Exhibit 10.34
CERTAIN MATERIAL (INDICATED BY THREE
ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
SALES REPRESENTATIVE
AGREEMENT
THIS SALES REPRESENTATIVE AGREEMENT
(“Agreement”) is made effective as of August 18, 2000,
by and between OrthoLogic Corp., a Delaware corporation
(hereinafter referred to as “OrthoLogic”), with its
principal place of business at 1275 West Washington Street, Tempe,
Arizona 85281, and DePuy AcroMed, Inc., an Ohio corporation
(hereinafter referred to as “DePuy AcroMed”), with its
principal place of business at 325 Paramount Drive, Raynham,
Massachusetts 02767.
BACKGROUND
WHEREAS, DePuy AcroMed is engaged in
the business of developing, manufacturing, marketing and selling
implants, instruments and other products for use in spinal, neuro,
cranial and/or orthopaedic surgical procedures.
WHEREAS, OrthoLogic is engaged in
the business of developing, manufacturing, marketing and selling
bone growth stimulation products utilizing combined magnetic field
technology.
WHEREAS, OrthoLogic and DePuy
AcroMed desire to enter into a sales representative agreement
pursuant to which OrthoLogic shall appoint DePuy AcroMed as its
exclusive sales representative to sell OrthoLogic’s bone
growth stimulation products, as more fully set forth
below.
NOW, THEREFORE, in consideration of
the mutual promises, covenants and agreements hereinafter set
forth, the parties hereto agree as follows:
1.0
DEFINITIONS
The following words shall have the
following meanings when used in this Agreement:
1.1
“Affiliate” of a Party
shall mean any entity or person that directly or indirectly
controls, is controlled by or is under common control with such
party. For purposes of this definition, “control”
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of an
entity, whether through the ownership of voting securities, by
contract or otherwise.
1.2
“Agreement” shall mean
this Sales Representative Agreement, as it may be amended in
writing by mutual agreement of the parties from time to
time.
1.3
“Approved Order” shall
mean an order for which OrthoLogic 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 therefore, the raw
materials or the method or process of manufacture or production of
any Product.
1.7
“Party” and
“Parties” mean DePuy AcroMed and OrthoLogic, singly
and/or collectively.
1.8
“Products” mean
OrthoLogic’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.
Exhibit A identifying the Products subject to this
Agreement shall be modified in writing as additional Products,
including Improvements and variations thereto, become
available.
1.9
“New Products” means
those OrthoLogic 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.
1.10
“Sales Quota” shall mean
the number of Products in either units or dollars shown on
Exhibit C .
1.11
“Sales Minimum” shall
mean 80% of the Sales Quota.
1.12
“Territory” shall mean
the spinal market throughout the world.
2.0
APPOINTMENT
2.1
Subject to the terms and conditions
of this Agreement, OrthoLogic hereby appoints DePuy AcroMed, and
DePuy AcroMed hereby accepts appointment, as the exclusive sales
agent of the Products in the Territory for the Term (as hereinafter
defined).
2.2
DePuy AcroMed acknowledges that
OrthoLogic is currently utilizing employed sales representatives in
various territories. OrthoLogic agrees to terminate the sales
activities currently being handled by such representatives as soon
as practicable, which shall be completed in any event no later than
January 1, 2001.
2.3
DePuy AcroMed further acknowledges
that OrthoLogic has contractual relationships with the nine
distributors listed on Exhibit B . OrthoLogic agrees to
terminate its contracts with the nine distributors as soon as is
commercially feasible, consistent with the terms of such existing
contracts between OrthoLogic and each of such
distributors.
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2.4
DePuy AcroMed acknowledges that
OrthoLogic also 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.
At any time more than 12 months after the signing of this
Agreement, OrthoLogic shall, at DePuy AcroMed’s request,
terminate, phase out or allow to expire, OrthoLogic’s
agreement with Vision Quest consistent with the terms of any such
agreement, at DePuy AcroMed’s sole discretion.
2.5
DePuy AcroMed 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 AcroMed sales network now
or as may be established from time to time, provided that DePuy
AcroMed shall remain responsible for all of its obligations under
this Agreement. DePuy AcroMed shall notify OrthoLogic in
writing of all Distributors appointed pursuant to this Section,
provided that OrthoLogic shall treat the identity of DePuy
AcroMed’s Distributors as DePuy AcroMed Confidential
Information pursuant to the provisions of Article 18. DePuy
AcroMed shall not knowingly appoint any Distributors to sell the
Products that are engaged in the marketing and/or selling of
Competing Products. Promptly after the execution of this
Agreement, DePuy AcroMed shall request its Distributors to
discontinue the marketing of any products that compete directly
with the Products. To the extent that any DePuy AcroMed
Distributor either continues to market such 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 AcroMed Distributor either continues to market Competing
Products or is unable to market the Products and DePuy AcroMed does
not cover the affected sales territory, then OrthoLogic may use its
employees or other distributors to market Products in such DePuy
AcroMed Distributor’s territory; provided that OrthoLogic
shall terminate or discontinue marketing efforts in such territory
promptly after DePuy AcroMed or one of its Distributors is able to
service such territory.
2.6
Provided OrthoLogic has first
offered the New Products in writing to DePuy AcroMed and DePuy
AcroMed has declined the opportunity to market the New Products in
writing, OrthoLogic may freely negotiate with other parties to
market the New Products. DePuy AcroMed shall have ninety (90)
days from receipt of OrthoLogic’s written offer within which
to accept or reject any such opportunity to market New
Products. In the case in which OrthoLogic had first offered
the New Products to DePuy AcroMed and the parties were unable to
negotiate mutually acceptable terms, OrthoLogic is free to contract
with other parties provided OrthoLogic does not accept terms
inferior to DePuy AcroMed’s last offer. In the case in
which the third party’s offered final terms are equal to or
inferior to DePuy AcroMed’s last offer, OrthoLogic will
contract with DePuy AcroMed under the terms of DePuy
AcroMed’s last offer.
3.0
EXCLUSIVITY
3.1
During the Term (as hereinafter
defined), OrthoLogic shall not enter into any other
distribution, marketing, sales representative or like agreement
related to the Products in the Territory except as provided in
Article 9 or as identified in Section 2.5.
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4.0
TERM AND
TERMINATION
4.1
The term (“Term”) of
this Agreement shall be ten (10) years from the date first written
above.
4.2
This Agreement may be terminated by
either Party if a 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 AcroMed upon 120 days’ prior written notice to
OrthoLogic.
4.5
This Agreement may be terminated by
OrthoLogic upon 120 days’ prior written notice to DePuy
AcroMed 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 AcroMed upon written notice to OrthoLogic if
DePuy AcroMed, its Affiliates or OrthoLogic 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 reissues or
re-examinations 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 AcroMed’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.
***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.
4
5.0
OBLIGATIONS OF
ORTHOLOGIC
5.1
OrthoLogic 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 Quotas applicable to that year,
pursuant to Article 9 below, shall be renegotiated to reduce the
same in an amount equal to (i) the average monthly volume of orders
received by OrthoLogic 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 OrthoLogic’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 AcroMed will manufacture or have manufactured Products
until production by OrthoLogic has resumed. DePuy AcroMed
wants assurance of continued supply of Product. If OrthoLogic
cannot supply the Product necessary to meet demand for a continuous
period of 30 days, then DePuy AcroMed shall have the right to any
and all licenses, manufacturing plans, and technology, etc. that
would allow DePuy AcroMed to find an alternative source for the
supply of such Product until OrthoLogic can resume adequate supply
of Product. OrthoLogic hereby grants DePuy AcroMed an
irrevocable, perpetual, non-exclusive paid up, royalty free license
and/or right to all licenses, manufacturing plans and know how
related to the Products, which DePuy AcroMed agrees to exercise on
the terms set forth in this Section 5.1.
5.2
OrthoLogic will be responsible for
Product development, testing, quality control, supply,
distribution, regulatory approvals and clearances, customer
service, shipping, patient fitting and billing. Additionally,
OrthoLogic shall display a jointly branded (OrthoLogic and DePuy
AcroMed) Product prominently at all appropriate trade shows and
conventions where OrthoLogic maintains a booth, at no cost to DePuy
AcroMed.
5.3
OrthoLogic shall report to DePuy
AcroMed any and all complaints received by OrthoLogic and any and
all medical device reports prepared by OrthoLogic with respect to
Products within the time required by applicable law and
regulations, and, in any case, within a reasonably prompt time
following OrthoLogic’s receipt or preparation of the
same. OrthoLogic 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 AcroMed’s request and
pursuant to a mutually determined training program, OrthoLogic
shall assist DePuy AcroMed in providing training in the use and
benefits of the Product to DePuy AcroMed’s domestic field
sales force. OrthoLogic will supply each of DePuy
AcroMed’s and its respective Distributors’ existing and
future sales representatives with an initial Product demonstration
unit at no cost to DePuy AcroMed or such Distributor.
5
Replacement or additional Product
demonstration units will be made available to DePuy AcroMed for use
by its sales representatives or Distributors, at a cost of $***
each.
5.5
OrthoLogic shall comply with the
requirements for DePuy AcroMed approval set forth in Section 6.3
below, and with the meeting requirements set forth in Section 6.4
below.
5.6
OrthoLogic shall maintain adequate
and competent personnel to manufacture, store and deliver, perform
patient fitting, and to prepare invoices and any other
manufacturer-generated materials necessary to enable OrthoLogic to
invoice purchasers and third-party payors in connection with the
sale of Products, and such manufacture, storage, sales, delivery,
patient fitting and invoices 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 OrthoLogic’s Corporate
Compliance Program. OrthoLogic shall perform patient fittings
within 48 hours of the prescribing physician’s request for
patient fitting, provided that an Approved Order for the patient
has been received by OrthoLogic.
5.7
OrthoLogic shall use diligent
efforts, at its sole cost and expense, to obtain and maintain
patents covering the Products in the United States and foreign
countries which DePuy AcroMed, and OrthoLogic agree constitute
substantial markets for the Products. OrthoLogic shall keep
DePuy AcroMed informed on a current basis of the status of any such
effort.
5.8
Except as provided in Section 6.10,
OrthoLogic shall pay all expenses, costs, overhead, debts and
obligations incurred by OrthoLogic in its fulfillment of its
obligations under this Agreement. Such expenses shall include
travel, room and board, and entertainment. Under no
circumstances shall DePuy AcroMed be liable to reimburse OrthoLogic
or any of its sales representatives or distributors for any of such
expenditures incurred by OrthoLogic or its sales representatives or
distributors.
6.0
OBLIGATIONS OF DEPUY
ACROMED
6.1
Subject to OrthoLogic’s rights
pursuant to Article 9, DePuy AcroMed may initiate, conduct, suspend
or terminate DePuy AcroMed’s activities relating to the
marketing and sale of Products as DePuy AcroMed, 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, state or foreign laws and regulations.
Subject to, and without limiting the scope of DePuy AcroMed’s
discretion pursuant to the foregoing, DePuy AcroMed may undertake
marketing and sales activities, including conducting advertising,
distributing marketing literature and displaying Products at
professional and trade shows, as DePuy AcroMed deems desirable to
(i) maximize sales of the Products in the United States, (ii)
achieve the Sales Minimums set forth in Article 9 below, and (iii)
promote and obtain orders for the Products. In connection
with its activities hereunder, DePuy AcroMed shall not solicit any
patients directly with respect to Products.
6.2
DePuy AcroMed, with the assistance
of OrthoLogic, shall train DePuy AcroMed’s domestic field
sales force with respect to the use of the Products.
***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.
6
6.3
All written sales, promotion,
training, customer education and marketing materials and press
releases issued by DePuy AcroMed or OrthoLogic and relating to
Products or the sale of Products shall be approved in writing by
both OrthoLogic and DePuy AcroMed prior to use in the
marketplace.
6.4
Representatives of DePuy AcroMed and
OrthoLogic, respectively, shall meet at least once during September
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. The final marketing plan rests
solely with DePuy AcroMed. Expenses shall be shared as
provided in Section 6.10. The Parties agree to meet, within
four weeks following the execution and delivery of this Agreement
by the Parties to develop a mutually acceptable marketing plan for
the balance of calendar year 2000.
6.5
DePuy AcroMed will be responsible
for representing Products in the marketplace and providing customer
education and other related services. Additionally, DePuy
AcroMed shall display a jointly branded product at all appropriate
trade shows and conventions at which DePuy AcroMed maintains a
booth, at no cost to OrthoLogic.
6.6
DePuy AcroMed shall promptly route
directly to OrthoLogic all inquiries relating to Products,
including medical product inquiries, technical inquiries, product
complaints, safety or compliance issues, billing issues, adverse
reactions and adverse events. DePuy AcroMed shall also route
directly to OrthoLogic any requests received from customers for
no-charge or discounted Products for indigent patients.
6.7
DePuy AcroMed will report to
OrthoLogic 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 AcroMed
will maintain a record of all complaints it receives consistent
with FDA guidelines.
6.8
DePuy AcroMed shall display and
deliver only Products that are marked and packaged by OrthoLogic or
as otherwise specified in advance by mutual agreement of the
Parties.
6.9
DePuy AcroMed 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 OrthoLogic, a written prescription order form and any
required supporting documentation for the purchase of the Product
and when required to process the order, provide original versions
of such documents. The parties understand and
acknowledge that (1) DePuy AcroMed’s employees and
Distributors are responsible for providing the written prescription
order forms to the treating physicians and requesting that any
additional supporting documentation be furnished directly to
OrthoLogic; and (2) DePuy AcroMed’s employees and
Distributors shall not complete any sections of the written
prescription order forms that must be completed by the treating
physician or maintain a copy of any completed written orders or
other documentation containing confidential patient medical
information in their files.
6.10
So long as they are pursuant to a
budget capped at 2% of projected sales for the
7
next year and agreed to by the
Parties in advance, DePuy AcroMed and OrthoLogic will share, on a
50-50 basis, the direct expenses (excluding direct employees and
related travel expenses) relating to marketing and promotional
materials relating to the Products, including printed promotional
materials, and video productions.
6.11
Except as provided in Section 6.10,
DePuy AcroMed shall pay all expenses, costs, overhead, debts and
obligations incurred by DePuy AcroMed in its fulfillment of its
obligations under this Agreement. Such expenses shall include
travel, room and board, and entertainment. Under no
circumstances shall OrthoLogic be liable to reimburse DePuy AcroMed
or any of its Distributors for any of such expenditures incurred by
DePuy AcroMed or its Distributors.
6.12
DePuy AcroMed shall be responsible
for all compensation, payroll taxes, facilities and related
expenses for employees of DePuy AcroMed.
6.13
DePuy AcroMed shall provide a list of all employees and
Distributors that will provide services in connection with this
Agreement. During the term of this Agreement, DePuy AcroMed
agrees that its current and future employees and Distributors shall
receive compliance training on any OrthoLogic compliance policies
and procedures which are not encompassed by DePuy AcroMed’s
existing corporate compliance program. Any such compliance
training on OrthoLogic compliance policies shall be conducted by
OrthoLogic. OrthoLogic shall submit compliance training
materials to DePuy AcroMed’s counsel for approval prior to
presenting same to the DePuy AcroMed sales force.
6.14
DePuy AcroMed understands and
acknowledges that, from time to time, OrthoLogic 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
AcroMed’s existing compliance program, DePuy AcroMed shall
provide any supplemental compliance training materials furnished by
OrthoLogic to DePuy AcroMed’s employees and
Distributors.
6.15
If OrthoLogic determines that any
employee or Distributor of DePuy AcroMed is (a) acting in a manner
in violation of OrthoLogic ‘s compliance program; or (b) is
acting in a manner that is detrimental to the operations of
OrthoLogic’s customers and patients; then OrthoLogic shall
notify DePuy AcroMed in writing, of the name of the employee or
Distributor and the basis for such determination. Within
fifteen (15) business days of such written notice, DePuy AcroMed
shall review the matter, and shall notify OrthoLogic of the action
DePuy AcroMed proposes to take with respect to such employee or
Distributor. If following any remedial action by DePuy
AcroMed, OrthoLogic requests the removal of the employee or
Distributor from providing any services under this Agreement, DePuy
AcroMed shall promptly remove the employee or Distributor from
providing any services under this Agreement.
7.0
ORTHOLOGIC
SPECIALISTS
From January 1, 2001 until the end
of the Term, OrthoLogic will maintain at OrthoLogic’s
expense, 10 full-time employees or the equivalent thereof in the
field, who shall be
8
available to assist DePuy AcroMed
with its sales of Products. Each of such specialists shall be
reasonably acceptable to DePuy AcroMed and they shall be assigned
so as to provide coverage in all of DePuy AcroMed’s 10 sales
regions. OrthoLogic will begin putting these specialists in
place as soon as this Agreement is executed but the Parties
understand that it will take until the end of 2000 to complete the
process.
8.0
PATIENT SERVICE AND
REIMBURSEMENT
8.1
OrthoLogic shall be responsible for
processing all U.S. orders for Products once a valid prescription
order form and any required supporting documentation is obtained
from a physician by DePuy AcroMed. This processing by
OrthoLogic includes 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.
8.2
OrthoLogic shall be responsible for
the negotiation of Product reimbursement pricing for its managed
care payor contracts, HCFA (Medicare) and State Medicaid programs
and with any future third-party payor identified by
OrthoLogic. Product pricing for sales in any country other
than the United States shall be mutually agreed upon by the Parties
before the Parties begin marketing Products in that
country.
8.3
OrthoLogic will also be responsible
for the placement of Products on patients 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 AcroMed has commenced
sales, and each calendar year thereafter, (each a
“Measurement Period”), insofar as DePuy AcroMed desires
that its exclusive rights granted hereunder not be subject to
conversion to non-exclusive rights, pursuant to this Section 9.1,
DePuy AcroMed 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 OrthoLogic in accordance with Section 9.3 below.
Accordingly, if total orders for Products received by OrthoLogic
during any Measurement Period do not equal or exceed the Sales
Minimums in either units or dollars applicable to such Measurement
Period, and DePuy AcroMed does not make payment to OrthoLogic with
respect to the shortfall pursuant to Section 9.3 below, OrthoLogic
may, at its option, convert DePuy AcroMed’s exclusive
worldwide rights to non-exclusive rights. Any such notice
(each a “Conversion Notice”) shall (i) include a
statement by OrthoLogic advising that the Sales
