EXHIBIT 10.1 -- DISTRIBUTION AGREEMENT
<PAGE>
DIOMED, INC.
One Dundee Park
Andover, MA 01810
August 5, 2005
Luminetx Corporation
1256 Union Avenue
Memphis, TN 38104
Ladies and Gentlemen:
This
letter sets forth our understanding and agreement regarding the
terms
upon which Diomed, Inc. (referred to as
"we" or "us" or variations thereof) will
distribute certain medical products
developed by Luminetx Corporation (referred
to as "you" or variations thereof).
1.
Background. You have developed a biomedical imaging system known as
the
VeinViewer Imaging System (the "System").
We are interested in obtaining
exclusive rights to distribute the System
directly and through leasing companies
to physicians for the purpose of performing
sclerotherapy, phlebectomies or the
treatment of varicose veins (the "Market"),
and you desire to appoint us as your
exclusive distributor of the System to the
Market. The territory within which we
may exercise our distribution rights (the
"Territory") shall initially consist
of the United States, including all
commonwealths, territories, possessions and
military bases, and the United Kingdom, and
may be expanded upon mutual
agreement to include other international
markets as the product becomes more
widely available. We agree that we will not
attempt to sell the system in the
U.K. during 2006 without your prior
approval, to allow time to obtain the
necessary regulatory clearances for that
portion of the Territory, however, if
we decide to bear such costs and
responsibilities to allow us to sell the System
in the U.K. sooner, we may do so.
2. Grant
of Distribution Rights. Subject to the provisions of this
Agreement, you appoint us as your exclusive
distributor of the System to the
Market within the Territory, and grant us
the exclusive right to distribute and
sell the System to the Market throughout
the Territory. You will refer to us all
inquiries you receive for or relating to
the System within the Market and the
Territory. We will refer to you all
inquiries we receive for or relating to the
System outside the Market or the Territory.
All new models or versions of the
System introduced during the term of this
Agreement, and all updates,
modifications, improvements and
customizations made to the System during the
term of this Agreement, will be considered
to be part of the System for purposes
of this Agreement, and our rights under
this paragraph 2 will apply to such new
models or versions of the System and to the
System as so updated, modified,
improved or customized. We recognize that
some modifications or improvements to
the system may lead to an increase in the
base price of the system. Pricing
changes will be implemented in accordance
with paragraph 8(a). We agree to use
commercially reasonable efforts (a) to
exploit the rights granted to us by you;
(b) to achieve and maintain sales volume
and distribution of the System; and (c)
otherwise to develop and satisfy the market
for the System in the Territory and
Market. We shall consult with you and give
due regard to your advice concerning
material aspects of distribution strategy
and policy, and you shall supply us
with such Technical Information or other
Confidential Information (as defined
below), as in your reasonable discretion,
is reasonably necessary to enable us
to perform our obligations under this
Agreement.
<PAGE>
3.
Limitation on Activities. During the term of this Agreement, you
will
not yourself distribute or sell (except to
us under this Agreement), or grant to
any third party any right to distribute or
sell, the System within the Market
anywhere in the Territory. During the term
of this Agreement and for a period of
two (2) years following any expiration or
termination of this Agreement, we
specifically agree to refrain from directly
or indirectly developing,
manufacturing, assembling, distributing,
marketing or selling products or
services, under our own brand name or
otherwise, within the Territory, which are
competitive with the System; provided,
however, that we may continue to sell and
support the sale of ultrasound equipment
which we currently market or may market
in the future and which may be considered
to compete with the System.
4.
Requirements for Systems. All Systems you sell to us for
distribution
under this Agreement will display the
Diomed name or logo on the border of all
projected images. We will have the right to
review and approve all such uses of
our trademarks and logos. In addition, you
will notify us promptly of material
defects in any System reported by any
user.
5.
Consideration. In consideration of the exclusive distribution
rights
granted to us hereunder, we have agreed to
invest a total of $1,000,000 in
Luminetx, upon the terms and conditions set
forth in Exhibit B, and to grant you
a warrant to purchase 600,000 shares of
Diomed common stock, upon the terms and
conditions set forth in Exhibit C. You
understand and acknowledge that we are
under no obligation to provide any
financial support to you other than as
expressly set forth herein.
6. Your
Assistance with Marketing and Distribution. You will reasonably
cooperate with us in our marketing and
distribution of the System. You will also
work with us to develop a program to
exchange sales leads, and to identify
opportunities for joint public relations
activities and trade show
participation. You will provide, at no
charge to us, specimen copies of
collateral advertising and promotional
materals developed by you including, but
not limited to, photographs, video files,
animations and graphic images; and you
will assist us in developing other
collateral materials to support our sales and
marketing programs. We shall prepare and
distribute such advertising material,
sales literature, catalogues, and other
printed promotional material, prepare
and disseminate such electronic and other
non-printed promotional material, and
conduct such promotional activities as we
believe necessary to perform our
obligations under this Agreement. Prior to
their distribution, dissemination or
use, we will supply you with copies of all
advertising material, sales
literature, catalogues, and other printed
promotional material, and transcripts
and graphical representations of all other
non-printed promotional material
prepared by or for us relating to the
System. You shall have a period of ten
(10) business days to review such
advertising and promotional materials by us,
and, upon your reasonable request we will
make changes in such advertising and
promotional materials prior to
distribution, dissemination or use thereof. All
copyright or other intellectual property
interests in any promotional,
advertising or marketing literature or
other materials produced by or for us
pertaining to the System, which bear any of
your trademarks or to which your
logo has been affixed, shall vest in you.
We agree to assign, and hereby do
assign, any and all such rights to you and
agree to execute any further
documents reasonably requested by you to
confirm such assignment, and further
hereby appoint you our attorney-in-fact to
execute all such documents in the
event that we fail to do so. We will retain
all copyright and other intellectual
property interests in all other
promotional, advertising or marketing literature
or other materials produced by or for us,
and you will retain all copyright and
other intellectual property interests in
all promotional, advertising or
marketing literature or other materials
produced by or for you.
2
<PAGE>
7. Orders.
We will place monthly orders for Systems with you on our
standard purchase order form setting forth
the quantity of the products ordered
and the desired delivery date (which shall
not be less than fifteen (15)
business days following the date of the
order unless you otherwise agree). No
order will be binding unless acknowledged
and accepted by you, but you may not
unreasonably refuse to accept any order.
You will confirm your acceptance or
rejection of an order within five (5) days
after your receipt of such order.
Once an order is accepted, neither you nor
we may cancel or modify it without
the other party's approval. We will also
provide by the end of each month a
rolling non-binding 12 month forecast of
our expected purchases to assist you
with production scheduling, which forecast
shall be subject to monthly review
and adjustment. We will make reasonable
attempts to purchase according to this
forecast.
8. Pricing, Shipping and Payment.
You will use your best efforts to make
first delivery of the Systems to us on or
before January 31, 2006. The date of
your initial delivery of the Systems to us
may be referred to in this Agreement
as the "Initial Delivery Date."
(a) Until the six (6) month anniversary of the Initial Delivery
Date
(the "Initial Period"), the price at which
you will sell us Systems under this
Agreement (the "System Price") will be as
set forth on Exhibit A. After the
Initial Period, the System Price shall be
determined for each Measuring Period
as set forth below. As used herein, the
"Measuring Periods" shall mean
successive quarterly periods following the
Initial Period until the second (2nd)
anniversary of the Initial Delivery Date
and successive annual periods
thereafter. For each Measuring Period, the
System Price shall be equal to
****CONFIDENTIAL TREATMENT REQUESTED**** of
the average selling price of Systems
to end users across all your distribution
channels and markets (including end
user sales by us but excluding sales of
demonstration units, loaners, used
Systems, and sales to governmental
authorities and research institutions) during
the preceding Measuring Period (or during
the Initial Period, in the case of the
first Measuring Period); provided, however,
that any increases in the System
Price shall not exceed, on a percentage
basis, the percentage increase in your
actual direct per-unit production costs for
the Systems, as evidenced by your
costed bill of materials, since the Initial
Delivery Date. We shall have the
right, at our expense, during normal
business hours and upon reasonable notice,
to review your books and records regarding
System sales as required to allow us
to verify the calculation of System
pricing; provided, however, that we may not
exercise this right more than once in any
twelve (12) month period. You and we
agree that we will determine the prices at
which we sell Systems to end users.
3
<PAGE>
(b) In the event that we realize an average gross margin of more
than
****CONFIDENTIAL TREATMENT REQUESTED**** %
on sales of Systems in any calendar
quarter, we will pay you an additional
amount equal to (i) ****CONFIDENTIAL
TREATMENT REQUESTED**** % of the portion of
our System gross margin in such
quarter that resulted in a gross margin of
more than but not more than
****CONFIDENTIAL TREATMENT REQUESTED**** %,
plus (ii) ****CONFIDENTIAL TREATMENT
REQUESTED**** % of the portion of our
System gross margin in such quarter that
resulted in a gross margin of more than
****CONFIDENTIAL TREATMENT REQUESTED****
%. Sales of demonstration units and
loaners, and sales to governmental
authorities and research units, shall be
excluded from the calculation of our
average gross margin for purposes of this
paragraph.
By way of
example, if System revenues in a particular quarter were $
****CONFIDENTIAL TREATMENT REQUESTED****
and our cost of sales for the System in
such quarter was $ ****CONFIDENTIAL
TREATMENT REQUESTED****, resulting in a
gross margin of ****CONFIDENTIAL TREATMENT
REQUESTED**** %, we would pay you an
amount equal to ****CONFIDENTIAL TREATMENT
REQUESTED**** % of $ ****CONFIDENTIAL
TREATMENT REQUESTED**** (being the
difference between $ ****CONFIDENTIAL
TREATMENT REQUESTED****, the level of
System revenues that would have resulted
in a ****CONFIDENTIAL TREATMENT
REQUESTED**** % gross margin, and $
****CONFIDENTIAL TREATMENT REQUESTED****,
the level of System revenues that
would have resulted in a ****CONFIDENTIAL
TREATMENT REQUESTED**** % gross
margin) plus ****CONFIDENTIAL TREATMENT
REQUESTED**** % of $ ****CONFIDENTIAL
TREATMENT REQUESTED**** (being the
difference between the $ ****CONFIDENTIAL
TREATMENT REQUESTED**** in actual System
revenues and $ ****CONFIDENTIAL
TREATMENT REQUESTED****, the level of
System revenues that would have resulted
in a ****CONFIDENTIAL TREATMENT
REQUESTED**** % gross margin), or a total of $
****CONFIDENTIAL TREATMENT REQUESTED****.
We will pay such additional amount to
you within forty-five (45) days following
the end of the applicable quarter. We
will make all accounting determinations
required under this paragraph in
accordance with our published financial
statements and generally accepted
accounting principles, consistently
applied. You shall have the right, at your
expense, during normal business hours and
upon reasonable notice, to review our
books and records regarding System sales as
required to allow you to verify the
amount of fees owed to you; provided,
however, that you may not exercise this
right more than once in any twelve (12)
month period.
(c) You will ship Systems purchased by us via ground carrier, FOB
from
your manufacturing facility or distribution
site, to any location we specify in
the continental United States. We will
provide you with contact and address
information for end users of Systems who
purchase from us, including associated
System identification numbers (such as
serial numbers or lot numbers).
(d) We will make payment to you within 45 days from the date of
our
receipt of the goods, and you may charge us
interest (at a rate of 1.0% per
month) on any late payments we make.
4
<PAGE>
9.
Fulfillment of Orders. You agree to sell and deliver to us (subject
to
our orders) a number of Systems at least
equal to the target number of Systems
described in paragraph 10 below. Beyond
such target number of Systems, you agree
to use your best efforts to sell and
deliver to us (subject to our orders) a
sufficient quantity of Systems to meet our
requirements.
10.
Purchase Quantities.
(a) The target number of Systems we are to purchase under this
Agreement shall be: (i) ****CONFIDENTIAL
TREATMENT REQUESTED**** Systems prior
to the first (1st) anniversary of the
Initial Delivery Date, purchased according
to the rolling twelve (12) month forecast
described in paragraph 7, (ii) an
additional ****CONFIDENTIAL TREATMENT
REQUESTED**** Systems prior to the second
(2nd) anniversary of the Initial Delivery
Date, and (iii) an additional
****CONFIDENTIAL TREATMENT REQUESTED****
Systems prior to the third (3rd)
anniversary of the Initial Delivery Date.
In the event that this Agreement
continues in effect after the third (3rd)
anniversary of the Initial Delivery
Date, the target number of Systems we are
to purchase in each subsequent year
shall be determined by good faith agreement
between you and us at least ninety
(90) days before the beginning of such
year, and will be in the range of
****CONFIDENTIAL TREATMENT REQUESTED**** %
to ****CONFIDENTIAL TREATMENT
REQUESTED**** % greater than the target
number for the preceding year, unless
you and we agree otherwise. Purchases in
all years beyond 2006 shall be made in
a quarterly spread as mutually agreed upon
at least ninety (90) days in advance
of the contract year based on an assessment
of the then current sales year
purchasing pattern.
(b) If we fail to purchase the annual target number of Systems
in
clauses (i) and (ii) of paragraph (a)
above, prior to the third (3rd)
anniversary of the Initial Delivery Date
for any reason (except as described
below), then, upon your delivery to us of
written notice of such failure, our
rights under paragraph 2 of this Agreement
shall become non-exclusive in nature
and thereafter you will have the right to
yourself distribute and sell, and
grant to third parties the right to
distribute and sell, the System within the
Market in the Territory. In addition, if we
fail to purchase at least
****CONFIDENTIAL TREATMENT REQUESTED**** %
of the annual target number of
Systems in any year for any reason (except
as described below), then you may
terminate this Agreement by written notice
to us of such failure.
(c) If we place an order for Systems that would not result in
our
purchases of Systems exceeding
****CONFIDENTIAL TREATMENT REQUESTED**** % of the
quantities reflected in our then-current
purchase forecast furnished to you
pursuant to paragraph 7 and you reject such
order, the target purchase quantity
for the period in which such order was
placed will be reduced by the number of
Systems covered by such rejected order. If
you accept an order and fail to
deliver any Systems within ten (10) days
after the date for delivery specified
by us in the order for such Systems as
described in paragraph 7, the target
purchase quantity for the period in which
such Systems were scheduled for
delivery will be reduced by the number of
Systems which were not so delivered.
If during any period we purchase more than
the target number of Systems that we
are to purchase for such period, such
excess number of Systems will be applied
to reduce the target purchase quantity for
the subsequent period or periods.
5
<PAGE>
11. Warranties.
(a) You
warrant each System sold in accordance with this Agreement to
be free from defects in materials and
workmanship for a period of twelve (12)
months from the date of its first use by
the end user. You make such warranty to
us and to each System end user. You agree
to provide warranty service directly
to all System end users, at your sole
expense. We acknowledge that the only
warranty given by you is a warranty to
repair or replace any System determined
to be defective, or determined by the
parties to have failed to meet existing,
applicable manufacturers' warranties,
specifications and/or standards for the
System; provided, however, that if you are
unable to repair or replace any
defective System, you will refund the
purchase price paid for the System. THE
REMEDY PROVIDED BY YOU AS TO REPAIR OR
REPLACEMENT OF SYSTEMS OR REFUNDS
THEREFOR SHALL BE OUR SOLE AND EXCLUSIVE
REMEDY UNDER THIS SECTION, AND IT IS
EXPRESSLY MADE IN SUBSTITUTION OF ANY AND
ALL REMEDIES OTHERWISE AVAILABLE TO
US, INCLUDING ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES, UNLESS SUCH
LIMITATION IS OTHERWISE PROHIBITED UNDER
APPLICABLE LAW. EXCEPT AS SET FORTH IN
PARAGRAPHS (b) AND (c) OF THIS SECTION, YOU
HEREBY DISCLAIM ANY AND ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, HOWSOEVER
ARISING RELATED TO THE SYSTEM,
INCLUDING BUT NOT LIMITED TO THE IMPLIED
WARRANTIES OF FITNESS FOR A PARTICULAR
PURPOSE, MERCHANTABILITY, OR OTHERWISE,
SAVE TO THE EXTENT SUCH WARRANTIES ARE
UNABLE TO BE EXCLUDED BY APPLICABLE LAW.
YOU NEITHER ASSUME OR AUTHORIZE ANY
PERSON TO ASSUME FOR YOU ANY OTHER
ADDITIONAL LIABILITY OR RESPONSIBILITY WITH
RESPECT TO THE SYSTEM.
(b) You represent and warrant that all Systems you sell to us
(i)
shall be manufactured in accordance with
Food and Drug Administration ("FDA")
Good Manufacturing Practices requirements
in the U.S. and other similar
governmental standards applicable in the
Territory, (ii) shall have all FDA and
other governmental approvals required in
the Territory in order to allow us to
sell them for use in the Market, and (iii)
shall bear labeling that conforms to
FDA and other applicable governmental rules
and regulations in the Territory. We
shall be responsible for obtaining any
approval or license necessary to import
the Systems into the Territory outside of
the U.S. You agree to cooperate and
use your best efforts to assist us in
obtaining and maintaining any and all
necessary regulatory or other government
approvals regarding the use or sale of
the System within the Territory outside of
the U.S. and all such approvals
relating to the System shall, if local
regulatory policy permits, be obtained in
your name and benefit as the manufacturer
and shall allow you to continue sales
of the System in such country in the event
of the termination of this Agreement.
Upon termination of this Agreement, we will
make all reasonable efforts at your
expense to transfer local registrations to
you or your designated third party.
All costs associated with obtaining and
maintain any and all necessary
regulatory or other government approvals
regarding the use or sale of the System
within the Territory, and any fines and/or
penalties resulting from the failure
to obtain or maintain such approvals, shall
be borne by you during the term of
this Agreement.
6
<PAGE>
(c) You represent and warrant that the System does not and shall
not
during the term of this Agreement violate
or infringe in the Territory any
copyright, patent, trademark, trade secret
or other proprietary rights of any
third party, and that no claims of any such
infringement have been made through
the date of this Agreement.
(d) You and we represent and warrant to each other that we and
you
have all power and authority necessary to
enter into and perform our respective
obligations under this Agreement, and you
and we have obtained all consents and
approvals required to permit each of us to
execute, deliver and perform this
Agreement.
12.
Confidentiality and Non-Disclosure. All information exchanged
between
you and us will be subject to the terms and
conditions of the Mutual
Confidentiality and Non-Disclosure
Agreement between you and us dated July 29,
2005, the terms of which are incorporated
herein by this reference and the
breach of which shall be a breach of this
Agreement. As used herein,
"Confidential Information" and "Technical
Information" shall both mean
information that constitutes "Confidential
Information" pursuant to the terms of
such agreement.
13.
Non-Solicitation. We and you each agree, during the term hereof
and
for a period of two (2) years after any
expiration or termination hereof, not to
directly or indirectly, without the other
party's prior written consent, offer
to employ or employ in any manner any
employees of the other party while they
are in the other party's employ, and not to
offer to employ or employ in any
manner any of the other party's former
employees for a period of six (6) months
after they have left the other party's
employ. Our and your obligations
contained in this section are independent,
and the existence of any claim or
cause of action of a party, whether
predicated on this Agreement or otherwise,
shall not constitute a defense to the
enforcement by the other party of such
party's obligations of under this section.
Our and your obligations under this
section shall survive any termination or
expiration of this Agreement.
14.
Injunction and Damages. We and you each acknowledge that any breach
or
imminent breach by a party of paragraphs
12, 13 or 15 of this Agreement may
cause irreparable injury and harm to the
other party, and that remedies at law
for the breach or imminent breach may be
inadequate. Accordingly,
notwithstanding the terms of any other
section of this Agreement to the
contrary, and in addition to any such other
relief, in the event of a breach of
such paragraphs by a party, the other party
shall be entitled to seek specific
performance, temporary and permanent
injunctive relief and such other relief to
which the other party may be entitled at
law or in equity without the necessity
of posting bond or proving actual damage. A
party shall be entitled to recover
all reasonable costs and attorneys' fees
incurred by it in the event it is
successful in obtaining any such relief. In
the event that a party is
unsuccessful in obtaining any relief under
this section, then it shall reimburse
the other party for such party's reasonable
costs and attorneys' fees incurred
in defense of such action.
15.
Intellectual Property Rights.
(a) Ownership. We acknowledge your exclusive ownership of your
trademarks affixed to or used in connection
with the System (collectively
referred to as the "Marks"), the patents,
compositions or technology embodied in
the System or any improvements or additions
thereto, and any copyrights or other
intellectual property interests in or
relating to the System, or advertising and
promotional literature associated therewith
(whether produced by you or us), and
will not make any modification or
obliteration of the trademark or patent
markings on the Products as sold. You
acknowledge our exclusive ownership of our
trademarks and logos that the System
displays pursuant to paragraph 4 and any
advertising, sales and promotional
materials in which we are to retain rights as
described in paragraph 6.
7
<PAGE>
(b) Use of Marks. This Agreement shall not give us any right to
use
the Marks, and shall not give you any right
to use our trademarks and logos,
except as specifically authorized by you
herein. We agree to identify ourselves
as an independent distributor of the System
and to display the Marks prominently
on or in connection with any and all
advertising material, sales literature,
catalogues, internet websites and other
printed and electronic promotional
material prepared by or for us relating to
the System or our business involving
the System. We shall not use any Mark with
any prefix, suffix or other modifying
words, terms, designs or symbols, or in any
modified form, nor use any Mark in
connection with the sale of any other
products or services not purchased from
you. Promptly following termination of this
Agreement for any reason, we agree
to discontinue use of the Marks, and to
remove, or dispose of, as you shall
direct, any signs or other indicia relating
our sale of the System and any use
of the Marks; provided, however, that we
may continue to use the Marks in
connection with the sale of Systems we have
on hand as of the effective date of
termination. Following termination of this
Agreement, we shall not be permitted
to use the Marks in connection with any
product or service, except as provided
in the preceding sentence. We shall not
have any right to register in the
Territory or elsewhere, any trademarks
identical with, substantially similar to
or a translation of the Marks. All use of
the Marks by us, including any new
variations thereof first used in the
Territory, in connection with the selling,
installation and service of the System,
under this Agreement shall be owned by
you, subject to your control in all
respects and shall inure to your benefit.
(c) Defense of Rights. We shall, at your request and expense,
assist
you in taking any action which may be
necessary in order to safeguard and defend
your right of ownership in the Marks or
your patents. In particular, we shall
observe the market for designations which
may infringe your rights in and to
your patents or Marks and inform you of our
observations. We shall (a) inform
you promptly of any such infringement; and
(b) collaborate with you in
proceeding against such infringers, to the
extent reasonably requested by you.
(d) Limited License; Inventions. This Agreement grants a
limited
license to us to use, only as may be
reasonably necessary to effectuate the
purposes of this Agreement, and subject to
your control and approval, the Marks,
patents, copyrights, Technical Information,
Confidential Information or
technology used by you in connection with
or embodied in the System. We agree to
execute any and all documents as you may
reasonably determine are necessary or
desirable to evidence the limited license
granted hereunder for recording
purposes. Any and all improvements,
modifications, inventions or discoveries by
us or our employees, relating to the System
shall be your sole and exclusive
property. In furtherance of the foregoing,
we hereby assign, and agree to
assign, all such improvements,
modifications, inventions and discoveries to you,
and further authorize you as our
attorney-in-fact to execute all such documents
as you may determine are necessary or
desirable to confirm the foregoing
assignment and/or your ownership rights to
such improvements, modifications,
inventions or discoveries. It is expressly
understood and agreed between the
parties that you retain full ownership of
all Marks, patents, copyrights,
Technical Information, Confidential
Information and other technology described
above in this Section. In the event of
termination of this Agreement, for any
reason, we agree that all rights of access
to or to use the Marks, patents,
copyrights, Technical Information,
Confidential Information and other technology
granted hereunder shall revert to you, and
we shall have no interest therein
whatsoever.
8
<PAGE>
16. Term.
This Agreement will be effective as of the date of your
execution of this Agreement, and unless
sooner terminated pursuant to the terms
of this paragraph, will terminate on the
third (3rd) anniversary of the Initial
Delivery Date; provided, however, that if
we purchase an aggregate of at least
****CONFIDENTIAL TREATMENT REQUESTED****
Systems prior to the third (3rd)
anniversary of the Initial Delivery Date,
the termination date of this Agreement
will be the fourth (4th) anniversary of the
Initial Delivery Date. You and we
may agree to extend the term hereof for
additional one year periods mutual
written agreement.
Termination by You. Upon giving us thirty (30) days prior written
notice,
you shall have the right to terminate this
Agreement in the event of any of the
following, unless we cure such situation in
all material respects within such
thirty (30) day period:
(a) We
intentionally, knowingly and on a continuing basis sell Systems
outside
the Territory or Market;
(b) In the
event of any material breach by us of our obligations
hereunder;
(c) We
make an assignment for the benefit of creditors or if a
petition
for
bankruptcy is filed by or against us and such petition is not
dismissed within ninety (90)
days after the filing of such petition; or
(d) Any of
your invoices to us remains unpaid more than ninety (90) days
past its
due date.
Termination by Us. Upon giving you thirty (30) days prior written
notice,
we shall have the right to terminate this
Agreement in the event of any of the
following, unless you cure such situation
in all material respects within such
thirty (30) day period:
(a) You
are adjudicated to be insolvent or if bankruptcy or similar
proceedings are instituted against you;
(b) You
intentionally, knowingly and on a continuing basis sell Systems
to
other
persons inside the Territory or Market;
(c) You
make an assignement for the benefit of creditors or if a
petition
for
bankruptcy is filed by or against you and such petition is not
dismissed
within ninety (90) days after filing of such petition;
9
<PAGE>
(d) You
intentionally, knowingly and on a continuing basis sell Systems
to
other
persons inside the Territory or Market;
(e) You
fail to make the first delivery of Systems to us prior to May
31,
2006;
or
(f) In the
event of any material breach by you of your obligations
hereunder.
In the event of any termination by us
pursuant to the foregoing provisions, (i)
the unexercised portion of the warrant we
have agreed to grant you as described
in paragraph 5 shall terminate immediately
and (ii) any obligation that we may
then have to make additional investments in
Luminetx shall terminate.
17. Rights
Upon Termination. Upon the termination of this Agreement for
any reason, all rights and obligations of
the parties under this Agreement will
cease, except for (i) our obligation to
make payments with respect to orders of
Systems delivered by you prior to the
effective date of termination, (ii) our
right to continue to distribute and sell
all Systems we have on hand as of the
effective date of termination, and (iii)
the rights and obligations of the
parties under this paragraph and under
paragraphs 12, 13, 14, 15, 17, and 24.
18.
Indemnification. You shall indemnify and defend us against and hold
us
harmless from any and all claims (including
without limitation, product
liability claims), suits, damages,
judgments, or losses, including reasonable
attorneys' fees and other expenses incurred
in investigation and defense, which
arise out of (i) any breach of your
warranties set forth in paragraph 11, or
(ii) any alleged lack of quality or safety
of any Systems sold by you to us
under this Agreement. You will retain
counsel reasonably acceptable to us to
defend any such claims, and will not settle
any such claims without our prior
written consent unless the settlement
includes a full and complete release of
our liability. During the term of this
Agreement, you will maintain product
liability insurance policies reasonably
acceptable to us, which policies shall
name us as an additional insured. You agree
to provide us evidence of such
policies at our request. We shall indemnify
and defend you against and hold you
harmless from any and all claims (including
without limitation, product
liability claims), suits, damages,
judgments, or losses, including reasonable
attorneys' fees and other expenses incurred
in investigation and defense, which
arise out of (i) any breach of our
warranties set forth in paragraph 11, or (ii)
any material misrepresentation we make
regarding the System that is inconsistent
with information regarding the System you
provide to us or authorize us to use.
10
<PAGE>
19.
Escrow.
(a) Within ten (10) days following the execution of this
Agreement,
you will deposit the plans, designs,
specifications and manufacturing
documentation necessary for manufacture of
the System (the "Escrow Materials")
with an escrow agent reasonably acceptable
to us. You will promptly update
Escrow Materials in the event of any
material change in the System, and in any
event not less than quarterly until the
first (1st) anniversary of the Initial
Delivery Date and annually thereafter. The
Escrow Material shall be maintained
under an agreement which provides that the
escrow agent shall furnish us with a
copy of the Escrow Materials in the event
of any of the following (the "Release
Events"); (i) you fail to make the first
delivery of Systems to us prior to May
31, 2006, (ii) you make an assignment for
the benefit of creditors, file a
petition for bankruptcy or a petition is
filed against you and such petition is
not dismissed within ninety (90) days after
filing of such petition, (iii) you
cease to provide warranty or maintenance
service for the System; or (iv) for a
period of at least three (3) consecutive
months, we order and you fail to
deliver or have delivered at least fifty
percent (50%) of the monthly forecast
number of Systems established pursuant to
paragraph 7 as and when described in
this Agreement, provided that the failure
to sell and deliver such Systems to us
is not the result of a Force Majeure Event
(as defined below) or the action of
any regulatory authority, or any breach of
this Agreement by us. Following the
Release Event, we will continue to purchase
those Systems which are actually
produced by you or your manufacturer and
delivered to us in accord with and as
per the terms of this Agreement; provided,
however, that we may utilize the
Escrow Materials, and shall have a limited
license, subject to the provisions of
this Agreement, to manufacture Systems
directly or have Systems manufactured by
third parties in order to supplement the
number of Systems available for our
purchase from you or your manufacturer and
allow us to meet the demand for
Systems in our Market. We will continue to
have access to the Escrow Materials
until the Release Event is terminated by:
(a) expiration or termination of this
Agreement, in the case of a Release Event
described in clause (i) above; (b)
your petition for bankruptcy being
dismissed, in the case of a Release Event
described in clause (ii) above; (c) you
resume the provision of warranty and
maintenance service for the System for a
period of three (3) consecutive months
in the case of a Release Event described in
clause (iii) above; or (d) you
demonstrate for a period of three (3)
cons
