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EXHIBIT 10.42
(CRYOCATH LOGO)
DISTRIBUTION AGREEMENT
THIS
DISTRIBUTION AGREEMENT (the "Agreement") is made as of November 9th
,
2004, (the "Effective Date") by and between
CRYOCATH TECHNOLOGIES INC., a
corporation organized and existing under
the laws of Quebec, Canada, with its
principal offices at 16771 Chemin
Ste-Marie, Kirkland (Quebec) Canada H9H 5H3
(hereinafter referred to as "Manufacturer"
or "CryoCath"), and ATS Medical,
Inc., a corporation organized and existing
under the laws of Minnesota with its
principal offices at 3905 ANNAPOLIS LANE,
SUITE 105, MINNEAPOLIS, MN 55447
U.S.A., (hereinafter referred to as
"Distributor").
In consideration
of the mutual promises contained herein and for other good
and valuable consideration, the receipt and
sufficiency of which are hereby
acknowledged, the parties hereto agree as
follows:
ARTICLE 1.
DEFINITIONS
As used in this
Agreement, the terms set forth in this Article 1 shall have
the following meanings:
1.1 Products. Products
shall mean those products listed in Exhibit A
attached hereto,
as amended from time to time by the Manufacturer and
communicated in
writing to Distributor.
1.2 Territory.
Territory shall mean all countries except for USA,
Italy, ,
Australia, Sweden, Denmark, Finland, Luxemburg, Spain,
Portugal,
Hungary, and the
Czech Republic, Slovakia, Norway, Iceland, Mexico.
1.3 Contract Quarter.
Contract Quarter shall mean a period of three
consecutive
calendar months beginning on January 1, April 1, July 1, or
October 1.
1.4 Purchase Commitment shall have the meaning set forth in
Section
3.2.
1.5 Standard Terms and Conditions of Sale. Standard Terms and
Conditions of
Sale shall mean Manufacturer's terms and conditions of sale
for its
products, as modified by Manufacturer from time to time and
communicated in
writing to Distributor.
1.6 Trademarks.
Trademarks shall mean those trademarks and trade
names, whether
registered in the Territory or not, labeling, trade dress,
packaging and
devices which are owned by, licensed or assigned to
Manufacturer or
which it otherwise has aright to use and which are applied
to or used with
the Products by Manufacturer
** The appearance of a double
asterisk denotes confidential information that
has been omitted
from the exhibit and filed separately, accompanied by a
confidential
treatment request, with the Securities and Exchange Commission
pursuant to Rule
24b-2 of the Securities Exchange Act of 1934.
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ARTICLE 2.
APPOINTMENT: EXCLUSIVITY; COMPETING PRODUCTS; PRICES
2.1 Appointment. Subject to the terms of this Agreement,
Manufacturer
appoints
Distributor as its exclusive distributor of the Products in the
Territory in
accordance with the terms of this Agreement and Distributor
accepts this
appointment. Such appointment does not constitute a grant of
any rights or
interests other than the rights specifically granted to the
Distributor
hereunder and does not constitute a license or sub-license of
the Products. If
the Distributor fails to meet the Purchase Commitment,
Distributor's
appointment will automatically become non-exclusive for the
remaining term
of this Agreement, as set forth under Section 3.2.
2.2 Exclusivity. Subject to Distributor's compliance with the terms
of
this Agreement,
Manufacturer shall sell the Products for delivery in the
Territory only
to Distributor.
2.3 Promotion and Sale of Products only within Territory.
Distributor
shall promote
and sell the Products to customers only for use or
consumption
within the Territory.
2.4 Competing Products. Manufacturer or Distributor shall
neither
distribute nor
market products competitive with the Products during the
Term as defined
in Section 17.1 and any renewal of this Agreement without
the prior
written consent of either Party. It is understood that
Manufacturer is
restricted from selling Products in Agent's Territory
during the term
of the Agreement. If either Party does not approve the
other Party's
request for representation of competitive products, the other
Party must
refuse to or cease representing the competitive products.
Distributor
shall not make any changes, alterations, modifications or
additions to the
Products without the prior written approval of CryoCath.
2.5 Prices. Manufacturer shall sell Products to Distributor at
prices
previously
communicated in writing by Manufacturer to its Product
distributors
generally from time to time. Subject to the Purchase
Commitment as
described in Section 3.2, the prices to be charged to the
Distributor
initially under this Agreement will be the prices set out in
Exhibit A under
"Distributor Price". A price adjustment will be made by
Distributor with
payment made to Distributor or deducted from payments owed
by Distributor
on the 30th day following the preceding quarter to which it
applies. ** With
respect to resale prices to be charged by Distributor to
customers,
Distributor shall have the right to determine the price of the
Products within
the Territory but will be guided by the prices listed for
the Products in
Exhibit A. Notwithstanding the generality of the foregoing,
Distributor will
not sell Products at prices below the Distributor Price in
Exhibit A, as
amended from time to time, without prior written approval
from
Manufacturer.
ARTICLE 3.
PROMOTION AND SALE OF PRODUCTS
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3.1 Commercially Reasonable Efforts. Distributor shall exercise
its
commercially
reasonable efforts to promote and sell the Products for use
only by
qualified individuals as appropriate in the Territory, in
compliance with
local laws and regulations and good commercial practice and
for uses and
applications reasonably approved by Manufacturer for the
Products.
Distributor shall only sell directly to end users of the
Products
and shall not
sell indirectly or engage sub-distributors without the prior
written consent
of Manufacturer. Distributor shall be subject to
performance
criteria applied to distributors of the Products in general, as
communicated in
writing by Manufacturer from time to time, after discussion
and agreement
with the Distributor. Manufacturer shall use commercially
reasonable
efforts to promptly obtain and maintain government approvals to
import, register
and market the Products in each jurisdiction in the
Territory. The
decision to obtain government approvals in each jurisdiction
in the Territory
will be made jointly based on the economic viability for
both parties of
marketing products in such jurisdictions. Such decisions
may require
agreement to special adjustments referred to in Section 2.5
determined on a
jurisdiction-by-jurisdiction basis. In the event that a
decision is made
jointly not to pursue marketing of products in a given
jurisdiction under this
agreement, then Manufacturer may at his option be
permitted to
market products in such jurisdiction directly or indirectly
without the
Distributor. Distributor will diligently secure and maintain,
as may be
required from time to time, government importing, import and
export licenses,
customs clearances and currency authorizations and any
other permits
necessary in each jurisdiction in the Territory. Manufacturer
will diligently
secure and maintain, as may be required from time to time,
government
registration and marketing approvals in each jurisdiction in
the
Territory and
shall submit to the government health authorities in each
jurisdiction in
the Territory where the sale of the Products is agreed to a
complete
application for registration and marketing plan.
3.2 Purchase Commitment. In addition to the commercially
reasonable
efforts
commitment described herein, Distributor hereby agrees to
purchase
from CryoCath
("Purchase Commitment") and for each renewal year term
thereafter, the
dollar value in Products set forth on the Purchase
Commitment,
Exhibit C. Distributor must meet the annual Purchase
Commitments at
the end of each twelve-month term and must meet 40% of the
first term's
commitment by the end of the first 9 months of that first term
and 40% of the
second term's commitment by the end of the first nine months
of the second
term (hereafter referred to as the "Interim Term Targets").
It is understood
that the initial period referred to with respect to the
interim and
annual purchase commitments will be for 15 months and will
commence as of
January 1, 2005. Subsequent periods will be for twelve
months
commencing on April 1, 2006 and April 1 each year thereafter.
CryoCath shall
transfer to Distributor as of January 1, 2005 all its
existing
customer accounts it has in the Territory identified in Section
1.2..
Distributor shall pay a one time compensation fee to CryoCath for
the
transferred
accounts on January 1, 2005 an amount equal to **
Throughout the term of this Agreement, if
Distributor fails to purchase
Distributor's Purchase Commitment at any
time or meet the Interim Term Targets,
Distributor's appointment may at CryoCath's
option, be terminated or may
automatically become non-exclusive for the
remaining
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term of this Agreement subject to a 30-day
cure period, without prejudice to
CryoCath's other rights under this
Agreement (including the right to terminate
this Agreement upon written notice to
Distributor) and CryoCath may appoint one
or more additional agents or Distributors
for sale of the Products or solicit
orders for the Products directly in the
Territory for the remaining term of this
Agreement. Products returned to CryoCath
for reason other than Product defect
shall not count towards the fulfillment of
Distributor's relevant Purchase
Commitment. Purchase Commitments for the
second twelve-month period are to be
negotiated mutually between the parties 6
months prior to the expiration of the
First Twelve Month Period such that **
Purchase Commitments will be adjusted as
new jurisdictions are added during the term
of this agreement. Throughout the
term of this Agreement, if Distributor
fails at any time to purchase
Distributor's Purchase Commitment or meet
the Interim Term Targets,
Distributor's appointment may at CryoCath's
option, automatically become
non-exclusive for the remaining term of
this Agreement subject to a 30-day cure
period, without prejudice to CryoCath's
other rights under this Agreement
(including the right to terminate this
Agreement upon written notice to Agent)
and CryoCath may appoint one or more
additional agents or Distributors for sale
of the Products or solicit orders for the
Products directly in the Territory for
the remaining term of this Agreement.
Products returned to CryoCath for reason
other than Product defect shall not count
towards the fulfillment of
Distributor's relevant Purchase Commitment.
The Purchase Commitment in year two
of the term of this Agreement will be
established by Manufacturer in
consultation with Distributor after the
third Contract Quarter and will be
confirmed in writing by the Manufacturer
prior to the commencement of year 2 and
similarly for each renewal period
thereafter.
3.3 Facilities. Subject to Article 16 hereof, Distributor shall
maintain, lease
or contract with such offices, warehouses, and sales
facilities as
are necessary to fulfill its duties under this Agreement.
3.4 Personnel. Distributor shall maintain such competent and
qualified
sales and
service personnel as are required to meet its duties under this
Agreement.
Manufacturer agrees to train the individual responsible for
training
Distributor's personnel in each major jurisdiction. In all
cases,
such training
will take place at Manufacturer's offices or at a place and
times agreed to
by Manufacturer.
3.5 Inventories. Distributor shall, at Distributor's own
expense,
maintain a
sufficient inventory of the Products at all times during the
term of this
Agreement as necessary to meet the requirements of any
customer or
potential customer within the Territory. Without restricting
the generality
of the foregoing, Distributor agrees to maintain inventory
levels at not
less than ** of forecasted requirements.
3.6 Promotional Materials. In promoting the Products in the
Territory,
Distributor shall not
use promotional materials contrary to the best
interest of the
Manufacturer. Manufacturer reserves the right to require
prior approval
of the promotional materials and advertising campaigns.
Manufacturer
will provide to Distributor reasonable amounts of such
promotional
materials that it provides to its own representatives, at no
cost. Certain
promo materials will be available at cost.
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3.7 Reports. Commencing on the first day of the second Contract
Quarter after
the Effective Date, Distributor shall provide Manufacturer on
the fifteenth
day of each Contract Quarter with a written report containing
information
concerning the following:
(a) Distributor's sales volumes and prices in each country for
each of the Products for the preceding Contract Quarter;
(b) Distributor's promotional activities regarding the Products
for the preceding Contract Quarter;
(c) a summary of current market conditions for the Products,
including information concerning introductions, promotional
activities
and sales levels of products competitive with the Products;
(d)
forecasts of prospective purchase orders and anticipated
sales volumes for the Products during the succeeding two
Contract
Quarters; and
(e) forecasted purchase order submission dates.
3.8 Warranties. Manufacturer's standard warranty of its Products
shall
apply to the
sale of the Products to Distributor as contained in
Manufacturer's
terms and conditions of sale, as may from time to time be
modified by
Manufacturer, and Distributor shall extend such warranty to its
customers.
Manufacturer shall honor the claims of Distributor's customers
within the
limits of the warranties offered by Manufacturer to
Distributor.
Distributor
shall offer no other warranties concerning the Products without
the prior
written authorization of Manufacturer.
3.9 Customer Complaints. Distributor shall report to Manufacturer
no
later than
within 48 hours of receipt all customer complaints of any
nature
concerning the
Products and all notices of serious or adverse reaction
associated with
the use of the Products, and cooperate with Manufacturer in
the resolution
of such complaints. Distributor shall maintain records of
such complaints
for at least two years after their receipt and shall make
such records
available to Manufacturer for inspection and copying upon
Manufacturer's
request at any time during Distributor's normal business
hours.
3.10 Assistance of Government Officials. Without Manufacturer's
prior
written approval
or as required by law, Distributor shall not hire, retain,
or make payment
of any kind to government or regulatory officials of the
Government of
the Territory or of any jurisdiction within the Territory, or
their relatives
to assist Distributor in marketing the Products.
3.11 Storage Practices, etc. Distributor shall conform its
sales,
storage and
quality control practices to those written standards provided
by Manufacturer
to Distributor from time to time.
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3.12 Sales Records. Distributor shall prepare accurate and
orderly
business and
accounting records concerning its inventories and sales of the
Products.
Distributor shall maintain these records for a period of at
least
two years after
the Contract Quarters to which they apply. Distributor
shall provide
Manufacturer with copies of such records within fifteen (15)
days of any
written request by Manufacturer. Manufacturer may request, and
Distributor
agrees to comply with such request, an audit of Distributor's
sales records
for the purpose of verifying the accuracy of Manufacturer's
price charged to
Distributor through out the life of the Agreement.
Manufacturer
will be responsible for the cost of such audit provided that
Distributor's
records reflect actual end user sales to within 98%. In the
event that the
audit reveals accuracy of such records to be lower than 98%,
Distributor will
bare the cost of such audit.
3.13 Shelf Life. Distributor shall maintain its inventory so as
to
sell the
Products only during their applicable shelf lives as
communicated
to Distributor
by Manufacturer from time to time. Manufacturer shall not be
obligated to
compensate Distributor for Products that Distributor is unable
to sell within
or after their shelf lives.
3.14 Inspections. During Distributor's normal business hours,
Distributor
shall permit representatives of Manufacturer after reasonable
notice to
inspect Distributor's facilities and inventory to ensure that
Distributor is
meeting applicable quality control standards and otherwise
exercising its
best efforts in storing, promoting, selling and delivering
the
Products.
3.15 Samples. The Manufacturer shall supply the Distributor with **
at
Manufacturer's
fully absorbed cost and a reasonable number of surgical
consoles not for
human use at **.
Conference and Marketing Booth. Distributor
agrees to attend the following
conferences (ATS to attach list) each year
for the promotion of Products. In
addition, Agent agrees to dedicate 25% of
its Marketing booth sales
representative stations to CryoCath.
CryoCath agrees to display ATS's name as
Distributor of its Products in its booth at
such Surgical conferences that it
attends and at which it has booth
space.
ARTICLE 4.
MANUFACTURER ASSISTANCE TO DISTRIBUTOR
To assist
Distributor in registering and marketing the Products in the
Territory,
Manufacturer shall:
(i) Provide Distributor with materials
necessary to obtain health
registrations, to the extent practicable. Such documentation shall
be
provided in English. Translation expense will be borne by the
Distributor.
(ii) Provide
Distributor with information on marketing and promotional
plans with respect to the Products as well as copies of
marketing,
advertising, sales and promotional literature concerning the
Products
produced by or for CryoCath, if any. Such documentation shall
be
provided in English. Translation expense will be borne by the
Distributor.
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(iii) Provide
Distributor with certain certificates of analysis concerning
the Products purchased by Distributor, certificates of free
sale,
trademark authorizations and any other documents which Distributor
may
require for
registration purposes, at Distributor's request and
expense, if available. Such documentation shall be provided in
English. Translation expense will be borne by the Distributor.
(iv) Provide
Distributor with Field Service Manual, Field Service
Procedures and requisite forms required to service CryoCath
Products,
as amended from time to time by CryoCath. Such documentation shall
be
provided in English. Translation expense will be borne by the
Distributor.
(v) Distributor agrees subject to the
terms identified in Section 17 of a
Termination or Early Termination of this agreement that
Distributor
will transfer at Manufacturer's cost all registration and
regulatory
files of Product's to Manufacturer.
ARTICLE 5.
ADDITION AND DELETION OF PRODUCTS FROM AGREEMENT
5.1 Addition of Products. From time to time new Products may be
added
to those covered
by this Agreement by amendment of Exhibit A in accordance
with Article
18.7.
5.2 Deletion of Products. Manufacturer may delete specific
Products,
provided such
Products are replaced with next generation Products, from
coverage by this
Agreement upon (30) thirty-day written notice to Agent,
which notice
includes an amendment of the attached Exhibit A reflecting the
deletion. No
such deletion shall be deemed a termination or partial
termination of
this Agreement.
Manufacturer's address. Distributor shall mail or fax all orders
for
the Products to the following address:
CryoCath Technologies Inc.
16771 Chemin Ste-Marie
Kirkland, Quebec H9H 5H3
Canada
Attention: Customer Service
Fax: 1-514-694-6279
or to such other
address or facsimile number as Manufacturer shall from
time to time
designate in writing.
5.3 Information in Distributor's Orders. In connection with each
order
of Products,
Distributor shall provide Manufacturer with the following
information:
(a) purchase order
number;
(b) billing
address;
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(c) name, list number,
and quantity of Products being ordered;
and
(d) preferred
warehouse of delivery.
5.4 Precedence of Agreement over Purchase Orders. In the event
of
conflict between
the terms of this Agreement and the terms of any purchase
order form or
other document submitted by Distributor to Manufacturer in
connection with
any order for the Products, this Agreement shall control
unless the
parties specifically otherwise agree in writing.
ARTICLE 6. TERMS
AND CONDITIONS OF SALE AND DELIVERY OF PRODUCTS;
NON-CONFORMING AND NON-DELIVERED PRODUCTS
6.1 Acceptance of Orders. All orders for Products submitted by
Distributor
shall be initiated by written purchase orders sent to CryoCath
and shall
request a delivery date during the term of this Agreement;
provided however
that an order may initially be placed orally or by
facsimile. A
written or facsimile confirmation purchase order is to be
received by
CryoCath within twenty-four (24) hours after an oral order is
placed. No order
shall be binding upon CryoCath until accepted by CryoCath
in writing, and
CryoCath shall have no liability to Distributor with
respect to
purchase orders that are not accepted. No partial shipment of
an
order shall
constitute the acceptance of the entire order. CryoCath shall
use commercially
reasonable efforts to deliver Products at the times
specified either
in CryoCath's quotation or in CryoCath's written
acceptance of
Distributor's purchase orders. CryoCath will send a facsimile
acceptance or
non-acceptance of purchase orders within two business days.
6.2 Taxes, Stamp , Duties, Prices and Currency; Charges for
Handling,
Shipping and
Insurance. All sales of the Products to Distributor under this
Agreement shall
be at Manufacturer
