EXCLUSIVE MARKETING AND DISTRIBUTION AGREEMENT
between
NORTH AMERICAN SCIENTIFIC, INC.
AND
MENTOR CORPORATION
EXCLUSIVE MARKETING AND DISTRIBUTION AGREEMENT
THIS EXCLUSIVE MARKETING AND DISTRIBUTION AGREEMENT ("Agreement"), dated
for reference purposes as of June 16, 1997, is entered into by and between NORTH
AMERICAN SCIENTIFIC, INC., a Delaware corporation ("NAMS"), and MENTOR
CORPORATION, a Minnesota corporation ("MENTOR"), with reference to the following
facts:
RECITALS:
A. NAMS (1) is engaged in the business of producing Iodine-125
radioactive sources (I-125 Sources) utilized in brachytherapy procedures for the
treatment of tumors and other cancerous conditions in soft-tissue organs and (2)
believes that it can manufacture I-125 Sources on a cost-effective basis.
B. MENTOR is engaged in the business of manufacturing, marketing and
distributing medical products, equipment and devices used in the treatment of
urological and other disorders.
C. There is only a limited supply of I-125 Sources available for use in
brachytherapy procedures, and the parties believe that there is an existing
unmet demand for additional I-125 Sources in the market. MENTOR therefore
desires to obtain the exclusive right to market and distribute I-125 Sources
produced by NAMS both in the United States and in all foreign markets in the
Field of Use (as hereinafter defined), and NAMS desires to grant such rights to
MENTOR for such purposes on the terms and conditions of this Agreement.
AGREEMENTS:
NOW, THEREFORE, the parties, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS
Unless the context in which used requires a different meaning or
interpretation, the following words and phrases shall have the meanings set
forth below:
1.1 AFFILIATE. A person or entity that directly or indirectly through
one or more intermediaries controls, is controlled by, or is under common
control with, the designated party, but only for as long as such control
relationship exists.
1.2 ANCILLARY PRODUCTS. Instruments, supplies and materials manufactured
by or for MENTOR or NAMS that are designed or are suitable for use in connection
with the use of the Product in the Field of Use, including (by way of example
and not in limitation), drapes, wipes, catheters, ultrasound guides, biopsy
guns, needles, templates and the like.
1.3 ANNUAL SALES TARGET. The quantity of Products required to be sold to
Customers during a Sales Year in order to achieve and maintain the Target Market
Share by the end of such Sales Year.
1.4 ANTICIPATED REQUIREMENTS. MENTOR's projected purchases of the
Product as set forth in the forecasts provided by MENTOR to NAMS pursuant to
Section 6.6 of this Agreement.
1.5 APPLICABLE REGULATORY REQUIREMENTS. Any statute, law, ordinance,
rule, regulation, requirement, order or decree promulgated by (a) any federal,
state or local government or any agency or instrumentality thereof having
jurisdiction over the manufacture, shipment, handling, use, storage or disposal
of medical devices or radioactive materials, and (b) any government, or any
agency or instrumentality of the government, of any foreign country or a
political subdivision of a foreign country into which the Product is shipped or
in which the Product is sold.
1.6 COMMERCIAL SALES. A sale of the Product made by MENTOR to a Customer
in the ordinary course of business (excluding sales of samples or for education
and training purposes) after the Product is Commercially Available.
1.7 COMMERCIALLY AVAILABLE. The existence of production capacity
sufficient to satisfy MENTOR's anticipated requirements for the Product during
the first Sales Year.
1.8 CONFIDENTIAL INFORMATION. All information of a confidential or
proprietary nature disclosed by MENTOR to NAMS or by NAMS to MENTOR in
connection with or pursuant to this Agreement. As used in this Agreement,
"Confidential Information" shall not include any information or data disclosed
to a party (the "Recipient") that (a) was in the Recipient's lawful possession
prior to the Recipient's receipt of the same pursuant to this Agreement, (b)
which at the time of the disclosure is or thereafter becomes, through no act or
failure to act on the part of the Recipient, known within the industry or part
of the public domain, (c) which corresponds in substance to information
furnished to the Recipient by a Third Party without breaching any
confidentiality or nondisclosure agreements to which such Third Party was
subject, or (d) which corresponds in substance to information which the
Recipient independently develops.
1.9 CONTROL. With respect to any Person or group of Persons,
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise, including (a) in the
case of a corporation, ownership of more than fifty percent (50%) of the shares
of stock entitled to vote for the election of directors and, (b) in the case of
any other business entity, ownership of more than fifty percent (50%) of the
beneficial interest in capital or profits.
1.10 CUSTOMER. Any Person to whom NAMS delivers one or more
units of the Product pursuant to a purchase order received by NAMS, whether such
purchaser order was submitted directly by the purchaser or on behalf of the
purchaser by MENTOR or any other Person.
1.11 DEFECTIVE PRODUCT. Product that was not manufactured and produced in
accordance with the requirements of Section 6.15 of this Agreement or that
otherwise fails to conform to the product warranties set forth in that Section.
1.12 DEFICIENCY NOTICE. A written notice given by NAMS to MENTOR pursuant
to Section 5.5, below, which (a) sets forth (i) NAMS's opinion as to the size of
the market for the Products in the Field of Use in a specified Geographic Market
Area for a specified Sales Year, and (ii) NAMS's computation of the amount of
additional purchases NAMS believes to be necessary to satisfy the Annual
Purchase Target for such Geographic Market Area for such Sales Year, and (b) is
accompanied by appropriate, independent market data and research in support of
such opinion.
1.13 DOCUMENTED COST. The sum of (a) the price paid by MENTOR to NAMS for
units of the Product purchased by MENTOR pursuant to this Agreement plus (b)
taxes, freight and insurance paid by MENTOR in order to take possession of such
Product FOB NAMS's factory.
1.14 EFFECTIVE DATE. The date on which the consideration payable by
MENTOR pursuant to Section 3 of this Agreement has been paid to NAMS.
1.15 EUROPEAN COMMUNITY. The European Economic Community formed pursuant
to the 1975 Treaty of Rome, as modified by the Single European Act of 1987.
1.16 FDA. The United States Food and Drug Administration.
1.17 FIELD OF USE. The treatment of prostate cancer through brachytherapy
procedures utilizing I-125 Sources and Palladium 103 Sources.
1.18 FIXED PRICE. That portion of the purchase price for the Product that
is payable by MENTOR to NAMS without regard to the Net Selling Price for the
Product received by MENTOR from its Customer.
1.19 FORCE MAJEURE. The occurrence of an act of God or other events
beyond the reasonable ability of the party affected thereby to control, such as
wars or insurrection, strikes, fires, vandalism, floods, earthquakes, work
stoppages, embargoes, labor shortages, lack of materials or other similar
circumstances.
1.20 GEOGRAPHIC MARKET AREA. The following geographic areas, each of
which shall constitute a separate Geographic Market Area: (a) the United States;
(b) Canada; (c) Central America (including
Mexico and the Caribbean); (d) the South American continent ; (e) the United
Kingdom and Western Europe; (e) Eastern Europe (including all former Soviet
Republics); (f) the African continent; (g) the Middle East and Southwest Asia
(excluding Afghanistan) ; (h) South Asia (including Afghanistan, Pakistan,
India, Nepal, Bhutan, Bangladesh and Sri Lanka); (i) Southeast Asia (including
Burma, Malaysia, Indonesia and the Philippines; (j) East Asia (▇▇▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ and Hong Kong); and (k) Australia/New Zealand (including
Oceania).
1.21 IMPROVEMENT. Any change in the Product that enhances the performance
of the Product or that makes it easier to distribute, store, use or dispose of.
1.22 INSOLVENT. With respect to any Person: (a) the filing of an
application by a Person for, or such Person's consent to, the appointment of a
trustee, receiver, or custodian of its other assets; (b) the entry of an order
for relief with respect to a Person in proceedings under the United States
Bankruptcy Code, as amended or superseded from time to time; (c) the making by a
Person of a general assignment for the benefit of creditors; (d) the entry of an
order, judgment, or decree by any court of competent jurisdiction appointing a
trustee, receiver, or custodian of the assets of a Person unless the proceedings
and the person appointed are dismissed within ninety (90) days; or (e) the
failure by a Person generally to pay his or her debts as the debts become due
within the meaning of Section 303(h)(1) of the United States Bankruptcy Code, as
determined by the Bankruptcy Court, or the admission in writing of such Person
of its inability to pay its debts as they become due.
1.23 INVOLUNTARY BUSINESS DISRUPTION. An interruption in the marketing
and distribution activities of MENTOR caused by, resulting from or attributable
to (a) the failure or inability of NAMS to supply MENTOR with the quantity of
Product required to be supplied by NAMS pursuant to Section 6.5 of this
Agreement, (b) the pendency of any claim that the Product or the Technology
utilized in its manufacture and production violates the intellectual property
rights of Third Parties, or (c) the absence of a requisite permit, approval or
license or other governmental authorization necessary in order to market and
sell the Product for use in the Field of Use in the United States without
violating the laws of the state in which such sale is proposed to be made, or
(d) the failure to obtain any CE ▇▇▇▇ required for sales in the European
Community after such CE ▇▇▇▇ is first required, or the subsequent loss of such
CE ▇▇▇▇ after it has been obtained, or (e) the occurrence of an event of Force
Majeure.
1.24 MARKETING PLAN. The marketing plan developed by MENTOR, and as
modified by the parties from time to time pursuant to Section 5.5 of this
Agreement, for the purpose of attempting to market, sell and distribute a
sufficient quantity of the Product each year to achieve the Target Market Share.
An overview of the Market for which such Plan is to be developed is attached as
Exhibit B to this Agreement.
1.25 NET SELLING PRICE. The net invoice price paid by a Customer and
actually received by MENTOR with respect to Products sold or distributed to
Customers, less returns, sales taxes, cost of shipping insurance, cost of
freight, cost of packing, or other transportation charges, and quantity
discounts given to Customers, dealers, distributors and agents, but only if such
returns, taxes, costs, charges and discounts are expressly stated and separately
invoiced or may be readily determined by acceptable accounting practices.
1.26 OVERAGE PAYMENTS. That portion of the transfer price payable for a
Product that exceeds the Fixed Price for the Product
1.27 PERSON. Any individual, partnership, association, joint stock
company, joint venture, corporation, limited liability company, trust,
unincorporated organization or governmental entity, or any agency or political
subdivision, or economic unit thereof.
1.28 PRODUCT. All I-125 Sources manufactured by or for NAMS for use in
brachytherapy procedures that are used or are suitable for use in brachytherapy
procedures for the treatment of prostate cancer, and all PD-103 Sources if and
when they become subject to this Agreement pursuant to Section 2.3, 2.3, below.
1.29 PRODUCT LINE. Each separate type of radioactive source for which
marketing and distribution rights are being granted to MENTOR hereunder, with
I-125 Sources and Pd-103 Sources each constituting a separate Product Line in
the Field of Use.
1.30 PRODUCT SPECIFICATIONS. The product specifications, quality control
tests and inspection procedures for the Product that are to be set forth in a
separate schedule prepared by NAMS and approved by MENTOR for attachment as
Exhibit A to this Agreement simultaneously with the execution of this Agreement,
as they may be amended by the mutual agreement of the parties from time to time.
1.31 PROPORTIONATE SHARE. The ratios in which MENTOR and NAMS shall share
(a) the costs and expenses of certain actions or proceedings under Section 10 of
this Agreement and (b) any recoveries resulting therefrom, if both parties elect
to participate in any such actions or proceedings. Each party's Proportionate
Share shall be the percentage obtained by multiplying 100% by a fraction, (a)
the numerator of which is the lost profits attributable to lost sales of the
Product by such party and (b) the denominator of which is the aggregate lost
profits of both parties attributable to lost sales of the Product.
1.32 REPORTING PERIODS. With respect to information required to be
included in a commission or overage payment report to be furnished by one party
to the other pursuant to this Agreement,
(a) the calendar quarter for which such Report is being furnished, and (b) in
addition, cumulatively for (i) the period commencing with the first day of the
Sales Year and ending on the last day of the calendar quarter for which such
Report is being furnished, and (ii) the period commencing with the Effective
Date of this Agreement and ending on the last day of the calendar quarter for
which such Report is being furnished.
1.33 SALES YEAR. The twelve (12)-month period commencing on the Term
Commencement Date, and each subsequent twelve (12)-month period commencing on
the anniversary of the Term Commencement Date.
1.34 TARGET MARKET SHARE. The percentage of the market for the use of the
Product in the Field of Use in a specific Geographic Market Area that MENTOR
must acquire and maintain as of the end of the first Sales Year and during each
subsequent Sales Year in order to preserve its exclusive marketing and
distribution rights for the Product in such Geographic Market Area.
1.35 TECHNOLOGY. Any proprietary invention, development or improvement,
and any trade secret, "know-how," proprietary manufacturing formula, process,
procedure, method or technique, whether or not patentable or registerable, owned
by or licensed to NAMS to the extent that such technology is reasonably relevant
to the design, manufacture, performance or use of the Product.
1.36 TERM COMMENCEMENT DATE. The first day of the first month following
(a) the date on which MENTOR's cumulative Commercial Sales of the Product equal
or exceed Twenty-Five Thousand Dollars ($25,000.00) or (b) the expiration of
ninety (90) days following the date on which NAMS has both (i) obtained 510(K)
approval for the Product from the FDA and (ii) has begun producing usable
Product conforming to the Product Specifications in sufficient quantity to
satisfy MENTOR's Anticipated Requirements for the Product, whichever first
occurs.
1.37 THIRD PARTY. Any person other than the legal entity that is a party
to this Agreement. As used in this Agreement, "Third Party" shall include
agents and employees of a party to this Agreement.
2. GRANT OF MARKETING AND DISTRIBUTION RIGHTS
2.1 SCOPE OF DISTRIBUTION RIGHTS. Subject to its paying the
consideration referred to in Section 3, below, MENTOR shall have an exclusive
license to market and sell the Products for use in the Field of Use both in the
United States and in all foreign markets, including North American markets other
than the United States, for an initial term of five (5) Sales Years as provided
by Section 4.1, below.
2.2 SUBLICENSES. The rights granted hereunder are personal to MENTOR and
may not be assigned or sublicensed except that:
2.2.1 MENTOR may grant a sublicense to any Affiliate to MENTOR for
as long as (a) MENTOR continues to own at least eighty percent (80%) of the
voting and beneficial ownership interest of such Affiliate, and (b) such
sublicense is on terms and conditions consistent with this Agreement and
expressly provides that it shall terminate simultaneously with the termination
of this Agreement; and
2.2.2 MENTOR shall be entitled to sell the Products for resale by
subdistributors and marketing representatives who are engaged in the sale and
distribution of MENTOR's products on a regular basis provided that such sales
are made in accordance with the provisions of this Agreement.
2.3 PD-103 SOURCES. Any Pd-103 Sources manufactured by or for NAMS that
are suitable for use in the Field of Use shall automatically be included in the
exclusive distribution rights granted to MENTOR hereunder unless the costs and
expense of creating the manufacturing capacity for such Pd-103 Sources was
funded by a Third Party not affiliated with NAMS in accordance with the
provisions of Section 7.1.4 of this Agreement after MENTOR declined the
opportunity to provide the additional capital required to create such
manufacturing capacity. Should NAMS begin supplying Pd-103 Sources to MENTOR
pursuant to this Agreement, then the parties shall execute an appropriate
addendum to this Agreement setting forth the Annual Sales Targets, Target Market
Share, Transfer Price, and all other terms and conditions for the marketing and
distribution of such Pd-103 Sources by MENTOR.
2.4 IMPROVEMENTS AND NEW PRODUCTS. All Improvements or modifications to
the Product that are intended for use or that can be adapted for use in the
Field of Use are included in this Agreement and subject to the distribution
rights granted to MENTOR hereunder. New or additional products developed or
licensed by NAMS are not covered by this Agreement unless such new or additional
products (a) perform the same or a substantially identical function as the
Products (i.e., radioactive sources designed for insertion into soft-tissue
organs for the purpose of treating tumors or other cancerous conditions) and (b)
are suitable for use in the Field of Use. NAMS shall not license any other
person to market or sell any such new or additional products for use in the
Field of Use so long as MENTOR has exclusive marketing and distribution rights
under this Agreement.
2.5 RIGHTS TO PRODUCT IMPROVEMENTS. Subject to the provisions of Section
7.1.9, below, any Improvements to the Product developed by NAMS during the term
of this Agreement that do not incorporate, modify or improve technology that is
proprietary to MENTOR shall be and remain the property solely of NAMS. MENTOR
shall not acquire any interest in NAMS's Technology or any Improvements unless
such technology or Improvements are made or developed jointly by the parties
pursuant to a written development
agreement, but all Improvements or modifications to the Products that are
intended for use or that can be adapted for use in the Field of Use are included
in this Agreement and subject to the distribution rights granted to MENTOR
hereunder.
3. CONSIDERATION FOR DISTRIBUTION RIGHTS
The consideration for the distribution rights being granted to MENTOR
hereunder is (a) the capital contribution being made to NAMS by MENTOR pursuant
to the terms of that certain Stock Purchase Agreement being executed by MENTOR
and NAMS concurrently with the execution of this Agreement and (b) the covenants
and agreements of MENTOR contained herein. This Agreement shall become
effective as of the date on which MENTOR pays to NAMS the capital contributions
called for by such Stock Purchase Agreement.
4. TERM OF AGREEMENT
4.1 TERM OF DISTRIBUTION RIGHTS. The term of the exclusive marketing and
distribution rights granted to MENTOR hereunder shall begin on the Effective
Date of this Agreement and, subject to the provisions of Section 5, below, shall
continue for a period of five (5) full Sales Years from the Term Commencement
Date.
4.1.1 NAMS shall advise MENTOR in writing once NAMS has obtained
510(K) approval for the Product and has established the production capacity
sufficient to produce Product conforming to the Product Specifications in
sufficient quantity to satisfy MENTOR's Anticipated Requirements.
4.1.2 If it is subsequently determined (a) by customer returns of
Defective Product that a substantial portion of the Product being produced by
NAMS does not conform to the Product Specifications and is therefore not usable,
or (b) that NAMS is unable to produce a sufficient quantity of the Product to
satisfy MENTOR's Anticipated Requirements, then in either case appropriate
representatives of NAMS and MENTOR shall meet to review, discuss and resolve any
problems that impair the production of usable Product in commercially reasonable
quantities and to establish a new Term Commencement Date.
4.2 OPTION TO EXTEND. Provided that (a) this Agreement has not
previously been terminated by either party and (b) MENTOR has attained its
Annual Sales Target in the United States for the initial term of this Agreement
(or has remedied its failure to do so as provided by Section 5.7, below), MENTOR
shall have an option, exercisable on one occasion, to extend the term of this
Agreement for an additional three (3) Sales Years by giving written notice of
its desire to do so within six (6) months prior to the expiration of the initial
term. Provided, however, that this option to extend shall not expire or lapse
by reason of MENTOR's failure to give such notice within such six (6)-month
period unless, not more than six (6) months prior to the expiration of the then
current term, NAMS gives MENTOR a written reminder that
such option will expire and terminate unless it is exercised (the "Reminder")
and MENTOR thereafter fails to give written notice of its intent to exercise
such option within fifteen (15) days after its receipt of such Reminder.
5. MANUFACTURER'S RIGHT TO RECAPTURE UNEXPLOITED MARKETS
5.1 TARGET MARKET SHARE. MENTOR shall prepare a Market Plan within
ninety (90) days after the effective date of this Agreement, and shall provide a
copy of such Plan to NAMS for its review and information. MENTOR shall
diligently attempt to attain (a) Product sales of $1,000,000 and ten percent
(10%) share of the United States market for the use of the Product in the Field
of Use by the end of the first Sales Year and (b) Product sales of $2,000,000
and fifteen percent (15%) share of the United States market for the use of the
Product for such purposes by the end of the second Sales Year, and (c) twenty
percent (20%) of the market for the use of the Product in the Field of Use in
each separate Geographic Market Area by the end of the third and each subsequent
Sales Year. Should MENTOR fail to make reasonable progress in attaining the
Target Market Share, then at the request of either party appropriate
representatives of NAMS and MENTOR shall meet in order to review and analyze
MENTOR's Marketing Plan, to identify any deficiencies in the plan or in its
implementation, and to develop and implement appropriate remedies.
5.2 TERMINATION OF EXCLUSIVE DISTRIBUTION RIGHTS. The right of MENTOR to
continue to market and distribute the Products pursuant to this Agreement on an
exclusive basis is subject to MENTOR's acquiring and maintaining the Target
Market Share set forth in Schedule 1 of this Agreement by the end of the first
Sales Year and during each subsequent Sales Year. Should MENTOR fail to achieve
and retain its Target Market Share for the Product in a specific Geographic
Market Area, NAMS shall have the right to terminate the exclusive marketing and
distribution rights granted to MENTOR in such Geographic Market Area in
accordance with the provisions of this Section 5 unless such failure is abated
pursuant to Section 5.4, below.
5.3 CREDIT FOR PRODUCT SALES. For purposes of determining MENTOR's
market share in a given Geographic Market Area (a) there shall be taken into
account both (i) direct sales by MENTOR and (ii) sales by suppliers and
distributors purchasing from MENTOR as permitted under this Agreement, and (b)
MENTOR shall be conclusively presumed to have satisfied its Target Market Share
for any Sales Year unless NAMS has given a Deficiency Notice to MENTOR within
ninety (90) days after the end of such Sales Year.
5.4 ABATEMENT. If by reason of an Involuntary Business Disruption during
the term of this Agreement, MENTOR (a) is unable to begin or to continue
marketing and distributing the Product in a specific Geographic Market Area, or
a material portion thereof, or (b) would incur an unreasonable risk (as
determined by an objective standard) of civil or criminal liability by
continuing
to do so, then:
5.4.1 The term of MENTOR's distribution rights under this
Agreement with respect to such Product Line in the affected Geographic Market
Area shall be extended for a period of time equal to such time as the
Involuntary Business Disruption continues to exist; and
5.4.2 The date by which MENTOR must attain the Target Market Share
for such Product Line with respect to such country or Geographic Market Area
shall be postponed for such period of time as the Involuntary Business
Disruption continues to exist; and
5.4.3 MENTOR's Target Market Share for the Product Line in the
affected Geographic Market Area for the Sales Year shall be reduced to an amount
mutually agreed to by NAMS and MENTOR that reflects both (a) the impact of the
Involuntary Business Disruption on (i) the supply of Product available to MENTOR
for distribution and sale and (ii) the period of time during which MENTOR was
unable to market and sell the Product Line or would incur an unreasonable risk
in doing so, and (b) the impact of such Involuntary Business Disruption on
MENTOR's future marketing and sales of the Product Line in the affected
Geographic Market Area due to such factors as loss of Customers, purchase orders
or credibility, any impact on seasonal orders and the like.
5.4.4 If MENTOR and NAMS are unable to agree on the extent to
which MENTOR's Target Market Share shall be reduced pursuant to this Section
5.4, then upon the request of either party such dispute shall be resolved by
binding arbitration in accordance with the commercial arbitration rules of the
American Arbitration Association (the "AAA"). Any such arbitration proceeding
shall be conducted in Los Angeles, California before a panel of three
arbitrators appointed in accordance with the customary procedures of the AAA, at
least one of whom shall have a reasonable level of experience in the marketing
and distribution of medical devices, and shall be limited to a determination of
the extent to which MENTOR's Target Market Share shall be reduced pursuant to
this Section 5.4. Each of the parties shall bear its own costs and expense in
any such arbitration proceeding and shall pay in equal one-half shares the costs
and fees of the arbitrators.
5.5 DEFICIENCY NOTICES AND REMEDIAL ACTION. If NAMS believes that MENTOR
has not attained or may not attain its Target Market Share for a specific
Geographic Market Area, NAMS shall be entitled to give MENTOR a Deficiency
Notice containing the information called for by Section 1.12, above, at any time
after the commencement of the second Sales Year.
5.5.1 Review of Marketing Plan. Should NAMS give a Deficiency
Notice to MENTOR hereunder, then appropriate representatives of NAMS and MENTOR
shall meet within thirty (30)
days after MENTOR's receipt of the Deficiency Notice to review, discuss and
analyze MENTOR's Marketing Plan, to identify any deficiencies in the Plan or in
its implementation, and to develop and agree upon appropriate remedies.
5.5.2 Revised Marketing Plan. Within thirty (30) days after the
completion of such meeting, MENTOR shall provide NAMS with a revised Marketing
Plan designed to increase Product sales during the following three full calendar
months to a level sufficient to establish and maintain the Target Market Share
during the following twelve (12) months.
A. If during the four full calendar months ending six full
calendar months after MENTOR's receipt of a Deficiency Notice, MENTOR's Product
sales, when computed on an annualized basis using MENTOR's highest level of
Product sales during a period of sixty (60) consecutive days within such
four-month period, are sufficient to attain and retain the Target Market Share
during the following twelve months, then MENTOR shall not be obligated to take
further remedial action for as long as its Product sales, computed on an
annualized basis, remain at a level sufficient to maintain Target Market Share.
B. If during the four full calendar months ending six full
calendar months after MENTOR's receipt of a Deficiency Notice, MENTOR's Product
sales, when computed on an annualized basis utilizing MENTOR's highest level of
Product sales during a period of sixty (60) consecutive days within such four
-month period, are not sufficient to attain and retain the Target Market Share
during the following twelve months, then NAMS shall be entitled to give a second
Deficiency Notice to MENTOR at any time following the expiration of such
four-month period and prior to the end of the then-current Sales Year unless,
prior to the delivery of such second Deficiency Notice, MENTOR's Product sales,
when computed on an annualized basis, are sufficient to achieve the Target
Market Share by the end of the then-current Sales Year.
(1) Appropriate representatives of NAMS and MENTOR shall
meet within thirty (30) days after MENTOR's receipt of a Second Deficiency
Notice and NAMS shall be entitled to present to MENTOR at any such meeting an
alternative written Marketing Plan designed to increase Product sales during the
following three full calendar months to a level sufficient to establish and
maintain the Target Market Share for the following twelve (12) month period.
(2) Should NAMS propose a Marketing Plan to MENTOR
following the delivery of a second Deficiency Notice to MENTOR pursuant to this
Section 5.5.2 during the same Sales Year, then MENTOR shall be required to elect
in writing within fifteen (15) days after its receipt of the NAMS's Marketing
Plan (the "Election Period"), to either (i) accept and implement the NAMS
Marketing Plan, or (ii) to propose in writing and to adopt and implement an
alternative Marketing Plan.
(a) Should MENTOR elect to accept and implement NAMS's
Marketing Plan, then:
(i) If during the three full calendar months
following the expiration of the Election Period, MENTOR's Product sales, when
computed on an annualized basis using MENTOR's highest level of Product sales
during a period of 45 consecutive days within such three-month period, equal or
exceed the Annual Sales Target for the following twelve months, then MENTOR
shall not be obligated to take further remedial action for as long as its
Product sales, computed on an annualized basis, remain at a level sufficient to
attain and retain Target Market Share.
(ii) If during the three full calendar months
following the expiration of the Election Period, MENTOR's Product sales, when
computed on an annualized basis using MENTOR's highest level of Product sales
during a period of 45 consecutive days within such three-month period, do not
equal or exceed the Annual Sales Target for the following twelve months, then
MENTOR's exclusive marketing and distribution rights shall be subject to
termination by NAMS as provided by Section 5.6, below, if the conditions for
termination set forth in that Section have been met.
(b) Should MENTOR elect to reject the NAMS's Marketing
Plan and to instead adopt and implement an alternative Marketing Plan developed
by MENTOR, then:
(i) If during the three full calendar months
following the expiration of the Election Period, MENTOR's Product sales, when
computed on an annualized basis using MENTOR's highest level of Product sales
during a period of 45 consecutive days within such three-month period, equal or
exceed the Annual Sales Target for the then-current Sales Year, then MENTOR
shall not be obligated to take further remedial action for as long as its
Product sales, computed on an annualized basis, remain at a level sufficient to
maintain Target Market Share; but
(ii) If during the three full calendar months
following the expiration of the Election Period, MENTOR's Product sales,
computed on an annualized basis utilizing MENTOR's highest level of Product
sales during a period of 45 consecutive days within such three-month period, do
not equal or exceed the Annual Sales Target for the then-current Sales Year,
then MENTOR's exclusive marketing and distribution rights shall be subject to
termination by NAMS as provided by Section 5.6, below, if the conditions for
termination set forth in that Section have been met.
5.5.3 Objection by MENTOR. If MENTOR objects to or contests the
accuracy of the information contained in a Deficiency Notice, then MENTOR shall,
within thirty (30) days after its
receipt of such Deficiency Notice, provide NAMS with (1) MENTOR's opinion as to
the size of the market for the use of the Product in the Field of Use during the
specified Sales Year, and (2) appropriate, independent market data and research
in support of MENTOR's opinion. If the parties are unable to resolve their
difference of opinion within thirty (30) days after the MENTOR's receipt of a
Deficiency Notice, then at the request of either party (the "Moving Party"), the
parties shall engage an independent market research firm ("an "Independent
Analyst") as provided by Section 5.5.4, below, to advise them as to the size of
the market for the Product for such purposes for the Geographic Market Area in
question.
5.5.4 Independent Market Study. Any Independent Analyst engaged
by the parties pursuant to this Section 5.5 shall be selected by the Moving
Party from a list of not less than three independent market research firms
provided by the other party. There shall be included in such list only
recognized national market research firms that have not less than three offices
and a demonstrable record of having performed market studies for the Geographic
Market Area in question.
A. Each party shall be entitled to provide the Independent
Analyst with such information that such party believes to be relevant to a
determination of the size of the market for use of the Product in brachytherapy
procedures for the treatment of prostate cancer. The opinion of any such
Independent Analyst engaged by the parties as provided herein shall be
conclusive and binding on both parties.
B. The parties shall pay in equal shares the costs and fees of
any Independent Analyst engaged pursuant to this Section 5.5, above, except that
(a) NAMS shall pay all such costs and fees if its opinion of the size of the
market exceeds the estimated market as determined by the Independent Analysis by
more than twenty percent (20%), (b) MENTOR shall pay all such costs and fees if
the Independent Analyst's estimate of the size of the market exceeds MENTOR's
opinion as to the size of the market by more than twenty percent (20%) and (c)
if both MENTOR's opinion of the size of the market and NAMS's opinion of the
size of the market differ by more than twenty percent (20%) from the estimated
market as determined by the Independent Analyst, then MENTOR and NAMS shall each
pay one-half of such costs and fees.
5.6 TERMINATION OF EXCLUSIVE RIGHTS. If it is determined through the
procedures set forth in this Section 5 that MENTOR has failed to achieve and
maintain the Target Market Share for the Product for any Geographic Market Area
for any Sales Year, then unless (a) the obligation of MENTOR to achieve such
Target Market share was abated pursuant to Section 5.4, above, or (b) MENTOR has
implemented successful remedial action as provided by Section 5.5, above, and
subject to the reinstatement rights conferred on MENTOR by Section 5.7, below,
NAMS shall be entitled to terminate the exclusive marketing and distribution
rights of MENTOR with respect
to the Geographic Market Area in question by giving MENTOR thirty (30) days
written notice of its intention to do so (a "Termination Notice"). At the
election of NAMS, in its sole discretion, such rights may be converted to
non-exclusive rights with respect to such Geographic Market Area.
5.7 REINSTATEMENT OF RIGHTS. Notwithstanding the provisions of Section
5.6, above, MENTOR shall be entitled to retain its exclusive marketing and
distribution rights for the United States by remitting to NAMS within thirty
(30) days after its receipt of the Termination Notice the additional amount that
would have been paid to NAMS had MENTOR achieved its Target Market Share for the
United States by selling an additional quantity of the Product sufficient to
achieve the Target Market Share at an average Net Selling Price equal to the
average Net Selling Price for the Product sales actually made. The Remedial
Period within which MENTOR must submit such payment shall be determined as
follows:
5.7.1 If a Termination Notice is properly given to MENTOR with
respect to a completed Sales Year, the Remedial Period shall be a period of
sixty (60) days following MENTOR's receipt of the Termination Notice.
5.7.2 If a Termination Notice is properly given to MENTOR prior to
the end of a current Sales Year, the Remedial Period shall be the greater of (a)
thirty days following the end of such Sales Year, or sixty (60) days following
its receipt of the Termination Notice.
5.8 EXCLUSIVE REMEDY. The right granted to NAMS to terminate the
exclusive marketing and distribution rights of MENTOR shall be the sole and
exclusive remedy for the failure of MENTOR to achieve the Annual Sales Target,
and in no event shall MENTOR be liable for damages or any other amount by reason
of its failure to achieve its Annual Sales Target or to attain its Target Market
Share.
5.9 RIGHT OF MENTOR TO MANUFACTURE OR PURCHASE FROM OTHERS. At any time
after the exclusive right of MENTOR to market and distribute the Product has
been terminated with respect to a designated Geographic Market Area pursuant to
Section 5.6, above, MENTOR shall be entitled to discontinue the purchase of its
requirements for the Product in such Geographic Market Area from NAMS, and to
begin manufacturing the radioactive sources itself or procuring its requirements
for radioactive sources from an alternative source as provided by Section 8,
below, provided that any Product so manufactured or procured is not distributed
in any Geographic Market Area other than the Geographic Market Areas for which
MENTOR's exclusive marketing and distribution rights have been terminated.
6. REQUIREMENTS AND SUPPLY
6.1 REQUIREMENTS. NAMS shall supply to the Customers of MENTOR and its
Affiliates each month the number of units of the Product for which MENTOR and
its Affiliates submit purchase orders pursuant to Section 6.7, below and,
subject to the ability of NAMS to satisfy its supply obligation, MENTOR and its
Affiliates shall procure from NAMS all I-125 Sources required to satisfy the
needs of MENTOR's Customers.
6.2 SPECIFICATIONS. All Product supplied by NAMS hereunder shall in all
material respects meet the Product Specifications applicable to the Product when
intended for use in the Field of Use. Simultaneously with the execution of this
Agreement, NAMS and MENTOR shall agree on the Product Specifications for the
Product and shall attach a Schedule setting forth such Specifications as Exhibit
A to this Agreement. The Product Specifications shall constitute an integral
part of this Agreement and NAMS shall not make any changes to the Product
Specifications without giving MENTOR not less than sixty (60) days prior written
notice of the proposed change and, if MENTOR so requests, meeting with MENTOR to
explain the nature of and the reasons for such change.
6.3 TRANSFER PRICES. The transfer price payable by MENTOR for the
Product shall be the amount set forth on the Terms Sheet attached as Schedule 1
to this Agreement.
6.4 SAMPLES AND PROMOTIONAL PRODUCT. NAMS will provide MENTOR with
samples and promotional units of the Product for use as samples, physician demos
and similar promotional or educational purposes in the quantities, at the prices
and for the period set forth in the Terms Sheet attached as Schedule 1 to this
Agreement.
6.5 DUTY TO MANUFACTURE. NAMS shall establish and maintain sufficient
capacity necessary to satisfy MENTOR's Anticipated Requirements for the Product
during the first and second Sales Years and thereafter shall increase its
production capacity to the extent that the parties mutually agree or, in the
absence of an agreement to the contrary, to an amount sufficient to satisfy
MENTOR's requirements if MENTOR's sales were to increase each year by the
percentage increase, if any, in its sales in the preceding year.
6.5.1 Should NAMS be unable to fill MENTOR's Anticipated
Requirements on a timely basis, then at the request of either party appropriate
representatives of NAMS and MENTOR shall meet in order to review and analyze
NAMS's production capacity, projected Product sales, and Product order,
manufacture and shipment cycles, in order to develop and implement appropriate
remedies.
6.5.2 NAMS shall exercise due diligence in
expanding its production capacity to meet unanticipated increases in demand for
the Product consistent with the availability of capital and its other operating
requirements, and MENTOR shall not be entitled to terminate its obligation to
procure all of its requirements for the Product from NAMS except on the terms
and conditions set forth in Section 8, below.
6.6 SALES FORECASTS. MENTOR will provide NAMS on or before the fifteenth
(15th) day of each month a nonbinding rolling forecast of projected Product
sales for the each of the three (3) calendar months following the month in which
the forecast is prepared.
6.7 PURCHASE ORDERS. All purchase orders shall be submitted on forms
that are acceptable to NAMS not less than seven (7) days prior to the required
delivery date. Each such purchase order shall specify by Customer name and
address (a) the number of units and activity level of the Product to be
delivered to such Customer, (b) the required delivery date, and (c) the Net
Selling Price payable by the Customer. Notwithstanding the provisions of any
such purchase order, the provisions of this Agreement shall govern the purchase
and sale of the Product between NAMS and MENTOR, and any inconsistency or
conflict between the terms set forth in any form of purchase order submitted by
MENTOR with the provisions of this Agreement shall be resolved in favor of the
provisions of this Agreement.
6.8 PACKAGING AND LABELLING. The Product will be supplied in containers
meeting the Product Specifications, and will be packaged with all applicable
product literature and instructions for use in packaging which (a) satisfies all
Applicable Regulatory Requirements governing the handling, shipment and storage
of the Product and (b) is sufficient to protect against damage during shipping.
6.8.1 Subject to any limitations imposed by the foregoing
requirements, the packaging design and trade dress for the Product shall conform
to MENTOR's specifications so as to assure that such design and trade dress are
consistent with the packaging of MENTOR's other products.
6.8.2 NAMS shall include with the Product such instructions for
use and product information data sheets as may be reasonably requested by
MENTOR, and shall include in any Products shipped to Customers in kit form such
instructions for use and product information data sheets as may be supplied by
MENTOR for such purposes.
6.8.3 All packaging, shipping labels, instructions for use and
product information data sheets shall bear such of MENTOR's trademarks,
labels and markings as MENTOR may reasonably request. MENTOR shall provide
NAMS with camera-ready art work for all trademarks, labels or markings that
MENTOR desires to have imprinted on all packaging and product insert data
sheets, and
NAMS shall not make any changes in such art work or in the specifications for
such packaging materials without the prior written consent of MENTOR.
6.8.4 NAMS shall be entitled (a) to display its trade name on the
Product packaging and Product information data sheets in a manner that (i)
clearly identifies the Product as having been manufactured by NAMS under patents
or licenses held by NAMS, and that (ii) gives the NAMS trade name equal
prominence with the MENTOR's trade name or the trademarks under which the
Products are distributed, and (b) to include its product literature and
advertising in the packaging.
6.9 ORDER FULFILLMENT. NAMS will timely fill all purchase orders
submitted by MENTOR, will make shipment of the Product directly to the Customer
identified in the purchase order within the time prescribed by Section 6.10,
below, and will afford all purchase orders for the Product received from MENTOR
equal priority with NAMS's own supply requirements and orders from other
distributors licensed to distribute the Product for use in other applications or
fields of use. NAMS will ship all orders for the Product in the priority in
which such orders were received, regardless of the field of use to which such
orders relate, and NAMS will not place any purchase orders received from MENTOR
on a back-order status if NAMS is then shipping Product to its own customers or
to any other purchaser or distributor.
6.10 SHIPPING AND INVOICING. All Product shall be drop shipped by NAMS
directly to MENTOR's Customers FOB NAMS's manufacturing plant at a date and time
appropriate to ensure that the Product will be delivered to the Customer at the
address specified in the purchase order on the delivery date specified in the
purchase order. Carriers and routing utilized to make such shipments shall be
selected by NAMS but shall be consistent with any shipping protocols or
procedures previously established by the parties.
6.11 INVOICING. NAMS shall invoice MENTOR, 30-days net, upon shipment of
the Product. MENTOR shall be entitled to make partial or complete payment of
any such invoice by returning to NAMS for credit against its account any unused
credit memos previously issued by NAMS pursuant to this Agreement.
6.12 PAYMENT. Payment of the Fixed Price for all Product shipped to
Customers shall be made by MENTOR, whether or not MENTOR receives payment from
the Customer, it being agreed that MENTOR is the Customer for all Product
shipped by NAMS pursuant to purchase orders submitted to NAMS by MENTOR pursuant
to this Agreement. MENTOR shall be responsible for all ▇▇▇▇▇▇▇▇, receivables
and collections attributable to Product sales made pursuant to purchase orders
submitted to NAMS by MENTOR, and NAMS shall not be required to bear any of the
risk or cost of collection with respect to the Fixed Price of the Product.
Payment of that portion of transfer price which exceeds the Fixed Price shall be
made in accordance with the provisions of Section
7.2.2, below.
6.13 RISK OF LOSS. Delivery of the Product by NAMS to MENTOR pursuant to
this Agreement shall be complete and the risk of loss shall pass to MENTOR upon
receipt by the carrier for shipment.
6.14 STATEMENTS AND CREDIT MEMOS. NAMS shall issue a monthly statement
within ten (10) days after the end of each month, reflecting all outstanding
invoices and any unused credits to which MENTOR is entitled under Section 6.18,
below.
6.14.1 Each such statement shall be accompanied by a separate
credit memo reflecting any credit to which MENTOR has become entitled during the
preceding month.
6.14.2 NAMS shall replace from time to time at the request of
MENTOR any credit memo that MENTOR reports as having been stolen, lost or
destroyed upon the presentation of appropriate evidence that such memo has not
been previously been returned to NAMS for credit. The inability of MENTOR to
deliver a credit memo to NAMS due to its theft, loss or destruction shall not
excuse NAMS from its obligation to allow credits against invoices for any
previously unused credits to which MENTOR is entitled under this Agreement.
6.15 PRODUCT WARRANTY. NAMS warrants to MENTOR that:
6.15.1 The Product to be supplied to MENTOR hereunder shall be
manufactured and produced:
A. In plants that have been registered with and are in
compliance with the requirements of the FDA; and
B. In accordance with: (1) applicable Good Manufacturing
Practices as promulgated by the FDA; and (2) applicable laws and regulations of
the United States and each of the fifty states in which MENTOR is marketing and
distributing the Products; and (3) all other Applicable Regulatory Requirements
which are made known to NAMS by MENTOR or of which NAMS could otherwise
reasonably be expected to be aware.
6.15.2 If NAMS has obtained a CE ▇▇▇▇ for the Product, then the
Products to be supplied to MENTOR and its Customers hereunder shall be
manufactured and produced (a) in plants that have been audited and certified by
the applicable Notified Body to satisfy the standards established by EN 46001
and 46002 and any other requirements promulgated by the European Commission for
manufacturing facilities for medical devices in order to qualify for the CE
▇▇▇▇; and (b) in accordance with the standards established by the applicable
Medical Device Directive promulgated by the European Commission or the European
Council in order to qualify for a CE ▇▇▇▇.
6.15.3 The use of the Product for its intended
purpose in the Field of Use will not violate any Applicable Regulatory
Requirements in the United States and, with respect to other Geographic Market
Areas, Applicable Regulatory Requirements which are made known to NAMS by MENTOR
or of which NAMS could otherwise reasonably be expected to be aware.
6.15.4 At the time of its delivery to the Customer, the Product
will: (a) conform to the then current Product Specifications; (b) be fit for its
intended purposes in the Field of Use; (c) be free of all liens, security
interests and encumbrances; (d) not be proscribed by federal or state law from
being introduced into interstate or intrastate commerce in the United States;
and (e) not be adulterated within the meaning of the Federal Food, Drug and
Cosmetic Act and regulations promulgated thereunder, nor within the meaning of
any substantially similar law of any state within the United States or any
Member State in the European Community.
6.16 WARRANTY DISCLAIMERS. EXCEPT AS EXPRESSLY PROVIDED IN SECTION 10.1,
BELOW, THE LIMITED WARRANTY SET FORTH IN SECTION 6.15, ABOVE, IS THE ONLY
WARRANTY BEING MADE BY NAMS WITH RESPECT TO THE PRODUCT. ALL OTHER WARRANTIES,
WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, CONTRACTUAL OR STATUTORY, INCLUDING
BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE ARE SPECIFICALLY EXCLUDED AND DISCLAIMED.
6.16.1 MENTOR agrees and understands that it shall be solely
responsible for any warranties or representations made by it to its customers
which are inconsistent with or in addition to any warranties made by NAMS to the
ultimate purchasers and users of the Product, and MENTOR shall, at its own
expense, defend, indemnify and hold NAMS harmless from and against any claims
thereon of any nature whatsoever in the manner and to the extent provided by
Section 11.3, below (it being the intention of the parties that the indemnity
obligation contained in this Section 6.16.1 shall be subject to the terms and
conditions of Section 11.2, below, and that this Section not be construed to
increase MENTOR's indemnification obligation beyond the obligations set forth in
Section 11.3).
6.16.2 The warranties given by NAMS pursuant to Section 6.15,
above, shall not apply to any components supplied by MENTOR for the purpose of
marketing the Product in kit form as contemplated by Section 7.1.9, below.
6.17 NONCONFORMING GOODS AND DEFECTIVE PRODUCT. MENTOR shall promptly
advise NAMS of any Product delivered to a Customer that has been or is being
rejected as Defective Product. Any such notice (a) shall be in writing, (b)
shall specify (i) the original date of sale and (ii) the shipment or lots being
rejected, and (c) shall be accompanied by appropriate information substantiating
the claim that such Product was Defective. The costs and expense of returning
Defective Product shall be borne by NAMS, but NAMS shall not be responsible for
the costs of Product believed to be
Defective Product until it is determined that the Product was Defective Product,
and no Product shall be deemed to be Defective Product until NAMS has first been
afforded the opportunity to inspect the Product and to confirm that it was
Defective Product. NAMS shall be responsible for assuring that any Defective
Product returned to NAMS by the Customer is disposed of in accordance with all
Applicable Regulatory Requirements governing the handling, shipment, storage and
disposal of the Product.
6.18 REPLACEMENT. NAMS shall promptly replace at its own cost and expense
any Defective Product that is returned to NAMS or, if MENTOR so requests, shall
credit to MENTOR on a monthly basis an amount equal to the Documented Cost of
any such returned Product, if such Product:
6.18.1 Is Defective Product that has been properly returned by
MENTOR or any Customer of MENTOR.
6.18.2 Has been replaced on a no-charge basis by MENTOR in
accordance with the established customer complaint and returned goods policies
of NAMS for the return and replacement of Defective Product.
6.19 PRODUCT RECALLS. NAMS shall bear all costs and expense incurred by
either of the parties on account of any recall of or any device notification or
safety alert given with respect to the Product, whether pursuant to a request of
the FDA or otherwise, including without limitation any expenses or obligations
to Third Parties and any costs associated with the shipment of recalled Product
from Customers to NAMS; provided, however, that the obligation of NAMS hereunder
shall not extend to any recall, notification or alert that is necessitated by an
act, error or omission of MENTOR. MENTOR shall maintain complete and accurate
records for such periods as may be required by applicable law of all Product
sold by it.
6.20 CUSTOMER COMPLAINTS. MENTOR shall promptly refer to NAMS for review
and evaluation any complaints received by it that are subject to the provisions
of Part 820 of Title 21 of the Code of Federal Regulations (Good Manufacturing
Practice for Medical Devices).
6.20.1 With respect both to complaints referred to NAMS by MENTOR
and complaints received directly by NAMS from Customers:
A. NAMS shall (1) give such notices, (2) conduct such
investigations, (3) maintain such records, and (4) take such other actions as in
each case are required by the FDA and any state regulatory agency having
jurisdiction with respect thereto unless NAMS is contesting the matter with the
FDA or other regulatory agency in good faith and with due diligence.
B. NAMS shall keep MENTOR advised on a continu-
ing basis with respect to (1) the nature of such complaints, (2) the results of
any investigations conducted by it with respect thereto, and (3) the corrective
action, if any, initiated as a result of or in response thereto. MENTOR shall
treat all such information received by NAMS as Confidential Information.
6.20.2 MENTOR shall promptly refer to NAMS any complaints, demands
or notices delivered to or made upon MENTOR by or on behalf of a Customer or any
Third Party who is seeking damages or other compensation on account of any
injury, illness or death of a person or damage to property that is alleged to
have resulted from or to be attributable to the use of the Product, and NAMS
shall indemnify, defend and hold MENTOR free and harmless with respect to any
such claim or demand in the manner but only to the extent provided in Section
11.2, below (it being the intention of the parties that the indemnity obligation
contained in this Section 6.20.2 shall be subject to the terms and conditions of
Section 11.2, below, and that this Section not be construed to increase NAMS's
indemnification obligation beyond the obligations set forth in Section 11.2).
6.21 COUNTRY OF ORIGIN. At MENTOR's request, NAMS shall provide MENTOR
with a signed affidavit of the country of origin of any Product delivered to
MENTOR pursuant to this Agreement.
6.22 SALES & USE TAXES. As between MENTOR and NAMS, MENTOR shall be
responsible for the payment of all sales and use taxes becoming payable by
reason of its purchase of the Product from NAMS and the subsequent sale of the
Product to its Customers.
7. ADDITIONAL COVENANTS OF THE PARTIES
7.1 COVENANTS OF NAMS. NAMS covenants, warrants and represents to MENTOR
that:
7.1.1 FDA Marketing Approval. NAMS shall exercise due diligence
in obtaining as soon as practicable after the execution of this Agreement and
thereafter maintaining in full force and effect throughout the term of this
Agreement all FDA Marketing Approvals necessary to the sale and distribution of
the Product for use in the Field of Use.
7.1.2 Registration in European Community. NAMS shall prepare at
its own cost all documents necessary to secure when first required and to
thereafter maintain in full force and effect a CE ▇▇▇▇ for the sale and
distribution of the Product and any Improvements thereto for use in the Field of
Use in any of the Member States of the European Community. Should NAMS fails to
secure a CE ▇▇▇▇ for the Product prior to the date on which such ▇▇▇▇ is first
required in order to lawfully sell the Product for use in the Field of Use in
the applicable Geographic Market Area, then the date by which MENTOR must attain
the Target Market share for such Geographic Market Area shall be postponed until
such CE ▇▇▇▇ has been obtained and the term of this Agreement shall be
extended for a like period of time.
7.1.3 Compliance with Applicable Regulatory Requirements. NAMS
shall at all times (a) keep and maintain all records necessary or appropriate to
evidence such compliance or that are otherwise mandated by the Applicable
Regulatory Requirements and the standards identified in Sections 6.15 and 7.1.2,
above, and (b) shall make such records available to MENTOR (subject to the
restrictions imposed by Section 7.3.6, below) and its duly authorized
representatives for inspection and copying at reasonable times during regular
business hours upon reasonable prior notice, and (c) shall promptly comply with
Applicable Regulatory Requirements of (i) any cognizant governmental authority
within the United States or any of the fifty states pertaining to the production
of the Products and (ii) the Applicable Regulatory Requirements adopted for the
European Community by the European Commission or the European Council, to the
extent necessary to procure and maintain in effect a CE ▇▇▇▇ for the sale and
distribution of the Products and any Improvements thereto for use in the Field
of Use in any Member State of the European Union.
7.1.4 Manufacture of Pd-103 Sources. NAMS shall proceed with due
diligence in attempting to develop the technology, know-how and manufacturing
capacity to produce Pd-103 Sources.
A. NAMS shall provide the first $250,000 of the capital
required to fund the costs required to create the manufacturing capacity
necessary to produce the Pd-103 Sources. If the costs of creating the necessary
manufacturing capacity for Pd-103 Sources exceed $250,000, then NAMS shall first
offer MENTOR the opportunity to supply any additional required capital in excess
of $250,000 and to acquire exclusive marketing and distribution rights for such
Pd-103 Sources on substantially the same terms and conditions of this Agreement.
B. If after sixty (60) days from the date on which NAMS first
makes a written proposal to MENTOR, NAMS and MENTOR are unable to agree on the
terms and conditions on which such additional required capital is to be
supplied, then NAMS shall be entitled to seek such additional required capital
from a Thirty Party, but in no event shall NAMS accept any such additional
required capital on terms and conditions that are more favorable to such Third
Party than the terms and conditions offered by NAMS to MENTOR, or on terms and
conditions less favorable to NAMS than the terms and conditions offered to NAMS
by MENTOR, without NAMS having first presented such terms and conditions to
MENTOR and affording MENTOR a period of ten (10) business days within which to
agree to supply such additional required capital on the same terms and
conditions as were proposed by such Third Party.
C. Should NAMS be unable to supply Pd-103 Sources to MENTOR in
commercially reasonable quantities within
three years after the Effective Date of this Agreement, then MENTOR shall be
entitled to obtain Pd-103 Sources from any other available source.
7.1.5 Covenant by NAMS not to Compete. Unless and until MENTOR's
exclusive marketing and distribution rights are terminated pursuant to Section
5, above:
A. Neither NAMS nor any of its Affiliates shall market or
distribute the Product for use in the Field of Use in violation of the exclusive
marketing and distribution rights granted to MENTOR under this Agreement, and
NAMS shall not (a) license any other Person to market or distribute the Product
for use in the Field of Use, or (b) knowingly or intentionally suffer or permit
any Person to sell the Product for use in the Field of Use; and
B. NAMS shall promptly refer to MENTOR for processing all
purchase orders or inquiries received by NAMS directly from Customers or
prospective purchasers of the Product, and NAMS shall not act upon or fill any
such purchase order that has not been processed and submitted to NAMS by MENTOR.
7.1.6 Marketing Support. NAMS shall from time to time provide
such scientific and technical information regarding the Product and its clinical
performance as MENTOR may reasonably request for the purpose of supporting
MENTOR's clinical study and marketing activities, including such information as
may be necessary to assist MENTOR in marketing the Product in kit form. In
addition, NAMS shall make its technical and marketing personnel available to
MENTOR for reasonable periods of time to provide technical support, to respond
to technical inquiries, and to participate in marketing and sales strategy
sessions.
7.1.7 Manufacturing Modifications. NAMS shall give MENTOR not
less than sixty (60) days' prior written notice (or such lesser period of time
as may be reasonable under the circumstances) of any modifications proposed to
made by NAMS or its suppliers to the manufacturing processes or procedures for
the Product or to any quality control test and/or compliance procedures relating
to the Product or the supplies and components embodied therein, whether
resulting from governmental inspection, customer complaints or for any other
reason, if any such modification will (a) cause a change in the Product
Specifications or (b) cause the Product or the procedure for its manufacture to
differ in any material respect from the information contained in NAMS's
application for 510(K) approval of the Product by the FDA. Such notice shall be
accompanied by a written report setting forth in reasonable detail the reasons
for and the nature of the proposed change and all relevant technical data and,
if MENTOR so requests, NAMS shall meet with MENTOR to explain the nature of and
the reasons for such change.
7.1.8 Product Improvements. NAMS shall (a) take
reasonable steps, including the maintenance and funding of continuing materials
and product research and development, to make such Improvements to the Product
as may be necessary to meet the needs of the market and to keep the Product
current and commercially acceptable, (b) shall consult with MENTOR regarding
proposed changes to the Product, and (c) shall endeavor to incorporate into the
Product any reasonable features or Improvements that are recommended by MENTOR
as the result of its clinical studies and its marketing and Customer support
activities, including such modifications or additions as MENTOR may reasonably
request for the purpose of marketing and distributing the Product in kit form.
7.1.9 Marketing of Product in Kit Form. MENTOR shall have the
right to (a) combine or assemble the Product with other devices or products for
the purpose of marketing and distributing the Product in kit form, including
pre-loading Radioactive Sources into needles and arrays, and (b) to market and
sell Ancillary Products and kits that do not include Radioactive Sources or any
other components manufactured or supplied by NAMS.
A. Any proprietary technology or Improvements developed or
acquired by MENTOR for the purpose of marketing the Product in kit form (but
excluding Technology that is embodied in or is related to the manufacture and
production of the Radioactive Sources) shall be and remain the intellectual
property of MENTOR, but NAMS shall have a non-exclusive, royalty-free license in
any such proprietary technology or Improvements to the extent necessary to
satisfy and discharge its obligations to MENTOR under this Agreement.
B. Should any such kits include additional devices, products or
service to be supplied by NAMS, then NAMS shall supply such devices, products
and service on the terms and conditions set forth in Section 6, above, at a
transfer price determined in accordance with paragraph 3 of the Terms Sheet
attached as Schedule 1 to this Agreement, but nothing herein shall be construed
to require MENTOR to procure such devices or materials from NAMS.
C. Except as provided in subparagraph B, above, NAMS shall not
be entitled to any increase in the transfer price for the Product by reason of
(a) its being packaged and marketed in kit form or (b) any increase in the
selling price attributable to the value added by MENTOR by packaging the Product
in kit form, it being intended that the transfer price for the Product will
remain constant, regardless of the manner in which it is marketed and
distributed by MENTOR.
7.1.10 Governmental Inspections. NAMS shall promptly notify MENTOR
of any inspection made of its facilities or its operations by any regulatory
agency or Notified Body, or of those of any of its suppliers or contract
manufacturers of which it receives notice, that relates in any manner to the
production,
distribution or use of the Product or any component of the Product. NAMS shall
promptly advise MENTOR of the conduct of any such inspection and the results
thereof, and shall provide MENTOR with a copy of any written notification or
report provided to NAMS by the inspecting agency. In addition, NAMS shall
immediately request an unexpurgated copy of the inspection report from the
inspecting governmental agency, and, unless prohibited from doing so under
applicable law, shall forward a copy thereof to MENTOR immediately upon its
receipt.
7.1.11 Labelling Claims. NAMS shall provide MENTOR with prior
written notice of any labelling claims for which NAMS intends to seek FDA
approval, and shall endeavor to include in its applications for FDA approval
such labelling claims as MENTOR may reasonably request.
7.1.12 Vendor's Audit. NAMS shall permit MENTOR or its authorized
representatives to enter and inspect, during normal business hours, the plants
and facilities in which the Product is manufactured, packaged, labeled or held
in order to permit MENTOR to verify that the Product is being produced in
conformity with applicable Good Manufacturing Practices and the applicable
Medical Device Directive of the European Commission, and that NAMS is otherwise
satisfying its obligations under this Agreement.
A. During any such inspection, MENTOR's quality control or
compliance inspectors shall be entitled to inspect the manufacturing and quality
control procedures of NAMS relating to the Product, and all records relating
thereto, but:
(1) MENTOR's access to those portions of NAMS's
manufacturing and quality control procedures that NAMS has designated as
proprietary to NAMS shall be limited to the degree of access required in order
to satisfy the applicable requirements of the FDA; and
(2) All such inspections shall be carried out in a manner
that does not unreasonably interfere with NAMS's manufacturing operations.
B. MENTOR's employees and agents shall be required to execute
NAMS's standard form confidentiality and non-disclosure agreement as a condition
to being allowed to conduct such audit.
C. MENTOR shall not perform an audit more than once in any
Sales Year unless necessary to satisfy Applicable Regulatory Requirements to
which MENTOR is subject. MENTOR shall give NAMS prior notice of its intention
to conduct any such audit at least five (5) business days prior to the scheduled
commencement thereof, and shall cooperate with NAMS in the scheduling of any
such audit so as to minimize to the extent practicable any disruption to NAMS's
business operations, but MENTOR shall not be obligated to postpone the conduct
of such
audit for more than fifteen (15) days.
D. MENTOR shall furnish NAMS with a written report of the
results of any such audit as soon as practicable after its completion, and NAMS
shall promptly take any action suggested or recommended in such report to the
extent that such action is necessary to cure a default by NAMS in the
performance of its obligations under this Agreement.
7.1.13 Covenants if MENTOR's Rights Become Nonexclusive. If at any
time the distribution rights held by MENTOR have become nonexclusive rights,
then all terms and conditions of this Agreement that are not rendered
inapplicable by the change in the nature of the rights held by MENTOR shall
continue in full force and effect and, in addition:
A. The transfer price charged to MENTOR shall not exceed the
most favorable transfer price charged by NAMS to any other distributor of the
Product for use in the Field of Use.
B. For as long as this Agreement remains in effect, NAMS shall
not enter into agreements for the marketing and distribution of the Product for
use in the Field of Use with any other person or entity on terms and conditions
that are more favorable than the terms and conditions of this Agreement without
giving to MENTOR the benefit thereof as of the date upon which any such more
favorable agreement becomes effective. Should NAMS enter into any such more
favorable agreement, it will promptly notify MENTOR to that effect and advise
MENTOR concerning the change in the terms and conditions affecting this
Agreement and the provision made by NAMS to effectuate such changes.
C. NAMS will timely fill all purchase orders submitted by
MENTOR, and will afford all purchase orders for the Product received from MENTOR
equal priority with NAMS's own supply requirements and orders from other
distributors licensed to distribute the Product. NAMS will ship all orders for
the Product in the priority in which such orders were received, and NAMS will
not place any purchase orders received from MENTOR or procured by MENTOR from a
Customer on a back-order status if NAMS is then shipping Product to its own
Customers or to any other purchaser or distributor.
7.2 COVENANTS OF MENTOR. MENTOR covenants to and agrees with NAMS that:
7.2.1 Sales Capacity. MENTOR shall train, equip and maintain
sufficient staff to effectively promote, sell and distribute the Product, and
shall use due diligence in developing and implementing a Marketing Plan pursuant
to the Marketing Plan Overview attached as Exhibit B to this Agreement, as it
may be amended by the parties from time to time, in order to maximize sales of
the Product, but nothing herein shall be construed to make MENTOR liable for any
failure or alleged failure to purchase
or sell the Product, it being understood that the failure of MENTOR to achieve
its Target Market Share for a specific Geographic Market Area shall not
constitute a default under this Agreement and shall only entitle NAMS to
terminate MENTOR's exclusive marketing and distribution rights as provided by
Section 5 of this Agreement.
7.2.2 Overage Reports and Payments. MENTOR shall deliver to NAMS
within thirty (30) days after the end of each calendar quarter an Overage Report
setting forth the following information for each Reporting Period, itemized by
Product Line for all Customers to whom Product sales have been made for which
Overage Payments are or may become due, but excluding Customers for whom MENTOR
and NAMS have made a separate written pricing arrangement excluding such
Customer from the computation of Overage Payments: (a) the number of units of
Product sold by MENTOR or any of its Affiliates to such Customers; (b) the Net
Selling Price payable to NAMS and its Affiliates with respect to such Product
sales; (d) the amount of the Net Selling Price actually paid to and received by
MENTOR; (c) the Overage Payment payable to NAMS with respect to such sales,
together with a clear computation of the amount thereof; (d) Overage Payments
actually paid with respect to such sales; and (e) Overage Payments that are not
yet due and payable. Each such report shall be accompanied by the payment of
any Overage Payments owing to NAMS under this Agreement, to the extent not
previously paid.
7.2.3 Covenant not to Manufacture or Sell Competing Products.
Provided that NAMS is not in default in the performance of its obligations
hereunder, then for as long as MENTOR holds exclusive marketing and distribution
rights under this Agreement, MENTOR shall not (a) manufacture or procure its
requirements for I-125 Sources for use in the Field of Use from any other source
without the prior written consent of NAMS, or (b) manufacture or procure its
requirements for Pd-103 Sources for use in the Field of Use from any other
source except in accordance with Section 7.1.4 of this Agreement. NAMS
understands that MENTOR is and shall remain in the business of developing,
manufacturing and distributing devices for use in the treatment of urological
and other medical disorders, and nothing in this Agreement is intended and no
provision of this Agreement shall be construed to limit the right of MENTOR to
continue to develop, manufacture and sell (a) Ancillary Products for use in the
Field of Use and (b) radioactive sources for use outside the Field of Use.
7.2.4 Covenant by MENTOR to Observe Restrictions. Neither MENTOR
nor any of its Affiliates shall market or distribute the Product for any use
other than applications in the Field of Use, and MENTOR will not knowingly or
intentionally suffer or permit any Person purchasing the Product from MENTOR or
its Affiliates to resell the Product for use in any application other than the
Field of Use without the prior written approval of NAMS.
7.2.5 Labelling and Warranty Claims. MENTOR shall not make any
express warranties or other claims with respect to the Product that have not
been authorized by the FDA or NAMS or that are inconsistent with any labelling
claims that have been approved by the FDA and NAMS with respect to the Product.
7.2.6 Foreign Registration. MENTOR shall inform NAMS in writing
of any Applicable Regulatory Requirements that are unique to a foreign country
into which MENTOR elects to begin marketing and distribution activities and that
must be satisfied as a condition to MENTOR'S obtaining any necessary permits,
licenses or Product registrations required for the distribution of the Product
in such country. Subject to the performance by NAMS of its obligations under
Section 7.1.2, above, MENTOR shall prepare at its own cost and expense all
documents necessary for registration, sale and distribution of the Product and
any Improvements thereto for use in the Field of Use, and shall secure and
maintain in full force and effect all other permits, licenses and approvals
required in order to sell the Product for use in the Field of Use in such
foreign countries.
7.2.7 Compliance with Applicable Regulatory Requirements. MENTOR
shall comply with all Applicable Regulatory Requirements in its promotion and
sale of the Product, including the Applicable Regulatory Requirements of any
foreign jurisdiction in which it distributes the Product.
7.2.8 Delivery of Clinical Data. MENTOR shall from time to time
at the request of NAMS provide NAMS with such scientific and technical
information regarding the Product and its clinical performance as becomes
available to MENTOR by reason of any clinical trials conducted by MENTOR.
7.3 MUTUAL WARRANTIES AND COVENANTS. Each of the parties (herein, a
"warranting party") covenants to and agrees with the other that:
7.3.1 Authority to Conduct Business. It is duly organized and in
good standing under the laws of the jurisdiction in which it is incorporated and
has all requisite corporate power and authority and the permits, consents, and
qualifications necessary to operate its business as it is currently being
conducted.
7.3.2 Authority to Perform Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary
corporate action, and does not constitute a breach by the warranting party of
its organizational documents or of any contract or agreement to which the
warranting party is a party or by which the warranting party or it assets are
bound.
7.3.3 Exchange of Information. It shall promptly furnish to the
other party a complete and correct copy of any
notice, report or other communication that it receives from the FDA or from any
other governmental agency concerning the Product.
7.3.4 Impairment of Obligation. Neither party has entered and
will not hereafter enter into any agreement, the execution or performance of
which would violate this Agreement or have an adverse effect upon its ability to
perform this Agreement.
7.3.5 Adverse Information. Each party will promptly notify the
other party in writing of any fact, condition or information which may hereafter
come to its attention and which may adversely affect the reliability, utility or
marketability of the Product, including but not limited to, adverse scientific
or technical studies or evaluations and threatened litigation or claims. If
such adverse information requires that corrective or protective action be taken
related to the Product, including, but not limited to, a recall, market
withdrawal, stock recovery or label clarification, the recipient of such
information will immediately notify the other of such requirement in writing,
provide the other party with complete copies of all documentation related
thereto, and provide all commercially reasonable assistance to the other party
necessary to assure that such actions are taken or such requirements are
satisfied.
7.3.6 Confidential Information. All information communicated by
each party to the other pursuant to this Agreement, including any Confidential
Information gained by either of the parties or their representatives by reason
of association with the other party in connection with the performance of any
obligations under this Agreement, whether or not such Confidential Information
was directly or intentionally communicated, is and shall at all times remain
confidential.
A. Each of the parties agrees that:
(1) It shall not disclose any information or other material
which is deemed confidential pursuant to this Agreement to any other person
unless specifically authorized in writing by the other party to do so. In the
event that any such written authorization to make disclosure is given,
disclosure shall be made only within the limits and to the extent of such of
authorization.
(2) It shall use its best efforts to prevent any
inadvertent disclosure of any information deemed confidential hereunder to any
Third Party by using at least the same care and/or discretion that it uses with
similar data of its own that it deems confidential in the operation of its
business.
B. For purposes of this Section 7.3.6, the disclosure of
confidential information to employees and agents of a party to this agreement
shall not be deemed to be disclosure to a Third Party provided that the
disclosure is made for purposes related to the performance by such party of its
duties and
obligations under this Agreement.
7.3.7 Books and Records. Each party shall at all times during
the continuance of this Agreement keep books and records in sufficient detail to
permit verification of its compliance with the terms and conditions of this
Agreement. All such books and records shall be available for inspection and
copying by the other party or its designated representative at the principal
place of business of the party keeping such books and records at reasonable
times during regular business hours for purposes reasonably related to this
Agreement.
7.3.8 Further Assurances. Each of the parties shall take such
acts and execute and deliver such documents and instruments as may reasonably be
requested by the other party to enable the other party to perfect any of its
rights under this Agreement, including any assignments, notices of assignment,
or other registrations with applicable domestic and foreign governmental
agencies.
8. MANUFACTURING RIGHTS; ALTERNATIVE SUPPLY SOURCES
8.1 RIGHT TO MANUFACTURE. MENTOR shall be released of its obligation
under Section 7.2.3, above, and shall be entitled (either itself or through
Affiliates or Third Parties) to manufacture the Product, or to have it
manufactured by a Third Party for purchase by MENTOR and Affiliates of MENTOR,
by giving not less than ten (10) days prior written notice of its intention to
do so:
8.1.1 If NAMS discontinues the manufacture of the Product; or
8.1.2 If (a) during any period of twenty-four (24) consecutive
months there are more than two occasions in which NAMS is unable to supply at
least ninety percent (90%) of MENTOR's requirements, as forecasted by MENTOR
pursuant to Section 6.6, above, during a period of ninety (90) consecutive days,
and (b) NAMS fails to successfully implement appropriate corrective action to
prevent a recurrence of NAMS's inability to supply sufficient Product to satisfy
MENTOR's requirements during the ensuing two years; or
8.1.3 If MENTOR terminates this Agreement due to the occurrence of
a material event of default by NAMS that is not cured by NAMS within the
applicable cure period; or
8.1.4 If MENTOR's exclusive marketing and distribution rights have
been terminated as to a designated Geographic Market Area pursuant to Section
5.6, above; provided however, that:
A. If NAMS elects to and in fact continues to supply the
Product to MENTOR for marketing and distribution in such Geographic Market Area
on a non-exclusive basis pursuant to Section 7.1.13, above, then for a period of
two years following the
loss of its exclusive marketing and distribution rights for such Geographic
Market Are, MENTOR (a) shall continue to purchase the Product from NAMS for
distribution in such Geographic Market Area and (b) shall not manufacture the
Product for distribution in such Area; and
B. Any Product manufactured by MENTOR or procured by MENTOR
from a Third Party may be marketed and distributed only in those Geographic
Market Areas for which MENTOR's exclusive marketing and distribution rights have
been terminated); or
8.1.5 NAMS becomes Insolvent.
8.2 TRANSITION PROCEDURES. If MENTOR becomes entitled and elects to
begin manufacturing the Product, then unless such election is made pursuant to
Section 5.9 of this Agreement due to the conversion of its exclusive marketing
and distribution rights to nonexclusive rights, upon the request of MENTOR NAMS
shall provide such cooperation and assistance as may reasonably be necessary to
enable MENTOR to design, engineer, manufacture, inspect and service the Product,
and shall consult with and advise MENTOR with respect to proper plant layout and
the selection of appropriate machinery, tools, equipment, and production flow
necessary for the manufacture of the Product on a cost-effective basis. MENTOR
shall reimburse NAMS, immediately against invoice therefor, any and all direct
costs or expenses, including prorated salary, overhead and benefits for NAMS
personnel, as such costs and expenses are incurred by NAMS in providing such
cooperation and assistance.
8.2.1 If the commencement of manufacturing operations by MENTOR is
attributable to any reason other than the occurrence of an uncured event of
default by NAMS, then at the request of NAMS the parties shall establish and
implement mutually agreeable transition procedures to ensure the purchase by
MENTOR of any inventory previously procured or produced by NAMS to fulfill
purchase orders previously submitted by MENTOR pursuant to this Agreement
(including any inventory or components MENTOR has authorized NAMS in writing to
acquire in order to assure their availability to satisfy MENTOR's forecasted
requirements).
8.2.2 If the commencement of manufacturing operations by MENTOR is
attributable to the occurrence of an event of Force Majeure over which NAMS had
no control, and if NAMS restores its ability to manufacture and supply the
Product within six (6) months after the date on which its manufacturing
operations were disrupted, then MENTOR shall be obligated to resume purchasing
its requirements for the Product from NAMS.
8.3 RIGHT TO PROCURE FROM ALTERNATIVE SOURCES. Should NAMS be unable to
supply all of the requirements of MENTOR and its Affiliates for the Product
within the periods of time specified by this Agreement, then MENTOR shall be
entitled to purchase from
alternative sources sufficient quantities of the Product to satisfy that portion
of its requirements that NAMS is unable to supply, but MENTOR shall be obligated
to continue to purchase so much of its requirements for the Product as NAMS is
able to supply unless and until MENTOR terminates this Agreement by reason of an
uncured material default by NAMS in the performance of its obligations under
this Agreement.
9. TRADE NAMES AND TRADEMARKS
9.1 MARKS OF NAMS. The provisions of this Agreement permitting or
requiring MENTOR to place NAMS'S name and Marks on the Product and its packaging
are not intended and shall not be construed to give MENTOR any interest or
license in any such trademarks, trade names, labels or markings. MENTOR shall
not make any use of NAMS's name or any trade name or trademark owned by NAMS
except for the purpose of marketing and selling the Product in accordance with
the provisions of this Agreement.
9.2 MARKS OF MENTOR. MENTOR shall be entitled to register and use its
own tradenames and trademarks for the purpose of marketing and distributing the
Product for uses within the Field of Use. Any such names and marks shall
constitute the proprietary property of MENTOR; NAMS shall not have any rights in
any such names and marks, and MENTOR shall be entitled to continue to use such
names and marks after the expiration of MENTOR's exclusive distribution rights
under this Agreement. The provisions of this Agreement permitting or requiring
NAMS to place MENTOR's name and Marks on the Product and its packaging are not
intended and shall not be construed to give NAMS any interest or license in any
such trademarks, trade names, labels or markings. Any uses by NAMS in its
advertising or elsewhere of MENTOR's name or any trade name or trademark owned
by MENTOR, or any name or ▇▇▇▇ similar thereto, shall be subject to the prior
written approval of MENTOR in its sole discretion and shall be governed by a
separate written agreement.
10. INFRINGEMENT CLAIMS
10.1 WARRANTIES OF NAMS. NAMS warrants and represents to MENTOR that:
10.1.1 NAMS is the owner of and, to the best of its knowledge, has
good and uncontested title to all of the intellectual property rights utilized
to manufacture and produce the Product, free of any liens or claims by Third
Parties. NAMS has full power and authority to enter into this Agreement
without the approval or consent of any other Person. NAMS has not granted any
other person the right to market or distribute the Product for use in the Field
of Use.
10.1.2 To the best of its knowledge and after having conducted a
reasonable investigation, the formulation, manufacture (including but not
limited to the process and materials used to
produce the Product), sale or use of the Product as it exists on the Effective
Date of this Agreement does not infringe any intellectual property rights of any
Third Party including, without limitation, any now existing patents.
10.1.3 In the performance of this Agreement, NAMS will not
knowingly or willfully infringe any intellectual property rights of any Third
Party including, without limitation, any now existing or subsequently issued
patents.
10.1.4 NAMS has no knowledge of any claims, disputes, or litigation
proceedings pending or threatened as of the Effective Date with respect to the
Product or the Technology or know-how used by NAMS in its manufacture, other
than certain proceedings with Best Industries previously disclosed to MENTOR.
10.2 CLAIMS AGAINST THIRD PARTIES. Should any actual or possible
infringement or other violation by any Third Party of any Technology or other
proprietary rights owned by NAMS come to the attention of either party to this
Agreement, such party shall promptly notify the other party of the alleged
infringement or violation. The parties hereto shall consult with one another
with a view to reaching agreement as to the best means of eliminating the
infringement or violation.
10.2.1 Discretionary Litigation. Should NAMS elect or agree to
commence litigation or other enforcement action or proceedings, then MENTOR
shall be entitled to elect to pay its Proportionate Share of the costs and
expense thereof and to receive its Proportionate Share of any net recovery
resulting therefrom provided that MENTOR has a material interest in such
proceedings or any potential recovery resulting therefrom. If MENTOR is not
entitled or elects not to participate in any such action or proceeding, then
NAMS shall bear the entire cost and expense thereof, and shall be entitled to
retain the entirety of any resulting recovery.
10.2.2 Duty to Cooperate. If NAMS elects to initiate litigation
or other action or proceeding on account of an alleged infringement of any
Technology owned by NAMS, and MENTOR elects not to participate in the costs and
expense of prosecuting such action or proceeding, MENTOR shall nonetheless
cooperate with NAMS in the prosecution of such action or proceeding provided
satisfactory provisions have been made for the reimbursement by NAMS of all
costs and expenses that MENTOR reasonably incurs in doing so.
10.3 CLAIMS BY THIRD PARTIES. In the event of any threatened or actual
suits against MENTOR by reason of its distribution and sale of the Product or
the exercise by MENTOR of any license granted to MENTOR hereunder based on an
allegation that the Product or the use of the Technology infringes on the
intellectual property rights of a Third Party, MENTOR shall promptly inform NAMS
and the parties shall jointly decide on steps to be taken
under the circumstances. If the parties are unable to agree on a mutually
acceptable course of action with respect to the defense of any such claim within
sixty (60) days after it is first brought to the attention of NAMS, then:
10.3.1 NAMS shall be responsible for the defense of such action,
including the defense of MENTOR with counsel reasonably acceptable to MENTOR,
and shall bear the cost and expense thereof, but MENTOR, at its election, shall
be entitled to be represented in any such proceeding by independent counsel of
its choosing at its own cost and expense.
10.3.2 NAMS shall indemnify and hold MENTOR harmless with respect
to any amounts becoming payable as damages to the claimant by reason of past
infringement attributable to the sale of the Product or the use of any
Technology owned by NAMS on the rights of the claimant.
10.3.3 If the settlement or satisfaction of any such infringement
claim requires the payment by MENTOR to any Third Party of damages or royalties
on account of the sale or distribution of the Product, then MENTOR shall be
entitled to deduct any such amounts paid to any such Third Party from any
amounts thereafter becoming payable to NAMS under this Agreement.
10.4 OBLIGATION TO MAKE PAYMENTS. Except as otherwise expressly provided
by this Section 10, threatened or actual claims of infringement made against
MENTOR by a Third Party, or possible or actual infringement claims asserted by
NAMS or MENTOR against Third Parties, shall not excuse the obligation of MENTOR
to continue to pay the transfer price for any Product being purchased from NAMS,
but any such threat or claim shall constitute an Involuntary Business Disruption
during:
10.4.1 Any period during which the sale of the Product is
restrained by an injunction or a temporary restraining order; and
10.4.2 During the pendency of any action or proceeding in which
damages are sought from NAMS or any of its distributors on account of the
alleged infringement of the intellectual property rights of a Third Party by
reason of the sale of the Product or the use of the Technology, unless NAMS
establishes an escrow arrangement, posts a surety bond, or otherwise provides
reasonable security for the performance of its indemnification obligations under
this Agreement in an amount sufficient to protect MENTOR from any damage or loss
that would result if MENTOR were to continue to market and distribute the
Product during the pendency of any such action or proceeding and the claims were
resolved adversely to NAMS.
11. INSURANCE, INDEMNIFICATION AND LIMITATIONS ON LIABILITY
11.1 NAMS'S LIABILITY INSURANCE. Beginning on the Term Commencement Date
and continuing for a period of five (5) years from the date on which the last
sale of a Product occurs, NAMS shall maintain (a) product liability insurance
(containing both a Vendor's Additional Insured Endorsement and a Products
Contractual Liability Endorsement) on the Product in amounts that are consistent
with the amount of products liability insurance that are maintained by similarly
situated companies selling comparable products for similar or related purposes,
but in no event less than One Million Dollars ($1,000,000) first dollar coverage
per occurrence and Five Million Dollars ($5,000,000) in the aggregate; and (b)
general business liability insurance with minimum limits of One Million Dollars
($1,000,000) first dollar coverage per occurrence and Five Million Dollars
($5,000,000) in the aggregate. MENTOR shall be named as an additional insured
in each policy of insurance required to be maintained by NAMS hereunder.
11.1.1 The issuer of each such policy shall be a standard company
licensed to issue insurance having a Best's rating of B+ or higher and a policy
holder surplus of not less than Twenty-Five Million Dollars ($25,000,000). Each
such policy shall provide for (a) the issuance of a reporting or tail coverage
endorsement upon termination of (i) the base policy, (ii) the production,
manufacturing, marketing and sale of the Product or (iii) the corporate
existence of NAMS and (b) for not less than thirty (30) days' prior written
notice to MENTOR of any proposed change in the nature, scope or amount of
coverage. NAMS shall provide MENTOR with certificates of such insurance and
evidence of the payment of premiums therefor, promptly upon request.
11.1.2 The insurance coverage required to be maintained hereunder
shall be subject to review and adjustment from time to the time at the request
of either party to limits of liability that are mutually agreeable in order to
assure a continuing level of insurance protection that, as nearly as practicable
after taking relative costs and benefits into account, is consistent with the
level of protection contemplated by the parties at the time they execute this
Agreement, but no such adjustment shall be made more than once in any
consecutive twelve-month period. Should the parties be unable to agree with
respect to the nature or amount of such insurance coverage, then the dispute
shall be resolved by an independent insurance consultant who has not previously
performed services for either party. If the parties cannot agree on any such
independent consultant, then such consultant shall be selected by the President
of the Independent Insurance Brokers Association in Los Angeles, California.
11.2 INDEMNIFICATION BY NAMS. NAMS shall promptly indemnify, defend and
hold MENTOR (including its officers, directors, employees, and agents) harmless
from and against any and all
claims by Third Parties (whether based in contract or tort or otherwise arising
by operation of law), losses, damages, penalties, expenses, settlements, or
attorneys' fees arising out of or resulting from (i) any breach of a
representation or warranty or failure to perform any covenant or obligation of
NAMS under this Agreement; and (ii) any written representations or warranties
made by NAMS regarding the Product. NAMS's contractual obligations to
indemnify, defend and hold MENTOR harmless shall extend to all such third-party
allegations or claims except to the extent that such allegations or claims have
been established by a court of competent jurisdiction or other dispute
resolution tribunal (including an arbitration panel) to have resulted from or to
be attributable to the fault or neglect of MENTOR.
11.2.1 Limitation on NAMS's Obligation. In any action or
proceeding in which liability for personal injury resulting from the use of the
Product is alleged to exist both against NAMS and MENTOR based in whole or in
part upon theories of negligent design, negligent manufacturing, failure to
warn, defective product, product liability, strict liability or any other theory
of liability directly related to the Product.
A. If MENTOR so requests, NAMS shall be obligated by this
Section 11.2 to defend MENTOR, notwithstanding that allegations are also made
that MENTOR (a) breached a written representation or warranty given by MENTOR
under this Agreement or to its Customers, or (b) was negligent in connection
with its marketing and distribution of the Product, unless NAMS elects to name
MENTOR as a cross-defendant in such action or proceeding.
(1) If NAMS elects to name MENTOR as a cross-defendant in
any such action or proceeding, then each party shall provide its own defense,
and each party shall be entitled to be indemnified by the other with respect to
any damages, costs or expense established by a court of competent jurisdiction
or other dispute resolution tribunal (including an arbitration panel) to have
resulted from or to be attributable to the fault or neglect of the other party.
(2) If allegations are made against MENTOR in any such
action or proceeding and (i) NAMS does not name MENTOR as a cross-defendant
therein, and (ii) MENTOR declines to provide its own defense with respect
thereto, and (iii) MENTOR subsequently acknowledges, or it is determined, that
MENTOR is liable by reason of the facts set forth in such allegations, then, in
addition to its indemnification obligation with respect to those damages for
which it is determined to be liable, MENTOR shall also be liable to NAMS for
that portion of the costs and fees incurred by NAMS in defending such action or
proceeding that is equal to MENTOR's percentage of liability for the damages
awarded in any such action or proceeding.
B. If MENTOR requests NAMS to accept the defense both of NAMS
and MENTOR in any action or proceeding that is the
subject of this Section 11.2, then NAMS shall be entitled to condition its
agreement to providing a defense to MENTOR on MENTOR's stipulating in writing
that (a) any information coming to the attention of NAMS's counsel with respect
to the actions and conduct of MENTOR and its employees and agents, including
information provided by such employees and agents, may be shared with NAMS and
(b) if a conflict of interest subsequently develops that precludes such counsel
from continuing to represent both NAMS and MENTOR, then NAMS's designated
counsel shall nonetheless be entitled to continue to represent NAMS,
notwithstanding that it may previously have received information that might be
prejudicial to the interests of MENTOR.
11.2.2 Defense Procedure. MENTOR shall notify NAMS in writing
within ten (10) days of the assertion of any claim or discovery of any fact upon
which MENTOR intends to base a claim for defense and/or indemnification under
this Agreement. The failure to so notify NAMS shall not relieve NAMS of the
duty to defend and indemnify MENTOR with respect to such claim except to the
extent the defense of such claim is actually prejudiced thereby.
11.2.3 Participation in and Control of Defense. If NAMS is
obligated to defend MENTOR in a lawsuit, arbitration, negotiation, or other
proceeding concerning a claim pursuant to this Agreement, MENTOR shall have the
right to engage separate counsel, at MENTOR's expense, to monitor and advise
MENTOR about the status and progress of the defense or to otherwise represent
the interests of MENTOR. To be entitled to sole control of the defense, upon
request by MENTOR, NAMS shall demonstrate, to the reasonable satisfaction of
MENTOR, NAMS's financial ability to carry out its defense obligations (and its
indemnity obligations, if any). MENTOR shall in any event provide such
cooperation and assistance in the conduct of any such defense as NAMS may
reasonably request.
11.3 INDEMNIFICATION BY MENTOR. MENTOR shall indemnify defend and hold
NAMS (including its officers, directors, employees, and agents) harmless from
and against any and all claims by Third Parties (whether based in contract or
tort or otherwise arising by operation of law), losses, damages, penalties,
expenses, settlements, or attorneys' fees that are established by a court of
competent jurisdiction or other dispute resolution tribunal (including an
arbitration panel) to have resulted from or to be attributable to (a) a breach
of a written representation or warranty or failure to perform any covenant or
obligation of MENTOR under this Agreement, (b) any breach of a product warranty
given by MENTOR which (i) exceeds the warranty given by NAMS or (ii) applies to
a kit component supplied by MENTOR, or (c) any negligent acts or omissions of
MENTOR in connection with its marketing and distribution of the Product or kit
components supplied by MENTOR.
11.3.1 Limitation on MENTOR's Obligation. In any
action or proceeding in which liability for personal injury resulting from the
use of the Product is alleged to exist both against MENTOR and NAMS based in
whole or in part upon theories of negligent manufacturing, defective product,
product liability, strict liability or similar theories of law:
A. MENTOR shall not be obligated by this Section 11.3 to defend
NAMS solely because allegations are also made that MENTOR (a) breached a written
representation or warranty given by MENTOR under this Agreement or to its
Customers, or (b) was negligent in connection with its marketing and
distribution of the Product; but
B. If such allegations are made and (i) MENTOR declines to
defend NAMS with respect thereto, and (ii) MENTOR subsequently acknowledges, or
it is determined, that MENTOR is liable by reason of the facts set forth in such
allegations, then MENTOR shall be liable to NAMS for that portion of the costs
and fees incurred by NAMS in defending such action or proceeding that is equal
to MENTOR's percentage of liability for the damages awarded in any such action
or proceeding.
11.3.2 Defense Procedure. NAMS shall notify MENTOR in writing
within ten (10) days of the assertion of any claim or discovery of any fact upon
which NAMS intends to base a claim for defense and/or indemnification under this
Agreement. Subject to the provisions of Section 11.3.1, above, NAMS's failure
to so notify MENTOR shall not relieve MENTOR of the duty to defend and indemnify
NAMS with respect to such claim except to the extent the defense of such claim
is actually prejudiced thereby.
11.3.3 Participation in and Control of Defense. If MENTOR is
obligated or elects to defend NAMS in a lawsuit, arbitration, negotiation, or
other proceeding concerning a claim pursuant to this Agreement, NAMS shall have
the right to engage separate counsel, at NAMS's expense, to monitor and advise
NAMS about the status and progress of the defense or to otherwise represent the
interests of NAMS. To be entitled to sole control of the defense, upon request
by NAMS, MENTOR shall demonstrate, to the reasonable satisfaction of NAMS, its
financial ability to carry out its defense obligations (and its indemnity
obligations, if any).
11.4 LIMITATION OF LIABILITY. WITH RESPECT TO CLAIMS MADE BY ONE PARTY (A
"CLAIMANT") AGAINST THE OTHER (A "DEFENDANT") UNDER THIS AGREEMENT FOR CLAIMS
NOT ARISING OR RESULTING FROM OR BASED UPON THIRD-PARTY CLAIMS, THE DEFENDANT
SHALL NOT BE LIABLE FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, EXEMPLARY OR
PUNITIVE DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS, IN CONNECTION WITH
OR ARISING OUT OF THIS AGREEMENT, REGARDLESS OF WHETHER A CLAIM AGAINST THE
DEFENDANT SOUNDS IN CONTRACT OR TORT (INCLUDING, BUT NOT LIMITED TO, ACTIONS
BASED ON ANY ALLEGED JOINT OR SOLE NEGLIGENCE OR THE DEFENDANT).
12. TERM AND TERMINATION
12.1 COMMENCEMENT. This Agreement shall commence on the Effective Date
hereof and, unless (a) extended pursuant to Section 4.2 of this Agreement or (b)
sooner terminated as provided by this Agreement, shall continue for a term of
five (5) Sales Years from the Term Commencement Date.
12.2 PARTIAL TERMINATIONS. NAMS shall be entitled to terminate MENTOR's
exclusive marketing and distribution rights with respect to a specific
Geographic Market Area as provided in Section 5.6, above, if the parties are
unable to develop marketing plans and strategies that enable MENTOR to attain
and retain the Target Market Share, but no such termination shall be deemed to
be a termination for cause or to entitle NAMS to recover damages or any other
amounts from MENTOR. Should NAMS exercise such right, then MENTOR shall be
entitled to terminate this Agreement, or to begin manufacturing the Product or
procuring it from other sources for distribution in such Geographic Market Area
as provided by Section 5.9, above.
12.3 TERMINATION FOR CAUSE. Any party who is not in material default in
the performance of its obligations under this Agreement shall be entitled to
terminate this Agreement for cause by giving written notice of intention to
terminate, specifying the effective date of termination, not less than thirty
(30) days prior to the effective date of termination, upon the occurrence of any
of the following events:
12.3.1 The other party (herein, a defaulting party") has committed
a material breach of any warranty, representation or covenant under this
Agreement, including the obligation to pay any amount owing under this Agreement
when due, and such breach remains uncured after written notice of default,
specifying the nature thereof, has been given to the defaulting party unless,
prior to the expiration of the applicable cure period, the defaulting party has
commenced and thereafter pursues with diligence to completion those actions
necessary to cure within the applicable cure period any such breach or default
that is capable of being cured. The applicable cure period shall be thirty (30)
days, but shall be subject to extension for a reasonable period of time if the
default (a) is not curable by the payment of amounts owing to the other party
that are past due, and (b) is of such a nature that it cannot reasonably be
cured with due diligence within thirty (30) days.
12.3.2 The other party becomes Insolvent.
12.4 RIGHTS AND DUTIES UPON TERMINATION. Upon termination of this
Agreement for any reason:
12.4.1 Any sublicenses entered into by MENTOR shall automatically
terminate.
12.4.2 Each party shall return to the providing party all copies of
any Confidential Information that was provided by one party to the other during
the course of this Agreement.
12.4.3 MENTOR shall be entitled to continue to market and sell its
existing inventory of the Product to the extent permitted by law until such
inventory has been exhausted provided that such sales are made at prices and on
terms that are consistent with MENTOR's past practices.
12.4.4 NAMS shall continue to accept Product returns made pursuant
to Section 6.17, above, and shall, at its option, either replace the Product or
issue a credit directly to the Customer.
12.4.5 Each party shall continue to be bound by the provisions of
this Agreement which, by their nature, extend beyond or cannot be fully
performed prior to the effective date of termination, including (a)
indemnification obligations and (b) provisions relating to the protection,
nondisclosure and restrictions on use of Confidential Information, including any
Confidentiality Agreements previously entered into by the parties.
12.5 SURVIVAL OF REMEDIES. The termination of this Agreement pursuant to
this Section shall be without prejudice to any rights or any remedies to which
the terminating party is entitled, if any, due to the material breach by one of
the parties of any warranty, representation or covenant given by the defaulting
party under this Agreement. The limitation on the liability of MENTOR with
respect to its failure to attain and retain Target Market Share shall not be
construed to insulate MENTOR for liability for actual damages caused by its
tortious conduct or by its wrongful breach of its obligations under this
Agreement.
13. GENERAL PROVISIONS
13.1 NOTICES. Any notices permitted or required hereunder shall be in
writing and shall be deemed to have been given (a) on the date of delivery if
delivery of a legible copy was made personally or by facsimile transmission, or
(b) on the third (3rd) business day after the date on which mailed by registered
or certified mail, return receipt requested, addressed to the party for whom
intended at the address set forth on the signature page of this Agreement or
such other address, notice of which is given as provided herein.
13.2 BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of each of the parties and their respective heirs, successors,
assigns and legal representatives. No party hereto shall have the right to
transfer or assign its interest in this Agreement, without the prior written
authorization of the other party hereto, except that (a) either party may freely
assign this Agreement to any Affiliate and (b)
either party shall have the right to assign its rights and licenses and to
delegate its duties under this Agreement to any third party who purchases
substantially all of the business assets of the assignor or who succeeds to the
business of the assignor by reason of a merger or consolidation. The assignment
by either party of any rights under this Agreement shall not relieve the
assigning party from any of its obligations under this agreement.
13.3 FORCE MAJEURE. Neither of the parties shall be liable for any delay
or default in performing its obligations hereunder if such delay or default is
caused by Force Majeure, provided that the party so affected (a) promptly gives
written notice of the occurrence of such event and the likely effects thereof,
and (b) resumes the performance of its obligations with due diligence as soon as
practicable after the effects of any such event have been alleviated.
13.4 GOVERNING LAW. This Agreement, the construction and enforcement of
its terms, and the interpretation of the rights and duties of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
the State of California.
13.5 RESOLUTION OF DISPUTES. The parties hereto (a) mutually consent and
submit to the jurisdiction of any state or federal court of competent
jurisdiction located in the City of Los Angeles, State of California, in any
action or proceeding arising out of or relating in any manner to this Agreement,
(b) each waive any claim that any such state or federal court is an inconvenient
forum, and (c) each irrevocably agree that any and all actions or proceedings
arising out of or relating to this Agreement or from transactions contemplated
herein shall be exclusively heard only in such state or federal court.
13.6 COSTS OF ENFORCEMENT. Should any action or proceeding be necessary
to construe or enforce this Agreement, then the party prevailing in any such
action or proceeding shall be entitled to recover all court costs and reasonable
attorneys' fees, to be fixed by the court and taxed as part of any judgment
entered therein, and the costs and fees incurred in enforcing or collecting any
such judgment.
13.7 INDEPENDENT CONTRACTORS. Each of the parties to this Agreement
understands and stipulates that they are independent contractors, and that this
Agreement is not intended and shall not be construed to make either party a
partner, joint venturer, employee, agent, or legal representative of the other
party for any purpose whatsoever. Neither party is granted any right or
authority to assume or create any obligation or responsibility, express or
implied, on behalf of or in the name of the other party hereto or to bind the
other party hereto in any manner or thing whatsoever.
13.8 COMPLETE AGREEMENT. This written instrument, together
with any exhibits or appendices referred to herein, constitutes the entire
understanding of the parties with respect to subject matter of this Agreement
and it may not be amended except by an instrument in writing signed by the party
alleged to be bound thereby.
(Signatures appear on the following page)