Document:

Exhibit 10.33

 

Amendment
Number One to

Outsourcing Agreement

 

 

This Amendment Number One to Outsourcing
Agreement (“Amendment”) is entered into as of this 12th day of
December 2003 by and between Creditek MediFinancial, Inc., a Delaware
corporation (“OUTSOURCER”), and dj Orthopedics, LLC, a Delaware limited
liability company (“CLIENT”).

 

Whereas, the parties
have previously entered into that certain Outsourcing Agreement dated as of
December 30, 2002 (the “Original Agreement”) relating to the provision of outsourcing
services by OUTSOURCER to CLIENT;

 

Whereas, the parties
desire to set forth in this Amendment certain changes and modifications to the
Original Agreement;

 

Now, therefore, the
parties hereby agree to amend the Original Agreement in the following
manner.  Capitalized terms used herein
and not defined in this Amendment shall have the meanings ascribed to them in
the Original Agreement.

 

1.                                      Section
1.2

 

Section 1.2 of the Original Agreement is hereby
amended to provide in the list of Exhibits after Exhibit D the following:  “Exhibit E                                                 [Intentionally omitted]”.

 

2.                                      Section
2.1

 

The first sentence of
Section 2.1 is hereby amended in its entirety to read as follows:  “The term of this Agreement (the “Term”)
shall be from the Agreement Date through December 31, 2006 (hereinafter, the
“Expiration Date”), unless terminated pursuant to Article XVII”.

 

The following sentence shall be added as a
new third sentence to Section 2.1:  “At
the request of CLIENT made on or before November 30, 2004, OUTSOURCER agrees to
engage in good faith renegotiation of such of the terms of the Agreement as are
indicated in the request of CLIENT.”

 

3                                         Section
2.2 

 

The third sentence of Section 2.2 is hereby
amended in its entirety to read as follows: 
“Thereafter, commencing effective as of October 1, 2003, OUTSOURCER
shall bill CLIENT on the 5th day of each month for the Services
rendered the prior month under the Agreement, as set forth in Article XII.”

 

4.                                      Section
3.4b

 

Paragraph (b) of
Section 3.4 is hereby amended in its entirety as follows:  “(b) Effective on November 17, 2003,
OUTSOURCER shall transfer to the employment of CLIENT, and CLIENT shall
thereafter employ, the CLIENT Service Location staff

 

 

performing OfficeCare
services. OUTSOURCER shall maintain operations at the CLIENT Service Location
until the transfer of employees is completed.”

 

5.                                      Section
3.12

 

Section 3.12 shall
be amended by adding the following new paragraph at the end thereof:  “Each month, OUTSOURCER shall

 

1)              Provide CLIENT with a project profit and
loss statement for the preceding month and cumulative for the calendar year,

 

2)              The monthly profit and loss statement
shall include detailed headcount and cost breakdown information for the
preceding month.

 

3)              The monthly profit and loss statement
shall be provided to CLIENT by the 30th day of the following month

 

4)              OUTSOURCER shall also provide CLIENT
quarterly with a forecast of anticipated revenues and expenses covering the
immediate next three-month period

 

5)              The above shall be presented to CLIENT no
later than the 15th day  of
the month immediately preceding the respective quarter.

 

6)              OUTSOURCER shall further provide CLIENT
every six months a profit and loss statement, balance sheet, and cash flow
statement reflecting OUTSOURCER’s 
entire operations.  The first
such set of statements will be provided for the month ended December 31, 2003
and include the previous 12 months. 
OUTSOURCER shall further supply CLIENT with audited financial statements
once per year .

 

6.                                      Section
4.3

 

Section 4.3 is hereby amended by adding a new
paragraph (d) as follows:

 

“(d) Rehired Employees.

 

(i) Effective as of October 10, 2003 (the Insurance Transfer Date), all
OUTSOURCER employees assigned to the Insurance/Custom Brace group at the
CLIENT’s Vista Service Location will become CLIENT employees. Effective on
November 17, 2003 (the OfficeCare Transfer Date), all OUTSOURCER staff assigned
to the OfficeCare group at the CLIENT’s Vista Service Location will become
CLIENT employees (collectively the “Rehired Employees”).

 

(ii) CLIENT shall offer employment on the above dates to the Rehired
Employees.  Such offers of employment
shall provide for compensation and benefits consistent with the compensation
and benefits in effect for such employees immediately preceding the Insurance
and OfficeCare Transfer Dates, giving effect to the level of seniority with
OUTSOURCER of such Rehired Employees immediately preceding their respective
Transfer Dates.

 

(iii) Nothing contained herein shall be deemed to create an employment
contract between CLIENT and any Rehired Employee or to cause any Rehired
Employee to be treated as other than an at will employee of CLIENT after the
Transfer Date.  CLIENT shall not be
obligated or deemed to employ any Rehired Employee who does not execute
CLIENT’s standard offer letter for similarly situated employees.

 

 

(iv) OUTSOURCER shall be responsible, and CLIENT shall have no
liability, for any accrued wages, severance pay, sick leave or any other
benefits, or benefits under any of OUTSOURCER’s benefits plans, or any other
liability or claim of any type or nature arising from or on account of
OUTSOURCER’s employment of, or termination of employment of, the Rehired
Employees on or prior to the Transfer Dates. 
CLIENT shall not assume or be responsible for liabilities for unpaid,
accrued (and unused) vacation and bonuses of Rehired Employees as of the
Transfer Dates.”

 

7.                                      Section 6.1

 

Section 6.1 is amended by
adding the following sentence to the end thereof:  “The parties agree that Ms. Lise Goldstein shall be the
OUTSOURCER Contract Executive through at least December 31, 2004 and that Mr.
Chris Chinni shall be the backup OUTSOURCER Contract Executive during the
Term.”

 

8.                                      Section 6.2 (b)

 

Section
6.2(b) is hereby deleted in its entirety and replaced by the following section:

 

“(b) Dedicated Staff.  OUTSOURCER will provide CLIENT the services
of the following individuals (or their functional equivalents in the event any
of them leaves Creditek’s employment) whose dedication to the project shall be:

 

•                  Isabel Burghardt 2004=100%, 2005=50%

 

•                  Roger Lin 2004=100%, 2005=50%

 

•                  Steve Fulton 2004=75%, 2005=50%

 

•                  The combined efforts of Scott DeMarzio, Grace Lu, Ed
Dwyer and Lisa Graham (or their functional equivalents) shall be equal to that
of one full time equivalent person working 100% on the Services during 2004.

 

OUTSOURCER shall provide to CLIENT detailed timesheets for the above
individuals (or their functional equivalents) at the time of the monthly
invoice and charge to CLIENT the actual hours incurred.

 

CLIENT and OUTSOURCER
shall, from time to time, evaluate the need to maintain or to change the level
of dedication of the above staff

 

OUTSOURCER will continue
to provide the services of Brian McCann as On-Site Manager at CLIENT Service
Location through December 4, 2003 or earlier if requested by CLIENT.”

 

9.                                      Section 6.5

 

Section 6.5 is
hereby amended by adding a new paragraph (c) as follows:

 

“(c) Effective as
of October 1, 2003, OUTSOURCER shall, from that date forward and for the
balance of the Term of the Agreement, cease paying CLIENT the Lease Rate
described above and previously set forth on former Exhibit E.”

 

 

10.                               Section 12.1

 

Section 12.1 is hereby amended in its entirety to read
as follows:  “Effective as of October 1,
2003 and continuing throughout the Term of the Agreement, OUTSOURCER shall
issue an invoice to CLIENT on the 5th day of each month for the Fees
due for the prior month. The Fees shall be due and payable to OUTSOURCER by
check, wire funds transfer or other electronic means acceptable to OUTSOURCER
to an account specified by OUTSOURCER within 30 days.”

 

11.                               Section
17.1

 

Section 17.1, paragraph (a)(i), is hereby amended by replacing the
phrase “90 days” with the phrase “120 days”.

 

Section 17.1, paragraph (a)(ii), is hereby amended by replacing the
phrase “180 days” with the phrase “270 days”.

 

12.                               Section
17.2

 

Section 17.2 is hereby amended in its entirety to read as follows:

 

“(a) If this Agreement is terminated for convenience by CLIENT as set
forth in 17.1(a)(i) on or prior to February 28, 2006, then CLIENT shall pay to
OUTSOURCER in immediately available funds the unamortized fixed costs based on
the monthly amortization schedule set forth on Exhibit I.

 

“(b) If this Agreement is terminated for convenience by OUTSOURCER as
set forth in 17.1(a)(ii) prior to December 31, 2006, OUTSOURCER shall  pay to CLIENT in immediately available funds
the amount equal to the greater of Four Hundred Thousand Dollars ($400,000.00)
or two hundred percent (200%) of the average monthly Fees paid to OUTSOURCER
hereunder during the period that is the shorter of (i) the 12 months
immediately preceding the date of OUTSOURCER’s notice of termination (the
“Notice Date”) or (ii) the period between the Effective Date and the Notice
Date.”

 

13.                               Exhibit A, Section
A

 

Section A of
Exhibit A to the Agreement is hereby amended as follows:

 

The first sentence
following the title of Section A is hereby amended to read in its entirety as
follows:  “The following are Required
Services to be performed after the Effective Date:”

 

14.                               Exhibit A, Section B, Part III

 

Item
1 and all subparts thereof are hereby deleted.

 

 

Items
2-5 are hereby amended to read in their entirety as follows:

 

“2)        Order Entry:

 

a)                                      The
following are CLIENT’s responsibilities regarding entry of Orders on
Outsourcer’s Systems:

i)                 Reviewing the PPA prior to entering
the data and, to the extent possible, identifying missing, incomplete or
incorrect information.

ii)              Implementing a process to communicate
with Physician Practices and/or CLIENT’s Agents to obtain missing and/or
correct the information necessary to bill for the services provided to
Patients.

iii)           Entering the content of the PPA forms into
the Systems.

iv)          Organizing and passing PPA forms to CLIENT’s
imaging department for timely imaging.

 

3)        Verification of insurance coverage:

 

a)                                      As
required by the Third Party Payer and based on the type of and charge for the
supply provided to Patients, CLIENT shall contact the Third Party Payer to
ascertain whether the Patient is covered for the OfficeCare and Insurance
Business DME products they have or shall receive, as well as the Patient’s and
Third Party Payer’s financial responsibilities.

 

b)                                     Required
verification of insurance coverage shall occur within 48 hours after an Order
is entered on the System.

 

4)                                                        Pre-Authorization
of insurance coverage:

 

a)                                      As
required by its managed care agreements, CLIENT will obtain insurance
Pre-Authorization for OfficeCare products that have already been dispensed to
Patients by Physician Offices. In those instances where the Pre-Authorization
is denied by the Third Party Payer, OUTSOURCER will seek payment from Patient.

 

b)                                     For
all Insurance Business products, CLIENT shall get prior approval from the
Patient’s Third Party Payer prior to the supply being delivered to the Patient.
If the service is denied, CLIENT intends to deliver Insurance Business supplies
only after payment for the service is received from Patient.

 

5)                                                        Billing:

 

a)                                      For
the Insurance Business only, CLIENT shall be responsible for submitting the
initial hard copy (paper) bill to Third Party Payers that do not accept
electronic billing. OUTSOURCER shall be responsible for submitting all
electronic bills for Insurance and OfficeCare business. OUTSOURCER  shall be responsible for rebilling all Third
Part Payers and/or Patients, for all Accounts, whether these happen
electronically or on paper. OUTSOURCER shall submit all OfficeCare invoices to
carriers that do not accept electronic billing.

 

b)                                     Except
as stated on Exhibit A, Section B, Part III, Item 5a, OUTSOURCER shall invoice
the appropriate Third Party Payers and/or Patients on CLIENT’s behalf in
accordance with payer specific requirements, including any additional required
documentation.”

 

 

Item 18 of Part III of Section B of Exhibit A is hereby deleted in its
entirety and the items thereafter are renumbered accordingly.

 

Item 20 of Part III of Section B of Exhibit A is hereby deleted in its
entirety and the items thereafter are renumbered accordingly.

 

Item 21 of Part III of Section B of Exhibit A is hereby amended to add
the following paragraphs:

 

“b). Certify/Register
Program.  CLIENT shall pay directly
to supplier all cost associated with the certifying and registering of paper
claims mailed to insurance companies by OUTSOURCER.

 

c). Patient Product Agreements
(PPA’s).  CLIENT will pay directly
to supplier all costs to print, store and distribute PPA’s to customers.

 

d). Bank Charges.
Effective as of October 1, 2003, CLIENT shall pay directly to supplier all
costs related to PNC Bank (or its replacement).”

 

15.                               Exhibit
B, Section A

 

Section
A of Exhibit B is hereby amended by deleting Items 1(c)(vi) and 1(d) in their
entirety.

 

16.                               Exhibit
B, Section C

 

Items 1a and
1b of Section C of Exhibit B are hereby amended in their entirety to read as
follows:

 

“a)        Subject
to 1(b) below, OUTSOURCER shall survey a sample of Patients semi-annually
(survey to be developed by the Parties prior to the Effective Date).  The first semi-annual survey shall be
conducted in April, 2004 and every 6 months thereafter.  The survey may have a section relating to
the evaluation of CLIENT’s business practices and shall have a section related
to the evaluation of OUTSOURCER’s Services. 
Such survey shall be scored from 1 (lowest) to 6 (highest) in tenth of
point increments.  Patient responses
shall be directed to:

 

VP of
OfficeCare

dj Orthopedics, LLC

2985 Scott Street

Vista, CA  92083-8339

 

 

b)             OUTSOURCER
shall conduct a baseline Patient survey within the 1 month period after the
Effective Date.  For such baseline
survey, OUTSOURCER shall survey

 

 

5% of the
Patient population for the preceding 12-month period.  Scores on the OUTSOURCER’s Services component of the baseline
survey shall be used as a baseline Patient satisfaction score.  The survey size for any  follow-up semi-annual surveys shall be
initially set up at 3% of the annual Patient population.  OUTSOURCER shall monitor the number of
returned surveys and increase (from 3% to up to 5%) or decrease the sample size
in order to receive approximately 1,000 responses; however, the maximum sample
size shall be limited to 5% of the total Patient population for the preceding
12 months.

i)                 In all cases OUTSOURCER shall review
survey results for the OUTSOURCER’s Services section of the survey to:

(1)          Investigate any decline in OUTSOURCER
performance.

(2)          Develop an action plan to improve OfficeCare
and Insurance Business Patient satisfaction score.

(3)          Report action plan and implementation
schedule to CLIENT Contract Executive within 30 days of survey results.

ii)              In all cases OUTSOURCER and CLIENT shall
work together using commercially reasonable efforts after each sampling to
increase Patient response rate.”

 

17.                               Exhibit
B, Section C

 

Item 2b of Section C of Exhibit B is hereby amended in
its entirety to read as follows:

 

“b) OUTSOURCER shall conduct a baseline survey for the
OfficeCare sales representatives (i) before the Effective Date and (ii) within
one month after the date which is twelve months after the Effective Date.  Scores for the OUTSOURCER’s Services section
of such baseline surveys shall be used as the baseline OfficeCare sales
representative satisfaction score for the next OfficeCare sales representative
survey, which shall be conducted 6 months after the second baseline survey and
thereafter conducted semi-annually.  Each
subsequent survey result shall become the baseline for the next semi-annual
survey.

i)                 During the semi-annual surveys after
the 2 initial baseline surveys, if the aggregate OfficeCare sales
representative satisfaction score, on the OUTSOURCER’s Services section of the
survey, is less than the baseline aggregate OfficeCare sales representative
satisfaction score, OUTSOURCER shall:

(1)          Investigate decline in performance.

(2)          Develop an action plan to improve OfficeCare
sales representative satisfaction score.

(3)          Report action plan and implementation
schedule to CLIENT Contract Executive within 30 days of survey results.

(4)          For any OfficeCare sales representatives who
score OUTSOURCER as less than three (3), on the OUTSOURCER’s Services section
of the survey, OUTSOURCER will:

(a)          Contact OfficeCare sales representative by
phone.

(b)         Understand the nature of the complaint.

(c)          Develop an action plan to resolve the
problem.”

 

 

18.                               Exhibit
B, Section C

 

Item 2e of Section C of Exhibit B is hereby amended in
its entirety to read as follows:

 

“e)  OUTSOURCER shall conduct a baseline survey
for the Insurance Business sales representatives (i) before the Effective Date
and (ii) within one month after the date which is twelve months after the
Effective Date.  Scores for the
OUTSOURCER’s Services section of such baseline surveys shall be used as the
baseline Insurance Business sales representative satisfaction score for the
next Insurance Business sales representative survey, which shall be conducted 6
months after the second baseline survey and thereafter conducted
semi-annually.  Each subsequent survey
result shall become the baseline for the next semi-annual survey.

i)                 During the semi-annual surveys after
the 2 initial baseline surveys, if the aggregate Insurance Business sales
representative satisfaction score, on the OUTSOURCER’s Services section of the
survey, is less than the aggregate baseline Insurance Business sales
representative satisfaction score, OUTSOURCER shall:

(1)          Investigate decline in performance.

(2)          Develop an action plan to improve Insurance
Business sales representative satisfaction score.

(3)          Report action plan and implementation
schedule to CLIENT Contract Executive within 30 days of survey results.

(4)           For any Insurance Business sales representatives
who score OUTSOURCER as less than three (3), OUTSOURCER will:

(a)          Contact such Insurance Business sales
representative by phone.

(b)         Understand the nature of the complaint.

(c)          Develop an action plan to resolve the
problem.”

 

Items 3(a)(i)(1), 3(b)(i)(1),
and 3(b)(iii) of Section C of Exhibit B are hereby deleted in their entirety.

 

19.                               Exhibit
B, Section E

 

Item
1(a)(i)(3) of Section E of Exhibit B is hereby amended to read in its entirety
as follows:

 

“3) If system outage is discovered by CLIENT, CLIENT shall use the
following escalation plan to notify OUTSOURCER of the downtime:

 

(a)          Call
to OUTSOURCER help desk at 866-671-3955

(b)         Call to Chris Chinni                                         c:
908-581-5488

(c)          Call Bruce Blair                                                               c:
908 304 4265

or to
such other numbers as designated in writing by OUTSOURCER Contract Executive
from time to time.”

 

 

20.                               Exhibit C

 

Exhibit C is hereby
amended in its entirety to read as follows:

 

“1)        No later than December first of each year, the Parties
will agree on a projected monthly headcount and costs (the “Target Operations
and Costs”) for OUTSOURCER to carry out the requirements of the Agreement
during the next calendar year. Current Target Operations and Costs are
incorporated herewith as Exhibit 1.

 

2)              From October 1, 2003 through December 31, 2003,
OUTSOURCER’s fees shall be equal to its actual costs of providing the Services
described in the Agreement, as amended herewith. OUTSOURCER costs shall include
those at OUTSOURCER and at CLIENT Service Locations, as well as required travel
between locations

 

3)              Starting on January 1, 2004 and until the termination
of the Agreement, as amended herewith, OUTSOURCER fees shall be determined by
adding a 10% Service Fee to the OUTSOURCER’s actual costs of providing the
Services described in the Agreement, as amended herewith. OUTSOURCER costs
shall include those at OUTSOURCER and at CLIENT Service Locations, as well as
required travel between locations.

 

4)              No later than the 5th day of each month,
OUTSOURCER will submit an invoice to CLIENT detailing total estimated costs for
the prior month plus the 10% Service Fee (the Estimated Fees). On or about the
30th day of each month, OUTSOURCER will provide CLIENT with the
actual costs for the prior month, as well as a final invoice (based on actual
costs) for the prior month (the Final Fees). Any difference between Estimated
and Final Fees shall be added or netted out of OUTSOURCER’s next invoice to
CLIENT.

 

5)              For the month of October 2003 only, OUTSOURCER shall
deduct $ 75,000 (seventy five thousand Dollars) from the Fees computed under
the methodology outlined in 2) above. The amount deducted is what completes
OUTSOURCER’s planned loss of $ 1.695 million for 2003.

 

6)              OUTSOURCER shall submit a written justification to
CLIENT each time the cumulative difference for a quarter, between actual and
Target Operations and Costs, is greater than 5%.

 

7)              OUTSOURCER and CLIENT shall meet prior to the end of
each calendar quarter to review the Target Operations and Costs for the
remainder of the calendar year and, if necessary, adjust these. Changes to
Target Operations and Costs can include but not be limited to staffing (number
and type of FTEs, management/employee ratios, etc) and non-staffing costs.

 

8)              The Parties shall work together to develop, by
November 30, 2003, an incentive system for the OUTSOURCER’s staff that provides
the Services.

 

9)              With the exception of item 7 above, OUTSOURCER staff
that provides the Services shall be under the same human resource policies that
OUTSOURCER utilizes for its other clients. These policies shall include, but
not be limited to, salary ranges, seniority, performance review process,
promotions, benefits, vacations, raises, etc. OUTSOURCER shall seek approval
from CLIENT prior to granting salary increases greater than 4% per year for the
employees performing the Services; CLIENT’s approval shall not be unreasonably
withheld.

 

10)        OUTSOURCER monthly invoices shall include the
following information:

 

 

•                  FTE’s who
provide the Services, by function (i.e.: cash application, CSR, analyst, etc.)

 

•                  A/R worked for
each project below (month and year to date dollars and touches)

•                  Dates of Entry
prior to or equal to 12/1/02

•                  Dates of Entry
between 12/1/02 and 6/30/03

•                  Dates on Entry
on or after 7/1/03 and prior to 10/1/03

 

•                  A comparison between
actual and planned collection rate by each one of the three projects above.
Planned collection rates are presented on Exhibit 2 and 3.

 

•                  Detailed
timecards listing projects and hours spent for the individuals mentioned in
section 6.2(b)

 

11)        OUTSOURCER costs shall include:

 

a)              Staff salaries and benefits

 

b)             Per diem staff (as required)

 

c)              Subcontractors

 

d)             Production and distribution (OUTSOURCER’S cost to
print and mail hard copy invoices and letters to patients and payers)

 

e)              Travel and lodging in connection with the Services
(for OUTSOURCER’s management and staff)

 

f)                Telecommunications

 

g)             Desktop support for OUTSOURCER’s and CLIENT’s staff
who perform the Services (Creditek’s actual quarterly costs to maintain its
network, terminals and systems, divided by the average number of terminals in
operation for the quarter. These shall include such expenses as staff, hardware
and software)

 

h)             IT maintenance fees in connection with the Services
(actual license fees paid to Medical Manager, plus 50% of the database
licensing fees (Oracle) paid for the MaxPro application)

 

i)                 IT team (salaries and benefits for the staff
referenced on Section 6.2.3 of this Amendment)

 

j)                 Medical Manager licenses in connection with the
Services (the one time, per user license paid to Medical Manager to increase
the number of users beyond the 85 currently available)

 

k)              Wilkes-Barre overhead (includes prorated cost of
space, utilities, maintenance, security, plus the salary and benefits costs,
through December 31, 2004, of: 10% of Chris Chinni, 100% of Lise Goldstein’s,
10% of a receptionist and 100% of Shelly Weiss)

 

l)                 Computer supplies in connection with the Services

 

m)           Office supplies in connection with the Services

 

n)             Recruiting/temporary agencies and related advertising
expenses in connection with the Services

 

o)             Forms (for September 2003 only)

 

 

7)              OUTSOURCER shall maintain a timecard or equivalent
monitoring system to record the hours devoted by the entire staff that provides
the Services, including the individuals listed on 6.2(b) above

 

8)              OUTSOURCER’s invoices and Target Operations and Costs
schedules shall follow CLIENTS manufacturing calendar

 

9)              OUTSOURCER agrees to use best efforts to either
continue to improve MaxPro or to replace it by a system that provides
equivalent or better functionality

 

10)        OUTSOURCER shall follow the operational standards
presented on Exhibit 4”

 

21.                               Exhibit E

 

Exhibit E is hereby
deleted in its entirety.

 

 

IN WITNESS WHEREOF, the
parties have hereunto executed this Amendment as of the first date above
mentioned.

 

 

	
  Creditek MediFinancial, Inc.

  	
  dj Orthopedics, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
  By

  	
   

  	
   

  
	
  Name:

  	
  Name:

  
	
  Title:

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  

 

 

Exhibit 1

 

Staffing
Levels for Oct-Dec 2003 and for 2004

 

	
  Oct

  	
   

  	
  Nov

  	
   

  	
  Dec

  	
   

  	
  Jan

  	
   

  	
  Feb

  	
   

  	
  Mar

  	
   

  	
  Apr

  	
   

  	
  Ongoing

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.5

  	
   

  	
  1.5

  	
   

  	
  1.5

  	
   

  	
  1.5

  	
   

  	
  1.5

  	
   

  	
  1.5

  	
   

  	
  1.5

  	
   

  	
  1.5

  	
   

  
	
  2.0

  	
   

  	
  2.0

  	
   

  	
  2.0

  	
   

  	
  2.0

  	
   

  	
  2.0

  	
   

  	
  2.0

  	
   

  	
  2.0

  	
   

  	
  2.0

  	
   

  
	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  
	
  8.0

  	
   

  	
  7.0

  	
   

  	
  6.0

  	
   

  	
  5.0

  	
   

  	
  5.0

  	
   

  	
  5.0

  	
   

  	
  5.0

  	
   

  	
  3.0

  	
   

  
	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  3.0

  	
   

  	
  2.0

  	
   

  
	
  6.0

  	
   

  	
  6.0

  	
   

  	
  6.0

  	
   

  	
  6.0

  	
   

  	
  6.0

  	
   

  	
  4.0

  	
   

  	
  4.0

  	
   

  	
  4.0

  	
   

  
	
  10.0

  	
   

  	
  10.0

  	
   

  	
  10.0

  	
   

  	
  10.0

  	
   

  	
  10.0

  	
   

  	
  10.0

  	
   

  	
  10.0

  	
   

  	
  7.0

  	
   

  
	
  2.0

  	
   

  	
  1.0

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.0

  	
   

  	
  32.0

  	
   

  	
  46.0

  	
   

  	
  47.0

  	
   

  	
  47.0

  	
   

  	
  38.0

  	
   

  	
  20.0

  	
   

  	
  10.0

  	
   

  
	
  52.5

  	
   

  	
  65.5

  	
   

  	
  77.5

  	
   

  	
  77.5

  	
   

  	
  77.5

  	
   

  	
  66.5

  	
   

  	
  48.5

  	
   

  	
  32.5

  	
   

  

 

Profit and Loss Statement

 

	
  Revenue ($/1000)

  	
   

  	
  Jan-Aug’03

  	
   

  	
  Sept

  	
   

  	
  Oct

  	
   

  	
  Nov

  	
   

  	
  Dec’03

  	
   

  	
  Sept-Dec’03

  	
   

  	
  2003

  	
   

  	
  2004

  	
   

  	
  2005

  	
   

  	
  2006

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total
  Revenue

  	
   

  	
  $

  	
  1,074.90

  	
   

  	
  $

  	
  162.83

  	
   

  	
  $

  	
  229.76

  	
   

  	
  $

  	
  280.79

  	
   

  	
  $

  	
  310.52

  	
   

  	
  $

  	
  983.90

  	
   

  	
  $

  	
  2,058.80

  	
   

  	
  $

  	
  2,993.16

  	
   

  	
  $

  	
  2,393.58

  	
   

  	
  $

  	
  2,334.54

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Salaries

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WB

  	
   

  	
   

  	
   

  	
  93.93

  	
   

  	
  97.65

  	
   

  	
  121.83

  	
   

  	
  144.15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,073.82

  	
   

  	
  830.10

  	
   

  	
  850.86

  	
   

  
	
  Vista

  	
   

  	
   

  	
   

  	
  62.65

  	
   

  	
  56.13

  	
   

  	
  11.52

  	
   

  	
  11.52

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Total
  Salaries

  	
   

  	
   

  	
   

  	
  156.58

  	
   

  	
  153.77

  	
   

  	
  133.35

  	
   

  	
  155.67

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,073.82

  	
   

  	
  830.10

  	
   

  	
  850.86

  	
   

  
	
  Fringe
  @ 22%

  	
   

  	
   

  	
   

  	
  34.45

  	
   

  	
  33.83

  	
   

  	
  29.34

  	
   

  	
  34.25

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  236.24

  	
   

  	
  182.62

  	
   

  	
  187.19

  	
   

  
	
  Total
  Salaries & Benefits

  	
   

  	
  $

  	
  1,555.02

  	
   

  	
  $

  	
  191.03

  	
   

  	
  $

  	
  187.61

  	
   

  	
  $

  	
  162.68

  	
   

  	
  $

  	
  189.91

  	
   

  	
  $

  	
  731.23

  	
   

  	
  $

  	
  2,286.25

  	
   

  	
  $

  	
  1,310.06

  	
   

  	
  $

  	
  1,012.73

  	
   

  	
  $

  	
  1,038.04

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subcontractors

  	
   

  	
  120.02

  	
   

  	
  5.00

  	
   

  	
  5.00

  	
   

  	
  5.00

  	
   

  	
  5.00

  	
   

  	
  20.00

  	
   

  	
  140.02

  	
   

  	
  21.00

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Production/Distribution

  	
   

  	
  164.60

  	
   

  	
  34.00

  	
   

  	
  32.50

  	
   

  	
  32.50

  	
   

  	
  32.50

  	
   

  	
  131.50

  	
   

  	
  296.10

  	
   

  	
  441.84

  	
   

  	
  441.84

  	
   

  	
  441.84

  	
   

  
	
  Travel
  & Lodging

  	
   

  	
  38.39

  	
   

  	
  3.00

  	
   

  	
  3.00

  	
   

  	
  1.25

  	
   

  	
  1.25

  	
   

  	
  8.50

  	
   

  	
  46.89

  	
   

  	
  15.00

  	
   

  	
  15.00

  	
   

  	
  15.38

  	
   

  
	
  Bank
  Charges

  	
   

  	
  42.30

  	
   

  	
  6.02

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  6.02

  	
   

  	
  48.32

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Telco
  (Set-Up Fees)

  	
   

  	
  16.90

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  16.90

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Telecommunications

  	
   

  	
  41.95

  	
   

  	
  5.24

  	
   

  	
  5.24

  	
   

  	
  5.24

  	
   

  	
  5.24

  	
   

  	
  20.98

  	
   

  	
  62.93

  	
   

  	
  41.67

  	
   

  	
  42.71

  	
   

  	
  43.78

  	
   

  
	
  Desktop
  support

  	
   

  	
  60.00

  	
   

  	
  6.29

  	
   

  	
  6.46

  	
   

  	
  7.54

  	
   

  	
  8.54

  	
   

  	
  28.83

  	
   

  	
  88.83

  	
   

  	
  79.13

  	
   

  	
  67.42

  	
   

  	
  69.11

  	
   

  
	
  IT
  maintenance fees

  	
   

  	
  26.67

  	
   

  	
  3.33

  	
   

  	
  3.33

  	
   

  	
  3.33

  	
   

  	
  3.33

  	
   

  	
  13.33

  	
   

  	
  40.00

  	
   

  	
  40.00

  	
   

  	
  41.00

  	
   

  	
  42.03

  	
   

  
	
  IT
  Team

  	
   

  	
  188.20

  	
   

  	
  29.60

  	
   

  	
  29.60

  	
   

  	
  29.60

  	
   

  	
  29.60

  	
   

  	
  118.40

  	
   

  	
  306.60

  	
   

  	
  362.30

  	
   

  	
  189.32

  	
   

  	
  97.03

  	
   

  
	
  MM
  licenses

  	
   

  	
  42.50

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  42.50

  	
   

  	
  27.00

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  W/B
  overhead

  	
   

  	
  162.83

  	
   

  	
  21.77

  	
   

  	
  22.02

  	
   

  	
  23.64

  	
   

  	
  25.14

  	
   

  	
  92.56

  	
   

  	
  255.39

  	
   

  	
  261.23

  	
   

  	
  247.24

  	
   

  	
  253.42

  	
   

  
	
  Computer
  Supplies

  	
   

  	
  19.73

  	
   

  	
  2.00

  	
   

  	
  2.00

  	
   

  	
  2.00

  	
   

  	
  2.00

  	
   

  	
  8.00

  	
   

  	
  27.73

  	
   

  	
  27.46

  	
   

  	
  28.14

  	
   

  	
  28.85

  	
   

  
	
  0ffice
  Supplies

  	
   

  	
  18.77

  	
   

  	
  6.00

  	
   

  	
  6.00

  	
   

  	
  6.00

  	
   

  	
  6.00

  	
   

  	
  24.00

  	
   

  	
  42.77

  	
   

  	
  82.37

  	
   

  	
  84.43

  	
   

  	
  86.54

  	
   

  
	
  Recruiting/Temp/Adv

  	
   

  	
  11.41

  	
   

  	
  2.00

  	
   

  	
  2.00

  	
   

  	
  2.00

  	
   

  	
  2.00

  	
   

  	
  8.00

  	
   

  	
  19.41

  	
   

  	
  12.00

  	
   

  	
  6.15

  	
   

  	
  6.30

  	
   

  
	
  Forms

  	
   

  	
   

  	
   

  	
  15.00

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  15.00

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rent
  to dj Ortho

  	
   

  	
  12.00

  	
   

  	
  1.50

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  1.50

  	
   

  	
  13.50

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Total
  Other Operating Exp

  	
   

  	
  966.26

  	
   

  	
  140.76

  	
   

  	
  117.15

  	
   

  	
  118.11

  	
   

  	
  120.61

  	
   

  	
  496.63

  	
   

  	
  1,462.89

  	
   

  	
  1,410.99

  	
   

  	
  1,163.26

  	
   

  	
  1,084.27

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Expenses

  	
   

  	
  2,521.27

  	
   

  	
  331.79

  	
   

  	
  304.76

  	
   

  	
  280.79

  	
   

  	
  310.52

  	
   

  	
  1,227.86

  	
   

  	
  3,749.13

  	
   

  	
  2,721.05

  	
   

  	
  2,175.98

  	
   

  	
  2,122.31

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Contribution

  	
   

  	
  $

  	
  (1,446.37

  	
  )

  	
  $

  	
  (168.96

  	
  )

  	
  $

  	
  (75.00

  	
  )

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  (243.96

  	
  )

  	
  $

  	
  (1,690.34

  	
  )

  	
  $

  	
  272.11

  	
   

  	
  $

  	
  217.60

  	
   

  	
  $

  	
  212.23

  	
   

  

 

 

Exhibit 2

 

Collection
Expectations by Backlog Project by Month

 

 

	
  OfficeCare Collections

  	
   

  	
  Oct

  	
   

  	
  Nov

  	
   

  	
  Dec

  	
   

  	
  Oct-Dec'03

  	
   

  	
  Jan'04

  	
   

  	
  Feb

  	
   

  	
  Mar

  	
   

  	
  Apr

  	
   

  	
  May

  	
   

  	
  June

  	
   

  	
  July

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dates of Entry on/after 10/1/03

  	
   

  	
  $

  	
  97

  	
   

  	
  $

  	
  699

  	
   

  	
  $

  	
  1,009

  	
   

  	
  $

  	
  1,805

  	
   

  	
  $

  	
  1,389

  	
   

  	
  $

  	
  1,280

  	
   

  	
  $

  	
  1,425

  	
   

  	
  $

  	
  1,963

  	
   

  	
  $

  	
  1,570

  	
   

  	
  $

  	
  1,570

  	
   

  	
  $

  	
  1,963

  	
   

  
	
  Dates of Entry after 12/1/02, before 10/1/03

  	
   

  	
  $

  	
  1,495

  	
   

  	
  $

  	
  797

  	
   

  	
  $

  	
  760

  	
   

  	
  $

  	
  3,053

  	
   

  	
  $

  	
  1,087

  	
   

  	
  $

  	
  1,087

  	
   

  	
  $

  	
  1,087

  	
   

  	
  $

  	
  1,268

  	
   

  	
  $

  	
  435

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
  Dates of Entry prior to 12/1/02

  	
   

  	
  $

  	
  91

  	
   

  	
  $

  	
  80

  	
   

  	
  $

  	
  95

  	
   

  	
  $

  	
  267

  	
   

  	
  $

  	
  137

  	
   

  	
  $

  	
  132

  	
   

  	
  $

  	
  132

  	
   

  	
  $

  	
  91

  	
   

  	
  $

  	
  37

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  1,684

  	
   

  	
  $

  	
  1,576

  	
   

  	
  $

  	
  1,865

  	
   

  	
  $

  	
  5,124

  	
   

  	
  $

  	
  2,613

  	
   

  	
  $

  	
  2,499

  	
   

  	
  $

  	
  2,644

  	
   

  	
  $

  	
  3,322

  	
   

  	
  $

  	
  2,042

  	
   

  	
  $

  	
  1,570

  	
   

  	
  $

  	
  1,963

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Aug'04

  	
   

  	
  Sep

  	
   

  	
  Oct

  	
   

  	
  Nov

  	
   

  	
  Dec

  	
   

  	
  2004

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dates of Entry on/after 10/1/03

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  1,570

  	
   

  	
  $

  	
  1,570

  	
   

  	
  $

  	
  1,963

  	
   

  	
  $

  	
  1,570

  	
   

  	
  $

  	
  1,570

  	
   

  	
  $

  	
  19,406

  	
   

  
	
  Dates of Entry after 12/1/02, before 10/1/03

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  4,964

  	
   

  
	
  Dates of Entry prior to 12/1/02

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  528

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  1,570

  	
   

  	
  $

  	
  1,570

  	
   

  	
  $

  	
  1,963

  	
   

  	
  $

  	
  1,570

  	
   

  	
  $

  	
  1,570

  	
   

  	
  $

  	
  24,898

  	
   

  

 

	
  Insurance Collections

  	
   

  	
  Oct

  	
   

  	
  Nov

  	
   

  	
  Dec

  	
   

  	
  Oct-Dec'03

  	
   

  	
  Jan'04

  	
   

  	
  Feb

  	
   

  	
  Mar

  	
   

  	
  Apr

  	
   

  	
  May

  	
   

  	
  June

  	
   

  	
  July

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dates of Entry on/after 10/1/03

  	
   

  	
  $

  	
  31

  	
   

  	
  $

  	
  221

  	
   

  	
  $

  	
  319

  	
   

  	
  $

  	
  570

  	
   

  	
  $

  	
  439

  	
   

  	
  $

  	
  404

  	
   

  	
  $

  	
  450

  	
   

  	
  $

  	
  620

  	
   

  	
  $

  	
  496

  	
   

  	
  $

  	
  496

  	
   

  	
  $

  	
  620

  	
   

  
	
  Dates of Entry after 12/1/02, before 10/1/03

  	
   

  	
  $

  	
  472

  	
   

  	
  $

  	
  252

  	
   

  	
  $

  	
  240

  	
   

  	
  $

  	
  964

  	
   

  	
  $

  	
  343

  	
   

  	
  $

  	
  343

  	
   

  	
  $

  	
  343

  	
   

  	
  $

  	
  400

  	
   

  	
  $

  	
  137

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
  Dates of Entry prior to 12/1/02

  	
   

  	
  $

  	
  20

  	
   

  	
  $

  	
  18

  	
   

  	
  $

  	
  21

  	
   

  	
  $

  	
  59

  	
   

  	
  $

  	
  30

  	
   

  	
  $

  	
  29

  	
   

  	
  $

  	
  29

  	
   

  	
  $

  	
  20

  	
   

  	
  $

  	
  8

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  $

  	
  523

  	
   

  	
  $

  	
  490

  	
   

  	
  $

  	
  580

  	
   

  	
  $

  	
  1,593

  	
   

  	
  $

  	
  812

  	
   

  	
  $

  	
  776

  	
   

  	
  $

  	
  822

  	
   

  	
  $

  	
  1,040

  	
   

  	
  $

  	
  641

  	
   

  	
  $

  	
  496

  	
   

  	
  $

  	
  620

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Aug'04

  	
   

  	
  Sep

  	
   

  	
  Oct

  	
   

  	
  Nov

  	
   

  	
  Dec

  	
   

  	
  2004

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dates of Entry on/after 10/1/03

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  496

  	
   

  	
  $

  	
  496

  	
   

  	
  $

  	
  620

  	
   

  	
  $

  	
  496

  	
   

  	
  $

  	
  496

  	
   

  	
  $

  	
  6,128

  	
   

  
	
  Dates of Entry after 12/1/02, before 10/1/03

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,567

  	
   

  
	
  Dates of Entry prior to 12/1/02

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  116

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  496

  	
   

  	
  $

  	
  496

  	
   

  	
  $

  	
  620

  	
   

  	
  $

  	
  496

  	
   

  	
  $

  	
  496

  	
   

  	
  $

  	
  7,812

  	
   

  

 

 

Exhibit 3

 

Collection
Expectations by Backlog Project by Receivable Bucket

 

	
  Self Pay - Old

  	
   

  	
  <30

  	
   

  	
  31-60

  	
   

  	
  61-90

  	
   

  	
  91-120

  	
   

  	
  121-150

  	
   

  	
  151-180

  	
   

  	
  181-270

  	
   

  	
  271-365

  	
   

  	
  366-546

  	
   

  	
  547-730

  	
   

  
	
  12/1/02 prior A/R

  	
   

  	
  $

  	
  116

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  25

  	
   

  	
  $

  	
  391

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  74

  	
   

  	
  $

  	
  356,891

  	
   

  	
  $

  	
  1,076,038

  	
   

  	
  $

  	
  810,625

  	
   

  
	
  est.
  # of accts

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  1

  	
   

  	
  1

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  1

  	
   

  	
  2455

  	
   

  	
  6,622

  	
   

  	
  6,384

  	
   

  
	
  Est.
  # of accts to touch

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  982

  	
   

  	
  2,649

  	
   

  	
  2,554

  	
   

  
	
  Est.
  Collection %

  	
   

  	
  50

  	
  %

  	
  0

  	
  %

  	
  50

  	
  %

  	
  50

  	
  %

  	
  50

  	
  %

  	
  0

  	
  %

  	
  50

  	
  %

  	
  30

  	
  %

  	
  20

  	
  %

  	
  10

  	
  %

  
	
  Est
  Collection $

  	
   

  	
  $

  	
  58

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  13

  	
   

  	
  $

  	
  196

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  37

  	
   

  	
  $

  	
  107,067

  	
   

  	
  $

  	
  215,208

  	
   

  	
  $

  	
  81,063

  	
   

  

 

	
  Billing Project -Old

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12/1/02
  prior A/R

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  1,510

  	
   

  	
  $

  	
  1,397,436

  	
   

  	
  $

  	
  1,819,726

  	
   

  	
  $

  	
  585,002

  	
   

  
	
  est.
  # of accts

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  2

  	
   

  	
  11,305

  	
   

  	
  15,725

  	
   

  	
  6,519

  	
   

  
	
  Est.
  # of accts to touch

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
  5,653

  	
   

  	
  7,863

  	
   

  	
  978

  	
   

  
	
  Est.
  Collection %

  	
   

  	
  0

  	
  %

  	
  0

  	
  %

  	
  0

  	
  %

  	
  0

  	
  %

  	
  0

  	
  %

  	
  0

  	
  %

  	
  50

  	
  %

  	
  20

  	
  %

  	
  10

  	
  %

  	
  10

  	
  %

  
	
  Est
  Collection $

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  755

  	
   

  	
  $

  	
  279,487

  	
   

  	
  $

  	
  181,973

  	
   

  	
  $

  	
  58,500

  	
   

  

 

	
  Self Pay - Mid

  	
   

  	
  <30

  	
   

  	
  31-60

  	
   

  	
  61-90

  	
   

  	
  91-120

  	
   

  	
  121-150

  	
   

  	
  151-180

  	
   

  	
  181-270

  	
   

  	
  271-365

  	
   

  	
  366-546

  	
   

  	
  547-730

  	
   

  
	
  12/2/02
  -6/30/03 A/R

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  96

  	
   

  	
  $

  	
  115

  	
   

  	
  $

  	
  586,451

  	
   

  	
  $

  	
  524,388

  	
   

  	
  $

  	
  485,122

  	
   

  	
  $

  	
  1,308,875

  	
   

  	
  $

  	
  230,388

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  
	
  est.
  # of accts

  	
   

  	
  0

  	
   

  	
  1

  	
   

  	
  1

  	
   

  	
  6203

  	
   

  	
  5426

  	
   

  	
  4776

  	
   

  	
  12156

  	
   

  	
  1608

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Est.
  # of accts to touch

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  2481

  	
   

  	
  2170

  	
   

  	
  1910

  	
   

  	
  4862

  	
   

  	
  643

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Est.
  Collection %

  	
   

  	
  0

  	
  %

  	
  80

  	
  %

  	
  80

  	
  %

  	
  80

  	
  %

  	
  70

  	
  %

  	
  60

  	
  %

  	
  50

  	
  %

  	
  30

  	
  %

  	
  0

  	
  %

  	
  0

  	
  %

  
	
  Est
  Collection $

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  77

  	
   

  	
  $

  	
  92

  	
   

  	
  $

  	
  469,161

  	
   

  	
  $

  	
  367,072

  	
   

  	
  $

  	
  291,073

  	
   

  	
  $

  	
  654,438

  	
   

  	
  $

  	
  69,116

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  

 

	
  Billing Project -Mid

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12/2/02
  -6/30/03 A/R

  	
   

  	
  $

  	
  1,150

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  1,250,271

  	
   

  	
  $

  	
  1,287,237

  	
   

  	
  $

  	
  1,388,708

  	
   

  	
  $

  	
  3,514,611

  	
   

  	
  $

  	
  867,563

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  
	
  est.
  # of accts

  	
   

  	
  1

  	
   

  	
  0

  	
   

  	
  —

  	
   

  	
  7,328

  	
   

  	
  7,614

  	
   

  	
  8,656

  	
   

  	
  23,561

  	
   

  	
  6,792

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Est.
  # of accts to touch

  	
   

  	
  1

  	
   

  	
  0

  	
   

  	
  —

  	
   

  	
  5,130

  	
   

  	
  6,091

  	
   

  	
  6,925

  	
   

  	
  21,205

  	
   

  	
  6,113

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Est.
  Collection %

  	
   

  	
  60

  	
  %

  	
  0

  	
  %

  	
  61

  	
  %

  	
  61

  	
  %

  	
  58

  	
  %

  	
  55

  	
  %

  	
  45

  	
  %

  	
  35

  	
  %

  	
  0

  	
  %

  	
  0

  	
  %

  
	
  Est
  Collection $

  	
   

  	
  $

  	
  695

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  765,541

  	
   

  	
  $

  	
  748,766

  	
   

  	
  $

  	
  765,275

  	
   

  	
  $

  	
  1,581,575

  	
   

  	
  $

  	
  303,647

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  

 

	
  Self Pay - New

  	
   

  	
  <30

  	
   

  	
  31-60

  	
   

  	
  61-90

  	
   

  	
  91-120

  	
   

  	
  121-150

  	
   

  	
  151-180

  	
   

  	
  181-270

  	
   

  	
  271-365

  	
   

  	
  366-546

  	
   

  	
  547-730

  	
   

  
	
  7/1/2003
  +

  	
   

  	
  $

  	
  209,220

  	
   

  	
  $

  	
  482,071

  	
   

  	
  $

  	
  658,968

  	
   

  	
  $

  	
  86,350

  	
   

  	
  $

  	
  6,373

  	
   

  	
  $

  	
  2,845

  	
   

  	
  $

  	
  2,272

  	
   

  	
  $

  	
  805

  	
   

  	
  $

  	
  793

  	
   

  	
  $

  	
  0

  	
   

  
	
  est.
  # of accts

  	
   

  	
  2949

  	
   

  	
  6121

  	
   

  	
  7703

  	
   

  	
  949

  	
   

  	
  91

  	
   

  	
  34

  	
   

  	
  38

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  —

  	
   

  
	
  Est.
  # of accts to touch

  	
   

  	
  295

  	
   

  	
  1224

  	
   

  	
  3081

  	
   

  	
  380

  	
   

  	
  36

  	
   

  	
  14

  	
   

  	
  15

  	
   

  	
  2

  	
   

  	
  2

  	
   

  	
  0

  	
   

  
	
  Est.
  Collection %

  	
   

  	
  80

  	
  %

  	
  80

  	
  %

  	
  80

  	
  %

  	
  70

  	
  %

  	
  60

  	
  %

  	
  50

  	
  %

  	
  40

  	
  %

  	
  30

  	
  %

  	
  20

  	
  %

  	
  10

  	
  %

  
	
  Est
  Collection $

  	
   

  	
  $

  	
  167,376

  	
   

  	
  $

  	
  385,657

  	
   

  	
  $

  	
  527,174

  	
   

  	
  $

  	
  60,445

  	
   

  	
  $

  	
  3,824

  	
   

  	
  $

  	
  1,423

  	
   

  	
  $

  	
  909

  	
   

  	
  $

  	
  242

  	
   

  	
  $

  	
  159

  	
   

  	
  $

  	
  0

  	
   

  

 

	
  Billing Project -New

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7/1/2003
  +

  	
   

  	
  $

  	
  1,979,182

  	
   

  	
  $

  	
  2,461,546

  	
   

  	
  $

  	
  1,713,652

  	
   

  	
  $

  	
  210,108

  	
   

  	
  $

  	
  36,280

  	
   

  	
  $

  	
  14,678

  	
   

  	
  $

  	
  14,823

  	
   

  	
  $

  	
  2,146

  	
   

  	
  $

  	
  2,261

  	
   

  	
  $

  	
  122

  	
   

  
	
  est.
  # of accts

  	
   

  	
  8,893

  	
   

  	
  12,808

  	
   

  	
  9,638

  	
   

  	
  1,243

  	
   

  	
  225

  	
   

  	
  94

  	
   

  	
  93

  	
   

  	
  15

  	
   

  	
  13

  	
   

  	
  2

  	
   

  
	
  Est.
  # of accts to touch

  	
   

  	
  3557

  	
   

  	
  6,404

  	
   

  	
  4,819

  	
   

  	
  870

  	
   

  	
  180

  	
   

  	
  75

  	
   

  	
  84

  	
   

  	
  14

  	
   

  	
  7

  	
   

  	
  1

  	
   

  
	
  Est.
  Collection %

  	
   

  	
  57

  	
  %

  	
  57

  	
  %

  	
  57

  	
  %

  	
  57

  	
  %

  	
  55

  	
  %

  	
  52

  	
  %

  	
  43

  	
  %

  	
  31

  	
  %

  	
  24

  	
  %

  	
  13

  	
  %

  
	
  Est
  Collection $

  	
   

  	
  $

  	
  1,129,717

  	
   

  	
  $

  	
  1,405,050

  	
   

  	
  $

  	
  978,153

  	
   

  	
  $

  	
  119,930

  	
   

  	
  $

  	
  19,993

  	
   

  	
  $

  	
  7,639

  	
   

  	
  $

  	
  6,353

  	
   

  	
  $

  	
  657

  	
   

  	
  $

  	
  554

  	
   

  	
  $

  	
  16

  	
   

  

 

	
  Summary Analysis (9/29/03
  A/R)

  	
   

  	
   

  	
  Total Open Bal

  
	
   

  	
   

  	
  Total Est Col

  
	
   

  	
   

  	
  Total open Est Col %

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total accts to work

  

 

	
  Est “old”Collections

  	
   

  	
  $

  	
  985,203

  	
   

  
	
  Est “mid” Collections(*)

  	
   

  	
  $

  	
  5,866,528

  	
   

  
	
  Est “new”Collections(*)

  	
   

  	
  $

  	
  4,665,353

  	
   

  
	
  Total estimate for 9/29/03
  A/

  	
   

  	
  $

  	
  11,517,084

  	
   

  

 

(*)  reduced by a total of $300K to account for unapplied
cash

 

 

Exhibit 4:  CREDITEK OPERATIONAL
STANDARDS

 

 

Creditek Standard

 

Cash
Application

•                  If EOB identifies Patient Responsible that appears
normal, Cash App sends to MaxPro for letter series

 

Collection
Agency

•                  Once Account has completed all Insurance and Self Pay
steps, file is generated and sent to Collections

•                  No follow-up after Account sent to collections

 

Paper
Claims

•                  Regular Mail

 

CSR
Patient Response

•                  Immediate for: Pay Plan, Credit Card Pay, or general
info or any sales consultant or distributor
call

 

•                  <48 hour average response time for other outbound
calls

 

Denial
Appeals

•                  No appeal if EOB = Deductible Applied, Max Ben Reached,
Not eligible DOS

•                  Appealed if EOB = Non cov service, etc

 

REP/Carrier
Complaint

•                  Mary G & Sherry P handle

 

Analyst
FTE Assumptions

•                  30% Accounts require touches @ 12 minutes to resolve =
10 analysts

 

 

Actions

 

•                  Standard OK.  Lise audit Cash App group regularly to
achieve <1.5% target error rate (eg no more than 1.5 errors/100 accounts
posted)

 

•                  Standard OK.  Lise audit and djOrtho to approve all
transfers

 

•                  Collect Data.  Lise report FTE requirements

 

•                  Standard = Notarize/Certify
for batches of 10 or more claims/week

 

•                  Standard OK.  Lise to provide target date to achieve CSR
standard

 

•                  Standard OK.  Controlled by Denial Instruction Procedures

 

•                  Standard OK

 

•                  Standard OK

 

•                  Standard OK.  Lise
report quarterly on 30% and 12 minute assumptionsExhibit 10.34

 

CERTAIN MATERIAL
(INDICATED BY THREE ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT. 
THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

 

SALES
REPRESENTATIVE AGREEMENT

 

 

THIS SALES REPRESENTATIVE
AGREEMENT (“Agreement”) is made effective as of August 18, 2000, by and between
OrthoLogic Corp., a Delaware corporation (hereinafter referred to as
“OrthoLogic”), with its principal place of business at 1275 West Washington
Street, Tempe, Arizona  85281, and DePuy
AcroMed, Inc., an Ohio corporation (hereinafter referred to as “DePuy
AcroMed”), with its principal place of business at 325 Paramount Drive,
Raynham, Massachusetts 02767.

 

 

BACKGROUND

 

WHEREAS, DePuy AcroMed is
engaged in the business of developing, manufacturing, marketing and selling
implants, instruments and other products for use in spinal, neuro, cranial
and/or orthopaedic surgical procedures.

 

WHEREAS, OrthoLogic is
engaged in the business of developing, manufacturing, marketing and selling
bone growth stimulation products utilizing combined magnetic field technology.

 

WHEREAS, OrthoLogic and
DePuy AcroMed desire to enter into a sales representative agreement pursuant to
which OrthoLogic shall appoint DePuy AcroMed as its exclusive sales
representative to sell OrthoLogic’s bone growth stimulation products, as more
fully set forth below.

 

NOW, THEREFORE, in
consideration of the mutual promises, covenants and agreements hereinafter set
forth, the parties hereto agree as follows:

 

 

1.0                               DEFINITIONS

 

The following words shall
have the following meanings when used in this Agreement:

 

1.1                                 “Affiliate”
of a Party shall mean any entity or person that directly or indirectly
controls, is controlled by or is under common control with such party.  For purposes of this definition, “control”
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of an entity, whether
through the ownership of voting securities, by contract or otherwise.

 

1.2                                 “Agreement”
shall mean this Sales Representative Agreement, as it may be amended in writing
by mutual agreement of the parties from time to time.

 

1.3                                 “Approved
Order” shall mean an order for which OrthoLogic has received a commitment for
payment from any patient or third party payer.

 

 

1.4                                 “Competing
Product” means an external lumbar spinal bone growth stimulation product.

 

1.5                                 “Customers”
shall mean all purchasers of the Products in the Territory.

 

1.6                                 “Improvement”
shall mean any adaptation, change, redesign, improvement, modification or
development to any Product, the specifications therefore, the raw materials or
the method or process of manufacture or production of any Product.

 

1.7                                 “Party”
and “Parties” mean DePuy AcroMed and OrthoLogic, singly and/or collectively.

 

1.8                                 “Products”
mean OrthoLogic’s spinal bone growth stimulation products for lumbar
applications utilizing Combined Magnetic Field (CMF) technology, along with any
Improvements thereto.  All such Products
currently in existence are identified on Exhibit A.  Exhibit A identifying the Products
subject to this Agreement shall be modified in writing as additional Products,
including Improvements and variations thereto, become available.

 

1.9                                 “New
Products” means those OrthoLogic bone growth electrical stimulation products
developed, designed, intended or sold for the spine market which perform a
significantly different function or perform in a significantly different manner
or perform for a significantly different indication from Products.

 

1.10                           “Sales
Quota” shall mean the number of Products in either units or dollars shown on Exhibit
C.

 

1.11                           “Sales
Minimum” shall mean 80% of the Sales Quota.

 

1.12                           “Territory”
shall mean the spinal market throughout the world.

 

 

2.0                               APPOINTMENT

 

2.1                                 Subject
to the terms and conditions of this Agreement, OrthoLogic hereby appoints DePuy
AcroMed, and DePuy AcroMed hereby accepts appointment, as the exclusive sales
agent of the Products in the Territory for the Term (as hereinafter defined).

 

2.2                                 DePuy
AcroMed acknowledges that OrthoLogic is currently utilizing employed sales
representatives in various territories. OrthoLogic agrees to terminate the
sales activities currently being handled by such representatives as soon as
practicable, which shall be completed in any event no later than January 1,
2001.

 

2.3                                 DePuy
AcroMed further acknowledges that OrthoLogic has contractual relationships with
the nine distributors listed on Exhibit B. OrthoLogic agrees to
terminate its contracts with the nine distributors as soon as is commercially
feasible, consistent with the terms of such existing contracts between
OrthoLogic and each of such distributors.

 

 

2

 

2.4                                 DePuy
AcroMed acknowledges that OrthoLogic also has an agreement with Vision Quest, a
durable medical equipment supplier (“DME”) based in California, and understands
that Vision Quest will continue to sell Products consistent with the terms and
provisions of such agreement.  At any
time more than 12 months after the signing of this Agreement, OrthoLogic shall,
at DePuy AcroMed’s request, terminate, phase out or allow to expire,
OrthoLogic’s agreement with Vision Quest consistent with the terms of any such
agreement, at DePuy AcroMed’s sole discretion.

 

2.5                                 DePuy
AcroMed may appoint one or more third parties as subagents or subdistributors
(individually and collectively, “Distributors”) to act on its behalf, including
without limitation, the DePuy AcroMed sales network now or as may be
established from time to time, provided that DePuy AcroMed shall remain
responsible for all of its obligations under this Agreement.  DePuy AcroMed shall notify OrthoLogic in
writing of all Distributors appointed pursuant to this Section, provided that
OrthoLogic shall treat the identity of DePuy AcroMed’s Distributors as DePuy
AcroMed Confidential Information pursuant to the provisions of Article 18.  DePuy AcroMed shall not knowingly appoint
any Distributors to sell the Products that are engaged in the marketing and/or
selling of Competing Products.  Promptly
after the execution of this Agreement, DePuy AcroMed shall request its
Distributors to discontinue the marketing of any products that compete directly
with the Products.  To the extent that
any DePuy AcroMed Distributor either continues to market such Competing
Products or is unable to market the Products, the Parties shall consult with
each other to consider appropriate actions that might be taken to address such
circumstances.  During the time period
when any DePuy AcroMed Distributor either continues to market Competing
Products or is unable to market the Products and DePuy AcroMed does not cover
the affected sales territory, then OrthoLogic may use its employees or other
distributors to market Products in such DePuy AcroMed Distributor’s territory;
provided that OrthoLogic shall terminate or discontinue marketing efforts in
such territory promptly after DePuy AcroMed or one of its Distributors is able
to service such territory.

 

2.6                                 Provided
OrthoLogic has first offered the New Products in writing to DePuy AcroMed and
DePuy AcroMed has declined the opportunity to market the New Products in
writing, OrthoLogic may freely negotiate with other parties to market the New
Products.  DePuy AcroMed shall have
ninety (90) days from receipt of OrthoLogic’s written offer within which to
accept or reject any such opportunity to market New Products.  In the case in which OrthoLogic had first
offered the New Products to DePuy AcroMed and the parties were unable to
negotiate mutually acceptable terms, OrthoLogic is free to contract with other
parties provided OrthoLogic does not accept terms inferior to DePuy AcroMed’s
last offer.  In the case in which the
third party’s offered final terms are equal to or inferior to DePuy AcroMed’s
last offer, OrthoLogic will contract with DePuy AcroMed under the terms of
DePuy AcroMed’s last offer.

 

3.0                               EXCLUSIVITY

 

3.1                                 During
the Term (as hereinafter defined), OrthoLogic shall not enter into any
other  distribution, marketing, sales
representative or like agreement related to the Products in the Territory
except as provided in Article 9 or as identified in Section 2.5.

 

3

 

4.0                               TERM AND TERMINATION

 

4.1                                 The
term (“Term”) of this Agreement shall be ten (10) years from the date first
written above.

 

4.2                                 This
Agreement may be terminated by either Party if a Party files a voluntary
petition for bankruptcy or reorganization, is the subject of an involuntary
petition for bankruptcy which is not dismissed within 60 days, has its affairs
placed in the hands of a receiver, enters into a composition for the benefit of
creditors, or is deemed insolvent by a court of competent jurisdiction.

 

4.3                                 This
Agreement may also be terminated if a Party is in material breach of this
Agreement provided the non-breaching Party has provided at least forty-five
(45) days prior written notice identifying the breach and such breach has not
been cured within said forty-five (45) days.

 

4.4                                 This
Agreement may be terminated by DePuy AcroMed upon 120 days’ prior written
notice to OrthoLogic.

 

4.5                                 This
Agreement may be terminated by OrthoLogic upon 120 days’ prior written notice
to DePuy AcroMed if the prior three (3) month average Net Sales Price (as
defined in Section 12.1) for the Products ever becomes less than $***.

 

4.6                                 This
Agreement may be terminated immediately by DePuy AcroMed upon written notice to
OrthoLogic if DePuy AcroMed, its Affiliates or OrthoLogic receive a notice that
a third party has filed suit alleging that any Product infringes in whole or in
part any aspect of any U.S. patent or reissues or re-examinations thereof.

 

4.7                                 The
provisions of this Agreement set forth in Section 4.8 and Articles 14, 17, 18,
19, 20, and any other provisions which by their terms survive termination, and
any remedies for the breach thereof, shall survive the termination of this
Agreement under the terms hereof.

 

4.8                                 Notwithstanding
the termination of this Agreement for any reason, each Party hereto shall be
entitled to recover any and all damages (other than punitive, exemplary,
multiplied or consequential (including lost sales or lost profits) damages)
that such Party shall have sustained by reason of the breach by the other Party
hereto of any of the terms of this Agreement. 
Termination of this Agreement for any reason shall be without prejudice
to DePuy AcroMed’s right to receive all payments accrued and unpaid on the
effective date of termination and shall not release either Party hereto from
any liability which at such time has already accrued or which thereafter
accrues from a breach or default prior to such expiration or termination, nor
affect in any way the survival of any other right, duty or obligation of either
Party hereto which is expressly stated elsewhere in this Agreement to survive
such termination.

 

***Certain information on this page has been filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 

4

 

5.0                               OBLIGATIONS OF ORTHOLOGIC

 

5.1                                 OrthoLogic
shall use commercially reasonable efforts to supply Products for customer
orders on a timely basis.  If Products
become unavailable during the Term for any reason, except where demand exceeds
125% of the non-binding rolling 12-month forecast updated on a quarterly basis,
for more than 15 days (which need not be consecutive) in any period of four
consecutive weeks, the Sales Quotas applicable to that year, pursuant to Article
9 below, shall be renegotiated to reduce the same in an amount equal to (i) the
average monthly volume of orders received by OrthoLogic during the preceding
six months, multiplied by (ii) the number of consecutive four-week periods
during which such Products are unavailable for any 15 days.  If Products become unavailable due, in whole
or in part, to a circumstance affecting OrthoLogic’s ability to manufacture
Products, and the Products continue to be unavailable due to such circumstance
for more than any 15 days in a given four consecutive weeks, the presidents of
the Parties or their designated representatives shall meet to determine the
best means to make Products available to the market, and in that regard, will
consider, in part, the possibility that DePuy AcroMed will manufacture or have
manufactured Products until production by OrthoLogic has resumed.  DePuy AcroMed wants assurance of continued
supply of Product.  If OrthoLogic cannot
supply the Product necessary to meet demand for a continuous period of 30 days,
then DePuy AcroMed shall have the right to any and all licenses, manufacturing
plans, and technology, etc. that would allow DePuy AcroMed to find an
alternative source for the supply of such Product until OrthoLogic can resume
adequate supply of Product.  OrthoLogic
hereby grants DePuy AcroMed an irrevocable, perpetual, non-exclusive paid up,
royalty free license and/or right to all licenses, manufacturing plans and know
how related to the Products, which DePuy AcroMed agrees to exercise on the
terms set forth in this Section 5.1.

 

5.2                                 OrthoLogic
will be responsible for Product development, testing, quality control, supply,
distribution, regulatory approvals and clearances, customer service, shipping,
patient fitting and billing.  Additionally,
OrthoLogic shall display a jointly branded (OrthoLogic and DePuy AcroMed)
Product prominently at all appropriate trade shows and conventions where
OrthoLogic maintains a booth, at no cost to DePuy AcroMed.

 

5.3                                 OrthoLogic
shall report to DePuy AcroMed any and all complaints received by OrthoLogic and
any and all medical device reports prepared by OrthoLogic with respect to
Products within the time required by applicable law and regulations, and, in
any case, within a reasonably prompt time following OrthoLogic’s receipt or
preparation of the same.  OrthoLogic
shall maintain a record of all complaints it receives consistent with
guidelines and requirements of the U.S. Food and Drug Administration (“FDA”) or
any other governmental agency or instrumentality that may have jurisdiction
over the Products, including if a “CE” mark or other European regulatory
clearance or approval is obtained for any Product, the applicable guidelines
and requirements of the European Union.

 

5.4                                 At
DePuy AcroMed’s request and pursuant to a mutually determined training program,
OrthoLogic shall assist DePuy AcroMed in providing training in the use and
benefits of the Product to DePuy AcroMed’s domestic field sales force.  OrthoLogic will supply each of DePuy
AcroMed’s and its respective Distributors’ existing and future sales
representatives with an initial Product demonstration unit at no cost to DePuy
AcroMed or such Distributor.

 

5

 

Replacement or additional
Product demonstration units will be made available to DePuy AcroMed for use by
its sales representatives or Distributors, at a cost of $*** each.

 

5.5                                 OrthoLogic
shall comply with the requirements for DePuy AcroMed approval set forth in
Section 6.3 below, and with the meeting requirements set forth in Section 6.4
below.

 

5.6                                 OrthoLogic
shall maintain adequate and competent personnel to manufacture, store and
deliver, perform patient fitting, and to prepare invoices and any other
manufacturer-generated materials necessary to enable OrthoLogic to invoice
purchasers and third-party payors in connection with the sale of Products, and
such manufacture, storage, sales, delivery, patient fitting and invoices shall
be undertaken and effected in a manner that does not violate any applicable
federal, state or foreign laws and regulations, and otherwise, in a manner that
is in accordance with the provisions of OrthoLogic’s Corporate Compliance
Program.  OrthoLogic shall perform
patient fittings within 48 hours of the prescribing physician’s request for
patient fitting, provided that an Approved Order for the patient has been
received by OrthoLogic.

 

5.7                                 OrthoLogic
shall use diligent efforts, at its sole cost and expense, to obtain and
maintain patents covering the Products in the United States and foreign
countries which DePuy AcroMed, and OrthoLogic agree constitute substantial
markets for the Products.  OrthoLogic
shall keep DePuy AcroMed informed on a current basis of the status of any such
effort.

 

5.8                                 Except
as provided in Section 6.10, OrthoLogic shall pay all expenses, costs,
overhead, debts and obligations incurred by OrthoLogic in its fulfillment of
its obligations under this Agreement. 
Such expenses shall include travel, room and board, and entertainment.  Under no circumstances shall DePuy AcroMed
be liable to reimburse OrthoLogic or any of its sales representatives or
distributors for any of such expenditures incurred by OrthoLogic or its sales
representatives or distributors.

 

6.0                               OBLIGATIONS
OF DEPUY ACROMED

 

6.1                                 Subject
to OrthoLogic’s rights pursuant to Article 9, DePuy AcroMed may initiate,
conduct, suspend or terminate DePuy AcroMed’s activities relating to the
marketing and sale of Products as DePuy AcroMed, in its sole and absolute
discretion, deems appropriate and adequate, provided that such activities are
conducted in a manner that does not violate any applicable federal, state or
foreign laws and regulations.  Subject
to, and without limiting the scope of DePuy AcroMed’s discretion pursuant to
the foregoing, DePuy AcroMed may undertake marketing and sales activities,
including conducting advertising, distributing marketing literature and
displaying Products at professional and trade shows, as DePuy AcroMed deems
desirable to (i) maximize sales of the Products in the United States, (ii)
achieve the Sales Minimums set forth in Article 9 below, and (iii) promote and
obtain orders for the Products.  In
connection with its activities hereunder, DePuy AcroMed shall not solicit any
patients directly with respect to Products.

 

6.2                                 DePuy
AcroMed, with the assistance of OrthoLogic, shall train DePuy AcroMed’s
domestic field sales force with respect to the use of the Products.

 

***Certain information on this page has been filed separately with the
Securities and Exchange Commission.  Confidential
treatment has been requested with respect to the omitted portions.

 

6

 

6.3                                 All
written sales, promotion, training, customer education and marketing materials
and press releases issued by DePuy AcroMed or OrthoLogic and relating to
Products or the sale of Products shall be approved in writing by both
OrthoLogic and DePuy AcroMed prior to use in the marketplace.

 

6.4                                 Representatives
of DePuy AcroMed and OrthoLogic, respectively, shall meet at least once during
September of each year, on a day and at a location mutually convenient, in an
effort to develop a mutually acceptable marketing plan for Products for the
following sales year.  The final
marketing plan rests solely with DePuy AcroMed.  Expenses shall be shared as provided in Section 6.10.  The Parties agree to meet, within four weeks
following the execution and delivery of this Agreement by the Parties to
develop a mutually acceptable marketing plan for the balance of calendar year
2000.

 

6.5                                 DePuy
AcroMed will be responsible for representing Products in the marketplace and
providing customer education and other related services.  Additionally, DePuy AcroMed shall display a
jointly branded product at all appropriate trade shows and conventions at which
DePuy AcroMed maintains a booth, at no cost to OrthoLogic.

 

6.6                                 DePuy
AcroMed shall promptly route directly to OrthoLogic all inquiries relating to
Products, including medical product inquiries, technical inquiries, product
complaints, safety or compliance issues, billing issues, adverse reactions and
adverse events.  DePuy AcroMed shall
also route directly to OrthoLogic any requests received from customers for
no-charge or discounted Products for indigent patients.

 

6.7                                 DePuy
AcroMed will report to OrthoLogic any and all complaints from any source and
medical device reports received with respect to Products within the time
required by applicable law and regulations. 
DePuy AcroMed will maintain a record of all complaints it receives
consistent with FDA guidelines.

 

6.8                                 DePuy
AcroMed shall display and deliver only Products that are marked and packaged by
OrthoLogic or as otherwise specified in advance by mutual agreement of the
Parties.

 

6.9                                 DePuy
AcroMed or its employees and Distributors shall provide from the treating
physician, or direct the treating physician or the physician’s staff to provide
directly to OrthoLogic, a written prescription order form and any required
supporting documentation for the purchase of the Product and when required to process
the order, provide original versions of such documents.   The parties understand and acknowledge that
(1) DePuy AcroMed’s employees and Distributors are responsible for providing
the written prescription order forms to the treating physicians and requesting
that any additional supporting documentation be furnished directly to
OrthoLogic; and (2) DePuy AcroMed’s employees and Distributors shall not
complete any sections of the written prescription order forms that must be
completed by the treating physician or maintain a copy of any completed written
orders or other documentation containing confidential patient medical
information in their files.

 

6.10                           So long
as they are pursuant to a budget capped at 2% of projected sales for the

 

7

 

next year and agreed to
by the Parties in advance, DePuy AcroMed and OrthoLogic will share, on a 50-50
basis, the direct expenses (excluding direct employees and related travel
expenses) relating to marketing and promotional materials relating to the
Products, including printed promotional materials, and video productions.

 

6.11                           Except
as provided in Section 6.10, DePuy AcroMed shall pay all expenses, costs,
overhead, debts and obligations incurred by DePuy AcroMed in its fulfillment of
its obligations under this Agreement. 
Such expenses shall include travel, room and board, and
entertainment.  Under no circumstances
shall OrthoLogic be liable to reimburse DePuy AcroMed or any of its
Distributors for any of such expenditures incurred by DePuy AcroMed or its
Distributors.

 

6.12                           DePuy
AcroMed shall be responsible for all compensation, payroll taxes, facilities
and related expenses for employees of DePuy AcroMed.

 

6.13         DePuy AcroMed shall provide a list of
all employees and Distributors that will provide services in connection with
this Agreement.  During the term of this
Agreement, DePuy AcroMed agrees that its current and future employees and
Distributors shall receive compliance training on any OrthoLogic compliance
policies and procedures which are not encompassed by DePuy AcroMed’s existing
corporate compliance program.  Any such
compliance training on OrthoLogic compliance policies shall be conducted by
OrthoLogic.  OrthoLogic shall submit
compliance training materials to DePuy AcroMed’s counsel for approval prior to
presenting same to the DePuy AcroMed sales force.

 

6.14                           DePuy
AcroMed understands and acknowledges that, from time to time, OrthoLogic may
require changes to its compliance program to encompass changes in third-party
payor requirements or any other changes required by law.  To the extent such changes are not reflected
in DePuy AcroMed’s existing compliance program, DePuy AcroMed shall provide any
supplemental compliance training materials furnished by OrthoLogic to DePuy
AcroMed’s employees and Distributors.

 

6.15                           If
OrthoLogic determines that any employee or Distributor of DePuy AcroMed is (a)
acting in a manner in violation of OrthoLogic ‘s compliance program; or (b) is
acting in a manner that is detrimental to the operations of OrthoLogic’s
customers and patients; then OrthoLogic shall notify DePuy AcroMed in writing,
of the name of the employee or Distributor and the basis for such
determination.  Within fifteen (15)
business days of such written notice, DePuy AcroMed shall review the matter,
and shall notify OrthoLogic of the action DePuy AcroMed proposes to take with
respect to such employee or Distributor. 
If following any remedial action by DePuy AcroMed, OrthoLogic requests
the removal of the employee or Distributor from providing any services under
this Agreement, DePuy AcroMed shall promptly remove the employee or Distributor
from providing any services under this Agreement.

 

 

7.0                               ORTHOLOGIC
SPECIALISTS

 

From January 1, 2001
until the end of the Term, OrthoLogic will maintain at OrthoLogic’s expense, 10
full-time employees or the equivalent thereof in the field, who shall be

 

8

 

available to assist DePuy
AcroMed with its sales of Products. 
Each of such specialists shall be reasonably acceptable to DePuy AcroMed
and they shall be assigned so as to provide coverage in all of DePuy AcroMed’s
10 sales regions.  OrthoLogic will begin
putting these specialists in place as soon as this Agreement is executed but
the Parties understand that it will take until the end of 2000 to complete the
process.

 

8.0                               PATIENT
SERVICE AND REIMBURSEMENT

 

8.1                                 OrthoLogic
shall be responsible for processing all U.S. orders for Products once a valid
prescription order form and any required supporting documentation is obtained
from a physician by DePuy AcroMed.  This
processing by OrthoLogic includes the prior authorization of the prescription
with the patient’s insurance company and the generation of any additional
paperwork required to process the prescription for payment.

 

8.2                                 OrthoLogic
shall be responsible for the negotiation of Product reimbursement pricing for
its managed care payor contracts, HCFA (Medicare) and State Medicaid programs
and with any future third-party payor identified by OrthoLogic.  Product pricing for sales in any country
other than the United States shall be mutually agreed upon by the Parties
before the Parties begin marketing Products in that country.

 

8.3                                 OrthoLogic
will also be responsible for the placement of Products on patients in the U.S.
once the authorization from the patient’s insurance company is received.

 

9.0                               SALES
MINIMUMS AND SALES QUOTAS

 

9.1                                 During
the initial period comprised of 2001 and that portion of 2000 after DePuy
AcroMed has commenced sales, and each calendar year thereafter, (each a
“Measurement Period”), insofar as DePuy AcroMed desires that its exclusive
rights granted hereunder not be subject to conversion to non-exclusive rights,
pursuant to this Section 9.1, DePuy AcroMed shall obtain, directly or through
its Distributors, customer orders for the Products in quantities that equal or
exceed Sales Minimums in either units or dollars applicable to each Measurement
Period, or, to the extent of any shortfall, make payment to OrthoLogic in accordance
with Section 9.3 below.  Accordingly, if
total orders for Products received by OrthoLogic during any Measurement Period
do not equal or exceed the Sales Minimums in either units or dollars applicable
to such Measurement Period, and DePuy AcroMed does not make payment to
OrthoLogic with respect to the shortfall pursuant to Section 9.3 below,
OrthoLogic may, at its option, convert DePuy AcroMed’s exclusive worldwide
rights to non-exclusive rights.  Any
such notice (each a “Conversion Notice”) shall (i) include a statement by
OrthoLogic advising that the Sales Minimum applicable to a period identified in
such notice has not been achieved, (ii) specify the volume or, as the case may
be, dollar amount, of the deficiency, (iii) state the total amount of OrthoLogic
Net Profit (as defined below) applicable to the deficiency, and (iv)
communicate OrthoLogic’s intention to convert DePuy AcroMed’s rights to
non-exclusive rights pursuant to this Article 9, unless DePuy AcroMed makes
payment to OrthoLogic with respect to the deficiency pursuant to Section
9.3.  Any failure by DePuy AcroMed to
achieve Sales Minimums in either units or dollars or make payment to OrthoLogic
with respect to the shortfall, pursuant to Section 9.3 below, shall entitle
OrthoLogic to exercise its foregoing option, but shall not

 

9

 

constitute a breach by
DePuy AcroMed of any of its obligations under this Agreement, and shall not
entitle OrthoLogic to terminate this Agreement or to claim or receive payment
for any damages or equitable relief.  If
DePuy AcroMed’s rights are converted to non-exclusive rights, OrthoLogic may
either assign direct sales employees or appoint third-party independent
distributors, or both, to promote the Products anywhere in the world.

 

9.2                                 If,
as of November 1 of each year, DePuy AcroMed is not tracking the Sales Minimums
in either units or dollars, the presidents of each of the Parties, or their
designated representatives, shall meet by November 15 of each applicable year
to discuss available options for remedy.

 

9.3                                 DePuy
AcroMed shall have the option, in its sole and absolute discretion, to retain
its exclusive rights notwithstanding a failure to achieve the Sales Minimums in
either units or dollars during any Measurement Period by making payment to
OrthoLogic, within 45 days of DePuy AcroMed’s receipt of a Conversion Notice
from OrthoLogic concerning such failure, equal to the total of OrthoLogic Net
Profits applicable to the volume of Products, or, as the case may be, gross
sales dollar volume, deficiency.  For
purposes hereof, “OrthoLogic Net Profits” shall mean the (i) amount by which
the average sales price at which OrthoLogic sold the Products to customers
within the United States during the three months preceding such Conversion
Notice exceeds (ii) the sum of the average direct and indirect manufacturing
costs incurred by OrthoLogic to manufacture Products during such three-month
period, plus the ***%, ***% or ***% sales commissions that would have been
payable to DePuy AcroMed, as appropriate, multiplied by (iii) the number of
units comprising the deficiency of achieving the Sales Minimum or, in the event
such deficiency is measured in dollars, the number of units, based upon the
foregoing average sales price, which are represented by such sales dollar
deficiency, whichever is less.

 

9.4                                 Sales
Quotas for the Products for August 1, 2000 through December 31, 2000 and the
full year 2001 will be set forth on Exhibit C attached hereto.  For purposes of determining whether DePuy
AcroMed has met its Sales Minimums and Sales Quotas in either units or dollars,
it shall be entitled to include sales by OrthoLogic’s sales representatives,
OrthoLogic’s distributors and Vision Quest, and if OrthoLogic is unable to
supply Products for at least 10 days during any 30-day period in amounts
consistent with DePuy AcroMed’s then current forecast pursuant to Section 10.1,
one month’s quota will be deducted from the Sales Minimum for the current year.
Sales Quotas for the initial Measurement Period shall be prorated to the extent
actual sales commence later than August 1, 2000.

 

9.5                                 OrthoLogic
and DePuy AcroMed will agree upon Sales Quotas for 2002 by October 31, 2001.
Sales Quotas for subsequent years that the Agreement is in effect will be
established in the same manner.  If the
parties are unable to agree on Sales Quotas within 10 business days, then
either Party may send the other Party a written notice invoking the right to
arbitrate and, the parties shall engage in arbitration as provided in Section
19.2 in order to set Sales Quotas.  Such
arbitration shall take place within 60 days of receipt of such notice.  The parties shall continue to use the
previous year’s Sales Quotas until Sales Quotas are set through arbitration.

 

***Certain information on this page has been filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 

10

 

10.0                        ORDERS,
DELIVERIES AND FORECASTS

 

10.1                           DePuy
AcroMed will supply OrthoLogic with a non-binding written 12-month rolling
Product forecast, in units, updated on a quarterly basis.  Such forecast shall be provided to
OrthoLogic promptly after the execution of this Agreement for 2000 and no later
than October 1 of each year, beginning October 1, 2000 with respect to the next
calendar year.  DePuy AcroMed shall also
supply OrthoLogic with a written quarterly update no later than 15 days after
the beginning of each quarter with respect to such quarter.

 

10.2                           DePuy
AcroMed shall submit requests for quotes, sales inquiries and customer
complaints on such forms as may be approved in advance by OrthoLogic for such
purpose.  All orders are subject to
written acceptance by OrthoLogic at its principal offices.  DePuy AcroMed shall have no liability for
any order cancelled by a customer.

 

10.3                           DePuy
AcroMed shall not be entitled to accept payments on behalf of OrthoLogic, nor
shall DePuy AcroMed issue quotations describing OrthoLogic Products or quote
prices to customers other than as set forth in OrthoLogic’s published price
lists.

 

10.4                           OrthoLogic
shall ship and deliver Products ordered through DePuy AcroMed to
customers.  All costs of transportation
and shipping shall be paid by OrthoLogic, or OrthoLogic, at its option, may
bill customers for costs of transportation and shipping.  In no event will DePuy AcroMed be
responsible for costs of transportation and shipping.

 

10.5                           OrthoLogic
shall promptly provide a patient fitting date confirmation upon acceptance of
any Approved Order.  OrthoLogic shall
exert commercially reasonable efforts to meet the ship date stated on the
customer quotation; provided, however, that shipment of the Products is subject
to availability and to OrthoLogic’s normal lead times as quoted to DePuy
AcroMed and/or Customers from time to time. 
In case of any delay or failure in delivery resulting in order
cancellation, in addition to DePuy AcroMed’s other remedies under this Agreement,
a per unit adjustment will be made to DePuy AcroMed’s annual Sales Quotas.

 

11.0                        PRODUCT PRICE

 

11.1                           DePuy
AcroMed shall market and promote the Products in accordance with OrthoLogic’s
standard price list in effect from time to time.

 

11.2                           Prices
established in the OrthoLogic price list are exclusive of all sales or use
taxes, tariffs, customs duties and other government charges, shipping and/or
mailing costs and insurance.  DePuy
AcroMed shall not bear any responsibility for the expenses listed in the preceding
sentence.

 

12.0                        COMMISSIONS

 

12.1                           For all
OrthoLogic Products, “Net Sales Price” shall be the amount invoiced to the
patient or any other purchaser or any third party payor, less any trade or cash
discounts, returns, taxes, tariffs, customs duties and other government
charges, shipping and/or mailing

 

11

 

costs and insurance to
the extent they are included in the invoice price.

 

12.2                           OrthoLogic
will pay to DePuy AcroMed a commission equal to ***% of the Net Sales Price for
all sales of Products up to and including the respective annual Sales Quota. If
DePuy AcroMed exceeds the annual Sales Quota in either units or dollars, then
OrthoLogic will pay DePuy AcroMed a commission equal to ***% of the Net Sales
Price for all sales of Products exceeding the respective annual Sales Quota.
OrthoLogic agrees to pay DePuy AcroMed commissions of ***% of the Net Sales
Price for all ***.  OrthoLogic agrees to
pay DePuy AcroMed commissions of ***% of the Net Sales Price for ***.

 

12.3                           A sale
of a Product shall be deemed to have occurred at the time that OrthoLogic has
invoiced the patient or any other purchaser or the third party payor for the
Product. All commissions payable hereunder shall accrue monthly on the last day
of each calendar month with respect to all Products invoiced during such
month.  Commissions shall be paid
monthly on or before the last day of each calendar month with respect to all
Products invoiced during the preceding month. 
Commission payments shall also reflect any appropriate adjustments in
accordance with Section 12.1. Each commissions payment shall be accompanied by
a statement showing the commissions accrued and adjustments made for the
preceding month and any other information necessary for the proper
determination of the amount of commissions payable hereunder.

 

12.4                           OrthoLogic
shall furnish DePuy AcroMed with a report by the 20th day of each month, which
shall include (i) a list of accounts that have placed orders for Products with
the Net Sales Price and third party payor reimbursement rates for Products;
(ii) a list of accounts where Products have been invoiced during the month; and
(iii) disposition of all orders placed during the month.

 

12.5                           OrthoLogic
shall keep accurate books of account containing information which may be necessary
for the purpose of demonstrating the commissions payable to DePuy AcroMed. Said
books shall be available to DePuy AcroMed during normal business hours upon
written request to OrthoLogic and may be audited and inspected by an
independent public accountant selected by and paid for by DePuy AcroMed for the
purpose of verifying the statements of OrthoLogic and the commissions paid to
DePuy AcroMed.  If the independent
public accountant conducting the audit determines that an underpayment in
commissions has occurred, then OrthoLogic shall pay the outstanding amount due
to DePuy AcroMed within thirty (30) days. 
If the underpayment in commissions totals 2% or more of the amount due,
then OrthoLogic shall also pay the reasonable costs of the audit.  If the outstanding amount of unpaid
commissions is not paid to DePuy AcroMed within thirty (30) days, then the
unpaid amount of commissions shall accrue interest at the greater of 1-1/2% per
month or the legal rate allowed by statute.

 

13.0                        REPRESENTATIONS
AND WARRANTIES

 

13.1                           Product
Warranties.  OrthoLogic represents
and warrants to DePuy AcroMed that

 

***Certain information on this page has been filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 

12

 

all Products supplied in
connection with this Agreement shall be of merchantable quality, free from
material defects in material and workmanship, and shall be manufactured and
provided in accordance and conformity with the specifications for the Products
and in compliance with this Agreement. 
OrthoLogic represents and warrants that it shall comply with all
material present and future statutes, laws, ordinances and regulations relating
to the manufacture, assembly, packaging, labeling and supply of the Product,
including, but not limited to, those enforced by the FDA (including compliance
with Quality System Regulations) and International Standards Organization Rules
9,000 et seq.

 

13.2                           Execution
and Performance of Agreement. 
OrthoLogic and DePuy AcroMed each represents and warrants to the other
that it has full right, power and authority to enter into and perform its
obligations under this Agreement. 
OrthoLogic and DePuy AcroMed each further represents and warrants to the
other that the performance of its obligations under this Agreement will not
result in a violation or breach of, and will not conflict with or constitute a
default under any agreement, contract, commitment or obligation to which such
Party or any of its Affiliates is a party or by which it is bound and that it
has not granted and will not grant during the term of this Agreement or any
renewal thereof, any conflicting rights, license, consent or privilege with
respect to the rights granted herein.

 

13.3                           Intellectual
Property.  OrthoLogic represents and
warrants to DePuy AcroMed that OrthoLogic owns all of the rights, title and
interest in and to or otherwise has the necessary licenses to use the
OrthoLogic patents, OrthoLogic trademarks, know-how and all other intellectual
property that appear on or are otherwise used in connection with the Products;
no academic institution, member of an academic institution, corporation or
other entity, or any local, state or federal government holds any property
rights inconsistent with OrthoLogic’s property rights in any Product; the
manufacture, use and sale of the Products in accordance with the terms of this
Agreement does not infringe any third party’s rights under any patent; the use
of the OrthoLogic trademarks by DePuy AcroMed hereunder does not and will not
infringe the rights of any third party; OrthoLogic has received no notice or
claim with respect to infringement of a third party’s intellectual property
rights, including but not limited to a notice letter either notifying
OrthoLogic of a third party’s patent or alleging infringement of a third party
patent; and OrthoLogic is presently aware of no infringement by any third party
of any OrthoLogic patent or any OrthoLogic trademark.

 

13.4                           Compliance.

 

a.                                       DePuy
AcroMed represents and warrants that neither DePuy AcroMed nor any of its
employees or Distributors that provide services under this Agreement have been
excluded, debarred or otherwise are ineligible for participation in federal
healthcare programs (as defined in 42 U.S.C. Section 1320a-7(i)) or have been
convicted of a criminal act related to healthcare (as defined in 42 U.S.C.
Section 1320a-7(i)).

 

b.                                      DePuy
AcroMed represents and warrants that neither DePuy AcroMed nor, to its
knowledge, any of its employees or any representatives of any of its
distributors engaged to provide services hereunder owns or operates a Medicare
Part B durable medical equipment, prosthetics, orthotics, and medical supply
supplier business or works, in any manner, for any

 

13

 

physician or hospital
that is in a position to refer or recommend OrthoLogic or the Products covered
by this Agreement.

 

c.                                       DePuy
AcroMed represents and warrants that it has implemented a corporate compliance
program, a copy of which has been provided to OrthoLogic.  On an annual basis, DePuy AcroMed shall
provide a written certification to OrthoLogic that annual compliance training
on the DePuy AcroMed compliance program has been furnished to all relevant
DePuy AcroMed employees and Distributors providing services under this
Agreement.

 

 

14.0                        INDEMNIFICATION

 

14.1                           Indemnification
by OrthoLogic.  OrthoLogic shall
indemnify and hold harmless DePuy AcroMed, its Affiliates and their respective
officers, directors, employees, agents and representatives from and against any
and all damages, liabilities, claims, costs, charges, judgments and expenses
(collectively “Damages”) incurred by such person(s) that arise out of or result
from claims by third parties:  (a) to
the extent caused by the fault or negligence of OrthoLogic, its Affiliates or
their respective officers, employees or agents; (b) related to any Products as
supplied by OrthoLogic, or arising from or related to any claimed hazard or
defect in any Products whether manufacturing, design or otherwise, including
but not limited to OrthoLogic’s failure to warn of hazards, or express or
implied warranties made by OrthoLogic; (c) of failure by OrthoLogic to comply
with the terms of the applicable OrthoLogic Product warranty; (d) failure by
OrthoLogic to comply with applicable laws and/or regulations relating to the
manufacture, sale and/or transport of any Product; (e) that any Products
supplied by OrthoLogic infringes any patent, copyright, trade secret or other
proprietary right of a third party; (f) any other matter which is the
responsibility of OrthoLogic as determined in accordance with applicable law of
the jurisdiction relating to the sale of any Products by OrthoLogic which is
the subject of claim or dispute; or (g) related to termination of OrthoLogic’s
sales representatives, distributors or agents as contemplated in Article 2.

 

14.2                           Indemnification
by DePuy AcroMed.  DePuy AcroMed
shall indemnify and hold harmless OrthoLogic, its Affiliates and their
respective officers, directors, employees, agents and representatives from and
against any and all Damages incurred by such person(s) that arise out of or
result from claims by third parties to the extent caused by the fault or
negligence of DePuy AcroMed or its respective officers, employees or agents.

 

14.3                           Claims.   Promptly after receipt by a DePuy AcroMed
or an OrthoLogic indemnitee of information concerning the commencement of any
claim, demand, action, suit or proceeding (collectively, “Action”) which is the
subject of the other Party’s indemnification obligations hereunder, the
indemnitee shall notify the other Party of the commencement of the Action.  Any failure to provide such notice shall
only relieve the other Party of its indemnification obligations hereunder to
the extent it has been materially prejudiced by such failure.  The indemnifying Party shall have sole right
to select and retain attorneys to assert or negotiate, and the sole right to
control, the defense and any settlement of the Action, to the extent of such
Party’s corresponding indemnification and defense obligations, except that
under no circumstances shall the indemnifying Party enter into any settlement
that involves an admission

 

14

 

of liability, negligence
or other culpability by the indemnitee, or requires the indemnitee to
contribute to the settlement. Without limiting the indemnifying Party’s
foregoing right to select and retain attorneys and to sole control of the
defense and settlement of such Action, the indemnitee may, at its own expense,
participate in the defense of, or otherwise consult with counsel of its own
choice in connection with, an Action that is the subject of the other Party’s indemnification
and defense obligations.

 

14.4                           Infringement.  DePuy AcroMed shall promptly inform
OrthoLogic of any infringement of OrthoLogic’s patents or trademarks concerning
the Products which may come to the attention of DePuy AcroMed.  In such event, OrthoLogic shall take all
necessary action, consistent with prudent business judgment, to restrain such
infringement, and to recover damages therefor. 
Any damages awarded because of losses incurred by DePuy AcroMed shall be
the property of DePuy AcroMed. 
Otherwise, any damages recovered from such action shall be the property
of OrthoLogic.  DePuy AcroMed agrees to
cooperate, at OrthoLogic’s expense for any reasonable out-of-pocket expenses
incurred by DePuy AcroMed, in all stages of such action.  If OrthoLogic fails to take action to
enforce its patents, trademarks or other intellectual property rights and DePuy
AcroMed’s ability to sell the Products is adversely affected, DePuy AcroMed’s
Sales Quota shall be reduced to the extent DePuy AcroMed’s performance is
adversely affected by OrthoLogic’s failure.

 

15.0                        INSURANCE

 

15.1                           OrthoLogic
agrees to procure and maintain in full force and effect during the term of this
Agreement valid and collectible insurance policies in connection with its
activities as contemplated hereby, which policies shall provide coverage for
product liability relating to use of the Products in an amount not less than $1
million per occurrence and $3 million in the aggregate and for professional
liability and comprehensive general liability in an amount not less than $1
million per occurrence and $3 million in the aggregate.  The product liability and general liability
policies (but not the professional liability policy) shall name DePuy AcroMed as
an additional insured vendor.  Upon DePuy
AcroMed’s request, OrthoLogic shall provide to DePuy AcroMed certificate of
coverage or other written evidence reasonably satisfactory to DePuy AcroMed of
such insurance coverage.  Such insurance
policy shall provide that in the event such insurance coverage should be
materially adversely changed or terminated for any reason, the insurer
thereunder will give OrthoLogic and DePuy AcroMed ten (10) days’ prior notice.
The existence of such coverage shall in no way limit OrthoLogic’s liability or
obligations hereunder.

 

16.0                        COMPETITION

 

16.1                           During
the Term, DePuy AcroMed shall not sell an external lumbar spinal bone growth
stimulation product that competes with the Product.  If a Distributor appointed by DePuy AcroMed engages in the sale
of a Competing Product, such activity shall not constitute a breach of this
Agreement by DePuy AcroMed.

 

16.2                           If
DePuy AcroMed terminates the Agreement upon 120 days’ written notice to
OrthoLogic, pursuant to the provisions of Section 4.4, or if OrthoLogic
terminates this Agreement for material breach by DePuy AcroMed which remains
uncured by DePuy AcroMed

 

15

 

after receipt of written
notice of breach, then the obligation set forth in Section 16.1 shall continue
for a period of 90 days after termination of the Agreement.  The foregoing covenant not to compete shall
not apply in the European Union (“EU”).

 

16.3                           If
OrthoLogic terminates the Agreement upon 120 days’ written notice to DePuy
AcroMed pursuant to the provisions of Section 4.5, then DePuy AcroMed shall be
relieved, immediately upon receipt of such notice of the obligations set forth
in Sections 16.1 and 16.2.

 

17.0                        PATENTS,
TRADEMARKS AND TRADENAMES

 

17.1                           Both
OrthoLogic and DePuy AcroMed acknowledge that neither has any rights in any
patents, know-how, copyrights, trademarks, trade names, or insignia owned by
the other anywhere in the world.  Both
OrthoLogic and DePuy AcroMed undertake that they will not assert any rights in
any such intellectual properties arising by reason of this Agreement or the use
of any such intellectual properties hereunder. 
Each Party shall use the other Party’s trademarks and trade names in
connection with its activities hereunder but only as and to the extent
expressly authorized by this Agreement.

 

17.2                           If
either Party desires to use the trademark(s) and/or name of the other Party in
an advertisement, marketing materials, or promotional literature, or in
connection with any product or service, such Party must first seek the prior
written approval of the Party owning the rights to such trademark and/or
name.  Such approval shall be within the
sole discretion of the other Party. Nothing in this Agreement shall be
construed as conferring any general license right to use any name, trade name,
trademark, or other designation (including contraction, abbreviation or
simulation) of either Party by the other Party in advertising, publicity or
other promotional activities, or in connection with a product.

 

17.3                           Upon
termination or expiration of this Agreement, each Party shall as soon as
practicable deliver to the other Party or its designee free of charge, or
certify destruction of, any and all materials, including signs, advertising
matter and catalogues containing such trademarks or trade names of such other
Party then in its possession or in the possession of its employees or agents
and shall cease from making further use of any such materials, trademarks or
trade names.

 

17.4                           This
Article 17 shall survive termination of this Agreement, however arising.

 

18.0                        CONFIDENTIALITY

 

18.1                           As used
herein, “Confidential Information” shall mean all confidential or proprietary
information that is reduced to writing, marked as confidential and given to one
Party by the other Party relating to such other Party or any of its Affiliates,
including information regarding any of the products of such other party or any
of its Affiliates, information regarding its advertising, distribution,
marketing or strategic plans or information regarding its costs, productivity
or technological advances.  Neither
Party shall, for three (3) years after such exchange, use or disclose to third
parties any Confidential Information of the other (except to the extent
reasonably necessary to exercise its rights or comply with its obligations under
this Agreement) and each Party shall insure that its employees, officers and
agents shall not use or

 

16

 

disclose to third parties
any Confidential Information of the other (except to the extent reasonably
necessary to exercise its rights or comply with its obligations under this
Agreement) provided, however, that DePuy AcroMed may disclose Confidential
Information of OrthoLogic to DePuy AcroMed’s Affiliates and consultants if such
persons are informed of the confidential nature of such information and are
under an obligation to keep such information confidential.  Confidential Information shall not include
information that (i) was already known to the receiving Party at the time of
its receipt thereof, as evidenced by its written records, (ii) is disclosed to
the receiving party after its receipt thereof by a third Party who has a right
to make such disclosure without violating any obligation of confidentiality,
(iii) is or becomes part of the public domain through no fault of the receiving
Party or (iv) is required to be disclosed to comply with applicable laws or
regulations or an order of a court or regulatory body having competent
jurisdiction, provided the receiving Party gives sufficient notice to the
disclosing Party in a time period sufficient to contest the requirement.  All Confidential Information shall remain
the property of the disclosing Party. 
Neither Party shall make copies of any Confidential Information of the
other Party without prior written consent and shall return to the disclosing
Party promptly upon request or at its option, destroy all Confidential
Information along with all copies made hereof and all documents or things
containing any portion of any Confidential Information.

 

18.2                           Except
as otherwise provided in this Agreement, each of the Parties agrees that it
shall restrict the dissemination of the other Party’s Confidential Information
only to those persons whose knowledge of such information is reasonably
necessary to the performance of the obligations of the Parties under this
Agreement.  The obligations of this
Article 18 shall continue for a period of three (3) years from the date of
termination of this Agreement.

 

19.0                        DISPUTE
RESOLUTION

 

19.1                           Mediation.
(a)  Any dispute, controversy or claim
arising out of or related to this Agreement, or the interpretation,
application, breach, termination or validity thereof, which claim would, but
for this provision, be submitted to arbitration as provided pursuant to Section
19.2 of this Agreement shall, before submission to arbitration, first be
mediated through non-binding mediation in accordance with the Model Procedures
for the Mediation of Business Disputes promulgated by the CPR Institute for
Dispute Resolution, or successor (“CPR”) then in effect, except where those
rules conflict with these provisions, in which case these provisions
control.  A mediation can be initiated
upon either Party sending a written notice to the other Party stating an intent
to initiate mediation.  The mediation
shall be conducted in Chicago, Illinois and shall be attended by a senior
executive with authority to resolve the dispute from each Party.

 

(b) The mediator shall be
neutral, independent, disinterested and impartial and shall be selected from a
professional mediation firm such as ADR Associates for JAMS/ENDISPUTE or DPR.

 

(c)  The Parties shall promptly confer in an
effort to select a mediator by agreement. 
In the absence of such an agreement within 10 days of initiation of the
mediation, the mediator shall be selected by CPR in accordance with this
Agreement as follows:  CPR shall provide
the Parties with a list of at least 15 names. 
Each Party shall exercise challenges for cause, two peremptory

 

17

 

challenges, and rank the
remaining candidates within 5 working days of receiving the CPR list.  The Parties may together interview the three
top-ranked candidates for no more than one hour each and, after the interviews,
may each exercise one peremptory challenge. 
The mediator shall be the remaining candidate with the highest aggregate
ranking.

 

(d)                                 The
mediator shall confer with the Parties to design procedures to conclude the
mediation within no more than 45 days after initiation.  Under no circumstances may the commencement
of arbitration under Section 19.2 below be delayed more than 45 days by the
mediation process specified herein absent contrary agreement of the Parties.

 

(e)  Each Party agrees not to use the period or
pendency of the mediation to disadvantage the other Party procedurally or
otherwise.  No statements made by either
side during the mediation may be used by the other or referred to during any
subsequent proceedings.

 

(f)  Each Party has the right to pursue
provisional relief from any court, such as attachment, preliminary injunction,
replevin, etc., to avoid irreparable harm, maintain status quo, or preserve the
subject matter of the arbitration, even though mediation has not been commenced
or completed.

 

19.2                           Arbitration/Dispute
Resolution. (a)  Any controversy or
claim arising out of or relating to this Agreement or the validity, inducement,
or breach thereof, shall be settled by arbitration before a single arbitrator
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”) then pertaining, except where those rules conflict with
this provision, in which case this provision controls.  The Parties hereby consent to the
jurisdiction of the federal district court for the district in which the arbitration
is held for the enforcement of this provision and entry of judgment on any
award rendered hereunder.  Should such
court for any reason lack jurisdiction, any court with jurisdiction shall
enforce this clause and enter judgment on any award.

 

(b)  The arbitrator shall be an attorney who has
at least 15 years of experience with a law firm or corporate law department of
over 25 lawyers or was a judge of a court of general jurisdiction for at least
10 years.  The arbitration shall be held
in Chicago, Illinois and in rendering the award the arbitrator must apply the
substantive law of Illinois (except where that law conflicts with this clause),
except that the interpretation and enforcement of this arbitration provision
shall be governed by the Federal Arbitration Act.  The arbitrator shall be neutral, independent, disinterested, and
impartial and shall abide by The Code of Ethics for Arbitrators in Commercial
Disputes approved by the AAA.  Within 45
days of the initiation of arbitration, the Parties shall reach agreement upon
and thereafter follow procedures assuring that the arbitration will be
concluded and the award rendered within no more than eight months from the
selection of the arbitrator.  Failing
such agreement, the AAA will design and the Parties will follow procedures that
meet such a time schedule.

 

(c)  Each Party has the right before, or if the
arbitrator cannot hear the matter within an acceptable period, during the
arbitration, to seek and obtain from the appropriate court provisional remedies
such as attachment, preliminary injunction, replevin, etc., to avoid
irreparable harm, maintain the status quo or preserve the subject matter of the
arbitration.

 

18

 

(d)  EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL
OF ANY ISSUE BY JURY.  THE DECISION OF
THE ARBITRATOR SHALL BE BINDING UPON THE PARTIES.  THE ARBITRATOR SHALL NOT AWARD ANY PARTY PUNITIVE, EXEMPLARY,
MULTIPLIED OR CONSEQUENTIAL (INCLUDING LOST SALES OR LOST PROFITS) DAMAGES, AND
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO SEEK SUCH DAMAGES.  NO PARTY MAY SEEK OR OBTAIN PREJUDGMENT
INTEREST OR ATTORNEY’S FEES OR COSTS.

 

20.0                        MISCELLANEOUS

 

20.1                           Publicity.  Neither Party hereto shall originate any
publicity, news release, or other announcement, written or oral, whether to the
public press, the trade, DePuy AcroMed’s or OrthoLogic’s Customers or
otherwise, relating to this Agreement, or to performance hereunder or the
existence of an arrangement between the Parties without the prior written approval
of the other Party hereto, save only such announcements as in the opinion of
counsel for the party making such announcement is required by law to be
made.  In the event disclosure is
required by applicable law, then the Party required to so disclose such
information shall, to the extent possible, provide to the other Party for its
approval a written copy of such public disclosure at least two (2) business
days prior to disclosure. 
Notwithstanding the foregoing, OrthoLogic may issue a press release with
respect to its entering into this Agreement, provided that OrthoLogic shall
provide to DePuy AcroMed a copy of the proposed press release no less than five
(5) business days prior to its proposed release.  The contents of such press release shall be subject to DePuy
AcroMed’s consent, such consent not to be unreasonably withheld or
delayed.  Neither Party shall use the
name of the other Party or any of its Affiliates for advertising or promotional
purposes without the prior written consent of such Party.

 

20.2                           Headings.  The Article and Section headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning and interpretation of this Agreement.

 

20.3                           Notices.  All notices and other communications required
or permitted to be given under this Agreement shall be in writing and shall be
considered given and delivered when personally delivered to the party to whom
such notice or communication is addressed or one (1) business day after
posting with an overnight courier or when confirmation is received if sent by
facsimile or five (5) business days after deposit in the United States mail,
postage prepaid, return receipt requested, properly addressed to a party at the
address set forth below, or at such other address as such party shall have
specified by notice given in accordance with this Section:

 

	
  If to OrthoLogic:

  	
   

  	
  OrthoLogic Corp.

  
	
   

  	
   

  	
  1275 West Washington
  Street

  
	
   

  	
   

  	
  Tempe, Arizona  85281

  
	
   

  	
   

  	
  Attention:  Thomas R. Trotter, President

  
	
   

  	
   

  	
  Facsimile No.
  602-286-5284

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Quarles & Brady LLP

  

 

19

 

	
   

  	
   

  	
  One East Camelback Road

  
	
   

  	
   

  	
  Suite 400

  
	
   

  	
   

  	
  Phoenix, Arizona  85012

  
	
   

  	
   

  	
  Attention: P. Robert
  Moya, Esq.

  
	
   

  	
   

  	
  Facsimile No.
  602-230-5598

  
	
   

  	
   

  	
   

  
	
  If to DePuy AcroMed:

  	
   

  	
  DePuy AcroMed, Inc.

  
	
   

  	
   

  	
  325 Paramount Drive

  
	
   

  	
   

  	
  Raynham, Massachusetts
  02767

  
	
   

  	
   

  	
  Attention:  President

  
	
   

  	
   

  	
  Facsimile No.:
  508-828-3400

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  DePuy AcroMed, Inc.

  
	
   

  	
   

  	
  325 Paramount Drive

  
	
   

  	
   

  	
  Raynham, Massachusetts
  02767

  
	
   

  	
   

  	
  Attention:  Corporate Counsel

  
	
   

  	
   

  	
  Facsimile No.:
  508-828-3789

  

 

20.4                           Failure
to Exercise.  The failure of either
Party to enforce at any time for any period any provision hereof shall not be
construed to be a waiver of such provision or of the right of such Party
thereafter to enforce each such provision. The waiver of any term or condition
hereof must be in writing, and any such waiver shall not be construed as a
waiver of any other term or condition of this Agreement.

 

20.5                           Assignment.  This Agreement, or any of the rights and
obligations created herein, shall not be assigned or transferred, in whole or
in part, by either Party hereto without the prior written consent of the other
Party; provided, however, that either Party shall have the right to assign any
or all of its rights or obligations under this Agreement to any Affiliate, or a
successor to that part of its business to which this Agreement relates, without
such prior written consent.

 

20.6                           Severability.
  In the event that any one or more of the provisions (or any part thereof)
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument. 
Any term or provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, to the extent the economic benefits
conferred by this Agreement to both Parties remain substantially unimpaired,
not affect the validity, legality or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.

 

20.7                           Relationship
of the Parties.  The relationship of
DePuy AcroMed and OrthoLogic established by this Agreement is that of
independent contractors, and nothing contained herein shall be construed to (i)
give either Party any right or authority to create or assume any obligation of
any kind on behalf of the other or (ii) constitute the Parties as partners,
joint venturers, co-owners or otherwise as participants in a joint or common
undertaking.

 

20

 

20.8                           Entire
Agreement.  It is the desire and
intent of the Parties to provide certainty as to their future rights and
remedies against each other by defining the extent of their undertakings
herein.  This Agreement constitutes and
sets forth the entire agreement and understanding between the Parties with
respect to the subject matter hereof and is intended to define the full extent
of the legally enforceable undertakings of the Parties hereto, and no promise,
agreement or representation, written or oral, which is not set forth explicitly
in this Agreement is intended by either Party to be legally binding.  Each Party acknowledges that in deciding to
enter into this Agreement and to consummate the transactions contemplated
hereby it has not relied upon any statements, promises or representations,
written or oral, express or implied, other than those explicitly set forth in
this Agreement.  This Agreement
supersedes all previous understandings, agreements and representations between
the Parties, written or oral, with respect to the subject matter hereof.

 

20.9                           Counterparts. 
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

 

20.10                     Compliance
with Law.  Each Party in the
performance of this Agreement, warrants that it and all its directors, officers
or employees shall comply with all applicable local, state, federal and
international laws, executive orders, regulations, ordinances, or similar
requirements of the national government or government entity which may now or
hereafter govern the performance of the parties hereunder.  This includes, but is not limited to, the
laws of the United States pertaining to procurement integrity, anti-kickback
procedures, and other standards of ethical conduct pertaining to gratuities,
gifts, entertainment, and employment of government officials and other
requirements.  Such required conduct
also includes, without limitation, compliance at that Party’s expense with all
applicable import and/or export control laws and regulations and any other laws
and regulations pertaining to export, import, sale and resale or other
distribution of the Products.

 

20.11                     Debarment.  By signing this Agreement, either Party
shall have the right to automatically terminate this Agreement in the event
that the other Party is debarred, excluded, suspended or otherwise determined
to be ineligible to participate in federal health care programs (collectively,
“Debarred” or “Debarment”). 
Accordingly, each Party shall provide the other Party with immediate
notice if it (i) receives notice of action or threat of action with respect to
its Debarment during the term of this Agreement; or (ii) becomes Debarred.  Upon receipt of such notice, this Agreement
shall automatically terminate without further action or notice.

 

20.12                     Expenses.  Each Party shall pay all of its own fees and
expenses (including all legal, accounting and other advisory fees) incurred in
connection with the negotiation and execution of this Agreement and the
arrangements contemplated hereby.

 

20.13                     Modifications
and Amendments.  This Agreement
shall not be modified or otherwise amended except pursuant to an instrument in
writing executed and delivered by each of the Parties hereto.

 

20.14                     Construction.  The Parties have participated jointly in the
negotiation and drafting

 

21

 

of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Agreement.

 

20.15                     Governing
Law.  This Agreement and its
performance shall be governed by and construed in accordance with the laws of
the State of Illinois, without regard to conflict of laws, principles, except
that the arbitration provisions set forth in Article 19 shall be governed by
the provisions of the Federal Arbitration Act.

 

20.16                     Incorporation
of Exhibits.  The Exhibits
identified in this Agreement are incorporated herein by reference and made a
part hereof.

 

20.17                     Binding
Agreement.  This Agreement is not
binding on either Party unless and until signed by both Parties.

 

IN WITNESS WHEREOF, the
Parties hereto intending legally to be bound hereby, have each caused this
Agreement to be duly executed as of the date first above written.

 

	
   

  	
  ORTHOLOGIC CORP

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Thomas Trotter

  
	
   

  	
   

  	
  Name:  Thomas Trotter

  
	
   

  	
   

  	
  Title:  President

  
	
   

  	
   

  
	
   

  	
  DEPUY ACROMED, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Earl R. Fender

  
	
   

  	
   

  	
  Name:  Earl R. Fender

  
	
   

  	
   

  	
  Title:  President

  

 

22

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