NOTE 8 — COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

The Company has been and may again become involved in legal proceedings, claims and litigation arising in the ordinary course of business.  Except as described below, KORU Medical is not presently a party to any litigation or other legal proceeding that is believed to be material to its financial condition.

Litigation

From 2013 until May 2020, we were involved in several lawsuits with our principal competitor, EMED.  EMED alleged that our needle sets infringed various patents controlled by EMED.  Certain of these lawsuits also alleged antitrust violations, unfair business practices, and various other business tort claims.  On May 26, 2020, the parties announced the settlement of all of the litigation between KORU Medical and EMED.  The settlement agreement provides KORU Medical with freedom to operate under EMED’s existing patent portfolio, dismissal of all litigation with prejudice (including the claims against Andrew Sealfon, our former President and Chief Executive Officer), and an equity payment by KORU Medical to EMED.

Refer to our Form 10-Q for the quarterly period ended June 30, 2020 regarding the dismissed case with our principal competitor, EMED.

OTHER

On November 11, 2020, the Company entered into a Manufacturing and Supply Agreement with Command Medical Products, Inc. (“Command”), pursuant to which Command has agreed to manufacture and supply the Company’s subassemblies, needle sets and tubing products pursuant to the Company’s specifications and purchase orders.  The first binding purchase order pursuant to the Manufacturing and Supply Agreement was made on November 17, 2020 (the “Effective Date”).

The Manufacturing and Supply Agreement provides for a term of five years from the Effective Date.  Either party may terminate the Manufacturing and Supply Agreement upon a material breach by the other Party that has not been cured within 90 days, upon the bankruptcy or insolvency of the other Party or as expressly set forth elsewhere in the Agreement.  If the Company terminates the Manufacturing and Supply Agreement other than for those reasons within the first three years from the Effective Date, the Company is obligated to pay an early termination fee to Command.

The Manufacturing and Supply Agreement also includes customary provisions relating to, among other things, delivery, inspection procedures, warranties, quality management, business continuity plans, handling and transport, intellectual property, confidentiality and indemnification.