Manufacturing And Supply Agreement

EXHIBIT 10.4


IMPLANTABLE CARDIOVERTER DEFIBRILLATOR PRODUCT
MANUFACTURING AND SUPPLY AGREEMENT


BETWEEN


ANGEION CORPORATION, AS MANUFACTURER


AND


ANGELLAN MEDICAL SYSTEMS, LLC, AS PURCHASER


Note: Portions of this exhibit marked with "X's" have been omitted pursuant to
a request for confidentiality under Rule 24b-2 of the Securities Exchange
Act of 1934, as amended. A copy of this exhibit in its entirety has been
filed separately with the Securities and Exchange Commission.


TABLE OF CONTENTS


1. Definitions................................................................................... 1


2. Manufacture and Purchase...................................................................... 7
2.1. Agreement to Manufacture......................................................... 7
2.2. Exclusivity...................................................................... 8
2.3. Existing Distributors of Manufacturer............................................ 9
2.4. Other Cardiac-Related Devices.................................................... 9


3. Intellectual Property Matters................................................................. 10
3.1. Use of Purchaser's Trademarks on Products........................................ 10
3.2. Use of Manufacturer's Name on Products........................................... 10
3.3. No Use of Manufacturer's Trademarks.............................................. 10
3.4. Copyrights....................................................................... 10
3.5. Technical Information............................................................ 10
3.6. Infringement of Intellectual Property Rights of Manufacturer..................... 11
3.7. License of Technical Information................................................. 11


4. Commercialization............................................................................. 11
4.1. Diligence........................................................................ 11
4.2. Reports and Sales Records........................................................ 12
4.3. Promotional and Product Literature............................................... 12
4.4. Technical Assistance............................................................. 13
4.5. Labels and Markings.............................................................. 14
4.6. Marketing Allowance and Royalties................................................ 14


5. Regulatory and Governmental Approvals......................................................... 14
5.1. Clinical Studies................................................................. 14
5.2. Government Approvals............................................................. 15


6. Pricing and Payments.......................................................................... 16
6.1. Transfer Prices.................................................................. 16
6.2. Payment Terms.................................................................... 17
6.3. Financial and Related Books and Records.......................................... 17
6.4. Late Payments.................................................................... 18


7. Purchase and Supply of Product................................................................ 18
7.1. Orders........................................................................... 18
7.2. Effect of Late Payments.......................................................... 19
7.3. Inspection of Shipments.......................................................... 19
7.4. Purchase Forecasts............................................................... 20
7.5. Return of Expired Products....................................................... 20


8. Quality Assurance; Testing.................................................................... 21


8.1. Quality Control.................................................................. 21
8.2. Testing.......................................................................... 21
8.3. Records and Traceability......................................................... 21


9. Warranties and Indemnifications............................................................... 22
9.1. Manufacturer Product Warranties.................................................. 22
9.2. Recalls.......................................................................... 23
9.3. Indemnification for Third Party Claims........................................... 24
9.4. Manufacturer Infringement Indemnification........................................ 25
9.5. Limitation on Damages. .......................................................... 25
9.6. Certain Covenants................................................................ 26
9.7. Representations and Warranties of the Parties.................................... 26
9.8. Mitigation....................................................................... 27
9.9. Indemnification Procedure for Third Party Claims and Infringement Claims......... 27


10. Term and Termination.......................................................................... 28
10.1. Term............................................................................. 28
10.2. Events of Early Termination...................................................... 28
10.3. Rights and Obligations on Expiration or Termination.............................. 29


11. Confidentiality; Publicity; Non-Solicitation.................................................. 30
11.1. Confidential Information......................................................... 30
11.2. Publicity........................................................................ 31
11.3. Non-Solicitation................................................................. 31


12. Dispute Resolution Provisions................................................................. 32
12.1. General Dispute Principles....................................................... 32
12.2. Arbitration of Other Disputes.................................................... 32


13. Miscellaneous................................................................................. 35
13.1. Fees and Expenses................................................................ 35
13.2. Severability..................................................................... 35
13.3. Entire Agreement; Amendments..................................................... 36
13.4. Notices.......................................................................... 36
13.5. No Waiver........................................................................ 37
13.6. Headings......................................................................... 38
13.7. Survival of Provisions........................................................... 38
13.8. Successors and Assigns........................................................... 38
13.9. No Third Party Beneficiaries..................................................... 38
13.10. Governing Law.................................................................... 38
13.11. Insurance........................................................................ 39
13.12. Waivers.......................................................................... 39
13.13. English Language Controls........................................................ 39
13.14. Relationship of the Parties...................................................... 39
13.15. Counterparts..................................................................... 40
13.16. Sovereign Immunity; Exclusions................................................... 40


13.17. Force Majeure.................................................................... 40


Schedule 1.13 - Existing Distributors Schedule 1.42 - Related Agreements Schedule 4.6 - Marketing Allowance Schedule 6.1(a) - Unit Transfer Prices for Initial Products Schedule 8.2 - Testing Procedures Schedule 9.7 - No Conflicts Schedule 12.2 - AAA Rules Schedule 13.11 - Insurance


IMPLANTABLE CARDIOVERTER DEFIBRILLATOR PRODUCT


MANUFACTURING AND SUPPLY AGREEMENT


This Implantable Cardioverter Defibrillator Product Manufacturing and Supply Agreement (the "Agreement") is entered into as of the 9th day of December, 1997 ("Effective Date") by and between Angeion Corporation, a Minnesota corporation ("Manufacturer"), and Angellan Medical Systems, LLC, a Delaware limited liability company ("Purchaser").


Manufacturer has the expertise in the manufacture of certain Implantable Cardioverter Defibrillator ("ICD") products which shall be the subject of this Agreement.


Purchaser wishes to have made certain Products (as hereinafter defined) and Manufacturer wishes to manufacture and sell to Purchaser such Products for resale in the Territory (as hereinafter defined) subject to the terms and conditions of this Agreement.


NOW THEREFORE, in consideration of the mutual covenants and agreements provided herein, the Parties agree as follows:


1. DEFINITIONS.


1.1. "AAA" shall mean the American Arbitration Association.


1.2. "Act" shall mean the United States Food, Drug and Cosmetic Act of 1938, as amended from time to time (and any amendments or additions thereto from time to time or any successor or similar Applicable Law).


1.3. "Adverse Device Events" shall mean any Product-related event that is reportable (or that Purchaser or Manufacturer determines after Best Efforts at mutual consultation should be reported) to (i) the FDA, or any local ethics committee ("LEC") responsible for approving the protocols for any clinical trials) conducted upon the Products in the Territory or any other ethics committee within the Territory with responsibilities analogous to a LEC; or (ii) to any other Governmental Authority responsible for the regulation of medical devices.


1.4. "Affiliate(s)" shall mean any corporation, association or other entity which directly or indirectly controls, is controlled by or is under common control with the Party in question, but only for so long as such relationship exists. As used herein, the term "control" shall mean the ability to direct the business of a company and shall be presumed in the case of ownership, directly or indirectly, of shares of stock having at least fifty percent (50%) of the voting power entitled to vote for the election of directors in the case of a corporation, and at least fifty percent (50%) of the voting power and interest in profits in the case of a business entity other than a corporation, or only if less than fifty percent (50%) of the voting power and interest in profits is permitted by Applicable Law, the maximum amount allowed in the country in question (so long as the holder retains the ability to direct the business of the entity). The Parties acknowledge and agree that neither the Purchaser nor any member of Purchaser or such member's Affiliates shall be deemed to be included within the term "Affiliate" for any purposes under this Agreement unless


otherwise expressly provided in this Agreement.


1.5. "Applicable Laws" shall mean all foreign, federal, state and local laws, statutes, rules and regulations which have been enacted by a Governmental Authority and are in force as of the date hereof or which are enacted by a Governmental Authority and come into force during the term of this Agreement, in each case to the extent that the same are applicable to the performance by the Parties of their respective obligations under this Agreement. Without limiting the foregoing, Applicable Laws shall include the Act (including any applicable regulations under the Act governing manufacturing practices).


1.6. "Best Efforts" shall be determined under New York law and shall mean such efforts as are consistent with efforts made by businesses of similar size and resources in a similar circumstance and context to achieve a particular result in a timely manner, but shall not require a Party to take actions that would be commercially unreasonable to such Party in the circumstances.


1.7. "Budgeted Sales Price" shall have the meaning set forth in Section 6.1(b) of this Agreement.


1.8. "Cardiac Stimulation Device" shall mean an implantable medical device for electrically stimulating or shocking the heart which is suitable for use by or with human patients. The term "Cardiac Stimulation Device" includes, without limitation: cardiac pacemakers, antitachycardia pacemakers, cardioverters and defibrillators, including combinations thereof ("such devices"), pulse generators and other waveform generators for such devices; electronic and mechanical components, including without limitation batteries and capacitors to the extent these components are used for or with such devices; mechanisms for coupling such devices in a stimulating, shocking or sensing relationship to the heart including without limitation leads, electrodes, and sensors; and data dispensing, processing and gathering systems for such devices, including without limitation programmers, pacing system analyzers, defibrillation system analyzers, testers, encoders, decoders, transmitters, receivers, and computer software-controlled systems, including all related software; and internal, but not external, holter monitors used for recording heart rhythms (even though such internal holter monitors do not electrically stimulate the heart). The term "Cardiac Stimulation Device" excludes, by way of example and not limitation, muscle stimulators, nerve stimulators, bone growth stimulators, cardiomyoplasty stimulators and associated devices, arrhythmia mapping devices, imaging technology, angioplasty devices, catheter ablation systems, and temporary external pacemakers and defibrillators and EKG monitors (other than pacing programmers) which are stand-alone, non-ambulatory and not intended for transtelephonic monitoring.


1.9. "Confidential Information" shall mean technical and business information relating to a Party's or its Affiliates' Intellectual Property Rights, trade secret processes or devices, techniques, data, formula, inventions (whether or not patentable) or products, research and development (including research subjects, methods and results), production, manufacturing and engineering processes, computer software, costs, profit or margin information, pricing policies, confidential market information, finances, customers, distribution, sales, marketing, and production and future business plans and any other information of a "confidential" nature, specifically including, without limitation, any information that is identified orally or in writing by the disclosing party to be confidential, or that the receiving party should reasonably understand under the circumstances to be a trade secret of the disclosing party or information of a similar nature that is not generally known to the public.


1.10. "Demand for Arbitration" shall have the meaning set forth in Section 12.2(b).


1.11. "ELA" shall mean ELA Medical, Inc., a Delaware corporation.


1.12. "ELA Supply Agreement" shall mean that certain Cardiac Stimulation Device Product Manufacturing and Supply Agreement between Purchaser and ELA dated the date hereof.


1.13. "Existing Distributors" shall mean those third parties having an existing distribution, sales representative or agency arrangement with Manufacturer in the Territory, the list of which third parties is set forth in Schedule 1.13.


1.14. "Expense Reimbursement Basis" shall mean a reimbursement for all reasonable out-of-pocket costs and expenses plus an agreed upon hourly or per diem amount for personnel and agreed upon amounts for reasonable overhead allocation.


1.15. "FDA" shall mean the United States Food and Drug Administration or any successor United States governmental agency performing similar functions with respect to medical devices.


1.16. "FDA Tracking Information" shall mean the information relating to the Products that must be maintained pursuant to 21 U.S. Code of Federal Regulations Part 821 and any amendments or additions thereto.


1.17. "Firm Period" shall mean any three months (or six months, as applicable) of a Forecast which are considered "firm" pursuant to Section 7.4.


1.18. "Force Majeure" shall mean, in relation to either Party, any circumstances beyond the reasonable control of that Party, including, without limitation, any fire, storm, flood, earthquake, explosion, accident, acts of the public enemy, war, rebellion, insurrection, sabotage, epidemic, quarantine restrictions, acts of God or acts of any Governmental Authority, labor disputes that result in work stoppages, transportation embargoes or failure or delays of transportation, or inability to secure raw materials or machinery for the manufacture of devices as a result of any of


the foregoing. No acts of a Governmental Authority resulting from any acts or omissions of Purchaser or Manufacturer that are in breach of this Agreement shall constitute an event of Force Majeure for the breaching Party.


1.19. "Forecast" shall have the meaning set forth in Section 7.4.


1.20. "Government Approval" shall mean governmental marketing, and other governmental authorization required from any Governmental Authority before the Products may be commercially marketed in the Territory, including any requirements for reimbursement and pricing approval.


1.21. "Governmental Authority" shall mean any nation or government, any state, province or other political subdivision thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the FDA.


1.22. "ICD" shall have the meaning set forth in the recitals hereto.


1.23. "Infringement Claims" shall have the meaning set forth in Section 9.4.


1.24. "Initiating Person" shall have the meaning set forth in Section 12.2(b).


1.25. "Intellectual Property Rights" shall mean any patent, copyright, registered design, trademark or other industrial or intellectual property right owned or otherwise enforceable pursuant to license or otherwise by any Person, and applications for any of the foregoing.


1.26. "Inventory" shall mean the Purchaser's inventory of Products.


1.27. "IDE" shall mean an investigational device exemption from the FDA for sale of Products in the United States prior to obtaining FDA approval for commercial sale.


1.28. "Labels and Markings" shall mean labeling materials, packaging, trade dress, logos, tradenames, trademarks and related materials used for exterior packaging and exterior labeling of Products to be sold by Purchaser (or any distributor or subdistributor thereof) under this Agreement, but shall not include Promotional Materials or Technical Materials.


1.29. "LLC Agreement" shall mean the limited liability company operating agreement between Manufacturer and ELA relating to the operations and governance of Purchaser dated the date hereof.


1.30. "Material Adverse Effect" means any material adverse effect on the assets, results of operations, properties, business or financial condition of the Manufacturer or Purchaser, as applicable, and its subsidiaries taken as a whole.


1.31. "Order" shall mean a firm purchase order for the Products made by Purchaser.


1.32. "Other Cardiac-Related Devices" shall mean any cardiac-related devices other than Cardiac Stimulation Devices.


1.33. "Party" shall mean each of Manufacturer and Purchaser and "Parties" shall mean both of Manufacturer and Purchaser, in each case together with each of their successors and permitted assigns.


1.34. "Person" shall mean any individual, general partnership, limited partnership, limited liability company corporation, joint venture, trust, business trust, cooperative or association, or any foreign trust or foreign business organization or any Governmental Authority.


1.35. "Price Period" shall mean a six-month period beginning on January 1 and July 1 of each year until December 31, 1999 and a one-year period from January 1 to December 31 of each year of the term of this Agreement thereafter; provided, that the first Price Period under this Agreement shall be from the date of this Agreement through June 30, 1998.


1.36. "Product" and "Products" shall mean the entire current and future ICD product line, including, without limitation, mechanisms for coupling such devices in a stimulating, shocking or sensing relationship to the heart including, without limitation, leads, electrodes and sensors; and data dispensing, processing and gathering systems for such devices including, without limitation, programmers, defibrillation system analyzers, testers, encoders, decoders, transmitters, receivers and computer software-controlled systems, including all related software, that are developed or acquired, directly or indirectly (including by Manufacturer being acquired by or becoming an Affiliate of a party not previously an Affiliate) by Manufacturer and its Affiliates, and all subsequent modifications, components and improvements used therein during the term of this Agreement; provided, however, that any Products acquired by Manufacturer, directly or indirectly, that are subject to agreements or restrictions that prevent Manufacturer from complying with the terms hereof shall be excluded from this Agreement only to the extent of such pre-existing agreements and only for the remainder of the then existing term thereof.


1.37. "Promotional Materials" shall mean all promotional and marketing materials used by Purchaser in connection with the marketing and commercialization of the Products in the Territory, including but not limited to sales aids, catalogues, sales brochures, sales manuals, advertisements (in printed or electronic form), convention exhibits, protocols for clinical studies after FDA approval of a Product and publications from such studies.


1.38. "Purchaser's Marks" shall mean the trademarks and logos owned or licensed by Purchaser or its Affiliates (including ELA and its Affiliates) (whether registered or not) as Purchaser may from time to time designate to be used in marketing and selling the Products in the Territory during the term of this Agreement.


1.39. "Quarter" shall mean each calendar quarter ending March 31, June 30, September 30, or December 31 of each year during the term of this Agreement.


1.40. "Recalls" shall mean any withdrawals of the Product from the market in the Territory declared by Manufacturer or Purchaser, whether voluntary or involuntary.


1.41. "Regulatory Data" shall mean the medical, clinical and other scientific data necessary to, required for, or included in any regulatory filing to obtain or maintain any Government Approval to market the Products including pre-approval and post-approval reports, filings and submissions, other than reports of Adverse Device Events and related summaries.


1.42. "Related Agreements" shall mean the agreements listed on Schedule 1.42.


1.43. "Respondent" shall have the meaning set forth in Section 12.2(b).


1.44. "Technical Information" shall mean know-how, trade secrets, inventions, data, technology, processes and information, including improvements and modifications to any thereof, relating to the Products, disclosed by Manufacturer to Purchaser under this Agreement that are either Confidential Information of Manufacturer or its Affiliates or are protected by Intellectual Property Rights of Manufacturer or its Affiliates, including without limitation, processes and analytical methodology used in development, testing, analysis and manufacture and medical, clinical and other scientific data other than those which (i) are already known to Purchaser at the time of disclosure or are received from a third party with a right to convey it, or (ii) were independently developed by Purchaser prior to the time of disclosure; provided, that Purchaser shall bear the burden of proving either of the exceptions in (i) or (ii) hereto.


1.45. "Technical Materials" shall mean all manuals, programming guides, user guides and training manuals of an educational or instructional nature which are distributed in conjunction with each Product, including any information made available by Manufacturer to Purchaser to be used as part of the content of the Promotional Materials.


1.46. "Territory" shall mean the United States of America and any additional countries which may be added to the Territory by written amendment of this Agreement executed by both Parties.


1.47. "Third Party Claims" shall have the meaning set forth in Section 9.3(b).


1.48. "Unit" shall mean a specific model of Product that is packaged, invoiced and sold as a unit by Manufacturer, such as an ICD Unit, a lead Unit, a programming Unit and an accessory Unit.


1.49. "Unit Transfer Price" shall mean the transfer prices set in accordance with Section 6.1.


Any reference in this Agreement to "writing" or cognate expressions includes a reference to electronic or facsimile transmission or comparable means of communications.


Any reference in this Agreement to any Applicable Law shall be construed as a reference to the relevant Applicable Law (including any successor provisions) as amended, re-enacted or extended at the time in question.


2. MANUFACTURE AND PURCHASE.


2.1. AGREEMENT TO MANUFACTURE.


(a) Subject to the terms and conditions of this Agreement, Manufacturer shall manufacture and supply Products to be labeled under Purchaser's Marks to Purchaser for sale in the Territory on an exclusive basis as specified in Section 2.2 and Purchaser shall purchase Products to be labeled under Purchaser's Marks from Manufacturer for sale in the Territory.


(b) During the term of this Agreement, Purchaser shall not have any rights to obtain the Products of Manufacturer from any P ...