AMENDED AND RESTATED SALES REPRESENTATIVE AGREEMENT

 

1.2           “Agreement” shall mean this Amended and Restated Sales Representative Agreement, as it may be further amended in writing by mutual agreement of the parties from time to time.

 

1.3           “Approved Order” shall mean an order for which DJO has received a commitment for payment from any patient or third party payer.

 

1.4           “Competing Product” means an external lumbar spinal bone growth stimulation product.

 

1.5           “Customers” shall mean all purchasers of the Products in the Territory.

 

1.6           “Improvement” shall mean any adaptation, change, redesign, improvement, modification or development to any Product, the specifications therefor, the raw materials or the method or process of manufacture or production of any Product.

 

1.7           “Patient Placement” shall mean the following activities with respect to any patient who has been prescribed a Product:  (a) education of such patient on the use of the Product, the treatment protocol and device placement, (b) reviewing with such patient all pertinent documentation, including patient manuals and the patient bill of rights, (c) informing such patient of contacts for additional support in case of questions, (d) ensuring that such patient has signed all necessary documentation in connection with its use of the Product and that DJO has received copies of such documentation.

 

1.8           “Party” and “Parties” mean DePuy Spine and DJO, singly and/or collectively.

 

1.9           “Products” mean DJO’s spinal bone growth stimulation products for lumbar applications utilizing Combined Magnetic Field (CMF) technology, along with any Improvements thereto.  All such Products currently in existence are identified on Exhibit A.  Additional Products, including Improvements and variations thereto, shall be added to Exhibit A as they become available.

 

1.10         “New Products” means those DJO bone growth electrical stimulation products developed, designed, intended or sold for the spine market which perform a significantly different function or perform in a significantly different manner or perform for a significantly different indication from Products.

 

1.11         “Sales Quota” shall mean the targeted annual amount of Product sales to be solicited by DePuy Spine in the Exclusive Territory as agreed upon by the parties pursuant to Section 9.5 below, expressed in terms of units and gross sales dollars.

 

1.12         “Sales Minimum” shall mean 90% of the Sales Quota.

 

1.13         “Territory” shall mean the spinal market in the United States of America.

 

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2.0          APPOINTMENT

 

2.1           Subject to the terms and conditions of this Agreement, DJO hereby appoints DePuy Spine, and DePuy Spine hereby accepts appointment, as the sales agent of the Products in the Territory for the Term (as hereinafter defined).  DePuy Spine shall be the exclusive sales agent in the portions of the Territory that are shown as shaded on the maps attached hereto as Exhibit B (collectively, the “Exclusive Territory”) and the non-exclusive sales agent in the remaining portions of the Territory.

 

2.2           DePuy Spine acknowledges that DJO has an agreement with Vision Quest, a durable medical equipment supplier (“DME”) based in California, and understands that Vision Quest will continue to sell Products consistent with the terms and provisions of such agreement and solely outside the Exclusive Territory, except that Vision Quest may also sell Products to customers located in San Diego County, California.  DJO shall, at DePuy Spine’s request, terminate, phase out or allow to expire, DJO’s agreement with Vision Quest consistent with the terms of any such agreement, at DePuy Spine’s sole discretion.  In no event shall DJO permit Vision Quest to sell or promote Products within the Exclusive Territory (with the aforementioned exception of San Diego County).

 

2.3           DePuy Spine may appoint one or more third parties as subagents or subdistributors (individually and collectively, “Distributors”) to act on its behalf, including without limitation, the DePuy Spine sales network now or as may be established from time to time, provided that DePuy Spine shall remain responsible for all of its obligations under this Agreement. DePuy Spine shall notify DJO in writing of all Distributors appointed pursuant to this Section, provided that DJO shall treat the identity of DePuy Spine’s Distributors as DePuy Spine Confidential Information pursuant to the provisions of Article 18.  DePuy Spine shall not knowingly appoint any Distributors to sell the Products that are engaged in the marketing and/or selling of Competing Products.  To the extent that any DePuy Spine Distributor either continues to market Competing Products or is unable to market the Products, the Parties shall consult with each other to consider appropriate actions that might be taken to address such circumstances.  During the time period when any DePuy Spine Distributor either continues to market Competing Products or is unable to market the Products and DePuy Spine does not cover the affected sales territory (either directly or through another Distributor), then DJO may use its employees or other distributors to market Products in such DePuy Spine Distributor’s territory; provided that DJO shall terminate or discontinue marketing efforts in such territory (if it is within the Exclusive Territory) promptly after DePuy Spine or one of its Distributors is able to service such territory.

 

2.4           Provided DJO has first offered the New Products in writing to DePuy Spine and DePuy Spine has declined the opportunity to market the New Products in writing, DJO may freely negotiate with other parties to market the New Products.  DePuy Spine shall have ninety (90) days from receipt of DJO’s written offer within which to accept or reject any such opportunity to market New Products.  In the case in which DJO had first offered the New Products to DePuy Spine and the parties were unable to negotiate mutually acceptable terms, DJO is free to contract with other parties provided DJO does not accept terms inferior to DePuy Spine’s last offer.  In the case in which the third party’s offered final terms are equal to or inferior to DePuy Spine’s last offer, DJO will contract with DePuy Spine under the terms of

 

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DePuy Spine’s last offer.

 

3.0          EXCLUSIVITY

 

3.1           During the Term (as hereinafter defined), DJO shall not, with respect to all or any part of the Exclusive Territory, enter into or be party to any distribution, marketing, sales representative or like agreement related to the Products with any person other than DePuy Spine or its Affiliates, nor shall DJO give any such other person any rights to sell, promote or otherwise commercially exploit Products in the Exclusive Territory, except as provided in Article 9.  Without in any way limiting the foregoing, DJO shall use commercially reasonable efforts to prevent the sale or promotion by DJO’s agents and representatives, wherever located, of Products either in the Exclusive Territory or to customers in the Exclusive Territory.  In order to better protect DePuy Spine’s exclusive rights hereunder and to preserve the intended economic benefits thereof, DJO agrees to pay DePuy Spine its commission pursuant to Section 12 with respect to each sale of Products in the Exclusive Territory, regardless of who makes the sale or solicits the order for the sale.  This Section 3.1 is not intended to prohibit or limit DJO sales management personnel from assisting or supporting DePuy Spine’s activities hereunder pursuant to a specific request by DePuy Spine, provided such personnel’s activities are conducted solely in conjunction with DePuy Spine and not independently.

 

4.0          TERM AND TERMINATION

 

4.1           The term (“Term”) of this Agreement shall continue, unless terminated early as provided in this Article 4, until August 18, 2010.

 

4.2           This Agreement may be terminated by either Party if the other Party files a voluntary petition for bankruptcy or reorganization, is the subject of an involuntary petition for bankruptcy which is not dismissed within 60 days, has its affairs placed in the hands of a receiver, enters into a composition for the benefit of creditors, or is deemed insolvent by a court of competent jurisdiction.

 

4.3           This Agreement may also be terminated if a Party is in material breach of this Agreement provided the non-breaching Party has provided at least forty-five (45) days prior written notice identifying the breach and such breach has not been cured within said forty-five (45) days.

 

4.4           This Agreement may be terminated by DePuy Spine upon 120 days’ prior written notice to DJO.

 

4.5           This Agreement may be terminated by DJO upon 120 days’ prior written notice to DePuy Spine if the prior three (3) month average Net Sales Price (as defined in Section 12.1) for the Products ever becomes less than $***.

 

4.6           This Agreement may be terminated immediately by DePuy Spine upon written notice to DJO if DePuy Spine, its Affiliates or DJO receive a notice that a third party has filed suit alleging that any Product infringes in whole or in part any aspect of any U.S. patent or any

 

***Certain information on this page has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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reissue or re-examination thereof.

 

4.7           The provisions of this Agreement set forth in Section 4.8 and Articles 14, 17, 18, 19, 20, and any other provisions which by their terms survive termination, and any remedies for the breach thereof, shall survive the termination of this Agreement under the terms hereof.

 

4.8           Notwithstanding the termination of this Agreement for any reason, each Party hereto shall be entitled to recover any and all damages (other than punitive, exemplary, multiplied or consequential (including lost sales or lost profits) damages) that such Party shall have sustained by reason of the breach by the other Party hereto of any of the terms of this Agreement.  Termination of this Agreement for any reason shall be without prejudice to DePuy Spine’s right to receive all payments accrued and unpaid on the effective date of termination and shall not release either Party hereto from any liability which at such time has already accrued or which thereafter accrues from a breach or default prior to such expiration or termination, nor affect in any way the survival of any other right, duty or obligation of either Party hereto which is expressly stated elsewhere in this Agreement to survive such termination.

 

5.0          OBLIGATIONS OF DJO

 

5.1           DJO shall use commercially reasonable efforts to supply Products for customer orders on a timely basis.  If Products become unavailable during the Term for any reason, except where demand exceeds 125% of the non-binding rolling 12-month forecast updated on a quarterly basis, for more than 15 days (which need not be consecutive) in any period of four consecutive weeks, the Sales Quota applicable to that year, pursuant to Article 9 below, shall be reduced by an amount equal to (i) the average monthly volume of orders received by DJO during the preceding six months, multiplied by (ii) the number of consecutive four-week periods during which such Products are unavailable for any 15 days.  If Products become unavailable due, in whole or in part, to a circumstance affecting DJO’s ability to manufacture Products, and the Products continue to be unavailable due to such circumstance for more than any 15 days in a given four consecutive weeks, the presidents of the Parties or their designated representatives shall meet to determine the best means to make Products available to the market, and in that regard, will consider, in part, the possibility that DePuy Spine will manufacture or have manufactured Products until production by DJO has resumed.  DePuy Spine wants assurance of continued supply of Product.  If DJO cannot supply the Product necessary to meet demand for a continuous period of 30 days, then DePuy Spine shall have the right to any and all licenses, manufacturing plans, and technology, etc. that would allow DePuy Spine to find an alternative source for the supply of such Product until DJO can resume adequate supply of Product.  DJO hereby grants DePuy Spine an irrevocable, perpetual, non-exclusive paid up, royalty free license and/or right to all licenses, manufacturing plans, patents and know how related to the Products, which DePuy Spine agrees to exercise on the terms set forth in this Section 5.1.

 

5.2           DJO will be responsible for Product development, manufacturing, testing, quality control, supply, distribution, regulatory approvals and clearances, customer service, shipping, Patient Placement and billing, as well as for obtaining the necessary supporting documents for billing as provided in Section 8.1 hereof.  Additionally, at all appropriate trade shows and conventions where DJO maintains a booth, DJO shall, at no cost to DePuy Spine, include a

 

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prominent Product display that is jointly branded with DePuy Spine, including jointly branded signage and promotional brochures.

 

5.3           DJO shall report to DePuy Spine any and all complaints received by DJO and any and all medical device reports prepared by DJO with respect to Products within the time required by applicable law and regulations, and, in any case, within a reasonably prompt time following DJO’s receipt or preparation of the same.  DJO shall maintain a record of all complaints it receives consistent with guidelines and requirements of the U.S. Food and Drug Administration (“FDA”) or any other governmental agency or instrumentality that may have jurisdiction over the Products, including, if a “CE” mark or other European regulatory clearance or approval is obtained for any Product, the applicable guidelines and requirements of the European Union.

 

5.4           At DePuy Spine’s request and pursuant to a mutually determined training program, DJO shall assist DePuy Spine in providing training in the use and benefits of the Product to DePuy Spine’s domestic field sales force (whether such sales representatives are employed by DePuy Spine or by its Distributors).  DJO will supply each of DePuy Spine’s and its respective Distributors’ existing and future sales representatives with an initial Product demonstration unit at no cost to DePuy Spine or such Distributor.  Replacement or additional Product demonstration units will be made available to DePuy Spine for use by its sales representatives or Distributors, at a cost of $*** each.

 

5.5           DJO shall comply with the requirements for DePuy Spine approval set forth in Section 6.3 below, and with the meeting requirements set forth in Section 6.4 below.

 

5.6           DJO shall maintain adequate and competent personnel to manufacture, store and deliver, obtain supporting documents as provided in Section 8.1 hereof, perform Patient Placement, and prepare invoices and any other manufacturer-generated materials necessary to enable DJO to invoice purchasers and third-party payors in connection with the sale of Products, and such manufacture, storage, sales, collection of supporting documents, delivery, Patient Placement and invoicing shall be undertaken and effected in a manner that does not violate any applicable federal, state or foreign laws and regulations, and otherwise, in a manner that is in accordance with the provisions of DJO’s Corporate Compliance Program.  DJO shall perform Patient Placement as promptly as is reasonably practicable following the prescribing physician’s request for same, provided that an Approved Order for the patient has been received by DJO.

 

5.7           DJO shall use diligent efforts, at its sole cost and expense, to obtain and maintain patents covering the Products in the United States.  DJO shall keep DePuy Spine informed on a current basis of the status of any such effort.

 

5.8           Except as provided in Section 6.10, DJO shall pay all expenses, costs, overhead, debts and obligations incurred by DJO in its fulfillment of its obligations under this Agreement.  Such expenses shall include travel, room and board, and entertainment.  Except as provided in Section 6.10, under no circumstances shall DePuy Spine be liable to reimburse DJO or any of its sales representatives or distributors for any of such expenditures incurred by DJO or its sales representatives or distributors.

 

***Certain information on this page has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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5.9           DJO shall, at its expense except as provided in Section 6.10, furnish DePuy Spine and its Distributors with such quantities of Product-related, jointly branded (DJO and DePuy Spine) printed promotional materials, video productions, clinical data, instructions for use, patient guides and such other marketing, promotional and informational materials, as DePuy Spine shall reasonably request from time to time in connection with its activities hereunder; provided that the content and appearance of such materials shall be subject to DePuy Spine’s prior written approval; and provided, further, that DJO shall not be obligated to furnish or pay for any such materials that also feature DePuy Spine’s other products, which DePuy Spine shall have the right to prepare and distribute at its own expense.

 

6.0          OBLIGATIONS OF DEPUY SPINE

 

6.1           Subject to DJO’s rights pursuant to Article 9, DePuy Spine may initiate, conduct, suspend or terminate DePuy Spine’s activities relating to the marketing and sale of Products as DePuy Spine, in its sole and absolute discretion, deems appropriate and adequate, provided that such activities are conducted in a manner that does not violate any applicable federal or state laws and regulations.  Subject to, and without limiting the scope of, DePuy Spine’s discretion pursuant to the foregoing, DePuy Spine may undertake marketing and sales activities, including conducting advertising, distributing marketing literature and displaying Products at professional and trade shows, as DePuy Spine deems desirable to promote and obtain orders for the Products in the United States so as to achieve or exceed the Sales Minimums set forth in Article 9 below.  In connection with its activities hereunder, DePuy Spine shall not solicit any patients directly with respect to Products.

 

6.2           DePuy Spine, with the assistance of DJO, shall train DePuy Spine’s domestic field sales force with respect to the use of the Products.

 

6.3           All written sales, promotion, training, customer education and marketing materials and press releases issued by DePuy Spine or DJO, to the extent relating to the other party or to Products or the sale of Products, shall be approved in writing by both DJO and DePuy Spine prior to use in the marketplace.

 

6.4           Representatives of DePuy Spine and DJO, respectively, shall meet at least once before October 15 of each year, on a day and at a location mutually convenient, in an effort to develop a mutually acceptable marketing plan for Products for the following sales year in the Exclusive Territory.  The final marketing plan shall be left solely to the discretion of DePuy Spine.

 

6.5           Subject to Section 6.1, DePuy Spine will be responsible for representing Products in the marketplace and providing customer education and other related services in the Territory.  Additionally, DePuy Spine shall include a Product display that is jointly branded at all appropriate trade shows and conventions at which DePuy Spine maintains a booth, at no cost to DJO.

 

6.6           DePuy Spine shall promptly route directly to DJO all inquiries relating to Products, including medical product inquiries, technical inquiries, product complaints, safety or

 

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compliance issues, billing issues, adverse reactions and adverse events.  DePuy Spine shall also route directly to DJO any requests received from customers for no-charge or discounted Products for indigent patients.

 

6.7           DePuy Spine will report to DJO any and all complaints from any source and medical device reports received with respect to Products within the time required by applicable law and regulations.  DePuy Spine will maintain a record of all complaints it receives consistent with FDA guidelines.

 

6.8           DePuy Spine shall display and deliver only Products that are marked and packaged by DJO or as otherwise specified in advance by mutual agreement of the Parties.

 

6.9           DePuy Spine or its employees and Distributors shall provide from the treating physician, or direct the treating physician or the physician’s staff to provide directly to DJO, a written prescription order form for the purchase of the Products.

 

6.10         So long as they are pursuant to a budget capped at 2% of projected sales in the Exclusive Territory for the next year and agreed to by the Parties in advance, DePuy Spine and DJO will share, on a 50-50 basis, the direct expenses (excluding direct employees and related travel expenses) of producing, printing or otherwise reproducing such marketing and promotional materials as DePuy Spine or its Distributors may request from DJO relating to the Products, including printed promotional materials and video productions.  DePuy Spine shall not be required to bear any costs or expenses to the extent related to the development, production or reproduction of marketing and promotional materials for anyone other than DePuy Spine and its Distributors.  DePuy Spine shall have the right to produce marketing and promotional materials for the Products independently of DJO, subject to DJO’s approval (not to be unreasonably withheld) as to the content of such materials, and DJO shall have no right or license to any copyrightable works contained therein that are created by or on behalf of DePuy Spine.

 

6.11         Except as provided in Section 6.10, DePuy Spine shall pay all expenses, costs, overhead, debts and obligations incurred by DePuy Spine in its fulfillment of its obligations under this Agreement.  Such expenses shall include travel, room and board, and entertainment.  Except as provided in Section 6.10, under no circumstances shall DJO be liable to reimburse DePuy Spine or any of its Distributors for any of such expenditures incurred by DePuy Spine or its Distributors.

 

6.12         DePuy Spine shall be responsible for all compensation, payroll taxes, facilities and related expenses for employees of DePuy Spine.

 

6.13         DePuy Spine shall provide a list of all employees and Distributors that will provide services in connection with this Agreement (collectively, “Product Representatives”).  During the term of this Agreement, DePuy Spine agrees that its current and future Product Representatives shall, upon DJO’s request, receive compliance training on any DJO compliance policies and procedures which are not encompassed by DePuy Spine’s existing corporate compliance program.  Any such compliance training on DJO compliance policies shall be conducted by DJO.  DJO shall submit compliance training materials to DePuy Spine’s counsel

 

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for approval prior to presenting same to the DePuy Spine sales force.

 

6.14         DePuy Spine understands and acknowledges that, from time to time, DJO may require changes to its compliance program to encompass changes in third-party payor requirements or any other changes required by law.  To the extent such changes are not reflected in DePuy Spine’s existing compliance program, DePuy Spine shall provide any supplemental compliance training materials furnished by DJO to DePuy Spine’s Product Representatives.

 

6.15         If DJO determines that any Product Representative is (a) acting in a manner in violation of DJO ‘s compliance program (other than an aspect of the compliance program that is not encompassed by DePuy Spine’s compliance program and has not been included in materials or training furnished by DJO); or (b) is acting in a manner that is detrimental to the operations of DJO’s customers and patients; then DJO shall notify DePuy Spine in writing, of the name of the Product Representative and the basis for such determination.  Within fifteen (15) business days of such written notice, DePuy Spine shall review the matter, and shall notify DJO of the action DePuy Spine proposes to take with respect to such Product Representative.  If following any remedial action by DePuy Spine such violations or detrimental actions continue, and DJO requests the removal of the Product Representative from providing any services under this Agreement, DePuy Spine shall promptly remove the Product Representative from providing any services under this Agreement.

 

7.0          TECHNICAL, SALES AND PROCESSING SUPPORT BY DJO

 

7.1           DJO shall provide such technical, sales, order processing and payment processing support as DePuy Spine and its Distributors may reasonably request from time to time to facilitate their effective promotion of, and the fulfillment of orders for, the Products.  Such support and assistance shall be provided in the same manner and with the same priority as DJO provides such support and assistance to its other customers and distributors generally.  DJO shall maintain, at its own expense, field-based personnel in such numbers and locations as shall be reasonably adequate to provide such support and assistance to DePuy Spine and its Distributors on a regional or local basis.  The support and assistance to be provided pursuant to this Section shall include but not be limited to the provision of technical information regarding product specifications, features, capabilities and troubleshooting, the provision of information requested by or concerning third-party payors and reimbursement programs, and communication and cooperation with such payors and reimbursement programs on behalf of customers and DePuy Spine and its Distributors, as the case may be.

 

8.0          PATIENT SERVICE AND REIMBURSEMENT

 

8.1           DJO shall be responsible for processing all U.S. orders for Products once a valid prescription order form or commercial order form is obtained by DePuy Spine.  This processing by DJO includes commercially reasonable efforts to obtain all necessary supporting documents, the prior authorization of the prescription with the patient’s insurance company and the generation of any additional paperwork required to process the prescription for payment.  It is understood that from time to time DJO may elect to employ one or more independent contractors

 

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to perform portions of its obligations under this Agreement as deemed appropriate by DJO, including any required follow up with prescribing physicians to obtain supporting documents, and that such independent contractors shall be acting solely on behalf of DJO when obtaining such supporting documents even though such independent contractors may be persons or entities with which or whom DePuy Spine also has an independent contractor relationship, including Distributors.

 

8.2           DJO shall be responsible for the negotiation of Product reimbursement pricing for its managed care payor contracts,  Centers for Medicare and Medicaid Services (CMS) and State Medicaid programs and with any future third-party payor identified by DJO.

 

8.3           DJO will also be responsible for Patient Placement of Products in the U.S. once the authorization from the patient’s insurance company is received.

 

9.0          SALES MINIMUMS AND SALES QUOTAS

 

9.1           During the initial period comprised of 2001 and that portion of 2000 after DePuy Spine has commenced sales, and each calendar year thereafter (each a “Measurement Period”), insofar as DePuy Spine desires that its exclusive rights in the Exclusive Territory granted hereunder not be subject to conversion to non-exclusive rights, pursuant to this Section 9.1, DePuy Spine shall obtain, directly or through its Distributors, customer orders for the Products in quantities that equal or exceed Sales Minimums in either units or dollars applicable to each Measurement Period, or, to the extent of any shortfall, make payment to DJO in accordance with Section 9.3 below; provided that for purposes of this Article 9, all customer orders for Products in the Exclusive Territory shall count toward the fulfillment of the Sales Minimums, regardless of who obtains the order or makes the sale of such Products.  Accordingly, if total orders for Products received by DJO during any Measurement Period do not equal or exceed the Sales Minimums in either units or dollars applicable to such Measurement Period, and DePuy Spine does not make payment to DJO with respect to the shortfall pursuant to Section 9.3 below, DJO may, at its option, convert DePuy Spine’s exclusive rights in the Exclusive Territory to non-exclusive rights.  In the event DJO desires to exercise such option, it shall, within 60 days following the end of the applicable Measurement Period, first deliver to DePuy Spine a written notice (each a “Conversion Notice”) which shall (i) include a statement by DJO advising that the Sales Minimum applicable to the Measurement Period identified in such notice has not been achieved, (ii) specify the deficiency in terms of units and dollar amount, (iii) state the total amount of DJO Net Profit (as defined below) applicable to the deficiency, and (iv) communicate DJO’s intention to convert DePuy Spine’s rights in the Exclusive Territory to non-exclusive rights pursuant to this Article 9.  Unless DePuy Spine makes payment to DJO with respect to the deficiency pursuant to Section 9.3, DJO shall be entitled to exercise its foregoing option, but any failure by DePuy Spine to achieve Sales Minimums in either units or dollars or make payment to DJO with respect to the shortfall shall not constitute a breach by DePuy Spine of any of its obligations under this Agreement, and shall not entitle DJO to terminate this Agreement or to claim or receive payment for any damages or equitable relief.  If DePuy Spine’s rights in the Exclusive Territory are converted to non-exclusive rights, DJO may either assign direct sales employees or appoint third-party independent distributors, or both, to promote the Products anywhere in the world.