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.
 
WITNESSETH
 
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:
 
1.  Purpose
 
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.
 
2.  Purchase Orders
 
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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3.  Term and Termination
 

A.  
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.

 

B.  
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.

 
 

C.  
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.

 

D.  
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.

 
4.  Payment, Price, Exclusivity, Territory, and New Products
 
 

A.  
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.

   

B. 
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:

  

  i. [price term redacted and confidential treatment requested]         ii.
[price term redacted and confidential treatment requested]         iii. [price
term redacted and confidential treatment requested]           [price term
redacted and confidential treatment requested]

 
“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.
 
 
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“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.
 
 C. 
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.      
 D. 
Exclusivity         i.
 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.
        ii. 
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.
        iii.
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.  
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.

   

F.  
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.

   

G. 
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.

 
5.  Taxes
 
 A. 
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.    
 B. 
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.
   

 
6.  Shipments/Delivery Scheduling
 
 A. 
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.
   
 B. 
Hill-Rom may, at its election, specify the carrier for delivery of Products to
be used by Seller.    
 C. 
All shipments shall be made F.O.B. Shipping point.    
 D. 
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
 

A.  
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.

 

B.  
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.

 

C.  
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.

   

D.  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.

   

E. 
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.

   

F. 
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
 

A.  
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.

 

B.  
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.

 

C.  
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.

 

D.  
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.

 
9. Indemnification
 
 
 
 A.  
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. 
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 and (ii) shall indemnify Seller, its employees
and agents and save them harmless from all claims and judgments for injury or
death to persons or property damage (including reasonable costs of litigation
and attorney’s fees) made or obtained against Seller, 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 any modification of the Products
by Hill-Rom made without Seller’s express written consent, any change in any
label by Hill-Rom not approved by Seller, the design of any Product feature
designed by Hill-Rom, any technology or invention owned by Hill-Rom and supplied
by Hill-Rom to Seller, the negligence or intentional wrongful acts or omissions
of Hill-Rom, or the presence of Hill-Rom’s employees, and/or agents on Seller’s
premises in connection with the performance by Hill-Rom of its obligations under
this Agreement, but Hill-Rom will not be responsible for any claims, loss,
damage or injury, including death, to the extent caused by or arising 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, or 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, or the negligence or intentional wrongful acts or
omissions of Seller, its agents or its employees.    

 
10. Patent and Intellectual Property Indemnification
 
 A. 
Subject to the limitations and requirements contained in this Agreement, Seller
shall indemnify and save harmless Hill-Rom, its successors, assigns, customers
or users of the Products, from and against all loss, liability and damage,
including costs and expenses, resulting from any claim that the manufacture,
use, sale or resale of any Products (except the VersaCare CFT Mattress) supplied
under this Agreement infringe any patent or patent rights, copyrights, trade
secrets or other intellectual property rights and Seller shall, when notified,
defend any action or claim of such infringement at its own expense. This
indemnity shall not apply to any claim of infringement arising from any Products
or labeling modified at the express direction of Hill-Rom, or modified by
anyone other than Seller without Seller’s express written approval, to the
extent the claim of infringement is based on the modifications. Nor shall this
indemnity apply to any claim of infringement arising from the use, sale or
resale of any products outside of the United States and Canada.
   
 B. 
Subject to the limitations and requirements contained in this Agreement, Seller
shall indemnify and save harmless Hill-Rom, its successors, assigns, customers
or users of VersaCare CFT Mattress purchased under this Agreement, from and
against all loss, liability and damage, including costs and expenses, resulting
from any claim that the manufacture, use, sale or resale of the Key Technology
embodied in any VersaCare CFT Mattresses supplied under this Agreement infringes
any patent or patent rights, copyrights, trade secrets or other intellectual
property rights and Seller shall, when notified, defend any action or claim of
such infringement at its own expense. This indemnity shall not apply to any
claim of infringement arising in whole or in part from any invention, design,
idea or technology provided by Hill-Rom, any aspect of any Product designed by
Hill-Rom, any Product or labeling modified at the express direction of Hill-Rom,
or modified by anyone other than Seller without Seller’s express written
approval, to the extent the claim of infringement is based on the modifications.
Nor shall this indemnity apply to any claim of infringement arising from the
use, sale or resale of any products outside of the United States of America, and
Canada. The Key Technology means Seller’s non-powered self adjusting technology
for equalizing pressure over the surface of a body and CFT Developments (defined
herein).

 
 
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11. Insurance
 
Seller shall maintain insurance as described below during the duration of the
Agreement. In the event of completed operations, insurance must be maintained
for a period of not less than 12 months from the date of termination.
 
Evidence of insurance shall be provided to Hill-Rom on Certificate(s) of
Insurance before any Products are delivered or services are performed.
 
A. 
Comprehensive General Liability - Insurance shall include products/completed
operations liability, contractual liability, personal injury liability and broad
form property damage coverage with limits of at least $5,000,000 per occurrence
and $7,000,000 aggregate combined single limit. Certificates of Insurance shall
stipulate: “Hill-Rom, Inc. has been made an additional insured under this policy
with respect to all products, operations or services provided or performed under
contract or purchase order.”
   
B. 
Statutory Workers’ Compensation and Employer’s Liability - Certificate of
insurance must evidence coverage in the State in which the work is being
performed and must evidence a limit of liability for Employers Liability
(Coverage B) of not less than $250,000 per accident.    
C. 
Atomobile Liability Insurance - To be supplied if Seller will bring vehicles
onto Hill-Rom’s premises. Insurance shall cover any owned, non-owned or hired
vehicles with limits of at least $500,000 per occurrence combined single limit
bodily injury and property damage.
   
D. 
Primary - Insurance evidenced above shall be primary and not entitled to
contribution from any insurance maintained by Hill-Rom, Inc.    
E. 
Cancellation - The Certificate of Insurance shall state that the above policies
shall not be canceled, nor reduced in coverage, until after thirty (30) days
written notice of such cancellation or reduction shall have been mailed to the
Certificate holder.
   
F. 
Neither failure of Seller to comply with any or all of the insurance provisions
of this Agreement, nor the failure to secure endorsements on the policies as may
be necessary to, carry out the terms and provisions of this Agreement shall be
construed to limit or relieve Seller from any of its obligations under this
Agreement, including the insurance provisions.    

 
12. Intellectual Property Rights
 
 A. 
SELLER’S INTELLECTUAL PROPERTY. Except as specifically provided below in respect
to the VersaCare CFT Mattress, Hill-Rom shall have no right to or claim under
any of Seller’s existing or subsequently developed intellectual property
including, without limitation, any patents, trademarks, service marks,
copyrights, and trade secrets, except to the extent required for the marketing
and sale by Hill-Rom in the Territory of the Products purchased from Seller
under this Agreement.

 
 
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B. 
HILL-ROM’S INTELLECTUAL PROPERTY. Except as specifically provided below in
respect to the VersaCare CFT Mattress, Seller shall have no right to or claim
under any of Hill-Rom’s existing or subsequently developed intellectual property
including, without limitation, any patents, trademarks, service marks,
copyrights, and trade secrets.      
 C. 
NO JOINT DEVELOPMENT ACTIVITIES.
  (i) Seller and Hill-Rom will not enter into any joint development activities
during the term of this Agreement except as may be agreed to in a separate
writing signed by the parties or in section D below with respect to the
VersaCare CFT Mattress;         (ii)
Seller shall own the rights to the force concentrator plastic strips developed
for use with the Hill-Rom bed exit system prior to the execution of this
Agreement, notwithstanding the contribution by Hill-Rom, if any, to its
development;
        (iii)
Hill-Rom shall own the rights to the “enhanced calf” feature (a feature
exclusive to Hill-Rom) and the foam force concentrator strips developed for use
with the Hill-Rom bed exit system, each developed prior to the execution of this
Agreement, notwithstanding the contribution by Seller, if any, to their
development;
        (iv)
Except as may otherwise be expressly agreed in writing, neither Seller nor
Hill-Rom acquires any rights in the inventions or other intellectual property of
the other created prior to the execution of this Agreement including, without
limitation, any such invention or other intellectual property pertaining to
those features designated as exclusive to Hill-Rom in Exhibit A.

 
 
D.  INTELLECTUAL PROPERTY DEVELOPED IN RESPECT TO THE VERSACARE CFT MATTRESS.
 
   i.         Owner of Inventions
 
Hill-Rom and Seller may engage in joint development activities in respect to the
VersaCare CFT Mattress. The Owner of Inventions (defined below) by either party
shall be established as follows:
 
a.  For Inventions relating to the bed frame, to the interface between the
mattress and the bed frame, to the shape of the mattress so that it is
compatible with the bed frame or with an extending or retracting foot section of
the bed frame, or to the positioning or interconnection of mattress components
so that they fit to the space allotted by the bed frame (“VersaCare CFT Mattress
Frame Developments”), the term “Owner” shall mean Hill-Rom and the term “Other
Party” shall mean Seller;
 
b.  For Inventions relating to non-powered self adjusting technology for
equalizing pressure over the surface of the body (“CFT Developments”), the term
“Owner” shall mean Seller and the term “Other Party” shall mean Hill-Rom; and
 
c.  For Inventions that are neither VersaCare CFT Mattress Frame Developments
nor CFT Developments (“Other Developments”), the term “Owner” shall mean
Hill-Rom and “Other Party” shall mean Seller.
 
     ii.        VersaCare CFT Mattress Inventions.
 
 
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An “Invention” shall mean any discovery, concept, or idea, whether patentable or
not including, but not limited to, apparatus, processes, methods, compositions
of matter, techniques, and formulae, as well as improvements thereof or know-how
related thereto, developed by one party in the course of and in connection with
the development of the VersaCare CFT Mattress after the date that the VersaCare
CFT Mattress was added to Exhibit A, disclosed by that party in writing to the
other party for use in the VersaCare CFT Mattress, and not previously known to
the party receiving the written disclosure, Decisions as to whether to disclose
information that may be pertinent to the VersaCare CFT Mattress shall be in the
sole discretion of a party.
 
    iii.        Duties of Other Party in respect to VersaCare CFT Mattress
Inventions.
 
An Invention shall become and remain the exclusive property of Owner, whether
patentable or not, and the Other Party will, without royalty or any additional
consideration:
 

a.  
assign to Owner all of the Other Party’s rights, title, and interests in and to
such Inventions, any applications for United States and foreign Letters Patent,
any United States and foreign Letters Patent, and any renewals thereof granted
upon such Inventions;

   

b. 
assist Owner or its nominees, at the expense of Owner, to obtain such United
States and foreign Letters Patent for such Inventions as Owner may elect; and

   

c.  execute, acknowledge, and deliver to Owner at Owner’s expense such written
documents and instruments, and do such other acts at Owner’s expense, such as
giving testimony in support of the Other Party’s inventorship, as may be
reasonably necessary to obtain and maintain United States and foreign Letters
Patent upon such Inventions and to vest the entire rights and title thereto in
Owner and to confirm the complete ownership by Owner of such Inventions, patent
applications, and patents.

   

   iv.
 
LICENSE TO OTHER DEVELOPMENTS. Hill-Rom grants to Seller a non-exclusive,
non-transferable (except as specified in this section), paid-up, perpetual,
right and license to manufacture, use, offer for sale, sell, display, modify and
distribute, internally and externally the Other Developments for any purpose.
Upon Hill-Rom’s prior written consent which shall not be unreasonably withheld,
delayed or conditioned, Seller shall have (i) the right to transfer this license
to any purchaser of substantially all the assets involved in the production of
the VersaCare CFT Mattress and (ii) the right to sublicense to third party
contractors who produce items for Seller.

 
13. Confidential Information
 

A.  
During the course of this Agreement one party (the “Disclosing Party”) may
disclose to the other party (the “Receiving Party”) information about the
Disclosing Party’s business including without limitation, product
specifications, drawings, manufacturing processes, business plans, marketing
information and customer information (“Confidential Information”). Disclosure
may be oral or written. The Receiving Party agrees that during the term of this
Agreement and for a period of five (5) years from the date of termination of
this Agreement it shall not make any use of the Disclosing Party’s Confidential
Information except as necessary to perform this Agreement and shall not disclose
the Disclosing Party’s Confidential Information to any third party, except as
required by law or except for disclosures on a confidential basis to its
accountants, attorneys, and financial advisors, and shall make disclosure only
to its own employees who agree to maintain in confidence such Confidential
Information consistent with this provision and have a business need to know in
order for the Receiving Party to perform its obligations under this Agreement.
In the event the Receiving Party is required to disclose Confidential
Information in response to valid legal process, the Receiving Party agrees to
immediately notify the Disclosing Party and assist the Disclosing Party in
obtaining a protective order or other appropriate protection for the
Confidential Information prior to disclosure.

 
 
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B. 
Confidential Information shall not include information in the possession of the
Receiving Party in the event of any of the following:
        i.  The Receiving Party was in receipt of the information at the time of
disclosure by the Disclosing Party without obligation of confidentiality, as
clearly documented by the Receiving Party’s business records;         ii.
The Receiving Party obtains the information from a third party free to disclose
the information without obligation of confidentiality; or
        iii. The information is disclosed to the public without breach of the
obligations of this Agreement.      
 C. 
Seller and Hill-Rom each agrees that disclosure by the Receiving Party of
Confidential Information of the Disclosing Party in violation of this Agreement
would cause irreparable harm to the Disclosing Party and that the Disclosing
Party shall be entitled to injunctive or other equitable relief without a
further showing of irreparable harm in addition to any other remedy available to
the Disclosing Party at law.      
 D. 
The terms and conditions of this Agreement are considered to be Confidential
Information and shall not be disclosed by either party, other than to confirm
and promote the relationship established by this Agreement, except as required
by law and on a confidential basis to their attorneys, accountants and financial
advisors, without the prior written consent of the other party, which shall not
be withheld or delayed unreasonably.      
 E. 
Upon the termination of this Agreement each party, at the request of the other
party, shall return to the other party all Confidential Information received
from that party in any form including without limitation any memoranda or other
form of data containing any such Confidential Information, and any and all
copies, prints, and negatives.      

 
14. Claims and Indemnification Procedure Rejection or Revocation of Acceptance
and Limitations on Remedies
 
 A. 
Limitation of remedy for breach of warranty. Hill-Rom’s sole and exclusive
remedy for breach of the warranty set forth in Section 8 above shall be the
replacement at the facility of Hill-Rom of the goods or defective components
involved or, at Sellers option, the refund or credit to Hill-Rom of an amount
equal to the amount paid by Hill-Rom for the defective goods including shipping
costs to the initial destination of the goods. In the event of a voluntary or
mandatory recall (including any field modification or inventory withdrawal) of
any Product in the United States of America or Canada that does not result from
the negligent or otherwise wrongful acts or omissions of Hill-Rom, in addition
to replacing or repairing defective goods or components, Seller shall either (at
Seller’s option) (a) install the replacement goods or components or (b)
reimburse Hill-Rom for the expenses reasonably incurred by Hill-Rom in
connection with installing the replacement goods or components. Seller shall be
obligated to make refunds or replacements only if Hill-Rom or the end-user
customer (a) promptly notifies Seller in writing of the defect, or
non-conformity and states the basis for Hill-Rom’s determination of a defect or
non-conformity and (b) complies with Seller’s reasonable written instructions as
to return of good in the event that Seller elects to request that the goods
involved be returned.

 
 
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 B.  
Except for the Intellectual Property Indemnity, in no event, including but not
limited to cases of claims of negligence or strict liability, shall either party
be liable to the other for lost profits, lost sales, punitive, indirect,
incidental, special or consequential damages. Except as to claims of indemnity
made according to Section 14 of this Agreement, in no event, including without
limitation cases of claims of negligence or strict liability, shall Seller be
liable for damages in excess of the purchase price, and shipping costs of the
goods claimed to be defective.      
 C. 
Indemnification Procedure.         i.
In order to be entitled to indemnity under this Agreement, the party that
believes that it is entitled to indemnity (“Indemnified Party”) from the other
party (“Indemnifying Party”), must promptly give written notice to the
Indemnifying Party of the basis of any claim for indemnity stating the nature
and the basis of the claim as well as the amount, to the extent that it is
known. The Indemnifying Party shall not be obligated to provide indemnity except
for claims as to which it receives notice prior to two years after the date on
which this Agreement terminates.
        ii.
Third Party Claims. In order to be entitled to indemnity from claims asserted by
third parties, an Indemnified Party must follow the procedures of this section
with respect to claims resulting from the assertion of liability by persons or
entities not parties to this Agreement, including claims by governmental
authorities for penalties, fines or assessments.

 

a.  
The Indemnified Party shall give prompt written notice to the Indemnifying Party
of any assertion of liability by a third party which might give rise to a claim
by the Indemnified Party against the Indemnifying Party based on the indemnity
agreements contained in this Agreement, stating the nature and basis of the
assertion and the amount thereof to the extent known.

 

b.  
In the event that any action, suit or proceeding (“Legal Action”) is brought
against an Indemnified Party with respect to which the Indemnifying Party may
have liability under this Agreement, the Indemnifying Party will have the right
at any time to assume and thereafter conduct the defense of the Legal Action
with counsel of its choice and such defense shall include all appeals or reviews
which counsel for the Indemnifying Party shall deem appropriate.

 

c.  
The Indemnified Party shall make available to the Indemnifying Party and its
attorneys and accountants, for review and copying, all of its books and records
relating to such Legal Action (except those which are subject to privilege or
other restrictions on disclosure) and the parties agree to render to each other
such assistance as may reasonably be requested in order to facilitate the proper
and adequate defense of any such Legal Action.

 

d.  
The Indemnifying Party shall be permitted to effect any settlement of any claim
without the written consent of the Indemnified Party, except to the extent that
the settlement (i) requires any payment or other action or agreement to refrain
from acting on the part of the Indemnified Party, (ii) materially and adversely
affects the business or business prospects of the Indemnified Party (iii)
involves an injunction or other equitable relief against the Indemnified Party
or its assets, employees or business, or (iv) requires an admission of liability
by the Indemnified Party, whether or not such admission is or is not admissible
in any concurrent or subsequent criminal or civil Legal Action. In any case
described in any of clauses (i), (ii) or (iii) of the preceding sentence, the
Indemnifying Party may effect any settlement of the claim with the consent of
the Indemnified Party, which consent shall not be unreasonably withheld. In any
case described in clause (iv), the Indemnifying Party shall not propose any such
admission without the express written consent of the Indemnified Party, which
consent may be withheld in the sole reasonable discretion of the Indemnified
Party.

 
 
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e.  
In no event will the Indemnified Party consent to the entry of any judgment or
enter into any settlement with respect to the third party claim without the
prior written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.

 

f.  
Reporting of infringement and enforcement of rights. If Hill-Rom becomes aware
of any infringement by a third party of the intellectual property right of
Seller, Hill-Rom will promptly notify Seller in writing of its discovery of
potential infringement and shall provide to Seller any information Hill-Rom has
in support of such belief. Seller shall have the sole right, but not the
obligation, to institute such action as it deems appropriate to obtain a
declaration of Seller’s intellectual property rights and/or to terminate the
infringement through negotiation, litigation and/or alternative dispute
resolution means, at its sole discretion and at its sole cost. Seller shall have
the right to select and to control counsel in any action initiated by Seller.
Hill-Rom shall lend its name to the action or join as a party in any such
action, and provide assistance as may be reasonably necessary to conduct the
action; Seller shall reimburse Hill-Rom its reasonable out-of-pocket costs for
rendering such assistance. Seller has the right to settle such action at its
sole discretion.

 

  iii.
Limitations on Indemnity. For all Products, except in respect to third party
claims for personal injury, in no event shall Seller’s cumulative obligation to
indemnify (including the cost to Seller of providing a defense) exceed the total
of the purchase price received by Seller from Hill-Rom for Products purchased by
Hill-Rom under this Agreement.

 
15.  Force Majeure
 
No party will be liable for any failure of performance (other than Hill-Rom’s
obligation to make timely payment for Product shipped to Hill-Rom under this
Agreement) resulting from any cause not within its reasonable control including,
but not limited to, fire, strikes, lockouts, riot, insurrection, war, accidents
to plant or equipment, process failure, mechanical failure, failure of usual
source of supply, act of God, acts of the public domain, shortage of
transportation equipment, or any acts of government whatever; provided, however,
that the obligations of the parties hereunder shall be suspended only during the
period of such delay occasioned by the occurrence of any such event covered by
this paragraph. In the event that the obligations of one party are suspended due
to force majeure for over ninety (90) days, the other party may cancel this
agreement on written notice. Prompt notice to the other party of the reliance by
one party on the provision of this paragraph must be made as soon as possible
after the occurrence of any such event and must specify the full particulars of
the event relied on.
 
 
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16.  Compliance with Laws
 
Seller agrees that it will comply fully with all applicable federal, state and
local laws, rules, regulations and orders of the governing authorities within
the United States of America and Canada pertaining to the production and sale of
the Products ordered, including but not limited to, the requirements of the EPA,
OSHA, FDA, FLSA, provisions of the Equal Opportunity Clause of Executive Orders
11246 and 11375, small business, small Disadvantaged and Woman-Owned Small
Business Concerns and Affirmative Action provisions. In the event any state or
federal governmental action is initiated or investigation is conducted alleging
that this Agreement violates the antitrust laws of the United States or any of
the various states, either party may terminate this Agreement forthwith upon
thirty (30) days written notice and such termination shall not constitute a
breach of this Agreement.

 
17.  Minority Subcontractors and Vendors
 
Seller is encouraged to utilize small, disadvantaged, minority and women-owned
subcontractors and vendors (as defined by applicable State or Federal law) among
its sources of supply in the performance of this Agreement. Seller has disclosed
to Hill-Rom that Seller currently meets the Small Business Association small
vendor requirements.
 
18.  Assignment, Successors, and no Third-Party Rights
 
Neither party may assign any of its rights or obligations under this Agreement
without the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed. This Agreement will apply to, be binding in
all respects upon, and inure to the benefit of any heirs, legal representatives,
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and permitted assigns.
 
19.  Equitable Remedies
 
The parties acknowledge that the breach of their respective duties under
Sections 9 (Indemnification), 10 (Patent and Intellectual Property
Indemnification), 12 (Intellectual Property Rights), 13 (Confidential
Information) and/or 18 (Assignment) would cause significant harm to the other
party. Therefore, non-breaching party will be entitled to equitable relief
including injunctive relief and specific performance, upon application to a
court of competent jurisdiction without posting bond or making any showing other
than a breach by the other party by a preponderance of the evidence.
 
20.  Notices
 
Unless otherwise provided herein, all notices, demands, consents, waivers and
other communications that are required by this Agreement to be in writing will
be deemed to have been properly given (a) if delivered by hand, effective upon
receipt, (b) if sent by certified or registered mail, postage prepaid, return
receipt requested, effective five (5) business days after mailing, or (c) if
sent by a nationally recognized overnight delivery service, effective upon
receipt, in each case to the appropriate addresses set forth below, or to such
other addresses as a party may designate by written notice to the other parties:
 
 
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To Hill-Rom:
 
4349 Corporate Road
Charleston, SC 29405
Attention: Commodity Specialist
 
To Seller:
 
Span-America Medical Systems, Inc.
Attn: President
70 Commerce Center
Greenville, SC 29615
With a required copy to:
 
1069 State Route 46
East Batesville, IN 47006
Attention: General Counsel
 
With a required copy to:
 
Wyche Burgess Freeman & Parham, P.A.
c/o Mr. James M. Shoemaker
P. O. Box 728
Greenville, SC 29602

 
21.  Headings; Entire Agreement
 
The headings in this Agreement are provided for convenience of reference only,
and are not an integral part of this Agreement and will not affect its
construction or interpretation. This Agreement, together with its Exhibits and
all purchase orders, embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof, and supersedes and
cancels all previous written or oral understandings, agreements, negotiations,
commitments, or any other writings or communications with respect to such
subject matter. Each party acknowledges that it places no reliance on any such
previous written or oral writings, understandings, negotiations, commitments,
agreements, or communications.
 
22.       Governing Law; Venue
 
This Agreement shall be construed as an agreement made in the State of South
Carolina and shall be governed and construed in accordance with the laws of the
State of South Carolina without regard to conflicts of laws principles. The
parties expressly consent to the exclusive jurisdiction of the state and federal
courts of South Carolina for any action arising under this Agreement. Any
actions or proceedings with respect to any matters, arising under or growing out
of this Agreement or the performance of this agreement, shall be instituted and
prosecuted only in state or federal courts located in the state of South
Carolina. The provisions of the United Nations Convention for the International
Sale of Goods shall not apply to this Agreement
 
23.       Severability.
 
The Provisions of this Agreement shall be severable, and if any provision of
this Agreement shall be held or declared to be illegal, invalid, or
unenforceable, such illegality, invalidity, or unenforceability shall not affect
any other provision hereof, and the remainder of this Agreement, disregarding
such invalid portion, shall continue in full force and effect as though such
void provision had not been contained herein.
 
24.  Public Announcements
 
 
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Except to the extent that a press release or public statement is required by
law, the parties will consult with each another before issuing any press
releases or otherwise making any public statements with respect to this
agreement or the transactions contemplated hereby and neither of them will issue
any such press release or make any such public statement without the written
consent of the other which shall not be withheld or delayed unreasonably. If
written objection is not provided within seven (7) calendar days of receipt of
the request for consent, consent shall be deemed to be granted. Notwithstanding
the foregoing, neither consultation nor permission is required for any press
release or public statement by either party relating to this agreement or the
transactions contemplated hereby if the identity of the other party cannot be
discerned from the press release or public statement or circumstances
surrounding the release.
 
25.       Modification Waiver

This Agreement may not be amended except by a written agreement executed by all
of the parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver unless expressly so
stated in writing. No waiver shall be implied from conduct or a failure to
enforce rights or delay in enforcing rights. No waiver shall be binding unless
executed in writing by the party making the waiver.
 
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives.

SPAN-AMERICA MEDICAL SYSTEMS, INC. 
 
 
 
 
 
 
BY:  /s/ James D. Ferguson             
TITLE: President/CEO
DATE: 9-15-04
   Signature [a5047160ex10_181.jpg]

 
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EXHIBIT A

PRODUCT DESCRIPTION/CONFIGURATION

[Specifications and price terms redacted and confidential treatment requested]

 
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EXHIBIT B - TERRITORY
 

For all Products other than the VersaCare CFT Mattress, “Territory” as use in
this Agreement shall mean the geographic territory of:

(1) The United States of America and its territories and possessions; and

(2) Canada, including all provinces and territories.

In respect to the VersaCare CFT Mattress, “Territory” as used in this Agreement
shall mean the entire world.

 
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EXHIBIT C
SALES AND MARKETING SUPPORT

1.
To the extend that the services of Laurie Rappl are available to Seller and can
reasonably and practicably be made available to Hill-Rom, Seller agrees to make
available Laurie Rappl for sales support at no additional charge to Hill-Rom for
a period of twelve months from the date Hill-Rom first ships one or more
Products to a customer in the Territory. Such sales support shall include
attendance at trade shows and major customer sales calls.
    2.
To the extent that Seller has prepared sales and marketing materials for the
Products, Seller agrees to make those materials available to Hill-Rom in camera
ready form (or in electronic/digital form.) These materials shall include,
without limitation, product descriptions, product photographs, clinical studies,
benchmarking and engineering data, and the like.
    3.
 Hill-Rom agrees that it will not use any trademark of Seller except with the
prior written approval of Seller and that it will not attempt to register any
trademark of the Seller anywhere in the world, nor take any actions adverse to
Seller’s trademark rights anywhere in the world. The trademarks of Seller
include “CFT” (federally registered), “PRESSUREGUARD” (federally registered) and
“CONSTANT FORCE TECHNOLOGY” (unregistered) owned by Seller, and/or formatives
and confusingly similar variations of these marks. Hill-Rom further agrees that
any use of Seller’s marks by Hill-Rom will inure to the benefit of Seller.

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