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EXHIBIT 10.1
THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST UNDER RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. THE CONFIDENTIAL INFORMATION ON PAGES 2, 5, 6, AND 7 HAVE BEEN REPLACED
WITH ASTERISKS.
EXCLUSIVE MARKETING AND DISTRIBUTION AGREEMENT
BETWEEN
ORTHOPAEDIC BIOSYSTEMS, LTD., INC.
AND
MENTOR UROLOGY CORPORATION
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TABLE OF CONTENTS
SECTION PAGE
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1. DEFINITIONS ....................................................... 1
1.1 Affiliate ............................................... 1
1.2 Agreed Purchase Commitment .............................. 2
1.3 Anchor................................................... 2
1.4 Anchor System ........................................... 2
1.5 Ancillary Products....................................... 2
1.6 Clinical Trials ......................................... 2
1.7 Clinical Trials Protocol................................. 2
1.8 Commercial Sale ......................................... 2
1.9 Computation Period ...................................... 2
1.10 Confidential Information ................................ 2
1.11 Control ................................................. 3
1.12 Defective Product ....................................... 3
1.13 Deficiency Notice ....................................... 3
1.14 Direct Production Costs ................................. 3
1.15 Documented Cost ......................................... 3
1.16 Effective Date .......................................... 3
1.17 European Union .......................................... 3
1.18 FDA ..................................................... 3
1.19 Field of Use ............................................ 4
1.20 Force Majeure ........................................... 4
1.21 Improvement ............................................. 4
1.22 Initial Computation Period .............................. 4
1.23 Involuntary Business Disruption ......................... 4
1.24 Products ................................................ 4
1.25 Product Specifications .................................. 4
1.26 Proportionate Share ..................................... 4
1.27 Quota Commencement Date ................................. 5
1.28 Third Party ............................................. 5
2. GRANT OF MARKETING AND DISTRIBUTION RIGHTS ........................ 5
2.1 Scope of Distribution Rights ............................ 5
2.2 Sublicenses ............................................. 5
2.3 Improvements and New Products .......................... 5
2.4 Rights to Product Improvements .......................... 5
3. CONSIDERATION FOR DISTRIBUTION RIGHTS ............................. 6
3.1 Distribution Fee ........................................ 6
3.2 Conduct of Clinical Trials .............................. 6
3.3 Product Research and Development ........................ 6
3.4 Option to Terminate after Clinical Trials ............... 7
4. TERM OF AGREEMENT ................................................. 7
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TABLE OF CONTENTS (CONT'D)
SECTION PAGE
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4.1 Term of Distribution Rights .......................... 7
4.2 Option to Extend ..................................... 7
4.3 Deficiency Notices ................................... 8
4.4 Termination of Distribution Rights ................... 8
4.5 Exclusive Remedy ..................................... 8
4.6 Abatement ............................................ 8
5. REQUIREMENTS AND SUPPLY ......................................... 9
5.1 Requirements ......................................... 9
5.2 Specifications ....................................... 9
5.3 Transfer Prices ...................................... 9
5.4 Samples and Promotional Product ...................... 10
5.5 Duty to Manufacture .................................. 10
5.6 Inventory Support .................................... 10
5.7 Purchase Orders and Forecasts ........................ 10
5.8 Order Fulfillment .................................... 11
5.9 Product Acceptance ................................... 11
5.10 Nonconforming Goods .................................. 11
5.11 Replacement .......................................... 11
5.12 Packaging ............................................ 11
5.13 Patent Information ................................... 12
5.14 Invoicing ............................................ 12
5.15 Title and Risk of Loss ............................... 12
5.16 Monthly Statements; Payment .......................... 12
5.17 Product Warranty ..................................... 12
5.18 Warranty Disclaimers ................................. 13
5.19 Product Recalls ...................................... 13
5.20 Customer Returns ..................................... 14
5.21 Customer Complaints .................................. 14
5.22 Country of Origin .................................... 14
5.23 Taxes ................................................ 15
6. ADDITIONAL COVENANTS OF THE PARTIES ............................. 15
6.1 Covenants of ORTHOBIO ................................ 15
6.2 Covenants of MENTOR .................................. 18
6.3 Mutual Covenants ..................................... 20
7. TRADE NAMES AND TRADEMARKS ...................................... 22
7.1 Acknowledgment of Source ............................. 22
7.2 Infringement Proceedings ............................. 22
7.3 Marks Owned by MENTOR ................................ 22
8. INFRINGEMENT CLAIMS ............................................. 22
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TABLE OF CONTENTS (CONT'D)
SECTION PAGE
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8.1 Warranties of ORTHOBIO ...................................... 22
8.2 Claims against Third Parties ................................. 23
8.3 Claims by Third Parties ...................................... 23
8.4 Preventing Further Infringement .............................. 24
8.5 Limitation on Infringement Claims ............................ 24
8.6 Obligation to Make Payments .................................. 25
9. INSURANCE, INDEMNIFICATION AND LIMITATIONS ON LIABILITY ............. 25
9.1 ORTHOBIO's Liability Insurance ............................... 25
9.2 Policy Requirements .......................................... 25
9.3 Indemnification by ORTHOBIO .................................. 26
9.4 Indemnification by MENTOR .................................... 26
9.5 Limitation of Liability ...................................... 27
10. TERM AND TERMINATION ............................................... 27
10.1 Commencement ................................................. 27
10.2 Termination Prior to Term Commencement Date .................. 27
10.3 Termination for Cause......................................... 27
10.4 Rights and Duties upon Termination............................ 28
11. GENERAL ............................................................ 29
11.1 Notices ...................................................... 29
11.2 Binding Effect ............................................... 29
11.3 Force Majeure ................................................ 30
11.4 Governing Law ................................................ 30
11.5 Resolution of Disputes ....................................... 30
11.6 Costs of Enforcement ......................................... 30
11.7 Independent Contractors ...................................... 30
11.8 Offset Rights ................................................ 30
11.9 Severability ................................................. 31
11.10 No Rights by Implication ..................................... 31
11.11 Waiver ....................................................... 31
11.12 Complete Agreement ........................................... 31
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EXCLUSIVE MARKETING AND DISTRIBUTION AGREEMENT
THIS EXCLUSIVE MARKETING AND DISTRIBUTION AGREEMENT ("Agreement"),
dated for reference purposes as of August 1, 1996, is entered into by and
between ORTHOPAEDIC BIOSYSTEMS, LTD., INC., an Arizona corporation ("ORTHOBIO"),
and MENTOR UROLOGY CORPORATION, a Delaware corporation ("MENTOR"), with
reference to the following facts:
RECITALS:
A. ORTHOBIO has developed and has United States and foreign patent
applications pending for certain proprietary, innovative bone fixation anchors
that are characterized by superior holding strength and ease of use which,
together with associated devices, are marketed for use in orthopedic
applications under the tradename of PeBA C Soft Tissue(TM) Anchor (herein,
collectively the "Products").
B. The Products also have potential application in the treatment of
female urinary stress incontinence and other urological disorders, and ORTHOBIO
has obtained FDA approval to market and sell the Products for urological
applications.
C. MENTOR is engaged in the business of manufacturing, marketing and
distributing medical equipment and devices, including products used in the
treatment of urinary incontinence and other urological disorders. ORTHOBIO and
MENTOR believe that ORTHOBIO's Anchors can provide benefits in the treatment of
female urinary stress incontinence and other urological disorders by reason of
(1) their greater holding and pull-out strength, (2) the resulting reduction in
anchor migration, and (3) their ease of insertion.
A. MENTOR therefore desires to obtain the exclusive right to market and
distribute the Products both in the United States and in all foreign markets in
the Field of Use (as hereinafter defined), and ORTHOBIO 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
Except as otherwise expressly defined in this Agreement, 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.
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
1.2 AGREED PURCHASE COMMITMENT. The quantity of Anchors that MENTOR has
agreed to purchase as a condition to preserving its exclusive distribution
rights under this Agreement. The Agreed Purchase Commitment shall be *
Anchors during the Initial Computation Period, and * Anchors during each
succeeding Computation Period thereafter.
1.3 ANCHOR. A bone fixation anchor suitable for use in affixing to
human bones sutures utilized in surgical procedures.
1.4 ANCHOR SYSTEM. ORTHOBIO's PeBA C Soft Tissue(TM) Anchor, which is
comprised of (a) an Anchor and (b) an instrumentation package which, in the case
of urological applications, currently consists only of a re-usable inserter
device, together with (c) associated packaging and sterilization.
1.5 ANCILLARY PRODUCTS. Instruments, supplies and materials
manufactured by or for ORTHOBIO that are designed or are suitable for use with
an Anchor or the Anchor System in the Field of Use, including (by way of example
and not in limitation), inserter guns, drill bits, drill guides and sterilizer
trays.
1.6 CLINICAL TRIALS. The clinical studies and evaluations to be carried
out by MENTOR in accordance with the Clinical Trial Protocols to be developed by
MENTOR and approved by ORTHOBIO as provided in Section 3.2 of this Agreement.
1.7 CLINICAL TRIALS PROTOCOL. Regimens, specifications and procedures
established pursuant to Section 3.2 of this Agreement for the conduct of
Clinical Trials to (a) implant the Anchors on an experimental basis in up to
sixty (60) human patients, and (b) to monitor such patients in order to identify
and evaluate the outcomes and effects of the use of the Products in the Field of
Use.
1.8 COMMERCIAL SALES. A sale of Product by MENTOR to a customer in the
ordinary course of business (excluding sales of samples or for education and
training purposes) after the Products are both commercially available and
legally marketable in the United States pursuant to a marketing approval issued
by the FDA.
1.9 COMPUTATION PERIOD. The eighteen (18)-month period commencing on
the Quota Commencement Date, and each subsequent twelve (12)-month period
thereafter.
1.10 CONFIDENTIAL INFORMATION. All information of a confidential or
proprietary nature disclosed by MENTOR to ORTHOBIO or by ORTHOBIO 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 possession prior to
the Recipient's receipt of the same pursuant to this Agreement, or (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, or (c) is 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 the Recipient independently develops.
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1.11 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.
1.12 DEFECTIVE PRODUCT. Product that was not manufactured and produced
in accordance with the requirements of Section 5.17 of this Agreement or that
otherwise fails to conform to the product warranties set forth in that Section.
1.13 DEFICIENCY NOTICE. A written notice given by ORTHOBIO to MENTOR
pursuant to Section 4.3, below, which (a) sets forth (i) the number of Anchors
required to be purchased during the Computation Period in question in order to
satisfy the Agreed Purchase Commitments for such Period and (ii) the aggregate
number of Anchors during such Period; and (iii) the number of Anchors remaining
to be purchased in order to satisfy the Agreed Purchase Commitment for such
Period Year and (b) is accompanied by appropriate documentation corroborating
the information contained in such notice.
1.14 DIRECT PRODUCTION COSTS. The direct costs of labor employed (based
on labor hours at the then prevailing standard rates) and amounts paid to
independent contractors and/or suppliers for supplies, materials, components and
services consumed or utilized in manufacturing, assembling, inspecting and
testing the Products, including (a) payroll taxes and employee benefits for
direct labor and (b) the costs incurred in satisfying the requirements of
federal, state and local government regulatory agencies with resect to Product
testing and labelling. Direct Production Costs shall be computed on a per-unit
basis, exclusive of any overhead allocations, general or administrative expense,
the costs and expense of obtaining marketing or pre-marketing approvals, or
other indirect expense.
1.15 DOCUMENTED COST. The sum of (a) the price paid by MENTOR to
ORTHOBIO for units of the Products purchased by MENTOR pursuant to this
Agreement plus (b) taxes, freight and insurance paid by MENTOR in order to take
possession of such Products FOB ORTHOBIO's factory.
1.16 EFFECTIVE DATE. The later of date on which (a) the last party to
execute this Agreement affixes its signature hereto or (b) the parties have
agreed upon the initial Product Specifications and the Clinical Trials Protocol
to be established pursuant to Section 3.2 of this Agreement.
1.17 EUROPEAN UNION. The European Economic Community formed pursuant to
the 1975 Treaty of Rome, as modified by the Single European Act of 1987, the
member states of which currently consist of Belgium, the Netherlands,
Luxembourg, France, Germany, Italy, the United Kingdom, Ireland, Denmark, Spain,
Portugal, Greece, Sweden, Finland and Austria.
1.18 FDA. The United States Food and Drug Administration.
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1.19 FIELD OF USE. The surgical treatment of urological conditions or
disorders, including by way of example and not as a limitation, the treatment of
female urinary stress incontinence through bladder neck suspension and
pubovaginal sling procedures.
1.20 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.
1.21 IMPROVEMENT. Any change in the components of the Products, or in
the processes, procedures, methods or techniques used in their manufacture,
production or assembly, that enhances the performance of the Products or that
makes them quicker, easier or less expensive to manufacture, assemble,
distribute, store, use or dispose of.
1.22 INITIAL COMPUTATION PERIOD. The eighteen (18) month period
beginning on the Quota Commencement Date.
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 ORTHOBIO to supply MENTOR in any month with
the number of units of the Products equal to MENTOR's Firm Order for such month,
(b) the pendency of any claim that the Products or the Technology utilized in
their 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
Products 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
occurrence of an event of Force Majeure as defined in Section 11.3 of this
Agreement.
1.24 PRODUCTS. ORTHOBIO's (a) proprietary Anchors, (b) the Anchor
System, (c) any Ancillary Products manufactured by or for ORTHOBIO and marketed
for use with the Anchors, (d) any Improvements to such Products, and (e) any
other product or component hereafter developed or manufactured by or for
ORTHOBIO that performs the same or a substantially identical function (i.e., the
attachment of a sling or similar device to a bone) as the Products or a Product
component.
1.25 PRODUCT SPECIFICATIONS. The product specifications, quality
control tests and inspection procedures for the Products that are to be set
forth in a separate schedule prepared by ORTHOBIO and approved by MENTOR for
attachment as Exhibit A to this Agreement concurrently with the execution of
this Agreement, as they may be amended by the mutual written agreement of the
parties from time to time.
1.26 PROPORTIONATE SHARE. The ratios in which MENTOR and ORTHOBIO
shall share (a) the costs and expenses of certain actions or proceedings under
Section 8 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.
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*Confidential information has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a confidential
treatment request.
1.27 QUOTA COMMENCEMENT DATE. The first day of the first month
following the date on which MENTOR'S cumulative Commercial Sales of the Products
since the Effective Date equal or exceed * .
1.28 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 fee
referred to in Section 3.1, 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, other than the Country of Japan, for an initial term of seven
(7) years, commencing on the Quota Commencement Date 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 IMPROVEMENTS AND NEW PRODUCTS. All Improvements or modifications to
the Products that are intended for use or that can be adapted for use in
urological applications are included in this Agreement and subject to the
distribution rights granted to MENTOR hereunder. New or additional products
developed or licensed by ORTHOBIO are not covered by this Agreement unless such
new or additional products perform the same or a substantially identical
function (i.e., the attachment of a sling or similar device to a bone) as the
Products, but if any such new or additional product has urological applications,
ORTHOBIO shall not license any other person to market or sell such product for
urology applications without first having advised MENTOR of its availability and
negotiating with MENTOR in good faith for sixty (60) days with respect to an
exclusive distribution arrangement for such new or additional product.
2.4 RIGHTS TO PRODUCT IMPROVEMENTS. Subject to the provisions of
Section 6.1.9, below, In any Improvements to the Product developed by ORTHOBIO
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 ORTHOBIO. MENTOR shall not acquire any interest in ORTHOBIO's proprietary
technology or any such Improvements unless such technology or
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
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 urological
applications are included in this Agreement and subject to the distribution
rights granted to MENTOR hereunder.
3. CONSIDERATION FOR DISTRIBUTION RIGHTS
3.1 DISTRIBUTION FEE. On the Effective Date of this, Agreement, MENTOR
shall pay ORTHOBIO a non-refundable distribution fee of * . Thereafter,
MENTOR shall pay to ORTHOBIO:
3.1.1 An additional distribution fee in the amount of *
upon completion of the Clinic Trials as provided by Section 3.2, below; and
3.1.2 Simultaneously with the payment called for by Section 3.
1, above, the additional sum of * which shall be credited as an advance
payment for purchases of Product by MENTOR. Such credit shall be applied against
the unpaid balance shown on invoices submitted by ORTHOBIO to MENTOR until such
credit has been exhausted.
3.2 CONDUCT OF CLINICAL TRIALS. Concurrently with the execution of this
Agreement, or as soon thereafter as practicable, (a) MENTOR shall complete and
deliver to ORTHOBIO for its approval an appropriate Clinical Trials Protocol,
and (b) shall thereafter conduct Clinical Trials in accordance with the approved
Clinical Trials Protocol for a period of time, not to exceed six full calendar
months, sufficient, to (a) demonstrate the efficacy of the Products in the Field
of Use, and (b) to determine whether and the extent to which modifications to
the Products or the associated surgical instructions may be necessary to assure
commercial acceptance of the Products.
3.2.1 ORTHOBIO shall promptly review and provide comments to
MENTOR regarding any proposed Clinical Trials Protocol submitted by MENTOR and
shall not unreasonably withhold its approval of any such proposed Protocol.
3.2.2 MENTOR shall pay all costs and expense of such Clinical
Trials as provided by Section 6.2.1, below.
3.2.3 All data arising from the conduct of the Clinical Trials
shall be owned jointly by MENTOR and ORTHOBIO. MENTOR shall keep ORTHOBIO fully
advised on a continuing basis of the progress of and the data being obtained
from such Clinical Trials, and shall provide ORTHOBIO with copies of all
reports, studies and other data resulting from such Clinical Trials.
3.3 PRODUCT RESEARCH AND DEVELOPMENT. If during the course of the
Clinical Trials the parties mutually agree that further research and/or
development is necessary to adapt the Products for use in the Field of Use, or
to enhance their performance in the Field of Use, then ORTHOBIO shall perform
such additional research and development and make such alterations or
Improvements to the Products as the parties mutually agree in writing to be
appropriate to assure commercial acceptance of the Products for use in the Field
of Use. MENTOR shall reimburse the costs
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
ORTHOBIO incurs in performing any such additional research and development work
to the extent provided by Section 6.2.2, below.
3.4 OPTION TO TERMINATE AFTER CLINICAL TRIALS. MENTOR shall be entitled
to terminate this Agreement by giving written notice of termination to ORTHOBIO
at any time during the thirty (30) day period following the completion of the
Clinical Trials called for by Section 3.2 if the Clinical Trials disclose or
provide a reasonable basis for concluding that (a) use of the Products in the
Field of Use poses an undue risk of post-operative infection or other acute
complications, or (b) the Products are unlikely to gain market acceptance for
use in the Field of Use, or (c) ORTHOBIO is unable to make such alterations or
Improvements to the Products as MENTOR requests for the purpose of adapting the
Products for use in the Field of Use.
3.4.1 Should MENTOR elect to terminate this Agreement pursuant
to this Section 3.4, then (a) no portion of the Distribution Fee paid by MENTOR
pursuant to Section 3.1, above, and no funds expended by MENTOR in the conduct
of the Clinical Trials or product research and development, shall be refundable
to MENTOR, (b) ORTHOBIO shall be entitled to market and sell the Products for
use in the Field of Use, or to license Third Parties to distribute and sell the
Products, without further duty or obligation to MENTOR, and (c) MENTOR shall not
disclose to any Third Party its reasons for terminating this Agreement.
3.4.2 Unless MENTOR exercises it termination right under
Section 3.4.1, above, then upon completion of the Clinical Trials MENTOR shall
pay to ORTHOBIO the additional * called for by Section 3.1, above.
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 Quota
Commencement Date and, subject to the provisions of Section 4.4, below, shall
continue for a period of seven (7) years thereafter.
4.2 OPTION TO EXTEND. Provided that (a) this Agreement has not
previously been terminated by either party and (b) MENTOR has attained its
Agreed Purchase Commitment in the United States for the initial term of this
Agreement (or has remedied its failure to do so as provided by Section 4.3.2,
below):
4.2.1 MENTOR shall have the option to extend the term of this
Agreement for an additional five (5) 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:
4.2.2 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, ORTHOBIO 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.
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4.3 DEFICIENCY NOTICES. ORTHOBIO shall have the right to terminate
MENTOR's marketing and distribution rights under this Agreement if MENTOR fails
to purchase a sufficient quantity of Anchors to fulfill its Agreed Purchase
Commitment for any Computation Period. In determining whether MENTOR has
satisfied its Agreed Purchase Commitment for a Computation Period, (a) purchases
in a single Computation Period that exceed the Agreed Purchase Commitment for
that Computation Period shall be credited against the Agreed Purchase Commitment
for the following Computation Period, and (b) MENTOR shall be deemed to have
satisfied its Agreed Purchase Commitment for any Computation Period if the
cumulative purchases by MENTOR from and after the Quota Commencement Date
through the end of such Computation Period equal or exceed the cumulative Agreed
Purchase Commitment from such Date through the end of such Computation Period.
4.3.1 Prior to terminating MENTOR's rights under this
Agreement, and as a condition precedent thereto, ORTHOBIO shall give MENTOR a
Deficiency Notice setting forth the information called for by Section 1.13,
above. Any such notice, to be effective, must be given by ORTHOBIO to MENTOR
within ninety (90) days following the expiration of the Computation Period for
which the deficiency is alleged to exist.
4.3.2 MENTOR shall have a period of sixty (60) days following
its receipt of a Deficiency Notice within which to purchase a sufficient number
of Anchors to fulfill its Agreed Purchase Commitment for such Computation
Period. Any such purchases made pursuant to this Section 4.3.2 shall be credited
only against the Agreed Purchase Commitment for the Computation Period covered
by the Deficiency Notice, and shall not be credited against the Agreed Purchase
Commitment for the Computation Period in which actually made.
4.4 TERMINATION OF DISTRIBUTION RIGHTS. Unless its duty to fulfill its
Agreed Purchase Commitment is abated pursuant to Section 4.6, below, the failure
of MENTOR to purchase a sufficient number of Anchors to remedy the deficiency
shall constitute a material default by MENTOR in the performance of its
obligations under this Agreement and, upon the occurrence of any such default,
ORTHOBIO shall be entitled to terminate this Agreement by giving written notice
of termination as provided, in Section 10.3, below.
4.5 EXCLUSIVE REMEDY. The right granted to ORTHOBIO to terminate the
exclusive marketing and distribution rights of MENTOR for the Products shall be
the sole and exclusive remedy for the failure of MENTOR to fulfill its the
Agreed Purchase Commitment, and in no event shall MENTOR be liable for damages
or any other amount by reason of its failure to fulfill its Agreed Purchase
Commitment
4.6 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 Products in the United States, or (b) would incur
an unreasonable risk of civil or criminal liability by continuing to do so,
then:
4.6.1 The term of MENTOR's distribution rights under this
Agreement shall be extended a period of time equal to such time as the
Involuntary Business Disruption continues to exist; and
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4.6.2 The Quota Commencement Date shall be postponed for such
period of time as the Involuntary Business Disruption continues to exist; and
4.6.3 MENTOR's Agreed Purchase Commitment shall be reduced to
an amount mutually agreed to by ORTHOBIO 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, (ii) the period of time during
which MENTOR was unable to market and sell the Products or would incur an
unreasonable risk in doing so, and (iii) the size of the market to which MENTOR
was denied access, and (b) the impact of such Involuntary Business Disruption on
MENTOR's future marketing and sales of the Products due to such factors as loss
of customers, purchase orders or credibility, any impact on seasonal orders and
the like.
4.6.4 If MENTOR and ORTHOBIO are unable to agree on the extent
to which MENTOR's Agreed Purchase Commitment shall be reduced pursuant to this
Section 4.6, 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 Chicago, Illinois 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. 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. REQUIREMENTS AND SUPPLY
5.1. REQUIREMENTS. ORTHOBIO shall supply to MENTOR and its Affiliates
each month the number of units of the Products for which MENTOR and its
Affiliates submit Firm Orders pursuant to Section 5.7, below.
5.2 SPECIFICATIONS. All Products supplied by ORTHOBIO hereunder shall
in all material respects meet the Product Specifications applicable to such
Product when intended for use in the Field of Use. As soon as practicable after
the execution of this Agreement, ORTHOBIO and MENTOR shall agree on the Product
Specifications for the Products 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, for as long as MENTOR has
exclusive marketing and distribution rights in the Products, shall not be
modified by ORTHOBIO without the prior written consent of MENTOR, which shall
not be unreasonably withheld. If ORTHOBIO and MENTOR do not reach agreement on
the Product Specifications within sixty (60) days after their execution of this
Agreement, then either party shall be entitled to terminate this Agreement by
giving written notice of intention to terminate, specifying the effective date
of termination, not less than ten (10) business days prior to such effective
date of termination.
5.3 TRANSFER PRICES. The transfer price initially payable by MENTOR
shall be the amount set forth on the Terms Sheet attached as Schedule I to this
Agreement. The transfer price shall be subject to adjustment effective as of the
second anniversary of the Quota Commencement Date and on the corresponding date
each year thereafter as provided in the Terms Sheet.
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5.3.1 The Transfer Price being charged to MENTOR for the
Products shall not be greater than the Transfer Price charged by ORTHOBIO to any
other distributor of the Products for applications involving human patients in
hospitals or surgical centers, whether or not in the Field of Use.
5.3.2 Notwithstanding the provisions of Section 5.3.1. above,
ORTHOBIO shall be entitled to establish and maintain a tiered pricing schedule
based on the quantity purchased so long as such pricing schedule is applied on a
uniform basis with respect to all purchasers to whom ORTHOBIO sells the
Products.
5.4 SAMPLES AND PROMOTIONAL PRODUCT. ORTHOBIO will provide MENTOR with
samples and promotional units of the Products 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.
5.5 DUTY TO MANUFACTURE. ORTHOBIO shall establish and maintain the
capacity necessary to produce in any thirty (30)-day period a quantity of the
Products sufficient to satisfy the greater of (a) twelve percent (12%) of
MENTOR's Agreed Purchase Commitment for the Products for the then-current
Computation Period or (b) ten percent (10%) of MENTOR's actual purchases during
the preceding calendar year. MENTOR's Firm Order pursuant to Section 5.7, below,
for any given month shall not exceed ORTHOBIO's then-existing production
capacity unless ORTHOBIO agrees otherwise.
5.6 INVENTORY SUPPORT. ORTHOBIO shall establish and maintain an
inventory of the Products sufficient (after taking into account its obligations
to supply the requirements of other distributors of the Products) to fill a
purchase order from MENTOR for up to (a) ten percent (10%) of MENTOR's Agreed
Purchase Commitment for the Products for the then current Computation Period or
(b) ten percent (10%) of MENTOR's actual purchases during the preceding calendar
year, within fifteen (15) business days of the receipt of such order.
5.7 PURCHASE ORDERS AND FORECASTS. By the fifteenth (15th) day of each
calendar month following the Effective Date of this Agreement, MENTOR will
furnish ORTHOBIO with an order (a "Firm Order") specifying quantities and
delivery dates for units of the Products, if any, to be delivered during the
month following the month in which the Firm Order is furnished to ORTHOBIO.
Concurrently therewith, MENTOR will provide ORTHOBIO a nonbinding rolling
forecast of MENTOR's projected requirements for the three (3) calendar months
following the delivery month for which the Firm Order has been placed. During
each calendar month, ORTHOBIO shall furnish the requested quantity of Product
specified by MENTOR in its Firm Order for such month, but ORTHOBIO shall not be
legally obligated to furnish quantities that exceed the quantities that ORTHOBIO
is able to supply when ORTHOBIO's production capacity and inventory levels
satisfy the requirements of Sections 5.5 and 5.6, above.
5.7.1 All purchase orders shall be submitted on forms that are
acceptable to ORTHOBIO.
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5.7.2 The provisions of this Agreement shall govern the
purchase and sale of the Products between ORTHOBIO 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.
5.8 ORDER FULFILLMENT. ORTHOBIO will timely fill all purchase orders
submitted by MENTOR, and will afford all purchase orders for the Products
received from MENTOR equal priority with ORTHOBIO's own supply requirements and
orders from other distributors licensed to distribute the Products for use in
other applications or fields of use. ORTHOBIO will ship all orders for the
Products in the priority in which such orders were received, regardless of the
field of use to which such orders relate, and ORTHOBIO will not place any
purchase orders received from MENTOR on a back-order status if ORTHOBIO is then
shipping Products to its own customers or to any other purchaser or distributor.
5.9 PRODUCT ACCEPTANCE. MENTOR does not intend and shall not be
required to inspect or test any Product supplied by ORTHOBIO, it being the
intention of the parties that (a) the Products shall be supplied to MENTOR in a
ready-to-sell condition without further testing or inspection and that (b)
MENTOR shall be entitled to immediately distribute all such Products. The
acceptance and resale of Products by MENTOR shall not alter or diminish
ORTHOBIO's warranties contained elsewhere in this Agreement.
5.10 NONCONFORMING GOODS. Should it come to the attention of MENTOR
that any lot or shipment of the Products does not conform to the Product
Specifications, then MENTOR shall not be obligated to pay for such Defective
Product. MENTOR shall promptly advise ORTHOBIO of any Product delivered to
MENTOR that is being rejected as nonconforming. Any such notice (a) shall be in
writing, (b) shall specify the shipment or lots being rejected, and (c) shall be
accompanied by appropriate information substantiating the claim that such
Products were Defective Product. The costs and expense of returning Defective
Product rejected by MENTOR or Defective Product returned by a customer to MENTOR
shall be borne by ORTHOBIO.
5.11 REPLACEMENT. ORTHOBIO shall promptly replace at its own cost and
expense any Products that are properly rejected by MENTOR or whose acceptance
MENTOR has properly revoked or, if MENTOR so requests, shall credit MENTOR with
an amount equal to the Documented Cost of any such rejected Products. MENTOR
shall not be entitled to recover damages, lost profits or other amounts from
ORTHOBIO with respect to any such Defective Product, but nothing in this
sentence shall be construed to limit MENTOR's abatement rights under Section
4.6, above, or its indemnification rights under Section 9.3, below, with respect
to any such Defective Product.
5.12 PACKAGING. The Products will be supplied in sealed containers
meeting the Product Specifications, and all Anchors and related Product
components comprising the Anchor System, other than the inserters, shall be
supplied in sterile condition. All Products shall be delivered in packaging of a
design specified in the Product Specifications, together with all applicable
product literature and instructions for use. MENTOR shall provide ORTHOBIO 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 ORTHOBIO
shall not make any changes in such art work or in the specifications for such
packaging materials without the prior written consent of MENTOR.
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MENTOR shall pay all costs associated with any and all changes to the design of
the packaging after such design has been agreed to by the parties.
5.13 PATENT INFORMATION. The Product packaging shall identify all
patents and pending patent applications under which the Product is manufactured
by ORTHOBIO.
5.14 INVOICING. ORTHOBIO shall invoice MENTOR, 30-days net, for the
Products upon shipment FOB ORTHOBIO's manufacturing plant. MENTOR shall be
entitled to make partial or complete payment of any such invoice by offsetting
against such invoice any credits to which MENTOR is entitled pursuant to Section
5.11, above, or Section 5.20, below, on account of the return of Defective
Product.
5.15 TITLE AND RISK OF LOSS. Title to the Products shall transfer to
MENTOR and risk of loss to the Products shall transfer to MENTOR upon removal of
the Products from ORTHOBIO's manufacturing plant.
5.16 MONTHLY STATEMENTS; PAYMENT. ORTHOBIO 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 5.11, above or Section 5.20, below. MENTOR shall pay the balance owing
on each monthly statement within thirty (30) days after its receipt of such
statement. Amounts not timely paid shall thereafter bear interest at a rate
equal to the lesser of (a) twelve percent (12%) per annum or (b) the maximum
rate permitted by law.
5.17 PRODUCT WARRANTY. ORTHOBIO warrants to MENTOR that:
5.17.1 The Products to be supplied to MENTOR hereunder shall
be manufactured and produced:
A. In plants that: (1) have been registered with and
are in compliance with the requirements of the FDA; and (2) satisfy the
applicable requirements established under ISO 9001 and ISO 9002; and
B. In accordance with: (1) applicable Good
Manufacturing Practices as promulgated by the FDA; and (2) applicable standard
established by ISO 9001 and ISO 9002; and (3) applicable laws and regulations of
the United States and each of the fifty states in which MENTOR is marketing and
distributing the Products; and
5.17.2 The use of the Products for their intended purpose in
the Field of Use will not violate any federal, state or local laws applicable to
the use of the Products in the United States; and
5.17.3 At the time of its delivery to MENTOR, the Products
will: (a) conform to the then-current Product Specifications; (b) be fit for use
in the intended Field of Use; (c) have a remaining shelf life of not less than
twenty-seven (27) full calendar months from the date on which tendered to
MENTOR; (d) be free of all liens, security interests and encumbrances; (e) not
be proscribed by federal or state law from being introduced into interstate or
intrastate commerce in the
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United States; and (f) 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.
5.17.4 If ORTHOBIO has obtained a CE Mark for the Products,
then the Products to be supplied to MENTOR 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 Mark, 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 Mark
5.18 WARRANTY DISCLAIMERS. EXCEPT AS EXPRESSLY PROVIDED IN SECTION
8.1, BELOW, THE LIMITED WARRANTY SET FORTH IN SECTION 5.17, ABOVE, IS THE ONLY
WARRANTY BEING MADE BY ORTHOBIO WITH RESPECT TO THE PRODUCTS. ALL OTHER
WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESSED OR IMPLIED, CONTRACTUAL OR
STATUTORY, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE ARE SPECIFICALLY EXCLUDED AND DISCLAIMED.
5.18.1 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 ORTHOBIO to
the ultimate purchasers and users of the Products, and MENTOR shall, at its own
expense, defend, indemnify and hold ORTHOBIO harmless from and against any
claims thereon of any nature whatsoever in the manner but only to the extent
provided by Section 9.4, below (it being the intention of the parties that the
indemnity obligation contained in this Section 5.18.1 shall be subject to the
terms and conditions of Section 9.3, below, and that this Section not be
construed to increase MENTOR's indemnification obligation beyond the obligations
set forth in Section 9.4).
5.18.2 The Warranties given by ORTHOBIO pursuant to Section
5.17, above, (a) shall cease to be in effect with respect to any defective
condition that results from or is attributable to the failure of MENTOR to
store, ship or otherwise handle the Products in accordance with ORTHOBIO's
instructions for handling, and (b) shall not apply to any components supplied by
MENTOR for the purpose of marketing the Products in kit form as contemplated by
Section 6.1.9, below.
5.19 PRODUCT RECALLS. ORTHOBIO shall bear all costs and direct
out-of-pocket 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
Products, 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 MENTOR or
ORTHOBIO; provided, however, that the obligation of ORTHOBIO hereunder shall not
extend to any recall, notification or alert that is necessitated by an act,
error or omission of MENTOR, in which case MENTOR shall bear all costs and
out-of-pocket expenses incurred by either MENTOR or ORTHOBIO. MENTOR shall
maintain
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complete and accurate records for such periods as may be required by applicable
law of all Products sold by it.
5.20 CUSTOMER RETURNS. Defective Product supplied to MENTOR and
returned by the customer to MENTOR will be forwarded to ORTHOBIO with all
associated paperwork, including sufficient documentation to establish the date
of original sale to the customer. The costs and expense of returning to ORTHOBIO
Defective Product returned by a customer shall be borne by ORTHOBIO. ORTHOBIO
shall promptly replace at its own cost and expense any Defective Products that
are returned to ORTHOBIO or, if Mentors so requests, shall credit to MENTOR on a
monthly basis an amount equal to the Documented Cost of any such returned
Defective Product, if such Defective Product (a) is Defective Product that has
been properly returned by Mentor or any customer of MENTOR or (b) has been
replaced on a no-charge basis by MENTOR in accordance with the established
customer complaint and returned goods policies of MENTOR for the return and
replacement of Defective Product.
5.21 CUSTOMER COMPLAINTS. MENTOR shall promptly refer to ORTHOBIO 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).
5.21.1 With respect both to complaints referred to ORTHOBIO by MENTOR
and complaints received directly by ORTHOBIO:
A. ORTHOBIO shall (1) give such notices (including any Medical
Device Reports required by the FDA), (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 ORTHOBIO is contesting the matter with the FDA or other
regulatory agency in good faith and with due diligence.
B. ORTHOBIO shall keep MENTOR advised on a continuing 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.
5.21.2 MENTOR shall promptly refer to ORTHOBIO 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 Products, and
ORTHOBIO shall indemnity, 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 9.3, below (it being the intention of the parties that the indemnify
obligation contained in this Section 5.21.2 shall be subject to the terms and
conditions of Section 9.3, below, and that this Section not be construed to
increase ORTHOBIO's indemnification obligation beyond the obligations set forth
in Section 9.3).
5.22 COUNTRY OF ORIGIN. At MENTOR's request, ORTHOBIO shall provide
MENTOR with a signed affidavit of the country of origin of any Products
delivered to MENTOR pursuant to this Agreement.
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5.23 TAXES. Taxes, whether in the United States or any other country,
now or hereafter imposed with respect to the transactions contemplated hereunder
(with the exception of income taxes imposed upon ORTHOBIO and measured by the
gross or net income of ORTHOBIO) shall be the responsibility of MENTOR, and if
paid or required to be paid by ORTHOBIO, the amount thereof shall be added to an
become a part of the amounts payable by MENTOR hereunder.
6. ADDITIONAL COVENANTS OF THE PARTIES
6.1 COVENANTS OF ORTHOBIO. ORTHOBIO covenants, warrants and represents
to MENTOR that:
6.1.1 FDA MARKETING APPROVAL. ORTHOBIO now has and shall maintain in
full force and effect throughout the term of this Agreement all FDA Marketing
Approvals necessary to the sale and distribution of the Products and any
Improvements thereto for use in the Field of Use in the United States.
6.1.2 REGISTRATION IN EUROPEAN COMMUNITY. As soon as practicable after
the execution of this Agreement (if it has not previously done so), ORTHOBIO
shall prepare at its Own cost all documents necessary to apply for a CE Mark
for the sale and distribution of the Products and any Improvements thereto for
use in the Field of Use in any of the Member States of the European Union, and
shall exercise due diligence in pursuing the issuance of a CE Mark for the
Product, but delays in ORTHOBIO's receipt of a CE Mark, or its inability to
obtain a CE Mark after making diligent efforts to do so, shall not constitute an
Involuntary Business Disruption under this Agreement.
6.1.3 COMPLIANCE WITH LAW. ORTHOBIO shall at all times (a) keep and
maintain all records necessary or appropriate to evidence such compliance or
that are otherwise mandated by the laws, rules, standards and requirements
identified in Sections 5.17 and 6.1.2, above, and (b) shall make such records
available to MENTOR (subject to the restrictions imposed by Section 6.3.3,
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 the orders or directives of (1) any cognizant
governmental authority within the United States or any of the fifty states
pertaining to the production of the Products and (ii) the laws, rules and
regulations adopted for the European Community the European Commission or the
European Council, to the extent necessary to procure and maintain in effect
a CE Mark 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.
6.1.4 PRODUCT DEVELOPMENT. ORTHOBIO shall commit on a commercially
reasonable basis the necessary human and technical resources and provide
sufficient funding to assure prompt completion of the design configuration for
the Products and their packaging, associated product literature and information,
Product insert data sheets and the like resulting from changes agreed to by the
parties during the Clinical Studies promptly after the completion of such
Studies.
6.1.5 COVENANT BY ORTHOBIO NOT TO COMPETE. Unless and until MENTOR's
marketing, and distribution rights; are terminated pursuant to Section 10.3,
below:
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A. Neither ORTHOBIO nor any of its Affiliates shall market or
distribute the Products for use in the Field of Use, other than marketing and
distribution of the Product for use in the Field of Use in Japan through
independent distributors who are not Affiliates of ORTHOBIO.
B. ORTHOBIO shall not knowingly or intentionally suffer or permit
any Person to sell the Products for use in the Field of Use in violation of the
exclusive marketing and distribution rights held by MENTOR under this Agreement.
C. ORTHOBIO shall take such actions as may be reasonable and
necessary to assure that any Persons authorized to market and distribute the
Product for use in the Field of Use in Japan do not market and sell the Product
in any other country or to Persons who are likely to distribute the Product for
use in the Field of Use in any other country.
6.1.6 MARKETING SUPPORT. ORTHOBIO shall from time to time provide such
scientific and Technical Information regarding the Products and their 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 Products in kit form. In
addition, ORTHOBIO 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. However, MENTOR shall pay ORTHOBIO for all travel and out-of-pocket
expenses incurred by ORTHOBIO in making such personnel available.
6.1.7 MANUFACTURING MODIFICATIONS. ORTHOBIO 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
ORTHOBIO or its suppliers to the manufacturing processes or procedures for the
Products or to any quality control test and/or compliance procedures relating to
the Products or the supplies and components embodied therein, whether resulting
from governmental inspection, customer complaints or for any other reason. 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 no such proposed change shall be implemented without the
prior approval of MENTOR, which shall not be unreasonably withheld.
6.1.8 PRODUCT IMPROVEMENTS. ORTHOBIO shall (a) consult with MENTOR
regarding proposed changes to the Products, (b) make such Improvements to the
Product as may be reasonably necessary to meet the needs of the market and to
keep the Products current and commercially acceptable, and (c) make reasonable
efforts consistent with its available resources and its other contractual
commitments and business objectives to incorporate into the Products any
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 and additions as MENTOR may reasonably request for the
purpose of marketing and distributing the Products in kit form.
6.1.9 MARKETING OF PRODUCTS IN KIT FORM. MENTOR shall have the right to
combine or assemble the Products with other devices, instruments or materials,
including biological materials that mimic the desirable characteristics of
autologous tissue or are otherwise substantially
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equivalent to human tissue, for the purpose of marketing and distributing the
products in kit form, including by way of example and not in limitation, starter
kits and procedure kits.
A. MENTOR shall bear all costs and expense of packaging the
Products in kit form.
B. Subject to the provisions of Section 7.1, below, MENTOR shall
have the right to distribute any such kits under its own name and marks. MENTOR
shall own all intellectual and other property rights with respect to kit
configuration and trade dress for any of the kits that are designed or marketed
by MENTOR, and ORTHOBIO shall not have any rights with respect thereto.
C. Any proprietary technology or Improvements developed or
acquired by MENTOR for the purpose of marketing the Products in kit form shall
be and remain the intellectual property of MENTOR. ORTHOBIO shall have a
nonexclusive, royalty-free license in any such technology or Improvements solely
for the purpose of performing its obligations any such proprietary improvements
under this Agreement, and any such license shall terminate simultaneously with
the termination of this Agreement.
D. Should any such kits include additional devices or products to
be supplied by ORTHOBIO, then ORTHOBIO shall supply such devices and products on
the terms and conditions set forth in Section 5, above, at a transfer price that
is established by the mutual agreement of the parties, but nothing herein shall
be construed to require MENTOR to procure any kit components from ORTHOBIO.
E. Except as provided in Section 6.1.9.D, above, ORTHOBIO shall
not be entitled to any increase in the transfer price for the Products by reason
of (a) their 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
Products in kit form, it being intended that the transfer price for the Products
will remain constant, regardless of the manner in which they are marketed and
distributed by MENTOR.
6.1.10 GOVERNMENTAL INSPECTIONS. ORTHOBIO 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 Products or any component of the
Products. ORTHOBIO shall promptly provide MENTOR with a written report of any
such inspection. In addition. ORTHOBIO 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.
6.1.11 LABELLING CLAIMS. ORTHOBIO shall consult with MENTOR with
respect to any labelling claims for which ORTHOBIO intends to seek FDA approval,
and shall include in its applications for FDA approval such labelling claims as
MENTOR may reasonably request.
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6.1.12 VENDOR'S AUDIT. ORTHOBIO shall permit MENTOR or its authorized
representatives to enter and inspect, during normal business hours, the plants
and facilities in which the Products are manufactured, packaged, labeled or held
in order to (a) permit MENTOR to verify that the Products are being produced in
conformity with applicable Good Manufacturing Practices, ISO 9001 and/or 9002
and the applicable Medical Device Directive of the European Commission. During
any such inspection, MENTOR's quality control or compliance inspectors shall be
entitled to inspect the manufacturing and quality control procedures of ORTHOBIO
relating to the Products, and all records relating thereto, provided that such
inspections are carried out in a manner that does not unreasonably interfere
with ORTHOBIO's manufacturing operations.
A. MENTOR shall give ORTHOBIO 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 ORTHOBIO in the scheduling of any
such audit so as to minimize to the extent practicable any disruption to
ORTHOBIO's business operations, but MENTOR shall not be obligated to postpone
the conduct of such audit for more than fifteen (15) days.
B. MENTOR shall furnish ORTHOBIO with a written report of the
results of any such audit as soon as practicable after its completion, and
ORTHOBIO shall promptly take any action suggested or recommended in such report
to the extent that such action is necessary to cure a default by ORTHOBIO in the
performance of its obligations under this Agreement.
6.1.13 CONVERSION TO NONEXCLUSIVE RIGHTS. If at any time the
distribution rights held by MENTOR have become nonexclusive rights, 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 ORTHOBIO to any other distributor of the
Products for use in the Field of Use.
B. For as long as this Agreement remains in effect, ORTHOBIO shall
not enter into agreements for the marketing and distribution of the Products 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 ORTHOBIO 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 ORTHOBIO to effectuate such chances.
6.2 COVENANTS OF MENTOR. MENTOR covenants to and agrees with ORTHOBIO
that:
6.2.1 CONDUCT AND FUNDING OF CLINICAL TRIALS. MENTOR shall
exercise due diligence in developing and implementing the Clinical Trials called
for by Section 3.2, above, and shall bear all of the costs and expense incurred
by MENTOR in connection therewith.
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6.2.2 FUNDING OF PRODUCT DEVELOPMENT. MENTOR shall reimburse ORTHOBIO
the costs ORTHOBIO incurs in performing additional research and development work
requested by MENTOR pursuant to Section 3.3, above. For purposes of this Section
6.2.2, ORTHOBIO's costs shall include (a) the direct costs of ORTHOBIO's
engineering, technical and support personnel actively engaged in the additional
work, computed at ORTHOBIO's standard hourly rates for such personnel, together
with all payroll and benefit costs, and (b) the costs of all materials and
services procured from unrelated third parties.
6.2.3 PHYSICIAN TRAINING. During the conduct of the Clinical Trials and
thereafter, MENTOR shall establish and implement a physician training program
for the purpose of standardizing procedures for use of the Products for use in
the Field of Use, and promoting and providing physician education regarding the
Products and their use in the Field of Use. All costs and expense that MENTOR
incurs in providing physician training or education in the use of the Products,
including (a) fees paid to physicians or others to write articles concerning the
Products or the results of clinical studies for publication in professional and
trade journals or periodicals, and (b) the incremental costs of including
information and training with respect to the Products in professional seminars
and training programs conducted by MENTOR, shall be borne by MENTOR.
6.2.4 MARKETING, PROGRAM. MENTOR shall consult with ORTHOBIO on a
continuing basis with respect to (a) the design and development of kit
configurations for the marketing of the Products in kit form as contemplated by
Section 6.1.9, above, and (b) the development and registration of tradenames to
differentiate the Products when used in the Field of Use from Product readily
available from other distributors and suppliers for orthopedic applications and
procedures.
6.2.5 SALES CAPACITY. MENTOR shall maintain adequate warehouses and
other facilities and shall train and equip sufficient staff to effectively
promote, sell and distribute the Products, but nothing herein shall be construed
to make MENTOR liable for any failure or alleged failure to purchase or sell the
Products.
6.2.6 COVENANT BY MENTOR TO OBSERVE RESTRICTIONS. Neither MENTOR nor
any of its Affiliates shall market or distribute the Products 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 Products from MENTOR or
its Affiliates to resell the Products for use in any application other than the
Field of Use.
6.2.7 LABELLING AND WARRANTY CLAIMS. MENTOR shall not make any
expressed warranties or other claims with respect to the Products that have not
been authorized by the FDA or ORTHOBIO or that are inconsistent with any
labelling claims that have been approved by the FDA and ORTHOBIO with respect to
the Products.
6.2.8 FOREIGN REGISTRATION. Subject to the performance by ORTHOBIO of
its obligations under Section 6.1.2, above, MENTOR shall prepare at its own cost
and expense all documents necessary for registration, sale and distribution of
the Products and any Improvements thereto for use in the Field of Use in any
foreign country into which MENTOR elects to begin marketing and distribution
activities, and shall secure and maintain in full force and effect all other
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permits, licenses and approvals required in order to sell the Products for use
in the Field of Use in such foreign countries.
6.2.9 FOREIGN LANGUAGE TRANSLATIONS. MENTOR shall, at its own
expense, translate all user and technical manuals and advertising and marketing
information into the language of its customers and shall provide ORTHOBIO with
advance copies of all such materials for approval by ORTHOBIO, which approval
shall not be unreasonably withheld and shall be deemed to have been given unless
ORTHOBIO makes a written objection to such translations, setting forth the
reasons therefor, within ten (10) days after its receipt thereof. MENTOR shall
assign to ORTHOBIO the copyrights for any such translations of product
information data, instructions for use or other materials that are supplied by
ORTHOBIO, but MENTOR shall have a nonexclusive, royalty-free right to use any
such translations during the term of this Agreement in connection with its
activities pursuant to this Agreement.
6.2.10 COMPLIANCE WITH LAW. MENTOR shall comply with all
applicable federal, state and local laws and regulation in its promotion and
sale of the Products, and the laws of any foreign jurisdiction in which it
distributes the Products.
6.2.11 DELIVERY OF CLINICAL DATA. MENTOR shall from time to time
at the request of ORTHOBIO provide ORTHOBIO with such scientific and technical
information regarding the Products and their clinical performance as becomes
available to MENTOR by reason of any Clinical Trials conducted by MENTOR.
6.2.12 REPORTING. During the term of this Agreement MENTOR shall
provide ORTHOBIO no less frequently than annually with a written report
regarding its marketing and distribution activities, which shall include
customer call reports, business trends, production planning of MENTOR's primary
customers in the Field or Use, market forecasts and other reports reasonably
requested by ORTHOBIO, but nothing herein shall be construed to require MENTOR
to furnish ORTHOBIO with the names of MENTOR's customers or to otherwise provide
ORTHOBIO with any Confidential or Proprietary information regarding its
customers or its marketing plans or strategy.
6.3 MUTUAL COVENANTS. Each of the parties covenants to and agrees with
the other that:
6.3.1 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.
6.3.2 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 Products.
6.3.3 CONFIDENTIAL INFORMATION. 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
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Information was directly or intentionally communicated, is and shall at all
times remain confidential. Each of the parties agrees that:
A. It shall not disclose any Confidential Information or other
material which is deemed confidential pursuant to this Agreement to any other
person unless such disclosure is (a) specifically authorized in writing by the
other party or (b) required by law or judicial process.
(1) 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) Each party shall give the other at least fifteen (15)
days prior written notice of its intention to make a disclosure of Confidential
Information it believes to be required by law to a Third Party who does not
agree to be bound by the confidentiality provisions of this Agreement, setting
forth (a) the nature of the information proposed to be disclosed and (b) the
basis for the disclosing party's conclusion that such disclosure is required by
law.
B. It shall use its best efforts to prevent any inadvertent
disclosure of any Confidential Information deemed confidential hereunder to any
Third Party by using 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.
C. It shall not use the Confidential Information in any manner
except to satisfy its obligations hereunder.
6.3.4 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.
6.3.5 IMPAIRMENT OF OBLIGATION. Neither party has entered into, and
neither party will hereafter enter into any agreement, the execution or
performance of which would violate or interfere with this Agreement or have an
adverse effect on such party's ability to perform its obligations under this
Agreement.
6.3.6 ADVERSE INFORMATION. Each party will promptly notify the other in
writing of any fact, condition or information which may hereinafter come to the
attention of such party and which may adversely affect the reliability, utility
or marketability of the Products, 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 Products, including, but not limited to, a
recall, market withdrawal, stock recovery or label clarification, MENTOR will
immediately notify ORTHOBIO of such requirement in writing, provide ORTHOBIO
with complete copies of all documentation related thereto, and provide all
commercially reasonable assistance to ORTHOBIO necessary to take such action or
to satisfy such requirements.
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6.3.7 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.
7. TRADE NAMES AND TRADE DEMANDS
7.1 ACKNOWLEDGMENT OF SOURCE. MENTOR will acknowledge in its Product
literature that the Anchor System is manufactured and supplied by ORTHOBIO, and
(b) include in the packaging or the associated Product literature a statement
(a) to the effect that the Product is patented, or that patent protection is
pending or has been applied for, and (b) setting forth the registration
number(s) of all patents identified by ORTHOBIO as being applicable to the
Product. ORTHOBIO hereby grants to MENTOR a nonexclusive, royalty-free license
to use its tradename and the PeBA C Soft Tissue trademark solely for the
purposes authorized by this Section 7.1.
7.1.1 The license granted hereunder shall (a) commence on the
Effective Date of this Agreement, (b) be nontransferable except to Affiliates of
MENTOR in connection with the subdistributor activities of such Affiliates in
accordance with the provisions of this Agreement, (c) be coterminous with
MENTOR's distribution rights and, (d) subject to the provisions of Section
10.4.3. belong, shall terminate upon the expiration or termination of MENTOR's
distribution rights.
7.1.2 During the term of this Agreement, MENTOR may indicate in
signs, advertising, publicity, or other sales, promotional or marketing media or
materials that MENTOR is an authorized dealer or distributor of ORTHOBIO's
Products.
7.2 INFRINGEMENT PROCEEDINGS. MENTOR agrees to use reasonable efforts
to notify ORTHOBIO of any unauthorized use by others of any trademark or
tradename owned by ORTHOBIO promptly as such unauthorized use comes to MENTOR's
attention. ORTHOBIO shall have the sole right and discretion to bring
infringement or unfair competition proceedings involving the unauthorized use of
its trademark or tradename.
7.3 MARKS OWNED BY MENTOR. MENTOR shall be entitled to develop,
register and promote the use its own tradenames and trademarks for the purpose
of marketing and distributing the Products for uses within the Field of Use. Any
such names and marks shall constitute the proprietary property of MENTOR;
ORTHOBIO 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. ORTHOBIO agrees to
respect the exclusive rights of MENTOR in and to all of MENTOR's trademarks,
tradenames, labels or markings.
8. INFRINGEMENT CLAIMS
8.1 WARRANTIES OF ORTHOBIO. ORTHOBIO warrants and represents to MENTOR
that:
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8.1.1 ORTHOBIO is the owner of the technology utilized to
manufacture and produce the Products and has full power and authority to enter
into this Agreement without the approval or consent of any other person.
8.1.2 ORTHOBIO has not granted any other person the right to
market or distribute the Products for use in the Field of Use.
8.1.3 The manufacture, sale or use of the Products as they exist
on the Effective Date of this Agreement (including but not limited to the
process and materials used to produce the Products), does not infringe any
existing patent or other intellectual property rights of any Third Party.
8.1.4 In the performance of this Agreement, ORTHOBIO will not
knowingly or willfully infringe any intellectual property rights of any Third
Party including, without limitation, any now existing or subsequently issued
patents.
8.1.5 There are no claims, disputes, or litigation proceedings
pending or threatened as of the Effective Date with respect to the Products or
the Technology sed by ORTHOBIO in their manufacture.
8.2 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 ORTHOBIO 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. If the parties are unable to agree with respect to a
proposed course of action, then:
8.2.1 DISCRETIONARY LITIGATION. Either party shall have the right,
but shall not be obligated, to elect to commence litigation or other enforcement
action or proceedings. If either party (an "Enforcing Party") elects to initiate
litigation or other enforcement proceedings, the other party (a "Participating
Party") shall be entitled to elect to pay its Proportionate Share of the costs
and expense hereof and to receive its Proportionate Share of any net recovery
resulting therefrom. If the other party elects not to participate in any such
action or proceeding, then the Enforcing Party shall bear the entire cost and
expense thereof, and shall be entitled to retain the entirety of any resulting
recovery.
8.2.2 DUTY TO COOPERATE. If an Enforcing Party elects to initiate
litigation or any other action or proceeding on account of an alleged
infringement of any technology owned by ORTHOBIO, and the other party elects not
to participate in the costs and expense of prosecuting such action or
proceeding, such party shall nonetheless cooperate with the Enforcing Party in
the prosecution of such action or proceeding provided satisfactory provisions
have been made for the reimbursement by the Enforcing Party of all costs and
expenses that it incurs in doing so.
8.3 CLAIMS BY THIRD PARTIES. In the event of any threatened or actual
suits against MENTOR by reason of its distribution and sale of the Products or
the exercise by MENTOR of any license ranted to MENTOR hereunder based on an
allegation that the Products or the use of the
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technology infringes on the intellectual property rights of a Third Party,
MENTOR shall promptly inform ORTHOBIO 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
ORTHOBIO, then:
8.3.1 ORTHOBIO 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.
8.3.2 ORTHOBIO 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 Products or the use of any
Technology owned by ORTHOBIO on the rights of the claimant.
8.3.3 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 Products, then MENTOR shall be
entitled to deduct any such amounts paid to any such Third Party from any
amounts thereafter becoming payable to ORTHOBIO under this Agreement.
8.4 PREVENTING FURTHER INFRINGEMENT. If MENTOR's use of the Product is
in any action or proceeding held to constitute an infringement on the
intellectual property rights of a Third Party, then ORTHOBIO shall at its own
cost and expense either (a) procure for MENTOR the right to continue using such
Product, or (b) modify such Product (with MENTOR's approval of such
modifications) so that its use becomes non-infringing. Should ORTHOBIO be unable
to eliminate the infringement or to procure the right to continue to distribute
the Product on commercially reasonable terms, then ORTHOBIO shall be entitled to
terminate this Agreement by giving written notice of termination to MENTOR,
effective upon the giving of such notice or on such later date as is specified
therein. In such event, ORTHOBIO shall, within thirty (30) days after the
effective date of such termination:
8.4.1 Repurchase any Product then in MENTOR's possession at its
Documented Cost; and
8.4.2 Pay to MENTOR an amount equal to the sum of (a) the
unamortized portion of the Distribution Fee received by ORTHOBIO from MENTOR
pursuant to Section 3.1, above, assuming such Fee was being amortized over a
period of seven years, plus (b) the unamortized portion of MENTOR's documented
marketing and promotional expense during the first two (2) years of this
Agreement, assuming that such costs were being amortized over a period of five
(5) years.
8.5 LIMITATION ON INFRINGEMENT CLAIMS. ORTHOBIO shall have no
obligation for any claim of infringement arising from: (i) the combination by
MENTOR or its customers of any product with a product not supplied by ORTHOBIO,
where the Product, by itself, would not have been infringing; (ii) the
application by MENTOR or its customers of a Product for a use for which it was
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not designed or intended; or (iii) the infringements on any intellectual
property rights owned by MENTOR or any of its Affiliates.
8.6 OBLIGATION TO MAKE PAYMENTS. Except as otherwise expressly provided
by this Section 8, threatened or actual claims of infringement made against
MENTOR by a Third Party, or possible or actual infringement claims asserted by
ORTHOBIO or MENTOR against Third Parties, shall not excuse the obligation of
MENTOR to continue to pay the transfer price for any Products being purchased
from ORTHOBIO, but any such threat or claim shall constitute an Involuntary
Business Disruption during:
8.6.1 Any period during which the sale of the Products is
restrained by an injunction or a temporary restraining order, or
8.6.2 The pendency of any action or proceeding in which damages
are sought from ORTHOBIO 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 Products or the use of the Technology unless such action or
proceeding (a) is manifestly frivolous or without merit or (b) does not expose
MENTOR to an unreasonable risk of liability.
9. INSURANCE, INDEMNIFICATION AND LIMITATIONS ON LIABILITY
9.1 ORTHOBIO'S LIABILITY INSURANCE. Beginning on the Quota Commencement
Date and continuing for a period of five (5) years from the date on which the
last sale of a Product occurs, ORTHOBIO shall maintain (a) product liability
insurance (containing both a Vendor's Additional Insured Endorsement and a
Products Contractual Liability Endorsement) on the Products 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
ORTHOBIO hereunder.
9.2 POLICY REQUIREMENTS. The issuer of each policy of insurance
required under this Agreement 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 Products or (iii) the corporate existence of the
insured 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.
ORTHOBIO shall provide MENTOR with certificates of such insurance and evidence
of the payment of premiums therefor, promptly upon request.
9.2.1 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
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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.
9.2.2 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 Minneapolis, Minnesota.
9.3 INDEMNIFICATION BY ORTHOBIO. ORTHOBIO 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 (a) any breach of a representation or warranty or failure to
perform any covenant or obligation under this Agreement; and (b) any written
representations or warranties made by ORTHOBIO regarding the Products.
ORTHOBIO'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 (a) to the fault or neglect
of MENTOR or (b) the use of the product in combination with other kit components
not supplied by ORTHOBIO if by reason of such combination the Product (i) is
modified or altered or (ii) is used in a manner that is inconsistent with the
instructions for use supplied by ORTHOBIO.
9.4 INDEMNIFICATION BY MENTOR. MENTOR shall promptly indemnify defend
and hold ORTHOBIO (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 (a) a breach of a written representation or warranty given by MENTOR under
this Agreement or (b) any negligent acts or omissions of MENTOR in connection
with its marketing and distribution of the Products. MENTOR's contractual
obligations to indemnify, defend and hold ORTHOBIO 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 ORTHOBIO.
9.4.1 JOINT DEFENSE OF CLAIMS. In any action or proceeding in
which liability for personal injury resulting the use of the Products is alleged
to exist both against ORTHOBIO and MENTOR based in whole or in part upon
theories of negligent manufacturing, defective product, product liability,
strict liability, or any other theory of liability, each party shall provide its
own defense at its own cost and expense, but each party shall be entitled to be
indemnified by the other with respect to any damages, liabilities, 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.
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9.4.2 DEFENSE PROCEDURE. Each party shall promptly notify the
other in writing within ten (10) days of the assertion of any claim or discovery
of any fact upon which such party intends to base a claim for defense and/or
indemnification under this Agreement. The failure to so notify the other party
shall not relieve the other party of the duty to defend and indemnify the
notifying party with respect to such claim except to the extent the defense of
such claim is actually prejudiced thereby.
9.4.3 PARTICIPATION IN AND CONTROL OF DEFENSE. If either party is
obligated to defend the other in a lawsuit, arbitration, negotiation, or other
proceeding concerning a claim pursuant to this Agreement, the indemnified party
shall have the right to engage separate counsel, at its own cost and expense, to
monitor and advise such indemnified party about the status and progress of the
defense or to otherwise represent the interests of the indemnified party. To be
entitled to sole control of the defense, upon request by the indemnified party,
the indemnifying party shall demonstrate, to the reasonable satisfaction of the
indemnified party the financial ability of the indemnifying party to carry out
its defense obligations (and its indemnity obligations, if any).
9.5 LIMITATION OF LIABILITY. WITH RESPECT TO CLAIMS MADE BY ONE PARTY
(A "CLAIMANT") AGAINST THE OTHER (A "DEFENDANT") UNDER THIS AGREEMENT, 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) EVEN IF
MANUFACTURER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSSES.
10. TERM AND TERMINATION
10.1 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
seven (7) years from the Quota Commencement Date.
10.2 TERMINATION PRIOR TO QUOTA COMMENCEMENT DATE. MENTOR shall be
entitled to terminate this Agreement by giving written notice to ORTHOBIO of its
election pursuant to Section 3.4, above, to not proceed with the marketing and
distribution arrangement contemplated by this Agreement due to a determination
by MENTOR at the conclusion of the Clinical Trials that the use of the Products
in the Field of Use poses a risk of acute complications or undue risk of
post-operative infection or that the Products will not be commercially feasible.
10.3 TERMINATION FOR CAUSE. ORTHOBIO shall be entitled to terminate
MENTOR's marketing and distribution rights under this Agreement as provided in
Section 4.4, above, due to the failure of MENTOR to satisfy its Agreed Purchase
Commitment in any Computation Period unless MENTOR has remedied its failure to
do so within the time and in the manner provided by Section 4.3.2, above. In
addition, 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 upon the occurrence
of any of the following events:
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10.3.1 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. 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.
10.3.2 The other party becomes bankrupt or insolvent or a receiver
is appointed for the business and/or assets of such other party or an assignment
is made by such other party for the benefit of its creditors, in each case
whether by voluntary act or otherwise and, in the case of any such proceeding
that is involuntary, if such proceeding is not terminated within thirty (30)
days thereafter.
10.4 RIGHTS AND DUTIES UPON TERMINATION. Upon termination of this
Agreement for any reason:
10.4.1 Any subdistributorships entered into by MENTOR with respect
to the affected country or Geographic Market Area shall automatically terminate.
10.4.2 Unless MENTOR continues to hold marketing and distribution
rights that have not then been terminated, 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, and shall continue
to respect and observe the provisions regarding the use and disclosure of
Confidential Information set forth in Section 6.3.3, above.
10.4.3 MENTOR shall be entitled (a) to continue to market and sell
its existing inventory of the Products 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, but in no case shall the
term be longer than six (6) months, and (b) to continue to display the ORTHOBIO
tradename on Products being distributed by MENTOR for (i) as long as MENTOR has
a non-exclusive right to continue to market and sell the Products for such
period or (ii) until its inventory of the Products bearing such tradename or
packaged in materials bearing such tradename have been exhausted, whichever
first occurs.
10.4.4 ORTHOBIO shall continue to accept Product returns made
pursuant to Section 5.20, above, and shall, at its option, either replace or
issue a credit directly to the customer for Defective Product.
10.4.5 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 without
limitation the provisions Articles 8, 9 and 11 of this Agreement.
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10.4.6 If this Agreement is terminated by ORTHOBIO pursuant to
Section 10.3 upon the occurrence of an unresolved breach by MENTOR, then MENTOR
shall make available to ORTHOBIO within forty-five (45) days thereafter such
information then in MENTOR's possession that ORTHOBIO may reasonably request for
the purpose of obtaining approval of applicable government regulatory agencies
to manufacture and market the Products for use in the Field of Use. ORTHOBIO may
share such data with its other licensees.
10.5 SURVIVAL OF REMEDIES. The termination of this Agreement for cause
pursuant to this Section 10.3 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.
10.6 REPURCHASE OF INVENTORY. Upon either termination of expiration of
this Agreement, as the case met be, ORTHOBIO shall have the option, but not the
obligation, to repurchase Distributor's inventory of Products.
10.6.1 Within thirty (30) days after such termination or
expiration, ORTHOBIO shall elect in writing to either, (a) permit MENTOR to sell
off its remaining inventory of Products; provided, however, that MENTOR shall
comply with all terms and conditions of this Agreement restricting such
reselling activities in effect immediately prior to termination or expiration;
or (b) repurchase MENTOR's inventory of Products which are saleable and in the
original packages and unaltered from their original form and design, subject to
ORTHOBIO's inspection, test and acceptance.
10.6.2 Any such repurchase of MENTOR's inventory of Products shall
be at MENTOR's Documented Cost less a five percent (5%) handling charge.
Repurchased inventory shall be shipped by MENTOR, freight pre-paid, according to
ORTHOBIO's instructions. ORTHOBIO shall pay MENTOR for such repurchased Products
within thirty (30) days after ORTHOBIO receives those Products in one of its
facilities.
11. GENERAL PROVISIONS
11.1 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.
11.2 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, which permission shall not be
unreasonably withheld, except that (a) MENTOR can freely assign this Agreement
to any Affiliate of MENTOR and (b) either party shall have the right to assign
its rights and licenses and to delegate its duties under this
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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.
11.3 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.
11.4 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 Arizona, excluding (i) its conflicts of law principles, (ii) the
United Nations Convention on Contracts for the International Sale of Goods,
(iii) the 1974 Convention on the Limitation Period in the International Sale of
Goods (the "1974 Convention"), and (iv) the Protocol amending the 1974
Convention, done at Vienna April 11, 1980.
11.5 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 San Francisco, 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.
11.6 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.
11.7 INDEPENDENT CONTRACTORS. Each of the parties to this Agreement
understood and stipulate that they are independent contractors, and that this
Agreement is not intended and shall not be construed to make either party an
employee, agent, franchisee or legal representative of the other party for any
purpose whatsoever. MENTOR shall be entitled to develop and implement its own
marketing and distribution plans free of control by or interference from
ORTHOBIO, and the parties agree that this agreement shall not constitute a
franchise agreement under California or Minnesota law. 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.
11.8 OFFSET RIGHTS. MENTOR shall be entitled to offset against any
amounts accruing for the benefit of ORTHOBIO under this Agreement any damages
that have been awarded to MENTOR in any stipulated agreement or by any
arbitration award or judgment that has become final and is no longer subject to
any right of appeal.
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11.9 SEVERABILITY. If for provision of this Agreement is declared
invalid or unenforceable by a court having competent jurisdiction, it is
mutually agreed that this Agreement shall endure except for the part declared
invalid or unenforceable by order of such court. The parties shall consult and
use their best efforts to agree upon a valid and enforceable provision which
shall be a reasonable substitute for such invalid or unenforceable provision in
light of the intent of this Agreement.
11.10 NO RIGHTS BY IMPLICATION. No rights or licenses with respect to
the Products, trademarks, or tradenames are granted or deemed granted hereunder
or in connection herewith, other than those rights expressly granted in this
Agreement.
11.11 WAIVER. None of the conditions of this Agreement shall be held to
have been waived by any act or knowledge on the part of either party, except by
an instrument in writing signed by a duly authorized officer or representative
of such party. Further, the waiver by either party of any right hereunder or the
failure to enforce at any time any of the provisions of this Agreement, or any
rights with respect thereto, shall not be deemed to be a waiver of any rights
hereunder or any breach or failure of performance of the other party.
11.12 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.
IN WITNESS WHEREOF, both parties have executed this Exclusive Marketing
and Distribution Agreement to be duly executed on the dates set forth below.
ORTHOBIO: MENTOR:
Date: 8/21/96 Date: Aug. 22, 1996
--------------------------- -------------------------
ORTHOPAEDIC BIOSYSTEMS, INC., MENTOR UROLOGY CORPORATION,
an Arizona corporation a Delaware corporation
By /s/ D. Ronald Yagoda By /s/ Anthony R. Gette
------------------------------ ----------------------------
D. Ronald Yagoda Anthony R. Gette
Its President Its President
ADDRESS FOR NOTICES: ADDRESS FOR NOTICES:
Orthopaedic Biosystems LTD. Inc. Mentor Urology Corporation
320 East Butherus, Suite 206 5425 Hollister Avenue
Scottsdale, Arizona 85260 Santa Barbara, California 93111
TEL: (602) 596-4066 TEL: (805) 681-6000
FAX: (602) 596-2180 FAX: (713) 967-3362
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