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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
shall comply with all applicable treaties, laws and regulations,
and sh
