International Distributor Agreement

EXHIBIT 10.1


INTERNATIONAL DISTRIBUTOR AGREEMENT


This INTERNATIONAL DISTRIBUTOR AGREEMENT (the "Agreement") is entered into effective July 1st, 1999 (the "Effective Date") by and between FUSION MEDICAL TECHNOLOGIES, INC., a Delaware corporation with a principal place of business at 1615 Plymouth Street, Mountain View, CA 94043 ("FMT") and SULZER SPINE-TECH INC., a Delaware corporation with a principal place of business at 7375 Bush Lake Rd., Minneapolis, MN 55439-2027 ("SST").


BACKGROUND


A. FMT is engaged in the business of manufacturing, distributing, and selling Products (as defined below); and


B. SST desires to distribute and sell Products to customers in the Territory (as defined below); and


C. SST desires to purchase from FMT, and FMT desires to sell to SST, Products for resale in the Territory; and


NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows:


1. Definitions.
-----------


1.1 "Affiliate" shall mean any corporation or other entity, which is
--------- directly or indirectly controlling, controlled by or under common control with FMT or SST. For the purpose of this Agreement, "control" shall mean the direct or indirect ownership of fifty percent (50%) or more of the outstanding shares or other voting rights of the subject entity to elect directors, or if not meeting the preceding, any entity owned or controlled by or owning or controlling at the maximum control or ownership right permitted in the country where such entity exists.


1.2 "Customers" shall mean SST's end-user customers solicited by SST
--------- or its Subdistributors within the Territory.


1.3 "Field of Use" shall mean spinal and cranial applications of
------------ hemostatic agents.


1.4 "Gross Profits" shall mean net revenues derived by SST from the
------------- sale of the Products in the Territory less (i) the cost of the Products sold, (ii) sales, use, and/or other excise taxes or duties actually paid, (iii) the cost of any packaging, shipping and handling, (iv) [*] and (vi) [*]


1.5 "Gross Sales" shall mean the total amounts invoiced by SST, its
----------- Affiliates, or its Subdistributors to third parties for the sale of Products, less sales taxes, in each case if charged separately on the invoice and paid by


[*] - Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portion.


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the customer. A "sale" shall include any transfer or other disposition for consideration other than cash, in which case such consideration shall be valued at the fair market value thereof.


1.6 "Product" or "Products" means those products listed in Exhibit A
--------------------- attached hereto, and as revised by the parties pursuant to Section 2.3 below. The Products listed on Exhibit A, and as revised pursuant to Section 2.3 below, may be changed, discontinued or added by FMT, at its sole discretion with twelve (12) months notice to SST.


1.7 "Product Specifications" shall mean FMT's product specifications
---------------------- as set forth in Exhibit B attached hereto, and as may be amended from time to time by FMT.


1.8 "Subdistributor" shall mean a third party whom SST has granted
-------------- the right to distribute the Products under Section 2.4 hereto.


1.9 "Territory" shall mean, as of the Effective Date, all countries
--------- worldwide, except those countries listed on Exhibit C attached hereto, as revised by the parties pursuant to Section 2.2 below.


2. Appointment and Authority of SST.
--------------------------------


2.1 Exclusive Distributor.
---------------------


2.1.1 Subject to the terms and conditions herein, FMT hereby appoints SST as FMT's exclusive sales distributor for the Products within the Territory in the Field of Use, and SST hereby accepts such appointment. SST's sole authority shall be to purchase Products from FMT and to promote, market and resell such Products for delivery to Customers in the Territory in the Field of Use in accordance with the terms of this Agreement. SST shall not have the authority to make any commitments whatsoever on behalf of FMT.


2.1.2 Notwithstanding the rights granted to SST to distribute Products hereunder, SST shall have no right to directly:


(a) solicit sales, promote, market or sell (i)
Products outside the Territory, or (ii)
Products, other than Products in the Field of
Use, in the Territory;


(b) advertise, market or promote (i) Products
outside the Territory, or (ii) Products, other
than Products in the Field of Use, in the
Territory;


(c) solicit orders from persons or entities
located outside the Territory.


2.2 Countries.
---------


2.2.1 Countries in which SST has not Initiated Direct
----------------------------------------------- Conduct of Business. As Product becomes available for distribution in the ------------------- Field of Use in countries included within the Territory, FMT shall notify SST as to the availability of such Product in such country. Within [*] following receipt of such notice, the parties shall negotiate in good faith the terms under which SST shall initiate and maintain direct distribution of such Product in the Field of Use in such country. If the parties fail to reach written agreement within such period, SST shall have no further rights with respect to distribution rights for such Product in the Field of Use in such country and FMT shall have the right to appoint third parties to distribute such Product in the Field of Use in such country.


[*] - Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portion.


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2.2.2 Additional Countries; Other than Japan. As additional
-------------------------------------- countries, other than Japan, become available for inclusion in the Territory (for distribution of Products in the Field of Use), FMT will notify SST as to the availability of such country. Within [*] following receipt of such notice from FMT, SST will notify FMT in writing whether it wishes to include such country in the Territory. If SST notifies FMT in writing that it wishes to include such country in the Territory, concurrent with such notice to FMT, the Territory shall be expanded to include such country, and SST shall have exclusive distribution rights for Products in the Field of Use in such country, subject to the terms and condition of this Agreement. If SST fails to exercise such right within such [*] period, or if SST notifies FMT in writing that it does not wish to include such country within the Territory, then SST shall have no further rights with respect to such country.


2.2.3 Japan. In the event that Japan becomes available for
----- inclusion in the Territory (for distribution of Products in the Field of Use), FMT will notify SST as to its availability. For a period of [*] after such notice, SST shall have an exclusive right to negotiate with FMT an exclusive license to distribute Products in the Field of Use in Japan, unless during such [*] period SST notifies FMT in writing that it does not desire rights to distribute Products in the Field of Use in Japan. If the parties fail to reach written agreement upon mutually acceptable terms for the distribution rights of Products in the Field of Use in Japan within such [*] period, SST shall have no further rights with respect to Japan.


2.3 Additional Products. Prior to commencing the commercialization
------------------- of [*] during the term of this Agreement, [*]. For a period of [*] after such notice, SST shall have [*] with FMT [*] to distribute such [*] in the Territory, unless during such [*] period SST notifies FMT in writing that it does not desire rights to distribute such [*]. If the parties fail to reach written agreement upon mutually acceptable terms for the distribution rights of such [*] within such [*] period, SST shall have no further rights with respect to the applicable [*].


2.4 Subdistributors. Subject to the provisions of this Section 2.4,
--------------- SST may appoint one or more third parties within any portion of the Territory to distribute the Products in the Field of Use to Customers (each a "Subdistributor"). Within [*] after the appointment of such Subdistributor, SST shall notify FMT of the identity of such Subdistributor. SST shall not sell or otherwise transfer Products to any Subdistributor until such Subdistributor enters into a form of written agreement ("Subdistributor Agreement") with SST, binding the Subdistributor to terms and conditions substantially similar to those terms and conditions agreed upon by SST in this Agreement. Further, SST shall only grant Subdistributors the right to make sales of Products directly to Customers in the Territory in the Field of Use. Distributor agrees to terminate a Subdistributor's right to distribute Products promptly upon becoming aware that such Subdistributor is selling or otherwise distributing Products, directly or indirectly, in a manner that is not in accordance with the provisions of this Article 2. Each Subdistributor Agreement shall contain provisions making FMT a direct and intended third party beneficiary of such Subdistributor Agreement, and SST hereby guarantees the


[*] - Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portion.


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performance of each such Subdistributor with the provisions listed in this Section 2.4.


2.5 Reservation of Rights. Except as expressly provided in this
--------------------- Article 2, no right, title, or interest is granted, whether express or implied, by FMT to SST, and nothing in this Agreement shall be deemed to grant to SST rights in any products or technology other than the Products, nor shall any provision of this Agreement be deemed to restrict FMT's right to exploit technology, know-how, patents, or any other intellectual property rights relating to the Products in products other than Products. FMT reserves the right to appoint other authorized distributors or resellers outside the Territory without restriction. FMT also reserves the right to appoint third parties to distribute Products in the Territory in fields of use other than the Field of Use; provided, that (i) any such appointment shall contain terms reasonably restricting such distribution rights to a field of use other than spinal and cranial applications of hemostatic agents, and (ii) FMT shall notify SST of such appointment. SST acknowledges that this Agreement does not prohibit passive sales of Product in the Territory. It is further understood and agreed that FMT may distribute products, other than Products or products in the Field of Use, in the Territory, either directly or indirectly, for any and all uses.


2.6 Conflict of Interest. SST shall pursue reasonable sales
-------------------- policies and procedures to realize the maximum sales potential for the Products in the Territory. SST agrees that any efforts by SST to sell competing products in the Territory would constitute a conflict of interest with respect to SST's obligations to market the Products, and SST warrants to FMT that it does not currently represent or promote any hemostatic products that compete with the Products. During the terms of this Agreement, SST shall not represent, promote or otherwise try to sell within the Territory any other products that, in FMT's reasonable judgment, compete with the Products.


2.7 Sale Conveys No Right to Manufacture or Modify. Products are
---------------------------------------------- offered for sale and are sold by FMT subject in every case to the condition that such sale does not convey any license, expressly or by implication, to manufacture, modify, duplicate, or otherwise copy or reproduce any of the Products.


2.8 Independent Contractors. The relationship of FMT and SST
----------------------- established by this Agreement is that of independent contractors, and nothing contained in this Agreement shall be construed to (i) give either party the power to direct and control the day-to-day activities of the other, (ii) constitute the parties as partners, joint venturers, co-owners or otherwise as participants in a joint venture or common undertaking, or (iii) allow SST to create or assume any obligation on behalf of FMT for any purpose whatsoever. All financial and other obligations associated with SST's business are the sole responsibility of SST. SST shall be solely responsible for, and shall indemnify and hold FMT free and harmless from, any and all claims, damages or lawsuits (including FMT's attorneys' fees) arising out of the acts of SST, its employees or its agents.


3. Advertising, Marketing and Promotion.
------------------------------------


3.1 Advertising and Promotions. SST shall, at its own expense, (i)
-------------------------- reasonably promote the distribution of the Products in the Territory, and (ii) use its best efforts to promote and market the Products and to realize the maximum sales potential for the Products in the Territory. SST shall list the Products in its catalogs and make such Products available to its Customers.


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Such advertising and promotion may take the form of, but shall not be limited to, magazine advertising, direct mail promotion, trade show displays, educational seminars and other activities related to promoting Products


3.2 Minimum Activities. SST hereby commits, at a minimum, to
------------------ undertake the following marketing and promotional activities:


(a) Development and execution of a promotional brochure for
the Products;


(b) Development and execution of a promotional mailer for
the Products;


(c) Development and execution of quarterly advertising for
the Products in a spinal surgery journal;


(d) Dedicated exhibit booth space for the Products at all
U.S. and European meetings where SST exhibits, including
but not limited to Product promotional graphics at the
following meetings:


(i) [*]


(ii) [*]


(iii) [*]


(iv) [*]


(e) Inclusion of Products in all SST surgeon training
courses;


(f) Inclusion of Products in product fairs at all SST
medical advisory board meetings;


(g) Launch promotion program for the Products with SST sales
force;


(h) Incorporation of the Products into SST sales training
syllabus at first appropriate sales meeting;


(i) Incorporation of the Product into SST sales training for
new representatives; and


(j) Establishment of the same commission and bonus structure
for the Product as for all other SST products.


3.3 SST Materials. SST shall provide to FMT for purposes of review,
------------- comment and approval by FMT any and all promotional, advertising and educational materials and programs, package data sheets, and other literature relating to the Products at least fifteen (15) days prior to the commercial release of such materials or commencement of such programs.


[*] - Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portion.


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3.4 FMT Collaboration. FMT will collaborate with SST in the
----------------- development of all marketing and promotional materials. FMT shall acknowledge SST's distributorship in all marketing and promotional materials prepared by FMT for use in the Territory in the Field of Use. All such materials shall be submitted to SST for its approval.


4. Product Packaging and Labeling.
------------------------------


4.1 Product, Packaging and Labeling. Each Product shall be
------------------------------- delivered to Customer (if located in the U.S.), or SST, its Affiliate, or its Subdistributor (if Customer is located outside of the U.S.), at SST's request in its purchase order to FMT pursuant to Section 6.5 below, in a package (the "Package") containing the Product together with a Product insert, labeled as follows: "Manufactured by FMT." Unless otherwise instructed by FMT, SST shall deliver the Product to its Customers only as part of an unopened Package. SST shall not repackage Products supplied to SST by FMT hereunder without the prior written consent of FMT. In addition, except for the addition of information required by applicable laws and regulations, SST shall not re-label Products supplied to SST by FMT hereunder without the prior written consent of FMT. FMT shall be responsible for ensuring that all Products are packaged and labeled in accordance with the requirements set forth by the U.S. Food and Drug Administration ("FDA") and comparable regulatory authorities in the E.U..


4.2 Proprietary Notices. SST, its Affiliates, and its
------------------- Subdistributors shall not remove, alter, cover or obfuscate any logo, trademark notice or other proprietary rights notices placed or embedded by FMT on or in any Package or any of the items contained therein.


5. Product Sales.
-------------


5.1 Solicitation and Placement of Orders from Customers. SST shall
--------------------------------------------------- be responsible for marketing and soliciting orders for Products from Customers in the Territory. SST shall [*] submit all Customer orders to FMT, subject to Section 6.5 below, and shall provide the following Customer order information:


(a) Date of order;


(b) Purchase order number;


(c) Customer name and contact;


(d) Surgeon user(s) of Product;


(e) Billing and shipping address of Customer;


(f) Telephone and facsimile numbers of Customer; and


(g) Product number, quantity, and Customer invoice price.


In addition to the above, for Customer orders outside the U.S., SST shall provide the billing and shipping address of SST, SST's Affiliate, or its Subdistributor.


[*] - Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portion.


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5.2 Customer Invoice and Payment. SST shall submit an invoice, in
---------------------------- SST's name, to: (i) its U.S. Customers upon FMT's invoice and confirmation of shipment to SST, pursuant to Section 6.3.1, of Products ordered by such U.S. Customer; and (ii) to its non-U.S. Customers upon SST's shipment of Products to such non-U.S. Customer. Such invoice shall cover SST's price to its Customers for the Products in any given shipment plus any freight, taxes, or other costs incident to the purchase or shipment initially paid by FMT but to be borne by SST. SST shall be solely responsible for the collection of all monies due to SST from Customers.


6. Terms of Purchase of Products by SST.
------------------------------------


6.1 Terms and Conditions. All orders of Products by SST from FMT
-------------------- during the term of this Agreement shall be subject to the terms of this Agreement. Nothing contained in any purchase order or the like document submitted by SST to FMT shall in any way modify or add to the terms and conditions in this Agreement.


6.2 Prices. For each Product purchased from FMT, SST shall pay to
------ FMT an amount equal to: (i) [*] per Product Unit (as described in Exhibit A) for Products to be resold in the United States, and [*] per Product Unit for Products to be resold outside the United States, plus (ii) [*] of the Gross Sales in excess of [*] per Product Unit from the sale of such Product in the United States, and [*] of the Gross Sales in excess of [*] per Product Unit from the sale of such Product outside the United States (the "Product Price"). All prices are in U.S. Dollars. In the event that the Product pricing structure defined in this Section is commercially impractical in a country outside the United States, as determined mutually by the parties, SST and FMT shall negotiate in good faith and mutually determine the appropriate Product price to be paid by SST in such country; provided, the price described above shall remain in effect unless the parties agree in writing to other prices. If the parties fail to reach written agreement upon mutually acceptable terms for the Product pricing in such country within three (3) months of their determination that such Product pricing is impractical in such country, SST shall have no further rights with respect to such country and FMT shall thereafter by free to appoint third parties to distribute Products in such country. The difference between the SST Product Price and SST's price to its Customers shall be SST's sole remuneration for distribution of the Products. FMT has the right at any time to revise the prices with [*] days advance written notice to SST if FMT can provide reasonable documentation indicating that FMT's costs for such Products have increased by [*] or more as of the later of (i) the Effective Date or (ii) the last revision in prices. Such revisions shall apply to all orders received after the effective date of revision. Upon receipt of such notice of an increase in prices, SST may anytime within such [*]days notice terminate the Agreement.


6.3 Payment.
-------


6.3.1 FMT shall submit an invoice to SST upon each shipment of Products ordered by SST and as set forth below. The invoice shall cover SST's Product Price pursuant to Section 6.2(i) above for the Products in a given shipment plus any freight, taxes or other costs incident to the purchase or shipment initially paid by FMT but to be borne by SST. By the [*] of each month, the invoiced amounts for Product shipped in the previous calendar month shall be due in full.


[*] - Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portion.


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6.3.2 Within [*] of the end of the calendar quarter in which the applicable Products are sold, SST shall provide a detailed accounting on a Product-by-Product basis, showing the calculations used to determine the amounts due to FMT pursuant to Section 6.2(ii) above. On or before the earlier of (i) [*] following the end of the calendar quarter in which such products are sold, or (ii) at such time as [*], SST shall pay to FMT the remaining amounts, if any, due pursuant to Section 6.2(ii) above, calculated by subtracting the amounts previously paid pursuant to Section 6.2(i) above for such Products from the amounts due pursuant to Section 6.2 above. [*]


6.3.3 SST shall make payments to FMT under this Agreement in immediately available funds to a bank account designated by FMT. All payments due hereunder shall be paid in United States dollars. If any currency conversion shall be required in connection with the payment of any amounts due FMT hereunder, such conversion shall be made by using the daily exchange rate for the purchase of U.S. dollars reported by the Wall Street Journal. Any
------------------- payments due hereunder which are not paid within [*] of the date such payments are due shall be subject to a service charge of [*] per month or the maximum rate permitted by law, calculated on the [*] such payment is delinquent. This Section 6.3.3 shall in no way limit any other remedies available to FMT. SST shall pay all of FMT's costs and expenses (including reasonable attorneys' fees) to enforce and preserve FMT's rights under this Section 6.3.3.


6.3.4 In the event that SST's account becomes more than sixty (60) days overdue, FMT may, in its sole discretion, require that SST pay for all future orders through an irrevocable letter of credit drawn on a major commercial bank and delivered to FMT at least thirty (30) days prior to requested delivery date, and FMT shall have no obligation to deliver any Products until it receives such letter of credit from SST.


6.4 Forecasts.
---------


6.4.1 Forecasts. Beginning [*] after FDA approval of the
--------- first Product and thereafter [*] prior to the first day of each calendar quarter, SST shall provide to FMT a good faith, quarterly written forecast of the number of units of each Product, on a Product-by-Product basis, that SST expects to purchase over the [*] commencing with the first day of the next calendar quarter ("Forecasts"). The Forecasts by SST shall constitute [*] The parties acknowledge that the [*] included in each Forecast are for FMT's planning purposes only and shall not be binding upon the parties. SST and FMT shall meet, by telephone or in person, no less frequently than once per calendar quarter to review Forecasts.


6.4.2 Subsequent Forecasts. The parties agree, that in no
-------------------- event may [*] any Forecast: (i) in the first year of the Initial Term (as defined in Section 14.1 below), be greater than [*] (ii) in any subsequent year, [*]


6.4.3 Outstanding Commitments. At the end of each calendar
----------------------- quarter FMT shall [*] For all Products subject to [*] SST shall be responsible for paying such invoice pursuant to Section 6.3.


6.5 Order and Acceptance. All orders for Products submitted by SST
-------------------- shall be initiated only by the of ...