Document:

exv10w13

 

Exhibit 10.13

DISTRIBUTION AGREEMENT

     THIS AGREEMENT is made as of 20 January 2005 (the “Effective Date”) by and between Restore
Medical, Inc., a Minnesota corporation having its principal place of business at 2800 Patton Road,
Roseville, Minnesota 55113 USA (“Restore”) and Sonomed Ltd., a company organized under the laws of
Israel and having its principal place of business at 40/42 Hatizmoret Str., Rishon Le Zion, Zip
75562, Israel (“Distributor”).

RECITALS

	A.	 	Restore has developed a proprietary implantable medical device as more fully described in
Exhibit A (the “Products”).
	 
	B.	 	Restore wishes to appoint Distributor, and Distributor wishes to be appointed, as a
distributor of the Products in the territory set forth in Exhibit A (the “Territory”).

1. APPOINTMENT

     1.1 Scope. Subject to the terms and conditions of this Agreement, Restore hereby
appoints Distributor, and Distributor hereby accepts appointment, as Restore’s exclusive
distributor of the Products listed in Exhibit A in the Territory. So long as Distributor is
Restore’s exclusive distributor of the Products in the Territory under the terms of this Agreement,
and subject to the laws and regulations applicable in the Territory, Restore agrees that it will
not sell or distribute the Products in the Territory, directly or through third parties.

     1.2 Subdistributors. Distributor may appoint subdistributors that are duly licensed
in the Territory to promote and/or distribute Products within the Territory, provided that
Distributor obtains Restore’s prior written approval to such appointment, which approval Restore
may grant or withhold in its sole discretion. In no event shall any such subdistributor be allowed
to promote, market or distribute products which compete with the Products without Restore’s prior
written consent. Distributor shall at all times remain fully liable for and shall indemnify and
hold Restore harmless for the performance of its subdistributors.

     1.3 Sales Outside the Territory. Distributor shall not sell the Products to customers
outside the Territory.

     1.4 Competitive Products. During the term of this Agreement, Distributor shall not,
either directly or indirectly, through subdistributors or otherwise, develop, manufacture, promote,
market or distribute products that are competitive with the Products.

2. OBLIGATIONS OF DISTRIBUTOR.

     2.1 Marketing Efforts. Distributor shall have the following obligations with respect
to the marketing and distribution of the Products:

 

 

	 	(a)	 	To use its best efforts to further the promotion, marketing, sales, and
distribution of the Products in the Territory, and to maintain adequate sales and
service facilities in the Territory;
	 
	 	(b)	 	To promptly respond to all inquiries or complaints from purchasers of the
Products, and to maintain and support the Products;
	 
	 	(c)	 	To provide adequate and appropriate training to its sales and support
personnel, approved agents and subdistributors, and clinicians concerning the Products,
and to make available such persons for training;
	 
	 	(d)	 	To provide for Restore’s approval a reasonably detailed business plan for the
marketing and distribution of the Products within thirty (30) days of the Effective
Date (including pricing strategies and promotional activities) and thereafter to update
for Restore’s approval such business plan at least once per year;
	 
	 	(e)	 	To provide Restore with reports of Distributor’s activities, the market for the
Products, customer prospects and other information regarding sales of the Products once
per quarter in such detail as reasonably requested by Restore;
	 
	 	(f)	 	To provide Restore on a timely basis for each calendar quarter during the term
of this Agreement a rolling quarterly forecast of orders for the Products for the next
12 months;
	 
	 	(g)	 	To prepare and print advertising and marketing materials for the Products,
which materials must be approved in writing by Restore prior to their first use, as
described in Section 3.1 below;
	 
	 	(h)	 	To conduct its business in a professional manner which will reflect positively
upon Restore and its Products; and
	 
	 	(i)	 	To comply with all laws and regulations of the Territory.

     2.2 Minimum Purchase Requirement. Distributor agrees to purchase and take delivery of
a quantity of Products that, at a minimum, meets the Minimum Purchase Requirements specified in
Exhibit A. No less than three (3) months before the end of each twelve (12) month period (the
first of which shall commence on the Effective Date) during the initial term hereof, and any
renewal term, new Minimum Purchase Requirements shall be agreed by the parties. Distributor
understands and agrees that achievement of the Minimum Purchase Requirements is of the essence of
this
Agreement and if at the end of the initial term or any renewal term: (a) Distributor and
Restore fail to agree upon Minimum Purchase Requirements for the Products for the following year,
or (b) Distributor fails to meet the Minimum Purchase Requirements, Restore, at its sole option,
shall have the right to (1) terminate this Agreement pursuant to Section 9.2(c)(i) hereof with no
liability to Distributor, or (2) appoint other distributors of the Products in all or part of the
Territory (i.e., so that Distributor is Restore’s nonexclusive distributor of the Products in the
Territory) during the remaining term of this Agreement notwithstanding any contrary terms herein.

-2-

 

     2.3 Expired Products. Distributor shall not sell any Products beyond their stated
expiration date.

     2.4 Returned Products Policy. All returns must be authorized in writing by Restore
and an authorization number given to Distributor prior to the return of any Product, freight
pre-paid. Product returned must be unopened and undamaged, and must be received within 30 days of
the invoice date for full replacement or credit. Product returned after 30 days may be subject to
a restocking fee. Returns after 90 days from the invoice date may not be accepted. For Product
returns because of defective product or under warranty, see the warranty provision in Section 5.1.

     2.5 Reverse Engineering; Alteration of Products. Except as may be permitted by
applicable law, Distributor shall not reverse engineer or disassemble the Products and shall not
knowingly allow any other person to do so. Distributor shall not alter the Products or any Product
packaging or labeling except with the prior written consent of Restore.

     2.6 Inventory. Distributor shall at all times maintain an inventory of the Products
sufficient to meet anticipated demand but calculated to result in the minimum possible return of
Products under Section 2.4.

     2.7 Governmental Requirements; Registrations. Except as otherwise agreed by Restore
in writing, Distributor shall be responsible for compliance with all governmental requirements for
importing the Products into the Territory, including but not limited to all customs requirements.
Distributor shall obtain any necessary import licenses at its own expense. Restore shall be
responsible for obtaining all governmental approvals for the Products, and Distributor shall
provide Restore with assistance in obtaining all governmental approvals as Restore may reasonably
request, unless the parties agree otherwise or unless otherwise required by law in the Territory.
In the event that Distributor obtains the necessary registrations or approvals by agreement of the
parties or because required by the law of the Territory, Distributor shall provide Restore with
copies of filings and correspondence with regulatory authorities relating to the Products or such
registrations or approvals and, upon termination or expiration of this Agreement, Distributor shall
promptly execute and deliver all
documents reasonably requested by Restore to Restore or any third party designated by Restore
to transfer such registrations or approvals to Restore or its designee. If Distributor obtains
such registrations or approvals in its own name without Restore’s prior written consent,
Distributor agrees that such registrations and approvals shall be the property of Restore and
Distributor shall cooperate as requested by Restore in connection therewith.

     2.8 Product Claims. Distributor shall make no representations, warranties or other
claims concerning the Products except as authorized by Restore in writing or as are contained in
any of Restore’s marketing materials that may be provided to Distributor. Without prior written
consent of Restore, no studies concerning the Products conducted by or for Distributor shall be
deemed clinical studies of the Products or shall be used to market or promote the Products.
Restore shall be the sole owner of, and Distributor hereby assigns to Restore all right, title and
interest in, the Products and any information or data concerning the Products that result from such
studies or clinical trials. Distributor shall take any actions and execute any documents requested
by Restore to perfect Restore’s ownership rights in such information or data.

-3-

 

     2.9 Notice of Intellectual Property Infringement. Distributor shall promptly notify
Restore in writing of any patent, copyright infringement or unauthorized use of Restore’s trade
secrets in the Territory. Restore reserves the right in its sole discretion to institute any
proceedings against such third party infringers, and Distributor shall refrain from doing so.
Distributor shall cooperate fully with Restore in any legal action taken by Restore against such
third parties, provided that Restore shall pay all expenses of such action and all damages which
may be awarded or agreed upon in settlement of such action shall accrue to Restore.

     2.10 Laws of the Territory. Distributor shall promptly inform Restore of any legal
requirements in the Territory relating to the use or distribution of the Products, marketing
materials or Product packaging and labeling.

     2.11 Insurance. Distributor shall maintain in force, during the term of this
Agreement and for as long thereafter as a practical need exists, one or more policies of liability
insurance with an insurer reasonably acceptable to Restore which shall cover all liabilities of
Distributor, whenever arising, attributable to the Products and in an amount of at least One
Million Dollars ($1,000,000). Restore shall be designated as an additional named insured under
each such policy and shall be provided with a certificate of insurance within thirty (30) days
after the issuance and each renewal thereof.

     2.12 Adverse Reactions. Distributor shall advise Restore within twenty four (24)
hours of any adverse reaction, injury or death resulting from any use of the Products (“Adverse
Reaction”) of which it becomes
aware. Distributor shall also, within five (5) days thereafter, provide Restore with a
written report stating the full facts known to it about the Adverse Reaction, including but not
limited to customer name, address, telephone number and Product, lot or serial number. Restore
shall from time to time provide Distributor with written procedures regarding the information
required by Restore in the event of any Adverse Reaction. At all times during the term of this
Agreement, Distributor shall have appropriate written procedures established for processing any
Adverse Reaction, and shall provide the same to Restore upon request. As part of such procedures,
Distributor shall establish a means for properly (a) tracking delivery of Products to customers
(including all customers who receive Products from subdistributors), including, without limitation,
tracking which customers have received Products from particular lot numbers, and (b) maintaining
its distribution records for the Products for a reasonable time period. All information related to
any Adverse Reaction shall be the Confidential Information of Restore, and shall not be disclosed
by Distributor to any third party or used by Distributor except as required by applicable laws.

     2.13 Distributor Expenses. Distributor assumes full responsibility for all its own
costs and expenses incurred in carrying out its obligations under this Agreement, including but not
limited to all rents, salaries, commissions, and advertising, demonstration, travel and
accommodation expenses.

     2.14 Product Recalls.

	 	(a)	 	Notification. If either party believes that a recall of any Products in the
Territory is desirable or required by law in the Territory or elsewhere, it shall
immediately notify the other party. The parties shall then discuss reasonably and in
good faith 

-4-

 

	 	 	 	whether such recall is appropriate or required and the manner in which any
mutually agreed recall shall be handled. This Section 2.14 shall not limit the
obligations of either party under law with respect to recall of Products required by
law or properly mandated by any governmental authority.
	 
	 	(b)	 	Corrective Action. If any governmental agency having jurisdiction in the U.S.
or the Territory shall request or order any corrective action with respect to Products
supplied hereunder, including any Product recall, customer notice, restriction, change,
corrective action or market action or any Product change, the parties shall cooperate
fully to effectuate such corrective action.
	 
	 	(c)	 	Correspondence. Each party shall promptly provide the other with copies of
correspondence to or from governmental authorities relating to corrective action in the
Territory concerning the Products.
	 
	 	(d)	 	Records, Adverse Event Reports and Recalls. Distributor shall maintain
complete and accurate records of all Products imported into and resold by Distributor
in the Territory, which records may be examined at any time by Restore upon reasonable
notice to Distributor.

     2.15 Personnel.

	 	(a)	 	Distributor shall employ or retain an adequate organization of well-trained and
qualified personnel to effectively perform its obligations under this Agreement in the
Territory.
	 
	 	(b)	 	Distributor shall comply fully with its obligations under labor, tax, social
welfare and other laws relating to its personnel. In addition, Distributor undertakes
that it shall not knowingly hire any personnel in violation of any restrictive
covenants contained in any agreement with a third party or any other obligations owed
to any third party, and Distributor shall procure that none of its subdistributors,
agents, officers, directors, employees or representatives shall do so. Distributor
shall also assure that any and all subdistributors, agents, officers, directors,
employees or representatives engaged or employed by it are not subject to any such
obligations.

3. OBLIGATIONS OF RESTORE

     3.1 Sales and Technical Literature. Restore shall provide to Distributor reasonable
quantities of such sales and technical literature and materials as Restore may have prepared and
shall make available copies of promotional artwork it may have prepared. At its option, Restore
may provide the same to Distributor in electronic format. Distributor shall use such materials
solely as provided under this Agreement. Distributor shall not alter such materials or use any
other materials in connection with the marketing and distribution of Products hereunder without
Restore’s prior written consent. Notwithstanding the above, Distributor shall translate all
materials into the language or languages required by law or appropriate to the Territory, and shall
provide Restore with copies of such translations for approval prior to their first use. Restore
retains all right, title and interest in and to such materials and to all translated versions
thereof.

-5-

 

     3.2 Marketing and Technical Support. Restore will provide Distributor with such other
marketing support as the parties may mutually agree, including providing training with respect to
the Products to Distributor’s employees at Distributor’s expense.

     3.3 Export of Products. Restore shall be responsible for obtaining U.S. export
licenses for the Products. Distributor shall cooperate with Restore with respect to export
licenses, including supplying Restore on a timely basis with such information and documentation as
Restore shall request in connection therewith.

     3.4 Special Programs. Restore may, in its sole discretion from time to time during the term of this Agreement,
offer to Distributor certain promotional items related to the Products and discounts from the
then-current prices for the Products, in order to support certain time- and volume-limited
promotional and sales programs instituted by Restore. Special programs offered by Restore as of
the Effective Date are set forth in Exhibit C, which may be modified by Restore from time to time
during the term of this Agreement upon notice to Distributor. In no event shall Restore be
obligated to offer, or continue to offer, any special programs under this Agreement.

4. PURCHASES AND PAYMENT TERMS

     4.1 Orders. Distributor shall submit orders pursuant to Restore procedures as
communicated to Distributor from time to time. Distributor shall confirm all oral orders in
writing (preferably by e-mail or facsimile). All orders from Distributor are subject to acceptance
in writing by Restore, which acceptance may be delivered by reply e-mail or facsimile. No accepted
order may be modified or canceled except as agreed in writing by the parties. Distributor’s orders
or mutually agreed change orders shall be subject to all provisions of this Agreement. Any terms
or conditions of such order or change order which conflict with the terms or conditions of this
Agreement shall be deemed excluded.

     4.2 Fulfillment of Orders. Distributor’s purchase orders shall include shipping
instructions and shipping address and, if applicable, any relevant export control information or
documentation to enable Restore to comply with applicable U.S. export control laws. Restore shall
use its best efforts to fill orders that are within Distributor’s forecast within fourteen (14)
business days. Restore shall use reasonable efforts to fill orders to the extent they exceed
Distributor’s forecast.

     4.3 Delivery Terms. Distributor shall insure each shipment of the Products with a
reputable insurer for the full invoice price of such shipment. Such insurance shall provide for
coverage from delivery of the Products at the Free Carrier point, Restore’s facility in St. Paul,
Minnesota, U.S.A.

     4.4 Acceptance of Products. In the event of any shortage, damage or discrepancy in or
to a shipment of Products, Distributor shall promptly report the same to Restore and furnish such
written evidence or other documentation as Restore may deem appropriate. Restore shall not be
liable for any such shortage, damage or discrepancy unless Restore has received notice and evidence
thereof from Distributor within ten (10) days after delivery of the Products. If such evidence
demonstrates to Restore’s satisfaction that Restore is responsible for such shortage, damage or
discrepancy, Restore shall promptly deliver additional or substitute Products to

-6-

 

Distributor, but
in no event shall Restore be liable for any additional costs, expenses or damages incurred by
Distributor directly or indirectly as a result of such shortage, damage or discrepancy in or to a
shipment. Distributor shall return any excess or damaged Products as directed by Restore.

     4.5 Prices. Distributor shall pay Restore the prices for the Products as listed in
Exhibit B hereto. Restore may increase its prices for the Products upon one hundred eighty (180)
days written notice. Increased prices shall not apply to any purchase order accepted prior to the
effective date of the price increase unless the order provides for delivery more than one hundred
twenty (120) days after acceptance of the order. Prices are quoted in U.S. dollars, and include
charges for freight and insurance. Taxes, duties and the like shall be the sole responsibility of
Distributor. Any special packing or handling requested by Distributor shall be at the sole expense
of Distributor.

     4.6 Payment Terms. Subject to credit review and credit limits which may be
established by Restore in its sole discretion, payment for each shipment shall be paid within sixty
(60) days of receipt of Restore’s invoice by wire transfer or check drawn on a U.S. bank designated
by Restore. All payments shall be made in U.S. dollars. Any overdue payment from Distributor to
Restore under this Agreement shall accrue interest at the lesser of one and one-half percent (1.5%)
per month or the highest rate permitted under applicable law. Restore shall have the right to
recover its collection costs and expenses (including attorneys’ fees) for late payments. Restore
reserves the right to withhold or suspend shipment of Products if there is any overdue balance owed
by Distributor to Restore and to modify the payment terms set forth in this Section 4.6.

     4.7 Resale Prices. Distributor may offer the Products in the Territory at such prices
as Distributor, in its sole discretion, shall determine.

     4.8 Product Changes. Restore may do the following upon written notice and without
liability to Distributor:

	 	(a)	 	Discontinue the sale of one or more Products; or
	 
	 	(b)	 	Commence the development and distribution of new products or of modifications
or improvements to the Products having features which may make the Products wholly or
partially obsolete, whether or not Distributor is granted any distribution rights in
respect of such new or modified products.

     4.9 Net Payments. All payments to be made by Distributor to Restore pursuant to this
Agreement represent net amounts Restore is entitled to receive and shall not be subject to any
deductions for any reason whatsoever, including duties, assessments, taxes and bank charges.

5. WARRANTY; LIMITATION OF DAMAGES

     5.1 Limited Warranty. Restore warrants that the Products will conform to the then-current specifications
published by Restore for a period of ninety (90) days after delivery thereof to Distributor under
this Agreement. The foregoing warranty, or such other warranty of which Restore may notify
Distributor in writing from time to time, is the sole and exclusive warranty

-7-

 

made by Restore
relating to the Products. Distributor agrees that it alone shall be liable, to the exclusion of
Restore, for the breach of any other warranty given by Distributor to its customers or others
regarding the Products. Restore’s obligation in the event of a breach of Restore’s warranty shall
be limited replacement of the relevant Product. Distributor shall cooperate with Restore to
provide such remedies to purchasers of the Products in the Territory. THE LIMITED WARRANTY SET
FORTH IN THIS SECTION 5.1, OR ANY SUCCESSOR WARRANTY, IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, WHICH ARE HEREBY DISCLAIMED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.

     5.2 Limitation of Damages. RESTORE SHALL NOT BE LIABLE TO DISTRIBUTOR OR ANY THIRD
PARTY FOR ANY LOSS OR DAMAGE CAUSED BY DELAY IN FURNISHING THE PRODUCTS UNDER THIS AGREEMENT OR ANY
OTHER PERFORMANCE UNDER THIS AGREEMENT. NEITHER PARTY SHALL HAVE ANY LIABILITY OF ANY KIND TO THE
OTHER PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL LOSSES OR
DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH POTENTIAL LOSS OR DAMAGE BY
THE OTHER PARTY OR ANY THIRD PARTY. IN NO EVENT SHALL RESTORE BE LIABLE FOR ANY DAMAGES IN EXCESS
OF THE AGGREGATE AMOUNTS ACTUALLY PAID BY DISTRIBUTOR TO RESTORE UNDER THIS AGREEMENT.

6. INDEMNIFICATION

     6.1 Indemnification by Restore. Restore hereby agrees to indemnify, defend and hold
Distributor harmless from any damages awarded against Distributor (including, without limitation,
reasonable costs and legal fees thereby incurred by Distributor) arising out of any suit, claim or
other legal action (“Legal Action”) brought by a third party that alleges the Products, or any of
them, infringe any United States patent, copyright, or trade secret. If a Product is found to
infringe any such third party intellectual property right in such a Legal Action, at Restore’s sole
discretion and expense, Restore may (a) obtain a license from such third party for the benefit of
Distributor; (b) replace or modify the Product so that it is no longer infringing; or (c), if
neither of the foregoing is commercially feasible, terminate this Agreement with no further
liability to Distributor.

     6.2 Indemnification by Distributor. Distributor hereby agrees to indemnify, defend
and hold Restore harmless from any damages, costs or liabilities (including, without limitation,
any reasonable costs or legal fees thereby incurred by Restore) arising out of any Legal Action
that arises from or results out of the marketing, distribution or sale of the Products by
Distributor, including, without limitation, (a)
any act or omission by Distributor or any of its subdistributors or agents; (b) any unfair
business practice of Distributor or any of its subdistributors or agents; or (c) any violation by
Distributor or any of its subdistributors or agents of any law, regulation or order of the
Territory.

     6.3 Indemnification Procedure. A party seeking indemnification (an “indemnified
party”) shall give the other party (an “indemnifying party”) written notice of any Legal Action
within ten (10) days of first knowledge thereof. The indemnifying party shall have sole and

-8-

 

exclusive control of the defense of any Legal Action, including the choice and direction of legal
counsel. The indemnified party shall have the right to engage its own counsel, at its own expense.
The indemnified party may not settle or compromise any Legal Action without the written consent of
the indemnifying party.

7. CONFIDENTIALITY

     7.1 Confidential Information; Term. All Confidential Information (as defined below)
shall be deemed confidential and proprietary to the disclosing party. Each party may use the
Confidential Information disclosed by the other party during the term of this Agreement only as
permitted or required for its performance hereunder. Neither party shall disclose or provide any
Confidential Information of the other party to any third party and shall take reasonable measures
to prevent any unauthorized disclosure by its employees, agents, contractors, consultants or
permitted subdistributors, including appropriate individual nondisclosure agreements. The
foregoing duty shall survive for five (5) years after any termination or expiration of this
Agreement.

     7.2 Definition. As used in this Agreement, the term “Confidential Information” shall
mean all information disclosed by Restore to Distributor, or by Distributor to Restore, including
without limitation customer lists, information that is embodied in the Products, or any information
regardless of the form in which it is disclosed that relates to a party’s markets, customers,
products, patents, inventions, procedures, methods, designs, strategies, plans, assets,
liabilities, prices, costs, revenues, profits, organization, employees, agents, resellers or
business in general. The following shall not be considered Confidential Information for purposes
of this Article 7:

	 	(a)	 	Information which is or becomes in the public domain through no fault or act of
the receiving party;
	 
	 	(b)	 	Information which was independently developed by the receiving party without
the use of or reliance on Confidential Information of the other party;
	 
	 	(c)	 	Information which was provided to the receiving party by a third party under no
duty of confidentiality to the disclosing party; or
	 
	 	(d)	 	Information which is required to be disclosed by law, provided, however, prompt
prior notice thereof shall be given to the disclosing party and disclosure shall be
limited to the maximum extent possible.

8. TRADEMARKS

     8.1 Use of Trademarks. Subject to the terms and conditions of this Agreement, Restore
hereby grants to Distributor, and Distributor hereby accepts from Restore, a nonexclusive,
nontransferable license to use the Restore trademarks specified in Exhibit A hereto, as the same
may be revised by Restore from time to time, during the term of this Agreement, solely in
connection with the distribution, promotion and advertising of the Products in the Territory, and
solely in accordance with Restore’s standards and instructions. Distributor may use the Restore
trademarks in promotional brochures and in connection with trade fairs only

-9-

 

with Restore’s prior
written consent. Distributor shall not use any other marks or trade names in connection with the
marketing and distribution of the Products. Restore may inspect and monitor Distributor’s use of
the Restore trademarks. Distributor shall not remove or alter any Restore trade names, trademarks,
copyright notices, catalogue and lot numbers, labels, tags or other identifying marks, symbols or
legends affixed to any Products, documentation or containers or packages. Distributor shall not
adopt, use or register any words, phrases or symbols which are identical to or confusingly similar
to any of Restore’s trademarks.

     8.2 Ownership. Distributor acknowledges and agrees that Restore is the owner of all
rights in the Restore trademarks, that all use of the Restore trademarks by Distributor shall inure
to the benefit of Restore, that Distributor will not take any action which is inconsistent with
Restore’s ownership of the Restore trademarks and that, upon termination of this Agreement, all
rights in the Restore trademarks, including the goodwill connected therewith, shall remain the
property of Restore.

     8.3 Registration and Enforcement. Restore shall be solely responsible for, and may
exercise its sole discretion in, deciding whether to apply for and prosecute applications for
registration of the Restore trademarks in any jurisdiction and whether to maintain any such
registrations therefor. Distributor shall give Restore immediate notice in writing of any
infringement or threatened infringement of the Restore trademarks of which Distributor becomes
aware. In any such case, Restore shall have complete discretion whether to institute proceedings
for infringement of the Restore trademarks and complete discretion and control over such
proceedings, and Distributor shall cooperate fully with Restore in any such proceedings with such
third parties, provided that Restore shall pay all expenses of such action and all damages which
may be awarded or agreed upon in settlement of such proceedings shall accrue to Restore.

9. TERM AND TERMINATION

     9.1 Term. This Agreement shall take effect on the Effective Date and shall continue
for an initial term of three (3) years, unless terminated earlier pursuant to the terms of this
Article 9. This Agreement may be renewed for additional one (1) year extensions after the
expiration of its
initial term upon mutual written agreement of the parties. If such renewal has not been
agreed to by the parties in writing at least three (3) months prior the end of the initial or any
renewal term, then this Agreement shall terminate at the end such term and Restore shall
immediately be free to make other arrangements regarding the future distribution and sale of the
Products in the Territory.

     9.2 Termination. This Agreement may be terminated prior to expiration as follows:

	 	(a)	 	Either party may terminate this Agreement with written notice to the other
party if the other party files a petition of any type as to its bankruptcy, is declared
bankrupt, becomes insolvent, makes an assignment for the benefit of creditors, goes
into liquidation or receivership, otherwise loses legal control of its business
involuntarily, or discontinues its business operations related to this Agreement.
	 
	 	(b)	 	Either party may terminate this Agreement if the other party is in material
breach of this Agreement (including but not limited to Distributor’s failure to pay

-10-

 

	 	 	 	promptly sums owing to Restore or Distributor’s breach of Section 1.3) and has failed
to cure such breach within thirty (30) days of receipt of written notice thereof from
the first party.
	 
	 	(c)	 	Restore may terminate this Agreement immediately upon written notice to
Distributor if:

	 	(i)	 	Distributor has failed to meet the applicable Minimum Purchase
Requirements for the Products, as set forth in Exhibit A, in any particular
contract year, or the parties have not agreed upon the Minimum Purchase
Requirements for the Products for any particular year as provided in Section
2.2;
	 
	 	(ii)	 	an act or omission of Distributor or Distributor’s employees,
officers, subdistributors or agents is likely, in the sole discretion of
Restore, to cause or has caused harm or disrepute to the reputation of Restore
or the Products, or harm to the public;
	 
	 	(iii)	 	there is a material change in the management of or operation
of Distributor’s business, or any change in the ownership (including ownership
of shares of Distributor) or control of Distributor;
	 
	 	(iv)	 	Distributor breaches any obligation regarding Restore’s
intellectual property, alters any Product or the labeling therefor without
Restore’s prior written consent or sells a Product beyond its expiration date;
or
	 
	 	(v)	 	in the sole opinion of Restore, any law or government-enacted
regulation or decree renders the performance by either party of its respective
obligations hereunder unduly onerous or otherwise inexpedient; or
	 
	 	(vi)	 	Restore ceases to sell the Products.

	 	(d)	 	Either party may terminate this Agreement immediately upon written notice to
the other party if an event of force majeure (as described in Section 11.2 below),
which affects the performance of the other party, continues for more than six (6)
months.
	 
	 	(e)	 	Either party may terminate this Agreement with sixty (60) days prior written
notice to the other party if this Agreement is assigned by the other party as a result
of a merger, acquisition, or sale of all or substantially all of the assets of the
other party, and the first party does not consent to such assignment, which consent
will not be unreasonably withheld.

     9.3 Partial Termination. In the event that Restore shall have the right pursuant to
the provisions of Section 9.2 to terminate this Agreement in its entirety, Restore may elect, in
its sole discretion, to terminate this Agreement solely as it applies to any portion of the
Territory.

-11-

 

     9.4 Rights and Obligations on Termination. In the event of termination of this
Agreement for any reason, the parties shall have the following rights and obligations:

	 	(a)	 	Neither party shall be released from the obligation to make payment of all
amounts then or thereafter due and payable;
	 
	 	(b)	 	The following Sections and Articles shall survive any termination or expiration
of this Agreement: Sections 1.2 (but only to the extent Distributor is obligated to
indemnify Restore), 2.3, 2.5, 2.7, 2.8, 2.11, 2.13, 8.3, and Articles 5, 6, 7, 9, 10
and 11;
	 
	 	(c)	 	Distributor shall cease to distribute the Products and shall return to Restore,
at Distributor’s expense, all copies of promotional and technical materials and artwork
provided by Restore;
	 
	 	(d)	 	Restore may, at its option, repurchase Distributor’s inventory of non-obsolete
and nonexpired Products at the price paid by Distributor for such Products or direct
Distributor to sell them to the third party or parties selected by Restore;
	 
	 	(e)	 	Each party shall return or, if requested by the other party, destroy all
Confidential Information of the other party, including, if applicable, all electronic
copies thereof and shall certify in writing that it has done so; and
	 
	 	(f)	 	Upon the effective date of termination or expiration of this Agreement,
Distributor shall immediately cease any use of the Restore trademarks in any manner, or
any confusingly similar imitation thereof, and shall destroy all packaging, advertising
material, labels and other printed materials bearing the
Restore trademarks. In addition, Distributor hereby empowers Restore and shall
assist Restore, if requested, to cancel, revoke or withdraw any governmental
registration or authorization permitting Distributor to use Restore trademarks in
the Territory.

     9.5 No Compensation. In the event of any expiration or termination of this Agreement
for any reason, neither party shall owe any compensation to the other party for lost profits, lost
opportunities, goodwill, or any other loss or damage as a result of or arising from such
termination or expiration. Distributor acknowledges that Restore may terminate this Agreement in
the manner provided in this Article 9, that Distributor has not paid any consideration for the
right to act as Restore’s distributor in the Territory, and that Restore has agreed to enter into
this Agreement on the express condition that Distributor will not be entitled to any compensation
for its termination or non-renewal.

10. ARBITRATION

     10.1 Litigation Rights Reserved. If any dispute arises with respect to the
unauthorized use of Confidential Information, Restore’s trademarks or other intellectual property
of Restore by Distributor, or with respect to acts or omissions of Distributor relating to the
Products which in the judgment of Restore, negatively impact the reputation of Restore or the
Products or the

-12-

 

safety of the public, the aggrieved party may seek any available remedy at law or
equity from a court of competent jurisdiction, in addition to its right to arbitration as provided
in Section 10.2.

     10.2 Arbitration. Except as provided in Section 10.1 above, any dispute, claim or
controversy which shall arise out of or in relation to this Agreement, or the breach thereof, shall
be finally settled by binding arbitration at Minneapolis, Minnesota, U.S.A. in accordance with the
International Arbitration Rules of the American Arbitration Association (“AAA”). Any such
arbitration shall be conducted by three (3) arbitrators appointed by mutual agreement of the
parties or, failing such agreement, in accordance with the AAA rules. At least one (1) arbitrator
shall be an experienced biomedical device professional, and at least one (1) arbitrator shall be an
experienced business attorney with background in the licensing and distribution of biomedical
devices. The arbitration shall be conducted in the English language. Notwithstanding any contrary
provisions in the AAA rules, each party shall bear its own costs and expenses of the arbitration
and one-half (1/2) of the fees and costs for the arbitrator unless the arbitrator determines the
fees and costs should be borne by one of the parties. The arbitrator may not award or assess
punitive damages against either party.

     10.3 Governing Law. This Agreement shall be construed and interpreted in English.
This Agreement shall also be governed by, and interpreted and construed in accordance with, the
laws of the State of Minnesota, U.S.A., excluding its choice of law rules and the United Nations
Convention on the
International Sale of Goods, provided that enforcement and operation of the arbitration
agreement contained in Section 10.2 hereof, and the enforcement of any award rendered pursuant
thereto, shall be governed by United States federal law to the exclusion of State law.

11. MISCELLANEOUS

     11.1 Compliance with Laws. Distributor shall comply with all applicable laws
affecting this Agreement and its performance hereunder, including, without limitation, the U.S.
Foreign Corrupt Practices Act, and any restrictions on the export of the Products under the U.S.
Export Administration Regulations. Without limiting the generality of the foregoing sentence,
Distributor shall maintain all registrations with governmental agencies, commercial registries,
chambers of commerce, or other offices which may be required under local law in order to enable it
lawfully to conduct its business and perform its obligations under this Agreement. Upon written
notice from Restore, Distributor shall provide such information as Restore shall reasonably
consider necessary to verify compliance by Distributor with the provisions of this Section 11.1.

     11.2 Force Majeure. If the performance of this Agreement or any obligation hereunder
(other than the payment of monies due owing hereunder) is prevented, restricted or interfered with
by reason of any event or condition beyond the reasonable control of such party (including without
limitation acts of state or governmental action, riots, disturbance, war, strikes, lockouts,
slowdowns, prolonged shortage of energy or other supplies, epidemics, fire, flood, hurricane,
typhoon, earthquake, lightning and explosion, or any refusal or failure of any governmental
authority to grant any export license legally required), the party so affected shall be excused
from such performance, only for so long as and to the extent that such a force prevents, restricts
or

-13-

 

interferes with the party’s performance and provided that the party affected gives notice
thereof to the other party and uses diligent efforts to remedy such event or conditions.

     11.3 Relationship. This Agreement does not make either party the employee, agent or
legal representative of the other for any purpose whatsoever. Neither party is granted any right
or authority to assume or to create any obligation or responsibility, express or implied, on behalf
of or in the name of the other party. Each party is acting as an independent contractor.

     11.4 Assignment. Distributor shall not have the right to assign or otherwise transfer
its rights and obligations under this Agreement except with the prior written consent of Restore.
Any prohibited assignment shall be null and void. This Agreement will be binding on the parties
hereto and their successors and permitted assignees.

     11.5 Notices. Notices permitted or required to be given hereunder shall be given to the parties at the
addresses set forth below or such other address of which a party may notify the other party in
writing,:

	 	 	 	 	 
	 

	 	To Restore:
	 	Restore Medical, Inc.
	 

	 	 	 	2800 Patton Road
	 

	 	 	 	Roseville, MN 55113 USA

	 

	 	 	 	Fax: 651-634-3025

Attention: Sr. VP of Commercial Operations
	 
	 	 	 	 
	 

	 	To Distributor:
	 	Sonomed Ltd

Hatizmoret Str. 40/42

Rishon Le Zion, 75562, Israel

Fax: +972 3 9515490

Attention: Shimon Aharon

Notices shall be deemed sufficient if given by (a) registered or certified mail, postage prepaid,
return receipt requested, (b) private courier service, or (c) facsimile with electronic
confirmation of receipt, addressed to the respective addresses of the parties as first above
written or at such other addresses as the respective parties may designate by like notice from time
to time. Notices so given shall be effective upon (1) receipt by the party to which notice is
given, or (2) on the fifth (5th) day following domestic mailing or the tenth (10th) day following
international mailing, as may be the case, whichever occurs first.

     11.6 Entire Agreement. This Agreement, including the Exhibits hereto which are
incorporated herein, constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes all proposals, oral or written, and all negotiations, conversations,
discussions or previous distribution agreements or arrangements heretofore between the parties.
Distributor hereby acknowledges that it has not been induced to enter into this Agreement by any
representations or statements, oral or written, not expressly contained herein.

     11.7 Amendment. This Agreement may not be modified, amended, rescinded, canceled or
waived, in whole or in part, except by written amendment signed by both parties.

-14-

 

     11.8 Severability. If any provision of this Agreement is found unenforceable under
any of the laws or regulations applicable thereto, such provision terms shall be deemed stricken
from this Agreement, but such invalidity or unenforceability shall not invalidate any of the other
provisions of this Agreement.

     11.9 Counterparts. This Agreement may be executed in two or more counterparts in the English language, and
each such counterpart shall be deemed an original hereof. In case of any conflict between the
English version and any translated version of this Agreement, the English version shall govern.

     11.10 Waiver. No failure by either party to take any action or assert any right
hereunder shall be deemed to be a waiver of such right in the event of the continuation or
repetition of the circumstances giving rise to such right.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-15-

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly
authorized representatives below.

	 	 	 	 	 	 	 	 	 	 	 
	Restore Medical, Inc.	 	 	 	Sonomed, Ltd.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Susan L. Critzer
	 	 	 	By
	 	/s/ Aharon Shimon	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Name: Susan L. Critzer	 	 	 	Name: Aharon Shimon	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title: President & CEO	 	 	 	Title: General Manager	 	 
	 

	 	 	 	 
	 	 	 	 	 	 

	 	 	 
	Exhibit List
	A

	 	Territory, Products, Minimum Purchase Requirements, Trademarks
	B

	 	Pricing and Special Programs
	C

	 	Special Programs

-16-

 

EXHIBIT A

Territory:

Israel

Products:

Distributor may purchase and resell the following RMI products:

Pillar® Palatal Implant System (Part Numbers PDS-1000,PDS-2000, PDS-3000, or PDS-4000)

Restore Trademarks:

Minimum Purchase Requirements:

Distributor agrees to purchase and take delivery of a minimum of one thousand (1000) Products (net
of returns) during the first twelve (12) month period of this Agreement, which shall be purchased
by Distributor in the following increments: (a) two hundred fifty (250) Products no later than
thirty (30) days after approval of the Product by the appropriate authorities in the Territory (the
“Initial Order”); (b) two hundred fifty
(250) Products by the earlier of
                                        , or one
hundred twenty (120) days after receipt of the Initial Order by Restore; (c) two hundred fifty
(250) Products by the earlier of
                                        ,
or two hundred ten (210) days after receipt of the
Initial Order by Restore; and (d) two hundred fifty (250) Products by the earlier of
                                        
or three hundred (300) days after receipt of the Initial Order by Restore.

 

 

EXHIBIT B

PRICING

	 	 	 	 	 
	 

	 	Product Number
	 	Each Price
	 

	 	 
	 	 
	One Each

	 	PDS-1000, 2000, 3000, or 4000
	 	$115 ea up to 1000 devices
purchased within first year
and $105 each for all devices
over 1000 purchased in first
year
	 
	 	 	 	 
	 

	 	 	 	In year 2, $125 each

 

 

EXHIBIT C

SPECIAL PROGRAMS

1. Practice Introduction Program:

The Practice introduction program provides distributors the ability to offer no-charge
product to physicians during the practice introduction process. Restore Medical will credit
the Distributor for 50% of the cost of up to 9 devices per physician who is trained using
the program and for whom no-charge product was offered. A Practice Introduction Form (see
attachment I) must be completed by the implanting physician and provided to Restore Medical
to receive credit. All forms will be processed quarterly and credits applied to the
Distributor’s account within 30 days of receipt and verification of all documentation.

2. Product Replacement Program:

Restore Medical will provide one-for-one replacement product to the Distributor upon
notification with documentation by an implanting physician that an implant had to be removed
and replaced.

3. Demonstration Product Program:

Restore Medical will provide the Distributor an initial supply of twenty-five (25)
not-for-sale, not-for-human use demonstration devices and 100 individual implants.
Additional demonstration devices will be made available as necessary and as agreed upon by
Restore Medical and the Distributor.

 

 

ATTACHMENT I TO EXHIBIT C

Practice Introduction

	 	 	 	 	 	 	 	 	 	 	 
	Date

	 	 	 	 	 	Distributor	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 
	 	 	 	 	 	 

	 	 	 	 	 
	Physician Name
	 	 	 	 
	 

	 	 	 	 
	 

	 	                    (first, last)
	 	 

	 	 	 	 	 
	Address

	 	 

	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Number of Patients Treated
	 	 	 	Snoring
	 	 	 	 	 	OSA	 	 	 	 
	 

	 	Number of Implants Used
	 	 

	 	 	 	 

	 	 
	 	 	 	 

	 	 
	 

	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Lot Number (s)	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 

	 	 	 	 

	 	 	 	 	 	 	 	 

Thank you for evaluating the Pillar Palatal Implant product. Please sign below to confirm you have
used the number of no-charge implants, as indicated above.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Physician Signature:exv10w14

 

Exhibit 10.14

Pi Medical, Inc.

Research and Development Agreement

This Agreement is made effective the 11th day of August, 2000 by and between Pi Medical,
Inc., (“Pi Medical”) a Minnesota corporation, whose principal place of business is 2800 Patton
Road, St. Paul, MN 55113, and Advanced Composites Industries, Inc., 3620 Horizon Drive, King of
Prussia, PA 19072 (“ACI”). In consideration of the mutual covenants and promises set forth herein,
the parties hereby agree as follows:

	1.	 	Term: Unless terminated as hereafter provided, this Agreement shall begin on the
above effective date and end on October 15, 2000 unless earlier terminated below. The parties
may negotiate one or more renewals of this Agreement.

	2.	 	Relation to Other Agreements: An earlier agreement and Exhibit A between the parties
dated July 5, 2000 calling for 5,000 units of 3-D Braided Pi Medical Devices (“Manufacturing
Agreement”) is suspended herewith. The parties intend that a product specification arising
from this Agreement with then be a substitute specification for the Manufacturing Agreement.

	3.	 	Duties: Duties will be assigned by Pi Medical and will involve consulting in the
area of device design and development for use in snoring or sleep apnea treatment and
manufacturing of such product. As part of these duties, ACI will use its best efforts to
design and produce prototype 3-D braided structures in accordance with Pi Medical Design
Specifications (PMDSs). ACI will focus initially on PMDSs #100018-600 and #100018-700. Other
designs may include round structures such as PMDSs #100018-300, 400, 500, 800 and/or other
more complex structures as mutually determined by Pi Medical and ACI. The number of designs
and prototypes produced under this program will depend on the PMDSs selected. As such, this
program is based on a two month level of effort by ACI, rather than a guaranteed number of
designs and prototypes delivered. ACI currently projects each design and prototype iteration
of PMDSs #100018-300 through 800 to last about 8 days, with 2 — 3 days of design and 5 — 6
days of prototyping. More complex structures will take longer to design and prototype. These
projections do not include lead times for procuring materials and other items such as yarns,
monofilaments, carriers, dies, etc.

	4.	 	Compensation:

	 	A.	 	This contract will be performed by ACI on a time and materials basis with a
fixed (%) fee. ACI will bill Pi Medical for the actual time spent and actual materials,
subcontracts, ACIs, travel, shipping and other direct costs purchased on this program
by ACI plus a fixed fee.

Page 1 of 4

 

	 	B.	 	ACI will bill Pi Medical based on the following Labor Categories and Labor
Rates:

	 	 	 	 	 
	Labor Category	 	Labor Rate
	Program Management
	 	$172.50	/hr.
	Senior Design Engineer
	 	$172.50	/hr.
	Manufacturing Engineer
	 	$  51.75	/hr.
	Manufacturing Technician
	 	$  46.00	/hr.

	 	C.	 	Based on the above Effective Dates, Costs, required Level of Effort for PMDSs
1000 18-300 through 800, and a limited materials and other direct costs requirement,
ACI currently projects this program to have a total value of about $70,000.00.

	5.	 	Termination: Pi Medical may terminate this Agreement prior to the conclusion date
but shall remain liable for all costs and fixed fee incurred up to the date of termination.

	6.	 	Authority: ACI shall not have the right to bind Pi Medical or commit Pi Medical to
any agreement or understanding with any third party whatsoever.

	7.	 	Confidential Information: Because of the confidential nature of the information
which will be disclosed to ACI under this Agreement, ACI will not, except as authorized by Pi
Medical, disclose such confidential information to any other third party or company. The
obligation of confidentiality shall not be applicable with respect to such information which:
(A) was known to ACI prior to disclosure, (B) is or becomes known to the public by general
publication without violation of this Agreement, (C) is given to ACI by a third party having a
right to do so, or (D) is independently developed by ACI without the use of information
supplied by Pi Medical under this Agreement.

	8.	 	Exclusivity: Because of the confidential nature of the information, which will be
disclosed to ACI under this Agreement, ACI will not do any other consulting, research or
development work in the area of snoring treatment involving an implant to stiffen the soft
palate without prior approval by Pi Medical during the duration of this Agreement and for one
year thereafter.

	9.	 	Ownership of Inventions and Patents:

	 	A.	 	Pi Medical Ownership

     If any patentable inventions result from performance of this Agreement, all rights
under any patents that may issue on those inventions shall belong exclusively to Pi Medical.
ACI hereby assigns and agrees to assign in the future all such inventions to Pi Medical
without further payment from Pi Medical. ACI also agrees that, upon Pi Medical’s request and
at Pi Medical’s expense, he/she would provide reasonable assistance to Pi Medical in
prosecuting patents covering those inventions. All information, including copyrights,
developed by ACI under this Agreement shall belong to Pi Medical and all copyrightable works
are works made for hire and ACI hereby assigns and agrees to assign to Pi Medical such
rights now and in the future. The

Page 2 of 4

 

obligations to assign inventions and copyrights to Pi Medical shall not apply to any
invention or copyright for which no equipment, supplies, facility or trade secret
information of Pi Medical was used and which was developed entirely on the ACI’s own time,
and (1) which does not relate (a) directly to the business of Pi Medical or (b) to Pi
Medical’s actual or demonstrably anticipated research or development, or (2) which does not
result from any work performed by the ACI for Pi Medical.

	 	B.	 	Grant Back to ACI

     Pi Medical grants ACI a paid-up, non-exclusive license to make, use or sell an
invention of paragraph 9.A., above, only to the extent any final or intermediate use of such
invention by ACI or any customer or end-user is limited to a field of use not including
treatment of snoring, sleep apnea, sleep or breathing disorder or any implant for stiffening
tissue for use in the nasal, oral or pharyngeal regions.

	10.	 	Notices: All notices required or permitted by this Agreement shall be in writing and
shall be delivered in person or sent by certified or registered mail, return receipt required,
postage paid to the addresses stated above or to other’s address as either party may
designate. All mailing notices shall be deemed effective upon depositing in the mail.

	11.	 	Waiver: The waiver of either party of a breach of any provision of this Agreement
shall not operate as or be construed as a continuing waiver or as a consent to or waiver of
such subsequent breach.

	12.	 	Modification: This Agreement may only be modified in writing signed by both parties.

	13.	 	Non-assignable: Since the services to be provided under this Agreement are personal,
all duties to be executed by ACI shall be performed by ACI and may not be assigned or
delegated without written consent of Pi Medical.

	14.	 	Entire Agreement: This Agreement constitutes the entire Agreement between the
parties with respect to the subject matter hereof and supersedes all previous agreements and
understandings rather oral or written between the parties with respect to the subject hereof.

	15.	 	Governing Law: This Agreement shall be governed by the laws of the State of
Minnesota.

Page 3 of 4

 

     In witness thereof, the parties have set forth their hand hither and to on the date indicated
below.

	 	 	 	 	 	 	 	 	 	 	 
	PI MEDICAL, INC.	 	 	 	ADVANCED COMPOSITES	 	 
	 	 	 	 	 	 	   INDUSTRIES, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Timothy R. Conrad
	 	 	 	By:
	 	/s/ George C.H. Chou
	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Printed Name: Timothy R. Conrad	 	 	 	Printed Name: George C.H. Chou	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title: Vice President	 	 	 	Title: President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date: August 29, 2000	 	 	 	Date: August 21, 2000	 	 

Page 4 of 4

 

May 17, 2002

George Chou

Advanced Composites Industries, Inc. 3620 Horizon Dr.

King of Prussia, PA 19046

SUBJECT: Closing out August 1, 2001 Contract

George,

After reviewing the correspondence related to the last several lots of implants shipped against the
August 1, 2001 contract, it appears that we are not in agreement on the “accept/reject” status of
those units.

Our position is that the returned units do not meet the requirements of Pi Medical drawing numbers
400005 and 100029 as required in the August 1, 2001 contract. Your correspondence with us indicates
that you disagree with this position.

It appears that this issue will not be resolved in the short-term. Rather than continue to debate
the issue, we would like to propose the following so that we may close out the August 1, 2001
contract:

	 	 	 	– Return the “rejected” lots to Pi Medical.
	 
	 	 	 	– Pi Medical will complete the final payment for the August 1, 2001 contract.
	 
	 	 	 	– Pi Medical will absorb any costs associated with reduced production yields from
these lots.
	 
	 	 	 	– ACI will not bill Pi Medical for any costs associated with investigating this
issue.

At this time, we do not have an immediate need for additional implants or development work. No
additional work should be performed at ACI until a new contract is signed.

Acceptance of the final payment is confirmation that all obligations of the August 1, 2001 contract
have been met. If you have any questions, please contact me at 651-634-3062.

Sincerely,

John Sopp

	 	 	 
	Cc:

	 	Terry O’Brien
	 

	 	Sue Critzer
	 

	 	Anja Metzger
	 

	 	Shannon Witkowski

 

 

PI MEDICAL, INC.

AMENDMENT TO AGREEMENT

     This Amendment amends an agreement dated the 1st day of August, 2001 (the “Original
Agreement”) by and between Pi Medical, Inc. (“Pi Medical”), a Minnesota corporation, whose
principal place of business is 2800 Patton Road, St. Paul, MN 55113, and Advanced Composite
Industries, Inc. (“ACT”) whose address is 3620 Horizon Drive, King of Prussia, PA 19072.

     For mutual consideration received, the term of the Original Agreement is hereby extended one
month (effective February l, 2002 through February 28, 2002).

     All other terms and conditions remain unchanged.

Agreed to by:

	 	 	 	 	 	 	 	 	 	 	 
	PI MEDICAL, INC.	 	 	 	ADVANCED COMPOSITES	 	 
	 	 	 	 	 	 	   INDUSTRIES, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Susan L. Critzer
	 	 	 	By:
	 	 /s/ George C.H. Chou
	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Printed Name: Susan L. Critzer	 	 	 	Printed Name: George C.H. Chou	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title: Chief Operating Officer	 	 	 	Title: President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date: January 29, 2002	 	 	 	Date: January 31, 2002	 	 

 

 

AGREEMENT

     Effective August 1, 2001 (“Effective Date”), Advanced Composite Industries, Inc., 3620 Horizon
Drive, King of Prussia, PA 19072 (“ACT”) and Pi Medical, Inc., 2800 Patton Road, St. Paul, MN 55113
(“Pi Medical”) agree as follows:

	1.	 	Replacement of Earlier Agreement

	 	A.	 	This Agreement supercedes and replaces an original Agreement entitled “Pi
Medical, Inc. Research and Development Agreement (“Original Agreement”) executed by the
parties on August 11, 2000. Through agreement of the parties, all terms of the Original
Agreement had been extended beyond the original termination date up to and including
the Effective Date of this Agreement.
	 
	 	B.	 	As of the Effective Date all obligations (except for continuing obligations of
confidentiality and duty to disclose inventions as recited in the Original Agreement)
of the parties under the Original Agreement have been faithfully concluded by both
parties except only for June 2001 and July 2001 invoices not yet received by Pi
Medical.

	2.	 	Term: Unless terminated as hereafter provided, this Agreement shall begin on the
above Effective Date and end on January 31, 2002 unless earlier terminated below. The parties
may negotiate one or more renewals of this Agreement.

	3.	 	Project Plan

	 	A.	 	ACI will make such implants according to the attached quotation of Appendix A
and Pi Medical will pay according to the terms of Appendix A.
	 
	 	B.	 	The parties will agree on a Project Schedule which will include all project
activities, estimated cost, lead-time and agreed notations of the parties as to whether
any listed activity is either authorized or on hold.

	4.	 	Audit Preparation and Cooperation

ACI understands Pi Medical intends to successfully complete an ISO certification
audit by the end of October, 2001 (“Anticipated Audit Date”). ACI agrees to an audit
by Pi Medical or a third party as part of the Pi Medical audit by the Anticipated
Audit Date and will cooperate with Pi Medical in preparation for and during such
audit. By the Anticipated Audit Date, ACI will have documentation of the
manufacturing processes of the braids made under this Agreement completed in
compliance with Pi Medical’s quality systems. Alternatively, ACI may choose to
assure the manufacturing process and quality requirements for the production of Pi
Medical’s braids by developing their own Standard Operating Procedures to fully
document the manufacturing system for the braids made under this Agreement. This ACI
Quality System must be sufficient to successfully

 

 

complete an audit by one month after the Anticipated Audit Date. In this Section 4,
time is of the essence.

	5.	 	Confidential Information

	 	A.	 	Because of the confidential nature of the information which will be disclosed
to ACI under this Agreement, ACI will not, except as authorized by Pi Medical, disclose
such confidential information to any other third party or company. The obligation of
confidentiality shall not be applicable with respect to such information which: (A)
was known to ACI prior to disclosure, (B) is or becomes known to the public by general
publication without violation of this Agreement, (C) is given to ACI by a third party
having a right to do so, or (D) is independently developed by ACI without the use of
information supplied by Pi Medical under this Agreement.
	 
	 	B.	 	Because of the confidential nature of the information, which will be disclosed
to ACI under this Agreement, ACI will not do any other consulting, research or
development work in the area of snoring treatment involving an implant to stiffen the
soft palate without prior approval by Pi Medical during the duration of this Agreement
and for one year thereafter.

	6.	 	Ownership and Inventions

	 	A.	 	Pi Medical Ownership

If any patentable inventions result from performance of this Agreement, all rights
under any patents that may issue on those inventions shall belong exclusively to Pi
Medical. ACI hereby assigns and agrees to assign in the future all such inventions
to Pi Medical without further payment from Pi Medical. ACI also agrees that, upon Pi
Medical’s request and at Pi Medical’s expense, it will provide reasonable assistance
to Pi Medical in prosecuting patents covering those inventions. All information,
including copyrights, developed by ACI under this Agreement shall belong to Pi
Medical and all copyrightable works are works made for hire and ACI hereby assigns
and agrees to assign to Pi Medical such rights now and in the future. The
obligations to assign inventions and copyrights to Pi Medical shall not apply to any
invention or copyright for which no equipment, supplies, facility or trade secret
information of Pi Medical was used and which was developed entirely on the ACI’s own
time, and (1) which does not relate (a) directly to the business of Pi Medical or
(b) to Pi Medical’s actual or demonstrably anticipated research or development, or
(2) which does not result from any work performed by the ACI for Pi Medical.

	 	B.	 	Grant Back to ACI

Pi Medical grants ACI a paid-up, non-exclusive license to make, use or sell an
invention of paragraph 6.A., above, only to the extent any final or intermediate use
of such invention by ACI or any customer or end-user is limited to a field of

2

 

use not including treatment of snoring, sleep apnea, sleep or breathing disorder or
any implant for stiffening tissue for use in the nasal, oral or pharyngeal regions.

	 	C.	 	Pi Medical retains exclusive ownership of all equipment, tools, fixtures,
procedures, documentation paid for by Pi Medical (with exception of a previously
authorized and paid $100,000 upgrade to the braiding machine). In the event Pi Medical
terminates this Amended Agreement at will, no tool removal fee will be charged to Pi
Medical.

	7.	 	Billing and Expenses

ACI will invoice Pi Medical monthly for all charges incurred during the preceding month.
Billing to Pi Medical shall occur only on activities authorized by Pi Medical.

	 	A.	 	All time tracking, materials purchases, subcontracting and other expenses must
be submitted to Pi Medical on a bi-weekly basis for review within one week of the time
that the cost is incurred.
	 
	 	B.	 	ACI is responsible for accuracy/appropriateness of all time tracking for ACI
and subcontractors. Costs associated with errors in execution (as mutually agreed upon
by ACI and Pi Medical) shall not be passed onto Pi Medical. Pi Medical reserves the
right to audit time cards and billing records.
	 
	 	C.	 	Subcontractor fees and duties, if any, must be pre-approved by Pi Medical.
	 
	 	D.	 	Time/material charges for work authorized by Pi Medical will be billed at the
rates recited in Appendix A.
	 
	 	E.	 	It is the intent of the parties that time and material charges to Pi Medical
would be driven by technical work related to new designs and development of a quality
control system. Costs associated with troubleshooting routine production issues for a
braid produced at a fixed unit price would not be charged to Pi Medical. All time and
material charges together with all other charges shall be within the budget constraints
recited in Appendix A.

	8.	 	Authority

ACI shall not have the right to bind Pi Medical or commit Pi Medical to any agreement or
understanding with any third party whatsoever.

	9.	 	Termination

Pi Medical may terminate this Agreement prior to the conclusion date but shall remain liable
for all costs incurred. up to the date of termination. ACI may also terminate but shall be
liable for returning all documents, equipment and other property to Pi Medical within 30
days. Pi Medical shall pay shipping costs for all items returned to Pi Medical following
termination.

3

 

	10.	 	Notices

All notices required or permitted by this Agreement shall be in writing and shall be
delivered in person or sent by certified or. registered mail, return receipt required,
postage paid to the addresses stated above or to other’s address as either party may
designate. All mailing notices shall be deemed effective upon depositing in the mail.

	11.	 	Waiver

The waiver of either party of a breach of any provision of this Agreement shall not operate
as or be construed as a continuing waiver or as a consent to or waiver of such subsequent
breach.

	12.	 	Modification

This Agreement may only be modified in writing signed by both parties.

	13.	 	Non-assignable

Since the services to be provided under this Agreement are personal, all duties to be
executed by ACI shall be performed by ACI and may not be assigned or delegated without
written consent of Pi Medical.

	14.	 	Entire Agreement

This Agreement constitutes the entire Agreement between the parties with respect to the
subject matter hereof and supersedes all previous agreements and understandings rather oral
or written between the parties with respect to the subject hereof.

	15.	 	Governing Law

This Agreement shall be governed by the laws of the State of Minnesota.

AGREED TO BY:

	 	 	 	 	 	 	 	 	 	 	 
	PI MEDICAL, INC.	 	 	 	ADVANCED COMPOSITES	 	 
	 	 	 	 	 	 	INDUSTRIES, INC.	 	 
	 
	By:

	 	/s/ S. L. Critzer
	 	 
	 	By:
	 	 /s/ George C.H. Chou
	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Susan L. Critzer
	 	 	 	 	 	George C.H. Chou	 	 
	 
	Title: Chief Operating Officer	 	 	 	Title: President	 	 
	 
	Date: August 13, 2001	 	 	 	Date: August 17, 2001	 	 

4

 

APPENDIX A

	A.	 	Unit Braid Price

	 	1.	 	ACI shall charge a fixed unit price of $22.71 per unit for braids made in
accordance with Pi Medical drawing numbers 400005 and 100029.
	 
	 	2.	 	All products shall conform to specifications on Pi Medical drawing numbers
400005 and 100029.
	 
	 	3.	 	All manufacturing shall follow the process steps of ACI flowchart dated 6 June
2001 (a reduced-in-size copy attached hereto). Any changes to the flow chart require
mutual agreement of the parties.
	 
	 	4.	 	The unit cost shall include materials, machine set-up, braiding, in-process
quality control at ACI, welding, cleaning, packaging, labeling, shipping to Pi Medical,
maintaining routine quality control records and equipment maintenance. Attached is a
7/30/01 Braid Quality Control plan listing routine quality control.
	 
	 	5.	 	The unit cost may be adjusted (increased or decreased) based on requested
changes to the process.
	 
	 	6.	 	The foregoing unit price is based on a delivery schedule of 500 accepted unites
delivered in each of the six months of the term of this Agreement with an initial
delivery in August, 2001. It is preferred that 250 accepted units be delivered by the
15th of each of said months with the remainder delivered by the end of each of said
months. Failure of ACI to deliver accepted units in the quantities described within
30-days of the above-stated due dates is a breach of this agreement.

	B.	 	Time and Material Charges

Time/material charges for work authorized by Pi Medical will be billed at the following
rates:

	 	 	 	 	 
	1.

	 	ACI Program Management
	 	$125 /hr
	2.

	 	ACI Senior Design Engineer
	 	$150 /hr
	3.

	 	Subcontract Senior Design Engineer
	 	$150 /hr
	4.

	 	ACI Manufacturing Engineer
	 	$  60 /hr
	5.

	 	ACI Manufacturing Technician
	 	$  46 /hr
	6.

	 	DET subcontract Program Management/QC Engineer
	 	$125 /hr
	7.

	 	DET subcontract Mechanical Engineer/Technician
	 	$105 /hr

5

 

	C.	 	Budget Constraint

Monthly charges to Pi Medical shall not exceed $25,000 for any one month with ACI assuming
any overage. The monthly budget shall be a monthly average of $20,000 per month and the
total cash paid over the term of this Agreement shall not exceed $120,000. The monthly
budget is the sum of time and materials and production unit charges for that month.

[ACI Production Flow Chart and Quality Control System]

6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00099-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00099-of-00352.parquet"}]]