Exhibit
10.18
AMENDED PRIVATE LABEL PRODUCT SUPPLY
AGREEMENT
THIS AMENDED PRIVATE LABEL PRODUCT SUPPLY
AGREEMENT (“Agreement”), is made as of the 14th day of
September, 2004, replacing and superseding the initial PRIVATE
LABEL PRODUCT SUPPLY AGREEMENT made as of December 22, 2003, by and
between Hill-Rom Company, Inc. (hereinafter referred to as
“Hill-Rom”), an Indiana corporation with an office
located at 4349 Corporate Road, Charleston, South Carolina, 29405
and Span-America Medical Systems, Inc., a South Carolina
corporation (hereinafter referred to as “Seller”) with
its place of business located at Greenville, South Carolina, 29606.
This amended Agreement replaces and supersedes the initial
Agreement entered on December 22, 2003.
WHEREAS, SELLER desires to sell its full line of
non-powered CFT mattress products specially manufactured as
Hill-Rom private label products to Hill-Rom from time to time, and
Hill-Rom desires to purchase such Products from Seller.
NOW THEREFORE, in consideration of the foregoing
and the mutual promises and covenants set forth herein, Hill-Rom
and Seller agree as follows:
The purpose of this Agreement is to set forth
the terms which will be applicable to the sale of Products to
Hill-Rom by Seller. The “Products” shall be
Seller’s line of non-powered CFT mattress products each of
which is listed on Exhibit A in their standard, off-shelf
configuration and also private labeled for Hill-Rom and modified to
specifications agreed upon and included in this Agreement as set
forth in Exhibit A. Except for the exclusive rights granted or
otherwise available under this Agreement, each party shall continue
to compete in the marketplace, however, notwithstanding the
foregoing, except as specifically stated in this Agreement neither
party is granted a license under this Agreement to any intellectual
property right of the other party.
All purchases made under this Agreement shall be
with purchase orders. The purchase order shall identify which of
the Products are being ordered and as to each such Product the
quantity, shipment destination, and method of shipment and desired
date of delivery. The terms of sale provided in this Agreement and
the quantity, shipping destination, method of shipment and delivery
dates contained in any purchase orders accepted by Seller shall
apply to the sale of Products pursuant to this Agreement. No
additional or contrary terms printed on any purchase order,
invoice, packing slip, acknowledgement or other similar document
exchanged by the parties shall apply unless specifically accepted
in a writing signed by both parties. Whether the purchase order
refers to this Agreement or not, the terms of this Agreement shall
be a part of each purchase order. Seller may accept or reject
orders from Hill-Rom. No order shall be binding on Seller until
accepted by Seller in writing. In the event that any person or
entity claims that any of the Products infringe intellectual
property rights of others, Seller shall have the right in its sole
discretion to cancel any orders from Hill-Rom pertaining to the
allegedly infringing products without incurring any liability to
Hill-Rom in respect to those orders. In such case, Seller shall use
commercially reasonable efforts either to obtain for Hill-Rom the
right to continue to sell the Product or Products that allegedly
infringe the intellectual property rights of the third person or to
modify the Product or Products so that they become
non-infringing.
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A.
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This Agreement
commenced on December 15, 2003 (“Effective Date”), and
shall continue in full force and effect for an initial thirty-nine
month term and additional one year renewal terms unless otherwise
terminated or canceled in accordance with the terms of this
Agreement. Six months prior to the end of the initial term (to
terminate upon the conclusion of the initial term) or at any time
following the end of the initial term (to terminate any additional
term), either party may terminate this Agreement upon not less than
one hundred eighty (180) days advance written notice of
termination.
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B.
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If either party
shall, at any time during the term of this Agreement, materially
breach any obligation hereunder and such breach shall not be cured
within thirty (30) days after written notice from the non-breaching
party specifying the nature of the breach, the non-breaching party
may terminate this Agreement immediately.
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C.
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Seller shall
not be required to fill any purchase order from Hill-Rom that has a
delivery date falling after the termination of this
Agreement.
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D.
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The obligations
of sections 8. Warranties, 9. Indemnification, 10. Patent and
Intellectual Property Indemnification, 12. Intellectual Property
Rights, 13. Confidential Information, 14. Claims and
Indemnification Procedure Rejection or Revocation of Acceptance and
Limitations on Remedies, 18. Assignment, Successors, and No
Third-Party 19. Equitable Remedies, 20. Notices, 21. Headings
Entire Agreement, 22. Governing Law: Venue, 23. Severability, 24.
Public Announcements, and 25. Modification and Waiver shall survive
the termination of this Agreement.
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4.
Payment, Price, Exclusivity,
Territory, and New Products
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A.
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Payment. For goods purchased Hill-Rom shall pay Seller in
full within thirty (30) days of the date of Seller’s invoice.
Hill-Rom shall be entitled to a one percent (1%) discount for
payments made within ten (10) days of the date of Seller’s
invoice. Payment shall be made by check to the address reflected on
the invoice, unless Seller gives written notice specifying a
different payment address. Late payments shall be subject to
interest at the rate of one percent (1%) per month.
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B.
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Pricing and
Incentives. Seller
represents that the prices charged for the Products are as
favorable as those offered to other customers of Seller for
substantially comparable products, whether or not such products are
private labeled. In addition to the foregoing, Seller agrees to
provide a volume incentive rebate to Hill-Rom for its Net Invoice
Sales, as defined below, of Products during each Contract Year as
follows:
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i.
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[price term
redacted and confidential treatment requested]
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ii.
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[price term
redacted and confidential treatment requested]
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iii.
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[price term
redacted and confidential treatment requested]
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[price term
redacted and confidential treatment requested]
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“Net
Invoice Sales” means, for any specified time period, the
amount invoiced for sales of the Products to Hill-Rom under this
Agreement less purchases of evaluation/demonstration units and any
credits and adjustments for returned goods during such time
period.
“Contract
Year” means the fifteen month period beginning on January 1,
2004, and each successive twelve month period after that initial
fifteen month period. The first Contract Year begins on January 1,
2004 and ends March 31, 2005. Thereafter each Contract Year shall
begin on April 1 and end on the following March 31.
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C.
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Purchase
Price. The initial prices
for the Products shall be as specified in Exhibit A and shall
remain firm until April 1, 2005. Thereafter Seller shall set the
price for Products based on then existing market conditions and
trends, provided, however, that price increases shall not exceed
[price term redacted and confidential treatment requested] per
year. Additionally, Seller shall seek to reduce the prices through
continuing cost control and productivity improvements.
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D.
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Exclusivity
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i.
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Hill-Rom exclusivity. While this Agreement is in effect, Seller will
not sell private label versions of the Products except for export
to locations outside of the Territory or provide for non-powered
CFT Products any of the features that are marked as being exclusive
to Hill-Rom on Exhibit A to any purchaser other than Hill-Rom
except that Seller may sell certain exclusive features to other
purchasers as replacement parts as indicated on Exhibit A. In the
event that Hill-Rom meets the Net Invoice Sales requirements
specified in this paragraph for purchases of Products in regard to
a Contract Year, Seller will grant Hill-Rom the exclusive rights
provided in this section (in addition to any exclusive rights that
Hill-Rom may have independently as a result of patents) for the
following Contract Year. The Net Invoice Sales requirements are as
follows: Contract Year one, [price term redacted and confidential
treatment requested]; Contract Year two, [price term redacted and
confidential treatment requested]; Contract Year three, [price term
redacted and confidential treatment requested]; amounts for
subsequent Contract Years to be agreed to by the parties at least
190 days prior to the beginning of those Contract Years. If the Net
Invoice Sales of Product under this Agreement by Hill-Rom in a
Contract Year meet or exceed the above requirement, then during the
next Contract Year, as long as Hill-Rom complies with its other
obligations under this Agreement, Seller will not sell the Products
to any purchaser in the Territory other than Hill-Rom, except for
export to locations outside of the Territory.
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ii.
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Seller
exclusivity. During the
term of this Agreement, in any Contract Year in which Hill-Rom has
received the exclusive rights provided for in the foregoing
paragraph 4(D)(i), Hill-Rom will obtain all of its requirements for
non-powered self adjusting technology products from Seller. Despite
this exclusivity requirement, Hill-Rom may use non-powered self
adjusting technology products developed by Hill-Rom or any
affiliated company (“Internal Alternative Products”),
if Hill-Rom (a) gives Seller twelve months advance written notice
of its election to use Internal Alternative Products and (b)
releases Seller from its exclusivity obligations to Hill Rom under
this Agreement. The term “affiliated company” shall be
defined as a corporation, at least fifty-percent of the voting
stock of which is owned by Hill-Rom or a Hill-Rom parent
company.
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iii.
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Notwithstanding
anything to the contrary in preceding Section 4Di., and provided
that Hill-Rom owns valid patents protecting aspects of the
VersaCare CFT Mattress, Seller shall not sell any version of the
VersaCare CFT Mattress to any purchaser other than Hill-Rom, even
in the event that Hill-Rom fails to meet the Net Invoice Sales
requirements set forth in Section 4Di.
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E.
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Territory
Limits. Hill-Rom agrees
that the Products purchased under this Agreement will be sold only
within the Territory, as defined in Exhibit B attached hereto, to
buyers who intend to use them within the Territory. Hill-Rom agrees
that it will not, without Seller’s specific written consent,
sell or make any Products available to any buyer when, based on the
information reasonably available to Hi1l-Rom, the sale or transfer
of Products is likely to result in the sale or use of the Products
outside of the Territory.
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F.
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Territory
Expansion. In the event
that Seller determines to explore the possibility of selling the
Products outside of the Territory, Seller will notify
Hill-Rom and the parties will negotiate in
good faith the possibility of expanding the Territory.
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G.
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New
Products. In the event
Seller develops a new product that is an improvement to any of the
Products or is a line extension of a Product developed for
compatibility with a Hill-Rom bed frame (a “Minor
Enhancement”) or a new CFT product modality (e.g. upgradeable
to powered surfaces or other significant functional change), (a
“Major Enhancement”) Seller shall not appoint any
distributor for the new product within the
Territory without giving Hill-Rom notice of the product and
offering to permit Hill-Rom to add the new product to the line of
Products that Hill-Rom purchases under this Agreement at prices
specified by Seller which shall be no less favorable than those
available to any other distributor of Seller’s new products.
If Hill-Rom accepts Seller’s offer within sixty (60) days of
receipt of the notice, the new product shall be added to Exhibit A
and listed as a new product. Purchases of any Minor Enhancement
Products added to Exhibit A shall be applied to the existing
minimum Net Invoice Sales requirements for exclusivity and volume
incentives. Major Enhancement Product purchases shall not count
toward existing minimums for exclusivity or volume discounts. The
parties shall negotiate in good faith any new
minimums for exclusivity and volume discounts applicable to Major
Enhancement Products, but Hill-Rom shall not be deemed to have any
exclusivity for Major Enhancements unless such new minimums and/or
volume discounts have been agreed to in writing signed by both
parties and met by Hill-Rom. Further, in the event Hill-Rom has
exclusive rights in the Territory, such rights shall extend to any
new Minor Enhancement Products added to this Agreement.
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A.
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Where Seller is
required to pay or collect sales, use, or other applicable taxes
(except for taxes based on Seller’s income), the amount shall
be added to the invoice as a separate item.
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B.
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Seller shall be
responsible for paying all social security, unemployment
compensation, withholding taxes and other applicable taxes
regarding Seller’s employees, facilities and raw materials
for providing Products hereunder or applicable to Seller’s
income hereunder and shall not invoice such taxes to
Hill-Rom.
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6.
Shipments/Delivery
Scheduling
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A.
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Hill-Rom will
provide Seller a non-binding annual forecast of its requirements of
Products. If the purchase order is used to provide forecasts then
on the face of the purchase order, the term “Blanket
Order” shall be written. Purchase Orders bearing the term
Blanket Order shall be for forecast and planning purposes only and
not a commitment to purchase any quantity.
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B.
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Hill-Rom may,
at its election, specify the carrier for delivery of Products to be
used by Seller.
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C.
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All shipments
shall be made F.O.B. Shipping point.
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D.
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Hill-Rom may
cancel a purchase order or scheduled shipment at anytime prior to
shipment by Seller. Hill-Rom shall incur no liability to Seller for
any cancellation where notice is given to Seller at least
thirty (30) days in advance of the scheduled delivery date.
Hill-Rom’s liability to Seller for cancellation with
less than thirty (30) days notice before the delivery date shall be
limited to Seller’s unavoidable direct costs associated with
returning any components or materials it cannot use for Hill-Rom or
its other customers and its direct costs for finished Products
except where such Products can be included in orders for later
shipment to Hill-Rom.
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7.
Quality; Product
Modifications
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A.
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Hill-Rom has
audited Seller and has confirmed that Seller has a formal ISO based
Quality System. Seller shall maintain a formal ISO based Quality
System or acceptable score on Hill-Rom Quality System Audit.
Minimum acceptable score on Hill-Rom audit is 95% with active
Corrective Action Preventive Action (CAPA) agreed to or in place
for all other elements.
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B.
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Hill-Rom shall
have the right from time to time, after reasonable notice and
agreement by Seller to a date, to audit, inspect and/or verify
(collectively, an “Audit”) on a confidential basis the
(a) records kept by Seller pertaining to the quality of the
Products sold in connection with this Agreement, and/or (b)
Products produced by Seller for Hill-Rom, as well as the production
processes, facilities and quality systems pertaining to the
Products at Seller’s regular place of business or other
applicable location(s) at all reasonable times, including during
the period Hill-Rom Products are manufactured. Hill-Rom will
provide Seller with at least three (3) days-advance notice of such
Audit(s). In the event, that the specified date is unsuitable to
Seller, the date for the Audit will be postponed by not more than
ten (10) business days to a date mutually agreeable to Seller and
Hill-Rom.
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C.
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If Seller is
not in compliance with any of Hill-Rom’s quality systems or
production processes, then Hill-Rom shall notify Seller of such
non-compliance and allow Seller to correct the
non-compliance. If Seller has not corrected the non-compliance
as soon as reasonably possible, but in any case within thirty (30)
days from the time Seller is notified by Hill-Rom, then Hill-Rom,
at its option, may terminate this Agreement without further notice
as may otherwise be required under Section 3 of this
Agreement.
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D.
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Hill-Rom has
reviewed and accepted Seller’s proposed labeling for the
Products. Seller reserves the right to change labels to reflect any
requirement of law, any change in the Product or the manufacturing
process, or any need for protection of intellectual property or
other proprietary rights as provided in Section 7.E., otherwise, no
changes shall be made in the labeling without agreement of both
Seller and Hill-Rom. Seller shall notify Hill-Rom not less than
sixty (60) days in advance of Seller’s intention to make any
material modifications to the Products, labeling for the Products,
the manufacturing process or the manufacturing location, unless
Seller determines that earlier modification is necessary or
advisable due to the requirements of applicable law, in which case
Seller shall provide Hill-Rom with notice of such modification as
soon as reasonably practicable. Seller shall not modify any
Hill-Rom specification without the prior written approval of
Hill-Rom, unless such modification is necessary or advisable due to
requirements of applicable law, in which case such change shall be
made without such approval of Hill-Rom and Seller shall provide
Hill-Rom with notice of such modification as soon as reasonably
practicable.
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E.
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Hill-Rom agrees
to mark Products and all commercial packaging used with the
Products with pertinent intellectual property markings, such as
corresponding patent, trademark, and/or copyright markings and
notices, as from time-to-time instructed by Seller.
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F.
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Seller’s
manufacture of the private label Products for Hill-Rom, including
any agreed upon modifications to Seller’s
standard off-the-shelf products, shall include any testing,
including verification testing, to assure that the Products meet
the Specifications and to comply with applicable FDA regulations.
Seller agrees to maintain all required Device History Records and a
Device Master Record, as those terms are defined in 21 CFR Part
820.
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8.
Warranties and Representations;
Sales and Marketing Support
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A.
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Subject to the
limitations and requirements set forth in Section 14, Seller
warrants that all Products supplied to Hill-Rom shall conform to
the specifications included in Exhibit A, which have been prepared
jointly by the parties, and shall be free from defects in material
and workmanship for a period which shall be the lesser of five (5)
years from the date the Products are delivered by Hill-Rom to its
customer or sixty-six (66) months after delivery to and acceptance
by Hill-Rom. Seller warrants that it is transferring good title to
all Products. Seller specifically disclaims any and all
other warranties, expressed, implied, or statutory, written or
oral, including but not limited to, warranties of merchantability
or fitness for a particular purpose.
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B.
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If any of
Seller’s operations or affiliated entities, or its first tier
subcontractors’ or first tier suppliers’ operations or
affiliated entities are located within a Non-exempt Country, it
shall comply with the international workplace standards put forth
by Social Accountability International in its policy statement,
Social Accountability 8000 (“SA 8000”) and any
amendment or supplement thereto; and Hill-Rom’s
representatives shall have the right to verify conformity with the
requirements of SA 8000.
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C.
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Seller agrees
to make available equivalent replacement parts for each particular
Product sold under this Agreement for not less than ten (10) years
following the last date of sale of that particular Product. During
the term of this Agreement, unique replacement parts for Hill-Rom
private label Products shall be sold only to Hill-Rom, except as
expressly permitted in Exhibit A. Seller also agrees to provide
sales and marketing support for the Products described more fully
in Exhibit C. Hill-Rom agrees to the restrictions on its use of
Seller’s trademarks as described more fully in Exhibit
C.
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D.
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Hill-Rom agrees
that, except with Seller’s express written consent, it will
not make any modifications to the Products after they are shipped
by Seller.
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9.
Indemnification
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A.
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Subject to the
limitations and requirements set forth in this Agreement, Seller
(i) shall indemnify Hill-Rom and save it harmless from losses
resulting from damage to Hill-Rom property (other than damage to
Products) and (ii) shall indemnify Hill-Rom, its employees and
agents and save them harmless from all claims and judgments for
injury or death to persons or property damage (other than damage to
Products) (including reasonable costs of litigation and
attorney’s fees) made or obtained against Hill-Rom, its
employee, or agent, as the case may be, by third persons, including
Hill-Rom’s and Seller’s employees and agents, based on
injuries to person or property to the extent, in each of clause (i)
and (ii) above, that they arise from Seller’s design of the
Product(s), method of manufacture and assembly of Products
purchased by Hill-Rom, the adequacy of any warnings on any labels
prepared by Seller, the failure of any Product purchased by
Hill-Rom under this Agreement to comply with the regulations of the
U.S. Food and Drug Administration (“FDA”) or other
applicable governmental entity within the United States of America
or Canada, the negligence or intentional wrongful acts or omissions
of Seller, or the presence of Seller’s employees, and/or
agents on Hill-Rom’s premises in connection with the
performance by Seller of its obligations under this Agreement, but
the Seller will not be responsible for any claims, loss, damage or
injury, including death, to the extent caused by or arising from
improper use of the Products; the negligence or intentional
wrongful acts or omissions of Hill-Rom, its agents or its
employees; any modifications to the off-shelf Products or product
labeling expressly requested or approved by Hill-Rom or any of its
agents or employees; from any invention or technology owned by
Hill-Rom and supplied by Hill-Rom; or from the design of any
Product feature designed by Hill-Rom.
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B.
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Subject to the
limitations and requirements set forth in this Agreement, Hill-Rom
(i) shall indemnify Seller and save it harmless from losses
resulting from damage to Seller’s property
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