ALLIANCE AND PRODUCT SUPPLY AGREEMENT

Exhibit 10.5

 

CONFIDENTIAL TREATMENT

EXECUTION COPY

 

ALLIANCE AND PRODUCT SUPPLY AGREEMENT

 

among

 

GAMBRO RENAL PRODUCTS, INC.,

 

DAVITA INC.

 

and

 

GAMBRO AB

 

dated as of October 5, 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission.

TABLE OF CONTENTS

 

 

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ALLIANCE AND PRODUCT SUPPLY AGREEMENT

 

ALLIANCE AND PRODUCT SUPPLY AGREEMENT (this “ APS Agreement ”), dated as of October 5, 2005 (the “ Effective Date ”), among GAMBRO RENAL PRODUCTS INC., a Colorado corporation (the “ Supplier ”), DAVITA INC., a Delaware corporation (the “ Purchaser ”), and, solely for purposes of Section 11.04, GAMBRO AB, a company organized under the laws of the Kingdom of Sweden (“ Parent ”).

 

RECITALS

 

WHEREAS, the Purchaser and Gambro, Inc., a Colorado corporation (the “ Seller ”), have entered into a Stock Purchase Agreement, dated as of December 6, 2004 (the “ Purchase Agreement ”) pursuant to which the Seller agreed to sell to the Purchaser, and the Purchaser agreed to purchase from the Seller, all the issued and outstanding shares of common stock of Gambro Healthcare, Inc., a Tennessee corporation (“ GUS ”), which owns and operates a network of dialysis clinics at various locations in the United States, all as more particularly set forth in the Purchase Agreement;

 

WHEREAS, the Parties have agreed, among other things, to cooperate in the areas of clinical research, medical outcomes, clinic productivity, product development, and education; and to establish a steering committee to, among other things, develop, implement and monitor the cooperative relationship established between the Parties as well as to oversee and negotiate or make determinations required under this APS Agreement;

 

WHEREAS, the Supplier and its Affiliates are engaged in the business of developing, manufacturing and marketing, among other things, (a) products for hemodialysis, peritoneal dialysis, intensive care and certain types of extra-corporeal therapies, including apheresis, and (b) water purification systems;

 

WHEREAS, the Purchaser and its Affiliates own and control clinics, [DELETED] that require certain products manufactured and marketed by the Supplier, its Affiliates and/or licensees, and the Purchaser has agreed to purchase its requirements for such clinics from the Supplier, its Affiliates and/or licensees; and

 

WHEREAS, the Supplier has agreed to supply the Purchaser’s requirements for such products;

 

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties, covenants and agreements contained herein, the Parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Capitalized terms defined in the Purchase Agreement are used herein as therein defined and the interpretations and rules of construction therein shall apply hereto.

SECTION 1.01. Certain Defined Terms . For purposes of this APS Agreement:

 

“ Clinical Development ” means the development of clinical protocols, clinical evaluation site selection, clinical patient selection, and clinical trial management to support the preparation and filing of all applicable Regulatory Filings, and obtaining all necessary regulatory, reimbursement and pricing approvals in the United States with respect to a Developmental Product.

 

[DELETED]

 

“ Confidential Information ” means all proprietary information and materials (whether or not patentable), disclosed by one Party to the other Party, irrespective of the manner in which a Party disclosed such information, in furtherance of this APS Agreement, including inventions, data and information related to clinical trials and protocols, substances, formulations, techniques, methodology, equipment, data, reports, correspondence, know-how, manufacturing documentation and sources of supply, as well as the existence and terms of this APS Agreement.

 

“ Current Machines ” means [DELETED]

 

“ Data ” means (a) all data (including clinical and medical outcome, as well as [DELETED] data) and information generated in connection with Pre-Clinical Development and Clinical Development of Developmental Products; (b) all information relating to clinical research, to medical outcomes, and to [DELETED] when Products (including New Products and Improved Products) are used in treatments; (c) all information relating to the performance of Products (including New Products and Improved Product); (d) information relating to Education; and (e) all data necessary for regulatory filings on Products, Developmental Products and Improved Products.

 

“ Designated Executive Officers ” means, at any time, the Designated Executive Officers identified on Schedule A, as such Schedule may be amended at any time by either Party, but only with respect to the identity of such amending Party’s Designated Executive Officer.

 

“ Developmental Product ” means any product that is proposed to be, or is being, developed by either Party for use in the Field.

 

“ Disclosing Party ” means, with respect to any Confidential Information, the Party that provides, directly or indirectly, its Confidential Information to the Receiving Party.

 

“ Dry Concentrate ” means, [DELETED]

 

“ Education ” means training health care professionals in the use of the Products, New Products or Developmental Products or in the proper documentation of services provided utilizing same.

 

“ Extra-corporeal Therapies ” means the collection, purification and/or treatment (including apheresis and leukopheresis) of blood or blood components outside the body using products manufactured or marketed by the Supplier, its Affiliates and/or licensees.

 

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“ FDA ” means the United States Food and Drug Administration.

 

“ Field ” means the treatment of chronic and acute (temporary) organ failures via dialysis, including hemodialysis, intensive care treatments, peritoneal dialysis, and related treatments, including apheresis.

 

“ Force Majeure ” means a circumstance beyond the control of a Party, including acts of war (whether declared or undeclared) or terrorism; fire, flood, or other natural catastrophe; riot, strikes or work stoppages for any reason; embargo or other government action, including the enactment of any Law that restricts or prohibits the providing of the Products or the providing of healthcare services utilizing the Products.

 

[DELETED]

 

“ HD Products ” means machines, single-use and re-use dialyzers, cassettes, bloodlines, disposables, dry and liquid concentrates, solutions, and access devices, including needles and catheters, in each case for hemodialysis.

 

“ IC Products ” means machines; dialyzers; cassettes; tubing sets; disposables; access devices, including needles and catheters; and solutions, in each case for intensive care or the types of Extra-corporeal Therapies for which the Supplier’s, its Affiliates’ and/or licensees’ machines have received 510K clearance from the FDA.

 

“ Improved Product ” means any product that (a) is a new version, model and/or other improvement of, and (b) has the same basic functionality as, an existing HD Product, Water Purification Product and/or IC Product set forth on Exhibit 1 as of the Effective Date.

 

“ Inability to Supply ” means the Supplier’s failure for any reason to supply the Purchaser with quantities of any Product that the Supplier is required to supply pursuant to Article VII and Section 8.04(a).

 

“ Intellectual Property ” means (a) inventions (whether filed as patent applications of not), patents and patent applications, (b) trademarks, service marks, trade names, trade dress and domain names, together with the goodwill associated exclusively therewith, (c) copyrights, including copyrights in computer software, (d) confidential and proprietary information, including trade secrets and know-how, and (e) registrations and applications for registration of the foregoing

 

“ Material Change ” and cognates thereof means a variation in a Product that would require (a) retraining of clinic personnel, (b) modifications in other Products in order to use the Product that is Materially Changed, or (c) submission of the Product that is Materially Changed to the FDA for 510K clearance.

 

“ New Product ” means a product for use in hemodialysis, peritoneal dialysis, renal intensive care and Extra-corporeal Therapies that has a basic functionality different from any Product specified on Exhibit 1 to the APS Agreement.

 

[DELETED]

 

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“ Party ” means either the Supplier or the Purchaser, and their respective successors and permitted assigns hereunder, as appropriate.

 

“ Pre-Clinical Development ” means pre-clinical safety and tolerance studies, including prototype design and development, process development, the collection of data, and the supply of materials (including fluid and blood samples or products).

 

“ Product Liability Claims ” means any and all claims by users of Products (including patients treated with any Product or their family members, insurers, health care providers, subrogees or assignees) seeking damages for personal injury, death, expense, economic loss (including, without limitation, loss of value of the Product), or any other relief or remedy, arising out of or related to any alleged defect in the design or manufacture, labeling, packaging or marketing of any Product.

 

“ Products ” means those HD Products, Water Purification Products and IC Products, collectively, specified on Exhibit 1 to this APS Agreement, as such Exhibit shall be amended from time to time in accordance herewith to (a) delete any Products discontinued by the Supplier, its Affiliates and/or licensees, (b) include any Improved Product, and (c) include all mutually agreed New Products.

 

“ Receiving Party ” means, with respect to any Confidential Information, the Party that receives such Confidential Information.

 

“ Regulatory Filings ” means the preparation and filing of all applicable regulatory documents, and obtaining all necessary regulatory, reimbursement and pricing approvals in the United States.

 

“ Representative ” means, as to a Party, such Party’s Affiliates and its and their directors, officers, employees, agents, and advisors (including counsel and accountants).

 

“ Spare Parts ” means any replacement parts required for Products utilized in a [DELETED].

 

“ UCC ” means the Uniform Commercial Code as enacted in the State of New York.

 

“ Water Purification Products ” means water purification systems and related parts and materials, whether stand-alone equipment or central water systems, and equipment designed to meet the specifications for a particular [DELETED], and any services related thereto, except for installation of stand-alone equipment.

 

SECTION 1.02. Additional Definitions . The following terms have the meanings set forth in the Sections set forth below:

 

 

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ARTICLE II

 

SCOPE

 

SECTION 2.01. Oversight and Guidance . The Relationship Managers and the Steering Committee shall have oversight and guidance responsibilities with respect to the Parties’ performance under this APS Agreement, as more fully set forth in Article III.

 

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SECTION 2.02. Cooperation . The Parties hereby agree to cooperate with each other pursuant to the terms of this APS Agreement in the development of products with application in the Field. Such cooperation shall be directed, overseen and guided by the Relationship Managers and the Steering Committee, in accordance with the terms of this APS Agreement. Such cooperation shall include the Parties’ cooperating in the following activities: (a) Pre Clinical Development and Clinical Development of Developmental Products; (b) Data exchange; and (c) Education.

 

SECTION 2.03. Data Supply . Subject to any confidentiality or other regulatory restriction (including HIPAA and applicable state privacy regulations), the Purchaser agrees to provide the Supplier with reasonable access to requested Data (including samples, if appropriate) collected and/or generated by the [DELETED]. Such Data shall at all times be owned by the Purchaser (and may not be resold, transferred, shared or otherwise made available to third parties by the Supplier except with the prior written consent of the Purchaser) and shall be subject to the confidentiality provisions of this APS Agreement. Such Data shall be used solely in connection with (a) assessing the performance of the Products, or the development of New Products or Improved Products and (b) the publication of articles and/or marketing materials based on such Data, provided the use of Data in such articles and marketing material is anonymized and non-attributed.

 

SECTION 2.04. Clinical Trial Participation . The Supplier may, from time to time, request that the Purchaser cause any [DELETED] to participate, to the extent commercially reasonable, in clinical trials relating to New Products and/or Developmental Products. The Purchaser agrees to negotiate in good faith the terms and conditions related to such participation, including preparation of a trial protocol to identify the types of Data to be reported.

 

SECTION 2.05. Sales . The Supplier and the Purchaser agree that all sales of the Products by and between the Supplier and the Purchaser shall be subject exclusively to the terms of this APS Agreement. Nothing in this APS Agreement is intended nor shall it be construed as restricting the Supplier, its Affiliates and/or licensees from selling goods or services (including the Products) to any other Person.

 

SECTION 2.06. No Re-Sale . The Purchaser agrees that the Products sold under this APS Agreement shall not be re-sold or re-marketed, directly or indirectly, by the Purchaser, and that the Purchaser shall cause its Affiliates not to re-sell or remarket such Products, in each case other than to dialysis centers managed by the Purchaser.

 

SECTION 2.07. Access to Product Portfolio . During the Term, the Supplier shall provide the Purchaser with access to all Supplier-manufactured products that are approved for use in the U.S. and are commercially available for use in the Field.

 

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ARTICLE III

 

STEERING COMMITTEE

 

SECTION 3.01. Steering Committee . (a)  Formation of Steering Committee . The Parties shall cooperate in good faith to form a steering committee (the “ Steering Committee ”) as soon as reasonably practicable following the Closing Date. The Steering Committee shall consist of no fewer than four (4) but no more than six (6) members, with the Supplier and the Purchaser each designating the same number of members. Each Party’s Relationship Manager shall be a member of the Steering Committee. The initial members of the Steering Committee shall be as set forth on Schedule A.

 

(b) Steering Committee Member Replacement . Either Party may at any time upon written notice replace any member of the Steering Committee that it has designated, including such Party’s designated Relationship Manager. In the event a vacancy occurs in the Steering Committee, the Party that appointed the member that has vacated its membership shall promptly designate a substitute member and provide written notice to the other Party of such designation.

 

(c) Steering Committee Meetings and Responsibilities . The Steering Committee shall meet as necessary, but at least once each during each calendar quarter, or as otherwise agreed in writing by the Parties. The Steering Committee shall, at a minimum:

 

(i) ensure each Party is performing its obligations under this APS Agreement;

 

(ii) coordinate the Parties’ activities relating to (A) Pre-Clinical Development and Clinical Development of Development Products; (B) the exchange of Data, and (C) Education;

 

(iii) determine prices for Improved Products and New Products as set forth in Sections 4.03 and 4.05, respectively; and

 

(iv) attempt in good faith to resolve any issue presented to the Steering Committee by a Relationship Manager.

 

(d) Steering Committee Decisions . Each Party shall have one (1) vote on the Steering Committee, and a quorum of the Steering Committee shall require at least two (2) representatives from each Party. All decisions of the Steering Committee shall be by unanimous vote and documented in a writing signed by the Steering Committee members participating in such decision. The Steering Committee shall not have the power to amend this APS Agreement, provided , that the Steering Committee shall have the power to amend Exhibit 1 solely with respect to the price of New Products or Improved Products.

 

(e) Formation of Subcommittees . If and when required under this APS Agreement, or as the Steering Committee shall determine necessary or appropriate, the Steering Committee shall establish, appoint and oversee subcommittees in its discretion. Each subcommittee shall meet as directed by the Steering Committee, and shall report to the Steering Committee as requested. Any such subcommittee shall include at least two members, and such

 

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members shall be appointed, in equal number, by each Party’s Relationship Manager. Such representatives may, but need not, be members of the Steering Committee.

 

SECTION 3.02. Relationship Managers . In addition to the Steering Committee, each Party shall designate an individual (each a “ Relationship Manager ”) who shall serve as the primary representative to the other Party with respect to managing the relationship of the Parties under this APS Agreement and who shall report to the other members of the Steering Committee. The Relationship Manager for each Party shall have overall responsibility for managing and coordinating the performance of such Party’s obligations under this APS Agreement and for coordination with such Party’s personnel. The initial Supplier Relationship Manager and Purchaser Relationship Manager shall be as set forth on Schedule A. The Supplier and the Purchaser Relationship Managers shall work with and make reports to each other on a regular basis, and no less than semi-monthly, with respect to issues that arise regarding this APS Agreement. Each Relationship Manager shall be deemed to have authority to issue, execute, grant or provide any requests, notices or other communications required hereunder or requested by the other Party in connection with this APS Agreement.

 

SECTION 3.03. Access to Managers . The Supplier shall ensure that the Purchaser has adequate access to the Supplier Relationship Manager, and that such Relationship Manager responds to and has sufficient time to service the Purchaser hereunder to the reasonable satisfaction of the Purchaser. The Purchaser shall ensure that the Supplier has adequate access to the Purchaser Relationship Manager and that such Relationship Manager responds to and has sufficient time to service the Supplier hereunder to the reasonable satisfaction of the Supplier.

 

SECTION 3.04. Review Meetings and Progress Reports . Upon the reasonable request of either Party’s Relationship Manager, and with reasonable notice, each Party’s Relationship Manager, as well as appropriate additional personnel involved in the performance of this APS Agreement, shall meet at a location mutually agreed to by the Parties or conduct a teleconference or videoconference meeting, to discuss this APS Agreement. At each such meeting and whenever reasonably requested by either Party and with reasonable notice, each Party shall provide the other Party with a written status report that identifies any problem or circumstance encountered by the Party, or that the Party gained knowledge of during the period since the last such status report, that may prevent or tend to prevent the Party from completing any of its obligations under this APS Agreement. If applicable, the Party shall identify the cause of any identified problem or circumstance and steps taken or proposed to be taken by the Party to remedy the problem or circumstance.

 

SECTION 3.05. Issue Resolution .

 

(a) Internal Resolution Process . Subject to Sections 3.05(c) and 4.03(c), in the event of any issue, controversy or claim arising out of or relating to this APS Agreement, including any disagreement between the Relationship Managers, the Relationship Managers shall attempt in good faith to resolve such issue promptly. In the event that the Relationship Managers cannot resolve any such issue, either Relationship Manager may refer such issue to the Steering Committee for resolution. If the Steering Committee cannot reach consensus to resolve the issue within twenty (20) business days after the matter has been brought to the Steering Committee’s

 

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attention, then any Steering Committee member may submit such issue to the Designated Executive Officers of each Party for resolution. The Designated Executive Officers shall attempt in good faith to resolve any issue presented to them by the Steering Committee. In the event that the Designated Executive Officers cannot resolve an issue, controversy or claim arising out of or relating to this APS Agreement within twenty (20) business days after the matter has been brought to their attention, such issue, controversy or claim shall be submitted to non binding mediation pursuant to Section 3.05(b).

 

(b) External Mediation Process . Subject to Sections 3.05(c) and 4.03(c), any issue, controversy or claim that has not been resolved pursuant to Section 3.05(a) shall be submitted to non-binding mediation in the county where the non-complaining Party has its principal place of business. The Parties shall use their commercially reasonable efforts to schedule mediation within thirty (30) days from the date on which the claim is submitted to mediation. If the Parties in good faith do not settle the dispute through mediation, such dispute shall be submitted to binding arbitration pursuant to Article XIV.

 

(c) Third Party Product Disputes . Notwithstanding anything to the contrary in Section 3.05(a), in the event that the Purchaser in good faith believes that one or more Products supplied by the Supplier, its Affiliates and/or licensees is materially inferior in performance to a functionally similar product manufactured by a third party (a “ Third Party Product ”), and the Supplier disagrees with such belief, the issue shall be treated as specified for a general dispute, except that if the Designated Executive Officers are unable to resolve such issue, the matter shall not be resolved pursuant to the terms of Section 3.05(b) or Article XIV, but rather shall be referred by the Designated Executive Officers to a medical advisory board composed of five nationally recognized nephrologists, one to be selected by each Party and the other three to be mutually agreeable to those nephrologists selected by the Parties. The medical advisory board’s decision shall be final, conclusive and binding on the Parties. If the medical advisory board agrees with the Purchaser, then the Purchaser may purchase such Third Party Product and such purchase shall be included in any calculation made of the Purchaser’s purchase obligations pursuant to Article VII for the time period that such Third Party Product purchases continue. Subject to any contractual obligations of the Purchaser, the Purchaser’s purchase obligations pursuant to Article VII with respect to such Product shall be reinstated when such previously inferior Product is determined by the Designated Executive Officers to be functionally equivalent and not inferior to the Third Party Product, except that if the Designated Executive Officers are unable to resolve such issue, the matter shall be resolved pursuant to the terms of Section 3.05(c).

 

ARTICLE IV

 

PRODUCT CHANGES AND TERMINATIONS

 

SECTION 4.01. Material Changes . The Supplier shall provide reasonable, and in no event less than six (6) months, prior written notice to the Purchaser when contemplating making any Material Changes. The Purchaser shall use its commercially reasonable efforts to review all such proposed Material Changes in an expeditious manner, but shall incur no liability in connection with such review or any failure to make such review, nor

 

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shall such review relieve the Supplier from any warranty obligation or any other obligation set forth herein.

 

SECTION 4.02. Cessation of Production . In the event that the Supplier, its Affiliates and/or licensees decides to cease producing any Product, the Supplier shall notify the Purchaser of its intent to withdraw such Product at least [DELETED] before such withdrawal. Except as shown on Schedule B, the Supplier has no current plans to withdraw any Products within [DELETED] of the date of this APS Agreement. The Purchaser will have a minimum of [DELETED] from the date of such notice to place orders for such Product without quantity restrictions; provided , that the Purchaser promptly tenders to the Supplier a good faith forecast, complying with the terms of Article VIII, of the Purchaser’s requirements and allowing a commercially reasonable lead time for the Supplier, its Affiliates and/or licensees to produce such requirements. The Supplier, its Affiliates and/or licensees will maintain the capability to supply agreed upon Products, including Spare Parts, for a period to be agreed by the Parties, but in no event less than [DELETED] after withdrawal of such Products. In addition, after discontinuing any Product, the Supplier, its Affiliates and/or licensees shall maintain a reasonable supply of warranty replacements therefor for the remainder of all applicable warranty periods and an adequate supply of Spare Parts for the reasonable expected useful life of such Product.

 

SECTION 4.03. Improved Products . (a) The Supplier may amend Exhibit 1 to (i) include one or more Improved Products as a “Product” at any time and (ii) provided that the Supplier is in compliance with Section 4.02, remove one or more Products from Exhibit 1. Upon the amendment and delivery of an amended Exhibit to the Steering Committee in connection with the addition of an Improved Product, the Relationship Managers shall negotiate in good faith to determine a market price for each such Improved Product. The market price for any Improved Product shall be based on [DELETED] following amendment of Exhibit 1 to add such Improved Product. Upon determination of a market price for such Improved Products, Exhibit 1 shall be amended to include any such Price for such items.

 

(b) If the Relationship Managers are unable to resolve the price for an Improved Product within twenty (20) days, the issue shall be treated as specified in Section 3.05(a), except that if the Designated Executive Officers are unable to resolve such issue within twenty (20) days after the matter has been brought to their attention, or earlier at the agreement of the Parties, Exhibit 1 shall be amended to reflect [DELETED]. Either Party shall have the right, for the twenty-day period following each such amendment of Exhibit 1, to dispute such price pursuant to the terms of Section 4.03(c).

 

(c) Notwithstanding anything to the contrary in Section 3.05(a), in the event that Exhibit 1 has been amended pursuant to Section 4.03(b) to reflect the [DELETED] of any Improved Product, the price of which is in dispute, either Party may, within twenty (20) days from the date of such amendment, seek non-binding mediation pursuant to Section 3.05(a) or, notwithstanding Section 3.05(b), immediately seek binding arbitration pursuant to Article XIV. Following a negotiated or binding decision resulting from such arbitration procedure, the Parties shall adjust the amounts paid prior to such final price determination, in accordance with such determination.

 

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(d) [DELETED].

 

SECTION 4.04. Developmental Products . Either Party may propose a Developmental Product through its Relationship Manager to the other Party’s Relationship Manager. The Relationship Managers shall in good faith consider the advisability of establishing cooperation between the Parties with respect to the development and commercialization of such proposed Developmental Product. Any such cooperation shall be subject to a separate written agreement between the Parties.

 

SECTION 4.05. New Products . The Purchaser and the Supplier shall negotiate in good faith the amendment of Exhibit 1 to include one or more New Products as a “Product” at any time and Exhibit 1 shall only be amended on the mutual agreement of the Parties. The price being charged to the Purchaser for any New Product shall be based on all relevant factors including [DELETED] in respect of such New Product for the [DELETED] to add such New Product.

 

SECTION 4.06 [DELETED]

 

ARTICLE V

 

REGULATORY COOPERATION

 

SECTION 5.01. Regulatory Action . Each Party shall promptly inform the other Party of any regulatory action of which it is aware that would materially and adversely affect any Product in the United States.

 

ARTICLE VI

 

OWNERSHIP OF INTELLECTUAL PROPERTY

 

SECTION 6.01. Continuing Ownership . Each Party acknowledges that any Intellectual Property of the other Party or its Affiliates is and shall continue to be owned by such other Party and its Affiliates, respectively, subject only to any licenses that may from time to time be granted by one Party to another.

 

SECTION 6.02. Exclusive Ownership . Any inventions, discoveries, improvements, modifications, alterations or enhancements, including those in Developmental Products, New Products and Improved Products that are made, conceived, discovered or reduced to practice solely by the employees or contractors of a Party or the employees or contractors of its Affiliates, during and in the course of performance under this APS Agreement, together with all Intellectual Property rights therein, shall be owned exclusively by such Party or its Affiliates and shall be included in the Intellectual Property of such Party.

 

SECTION 6.03. Joint Inventions . (a) Any invention that is conceived, discovered or reduced to practice jointly by the employees or contractors of both Parties or their Affiliates pursuant to performance under this APS Agreement (a “Joint Invention”), including Joint Inventions relating to Improved Products, New Products or Developmental Products, shall be jointly owned by the Parties without any right or duty of

 

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accounting. Expenses relating to any patent filings, patent applications and patent grants covering Joint Inventions shall be shared equally by each Party and the Parties agree to assist and require their employees and contractors and their Affiliate’s employees and contractors, if applicable, to assist in filing and prosecuting such patent applications and securing such patent grants. If either Party elects not to monetarily support the filing, prosecution, or maintenance of a patent application or patent on any such Joint Invention in any country, then that Party shall promptly notify the other Party, who may elect to file, continue prosecution or pay maintenance at its own expense. The non-paying Party agrees to assign all its rights, and to require its employees and contractors and the employees and contractors of its Affiliates, if applicable, to assign their rights in such Joint Invention, patent application, and patent to the Party paying the expenses.

 

(b) In the event that a filing is made for patent protection for any Joint Invention, the Supplier shall have the right, at its option during the [DELETED] upon written notice to the Purchaser, to purchase the Purchaser’s interest in each such Joint Invention. The Purchaser shall, if the Supplier provides timely written notice of its intent to exercise such option, promptly sell such interest to the Supplier. Each such sale shall be made at the [DELETED], as the [DELETED] shall be agreed by the Relationship Managers, subject to the terms of Sections 3.05(a) and (b).

 

ARTICLE VII

 

PURCHASE REQUIREMENTS

 

SECTION 7.01. [DELETED] Purchase Requirements . (a) During the Initial Term and, if applicable, during the First Renewal Period, the Purchaser shall purchase, and shall cause its Affiliates to purchase, from the Supplier, subject to the terms and conditions of this APS Agreement at the prices set out in Exhibit 1:

 

(i) [DELETED]% of the [DELETED] requirements of each of the following:

 

(A)

subject to Section 7.08, Dry Concentrates [DELETED];

 

(B)

cassettes and Spare Parts for machines manufactured or marketed by Supplier, its Affiliates and/or licensees; and

 

(C)

machines that replace [DELETED];

 

(ii) no less than [DELETED]%, and shall make reasonable efforts to purchase [DELETED]%, of the [DELETED] requirements of each of the following:

 

(A)

dialysis or apheresis machines that do not replace [DELETED]; provided , that during the [DELETED], the Purchaser shall, and shall cause its Affiliates to purchase from the Supplier no less than [DELETED]%, and shall make reasonable efforts to purchase [DELETED]%, of the [DELETED] requirements of dialysis machines that do not replace [DELETED];

 

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(B)

single-use dialyzers; provided , that during the [DELETED], the Purchaser shall only be required to purchase [DELETED]%, and shall make reasonable efforts to purchase [DELETED]%, of the [DELETED] requirements of single-use dialyzers;

 

(C)

re use dialyzers; provided , that during the [DELETED] the Purchaser shall only be required to purchase [DELETED]%, and shall make reasonable efforts to purchase [DELETED]%, of the [DELETED] requirements of re-use dialyzers;

 

(D)

subject to Section 7.08, Dry Concentrates for machines [DELETED]; and

 

(E)

any other Product not otherwise specified in this Section 7.01(a).

 

(b) During the Second Renewal Period, if applicable, the Purchaser shall purchase, and shall cause its Affiliates to purchase, from the Supplier, subject to the terms and conditions of this APS Agreement at the prices set out in Exhibit 1:

 

(i) no less than [DELETED]% of the [DELETED] requirements of each of the following:

 

(A)

subject to Section 7.08, Dry Concentrates for use with [DELETED];

 

(B)

cassettes and Spare Parts for machines manufactured or marketed by Supplier, its Affiliates and/or licensees; and

 

(C)

machines that replace [DELETED];

 

(ii) no less than [DELETED]% of the [DELETED] requirements of each of the following:

 

(A)

dialysis or apheresis machines that do not replace [DELETED];

 

(B)

single-use dialyzers;

 

(C)

re-use dialyzers;

 

(D)

subject to Section 7.08, Dry Concentrates for machines [DELETED]; and

 

(E)

any other Product not otherwise specified in this Section 7.01(b).

 

(c) During the Third Renewal Period, if applicable, the Purchaser shall purchase, and shall cause its Affiliates to purchase, from the Supplier, subject to the terms and conditions of this APS Agreement at the prices set out in Exhibit 1:

 

(i) no less than [DELETED]% of the [DELETED] requirements of each of the following:

 

(A)

subject to Section 7.08, Dry Concentrates for use with [DELETED];

 

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(B)

cassettes and Spare Parts for machines manufactured or marketed by Supplier, its Affiliates and/or licensees; and

 

(C)

machines that replace [DELETED];

 

(ii) no less than [DELETED]% of the [DELETED] requirements of each of the following:

 

(A)

dialysis or apheresis machines that do not replace [DELETED];

 

(B)

single-use dialyzers;

 

(C)

re-use dialyzers;

 

(D)

subject to Section 7.08, Dry Concentrates for machines [DELETED]; and

 

(E)

any other Product not otherwise specified in this Section 7.01(c).

 

SECTION 7.02. [DELETED] Purchase Requirements . (a) During the Initial Term and, if applicable, during the First Renewal Period, the Purchaser shall purchase, and shall cause its Affiliates to purchase, from the Supplier [DELETED]% of the [DELETED] requirements of Dry Concentrate and other Products, subject to the terms and conditions of this APS Agreement (including, without limitation, section 7.08 below) at the prices set out in Exhibit 1; provided, that, subject to Section 7.09, the Purchaser [DELETED] for use with [DELETED] in [DELETED].

 

(b) During the Second Renewal Period, if applicable, the Purchaser shall purchase, and shall cause its Affiliates to purchase, from the Supplier [DELETED]% of the machines that replace the [DELETED] and no less than [DELETED]% of the [DELETED] requirements of Dry Concentrate and other Products, subject to the terms and conditions of this APS Agreement (including, without limitation, section 7.08 below) at the prices set out in Exhibit 1; provided, that, subject to Section 7.09, the Purchaser [DELETED] for use with [DELETED] in [DELETED].

 

(c) During the Third Renewal Period, if applicable, the Purchaser shall purchase, and shall cause its Affiliates to purchase, from the Supplier [DELETED]% of the machines that replace the [DELETED] and no less than [DELETED]% of the [DELETED] requirements of Dry Concentrate and other Products, subject to the terms and conditions of this APS Agreement (including, without limitation, section 7.08 below) at the prices set out in Exhibit 1; provided, that, subject to Section 7.09, the Purchaser [DELETED] for use with [DELETED] in [DELETED].

 

SECTION 7.03. Extension Requirements . The Purchaser’s purchasing obligations with respect to the [DELETED] requirements and the [DELETED] requirements during the Extension shall be determined through negotiation pursuant to Section 12.02.

 

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SECTION 7.04. [DELETED] Purchase Requirements . (a) The Purchaser may satisfy its obligations pursuant to Section 7.01 and Section 7.02 on a unit volume weighted average basis and on a Product category by Product category basis as such Product categories are specified in each sub-sub-subsection (as indicated by a capitalized letter) of Section 7.01 for any measurement period taking into account [DELETED] aggregate purchases for each such Product category. Schedule D attached hereto contains illustrative examples to aid in the interpretation of the requirement contained in this Section 7.04. None of the terms or figures shown in such Schedule D examples shall bear any legally operative meaning, and the examples are provided for illustration purposes only.

 

(b) Except as otherwise permitted under this APS Agreement, the Purchaser shall not purchase, and shall cause its Affiliates not to purchase, any product that is a substitute for any Product.

 

(c) Within thirty (30) days after each calendar quarter, the Purchaser will provide a report to each of the Relationship Managers identifying (i) the Purchaser’s total purchases of Products, on a Product category basis as described in paragraph (a) above, during such quarter and (ii) the quantity of such purchases made from the Supplier. Within thirty (30) days after each calendar quarter, the Supplier shall also provide a report to the Relationship Managers reflecting the Supplier’s record of the Products Purchaser bought during the quarter. The Steering Committee will review such quarterly reports at its regular meetings to assure that the Parties’ records concur and that the Purchaser is fulfilling its obligations under this Section 7.04 for the applicable measurement period.

 

SECTION 7.05. Installation; Training, Transition; Acquisitions

 

(a)(i) During the Initial Term and the Automatic Renewal Period, if any, the Supplier shall be responsible for [DELETED] of all dialysis, apheresis and continuous renal replacement therapy machines purchased by Purchaser pursuant to this APS Agreement. In addition, during the Initial Term and the Automatic Renewal Period, if any, the Supplier shall be responsible for [DELETED].

 

(ii) During the Initial Term and the Automatic Renewal Period, if any, to the extent commercially reasonable, the Supplier shall make available to the Purchaser educational and technical support, materials and personnel in order to assist the Purchaser in efficiently complying with its obligations under this Article VII.

 

(iii) During the Initial Term and the Automatic Renewal Period, if any, the Supplier shall install and certify all Water Purification Products consisting of [DELETED] products purchased hereunder by [DELETED].

 

(iv) The Supplier shall provide [DELETED] to the personnel of the Purchaser as part of the Supplier’s biomed technical training program and will enroll such personnel in the Supplier’s regularly scheduled classes as quickly as possible after the Effective Date. The Purchaser shall pay the Supplier for such training [DELETED] as set out in Exhibit 1, which cost may be amended by the Steering Committee each year during the

 

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term of this APS Agreement as part of its responsibility for coordinating the parties’ activities relating to education; and the Purchaser shall require [DELETED] from the Supplier on such terms.

 

(b) The requirements of this Article VII shall be subject to the existing obligations of the Purchaser, each of which are shown on Schedule C and purchases under such obligations shall not be included in any calculation made of the Purchaser’s purchase obligations pursuant to this Article VII for the time period that such obligations are in effect. The Supplier shall have the right to buy out any existing contracts under which the Purchaser currently has purchasing obligations in order to more quickly transition Products under this APS Agreement.

 

(c) With respect to any clinic acquired by the Purchaser subsequent to the Effective Date, the requirements of this Article VII shall be subject to the existing obligations of such clinic, provided that the Supplier is given prompt notice of such existing obligations and the Supplier shall have the right to buy out any existing contracts under which such acquired clinic currently has purchasing obligations in order to more quickly transition Products under this APS Agreement.

 

SECTION 7.06. Supplier’s Agreement to Supply . During the Initial Term, and, if applicable, the Automatic Renewal Period, the Supplier shall supply to the Purchaser and its Affiliates the Products to be purchased pursuant to this Article VII, subject to the terms and conditions of this APS Agreement at the prices set out in Exhibit 1.

 

SECTION 7.07. Bloodlines . (a) Provided that the Purchaser cooperates with the Supplier to minimize the number of bloodlines and product codes that require modification, the Supplier agrees to use commercially reasonable efforts to modify bloodlines purchased by the Purchaser pursuant to this APS Agreement for use in machines that are owned by the Purchaser prior to the Effective Date. The Parties shall cooperate to develop a schedule for the conversion and introduction of such modified bloodlines.

 

(b) The Parties agree that the Purchaser’s contract with [DELETED], as described in Schedule C to this APS Agreement, may be extended until no later than [DELETED], for up to [DELETED]% of the bloodlines required for [DELETED] and that the Parties’ purchase and supply obligations with respect to modified bloodlines for [DELETED] shall not go into effect until the expiration or earlier termination of the [DELETED] extended contract, at which time they shall be fully enforceable. The terms of this APS Agreement with respect to bloodlines for [DELETED] shall remain in effect, irrespective of the contract with [DELETED].

 

SECTION 7.08. [DELETED]. The Purchaser agrees to the following:

 

(a) The Purchaser shall use reasonable good faith efforts such that by [DELETED] as defined below, the Purchaser shall purchase, and shall cause its Affiliates to purchase, from the Supplier, on the terms and conditions of this APS Agreement, [DELETED];

 

(b) by the [DELETED], the Purchaser’s purchases of [DELETED] from the Supplier will comprise not less than [DELETED]percent ([DELETED]%), and the Purchaser

 

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shall make commercially reasonable efforts to purchase from the Supplier [DELETED] percent ([DELETED]%), of the total volume of the Purchaser’s aggregate requirements for [DELETED] required by [DELETED] and [DELETED]; provided, however, that in each case, the selection of the clinics purchasing the [DELETED] from the Supplier shall be made by the Purchaser in its sole and absolute discretion after consultation with Supplier;

 

(c) [DELETED] [DELETED], Supplier shall be obligated to supply the Purchaser’s aggregate volume requirements for [DELETED] required by [DELETED] and [DELETED], provided that (i) prior to the [DELETED], such volume requirements of [DELETED] shall not exceed [DELETED] percent ([DELETED]%) of [DELETED] and the [DELETED] aggregate volume requirements for [DELETED], and (ii) by the [DELETED], the Supplier shall not be obligated to supply as [DELETED] more than [DELETED] percent ([DELETED]%) of [DELETED] and the [DELETED] aggregate volume requirements for [DELETED]; and

 

(d) [DELETED], the Supplier shall have no obligation [DELETED].

 

For purposes of this Section 7.08, the [DELETED] shall mean the date on which the Purchaser confirms in writing that, after good faith efforts, the Purchaser has adequately [DELETED] in its clinics. If the Purchaser has not given such written notice by [DELETED], the Seller shall have the right to refer the matter to the Steering Committee to determine the [DELETED]. The price for the [DELETED] as set out in Exhibit 1.

 

SECTION 7.09. [DELETED] Dry Concentrate [DELETED]. The Supplier will [DELETED], manufacture and make commercially available to Purchaser [DELETED], [DELETED] (such [DELETED] product shall be referred to as the [DELETED]), that will [DELETED] and [DELETED] the Purchaser’s [DELETED] as described below. The [DELETED] will deliver [DELETED] according to the Purchaser’s current prescription standard [DELETED]. [DELETED] will be priced at the same level as [DELETED].

 

ARTICLE VIII

 

FORECASTS, PURCHASE ORDERS, FULFILLMENT

 

SECTION 8.01. Rolling Forecasts . The Parties shall have agreed by the Effective Date, on an initial 12-month demand forecast, in standard units of purchase, that will commence on October 1, 2005. The first and second months of that initial forecast will be binding.

 

(a) No later than fifteen (15) U.S. business days after the beginning of each month following the Effective Date, the Parties shall conduct a monthly forecast review to develop a good-faith rolling monthly national forecast for the following 12 months. At that time, the forecast for the third following month in the relevant forecast will become binding (i.e., if the forecast is reviewed in September, the forecast for December becomes binding, October and November having already been made and remaining binding), unless the Parties agree otherwise in writing. Prior to each monthly review, the Supplier will compare the immediate past month’s

 

17

forecast to actual purchase orders received from the Purchaser. On the basis of that comparison, the Parties will determine what corrective actions and adjustments might be required.

 

(b) During each monthly forecast review, the Purchaser shall also inform the Supplier about factors that may cause the Purchaser to purchase differently than in the past. Examples of such factors include:

 

(i) A planned transition from one Product or product type to another Product or product type (e.g., a change in Purchaser’s reuse vs. single use strategy);

 

(ii) A planned transition from one therapy type to another;

 

(iii) Plans for new clinics, acquisitions, expansions, and divestitures.

 

The Parties will develop a mutually agreed supply plan to address the supply implications of such changes. These factors will be documented in the monthly forecast review minutes. The Purchaser’s failure to disclose such factors will release the Supplier from any obligation to respond to these conditions in a timely manner and will obligate the Purchaser to compensate the Supplier for any obsolescence and product disposal costs that result from the Purchaser’s failure to disclose these factors to the Supplier.

 

(c) Each monthly forecast will be signed off by the Parties. If the Purchaser fails to participate or contribute to the process, the Supplier will note that failure in the forecast review minutes and will set the forecast based on the Supplier’s best information. The Supplier will also notify the Purchaser in writing that the Supplier believes that the Purchaser is not making a good-faith effort to participate in and contribute to the forecasting process. The Purchaser will also pay the Supplier for all obsolescence and product disposal costs that result from forecast errors in those months that became binding when the Purchaser failed to participate in the forecast process.

 

(d) Within fifteen (15) U.S. business days following the close of each calendar quarter, the Parties will determine whether the Purchaser has actually ordered the quantities of Products specified in the binding forecasts for such calendar quarter. In the event actual orders did not equal or exceed the binding forecasts for Products (by categories as defined in Section 7.04(a)), the Seller may invoice, and the Purchaser agrees to pay, [DELETED] percent ([DELETED]%) of [DELETED].

 

SECTION 8.02. Purchase Orders . Purchase orders may be communicated from the Purchaser to the Supplier via telephone, U.S. mail, facsimile transmission, Web ordering or by Electronic Data Interface (“ EDI ”) transaction sets mutually agreed and tested by the Supplier and the Purchaser. The Supplier is under no obligation to use any electronic communication method that would cost the Supplier more than the standard EDI Value Added Network (VAN) fees typically charged in the United States market. The Supplier is obligated to pay EDI VAN fees only for the “supplier side” of the transaction mailbox. Purchase orders shall:

 

(a) be in a form mutually acceptable to the Purchaser and the Supplier;

 

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(b) conform to the terms and conditions of this APS Agreement; and

 

(c) set forth the following information:

 

(i) the complete ‘bill to’ and ‘ship to’ address(es);

 

(ii) catalog number, description and quantity of Products being purchased;

 

(iii) price per item;

 

(iv) payment terms;

 

(v) shipping term as stated herein (i.e., F.O.B. (UCC) shipping point);

 

(vi) required delivery date, if desired; and

 

(vii) lift gate and/or inside delivery requirements, if needed.

 

EDI purchase orders for equipment from [DELETED] may be accepted without a follow-up written purchase order. All orders placed by telephone must be followed up by a written purchase order (faxed or mailed). Until the Purchaser provides the Supplier with written notice permitting [DELETED] to utilize EDI ordering, all purchase orders for equipment for [DELETED] must be either faxed or mailed.

 

SECTION 8.03. Terms of Agreement Govern . No modification or amendment to this APS Agreement shall be effected by or result from the receipt, acceptance, signing or acknowledgement of any purchase order hereunder, Supplier’s quotations, invoices, shipping documents or other business forms containing terms or conditions in addition to or different from the terms and conditions set forth in this APS Agreement. The terms of this APS Agreement shall supersede any provision in any purchase order, invoice or other document (including the Supplier’s policies, practices, catalogs, brochures and the like) that is inconsistent with the terms of this APS Agreement.

 

SECTION 8.04. Supply Obligations

 

(a) Duty to Accept . The Supplier shall accept purchase orders from the Purchaser, subject to the other terms and conditions of this APS Agreement, to the extent such quantity of any Product is no more than [DELETED]% of the quantity of such Product agreed by the Parties in the binding forecast for that month.

 

(b) No Duty to Accept . The Supplier shall not be obligated to accept purchase orders to the extent the quantity of a Product ordered exceeds the limitation in Section 8.04(a), but shall use commercially reasonable efforts to fill orders for quantities exceeding forecast from the Supplier’s available supplies. In the event that the Supplier, despite the use of its commercially reasonable efforts, is unable to supply such excess quantities to the Purchaser, such inability to supply shall not constitute a breach of the Supplier’s obligations under this Article VIII.

 

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(c) Excess Supply Notice . The Supplier shall notify the Purchaser as soon as the Supplier becomes aware that the Purchaser’s orders are exceeding forecast and shall advise the Purchaser of the Supplier’s ability to fill any amounts of such orders in excess of [DELETED]% of the forecast. The Purchaser shall notify the Supplier as soon as the Purchaser becomes aware that the Purchaser’s requirements for any Product will exceed the forecast of such Product.

 

SECTION 8.05. Inability to Supply

 

(a) Notice . The Supplier shall provide the Purchaser with a written notice of an Inability to Supply as promptly as practicable, but in no event more than ten (10) days after the Supplier becomes aware of an Inability to Supply. In the event that the Purchaser reasonably believes that an Inability to Supply exists, the Purchaser shall provide the Supplier with written notice of such belief and the Supplier shall respond by written notice within ten (10) days confirming or denying such belief.

 

(b) Alternative Supply . In the event of an Inability to Supply, the parties shall reasonably cooperate to establish an alternative supply for those Products for which an Inability to Supply exists, including enabling the Supplier to provide reasonable third-party substitute products. The Supplier shall [DELETED] in connection with an Inability to Supply, provided that the Purchaser has cooperated with the Supplier pursuant to this Section 8.05(b) including to [DELETED].

 

(c) Calculations . In the event of an Inability to Supply, any purchases of products made by the Purchaser from third parties in substitution for those Products affected by such Inability to Supply shall be included in any calculation made of the Purchaser’s purchase obligations pursuant to Article VII for the time period that such Inability to Supply exists.

 

SECTION 8.06. Delivery

 

(a) Delivery Dates . The Supplier shall make commercially reasonable efforts to ship or cause to be shipped quantities of Product that the Supplier is obligated to supply pursuant to Section 8.04 for delivery on the dates specified in the Purchaser’s purchase orders submitted and accepted in accordance with this Article VIII. All stated shipment dates are based upon timely receipt of all necessary information from the Purchaser. Alternate delivery arrangements may be agreed upon and must be added to this APS Agreement. If requested by the Purchaser, the Supplier shall provide advance shipping notice in an EDI 856 transaction set.

 

(b) Delivery Terms .

 

(i) Products indicated with an asterisk (*) on Exhibit 1 will be shipped [DELETED] of the Supplier when the shipment meets all of the criteria necessary to allow it to be delivered by the Supplier’s Dedicated Carrier Service (“ DCS ”). Those criteria are:

 

(A)

The order must include at least [DELETED] pounds of Products (including but not limited to Products marked with an asterisk(*)) in the aggregate.

 

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(B)

The destination clinic must be willing to accept the delivery schedule guidelines that are necessary to make DCS deliveries possible.

 

(C)

Standard DCS deliveries will be made [DELETED]. If a facility cannot accommodate such trailers from DCS, or if circumstances prevent the use of the Supplier’s standard delivery methods, including removal and return of drums, or if the facility schedules fewer than 7 receiving hours per day (when the facility is open), the Purchaser will be responsible for incremental charges to be reflected on the invoice. (This service is not available for shipments to Alaska or Hawaii). In the event the Supplier’s [DELETED] of the Products [DELETED] by an amount [DELETED]% of the contract rates (i.e., cost per 100 pounds) in effect as of the Effective Date, the Supplier [DELETED], and the [DELETED] of such [DELETED] shall be referred to as the “[DELETED]”); provided, however, that the [DELETED] may not [DELETED] (as defined below) between the [DELETED].

 

For products marked with an asterisk (*) on Exhibit 1, [DELETED] for all orders that do not meet all of the above DCS criteria.

 

(ii) All other Products (with the exception of capital equipment, accessories, software, spare parts and manuals) are shipped [DELETED] via surface common carrier [DELETED]. Any extra charges for expediting, tailgate service, inside delivery, redelivery, etc., are prepaid and added to the invoice. Capital equipment, accessories, software, spare parts and manuals are shipped [DELETED].

 

(iii) All shipments are F.O.B. (UCC) the Supplier’s warehouse or manufacturing facility in the 48 continental states of the United States via common carrier.

 

(iv) The Purchaser must visually inspect the shipment and notify the Supplier in writing of any apparent irregularity within ten (10) days of receipt of the shipment. In the absence of timely written notice, acceptance will be conclusively presumed. In the event that Product is damaged or lost in transit, the Purchaser may choose to:

 

(A)

file a damage or loss claim with the carrier; or

 

(B)

request refund or replacement from the Supplier. In that instance, the Purchaser would assign to the Supplier all rights to file a claim with the carrier.

 

(v) If drums are delivered into the Purchaser’s custody rather than being pumped off into the clinic’s tanks, the Supplier reserves the right to charge the Purchaser $[DELETED] for each lost or damaged drum. The Supplier [DELETED] the Purchaser to pick up empty drums in conjunction with a delivery of drummed Product. The Supplier may charge the Purchaser $[DELETED] for each lost or damaged pallet.

 

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(c) Pump Off . The Supplier agrees to provide bulk delivery of liquid Products at the request of, and as a service to, the Purchaser. It is the responsibility of the Purchaser’s clinic employees to monitor the product delivery process and ensure that the product formula transferred into the clinic’s storage vessel(s) is correct. The Supplier will provide delivery equipment and assistance in the transfer process but will not be responsible for assuring that the product transferred into storage vessels at the clinic has the same formulas as the product label on the vessel. Neither the Supplier nor its agents will be liable for errors in transferring product into the clinic’s storage vessels.

 

SECTION 8.07. Returned Goods . Returned goods will be accepted only with prior written authorization from the Supplier which authorization shall not be unreasonably withheld or delayed and in accordance with such authorization. Items must be returned freight prepaid and accompanied by the Supplier’s Returned Goods Authorization (RGA) form. Items to be returned must be in original cartons, have original labels, be in salable condition and are subject to a [DELETED] percent ([DELETED]%) re-stocking charge except there will be no such re-stocking charge and any related freight charges shall be borne by the Supplier if the items were sent to the Purchaser in error or were damaged at the time of receipt of such goods. Goods held over [DELETED] from the date of invoicing, abused or custom items, chemical concentrates, and items identified as non-returnable or that have deteriorated due to cause beyond the Supplier’s control, may not be returned.

 

ARTICLE IX

 

PRICES; PAYMENT

 

SECTION 9.01. Price . Subject to the provisions of this APS Agreement, the Supplier agrees to offer each Product for sale to the Purchaser during the Initial Term and, if applicable, the Automatic Renewal Period, at the respective price set forth on Exhibit 1 (with respect to any Product, the “ Price ”).

 

SECTION 9.02. Price Amendments . The Steering Committee shall amend Exhibit 1 to include any Price associated with an Improved Product or a New Product.

 

SECTION 9.03. Payment Terms . The Supplier shall submit invoices to the Purchaser on a ‘bill as shipped’ basis with respect to all amounts payable by the Purchaser to the Supplier hereunder (the “ Invoiced Amount ”) setting out (a) the Products shipped and (b) the aggregate amount payable hereunder for the supply of such Products. The Purchaser shall pay the Invoiced Amount to the Supplier within [DELETED] after the date of the relevant invoice. Interest shall be charged on any undisputed past due amount at a rate equal to [DELETED] % per month or the highest rate permitted by applicable Law (whichever is less).

 

SECTION 9.04. Taxes . Quoted prices do not include sales, use, excise or similar taxes. The Purchaser agrees to pay promptly any and all applicable taxes, assessments or other charges levied or assessed on or with respect to acquisition, possession, or use of the Products, or shall reimburse the Supplier if the Supplier has paid such taxes.

 

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ARTICLE X

 

PRODUCT RELATED WARRANTIES AND COVENANTS

 

SECTION 10.01. Warranty . (a) Except as may be otherwise expressly set forth in this APS Agreement, the sale of each item of the Products is subject to the terms of the Suppliers’ standard warranty applicable to the relevant Product (the “ Product Warranties ”), which the Supplier represents and warrants are the standard warranties which have been generally provided to its customers and which terms are attached hereto in Exhibit 2 and fully incorporated here in by reference.

 

(b) Notwithstanding anything to the contrary in this APS Agreement, the [DELETED] all of the Product Warranty services that may be required by the Purchaser, [DELETED], with respect to any particular Product that is under a Product Warranty (the “ Warranty Service ”).

 

(c) All Warranty Services [DELETED] shall be performed in accordance with the instructions and specifications for such Warranty Services as provided by the [DELETED]; following procedures exactly; using certified, calibrated test and measurement equipment and Spare Parts; and documenting the service to procedure (collectively, the “ Warranty Service Specifications ”).

 

(d) At the Supplier’s request, the parties shall jointly develop a procedure that will enable the Supplier to monitor, on a continuing basis, the [DELETED] in conformance with the Warranty Service Specifications. Except as may otherwise be agreed in such jointly developed procedure, the Purchaser shall notify the Supplier of a Product the Purchaser believes to be defective and the Supplier will promptly provide the necessary Spare Parts at the Supplier’s expense. The Purchaser will promptly return to the Supplier, at the Supplier’s expense, all defective goods that have been replaced with Spare Parts during the Term. If the Supplier determines in good faith that the returned goods were not really defective, the Supplier shall have the right to charge the Purchaser for the replacement Spare Parts at the prices specified in Exhibit 1, including shipping costs for the replacement Spare Parts, and shall promptly return to the Purchaser, at the Purchaser’s expense, the non-defective returned goods.

 

(e) In connection with [DELETED].

 

(f) The Supplier makes no warranty and will have no obligation for any consumable parts or supplies or damage to the Products caused by or resulting from abuse, misuse, neglect or any unauthorized repairs, maintenance or alterations of the Products or any [DELETED] will void all warranties with respect to the applicable Product. To the extent possible and applicable to the Products, the Supplier will extend to the Purchaser all applicable warranties of its suppliers, without recourse to the Supplier.

 

(g) EXCEPT AS EXPRESSLY SET FORTH IN THIS APS AGREEMENT, THE SUPPLIER’S LIABILITY FOR ANY BREACH OF THE APPLICABLE STANDARD WARRANTY AND THE REMEDIES AVAILABLE TO THE PURCHASER, [DELETED] FOR CLAIMS OF BREACH THEREOF (WHETHER SUCH CLAIMS ARE MADE IN

 

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CONTRACT OR STRICT LIABILITY OR OTHERWISE), SHALL BE LIMITED AS SET FORTH IN THE APPLICABLE STANDARD WARRANTY. THE APPLICABLE STANDARD WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL SUPPLIERS’ LIABILITY INCLUDE LIABILITY FOR INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES.

 

SECTION 10.02. Dialyzers . Some dialyzers are labeled “For Single Use Only”. The Purchaser hereby covenants that it will not reuse such dialyzers. The Purchaser further covenants that it will use those dialyzers which are labeled for reuse only in accordance with the “General Information” included with such product

 

SECTION 10.03. Limitations on Use . Sales by the Supplier under this APS Agreement are made in reliance on the Purchaser’s representation that the Purchaser’s order is pursuant to a physician’s prescription or a legally authorized customer’s purchase order. The Purchaser agrees that any Product purchased from the Supplier is for use in the United States and/or authorized United States territories only.

 

ARTICLE XI

 

REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; INSURANCE

 

SECTION 11.01. Mutual Representations . (a) Each Party hereby represents and warrants to the other Party as follows:

 

(i) The execution, delivery and performance of this APS Agreement by such Party has been duly authorized by all necessary action on the part of such Party.

 

(ii) This APS Agreement has been duly executed and delivered by such Party and, assuming due authorization, execution and delivery by the other Party, constitutes a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with their respective terms, except as enforceability may be restricted, limited or delayed by applicable bankruptcy or other laws affecting creditors’ rights generally and except as enforceability may be subject to general principles or equity.

 

(iii) A Party’s execution, delivery and performance of this APS Agreement and the consummation of the transactions contemplated hereby does not and will not (a) violate, conflict with or result in the breach of any provision of the certificate of incorporation or by-laws (or similar organizational documents) of such Party; (b) conflict with or violate any Law or governmental order applicable to such Party or its assets, properties or businesses, or (c) conflict with, result in any breach of, constitute a default (or event which, with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any encumbrance on any of its outstanding shares of common stock or preferred stock or any of the assets or properties of such Party pursuant to, any note,

 

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bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which it is a Party or by which any of such Party’s shares of common stock or preferred stock or any of the Party’s assets or properties is bound or affected.

 

(iv) Such Party has all rights, licenses, permits and consents necessary to sell, purchase and use, as applicable, the Products and to perform its obligations hereunder, and that it shall at all times comply in all material respects with all federal, state and local laws and regulations applicable to its business and its performance of its obligations under this APS Agreement.

 

(b) The Supplier represents and warrants to the Purchaser as follows:

 

(i) It will convey to Purchaser good and marketable title to the Products.

 

(ii) The Products sold by Supplier pursuant to this APS Agreement (a) shall be manufactured in accordance with their packaging and product specification; (b) are and shall be manufactured, handled, stored and transported in accordance with all applicable U.S., state and local laws and regulations pertaining thereto, including, without limitation, the Federal Food, Drug and Cosmetic Act, as amended (the “ FFDCA ”) and implementing regulations and FDA-approved Good Manufacturing Practices, and meet all specifications for effectiveness, safety and reliability as required by the FDA; and (c) when used in accordance with the directions on the labeling, are and shall be fit for the purposes and indications described in the labeling.

 

(iii) The Products’ labeling is in compliance with all applicable laws.

 

(iv) No Product delivered hereunder is or will be adulterated or misbranded within the meaning of the FFDCA, or within the meaning of any applicable state or municipal law, or is or will be a product which may not be introduced into interstate commerce.

 

(v) All Products purchased hereunder will be of the kind and quality specified herein, and will be free of material defects in design, materials or workmanship.

 

(vi) Any printed terms set forth on any Exhibits are in addition to and not in lieu of the foregoing warranties.

 

(vii) The prices reflected on Exhibit 1 on the date of this APS Agreement are [DELETED] except for (A) [DELETED] and (B) [DELETED].

 

(c) In addition, the Supplier represents and warrants to the Purchaser as follows, and these shall be ongoing representations and warranties during the Term and the Supplier shall promptly notify the Purchaser of any change in the status in respect of the following:

 

(i) Neither the Supplier, nor any of its Affiliates, is named on any of the following lists: (A) HHS/OIG List of Excluded Individuals/Entities; (B) HHS/HRSA’s

 

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Healthcare Integrity and Protection Data Bank; (C) GSA List of Parties Excluded from Federal Programs; and (D) OFAC Terrorist Database.

 

(ii) Neither the Supplier, nor any of its Affiliates is under investigation or otherwise aware of any circumstances which may result in being excluded from participation in any federal healthcare programs.

 

(d) The Purchaser represents and warrants to the Supplier that its use of the Products purchased by it pursuant to this APS Agreement shall be consistent with the Supplier’s written instructions and specifications and shall be in accordance with all applicable U.S., state and local laws and regulations pertaining thereto, including, without limitation, the FFDCA and applicable implementing regulations.

 

SECTION 11.02. Indemnification . (a) The Supplier and its Affiliates, officers, directors, employees, agents, successors and assigns (each, a “ Supplier Indemnified Party ”) shall be indemnified and held harmless by the Purchaser from and against all losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including reasonable attorneys’ and consultants’ fees and expenses) actually suffered or incurred by them (hereinafter, a “ Loss ”), arising out of or resulting from third party claims arising out of or resulting from the breach of any representation, warranty, covenant or agreement made by the Purchaser contained in this APS Agreement. The Supplier shall give the Purchaser prompt written notice of any claim or action for which it seeks indemnification pursuant to this Section 11.02(a) and shall allow the Purchaser to control the defense and settlement of any such claim or action; provided , that the Purchaser shall not have the right to bind any Supplier Indemnified Party to any settlement agreement without the Supplier’s prior written consent, which consent will not be unreasonably withheld or delayed. The Supplier shall reasonably assist the Purchaser, if requested and at the Purchaser’s sole expense, in the defense of any such claim or action.

 

(b) Except for Product Liability Claims, which shall be treated pursuant to Section 11.02(c), the Purchaser and its Affiliates, officers, directors, employees, agents, successors and assigns (each, a “ Purchaser Indemnified Party ”) shall be indemnified and held harmless by the Supplier from and against all Losses arising out of or resulting from: third party claims arising out of or resulting from (i) the breach of (A) any representation, warranty, covenant or agreement made by the Supplier contained in this APS Agreement or (B) any representation or warranty in the materials furnished by the Supplier for the Purchaser’s use, (ii) a claim or allegation that the use of the Products in accordance with product instructions for use or supplier operator manual infringes upon any patent, copyright, trademark, or other intellectual property or proprietary right or trade secret of any third party, (iii) any recall or field corrective action taken with respect to any Product, whether voluntary or involuntary. The Purchaser shall give the Supplier prompt written notice of any claim or action for which it seeks indemnification pursuant to this Section 11.02(b) and shall allow the Supplier to control the defense and settlement of any such claim or action; provided , that the Supplier shall not have the right to bind any Purchaser Indemnified Party to any settlement agreement without the Purchaser’s prior written consent, which consent will not be unreasonably withheld or delayed. The Purchaser shall reasonably assist the Supplier, if requested and at the Supplier’s sole expense, in the defense of any such claim or action.

 

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(c) Product Liability Claims shall be governed exclusively by the provisions of this Section 11.02(c) and, except in accordance with this Section 11.02(c), neither Party shall seek from the other Party any indemnity or other recovery on account of any such Product Liability Claims; provided , that nothing in this Section 11.02(c) shall limit either Party’s liability to the other Party for damages on account of any breach by such Party of its representations, warranties, covenants or agreements under this APS Agreement. Purchaser Indemnified Parties shall be indemnified and held harmless by the Supplier from and against any and all Losses arising out of or resulting from any Product Liability Claim, regardless of the legal theory underlying such claim, in accordance with the following procedures:

 

(i) the Purchaser shall give the Supplier prompt written notice of any Product Liability Claim, but failure to provide such prompt notice shall not relieve the Supplier of the duty to defend or indemnify unless such failure materially prejudices the defense of any matter;

 

(ii) the Parties shall negotiate in good faith to enter into a joint defense agreement as soon as reasonably practicable after the commencement of any Product Liability Claim. Neither Party will implead the other in any Product Liability Claim. If both Parties are named in any Product Liability Claim, neither Party will counter claim or cross claim the other in such Product Liability Claim. If the Parties have not entered into a joint defense agreement in connection with a Product Liability Claim, the Parties will allocate relative responsibility as between the Parties through binding arbitration pursuant to Article XIV following the conclusion of such Product Liability Claim (and such allocation will include reasonable attorneys’ fees and other litigation costs). No settlement or court judgment relating to a Product Liability Claim will bar any rights of contribution of the Parties in such arbitration, and the judgment or allocation of responsibility in any court judgment in such Product Liability Claim shall not be binding on the Parties or arbitrators in such arbitration.

 

(d) Notwithstanding anything to the contrary in Sections 11.02(b) and 11.02(c), in no event shall the Supplier have an obligation to defend, indemnify or hold harmless the Purchaser Indemnified Parties for a Loss to the extent that any such Loss was caused by the negligence or willful misconduct of the Purchaser.

 

SECTION 11.03. Insurance . The Supplier agrees that it shall secure and maintain in full force and effect throughout the Term (and following termination, to cover any claims arising from this APS Agreement) commercial general liability insurance, which includes contractual liability coverage, product liability and workers’ compensation insurance, with limits consistent with industry standards in the market where Supplier purchases such insurance (the “ Insurance Market ”). Any limits on the Supplier’s insurance coverage shall not be construed to create a limit on its liability with respect to its obligations hereunder. To the extent customary in the Insurance Market, (a) the Purchaser shall be included as an additional insured on vendor’s endorsement for product liability insurance and (b) such policies shall provide at least thirty (30) days prior written notice to the Purchaser of the cancellation, non-renewal or substantial modification thereof. The Supplier shall supply certificates of insurance to the Purchaser upon request.

 

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SECTION 11.04. Parent Guaranty . Parent hereby agrees to severally, irrevocably, absolutely, fully and unconditionally guaranty to the Purchaser the prompt and complete payment and performance by the Supplier of its [DELETED] indemnification obligations pursuant to Sections 8.05(b), 11.02(b) and 11.02(c).

 

ARTICLE XII

 

TERM AND TERMINATION

 

SECTION 12.01. Initial Term . This APS Agreement shall commence and be effective as of the Effective Date and shall expire on the [DELETED] of the Effective Date (the “ Initial Term ”).

 

SECTION 12.02. Extension to Initial Term . No later than six (6) months before the expiration of the Initial Term, the Parties’ duly authorized Representatives shall negotiate in good faith with the intent to renew this APS Agreement for an additional eight (8) year term (the “ Extension ”); provided , that if no agreement can be reached with respect to the Extension, this APS Agreement shall be automatically renewed and extended for three (3) additional successive one-year periods (the first such one-year period, the “ First Renewal Period ”, the second, the “ Second Renewal Period ”, and the third, the “ Third Renewal Period ”, and all such one-year periods, together, the “ Automatic Renewal Period ”, and the Initial Term together with the Extension or the Automatic Renewal Period, as the case may be, the “ Term ”).

 

SECTION 12.03. Termination for Cause . (a) Notwithstanding any other provision in this APS Agreement, either Party may, without prejudice to any other remedies available to it at law or in equity, terminate this APS Agreement in the event that the other Party shall have materially breached or defaulted in the performance of any of its material obligations and (a) has not cured such breach or default within ninety (90) days after notice of the breach or default or (b) if a cure is not possible within ninety (90) days, has failed to commence or diligently continue steps the Parties agree should result in a cure or prevent a similar subsequent breach; provided , that in respect of any material breach of Section 11.01(d), the ninety (90) day period in this Section 12.03(a) shall be sixty (60) days, and Section 12.03(b) shall not apply.

 

(b) Any termination pursuant to this Section 12.03 shall become effective at the end of such ninety (90) day period unless (i) the Party that has breached or defaulted (the “ Breaching Party ”) cures such breach or default during such ninety (90) day period or (ii) if such breach or default is not possible to cure within such ninety (90) day period, the Breaching Party has commenced and is diligently pursuing a mutually agreeable plan to effect a cure or prevent a similar subsequent breach or default.

 

SECTION 12.04. Survival . In the event of termination, the indemnification and confidentiality provisions of this APS Agreement shall survive such termination for a period of one (1) year.

 

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ARTICLE XIII

 

FORCE MAJEURE; HARDSHIP EVENTS

 

SECTION 13.01. Force Majeure . Neither Party shall be liable or in breach of any provision of this APS Agreement for any failure or delay on its part to perform any obligation hereof because of Force Majeure, provided that such Party shall promptly give notice to the other Party of such occurrence and shall do all things reasonable to eliminate the effect thereof to the extent possible. If the Supplier is unable to supply the Purchaser’s demand for any of the Products, as and when ordered, as a result of any causes beyond the Supplier’s control (including, but without limitation, Product recall) or otherwise, then the following provisions apply: (a) the Supplier agrees that it will not intentionally discriminate against the Purchaser in the allocation of making Products available to customers by making the Supplier’s allocation decisions, in whole or in part, on the basis of the prices, discounts, or other financial terms of this APS Agreement; (b) as to those Products which the Supplier is unable to supply and the Purchaser must purchase elsewhere, the Purchaser shall be deemed to have purchased such products from the Supplier for purposes of determining the purchase tiers and pricing set forth on Exhibit 1; (c) the pricing and other terms set forth in this APS Agreement shall continue to apply to all Products that are available; and (d) the Supplier, to the extent it is reasonable and practicable to do so, shall give at least thirty (30) days notice of any inability to supply, unless an order of a regulatory agency or other action arising out of patient safety concerns requires the giving of shorter notice.

 

SECTION 13.02. Hardship Events . At any time following an event that requires either Party to incur material additional costs or suffer other materially adverse consequences in connection with the transactions contemplated by this APS Agreement not contemplated on the Effective Date (any such event, a “ Hardship Event ”), then, at the written request of the Party suffering such Hardship Event, made no later than thirty (30) days after such Hardship Event, the Parties shall reasonably cooperate with each other in good faith to negotiate with a view toward eliminating or reducing or recovering such costs or other adverse consequences.

 

ARTICLE XIV

 

ARBITRATION

 

SECTION 14.01. Arbitration .

 

(a) Scope of Arbitration . Any controversy or claim arising out of or relating to this APS Agreement that has not been resolved pursuant to Section 3.05(a) or 3.05(b) is to be resolved by binding arbitration.

 

(b) Administration of Arbitration . The arbitration is to be administered by the American Arbitration Association and is to be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association.

 

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(c) Appointment of Arbitrators . The arbitration is to be held before a panel of five arbitrators, each of whom must be independent of the Parties. No later than ten (10) days after the arbitration begins, each Party shall select an arbitrator and request the two selected arbitrators to select a third neutral arbitrator. If the two arbitrators fail to select a third on or before the tenth (10th) day after the second arbitrator was selected, either Party is entitled to request the American Arbitration Association to appoint the third neutral arbitrator in accordance with its rules. Before beginning the hearings, each arbitrator must provide an oath or undertaking of impartiality.

 

(d) Scope of Arbitrators’ Authority .

 

(i) Interim Relief . Notwithstanding the foregoing, this Article XIV will not preclude either Party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction, or any other interim or provisional relief that is necessary to protect the rights or property of that Party in circumstances in which such relief is appropriate, provided that any other relief will be pursued through an arbitration proceeding pursuant to this Article XIV. Each of the Parties hereby (A) submits to the exclusive jurisdiction of any New York Court for the purpose of any court action arising out of or relating to this APS Agreement and (B) waives any claim or defense that the venue of any such court action in the State of New York is improper. Any interim or provisional relief is to remain in effect until the arbitration award is rendered or the controversy is resolved.

 

(ii) Punitive Damages . The arbitrators will have no authority to award punitive damages or other damages not measured by the prevailing party’s actual damages, and may not, in any event, make any ruling, finding or award that does not conform to the provisions of this APS Agreement.

 

(iii) Awards . The award of the arbitrators in writing shall be final and binding upon the Parties and shall not be appealed from or contested in any court. No Party shall, in connection with any proceeding held pursuant to this Article XIV, be required to furnish any bond. Should either Party hereto fail to appear or be presented at the arbitration proceedings after due notice in accordance with the applicable rules, then the arbitrator may nevertheless render a decision in the absence of such Party and such decision shall have the same force and effect as if the absent Party had been present, whether or not it shall be adverse to the interests of such Party.

 

(e) Time Limitation . Any arbitration proceeding under this APS Agreement must be commenced no later than one year after the controversy or claim arose. Failure timely to commence an arbitration proceeding const