<PAGE>
Confidential Materials omitted and filed separately with the
securities and Exchange Commission. Asterisks denote omissions.
Exhibit 10.1
EXECUTION COPY
PRODUCT DEVELOPMENT AND DISTRIBUTION AGREEMENT
This
PRODUCT DEVELOPMENT AND DISTRIBUTION AGREEMENT is entered into as
of
May 23, 2005 (the "Effective Date"), by and
between Aspect Medical Systems,
Inc., a Delaware corporation having a
principal place of business at 141 Needham
Street, Newton, Massachusetts 02464
("AMS"), and Boston Scientific Corporation,
a Delaware corporation having a principal
place of business at One Boston
Scientific Place, Natick, Massachusetts
01760 ("BSC").
Background
WHEREAS,
AMS is interested in developing new applications of its
brain-monitoring technology in the area of
the diagnosis and treatment of
neurological, psychiatric and pain
disorders;
WHEREAS,
BSC is willing to provide AMS certain funding in connection
with
such development efforts;
WHEREAS,
the Board of Directors of AMS has amended the Rights Agreement
dated November 29, 2004 by and between AMS
and EquiServe Trust Company, N.A., as
Rights Agent of AMS (the "Rights Plan"),
pursuant to which rights under the plan
would become exercisable if BSC acquires
any shares of AMS' common stock such
that, after such acquisition, BSC holds
beneficial ownership of 29.5 percent or
more of AMS' common stock or commences a
tender offer for such stock; and
WHEREAS,
AMS is willing to appoint BSC as the exclusive distributor for
the products developed in connection with
those efforts on the terms set forth
herein.
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants
contained herein, and for other good and
valuable consideration, the receipt and
sufficiency of which are hereby
acknowledged by each of the parties hereto, AMS
and BSC agree as follows:
1. DEFINITIONS.
Capitalized terms used in this Agreement and not otherwise defined
herein
shall have the respective meanings set
forth below.
"AMS
Field" means products designed for the early detection,
diagnosis
and management of patients with dementia
caused by a neurological condition such
as Alzheimer's disease, or with cognitive
impairment that is likely a precursor
to Alzheimer's disease.
"AMS
Intellectual Property" shall mean all Intellectual Property which,
at
the relevant time of reference thereto, is
owned by AMS or to which AMS through
license or otherwise has or acquires
rights; provided, however, that (i) "AMS
Intellectual Property" shall specifically
exclude Intellectual Property that may
be licensed by BSC to AMS, and (ii) "AMS
Intellectual Property" shall include
Program Intellectual Property only if and
to the extent provided in this
Agreement.
<PAGE>
"ASP"
shall mean, with respect to any sales of any BIS-Screen Product
and
period of time, Net Sales of a Person
during such period of time for the sale of
such BIS-Screen Product, divided by the
number of units of such BIS-Screen
Product sold by such Person and its
Affiliates during such period of time.
"Act"
means the United States Food, Drug and Cosmetic Act and similar
laws
and regulations in foreign jurisdictions,
all as may be amended from time to
time.
"Affiliate" means with respect to any party, any Person or entity
that,
directly or indirectly, is controlled by,
controls or is under common control
with such party.
"Agreement" means this Agreement, including all Exhibits hereto
(which are
hereby incorporated by reference herein),
as the same may be amended or
supplemented from time to time in
accordance herewith.
"Approved
Major Category" means any Major Category in which the
development of a BIS-Screen Product by AMS
has been approved by the Steering
Committee in accordance with the terms of
Section 3.5(vi). For purposes of this
Agreement, Depression (including the
diagnosis of or detection of suicide
ideation) shall be deemed an Approved Major
Category as of the Effective Date.
"BIS-Screen Products" means any products that incorporate the
BIS-Screen
Technology in the BSC Field, provided, that
BIS-Screen Products shall not
include any BIS(R) consciousness monitoring
products and related products (such
as products designed for closed loop
delivery of anesthesia, seizure detection,
analgesia monitoring or other brain status
indications) which are used
contemporaneously and in conjunction with
BIS(R) consciousness monitoring
products, provided, that such BIS
consciousness monitoring products and related
products are not marketed or sold
principally for use in the BSC Field. Any
Specified [**] Product shall be a
BIS-Screen Product.
"BIS-Screen Technology" means any EEG analysis technology developed
by or
for AMS, or to which AMS otherwise has the
right to use as contemplated by this
Agreement, which may be used for the
diagnosis of neurological, psychiatric or
pain disorders or screening or monitoring
patient response to treatment options
for such disorders.
"BSC
Field" means all applications of the BIS-Screen Technology for
the
diagnosis of neurological, psychiatric or
pain disorders or screening or
monitoring patient response to treatment
options for such disorders, provided,
that the BSC Field shall not include
applications specifically within the AMS
Field.
"Contract
Year" means the one-year period beginning on the first day of
the first month immediately following the
month in which the Effective Date
occurs and ending on the first anniversary
thereof, and each successive one-year
period thereafter during the term of this
Agreement.
2
<PAGE>
"Confidential Information" means all data, specifications,
training
materials and other know-how related to the
design, use, implementation,
performance, manufacture, distribution or
sale of the BIS-Screen Products, as
well as all other information and data
provided by either party to the other
party hereunder in written or other
tangible medium and marked as confidential,
or if disclosed orally or displayed,
identified as confidential prior to or at
the time of disclosure and confirmed in
writing as confidential within 10 days
after disclosure, in each case except any
portion thereof which: (i) is known to
the receiving party before receipt thereof
under this Agreement as evidenced by
the receiving party's written records; (ii)
is properly and lawfully disclosed
to the receiving party by a third person
who has the legal right to make such
disclosure; (iii) is or becomes generally
known in the trade through no fault of
the receiving party; or (iv) is
independently developed by the receiving party
without use of such information, as
evidenced by the receiving party's written
records.
"Cost of
Goods Sold" means, (a) with respect to any BIS-Screen Product
manufactured by AMS or BSC, the cost of
direct labor, materials, components and
factory overhead, and related costs, in
each case as determined in accordance
with GAAP consistently applied, and (b)
with respect to any BIS-Screen Product
manufactured by a third party, the amount
Distributor pays such third party for
such BIS-Screen Product. Notwithstanding
the foregoing, Cost of Goods Sold shall
exclude, in any event, any Distribution
Commission and shall include (regardless
of whether or not recorded as part of Cost
of Goods Sold on a Person's
regularly-prepared financial statements)
any royalties, to the extent that the
inclusion of such amounts would otherwise
be consistent with GAAP.
"Custom
Third Party Product" is a BIS-Screen Product developed by AMS,
after receipt of and in accordance with the
approval of the Steering Committee
in accordance with Section 3.5(b)(viii),
without the use of the proceeds of any
Development Payments, for the treatment of
neurological, psychiatric or pain
disorders.
"Development Period" means the five year period starting on the
Effective
Date of this Agreement and ending on the
last day of the calendar month
including the fifth anniversary
thereof.
"Disposable Product" means a BIS-Screen Product that is intended
for
limited use, or a component of a larger
BIS-Screen Product intended to be used
for a limited number of uses. As an
example, a separate sensor intended to be
used a single time, or on a limited basis,
which requires another device to
collect, collate or interpret results
collected by such sensor, would be
considered a "Disposable Product."
"Distributor" shall mean BSC, in the case of any circumstances
where BSC
is distributing BIS-Screen Products
manufactured by AMS hereunder, or AMS, in
the case of any circumstances where AMS is
distributing BIS-Screen Products
manufactured by BSC hereunder.
"Excluded
BIS-Screen Product" means any BIS-Screen Product (x) with
respect to which the Product Completion
Date occurs after the Product Cut-Off
Date and which is not at a stage of
3
<PAGE>
development, on or prior to the Product
Cut-Off Date, such that a functional
prototype that could be used in a clinical
trial, including without limitation a
Phase 1 or Phase 2 clinical trial, that
could serve as the basis for Product
Approval in the United States has been
developed (any such BIS-Screen Products
being referred to herein as
"After-Developed Products"), (y) which may be used
only for indications in Major Categories
with respect to which BSC has
previously exercised its Opt-Out Options,
or (z) any Custom Third Party
Products. Excluded BIS-Screen Products
shall not include any Included BIS-Screen
Products, including any BIS-Screen Products
which become Included BIS-Screen
Products as a result of a determination by
the Steering Committee in accordance
with Section 3.5(b)(xii).
"Existing
[**] Program" means the existing development relationship which
AMS is party to with a third party [**]
manufacturer (the "Specified Third
Party"), pursuant to which AMS has received
a specified amount of funding to
develop a new product (the "Specified [**]
Product"), which may include
BIS-Screen Technology, which Specified [**]
Product is intended to provide a
therapeutic option for the treatment of
[**] through [**]. AMS hereby represents
and warrants to BSC that AMS has not
granted the Specified Third Party any
rights to distribute or sell any Specified
[**] Product or other product of AMS.
"FDA"
means the United States Food and Drug Administration, or any
successor entity.
"First BSC
Sales Date" means the first day on which BSC sells a BIS-Screen
Product which is generally available for
end-user customers to an unaffiliated
end-user customer or other distributor in
the United States (other than
"stocking" orders) following receipt of
Product Approval and the commercial
launch by BSC of such BIS-Screen
Product.
"First
Other Distributor Sales Date" means the first day on which any
distributor other than BSC, including AMS
or any third party distributor engaged
after a determination of the Steering
Committee to engage such distributor in
accordance with Section 3.5(b)(xi), sells
an Included BIS-Screen Product (other
than a Specific [**] Product) which is
generally available for end-user
customers to an end-user customer or other
distributor in the United States
(other than "stocking" orders) following
receipt of Product Approval and the
commercial launch by such person of such
BIS-Screen Product.
"Foreign
Regulatory Authority" means a Regulatory Authority other than
the
FDA.
"GAAP"
means United States generally accepted accounting principles.
"Included
BIS-Screen Product" means any BIS-Screen Product (x) with
respect to which the Product Completion
Date has occurred on or prior to the
Product Cut-Off Date, (y) which is at a
stage of development, on or prior to the
Product Cut-Off Date, such that a
functional prototype that could be used in a
clinical trial, including without
limitation a Phase 1 or Phase 2 clinical
trial, that could serve as the basis for
Product Approval has been substantially
developed, or (z) which has otherwise been
designated as an Included BIS-Screen
Product by the Steering Committee in
accordance with Section 3.5(b)(xii).
Included BIS-Screen Products shall not
4
<PAGE>
include any BIS-Screen Products which may
be used only for indications in Major
Categories with respect to which BSC has
exercised its Opt-Out Options.
"Intellectual Property" shall mean intellectual property or
proprietary
rights of any description including without
limitation (i) the Patent Rights,
copyrights, industrial designs, trademarks,
service marks, logos, trade dress or
trade name, (ii) related registrations and
applications for registration, (iii)
trade secrets, (iv) inventions,
discoveries, improvements, modifications,
know-how, technique, methodologies, works
of authorship, design or data, whether
or not patented, patentable, copyrightable
or reduced to practice, including but
not limited to any inventions, discoveries,
improvements, modifications,
know-how, technique, methodologies, works
of authorship, designs or data
embodied or disclosed in any: (1) computer
source code (human readable format)
and object code (machine readable format);
(2) specifications; (3)
manufacturing, assembly, test,
installation, service and inspection instructions
and procedures; (4) engineering,
programming, service and maintenance notes and
logs; (5) technical, operating and service
and maintenance manuals and data; (6)
hardware reference manuals; and (7) user
documentation, help files or training
materials, and (v) good will related to any
of the foregoing.
"Major
Category" means with respect to the BIS-Screen Products, any
particular disease state or other
significant application in the BSC Field. For
purposes of this Agreement, [**] and [**]
(including screening for [**] in
connection with [**]), shall each be deemed
a separate Major Category within the
BSC Field.
"Manufacturer" means AMS, in any circumstances where AMS is
manufacturing
BIS-Screen Products for distribution by BSC
hereunder, and BSC, in any
circumstances where BSC is manufacturing
BIS-Screen Products for distribution by
AMS hereunder.
"Net
Sales" of a Person means the aggregate amount of net sales
recorded
by such Person or any of its Affiliates
from the sale or license of a BIS-Screen
Products in the Territory, in accordance
with generally accepted accounting
principles, consistently applied by such
Person across all similar product
lines, if any, in connection with the
preparation of such Person's audited
financial statements. All sales of
BIS-Screen Products invoiced in a currency
other than U.S. Dollars shall be converted
to U.S. Dollars on a monthly basis in
accordance with BSC's standard practice
prior to calculating the Net Sales of
such BIS-Screen Products. In no event shall
the Net Sales of any Person with
respect to any BIS-Screen Products be
reduced by any Distribution Commission
that may be payable by any Person with
respect to sales of such BIS-Screen
Product.
When a
BIS-Screen Product is sold by a Person in connection with or as
a
component of other components or products,
then the computation of Net Sales
shall be based on the relative average
prices charged during the applicable
quarter for the BIS-Screen Product and the
other components or products when
separately invoiced or priced. In the event
the BIS-Screen Product and the other
components or products were not separately
invoiced or priced during the
applicable quarterly period, the Net Sales
computation shall be based on the
relative fair market price which such
Person would have charged for the
BIS-Screen Product and other components
5
<PAGE>
or products to an unrelated purchaser in an
arm's length transaction.
"Opt-Out
Period" means, with respect to any Major Category, the period
beginning on the Effective Date and ending
on the last day of the fifth (5th)
Contract Year or, if later, the date which
is six (6) months following the date
on which the first Product Completion Date
for a BIS-Screen Product in such
Major Category has occurred.
"Patent
Rights" means all patents, patent applications and rights to
file
patent applications that relate to any
BIS-Screen Product or its manufacture,
sale, use, design, import and are licensed
to, owned or controlled by AMS now or
in the future and, in each case, any
reissues or extensions thereof and any
foreign counterparts, divisions,
continuations or continuations-in-part of any
applications or substitutes therefor.
"Permitted
Licenses" means any license of BIS-Screen Technology or Program
Intellectual Property in the BSC Field, or
the right to manufacture, market or
sell BIS-Screen Products in the BSC Field,
granted by AMS to a third party with
the express approval of the Steering
Committee.
"Person"
means an individual, corporation, partnership, limited
partnership, limited liability company,
joint venture, trust or unincorporated
organization, or a government or any agency
or political subdivision thereof.
"Product
Approvals" means, for any country or other jurisdiction in the
Territory, those regulatory approvals
and/or clearances required for
importation, exportation, promotion,
pricing, marketing and sale of any
BIS-Screen Products in such country or
other jurisdiction for use in one or more
Major Category.
"Product
Completion Date" will be deemed to have occurred for a
BIS-Screen
Product if each of the following conditions
has been satisfied for such
BIS-Screen Product : (a) such BIS-Screen
Product shall have received final
Product Approval in the United States for a
specific indication; (b) AMS (if it
has exercised the Manufacturing Option with
respect to such BIS-Screen Product),
BSC (if it shall have exercised the
Manufacturing Option with respect to such
BIS-Screen Product) or a third party
manufacturer selected by the Steering
Committee, has demonstrated the ability to
manufacture and deliver units of such
BIS-Screen Product in commercial quantities
at least equaling BSC's reasonable
internal forecast for the subsequent six
(6) months, assuming an immediate
market launch; (c) the sale of such
BIS-Screen Product has not been enjoined by
any court of competent jurisdiction as a
result of the any claim by a
third-party that the development,
manufacture, marketing, sale or use of such
BIS-Screen Product infringes or violates
any Intellectual Property rights of
such third-party; and (d) the Steering
Committee shall have determined the
Product Specifications for such BIS-Screen
Product in accordance with Section
3.5(b)(vii).
"Product
Cut-Off Date" means [**].
6
<PAGE>
"Product
Specifications" means with respect to any BIS-Screen Product,
the
specifications for such BIS-Screen Product
which shall be developed by AMS,
after consultation with BSC, prior to the
Product Completion Date for such
BIS-Screen Product and approved by the
Steering Committee.
"Program"
means the development of BIS-Screen Products by AMS pursuant to
this Agreement.
"Program
Intellectual Property" means individually and collectively all
Intellectual Property that is conceived,
created, discovered, developed, or
reduced to practice or tangible medium of
expression by one or more employees or
consultants of AMS and/or one or more
employees or consultants of BSC at any
time after the Effective Date in connection
with the conduct of the Program.
"Regulatory Authority" means any national, supra-national,
regional, state
or local regulatory agency, department,
bureau, commission, council or other
governmental entity in the Territory,
including without limitation, the FDA, or
any entity delegated authority by any such
governmental entity, including for
example any notified body.
"Reimbursement Approvals" means governmental and other approvals in
any
country or jurisdiction in the Territory,
for a buyer to claim reimbursement at
any level for the purchase of the
BIS-Screen Products, from private or public
health insurance organizations in such
country or jurisdiction in the Territory.
"Territory" means all countries, and each of their respective
territories
and possessions, of the world.
"Trademarks" means the trademarks owned or controlled by AMS that
may be
used from time to time with respect to the
BIS-Screen Products.
Other
Defined Terms. Each of the following terms shall have the
respective
meaning ascribed to such term in the
section of this Agreement set forth
opposite such term below:
<TABLE>
<S>
<C>
"After-Developed
Product"..................................................
Definition of Excluded
BIS-Screen Product
"AMS"......................................................................
Introductory paragraph
"AMS Development
Obligations"..............................................
Section 3.1
"AMS Distribution
Election"................................................
Section 5.1(d)
"BSC"......................................................................
Introductory paragraph
"BSC Intellectual
Property"................................................
Section 8.2(a)
"Continuous Improvement
Option"............................................
Section 3.4
"Coordinator"..............................................................
Section 3.5(a)
"Development Funding Obligation"
Section 2.1
"Development
Payment"......................................................
Section 2.2
</TABLE>
7
<PAGE>
<TABLE>
<S>
<C>
"Distribution
Commission"..................................................
Sections 5.5 and 5.6
"Distribution
Term"........................................................
Section 5.1(b)
"Effective
Date"...........................................................
Introductory paragraph
"GMP"......................................................................
Section 7.7
"Indemnifying
Party".......................................................
Section 11.2
"Indemnitees"..............................................................
Section 11.2
"Losses"...................................................................
Section 11.1
"Manufacturing
Option".....................................................
Section 4.1
"Option Exercise
Date".....................................................
Section 4.1
"Opt-Out
Options"..........................................................
Section 5.1(b)
"Payment
Year".............................................................
Section 2.2
"Product
Information"......................................................
Section 9.1
"QSR"......................................................................
Section 7.7
"Resource
Plan"............................................................
Section 2.4
"Rights
Plan"..............................................................
Recitals
"Specified [**]
Product"...................................................
Definition of Excluded
BIS-Screen Product
"Specified Third
Party"....................................................
Definition of Excluded
BIS-Screen Product
"Steering
Committee".......................................................
Section 3.5(a)
"Supply
Forecast"..........................................................
Section 6.1
"Transfer
Price"...........................................................
Sections 5.5 and 5.6
</TABLE>
2 FUNDING
COMMITMENT.
2.1
Funding Obligation by BSC. Subject to Section 2.4 and the terms
and
conditions of this Agreement, BSC agrees to
provide AMS twenty-five million
dollars ($25,000,000) (the "Development
Funding Obligation"), to assist in the
funding of AMS' efforts to develop
BIS-Screen Products in Approved Major
Categories.
2.2
Payment Date. The Development Funding Obligation shall be paid to
AMS
in separate payments of five million
dollars ($5,000,000.00) (each, a
"Development Payment"), with the first such
payment to be made on May 31, 2005,
and each of the four remaining payments to
be made on or about May 31st of each
of the four calendar years beginning with
2006 (each, a "Payment Year"), by wire
transfer of immediately available funds
within thirty (30) days of delivery by
AMS to BSC of a written request
therefor.
2.3
Acceleration of Payments. AMS may, from time to time during any
Payment Year, request an acceleration of
part of the Development Payment for a
subsequent Payment Year, subject to an
aggregate maximum of an additional two
and a half million dollars ($2,500,000.00)
for any Payment Year. BSC shall be
entitled to accept or decline any such
request for an acceleration of part of a
Development Payment in its sole discretion.
In the event BSC agrees to
accelerate a portion or portions of a
Development Payment for any Payment Year,
the obligation of BSC to make a Development
Payment for that year shall be
reduced by all
8
<PAGE>
amounts of such Development Payment
accelerated to prior Payment Years, and in
no event shall BSC be required to make
Development Payments, in the aggregate,
that exceed the Development Funding
Obligation.
2.4 Use of
Proceeds. Attached as Exhibit A hereto is a "Resource Plan"
specifying AMS' current planned use of
proceeds for the Development Payments.
The Resource Plan shall be updated no less
than annually by the Steering
Committee in accordance with Section
3.5(b)(ix). AMS shall be required to use no
less than eighty percent (80%) of the
aggregate amount of the Development
Payments paid to AMS during the Development
Period to pay the fully burdened
costs incurred by AMS in developing
BIS-Screen Products in any Approved Major
Categories during such period in accordance
with the terms of the then-current
Resource Plan, and shall be entitled to use
up to twenty per cent (20%) of the
aggregate amount of the proceeds of the
Development Payments paid to AMS during
the Development Period to pay the fully
burdened costs incurred by AMS in
developing BIS-Screen Products in the AMS
Field, or in Major Categories which
are not Approved Major Categories. The
proceeds of the Development Payments may
not be used for any other purpose. Without
limiting the foregoing, AMS may not
use the proceeds of any Development Payment
in connection with the Existing [**]
Program, or for the development of Custom
Third Party Products. To the extent
that AMS does not, prior to the end of the
Development Period, spend the entire
amount of the Development Payments paid to
AMS during the Development Period in
accordance with this Section 2.4, AMS shall
be required to spend the balance of
such amounts in accordance with the
provisions of this Section 2.4 prior to the
Product Cut-Off Date. For purposes of this
Agreement, such fully burdened costs
shall include the sum of all AMS direct
labor (incurred at a rate to reflect
both direct and indirect costs) and other
direct costs (such as clinical trial
expenses, consultants, etc.) for research
& product development, regulatory
clearances and clinical trials, market
assessment and development, ongoing
product support, recruiting and corporate
and public communications relating to
the Program, legal and audit expenses
relating to the Program, as applicable,
and for refining and continuously improving
the BIS-Screen Products in the BSC
Field, or in the AMS Field, as
applicable.
3 DEVELOPMENT.
3.1 AMS
Development Obligations; Development Costs. During the
Development
Period, AMS shall use its commercially
reasonable efforts in light of the
feasibility of obtaining relevant Product
Approvals, the efficacy and safety of
such BIS-Screen Product and the engineering
feasibility, among other factors, to
design and develop BIS-Screen Products for
use in Approved Major Categories in
accordance with the then-current Resource
Plan. As part of AMS' obligation to
develop BIS-Screen Products in Approved
Major Categories during the Development
Period, AMS shall conduct clinical studies
for such BIS-Screen Products, and
shall use commercially reasonable efforts
to obtain reimbursement in the United
States for such BIS-Screen Products
(subject to Section 4 below). In addition,
during the Development Period, AMS shall
use commercially reasonable efforts to
timely obtain, to the extent available, the
endorsement of the thought leaders
in the profession associated with the
indications for which the BIS-Screen
Products are designed. Furthermore, in the
event that the Steering Committee
should
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<PAGE>
determine during the Development Period
that any BIS-Screen Product requires
material modification for application in a
particular Approved Major Category in
accordance with Section 3.5(b)(xiii), AMS
shall, as part of its obligation to
develop the BIS-Screen Products, design and
develop such modifications. The
development obligations described in this
Section 3.1 are sometimes referred to
herein as the "AMS Development
Obligations". AMS agrees to bear and pay all
costs, including, but not limited to,
non-recurring engineering costs, directly
and indirectly related to the AMS
Development Obligations. BSC shall have no
obligation to fund, directly or indirectly,
any portion of such development
efforts beyond the Development Funding
Obligation pursuant to Section 2.1.
During the Distribution Term, to the extent
AMS designs or develops BIS-Screen
Products in the AMS Field, AMS will use
best efforts to design and develop such
BIS-Screen Products in the AMS Field in a
manner such that (i) they differ
materially from BIS-Screen Products in the
BSC Field with respect to the
underlying algorithm, the product labeling,
the information displayed and the
components that may constitute Disposable
Products; and (ii) they may not be
used for indications in the BSC Field
(whether or not approved for such
indications), and cannot be interchanged
with or substituted for BIS-Screen
Products marketed or sold for use in the
BSC Field.
3.2 Future
Developments. In the event BSC desires to have AMS complete
specific development work that has been
partially funded by BSC or to have AMS
perform additional development work with
respect to BIS-Screen Products (other
than Excluded BIS-Screen Products) for use
in the BSC Field after the
Development Period (other than as provided
in Section 3.4 below), the Steering
Committee will determine the appropriate
level of additional development work
and the appropriate allocation of costs, to
continue to design and develop such
BIS-Screen Products for use in the BSC
Field in accordance with Section
3.5(b)(x). In the event AMS desires to seek
funding for development work with
respect to BIS-Screen Products for use in
the BSC Field after the Development
Period, AMS shall not enter into any
agreement with a third party relating to
funding of such development work, unless
AMS shall first offer such opportunity
to BSC. For purposes of offering BSC any
such opportunity, AMS will provide BSC
with notice thereof (which notice will
include sufficient technical detail to
permit BSC to evaluate its interest in the
opportunity) and shall meet with BSC
within thirty (30) days following such
notice to discuss the opportunity. BSC
shall within thirty (30) days from its
receipt of such notice notify AMS in
writing whether it will exercise the
aforementioned right of first offer with
respect to any such proposal. If BSC
indicates that it wishes to pursue such
opportunity, then the parties shall within
forty-five (45) days following BSC's
notice engage in good faith negotiation of
terms for such funding. If the
parties cannot negotiate mutually
acceptable terms within such 45-day period,
and the parties are not willing to extend
the period for negotiation, then BSC's
option shall expire with respect to such
opportunity and AMS may negotiate with
a third party concerning such opportunity;
provided, however, that any such
agreement shall contain terms that are in
the aggregate not materially more
favorable to such third party than those
last offered to BSC. If AMS wishes to
offer such opportunity to a third party on
terms that are in the aggregate
materially more favorable than those last
offered to BSC, AMS shall first make
an offer on such "improved" terms to BSC in
accordance with the procedure
specified in this Section 3.2.
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3.3
Notice; Prototype. During the Development Term, AMS shall
promptly
provide written notice exclusively to BSC
of the development of any and all
Included BIS-Screen Products potentially
having application in the BSC Field.
Upon BSC's written request, AMS shall
provide to BSC a functional prototype of
each such BIS-Screen Product and shall
permit BSC to conduct due diligence with
respect thereto.
3.4
Continuous Improvement. During the Development Period, AMS shall,
as
appropriate and commercially feasible,
improve and enhance the design, quality
and performance of any BIS-Screen Products
then being distributed and sold under
this Agreement so as to maintain or
increase the competitive advantage of such
BIS-Screen Products in the BSC Field as
compared to similar products in the
marketplace for use in the BSC Field,
including reducing the Cost of Goods Sold
of each Included BIS-Screen Product in the
BSC Field. During the Distribution
Term of this Agreement, on or prior to the
First BSC Sales Date or First Other
Distributor Sales Date for a BIS-Screen
Product, AMS shall be entitled to elect
(the "Continuous Improvement Option"), to
assume the responsibility to, as
appropriate and commercially feasible,
continuously improve and enhance the
design, quality and performance of any
BIS-Screen Products being distributed and
sold under this Agreement so as to maintain
or increase the competitive
advantage of such BIS-Screen Products in
the BSC Field as compared to similar
products in the marketplace for use in the
BSC Field, including reducing the
Cost of Goods Sold of each Included
BIS-Screen Product in the BSC Field, for the
duration of the Distribution Period. In the
event that AMS does not exercise the
Continuous Improvement Option with respect
to any BIS-Screen Product on or prior
to the First BSC Sales Date or First Other
Distributor Sales Date for such
BIS-Screen Product, then (x) any Transfer
Price or Distribution Commission
payable by BSC to AMS pursuant to Sections
5.5 or 5.7 for the duration of the
Distribution Term shall be reduced by an
amount equal to [**] percent ([**]%) of
the ASP of BSC for such BIS-Screen Product,
or [**] percent ([**]%) of Net Sales
of BSC of such BIS-Screen Product, for the
applicable period, and (y) any
Transfer Price or Distribution Commission
payable by AMS to BSC pursuant to
Sections 5.6 or 5.7 for the duration of the
Distribution Term shall be increased
by an amount equal to [**] percent ([**]%)
of the ASP of AMS for such BIS-Screen
Product, or [**] percent ([**]%) of Net
Sales of AMS of such BIS-Screen Product,
for the applicable period. In addition, in
the event that AMS does not exercise
the Continuous Improvement Option with
respect to any BIS-Screen Product, the
Steering Committee will be charged with
determining which party shall be
responsible for improving the BIS-Screen
Product after its market launch, and
what allocation, if any, should be made of
the costs thereof between AMS and BSC
in accordance with Section 3.5(b)(xix).
3.5 Steering Committee and
Coordinators.
(a)
Appointment. Each party shall appoint two (2) individuals, a
Coordinator and another who is also either
an employee of such party or of any
of its Affiliates, to represent such party
on a steering committee in connection
with the Program ("Steering Committee").
Each party may, at its sole discretion,
replace its Coordinator or its other member
of the Steering Committee. Each
party shall designate a coordinator
("Coordinator") to act as the
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primary liaison between it and the other
party for all technical matters that
may arise during the course of the Program.
The initial Coordinator for AMS
shall be Philip Devlin; and the initial
Coordinator for BSC shall be Robert F.
Braun.
(b)
Responsibilities. The Steering Committee shall have the
following
authority and obligations with respect to
the relationship of the parties
hereunder:
(i) to encourage and facilitate the cooperation of the parties
under
this
Agreement, and to manage, direct and oversee the efforts
corresponding thereto;
(ii) to review and evaluate the results of the Program, to
regularly
report the
progress of the Program to the parties;
(iii) to coordinate the communication, Confidential Information
exchange
and efforts of the parties with respect to all matters under
this
Agreement
relating to the Program;
(iv) to schedule and coordinate visits by personnel of each party
to
facilities
of the other party;
(v) to discuss and resolve, if possible, any issues or disputes
that
arise in
the course of the relationship established by this Agreement;
(vi) to approve any Major Categories with respect to which AMS
shall
attempt to
develop BIS-Screen Products;
(vii) to approve any Product Specifications;
(viii) to consider, approve or reject, or recommend modifications
to
in
anticipation of approving, any proposals by AMS to develop any
Custom
Third
Party Products, it being understood that AMS may not develop,
manufacture, have manufactured, market, sell or distribute any
Custom
Third
Party Product without the approval of the Steering Committee;
(ix) to agree upon, no less than once per Contract Year during
the
Development Period, updates and revisions of the Resource Plan;
(x) to determine the appropriate level of development work and
allocation
of costs with respect to specific development work after the
Development Period is complete in accordance with Section 3.2;
(xi) (1) to review a marketing plan by BSC for any Included
BIS-Screen
Product, three months prior to the Product Completion Date for
such
BIS-Screen Product, and at least annually thereafter, taking
into
account relevant
factors, including projected volumes
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and the
experience of the sales force with respect to such Included
BIS-Screen
Product, and (2) to identify for approval any third party
entity to
distribute a BIS-Screen Product if BSC has elected to exercise
its
Opt-Out Option with respect to the Major Category to which such
BIS-Screen
Product relates in accordance with Section 5.1(b), and AMS has
not
elected to distribute such BIS-Screen Product in accordance
with
Section
5.1(d), and to determine the principal terms and conditions of
such
distribution arrangement. Without limiting the foregoing, any
distribution agreement reflecting such third party distribution
arrangement shall impose obligations on such distributor
substantially
identical
to those applicable to the Distributor hereunder;
(xii) to determine whether any BIS-Screen Products that are
otherwise
Excluded BIS-Screen Products should be designated Included
BIS-Screen
Products for purposes of this Agreement,
(xiii) to determine whether any BIS-Screen Product requires any
material
modification for application in a particular Approved Major
Category
in accordance with Section 3.1;
(xiv) to determine whether to grant any licenses or sublicenses
to
the
BIS-Screen Technology, the Program Intellectual Property or the
right
to
manufacture, market or sell BIS-Screen Products, in each case in
the
BSC Field,
in accordance with Section 5.8;
(xv) to determine the appropriate course of action with respect
to
BIS-Screen
Products which are found, or are deemed likely to be held, to
infringe
third party Intellectual Property in accordance with Section
11.1;
(xvi) to determine which third party manufacturer, if any, may
be
engaged to
manufacture a BIS-Screen Product to be distributed by BSC or
AMS in
accordance with Section 4.1, and to determine the terms of such
manufacturing arrangement. Without limiting the foregoing, any
manufacturing agreement reflecting such manufacturing arrangement
shall
impose
obligations on such third party manufacturer substantially
identical
to those applicable to the Manufacturer hereunder;
(xvii) to determine whether AMS or BSC shall prosecute and
maintain
any
jointly-owned Program Intellectual Property in accordance with
Section
8.2(d)(ii);
(xviii) to determine whether any Specified [**] Product should
be
distributed by a third party distributor (including the Specified
Third
Party),
and the terms of any such distribution. Any such determination
made under
this clause (xviii) shall be made by the Steering Committee
with due
regard to the strategic interests of BSC and AMS that may be
applicable
from time to time, and in light of the financial and other
terms of
such proposed distribution arrangement;
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<PAGE>
(xix) to determine which party shall be responsible for improving
a
BIS-Screen
Product after its market launch, and what allocation, if any,
should be
made of the costs thereof between AMS and BSC, in the event
that
AMS does
not exercise the Continuous Improvement Option with respect to
such
BIS-Screen Product; and
(xx) to determine the allocation between BSC and AMS of any
expenses
incurred
in seeking and maintaining Product Approvals and/or
Reimbursement
Approvals
after the Development Period.
Where a particular matter described above is made subject to
Steering
Committee approval, it is intended that the parties shall not
take any
such action unless and until such approval is obtained.
(c)
Meetings and Procedures. The Steering Committee meetings shall
take
place at such times and places as
determined by the Steering Committee, but no
less frequently than twice per Contract
Year. The Steering Committee meetings
shall be held alternately at the respective
facilities of the parties in the
Commonwealth of Massachusetts, or at such
other convenient locations as agreed,
or by teleconference or
videoconference.
(i) AMS shall promptly report to the Steering Committee on all
material
issues relating to its progress in achieving its development
efforts
under the Program.
(ii) Decisions of the Steering Committee shall be made by
unanimous
vote. If
the Steering Committee becomes deadlocked on an issue, the
issue
shall be
escalated to each the Chief Financial Officer of BSC, and the
President
of AMS, to seek resolution.
(iii) The parties shall alternately prepare the minutes of the
meetings
of the Steering Committee, and such minutes shall be provided
to
the
non-preparing party for review.
3.6
Reimbursement Consultation. During the Development Period, BSC
shall
make BSC personnel skilled in obtaining
Reimbursement Approval available on a
reasonable basis to assist AMS in its
efforts to obtain Reimbursement Approval
for the BIS-Screen Products in the BSC
Field.
4. MANUFACTURE OF
BIS-SCREEN PRODUCTS
4.1 AMS
Option to Manufacture. AMS shall have the option to manufacture
the requirements of BSC or any other
distributor of any Included BIS-Screen
Product, including AMS and any third party
distributor appointed in accordance
with Section 5.1(d) (the "Manufacturing
Option") under this Agreement. Such
Manufacturing Option shall be exercisable
by AMS upon notice to BSC at any time
that is not later than six (6) months prior
to
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<PAGE>
the reasonably anticipated Product
Completion Date for such Included BIS-Screen
Product ("Option Exercise Date"). In the
event AMS does not exercise the
Manufacturing Option prior to the Option
Exercise Date with respect to any
Included BIS-Screen Product, BSC shall have
the right to exercise the
Manufacturing Option with respect to such
BIS-Screen Product. If neither party
exercises the Manufacturing Option, the
Steering Committee shall determine the
identity of a third party manufacturer to
manufacture such Included BIS-Screen
Product, and the terms of such
manufacturing arrangement in accordance with
Section 3.5(b)(xvi).
4.2
Manufacturing License. (a) In the event BSC exercises the
Manufacturing Option pursuant to Section
4.1 with respect to any Included
BIS-Screen Product, AMS shall grant BSC a
nonexclusive, worldwide license under
the AMS Intellectual Property to make such
Included BIS-Screen Product for use
and sale in the BSC Field for Approved
Major Categories. In the event the
Steering Committee identifies a third party
to manufacture a BIS-Screen Product
pursuant to Section 4.1, AMS shall grant
such third party a nonexclusive,
worldwide license to make such BIS-Screen
Product that Distributor will purchase
from such third party to enable such
Distributor to use and sell such BIS-Screen
Product in the BSC Field for Approved Major
Categories.
(b) In the
event BSC exercises the Manufacturing Option with respect to
any Included BIS-Screen Product pursuant to
Section 4.1, then at BSC's request,
AMS shall, at AMS' cost transfer all
technology necessary for BSC to manufacture
such BIS-Screen Product, including the
following: (i) deliver to BSC within
thirty (30) days of notice of BSC's intent
to exercise rights under Section 4.1,
media embodying or disclosing all
technology and know-how, including interfaces
necessary for interoperability with
hardware, whether existing as of the
Effective Date or in the future, necessary
to enable BSC to manufacture such
Included BIS-Screen Product, and conforming
with the applicable Product
Specifications; (ii) undertake all
customary activities, and take such other
actions as may be reasonably necessary,
including training qualified personnel
of BSC, to transfer the manufacturing of
such Included BIS-Screen Product to BSC
from AMS' development and manufacturing
functions, until such time as BSC is
manufacturing such Included BIS-Screen
Products in accordance with the Product
Specifications on a reproducible commercial
volume basis with yields in excess
of [**] percent ([**]%); and (iii) provide
BSC with any other reasonable
assistance requested by BSC to assist BSC
in attaining such manufacturing
yield..
5. DISTRIBUTION.
5.1
Appointment as Distributor; Term of Appointments.
(a) Appointment. Subject to the terms and
conditions set forth in this
Agreement, AMS hereby appoints BSC as AMS'
exclusive, worldwide distributor of
any and all BIS-Screen Products in all
Major Categories within the BSC Field
(other than with respect to any Excluded
BIS-Screen Products or any Specified
[**] Product). In connection therewith, AMS
hereby grants to BSC and its
Affiliates a fully paid-up, non-exclusive,
worldwide, right and license,
including the right to sublicense, to
practice the Patent Rights solely in the
BSC Field and use any other AMS
Intellectual Property solely in the BSC Field,
whether existing as of the date hereof or
in the future, during the Distribution
Term, solely in order to sell, market,
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<PAGE>
commercialize, import, export, develop and
distribute (but not to make or have
made) any BIS-Screen Products manufactured
by AMS, or manufactured by BSC or a
third party as provided in Section 4.1, for
distribution by BSC to end-user
customers hereunder. AMS acknowledges and
agrees that this license is being
granted without specific compensation. The
license granted by this Section
5.1(a) shall be in addition to, and not in
substitution or limit of, any license
that may be granted under Section 4.2.
BSC acknowledges and agrees that the license granted by this
Section
5.1(a) shall provide BSC with no rights
with respect to the Patent Rights and
other AMS Intellectual Property other than
those specifically provided herein.
(b) Distribution Term; Opt-Out Options. The term of the
distribution
appointment made under paragraph (a) above
(the "Distribution Term"), shall
commence on the Effective Date and shall
continue until the earlier of the
termination or expiration of this
Agreement, or the last day of the calendar
month including the twelfth (12th)
anniversary of the First BSC Sales Date of an
Included BIS-Screen Product, provided, that
(x) BSC may terminate its
appointment under paragraph (a) with
respect to any Major Category (the "Opt-Out
Options") by delivering written notice of
such termination, specifying the
applicable Major Category, to AMS in
accordance with Section 13.8; (y) AMS may
terminate BSC's appointment under paragraph
(a) with respect to any Major
Category in accordance with Section
12.2(b), or BIS-Screen Product in accordance
with Section 12.2(c); and (z) BSC may
terminate its appointment under paragraph
(a) with respect to any BIS-Screen Product
in accordance with Section 12.2(e).
Notwithstanding the foregoing, in the event
that BSC exercises its Opt-Out
Option with respect to an Approved Major
Category and a First Other Distributor
Sales Date of a BIS-Screen Product within
such Approved Major Category occurs
prior to the First BSC Sales Date of an
Included BIS-Screen Product, then the
Distribution Term shall terminate on the
last day of the calendar month
including the twelfth (12th) anniversary of
such First Other Distributor Sales
Date. At least twelve (12) months prior to
the expiration of the Distribution
Term, BSC and AMS shall meet to discuss
extending BSC's distributor status with
respect to such Major Category.
(c) Standstill. During the term of this Agreement, unless BSC
shall
exercise its Opt-Out Option with respect to
any Major Category, AMS shall not
enter into any agreements with respect to
the development, marketing and
distribution of any products with any
Person other than BSC that would be
inconsistent with or prevent BSC from being
able to market, distribute and sell
BIS-Screen Products (other than Excluded
BIS-Screen Products or any Specified
[**] Product) in such Major Category on an
exclusive basis as set forth herein.
In addition, during the term of this
Agreement, unless BSC shall exercise its
Opt-Out Option with respect to any Major
Category, AMS shall not grant to any
Person other than BSC, including but not
limited to the Specified Third Party, a
license to any BIS-Screen Technology or AMS
Intellectual Property in the BSC
Field or any other right to use, sell,
offer to sell, commercialize, import and
export BIS-Screen Products (other than any
Excluded BIS-Screen Products) for use
in such Major Category, except to the
extent the Steering Committee consents to
the granting of Permitted Licenses.
Notwithstanding the foregoing, this Section
5.1 shall not prohibit AMS from granting
Permitted Licenses to the extent
approved by the Steering Committee. Without
limiting
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<PAGE>
the foregoing, AMS shall not market, sell
or distribute, or permit or facilitate
(including by way of grant of a license to
any BIS-Screen Technology or AMS
Intellectual Property) the marketing, sale
or distribution by any third party
(including the Specified Third Party) of
any Specified [**] Product, without the
consent of the Steering Committee.
(d) Distribution by AMS or Third Parties. In the event that AMS
terminates BSC's distribution appointment
with respect to any BIS-Screen Product
in accordance with Section 12.2(c), BSC
terminates its distribution appointment
with respect to any BIS-Screen Product in
accordance with Section 12.2(e), or
BSC exercises its Opt-Out Option with
respect to any Major Category in the BSC
Field, AMS shall be entitled to elect to
distribute any such BIS-Screen Product
or BIS-Screen Products in such Major
Category, as applicable, directly. AMS
shall be required to give notice to BSC of
any such election (an "AMS
Distribution Election") within thirty (30)
days of the termination of BSC's
appointment with respect to the applicable
BIS-Screen Product or BSC's exercise
of its Opt-Out Option with respect to such
Majority Category, as applicable. In
the event that AMS does not exercise the
AMS Distribution Election with respect
to any such BIS-Screen Product or Major
Category, the Steering Committee shall
determine the identity of any third party
distributors to be appointed to
distribute such BIS-Screen Product or
BIS-Screen Products in such Major
Category, and the terms of any such
distribution arrangement in accordance with
Section 3.5(b)(xi). AMS shall also be
entitled to distribute any After-Developed
Products or Custom Third Party Products
directly, or through one or more
third-party distributors, without requiring
the approval or consent of the
Steering Committee or BSC.
5.2
Distribution Relationship; No Competitive Devices. With respect
to
each BIS-Screen Product (other than any
Excluded BIS-Screen Products), until the
end of the Distribution Term, (i) AMS
agrees not to sell such BIS-Screen Product
for use in the BSC Field to any party other
than BSC in a manner inconsistent
with the rights granted to BSC hereunder;
and (ii) AMS agrees not to
manufacture, license for manufacture,
provide or sell such BIS-Screen Product
for or to any third party if AMS knows or
has reason to believe that such
BIS-Screen Product will be provided,
distributed or sold anywhere in the
Territory for use in the BSC Field in a
manner inconsistent with the rights
granted to BSC hereunder. AMS further
agrees to use all commercially reasonable
best efforts to prevent the sale of
products to customers for resale or
distribution within the Territory for use
in the BSC Field in a manner
inconsistent with the rights granted to BSC
hereunder and shall take all actions
reasonably requested by BSC to prevent such
unauthorized sales activity,
provided, that AMS shall not be required to
initiate legal action against any
third party as a result of this provision.
Notwithstanding anything to the
contrary in this Agreement, provided that
BSC does not market or promote the use
of any such Included BIS-Screen Products
outside the BSC Field, BSC shall be
permitted to sell Included BIS-Screen
Products within the Territory for
applications in the BSC Field without
regard to the indications for which such
BIS-Screen Products are actually used by
end-user customers. AMS also agrees,
with respect to each BIS-Screen Product
that is then being distributed by BSC,
AMS will not contemporaneously market, sell
or otherwise promote the sale of any
device that is intended to be used for the
indication for which such BIS-Screen
Product is then being marketed and sold by
BSC.
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<PAGE>
5.3
Marketing. Subject to Section 9.1, all business decisions
concerning
the marketing, sales and distribution by
BSC in the Territory of any BIS-Screen
Products to be distributed by BSC,
including the price, other sale terms and
promotion thereof, will be within the sole
discretion of BSC. All business
decisions concerning the marketing, sales
and distribution by AMS in the
Territory of any BIS-Screen Products to be
distributed by AMS, including the
price, other sale terms and promotion
thereof, will be within the sole
discretion of AMS.
5.4 BSC's
Obligation to Promote BIS-Screen Products; No Competitive
Devices. With respect to each BIS-Screen
Product then being distributed by BSC,
BSC shall promote and market such
BIS-Screen Product for sale in the Territory,
using its usual and customary efforts
exercised in connection with the promotion
and marketing of other products having
similar market potential, viewed in light
of the state of the relevant Product
Approvals and Reimbursement Approvals,
including the level of reimbursement,
efficacy and safety of the BIS-Screen
Product, perceived market size and
potential, BSC's gross margin, anticipated
difficulty of market development, level of
competition in a particular country
and availability of BIS-Screen Products,
among other relevant factors. BSC's
efforts shall include, where appropriate,
(i) maintenance and training of a
sales force, (ii) development and
distribution of marketing materials, and (iii)
representation of such BIS-Screen Product
during appropriate trade conferences
attended by BSC, in each case as the same
shall be reasonably available to BSC
and reasonably necessary to achieve the
purposes of this Section 5.4. BSC also
agrees, with respect to each BIS-Screen
Product that is then being distributed
by BSC, without the consent of AMS, which
consent will not be unreasonably
withheld, delayed or conditioned, BSC will
not contemporaneously market, sell or
otherwise promote the sale of any device
that is intended to be used for the
indication for which such BIS-Screen
Product is then being marketed and sold by
BSC. Such restriction shall not apply to
(1) products which have received
approval for other indications so long as
BSC does not promote the product for
the same indication with respect to which
BSC is then distributing a BIS-Screen
Product; and (2) screening technology
incorporated into a separate medical
device principally intended as a treatment
option.
5.5
Transfer Price for BSC Distributed Products Manufactured by AMS;
BSC
Distribution Commission where BSC is
Manufacturer. With respect to each
BIS-Screen Product manufactured by AMS and
distributed by BSC during the
Distribution Term, BSC shall pay AMS a
transfer price (a "Transfer Price") for
any unit of such BIS-Screen Product
delivered to and not rejected by BSC during
such period equal to the quotient of (x)
the ASP of BSC for such BIS-Screen
Product for such period multiplied by [**],
plus the Cost of Goods Sold of AMS
for such BIS-Screen Product for such
period, divided by (y) [**]. In the event
that BSC exercises the Manufacturing Option
with respect to any BIS-Screen
Products and distributes and sells such
BIS-Screen Products to end-users, then
BSC shall pay to AMS, within sixty (60)
days of the end of each fiscal quarter
of BSC during the term of this Agreement, a
commission (a "Distribution
Commission"), on Net Sales recorded by BSC
with respect to the sale of any such
BIS-Screen Product within such fiscal
quarter by BSC, in an amount equal to the
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quotient of (x) the Net Sales recorded by
BSC of such BIS-Screen Product for
such period multiplied by [**], minus an
amount equal to the aggregate Cost of
Goods Sold of BSC for such BIS-Screen
Product for such period, divided by (y)
[**].
5.6
Commission Payable to BSC on Sales of BIS-Screen Products
(including
Custom Third Party Products) by AMS; AMS
Transfer Price. With respect to each
BIS-Screen Product manufactured by AMS
(including, without limitation, any
Custom Third Party Product, any BIS-Screen
Product marketed for an indication in
a Major Category with respect to which BSC
has exercised its Opt-Out Option, any
BIS-Screen Product with respect to which
BSC's distribution appointment was
terminated in accordance with Section 12.2,
and any Specified [**] Product, but
excluding any After-Developed Products) and
distributed by AMS directly in
accordance with Section 5.1(d), AMS shall
pay to BSC, within sixty (60) days of
the end of each fiscal quarter of AMS
during the term of this Agreement, a
commission (also, a "Distribution
Commission"), on Net Sales recorded by AMS
with respect to the sale of any such
BIS-Screen Product within such fiscal
quarter by AMS, in an amount equal to the
quotient of (x) the Net Sales recorded
by AMS of such BIS-Screen Product for such
period multiplied by [**], minus the
aggregate Cost of Goods Sold of such
BIS-Screen Product for such period, divided
by (y) [**]. With respect to each
BIS-Screen Product manufactured by BSC and
distributed by AMS during the Distribution
Term, AMS shall pay BSC a transfer
price (also, a "Transfer Price") for any
unit of such BIS-Screen Product
delivered to and not rejected by AMS during
such period equal to the quotient of
(x) the ASP of AMS for such BIS-Screen
Product for such period, multiplied by
[**], plus the Cost of Goods Sold of BSC
for such BIS-Screen Product for such
period, divided by (y) [**].
5.7
Commission Payable to BSC on Sales of BIS-Screen Products by a
Third
Party Distributor. In the event that one or
more third party distributors with
respect to any BIS-Screen Products
(including, without limitation, any Custom
Third Party Product, any BIS-Screen Product
marketed for an indication in a
Major Category with respect to which BSC
has exercised its Opt-Out Option, any
BIS-Screen Product with respect to which
BSC's distribution appointment was
terminated in accordance with Section 12.2,
and any Specified [**] Product, but
excluding any After-Developed Products) in
the BSC Field is appointed in
accordance with Section 5.1(d), then AMS
shall pay to BSC, within thirty (30)
days of the end of each fiscal quarter of
AMS during the term of this Agreement,
a Distribution Commission, on Net Sales
recorded by AMS with respect to the
sales of any such BIS-Screen Products
within such fiscal quarter by such
third-party distributor or distributors, in
an amount equal to (x) the Net Sales
recorded by AMS from the sale of such
BIS-Screen Products, minus the Cost of
Goods Sold of AMS with respect to such
BIS-Screen Products, divided by [**]. In
the event that a third party distributor
with respect to any BIS-Screen Products
in the BSC Field is appointed in accordance
with Section 5.1(d), and BSC
manufactures and sells such BIS-Screen
Product to such third party distributor
for resale (without such BIS-Screen Product
first being sold to AMS) then BSC
shall pay to AMS, within thirty (30) days
of the end of each fiscal quarter of
BSC during the term of this Agreement, a
Distribution Commission, on Net Sales
recorded by BSC with respect to the sales
of any such BIS-Screen Products within
such fiscal quarter by such third-party
distributor or distributors, in an
amount equal to (x) the Net Sales recorded
by BSC from the sale of such
BIS-
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Screen Products, minus the Cost of Goods
Sold of BSC with respect to such
BIS-Screen Products, divided by [**].
5.8
Sublicense Revenue. Without limiting AMS' obligations to pay
Distribution Commissions in accordance with
Sections 5.6 and 5.7, AMS shall
share with BSC on an equal basis all
payments received by AMS during the term of
this Agreement as a result of licenses or
sublicenses entered into by AMS for
any rights to the BIS-Screen Technology or
any AMS Intellectual Property or
Program Intellectual Property in the BSC
Field, other than any license to the
BIS-Screen Technology or any AMS
Intellectual Property or Program Intellectual
Property in the BSC Field which does not
permit the licensee to use such
technology or Intellectual Property in
connection with the sale of products
marketed or intended for use principally in
the BSC Field. AMS' right to enter
into licenses or sublicenses with respect
to any rights to the BIS-Screen
Technology in the BSC Field is subject to
the prior approval of the Steering
Committee in accordance with Section
3.5(b)(xiv).
5.9
Distribution Commissions Payable to BSC on After-Developed
Products.
In the event that AMS elects to distribute
any BIS-Screen Products which are
After-Developed Products itself or appoint
one or more third-party distributors
to distribute such BIS-Screen Products, AMS
shall pay to BSC, within thirty (30)
days of the end of each fiscal quarter of
AMS during the term of this Agreement,
a Distribution Commission on Net Sales
recorded by AMS with respect to the sales
of any such BIS-Screen Products within such
fiscal quarter by AMS or such
third-party distributor or distributors, in
an amount equal to the Net Sales
recorded by AMS from the sale of such
BIS-Screen Products (without any deduction
for the amounts required to be paid to BSC
under this Section 5.9), multiplied
by [**].
6. PURCHASE OF PRODUCTS
BY BSC AND TERMS OF SALE.
6.1 Supply
Forecasts. During the Distribution Term, the Distributor of any
BIS-Screen Product shall provide to the
Manufacturer of such BIS-Screen Product,
on a monthly basis, a six-month forecast
(each, a "Supply Forecast") of expected
orders of such BIS-Screen Product beginning
with the month following the month
in which such Supply Forecast is delivered.
With the exception of the first [**]
of each Supply Forecast delivered to
Manufacturer, such Supply Forecasts shall
not constitute binding orders.
Notwithstanding the foregoing, following
termination of this Agreement in accordance
with Section 12, Distributor shall
be released from any requirement with
respect to the [**] of the then-current
Supply Forecast other than to reimburse
Manufacturer for the Cost of Goods Sold
for the BIS-Screen Products forecast for
purchase in such month, to the extent
such BIS-Screen Products, or components
thereof, cannot be incorporated into
products purchased by Distributor or
another party.
6.2
Product Orders. All orders of BIS-Screen Products by BSC, where BSC
is
Distributor and AMS is Manufacturer with
respect to any BIS-Screen Product shall
be on BSC's standard form of purchase order
which BSC may employ and be in
effect from time to time generally for the
purchase of products similar to the
BIS-Screen Product being ordered and
AMS
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shall deliver the BIS-Screen Products in
accordance therewith. A copy of BSC's
current standard form of purchase order
employed by BSC and in effect as of the
date of this Agreement is attached hereto
as Exhibit B. BSC reserves the right
to modify its standard form of purchase
order in effect from time to time
generally for the purchase of products
similar to the BIS-Screen Products;
provided that such modifications do not
materially change the obligations and
rights of AMS, in the circumstances where
AMS is Manufacturer, under this
Agreement. The provisions of this Agreement
shall prevail over any inconsistent
statements or additional statements or
provisions, rights and obligations
contained in any document related to this
Agree
