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Exhibit 10.2
DISTRIBUTION
AGREEMENT
THIS DISTRIBUTION AGREEMENT
("AGREEMENT") is made as of the 6th day of
September, 2005 (the "EFFECTIVE DATE"), by and between BioPad Ltd.,
an Israeli
corporation ("BIOPAD") and Synova Pre-Natal Healthcare, Inc., a
Delaware
corporation ("SYNOVA").
RECITALS
BioPad is in the business of
researching, developing, and manufacturing
products designed for fetal monitoring and products related thereto; presently,
such products are limited to the products set forth in EXHIBIT A to this
Agreement (the "LICENSED PRODUCTS");
Synova is in the business of
marketing, distributing, and selling
consumer health care products;
BioPad desires that Synova
market, distribute, and sell, and Synova
desires to market, distribute, and sell, the Licensed Products, as more fully
set forth in this Agreement;
NOW, THEREFORE, for and in
consideration of the promises and the
covenants, terms and conditions contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be bound legally, BioPad and Synova hereby agree
as set forth herein.
1. DEFINITIONS
In addition to the terms defined
elsewhere in this Agreement, the
following words and phrases, whenever capitalized in this Agreement, shall have
the following meanings:
1.1 "CONTRACT YEAR"
means, for the first Contract Year, that period of
time commencing on the Effective Date and ending as of the first anniversary
thereof, and for all subsequent Contract Years, the twelve (12) month period
commencing as of the day after the last day of the previous Contract Year.
1.2 "DISTRIBUTION
YEAR" means each annual period beginning as of the
date that Synova first offers for sale in general commerce a Licensed Product
(or, as applicable, as of the anniversary of that date).
1.3 "FDA" means the
United States Food and Drug Administration or any
successor agency thereof.
1.4 "KNOW-HOW" means
any and all information, inventions, discoveries,
designs, composition, construction, concepts, ideas, data, and material
pertaining to the Licensed Products, including, without limitation, the
research, development, and manufacture thereof.
1.5 "PATENT RIGHTS"
means the patent applications identified in EXHIBIT
B and any and all Letters Patent of the United States which have been or
hereafter may be granted thereon or regarding any other Licensed Products
(including, without limitation, improvements thereof)
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and all reissues and extensions thereof (including, without limitation, all
proceeds thereof and the rights to sue for past, present and future
infringement), all applications for Letters Patent which have been or hereafter
may be filed for any patent or patents regarding Licensed Products in any
country or countries foreign to the United States (and any and all divisions,
renewals, continuations, and continuations-in-part thereof), all Letters Patent
which have been or hereafter may be granted or issued for any such patents in
any country or countries foreign to the United States, and any and all right,
title, and interest in, to, or under the foregoing, including, without
limitation, the right to sue for past infringement.
1.6 "QUALITY SYSTEMS AND
GMP REQUIREMENTS" means the current and any
future quality system and good manufacturing practices regulations under 21
C.F.R. Part 820, as amended, to the extent that such regulations are applicable
to the Product, as such regulations are implemented by the FDA.
1.7 "SPECIFICATIONS"
means those product, labeling, packaging and
performance specifications established for the Licensed Products as agreed upon
by the parties.
1.8 "MARKETING
Materials" means any and all information, data, and
material pertaining to the Licensed Products and made available by BioPad,
including, without limitation, the research, development, and manufacture
thereof, that may assist Synova in the marketing, promotion, distribution, or
sale of the Licensed Products as permitted under this Agreement.
1.9 "Territory" means
North America, including, without limitation, the
United States of America, Canada, and Mexico.
2. DISTRIBUTION, PURCHASE AND SALE
2.1 Appointment. (a) BioPad
hereby grants Synova, and Synova hereby
accepts, the sole and exclusive right to market, promote, sell, offer to sell,
and distribute the Licensed Products in the Territory. (For the avoidance of
doubt, end users of the Licensed Products shall have the right to use the
Licensed Products.) (b) In addition, BioPad hereby grants Synova, and Synova
hereby accepts, a non-exclusive right to use the Marketing Materials in
connection with Synova's exercise of the rights granted in Paragraph (a),
above.
Synova shall not distribute, purchase or manufacture any product which is
compatible to a Licensed Product.
2.2 Purchase and Sale. Synova
shall have the right to purchase the
Licensed Products from BioPad and BioPad shall supply, or shall cause to be
supplied, to Synova such quantities of the Licensed Products as may be ordered
by Synova from time to time, up to the quantities specified in Section 3.5
hereinafter, and any additional quantities as may be ordered by Synova from
time
to time and approved by BioPad (orders for all such quantities shall be
referred
to as "APPROVED ORDERS"). BioPad shall supply, or cause to be
supplied, to
Synova with the quantities of Licensed Products ordered by Synova under
Approved
Orders prior to supplying, or causing to be supplied, any orders for Licensed
Products from any other person or entity. Synova shall purchase the Licensed
Products only from BioPad; unless otherwise agreed upon by the parties, BioPad
shall not sell, and Synova shall not purchase, elements or components of the
Licensed Products separate or apart from the Licensed Products.
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2.3 Synova shall have the right
to appoint and authorize
subdistributors to exercise the marketing, promotion, distribution, and sale
and
related rights granted to Synova under Section 2.1, above, and Section 7.2,
below (the subdistributors to which Synova grants such rights are referred to
herein as "SUBDISTRIBUTORS"). Upon BioPad's request, Synova will
provide BioPad
with a list of then-current Subdistributors and Synova's strategy and plans for
distributing the Licensed Products through the Subdistributors.
2.4 Synova shall provide to
BioPad in advance its proposed marketing
strategy and plans. Such proposed strategy and plans shall be provided to
BioPad
at least thirty (30) days prior to full implementation of the strategy and
plans.
2.5 Synova shall not make any
representations and warranties as to the
Licensed Products, other than those contained in written information provided
by
BioPad or authorized in writing in advance by BioPad. Synova shall be
responsible for any representations and warranties made by it as to Licensed
Products which are not contained in written information provided by BioPad or
authorized by BioPad as abovementioned and shall indemnify, for and hold BioPad
harmless, from any claims and expenses resulting from such representations or
warranties only as and to the extent expressly set forth in Section 10.2.
2.6 In the event that BioPad
shall, at any time during the term of this
Agreement, desire to market, promote, sell, offer to sell or distribute the
Licensed Products outside of the Territory (whether on its own or through a
third party), it will first offer, in writing, the right to do so to Synova
("BIOPAD'S OFFER"). If within sixty (60) days after Synova receives
BioPad's
Offer (the "OPTION PERIOD"), Synova does not notify BioPad in writing
that
Synova desires to obtain such rights, BioPad may retain such rights to itself
or
grant to any other person or entity such rights. On the other hand, if, within
the Option Period, Synova notifies BioPad in writing that Synova desires to
obtain such rights and provides the terms on which it wishes to obtain such
rights ("SYNOVA'S OFFER") then BioPad will have the option either to
accept
Synova's Offer or to grant such rights to a third party within sixty (60) days
from its receipt of Synova's Offer at better terms for BioPad. If, within the
said period of sixty (60) days, BioPad shall not conclude a binding written
agreement with a third party to market, promote, sell, offer to sell or
distribute the Licensed Products outside the Territory as abovementioned, it
shall have the right to accept Synova's Offer, and, if BioPad shall not accept
Synova's Offer, the abovementioned procedure shall apply again, anew.
3. PURCHASE PRICE, ORDERS, PRODUCT SUPPLY
3.1 Purchase Price. BioPad shall
charge Synova, and Synova shall
purchase the quantities of the Licensed Products ordered by Synova and made
available for shipment to Synova pursuant to and in accordance with this
Agreement, at the purchase prices set forth on EXHIBIT A (the "PURCHASE
PRICE").
3.2 Orders.
(a) At least one hundred eighty
(180) days prior to the beginning of
each Distribution Year, Synova shall provide BioPad with an estimated forecast
for the Licensed Products to be
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ordered in the said Distribution Year. Synova shall provide such forecast in
good faith, but such forecast shall not be binding in any manner upon Synova.
BioPad shall notify Synova in writing within forty-five (45) days after
receiving the forecast from Synova of the quantities of Licensed Products
(greater than the quantities set forth in Section 3.5) that BioPad will be able
to supply under this Agreement for the Distribution Year and the delivery dates
for such additional quantities ("SUPPLEMENTAL NOTIFICATION").
(b) At least ninety (90) days
before the beginning of each Distribution
Year, Synova will place an order for the Licensed Products for the said
Distribution Year based on the Supplemental Notification, specifying
quantities,
delivery dates, and shipping instructions. Each such order submitted for the
first two (2) Distribution Years shall be accompanied by an Irrevocable Letter
of Credit ("LC") in the amount of the whole order, issued by any of
the U.S.
financial institutions identified in EXHIBIT C hereto or any other financial
institution approved by BioPad; provided, however, to the extent that BioPad
has
a commercially reasonable basis for removing a financial institution from
EXHIBIT C, BioPad shall have the right to remove from EXHIBIT C within ninety
(90) days after the Effective Date any financial institution listed thereon,
upon written notice to Synova (including in such notice reasonable detail of
all
of the reasons for such removal) with such ninety (90) day period. No other
writings will be binding on the parties relative to any Synova orders unless
signed by both parties.
3.3 Delivery and Invoicing.
(a) BioPad shall issue an
invoice for each shipment to Synova of the
Licensed Products, which shall be included with the shipment for the Licensed
Products (as described in Paragraph (b), below).
(b) Each shipment shall be EXW
and shall be accompanied by the original
shipment documents:
(1) One original and two
copies of BioPad's invoice;
(2) Bill of Lading;
(3) Packing List;
(4) Certificate of
Insurance, if insurance will be done by BioPad,
at the request of Synova on Synova's
account; and,
(5) Certificate of Origin.
(all of the above, the
"SHIPPING DOCUMENTS").
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(c) (i) Synova shall pay to
BioPad the amount due for each shipment of
the Licensed Products within thirty (30) days after the date of the bill of
lading accurately completed by the shipper selected by Synova; provided,
however, if any LC currently issued in connection with Section 3.2(b), BioPad
shall have the right to present a demand for such amount due against the LC
upon
presentation of copies of the Shipping Documents delivered to Synova (except
the
insurance) (and no such thirty (30) day payment period or interest obligation
under Paragraph (f), below, shall apply). Without limiting anything else, at
all
times Synova shall have the option pay any amount due to BioPad directly,
instead of by way of BioPad presenting a demand for payment pursuant to an LC.
(ii) The amount of any LC
currently issued in connection with
Section 3.2(b) shall be immediately reduced by the amount of payments made by
Synova under this Agreement and by the amount of payments made to BioPad
against
the LC or, at Synova's option, a new LC shall be issued reflecting the reduced
amount in any case(s).
(d) Customs (if any) on the
Licensed Products shipped to Synova shall
be borne and paid by Synova.
(e) The payments to BioPad shall
be net, free of any sales tax,
property tax, exiles tax, duties and any other taxes imposed by federal, state
or municipal taxing authorities and without any withholding tax.
(f) Any amount due that is to be
paid under Paragraph (c), above, that
is not paid on its due date shall bear interest at the LIBOR (one month) rate
plus 2.5%, accumulated every three months, which rate appears in the paper
version of The Wall Street Journal as of or next available after the date the
amount was due.
(g) To the extent that (a)(i)
Synova fails to pay to BioPad any amount
due under this Agreement for a shipment of Licensed Products supplied by BioPad
under this Agreement, (ii) as a direct result of such failure BioPad then has
grounds to immediately terminate this Agreement under Section 11.2, and (iii)
BioPad has exhausted all rights and remedies available to it to enforce
Synova's
obligation to pay such amount (other than termination of this Agreement) and
(b)
there is no LC currently issued in connection therewith, then (c) BioPad, and
only BioPad, shall have the right to demand that Synova Health Care, Inc. pay
such amount, but BioPad may only exercise such right within two (2) years
following the date such amount first became due.
3.4 Research and Development.
BioPad shall exercise best efforts to
continue to research, develop, and manufacture the Licensed Products, and to
research, develop, and manufacture new and alternative versions of and
improvement to the Licensed Products ("IMPROVED LICENSED PRODUCTS").
Upon the
development of any Improved Licensed Products, each such Improved Licensed
Product shall be added to EXHIBIT A and shall be treated as a Licensed Product
(and shall be given a unique catalog or other identifying number). BioPad shall
consult with and keep currently advised Synova prior to and during the
research,
development, and manufacture of Licensed Products and Improved Licensed
Products
and shall,
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upon Synova request, discuss in good faith options for and alternatives to
research, develop, and manufacture products designed for fetal monitoring and
products related thereto.
3.5 Minimum Quantities. In the
event that Synova fails to order:
(a) For distribution in the USA:
in the first Distribution Year at
least 40,000 BioPad Fetal Monitor units; in the second Distribution Year at
least 120,000 BioPad Fetal Monitor units; in the third and future Distribution
Years at least 200,000 BioPad Fetal Monitor units;
(b) For distribution in Canada:
in the first Distribution Year 4,000
BioPad Fetal Monitor units; in the second Distribution Year at least 12,000
BioPad Fetal Monitor units; in the third and future Distribution Years at least
20,000 BioPad Fetal Monitor units;
and shall not order the
difference between the abovementioned amount
and the BioPad Fetal Monitor units actually ordered in that Distribution Year,
to be shipped within ninety (90) days after the beginning of the next
Distribution Year, in addition to the quantities to be ordered for the next
Distribution Year, then BioPad, upon thirty (30) days' prior written notice to
Synova, shall have the option and be entitled to terminate this Agreement or to
terminate the exclusivity rights of Synova for the BioPad Fetal Monitor in that
country within the Territory;
provided, however, in the event
that (x)(i) BioPad fails to prosecute
or otherwise abate any infringement, misappropriation, or potential
infringement
or misappropriation of any Know-How or Patent Rights, or (ii) Synova fails to
meet any obligation under this Agreement due to any event or condition of force
majeure, such as, for example, any act of God or nature, war, terrorism, civil
disturbance, sabotage, riot or public disorder, work stoppage, strike,
accident,
or action, omission, or restraint of any government agency, such failure shall
be excused and (y) BioPad shall not have the right to terminate this Agreement
or to terminate the exclusivity rights of Synova for any country within the
Territory.
(c) In the event that new and
alternative Licensed Products shall be
added to EXHIBIT A, the abovementioned quantities will be adjusted as shall be
agreed between the parties in good faith and pursuant to commercially
reasonable
negotiation.
3.6 Reports. Synova will provide
to BioPad monthly reports of the
identities of Subdistributors (to the extent not otherwise provided pursuant to
Section 2.3) and sales of the Licensed Products within 15 days after the end of
each month and annual reports, prepared or approved by an accountant of Synova,
within 60 days after the end of each year. Any failure by Synova to provide any
monthly reports as provided herein shall not be a breach of this Agreement if,
instead, such reports are provided on a quarterly basis.
4. MANUFACTURE, PACKAGING AND QUALITY ASSURANCE
4.1 Manufacture. BioPad shall
manufacture the Licensed Products in
accordance with all applicable laws and regulations, including, without
limitation, the Quality Systems and GMP Requirements.
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4.2 Product Description and
Packaging. BioPad shall package and supply
the Licensed Products in the manner agreed upon by the parties. To the extent
that BioPad is to use particular art work in connection with the packaging of
the Licensed Products, unless otherwise agreed upon by the parties Synova will
specify and provide BioPad with such art work.
4.3 Changes to Product. BioPad
shall notify Synova in writing at least
sixty (60) days prior to any proposed changes in its manufacturing procedures,
materials, equipment used or processes, which effect Licensed Product fit, form
or function. BioPad shall not make any changes to any Licensed Product that
would require a new, amended, or updated 510(k) registration with the FDA.
Unless approved in advance by Synova, which approval will not be withheld
unreasonably, BioPad shall not make any change to the Licensed Products that
requires Synova to incur additional effort, cost, or expense or otherwise
negatively impacts Synova. Without limiting the foregoing, if any change to
BioPad's manufacturing procedures, materials, equipment used or processes, if
implemented, likely would materially change any Licensed Product or Synova's
rights or obligations under this Agreement, Synova shall have the right to
terminate this Agreement immediately upon thirty (30) days' advance written
notice to BioPad.
4.4 Rejected Goods/Shortages.
(a) Synova shall notify
BioPad, within 30 days after Synova's
receipt of shipment, of any Licensed Product shipped to Synova that does not
conform to the Specifications or is the subject of a manufacturing or other
defect, or of any shortage in quantity of any Licensed Product shipment (each,
a
"REJECTION EVENT").
(b) BioPad shall, in its discretion (i)
and at its sole cost and
expense, replace all such Licensed Product or make up the shortage or (ii)
issue
to Synova a payment for all amounts paid for such Licensed Products and for all
costs and expenses incurred by Synova in connection with the delivery of such
Licensed Products, within forty-five (45) days of receiving notice of the
Rejection Event from Synova or, to the extent agreed upon by Synova together
with the next shipment after receiving notice of the Rejection Event from
Synova. BioPad shall make arrangements with Synova for the return or
destruction
of any rejected Licensed Product, such return shipping charges to be paid by
BioPad.
4.5 Expiration Period. All
Licensed Products supplied by BioPad to
Synova shall have an expiration date of at least twenty (20) months after the
date of shipment of such Licensed Product to Synova, unless advance written
approval is obtained from Synova by BioPad to ship Licensed Product with a
shorter expiration period.
4.6 Inspection by Synova. Synova
reserves the right to inspect BioPad's
facilities at Synova's sole cost and expense, as reasonably necessary, to
verify
compliance by BioPad with the terms and conditions of this Agreement. Exercise
by Synova of such right shall be subject to the following conditions: (a)(i)
without good cause shown (for example BioPad's failure to remedy problems),
Synova shall be entitled to conduct only one (1) inspection per Contract Year;
(ii) with good cause shown, Synova shall be entitled to conduct such number of
inspections per Contract Year as Synova reasonably determines is appropriate
under the circumstances; (b) Synova inspections shall be conducted only after
reasonable advance written
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notice of the audit is provided by Synova to BioPad; and, (c) all information
gathered and data reviewed during any such inspection shall be
"Confidential
Information" subject to the provisions of Article 9 of this Agreement. BioPad
shall at all times maintain complete and accurate books and records pertaining
to its performance of its obligations set forth in this Agreement, which Synova
shall have the right to audit to verify compliance by BioPad with the terms and
conditions of this Agreement. BioPad shall provide commercially reasonable
cooperation to Synova in the performance of inspections by or on behalf of
Synova, including, without limitation, providing reasonable access to all
documents relevant to the development and manufacture of any Licensed Product
sold to Synova or contemplated for sale to Synova.
4.7 Inspection by BioPad. The
provisions of Section 4.6 shall apply,
mutatis mutandis, to inspections by BioPad.
5. CUSTOMER SUPPORT, COMPLAINTS AND RETURNS
5.1 Customer Complaints. BioPad or
Synova, as the case may be, shall
respond in writing to any inquiry, customer complaint, nonconformity or
corrective or preventative action request, within ten (10) days of written
request therefor. BioPad or Synova, as the case may be, shall promptly provide
a
copy of all such writings to the other party.
5.2 Returned Product. In the
event any customer of Synova rejects or
returns a Licensed Product to Synova as a result of performance problems or
other deficiencies, noncompliance of any Licensed Product with its
Specifications, or any failure of BioPad to perform in accordance herewith any
of its obligations under this Agreement, BioPad shall, at its sole cost and
expense promptly replace such Licensed Product and ship the Licensed Product in
accordance with Synova's instructions therefor. Additionally, BioPad shall pay
all costs and expenses of shipping the rejected Licensed Product to BioPad.
BioPad shall not repackage any returned Licensed Product for sale to Synova.
6. REGULATORY MATTERS
6.1 Regulations. BioPad will be
responsible for and bear the cost of
the minimum number of clinical trials of the Licensed Products required by the
FDA and Synova will be responsible for and bear the cost of any additional
clinical trials as determined by Synova and any 510(k) registrations, filings
or
updates necessary with the FDA and/or United States Centers for Disease Control
in order for Synova to market any Licensed Product in the United States, or any
other registrations, filing or updates necessary to market any Licensed
Products
in any other country included in the Territory. BioPad will not conduct,
authorize, or have conducted or authorized any number of clinical trials
exceeding the minimum number of clinical trials of the Licensed Products
required by the FDA without Synova's advance written consent. Synova will, at
its cost, employ the services of a chief scientific and technical officer to
oversee and manage the aforementioned clinical trial process.
6.2 Regulatory Inquiry. Each
party promptly and, in any event, within
five (5) days of receipt of any notice of inquiry from any local, state,
national, or international regulatory
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agency or government department, shall inform the other in writing of such
formal or informal inquiry relating to any Licensed Product.
6.3 Recall. If any Licensed
Product defect or any final, non-appealable
governmental or court action or any voluntary action results in the recall,
destruction or withholding from market of any Licensed Product sold under this
Agreement (hereinafter "RECALL"); BioPad shall bear all costs and
expenses of
and shall be responsible for all corrective actions and agency communications
associated with such Recall, provided it is BioPad's fault and the
abovementioned shall apply to Synova if it is Synova's fault. Synova will
provide BioPad with reasonable access to those Synova customers affected by the
Recall, to the extent practicable, and all information received or compiled by
Synova from such customers or otherwise with respect to such Recall, except as
otherwise prohibited by law or contract. BioPad shall not initiate a Recall
until it has communicated its intention to Synova and provided Synova with data
and information relating to the proposed Recall and a reasonable opportunity to
evaluate and comment on its implementation. Further, unless otherwise agreed by
the parties, BioPad will be responsible for communication to Synova customers
regarding any such Recall. All costs and expenses, including, but not limited
to, the expenses of notification and destruction or return of the defective
Licensed Product, and the cost of replacement Licensed Product, paid or
incurred
by Synova relating to any Recall shall be reimbursed by BioPad, provided it is
BioPad's fault, and shall be borne and reimbursed by Synova if it is Synova's
fault.
6.4 Medical Device Reports.
BioPad or Synova, as the case may be, will
immediately (within two (2) business days) notify the other party in writing of
any event or complaint that gives rise or could give rise to the need to file a
Medical Device Report (hereinafter, an "MDR") within the meaning of
the U.S.
Federal Food, Drug and Cosmetic Act, as amended (the "ACT"), with
respect to any
Licensed Product or the manufacture, distribution or use thereof in accordance
with the MDR regulation, 21 C.F.R. Part 803, as amended. Synova shall be
responsible for preparing and shall file any MDR that is required by law. If,
as
a result of any corrective action or any final, non-appealable or non-appealed
governmental or court action, an MDR is required to be issued for any Licensed
Product sold hereunder, Synova shall bear the costs and expenses of and shall
be
responsible for all corrective actions associated with such MDR.
6.5 MSDS. BioPad shall promptly
provide to Synova or its customers upon
request all required Material Safety Data Sheets ("MSDS") for any
Licensed
Product containing hazardous chemicals as required by international, national,
state or local law.
6.6 Confidential Information.
All notices, correspondence, submissions,
filings, MDR's, MSDS's and other information provided by one party to the other
party under this Article 6 shall be "Confidential Information" under
this
Agreement.
6.7 Compliance with Laws. In
performing this Agreement, each party
sha






