will have no Minimum Purchase Requirements; provided, however,
that Guidant agrees to use reasonable commercial efforts to distribute the
Product in Europe in 1999, in light of Guidant's existing European sales force.
Such efforts will not include a requirement for Guidant to hire additional sales
force or support personnel to support the Product sales in 1999. During calendar
year 2000 and each remaining calendar year during the Initial Term (except as
provided in Section 3.3.2 below), the Minimum Purchase Requirements for sales of
Products in the Initial Territory will be [***] of the greater of the previous
calendar year's Minimum Purchase Requirements or [***] of units actually sold to
Guidant for distribution in the Initial Territory during the previous calendar
year.
3.3.2 After Milestone Date. If the Milestone Date occurs
on or after July 1 of a calendar year, Guidant will have no Minimum Purchase
Requirements with respect to Products distributed in the United States for such
year. However, if the Milestone Date occurs prior to July 1 of that year, then
the Minimum Purchase Requirement for that calendar year for United States
distribution shall be [***] units of the Products. For the first full calendar
year after the Milestone Date, Guidant's Minimum Purchase Requirement shall be
[***] units of the Products for distribution in both the United States and the
Initial Territory. For the second full calendar year after the Milestone Date,
the Minimum Purchase Requirement will equal the greater of [***] units or [***]
percent ([***]%) times the actual sales for the previous calendar year.
Thereafter, during the term of this Agreement (including, if applicable, the
Renewal Term as provided in Section 13.2), the parties agree to negotiate in
good faith the Minimum Purchase Requirement for the following year prior to the
beginning of that year. The parties agree that such negotiations shall be based
upon the following and other similar factors: (a) the previous years' Minimum
Purchase Requirement; (b) the competitive marketplace for the Products in the
Territory, including any recent changes, such as the introduction of competitive
products; and (c) any changes in the market price(s) for the Products and
competitive products. Further, unless the parties otherwise agree, the Minimum
Purchase Requirement for each such year shall be no less than [***]% nor more
than [***]% of the greater of the previous year's Minimum Purchase Requirement
or [***] of units actually sold to Guidant for distribution in the previous
year.
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3.3.3 Failure to Meet Minimum Purchase Requirements. If,
during any six month period of any calendar year during which Minimum Purchase
Requirements apply, Guidant shall fail to purchase at least [***] percent
([***]%) of its Minimum Purchase Requirement (with the difference between
Guidant's actual quantity of purchases of the Product and [***] percent ([***]%)
of the Minimum Purchase Requirement being referred to as the "Shortfall"),
Thoratec shall provide Guidant with written notice of the Shortfall. Such notice
shall indicate the amount of the Shortfall as well as the profit margin that
Thoratec was otherwise entitled to receive on the amount of Products making up
the Shortfall ("Shortfall Profit Margin"). The Shortfall Profit Margin shall be
determined in accordance with generally accepted accounting principles, and
Thoratec shall provide, upon Guidant's request, written documentation supporting
such calculation. In addition, Guidant shall have the right to audit Thoratec's
books and records used in calculating the Shortfall Profit Margin. Guidant shall
have thirty (30) days from receipt of Thoratec's notice to submit a purchase
order to Thoratec for a minimum of one-third of the amount of the Shortfall and
to pay the remaining Shortfall Profit Margin. If Guidant fails to do the
foregoing within the 30-day period, Thoratec may convert Guidant's distribution
rights in the Territory to non-exclusive for a period of three (3) months, at
the end of which time Thoratec may terminate this Agreement.
3.3.4 Allocation of Minimum Purchase Requirements. At the
beginning of each calendar year during which Minimum Purchase Requirements
apply, the parties agree to designate the portion of the Minimum Purchase
Requirement for that year that will be allocated to purchases made during the
first six months of that year and the portion that will be allocated to
purchases made during the last six months of that year.
3.4 Compliance with Laws. Subject to Section 4 below, Guidant
will have the necessary legal permits and licenses required by any governmental
unit or agency and will comply with applicable international, national, state,
regional and local laws and regulations, in performing its duties hereunder and
in any of its dealings with respect to the Products. Upon termination of this
Agreement, Guidant agrees to cooperate, at Thoratec's expense, in transferring
to Thoratec all Product authorizations, registrations, permits and approvals
with respect to the Products.
3.5 Non-compete. Guidant agrees that, during the term of this
Agreement, and so long as Thoratec fulfills all of Guidant's purchase orders for
Products
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as provided in this Agreement, Guidant will not develop, acquire or distribute
any other arterio/venus vascular access graft technology products for
hemodialysis.
3.6 Marketing Plan. Within sixty (60) days of the Effective Date
of this Agreement, and at each yearly anniversary thereafter during the term of
this Agreement, upon Thoratec's request, Guidant shall submit to Thoratec a
marketing plan for the distribution of the Products during the upcoming 12-month
period. Such plan will include a review of planned selling and marketing
tactics, pricing strategy, competition, and projected units and market share and
generally will be comparable to Guidant's marketing plans for its own similar
products.
3.7 Milestone Payments. In consideration of the rights granted
herein, Guidant shall pay to Thoratec the amount of One Million Five Hundred
Thousand U.S. Dollars (US $1,500,000) upon execution of this Agreement. In
addition, on or within thirty (30) days of Guidant's receipt of written notice
from Thoratec of its achievement of the Milestones (which notice shall include
sufficient written evidence and documentation of such achievement), Guidant
shall pay for exclusive United States distribution rights as provided under this
Agreement in the amount of Two Million U.S. Dollars (US $2,000,000); provided
that if Thoratec has not achieved the Milestones by the following dates, the
Milestone payment required to be made by Guidant for U.S. distribution rights
("U.S. Milestone Payment") shall be reduced as follows:
If the Milestones are achieved on or before March 31, 2001, the U.S.
Milestone Payment shall be Two Million U.S. Dollars (US $2,000,000).
If the Milestones are achieved between April 1, 2001 and June 30, 2001,
the U.S. Milestone Payment shall be One Million Seven Hundred Fifty Thousand
U.S. Dollars (US $1,750,000).
If the Milestones are achieved between July 1, 2001 and September 30,
2001, the U.S. Milestone Payment shall be One Million Five Hundred Thousand U.S.
Dollars (US $1,500,000).
If the Milestones are achieved between October 1, 2001 and December 31,
2001, the U.S. Milestone Payment shall be One Million Two Hundred Fifty Thousand
U.S. Dollars (US $1,250,000).
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If the Milestones are achieved after December 31, 2001 but on or before
December 31, 2003, the U.S. Milestone Payment shall be One Million U.S. Dollars
(US $1,000,000), provided that prior to achievement of the Milestones, Guidant
shall have the right to terminate this Agreement upon ninety (90) days prior
written notice to Thoratec. Such termination shall be effective notwithstanding
Thoratec's achievement of the Milestones during the 90-day notice period.
If the Milestones are not achieved by December 31, 2003, then this
Agreement shall terminate.
Milestone payments made under this Section 3.7 shall be nonrefundable.
3.8 Post-Market Surveillance. With respect to Guidant's
distribution of the Products under this Agreement, Guidant agrees to comply with
the United States Food and Drug Administration regulations as outlined in
Exhibit B attached hereto.
4. Thoratec's Duties.
4.1 Responsibility for Regulatory and Safety Testing Requirements
and for Obtaining Required Approvals and Registrations.
4.1.1 Regulatory and Safety Testing Requirements. Thoratec
will be considered to be the finished device manufacturer for the Products, and
will be responsible for compliance with all regulatory and safety testing
requirements in the Territory.
4.1.2 Regulatory Approvals and Registrations. Thoratec, at
its expense, shall obtain all regulatory approvals for the Products in the
Territory. This includes, without limitation, designing, implementing and
funding the IDE application and the FDA market approval applications in the
United States and obtaining and maintaining a CE Mark or other equivalent
requirements to market the Product.
4.1.3 Quality System Compliance. Thoratec will be solely
responsible for quality system compliance affecting the Products, including, at
a minimum, ISO certification and compliance with FDA Quality System Regulations
and similar requirements in other jurisdictions within the Territory. During the
term of this Agreement, Thoratec will manage the complaint files associated with
the Products in the Territory.
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4.1.4 Post-Market Surveillance. Thoratec will be
responsible for any reportable events, such as patient death or injury,
associated with the Products and will be solely responsible for any recall
activity associated with the Products; provided, however, that to the extent
required by applicable law each party may report such events to the applicable
authorities. Each party agrees to provide the other party with any assistance
required in connection with such activities, including without limitation access
to the Products files and access to customers or end users, as required.
4.2 Literature. Upon Guidant's reasonable request, Thoratec shall
furnish Guidant, without charge (except as otherwise agreed), with technical,
advertising and selling information and literature concerning the Products as
available.
4.3 Marketing Support. To assist Guidant in marketing the
Products in the Territory, Thoratec shall:
4.3.1 provide Guidant with any information reasonably
requested by Guidant for the purpose of complying with governmental
requirements.
4.3.2 provide Guidant with information on marketing and
promotional plans of Thoratec for the Products as well as copies of marketing,
advertising, sales and promotional literature concerning the Products produced
by or for Thoratec, if any; and
4.3.3 provide Guidant with all certificates of analysis
concerning the Products, certificates of free sale, trademark authorizations and
any other documents which Guidant may reasonably request to satisfy the
requirements of the laws of the various jurisdictions within the Territory and
of any competent authority.
4.4 Sales and Training. Thoratec shall provide training of
Guidant's personnel in the use of the Products initially and after any material
changes to the Products upon Guidant's request at a mutually-agreeable location;
provided that the initial training shall at a minimum include Thoratec's
providing, at its expense, two Thoratec employees to train Guidant's European
sales force at a European location designated by Guidant. Guidant will pay the
cost of any travel and lodging for its personnel attending any such training,
and Thoratec will pay the cost of the trainers and materials.
4.5 Changed Product. Thoratec shall notify Guidant at least sixty
(60) days in advance of any change in the processes, materials, equipment,
inspection, testing,
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manufacturing location and the like of which it has knowledge that may have any
effect on the Products or their uses, and Guidant will have the right to make a
"last buy" of Product (in no greater quantity than the last three months'
forecast) prior to any such material changes.
4.6 Insurance. Thoratec shall at all times maintain product
liability insurance covering the Products with minimum annual limits of Two
Million U.S. Dollars (US $2,000,000) per occurrence and Two Million U.S. Dollars
(US $2,000,000) in the aggregate. Thoratec shall maintain such insurance for a
minimum of five (5) years after termination of this Agreement. Within thirty
(30) days of the Effective Date, Thoratec shall deliver to Guidant a certificate
of insurance evidencing such insurance and stating that the policy will not be
canceled or modified without at least thirty (30) days prior written notice to
Guidant.
4.7 Non-Revenue Units. During the term of this Agreement,
Thoratec agrees to provide Guidant with non-sterile Products, at no charge, as
requested by Guidant and as available, for demonstration and testing purposes.
4.8 Right of First Offer for Other Graft Products. During the
Initial Term of this Agreement, if Thoratec intends to negotiate with a third
party for the granting of license, marketing or distribution rights with respect
to any Other Graft Product, Thoratec shall notify Guidant as soon as possible
after Thoratec's having first contact with such third party. Thoratec and
Guidant shall negotiate in good faith with respect to the licensing, marketing
or distribution of such Other Graft Product(s) for a period of no less than
sixty (60) days after such notification. During such negotiations, Thoratec
agrees that it will not enter into any binding commitments with any third party
with respect to the Other Graft Products.
5. Trademarks.
5.1 Trademark License. Thoratec hereby grants to Guidant an
exclusive, royalty-free license to use the trademarks, trade names and logos
used by Thoratec to identify the Products (the "Trademarks") solely in the
course of Guidant's advertisement, promotion, distribution and sale of the
Products as provided in this Agreement. Guidant's use of the Trademarks will be
in accordance with Thoratec's policies that are provided to Guidant in writing
from time to time. Use of the Trademarks on the Products shall not give Guidant
any proprietary rights in the Trademarks.
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5.2 Ownership. Guidant acknowledges that, subject only to the
license granted herein to Guidant, Thoratec owns and retains all proprietary
rights in all of its Trademarks.
5.3 No Continuing Rights. Upon termination of this Agreement,
Guidant will cease all further display, advertising and use of all Trademarks
except in connection with the sale of Products in inventory as provided in
Section 13.6 below.
5.4 Labeling of Products. Guidant shall have the right to label
the Products distributed under this Agreement; provided, however, that Guidant
agrees to credit Thoratec as the manufacturer, and to include the Thoralon(TM)
biomaterial brand name, on the Product packaging, brochures, advertisements and
any other promotional materials or devices; and provided further that Guidant
may use either Thoratec's Vectra(TM) vascular access graft mark or Guidant's own
mark to identify the Products. If Guidant uses its own mark to identify the
Products, Guidant agrees that, upon termination of this Agreement, it will
assign to Thoratec its rights in such mark for no additional consideration. Both
parties agree that the labeling of the Products shall be in accordance with
applicable regulations in the Territory. Guidant shall provide to Thoratec a
sample of Product packaging, brochures, advertising and other promotional
materials that include the Vectra(TM) mark or that contain technical information
regarding the Products for review and approval prior to Guidant's commercial use
of such materials. If Thoratec has not provided Guidant with written notice of
its disapproval and request for correction within ten (10) days of receipt of
such materials, Thoratec shall be deemed to have approved such materials.
6. Order Placement.
6.1 Transfer Price. Prior to the Milestone Date, the transfer
price for each Product purchased by Guidant under this Agreement shall be [***]
U.S. Dollars (US $[***]). After the Milestone Date, the transfer price for each
Product shall be equal to [***] percent ([***]%) of the worldwide weighted
average selling price of the Products in the Territory (excluding non-revenue
units distributed by Guidant), determined on a calendar quarterly basis;
provided, however, that in no event will the price be lower than [***] U.S.
Dollars (US $[***]). All prices are FOB Guidant's distribution facilities in
Menlo Park, and are exclusive of transportation, duties and taxes, including
sales, use, excise, value-added, withholding or other similar tax of any kind.
Foreign currency conversion shall be pursuant to Guidant's standard procedures
for converting foreign
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currency. Upon no less than thirty (30) days prior written notice to Guidant,
Thoratec shall have the right, at its own expense, through an established and
reputable certified public accounting firm, to examine Guidant's relevant books
and records with respect to sales of Products under this Agreement. Such
examination shall be during Guidant's normal business hours, shall be no more
frequently than one each year and shall cover no more than the preceding two (2)
calendar years. If such examination reveals that Guidant has underreported the
worldwide weighted average selling price by 5% or more, then Guidant shall
immediately pay the underreported amounts and shall pay for reasonable costs
incurred by Thoratec for such audit.
6.2 Purchase Orders and Acknowledgements.
6.2.1 Purchase Orders. All purchases of the Products by
Guidant shall be made by written purchase order specifying by Product, the
quantity, price, requested delivery schedule, and shipping instructions. All
purchases of the Products by Guidant from Thoratec during the term of this
Agreement shall be subject to the terms and conditions of this Agreement, and
any additional or different terms and conditions in a purchase order or
confirmation form which conflicts with this Agreement, shall be of no force and
effect, unless the parties specifically agree in writing to the terms and
conditions which conflict with this Agreement.
6.2.2 Acceptance of Orders. All orders and modifications
to orders are subject to acceptance by Thoratec; provided, however, that
Thoratec agrees to accept all purchase orders by Guidant for the Products as
long as such orders are consistent with Guidant's forecasts of its expected
orders of the Products (as described in Section 3.2 above). In addition,
Thoratec shall use reasonable best efforts to fulfill all orders by Guidant for
the Products in excess of Guidant's forecasts. If Thoratec believes that it will
not be able to satisfy Guidant's orders for the Products, it shall promptly
notify Guidant, specifying the reasons for the delay and its expected duration.
6.2.3 Packaging. All Products shall be suitably packed for
shipment in the current sterile and finished-goods configuration, unless
otherwise agreed by Thoratec and Guidant in writing. Cost of packaging of the
Products for shipment to Guidant as specified in this Agreement shall be paid by
Thoratec.
6.3 Title and Delivery of Products.
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6.3.1 Delivery of the Products shall be completed upon
delivery of the Products to Guidant at Guidant's facility specified in Section
6.1, and in all cases, Thoratec's title and the risk of loss or damage to any
Products shall pass to Guidant upon delivery of the Products to Guidant at its
facility.
6.3.2 Thoratec may make partial shipments against
Guidant's purchase orders upon mutual agreement of the parties.
6.4 Cancellation/Reschedules.
6.4.1 Guidant may reschedule each order once and no such
reschedule will exceed forty-five (45) days from the originally scheduled ship
date. Thoratec will work with Guidant on a case by case basis to resolve issues
related to market changes and potential impact on orders placed with Thoratec.
6.4.2 Subject to Guidant's obligations under Section 3.2
of this Agreement, Guidant may cancel all or any portion of an order or change
the scope of an order at any time prior to fifteen (15) days before the
scheduled ship date. Thereafter, Guidant may do so only with Thoratec's written
approval.
6.5 Recalls. The parties will give prompt notice of any
contemplated recall of the Products to the other party. The parties shall give
each other full cooperation throughout the recall process whether such recall is
voluntary or otherwise.
7. Payment Terms. Thoratec will invoice Guidant for ordered units of the
Products when Thoratec delivers such units to Guidant in accordance with Section
6.3 of this Agreement. All payments due pursuant to this Agreement shall be made
within forty-five (45) days of Guidant's receipt of each invoice. All payments
shall be made in United States dollars.
8. Returns.
8.1 Returns. Guidant may return for credit or a refund, at
Thoratec's option, any Product that does not meet Thoratec's warranty as set
forth in Section 10 of this Agreement. Thoratec will issue a return material
authorization (RMA) number for such defective Product upon Guidant's request.
Guidant shall return any such defective Product to Thoratec with documentation
referencing the applicable RMA number. Thoratec shall submit any refund to
Guidant within forty-five (45) days of receiving the
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defective Product, or if credit is provided, such credit shall be applied to any
outstanding purchase orders first and then to the next purchase order(s)
submitted by Guidant.
8.2 Minimum Shelf Life. Each Product delivered under this
Agreement must have, upon Guidant's receipt of such Product, a minimum remaining
shelf life of two-thirds (2/3) of the Product's approved shelf life. At
Thoratec's expense, Guidant may return for a refund or replacement, at Guidant's
option, any Product that does not meet this requirement. Thoratec shall submit
such refund and reimbursement for shipping costs or replacement Product to
Guidant within forty-five (45) days of receiving the returned Product. Thoratec
represents that, by June 30, 1999, the approved shelf life of the Products shall
be three (3) years for each of the Products.
9. Confidential Information.
9.1 Identification of Confidential Information. Confidential
Information provided by the disclosing party and entitled to protection under
this Agreement shall be identified as such by appropriate markings on any
documents exchanged. If the disclosing party provides information other than in
written form, such information shall be considered Confidential Information only
if the information by its nature would reasonably be considered of a
confidential nature or if the receiving party, due to the context in which the
information was disclosed, should have reasonably known it to be confidential,
and the disclosing party gives written notice within ten (10) days of disclosure
that such information is to remain confidential or the disclosing party had
previously confirmed in writing that such information was confidential.
9.2 Protection of Confidential Information. Each party
acknowledges that the other party claims its Confidential Information as a
special, valuable and unique asset. During the term of this Agreement and for
three (3) years thereafter, for itself and on behalf of its officers, directors,
agents, and employees, each party agrees to the following:
9.2.1 Receiving party will not disclose the Confidential
Information to any third party or disclose to an employee unless such third
party or employee has a need to know the Confidential Information in order to
enable the disclosing party to exercise its rights or perform its obligations
under this Agreement. Receiving party will use the Confidential Information only
for the purposes of exercising its rights or fulfilling its obligations under
this Agreement and will not otherwise use it for its own benefit. In
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no event shall the receiving party use less than the same degree of care to
protect the Confidential Information as it would employ with respect to its own
information of like importance which it does not desire to have published or
disseminated;
9.2.2 If the receiving party faces legal action or is
subject to legal proceedings requiring disclosure of Confidential Information,
then, prior to disclosing any such Confidential Information, the receiving party
shall promptly notify the disclosing party and, upon the disclosing party's
request, shall cooperate with the disclosing party in contesting such request.
9.3 Return of Confidential Information. All information furnished
under this Agreement shall remain the property of the disclosing party and shall
be returned to it or destroyed or purged promptly as its request upon
termination of this Agreement; provided, however, that Guidant may retain
Confidential Information of Thoratec as reasonably necessary for Guidant to be
able to complete the sale of Products on order or in inventory at the time of
termination and to support Products already sold by Guidant under this
Agreement. All documents, memoranda, notes and other tangible embodiments
whatsoever prepared by the receiving party based on or which includes
Confidential Information shall be destroyed to the extent necessary to remove
all such Confidential Information upon the disclosing party's request. All
destruction under this Section 9.3 shall be certified in writing to the
disclosing party by an authorized officer of the receiving party.
9.4 Residual Information. Either party shall be free to use for
any purpose (including, but not limited to, use in the development, manufacture,
marketing and maintenance of its own products and services) the Residuals
resulting from access to or work with Confidential Information of the other
party, provided that the party maintains the confidentiality of the Confidential
Information as provided herein. The term "Residuals" shall mean information in
non-tangible form that may be inadvertently retained by persons who have had
rightful access to the Confidential Information, including the ideas, concepts,
know-how or techniques contained therein. Notwithstanding the provisions of this
Section 9.4, during the term of this Agreement, neither party may avoid its
obligations toward a particular item of the Confidential Information merely by
having a person commit such item to memory so as to reduce it to a non-tangible
form.
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9.5 Limitations. The confidentiality obligations in this Section
9 shall not apply to disclosed information which the receiving party can prove:
receiving party knows at the time of disclosure, free of any obligation to keep
it confidential, as evidenced by written records; is or becomes generally
publicly known through authorized disclosure, receiving party independently
developed without the use of any Confidential Information as evidenced by
written records; or receiving party rightfully obtains from a third party who
has the right to transfer or disclose it.
9.6 Public Announcements. Notwithstanding anything to the
contrary contained in this Agreement, neither party may initiate any public
announcement concerning the subject matter of this Agreement without the prior
written approval of the other party; provided, however, that this Section 9.6
shall not be construed to limit Guidant's ability to market the Products as it
deems necessary or appropriate.
10. Warranty. Thoratec warrants that each Product to be delivered
hereunder shall be free of defects in materials and workmanship and shall
conform to Thoratec's specifications for such Product, at the time of delivery
and for the remaining shelf life thereafter. The warranty period shall be
extended to Guidant's customers, but will not exceed the shelf life of the
Product. Thoratec warrants that the Products do not and will not infringe the
proprietary rights of any third party. THERE ARE NO WARRANTIES THAT EXTEND
BEYOND THE FACE OF THIS AGREEMENT. THORATEC DISCLAIMS ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, REGARDING THE PRODUCTS, INCLUDING, BUT NOT LIMITED TO, ANY
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
11. Indemnification.
11.1 Indemnification. Subject to Section 11.3 below, Thoratec
agrees, at its own expense, to defend Guidant against an "Indemnified Claim," as
defined in Section 11.2 below, and to hold Guidant harmless and indemnify
Guidant from any loss, expense, liability and/or settlement (including
attorneys' fees) resulting from an Indemnified Claim.
11.2 Indemnified Claim. For purposes of this Agreement, an
"Indemnified Claim" shall mean: (i) any claim asserting that the Products or any
part thereof infringes any third party patent, trade secret, trademark,
copyright or other
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proprietary right; (ii) any claim arising from or related to a material failure
of Thoratec to comply with its warranties under this Agreement; and (iii) any
claim asserting that the Products caused injury, or death to person or damage to
property.
11.3 Limitations. Thoratec's obligation to indemnify Guidant is
contingent upon Guidant (i) promptly notifying Thoratec of such claim and (ii)
cooperating with Thoratec in the defense thereof, of which Thoratec will have
control at Thoratec's expense. Notwithstanding the above, Guidant shall have the
right but not the obligation, at Guidant's expense, to participate in any such
defense.
11.4 Infringements. If a claim of infringement is made with
respect to a Product, then Thoratec at its option shall (i) obtain for Guidant
the right to continue to market and distribute the Product, (ii) replace the
Product with a functionally-equivalent noninfringing Product, or (iii) modify
said Product so that it become noninfringing, so long as the functionality of
the Product is not adversely affected. If Thoratec is unable to do any of the
foregoing, it shall grant Guidant a full refund for all affected Products and
accept return of them, and refund to Guidant the amounts paid by Guidant under
Section 3.7.
11.5 Guidant Indemnification. Guidant agrees, at its own expense,
to defend Thoratec against (i) any claim asserting that Guidant mishandled the
Products, (ii) any claim asserting a misrepresentation by Guidant concerning any
of the characteristics of the Products, and (iii) any claim asserting any
negligent act or omission of Guidant relating to the Products. Guidant's
obligation to indemnify Thoratec is contingent upon Thoratec (i) promptly
notifying Guidant of such claim and (ii) cooperating with Guidant in the defense
thereof, of which Guidant will have control at its expense. Notwithstanding the
above, Thoratec shall have the right but not the obligation, at its expense, to
participate in any such defense.
12. Limitation of Liability. NEITHER PARTY SHALL, BY REASON OF THE
TERMINATION OF THIS AGREEMENT OR OTHERWISE, BE LIABLE TO THE OTHER PARTY FOR ANY
CONSEQUENTIAL, SPECIAL, INCIDENTAL, OR OTHER DAMAGES (INCLUDING WITHOUT
LIMITATION LOSS OF PROFIT) WHETHER OR NOT ADVISED TO THE POSSIBILITY OF SUCH
DAMAGES. THIS LIMITATION SHALL APPLY TO ANY CLAIM OR CAUSE OF ACTION WHETHER IN
CONTRACT OR TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, OR BREACH OF
WARRANTY, BUT SHALL NOT APPLY IF A PRODUCT IS
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DETERMINED TO BE DEFECTIVE AND TO HAVE CAUSED BODILY INJURY OR DEATH, NOR SHALL
IT APPLY TO LIABILITY UNDER SECTION 11.
13. Term and Termination.
13.1 Term. This Agreement is effective as of the Effective Date
and shall continue until the end of the Initial Term unless terminated earlier
pursuant to this Section 13 or as provided in Section 3.3 or Section 3.7.
13.2 Renewal. After the Initial Term, Guidant shall have the
right, for no additional payment or other consideration, to renew this Agreement
for an additional five (5) year period ("Renewal Term") under the same terms and
conditions, including the same transfer pricing terms described herein, except
that the Minimum Purchase Requirements shall be negotiated in good faith for
each year during the Renewal Term. Unless the parties otherwise agree, the
Minimum Purchase Requirement for each year during the Renewal Term shall be no
less than [***]% nor more than [***]% of the previous year's Minimum Purchase
Requirement. The parties shall commence such negotiations promptly after Guidant
provides notice of its intent to renew this Agreement and before the beginning
of the Renewal Term. If the parties have engaged in good faith negotiations
(with each party represented by persons with authority to settle the matter),
for a period of no less than ninety (90) days or in such other time frame as the
parties may otherwise agree, and the parties are still unable to agree on such
Minimum Purchase Requirements for any of the Products, then such disagreement
shall be resolved by binding arbitration as provided in Exhibit A.
13.3 Immediate Termination For Cause. Either party may terminate
this Agreement by giving the other party thirty (30) days' written notice of
such termination if the other party materially breaches or defaults in any of
the material terms or conditions of this Agreement and fails to cure such breach
or default within thirty (30) days of receiving notice thereof.
13.4 Effect of Termination.
13.4.1 Upon any termination of this Agreement by Thoratec,
Guidant will be entitled to have delivered the Products ordered prior to
termination. In addition, upon any termination of this Agreement, Guidant may,
at its option, either sell all or any part of its remaining inventory of the
Products to customers or, if the Agreement terminated for Thoratec's breach,
sell to Thoratec all or any part of Guidant's
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inventory of the Products (excluding demonstration units and Products with less
than 6 months shelf life remaining as of the effective date of termination).
Thoratec agrees to repurchase all of such Products that Guidant may decide to
sell to Thoratec. Guidant must exercise the right to resell within sixty (60)
days after termination of this Agreement. The price for such inventory shall be
the total invoice price paid by Guidant for such Products.
13.4.2 Sections 1, 3.4, 3.8, 4.6, 6.5, 9, 10, 11, 12, 13.4
and 14 shall survive termination of this Agreement for any reason.
14. General Provisions.
14.1 No Waiver. The failure of either party to enforce at any
time or for any period any of the provisions of this Agreement shall not be
construed to be waiver of those provisions or of the right of that party
thereafter to enforce each and every provision hereof.
14.2 Assignment. This Agreement shall not be assignable by either
party without the prior written consent of the other party; provided, however,
that, upon thirty (30) days prior written notice to Thoratec, Guidant may assign
this Agreement to any of its Affiliates without Thoratec's consent. For purposes
of this Section, the term "assignment" will be deemed to include a sale of all
or substantially all of the stock or assets of either party (including by way of
merger), or a sale of all or substantially all of the assets of that portion of
the either party's business to which this Agreement relates. Any attempted
assignment not otherwise permitted herein shall be void. The provisions hereof
shall be binding upon and inure to the benefit of the parties, their successors
and permitted assigns.
14.3 Notices. Any notice, report or statement to either party
required or permitted under this Agreement shall be in writing and shall be sent
by certified mail, return receipt requested, postage prepaid, or by facsimile
transmission with confirmation sent by certified mail as above, or by courier,
such as Federal Express, DHL or the like, with confirmation of receipt by
signature requested, directed to the other party at its mailing address set
forth below, or to such other mailing address as the party may from time to time
designate by prior notice in accordance herewith. Any such notice, report or
statement sent in accordance with this Section 14.3 shall be deemed duly given
upon dispatch, subject to proof of receipt.
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14.4 Governing Law. This Agreement (and any other documents
referred to herein) shall be construed in accordance with the laws of the State
of California without reference to choice of law principles, as to all matters,
including, but not limited to, matters of validity, construction, effect or
performance. The exclusive venue and jurisdiction for resolution of disputes
hereunder shall be the courts located in San Mateo County, California, or, if
applicable, the Federal Courts in the Northern District of California. The
United Nations' Convention on the Contracts for the International Sale of Goods
shall not apply to this Agreement.
14.5 Force Majeure. The parties shall not be liable for any delay
or failure of obligations under this Agreement, in whole or in part, for any
causes beyond the reasonable control of the parties, including, but not limited
to, acts of God, war, riot, civil disturbances, strikes, lockouts or other labor
disputes, accident of transportation or other force majeure.
14.6 Titles of Sections. The title of the various sections of
this Agreement are used for convenience of reference only and are not intended
to and shall not in any way enlarge or diminish the rights or obligations of the
parties or affect the meaning or construction of this document.
14.7 Investigation; Joint Preparation. Each party acknowledges
that it has had adequate opportunity to make whatever investigation or inquiry
it deems necessary or desirable in connection with the subject matter of this
Agreement prior to the execution hereof. Each party further acknowledges that it
has read and understands each provision of this Agreement. This Agreement has
been prepared jointly by the parties and shall not be strictly construed against
either party, it being agreed that each party has had an opportunity to consult
with counsel of its own choosing regarding the terms and conditions of this
Agreement.
14.8 Integration/Modification/Entire Agreement. This Agreement
(including any Exhibits) sets forth the entire agreement and understanding
between the parties as to the subject matter hereof, and supersedes, integrates
and merges all prior discussions, correspondence, negotiations, understandings
or agreements. This Agreement may not be altered, amended, modified or otherwise
changed in any way except by a written instrument, which specifically identifies
the intended alteration, amendment, modification or other change and clearly
expresses the intention to so change this Agreement, signed by authorized
representative of the parties.
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14.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which when executed shall be deemed an original, and all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date.
THORATEC LABORATORIES CORPORATION GUIDANT CORPORATION
/s/ D. KEITH GROSSMAN /s/ RONALD W. DOLLENS
- ----------------------------------- -----------------------------------
(signature) (signature)
BY: D. Keith Grossman BY: Ronald W. Dollens
------------------------------ -------------------------------
(print name) (print name)
TITLE: President and Chief TITLE: President and Chief
Executive Officer Executive Officer
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EXHIBIT A
BINDING ARBITRATION
FOR MINIMUM PURCHASE REQUIREMENTS
(a) The disputed Minimum Purchase Requirements during each year shall be
resolved by final and binding arbitration conducted in accordance with the
commercial arbitration rules of the American Arbitration Association ("AAA")
then in effect, except as set forth herein.
(b) There shall be a sole arbitrator mutually agreed to by the parties.
If the parties cannot agree on a sole arbitrator on or before the date that is
sixty (60) days before the start of the applicable year, then the arbitrator
shall be appointed by AAA in accordance with its rules. The arbitrator shall be
neutral, independent and impartial.
(c) Arbitration of the dispute shall consist of a one-day hearing in
which each party shall have equal time to present to the arbitrator the party's
evidence relating to the disputed Minimum Purchase Requirements of the
Product(s). On the day following the hearing, each party shall deliver
simultaneously to the other and to the arbitrator an offer setting forth the
party's final position as to what the Minimum Purchase Requirements for each of
the Products and for each year in dispute should be, together with a short
explanation of the reasons supporting such offer.
(d) Unless the parties have entered into a final and binding agreement
resolving each dispute submitted to arbitration hereunder as to the Minimum
Purchase Requirement for each Product during each year, the arbitrator shall,
within ten (10) business days after the hearing, choose one of the two offers
submitted by the parties on a Product by Product basis and render to the parties
simultaneously a reasoned written decision explaining the basis for deciding
between the submitted offers.
(e) That decision shall be binding upon the parties, and the chosen
Minimum Purchase Requirement for each Product for each year specified in such
decision (the "Chosen MPR") shall be the Minimum Purchase Requirements of
Guidant during the applicable year under this Agreement.
(f) If the final decision of the arbitrator is not rendered by the
beginning of the applicable year, then the Minimum Purchase Requirements for the
Products during the
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preceding year (the "Previous MPR") shall continue to apply until the final
decision is rendered. Upon the rendering of the arbitrator's decision, the
Chosen MPR for each Product for the then-current year shall be applied on a
prorated basis.
(g) The arbitration proceedings contemplated by this Section shall be as
confidential and private as permitted by law. To that end, the parties shall not
disclose the existence, content or results of the proceedings conducted in
accordance with this Section, and materials prepared and submitted in connection
with such proceedings shall not be admissible in any other proceeding; provided,
however, that this confidentiality provision shall not prevent a petition to
vacate or enforce an arbitral decision, and shall not bar disclosures required
by law. The parties agree that any decision resulting from proceedings in
accordance with this dispute resolution provision shall have no preclusive
effect in any other matter involving third parties.
(h) Judgment on an arbitral decision may be entered by any court of
competent jurisdiction, or application may be made to such a court for judicial
recognition and acceptance of the decision and any appropriate order including
enforcement.
(i) Each party shall bear its own legal costs and expenses, and the
parties shall share the costs and fees of the arbitrator.
(j) All proceedings and meetings referred to in this Section shall take
place in San Mateo County, California, or at such other location as the parties
may agree.
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EXHIBIT B
UNITED STATES FOOD & DRUG ADMINISTRATION (FDA) REGULATORY REQUIREMENTS
1. The United States Food & Drug Administration (FDA) requires a device
manufacturer or importer "to report to FDA whenever the manufacturer or importer
receives or otherwise becomes aware of information that reasonably suggests that
one of its marketed devices (1) may have caused or contributed to a death or
serious injury or (2) has malfunctioned and that the device or any other device
marketed by the manufacturer or importer would be likely to cause or contribute
to a death or serious injury if the malfunction were to recur." (Section 803.1
of Title 21 Code of Federal Regulations.
2. Therefore, Thoratec requires, as a condition to entering into a
distribution agreement for its products, that the distributor, in the
circumstances outlined in paragraph 1 above, will give to Thoratec the following
information as soon as possible, but not later than 5 calendar days after the
distributor's receipt of such information:
A. Identify the device, including model, catalog or other
identifying number, including manufacturing lot or serial number.
B. Identify by name, address and telephone number the individual
making the report.
C. Describe, to the extent known, the event giving rise to the
information received by the distributor, including (1) whether any deaths or
serious injuries have occurred and (2) the number of persons who died or were
seriously injured.
D. State whether distributor intends to submit additional
information and, if so, when such information will be submitted.
The information outlined in paragraph 2 above is required to be
collected and transmitted by telephone call or facsimile to Thoratec for its
reporting to FDA as soon as possible but no later than 5 calendar days after
receipt. If this information was transmitted by telephone call to Thoratec, such
call shall be followed by a written report.
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In addition, pursuant to FDA regulation, Thoratec requires that the
distributor of any of its products give to Thoratec all information in its
possession regarding bench tests, in vitro tests, and in vivo tests relating to
Thoratec's products. Summaries of the tests performed and the results are
initially required, with the agreement that, if the FDA asks questions about the
summaries, the actual test reports or other raw data will be provided to
Thoratec by the distributor. (Section 814, Title 21 CFR)
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