DISTRIBUTION AGREEMENT

EXHIBIT 10.18

 

CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934 AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.  THE LOCATIONS OF THE OMITTED INFORMATION ARE INDICATED BY THE FOLLOWING NOTATION: [OMITTED MATERIAL] .

 

EXECUTION COPY

 

DISTRIBUTION AGREEMENT

 

This DISTRIBUTION AGREEMENT (the “Agreement”), is made as of the 24th day of November, 2003 (the “Effective Date”) among Hoefer, Inc., a Delaware corporation having a principal place of business at 654 Minnesota Street, San Francisco, California 94107-0387 (“Hoefer”); Harvard Bioscience, Inc., a Delaware corporation having a principal place of business at 84 October Hill Road, Holliston, Massachusetts  01746 (“HBIO”), solely for the limited purpose of performing the obligations set forth in Section 19.16 below; and Amersham Biosciences Corp, a Delaware corporation, having a principal place of business at 800 Centennial Avenue, Piscataway, New Jersey 08855 (“AB”).

 

W I T N E S S E T H :

 

WHEREAS, pursuant to that certain Asset Purchase Agreement by and among HBIO, Hoefer, Amersham Biosciences (SF) Corp. (“Seller”) and AB of even date herewith (the “Purchase Agreement”), Hoefer is purchasing from Seller certain assets related to Seller’s 1-D gel electrophoresis business (the “Acquisition”);

 

WHEREAS, it is a condition to the closing of the Acquisition that AB enter into this Agreement with Hoefer and HBIO and that this Agreement become effective upon the closing of the Acquisition;

 

WHEREAS, subsequent to the closing of the Acquisition, Hoefer will be the reseller or manufacturer and seller of certain Products and Equivalent Products (each as hereinafter defined);

 

WHEREAS, Hoefer and AB recognize AB’s strength in marketing Products to certain categories of customers; and

 

WHEREAS, Hoefer and AB desire that AB distribute the Products on the terms and subject to the conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the above premises and of the mutual agreements and understandings set forth herein, the parties hereto hereby agree as follows:

 

1.                Definitions .

 

1.1  “AB Trademarks” shall mean (a) any of the trademarks, service marks, trade names or logos owned by AB or its Affiliates or any successor entities and (b) the Product Trademarks.

 

1.2  “Adjusted Contract Year Purchase Minimum” shall mean any of Adjusted Contract Year One Purchase Minimum, Adjusted Contract Year Two Purchase Minimum or Adjusted Contract Year Three Purchase Minimum as each of such terms is defined in Schedule 2 hereof.

 

1.3  “Affiliate” shall mean any company or entity that directly or indirectly through one or more intermediaries Controls, is Controlled by, or is under common Control with a party, where “Control” means the ownership of at least fifty percent (50%) of such company’s or entity’s

 

 

capital stock or the power to direct or cause the direction of such company’s or entity’s management, whether by ownership of securities, by contract or otherwise.

 

1.4  “Contract Year” shall mean any of Contract Year One, Contract Year Two, Contract Year Three, Contract Year Four, Contract Year Five or any other subsequent period of the same length prior to the termination of this Agreement commencing immediately subsequent to a Contract Year.  “Contract Year One” shall mean the period from the Effective Date until September 30, 2004.  “Contract Year Two” shall mean the period from October 1, 2004 until September 30, 2005.  “Contract Year Three” shall mean the period from October 1, 2005 to September 30, 2006.  “Contract Year Four” shall mean the period from October 1, 2006 to September 30, 2007.  “Contract Year Five” shall mean the period from October 1, 2007 to September 30, 2008.

 

1.5  “Effective Date” shall have the meaning set forth above.

 

1.6  “Equivalent Products” shall mean any products which have the same or substantially the same external appearance, base function and internal components of the Products, or are functionally equivalent thereto, but which do not bear or otherwise display any of the AB Trademarks.

 

1.7  “European Economic Area” means the territories defined in the Agreement on the European Economic Area, signed in Oporto on May 2, 1992, as such agreement has been amended or may be amended from time to time.  The member countries currently consist of the Kingdom of Belgium, the Kingdom of Denmark, the Federal Republic of Germany, the Hellenic Republic, the Kingdom of Spain, the French Republic, Ireland, the Italian Republic, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, the Portuguese Republic, the United Kingdom of Great Britain and Northern Ireland, the Republic of Austria, the Republic of Finland, the Republic of Iceland, the Principality of Liechtenstein, the Kingdom of Norway, and the Kingdom of Sweden.

 

1.8  “Hoefer Trademarks” shall mean any of the trademarks, service marks, trade names or logos owned by Hoefer or its Affiliates other than the Product Trademarks.

 

1.9  “Intellectual Property Rights” means all rights in, to and under patents, trade secret rights, copyrights, trademarks, service marks, logos, trade dress and similar rights of any type under the laws of any governmental authority, including without limitation, all applications and registrations relating to the foregoing.

 

1.10                            “Product Trademarks” shall mean the trademarks owned by Hoefer or its Affiliates listed on Schedule 6 attached hereto.

 

1.11                            “Products” shall mean the products listed in Schedule 1 attached hereto and all updates or replacements thereof and any other 1-D Products manufactured and sold or resold by Hoefer in the future, in each case solely to the extent that any such updates, replacements or other 1-D products are added to Schedule 1 in accordance with Sections 8.1 or 8.3.  “1-D Products” shall mean gel electrophoresis equipment, instrumentation and accessories that aid in the analysis of proteins according to a single property, either isoelectric point or molecular weight, and that aid in the analysis of nucleic acids according to a combination of charge and

 

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size.  “2-D Products” shall mean gel electrophoresis equipment, instrumentation and accessories that aid in the analysis of proteins according to the two independent properties of isoelectric points and molecular weight in any combination.  The terms Products, 1-D Products and 2-D Products shall not include reagents (including gel electrophoresis reagents).  Notwithstanding anything herein to the contrary, any and all products listed in Schedule 1 shall be deemed a “Product” under this Agreement, regardless of whether any such product bears or otherwise displays an AB Trademark, a Hoefer Trademark, a third party trademark or any combination of the foregoing or no trademark.

 

1.12                            “Restricted Distributor” shall mean any of the following entities: [OMITTED MATERIAL] and each of their respective Affiliates.

 

1.13                            “Seller Affiliate” shall mean (a) Amersham plc and any successor to Amersham plc, (b) any company or entity (including, without limitation, AB and Seller) that, on or after the Effective Date, directly or indirectly through one or more intermediaries is Controlled by Amersham plc or by a successor to Amersham plc, and any successor to any such company or entity, and (c) in the event of an assignment by AB to an assignee in accordance with Section 19.9, such assignee and Affiliates of such assignee; provided that no Qualified Company (as hereinafter defined), Non-Qualified Company (as hereinafter defined), or owner of Amersham plc or of a successor to Amersham plc shall be considered a Seller Affiliate.

 

1.14                            “Territory” shall mean the world.

 

1.15                            “USD” shall mean United States Dollars.

 

2.                Appointment of Distributor .

 

2.1  Appointment .  Subject to the terms and conditions hereof and except as otherwise set forth in Section 2.4 below, Hoefer hereby appoints AB as the exclusive distributor, marketer and seller of the Products which, subject to Section 2.5 below, bear or otherwise display AB Trademarks in the Territory.  AB agrees to market, distribute and sell the Products solely under AB Trademarks unless the parties agree in writing that AB may market, distribute and sell Products which bear the AB Trademarks and/or Hoefer Trademarks.  The preceding notwithstanding, the parties acknowledge that Hoefer and AB each have an inventory of Products that may bear both the AB and Hoefer Trademarks and that Hoefer will require a reasonable period of time in which to modify its procedures so as to manufacture and sell Products which, consistent with past practice, or as reasonably requested by AB and to the extent practicable, bear AB Trademarks and, unless otherwise agreed by the parties in writing, do not bear Hoefer Trademarks.  Accordingly, the parties agree as follows: (a) Hoefer will exercise commercially reasonable efforts to promptly modify its procedures in order to manufacture, sell or resell Products to AB which consistent with past practice, or as reasonably requested by AB and to the extent practicable, bear AB Trademarks and, unless otherwise agreed by the parties in writing, do not bear Hoefer Trademarks; (b) for a period of up to 270 days after the Effective Date, Hoefer may supply, and AB shall accept, delivery of Products which may bear Hoefer Trademarks; and (c) AB shall have the right to market, sell and distribute any such Products and any other Products in AB’s inventory which may bear Hoefer Trademarks, whether before or

 

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after the foregoing 270 day period.  For the avoidance of doubt: (x) Hoefer may not sell to any party other than AB any Product that bears an AB Trademark; and (y) AB may not use any of the Hoefer Trademarks, except in connection with (i) distributing and selling of any Products which AB has in inventory on the date hereof or which are purchased from Hoefer prior to the end of the foregoing 270 day period and/or (ii) distributing marketing materials in existence on the date hereof, without the prior written consent of Hoefer.  AB shall obtain Hoefer’s written approval of all samples of any materials (other than materials provided by Hoefer) which bear or display any Hoefer Trademark or Product Trademark prior to any use of a Hoefer Trademark or Product Trademark, any and all use of the Hoefer Trademarks and of the Product Trademarks by AB or any of its Affiliates inures solely to the benefit of Hoefer and any right AB or any of its Affiliates may acquire in such trademarks is hereby assigned to Hoefer or its Affiliates absolutely; provided further that, AB shall not use the Hoefer Trademarks or the Product Trademarks in a manner or form whereby, in Hoefer’s reasonable opinion, the goodwill and reputation of such trademarks are prejudiced or damaged.

 

2.2  Hoefer is Exclusive Supplier .  Except as otherwise permitted in Section 8.3(b) or Section 15, AB agrees that, in the geographic areas and for the time periods set forth in this Section 2.2 below AB and the Seller Affiliates shall not, directly or indirectly, manufacture any product, purchase any product from any company or entity other than Hoefer, and/or market, sell or distribute any product (other than a Product pursuant to this Agreement) which (a) is substantially the same as any of the Products or (b) has substantially the same external appearance, base function and internal components of any of the Products or is functionally equivalent thereto.  Such restrictions shall apply: (x) in the European Economic Area for the Initial Term plus any Tail Period; and (y) in the rest of the world for the Term of this Agreement plus any Tail Period (the aforementioned territories being referred to as the “ Restricted Territories ” during the applicable time periods).  The term “ Tail Period ” shall mean: (m) in the European Economic Area, the one (1) year period following any termination of this Agreement (other than any termination by AB under Section 17.2) effective during the Initial Term; and (n) in the rest of the world, the one (1) year period following any termination of this Agreement (other than any termination by AB under Section 17.1(b) or 17.2); provided that such Tail Period shall not extend beyond September 30, 2013.

 

2.3  AB Sub-distributors .  AB shall be entitled to appoint one or more sub-distributors (each, a “Sub-distributor”).  AB shall have written agreements (each a “Sub-distribution Agreement”) with any and all Sub-distributors that are not Affiliates of AB (each an “Independent Sub-distributor”); provided, however, that in no event shall any Sub-distribution Agreement contain terms and conditions, that are inconsistent with the terms and conditions of this Agreement.  Notwithstanding AB’s entering into any Sub-distribution Agreement, AB shall remain responsible to Hoefer for any and all actions or inactions of its Sub-distributors in connection with the performance of any AB obligations under this Agreement, and AB shall not be relieved from responsibility for its obligations under this Agreement.  Hoefer shall not be required to seek fulfillment of, or otherwise enforce, such obligations from or against any Sub-distributor or any party other than AB.

 

2.4  Hoefer Distribution of Equivalent Products .  Hoefer may directly (e.g., to end users or customers), or indirectly, through one or more distributors, market, sell and/or distribute Equivalent Products under any trademarks other than the AB Trademarks or no trademarks;

 

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provided, however, that in light of, among other things, AB’s undertakings in Section 11.1(a) below, Hoefer will not engage or appoint any Restricted Distributor to market, sell and/or distribute any of the Equivalent Products:  (a) during Contract Year One, Contract Year Two or Contract Year Three; and (b) thereafter until the earlier of: (i) the termination of this Agreement; and (ii) such time as the total amount of Products purchased by AB from Hoefer multiplied by the transfer price for such Products then in effect under this Agreement (reduced by any credit notes or refunds issued for returns or discounts applied to any such Products) for each of three (3) consecutive calendar months falls below [OMITTED MATERIAL] .

 

2.5  AB Trademarks Usage .  Hoefer shall utilize AB Trademarks only in connection with the manufacturing of Products for sale to AB pursuant to this Agreement.  Hoefer agrees as follows:

 

(a)  Hoefer shall be responsible for the safe and suitable packaging of the Products for delivery;

 

(b)  The Products, product literature and packaging shall, consistent with past practice, or as reasonably requested by AB and to the extent practicable, state that the Products are manufactured by and/or for Hoefer and shall, consistent with past practice, or as reasonably requested by AB and to the extent practicable, bear AB Trademarks specified by AB to be affixed by and at the expense of Hoefer (except as otherwise contemplated in Section 10.1(k)).  Hoefer shall obtain AB’s prior written approval of all samples of product literature and packaging relating to the Products.

 

(c)  AB or its Affiliates own all AB Trademarks (other than Product Trademarks) appearing on or used in relation to the Products and literature pursuant to this Section 2.5;

 

(d)  Hoefer may only use AB Trademarks for the purposes set forth in this Agreement during the Term of this Agreement; provided, however, that nothing herein shall restrict Hoefer’s use of any of the Product Trademarks after the termination of this Agreement;

 

(e)  Any and all use of the AB Trademarks (other than Product Trademarks) by Hoefer will inure to the benefit of AB and any right Hoefer or any of its Affiliates may acquire in such trademarks is hereby assigned to AB or its Affiliates absolutely;

 

(f)  Hoefer shall not use the AB Trademarks in a manner or form whereby, in AB’s reasonable opinion, the goodwill or reputation of such trademarks is prejudiced or damaged; and

 

(g)  Hoefer hereby grants AB and its Affiliates an exclusive (even as to Hoefer), worldwide, non-royalty bearing license to use the Product Trademarks in connection with distributing and selling the Products, any marketing media relating to the Products and otherwise consistently with its rights and obligations hereunder during the Term.  AB shall not and will ensure that none of its Affiliates modify or alter the Product Trademarks without first obtaining Hoefer’s written consent, which shall not be unreasonably withheld or delayed.  AB and its Affiliates shall display such notices as may be necessary to preserve and protect Hoefer’s Intellectual Property Rights in the Product Trademarks.  AB and its Affiliates shall not use any

 

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trademark, trade name, logo, internet domain name or design which is the same or substantially similar to any of the Product Trademarks as such to cause confusion in the mind of a reasonable person.  If Hoefer at any time finds that AB’s or any of its Affiliates’ use of any of the Product Trademarks is not consistent with standards of quality acceptable to Hoefer, Hoefer may notify AB in writing of such deficiencies, and if AB fails to correct such deficiencies within forty five (45) days after receipt of such notice, Hoefer may, at its election, terminate this license effective immediately.  Hoefer reserves all rights to the Product Trademarks except as expressly granted herein to AB and its Affiliates.  AB and its Affiliates shall never challenge Hoefer’s ownership of or right to license, or the validity of, the Product Trademarks, any application for registration thereof or any trademark registration thereof.

 

3.                Forecasts; Orders .

 

3.1  Forecasts .  AB will submit a 90 day non-binding units forecast for AB’s future Product needs to Hoefer each calendar quarter.  This forecast will be used by Hoefer for production planning.  AB shall submit such forecast to Hoefer no later than ten (10) days after the beginning of each calendar quarter.  AB shall use commercially reasonable efforts to provide reasonable estimates in such forecasts.

 

3.2  Orders .  Although AB may submit its standard purchase order form for orders, change orders, or other notices hereunder, such orders, change orders, or notices will be governed by the terms and conditions of this Agreement and any term or condition set forth in any such form which is inconsistent with or in addition to the terms and conditions of this Agreement shall have no force or effect.  AB will submit purchase orders (each, a “PO”) in a manner and form consistent with past practice.  Subject to the foregoing, AB may, in its sole discretion, change the manner in which it submits POs; provided that such change does not unreasonably increase the expenses incurred by or workload required by Hoefer to respond to and/or accept any such PO.

 

3.3  Acceptance of Orders .  Hoefer shall accept any PO submitted by AB that is consistent with the terms of this Agreement.  If AB submits a PO that is not consistent with the terms of this Agreement, Hoefer will notify AB of such fact within five (5) business days and each of AB and Hoefer will work together expeditiously and in good faith to address and resolve the issues which caused Hoefer to query such PO.  If the parties cannot resolve such outstanding issues within five (5) business days after the date of Hoefer’s notice, Hoefer may reject such PO.  If Hoefer does not give AB notice of a PO’s inconsistency with this Agreement within five (5) business days, such PO shall be deemed accepted.  Notwithstanding anything herein to the contrary, in the event that AB submits a PO which is consistent with the terms of this Agreement but contains terms which Hoefer cannot reasonably fulfill (e.g., delivery timing or unusually large order (as measured against AB’s applicable forecast or, if no such forecast has been issued, against AB’s average orders during the prior calendar quarter)), Hoefer shall notify AB within five (5) business days and each of AB and Hoefer will work together expeditiously and in good faith to address and resolve such issue(s) within five (5) business days.  If the parties cannot resolve such issue(s) within five (5) business days after the date of Hoefer’s notice, Hoefer may reject such PO.   If Hoefer does not give AB notice that Hoefer cannot reasonably fulfill a PO within five (5) business days, such PO shall be deemed accepted.

 

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4.                Delivery of Products .

 

4.1  “Ex Works” Delivery .  The Products sold by Hoefer to AB shall be delivered “ex works” Hoefer’s production facility located in San Francisco, California, or if such location is moved, to such other location as Hoefer notifies AB in writing.  The term “ex works” as used in this Agreement refers to Incoterms 2000.

 

4.2  Delivery of Products .  Subject to the requirement that the Products shall be delivered “ex works”, Hoefer will deliver, consistent with past practice, the Products covered by a PO which it has accepted or is deemed to have accepted.  AB may change the way that Products are delivered “ex-works” from Hoefer to AB, at AB’s sole discretion; provided that such change does not unreasonably increase the expenses incurred by or workload required by Hoefer to so deliver such Products.

 

5.                Prices .

 

5.1  Initial Price List .  The transfer prices for Products sold by Hoefer to AB from the Effective Date until December 31, 2004 shall be the transfer prices set forth in Schedule 1 attached hereto; provided that such transfer prices shall be not less favorable to AB than any transfer prices for Equivalent Products offered by Hoefer to any other customer or distributor under substantially similar circumstances (e.g., substantially similar purchase commitments and volumes).

 

5.2  Delivery of Subsequent Price Lists .  Subsequent price lists for the Products shall be prepared in accordance with the provisions of this Section 5 and issued by Hoefer at least three (3) months prior to the commencement of calendar year 2005 and each calendar year thereafter.  Notwithstanding any other provisions of this Agreement, in all cases transfer prices shall be not less favorable to AB than any transfer prices for Equivalent Products offered by Hoefer to any other customer or distributor under substantially similar circumstances (e.g., substantially similar purchase commitments and volumes).

 

5.3  Price Increases .  The parties shall meet on or before one hundred twenty (120) days prior to the end of each calendar year beginning with calendar year 2004 and negotiate in good faith increases in the transfer prices of Products to be sold to AB in the subsequent calendar year such price increase to be effective as of on January 1 of each such calendar year; provided, that (a) for calendar year 2005, Hoefer may, in its sole discretion, increase the transfer prices of Products sold to AB by up to [OMITTED MATERIAL] over the transfer prices previously in effect, and (b) for each of calendar years 2006 and 2007 and each calendar year thereafter, Hoefer may, in its sole discretion, increase the transfer prices of Products sold to AB by up to [OMITTED MATERIAL] over the transfer prices previously in effect.  Any transfer price increase in excess of [OMITTED MATERIAL] in 2005 and [OMITTED MATERIAL] in each of 2006 and 2007 and in each calendar year thereafter must be mutually agreed upon by the parties; provided however that, in the event that AB or any Seller Affiliate, directly or indirectly, manufactures any Restricted Product, purchases any Restricted Product from any company or entity other than Hoefer, and/or markets, sells or distributes any Restricted Product (other than a Product pursuant to this Agreement) in the European Economic Area during the Renewal Term, AB will immediately notify Hoefer in writing and Hoefer may unilaterally increase the transfer prices of

 

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Products sold to AB by up to [OMITTED MATERIAL] over the transfer prices previously in effect.  The term “Restricted Product” shall mean any 1-D Product other than any product described in Section 15.1(a) or any Rejected Requested 1-D Product.

 

5.4  General .  All transfer prices for Products shall be stated in USD and will exclude those items described in Section 9.5 below, which items shall be paid by AB in accordance with Section 9.5 below.

 

6.                Minimum Annual Purchases .

 

6.1  For purposes of this Section 6, a “purchase” of Products shall be deemed to be made on the actual date that Hoefer delivers the Products “ex works” in accordance with Section 4 above.  A purchase of Products shall be deemed to have been made as of the final day of Contract Year Three, notwithstanding that Hoefer has not delivered such Products “ex works”, in the event that (a) AB has submitted a PO for such Products thirty (30) days or more prior to such date and (b) such PO has been deemed accepted by Hoefer in accordance with Section 3 of this Agreement.

 

6.2  During each of Contract Year One, Contract Year Two and Contract Year Three, AB will purchase from Hoefer a sufficient number of Products such that the aggregate purchase price (this calculation to be based on the units of Products purchased by AB from Hoefer during a Contract Year multiplied by the applicable transfer price for such Products then in effect for such Contract Year reduced by any credit notes or refunds issued for returns or discounts applied to such purchased Products) (the “Aggregate Purchase Price”) of Products purchased by AB during a Contract Year shall be at least equal to the applicable Adjusted Contract Year Purchase Minimum (each as determined and defined on Schedule 2 ); provided that it shall not be a breach of this Agreement if AB does not meet such Adjusted Contract Year Purchase Minimum in any such period provided that AB complies with its obligations under Section 7.

 

7.                Minimum Adjustment Mechanisms; Failure to Meet Minimums; Inventory Over-Stocking Payment and Related Reports .

 

7.1  Minimum Adjustment Mechanisms .  As set forth in Schedule 2 , the Initial Contract Year Purchase Minimum (as defined on Schedule 2 ) for Contract Year Two and Contract Year Three shall be reduced by the amount of (i) the dollar value amount, if any, of the Aggregate Purchase Price of Products purchased by AB during the immediately prior Contract Year in excess of the Adjusted Contract Year Purchase Minimum for the immediately prior Contract Year.  In addition, as set forth in Schedule 2 , the Initial Contract Year Purchase Minimum for each Contract Year shall be reduced by the aggregate sales by Hoefer for sales of Equivalent Products during such Contract Year (this calculation to be based on units of Equivalent Products sold by Hoefer (excluding any and all returned units) multiplied by the transfer price for the corresponding equivalent Products then in effect under this Agreement).

 

7.2  Failure to Meet Minimums .  In the event that AB does not purchase, during any of Contract Year One, Contract Year Two or Contract Year Three, from Hoefer a sufficient number of Products such that the Aggregate Purchase Price of Products purchased by AB during such

 

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Contract Year is not equal to or greater than the applicable Adjusted Contract Year Purchase Minimum for such Contract Year, then the following shall apply:

 

(a)  Make Good Order . Subject to Section 7.2(b), on or prior to thirty (30) days after the end of any such Contract Year, AB shall submit to Hoefer a PO (a “Make Good PO”) which is clearly identified as a Make Good PO to order an amount of Products such that the aggregate purchase price (this calculation to be based on the units of Products ordered by AB from Hoefer via the Make Good PO multiplied by the applicable transfer price for such Products then in effect as of the date of such Make Good PO reduced by any discounts applied to such Products) (the “MGPO Aggregate Purchase Price”) of such Products is at least equal to the difference between (i) the applicable Adjusted Contract Year Purchase Minimum for such Contract Year and (ii) the Aggregate Purchase Price for all Products purchased by AB during such Contract Year prior to submitting such Make Good PO.  For the avoidance of doubt, the parties agree that purchases of Products pursuant to a Make Good PO will not be included as purchases of Products during any Contract Year in which the Make Good PO is submitted by AB for purposes of calculating whether AB has met an applicable Adjusted Contract Year Purchase Minimum.

 

(b)  Inventory Restriction .

 

(i)                                        Notwithstanding the provisions of Section 7.2(a), with respect to Contract Year Three only, AB shall not submit and shall not be permitted to submit a Make Good PO which orders an amount of Products such that the MGPO Aggregate Purchase Price for such ordered Products is in excess of the greater of X or Y where:

 

X = [OMITTED MATERIAL]

 

Y = [OMITTED MATERIAL]

 

As used herein, the “Starting Inventory Value” means the product of (A) the number of units of Products held by or on behalf of AB in inventory as of September 30, 2003 as set forth on Schedule 5 (the “Starting Inventory Units”) and (B) the transfer price per unit of such Products as of September 30, 2006, or if such Products have been removed from Schedule 1 , the transfer price of such Products as of the date they were removed from Schedule 1 .  As used herein, the “Ending Inventory Value” means the product of (1) the number of units of Products held by or on behalf of AB in inventory as of September 30, 2006 and (2) the transfer price per unit of such Products as of September 30, 2006, or if such Products have been removed from Schedule 1 , the transfer price of such Products as of the date they were removed from Schedule 1 .  AB shall deliver to Hoefer notice within a reasonable time after September 30, 2006, setting forth the number of units of Products held by or on behalf of AB in inventory as of such date and AB’s computation of the Starting Inventory Value and the Ending Inventory Value.  AB shall use the same methodology to measure the number of units of Products held by or on behalf of AB in inventory as of September 30, 2006 as it used to calculate the Starting Inventory Units; provided that such methodology will incorporate the assumptions set forth on Schedule 5 .

 

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(ii)                                     For the avoidance of doubt, to the extent that the restriction in Section 7.2(b)(i) actually applies to a Make Good PO to be submitted by AB, AB will only be permitted to submit a Make Good PO which orders an amount of Products such that the MGPO Aggregate Purchase Price for such ordered Products is equal to the greater of X or Y (each as defined in Section 7.2(b)(i) above).

 

(c)  Margin Payment .  In the event that (i) AB does not submit a Make Good PO to order an amount of Products such that the MGPO Aggregate Purchase Price for such ordered Products is at least equal to the difference between (A) the Adjusted Contract Year Purchase Minimum for Contract Year Three and (B) the Aggregate Purchase Price for Products purchased by AB during Contract Year Three or (ii) Section 7.2(b) prohibits AB from submitting such a Make Good PO, on or prior to thirty (30) days after the end of Contract Year Three, AB shall pay to Hoefer an amount equal to [OMITTED MATERIAL] (such amount, the “Margin Payment”) where:

 

P = [OMITTED MATERIAL]

 

Q = [OMITTED MATERIAL]

 

R = [OMITTED MATERIAL]

 

7.3  Inventory Over-Stocking Payment .  In addition to any payments required to be made pursuant to Section 7.2(c), on or prior to thirty (30) days after the end of Contract Year Three, AB will pay to Hoefer an amount equal to [OMITTED MATERIAL] where:

 

J = [OMITTED MATERIAL]

 

K = [OMITTED MATERIAL]

 

7.4  Reports .  Within 15 days after the end of each of March 31 and September 30 during Contract Years One, Two and Three, (a) AB will deliver to Hoefer a written report certified by an officer of AB which sets forth the units of Products held by or on behalf of AB as of each such March 31 or September 30 and (b) Hoefer will deliver to AB a written report certified by an officer of Hoefer which sets forth the aggregate transfer prices received by Hoefer for sales of Equivalent Products during the six (6) months ending on such March 31st or September 30th, as applicable (this calculation to be based on units of Equivalent Products sold by Hoefer during such periods multiplied by the then current transfer price applicable to the corresponding

 

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equivalent Products sold to AB, or if AB has discontinued selling such equivalent Products as of such date, the transfer price of such equivalent Products as of the date they were discontinued.

 

For the avoidance of doubt, the parties acknowledge and agree that Schedule 3 attached hereto sets forth examples of the Minimums Mechanisms and the Inventory Over-Stocking Payment described in Sections 7.2(a), 7.2(b), 7.2(c) and 7.3.

 

8.                Products .  The parties acknowledge that Hoefer will, from time to time, update products and develop new products which will either replace current Products or represent additions to Hoefer’s existing catalog of products.  Accordingly, the products listed on Schedule 1 may be amended from time to time in the following manner:

 

8.1  Adding, Updating and Replacing 1-D Products .  When Hoefer develops an additional, updated or replacement 1-D Product, Hoefer shall notify AB in writing of the development of any such product, and describe in reasonable detail its specifications and functions and, for up to 60 days after Hoefer delivers such notice, Hoefer and AB will negotiate in good faith the transfer price at which Hoefer will sell such product to AB taking into consideration the prices of any comparable Products.  If the parties mutually agree on the applicable transfer price at which Hoefer will sell such 1-D product to AB prior to the expiration of such 60 day period, the parties will promptly attach an amendment to Schedule 1 which will identify such product and the corresponding transfer price and upon attaching such amendment such product will be deemed to be a “Product” under and subject to this Agreement.  If the parties cannot agree on such applicable transfer price prior to the expiration of such 60 day period, such product will only be (a) added to Schedule 1 and deemed a “Product” under or subject to this Agreement on such date as AB purchases such product from Hoefer (such date, the “Section 8.1 Sale Date”) and (b) deemed an “Equivalent Product” under or subject to this Agreement if and to the extent it is sold by Hoefer to any third party after the Section 8.1 Sale Date.  AB shall be entitled to purchase such product from Hoefer at a price no less favorable to AB than any prices for such product offered by Hoefer to any other customer or distributor under substantially similar circumstances (e.g., substantially similar purchase commitments and volumes).   For the avoidance of doubt, (i) sales of products described in this Section 8.1 by Hoefer to third parties on and after the Section 8.1 Sale Date will be deemed sales of Equivalent Products and (ii) sales of products described in this Section 8.1 by Hoefer to AB shall be deemed sales of Products and, in each case, such sales will be taken into account in the computations with respect to the Adjusted Contract Year Purchase Minimums as set forth in Schedule 2 .

 

8.2  Adding 2-D Products or other non-1-D products .

 

(a)  Hoefer hereby grants to AB a right of first negotiation to be the exclusive (even as to Hoefer) distributor of any 2-D Product or other non-1-D Product developed by Hoefer while this Agreement is in effect, such products to be distributed under AB Trademarks.  The right of first negotiation shall be exercised as follows: (i) Hoefer will notify AB in writing of the development of any such product, and describe in reasonable detail its specifications and functions, a reasonable period of time prior to product launch; (ii) if AB notifies Hoefer within 30 days of receiving Hoefer’s notice that it may be interested in distributing such product, AB will be offered a reasonable opportunity to evaluate the product and both parties will negotiate in good faith the transfer price and other principal terms relating to the distribution of such product

 

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within 45 days of the date on which AB received Hoefer’s notice; and (iii) if Hoefer and AB agree to such terms during such 45 day period, Hoefer and AB shall use good faith efforts to enter into a separate distribution agreement relating to such product within 90 days of the date on which AB received Hoefer’s notice.

 

(b)  In the event that Hoefer and AB do not enter into an exclusive distribution agreement with respect to any 2-D Product or other non-1-D Product, within such 90 day period, Hoefer may directly (e.g., to end users or customers), or indirectly, through one or more distributors, including but not limited to, Restricted Distributors, market, sell and/or distribute such products but on transfer price terms which are no better than those which were offered to AB; provided that in any event, AB shall be entitled to purchase any such product from Hoefer at a price no less favorable to AB than any price for such product offered to any other customer or distributor under substantially similar circumstances (e.g., substantially similar purchase commitments and volumes); provided further, and notwithstanding any of the foregoing, that AB shall not be so entitled to purchase with respect to any such product with respect to which Hoefer has entered into an exclusive distribution agreement with another distributor.  Notwithstanding anything herein, in no event will any 2-D Products or other non-1-D Products described in this Section 8.2 be deemed to be a “Product” or an “Equivalent Product” under this Agreement, and sales by Hoefer or purchases by AB of such products shall not be taken into account in the computation of any of the Adjusted Contract Year Purchase Minimums as set forth in Schedule 2 .

 

8.3  AB’s Request For Adding 1-D Products .

 

(a)  AB VP Product Management Genomics (or such VP’s designee) and/or the AB VP Product Management Proteomics (or such VP’s designee) will meet with the Hoefer Sales and Marketing Manager (or such Manager’s designee) and/or Research and Development Manager (or such Manager’s designee) every six months starting three months after the Effective Date to discuss, among other things, product development issues.  In the event that AB desires to distribute a new product that replaces a Product or any other product that AB would otherwise not be permitted to develop, manufacture or sell pursuant to the Purchase Agreement or Section 2.2 hereof (a “Requested 1-D Product”), AB will so notify Hoefer of such desire during any such meeting in a writing (together with a reasonably detailed description of the proposed technical specification and functions, competitive comparison, unique selling propositions, expected end-user sales price, transfer price required, sales volumes, sales channels and requested launch date) (each a “Requested 1-D Product Notice”) and shall offer to Hoefer the first opportunity to develop, manufacture and sell such Requested 1-D Product.  If Hoefer notifies AB within 30 days of receiving a Requested 1-D Product Notice that it may be interested in developing, manufacturing and selling such Requested 1-D Product, both parties will, for up to 60 days after Hoefer delivers such notice, negotiate in good faith the transfer price at which Hoefer will sell such Requested 1-D Product to AB taking into consideration the prices of any comparable Products.  If the parties mutually agree on the applicable transfer price at which Hoefer will sell such Requested 1-D Product to AB prior to the expiration of such 60 day period, the parties will promptly attach an amendment to Schedule 1 which will identify such Requested 1-D Product and the corresponding transfer price and such product will be deemed to be a “Product” under and subject to this Agreement at such time as Hoefer notifies AB that such product is available for sale.  If the parties cannot agree on such applicable transfer price prior to

 

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the expiration of such 60 day period and Hoefer develops such Requested 1-D Product, such Requested 1-D Product will be (i) added to Schedule 1 and be deemed a “Product” under or subject to this Agreement on such date as AB purchases such product from Hoefer (such date, the “Section 8.3 Sale Date”) and (ii) deemed an “Equivalent Product” under or subject to this Agreement if and to the extent it is sold by Hoefer to any third party after the Section 8.3 Sale Date.  AB shall be entitled to purchase such Requested 1-D Product from Hoefer at a price no less favorable to AB than any prices for such product offered by Hoefer to any other customer or distributor under substantially similar circumstances (e.g., substantially similar purchase commitments and volumes).   For the avoidance of doubt, sales of Requested 1-D Products (A) by Hoefer to third parties on and after the Section 8.3 Sale Date will be deemed sales of Equivalent Products and (B) by Hoefer to AB shall be deemed sales of Products and, in each case, such sales will be taken into account in the computations with respect to the Adjusted Contract Year Purchase Minimums as set forth in Schedule 2 .  Both AB and Hoefer accept that only a reasonable number of such Requested 1-D Products should be proposed by AB, based on their size and complexity and based on the capacity of Hoefer’s research and development department.

 

(b)  If, during the Renewal Term, AB delivers a Requested 1-D Product Notice and either (i) Hoefer does not notify AB that it may be interested in developing, manufacturing and selling such Requested 1-D Product within 30 days of receiving such Requested 1-D Product Notice or (ii) Hoefer and AB do not, after negotiating in good faith for the 60 day period described in Section 8.3(a) above, agree on the applicable transfer price at which Hoefer will sell such Requested 1-D Product to AB (any Requested 1-D Product described in the foregoing subsections (i) or (ii), a “Rejected Requested 1-D Product”), then AB and its Affiliates may develop or have developed, manufacture or have manufactured, sell and/or distribute such Rejected Requested 1-D Product, but on terms with respect to transfer price which are no better than those which were offered to Hoefer.  The manufacture, sale and/or distribution of any Rejected Requested 1-D Product by AB or its Affiliates during the Renewal Term shall not be deemed to be a breach of Section 2.2 or Section 15 of this Agreement or of Section 3.6 of the Purchase Agreement by AB.  For the avoidance of doubt, AB agrees that it shall not develop or have developed, manufacture or have manufactured, sell and/or distribute any Requested 1-D Product during the Initial Term.

 

8.4  Removing Products .  Hoefer may remove obsolete or replaced Products from Schedule 1 by giving AB not less than six (6) months prior written notice.  Such removal shall be effective six (6) months from the date that Hoefer delivers such written notice, unless the parties mutually agree in writing to a different effective date.  Notwithstanding anything to the contrary in this Section 8.4, (a) Hoefer shall not without the written consent of AB remove from Schedule 1 any Product which Hoefer continues to sell or distribute directly (e.g., to end users or customers), or indirectly, through one or more distributors, after such removal date and (b) any removal of a Product from Schedule 1 in the absence of the agreement of AB to the contrary shall be accompanied by a pro rata reduction (based on the prior sales volume of such product) in the Adjusted Contract Year Purchase Minimum for the current period as well as future periods.

 

8.5  Replacing Minor Products .  Notwithstanding anything herein to the contrary, Hoefer may modify Schedule 1 to replace any Product, the per unit transfer price of which is less than one hundred USD ($100), with a replacement product which has the same functionality and

 

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transfer price upon reasonable prior written notice to AB.  Each such replacement product will be deemed to be a “Product” under and subject to this Agreement.  For the avoidance of doubt, nothing in this Section 8.5 will be deemed to cause or require any adjustment to any of the Adjusted Contract Year Purchase Minimums.

 

9.                Payment .

 

9.1  Timing .  Payment of invoices shall be made in full by AB in USD to Hoefer for all Products sold by Hoefer to AB no later than forty-five (45) days from the date of invoice in USD.

 

9.2  Delivery of Invoices .  No invoice shall be issued by Hoefer with respect to Products prior to the actual date Hoefer delivers such Products “ex works” in accordance with Section 4.  Although Hoefer may submit its standard invoice form, such invoices and any order confirmations or other standard forms issued by Hoefer will be governed by the terms and conditions of this Agreement and every term or condition set forth in any such invoice, order confirmation or other standard form which is inconsistent with or in addition to the terms and conditions of this Agreement shall have no force or effect.

 

9.3  Wire Transfer .  All payments to be made by AB to Hoefer hereunder shall be made in USD by wire transfer in immediately available funds to such bank account as Hoefer shall specify in writing to AB.

 

9.4  Deductions .  No deductions are to be taken for any reason without a written credit memo from Hoefer for such amount, which credit memo shall not be unreasonably withheld or delayed.

 

9.5  Taxes; Shipping and Handling .  All transfer prices quoted for Products in accordance with the provisions of this Agreement shall be exclusive of any federal, state, municipal, value added and other taxes (such as sales, use or privilege taxes), all customs duties, shipping and handling costs (if any), imposts, or excise taxes, or personal property or other similar taxes or duties and any such taxes and other amounts shall be assumed and paid by AB except those taxes based on or measured by the net income of Hoefer.

 

9.6  Returns .  Should AB wish, for whatever reason, to return to Hoefer any items purchased from Hoefer, it will do this only with the agreement of Hoefer in the form of a return number issued by Hoefer; provided, however, that this Section 9.6 will not operate to limit or otherwise restrict any of AB’s remedies set forth in Section 13.1(b) below.

 

10.          Duties of Hoefer .

 

10.1                            Duties .  Without limiting any of its obligations otherwise set forth in this Agreement, Hoefer shall, except as otherwise provided below, at its sole expense, perform the following duties:

 

(a)  Hoefer shall manufacture Products and sell Products to AB for distribution as set forth herein.

 

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(b)  Hoefer shall, as reasonably requested by AB, assist AB in its sales and marketing program concerning the Products; provided however, that AB is solely responsible for all costs of marketing and sales efforts, except where agreed in advance and in writing, by Hoefer.

 

(c)  Hoefer shall provide sales and support training which AB and Hoefer shall jointly deem necessary for AB’s sales and service representatives, if any, in individual or other sessions at such location as AB shall reasonably request.  Hoefer will provide instructors with training materials and Products for use in connection with such training activities, provided that AB acknowledges that ownership of all rights, including but not limited to, all Intellectual Property Rights, in and to such materials remains vested in Hoefer.  Accordingly, AB undertakes not to amend or copy any such materials without Hoefer’s consent in writing and if this Agreement terminates, to immediately return all such materials (together with any copies or amended versions allowed as aforesaid) to Hoefer.

 

(d)  Hoefer shall update AB with all available information reasonably necessary or desirable for the effective marketing of Products and promptly notify AB, in suitable electronic format, of any material instrument modifications or changes.

 

(e)  Hoefer shall provide reasonable back-up technical support by e-mail, telephone and facsimile to AB and its Sub-distributors’ technical service and sales personnel in connection with the Products.

 

(f)  Hoefer will participate, as mutually agreed by Hoefer and AB, in AB’s promotional efforts, by providing relevant copy and photography for advertising, direct mail and/or any other promotional efforts in connection with the Products, the manner in which the materials are to be used to be mutually agreed upon by Hoefer and AB, all costs and expenses for advertising, direct mail and/or any other promotional effort are solely to be borne by AB.

 

(g)  Hoefer will update existing Products and develop new products and all such products will be offered to AB for sale by AB on an exclusive or non-exclusive basis in accordance with Section 8 above.  Hoefer will during the Initial Term of this Agreement dedicate not less than a monthly average (calculated over the Initial Term) of an aggregate of three full time equivalent employees within its research and development department to updating existing Products and developing new products.

 

(h)  Hoefer shall, as reasonably requested, perform maintenance, service and repair activities for Products at Hoefer’s then current rates and terms for such services and at levels consistent with prior practice.  If Hoefer does not currently provide such services as of the date they are requested, Hoefer will provide them to AB at Hoefer’s then current rates and terms.

 

(i)  Hoefer shall make available spare parts for Products for a period of not less than seven (7) years following the date the relevant Product is discontinued by Hoefer; provided that AB shall immediately notify Hoefer in the event that its commitments to its customers to make spare parts available for discontinued Products provide for a shorter period, and if any such commitments provide for a shorter period, the term of Hoefer’s applicable obligation set forth in this Section 10.1(i) will be automatically reduced to such shorter period in accordance with such

 

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notice.  Both parties accept and agree that the price of spare parts for discontinued Products may increase at a higher rate than the caps on price increases contemplated in Section 5.3 and thus, if Hoefer’s costs for such spare parts increase at a rate greater than the caps on price increases set forth in Section 5.3, Hoefer and AB will negotiate the transfer price for such spare parts in good faith.

 

(j)  Hoefer shall comply with all applicable export control laws and regulations relating to Hoefer’s export of Products pursuant to this Agreement and shall provide information and documentation reasonably necessary or useful to assist AB in complying with its obligations under applicable export control laws and regulations; provided that AB reimburse Hoefer for any and all reasonable out-of-pocket expenses incurred by Hoefer in connection with performing the foregoing obligations.

 

(k)  Hoefer shall make changes to the packaging and labeling of the Products as might be reasonably requested by AB; provided that AB shall reimburse Hoefer for any and all reasonable out-of-pocket expenses incurred by Hoefer in connection with performing the foregoing obligations (other than any expenses incurred by Hoefer to modify its manufacturing procedures to remove Hoefer Trademarks from Products supplied to AB pursuant to this Agreement), including the cost of any materials Hoefer has to scrap as a result of these changes.

 

11.          Duties of AB .

 

11.1                            Duties of AB .  Without limiting any of its obligations otherwise set forth in this Agreement, AB shall, except as otherwise provided below, at its sole expense, perform the following duties:

 

(a)  AB shall use commercially reasonable efforts to market, promote and sell the Products.  For purposes of this Section 11.1(a), “commercially reasonable efforts” shall mean the (i) listing and displaying of the Products in AB’s product catalog or any successor document and on AB’s website or any successor website in at least the same manner and prominence as the listing and displaying of the Transferred 1-D Product Lines (as defined in the Purchase Agreement) set forth in Chapter 9 of the AB 2003 BioDirectory Catalog and the AB website as of the Effective Date, and (ii) market, promote and sell any new Product with the level of marketing and promotion customarily given by AB to the launch of comparable new products.

 

(b)  AB shall, within 10 business days from the Effective Date (the “DVD Delivery Date”), deliver to Hoefer a copy of the AB website substantially as such web site existed on the Effective Date in DVD format (the “DVD”).  Upon Hoefer’s receipt of the DVD, the DVD will be attached to this Agreement as Schedule 4 .

 

(c)  AB shall establish and maintain an inventory of the Products, appropriate to meet the needs of purchasers and end-users.

 

(d)  AB shall notify Hoefer if it becomes aware of any substantial improper or wrongful use of the Products, any complaints or allegations of product liability in respect of the Products, or of any unauthorized use and/or exploitation of the Intellectual Property Rights contained in the Products and provide such assistance as Hoefer may reasonably request (at

 

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Hoefer’s expense) in connection with any action concerning such unauthorized use or exploitation.

 

(e)  AB shall, on a quarterly basis, at a minimum, brief Hoefer with any information regarding sales of the Products, that AB believes would be of benefit to the business relationship between the two parties.

 

(f)  AB shall not misrepresent Hoefer’s descriptions or instructions for the use of the Products.

 

(g)  AB shall comply with all applicable export control laws and regulations relating to AB’s or its Affiliates’ export of Products pursuant to this Agreement and shall provide information and documentation reasonably necessary or useful to assist Hoefer in complying with its obligation under applicable export control laws and regulations; provided that AB shall reimburse Hoefer for any and all reasonable out-of-pocket expenses incurred by Hoefer in connection with performing the foregoing obligations.

 

12.          Insurance .   From and after the Effective Date, for so long as this Agreement shall remain in effect and for two (2) years thereafter, Hoefer shall maintain or have maintained on its behalf, product liability insurance coverage on an occurrence basis for all occurrences relating to the Products sold by Hoefer to AB with limits of liability not less than Two Million USD ($2,000,000) combined single limit for bodily injury and property damage.  Hoefer shall, if requested, provide to AB a certificate evidencing coverage of such policy. 

 

13.          Warranties .

 

13.1                            Warranties of Hoefer .

 

(a)  Hoefer warrants that the Products sold to AB in accordance with the provisions of this Agreement will be free of defects in material and workmanship and will conform to the published specifications set forth in literature, packaging, inserts, materials and/or other documentation prepared by or on behalf of Hoefer and provided with the Products under normal use and service for a period of fifteen (15) months from the date on which Hoefer delivers the Products “ex works” in accordance with Section 4 above, except for those parts and/or materials which are consumed or expended in the normal use of the Products, in which case Hoefer warrants conformity to the published specifications described above for a period of ninety (90) days from the date on which Hoefer delivers the Products.  This warranty is void if the Product has been abused or misused or if repairs have been attempted by unauthorized persons.

 

(b)  The obligation of Hoefer for breaches of the warranties set forth in Section 13.1(a) is limited to, at Hoefer’s sole discretion (i) repairing the Product at Hoefer’s or one of its Affiliates’ premises or (ii) replacing the Product; provided that if AB so agrees, Hoefer may supply spare parts to AB for AB to carry out the repair.  The cost of the shipment of spare parts or replacement Products from Hoefer to AB will be paid by Hoefer and the cost of returning defective spare parts or defective Products to Hoefer, if such return is requested by Hoefer, will be paid by AB.

 

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(c)  As between Hoefer and AB, AB’s sole and exclusive remedy for breach of the warranties set forth in Section 13.1(a) is set forth in Section 13.1(b).

 

(d)  Hoefer warrants that it owns and has valid title to the Products sold to AB in accordance with the provisions of this Agreement free and clear of all liens, security interests or other encumbrances; provided however, that this representation and warranty shall not constitute any representation or warranty that such Products do not infringe or otherwise conflict with any copyright, patent, trade secret, trademark or other intellectual property right of any third party.

 

13.2                            Warranties of Hoefer and AB .  Each of Hoefer and AB represents and warrants that (a) it is a corporation organized and existing under the laws of its jurisdiction of incorporation with full power and authority to enter into and perform this Agreement; (b) this Agreement has been duly authorized by all necessary corporate action and constitutes the binding obligation of such party enforceable against such party in accordance with its terms, except as such enforceability may be limited by bankruptcy laws or other laws affecting the rights of creditors generally, equitable principles, or the discretionary powers of courts or arbitral bodies; (c) the person(s) executing this Agreement on its behalf has actual authority to bind it to this Agreement; and (d) its execution and performance of this Agreement does not and will not violate or conflict with any provision of its governing corporate instruments or of any commitment, agreement or understanding that it has or will have to or with any company or entity.

 

13.3                            Exclusion of Implied Warranties .  Except as provided in this Section 13, Hoefer makes no warranty as to any Products, or the results to be obtained from using any Products.  HOEFER EXCLUDES AND DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR TITLE AND ALL WARRANTIES ARISING FROM THE COURSE OF DEALING OR USAGE OF TRADE.

 

14.          Indemnification .

 

14.1                            Indemnification by Hoefer .  Hoefer shall indemnify, defend and hold harmless AB and its Affiliates and their respective officers, directors, shareholders, employees, successors and assigns against and from any and all third party claims, actions, suits and judgments, and against and from any and all claims, liabilities, losses, damages, costs (including, reasonable attorney’s fees), charges and other expenses of whatever nature and character (collectively, “Claims”) arising out of or in connection with (i) third party claims which result from the manufacture of any Product or (ii) an allegation by a third party that the Products sold by Hoefer to AB in accordance with this Agreement infringe any other party’s Intellectual Property Rights.  If Hoefer determines, in its sole discretion, that a claim of infringement is likely or if infringement is held to exist, or if injunctive relief is granted to a claimant, and such infringement is not covered by AB’s indemnification obligations under the Purchase Agreement (it being understood by the parties that such indemnification obligations will be governed by and subject to the provisions of the Purchase Agreement), Hoefer may, at its own expense and at its option, either (A) supply to AB revisions to the infringing material so as to make it noninfringing while retaining substantially similar functionality or substitute other noninfringing material of substantially similar functionality, or (B) procure for AB, at no additional expense to AB, the

 

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right to continue accessing, using and distributing the infringing material to the extent permitted by this Agreement, or (C) if Hoefer is not able to supply revisions or otherwise secure for AB the right to continue accessing, using and distributing the infringing material, on commercially reasonable terms, AB shall, upon written request by Hoefer, return the material claimed to be infringing and Hoefer will refund all amounts paid for such Product(s).  THE FOREGOING STATES HOEFER’S ENTIRE OBLIGATION AND LIABILITY WITH RESPECT TO ANY CLAIMS DESCRIBED IN CLAUSES (i) AND (ii) OF THIS SECTION 14.1.  Notwithstanding anything contained herein to the contrary, Hoefer shall not be required to provide indemnification with respect to any Claims to the extent that they result from (1) the gross negligence or willful misconduct of AB, (2) the combination of a Product with different product supplied by AB or any of its Sub-distributors, where such Claim would not have arisen but for such combination, (3) use of any Products for any use other than its reasonably intended use, (4) matters for which Hoefer is entitled to indemnification from AB pursuant to the Purchase Agreement or (5) any infringement or misappropriation of any third party Intellectual Property Right by any Subject Asset (as defined in the Purchase Agreement) and/or the Transferred 1-D Business (as defined in the Purchase Agreement) as conducted on or prior to the Closing Date (as defined in the Purchase Agreement), provided, however, that if Hoefer becomes aware of any such infringement or misappropriation it will take reasonable steps to avoid selling infringing or misappropriating Products to AB or any of its Sub-distributors.

 

14.2                            Indemnification by AB .  AB shall defend, indemnify and hold harmless Hoefer and its Affiliates and their respective  officers, directors, shareholders, employees, successors and assigns from and against any and all Claims arising out of or in connection with the distribution by AB or any of its Sub-distributors of Products pursuant to this Agreement.  Notwithstanding anything contained herein to the contrary, AB shall not be required to provide indemnification with respect to any Claims to the extent that they result from (a) the gross negligence or willful misconduct of Hoefer or (b) matters for which AB is entitled to indemnification from Hoefer pursuant to Section 14.1 above or the Purchase Agreement.  THE FOREGOING STATES AB’S ENTIRE OBLIGATION AND LIABILITY WITH RESPECT TO ANY CLAIMS ARISING OUT OF OR IN CONNECTION WITH THE DISTRIBUTION BY AB OR ANY OF ITS SUB-DISTRIBUTORS OF PRODUCTS PURSUANT TO THIS AGREEMENT.

 

14.3                            Notice; Defense of Claims .  An indemnified party may seek indemnification hereunder by giving written notice thereof to the indemnifying party.  The indemnified party shall also give written notice thereof to the indemnifying party promptly after it receives notice of a Claim being asserted, but the failure to do so shall not relieve the indemnifying party from any liability except to the extent that it is materially prejudiced by the failure or delay in giving such notice.  Such notice shall summarize the bases for seeking indemnification and any Claim being asserted by a third party.  Within thirty (30) days after receiving such notice the indemnifying party shall give written notice to the indemnified party stating whether it disputes the right for indemnification and whether it will defend against any third party Claim at its own cost and expense.  If the indemnifying party fails to give notice that it disputes an indemnification request within thirty (30) days after receipt of notice thereof, it shall be deemed to have accepted and agreed to the request and it shall defend against such third party Claim at its own cost and expense.  An indemnifying party (provided such indemnifying party acknowledges its obligation to indemnify if adversely determined) shall be entitled to direct the defense against

 

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a third party Claim with counsel selected by it as long as the indemnifying party is conducting a good faith and diligent defense.  If the named parties to the action or proceeding include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate under applicable standards of professional conduct, the indemnified party may engage separate counsel at the expense of the indemnifying party.  The indemnifying party shall have the right to compromise or settle any such dispute if such settlement includes an unconditional release of all claims against the indemnified party.  If such settlement does not include an unconditional release of all claims against the indemnified party, the settlement shall be subject to the prior written consent of the indemnified party (which consent shall not be unreasonably withheld, delayed or conditioned).  If a good faith and diligent defense is not being or ceases to be conducted by the indemnifying party, the indemnified party shall have the right, at the expense of the indemnifying party, to undertake the defense of such claim or liability (with counsel selected by the indemnified party), and to compromise or settle it, exercising reasonable business judgment.  If the third party claim or liability is one that by its nature cannot be defended solely by the indemnifying party, then the indemnified party shall make available such information and assistance as the indemnifying party may reasonably request and shall cooperate with the indemnifying party in such defense, at the expense of the indemnifying party.

 

15.          Exceptions to Exclusivity .

 

15.1                            Nothing in Section 2.2 shall prevent AB or any of the Seller Affiliates, from:

 

(a)  manufacturing, purchasing, marketing, promoting, selling or distributing anywhere in the world 2-D Products, 1-D Products used solely within in a 2-D Product or system (it being expressly understood that in no event shall any 1-D Product be marketed, purchased, promoted, sold or distributed as a stand-alone product), Multi-Channel Platforms, MegaBACE products, any products in the Retained Product Lines (as defined in the Purchase Agreement) (including any updates, replacements or functional equivalents thereof), any products for use in Diagnostics, and reagents (including gel electrophoresis reagents).  The term “ Multi-Channel Platforms ” shall mean plate systems with multiple microfabricated channels for electrophoresis and/or chromatography.  The term “ MegaBACE products ” shall mean high throughput, multi-channel capillary electrophoresis analysis systems for nucleic acid sequencing, genotyping and fragment analysis as well as for protein and carbohydrate analysis.  The term “ Diagnostics ” shall mean the testing or analysis of biological samples (whether human or otherwise), the results of which are provided to health care recipients and/or providers for use in the diagnosis of disease, assessing the predisposition to disease, determining genetic status, monitoring the progression of disease, determining efficacy of treatment of disease, clinical management of the health care recipients from which such samples are derived and/or performing research to discover and develop methods and technologies for any of the foregoing.

 

(b)  acquiring Control of, or being acquired by (in either case, whether by merger, sale of stock, assets or otherwise) any company or entity having annual, world-wide revenue in its last complete fiscal year in excess of one billion dollars ($1,000,000,000) (such acquired or acquiring company or entity together with any company or entity Controlled by such company or entity on or following the effective date of such acquisition (excluding Seller Affiliates), a “Qualified Company”); provided that following any such acquisition:  (i) except upon Hoefer’s

 

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receipt of the payment contemplated in Section 15.2 below, none of the catalogues, websites or sales personnel of any Seller Affiliate shall be used to market, promote, sell or distribute both Products and such Qualified Company’s Restricted Products in the Restricted Territory; (ii) each Seller Affiliate shall continue to use commercially reasonable efforts which are substantially equivalent to those used by such Seller Affiliate prior to such acquisition to market, promote, sell and distribute the Products and, in the case of AB, in accordance with Section 11.1(a); provided that upon Hoefer’s receipt of the payment contemplated in Section 15.2 below, each Seller Affiliate that markets, promotes, sells or distributes both Products and the Qualified Company’s Restricted Products in the Restricted Territory shall use substantially equivalent efforts (on a per product basis) to market, promote, sell and distribute Products as it uses to market, promote, sell and distribute the Qualified Company’s Restricted Products in the Restricted Territory (including, without limitation, listing and displaying the Products in such Seller Affiliate’s product catalogue or any successor document and on such Seller Affiliate’s website in a manner and prominence that are substantially equivalent to any listing and displaying of the Qualified Company’s Restricted Products in the Restricted Territory), and the Seller and the Seller Affiliates shall, in the aggregate, use substantially equivalent efforts (on a per product basis) to market, promote, sell and distribute Products as they use to market, promote, sell and distribute the Qualified Company’s Restricted Products in any Restricted Territory and (iii) no Seller Affiliate will (A) grant any license to or otherwise permit any Qualified Company to use the Relevant Patents (as defined in the Purchase Agreement) which are licensed to Hoefer for purposes of selling, developing, using or manufacturing Restricted Products in the Restricted Territory or (B) grant any license or sublicense to or otherwise permit any Qualified Company to use any of the Relevant Trade Secrets (as defined in the Purchase Agreement) for purposes of selling, developing, using or manufacturing Restricted Products in the Restricted Territory other than in accordance with the terms and conditions of the Trade Secrets License Agreement dated as of the date hereof between Amersham Biosciences (SF) Corp., a California corporation and Hoefer (the “Trade Secrets License Agreement”);

 

(c)  acquiring Control of, or being acquired by (in either case whether by merger, sale of stock, assets or otherwise), any company or entity having annual, world-wide revenue in its last complete fiscal year equal to or less than one billion dollars ($1,000,000,000) (such acquired or acquiring company or entity together with any company or entity Controlled by such company or entity on or following the effective date of such acquisition (excluding Seller Affiliates), a “Non-Qualified Company”), including any company or entity that manufactures, markets, promotes, sells or distributes Restricted Products; provided that following any such acquisition:  (i) the catalogues, websites or sales personnel of any Seller Affiliate shall not be used to market, promote, sell or distribute both Products and such Non-Qualified Company’s Restricted Products in the Restricted Territory; (ii) each Seller Affiliate shall continue to use commercially reasonable efforts which are substantially equivalent to those used by such Seller Affiliate prior to such acquisition to market, promote, sell and distribute the Products and, in the case of AB, in accordance with Section 11.1(a) and (iii) no Seller Affiliate will (A) grant any license to or otherwise permit any Non-Qualified Company to use the Relevant Patents (as defined in the Purchase Agreement) which are licensed to Hoefer for purposes of selling, developing, using or manufacturing Restricted Products in the Restricted Territory or (B) grant any license or sublicense to or otherwise permit any Non-Qualified Company to use any of the Relevant Trade Secrets (as defined in the Purchase Agreement) for purposes of selling, developing, using or manufacturing Restricted Products in the Restricted Territory other than in

 

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accordance with the terms and conditions of the Trade Secrets License Agreement; provided, further that, the preceding notwithstanding, in the event that a Seller Affiliate acquires Control of a Non-Qualified Company that manufactures, markets, promotes, sells or distributes Restricted Products that are competitive with the Products in the Restricted Territory, such Seller Affiliate shall use commercially reasonable efforts to promptly divest any portion(s) of such Non-Qualified Company’s business that manufactures, markets, promotes, sells or distributes such Restricted Products that are competitive with the Products in the Restricted Territory;

 

(d)  entering into joint ventures, strategic alliances or other collaborations (each a “Collaboration”) with any company or entity, even if such company or entity manufactures, purchases, markets, promotes, sells, or distributes Restricted Products, as long as (i) such Collaboration does not relate to Restricted Products in the Restricted Territory, (ii) the catalogues, websites or sales personnel of any Seller Affiliate are not used to market, promote, sell or distribute Restricted Products of any such company or entity in the Restricted Territory, and (iii) no Seller Affiliate will (A) grant any license to or otherwise permit any such company or entity to use the Relevant Patents (as defined in the Purchase Agreement) which are licensed to Hoefer for purposes of selling, developing, using or manufacturing Restricted Products in the Restricted Territory or (B) grant any license or sublicense to or otherwise permit any such company or entity to use any of the Relevant Trade Secrets (as defined in the Purchase Agreement) for purposes of selling, developing, using or manufacturing Restricted Products in the Restricted Territory other than in accordance with the terms and conditions of the Trade Secrets License Agreement; or

 

(e)  owning beneficially or of record up to five percent (5%) of the outstanding securities of a publicly-held corporation which engages in any Restricted Activity (as defined in the Purchase Agreement) and/or manufactures, purchases, markets, promotes, sells or distributes any Restricted Products in the Restricted Territory.

 

15.2                            Following an acquisition contemplated by Section 15.1(b), prior to the date of the first use (the “Integration Date”) by any Seller Affiliate or Qualified Company of the catalogues, websites or sales personnel of any Seller Affiliate to market, sell or distribute both Products and Restricted Products of any Qualified Company in the Restricted Territory (a) AB or another Seller Affiliate shall deliver to Hoefer reasonable prior written notice thereof, and (b) AB or another Seller Affiliate shall pay Hoefer as follows:

 

(i)                                      [OMITTED MATERIAL] , if the Integration Date occurs during Contract Year One, Contract Year Two or Contract Year Three;

 

(ii)                                   [OMITTED MATERIAL] , if the Integration Date occurs during Contract Year Four;

 

(iii)                                [OMITTED MATERIAL] , if the Integration Date occurs during Contract Year Five; or

 

(iv)                               [OMITTED MATERIAL] , if the Integration Date occurs during the Term after Contract Year Five.

 

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Upon making the foregoing payment, the restrictions set forth in Section 15.1(b)(i) shall have no further effect with respect to any acquisition transaction described in Section 15.1(b).  Each applicable Seller Affiliate shall continue to comply with the obligations set forth in Section 15.1(b)(ii) and (iii).

 

15.3                            Except as otherwise expressly stated herein, all terms and conditions of this Agreement will remain in full force and effect subsequent to an acquisition transaction described in Section 15.1(b) or 15.1(c); provided that no product of a Qualified Company or