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EXHIBIT 10.30
MANUFACTURING AGREEMENT
This MANUFACTURING AGREEMENT (the "Agreement") is dated as of September 30,
1998 by and between HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation
("Horizon"), and IDEAS FOR MEDICINE, INC., a Florida corporation ("IFM").
RECITALS
WHEREAS, pursuant to an Asset Purchase Agreement, dated as of September 30,
1998 (the "Asset Purchase Agreement"), by and between Horizon and IFM, Horizon
has purchased from IFM, and IFM has sold to Horizon, certain assets related to
the Products Business, including all rights in and to the Products;
WHEREAS, pursuant to Section 3.2(d) of the Asset Purchase Agreement, IFM
has agreed to enter into this Agreement to provide certain manufacturing
services to Horizon on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein expressed
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used but not otherwise
defined in this Agreement shall have the meanings ascribed to such terms in the
Asset Purchase Agreement.
Section 2. Manufacturing Services. IFM agrees to furnish all of the
following services (referred to herein collectively as the "Manufacturing
Services"):
(a) Manufacturing of Products. After the Closing Date and for
the term of this Agreement, IFM shall continue to manufacture the Products for
Horizon in accordance with the terms of this Agreement. IFM will manufacture the
Products exclusively for Horizon for the term of the Agreement. Horizon agrees
to purchase Products exclusively from IFM during the term of this Agreement
except as otherwise provided herein.
(b) Quantity of Products. During each of the four consecutive
12-month periods beginning October 1, 1998 and ending September 30, 2002,
Horizon shall purchase and IFM shall deliver Products pursuant to the production
schedule in respect of such year as described in Exhibit A. Horizon shall order
and purchase from IFM, and IFM shall manufacture and deliver, an amount (the
"Minimum Annual Sale Amount") of Products such that the annual sales of Products
to Horizon herewith shall equal at least $6,000,000 during each 12-month period
under this Agreement, provided that such Minimum Annual Sale Amount shall be
reduced by the Lost Sales Amount (as defined below) of any Product (a "Lost
Product") which (i) IFM is unable to deliver as a result of a failure by IFM to
comply with the Laws of the FDA or the Authorities applicable to IFM in
connection with its services under this Agreement, or (ii) Horizon is prevented
from selling as a result of interference or infringement actions or other
judicial or adversary proceedings concerning the Intellectual Property
transferred to Horizon under the Asset Purchase Agreement. "Lost Sales Amount"
means the average weekly sales of a Lost Product for the prior quarter
multiplied by the number of weeks during which IFM is unable to deliver or
during which Horizon is prevent from selling.
(c) Pricing. Horizon shall pay IFM for all Products ordered by
Horizon at the price indicated on Exhibit B during the 12-month period following
the date of this Agreement. The prices shall
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be subject to adjustment after October 1, 1999 in the event the direct cost of
the components and raw materials used in the Products increases by more than 25%
from such direct cost as of the date of this Agreement. IFM shall provide an
invoice to Horizon for each shipment of the Products and Horizon shall pay the
appropriate Price as provided herein within 45 days of the date of each such
invoice. Any amounts not paid when due under this Agreement shall bear interest
at the lesser of (a) 1 1/2% per month or (b) the maximum legal rate.
(d) Establishment of Manchester Production Line. Upon the
expiration or termination of the Agreement, Horizon shall establish a new
production line to be used for the manufacturing of the Products (the
"Manchester Production Line") at Horizon's manufacturing facility located in
Manchester, Georgia (the "Manchester Facility"). Horizon shall be responsible
for the disassembly, packing, moving, and reassembly of the Equipment. IFM shall
assist Horizon with such disassembly and reassembly and shall give Horizon
reasonable access to IFM's manufacturing facility in order to complete the
disassembly and packing of the Equipment. After the transfer of the Equipment to
the Manchester Facility, IFM shall provide technical assistance for one (1)
month and shall be available for three (3) months thereafter for purposes of
assisting Horizon with the manufacturing process. Except for the Equipment,
Horizon shall be responsible for the cost and acquisition of all equipment,
machinery, tools and supplies required for the establishment of the Manchester
Production Line.
The Manufacturing Services are further described on the attached Exhibit A.
Section 3. Equipment and Inventory.
(a) Use of Equipment. During the term of this Agreement and in
connection with IFM's obligations under Section 2(a) of this Agreement, IFM may
use the Equipment at no charge to IFM but only in connection with the
manufacture of the Products as provided hereunder. Normal wear and tear and
deterioration are the responsibility of Horizon. Repair or replacement of the
Equipment will be the responsibility of IFM.
(b) License Grant. Horizon hereby grants to IFM the license to
use the Intellectual Property in connection with the performance of the
Manufacturing Services hereunder.
Section 4. Term.
(a) The term of this Agreement shall expire four (4) years
from the Closing Date, unless earlier terminated as provided below.
(b) Horizon may terminate this Agreement on 90 days written
notice of termination to IFM in the event IFM is unable to deliver the Products
as required pursuant to Exhibit A or otherwise breaches a material term of this
Agreement, and such failure or breach is not cured by IFM within 60 days after
notice of such failure or breach is submitted to IFM by Horizon.
(c) In the event of the termination or expiration of this
Agreement, Horizon shall purchase from IFM all of its raw materials and
components inventory at a price equal to IFM's cost, provided in no event shall
Horizon be required to purchase raw materials or components inventory in excess
of the amount required to assemble the Products to be purchased during the next
6-month period as set forth in the then applicable production schedule or
forecast. No termination of this Agreement shall affect the obligation to pay
for any amounts due prior to such termination or as a result of such
termination.
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(d) Horizon may terminate this Agreement on 6 months written
notice of termination after Horizon has purchased an aggregate of $24,000,000 of
Products under this Agreement, and in such event, the prices for the Products
indicated on Exhibit B, which reflect a percentage of the sales price of the
Products as of the date hereof, shall be increased to an amount which reflects
60% of the sales price of the Products as of the date hereof, plus any
adjustments made pursuant to Section 2(c), for the 6 months prior to
termination.
(e) In the event of any breach of this Agreement by Horizon
which is not cured within 60 days following written notice thereof by IFM to
Horizon, IFM may terminate this Agreement for breach and shall be entitled to
receive an amount equal to (i) the direct costs incurred by IFM for all purchase
orders committed for raw materials and components, (ii) the direct and indirect
costs incurred by IFM for 6 months after such termination for labor utilized in
the manufacture of the Products, and (iii) the fixed facility costs incurred by
IFM in connection with the manufacture of the Products for the period from
termination to 4 years following the Closing Date. The parties acknowledge that
damages in the event of a breach by Horizon are difficult to ascertain and that
the payment required hereby has been agreed by the parties to be liquidated
damages and not a penalty.
(f) After the first 18-month period under this Agreement, IFM
may terminate this Agreement on 12 months notice of termination, and in such
event, the prices for the Products indicated on Exhibit B, which reflect a
percentage of the sales price of the Products as of the date hereof, shall be
decreased during the final 6-month period of the Agreement to an amount which
reflects 40% of the sales price of the Products as of the date hereof, plus any
adjustments made pursuant to Section 2(c).
Section 5. Performance of Manufacturing Services. IFM agrees to perform the
Manufacturing Services in a professional and competent manner, using the same
standard of care that IFM uses in performing such services in its own affairs.
Section 6. Indemnification.
(a) IFM agrees to indemnify and hold harmless Horizon and its
officers, employees, agents and assigns from and against any and all
liabilities, claims, demands, suits, actions, causes of action or any other
legal proceedings arising out of, or related in any way to, (i) any grossly
negligent or intentional act or omission by IFM arising out of or in connection
with IFM's performance of the Manufacturing Services under this Agreement, (ii)
the failure of the Products to meet the specifications provided by Horizon for
such Products, and (iii) the failure of IFM to comply with the Laws of the FDA
or the Authorities applicable to IFM in connection with the manufacture of the
Products hereunder. IFM agrees to pay all losses, damages (actual and
exemplary), costs, expenses, invoices and bills (including reasonable attorneys'
fees) incurred by Horizon and its officers, employees, agents and assigns as a
result of any such negligent or intentional act or omission by IFM.
(b) Horizon agrees to indemnify and hold harmless IFM and its
officers, employees, agents and assigns from and against any and all
liabilities, claims, demands, suits, actions, causes of action or any other
legal proceedings arising out of, or related in any way to, (i) any grossly
negligent or intentional act or omission by Horizon arising out of or in
connection with Horizon's performance of its obligations under this Agreement
(ii) except for actions for which Horizon is entitled to indemnification under
Section 6(a) hereof, the distribution, marketing or sales of the Products or
defect in the design or specifications for the Products, and (iii) the failure
of Horizon to comply with the Laws of the FDA or the Authorities in connection
with the sale of the products by Horizon. Horizon agrees to pay all losses,
damages (actual and exemplary), costs, expenses, invoices and bills (including
reasonable attorneys' fees) incurred by IFM and its officers, employees, agents
and assigns as a result of any such negligent or intentional act or omission by
Horizon.
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(c) Promptly after receipt by Horizon or IFM (hereinafter
collectively referred to as an "Indemnified Party") of notice by a third party
of any complaint or the commencement of any action or proceeding with respect to
which indemnification is being sought hereunder, such Indemnified Party shall
notify Horizon or IFM, whoever is the appropriate indemnifying party hereunder
(the "Indemnifying Party"), of such complaint or of the commencement of such
action or proceeding; provided, however, that the failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from liability for
such claim arising otherwise than under this Agreement and such failure to so
notify the Indemnifying Party shall relieve the Indemnifying Party from
liability which the Indemnifying Party may have hereunder with respect to such
claim only to the extent that, such failure to notify the Indemnifying Party
results in the forfeiture by the Indemnifying Party of rights and defenses
otherwise available to the Indemnifying Party with respect to such claim. The
Indemnifying Party shall have the right, upon written notice to the Indemnified
Party, to assume the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of the fees and disbursements of such counsel. In the event, however,
that the Indemnifying Party declines or fails to assume the defense of the
action or proceeding or to employ counsel reasonably satisfactory to the
Indemnified Party, in either case in a timely manner, then such Indemnified
Party may employ counsel to represent or defend it in any such action or
proceeding and the Indemnifying Party shall pay the reasonable fees and
disbursements of such counsel as incurred; provided, however, that the
Indemnifying Party shall not be required to pay the fees and disbursements of
more than one counsel for all Indemnified Parties in any jurisdiction in any
single action or proceeding. In any action or proceeding with respect to which
indemnification is being sought hereunder, the Indemnified Party or the
Indemnifying Party, whichever is not assuming the defense of such action, shall
have the right to participate in such litigation and to retain its own counsel
at such party's own expense. The Indemnifying Party or the Indemnified Party, as
the case may be, shall at all times use reasonable efforts to keep the
Indemnifying Party or the Indemnified Party, as the case may be, reasonably
apprised of the status of the defense of any action the defense of which they
are maintaining and to cooperate in good faith with each other with respect to
the defense of any such action.
(d) No Indemnified Party may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior written consent of the Indemnifying
Party, unless such settlement, compromise or consent includes an unconditional
release of the Indemnifying Party from all liability arising out of such claim.
An Indemnifying Party may not, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the entry of any
judgment with respect to which indemnification is being sought hereunder unless
such settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective affiliates.
(e) In the event an Indemnified Party shall claim a right to
payment pursuant to this Agreement, such Indemnified Party shall send written
notice of such claim to the appropriate Indemnifying Party. Such notice shall
specify the basis for such claim. As promptly as possible after the Indemnified
Party has given such notice, such Indemnified Party and the appropriate
Indemnifying Party shall establish the merits and amount of such claim (by
mutual agreement, litigation, arbitration or otherwise) and, within five (5)
business days of the final determination of the merits and amount of such claim,
the Indemnifying Party shall deliver to the Indemnified Party in immediately
available funds an amount equal to such claim as determined hereunder.
Section 7. Binding Effect; Assignment. This Agreement shall be binding
upon, and inure to the benefit of, the parties and their respective successors,
legal representatives and permitted assigns. No assignment of this Agreement or
of any rights or obligations hereunder may be made by either party without the
prior
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written consent of the other party. Any attempted assignment without the
required consent shall be null and void.
Section 8. Relationship of the Parties. None of the provisions of this
Agreement are intended to create nor shall they be deemed or construed by the
parties to create any partnership or joint venture relationship or other
relationship between the parties hereto, except that of independent entities
contracting with each other solely for the purpose of effecting the provisions
of this Agreement. The parties covenant and agree during the term of this
Agreement to provide access to information as provided in Section 6.5 of the
Asset Purchase Agreement.
Section 9. Governing Law. This Agreement shall be governed, construed and
enforced in accordance with the laws of the State of Georgia, without regard to
that state's conflict of laws provisions.
Section 10. Amendment. This Agreement may be amended, supplemented or
modified only by a written agreement signed by each party hereto.
Section 11. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which shall constitute one and
the same agreement.
Section 12. Attorneys Fees. If any action at law or in equity is necessary
to enforce the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys fees, costs and expenses in addition to any other relief
to which such prevailing party may be entitled.
Section 13. Force Majeure. Neither party shall be liable for failure or
delay in performance of any of its obligations hereunder if such delay or
failure results from an Act of God, war conditions, embargo, general labor
strike or other similar conditions beyond either party's control.
Section 14. Taxes. Horizon shall be responsible for paying all sales, use,
transaction or other value added taxes (other than taxes measured by the net
income of IFM) resulting from this Agreement, if any.
Section 15. Survival. The provisions of Sections 4, 6, 8, 9, 12, 14, 17,
18 and 19 shall survive any termination or expiration of this Agreement.
Section 16. Severability. In the event that any portion of this Agreement
is determined to be invalid or illegal, such invalidity or illegality shall not
impair the operation or effect of any remaining portions of this Agreement.
Section 17. Representations. Horizon shall make no representations or
warranties to any of its customers attributable to IFM with respect to the
Products except for those expressly authorized by IFM in writing.
Section 18. Insurance. During the term of this Agreement and for a three
(3) year period following expiration of this Agreement, Horizon shall maintain
product liability insurance in amounts of not less than $5,000,000 per
occurrence and $5,000,000 in the aggregate during the policy period to cover the
Products and the distribution, marketing, and sale of the Products. Such
insurance policy shall name Horizon as the named insured and IFM as an
additional insured.
Section 19. Limitation of Liability. EXCEPT FOR CLAIMS UNDER SECTION 6
HEREOF, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL
OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS OR LOST SAVINGS ARISING OUT OF
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THE SALE OR USE OF THE PRODUCTS, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES OR FOR ANY CLAIM BY ANY OTHER PARTY. IN NO EVENT
SHALL IFM'S LIABILITY UNDER THIS AGREEMENT EXCEED $15,000,000.
Section 20. Notice. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been given on the date when delivered personally or sent by facsimile, the
next business day after delivery to a nationally recognized overnight delivery
service, or on the seventh (7th) day after mailing if mailed by first class
mail, registered or certified, postage prepaid, and properly addressed as
follows or to such other address as either party may designate by notice to the
other party:
To Horizon:
Horizon Medical Products, Inc.
Attn: President
Seven North Parkway Square
0000 Xxxxxxxxx Xxxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
FAX: 404/000-0000
With copies to:
Xxx X. Xxxxxxxxx, III
Xxxxxxxxx & Virgin, P.C.
000 Xxxxxx Xxxxxx; Xxxxx 0000
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
FAX: 404/000-0000
and
Xxx X. Xxxxxx, Xx., Esq.
King & Spalding
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
To IFM:
Ideas for Medicine, Inc.
Attn: President
0000 Xxxxxxx Xxxx., X.X.
Xxxxxxxx, Xxxxxxx 00000
FAX: 770/000-0000
With a copy to:
Arnall Golden & Xxxxxxx, LLP
Attn: Xxxxxxx X. Xxxxxxxxxx
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2800 One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
FAX: 404/000-0000
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date first above written.
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ XXXXXXX X. XXXXXXXX
----------------------------------
Xxxxxxx X. Xxxxxxxx, Xx.
President
IDEAS FOR MEDICINE, INC.
By: /s/ XXXXX X. XXXXXXX, XX.
----------------------------------
Xxxxx X. Xxxxxxx, Xx.
Chief Financial Officer
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EXHIBIT A
Manufacturing Services
1. During the term of the Agreement, IFM will manufacture products per the
production schedule attached hereto as Exhibit A-1. At the end of the first 6
months of the term of this Agreement, Horizon shall provide to IFM a proposed
production schedule for the next 6-month period and, thereafter, Horizon shall
update such production schedule each month on a rolling 6-month basis. Changes
to the production schedule or forecast must be submitted at least 90 days prior
to requested delivery. After the first 12 months of the term of this Agreement,
the production schedule shall require production by IFM and sales to Horizon of
at least $500,000 of Products per month. In the event IFM is unable to deliver
Products requested by Horizon in excess of $500,000, then Horizon may obtain the
manufacture of the Products from another party. In the event IFM is unable to
fulfill Horizon orders for at least $500,000 of Products (based on a reasonable
Product mix) per month after the first 6 months of the term of this Agreement,
then Horizon shall have the rights provided in Section 4(b) hereof. All
forecasts must reflect a reasonable mix of Products. If Horizon requests a rapid
change in Product mix, IFM will use its reasonable efforts to accommodate a
request for change.
2. Products ordered in accordance with the terms thereof will be available to be
shipped from IFM's facility in accordance with the terms of the production
schedule.
3. IFM will package product per Horizon's specifications using packaging and
labeling made available by Horizon, and will ship product to the Manchester
Facility at Horizon's expense and direction.
4. IFM shall deliver the Products in accordance with the specifications and
quality requirements set forth herein. With respect to Products that are
defective or damaged prior to delivery to Horizon, IFM shall use reasonable
efforts to replace such Products within 15 days of the return thereof to IFM and
if IFM is unable to replace such Products within 15 days, then IFM shall refund
to Horizon the purchase price for such Products. IFM shall investigate customer
complaints and report to Horizon within 30 days with the results of such
investigation. Any required changes by IFM shall be recommended to Horizon in
connection with such complaint and implemented within 15 days thereafter.
5. Upon the expiration or termination of the Agreement, manufacturing of the
Products shall be transferred from the IFM Facility to the Manchester Facility.
6. For the first 6 months of this Agreement, IFM shall provide to Horizon, as
reasonably requested access to certain agreed upon personnel of IFM to assist
Horizon in training its personnel with respect to the Products. Horizon shall
reimburse IFM for the travel expenses incurred in connection with such training.
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EXHIBIT A-1
Production Schedule
See attached.
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EXHIBIT B
See Attached. The sales price of the Products is the amount listed in the
attached schedule under the column designated ASP. The price to be paid by
Horizon to IFM for the Products shall be (i) 55% of such ASP amount for the
first $3,000,000 of sales of Products to Horizon hereunder, (ii) 45% of such ASP
amount for the next $3,000,000 for sales of Products to Horizon hereunder, and
(iii) 50% of such ASP amount for sales of Products to Horizon thereafter, except
when modified under Section 4 of the Agreement. The ASP was calculated based on
the total sales revenues with respect to each individual Product divided by the
number of units of such Product sold, in each case for the period January 1,
1998 through August 31, 1998. In the event an error has been made in the
calculation of the ASP amounts set forth on the attached list, the parties agree
to recalculate the ASP as appropriate and to make an appropriate adjustment for
any amounts paid by Horizon to IFM prior to such recalculation.
