CONFIDENTIAL TREATMENT REQUESTED
2
DISTRIBUTOR AGREEMENT
ENDOCARE, INC.
&
U.S.M.D., LTD.
This Distributor Agreement (the "Agreement") is dated as of June 27, 2001
(the "Effective Date"), by and between Endocare, Inc., a Delaware corporation
having its principal place of business at 7 Studebaker, Xxxxxx, Xxxxxxxxxx 00000
("Company"), and U.S.M.D., Ltd., a Texas Limited Partnership having its
principle place of business at 0000 X. XxxXxxxxx Xxxx., Xxx 000, Xxxxxx, Xxxxx
00000 ("Distributor").
BACKGROUND
A. The Company develops, manufactures, markets and sells the Cryocare
Probe Surgical System and associated disposable products (the "Products").
B. Distributor desires to market and distribute the Products.
C. Company desires to grant Distributor, and Distributor desires to obtain
from Company, exclusive rights to market and distribute the Products in the
states of Texas, Oklahoma, Arkansas, Louisiana, Missouri, Colorado, Nebraska,
Kansas, Illinois, New Mexico, Tennessee, Georgia, Alabama, Indiana, Kentucky and
Mississippi (hereinafter the "States") upon the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth in this Agreement, Company and Distributor hereby agree as
follows:
Section 1. Mutual Exclusivity.
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(a) Exclusive Appointment The Company appoints the Distributor as the
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exclusive distributor of the Products in the States for the treatment of
prostate medical conditions. The Distributor may sell the Products of the
Company covered by this Agreement only within the States, and only for the
treatment of urological medical conditions. In addition, the Distributor shall
have an exclusive right to sell the Products to Healthtronics, Inc. and the
affiliated entities set forth on the Healthtronics, Inc. Schedule of
Subsidiaries, attached hereto as Exhibit A ("Healthtronic"), within and outside
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of the States. The Distributor may act through other business units approved
through mutual agreement of Company and Distributor, but only after the
Distributor has obtained these other entities' agreement to be bound by the
terms of this Agreement. Such exclusivity shall cease to exist, however, (i) if
Distributor fails to meet the Minimum Purchase Requirements set forth in Section
5 below, (ii) if this Agreement is terminated or (iii) to the extent that the
Company exercises the Company Sale Right set forth in Section 1(b) below.
Nothing in this Section or this Agreement shall be construed to place any
limitation upon Distributor's ability to market or distribute the products in
any locales outside of the States.
(b) Company Sales. Notwithstanding the exclusive appointment of the
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Distributor in Section 1(a) above, the Company shall have the exclusive right to
sell its Products (a "Company Sale Right") to a specific party or entity in the
States or to Healthtronic (a "Potential Customer") if and when (i) the
Distributor has notified the Company in writing that it is not interested in
selling the Products to a Potential Customer or (ii) if (A) the Company has
provided the Distributor with information on a Potential Customer and the
Distributor has not sold any Products to the Potential Customer within three (3)
months after receipt of the information and (B) after the Company has then
provided written notice to the Distributor, no sale of any Products is made by
the Distributor to the Potential Customer within fifteen (15) days after such
written notice is given by the Company. The exercise of the Company Sale Right
shall in no manner alter or reduce the Minimum Purchase Requirements of the
Distributor set forth in Section 5. Once the Company Sale Right is exercised
for a Potential Customer, it shall continue for perpetuity. The Company may
exercise the Company Sale Right on more than one occasion and as to multiple
Potential Customers.
(c) Product Exclusivity. So long as it is a distributor of the
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Company's Products, the Distributor, its agents, employees, affiliates, officers
or directors shall not promote or sell any new or competing product which would
reasonably be expected to interfere with the sale of any of the Products.
Section 2. Products Covered. The Products are subject, at the
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Company's sole discretion, to modification or change in part numbers, design or
specifications. Products are subject to individual removal from this Agreement
for failure of Distributor to meet the Minimum Purchase Requirements referenced
in Section 5(d) of this Agreement and described in Exhibit A attached or for
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reasons of Company's possible future discontinuance or transference of a
product.
Section 3. Duration of Agreement. This Agreement shall become effective on
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the date of the last signatory hereto and shall continue for one year
thereafter. After the expiration of the one year period, the Agreement shall
continue on a month to month basis until either parties elects to terminate the
Agreement with thirty (30) days written notice as set forth in Section 7 below.
Section 4. Representations and Obligations of the Company. As an inducement
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to Distributor to enter into this Agreement and to consummate the transactions
contemplated hereby, Company hereby represents, warrants, and covenants to
Distributor as follows:
(a) Company has full right, title and unencumbered proprietary interest
in and to the Products; and the consummation of the transactions contemplated
herein and the granting by Company to Distributor of the right to sell the
Products do not require the consent, waiver, approval, or authorization of any
person or authority and do not violate any other agreements, instruments, or
rights of any third party.
(b) Company shall provide, in reasonable quantities, sales and promotional
material for the Products.
(c) Company shall be solely responsible for its expenses and those of its
staff and agents.
(d) Company will use its best efforts to manufacture and ship the volume of
Products ordered by Distributor in its purchase orders on or near the delivery
dates set forth therein.
(e) Company will use its best efforts to periodically hold training and
education courses related to the Products that will be made available to
physicians who purchase the Products through Distributor.
Section 5. Representations and Obligations of Distributor.
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(a) Distributor represents that it has experience in marketing and
selling similar products in the States, that it has the financial resources to
market the Products and that it shall use its best efforts to market and sell
the Products in the States and to achieve the maximum utilization potential in
the States.
(b) Distributor will provide the Company, at the Company's request, with a
list of the accounts into which it has sold the Products, and the names of the
decision makers for the accounts.
(c) Distributor shall deliver reports of sales, pricing, and other
information reasonably requested by Company pertaining to the distribution and
marketing of the Products in the States.
(d) Distributor will purchase, at a minimum, *** Cryocare Probe Surgical
Systems in each quarter of the one year term of this Agreement (the "Minimum
Purchase Requirements") as specified in Attachment A hereto for the prices set
forth in Attachment A. After the expiration of the one year term of this
Agreement, Distributor will continue to purchase any combination of Products
(i.e. Cryocare Probe Surgical Systems , and/or related accessory or disposable
products) equivalent to the aggregate purchase price of *** Cryocare Probe
Surgical Systems during each quarter of any given twelve (12) month period.
(e) Distributor hereby accepts title of all Products upon Shipment and
acknowledges that no further performance is required of Company in order for
Company to receive payment for said Products.
Section 6. Shared Obligations of Company and Distributor.
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(a) Distributor and Company shall comply with all applicable laws,
statutes, and regulations relating to production, marketing, sales, and
distribution of the Products in the States.
(b) Distributor and Company shall be solely responsible for their respective
expenses and those of their staff and agents.
Section 7. Termination.
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(a) Notice. Either party may terminate this Agreement upon the
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material breach of any material term or condition of this Agreement, including
Distributor's failure to meet the quarterly Minimum Purchase Requirements set
forth in Section 5(d) of this Agreement and referenced in Attachment A. Upon a
material breach, the non-breaching party shall give the breaching party ninety
(90) days written notice of the breach. The breaching party shall have ninety
(90) days from the sending of the notice in which to cure its breach and avoid
termination.
(b) Upon One Year Expiration. Either party may terminate this
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Agreement for any reason, without cause, after the one year anniversary of this
Agreement as set forth in Section 3 hereto, assuming the Agreement is continuing
on a month-to-month basis and the parties have not mutually agreed upon a longer
term. Termination pursuant to this Section 7(b) shall be effective only upon
thirty (30) days written notice.
Section 8. Price List. The prices for the Products are listed in
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Attachment A to this Agreement. The Company reserves the right to change the
price list after the expiration of the one year term of this Agreement. Any
such price change shall only be effective upon thirty (30) days written notice
by Company to the Distributor.
Section 9. Purchase and Sale of the Products.
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(a) Purchase Orders. All purchase orders shall be submitted on
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Distributor's written Purchase Order by mail or fax (with original following by
mail) and paid for in accordance with the payment terms specified in Subsection
9(c). The Company will provide the Distributor with written confirmation of
each purchase order within five business days of receipt thereof.
(b) Title and Risk of Loss For Product Shipped. All Products purchased by
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Distributor shall be delivered to Distributor or a party designated by Purchaser
Ex-factory, Irvine, California, U.S.A. Distributor shall take title to the
Products upon shipment and all risks of loss and expenses in connection with
such Products shall thereafter rest upon Distributor including storage, cartage
and transportation of the Products as well as all fees, charges, and taxes.
However, Company hereby agrees to purchase and pay for the cost of insuring the
Products for shipment to Distributor (or a party designated by Distributor)
through the company/carrier hired to ship said Products.
(c) Payment Terms. The Distributor will make payment by check or wire
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transfer within ninety (90) days from date of each shipment. Interest will be
payable on payments not received within ninety (90) days from the date of each
shipment, at the rate of one percent per month, starting on the date of the
shipment.
Section 10. Indemnification, Disclaimer Of Warranty And Limitation Of
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Liability.
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(a) Distributor's Indemnification of the Company. Distributor shall,
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at Distributor's sole cost and expense, indemnify, defend and hold the Company,
its licensors and service providers, and their respective officers, directors,
employees, agents and consultants harmless from and against any judgment or
settlement and associated litigation and/or settlement costs (including
reasonable attorney's fees and costs) that arise out of the negligent or
intentionally tortious conduct of Distributor's business, or Distributor's use
or sale of Products delivered to it by the Company. The Company shall provide
Distributor with written notification of any claim subject to indemnification
pursuant to this Section 10 and of any associated court filings promptly after
the Company first learns of them. The Company shall provide Distributor with
such assistance and cooperation as Distributor may reasonably request from time
to time in connection with the defense thereof. The Company will use reasonable
efforts to mitigate all such claims, losses, damages, expense or liability after
receipt of notice thereof.
(b) The Company's Indemnification of Distributor. Company shall, at
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Company's sole cost and expense, indemnify, defend and hold the Distributor, its
licensors and Service providers, and their respective officers, directors,
employees, agents and consultants harmless from and against any judgment or
settlement and associated litigation and/or settlement costs (including
reasonable attorney's fees and costs) that arise out the Products' failure to
meet the Warranty as described in Subsection 10(d); for any claims based on
products liability theory against the Products; and for any claims that the
Products' or the Company's trademarks infringe the intellectual property rights
of third parties. The Distributor shall provide Company with written
notification of any claim subject to indemnification pursuant to this Section 10
and of any associated court filings promptly after the Distributor first learns
of them. The Distributor shall provide Company with such assistance and
cooperation as Company may reasonably request from time to time in connection
with the defense thereof. The Distributor will use reasonable efforts to
mitigate all such claims, losses, damages, expense or liability after receipt of
notice thereof.
(c) Cross Indemnification. Each party shall indemnify the other against any
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and all loss, liability, cost or expense, including reasonable attorneys' fees,
in any way arising out of any breach of warranty or representation hereunder, or
any recklessness or willful misconduct in connection with the implementation and
carrying out of the terms of this Agreement.
(d) Warranty. THE PRODUCTS THAT COMPANY IS PROVIDING TO DISTRIBUTOR ARE
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WARRANTIED ONLY TO THE EXTENT THAT THEY WILL BE FREE FROM DEFECT IN MATERIAL,
DESIGN AND WORKMANSHIP. COMPANY MAKES NO OTHER WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY REGARDING THE PRODUCTS PROVIDED HEREUNDER INCLUDING, BUT NOT LIMITED
TO, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
WHICH ARE HEREBY EXPRESSLY DISCLAIMED. COMPANY DOES NOT REPRESENT THAT THE
PRODUCTS WILL OPERATE ERROR-FREE, OR THAT THEY WILL OPERATE WITHOUT
INTERRUPTION, OR THAT THEY WILL FUNCTION IN ACCORDANCE WITH DISTRIBUTOR'S
REQUIREMENTS. IN NO EVENT SHALL COMPANY HAVE ANY LIABILITY FOR, NOR SHALL
PARTICIPANT HAVE ANY REMEDY AGAINST COMPANY FOR, CONSEQUENTIAL DAMAGES, ANY LOSS
OF PROFITS OR SAVINGS, LOSS OF USE, OR ANY OTHER COMMERCIAL LOSS.
Section 11. Notices. Any notice, request, demand, or other
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communication required or permitted hereunder shall be deemed to be properly
given when received by fax or received by mail, postage prepaid, addressed:
Company: Endocare, Inc.
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0 Xxxxxxxxxx
Xxxxxx, XX 00000
X.X.X.
Attention: Xxxx Xxxxx, CEO
Distributor: U.S. M. D., Ltd.
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0000 X. XxxXxxxxx Xxxx. Xxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxx, Director of Cryotherapy Development
Section 12. Intellectual Property - License and Ownership.
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(a) Technology. Subject to all the terms and conditions of the
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Agreement, Company grants Distributor a non-transferable, non-sublicensable, and
royalty-free license to use any technology, know how, trade secrets, and other
propriety information of the Company that the Company may share with Distributor
under this Agreement only in connection with the marketing and promotion of
Products to end-users in the States. All such technology, however, is and shall
remain the sole property of Company and shall be subject to the confidentiality
provisions of Section 19. Nothing in this license or elsewhere in this
Agreement shall be construed to grant to Distributor any rights whatsoever in
the Company's technology or intellectual property other than as delineated this
Section 12 license.
(b) Marks. Subject to all the terms and conditions of the Agreement,
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Company grants Distributor a non-transferable, non-sublicensable, royalty-free
and non-exclusive license to use the Company's trademarks, service marks, icons
or logos ("Company Marks") provided to Distributor by Company, only in the
States and only in connection with the marketing and promotion of Products to
end-users. Distributor shall submit to Company in writing for its prior written
approval, one (1) sample of each Product brochure or other marketing material on
which any Company Xxxx is proposed to be used. Company will provide Distributor
written notice of its approval or disapproval within fifteen (15) days after
receiving such request; provided, however, that if Company does not disapprove
Distributor's request within such fifteen (15) day period, the proposed use
shall be deemed approved. Company reserves the right to change, modify or
replace any Company Xxxx at any time, and Distributor agrees to comply with such
changes at its sole cost. Distributor will cease using any materials containing
any Company Xxxx immediately upon termination of the Agreement, or at any time
sooner, upon written request by Company. Distributor will not alter, modify or
change any Company Xxxx, or use it in combination with any other words or
symbols, without the prior written authorization of Company. Distributor agrees
that the presentation and image of the Company Marks will be uniform and
consistent with respect to the Products associated with such Company Marks. The
use of the Company Marks by Distributor shall inure to the sole benefit of
Company. Distributor agrees not to apply for registration of the Company Marks
(or any xxxx confusingly similar thereto) anywhere in the world.
Section 13. No Agency. This Agreement does not establish the
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Distributor as the agent or legal representative of the Company, or the Company
as the agent or representative of the Distributor for any purpose whatsoever.
Neither party is granted any express or implied right or authority by the other
party to assume or to create any obligation or responsibility on behalf of or in
the name of the other party, or to bind the other party in any manner or thing
whatsoever.
Section 14. Arbitration. Any controversy regarding, connected with or
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arising from this Agreement, shall be settled by informal, speedy and binding
arbitration using the offices of the Judicial Arbitration and Mediation Service
in the County of Orange, California, or if said service no longer exists, using
a similar service chosen by the Superior Court of California for the county of
Orange. The conduct of the arbitration shall be governed by California Code of
Civil Procedure section 1280, et seq. The arbitration shall be conducted by a
single neutral arbitrator who shall hold the arbitration hearing as soon as
practicable and shall make his or her award within 30 days of the conclusion of
the arbitration hearing. Each party to the arbitration shall bear its own
counsel fees and its pro rata share of the expenses and fees of the neutral
arbitrator.
Section 15. Jurisdiction, Venue, Choice of Law. Subject to Section 14
--------------------------------------
above, the parties consent to jurisdiction in the State of California, and agree
that venue is proper in Orange County, California. This Agreement will be
interpreted and construed in accordance with the laws of the State of California
without regard to which party drafted particular provisions of the Agreement.
Any choice-of-law issues will also be decided in accordance with California
choice-of-law provisions.
Section 16. Assignment. Neither Company nor Distributor shall assign its
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rights or obligations under this Agreement without the prior written consent of
the other party hereto; provided, however, that the Company may, without
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Distributor's consent, assign this Agreement and its rights and obligations
hereunder in connection with the transfer or sale of all or substantially all of
the Company's assets or equity, or in the event of its merger or consolidation
or change in control or similar transaction. Should such an assignee terminate
this Agreement without cause (outside the provisions of Section 7, above), the
assignee will pay Distributor no more than $250,000.00 if the termination is
within the one year term of this Agreement.
Section 17. Entire Agreement. All of the terms, provisions, and conditions
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agreed on by the parties hereto are contained in this instrument and Attachment
A hereto, there are no other or further understandings.
Section 18. Confidentiality. Distributor acknowledges that it may have
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access to information of the Company relating to the Product which is of a
confidential and proprietary nature ("Proprietary Information"). Such
Proprietary Information may include, without limitation, promotional material,
video tapes, customer lists, software, trade secrets, know-how, drawings, patent
applications, schematics, data coding, technical documentation and instructional
materials. Distributor agrees to take diligent care to prevent disclosure to
and use by others of the Proprietary Information. Distributor shall take
appropriate steps to ensure that the confidentiality of the Proprietary
Information is maintained by its employees and all permitted users of the
Product. Distributor shall not directly or indirectly use or permit any other
person to use the Proprietary Information. Distributor shall not disclose to
any other party the Proprietary Information, in any form, without the prior
written consent of Company, except for disclosures to employees of Distributor
or users of the Product in connection with the promotion and sale of the
Product. Upon the termination of the Agreement, for any reason, Distributor
shall promptly return to the Company all documents containing Proprietary
Information. Distributor acknowledges that this Section 18 shall extend beyond
the termination date of this Agreement. Distributor acknowledges that the
Company has no adequate remedy at law if this clause shall be violated and
agrees that, notwithstanding any other provisions of this Agreement to the
contrary, the Company may obtain injunctive relief and/or other equitable
remedies and further agrees that such action may be commenced and heard in the
appropriate court with jurisdiction of the subject matter in the State of
California.
Section 19. Headings. The descriptive headings of this Agreement have been
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inserted for convenience and shall not be deemed to limit or otherwise affect
the construction of any provision hereof.
Section 20. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
Section 21. Amendment. No amendment, modification, or supplement to this
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Agreement shall be binding on any of the parties unless it is in writing and
signed by the parties in interest at the time of the modification.
[SIGNATURE PAGE FOLLOWS]
11
Signature Page to Distribution Agreement
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
date set forth above.
ENDOCARE, INC. U.S.M.D., Ltd.
a Delaware Corporation a Texas Limited Partnership
By: U.S.M.D. I, L.L.C., General Partner
By: /s/ Xxxx Xxxxx By: /s/ Xxxx X. House, M.D.
Xxxx Xxxxx, CEO & Chair Xxxx X. House, M.D.
President
EXHIBIT A
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HEALTHTRONIC, INC. SCHEDULE OF SUBSIDIARIES
Tenn-Ga Prostate Therapies, LLC TN Limited Liability Corporation
Prostate Therapies of East Texas, LLC TX Limited Liability Corporation
Litho Management, Inc. TX Corporation
HLE Corporation TX Corporation
U.S. Lithotripsy, L.P. TX Limited Partnership
Metro I Stone Management, Ltd. TX Limited Partnership
Mississippi Valley I Stone Management, L.P. MO Limited Partnership
East Texas I Stone Management, Ltd. TX Limited Partnership
Xxxxxx Xxxxx Management, L.P. TX Limited Partnership
S.C. Missouri Stone Management, L.P. MO Limited Partnership
Tulsa Stone Management, L.P. OK Limited Partnership
SE Colorado Lithotripsy, L.P. CO Limited Partnership
Mississippi Valley II Stone Management, L.P. MO Limited Partnership
Missouri Valley Lithotripsy, L.P. MO Limited Partnership
North Central Texas Lithotripsy, L.P. TX Limited Partnership
White River Lithotripsy, LP CO Limited Partnership
Central Texas Lithotripsy, LP TX Limited Partnership
Central Dallas Lithotripsy, LP TX Limited Partnership
Western Colorado Lithotripsy, LP CO Limited Partnership
Oklahoma Lithotripsy, LP OK Limited Partnership
Florida Lithology, Inc. FL Corporation
Lithotripsy of East Texas, LP TX Limited Partnership
N.C. Missouri Lithotripsy, LP MO Limited Partnership
Rio Grande Lithotripsy, LP TX Limited Partnership
Florida Lithology, Ltd. FL Limited Partnership
Wave Forms Lithotripsy, LLC WA Limited Liability Corporation
Big Country Lithotripsy, LP TX Limited Partnership
Rolla Lithotripsy, LP MO Limited Partnership
Metro II Stone Management, LP TX Limited Partnership
Ozarks Lithotripsy, LP AR Limited Partnership
OssaTronics of Houston TX Limited Liability Corporation
New Jersey Kidney Stone, LLC NJ Limited Liability Corporation
Xxxxx Xxxxx Services, LP TX Limited Partnership
HT Lithotripsy Management Company, LLC GA Limited Liability Corporation
HT Orthotripsy Management Company, LLC GA Limited Liability Corporation
Orthotripsy Services of Anchorage, LP AK Limited Partnership
Orthotripsy Services of Atlanta, LP GA Limited Partnership
Orthotripsy Services of Austin, LP TX Limited Partnership
Orthotripsy Services of Bakersfield, LP CA Limited Partnership
Orthotripsy Services of Baltimore, LP MD Limited Partnership
Orthotripsy Services of Chattanooga, LP TN Limited Partnership
Orthotripsy Services of Chicago, LP IL Limited Partnership
Orthotripsy Services of Cincinnati, LP OH Limited Partnership
Orthotripsy Services of Eastern Tennessee, LP TN Limited Partnership
Orthotripsy Services of Memphis, LP TN Limited Partnership
Orthotripsy Services of Houston, LP TX Limited Partnership
Orthotripsy Services of Illinois, LP IL Limited Partnership
Orthotripsy Services of Fayetteville, LP NC Limited Partnership
Orthotripsy Services of Metroplex, LP TX Limited Partnership
Orthotripsy Services of New Mexico, LP NM Limited Partnership
Orthotripsy Services of New Orleans, LP LA Limited Partnership
Orthotripsy Services of Ohio, LP OH Limited Partnership
Orthotripsy Services of Oklahoma City, LP OK Limited Partnership
Orthotripsy Services of Philadelphia, LP PA Limited Partnership
Orthotripsy Services of Rochester, LP NY Limited Partnership
Orthotripsy Services of San Antonio, LP TX Limited Partnership
Orthotripsy Services of San Francisco, LP CA Limited Partnership
Orthotripsy Services of Seattle, LP WA Limited Partnership
Orthotripsy Services of South Central Michigan, LP MI Limited
Partnership
Orthotripsy Services of Southeast Tennessee, L.P. TN Limited Partnership
Orthotripsy Services of Southern Idaho, LP ID Limited Partnership
OssaTron Services of Sioux Falls, LP ID Limited Partnership
OssaTron Services of Tampa Bay, LP FL Limited Partnership
OssaTron Services of the Ozarks, LP AR Limited Partnership
OssaTron Services of Colorado, LP CO Limited Partnership
OssaTron Services of the Southeast I, LP GA Limited Partnership
OssaTronics of Los Angeles, LLC CA Limited Liability Corporation
