TABLE OF CONTENTS

 

ARTICLE I - Definitions		1
ARTICLE II - Appointment		3
Section 2.1	Appointment	3
Section 2.2	Competition	3
ARTICLE III - Obligations of Distributor		3
Section 3.1	General Obligations of Edwards	3
Section 3.2	Costs and Expenses	4
Section 3.3	Sales and Marketing Option	4
ARTICLE IV - Obligations of PLC		4
Section 4.1	Transition Services	4
Section 4.2	Approvals	4
Section 4.3	Labeling of Products	4
Section 4.4	Clinical or Marketing Studies	5
Section 4.5	Installation Services and Services Provided Under Extended Service Agreements	5
Section 4.6	Warranty and Preventive Maintenance Services	5
Section 4.7	Recall of Products	5
Section 4.8	Product Liability Insurance	6
Section 4.9	Costs and Expenses	6
ARTICLE V - Sales and Marketing		6
Section 5.1	Marketing Plan	6
Section 5.2	Sales Plan	6
Section 5.3	Sales Material and Literature	6
Section 5.4	Training and Retention of Sales Personnel	6
Section 5.5	Performance Record of Sales Personnel	7
ARTICLE VI - Purchase Arrangements		7
Section 6.1	Purchase Forecasts for Products	7
Section 6.2	Purchaser Orders; No Minimum Product Quantities	7
Section 6.3	Placement of Orders	7
ARTICLE VII - Pricing, Payment, Shipping		8
Section 7.1	TMR Disposable Kit.	8
Section 7.2	HL-1 Laser Systems	8
Section 7.3	HL-2 Laser Systems	8
Section 7.4	Product Accessories	9
Section 7.5	Shipping	9
Section 7.6	Payment	9
ARTICLE VIII - Term and Termination; Annual Meeting		9
Section 8.1	Term and Renewal	9

 

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Section 8.2	Immediate Termination	10
Section 8.3	Annual Meeting	10
ARTICLE IX - Warranties and Indemnification		10
Section 9.1	Warranties	10
Section 9.2	Indemnification by PLC	10
Section 9.3	Indemnification by Edwards	11
Section 9.4	Indemnification Procedures	11
ARTICLE X - Intellectual Property Rights and Confidentiality		12
Section 10.1	Trademarks	12
Section 10.2	Confidential Information	12
ARTICLE XI - MISCELLANEOUS		13
Section 11.1	Relationship	13
Section 11.2	No Conflict	13
Section 11.3	Governing Law	13
Section 11.4	Escalation	13
Section 11.5	Jurisdiction and Consent to Service	14
Section 11.6	Notices	14
Section 11.7	Interpretation	15
Section 11.8	Severability	15
Section 11.9	Counterparts	15
Section 11.10	Entire Agreement; No Third Party Beneficiaries	15
Section 11.11	Amendments and Modifications; Waivers and Extensions.	16
Section 11.12	Assignment	16
Section 11.13	Exhibits	16
Section 11.14	Expenses	16
Section 11.15	No Consequential or Punitive Damages	16

 

Exhibits and Schedules
Exhibit A		Description of Products
Schedule 2.1		Distributors
Schedule 3.3		Sales Personnel
Schedule 4.1		Transition Services
Schedule 4.5		Installation Services and Services Relating to Extended Service Agreements
Schedule 4.6		Warranty and Preventive Maintenance Services
Schedule 4.8		Product Liability Insurance
Schedule 5.1		Marketing Plan
Schedule 5.2		Sales Plan
Schedule 7.3		HL-2 Laser System Customers
Schedule 7.4		Product Accessories

 

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DISTRIBUTION AGREEMENT

 

DISTRIBUTION AGREEMENT, dated as of January 9, 2001 this “Agreement”), by and among Edwards Lifesciences LLC, a Delaware corporation (“Edwards”), PLC Systems Inc., a Yukon Territory corporation (“PLC Parent”), and PLC Medical Systems, Inc., a Delaware corporation (“PLC”), which is a wholly owned subsidiary of PLC Parent.

 

WHEREAS, PLC has developed a carbon dioxide laser system and related accessories described in Exhibit A hereto (as set forth in Exhibit A, the “Products”), and desires that the sale and use of the Products be actively promoted in the fifty states of the United States of America and the District of Columbia (the “Territory”);

 

WHEREAS, Edwards is a company in the medical devices field with experience and expertise in the commercialization and distribution of medical devices;

 

WHEREAS, PLC desires to engage Edwards to purchase, resell and distribute the Products in the Territory; and

 

WHEREAS, Edwards desires to obtain rights to purchase, resell and distribute the Products in the Territory;

 

NOW, THEREFORE, in consideration of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I

 

Definitions

 

As used in this Agreement, the following terms shall have the following meanings:

 

“Agreement” shall have the meaning set forth in the Recitals.

 

“Automatic Renewal Threshold” shall have the meaning set forth in Section 8.1.

 

“Average End User Price” shall have the meaning set forth in Section 7.1.

 

“Damages” shall have the meaning set forth in Section 9.2.

 

“DBMR” shall have the meaning set forth in Section 2.2.

 

“Dispute” shall have the meaning set forth in Section 11.4.

 

“Edwards” shall have the meaning set forth in the Recitals.

 

“Edwards Facility” shall have the meaning set forth in Section 7.5.

 

“Effective Date” shall have the meaning set forth in Section 8.1.

 

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“Escalation Notice” shall have the meaning set forth in Section 11.4.

 

“Estimated End User Price “ shall have the meaning set forth in Section 7.1.

 

“ETL” shall have the meaning set forth in Section 4.2.

 

“FDA” shall have the meaning set forth in Section 4.2.

 

“HL-1 Laser System” shall have the meaning set forth in Exhibit A .

 

“HL-2 Laser System” shall have the meaning set forth in Exhibit A .

 

“HL-2 Purchase Price” shall have the meaning set forth in Section 7.3.

 

“Indemnified Party” shall have the meaning set forth in Section 9.3.

 

“Indemnifying Party” shall have the meaning set forth in Section 9.3.

 

“Initial Term” shall have the meaning set forth in Section 8.1.

 

“PLC” shall have the meaning set forth in the Recitals.

 

“PLC Parent” shall have the meaning set forth in the Recitals.

 

“Products” shall have the meaning set forth in the Recitals.

 

“Sales and Marketing Option” shall have the meaning set forth in Section 3.3.

 

“Scheduled Employees” shall have the meaning set forth in Section 3.3

 

“Services” shall have the meaning set forth in Section 4.5.

 

“Territory” shall have the meaning set forth in the Recitals.

 

“TMR Disposable Kit” shall have the meaning set forth in Exhibit A .

 

“Transaction Agreements” shall have the meaning set forth in Section 11.10.

 

“Usage Premium” shall mean, with respect to each contract pursuant to which an HL-1 Laser System or HL-2 Laser System is sold, the dollar amount by which the per-usage charge set forth in such contract exceeds the TMR Disposable Kit price set forth in such contract or if the TMR Disposable Kit price is not explicitly stated in such contract, the list price of a TMR Disposable Kit at the time the contract was entered into. In addition, Usage Premium shall also include the amount of any additional payments related exclusively to the use of the applicable Laser System, including, but not limited to, rental or lease payments.

 

“Warehouse Retesting” shall mean retesting an HL-2 Laser System to its original factory specifications due to the fact that it has been warehoused by Edwards for longer than the Warehouse Life.

 

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“Warehouse Life” shall mean [**], unless PLC reasonably determines, at any time during the term of this Agreement, that such period may be extended, but in no event shall such period be extended to more than [**]; provided, however that PLC shall provide Edwards with the data upon which it makes the determination to extend or maintain the Warehouse Life.

 

“Warranty Period” shall mean in the event (a) an HL-2 Laser System is shipped before the expiration of the Warehouse Life, the period from the date of installation until the [**] anniversary of such installation, but not to exceed [**] from the date of shipment to the end user; (b) an HL-2 Laser System is shipped after the expiration of the Warehouse Life and PLC has requested that such HL-2 Laser System be Warehouse Retested and Edwards ships without such Warehouse Retesting, the period from the date of sale to Edwards until the date which is [**] plus the Warehouse Life; (c) a proposed shipment of an HL-2 Laser System would occur after the expiration of the Warehouse Life, and Edwards and PLC agree to the Warehouse Retesting of such HL-2 Laser System, the period from the date of installation until the [**] anniversary of such installation, but not to exceed [**] from the date of shipment to the end user; and (d) a proposed shipment of an HL-2 Laser System would occur after the expiration of the Warehouse Life, and Edwards and PLC agree that Warehouse Retesting of such HL-2 Laser System is not necessary, the period from the date of installation until the [**] anniversary of such installation, but not to exceed [**] from the date of shipment to the end user.

 

ARTICLE II

 

Appointment

 

SECTION 2.1  Appointment. Subject to the terms and conditions contained in this Agreement, PLC hereby appoints Edwards as PLC’s exclusive independent distributor of the Products in the Territory. Edwards may not appoint a secondary or sub-distributor to sell the Products without PLC’s prior written consent, other than those set forth on Schedule 2.1. PLC shall not appoint any other agents, representatives, or distributors for the purpose of selling the Products in the Territory.

 

SECTION 2.2  Competition. Edwards shall not sell any devices in the Territory which directly compete with the Products in the field of myocardial revascularization either intraoperative or percutaneous that uses a device-based channeling means (“DBMR”) during the term of this Agreement. Edwards may market and sell medical devices, including, without limitation, products that may be used in connection with revascularization of the heart, as long as such medical devices are not within the field of DBMR and all other medical devices which it is selling as of the date hereof. Edwards does not currently sell any devices in the field of DBMR.

 

ARTICLE III

 

Obligations of Distributor

 

SECTION 3.1  General Obligations of Edwards. Edwards shall use commercially reasonable efforts to distribute and sell the Products in the Territory including, without limitation, the following:

 

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(a)                                   Promote the sale and use of Products in the Territory;

 

(b)                                  Provide customer service, including responding to customer inquiries and requests for quotes on Product pricing; and

 

(c)                                   Provide invoices to customers and manage accounts receivable and collection responsibilities for sales by Edwards of the Products.

 

SECTION 3.2  Costs and Expenses. Edwards shall bear all the costs and expenses associated with its obligations set forth in this Agreement.

 

SECTION 3.3  Sales and Marketing Option. Edwards shall have the option (the “Sales and Marketing Option”) which must be exercised, if at all, upon 30 days prior written notice to PLC given during or before the three-month period following the first anniversary of the date hereof, to assume full sales and marketing responsibility for the Products in the Territory and to offer employment, subject to Edwards’ standard employment qualifications, with base compensation, commission and benefits substantially competitive to those provided by PLC immediately prior to such offer to each PLC employee set forth on Schedule 3.3 (the “Scheduled Employees”), provided they meet the performance criteria set forth on Schedule 3.3. Upon exercise of the Sales and Marketing Option, PLC shall release performance reviews of the Scheduled Employees to Edwards, subject to the waiver of each such employee. If such Scheduled Employee refuses to waive access to his or her performance reviews, such refusal shall constitute a rejection of an offer of employment from Edwards and Edwards shall have no further obligations with respect to such employee and PLC shall be responsible for any severance pay pursuant to the last sentence of this section. If Edwards chooses not to offer employment to any Scheduled Employee that meets the performance criteria set forth on Schedule 3.3 and Edwards’ standard employment qualifications, Edwards shall pay to PLC the amount on Schedule 3.3 per such employee. In the event a Scheduled Employee rejects the employment offer by Edwards, PLC shall be responsible for severance pay to such employee, if any, pursuant to PLC’s then existing severance policy, if any.

 

ARTICLE IV

 

Obligations of PLC

 

SECTION 4.1  Transition Services. PLC shall and PLC Parent shall cause PLC to provide to Edwards at no cost the transition services set forth on Schedule 4.1 for a period of up to two months from the Effective Date which services Edwards may terminate in whole or in part at any time prior to the expiration of such two-month period.

 

SECTION 4.2  Approvals. PLC shall and PLC Parent shall cause PLC to use commercially reasonable efforts to obtain and maintain all approvals and clearances required with respect to the sale of the Products in the Territory, including, without limitation, approvals from the Food and Drug Administration (the “FDA”) and the Electrical Testing Laboratory (“ETL”).

 

SECTION 4.3  Labeling of Products. PLC shall and PLC Parent shall cause PLC to provide and to assume regulatory responsibility for all finished Product and Product-related

 

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labeling, including all sales and marketing literature, such that it complies with all applicable laws and regulations in the Territory during the term of this Agreement. All labeling for the Products shall include the statement “Distributed by Edwards Lifesciences LLC, Manufactured by PLC Medical Systems, Inc.”

 

SECTION 4.4  Clinical or Marketing Studies. PLC shall and PLC Parent shall cause PLC to use commercially reasonable efforts to conduct any clinical study with respect to the Products required by the FDA or other governmental agencies to sell or market the Products in the Territory. All other clinical or marketing studies with respect to the Products that are conducted within the Territory will be approved, funded, and conducted on terms and conditions mutually agreed to by PLC and Edwards.

 

SECTION 4.5  Installation Services and Services Provided Under Extended Service Agreements. PLC shall and PLC Parent shall cause PLC to provide the services and technical support relating to the Products as set forth on Schedule 4.5 (the “Schedule 4.5 Services”). PLC shall retain all service fees and revenues that it receives from end users for providing the Schedule 4.5 Services, provided that PLC shall pay to Edwards a commission of [**] % of all such fees and revenues. If and to the extent that PLC fails to perform its obligation in the first sentence of this Section 4.5, Edwards may provide those Schedule 4.5 Services or contract with a third party to provide those Schedule 4.5 Services. In such event, Edwards shall keep all service fees and revenues resulting therefrom and PLC shall train the personnel (at a rate of $[**] per day) performing such Schedule 4.5 Services (whether employed by Edwards or a third party) and provide factory support, including, without limitation, spare parts, technical troubleshooting, and processing product returns. PLC shall also provide Edwards with monthly reports with respect to Product returns and complaints. Edwards shall log in any Products returned by customers to Edwards and return such Products to PLC. If an HL-2 Laser System is installed and the price to be paid by the end user for such installation is less than $[**] per day, PLC shall install such HL-2 Laser System and Edwards shall pay PLC the difference between $[**] and the amount to be paid by the end user per day for such installation, but in no event shall Edwards’ payment exceed $[**] per installation.

 

SECTION 4.6  Warranty and Preventive Maintenance Services. PLC shall and PLC Parent shall cause PLC to provide all warranty and two scheduled preventive maintenance services on all HL-2 Laser Systems as set forth on Schedule 4.6 during the Warranty Period. Edwards shall reimburse PLC for the costs set forth on Schedule 4.6 incurred by PLC in the performance of its obligation in the prior sentence during the Warranty Period, but in no event shall such reimbursement exceed $[**] per HL-2 Laser System. In the event PLC is required to conduct Warehouse Retesting on an HL-2 Laser System, Edwards shall reimburse PLC $[**] per such HL-2 Laser System, upon completion of Warehouse Retesting.

 

SECTION 4.7  Recall of Products. In the event of a recall of any of the Products, PLC shall and PLC Parent shall cause PLC to bear all costs and expenses of such recall, including, without limitation, expenses or obligations to third parties, the cost of notifying customers and end users, and costs associated with the shipment of recalled Products from customers to PLC. Edwards shall cooperate with PLC in effecting any recall of the Products sold by Edwards by producing customer lists and assisting with the notification of customers and end users of the recalled Products.

 

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SECTION 4.8  Product Liability Insurance. Set forth on Schedule 4.8 is a copy of PLC’s product liability insurance policy which is in full force and effect. PLC shall and PLC Parent shall cause PLC to obtain and keep in force during the term of this Agreement a product liability insurance policy in an amount not less than $10,000,000 in a form reasonably acceptable to Edwards. During the term of this Agreement and for a period of [**] following the expiration or termination of this Agreement, such insurance policy shall evidence Edwards and all of its affiliates as additional insured entities and shall provide for written notification to Edwards by the insurer not less than 30 days prior to cancellation, expiration or modification. PLC shall and PLC Parent shall cause PLC to provide a certificate of insurance evidencing compliance with this Section 4.8 to Edwards within 30 days of the date hereof.

 

SECTION 4.9  Costs and Expenses. PLC shall and PLC Parent shall cause PLC to bear all the costs and expenses associated with PLC’s obligations set forth in this Agreement.

 

ARTICLE V

 

Sales and Marketing

 

SECTION 5.1  Marketing Plan. PLC and Edwards shall jointly execute the marketing plan for the Products set forth in Schedule 5.1 and fund such plan based on the percentages set forth on such schedule during the first six months of the term of this Agreement. During such period, PLC and Edwards shall jointly develop a marketing plan for the Products for the next six months and PLC shall provide [**] % of the funding for such plan and Edwards shall provide the remaining [**]% of the funding. PLC and Edwards shall continue to jointly develop a marketing plan for the Products and provide funding for such plan according to mutually agreeable allocations until such time as Edwards exercises the Sales and Marketing Option.

 

SECTION 5.2  Sales Plan. Edwards and PLC agree to the sales plan set forth on Schedule 5.2. Edwards shall reimburse any out-of-pocket costs for travel incurred by PLC in connection with training Edwards’ sales personnel beyond the scope of the training requirements anticipated in Schedule 5.2.

 

SECTION 5.3  Sales Material and Literature. PLC shall initially provide all sales material and literature for the Products. PLC and Edwards shall jointly develop any new literature. The costs and expenses associated with developing and producing any new literature shall be paid jointly by PLC and Edwards according to the funding percentages set forth in Section 5.1 until such time as Edwards exercises the Sales and Marketing Option. If Edwards exercises such option, Edwards thereafter shall be solely responsible for paying the cost of such literature. Nothing in this Section 5.3 shall have any effects on PLC’s obligations set forth in Section 4.3.

 

SECTION 5.4  Training and Retention of Sales Personnel. PLC shall provide products and sales training to all PLC and Edwards sales personnel that are engaged in marketing and selling the Products in the Territory. PLC shall use commercially reasonable efforts to retain the sales personnel set forth on Schedule 3.3. During the term of this Agreement and for a period of [**] after the termination or expiration of this Agreement, neither PLC Parent nor PLC shall hire or solicit for employment any of Edwards’ personnel without the prior written consent of

 

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Edwards. During the term of this Agreement and for a period of one year after the termination or expiration of this Agreement, Edwards shall not hire or solicit for employment any personnel of PLC Parent or PLC without the prior written consent of PLC; provided, however, that if Edwards exercises the Sales and Marketing Option, the foregoing limitations shall be inapplicable to personnel listed or otherwise referenced on Schedule 3.3.

 

SECTION 5.5  Performance Record of Sales Personnel. PLC shall keep an accurate and complete record of the performance of all Scheduled Employees, including the sales figures for each Scheduled Employee, and will provide quarterly updates to Edwards of the sales figures for each territory.

 

ARTICLE VI

 

Purchase Arrangements

 

SECTION 6.1  Purchase Forecasts for Products. PLC and Edwards shall confer monthly and jointly produce a rolling twelve-month forecast of the expected demand for the Products until such time as Edwards exercises the Sales and Marketing Option. After Edwards exercises such option, for the remaining term of the Agreement, Edwards shall provide quarterly to PLC a rolling four quarter forecast of the expected demand for the Products.

 

SECTION 6.2  Purchaser Orders; No Minimum Product Quantities. Edwards shall submit a non-cancelable purchase order to PLC for TMR Disposal Kits for the upcoming calendar quarter on the first day of the month preceding such quarter except that until June 30, 2001, Edwards shall submit non-cancelable purchase orders on a monthly basis for TMR Disposal Kits. Until such time as Edwards exercises the Sales and Marketing Option, Edwards shall submit non-cancelable purchase orders to PLC for HL-2 Laser Systems on an as needed basis. If Edwards exercises such option, thereafter, Edwards shall submit a non-cancelable purchase order to PLC for HL-2 Laser Systems for the upcoming calendar quarter on the first day of the month preceding such quarter. Notwithstanding its provision of demand forecasts for the Products and anything else set forth herein, Edwards shall determine in its sole discretion the quantity of Products it shall purchase and there shall be no minimum purchase requirements for any Products. To the extent that the terms of any purchase order and the terms of this Agreement conflict, the terms of this Agreement shall control.

 

SECTION 6.3  Placement of Orders. All orders for Products submitted by Edwards shall be initiated by written purchase orders sent to PLC which shall specify the desired delivery date, location and method of transportation for the Products included in such order. With respect to any Product for which Edwards may submit purchase orders to PLC on an as needed basis, Edwards agrees to promptly submit purchase orders to PLC after its receipt of orders from its customers, but, in any event, shall submit purchase orders to PLC within ten business days of its receipt of a customer order.