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EXHIBIT 10.12
[WILSON GREATBATCH LTD. LETTERHEAD]
November 1, 1996
MiniMed Inc.
12744 San Fernando Road
Sylmar, California 91342
Gentlemen:
Reference is made to a certain Supply Agreement between you ("MMI")
and MiniMed Technologies Ltd. ("MMT"), and Wilson Greatbatch Ltd. ("WGL), dated
as of October 1, 1993 (the "Supply Agreement") and to a certain License
Agreement between MMI and WGL, dated as of October 1, 1993 (the "License
Agreement"). This letter is intended to set forth in writing certain amendments
to the Supply Agreement and License Agreement, respectively, as set forth below:
1. Section 1.5 of the Supply Agreement is hereby amended to
read in its entirety as follows:
"1.5 Products. "Products" shall mean any medical device now
or hereafter manufactured by or for MMI, including, without
limitation, an Insulin Device."
2. Article 2 of the Supply Agreement is hereby amended to read
in its entirety as follows:
"ARTICLE 2
Purchase of Pumps
2.1 Purchase Orders and Term (a) Subject to all of the terms and
conditions of this Agreement (including this amended Article 2), WGL
and MMI agree to a three (3) year supply arrangement to be effective
January 1, 1996 through December 31, 1998 ("Termination Date"). The
initial Termination Date may be automatically extended by one year
upon the delivery to WGL by MMI of a purchase order for not less than
five hundred (500) 05 Pumps not later than September 1, 1996 (which
order has been received); and for one additional year upon the
delivery to WGL by MMI of a purchase order for not less than five
hundred (500) 05 Pumps not later than September 1, 1997. Thereafter,
any extension of the Termination Date of this Agreement shall only be
by mutual written agreement. If MMI fails to submit a purchase order
by September 1 of any year during the Term for at least five hundred
(500) 05 Pumps for the following year of the Term, there shall be no
extension of the Term of this Agreement beyond the balance of the
then-current three-year term. In addition, WGL, at its sole
discretion, may (x) reject any such Order for less than five hundred
(500) 05 Pumps and give MMI notice that the supply obligation of WGL
shall terminate after completing and delivering any Pumps remaining
under then-accepted Orders, or (y) accept such Order and give MMI
notice that the supply obligation of WGL shall terminate after
completing such Order.
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November 1, 1996
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(b) For purposes hereof, the word "Term" shall mean the initial three
calendar years of 1996, 1997 and 1998, and any additional years resulting
from an extension of the initial three-year period as provided for in
Paragraph (a) above, subject to earlier termination as provided in said
Paragraph (a) and elsewhere in this Agreement.
(c) MMI has issued and delivered to WGL a written purchase order to
purchase seven hundred and fifty (750) WGL 05 Pumps for delivery during the
first year of the Term ("First Order"). The First Order is to be delivered
in accordance with the delivery schedule set forth therein. MMI has also
delivered a purchase order to purchase five hundred (500) WGL 05 Pumps for
delivery during 1997, which order shall be delivered in accordance
therewith. On or prior to each September 1 hereafter during the Term, MMI
may deliver a purchase order for additional WGL 05 Pumps. For purposes of
this Agreement, the term "Orders" shall mean, collectively, the First Order
and all additional purchase orders submitted by MMI in accordance with the
Agreement. Any term or condition contained in MMI's form purchase order(s)
(or any amendment thereto) which is in addition to or conflicts or is
inconsistent with this Agreement shall be null and void, and this Agreement
shall be controlling in all respects.
2.2 Prices. (a) Subject to Paragraphs (b) through (d) of this Section 2.2,
the purchase price for all WGL 05 Pumps during the Term shall be fifteen
hundred dollars ($1,500) per pump unless the number of 05 Pumps ordered by
MMI in any Order is less than seven hundred and fifty (750), in which case
the price per pump shall be one thousand seven hundred and fifty dollars
($1,750).
(b) If the Term of the Agreement is to extend beyond December 31, 1998,
then WGL shall have the right to increase the price of all Pumps to be
delivered after December 31, 1998 by an amount equal to the Base Prices
multiplied by the percentage increase in the Consumer Price Index for the
calendar month in which the Adjustment Date occurs over the Base CPI. WGL
shall have the right to increase the Base Prices once only for each
contract year; e.g., for Pumps sold in 1998, 1999, etc.
(c) For purposes hereof:
(i) "CPI Adjustment Date" shall mean June 1, 1998, June 1, 1999,
and June 1 of each year thereafter to the extent that the
Term shall have been extended.
(ii) "Consumer Price Index" shall mean the Revised Consumer Price
Index for Urban Wage Earners and Clerical Workers. All Items
(base index year 1982-84=100), for Buffalo, New York, as
published by the United States Department of Labor, Bureau
of Labor Statistics. If the manner
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November 1, 1996
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in which the Consumer Price Index is determined by the
Bureau of Labor Statistics shall be substantially revised,
including, without limitation, a change in the base index
year, an adjustment shall be made by WGL in such revised
index which would produce results equivalent, as nearly as
possible, to those which would have been obtained if such
Consumer Price Index had not been so revised. If the
Consumer Price Index shall become unavailable to the public
because publication is discontinued, or otherwise, or if
equivalent data is not readily available to enable WGL to
make the adjustment referred to in the preceding sentence,
then WGL will substitute therefor a comparable index based
upon charges in the cost of living or purchasing power of
the consumer dollar published by another governmental agency
or, if no such index shall be available, then a comparable
index published by a major bank or other financial
institution or by a university or recognized financial
publication.
(iii) "Base CPI" shall mean the Consumer Price Index for January,
1996.
(iv) "Base Prices" shall mean the $1,750 and $1,500 prices set
forth in Section 2.2(a) hereof.
(d) WGL shall give notice to MMI of any CPI adjustment promptly after the
CPI Adjustment Date and, in any event, at least 30 days prior to September
1 of 1998, September 1, 1999 and each September 1 thereafter to the extent
that the Term shall have been extended, so that MMI can take any such
adjustment into account in connection with placing its Orders under Section
2. 1. MMI shall have 30 days after receipt of a CPI notice to object to any
proposed increase in the Base Prices. If MMI does object to any such
increase within said period, MMI shall notify WGL in writing ("Objection")
and, if the parties cannot mutually agree on any proposed increase to Base
Prices hereunder within 30 days after WGL's receipt of any such objection,
the parties shall submit their dispute to an independent certified public
accounting firm whose decision shall be final and binding. Any decision
that an increase to the Base Price is warranted shall be retroactive to the
beginning of the contract year as to which the price increase applies.
2.3 No Modification of Order. (a) No Order shall be modified or cancelled.
If MMI stops or refuses delivery of any Pumps covered by any Order prior to
or on the applicable delivery date for the Pumps specified in the Order,
then WGL shall invoice MMI for such Pumps on such date.
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(b) In the event MMI cancels any one of the Orders by written notice
delivered to WGL, then WGL shall not be obligated to supply MMI with
any further Pumps and may cancel this Agreement.
MMI's purchase obligations are subject to WGL having
sufficient batteries compatible with the 05 Pumps. WGL represents and
warrants that it has available, and will retain solely for
availability to MMI in accordance with this Agreement, aminimum of at
least 3,000 batteries which are compatible with the 05 Pumps.
2.4 Quality. All Pumps covered by this Agreement will be manufactured
under ISO 9001 system. WGL is certified to the standard British
Standards Institute (BSI) certificate number FM 26911.
2.5 Terms. Shipping terms are FOB Clarence, New York, U.S.A. Payment
terms are Net 30 days after shipment.
2.6 Continuing Supply. WGL and MiniMed shall in good faith discuss a
continuing arrangement pursuant to which WGL would supply some Pumps
for MMI as a second source of supply. If mutually agreed, the terms,
conditions, price and time period for any such arrangement will be
set forth in a written amendment to this Agreement or other written
document, signed by both parties."
3. Article 7 of the Supply Agreement (as heretofore amended) is
hereby further amended as follows:
(i) The "Closing Date" as defined in Section 7.1 thereof is
changed from October 15, 1995 to October 15, 1998; and
(ii) The term "Technology Election Date" as defined in Section
7.2(a) thereof is changed from September 1, 1995 to
September 1, 1998.
If the initial Termination Date of this Agreement is extended by one year
pursuant to Section 2.1(a) (as amended), and each time it is so extended, then
the Closing Date and the Technology Election Date referred to above shall each
also be extended by the same period of time.
In addition, MMI agrees to deliver, to WGL, simultaneously with the
execution of this letter agreement, the securities of MMI that comprise the
License Fee (10,000 shares of common stock, $.01 par value, of MMI). In
connection with such delivery, WGL hereby restates and reaffirms to MMI the
representatives, warranties, acknowledgements and agreements appearing at
Exhibit C to the License Agreement.
4. Section 8.3 of the Supply Agreement is amended as follows:
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(i) Paragraph (a) is deleted.
(ii) Paragraph (b) is amended to change the
introductory text of said paragraph to read in
its entirety as follows:
"MMI shall not be released from its obligations
to pay for 05 Pumps covered by any Order placed
under this Agreement in the event of a
termination of this Agreement by WGL under
Section 8.2(b) or under Section 8.2(a) if the
termination under Section 8.2(a) is based on any
of the following events:... "
Clauses (i) through (iii) that follow the foregoing text shall not be changed.
5. The License Agreement is hereby amended as follows:
(i) Section 1.1 of the License Agreement is amended
to read in its entirety as follows:
"1.1 Affiliate. "Affiliate" of any entity shall
mean any other entity that directly, or
indirectly through one or more intermediaries,
controls, or is controlled by, or is under common
control with, the first entity. Control shall
mean owning more than thirty-four percent (34%)
of the total voting power of the entity.
(ii) Section 1.2 of the License Agreement is hereby
amended to add a proviso at the end of said
Section 1.2, after the word MMI, as follows:
"; provided, however, that MMI shall not have any
right or license to use, and the term "Know-How"
shall not include, any information or know-how of
WGL relating to Pumps which is developed by WGL
after September 30, 1996, whether alone or
jointly with any third party, unless such
information or know-how (A) is directly used by
WGL in manufacturing or producing Pumps which are
purchased by MMI under the Supply Agreement or
(B) is developed by WGL alone or jointly with MMI
pursuant to a written order by MMI to develop
improvements to the Pumps, which order shall have
been acknowledged and accepted in writing by
WGL."
(iii) Section 1.5 of the License Agreement is amended
to provide that "Pumps" shall include any 07
model Pump of WGL as well as 05 and 08 Pumps.
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(iv) Section 2.4(a) of the License Agreement is
amended to read in its entirety as follows:
"2.4 ADDITIONAL OBLIGATIONS AND CONSULTING
AGREEMENT. (a) With respect to the Know How, WGL
agrees to furnish MMI promptly after the
execution of this Agreement, at WGL expense,
copies of all documentation in written or
tangible form which compromises Know-How
hereunder that presently exists and was developed
in the normal course of WGL's engineering and
production. WGL further agrees to furnish to MMI
promptly after the date of Closing (as defined in
Section 6.2 hereof) any additional Know-How which
is directly related to the manufacture of the
Pumps theretofore purchased by MMI from WGL and
which may exist as of such time (but subject to
Section 1.2 as amended). In addition during the
nine-month period beginning upon MMI's written
notice thereof, which shall be given at least 60
days prior to the commencement of the Consulting
Period but not later than 60 days prior to the
Termination Date (as defined in the Supply
Agreement), as extended (the "Consulting
Period"), to the extent requested by MMI, WGL
agrees to consult with and provide to MMI up to
90 eight-hour man days of support and training as
to the Know How and the production of the Pumps,
by WGL personnel having knowledge of the Know
How. The first 30 eight-hour man days of such
services during the Consulting Period shall be at
no charge to MMI, and for the next 60 eight-hour
man days MMI shall be charged $500 per man day
except such charge shall be $1,000 per each man
day of WGL's program manager. In addition, MMI
shall promptly reimburse WGL for any travel and
living expense incurred by WGL personnel in
providing such services. The parties agree that
WGL shall not be required to maintain its current
Pump work force for purposes of this Section 2.4,
and shall only be required to make available WGL
personnel during the Consulting Period who are
knowledgeable and experienced with the Know How
and production of the Pumps. If the Initial
Termination Date of this Agreement is extended by
one year pursuant to Section 2. 1 (a) (as
amended), and each time it is so extended, then
the latest starting date for the Consulting
Period shall also be extended by one year and
shall run for a comparable 10-month period of
time."
(v) Section 3.1 of the License Agreement is hereby
amended to provide that the Securities
constituting the License Fee (in the form of
10,000 shares of the common stock of MiniMed,
Inc.) are being issued and delivered to WGL
simultaneously with the execution of this letter
agreement. In connection with such delivery, WGL
hereby restates and reaffirms to
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MMI the representatives, warranties, acknowledgements and
agreements appearing at Exhibit C to the License Agreement.
(vi) The "Royalty Date" as defined in Section 3.l(a) thereof is
changed from December 31, 1999 to December 31, 2002.
(vii) The date referred to in the first sentence of Section 5.1
thereof is changed from December 31, 1999 to December 31,
2002;
The month referred to in Section 5.5(b)(iii) thereof shall
continue to be July 1996; however, the "CPI Adjustment
Date" as defined in Section 5.5(b)(i) thereof is changed to
mean "July 1, 1997 and July 1 of each year thereafter
through July 1, 2002"; and
The date referred to in the first sentence of Section 5.6
thereof is changed from December 31, 1999 to December 31,
2002;
PROVIDED, HOWEVER, that the date December 31, 2002,
referred to in Sections 5.1, 5.5(b)(iii) and 5.6 of the
Agreement (as hereby amended), shall be extended each and
every time that the initial Termination Date of the Supply
Agreement between WGL and MMI shall be extended and by the
same period of time.
(viii) Section 5.2 is hereby amended to substitute for the term
"08 Pump" (in both places where it appears) the phrase "07
Pump or 08 Pump, as the case may be."
(ix) Sections 6.1 and 6.2 are hereby amended to read in their
entirety as follows:
"6.1 MMI PURCHASE OF EQUIPMENT. MMI agrees to purchase
subject to its inspection thereof at the time of
Closing (as hereinafter defined), and WGL agrees
to sell, certain equipment and tooling used by
WGL in the manufacture of 05 Pumps. At least 10
days prior to Closing, WGL shall deliver to MMI a
proposed list of the tooling and equipment to be
sold to MMI, which list shall be mutually agreed
upon prior to Closing (the "Equipment"). It is
agreed that there shall be included in the
Equipment which may be purchased at MMI's
election: (A) one of the laser welders currently
used by WGL in its pump motor assembly operation;
and (B) fixtures and associated custom tooling
that is used in the assembly of the 05 Pumps and
that is unique to such Pump. The
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purchase price for the Equipment shall be
determined in accordance with Section 6.4 (the
"Purchase Price").
If WGL manufactures any 07 Pumps or 08 Pumps for
MMI pursuant to the Supply Agreement, WGL will
discuss with MMI the possible purchase by MMI of
tooling and equipment used in connection with
such manufacture; provided, however, that WGL
shall not be obligated to sell any such tooling
or equipment unless WGL and MMI enter into a
further written agreement setting forth the
specific assets to be sold and the terms and
conditions of sale.
6.2 Closing. The consummation of the purchase and
sale of the Equipment ("Closing") shall take
place at WGL's offices in Clarence, New York at a
time and on a date to be mutually agreed upon;
provided, however, that (i) such date shall be
the date on which WGL delivers the Equipment to
MMI (subject to the WHERE IS condition of Section
6.3); and (ii) subject to clause (i) above, such
date shall be no later than 30 days following the
last date on which Pumps are manufactured by WGL
for MMI. MMI may pay the Purchase Price in cash
or by delivery of securities of MMI the number of
which shall be in the same proportion to the
number of Securities (as defined in and as to be
delivered by MMI pursuant to Section 3.1 of this
License Agreement) as the Purchase Price bears to
$100,000."
5. The parties agree that MMT shall no longer be a party to
the Supply Agreement or the License Agreement, and MMI shall be fully liable for
all obligations of MMT, and shall have all rights of MMT, under both the Supply
Agreement and the License Agreement.
6. Except as specifically provided in this Agreement, the
Supply Agreement and License Agreement shall remain unchanged and in full force
and effect.
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Please confirm you understanding and agreement to the foregoing by
countersigning this letter agreement and returning one copy to the undersigned.
Agreed to and Confirmed Agreed to and Confirmed
as of the date of this letter. as of the date of this letter.
MINIMED INC. WILSON GREATBATCH LTD.
By TERENCE H. GREGG By EDWARD F. VOBORIL
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Terrence H. Gregg, President/COO Edward F. Voboril, President/CE0