Document:

EX-10.7 EMPLOYMENT AGREEMENT/RICHARD DAMRON, JR.

 

Exhibit 10.7

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”), dated as of January 1, 2006, is made between Home
Diagnostics, Inc., a Delaware corporation with offices (the “Offices”) at 2400 NW 55th
Court, Fort Lauderdale, Florida (the “Company”), and J. Richard Damron, Jr., an individual residing
at 2120 NW 25th Street, Boca Raton, Florida 33431 (the “Executive”).

     The Company desires to assure itself of the continued services of Executive as an executive of
the Company, and to that end desires to enter into a contract of employment with him, upon the
terms and conditions herein set forth, and Executive is desirous of entering into such a contract
of employment.

     The parties, intending to be legally bound, agree as follows:

     1. EMPLOYMENT: Effective as of the date of this Agreement, Executive will be employed by the
Company as President and Chief Executive Officer to perform the duties and services generally
associated with the direction and supervision of the day to day operations of the Company and as
may be assigned to him from time to time by the Board of Directors of the Company (the “Board”) .
Executive accepts such employment and agrees to perform such duties to the best of his ability, and
shall use his best efforts, skill and ability to promote the interest of the Company and otherwise
to assist the Company in such matters as to which his knowledge and expertise may be particularly
relevant. During the term of this Agreement, Executive shall, except during customary vacation
periods and periods of illness, devote all of Executive’s business time, attention and energies to
the performance of Executive duties and to the business and affairs of the Company and to promoting
the best interests of the Company, and shall not, either during or outside of such normal business
hours, directly or indirectly, engage in any activity inimical to such best interests.

     2. TERM: The term of this Agreement shall commence on the date hereof and end on December 31,
2008, unless earlier terminated as provided herein.

     3. COMPENSATION AND BENEFITS: In consideration of his services during the term of this
Agreement, Executive shall be paid compensation and receive benefits from the Company as follows:

          (a) Executive shall receive a salary (“Base Salary”) at an annual rate of Five Hundred
Thousand Dollars ($500,000), payable in bi-weekly installments or in such other installments as may
be agreed upon. Executive’s salary rate may be subject to increase by the Board from time to time
in its sole discretion.

          (b) Executive shall be entitled to receive an annual bonus, as determined by the Board in its
sole discretion, of up to 50% of Executive’s salary in subparagraph (a) above.

          (c) Executive shall be entitled to participate in the Company’s benefit plans that are
generally available to the Company’s executives and employees, all in accordance with the normal
policies and practices of the Company, including, without limitation, health insurance, life
insurance, disability insurance, 401-K plan and stock option plans. The Company

 

 

reserves the right to make such modifications in its benefit plans at any time as it, in its
sole discretion, deems appropriate.

          (d) Executive shall be entitled to receive three (3) weeks of paid vacation per annum plus
U.S. holidays applicable to all Company employees.

          (e) Executive shall be entitled to receive a one-time bonus payment of $500,000 (the “Sale
Bonus”) upon the occurrence during the term of this Agreement of the sale by the stockholders of
the Company of eighty percent (80%) or more of the issued and outstanding capital stock of the
Company to a third party or third parties, not affiliated with or related to any such stockholders,
in any single transaction or series of related transactions. Executive shall be entitled to
receive a one-time bonus payment of $250,000 (the “IPO Bonus”) upon the occurrence during the term
of this Agreement of a Qualified Public Offering (as hereinafter defined). For purposes of this
Agreement, a “Qualified Public Offering” shall mean the closing of the first underwritten offering
by the Company or any of its subsidiaries (or any successor entity) to the public pursuant to an
effective registration statement under the Securities Act of 1933, as amended, provided that (i)
such registration statement covers the offer and sale of common stock of the Company of which the
aggregate gross proceeds attributable to sales for the account of the Company or any of its
subsidiaries are no less than $40,000,000, and (ii) such common stock is listed for trading on
either the New York Stock Exchange or the NASDAQ National Market. Notwithstanding anything herein
contained to the contrary, Executive may earn and receive payment pursuant to the provisions of
this Section 3(e) only up to a maximum aggregate amount of $500,000 even if both the Sales Bonus
and the IPO Bonus are earned.

          (f) Executive’s principal place of service shall not be changed from the present offices,
without Executive’s consent, which may be withheld for any or no reason, except that such principal
place of service may be changed without Executive’s consent to any comparable office space within
15 miles of the residence of Executive.

          (g) Except as otherwise provided in this Agreement, all compensation shall be payable only if
Executive is employed by the Company or an affiliate at the time payment is made. All compensation
shall be subject to withholding and other applicable taxes.

     4. TERMINATION:

          (a) Executive’s employment under this Agreement shall terminate:

               (i) upon written notice from the Company to Executive, for Cause (“Cause” being defined for
this purpose as Executive’s dishonesty, willful or intentional harm to the Company or failure to
comply with a reasonable request of the Board, material breach of this Agreement, excessive
absence, conviction of a felony under U.S. Federal, state or local laws or any applicable foreign
laws, misconduct in connection with or affecting the business of the Company, negligence in
performing Executive’s duties hereunder, failure to perform Executive duties hereunder after
delivery to Executive by the Company of written notice identifying the duties not being performed
by Executive or illegal drug use by Employee; provided, however, that “Cause” shall
not include the refusal of Executive to accept a material, unconsented reduction in
responsibilities and duties or to accept relocation from the offices other than

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pursuant to Section 3(h) above, (any such reduction or relocation being hereinafter referred
to as a “Just Cause Event”).

               (ii) upon the death of Executive; or

               (iii) upon 30 days’ advance written notice from either the Company or Executive to the other
in the event Executive acquires a Permanent Disability (“Permanent Disability”) being defined for
this purpose as it is defined in the Company’s long-term disability insurance policy in effect at
such time by reason of physical or mental disability, Executive is incapable of performing
Executive’s principal duties for a period of two consecutive months or 60 days’ in the aggregate in
any 12 month period.

          (b) Executive’s employment under this Agreement shall terminate upon written notice from the
Company to Executive without Cause at any time.

          (c) In the event that this Agreement is terminated pursuant to Section 4(a) hereof, Executive
shall be entitled to receive, after termination, all unpaid compensation earned and payable under
Section 3 hereof through the date of termination.

          (d) In the event that this Agreement is terminated pursuant to Section 4(b) hereof or by
Executive upon the occurrence of a Just Cause Event, Executive shall be entitled to continue to
receive, after such termination, the greater of (A) one year of his then current Base Salary or (B)
all Salary that would otherwise have been due to Executive under Section 3(a) hereof from the date
of termination, either, at the option of the Company, as a lump sum or bi-weekly in the same manner
and at the same time as if Executive had not been terminated.

          (e) In the event that this Agreement is terminated, (A) Executive shall be allowed to continue
to participate in the Company’s health insurance plan during any period that Executive is receiving
bi-weekly compensation hereunder and (B) the Company shall reimburse Executive for the cost of
health insurance made available under COBRA.

          (f) Notwithstanding anything herein to the contrary, in the event that this Agreement is
terminated or expires by its terms, Executive and his spouse shall be entitled to continue
participation in the Company’s health insurance plan at the Company’s expense until the earlier of
the first day of full Medicare benefits eligibility or August 21, 2019, which health insurance plan
will continue to provide Executive and his spouse with benefits that are comparable to those
existing at the time of such termination or expiration of this Agreement.

     5. COMPANY’S TRADE SECRETS: Executive acknowledges that he understands that in the
performance of his duties with the Company he will be exposed to the Company’s trade secrets and
confidential information. For purposes of this Agreement, “Trade Secrets” and/or “Confidential
Information” means information or material that is commercially valuable to the Company and not
generally known in the industry. This includes, but is not limited to, the following:

          (a) any and all versions of the Company’s proprietary computer software (including source code
and object code), hardware, firmware and documentation;

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          (b) technical information concerning the Company’s products and services, including training
programs, product data and specifications, diagrams, flow charts, drawings, test results, know-how,
processes, inventions, research projects and product development;

          (c) information concerning the Company’s business, including cost information, profits, sales
information, accounting and unpublished financial information, business plans, markets and
marketing methods, customer lists and customer information, purchasing techniques, supplier lists
and supplier information and advertising strategies;

          (d) information concerning the Company’s employees, including their salaries, strengths,
weaknesses and skills;

          (e) non-public information submitted by the Company’s customers, suppliers, employees,
consultants or co-venturers with the Company for study, evaluation or use; and

          (f) any other information not generally known to the public which, if misused or disclosed,
could reasonably be expected to adversely affect the Company’s business.

     6. NONDISCLOSURE OF TRADE SECRETS AND CONFIDENTIAL INFORMATION: Executive agrees that he will
keep the Company’s Trade Secrets and Confidential Information, whether or not prepared or developed
by him, in the strictest of confidence at all times, both during and after the term of this
Agreement. Executive will not use or disclose such secrets or information to others without the
Company’s written consent, except when necessary to perform his duties with the Company.

     7. CONFIDENTIAL INFORMATION OF OTHERS: Executive agrees that he will not disclose to the
Company, use in the Company’s business, or cause the Company to use any information or material
that is a trade secret of others. Executive hereby represents and warrants that his performance
of this Agreement will not breach any agreement to keep confidential any proprietary information
acquired by him prior to his employment by the Company.

     8. NO CONFLICTING OBLIGATIONS: Executive represents and warrants that he has no current or
prior agreements, relationships or commitments that conflict with this Agreement or with his
relationship with the Company.

     9. RETURN OF MATERIALS: When Executive’s employment with the Company terminates, for whatever
reason, he will promptly deliver to the Company all originals and copies of all documents, records,
software code and programs, media and other materials containing any of the Company’s Trade Secrets
or Confidential Information and all other property belonging to the Company. Executive will also
return to the Company all equipment, files, software programs and other personal property or
intellectual property belonging to the Company.

     10. CONFIDENTIALITY OBLIGATION SURVIVES EMPLOYMENT: Executive acknowledges that he
understands that his obligation to maintain the confidentiality and security of the Company’s Trade
Secrets and Confidential Information remains with him even after his employment with the Company
terminates and continues for so long as such material remains a trade secret or confidential.

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     11. WORKS MADE FOR HIRE: Executive acknowledges that he understands that, as part of his
duties to the Company, he may be asked to create or contribute to the creation of documentation and
other copyrightable works. Executive agrees that any and all documentation and other copyrightable
materials that he is asked to prepare or work on as part of his employment with the Company or that
he otherwise works on or creates while employed by the Company and within the scope of his
employment and duties for the Company shall be “works made for hire,” as that term is used and
defined by U.S. copyright law, and that the Company shall own all the copyright and other property
rights in such works. IF AND TO THE EXTENT ANY SUCH MATERIAL DOES NOT SATISFY THE LEGAL
REQUIREMENTS TO CONSTITUTE A “WORK MADE FOR HIRE,” EXECUTIVE HEREBY ASSIGNS ALL HIS RIGHT, TITLE
AND INTEREST IN ANY COPYRIGHT OR OTHER RIGHTS OR INTEREST IN SAID WORKS TO THE COMPANY.

     12. DISCLOSURE OF DEVELOPMENTS: Executive agrees that while he is employed by the Company, he
will promptly inform the Company of the full details of all his inventions, discoveries,
improvements, innovations and ideas (collectively called “Developments”)—whether or not patentable,
copyrightable or otherwise protectible—that he conceives, completes or reduces to practice (whether
jointly or with others) and which:

          (a) relate to the Company’s present or prospective business, or actual or demonstrably
anticipated research and development; or

          (b) result from any work he does using any equipment, facilities, materials, Trade Secrets,
Confidential Information or personnel of the Company; or

          (c) result from or are suggested by any work that he may do for the Company.

     13. ASSIGNMENT OF DEVELOPMENTS: Executive hereby assigns to the Company, or the Company’s
designee, his entire right, title and interest in all of the following that he conceives or makes
(whether alone or with others) while employed by the Company:

          (a) all Developments;

          (b) all copyrights, trade secrets, trademarks and mask work rights in Developments; and

          (c) all patent applications filed and patents granted in respect of any Developments,
including those in foreign countries.

     14. POST-EMPLOYMENT ASSIGNMENT: Executive agrees that he will fully disclose to the Company
any and all inventions, improvements or discoveries actually made, or copyright registrations or
patent applications filed within six months after his employment with the Company terminates.
Executive hereby assigns to the Company his entire right, title and interest in such inventions,
improvements and discoveries, whether made individually or jointly, which relate to the business of
the Company during the entire period of his employment preceding the termination of his employment.

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     15. EXECUTION OF DOCUMENTS: Both while employed by the Company and afterwards, Executive
agrees to execute and aid in the preparation of any papers or filings that the Company may consider
necessary or helpful to obtaining or maintaining any patents, copyrights, trademarks or other
proprietary rights covering work and Developments for which he has or had responsibility for and/or
involvement with during his term of employment at the Company at no charge to the Company, but at
its expense. If the Company is unable to secure Executive’s signature on any document necessary to
obtain or maintain any patent, copyright, trademark or other proprietary rights, whether due to his
mental or physical capacity or any other cause, Executive hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to execute and file such documents and do all other lawfully permitted acts to
further the prosecution, issuance and enforcement of patents, copyrights and other proprietary
rights with the same force and effect as if executed by the Executive.

     16. PRIOR DEVELOPMENTS: As a matter of record, Executive must identify at the time of signing
this Agreement all prior developments relevant to the subject matter of his employment by the
Company (“Prior Developments”) that have been conceived or reduced to practice or learned by him,
alone or jointly with others, before his employment with the Company, which he desires to remove
from the operation of this Agreement. Executive represents that he has made no such Prior
Developments at the time of signing this Agreement which he desires to remove from the operation of
this Agreement. Executive further represents and warrants that he is under no prior contractual or
other obligation that in any way impedes his ability to perform this Agreement or carry out his
duties and responsibilities for the Company, including any non-compete obligations and that, in
providing the services contemplated herein, he will not make any improper or unauthorized use of
any property rights, or trade secrets or property belonging to his previous employer or anyone
else.

     17. CONFLICT OF INTEREST: During Executive’s employment by the Company, he agrees that he
will not engage in any business activity competitive with or adverse to the Company’s business
activities Executive also agrees that he will not engage in any other activities that conflict
with the Company’s best interests.

     18. POST-EMPLOYMENT NON-COMPETITION AGREEMENT: Executive acknowledges that he understands
that, during his employment by the Company, he may become familiar with Confidential Information of
the Company. Therefore, it is possible that Executive could cause grave harm to the Company if he
worked for a competitor. Accordingly, Executive agrees for twelve (12) months after the
termination of his employment with the Company not to engage in, or contribute his knowledge to,
any business entity or activity that is in competition with or adverse to the Company’s business
activities, including, without limitation, with respect to the blood glucose monitoring business.

          (a) Diversion of Company Business: For a period of one year from the date Executive’s
employment terminates, he will not divert or attempt to divert from the Company any business the
Company enjoyed or solicited from its customers during the period two years prior to the
termination of his employment.

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          (b) Geographic Restrictions: Executive acknowledges and agrees that the restrictions
on his post-employment competitive activity shall apply throughout the entire United States.

     19. ADDITIONAL POST-EMPLOYMENT NON-COMPETITION TERMS: During any period in which Executive is
not receiving compensation payments from the Company only, the following post-employment
non-competition term(s) shall apply:

          (a) Written Consent: Executive acknowledges that he understands that he will be
permitted to engage in the work or activity described in Section 18 of this Agreement if he
provides the Company with clear and convincing written evidence, including assurances from his new
employer and him, that the contribution of his knowledge to that work or activity will not cause
him to disclose, base judgment upon or use any of the Company’s Confidential Information. The
Company will furnish Executive a written consent to that effect if he provides the required written
evidence. Executive agrees not to engage in such work or activity until he receives such written
consent from the Company, which consent will not be unreasonably withheld.

          (b) Inability to Secure Employment: If, solely as a result of this non-competition
agreement, Executive is unable to secure employment appropriate to his abilities and training,
despite his diligent efforts to do so, the Company shall release him from his non-competition
obligations, but only to the extent necessary to allow him to obtain such employment. In all other
respects, the non-competition and confidentiality restrictions herein shall continue to apply.

     20. NONINTERFERENCE WITH NON-SOLICITATION OF COMPANY EMPLOYEES: While employed by the
Company, and for one year after, Executive agrees that he will not directly or through the use of
agents induce, or attempt to induce, any Company employees to quit the Company’s employ.

     21. ENFORCEMENT: Executive agrees that in the event of a breach or threatened breach of this
Agreement by Executive, money damages would be an inadequate remedy and extremely difficult to
measure. Executive agrees, therefore, that the Company shall be entitled to an injunction to
restrain him from such breach or threatened breach. Nothing in this Agreement shall be construed
as preventing the Company from pursuing any remedy at law or in equity for any breach or threatened
breach.

     22. GENERAL PROVISIONS:

          (a) Successors: The rights and obligations under this Agreement shall survive the
termination of Executive’s service to the Company in any capacity and shall inure to the benefit
and shall be binding upon: (i) his heirs and personal representatives, and (ii) the successors and
assigns of the Company.

          (b) Governing Law: This Agreement shall be construed and enforced in accordance with
the laws of the State of Florida.

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          (c) Severability: If any provision of this Agreement is determined to be invalid or
unenforceable, the remainder shall be unaffected and shall be enforceable against both the Company
and Executive.

          (d) Entire Agreement: This Agreement supercedes and replaces all former agreements or
understandings, oral or written, between the Company and Executive.

          (e) Modification: This Agreement may not be modified except by a writing signed both
by the Company and Executive.

          (f) Assignment: This Agreement may be assigned by the Company to any affiliate of the
Company. Executive may not assign or delegate his duties under this Agreement without the
Company’s prior written approval.

          (g) Notices: Any notice required to be given hereunder shall be deemed to have been
sufficiently given either when served personally, by facsimile transmission or when served by first
class mail addressed to either party at the applicable address set forth on the first page of this
Agreement.

          (h) Counterparts. This Agreement may be executed in several identical counterparts,
each of which when so executed shall be deemed an original, but all such counterparts shall
constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto duly executed this Agreement as of the day and year
first above written.

	 	 	 	 	 	 	 
	 	 	HOME DIAGNOSTICS, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ George H. Holley	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: George H. Holley	 	 
	 

	 	 	 	Title: Chairman	 	 
	 
	 	 	 	 	 	 
	 
	 	/s/ J. Richard Damron, Jr.	 	 	 	 
	 	 	 
	 	 	J. Richard Damron, Jr.

-8-EX-10.8 PURCHASE AND SUPPLY AGREEMENT

 

Exhibit 10.8

PURCHASE AND SUPPY AGREEMENT

BETWEEN

HOME DIAGNOSTICS, INC.

AND

CONDUCTIVE TECHNOLOGIES

DATED February 8, 2006

 

 

CONTENTS

	 	 	 
	I

	 	Definitions
	II

	 	Term and Termination
	III

	 	Supplier Performance
	IV

	 	Terms of Sale
	V

	 	Confidential Information
	VI

	 	Modification
	VII

	 	Waiver
	VIII

	 	Time is of the Essence
	IX

	 	Assignments and Delegation
	X

	 	Third Party Beneficiaries
	XI

	 	Successors and Assigns
	XII

	 	Force Majeure
	XIII

	 	Notice
	XIV

	 	Indemnification
	XV

	 	Further Assurances
	XVI

	 	Legal Counsel; Rules of Construction
	XVII

	 	Arbitration
	XVIII

	 	Choice of Law
	XIX

	 	Attorney’s Fees
	XX

	 	Entire Agreement

EXHIBITS

	 	 	 
	A

	 	Specifications

 

 

PURCHASE AND SUPPLY AGREEMENT

THIS AGREEMENT is made and entered into in Fort Lauderdale, Broward County, Florida, this 8th of
October, 2006 by and between HOME DIAGNOSTICS, INC., a Delaware corporation with its principal
place of business at 2400 Northwest 55th Court, Fort Lauderdale, FL 33309, United States of America
(“HDI”) and CONDUCTIVE TECHNOLOGIES with its principal place of business at 935 Borom Road, York,
PA 17404 (“CT”) (hereinafter a “party” or the “parties”).

WHEREAS, HDI develops, manufactures, assembles, sells and markets diabetes management medical
devices and supplies (the “Products”);

WHEREAS, HDI desires to purchase Materials from Supplier for inclusion in HDI’s Products, on the
terms and conditions of this Agreement;

WHEREAS, Supplier desires to supply Materials to HDI for incorporation into Products on the terms
and conditions of this Agreement; and

WHEREAS, the parties hereto desire that HDI purchase all of its requirements for the Materials from
Supplier on the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

Section I : Definitions

1.1 “HDI Technical Information” shall mean any and all know-how, trade secrets, information, data,
formulations, practices, techniques, knowledge, skill, procedures, process and the like, and all
other clinical, physical and analytical, safety, quality control or proprietary data and
information relating to the manufacture and use of Materials currently or hereafter in the
possession of, or developed during the term hereof by HDI or its Affiliates.

1.2 “Confidential Information” shall have the meaning set forth in Section 2.

1.3 “Legal Requirements” shall mean all laws, statutes, ordinances, codes, rules, regulations,
published standards, permits, judgments, decrees, writs, injunctions, rulings, orders and other
requirements of all Public Authorities.

1.4 “Materials” shall mean HDI part number (s) detailed to the specifications set forth on Exhibit
A.

 

 

1.5 “Person” shall mean any natural person, corporation, firm, trust, business trust, joint
venture, association, organization, company, syndicate, partnership or other business entity, or
any government, or any agency or political subdivision thereof or any other form or entity not
specifically listed herein.

1.6 “Product” shall mean any product(s) currently being sold or marketed by HDI that are listed in
Exhibit A.

1.7 “Public Authority” shall mean any supranational, national, regional, state or local government,
court, governmental agency, authority, board, bureau, instrumentality or regulatory body.

1.8 “Specification” shall mean the specification for the Materials as described in Exhibit A, as
such specification may be amended from time to time, either by mutual agreement of HDI and Supplier
or in response to directives issued by a relevant Public Authority in connection with the
registration or marketing of the products in a particular jurisdiction.

1.9 “Third Party” shall mean any Person which is not an affiliate of any party hereto.

Section II : Term and Termination

2.1 Unless terminated sooner as hereinafter provided, this Agreement shall take effect on the
Effective Date and extend for a term of three (3) years from the date hereof.

2.2 Unless terminated sooner as hereinafter provided, the parties shall negotiate in good faith to
renew the terms of this Agreement six (6) months prior to the completion of the current three (3)
year term for an additional 3 year period.

2.3 CT shall have the right at any time during the initial term or any renewal period hereof, by
giving notice in writing to HDI, to terminate this Agreement forthwith without judicial action upon
the occurrence of any of the following events:

	 	(i)	 	Any breach of this Agreement by HDI not cured within thirty (45) business
days after written notice thereof including breach of any open account payment terms
which may be negotiated by the parties.
	 
	 	(ii)	 	Insolvency or bankruptcy of HDI, and/or the appointment of a trustee or
receiver in bankruptcy for HDI, and/or assignment for the benefit of creditors, and/or
sustained inability to perform obligations as the same become due;
	 
	 	(iii)	 	Inability or failure of HDI to make payments under this Agreement and any
inability or failure of HDI to perform its obligations hereunder not cured within
thirty (45) business days after written notice thereof;

 

 

2.4 HDI shall have the right at any time during the initial term or any renewal period hereof, by
giving notice in writing to CT, to terminate this Agreement forthwith without judicial action upon
the occurrence of any of the following events:

	 	(i)	 	any breach of this Agreement by CT not cured within thirty (45) business days
after written notice thereof; or
	 
	 	(ii)	 	Insolvency or bankruptcy of CT, and/or the appointment of a trustee or
receiver in bankruptcy for CT, and/or assignment for the benefit of creditors, and/or
sustained inability to perform obligations as the same become due.

2.5 Upon the expiration or termination of this Agreement for any reason, HDI and CT shall be bound
by the terms of this Agreement with respect to all orders placed by HDI within the time frame of
the current forecast prior to the date of such expiration or termination date; except if impacted
as per Sections 2.3 and 2.4.

Section III : Supplier Performance

3.1 Subject to Section II hereof; CT agrees to manufacture and supply, and HDI agrees to purchase,
such amounts of Material for use in products developed by HDI including but not limited to the
Product, as HDI may from time to time order in accordance with the terms of this Agreement.

3.2 CT shall perform the manufacturing, quality control, processing, packaging and shipping
necessary to supply the Materials to HDI for incorporation into the Product, all in accordance with
Specification and accordance with the terms of this Agreement.

3.3 CT shall ensure that each shipment of the Materials supplied by CT has been analyzed as
required in the Specification and conforms in all respects with the Specification. CT shall
further ensure through the use of audits, conducted on a regular and ongoing basis, that raw
materials used by CT to manufacture the Materials comply with Specifications.

3.4 In the event that the quantities of Materials are limited due to an Event of Force Majeure (as
defined in Section XII hereof), CT shall notify HDI of such shortage as soon as possible and shall
take mutually agreed upon measures to ensure that HDI’s demand for Material is satisfied.

3.5 If reasonably requested by HDI, all technical records relating to the manufacturing, supply or
provision of Material by or on behalf of CT shall be retained for a period of at least 2 years for
the date of delivery of the Material.

3.6 All Products sold to HDI shall be free from defects in material and workmanship and shall be
manufactured in accordance with applicable GMP requirements (21 CFR Part 820) and shall conform to
the specifications (“Specifications”) set forth in Exhibit I.

 

 

3.7 HDI shall be responsible for all shipping and insurance expenses.

Likewise, federal, state, or municipal taxes, now or hereafter imposed on shipping the Product to
HDI facilities.

3.8 CT shall maintain and adjust a minimum finished goods safety stock of 2 weeks supply not to
exceed 4 weeks. Safety Stock should be determined by averaging the previous 4 weeks order history.

3.9 CT shall submit invoices to HDI for each delivery, referencing HDI’s purchase order. HDI shall
be responsible for verifying that the invoiced quantities of Material match the quantities
invoiced. If a discrepancy is found, HDI should notify CT with twenty (20) business days of
delivery. The two parities will work together in order to resolve any discrepancies.

3.10 Notwithstanding any other provision of this Agreement, CT shall provide to HDI at least 12
months prior written notice if CT decides to cease manufacturing Material prior to the expiration
of this Agreement. The 12 months prior notice is required to allow sufficient time for HDI to
locate and source material from an alternate supplier. During the 12 month notice period, CT shall
continue to supply Material in response to HDI’s forecast in order to meet HDI product requirements
in accordance with the terms hereof and shall, at HDI’s option, sell and deliver to HDI a 12 month
supply of Material (based on the then most recent forecast) prior to CT ceasing production.

Section IV : Terms of Sale

4.1 Purchase Price – Unless the per Unit price is adjusted as set out in paragraph 4.2 the price
for the Material shall be based upon the following Schedule A.

          Schedule A:

	 	 	 	 	 
	Base Arrays per Month	 	Price per Base Array
	<20,000

	 	$	11.50	 
	20,000 – 40,000

	 	$	10.50	 
	40,001 – 60,000

	 	$	9.65	 
	60,001 – 80,000

	 	$	9.20	 
	80,001 – 100,000

	 	$	9.10	 
	100,001 – 130,000

	 	$	9.00	 

4.2 Starting on the first anniversary of the date hereof, the per Unit price shall be adjusted
annually; however, any increase shall not exceed the difference in the Consumer Price Index over
the 12-month period to that time. Notwithstanding the previous sentence, if at any time during the
term of this Agreement cost factors related to the raw materials increase or decreased by 5% or
more of the total raw material costs from the date hereof, the parties agree to discuss in good
faith appropriate adjustments to the price of Material hereunder to respond to such change in cost
factors.

 

 

4.3 During the term of this Agreement both parties agree to pursue cost improvement initiatives.
HDI and CTI shall share equally any reductions in costs associated with such improvement
initiatives.

4.4 Forecast – Promptly upon execution hereof, HDI shall provide CT with a forecast detailing its
anticipated requirement of Material on a monthly basis for the following 12-month period. The
forecast shall be updated by HDI quarterly or more often if HDI considers its requirements have
change by more than 20%. The first three months of each forecast shall be a binding commitment on
CT and HDI for those three months. (If HDI has open purchase orders for a forward three month
period; the purchase orders will supersede the rolling forecast) CT acknowledges that forecast
quantities beyond three months are estimates only and are not binding on either party.

4.5 Orders – HDI shall issue a purchase order for Material deliveries. All terms and conditions of
such purchase orders are hereby incorporated into this Agreement, except that if the terms and
conditions of the purchase order are in conflict with this Agreement, this Agreement shall control.

Section V : Confidential Information

5.1 From time to time during the term of the Agreement, Supplier may acquire confidential
information from HDI respecting the business of HDI and the manufacture and distribution of the
Products. Supplier shall not disclose and shall not allow access to any such confidential
information to or by any third person, firm, or corporation, excepting those of its employees,
sub-distributors, agents or representatives for whom such information is necessary for the
performance of their duties to distribute and then only to the extent such disclosure is necessary
and to the extent that the employees have agreed to be bound by the same confidentiality agreement
herein. At all times during the term hereof and thereafter, Supplier shall observe strict
confidentiality relating to any disclosed confidential information of HDI and shall require any
persons who are or become its employees, sub-distributors or agents to observe strict
confidentiality with respect thereto.

5.2 The following information is not considered Confidential Information:

	a)	 	information which, at the time of disclosure, can be proven is in the public domain;
	 
	b)	 	information which, after disclosure, becomes part of the public domain by publication or
otherwise, except by breach of this Agreement;
	 
	c)	 	information which the Supplier can establish by competent proof was in its possession at the
time of disclosure by HDI, and was not acquired, directly or indirectly, from HDI; or
	 
	d)	 	information which the Supplier received from third parties who had legal possession of such
Confidential Information; however, provided that such information was not obtained by said
party, indirectly or directly, from HDI.

 

 

5.3 The parties hereto have previously entered into a separate Confidentiality Agreement which is
attached hereto as Exhibit B. The terms of this Confidentiality Agreement shall continue to govern
the relationship of the Parties to this Agreement for all Confidential Information as that term is
used in the Confidentiality Agreement until the termination of this Agreement.

Section VI : Modifications

6.1 The Parties understand and agree that this Agreement cannot be modified or altered except by
another written agreement executed by each of the Parties hereto. In the case of HDI, written
authorization for any and all modifications to this Agreement must come from a current corporate
officer of HDI, regardless of what HDI officer may initially have executed this Agreement.

6.2 The ability to control modifications is a material consideration for HDI entering into this
Agreement. ANY MODIFICATIONS WHICH DO NOT STRICTLY ADHERE TO THE REQUIREMENTS OF THIS SECTION
SHALL NOT BE ENFORCEABLE AGAINST HDI. Any invoices, proposals, or similar documents received by
HDI in relation to this Agreement, even though they may be received and even paid, are hereby
deemed by the Parties to be solely for administrative purposes and are not sufficient to modify any
portion of this Agreement whatsoever. To the extent that any such invoices, proposals, or similar
documents contain additional terms or conditions, they will not be binding in any respect upon HDI.
To the extent they may be received or paid without objection by HDI, they are being received or
paid solely as an accommodation to SUPPLIER.

Section VII : Waiver

No waiver of any provision of this Agreement shall be effective against HDI unless (1) it is in a
separate writing (not merely a part of an invoice, proposal, or similar document), (2) it is signed
by all Parties, and (3) it specifically references a waiver of this Agreement by name.

Section VIII : Time is of the Essence

Time is of the essence in this Agreement and is an important consideration for Home Diagnostics,
Inc. in entering into this Agreement.

Section IX : Assignments and Delegations

Neither the SUPPLIER nor HDI shall assign or transfer, or purport to assign or transfer, any of
their rights or obligations arising under this Agreement without the prior written consent of the
other party (such consent not to be unreasonably withheld or delayed).

 

 

All rights and obligations provided under XIV of this Agreement regarding warranties and
indemnification shall survive all assignments or transfers permitted under this section.

For purposes of this section, a change of 51% or more of ownership is deemed an assignment.

Section XI : Successors and Assigns

This Agreement binds and benefits the Parties and their respective heirs, executors,
administrators, legal representatives, successors, and assigns, except for those purported
assignments prohibited or excluded under Section .

Section XII : Force Majeure

Either party may, without liability, delay performance on account of a force majeure or other
circumstances beyond its control including, but not limited to, acts of God, war, riot, fire,
earthquake, explosion, flood, strike, lockout, court injunction, or the unavailability of services,
personnel, products, or materials. In such event, however, the party seeking the delay must notify
the other party in writing within two days of the alleged event with sufficient particularity to
describe the condition and the efforts made to overcome it.

Section XIII : Notice

Any notice required or permitted to be given under this Agreement must be made in writing and shall
be deemed to have been sufficiently delivered five business days after its deposit as United States
Certified Mail, Return Receipt Requested, and addressed as follows: To

A.

HOME DIAGNOSTICS, INC.

2400 Northwest 55th Court

Fort Lauderdale, FL 33309

Attn: George Godfrey, VP Supply Chain

with a copy to:

HOME DIAGNOSTICS, INC.

2400 Northwest 55th Court

Fort Lauderdale, FL 33309

Attn: Todd Mayover, Esquire

B.

CONDUCTIVE TECHNOLOGIES

935 Borom Road

York, PA 17404

Attn: Jerry Anderson, President

 

 

or such other addresses as the parties may from time to time give notice of to the other party.
The parties may additionally comply with this section by hand-delivery or by overnight delivery in
which case it shall be deemed to have been delivered on the actual day of delivery.

Section XIV : Indemnification

In consideration of the terms and conditions stated herein, each party (the “Indemnitor”) hereby
agrees that the Indemnitor will at all times, including after the termination of this Agreement,
indemnify and hold harmless the other party from all losses, damages, liabilities, and expenses,
which may arise or be claimed against the other party and be in favor of any persons, firms or
corporations, for any injuries or damages to the person or property of any person, firms or
corporations, consequent upon or arising from the performance or lack of performance under this
Agreement, by the Indemnitor, or consequent upon or arising from any acts, omissions, neglect or
fault of the Indemnitor, its agents, servants, employees, licensees, visitors, customers, patrons,
or invitees, or consequent upon or arising from the Indemnitor  ́s failure to comply with any
applicable law, regulation or other provision.

Home Diagnostics, Inc. will indemnify and hold CT harmless against any claims for infringement
relating directly or indirectly, in whole or in part, to any patent, copyright, trademark or trade
secret right, or other intellectual property right, private right, or any other proprietary or
personal interest, arising out of the Product(s) designed and manufactured by HDI.

This indemnification applies to, and without limitation, all costs, expenses, and reasonable
attorneys’ fees incurred or paid by the other party in connection with claim, arbitration, or
litigation involving the other party.

Section XV : Further Assurances

Each Party hereto agrees to do all acts and things, and to make, execute, and deliver such written
instruments as shall from time to time be reasonably required, to carry out the terms and
provisions of this Agreement.

Section XVII : Legal Counsel; Rules of Construction

Each Party has had (or has been advised to seek) independent legal counsel of its own selection in
the negotiation of this Agreement. Each Party fully understands the facts and has been informed
about its legal rights and obligations. Each Party is signing this Agreement freely and
voluntarily intending to be bound by it. The Parties agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafter shall not apply to this Agreement.

 

 

Section XVII : Arbitration

All claims, controversies, differences or disputes between or among any of the parties hereto
arising from or relating to this Agreement shall be determined solely and exclusively by
arbitration in accordance with the rules of commercial arbitration then in effect of the American
Arbitration Association, or any successors hereto (“AAA”), in Broward County, Florida, unless the
parties otherwise agree in writing. Each of the parties consents to venue for such arbitrations in
Broward County, Florida and to service of process by certified or registered mail. Upon
commencement of any arbitration pursuant hereto, the parties shall jointly select an arbitrator.
In the event the parties fail to agree upon an arbitrator within twenty (20) days, then each party
shall select an arbitrator and such arbitrators shall then select a third arbitrator to serve as
sole arbitrator; provided that if either party, in such event, fails to select an arbitrator within
seven (7) days, such arbitrator shall be selected by the AAA upon application of either party.
Judgment upon the award of the agreed upon arbitrator or the so chosen third arbitrator, as the
case may be, shall be binding and shall be entered into by a court of competent jurisdiction. The
parties agree to abide by any decision rendered in any such arbitration as final and binding and
waive the right to submit the dispute to a public tribunal for a jury or non-jury trial.

Section XVIII : Choice of Law

The laws of the State of Florida (without giving effect to its conflicts of law principles) govern
all matters arising out of, or related to, this Agreement and all of the transactions it
contemplates, including, without limitation, its validity, interpretation, construction,
performance, and enforcement. Venue shall properly and exclusively lie in Broward County, Florida,
for any and all actions arising out of or relating to this Agreement.

Section XIX : Attorneys’ Fees

If any legal action, arbitration, proceeding, hearing, or motion is brought by any party to this
Agreement to enforce the terms and conditions of or relating to this Agreement, whichever party
shall prevail, shall be entitled to an award of reasonable attorneys’ fees, paralegal fees, costs,
and expenses.

Section XX : Entire Agreement.

The Parties understand and agree that this Agreement contains the entire agreement between the
Parties on this subject. The only consideration for signing this Agreement is the terms and
provisions of the Agreement as stated herein. No other promise, representation, or agreement of
any kind has been made to or with any person or entity whatsoever to cause the signing of this
Agreement. Any previous or contemporaneous oral agreements or representations which had been made
between the Parties are hereby agreed to be null and void.

 

 

IN WITNESS WHEREOF, the Parties hereto, have executed this Agreement the day and year first above
written.

HOME DIAGNOSTICS, INC.

	 	 	 	 	 
	BY:
	 	 	 	 
	 	 	 
	J. Richard Damron
	 	 	 	 
	/s/ J. Richard Damron
	 	 	 	 
	 	 	 
	(Signature)
	 	 	 	 
	 
	 	 	 	 
	CONDUCTIVE TECHNOLOGIES
	 	 	 	 
	 
	 	 	 	 
	BY: G.R.
Anderson
	 	 	 	 
	 	 	 
	(Printed Name)
	 	 	 	 
	/s/ G.R.
Anderson 
	 	 	 	 
	 	 	 
	(Signature)
	 	 	 	 

EXHIBIT A

Specifications for this contract are based on HDI drawing ECI (CT Electrode Sheet 50 x 6) (HDI
Part # 44240) Revision Level 06 (Dated 5/12/05). From time to time, HDI may update Part #44240.
Any updates will be provided to CT and referenced in HDI purchase orders following the updates.

EXHIBIT B – Attached.

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