Exhibit 10.13
DISTRIBUTION, LICENSE AND SUPPLY AGREEMENT
DISTRIBUTION, LICENSE AND SUPPLY AGREEMENT ("Agreement") dated as of
January 2, 1997, between ETHICON, INC, a company with its principal office at
Xxxxx 00, Xxxxxxxxxx, Xxx Xxxxxx 00000-0000 ("'Ethicon"), and FOCAL, INC, a
company with its principal xxxxxx xx Xxxx Xxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxxxxx
00000 ("Focal").
WHEREAS, Focal and Ethicon desire to enter into this Agreement which will
set out the terms and conditions under which (i) Focal will undertake certain
development obligations with respect to its technology, (d) Focal will supply to
Ethicon the Products (as defined below) for use in the Field (as defined below)
in the Territory (as defined below), (iii) Ethicon will market and distribute
the Products and (iv) Focal will grant to Ethicon certain limited license rights
to manufacture or have manufactured, develop, market, distribute, sub-license
and sell Products in the Field;
NOW THEREFORE, in consideration of the mutual covenants and consideration
set forth herein, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
(a) "Advisory Board" shall have the meaning set forth in Section
4(a)(i).
(b) "Affected Territories" shall have the meaning set forth in Section
6(b)(ii)(A).
(c) "Affiliate" shall mean, in relation to either party hereto, (i) any
company or other entity in which the relevant party directly or
indirectly holds more than 50% of the voting securities, (ii) any
company or other entity ("Holding Company") which holds directly or
indirectly more than 50% of the voting securities of the relevant
party, (iii) any other company or other entity in which more than
50% of the voting securities is directly or indirectly held by any
Holding Company of the relevant party or (iv) any company or other
entity in which the relevant party directly or indirectly holds less
than 50% of the voting securities but has management control of such
company or entity in that it
has the ability to appoint and remove the majority of the directors
of such company or entity.
(d) "Affiliated Distributor" shall have the meaning set forth in Section
1(mmm).
(e) "Alternate Cardiovascular Sealant Candidate" shall have the meaning
set forth in Section 4(b)(iii)(B).
(f) "Alternate Gastrointestinal Sealant Candidate" shall have the
meaning set forth in Section 4(b)(iv)(B).
(g) "Anti-Adhesion Product" shall have the meaning set forth in Section
4(b)(v)(A).
(h) "Anti-Adhesion Product Agreement" shall have the meaning set forth
in Section 4(b)(v)(A).
(i) "Applicable Forecast" shall have the meaning set forth in Section
7(d)(ii).
(j) "Audit Report" shall have the meaning set forth in Section 7(b)(ii).
(k) "Bankruptcy Event" shall mean the person or entity in question
becomes insolvent, or voluntary or involuntary proceedings by or
against such person or entity are instituted in bankruptcy or under
any insolvency law, or a receiver or custodian is appointed for such
person or entity, or proceedings are instituted by or against such
person or entity for corporate reorganization or the dissolution of
such person or entity, which proceedings, if involuntary, shall not
have been dismissed within sixty (60) days after the date of filing,
or such person or entity makes an assignment for the benefit of its
creditors, or substantially all of the assets of such person or
entity are seized or attached and not released within sixty (60)
days thereafter.
(l) "Cardiovascular Sealant Candidate" shall have the meaning set forth
in Section 4(b)(iii)(A).
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(m) "Cardiovascular "Studies" shall have the meaning set forth in
Section 4(b)(iii)(A).
(n) "Change in Control" shall mean (i) the liquidation or dissolution of
Focal or the sale or other transfer by Focal (excluding transfers to
subsidiaries) of all or substantially all of its assets; or (ii) the
occurrence of a tender offer, stock purchase, other stock
acquisition, merger, consolidation, recapitalization, sale or
transfer of assets, or other transaction as a result of which any
person, entity or group which is not a stockholder of Focal (or an
affiliate of any such stockholder) as of the date of this Agreement
(a "New Controlling Holder") (A) becomes the beneficial owner,
directly or indirectly, of securities of Focal representing more
than 50% of the ordinary shares of Focal or representing more than
50% of the combined voting power with respect to the election of
directors (or members of any other governing body) of Focal's then
outstanding securities, (B) obtains the ability to appoint a
majority of the Board of Directors (or other governing body) of
Focal, or (C) obtains the ability to direct the general operations
or management of Focal or any successor to Focal's business;
provided, however, that (x) a New Controlling Holder shall not
include, and a Change in Control shall not be deemed to exist on
account of the acquisition of Focal securities by, (1) Ethicon or
its Affiliates, or (2) any venture capital investor, financial
institution or any similar passive investor, and (y) in no event
shall a Change in Control be deemed to include the issuance by Focal
of equity to the public through a public offering or offerings.
(o) "Claims" shall have the meaning set forth in Section 7(g)(i).
(p) "Clinical Trials" shall mean that portion of the clinical
development program which generally provides for the introduction
into humans of a product or formulation with the purpose of
establishing the safety and/or efficacy for the desired claims and
indications.
(q) "Commercial Use" shall mean, with respect to any Product, the sale
by Ethicon, its Affiliates, licensees and/or assignees to
independent third parties or to an Affiliated Distributor.
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(r) [*]
(s) Conversion Right" shall have the meaning set forth in Section
3(d)(ii).
(t) "Delivery System" shall mean the devices, other than a Light System,
developed or obtained by Focal and/or Ethicon that are to be used in
the delivery of a Hydrogel Formulation (including but not limited to
syringes, syringe extensions, flow-through brushes and other
components).
(u) "Delivery System 1" shall mean the Delivery System that is specified
in Exhibit A.
(v) "Direct Costs" shall mean the cost of manufacture inclusive of
materials, direct labor, transport costs and an appropriate
allocation of production, warehousing, administration and technical
service overheads calculated in accordance with generally accepted
accounting practices.
(w) "Dural Sealant Formulation" shall mean the Hydrogel Formulation that
is specified in Exhibit B.
(x) "Dural Sealant Product" shall mean a product that consists of the
Dural Sealant Formulation and Delivery System 1.
(y) "EPC States" shall have the meaning set forth in Section 6(a)(i)(B).
(z) "Ethicon Delivery System" shall mean a Delivery System developed or
obtained by Ethicon that is to be used in the delivery of any
Hydrogel Formulation.
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(aa) "Ethicon Inventions" shall have the meaning set forth in Section
6(c)(ii).
(bb) "Ethicon Offer" shall have the meaning set forth in Section
3(e)(iii).
(cc) [*]
(dd) "Ethicon Standards" shall have the meaning set forth in Section
7(b)(ii)
(ee) "E.U." shall mean the European Union, as recognized as of the date
of this Agreement.
(ff) "Event of Default" shall have the meaning set forth in Section 8(f).
(gg) "Event of Force Majeure" shall have the meaning set forth in Section
9(h)(i).
(hh) "Existing Patents" shall mean Patents which exist or have been
applied for as of the date of this Agreement.
(ii) "FDA" shall mean the U.S. Food and Drug Administration, or any
successor agency thereto.
(jj) "Field" shall mean (i) all human intraoperative surgical sealing of
air and fluid leaks using any Hydrogel Polymer and (ii) [*]
provided, however, that the Field shall not include (A) the use of
any Hydrogel Polymer solely for purposes of drug delivery (it being
understood that drug delivery does not include medicated devices or
medical devices which are being promoted and sold as sealants), and
(B) the use of any Hydrogel Polymer for the prophylaxis, treatment
and/or inhibition of restenosis and/or stenosis.
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(kk) "First Commercial Sale" shall mean, with respect to a country, the
earlier of (i) the date on which Ethicon first sells a Product to a
third party in such country in the Territory pursuant to this
Agreement and (ii) the date that is six (6) months after the date on
which a Product receives Regulatory Approval in such country in the
Territory.
(ll) "Focal Counter Offer" shall have the meaning set forth in Section
3(e)(iv).
(mm) "Focal Delivery System" shall mean a Delivery System, other than
Delivery System 1 or the VATS Delivery System, developed or obtained
by Focal that is to be used in the delivery of any Hydrogel
Formulation.
(nn) "Focal Inventions" shall have the meaning set forth in Section
6(c)(i).
(oo) "Focal Patent Application" shall have the meaning set forth in
Section 6(a)(i).
(pp) "Force Majeure Notice" shall have the meaning set forth in Section
9(h)(i).
(qq) "Gastrointestinal Sealant Candidate" shall have the meaning set
forth in Section 4(b)(iv)(A).
(rr) "Gastrointestinal Studies" shall have the meaning set forth in
Section 4(b)(iv)(A).
(ss) "Holding Company" shall have the meaning set forth in Section 1(c).
(tt) "Hydrogel Formulation" shall mean the combination at specified
ratios and concentrations of a Hydrogel Polymer and, if applicable,
any solvents, initiators, stabilizers, excipients and any other
ingredients contained within a formulation.
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(uu) [*]
(vv) "Improved Formulation" shall mean a Hydrogel Formulation that (a) is
not the Lung Sealant Formulation or the Dural Sealant Formulation
but comprises the Hydrogel Polymer contained in the Lung Sealant
Formulation or the Dural Sealant Formulation, (b) does not contain a
biologically active ingredient (e.g.. a drug or medication), and (c)
is developed by Focal during the term of this Agreement to replace
the Lung Sealant Formulation or the Dural Sealant Formulation.
(ww) "Improved Product" shall mean any product that consists of (a) the
Lung Sealant Formulation or the Dural Sealant Formulation and a
Focal Delivery System or an Ethicon Delivery System, or (b) an
Improved Formulation and Delivery System 1, the VATS Delivery
System, a Focal Delivery System or an Ethicon Delivery System.
(xx) "Infringement Claim" shall have the meaning set forth in Section
6(b)(i).
(yy) "Infringement Notice" shall have the meaning set forth in Section
6(b)(ii)(A).
(zz) "Infringement Suit" shall have the meaning set forth in Section
6(b)(i)(C).
(aaa) "Initial Forecast" shall have the meaning set forth in Section 7(h).
(bbb) "Initial Product" shall mean (a) the Lung Sealant Product and/or (b)
the Dural Sealant Product.
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(ccc) "Joint Inventions" shall have the meaning set forth in Section
6(c)(iii).
(ddd) "Joint Invention Patent(s)" shall have the meaning set forth in
Section 6(c)(iii).
(eee) "Know-How" shall mean all know-how, including the Manufacturing
Technology, owned, controlled or acquired by Focal at any time prior
to or during the term of this Agreement, including without
limitation, processes, techniques, methods, products, software
(including the source code related thereto), components,
apparatuses, or chemical materials and other materials and
compositions, which (i) is related to any of the Products or (ii)
may be necessary to enable Ethicon to manufacture, develop, use or
sell the Products.
(fff) [*]
(ggg) "Lung Sealant Formulation" shall mean the Hydrogel Formulation that
is specified in Exhibit C.
(hhh) "Lung Sealant Product" shall mean a product that consists of the
Lung Sealant Formulation and Delivery System 1.
(iii) "Manufacturing Plan" shall have the meaning set forth in Section
7(b)(i).
(jjj) "Manufacturing Standards" shall have the meaning set forth in
Section 7(b)(ii).
(kkk) "Manufacturing Technology" shall mean, with respect to each Product,
the know-how, technical specifications, instructions, processes and
other intellectual property and information that (i) is owned,
controlled or acquired by Focal at any time prior to or during the
term of this Agreement, and (ii) is used or related to the
manufacture of
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such Product including, but not limited to, good manufacturing
procedures (such as FDA good manufacturing practices) and good
laboratory procedures, all such material to be in sufficient clarity
and detail to enable it to be followed by a skilled person.
(lll) "NAFTA" shall mean all of the United States, Canada and Mexico
(including any territories or possessions thereof), as the same
shall exist on the date of this Agreement.
(mmm) "Net Sales" shall mean, with respect to any Product, the amount
derived by Ethicon, its Affiliates, licensees and assignees from the
sale of such Product to independent third parties and/or to any
Affiliate of Ethicon acting as a distributor and/or wholesaler (an
"Affiliated Distributor"), in each case after (i) subtracting all
normal and customary discounts of any type or nature which are
provided solely in connection with such Product (such as cash
discounts, volume discounts, rebates, marketing subsidies and
credits), and (ii) taking into account all authorized returns of
such Product, provided, however, that in the case of sales or other
transfers to an Affiliated Distributor, such sales or transfers
shall, for the purpose of determining Net Sales, be deemed to be the
fair market value of such sales or transfers, where the fair market
value shall be determined from the sales of similar volumes of
similar Products to independent third parties. The parties
understand and agree that in calculating any royalties on Net Sales
payable by Ethicon under this Agreement, such calculations shall be
based upon either (A) sales or other transfers to independent third
parties, or (B) sales or other transfers to Affiliated Distributors,
but not both.
In the event that a Product is sold in the form of a combination
product, the amount invoiced for such Product shall be deemed to be
the invoiced price of such Product as if sold separately by Ethicon,
its Affiliates, licensees or assignees.
(nnn) "Net Selling Price" shall have the meaning set forth in Section
7(c)(ii)(E)(1).
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(ooo) "New Controlling Holder" shall have the meaning set forth in Section
1(n).
(ppp) "New Product" shall mean any product that (a) consists of a Hydrogel
Formulation with or without a Delivery System, (b) is not an Initial
Product or an Improved Product or a VATS Product, and (c) is
developed by Focal or jointly by the parties pursuant to this
Agreement for use in the Field in the Territory.
(qqq) "New Product Programs" shall have the meaning set forth in Section
4(b)(vii).
(rrr) "Notice Quarter" shall have the meaning set forth in Section
7(l)(ii)(B).
(sss) "Notification" shall have the meaning set forth in Section 3(e)(ii).
(ttt) "Patent(s)" shall mean (i) all the patents and applications for
patents, if any, that are identified in Exhibit D any applicable
foreign counterparts thereof, as well as all continuations,
continuations-in-part, divisions and renewals thereof, and any
amendments and modifications thereto, and all patents which may be
granted thereon, and all reissues, reexaminations, extensions,
patents of addition and patent of importation thereof, (ii) any
patent application which is owned or otherwise controlled by Focal
and is related to or based on any Know-How that is developed during
the term of this Agreement, and any division, continuation or
continuation-in-part of any such application and any patent which
shall issue based on such application, divisional, continuation or
continuation-in-part, and any patent which is a reissue or extension
thereof or a patent of addition to any such patent, and (iii) all
patent applications and patents which are owned or otherwise
controlled by Focal and which, but for the license granted herein,
the manufacture or sale of a Product would infringe a Valid Claim.
(uuu) "PCT" shall have the meaning set forth in Section 6(a)(i)(A).
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(vvv) "Prime Rate" shall mean the highest Prime Rate of interest as quoted
in U.S. edition of The Wall Street Journal from time to time.
(www) "Product" shall mean (a) the Initial Products, (b) Improved
Products, (c) VATS Products, or (d) New Products.
(xxx) "Purchase Price" shall mean the price paid by Ethicon to Focal for a
Product manufactured by or for Focal and supplied to Ethicon
pursuant to Section 7.
(yyy) "Regulatory Approval" shall mean, with respect to any country,
filing for and receipt of all regulatory agency registrations and
approvals (including, but not limited to, approvals of all final
Product labelling) required for the marketing and sale of a Product
for the indication for which it is being marketed in such country.
With respect to the E.U., Regulatory Approval shall mean XX- Xxxx
certification for sale of the Product within all the applicable E.U.
countries.
(zzz) "Regulatory Filings" shall mean all applications, filings,
materials, studies, data and documents of any nature whatsoever
(including any supporting information related thereto) filed with,
or prepared in connection with, any Regulatory Approval process in
any country or territory.
(aaaa) "Requirements for Full Royalty" shall have the meaning set forth in
Section 6(d)(i)(A).
(bbbb) "Sales Threshold" shall have the meaning set forth in Section
3(d)(ii).
(cccc) "Secondary Facilities" shall have the meaning set forth in Section
7(b)(i).
(dddd) "Specifications" shall have the meaning set forth in Section
7(a)(ii)
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(eeee) "Territory" shall mean the entire world, excluding only NAFTA.
(ffff) "Trigger Date" shall have the meaning set forth in Section 3(d)(ii).
(gggg) "Triggering Event shall have the meaning set forth in Section
7(1)(ii)(A).
(hhhh) "Unremedied Facilities Deficiency" shall have the meaning set forth
in Section 7(b)(ii).
(iiii) "UT Agreement" shall mean that certain patent and technology
agreement between Focal (formerly known as Pegas) and the Board of
Regents of the University of Texas System dated as of June 11, 1992
with respect to Hydrogel Polymers.
(jjjj) "Valid Claim" shall mean any claim in (a) any unexpired patent
which has not been held invalid by a non-appealed or unappealed
decision by a court or other appropriate body of competent
jurisdiction, or (b) any patent application that is filed in good
faith and is pending in any national or regional patent office.
(kkkk) [*]
(llll) [*]
(mmmm) [*]
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SECTION 2
DISCLOSURES
Focal expressly understands and acknowledges that Ethicon is currently and in
the future will evaluate and/or pursue other business opportunities and products
for the medical sealant, adhesive and adhesion prevention markets. Ethicon in
its sole discretion may participate in these markets alone or in other business
or research arrangements with third parties, both now and during the term of
this Agreement. Focal acknowledges that the consideration contemplated by this
Agreement, including but not limited to, the financial considerations and the
other obligations to be undertaken by Ethicon as specified in this Agreement, is
complete and adequate consideration for Focal entering this Agreement.
SECTION 3
DISTRIBUTION AND LIMITED LICENSE RIGHTS
(a) Grant of Rights.
(i) Subject to the terms and conditions of this Agreement, Focal
hereby grants to Ethicon (A) an exclusive right and license,
under Patents and Know-How, to use (including the undertaking
of development work and the seeking of Regulatory Approval,
all as contemplated herein), market, advertise, promote,
distribute and sell the Products in the Field throughout the
Territory and (B) a right and license, under Patents and
Know-How, to make and have made the Products in the Field,
solely in accordance with the provisions of Section 7(l).
(ii) Ethicon shall have the right to grant sublicenses to any
Affiliate or to any third party with respect to any rights
conferred upon Ethicon under this Agreement; provided,
however, that any sublicense shall be subject in all respects
to the same terms, conditions and provisions contained in this
Agreement; and provided further, however, that Ethicon shall
not be entitled to sub-license in its entirety Ethicon's
rights and obligations under this Agreement (other than where
Ethicon has exercised its rights to manufacture Products
pursuant to this Agreement or
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in connection with a permitted assignment of this Agreement), such
sub-licensing being restricted to those countries in the Territory
where it is commercially desirable or necessary to sell the Products
through a third party or parties.
(b) Exclusivity Provisions.
(i) During the term of this Agreement and except as specifically
permitted in this Agreement, Focal shall not:
(A) with respect to the Territory, grant or license to or
otherwise permit any third party to (a) use, make, have
made, lease, sell or otherwise commercialize the
Products in the Field or (b) use the Know-How to make,
have made, use, lease or sell or otherwise commercialize
any product that competes with the Products in the
Field; and
(B) with respect to the Territory, (a) use, make, have made
lease, sell or otherwise commercialize the Products in
the Field or (b) use the Know-How to make, have made,
use, lease or sell or otherwise commercialize any
product that competes with the Products in the Field.
As used in subsections (A) and (B) above, the phrase
"competes with the Products" shall not be deemed to
refer to the occasional and sporadic off-label use of
products in the Field.
(ii) Except as may be contemplated by this Agreement, Focal shall
cooperate with Ethicon and take all actions reasonable and
appropriate to prohibit and prevent third parties, including
any licensee of Focal, from making, using, leasing or selling
any, product which uses the Know-How which is obtained from or
through Focal in competition with any Product in the Field,
including, without limitation, the termination of licenses and
contract rights.
(iii) Except as may be contemplated by this Agreement, Focal shall
not, with respect to any products which use the Know-How,
place on such product or its packaging any CE xxxx obtained in
connection with or related to any Product, or allow any such
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CE xxxx to be placed thereon, either by Focal or by any third
party.
(c) UT Agreement and Rights.
(i) Focal shall, at its own expense, take all such actions and
proceedings as shall be necessary to ensure that the UT
Agreement remains in force and effect and that Focal's rights
under the UT Agreement to the Know-How (to the extent such
rights are granted under the UT Agreement) shall remain in
full force and effect. In the event that Focal fails to take
any such actions and proceedings, Ethicon shall have the right
to require that Focal take, and Focal agrees to take all such
actions as Ethicon shall reasonably deem necessary or
desirable in order to ensure that the UT Agreement remains in
force and effect and that Focal's rights under the UT
Agreement to the Know-How shall remain in full force and
effect, including, but not limited to, the execution and
filing of any court-related filings and documents, the pursuit
of injunctive proceedings, and any similar measures. If the
Board of Regents of the University of Texas System gives Focal
notice under Article 4.6 of the UT Agreement, Focal shall
decide in 90 days whether to undertake reasonable efforts to
sponsor research toward developing such PRODUCT ( as defined
in the UT Agreement). If Focal decides not to undertake such
development, Focal should inform Ethicon of such notification
and allow Ethicon to pursue its rights to proceed with said
development.
(ii) Focal shall, within five business days after notice thereof,
provide written notice to Ethicon of any challenges or claims
with respect to the UT Agreement, or alleged breaches under
the UT Agreement.
(iii) Focal shall not allow or agree to any amendment, waiver or
modification to the UT Agreement (which amendment, waiver or
modification restricts, modifies or limits in any way
Ethicon's rights under this Agreement) without the prior
written consent of Ethicon.
(d) Obligations of Ethicon.
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(i) Upon receipt of all necessary and appropriate Regulatory
Approvals, Ethicon shall, in a manner generally consistent
with the manner in which Ethicon markets and sells its own
products, market and sell either (A) one Product for at least
two (2) different indications, or (B) at least two (2)
different Products, in either case, as applicable, for use as
human surgical sealants in the Field pursuant to this
Agreement.
(ii) In the event that (A) after the date of the fifth anniversary
of the First Commercial Sale of the first Product in the E.U.
(the "Trigger Date"), Ethicon sells a Competing Product in
either the E.U. or Japan and (B) it can be reasonably
demonstrated that the aggregate Net Sales in the Territory for
all the Products decrease by the Sales Threshold as a direct
result of Ethicon's sale of such Competing Product, then Focal
shall have the right to convert (the "Conversion Right") the
rights and licenses granted to Ethicon pursuant to Section
3(a) into co-exclusive (as to Focal only, acting directly or
indirectly through a distributor) rights, provided that the
Conversion Right shall not be applicable to [*]. For purposes
of this paragraph, the term "Sales Threshold" shall mean the
decrease, in any calendar year which commences on or after the
Trigger Date, in the aggregate Net Sales of all three products
by an amount greater than [*] when compared to the Net Sales
for the immediately previous calendar year. Exercise of the
Conversion Right by Focal shall be made in writing upon no
less than thirty (30) days prior notice to Ethicon. Upon
exercise of the Conversion Right, (A) with respect to Products
that are not supplied by Focal pursuant to Section 7, any
royalty that Ethicon is obligated to pay Focal pursuant to
Section 6(d) on the sale in the Territory of Products other
than [*]) shall be reduced by [*] and (B) with respect
to Products that are supplied by Focal pursuant to
Section 7, the Purchase Price that Ethicon is obligated to
pay Focal pursuant to Section 7(c)(ii) for Products (other
than [*]) shall be reduced by an amount equal to [*], if any,
that Ethicon would be obligated to pay Focal per unit
of such Product pursuant to Section 6(d) (exclusive
of any reduction pursuant to this Section 3(d)(ii)),
but for the fact that Focal is supplying such
Product to Ethicon pursuant to Section 7.
(e) [*]
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[*]
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[*]
SECTION 4
DEVELOPMENT AND REGULATORY PROCEDURES
(a) Advisory Board.
(i) Advisory Board Composition. The parties agree to form an
advisory board made up Of not more than four (4) individuals each
from Focal and Ethicon, which shall include Focal's President and a
Vice President of Ethicon (the "Advisory Board"). The Advisory Board
will meet from time to time to discuss the development and
regulatory programs for the Products. The location, time and length
of such meetings shall be agreed to by the parties. The Advisory
Board shall alternate the location of its meetings between the
facilities of each of the parties or by mutual agreement meet at
either facility or telephonically. Meetings of the Advisory Board
shall be held at least as frequently as once per calendar quarter.
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(ii) Advisory Board Responsibilities. The Advisory Board role shall
include (A) evaluating and determining which products to develop,
(B) reviewing the progress of the development of Products, (C)
reviewing the seeking of Regulatory Approval for the Products in the
Territory, (D) reviewing the expenditure of funding on all
development work by Focal under this Agreement, (E) discussing a
marketing strategy for NAFTA and the Territory with a goal to avoid
inconsistencies in the marketing of Products, and (F) reviewing the
initial marketing, selling and distribution plans for each Product
in the Territory.
(iii) Reports, Etc. Each party shall be responsible for submitting
appropriate reports to the Advisory Board with respect to the
progress of those aspects of the development of Products and/or the
Regulatory Approval progress of Products for which it has
responsibility. Such reports shall be submitted not less frequently
than quarterly outlining the progress of such party, and identifying
any significant issues which require the attention of the Advisory
Board.
(b) Development and Regulatory Approvals
(i) Lung Sealant Product.
(A) Focal shall, at its own expense and with the reasonable
cooperation of Ethicon, conduct those preclinical
studies and Clinical Trials, and undertake such product
development work, process development work and other
steps and actions, including preparation of
documentation and applications, as shall be reasonably
necessary to obtain, in as prompt a fashion as is
reasonably practicable, Regulatory Approval in the E.U.
of the Lung Sealant Product [*]. Although Focal shall
have the responsibility for conducting such work, it
shall give adequate and due consideration to Ethicon's
concerns and priorities in connection with such process.
As part of such work, Focal shall (1) develop a
preclinical prototype [*] and (2) evaluate a [*]
comprising such precinical prototype [*] System in a
relevant animal model.
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(B) Copies of all Regulatory Filings made by Focal in
connection therewith shall be provided to Ethicon within
fourteen (14) days after each such submission, and
Ethicon shall be permitted to use and cross-reference
such Regulatory Filings, solely in connection with
Ethicon's rights under this Agreement.
(C) Ethicon shall have responsibility for filing at its own
expense and in its own name (or that of its Affiliates)
The Regulatory Filings for Regulatory Approval of the
Lung Sealant Product in countries in the Territory
outside of the E.U. Ethicon agrees to make Regulatory
Filings for Regulatory Approval of the Lung Sealant
Product in the following countries: Japan, Brazil,
Australia, South Africa and such other countries in the
Territory outside of the E.U. as Ethicon shall
determine. Such Regulatory Filings shall be conducted in
accordance with Ethicon's normal and customary
procedures for the submission of regulatory filings. Any
Clinical Studies required in connection with such
filings which are in addition to those Clinical Trials
which are required to be conducted for purposes of U.S.
Regulatory Approval or CE marking shall be done at the
expense of Ethicon. Copies of all such Regulatory
Filings by Ethicon shall be provided to Focal within
fourteen (14) days after each such submission. Focal
shall provide to Ethicon all such assistance and
information as shall be reasonably necessary for Ethicon
to make such Regulatory Filings.
(ii) Dural Sealant Product.
(A) Focal shall, at its own expense and with the reasonable
cooperation of Ethicon, conduct those preclinical
studies and Clinical Trials, and undertake such product
development work, process development work and other
steps and actions, including preparation of
documentation and applications, as shall be reasonably
necessary to obtain, in as prompt a fashion as is
reasonably practicable, Regulatory Approval in the E.U.
of the Dural Sealant Product [*]. Although Focal shall
have the responsibility for conducting such work, it
shall give adequate and due consideration to
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Ethicon's concerns and priorities in connection with
such process.
(B) Copies of all Regulatory Filings made by Focal in
connection therewith shall be provided to Ethicon within
fourteen (14) days after each such submission, and
Ethicon shall be permitted to use and cross-reference
such Regulatory Filings, solely in connection with
Ethicon's rights under this Agreement.
(C) Ethicon shall have responsibility for filing at its own
expense and in its own name (or that of its Affiliates)
the Regulatory Filings for Regulatory Approval of the
Dural Sealant Product in countries in the Territory
outside of the E.U. Ethicon agrees to make Regulatory
Filings for Regulatory Approval of the Dural Sealant
Product in the following countries: Japan, Brazil,
Australia, South Africa and such other countries in the
Territory outside of the E.U. as Ethicon shall
determine. Such Regulatory Filings shall be conducted in
accordance with Ethicon's normal and customary
procedures for the submission of regulatory filings. Any
Clinical Studies required in connection with such
filings which are in addition to those Clinical Trials
which are required to be conducted for purposes of U.S.
Regulatory Approval or CE marking shall be done at the
expense of Ethicon. Copies of all such Regulatory
Filings by Ethicon shall be provided to Focal within
fourteen (14) days after each such submission. Focal
shall provide to Ethicon all such assistance and
information as shall be reasonably necessary for Ethicon
to make such Regulatory Filings. Although Ethicon shall
have the responsibility for obtaining such Regulatory
Approvals, it shall give adequate and due consideration
to Focal's concerns in connection with such process.
(iii) Cardiovascular Sealant.
(A) Focal shall, at its own expense and with the cooperation
and reasonable assistance of Ethicon, conduct those
animal studies (the "Cardiovascular Studies") as shall
be necessary to evaluate the effectiveness [*]
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[*]
(B) Within sixty (60) days after the completion of the
Cardiovascular Studies, the Advisory Board shall review
such studies and determine whether further development
work in connection with the Cardiovascular Sealant
Candidate should be undertaken. In the event that the
members of the Advisory Board agree that further
development work in connection with the Cardiovascular
Sealant Candidate should be undertaken, the Advisory
Board shall determine (1) which additional studies
should be undertaken in order to obtain sufficient
information to initiate Clinical Trials in the E.U. and
in Japan, and (2) how to proceed with the seeking of
Regulatory Approval for the Cardiovascular Sealant
Candidate as a Product in the Territory. Ethicon, at its
own expense, shall have the responsibility for
conducting the requisite development work and for
obtaining Regulatory Approval for the Cardiovascular
Sealant Candidate in the Territory; provided, however,
that Ethicon may, upon agreement by Focal, utilize
Focal's services for the performance of selected
development work, such development work to be provided
at cost by Focal. In the event that the members of the
Advisory Board agree that further development in
connection with the Cardiovascular Sealant Candidate
should not be undertaken but that the parties should
consider a program to develop a New Product for use as
an intraoperative surgical sealant in cardiovascular
surgery (an "Alternate Cardiovascular Sealant
Candidate"), then the parties shall discuss in good
faith the initiation of such program in accordance with
the provisions set forth in Section 4(b)(vii). In the
event that the parties have not agreed to initiate a
development program with respect to the Cardiovascular
Sealant Candidate or an Alternate Cardiovascular Sealant
Candidate within [*] after completion of the
Cardiovascular Studies, then Ethicon shall be entitled,
in its sole and unfettered discretion and at its own
expense, to undertake its own preclinical development,
clinical development, Regulatory Approval and/or
commercialization program with respect to the
Cardiovascular Sealant Candidate in the Territory, and
Focal shall be under no obligation to participate in
such program. Ethicon shall (1) have all
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rights to use Patents and Know-How for the sole purpose
of undertaking any such Ethicon program(s) with respect
to a Cardiovascular Sealant Candidate in the Territory,
(2) provide the Advisory Board with such information as
shall be necessary to enable the Advisory Board to
fulfill its responsibilities with respect to such
Cardiovascular Sealant Candidate under Section 4(a)(ii),
and (3) be obligated to pay Focal (i) the Purchase Price
of such Cardiovascular Sealant Candidate pursuant to
Section 7, if such Product is being supplied by Focal,
or (ii) if Focal is not supplying such Product to
Ethicon, royalties on the sales of such Cardiovascular
Sealant Candidate in the Territory pursuant to Section
6(d).
(iv) Gastrointestinal Sealant.
(A) Focal shall, at its own expense and with the cooperation
and reasonable assistance of Ethicon, conduct those
animal studies (the "Gastrointestinal Studies") as shall
be necessary to evaluate the effectiveness of [*]
(B) Within sixty (60) days after the completion of the
Gastrointestinal Studies, the Advisory Board shall
review such studies and determine whether further
development work in connection with the Gastrointestinal
Sealant Candidate should be undertaken. In the event
that the members of the Advisory Board agree that
further development work in connection with the
Gastrointestinal Sealant Candidate should be undertaken,
the Advisory Board shall determine (1) which additional
studies should be undertaken in order to obtain
sufficient information to initiate Clinical Trials in
the E.U. and in Japan, and (2) how to proceed with the
seeking of Regulatory Approval for the Gastrointestinal
Sealant Candidate as a Product in the Territory.
Ethicon, at its own expense, shall have the
responsibility for conducting the requisite development
work and for obtaining Regulatory Approval for the
Gastrointestinal Sealant Candidate in the Territory;
provided, however, that Ethicon may, upon agreement by
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Focal, utilize Focal's services for the performance of
selected development work, such development work to be
provided at cost by Focal. In the event that the members of
the Advisory Board agree that further development in
connection with the Gastrointestinal Sealant Candidate should
not be undertaken but that the parties should consider a
program to develop a New Product for use as an intraoperative
surgical sealant in gastrointestinal surgery (an "Alternate
Gastrointestinal Sealant Candidate"), then the parties shall
discuss in good faith the initiation of such program in
accordance with the provisions set forth in Section 4(b)(vii).
In the event that the parties have not agreed to initiate a
development program with respect to the Gastrointestinal
Sealant Candidate or an Alternate Gastrointestinal Sealant
Candidate within [*] after completion of the Gastrointestinal
Studies, then Ethicon shall be entitled, in its sole and
unfettered discretion and at its own expense, to undertake its
own preclinical development, clinical development, Regulatory
Approval and/or commercialization program with respect to the
Gastrointestinal Sealant Candidate in the Territory, and Focal
shall be under no obligation to participate in such program.
Ethicon shall (1) have all rights to use Patents and Know-How
for the sole purpose of undertaking any Ethicon programs(s)
with respect to a Gastrointestinal Sealant Candidate in the
Territory, (2) provide the Advisory Board with such
information as shall be necessary to enable the Advisory Board
to fulfill its responsibilities with respect to such
Gastrointestinal Sealant Candidate under Section 4(a)(ii), and
(3) be obligated to pay Focal (i) the Purchase Price of such
Gastrointestinal Sealant Candidate pursuant to Section 7, if
such Product is being supplied by Focal, or, (ii) if Focal is
not supplying such Product to Ethicon, royalties on the sales
of such Gastrointestinal Sealant Candidate in the Territory
pursuant to Section 6(d).
(v) Anti-Adhesion Products.
(A) [*]
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(B) [*]
(C) [*]
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[*]
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(vi) Improved Products. Provided that Ethicon (A) has not abandoned
the development, marketing and/or sale in the Territory of the
Lung Sealant Product and the Dural Sealant Product, and (B)
has not caused an Event of Default, Ethicon shall have the
right to develop, market and sell the Improved Products, if
any, under substantially equivalent terms and conditions as
those that apply to the Initial Products; provided, that
Ethicon shall bear all of the expense of conducting any,
preclinical and clinical development, and of obtaining the
Regulatory Approvals, required to commercialize any such
Improved Products in the Field in the Territory.
(vii) New Products. The Advisory Board shall meet no less frequently
than once every six (6) months to discuss programs utilizing
the Know-How to develop New Products ("New Product Programs").
Either Ethicon or Focal may propose New Product Programs. The
Advisory Board shall be responsible for developing plans, time
lines and budgets for any New Product Program, and obtaining
the required approvals to initiate such program. Although each
New Product Program shall be discussed and agreed to on an
individual basis, each such program shall follow these general
guidelines:
(A) Development of Hydrogel Polymers and Hydrogel
Formulations. Focal shall at all times be exclusively
responsible for the technical development of Hydrogel
Polymers and Hydrogel Formulations.
(B) Development of Delivery Systems; Preclinical Studies;
Clinical Studies; Regulatory Approval. Focal and Ethicon
shall agree on the division of labor appropriate for the
development of Delivery Systems, the conduct of
preclinical and clinical studies, and the pursuit of
Regulatory Approval.
(C) Development Funding.
1. New Product Programs that are approved by the
Advisory Board shall be funded as follows:
(a) [*] for New Product Programs that are
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intended to develop Products that shall be
marketed and sold in the Territory and
NAFTA, or
(b) [*] for New Product Programs that are
intended to develop Products that shall be
marketed and sold only in the Territory.
2. For development work conducted by Focal and funded
by Ethicon, Ethicon shall pay to Focal an amount
to be agreed upon by the parties, intended to
cover the direct and indirect expenses incurred by
Focal in the conduct of a New Product Program.
(D) Commercial Terms. Excluding the development funding set
forth above, the general commercial terms for Initial
Products shall also apply to New Products. The parties
agree, however, to negotiate in good faith a Purchase
Price and royalty rate for New Products which (a)
reflect the cost of manufacture of such New Product
relative to the projected commercial selling price and
(b) reasonably approximate the relative margins
contemplated for the, Initial Products.
(viii) Japan Regulatory Approval. Ethicon shall, at its own expense
and with the cooperation and reasonable assistance of Focal,
prepare such documentation and applications, and undertake
such other steps and actions, as shall be reasonably necessary
to obtain Regulatory Approval in Japan of the Lung Sealant
Product and the Dural Sealant Product. Copies of all
Regulatory Filings made by Ethicon in connection therewith
shall be provided to Focal within fourteen (14) days after
each such submission. Ethicon shall use reasonable efforts to
file for such Regulatory Approval for (A) the Lung Sealant
Product within [*] after the date that Focal submits the
clinical portion required for Regulatory Approval for such
Product in the E.U. and (B) the Dural Sealant Product
within [*] after the date that Focal submits the clinical
portion required for Regulatory Approval for such Product in
the E.U.; provided, however, that the dates for filing in
Japan set forth in (A) and (B) above are subject to adjustment
by mutual agreement of the parties [*]
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[*] In the event that Ethicon does not file for Regulatory
Approval in Japan for (1) the Lung Sealant Product within the
time period set forth in (A) above, and/or (2) the Dural
Sealant Product within the time period set forth in (B) above,
then (a) Focal shall have the fight to terminate the rights
and licenses granted to Ethicon pursuant to Section 3(a) with
respect to the Lung Sealant Product and/or the Dural Sealant
Product, as the case may be, in Japan, and (b) Ethicon shall
provide Focal with all pre-clinical, clinical and regulatory
data and materials that Ethicon owns or otherwise controls
that relate to the applicable Product and are useful in
obtaining Regulatory Approval for such Product in Japan and
shall grant Focal the right to utilize such pre-clinical,
clinical and regulatory data and materials to the extent
necessary to obtain such Regulatory Approval.
(ix) Failure by Focal to Pursue E.U. Regulatory Approvals.
(A) Ethicon's Right to Pursue Regulatory Approval. If (1)
Focal ceases active pursuit of Regulatory Approval for
the Lung Sealant Product or does not receive CE marking
for such Product [*], or (2) Focal ceases active pursuit
of Regulatory Approval for the Dural Sealant Product or
does not receive CE marking for such Product in the [*]
then Ethicon shall be given notice of such event by
Focal and Ethicon shall be entitled to take such steps
and actions as shall be necessary to obtain such
Regulatory Approval; provided, however, that the dates,
set forth in (1) and (2) above are subject to adjustment
by mutual agreement of the parties [*] Ethicon's
exercise of its right to pursue Regulatory Approval for
a given Initial Product in no way relieves Focal of its
obligations to pursue Regulatory Approval for any other
Initial Product under this Agreement, nor does Ethicon's
exercise of such rights for a given Initial Product
cause the provisions of subsection (B) below to apply to
any other Initial Product.
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(B) Consequences. In the event that Ethicon exercises its
right to pursue Regulatory Approval in the E.U. for the
Lung Sealant Product and/or the Dural Sealant Product,
then
1. if Focal is supplying such Product(s) to Ethicon
pursuant to Section 7 and, but for the fact that
Focal is supplying such Product(s), Ethicon would
be obligated to pay a royalty to Focal on the sale
of such Product(s) in the E.U. pursuant to Section
6(d), then the Purchase Price for such Product(s)
shall be (a) for such Product(s) purchased prior
to the second anniversary of the First Commercial
Sale of such Product(s), the price set forth in
Section 7(c)(ii)(A)(1), except that such price
shall be based upon [*] of the Net Selling Price
of such Product(s) [*] and (b) for such Product(s)
purchased on or after such second anniversary, [*]
of the Net Selling Price of such Product(s), but
in no event less than [*] per unit of such
Product(s);
2. if Focal is supplying such Product(s) to Ethicon
pursuant to Section 7 but Ethicon would not be
obligated to pay a royalty to Focal on the sale of
such Product(s) in the E.U. pursuant to Section
6(d) if Focal was not supplying such Product(s),
then the Purchase Price for such Product(s) shall
be (a) for such Product(s) purchased prior to the
second anniversary of the First Commercial Sale of
such Product(s), the price set forth in Section
7(c)(ii)(A)(1), except that such price shall be
based upon [*] of the Net Selling Price of such
Product(s) [*] and (b) for such Product(s)
purchased on or after such second anniversary,
[*] of the Net Selling Price of such Products(s),
but in no event less than [*] per unit of such
Product(s); and
3. if Focal is not supplying such Product(s) to
Ethicon pursuant to Section 7 and Ethicon is
obligated to pay a royalty to Focal on the sale of
such Product(s) in the E.U. pursuant to Section
6(d), then the royalty payable
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to Focal shall equal [*] of the Net Selling Price
of such Product(s).
In the event that Ethicon exercises its right to pursue
Regulatory Approval in the E.U. for a Product pursuant
to this Section 4(ix), Ethicon shall be entitled to
deduct from the Purchase Price for units of such Product
or from the royalty payable to Focal on the sale of
units of such Product, as the case may be, any
reasonable costs that Ethicon incurs in obtaining such
Regulatory Approval.
(x) U.S. Regulatory Approval. Focal shall use diligent efforts,
acting either by itself, through a clinical research
organization or, subject to the [*] with one or more third
parties, to pursue and obtain Regulatory Approval for the
Initial Products in the US. in as prompt a fashion as
reasonably possible. If Focal ceases active pursuit of
Regulatory Approval for an Initial Product in the U.S., then
Focal shall immediately notify Ethicon of such cessation and,
if it can be reasonably demonstrated that a failure to obtain
such Regulatory Approval is likely to have a material adverse
effect on Ethicon's rights in the Territory with respect to
any Initial Product, Ethicon shall, upon such cessation, be
entitled to take such steps and actions as shall be necessary
to obtain such Regulatory Approval. Focal acknowledges that
Ethicon's right to pursue Regulatory Approval for such Initial
Product in the U.S. in no way relieves Focal of its
obligations to pursue Regulatory Approval in the Territory for
the Products in the manner required by this Agreement.
(xi) Product Labeling. The parties acknowledge that the Products
sold in the Territory shall bear labels which prominently
display the name of Ethicon or its designated Affiliate. Focal
agrees that it shall provide such reasonable cooperation and
assistance to Ethicon as shall be necessary for Ethicon to
obtain any CE marking in its own name for any of the Products
to the extent necessary either (A) to enable the Products to
include the labeling set forth in the preceding sentence, or
(B) to enable Ethicon to effectively market the Products in
the E.U. (as shall be mutually agreed upon by the parties).
(c) Training. Focal, if requested, shall be responsible for providing
training on the Products to Ethicon's sales personnel. In addition,
Focal shall provide technical
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support at all customer conventions. Such training and support shall
be at levels and times reasonably agreed between the parties from
time to time and shall be at Ethicon's cost. Focal shall not be
obligated to provide training and support at levels beyond that
which its available personnel reasonably permits.
SECTION 5
MILESTONE PAYMENTS AND DEVELOPMENT FUNDING
(a) Milestone Payments. In consideration of Focal entering into this
Agreement, and of Focal's reaching certain milestones relating to
the Products, Ethicon shall pay to Focal the following payments:
(i) the sum of [*] due within seven (7) days of the execution of
this Agreement, to reimburse Focal for past research
expenditures relating to Products; and
(ii) the sum of [*] due within fourteen (14) days after receipt by
Ethicon of written verification that the Lung Sealant Product
has received CE marking necessary to market, distribute and
sell the Lung Sealant Product throughout the E.U.; and
(iii) the sum of [*] due within fourteen (14) days after receipt by
Ethicon of written verification that the Dural Sealant Product
has received CE marking necessary to market, distribute and
sell the Dural Sealant Product throughout the E.U., [*]
(b) Development Funding and Scientific Benchmark Payments. In
consideration of Focal entering into this
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Agreement, and of Focal's undertaking development activities
relating to Products, Ethicon shall provide Focal with the following
development funding and scientific benchmark payments:
(i) the sum of [*] to be paid in quarterly installments of
[*] each on the first business day of each calendar
quarter during 1997; and
(ii) the sum of [*] to be paid in quarterly installments of
[*] each on the first business day of each calendar
quarter during 1998.
SECTION 6
PATENTS AND INVENTIONS; ROYALTIES
(a) Patents.
(i) Prosecution. Focal and Ethicon agree that, with respect to any
patent application, contained in Patents, that is solely owned
or otherwise controlled by Focal (a "Focal Patent
Application"), the obligations and expenses of patent
prosecution and issuance shall be apportioned as follows:
(A) Focal agrees to file and to faithfully prosecute, at its
Sole expense, initial United States Focal Patent
Applications and any additional United States Focal
Patent Applications, divisionals, continuations,
continuations-in-part, reissues, reexaminations, and the
like, including Patent Cooperation Treaty ("PCT")
applications, but only to the extent necessary to
protect the rights in the Territory granted to Ethicon
under this Agreement.
(B) Focal shall file Focal Patent Applications at its own
expense in at least Japan, Canada, the European Patent
Convention states (the "EPC States"), Australia, Brazil
and South Africa, unless the parties agree in writing
that any such filings should not be made. In addition,
Focal agrees
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to designate and file in such other countries as the
parties shall mutually agree.
(C) Focal shall, within twenty (20) days of mailing or
receipt, provide Ethicon with copies of all future filed
Focal Patent Applications and all correspondence from
and to patent offices worldwide relating to both the
future filed Focal Patent Applications and any issued
patents based thereon, reexaminations, reissues or the
like.
(D) If Focal does not prosecute a Focal Patent Application
or obtain an issued patent based thereon, Focal shall so
notify Ethicon and Ethicon shall, in its sole
discretion, have the right to assume the prosecution of
such Focal Patent Application in the Territory at its
expense on a country by country basis for such Focal
Patent Application. In the event Ethicon elects to pay
such costs related to the prosecution of such Focal
Patent Application and obtains an issued patent based
thereon, it shall have the right to offset [*] of
such costs and expenses against any royalties which
become due under Section 6(d) in the country where
such patent is obtained.
(ii) Maintenance. Ethicon shall, in jurisdictions in the Territory,
have the duty and responsibility to pay or reimburse Focal for
all taxes, maintenance fees and annuities on all patents
contained in the Patents that are solely owned or otherwise
controlled by Focal.
(iii) Patent Term Extensions. The parties agree to cooperate in
order to avoid loss of any rights which may otherwise be
available to the parties under the United States Drug Price
Competition and Patent Term Restoration Act of 1984, to the
extent necessary to protect the rights in the Territory
granted to Ethicon under this Agreement, the Supplementary
Certificate of Protection of the Member States of the European
Community and other similar measures in any other country in
the Territory. Without limiting the foregoing, Focal agrees to
notify Ethicon promptly upon receipt of Regulatory Approval to
market a Product in the United States and Focal agrees to
timely file an application for patent extension within the
sixty (60) day period following such Regulatory Approval. The
same shall apply with respect to the approval by the Health
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Authorities in a country of the E.U. or approval by the
appropriate authorities in any other country in the Territory.
(b) Infringement.
(i) Infringement of Third Party Rights. If, as a result of the
manufacture, use or sale of any Product in any country of the
Territory, a third party sues, threatens to xxx, or brings
other action for patent infringement against Focal or Ethicon
and/or any of their respective Affiliates (an "Infringement
Claim"), or if either party shall become aware of third-party
patent rights, Focal and Ethicon shall discuss in good faith
an appropriate response to such claim and shall determine by
mutual agreement an appropriate course of action.
(A) If an Infringement Claim exists with respect to an
Initial Product or an Improved Product that comprises
the Lung Sealant Formulation or the Dural Sealant
Formulation, and it is jointly determined in good faith
that a third-party patent poses a substantial risk to
such Initial Product or Improved Product in any country
in the Territory, then (1) Focal shall be responsible
for obtaining such license from such third-party and
shall pay all costs and fees associated with such
license, and (2) Ethicon shall have the right to suspend
performance of its obligations (other than payment
obligations arising prior to such suspension) with
respect to such Initial Product or Improved Product in
the country or countries in which such Infringement
Claim poses a substantial risk, such suspension right to
remain in effect until Focal obtains a license from such
third party or the Infringement Claim is otherwise
resolved to Ethicon's satisfaction. As used above, the
term "substantial risk" means that the claims of such
third-party patent cover, the manufacture, use or sale
of an Initial Product or Improved Product that comprises
the Lung Sealant Formulation or the Dural Sealant
Formulation.
(B) If an Infringement Claim exists with respect to a New,
Product or an Improved Product that does not comprise
the Lung Sealant Formulation or the Dural Sealant
Formulation, and it is jointly determined to be
necessary to obtain a license from such third party,
Focal and Ethicon shall be jointly responsible for
negotiating such license, it
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being understood that each shall make every effort to
minimize the license fees and/or royalty payable to such
third party, and each shall bear [*] of the costs and
fees associated with such license. In the event that
Ethicon shall be obligated to pay a license fee and/or
royalty to any such third party in any country of the
Territory, then Ethicon shall have the right to deduct
an amount equal to [*] of such payments made by Ethicon
to such third party (1) from any royalties payable to
Focal on the sale of such Product in such country
pursuant to Section 6(d), and (2) if Ethicon is paying
a Purchase Price to Focal for such Product pursuant to
Section 7, from that portion of such Purchase Price
equal to the royalty that would be payable to Focal
pursuant to Section 6(d) if Focal were not supplying
such a Product; provided, however, that in no event
shall such royalty or such portion of the Purchase Price
be reduced in any quarter by more than [*]. Any portion
of a deduction that is not available for the quarter due
to the foregoing limitation may be carried forward and
deducted from payments otherwise due hereunder for
subsequent quarters.
(C) [*]
(ii) Infringement by a Third Party.
(A) In the event that either party suspects or discovers
that there is infringement of a Patent in the Field in
the Territory involving a Product by a third party, the
party that suspects or discovers such infringement shall
notify
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the other in writing to that effect (an "Infringement
Notice"), including with said written notice evidence
establishing a case of infringement by such third party,
and an identification of the jurisdictions in the
Territory in which such infringement is alleged to have
occurred (the "Affected Territories").
(B) Ethicon shall have the right, but not the obligation, to
bring suit or other legal actions, in its own name and
on its own behalf to the extent permitted by the law of
the applicable jurisdiction, against any third party
infringers of the Patents in the Affected Territories.
If Ethicon undertakes such action against third party
infringers, Focal shall cooperate with Ethicon to the
extent necessary for the effective prosecution of such
action and shall, at Focal's election, either (A) join
as a party to such suit or other legal action, or (B)
take such other action as may be necessary to enable
Ethicon to bring such suit or other legal action. To the
extent that Focal is given the capacity under the UT
Agreement to take actions against third party
infringers, such capacity shall be made available to
Ethicon. The right of Ethicon to undertake action
against third party infringers shall terminate upon (A)
Ethicon notifying Focal that it is withdrawing from any
legal challenge or suit of such third party infringers,
(B) Ethicon notifying Focal that it has resolved such
alleged infringement or (C) Focal obtaining the right to
bring suit in its own name in accordance with Section
6(b)(ii)(C) below.
(C) Ethicon shall bear all the expenses of any infringement
suit either brought by it, or initiated by Focal or a
Focal licensee at Ethicon's behest, and shall, with
respect to any damages (i) be entitled to retain all
damages or other monies awarded or received in
settlement of such suit up to the amount required to
cover its reasonable out-of-pocket expenses in such suit
and (ii) with respect to any excess amounts, shall split
such remaining amount with Focal on the following basis
- [*] to Ethicon, [*] to Focal. Focal and/or its
Affiliates will cooperate with Ethicon in any such suit
and shall have the right to consult with Ethicon and be
represented by its counsel at its own expense. If,
within one hundred eighty (180) days, or a shorter
period if
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mandated by local law, from the date of delivery of the
Infringement Notice, Ethicon has not (A) notified Focal
that it is withdrawing from any legal challenge or suit
of such third party infringers, (B) notified Focal that
it has resolved such alleged infringement or a
discontinuance of such infringement, or (C) brought suit
against the third party infringer, then Focal shall have
the right, in its sole discretion, but not the
obligation, to bring such suit at its own expense and in
its own name, if possible. Focal shall bear all the
expenses of any suit brought by it and shall, with
respect to any damages, (i) be entitled to retain all
damages or other monies awarded or received in
settlement of such suit up to the amount required to
cover its reasonable out-of-pocket expenses in such suit
and (ii) with respect to any excess amounts, shall split
such remaining amount with Ethicon on the following
basis - [*] to Focal,[*] to Ethicon. Ethicon shall
cooperate with Focal in any such suit and shall have the
right to consult with Focal and be represented by its
counsel at its own expense.
(c) Inventions
(i) Title to any inventions or discoveries made by Focal employees
or its representatives (A) without inventive contribution of
Ethicon employees or agents, (B) without the use of Ethicon
information which, at the time of conception or reduction to
practice, constituted confidential information of Ethicon (as
defined in Section 9(a)(i)), and (C) based on any Know-How
related in any way to a Product and developed during Focal's
performance under this Agreement ("Focal Inventions") shall
belong to Focal.
(ii) Title to any inventions or discoveries made by Ethicon
employees or its representatives (A) without inventive
contribution by Focal employees or agents, (B) without the use
of Know-How which, at the time of conception or reduction to
practice, constituted confidential information of Focal (as
defined in Section 9(a)(i)), and (C) conceived and first
reduced to practice under this Agreement (hereinafter,
"Ethicon Inventions") shall belong to Ethicon. Ethicon may
file patent application(s) for Ethicon Inventions in its own
discretion and at its own expense.
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(iii) Any inventions or discoveries (A) conceived or reduced to
practice jointly by employees or agents of Focal and Ethicon
or (B) reduced to practice by employees or agents of Ethicon
and based on any Know-How which, at the time of such reduction
to practice, constituted confidential information of Focal (as
defined in Section 9(a)(i)) or (C) reduced to practice by
employees or agents of Focal and based on any information
which, at the time of such reduction to practice, constituted
confidential information of Ethicon (as defined in Section
9(a)(i)), shall belong to Focal and Ethicon jointly (the
"Joint Inventions"). Focal and Ethicon shall execute any
assignments necessary to effect the distribution of ownership
of joint Inventions specified in this Section 6(c)(iii). After
joint Inventions are reduced to practice, each party shall
have sole responsibility for filing, prosecuting and
maintaining applications or patents and local counterparts
thereof (the "Joint Invention Patent(s)") in its geographical
area (Territory or NAFTA, respectively) as defined under this
Agreement, but shall give full consideration to
recommendations of the other party, including selection of
attorney(s). Each party shall bear the expenses of filing,
prosecution and maintenance of joint Invention Patents in its
geographical area. If either party declines to file, prosecute
or maintain a joint Invention Patent in a jurisdiction in its
geographical area, it shall notify the other party in writing
before any applicable due date or other deadline and no later
than fifteen (15) days after such decision. The notified party
shall have the option to file, prosecute or maintain at its
expense on a country by country basis each such joint
Invention Patent. In that event, the party paying all the
costs and expenses shall cease to have any further obligation
under this Agreement to pay a royalty to the other party on
such joint Invention Patent in such country until the party
recovers half the total costs and expenses of such patent
filings, prosecution and maintenance.
(iv) Each party shall require its employees or agents responsible
for conducting research in performance of this Agreement to
keep contemporaneous records of their results and findings in
sufficient detail to document any inventions of discoveries
made by such employees and agents under this Agreement in
bound notebooks (which notebooks shall be reviewed and signed
by a witness on a regular basis).
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(v) Focal and Ethicon will cooperate in a timely manner to
prepare, review and execute patent applications and all such
further papers, as may be necessary to enable the parties to
protect joint Inventions by patent in any and all countries.
(vi) Ethicon hereby agrees that it shall not, except as permitted
under this Agreement, either alone or in collaboration with a
third party, market and/or sell any product in the Field in
NAFTA that embodies, and/or the manufacture of which utilizes,
a joint Invention. Focal hereby agrees that it shall not,
except as permitted under this Agreement, either alone or in
collaboration with a third-party, market and/or sell any
product in the Field in the Territory that embodies, and/or
the manufacture of which utilizes, a joint Invention. If (A)
Focal wishes to practice a patented Joint Invention in the
Field in NAFTA or (B) either party wishes to practice a
patented joint Invention outside the Field in NAFTA and/or the
Territory, the party practicing the patented Joint Invention
shall pay a royalty of [*] of the Net Sales of any product
covered by a joint Invention Patent (where Net Sales is
redefined for purposes of this paragraph to refer to the
amount invoiced on sales of any product covered by a joint
Invention Patent), unless said joint Invention is used solely
by a party in fulfilling its obligations under this Agreement;
provided, however, that if a party seeks to practice a
patented joint Invention for which it did not pay its share of
the cost and expenses, such party shall have to reimburse the
party that paid the costs and expenses [*] of the costs and
expenses incurred in the country or countries in which the
party seeking to practice the joint Invention will make, have
made, use, lease or sell any product covered by a joint
Invention Patent prior to practicing the patented Joint
Invention. A party practicing a joint Invention (1) shall only
be obligated to pay the [*] royalty with respect to sales in
those countries where the products being sold fall within a
Valid Claim under an issued patent included in joint Invention
Patents for such country and (2) shall not be obligated to pay
an amount greater than the [*] royalties irrespective of the
number of issued patents included in joint Invention Patents
that cover such product.
(d) Royalties on Products not Manufactured by or for Focal.
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(i) Initial Products. In the event that Ethicon assumes the
responsibility for the manufacture of an Initial Product
pursuant to Section 7(1), then Ethicon shall pay to Focal on a
country by country basis in the Territory the following
royalties:
(A) a royalty of [*] of Net Sales of an Initial Product in a
country, if the making, using or selling of such Initial
Product by Ethicon, its Affiliates or sublicensees, in
such country, (1) is covered by a Valid Claim of an
issued patent included in Patents, (2) is covered by a
Valid Claim of a patent application included in Patents;
provided, however, that if a patent based on such
application does not issue within [*] of the First
Commercial Sale of such Initial Product in such country,
then, commencing with the [*] Anniversary of such First
Commercial Sale, Ethicon shall pay to Focal the
royalties specified in Section 6(d)(i)(B) on the sale of
such Initial Product until such time, if ever, that a
patent based on such application issues, in which case
the royalty payable by Ethicon on the sale of such
Initial Product shall revert to the level specified in
this Section 6(d)(i)(A), or (3) would be covered by a
Valid Claim of an issued patent or patent application
included in Patents but for a joint decision by the
parties (other than where such decision was made on the
basis that the seeking of such a patent would not be
successful due to previously existing patents or prior
art) to not obtain or maintain a patent with respect to
such Initial Product in such country (collectively, the
"Requirements for Full Royalty").
(B) a royalty of [*] of Net Sales of an Initial Product in a
country, if the making, using or selling of such Initial
Product in such country does not meet any of the
Requirements for Full Royalty.
(ii) Improved Products. In the event that Ethicon assumes the
responsibility for the manufacture of an Improved Product
pursuant to Section 7(l), then Ethicon shall pay to Focal on a
country by country basis in the Territory royalties on the
sales of such Improved Product at rates that are substantially
equivalent to those set forth in Section 6(d)(i).
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(iii) New Products. In the event that Ethicon assumes the
responsibility for the manufacture of a New Product pursuant
to Section 7(l), then Ethicon shall pay to Focal on a country
by country basis in the Territory royalties on the sales of
such New Product at rates to be established in the New Product
Program.
(e) Duration of Royally Payments.
(i) With respect to each Product manufactured by or on behalf of
Ethicon (other than by Focal), the royalties payable to Focal
under Section 6(d) shall be paid for (A) a period of (1) [*]
years after the First Commercial Sale of such Product
(irrespective of who manufactures such Product) in the E.U.
with respect to sales in the E.U., or (2) [*] years after
the First Commercial Sale in Japan with respect to sales in
apart, or (3) in countries outside of Japan or the E.U., [*]
years after the First Commercial Sale in the E.U. or in Japan,
whichever is later, or (B) for as long as [*] whichever of (A)
or (B) is longer. In no event shall more than one royalty be
paid to Focal for the sales of any Product.
(ii) After payment of the royalties specified in Section 6(d) for
the periods of time specified in this Section 6(e) with
respect to a Product, the license rights of Ethicon granted
pursuant to Section 3(a) shall be fully paid up with respect
to such Product but not any other Product, subject, however,
to the provisions of Section 8(e).
(f) Royalty Payment Mechanics.
(i) All royalties payable pursuant to this Agreement shall be
subject to the provisions of this Section 6(f).
(ii) Royalties will be payable in United States Dollars calculated
at a rate of exchange of the currency of the country from
which the royalties are payable as shall be determined in
accordance with U.S. generally accepted accounting principles.
If the transfer or the conversion into United States Dollars
in any such instance is not lawful or possible, payment of the
royalties shall be made
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by the deposit to the account of the appropriate party or its
nominee in any commercial bank or trust company of its choice
located in that country, such deposit to be made in the
currency of the country where the sales were made on which the
royalty was based. Prompt notice of any such deposit shall be
given to the appropriate party.
(iii) If the applicable royalty rate exceeds the permissible rate
established in a given country for royalty payments in that
country or royalty remission from that country, as the case
may be, the rate of royalty payable by the party paying the
royalty shall not exceed the established permissible rate and
the party obligated to pay royalty under this Agreement shall
pay the difference between the royalty due and the royalty at
the established permissible rate, unless said payments made
outside the country are illegal.
(iv) Any tax required to be withheld by the party paying the
royalty or any Affiliate or sublicensee under the laws of any
foreign country for the account of the party owed the royalty
under this Agreement shall be promptly paid by the party
paying the royalty or said Affiliate or sublicensee for and on
behalf of the party owed the royalty to the appropriate
governmental authority, and the party paying the royalty or
its Affiliate or sublicensee shall furnish the party owed with
proof of payment of such tax together with official or other
appropriate evidence issued by the appropriate governmental
authority sufficient to enable the party owed the royalty to
document a claim for income tax credit in respect to any sum
so withheld. Any such tax required to be withheld shall be an
expense of and borne solely by the party owed the royalty.
(v) The party paying the royalty shall keep accurate books and
records of all payments due to the party owed the royalty.
Said books of account shall be kept at the party paying the
royalty's principal place of business or the principal place
of business of an appropriate Affiliate or sublicensee to
which this Agreement relates.
(vi) The party owed the royalty shall have the right to nominate an
independent accountant acceptable to and approved by the party
paying the royalty (which approval shall not be unreasonably
withheld) who shall have access to the records of
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the party paying the royalty during reasonable business hours
for the purpose of verifying, at the party owed the royalty's
expense (except as provided below), the royalty payable as
provided for in this Agreement for the two (2) preceding
years, but this right may not be exercised more than once in
any year. The party owed the royalty shall solicit or receive
only information relating to the accuracy of the royalty
report and the royalty payments made. The party paying the
royalty shall be entitled to withhold approval of an
accountant which the party owed the royalty nominates unless
the accountant agrees to sign a confidentiality agreement with
the party paying the royalty which shall obligate such
accountant to hold the information he receives from the party
paying the royalty in confidence, except for information
necessary for disclosure to the party owed the royalty
necessary to establish the accuracy of the royalty reports.
Any underpayment of royalty shall be paid within thirty (30)
days after the delivery of a detailed written accountants
report to the party paying the royalty. Any overpayment of
royalty shall be credited to the next royalty payment due from
the party paying the royalty. If no further royalty payments
will be due then a refund will be made within thirty (30) days
of the audit. In the event any such audit reveals a shortfall
in paid royalties by an amount of five percent (5%) or more,
then the costs of the accountant employed in order to perform
such audit shall be reimbursed by the party owing the royalty.
(vii) In the event that a party owes a royalty, such party shall
deliver to the party owed the royalty written reports of Net
Sales during the preceding calendar quarter, on or before the
ninetieth (90th) day following the end of each calendar
quarter. In the event that a party owes a royalty for sales
made by its Affiliate or its sublicensee, such party shall
deliver to the party owed the royalty written reports of Net
Sales for such Affiliate or sublicensee during the preceding
calendar quarter, on or before the ninetieth (90th) day
following the end of each calendar quarter. Such reports shall
include a calculation of the earned royalty due and shall be
accompanied by the monies due.
(viii) In the event that a party is late in making payment of any
royalty obligation, interest shall accrue at the Prime Rate
from the date such payment was due.
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SECTION 7
SUPPLY AGREEMENT
(a) Exclusive Supply of Products; Specifications.
(i) Focal shall have the right and shall manufacture the Products
exclusively on behalf of Ethicon for resale by Ethicon in the
Territory during the term of this Agreement, or until such time as
Ethicon shall take over all or part of the manufacturing pursuant to
this Agreement. Except as specifically provided by the provisions of
this Agreement, Ethicon shall exclusively acquire the Products from
Focal during the term of this Agreement.
(ii) The Initial Product preliminary specifications, from which the
detailed final specifications for each Product shall be derived, are
set out on Exhibit H. No less than [*] days prior to the placement
of the first order for each Initial Product, Ethicon and Focal shall
mutually agree upon the final specifications ("Specifications") for
such Initial Product. Such Specifications shall become a part of
this Agreement and be attached as Exhibit I hereof.
(iii) Specifications for each Product that is not an Initial Product shall
be mutually agreed upon by Ethicon and Focal no less than [*]
days prior to the placement of the first order for each such
Product. Such Specifications shall become part of this Agreement and
be attached as Exhibit I hereof.
(iv) All Products supplied to Ethicon hereunder shall be supplied in a
finished and sterile form, as may be specified. Products shall be
supplied in packaging which is suitable for delivery to the ultimate
end-user of the Products. The packaging and sterilization
requirements shall be specified in the Specifications.
(b) Production Facilities and Capabilities
(i) Within ninety (90) days after the execution and delivery of this
Agreement, Focal shall submit to Ethicon [*]
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manufacturing capability plan (the "Manufacturing Plan") for
completing implementation of procedures and facilities for producing
the Products which satisfy both the volume, specifications and other
supply requirements of this Section 7. The Manufacturing Plan shall
include commercially appropriate plans (including scheduled
availability thereof) which provide for alternative manufacturing
facilities (the "Secondary Facilities") in the event Focal's primary
manufacturing facility is incapable (either by reason of force
majeure or otherwise) of supplying the Products as anticipated under
this Agreement. Ethicon shall promptly review the Manufacturing Plan
and discuss with Focal changes, if any, required to meet the supply
obligations set forth in this Section 7.
(ii) Ethicon shall have the right, upon reasonable advance notice and
during regular business hours, to inspect and audit the facilities
(including the Secondary Facilities) to be used or being used by
Focal for the manufacture of the Products to assure compliance by
Focal with (A) the requirements of the Manufacturing Plan, (B) the
CE Xxxx procedures, (C) FDA Good Manufacturing Practices, (D) the
Ethicon manufacturing standards (the "Ethicon Standards") (as set
out in Exhibit F), (E) all federal, state, local and comparable
foreign rules and regulations directly applicable to the manufacture
of products and manufacturing facilities, and (F) the requirements
of this Section 7 and Section 8(a)(i) (collectively, the
"Manufacturing Standards"). With respect to each Initial Product,
such inspections and audits may be conducted by Ethicon once during
the six (6) month period immediately preceding the anticipated First
Commercial Sale of each such Initial Product and no more than once
quarterly after the First Commercial Sale of such Initial Product.
Such inspections and audits shall be conducted in a manner so as to
minimize disruption of Focal's business operations. If any of such
inspections and audits reveal that the manufacturing facilities are
not adequate to meet the requirements of the Manufacturing
Standards, then Ethicon shall promptly provide Focal with written
notice of such fact, which notice shall contain in reasonable detail
the deficiencies found in the manufacturing facilities and, if
practicable, those steps Focal should undertake in order to remedy
such deficiencies (an "Audit Report"). Focal shall use its best
efforts to remedy any such deficiencies within ninety (90) days of
its receipt of an Audit Report. In the event that, within such
ninety (90) day period, Focal fails to remedy any such
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deficiencies that could reasonably result in the failure by Focal to
supply a Product in accordance with the requirements of this Section
7 and Section 8(a)(i) (an "Unremedied Facilities Deficiency"), then
Ethicon shall have the right to assume the responsibility for the
manufacture of such Product pursuant to the provisions of Section
7(1)(ii)(A). Notwithstanding the foregoing, Ethicon's right to
assume the responsibility for the manufacture of a Product pursuant
to the provisions of Section 7(1)(ii)(A) shall not be triggered by
Focal's failure to comply with any requirements set forth in new
general Ethicon manufacturing standards that are not included in the
Ethicon Standards that are set forth in Exhibit F as of the
effective date of this Agreement for that period of time generally
permitted other third party manufacturers of Ethicon to comply
with such new requirements.
(c) Purchase Prices
(i) Products not Intended for Commercial Use.
(A) Initial Products. Focal shall provide to Ethicon reasonable
quantities of an Initial Product that is not intended for
Commercial Use at a cost equal to Focal's Direct Cost to
supply such Initial Product; provided, however, that Ethicon
shall not pay Focal less than [*] per unit or per unit or more
than [*] per unit for such Initial Product.
(B) Improved Products. Focal shall provide to Ethicon reasonable
quantities of an Improved Product that is not intended for
Commercial Use at a cost equal to Focal's Direct Cost to
supply such Product; provided, however, that Ethicon shall not
pay to Focal less than $P per unit or more than $Q per unit
for such Improved Product, where P and Q shall be determined
through a good faith negotiation between the parties.
(C) New Products. Focal shall provide to Ethicon reasonable
quantities of a New Product that is not intended for
Commercial Use at a cost to be established in the New Product
Program.
(ii) Products Intended for Commercial Use.
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(A) Initial Products.
1. The Purchase Price for Initial Products intended for
Commercial Use purchased prior to that date which is the
second anniversary of the First Commercial Sale of the first
Initial Product in any country in the E.U. shall equal [*] of
the Net Selling Price of such Initial Product; provided,
however, that if Focal's Direct Cost of supplying such Initial
Product to Ethicon is greater than [*] of the Net Selling
Price of such Initial Product, then the Purchase Price shall
equal [*]. Notwithstanding the foregoing, and any provision
in this Agreement pursuant to which the Purchase Price is
subject to a reduction, in no event shall the Purchase Price
be less than [*] per unit of such Initial Product.
2. The Purchase Price for Initial Products intended for
Commercial Use purchased on or after that date which is the
[*] of the First Commercial Sale of the first Initial Product
in any country in the E.U. shall be (a) the applicable
percentage of the Net Selling Price of such Initial Product
set forth in Exhibit G, part 1, if (1) but for the fact that
Focal is supplying such Initial Product, Ethicon would be
obligated to pay a royalty to Focal on the sale of such
Initial Product in the Territory pursuant to Section 6(d) and
(2) the making, using or selling of such Initial Product in a
country in the Territory meets any of the Requirements for
Full Royalty, or (b) the applicable percentage of the Net
Selling Price of such Initial Product set forth in Exhibit G,
part 2, if (1) but for the fact that Focal is supplying such
Initial Product, Ethicon would be obligated to pay a royalty
to Focal on the sale of such Initial Product in the Territory
pursuant to
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Section 6(d) and (2) the making, using or selling of such
Initial Product does not meet any of the Requirements for Full
Royalty or (c) [*] of the Net Selling Price of such Initial
Product, if Ethicon would not be obligated to pay a royalty to
Focal on the sale of such Initial Product in the Territory
pursuant to Section 6(d) if Focal was not supplying such
Initial Product. Notwithstanding the foregoing, and any
provision in this Agreement pursuant to which the Purchase
Price is subject to a reduction, in no event shall the
Purchase Price be less than [*] per unit of such Initial
Product.
(B) Improved Products. The Purchase Price for each Improved
Product intended for Commercial Use shall be calculated using
percentages of the Net Selling Price of such Improved Product
that are substantially equivalent to those set forth in
Exhibit G.
(C) New Products. The Purchase Price for each New Product intended
for Commercial Use shall be established in the New Product
Program.
(D) Delivery System. The parties acknowledge and agree that
Ethicon shall have the right to purchase Delivery Systems
directly from a third party manufacturer and/or to provide
such Delivery Systems itself, but only to the extent that the
manufacture, use or sale of such Delivery System is not
covered by a Valid Claim of a Patent. In the event Ethicon so
elects to obtain or provide a Delivery System, the parties
shall negotiate in good faith an equitable adjustment to the
Purchase Price to take into account any modification in the
costs incurred by Focal as a result thereof.
(E) Calculation of Purchase Price.
1. The net selling price ("the "Net Selling Price") for an
Initial Product shall be calculated by dividing the
aggregate Net Sales for such Initial Product (based upon
the Products shipped by Ethicon, its Affiliates or
licensees to customers during such previous
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calendar quarter), divided by the number of units of
such Initial Product so shipped by Ethicon, its
Affiliates or licensees, exclusive of units of such
Product that are not intended for Commercial Use.
2. Calculation of the Purchase Price shall be made based
upon the forecasts provided pursuant to Section 7(h).
Ethicon shall provide to Focal no later than the
ninetieth (90th) day after the end of each calendar
quarter Ethicon's calculation of the actual Net Selling
Price for each Product for such quarter. If such
calculation indicates that the aggregate Net Selling
Price of a Product exceeded the forecasted aggregate Net
Selling Price during such calendar quarter, then Ethicon
shall submit the underpaid amount to Focal when it
provides such calculation to Focal. If such calculation
indicates that the aggregate Net Selling Price of a
Product was less than the forecasted aggregate Net
Selling Price during such calendar quarter, then Focal
shall issue a check to Ethicon within ten (10) business
days of receipt of such calculation of the overpaid
amount or, at Focal's option, Focal may credit such
amount against purchases under this Agreement.
3. The Purchase Price for Products will be payable in
United States Dollars calculated at a rate of exchange
of the currency of the country in which the Products are
sold, as shall be determined in accordance with U.S.
generally accepted accounting principles. If the
transfer or the conversion into United States Dollars in
any such instance is not lawful or possible, payment of
the Purchase Price shall be made by deposit to the
account of the appropriate party or its nominee in any
commercial bank or trust company of its choice located
in that country, such deposit to be made in the currency
of the country where the sales were made on which the
Purchase Price was based. Prompt notice of any such
deposit shall be given to the appropriate party.
4. In the event that, as a result of significant currency
fluctuations, the financial return to either Ethicon or
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Focal is significantly different than had been
anticipated by the parties, either party may request
that the parties discuss in good faith revisions to the
financial terms of this Agreement intended to address
the situation, provided that neither party shall be
obligated to agree to any such revisions.
(d) Shipment and Purchase Orders.
(i) All shipments of Products shall be F.O.B. to a single Ethicon
designated facility located in NAFTA unless otherwise agreed by the
parties, and shall be accompanied by a packing slip which describes
the Products and states the purchase order number. To the extent of
any conflict or inconsistency between this Agreement and any
purchase order, purchase order release, confirmation, acceptance or
any similar document, the terms of this Agreement shall govern.
(ii) Ethicon shall, by the first business day of each calendar month,
provide purchase orders to Focal for Ethicon's Product requirements
for that calendar month which is two (2) months after the date such
purchase order is provided. Ethicon shall at all times be obliged to
purchase the quantity of the Products requested in such purchase
orders. Focal shall not be obligated to supply in any month a number
of units of a Product that is greater than [*] of the number of
units of such Product specified in the Applicable Forecast (as
defined below), and Ethicon shall be obligated to issue purchase
orders to Focal and to purchase at least [*] of the number of units
of such Product specified in the Applicable Forecast. As used
herein, the term "Applicable Forecast" means the forecast relating
to a specific month provided by Ethicon pursuant to Section 7(h)
four months prior to such month. For example, if the forecast
provided on January 1 specified [*] units of a particular Product
for shipment in the following May (which January forecast is the
Applicable Forecast in May), then Focal is not obligated to supply
more than [*] units of such Product in May, and Ethicon shall be
obligated to issue purchase orders and purchase at least [*] units
of such Product in May.
(iii) Ethicon will make payment upon any ordered Products within thirty
(30) days of receipt of the relevant shipment of such
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Products. Payments made past the due date shall accrue interest at
the Prime Rate from the date such payment was due.
(e) Minimum Purchases.
(i) Following the [*] of the First Commercial Sale in any country within
the E.U. of an Initial Product following receipt of E.U. Regulatory
Approval, Ethicon agrees to purchase from Focal the following
minimum unit quantities of Product per year for the term of this
Agreement:
(A) [*] of Product, if only one Initial Product has received
Regulatory Approval in the Territory and such Regulatory
Approval is for a single indication, or
(B) [*] of Product, if one Initial Product has received Regulatory
Approval in the Territory for more than one indication, or if
more than one Initial Product has received Regulatory Approval
in the Territory.
(ii) Ethicon shall not be considered as having failed to meet the
purchase minimums (A) in the event such failure is a result of
Focal's failure to supply a Product under this Agreement, (B) in the
event of a recall or government initiated action with respect to a
Product or (C) in the event that Ethicon fails to meet the purchase
minimum as set forth in this Section 7(e) for an Initial Product in
a given year but pays Focal during such year an amount equal to the
product of the Purchase Price for such Initial Product multiplied by
(M-A), where M is the minimum unit quantity of such Initial Product
that Ethicon is obligated to purchase from Focal during such year
and A is the number of units of such Initial Product that Ethicon
actually purchased from Focal during such year.
(iii) In the event that Ethicon does not meet the applicable annual
purchase minimums set forth in this Section in any calendar year
commencing after the [*] anniversary referred to in subsection (i)
above, then Focal's sole and exclusive remedy shall be [*] (it being
specifically understood that such failure to meet the
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annual purchase minimums shall not be considered to be an Event of
Default under this Agreement).
(f) Packaging.
(i) Packaging and labelling requirements for the Products shall be part
of the Specifications for each particular Product. In addition, from
time to time, Ethicon may submit changes to such packaging and
labelling specifications should Ethicon determine such changes are
necessary or desirable; provided that Focal shall only be obligated
to incur the expenses necessary to provide a single version of the
packaging and/or labelling materials for a Product, unless otherwise
agreed by the parties, but shall be obligated to provide additional
versions of the packaging and/or labelling materials [*]. Any
packaging and labelling requirements must be commercially reasonable
in light of Ethicon's then-existing packaging practices.
(ii) Focal acknowledges that Ethicon is the exclusive owner of and has
all rights to the trademarks, copyrights, plans, ideas, names,
slogans, artwork and all other intellectual property that appear on
or are otherwise used by Ethicon in connection with the marketing of
Products. Ethicon acknowledges that such ownership rights do not
extend to Focal's proprietary formulae or other proprietary
information. All trademarks to be used by Ethicon and/or its
Affiliates in connection with the Products shall be chosen by
Ethicon and/or its Affiliates in their sole discretion.
(iii) Ethicon shall have the option, but not the obligation, to use the
names "FocalSeal" and/or "Focal" in connection with the marketing,
distribution, promotion, advertising and sale of any Product,
provided that if Ethicon uses "FocalSeal" and/or "Focal" as a
trademark on a Product not manufactured by Focal, then, as a
condition to such use, the parties shall agree upon customary
quality control provisions in accordance with applicable trademark
laws. Any such use shall be without charge or cost to Ethicon, and
shall be subject to such reasonable written guidelines as to such
usage as Focal may elect to provide.
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(g) Product Defects and Warranties.
(i) Unless otherwise agreed in writing in any specific instance,
delivery of any Products by Focal to Ethicon shall constitute a
certification by Focal that the Products conform to the
Specifications and were manufactured in accordance with the
Manufacturing Standards. After delivery of a shipment of any
Products to Ethicon, Ethicon shall have thirty (30) days to examine
the Products to determine if they conform to the Specifications and,
on the basis of such examination, to accept or reject such shipment.
Any claims for failure to so conform ("Claims") shall be made by
Ethicon in writing to Focal during such thirty (30) day period,
indicating the nonconforming characteristics of the Products.
(ii) If Focal agrees with such Claim, then within thirty (30) days after
the submission of a Claim by Ethicon, Focal shall, at Ethicon's
option, provide Ethicon (i) with a credit against future xxxxxxxx
equal to the full amount paid by Ethicon for such Products or (ii)
replacement Products, if available. Focal shall pay for all shipping
costs of returning or destroying Products that are the subject of
such accepted Claims. Focal shall bear the risk of loss for such
Products, beginning at such time as they are taken at Ethicon's
premises for return delivery.
(iii) If Focal does not agree with such Claim, then the parties agree to
submit the Products in question to an independent party which has
the capability of testing the Products to determine whether or not
they comply with the Specifications. In the event the parties cannot
agree upon such independent party, or in the event it is not
possible to acquire the services of such an independent party, then
such dispute shall be resolved pursuant to Section 9(m).
(h) Forecasts. During the term of this Agreement, Ethicon shall provide to
Focal no later than the first day of each month a non-binding good faith
estimate by month of Ethicon's requirements for the Products for the
twelve (12) month period which commences one calendar month after the date
on which each forecast is due. In addition, Ethicon shall provide an
initial guidance forecast ("Initial Forecast") no later than six (6)
months prior to the estimated date of First Commercial Sale of a Product.
Such forecast shall be
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updated no later than three (3) months prior to such estimated date.
(i) Short-Shipments. Ethicon shall notify Focal of any short-shipment claims
within thirty (30) days of receipt of a shipment of Products.
(j) Adverse Events; FDA Audits.
(i) The parties recognize that the holder of all regulatory filings and
registrations may be required to submit information and file reports
to various governmental agencies on Products under clinical
investigation, Products proposed for marketing, or marketed
Products. Consequently, each party agrees to provide to the other
notification as soon as practicable, but in any event within seven
(7) days of the initial receipt of a report of any adverse
experience with a Product that is serious. Serious adverse
experiences mean any experience that suggests a significant hazard,
contraindication, side effect or precaution, or any experience that
is fatal or life threatening, is permanently disabling or requires
or prolongs inpatient hospitalization.
(ii) Focal shall promptly provide to Ethicon copies of any FDA or
Regulatory Agency inspection reports related to Focal's facilities
or to the manufacture of Products that it receives from such
agencies.
(iii) Ethicon shall promptly provide to Focal copies of any medical device
reviews filed with nominated E.U. competent authorities.
(iv) Focal shall promptly notify Ethicon of any FDA inspections of its
facilities related to the manufacture of Products.
(k) Recalls.
(i) In the event any governmental agency having applicable jurisdiction
shall order any corrective action with respect to a Product supplied
hereunder (including any recall of any product containing a
Product), customer notice, restriction, change, market action or any
Product change, and the cause of such corrective action is due to a
breach by Focal of any of its
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warranties, representations, obligations or covenants contained
herein, then Focal shall be liable, and shall reimburse Ethicon for
the reasonable costs of such action, including the cost of any
Product affected by such action whether or not such particular
Product shall be established to be in breach of any warranty by
Focal hereunder; provided, however, that Ethicon shall be obligated
to use reasonable efforts that are consistent with Ethicon's normal
business practice to minimize the cost of any such action.
(ii) In the event that Ethicon determines to undertake any recall of any
Product supplied hereunder (including any recall of any product
containing a Product), customer notice, restriction, change,
corrective action or market action or any Product change, and the
cause of such corrective action is due to a breach by Focal of any
of its warranties, representations, obligations or covenants
contained herein, then Focal shall be liable, and shall reimburse
Ethicon for the reasonable costs of such action, including the cost
of any Product affected by such action whether or not such
particular Product shall be established to be in breach of any
warranty by Focal hereunder; provided, however, that Ethicon shall
be obligated to use reasonable efforts that are consistent with
Ethicon's normal business practice to minimize the cost of any such
action.
(l) Ethicon Manufacturing.
(i) Transfer of Manufacturing Rights. Upon the occurrence of a
Triggering Event, Ethicon shall have the right to assume the
responsibility for the manufacture of the applicable Product(s). In
the event that Ethicon exercises its right to manufacture such
Product(s) pursuant to this Section 7(1), (A) Ethicon shall have a
royalty-bearing (in accordance with the terms of Section 6(d))
license, under Patents, Know-How and Manufacturing Technology for
the sole purpose of making and having made such Product(s) in the
Field throughout the Territory, (B) Ethicon shall have the right to
use and cross-reference Focal's Regulatory Filings with respect to
such Product(s) and (C) Focal shall provide, at Ethicon's cost, such
reasonable assistance and other information as shall be necessary in
order for Ethicon to manufacture or have manufactured such
Product(s).
(ii) Triggering Events.
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(A) Failure by Focal to Supply. As used in this Agreement, the term
"Triggering Event" means (1) an Unremedied Facilities Deficiency or
(2) that an Event of Default caused by Focal (which Event of Default
has not been cured within thirty (30) days after receipt of notice
thereof, subject to the proviso below) results in the failure by
Focal to supply Product(s) to Ethicon in accordance with the supply
obligations set forth in Section 7 and Section 8(a)(i) (provided
that if such Event of Default occurs within the first twelve (12)
months following the First Commercial Sale of the first Product and
Focal's failure to supply Products does not exceed by more than [*]
the quantity of the Product Focal is obligated to supply, Focal
shall have an additional sixty (60) days in which to diligently
attempt to remedy such Event of Default). Upon the occurrence of a
Triggering Event, Ethicon shall have the right to assume
responsibility for the manufacture of the applicable Product(s)
during the term of this Agreement. In the event that Ethicon assumes
the responsibility for the manufacture of such Product(s) pursuant
to this Section 7(1)(ii)(A), then (1) the provisions of Section 7
shall no longer be applicable to such Product(s), (2) Ethicon shall
pay Focal a royalty on the sale of such Product(s) in accordance
with the terms of Section 6(d); provided, however, that the rate
used to calculate the royalty on the sale of any Initial Product
shall be reduced to [*] and (3) Ethicon shall be entitled to deduct
from royalties payable to Focal pursuant to Section 6(d) [*].
(B) [*]
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[*]
(C) Change in Control. Upon a Change in Control, Ethicon shall have the
right to assume responsibility for the manufacture of any and all
Products during the term of this Agreement. In the event that
Ethicon exercises its right to manufacture a Product(s) pursuant to
this Section 7(1)(ii)(C), then (1) the provisions of Section 7 shall
no longer be applicable to such Product(s), (2) Ethicon shall pay
Focal a royalty on the sale of such Product(s) at the applicable
rate set forth in Section 6(d) and (3) Ethicon shall not be entitled
to deduct from the royalties payable to Focal pursuant to Section
6(d) any costs which Ethicon incurs in assuming such manufacturing
responsibility.
(D) Force Majeure. In the event that an Event of Force Majeure results
in an interruption in the supply of Product(s) by Focal to Ethicon
that continues unabated for a period of sixty (60) days or longer,
then Ethicon shall have the right to assume responsibility for the
manufacture of such Product(s), but only for so long as such Event
of Force Majeure prevents Focal from supplying such Product(s) to
Ethicon in accordance with the terms of this Agreement and subject
always to the last sentence of this paragraph. In the event that
Ethicon assumes the responsibility for the interim manufacture of
such Product(s) pursuant to this Section 7(l)(ii)(D), then (1) the
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provisions of Section 7 shall not be applicable to such Product(s)
during the period of time when Ethicon is responsible for such
manufacture, (2) Ethicon shall pay Focal a royalty on the sale of
such Product(s) at the applicable rate set forth in section 6(d) and
(3) Ethicon shall be entitled to deduct [*] of the direct costs
which Ethicon incurs in assuming such manufacturing responsibility
(it being understood that direct costs are intended to include the
costs of acquisition of facilities or equipment necessary for such
manufacture but are not intended to include the acquisition of raw
materials or normal and customary labor costs involved in such
manufacturing) (a) from royalties payable to Focal pursuant to
Section 6(d), or (b) in the event that Focal has resumed the
manufacture of Product(s) under this Section 7(1)(ii)(D), from that
portion of the Purchase Price equal to the royalty that would be
payable to Focal pursuant to Section 6(d) if Focal were not
supplying such Product(s), provided, however, that in no event shall
such royalty or such portion of the Purchase Price be reduced in any
quarter by more than [*] provided further that any portion of a
deduction that is not available for the quarter due to the foregoing
limitation shall be carried forward and deducted from payments
otherwise due hereunder for subsequent quarters. Notwithstanding the
foregoing, Focal's right to resume the manufacture of Product(s)
under this Section 7(1)(ii)(D) shall always be subject to the terms
and conditions of any agreement between Ethicon and a third party
with respect to the interim manufacture of Product(s) entered into
during the period when Ethicon was responsible for such manufacture,
it being acknowledged that the terms and conditions which Ethicon
agrees to shall be determined in Ethicon's sole discretion, provided
that Ethicon, in negotiating such terms and conditions, shall
consider in good faith the expected length of the interruption in
Focal's ability to supply Product(s) as a result of the Event of
Force Majeure.
(E) Manufacture by Ethicon by Agreement Upon mutual agreement by the
parties, Ethicon shall have the right to assume responsibility for
the manufacture of any and all Products. In the event that Ethicon
exercises its right to manufacture Product(s) pursuant to this
Section 7(l)(ii)(E),
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then (1) the provisions of Section 7 shall no longer be applicable
to such Product(s), (2) Ethicon shall pay Focal a royalty on the
sale of such Product(s) at the applicable rate set forth in Section
6(d), and (3) Ethicon shall not be entitled to deduct from the
royalties payable to Focal pursuant to Section 6(d), any costs which
Ethicon incurs in assuming such manufacturing responsibility.
(iii) Manufacturing Technology Escrow. The parties shall enter into an
escrow agreement within sixty (60) days after the date of this
Agreement (to be attached to this Agreement as Exhibit J) with a
mutually acceptable escrow agent. Focal shall deposit the
Manufacturing Technology (such material to be updated no less than
annually and upon any material change therein) with respect to a
Product in an escrow account with such escrow agent within the
thirty (30) day period immediately preceding the anticipated
Regulatory Approval of such Product in the Territory. All fees of
the escrow agent associated with such escrow shall be shared equally
by the parties. Such Manufacturing Technology shall be released to
Ethicon only upon the occurrence of a Triggering Event. In the event
the escrow agreement is terminated, the parties shall enter into a
new escrow agreement with another mutually agreeable escrow agent.
(m) Light System. The parties acknowledge and agree that Ethicon shall have
the right to purchase light Systems directly from a third party
manufacturer. In the event that Ethicon elects to purchase Light Systems
from Focal, such purchases shall be on the following terms:
(i) Purchase Price. The purchase price for each Light System purchased
from Focal shall be equal to [*]. In the event that suppliers of a
Light System require advance deposits with purchase orders for such
Light System, Ethicon shall arrange for timely payment of such
deposits either directly or through Focal, at Ethicon's option.
(ii) Shipment and Purchase Orders. Given that the estimated time from the
date of Focal's purchase order for a Light System to
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receipt of such Light System at Focal is [*], Ethicon shall order
each Light System as far in advance as possible, but no earlier than
[*] days from the required delivery date. a addition, Ethicon shall
estimate the number of Light Systems it requires for use during the
initial twelve (12) months from first commercial sale of such Light
Systems in the Territory, and place orders for such quantities no
less than [*] days prior to the anticipated first commercial sale.
(iii) Warranties. Focal warrants that the Light System shall be free from
defects in workmanship or material for a period of one (1) year from
the date of receipt of such Light Systems by Focal. Focal's warranty
for light bulbs contained in the Light System shall be limited to
six (6) months from date received by Focal. If any Light System does
not conform to the above warranty, Focal shall be obligated to
repair or replace such Light System at its own expense, and ship
such repaired or replacement Light System back to either Ethicon or
the applicable customer at its own expense. All defective Light
Systems returned to Ethicon by customers which are covered by the
foregoing warranty shall be shipped to Focal at Focal's expense for
such repair or replacement.
(iv) Servicing. Focal shall provide directly or through a third party,
after-warranty servicing of the Light Systems. All service costs
provided by Focal or its designated service representative shall be
billed to the customer by Ethicon and Ethicon shall reimburse Focal
for all such service costs within thirty (30) days after the receipt
of payment by the customer for such servicing.
SECTION 8
GENERALLY APPLICABLE TERMS
(a) Representations and Warranties.
(i) Focal represents and warrants to Ethicon that:
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(A) each Product supplied by Focal pursuant to this Agreement
shall be (i) manufactured in accordance with the
Specifications, the Manufacturing Standards and applicable
Regulatory Approvals for such Product, and (ii) free from
defects in materials, design or workmanship;
(B) each Product sold to Ethicon by Focal pursuant to this
Agreement shall be free and clear of all liens, claims and
encumbrances of any nature;
(C) to Focal's knowledge, as of the effective date of this
Agreement, the manufacture, use or sale of the Initial
Products does not infringe any valid, issued patents or
copyrights, or involve misappropriation of any trade secrets
or proprietary rights of any person;
(D) to Focal's knowledge, as of the effective date of this
Agreement, with respect to the Products, there are no pending
or threatened suits, claims, or actions of any type whatsoever
asserted against Focal;
(E) as of the effective date of this Agreement, (i) the UT
Agreement is in full force and effect; (ii) to Focal's best
knowledge, the UT Agreement is not subject to any challenge,
claim, breach, default or other similar action or threat
thereof, (iii) Focal, and to Focal's best knowledge, UT, is in
compliance in all material respects with the UT Agreement, and
(iv) Focal has not received any communication related to the
UT Agreement which may materially impact Focal's rights
thereunder or Ethicon's rights under this Agreement;
(F) all presently filed Patents having claims covering or related
to the manufacture, sale or distribution of the Initial
Products are listed in Exhibit D;
(G) all necessary corporate and other authorizations, consents and
approvals which are necessary or required for the entering
into of this Agreement have been duly obtained; and
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(H) the entering into of this Agreement by Focal will not (i)
violate any provision of U.S., state or local law, statute,
rule or regulation or any ruling, writ, injunction, order,
judgment or decree of any court, administrative agency or
other governmental body or (ii) conflict with or result in any
breach of any of the terms, conditions or provisions of, or
constitute a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in
the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Focal,
under its organizational documents, as amended to date, or any
material note, indenture, mortgage, lease, agreement
(including, but not limited to, the UT Agreement), contract,
purchase order or other instrument, document or agreement to
which Focal is a party or by which it or any of its properties
or assets is bound or affected.
(ii) Ethicon represents and warrants to Focal that:
(A) all necessary corporate and other authorizations, consents and
approvals which are necessary or required for the entering
into of this Agreement have been duly obtained; and
(B) the entering into of this Agreement by Ethicon will not (i)
violate any provision of U.S., state or local law, statute,
rule or regulation or any ruling, writ, injunction, order,
judgment or decree of any court, administrative agency or
other governmental body or (ii) conflict with or result in any
breach of any of the terms, conditions or provisions of, or
constitute a default (or give raise to any right of
termination, cancellation or acceleration) under, or result in
the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Ethicon
under its organizational documents, as amended to date, or any
material note, indenture, mortgage, lease, agreement,
contract, purchase order or other instrument, document or
agreement in which Ethicon is a party or by which it or any of
its properties or assets is bound or affected.
(iii) Disclaimer. THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS
AGREEMENT ARE IN LIEU OF ALL
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OTHER REPRESENTATIONS AND WARRANTIES. FOCAL AND ETHICON DISCLAIM ALL
OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO
PRODUCTS, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL EITHER FOCAL OR
ETHICON BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL CONSEQUENTIAL OR
PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT BASED ON CONTRACT,
TORT OR ANY OTHER LEGAL THEORY.
(b) Indemnification. In order to distribute among themselves the
responsibility for claims arising out of this Agreement, and except
as otherwise specifically provided for herein, the parties agree as
follows:
(i) Focal agrees to defend and indemnify and hold Ethicon harmless
against any and all claims, suits, proceedings, expenses,
recoveries and damages, including court costs and reasonable
attorneys fees and expenses, arising out of, based on, or
caused by, the breach by Focal of any representation or
warranty contained in this Agreement, in each case except to
the extent that such arise from or are aggravated by acts of
or failure to act by Ethicon. Ethicon will promptly notify
Focal of any such claim or demand which comes to its
attention.
(ii) Ethicon agrees to defend and indemnify and hold Focal harmless
against any and all claims, suits, proceedings, expenses,
recoveries, and damages including court costs and reasonable
attorneys fees and expenses, in connection with any of the
Products sold by Ethicon or its Affiliates arising out of,
based on, or caused by (A) statements, whether written or
oral, made or alleged to be made by Ethicon or its Affiliates
on the packaging or labelling of any of the Products, or in
the advertising, publicity, promotion, or sale of any of the
Products, (B) the manufacture, storage, sale, shipment,
promotion or distribution of the Products by Ethicon or its
Affiliates, or (C) the breach by Ethicon of any representation
or warranty contained in this Agreement, in each case except
to the extent that such arise from or are aggravated by acts
of or failure to act by Focal. Focal will promptly notify
Ethicon of any such claim or demand which comes to its
attention.
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(c) Other Responsibilities of Focal. During the term of this Agreement,
Focal shall:
(i) Refer to Ethicon all customers' inquiries and correspondence
which it receives relating to the sale of the Products in the
Territory, as well as all correspondence or communications it
receives with respect to any malfunction or failure of any
Product;
(ii) Make available to Ethicon such information and knowledge in
Focal's possession concerning the Products, their qualities
and uses, as will aid Ethicon in improving the sales of
Products;
(iii) Adhere to all law, rules and regulations applicable to the
manufacture and supply of the Products under this Agreement.
(d) Insurance. Focal agrees to procure and maintain in full force and
effect during the term of this Agreement valid and collectible
insurance Policies in connection with the supply of Products
pursuant to this Agreement, which policies shall provide for the
type of insurance and amount of coverage described in Exhibit K.
Upon Ethicon's request, Focal shall provide to Ethicon a certificate
of coverage or other written evidence reasonably satisfactory to
Ethicon of such insurance coverage.
(e) Term.
(i) This Agreement shall remain in effect for a period of ten
(10) years from the date of this Agreement and may be renewed
thereafter for successive additional periods of one (1) year
each by Ethicon upon at least ninety (90) days' notice prior
to the expiration of the applicable period; provided, however,
that, unless terminated earlier by Ethicon in accordance with
the terms of this Agreement, solely for purposes of that part
of the Territory covered by the E.U., the exclusivity of the
Patent and Know-How licenses granted pursuant to Section
3(a)(i) shall remain exclusive only for (A) ten (10) years
from the date of First Commercial Sale in the E.U. of any
Product manufactured by or on behalf of Ethicon with respect
to Know-How and (B) for the life of any Existing Patents
issued in the applicable E.U. country with respect to such
Existing Patent.
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(ii) In addition to the foregoing, Ethicon may terminate this
Agreement upon written notice to Focal on or after the third
anniversary of this Agreement upon no less than 12 month's
prior written notice to Focal.
(iii) Focal expressly acknowledges that the termination provisions
contained in this Section 8(e) are reasonable, considering the
intended nature and scope of this Agreement, and considering
the investments and undertakings required on the part of
Ethicon in connection herewith.
(f) Events of Default. The occurrence of any one or more of the
following acts, events or occurrences shall constitute an ""Event of
Default" under this Agreement.
(i) either party becomes the subject of a Bankruptcy Event; or
(ii) either party breaches any material provision of this Agreement
and fails to remedy such default within thirty (30) days after
receipt of notice thereof; provided, however, and subject to
Section 7(1)(ii)(A)(2), that in the event of such a breach
which cannot be remedied within such thirty (30) day period,
so long as the breaching party is diligently attempting to
remedy such breach, an Event of Default shall not have
occurred until three (3) months after notice of such breach
(unless such breach is cured during such period).
(g) Certain Rights After an Event of Default. In addition to those
rights which may be available at law or equity, the following
additional rights shall be available upon the occurrence of an Event
of Default under this Agreement or in the event that Focal
terminates this Agreement pursuant to Section 7(e)(iii):
(i) If the Event of Default is caused by Ethicon, Focal may
terminate this Agreement upon written notice thereof to
Ethicon. Upon termination of this Agreement by Focal upon the
occurrence of an Event of Default or pursuant to Section
7(e)(iii), Ethicon shall have one hundred eighty (180) days in
which to sell out its stock of any Products it possesses or
has committed to purchase under this Agreement, unless Focal
has
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informed Ethicon in such termination notice that it desires to
purchase such stock. In the event Focal provides such notice,
Focal shall repurchase such stock (except for stock which is
required by Ethicon in order to fill purchase orders received
prior to the termination of the Agreement) at Ethicon's landed
cost (the Purchase Price, plus all shipping, handling, customs
and other costs incurred by Ethicon to have such Product reach
Ethicon's facilities). In addition, upon any such termination
Focal shall have the right to cross-reference any Regulatory
Approval held in the name of Ethicon.
(ii) If the Event of Default is caused by Focal, Ethicon may, in
its discretion, either (i) terminate this Agreement in its
entirety or (ii) if the Event of Default arises out of a
breach by Focal of the supply obligations with respect to a
Product set forth in Section 7, assume the responsibility for
the manufacture of such Product pursuant to Section
7(1)(ii)(A).
SECTION 9
MISCELLANEOUS
(a) Confidentiality; Press Releases.
(i) Ethicon and Focal will be exchanging information relating to
the Products at the inception of and from time to time during
the term of this Agreement. Any such information which is
considered by the disclosing party to be confidential will be
identified in writing as confidential information or, if
disclosed orally or in another non-written manner, shall be
confirmed in writing as being confidential promptly after the
disclosure thereof. The party receiving such information will
maintain the information in confidence using the same standard
of care it uses to maintain its own information in confidence.
Such obligation of confidentiality shall not apply to
information which (i) is known to the receiving party prior to
the disclosure, (ii) is publicly known as of the date of the
disclosure, (iii) becomes publicly known after the date of
disclosure through no fault of the receiving party, (iv) is
received from a third party who has no obligation of
confidentiality to the disclosing party or (v) is developed
independently by the receiving party. Such
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obligation of confidentiality shall continue for a period of
seven (7) years from the date of disclosure of the
confidential information.
(ii) Notwithstanding the foregoing Section 9(a)(i), Ethicon shall
be permitted to disclose to its wholesalers and other direct
customers such confidential information relating to the
Products as Ethicon shall reasonably determine to be necessary
in order to effectively market and distribute the Products,
provided that such entities undertake the same confidentiality
obligation as Ethicon has with respect to Focal's confidential
information.
(iii) Neither party will originate any publicity, news release, or
other public announcement, written or oral, whether to the
public press or otherwise, relating to any amendment hereto or
to performance hereunder or the existence of an arrangement
between the parties, without the prior written approval of the
other party, such approval not to be unreasonably withheld.
(iv) Neither party shall use the name of the other for advertising
or promotional claims without the prior written consent of the
other party.
(b) Survival. Those provisions of this Agreement dealing with rights and
obligations upon and/or after termination of this Agreement shall
survive termination of this Agreement to the extent necessary to
give effect to such provisions.
(c) Penalties. If either party terminates this Agreement in accordance
with the terms herein, the terminating party shall owe no penalty or
indemnity to the terminated party on account of such termination.
(d) Independent Contractor. Focal is an independent contractor and shall
have no authority to obligate Ethicon in any respect nor hold itself
out as having any such authority. All personnel of Focal shall be
solely employees of Focal and shall not represent themselves as
employees of Ethicon.
(e) Binding Effect; Benefits; Assignment.
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(i) This Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective permitted
successors and assigns. Nothing contained herein shall give to
any other person any benefit or any legal or equitable right,
remedy or claim.
(ii) Anything contained herein to the contrary notwithstanding,
this Agreement shall not be assignable by Focal, without the
prior written consent of Ethicon, except that with respect to
the assignment of this Agreement to an Affiliate of Focal,
such consent will not be unreasonably withheld.
(iii) Ethicon shall be permitted to assign all or part of this
Agreement (i) to any Affiliate of Ethicon with an emphasis on
intraoperative wound closure upon written notice to Focal,
(ii) upon the sale of all or substantially all of the assets
or business of Ethicon, to the successor of such assets or
business upon written notice to Focal, and (iii) to such other
Affiliate of Ethicon or third party as Ethicon shall
determine, such assignment to be subject to Focal's consent,
such consent not to be unreasonably withheld. In the case of
all such assignments, such assignment shall be subject to the
assignee agreeing in writing to assume the benefits and
obligations of this Agreement.
(f) Entire Agreement, Amendments. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect
to its subject matter. This Agreement may be amended only by a
written instrument duly executed by the parties hereto. To the
extent of any conflict or inconsistency between this Agreement and
any purchase order, purchase order release, confirmation, acceptance
or any similar document, the terms of this Agreement shall govern.
(g) Remedies. Unless otherwise expressly provided, all remedies
hereunder (including, but not limited to, those remedies provided
for in Section 8(g) hereof), are cumulative, are in addition to any
other remedies provided for by law and may, to the extent permitted
by law, be exercised concurrently or separately, and the exercise of
any one remedy shall not be deemed to be an election of such
-69-
remedy or to preclude the exercise of any other remedy.
(h) Force Majeure.
(i) The obligations of Focal and Ethicon hereunder shall be
subject to any delays or non-performance caused by acts of
God, earthquakes, fires, floods, explosion, sabotage, riot,
accidents; orders of, or failure to issue all necessary
permits or licenses by, regulatory, governmental, or military
authorities; strikes, lockouts or labor trouble; perils of the
sea; or any other similar cause beyond the reasonable control
of either party (an "Event of Force Majeure"), and each party
shall be under no liability to the other for anything which
would constitute a breach of this Agreement arising by reason
of such matters. If either party is unable to perform one of
its obligations under this Agreement as a result of an Event
of Force Majeure, it shall so notify the other party in
writing as soon as reasonably practicable, but in no event
later than ten (10) days following the date by which such
obligation was to have been fulfilled (a "Force Majeure
Notice"). The party which is not performing its obligation
under this Agreement as a result of an Event of Force Majeure
shall use diligent efforts to resume compliance with this
Agreement as soon as possible. Should the Event of Force
Majeure continue unabated for a period of thirty (30) days or
more, the parties shall enter into good faith discussions with
a view to alleviating its affects or to agreeing upon such
alternative arrangements as may be fair and reasonable having
regard to the circumstances prevailing at that time.
(ii) In the event that such alternative arrangements cannot be
agreed upon with thirty (30) days after occurrence of the
Event of Force Majeure, and in the event such Event of Force
Majeure does not result in an interruption of supply to
Ethicon or its Affiliates of the Products in accordance with
the terms of this Agreement, then the non-performing party
shall continue to diligently attempt to alleviate such Event
of Force Majeure until it is removed or eliminated.
(i) Notices. All notices, claims, certificates, requests, demands and
other communications hereunder shall be in writing and shall be
delivered personally or sent by facsimile transmission, air courier,
or registered or certified
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mail, return receipt requested, addressed as follows:
if to Focal to:
Focal, Inc.
Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: President
Fax: 000-000-0000
with a copy to:
Xxxx and Xxxx
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax: 000-000-0000; and
if to Ethicon to:
Ethicon, Inc.
Xxxxx 00
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Vice President, Growth Technologies
and New Business Development
Fax: 0-000-000-0000
with a copy to:
Office of General Counsel
Xxxxxxx & Xxxxxxx
One Xxxxxxx & Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxx Xxxxxx 00000 X.X.X.
Fax: 0-000-000-0000;
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or to such other address as the party to whom notice is to be given
may have furnished to the other parties in writing in accordance
herewith. Any such communication shall be deemed to have been
delivered (i) when delivered, if delivered personally, (ii) when
sent (with confirmation received), if sent by facsimile transmission
on a business day, (iii) on the first business day after dispatch
(with confirmation received), if sent by facsimile transmission on a
day other than a business day, (iv) on the third business day after
dispatch, if sent by air courier, and (v) on the seventh business
day after mailing, if sent by mail.
(j) Waivers. It is further understood and agreed that no failure or
delay by either party hereto in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or
further exercise of any right, power or privilege hereunder.
(k) Counterparts. This Agreement may be executed in any number of
counterparts, and execution by each of the parties of any one of
such counterparts will constitute due execution of this Agreement.
Each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute but
one agreement.
(l) Headings. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
(m) Governing Law; Dispute Resolution.
(i) Excepting only actions and claims relating to actions
commenced by a third party against Focal or Ethicon
(including, without limitation, actions for injuries caused by
a Product, or in respect to a patent infringement claim), any
controversy or claim arising out of or relating to this
Agreement, or the parties' decision to enter into this
Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the arbitration rules of the
American Arbitration Association, and judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
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(ii) The arbitration shall be held before a panel of three (3)
arbitrators, one each being selected by Focal and Ethicon, and
the third being selected by such two arbitrators. Arbitration
shall be in the Borough of Manhattan, New York City, New York,
and the arbitrators shall apply the substantive law of the
State of New Jersey.
(iii) It shall be the duty of the arbitrators to set dates for
preparation and hearing of any dispute and to expedite the
resolution of such dispute. The arbitrators shall permit and
facilitate discovery, taking into account the needs of the
parties and the desirability of making discovery expeditious
and cost-effective. The arbitrators will set a discovery
schedule with which the parties will comply and attend
depositions if requested by either party. The arbitrators will
entertain such presentation of sworn testimony or evidence,
written briefs and/or oral argument as the parties may wish to
present; however, no testimony or exhibits will be admissible
unless the adverse party was afforded an opportunity to
examine such witness and to inspect and copy such exhibits
during the pre-hearing discovery phase. The arbitrators shall
among his other powers and authorities, have the power and
authority to award interim or preliminary relief.
(iv) The arbitrators shall not award either party punitive damages
and the parties shall be deemed to have waived any right to
such damages. A qualified court reporter will record and
transcribe the proceedings. The decision of the arbitrators
will be in writing and judgment upon the award by the
arbitrators may be entered into any court having jurisdiction
thereof. Prompt handling and disposal of the issue is
important. Accordingly, the arbitrators are instructed to
assume adequate managerial initiative and control over
discovery and other aspects of the proceeding to schedule
discovery and other activities for substantially continuous
work, thereby expediting the arbitration as much as is deemed
reasonable to him, but in all events to effect a final award
within 365 days of the arbitrators' selection or appointment
and within 20 days of the close of evidence.
(v) The proceedings shall be confidential and the arbitrators
shall issue appropriate protective orders to safeguard both
parties'
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confidential information. The fees of the arbitrators shall be
paid by the losing party which shall be designated by the
arbitrators. If the arbitrators are unable to designate a
losing party, they shall so state and the fees shall be split
equally between the parties.
(n) Severability. In the event that any provision of this Agreement
would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more
narrowly drawn so as not to be invalid, prohibited or unenforceable
in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of
this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
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IN WITNESS WHEREOF, duly authorized representatives of the parties hereto
have duly executed this Agreement as of the date first above written.
ETHICON, INC. FOCAL, INC.
By: /s/ Xxxxxxx X. X'Xxxxx 1/3/97 By: /s/ Xxxxx X. Xxxxxxx 1/2/97
---------------------- --------------------
Name: Xxxxxxx X. X'Xxxxx Name: Xxxxx X. Xxxxxxx
Title: Vice President, Title: President and CEO
Growth Technologies and
New Business Development
ORIGINAL
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EXHIBIT A
DELIVERY SYSTEM
Summary:
The Lung Sealant Product and or the Dural Sealant Product are applied to
tissue via a Delivery System consisting of separate applicators for the
primer and sealant solutions.
[*]
* Confidential treatment has been requested for marked portion
EXHIBIT B -- DURAL SEALANT FORMULATION
Summary:
The Dural Sealant Formulation consists of a crosslinkable hydrogel that can
be crosslinked by IN SITU photo-polymerization. It is designed to be faster
absorbing and exhibit less swelling than the Lung Sealant Formulation,
making it particularly useful for application to tissue such as the dura. It
is anticipated that the dosage size will be adequate for a single procedure
[*] each for the separate primer and sealant formulations.
[*]
* Confidential treatment has been requested for marked portion
EXHIBIT C--Lung Sealant Formulation
Summary:
The Lung Sealant Formulation consists of a crosslinkable hydrogel that can be
crosslinked by IN SITU photo-polymerization. The Lung Sealant Formulation is
applied as a laminate composed of a primer layer and a sealant layer. [*]
[*]
* Confidential treatment has been requested for marked portion
EXHIBIT D
PATENTS
Four patent families are covered by this agreement.
1. PHOTOPOLYMERIZABLE BIODEGRADABLE HYDROGELS AS TISSUE CONTACTING
MATERIALS AND CONTROLLED RELEASE CARRIERS, by X. X. Xxxxxxx, X. X. Xxxxxx,
and A. S. Xxxxxxx.
Licensed from the University of Texas (UTSB 496)
Focal Series 010
[*]
Two issued U.S. patents: 5,410,016, 5,567,435; [*]
2. GELS FOR ENCAPSULATION OF BIOLOGICAL MATERIAL, by X. X. Xxxxxxx,
X. X. Xxxxxx, A. S. Xxxxxxx and X. X. Xxxxx.
Licensed from the University of Texas (UTSB 493)
Focal Series 009
[*]
Two issued U.S. patents 5,529,914, 5,573,934; [*]
3. INITIATOR PRIMING FOR IMPROVED ADHERENCE OF GELS TO SUBSTRATES,
by X. X. Xxxxxxxx, A. S. Xxxxxxx and others.
Owned by Focal (note: some divisionals may also be assigned to U. Texas,
where priority to USTB 493 or 496 is appropriate).
Focal Series 110
[*]
4. APPARATUS & METHOD FOR LOCAL APPLICATION OF POLYMERIC MATERIAL TO TISSUE,
by Xxxxxxx X. Xxxx, Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxx, and Vae Sun
Owned by Focal
Focal Series 012
[*]
* Confidential treatment has been requested for marked portion
EXHIBIT E
[Intentionally omitted]
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EXHIBIT F
ETHICON STANDARDS
ATTACHMENTS:
- Ethicon Company Policy for External Manufacturing
- Ethicon Company Procedure for External Manufacturers
- J&J Guideline - Submission of Contract Sterilizer Validation Data
EXHIBIT G
Part I
PERCENT OF NET SELLING PRICE NET SALES FOR A PRODUCT
---------------------------- ------------------------
[*] $0 to [*] million
[*] greater than [*] million to [*] million
[*] greater than [*] million to [*] million
[*] greater than [*] million to [*] million
[*] greater than [*] million to [*] million
[*] greater than [*] million to [*] million
[*] greater than [*] million
Part II
PERCENT OF NET SELLING PRICE NET SALES FOR A PRODUCT
---------------------------- ------------------------
[*] $0 to [*] million
[*] greater than [*] million to [*] million
[*] greater than [*] million to [*] million
[*] greater than [*] million to [*] million
[*] greater than [*] million to [*] million
[*] greater than [*] million
* Confidential treatment has been requested for marked portion
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EXHIBIT H
INITIAL SPECIFICATIONS
(LUNG SEALANT PRODUCT)
FOCAL, INC.
PRODUCT DEVELOPMENT SPECIFICATION
PRODUCT: Ethicon Lung Sealant System, Commercial Product
SPEC. NO. DP001 REVISION NO. 000
PREPARED BY: Xxxx Xxxxxx DATE OF ORIG. PREP. October 11, 1996
REVISION DATE: 13DEC96
1. PRODUCT DESCRIPTION:
The Lung Sealant Product is designed at seal air leaks created during open
pulmonary surgical procedures. The Lung Sealant Product is delivered as a
two component system consisting of a lower viscosity primer and a higher
viscosity sealant. The applied materials are polymerized using a custom
visible light source. The materials hydrolyze and are absorbed by the body.
The sealant system consists of 4 sub-systems:
- Primer and Sealant formulations
- Separate applicators for applying primer and sealant
- Light Wand to provide directed light energy to the application site
- Light source
2. SPECIFICATION:
See attachment
APPLICATION SYSTEM
DESIGN SPECIFICATION
REVISION: gkDECEMBER 19, 1996
2.0 SYSTEM SPECIFICATIONS.
2.1 PRIMER AND SEALANT
[*]
2.2 APPLICATORS
Separate applicators are used to apply primer and sealant. The applicators'
attributes are listed below:
PRIMER APPLICATOR
[*]
[*]
* Confidential treatment has been requested for marked portion
[*]
SEALANT APPLICATOR
[*]
2.3 PROCEDURE KIT PACKAGING
[*]
2.4 LIGHT WAND
[*]
* Confidential treatment has been requested for marked portion
[*]
2.5 LIGHT SOURCE [*]
[*]
* Confidential treatment has been requested for marked portion
EXHIBIT I
Final Specifications
--------------------
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EXHIBIT J
Escrow Agreement
----------------
-85-
EXHIBIT K
INSURANCE COVERAGE
Upon First Commercial Sale, Focal will obtain and maintain the following
insurance coverage:
- Commercial General Liability coverage in the amount of [*] million U.S.
- Product Liability Insurance coverage in the amount of [*] million U.S.
per occurrence, [*] million in aggregate.
- As Focal's business continues to grow after First Commercial Sale, Focal
will consider in good faith securing additional insurance coverage as
appropriate, taking into consideration increases in aggregate amounts of
Commercial General Liability and Product Liability Coverage, up to [*]
million for each.
Such policies shall name Ethicon, Inc. as additional insured and shall
provide for 30 days written notice of cancellation. Focal shall annually
provide Ethicon with a Certificate of Insurance evidencing required
coverage.
* Confidential treatment has been requested for marked portion
