EXCLUSIVE DISTRIBUTION AGREEMENT
THIS AGREEMENT is made the ____ day of _________________________, 2000
---- ---------
BETWEEN
-------
THE FEMALE HEALTH COMPANY, a company organized under the laws of the State
of Wisconsin, having its place of business at 875 North Michigan Ave, Suite
3660, Chicago, Illinois 60611 (hereinafter referred to as "FHC"); and
MAYER LABORATORIES, INC., a company organized under the laws of the State
of California, having its principal offices at 646 Kennedy Street, Building C,
Oakland, California 94606, (hereinafter referred to as "MLI")
WITNESSETH:
WHEREAS, FHC and MLI wish to enter into an Agreement whereby MLI gains the
exclusive right to market FHC's Product listed in Appendix A (the "Product")
within the United States of America (the "Territory");
WHEREAS, FHC has been granted the exclusive license in the Territory, to import,
market and sell the Product; and
WHEREAS, MLI possesses an organization to market, sell and distribute the
Product in the Territory.
NOW THEREFORE, in consideration of the mutual covenants and obligations set
forth herein, the parties hereto have agreed and do hereby agree as follows:
IT IS HEREBY AGREED
-- -- ------ ------
1. APPOINTMENT
-----------
1.01 Effective as of October 1, 2000 (the "Effective Date") and subject to
the terms and conditions of this Agreement, FHC appoints MLI as its sole and
exclusive distributor of the Product, boxed and labeled as Reality(R), in the
Territory, including sales to drug, food, grocery, natural products, adult
market, retail military, electronic/internet commerce, and mass merchandisers
(the "Distributed Product"), but excluding sales in the Territory to
international non-profit organizations (such as UNAIDS, WHO, IPPF or the like)
and city, county and state agencies, not-for-profit agencies and community based
organizations receiving public funding (the Public Sector), and MLI accepts this
appointment. Neither MLI nor its Affiliates will market and/or distribute
and/or otherwise handle or have the
<PAGE>
Product marketed and/or distributed and/or otherwise handled outside the
Territory without prior written consent from FHC. "Affiliate(s)", as to either
party, means any legal entity directly or indirectly controlling, controlled by
or under common control with a party to this Agreement, and for purposes of this
definition, "control" shall mean the power to direct or cause direction of the
management and policies of an entity.
1.02 All correspondence, requests for information and/or samples, orders
etc. that MLI might receive from outside the Territory or for Product other than
Distributed Product shall be forwarded to FHC.
1.03 Subject to Section 1.01, FHC agrees to refer to MLI all inquiries,
original correspondence and orders received by FHC during the period of this
Agreement, directly or indirectly, pertaining to sales or the possible
distribution of Distributed Product in the Territory.
1.04 Subject to Section 9.01, MLI shall purchase all its requirements of the
Distributed Product from FHC or its designated Affiliate.
2. COMMENCEMENT OF SALE
----------------------
2.01 MLI shall commence actual sale and distribution of the Product as of
the Effective Date.
3. TERM
----
3.01 This Agreement shall be for an initial period of seven (7) years
following the Effective Date and shall continue thereafter (subject to earlier
termination under Sections 20.01 and 20.02 below) for additional one (1) year
periods unless and until terminated (i) by either party giving to the other not
less than ninety (90) days written notice prior to the end of the initial term
or any renewal or (ii) by a successor to substantially all of the assets of FHC
or the conduct of the business of FHC in the Territory.
4. MARKETING SUPPORT
--------- -------
4.01 MLI shall, at its own expense and subject to its own commercial
judgement, at all times during the term of this Agreement on such basis as may
be reasonably necessary to actively promote and endeavor to increase sales of
the Distributed Product throughout the Territory to all trade sectors
potentially relevant to the Distributed Product.
2
<PAGE>
4.02 MLI shall:
(a) In addition to its obligations in Section 15.01 below, submit to FHC,
for FHC's review and advice, a marketing plan on or before each October 1st
following the Effective Date concerning its marketing and promotion activities,
including internet web site references to the Product, for the twelve months
starting the following January 1st (the "Marketing Plan"). The Marketing Plan
shall include a forecast of MLI's sales and purchases of the Product in the
twelve months in question. FHC shall provide MLI with FHC's suggested changes,
if any, within thirty (30) days following receipt of the Marketing Plan.
(b) employ such numbers of staff having such qualifications and experience
as may be necessary to enable MLI to carry out its obligations under this
Agreement;
(c) establish and maintain adequate sales and marketing systems; and
(d) cooperate with and provide such assistance to FHC as may be necessary to
establish direct communication and flow of information with MLI's electronic
internet web site.
4.03 FHC will make available to MLI Jack Weissman, during the period that he
remains in the employ of FHC, to assist in the transition of activities and
responsibilities with respect to customer accounts from FHC to MLI. To the
extent such assistance is provided on or after the Effective Date, MLI shall
reimburse FHC, within ten (10) days of receipt of invoice, in an amount equal to
the annualized salary of such employee prorated on the basis of the time used,
together with any related costs and expenses incurred, in providing such
assistance.
5. ADVERTISING & PROMOTION
-------------------------
5.01 Without affecting MLI's freedom to select the prices and other terms on
which the Product is sold, MLI shall, before publishing advertising or
promotional material of the Product which has not already been reviewed by FHC,
present such material to FHC for its review and any suggested changes.
5.02 MLI may develop, at its expense, proprietary promotional materials for
the product, which shall be the property of MLI, provided that such materials
shall be used only with respect to MLI's activities as distributor under this
Agreement.
5.03 MLI shall provide FHC with ten copies of each item of promotional
material referred to in Sections 5.01 and 5.02 above upon its production.
3
<PAGE>
5.04 During the first twenty-four (24) month period of the term of this
Agreement following the Effective Date, and each twelve (12) month period
thereafter, MLI shall spend at least $250,000 and $150,000, respectively, in
marketing (as defined in Appendix D attached hereto), media and trade promotion
activities; such activities and related expenditures to be included in MLI's
Marketing Plans and subject to Section 4.02(a) above.
5.05 In the event of any action either on the part of governmental or other
authorities, "activists", consumer groups, lawyers, competitors, members of the
public, physicians or institutions - alleging inappropriate, unlawful or
unsubstantiated statements in any text prepared or suggested by FHC in relation
to the Product, either in leaflets, sales manuals, promotional materials,
labeling, or packaging material or the like, MLI shall refrain from entering
into any correspondence, defense, polemics, discussion or admission, except for
acknowledging receipt and reporting to FHC within 7 days for negotiation, unless
in the reasonable opinion of MLI it is necessary for it to take immediate action
in order to prevent damage being done to the reputation of the Product, or MLI,
in the Territory; and, in such circumstances, FHC shall be immediately informed
of the allegations raised and the manner in which they have been dealt with by
MLI.
6. INVENTORY STOCK & MINIMUM PURCHASES
---------------------------------------
6.01 Following the Effective Date:
(a) MLI shall maintain a minimum stock of Distributed Product, which will be
no less than an amount sufficient in MLI's reasonable, judgement to meet
customers' requirements.
(b) During each year (12-month period) of the initial seven year term of
this Agreement, MLI shall purchase from FHC and/or FHC's Affiliate, The Female
Health Company (UK) Plc ("FHC(UK)"), not less than six hundred sixty thousand
(660,000) Units (a "Unit" consisting of one (1) Product, regardless of
packaging). Not less than ninety (90) days prior to the end of the initial term
of this Agreement or any renewal period, the parties shall determine, in good
faith, the appropriate minimum number of Units to be purchased by MLI during
each renewal period thereafter. If the parties are unable to agree upon a
minimum number of Units for any renewal period, the minimum number of Units
applicable for such period shall be the greater of six hundred sixty thousand
(660,000) units or seventy percent (70%) of the number of Units purchased by MLI
during the prior twelve (12) month period.
(c) MLI shall purchase and take receipt of all the Distributed Product held
at FHC's distribution center, Distribution Systems & Services Corporation, St.
Paul, Minnesota, not more than ninety (90) days following the date of this
Agreement first set forth herein, upon the terms contained in Section 9 below.
MLI shall arrange, at its expense and risk, for shipment and delivery of such
Distributed Product to MLI's facilities.
4
<PAGE>
Subject to Section 6.01(a) above, MLI shall determine the amount of packages
containing three (3) of the Units it desires to purchase and FHC shall retain
the remaining inventory of such packaged Units located at FHC's distribution
center, with no future requirement for MLI to purchase the remaining inventory
of said packages containing three (3) of the units.
(d) On and after the Effective Date, MLI shall be responsible for handling
and acceptance of returns of Distributed Product. Notwithstanding the
aforementioned, in the first twelve (12) months after the Effective Date, if the
number of units of the Product returned to MLI exceeds ten percent (10%) of the
units sold by FHC during the twelve (12) months prior to the Effective Date, FHC
agrees to replace, at no cost to MLI, fifty percent (50%) of all the returned
units past their respective expiration date (with satisfactory proof thereof)
that exceed the ten percent (10%). Subject to Section 15.02, MLI shall provide
a report of returned Product, which shall be the basis of calculation; and, in
the event that FHC is to provide replacement Product, it shall use all
reasonable efforts to provide replacement on a first priority basis.
7. COMPETING PRODUCTS
-------------------
7.01 During the term of this Agreement and any renewal thereof, neither MLI
nor any of its Affiliates shall market or sell in the Territory any similar
products that compete with the Product, which in this context is defined as: any
other female condom.
7.02 MLI represents that its present product range does not include any
products that may compete with the Distributed Product in terms of the above
definition.
8. FORECASTS AND ORDERS
--------- --- ------
8.01 MLI shall submit in writing to FHC(UK), with copy to FHC, on a monthly
basis:
(a) firm orders for the Distributed Product to be supplied within the third
month following the month in which the order is submitted which order shall
specify the date on which delivery of such order is required;
(b) detailed forecasts of its requirements for the Distributed Product to be
supplied in the nine months thereafter, subject to FHC(UK)'s acceptance based
upon FHC(UK)'s manufacturing capacity and production schedule; and
(c) firm orders, during the first nine (9) months of each 12-month period of
the term of this Agreement or any renewal thereof, for not less than forty-five
percent (45%) of the minimum number of Units specified in Section 6.01(b).
5
<PAGE>
8.02 All orders for the sale of the Distributed Product to MLI shall be
subject to the terms of this Agreement and to FHC(UK)'s standard terms and
conditions of sale from time to time in force, and no terms of MLI shall apply
or have any effect, whether such terms appear on a written order or otherwise.
In the case of any inconsistency between FHC(UK)'s standard terms and conditions
and this Agreement, the terms of this Agreement shall prevail. The terms and
condition of sale may change upon the written consent of both MLI and FHC.
8.03 In the event FHC(UK) cannot ship product according to schedule, it will
notify MLI as soon as practicable and provide a specific delivery schedule. If
delays in shipment exceed thirty (30) days, FHC(UK) shall reimburse MLI for air
freight charges, as to that portion exceeding freight charges which would have
been otherwise paid by MLI under Section 9, with respect to any product that is
urgently required by MLI. The foregoing is conditioned upon the quantity of
product ordered being within the forecasts submitted by MLI under Section
8.01(b).
9. PRICES
------
9.01 During the term of this Agreement and any renewal thereof, MLI shall
purchase its requirements of the Distributed Product from FHC(UK). The
Distributed Product supplied by FHC(UK) shall bear FHC's trademark, Reality(R)
or any future trademark approved by the parties, and shall, subject to Section
9.02 below, be supplied to MLI at the following prices (in Pounds Sterling):
Packages containing three (3) Units each, or six (6) Units each:
50p (0.50 pounds) per Unit.
Bulk: 42p (0.42 pounds) per Unit
Bonus pack: Following Effective Date Price per Unit
-------------------------- ----------------
1st through 3rd month 46p (0.46 pounds)
4th through 15th month 48p (0.48 pounds)
16th month + 50p (0.50 pounds)
9.02 The prices set forth in Section 9.01 above shall be subject to future
price adjustments after twelve (12) months following the Effective Date as to
3-and 6-packs, and after the initial seven year term of this Agreement as to the
bonus pack, from time to time by FHC giving MLI not less than six (6) months
written notice.
9.03 Unless otherwise agreed specifically in writing, delivery is effected
EX WORKS FHC(UK) London (as defined by INCOTERMS 2000 Edition), with payment net
30-days from the date of shipment by FHC(UK).
6
<PAGE>
9.04 FHC and FHC(UK), as the case may be, reserve the right to charge any
additional costs incurred in repackaging and/or storing Distributed Product
ordered by MLI.
10. DELIVERY
--------
10.01 Delivery of the Distributed Product must be acknowledged by MLI by
signing the receipt documents provided by FHC, FHC(UK) or the carrier, as the
case may be.
10.02 FHC(UK) shall provide to MLI, prior to the arrival of any shipment by
courier, all documents required for the US Food and Drug Administration (FDA)
and US Customs clearance, including but not limited to, original invoice,
original Bill of Lading, factory Certificate of Analysis, packing slip.
10.03 MLI must notify FHC(UK), with copy to FHC, within 30 days :
(a) of the date of delivery of any short delivery or any other apparent loss
to the Distributed Product; and
(b) if delivery is delayed beyond the expected date of delivery;
provided that said 30-days shall be extended for such period as MLI, for reasons
beyond its control, shall not have access to the Distributed Product or shall
not have been reasonably expected to be aware of such short delivery or loss.
In the absence of such notice, the Distributed Product shall be conclusively
deemed to have been delivered.
10.04 MLI shall not be entitled to refuse to accept a delivery by reason
only of short or excess delivery unless the delivery is less than 90% of or
exceeds 110% of the volume of the Distributed Product ordered.
10.05 MLI shall notify FHC(UK), upon becoming aware of any Product that is
delivered damaged. Other than Distributed Product purchased by MLI pursuant to
Section 6.01(c), FHC(UK) shall deliver product to MLI that is packaged with an
expiration date of not less than four (4) years.
11. RISK AND PROPERTY
-------------------
11.01 Risk shall pass to MLI upon shipment of the Distributed Product in
accordance with Section 9.03 of this Agreement.
11.02 Title to the Distributed Product shall pass to MLI upon shipment. FHC
or FHC(UK) may claim a security interest in the shipment, as the case may be,
until payment in full has been made by MLI for the Distributed Product together
with any other sums payable in respect of the Distributed Product. MIL
authorizes FHC
7
<PAGE>
and FHC(UK), as MLI's agent, to prepare, execute and file in MLI's name
precautionary Uniform Commercial Code financing statements showing the interest
of FHC(UK) in the Distributed Product. MLI acknowledges that until such time,
it is in possession of the Product solely as bailee for FHC or FHC(UK) and that
the Distributed Product is held at MLI's risk.
11.03 At all times during which the Distributed Product is held at MLI's
risk, MLI shall keep all such Distributed Product fully insured in its own name
and at its own cost against all risk. Such insurance shall be for the full
replacement value of the Distributed Product free from any restriction or
excess.
12. STORAGE AND OUT OF CONDITION PRODUCTS
------------------------------------------
12.01 MLI shall store and transport the Distributed Product in conditions
which will preserve the Distributed Product in good condition, including:
(a) warehousing and product shipment operations for all Distributed Product;
and
(b) maintain complete records of all Product lots and shipped/destination of
Product by lot number.
12.02 MLI shall not sell any of the Distributed Product, which is out of
condition, or beyond the expiration date, for any reason. For this purpose "Out
of Condition" means Product (including packaging) which:
(a) FHC or FHC(UK) has informed MLI it would not regard as being saleable;
or
(b) has been damaged or has deteriorated; or
(c) is determined to be out of specification, as specified by the FDA, MLI
and agreed by FHC, or other recognized independent testing organization.
12.03 If Distributed Product in the possession of, under the control of, or
sold by MLI is or becomes Out of Condition, MLI shall, if requested by FHC or
FHC(UK), give all reasonable assistance to FHC and FHC(UK) in locating and
recovering the Out of Condition Product and preventing its sale to third
parties. MLI shall comply with any Product hold or Product recall requirements
practiced by FHC and FHC(UK), or required by the FDA or other applicable
government authority. With regard to the foregoing, the Distributed Product
supplied by FHC or FHC(UK) shall include the batch number and expiry date, or
such similar designations for Distributed Product identification as may be
appropriate.
8
<PAGE>
12.04 All action by MLI pursuant to this Section 12 shall be taken at its
own expense except in relation to Distributed Product that has been recalled by
FHC or FHC(UK), or that which has been determined to be out of specification by
the FDA, and not due to any action or omission on the part of MLI, its agents or
carriers. In the event that Product is so recalled and/or determined to be out
of specification, FHC agrees to replace Product, including costs for freight,
duty, Customs brokerage. In the event the FDA determines that Mayer cannot sell
the product in its warehouse, and FHC(UK) can not provide replacement due to
embargo, FHC shall fully refund MLI the cost for all inventory and all returns
resulting from such event.
12.05 If distributed Products are recalled by FHC or FHC(UK), and/or if
Distributed Products are found to be out of specification and not due to any
action or omission on the part of MLI, its agents or carriers, FHC agrees to use
all reasonable efforts to replace Product on a first priority basis.
13. COMPLIANCE WITH FEDERAL AND LOCAL LAWS
-------------------------------------------
13.01 MLI shall comply with (and keep FHC fully informed of) all applicable
laws, regulations, industry standards, Codes of Practice, and other voluntary
controls, including but not limited to pre-marketing approval requirements,
concerning the Distributed Product in the Territory and any changes therein,
including, but without affecting the general nature of this provision, obtaining
at its own expense any license, permission or registration of whatever nature
relating to the importation, marketing, sale and use of the Distributed Product
by MLI.
13.02 FHC shall maintain the pre-market approvals for the Product,
consistent with all requirements of the FDA. In the event that the FDA takes
action against FHC, FHC(UK) or the Product, FHC shall immediately notify MLI of
said action. In the event that the FDA takes action against FHC(UK), or the
Product, embargoing the Product from sale, it shall be then considered out of
specification, according to Section 12.04.
13.03 FHC(UK) shall provide a copy of its FDA registration each year, if
applicable, to MLI. In the event that FHC(UK) undergoes and FDA inspection and
audit, it shall notify MLI of said inspection and provide MLI with a copy of any
Form 483, or Warning Letter that might result from said audit.
13.04 FHC shall have the right, upon reasonable notice and during normal
business hours, to inspect the facilities and records of MLI relating to the
Distributed Product to assure compliance with the terms and conditions of this
Agreement.
13.05 FHC agrees to indemnify and hold harmless MLI, its associated
companies and its respective directors, officers and employees against any and
all claims, demands, proceedings, losses, costs and expenses which may be
brought against, suffered or incurred by MLI or its respective directors,
officers and employees in consequence
9
<PAGE>
of any action, legal proceeding, resulting from the FDA determining that the
Product has been found to be unsafe due to the negligence, act or omission of
FHC or FHC(UK).
14. PRODUCT LIABILITY AND PRODUCT REPLACEMENT
---------------------------------------------
14.01 FHC(UK) shall replace any Distributed Product that on delivery to MLI
is not in a saleable condition or is Out of Condition (in accordance with the
meaning given thereto in Section 12.02 above), other than due to any action or
omission on the part of MLI, its agents or carriers.
14.02 MLI agrees to indemnify and hold harmless FHC, its associated
companies and its respective directors, officers and employees against any and
all claims, demands, proceedings, losses, costs and expenses which may be
brought against, suffered or incurred by FHC or its or their respective
directors, officers and employees, in consequence of any negligence, or breach
of this Agreement, on the part of MLI or any of its employees or agents, in
storing, selling, promoting or distributing the Product, and any third-party
claims arising out of their actions, or lack of action under this Agreement.
14.03 FHC agrees to indemnify and hold harmless MLI, its associated
companies and its respective directors, officers and employees against any and
all claims, demands, proceedings, losses, costs and expenses which may be
brought against, suffered or incurred by MLI or its respective directors,
officers and employees in consequence of any negligence, or breach of this
Agreement on the part of FHC, any third-party claims arising out of their
actions, or lack of action under this Agreement, defective Product supplied by
FHC hereunder which cause death or personal injury.
14.04 Without prejudice to Section 14.03 above, FHC(UK)'s obligation to
replace Distributed Product as described in Sections 14.01 and 12.04 above shall
constitute the full extent of FHC and FHC(UK)'s liability in respect of any loss
or damage sustained by MLI for defective Product except for direct costs
incurred by MLI caused by FHC(UK)'s negligence. FHC and FHC(UK) shall not be
liable for any consequential loss or damages, including but not limited to any
loss of business or profit, arising out of or in connection with any act or
omission of FHC.
14.05 FHC and MLI agree that these provisions are fair and reasonable and
that the most suitable method of dealing with any greater loss or damage which
may be incurred by them is by taking out, in their names and at their expense,
such insurance policies as they consider appropriate the particulars of which
shall be notified in writing to the other for inclusion as Appendix C hereto but
in any event without further recourse. In the event FHC or MLI takes out
product liability insurance for the US, it agrees to name MLI or FHC,
respectively, as an additional insured.
14.06 In the event of a claim or demand being brought against either party,
as it relates to the Product or this Agreement, such party shall immediately
notify the other party thereof and the party having responsibility hereunder
shall forthwith at its own cost handle such claim. The party giving notice
hereunder shall provide the other party with such assistance as it may
reasonably require.
10
<PAGE>
15. RECORDS, REPORTING AND ACCESS
-------- --------- --- ------
15.01 MLI shall provide FHC within the first fifteen days following each
semi-annual period following the Effective Date with such records and any other
information as FHC may reasonably require, and provided Mayer Labs has such
other information, concerning its activities during the previous six months and
for the six months thereafter. Such information may include (but without
affecting the general nature of this provision);
(a) market share (most recent data);
(b) a brief description of the general market conditions within the
Territory and of MLI's advertising and promotional activities for the
forthcoming semi-annual period; and
(c) marketing, advertising and promotional plans.
15.02 Subject to the obligations of confidentiality contained herein, MLI
shall provide FHC with:
(a) A quarterly and annual physical inventory report (by the fifteenth
[15th]) day following the end of each calendar quarter and year;
(b) detailed monthly distribution and sales report by number of Units and
packages, by customer, provided that any obligations of confidentiality shall
not in any manner limit FHC's and FHC(UK)'s access to and use of customer
lists/names during or following the term of this Agreement; and
(c) monthly report of returned Product;
15.03 MLI and FHC agree that the response to all customer inquiries relating
to the appropriate use of the Product, complaints about product quality, or
reports that suggest an adverse or unwanted effect of the Product shall be the
exclusive responsibility of FHC. FHC shall conduct any investigations relating
to product quality required by applicable FDA requirements and shall make all
determinations whether reports be made to the FDA. MLI, as requested by FHC,
shall assist FHC in conducting any investigations deemed necessary by FHC. MLI
shall notify FHC within three business days in the event it receives any
complaints regarding product quality or adverse or undesirable effects
temporally associated with use of the Product. FHC shall promptly notify MLI of
the results of any investigation that indicates that Product provided to MLI
does not meet Product specifications and copies of any MDR submitted by FHC to
the FDA.
15.04 FHC shall provide MLI with marketing information regarding the
Product, both inside and outside the Territory, that it may receive from third
parties from time to time and which FHC believes may be relevant or helpful to
MLI; provided that such information is not subject to any third party
non-disclosure obligations and is subject to the obligations of confidentiality
contained herein.
11
<PAGE>
16. CONFIDENTIALITY
---------------
16.01 FHC and MLI agree that any and all information emanating from the
other or any of their respective associated companies and not publicly known
(including public information in a compilation which is not publicly known) but
not including,
(a) information that, at the time of disclosure, is publicly known,
(b) information that, after disclosure, becomes publicly known other than as
a result of a breach of this Agreement,
(c) information that the recipient can show was known to it prior to the
disclosure, and
(d) information that the recipient can show was made known to it by a third
party who was entitled to do so and who did not impose any obligation of
confidentiality or restricted use,
is confidential and proprietary to the party from whom it has emanated or its
associated companies, as the case may be.
16.02 FHC and MLI agree that they will not during or after the termination
of this Agreement use or disclose for any unauthorized purpose any such
confidential information. FHC and MLI each accept full responsibility for any
unauthorized use or disclosure of the other's confidential information by it or
persons to whom it has disclosed the information, however caused.
17. TRADEMARK
---------
17.01 FHC is the proprietor of the trademark described in Appendix B to this
Agreement and/or its substitutes (the "Trademark") under which the Distributed
Product is to be marketed by MLI.
17.02 MLI shall not sell the Distributed Product under any other name or
mark than the marks used or approved by FHC in relation to the Product nor
remove or obliterate those names or marks from the Product nor make any other
alteration to the Product, its packaging or its labeling.
17.03 FHC reserves all its rights in the Trademark but hereby grants to MLI
the exclusive right during the term of this Agreement to use the Trademark, or
any future trademark agreed by the parties, in the Territory in connection with
the promotion and marketing of the Distributed Product under Sections 4 and 5 of
this Agreement, subject to FHC's right to use the Trademark or any future
trademark other than with respect to the sale and distribution of Distributed
Product.
12
<PAGE>
17.04 The use of the Trademark by MLI shall at all times be in keeping with
and maintain its distinctiveness and reputation as determined by FHC and MLI
shall immediately cease any use not consistent therewith upon the reasonable
direction of FHC in that respect.
17.05 MLI shall not use any mark that can be reasonably expected to cause
confusion with the Trademark in its own corporate name or trading style on any
product whatsoever. This obligation shall survive the termination or expiry of
this Agreement and any extensions thereof.
17.06 FHC agrees to indemnify and hold harmless MLI, its associated
companies and its respective directors, officers and employees against any and
all claims, demands, proceedings, costs and expenses, including attorney fees,
if any, which may be brought against, suffered or incurred by MLI or its
respective directors, officers and employees with respect to any infringement by
or misuse of the Trademark, other than as may be due to the negligence, or
wrongful act, of MLI.
17.07 Notwithstanding anything to the contrary contained in this Section 17,
during the term of this Agreement or any renewal thereof, MLI shall have the
right to establish a division within MLI under the name "Female Health Company,
US Distribution", and with the prior review and approval of FHC, apply stickers
to current inventory assumed by MLI pursuant to Section 12 above, and modify
future Distributed Product packaging to be supplied by FHC(UK), to reflect
distribution by MLI under the foregoing name. MLI shall not take any action to
register or file any documents with any governmental authority regarding its use
of the name "Female Health Company, US Distribution, without the prior review
and written approval of FHC.
17.08 MLI shall assume full responsibility with respect to the use of the
name "Female Health Company, US Distribution" under this Agreement and
compliance with all applicable laws and regulations. MLI agrees to indemnify
and hold harmless FHC, its associated companies and its respective directors,
officers and employees against any and all claims, demands, proceedings, losses,
costs and expenses which may be brought against, suffered or incurred by FHC or
its or their respective directors, officers and employees, as a result of the
use of said name.
18. INTELLECTUAL PROPERTY
18.01 Nothing in this Agreement shall entitle MLI to any rights in (other
than the rights contained in Sections 17.03 and 17.07 of this Agreement) or to
any Intellectual Property Right (as defined below) owned, controlled or used by
FHC or any of its associated companies. All such rights, together with all
associated goodwill, are and shall remain the sole property of FHC or its
associated companies as the case may be.
13
<PAGE>
18.02 MLI shall take all steps which FHC may from time to time consider to
be necessary to perfect or protect FHC's Intellectual Property Rights including
(but without limitation) carrying out any act FHC requires in connection with
any registration and FHC shall reimburse MLI with any disbursements in
connection herewith reasonably incurred by it with FHC's prior written approval.
18.03 MLI shall inform FHC promptly of any potential or actual infringement
of any of FHC's Intellectual Property Rights and shall provide all assistance
and information required by FHC in connection with any such infringement and
shall, if FHC so requests, join in any court or other proceedings relating to
such infringement. FHC shall reimburse any disbursements reasonably incurred by
MLI in connection herewith with FHC's prior written approval.
18.04 In this Agreement, "Intellectual Property Rights" include, but are not
limited to, any copyright, patent, registered design, unregistered design, logo,
know-how, the Trademark and any other trademark, trade name or other
designation, or get-up and any similar rights in any part of the world owned or
used by FHC or any of its associated companies. Nothing contained in this
Agreement shall in any manner be deemed to require FHC or any of its associated
companies to take any action with respect to, defend, or maintain, any
Intellectual Property Rights.
19. FORCE MAJEURE
----- -------
19.01 Neither party shall be liable for any failure to fulfill or delay in
fulfilling any of its obligations under this Agreement (other than an obligation
to pay monies) caused by any circumstances beyond its reasonable control,
including but not limited to war, riot, civil commotion, accident, fire, flood,
Act of God, strike, lock-out or other industrial dispute (whether affecting
FHC's own employees or those of MLI), legislative or administrative
interference, inability to obtain raw materials, provided that if the period of
default continues for more than 6 months the other party shall be entitled to
terminate the Agreement forthwith by notice in writing.
20. TERMINATION
-----------
20.01 In addition to Section 3.01, this Agreement may be terminated:
(a) By FHC or MLI at any time upon not less that ninety (90) days written
notice; or
(b) by FHC or MLI if the other is in material breach of any term of this
Agreement, including but not limited to Sections 5.03 or 6.01(b), or of an
individual contract for the purchase of the Product and the defaulting party
fails to remedy such breach within 30 days of receipt of written notification
requiring it to do so; or
14
<PAGE>
(c) by FHC if MLI enters into or proposes voluntary or involuntary
arrangement or composition with its creditors or reconstruction of its debts or
if its directors make a declaration of solvency for the purpose of a members
voluntary winding up, or if notice is given of a creditors winding up, or if a
special resolution is passed that MLI be wound up by the court, or if an
administrative or other receiver is appointed, or if the court makes an
administration order or order that MLI be wound up by the court, or if MLI
ceases to carry on its business or is unable to pay its debt; or,
(d) by MLI if FHC enters into or proposes voluntary or involuntary
arrangement or composition with its creditors or reconstruction of its debts or
if its directors make a declaration of solvency for the purpose of a members
voluntary winding up, or if notice is given of a creditors winding up, or if a
special resolution is passed that FHC be wound up by the court, or if an
administrative or other receiver is appointed, or if the court makes an
administration order or order that FHC be wound up by the court, or if FHC
ceases to carry on its business or is unable to pay its debt; or,
20.03 Termination of this Agreement shall not affect the continuing validity
and enforceability of Sections 14, 16, 17, 18 and 21.
21. CONSEQUENCES OF TERMINATION
------------ -- -----------
21.01 Upon termination of this Agreement for whatever reason or its expiry:
(a) MLI's authority to sell Distributed Product which have not been paid
for, if applicable, shall cease, and all such Product and other property of FHC
or its associated companies in MLI's possession or control shall, at FHC's
request, be immediately delivered to FHC or its designee (or at FHC's option,
made available for collection by it, for which purpose FHC's representatives are
granted access to any place where such Product may be) and all monies owed by
MLI to FHC or FHC(UK), as the case may be, in respect of those of the
Distributed Product not paid for, if applicable, but sold or supplied by MLI
prior to the withdrawal of MLI's authority shall immediately be paid to FHC or
FHC;
(b) any or all stocks of Product in saleable condition owned by MLI be
repurchased by FHC or its nominee within 30 days of notice of termination at
landed cost price;
(c) MLI shall cease to represent in any way that it is an authorized
distributor of the Product and shall return to FHC all non-proprietary
advertising material, customer records and other documents as well as
demonstration equipment belonging to FHC and shall not make any further use of
any of FHC's or its associated companies' Intellectual Property Rights,
including the name "Female Health Company, US Distribution;
15
<PAGE>
(d) MLI shall use its best endeavors to provide FHC with the names and
addresses of all customers, as of the effective date of this Agreement to whom
it has sold the Product and FHC reserves the right to inform those customers of
termination of this Agreement howsoever occasioned;
(e) MLI shall assign, as may be assignable, to FHC within 30 days of notice
of termination free of charge all approvals, consents, registrations and
licenses (if any) relating to the marketing and sale of the Product and execute
all documents and do all things necessary so that FHC shall have the benefit of
such approvals, consents, registrations and licenses; and
(f) Within 15 days following notice of termination, MLI and FHC will meet to
agree upon all procedures, options and obligations outlined in Section 21. At
such meeting the parties shall determine guidelines regarding the release and
content of communication relating to the termination and the effects hereof to
any third person. From the time of such meeting, FHC shall be free to contact
any customer of MLI.
(g) In the event FHC terminates this Agreement pursuant to Sections 3.01 or
20.01(a), FHC shall pay to MLI, within thirty (30) days following the effective
date of termination, an amount equal to one hundred percent (100%) of the net
sales of the Distributed Product effected by MLI during the twelve (12) months
prior to receipt of notice of termination. The payment contemplated by this
Section constitutes the sole and exclusive remedy of MLI for any termination of
this Agreement by FHC as stated above.
(h) In the event MLI terminates this Agreement pursuant to Sections 3.01(i)
or 20.01(a), MLI shall pay to FHC, within thirty (30) days following the
effective date of termination, an amount equal to the required minimum purchase
requirements under Section 6.01(b) for the twelve (12) month period prior to
receipt of notice of termination. The payment contemplated by this Section
constitutes the sole and exclusive remedy of FHC for any termination of this
Agreement by MLI as stated above.
22. RELATIONSHIP OF THE PARTIES
------------ -- --- -------
22.01 FHC and MLI agree that the relationship between them shall be that of
independent contractor. MLI shall not assume any obligations, nor make any
representations, on behalf of FHC or its associated companies nor bind them in
any manner whatsoever. MLI is not the agent or partner of FHC or its associated
companies. Nothing in this Agreement shall affect MLI's freedom to select the
prices at, and terms on which, it resells the Distributed Product.
16
<PAGE>
23. ASSIGNMENT
----------
23.01 MLI may not assign in whole or in part any of its rights under this
Agreement or any rights arising from any individual contract for the purchase of
the Distributed Product without the written consent of FHC, such consent to be
at FHC's sole discretion; provided that if FHC's consent shall have been
unreasonably withheld, then MLI may elect to terminate this Agreement and
receive a payment in the amount specified in Section 21.01(g).
23.02 FHC shall be entitled to assign in whole or in part any of its rights
under this Agreement or arising from any individual contract for the purchase of
the Product without the prior consent of MLI.
Any assignment by FHC shall be subject to the terms and conditions of this
Agreement.
Should FHC assign its rights and obligations according to this Agreement to any
third party in the Territory, being a major competitor of MLI, MLI shall be
entitled to terminate this Agreement by giving not less than ninety (90) days
written notice. In such an event, MLI will not be obligated to the payment
requirements, stated in Section 21.01(h).
24. NOTICES
-------
24.01 Notices shall be in writing sent to FHC and MLI at their respective
addresses first set forth above, or to such other address as may from time to
time (by notice to the other party) be designated, and notices shall be deemed
to have been duly given;
(a) on the date of delivery if delivered by hand;
(b) by facsimile transmission, (FHC at 312-280-9360 and MLI at 510-536-9912)
provided that confirmed copy is mailed within 48 hours following transmission as
provided herein; or
(c) 10 days after the date of posting if sent by registered mail.
In proving service by post, it shall be sufficient to prove the envelope
containing the notice was properly addressed, stamped and posted.
Orders for Product under Section 8 shall be sent to FHC(UK), at 1 Sovereign
Park, Coronation Road, Park Royal, London NW10 7QP, England (facsimile at
011-44-208-453-0324), attention General Manager.
17
<PAGE>
25. ENTIRE AGREEMENT
------ ---------
25.01 This Agreement contains all the terms of the Agreement between FHC and
MLI in respect of the Product, and supersedes all previous representations,
negotiations, arrangements and agreements. The headings in this Agreement are
for convenience of reference only.
25.02 Any variation of this Agreement shall be effective only if agreed or
confirmed in writing and signed by both parties to this Agreement and the
intention to amend this Agreement is clearly expressed.
25.03 The invalidity of any provision in this Agreement shall not effect the
continuing enforceability of the remaining provisions.
25.04 All rights and remedies expressly granted to the parties are
cumulative and do not affect any other rights or remedies which the respective
parties may otherwise have at law.
26. WAIVER
------
26.01 The waiver of any right by either party shall not be construed as a
waiver of the same right at a future date or as waiver of any other right.
27. APPLICABLE LAW
---------------
27.01 This Agreement shall be governed by and interpreted under the laws of
the State of New York. All claims, disputes and other matters in question
between the parties to this Agreement, arising out of or relating to this
Agreement or the breach thereof, shall be decided by arbitration in accordance
with the applicable rules of The American Arbitration Association, then
obtaining, unless the parties mutually agree otherwise. This Agreement to
arbitrate shall be specifically enforceable under the prevailing arbitration
law. Notice of the demand for arbitration shall be filed in writing with the
other party to this Agreement and with a recognized arbitration association.
Arbitration with respect to any notice of demand by FHC shall take place in
Oakland, California, and arbitration with respect to any notice of demand by MLI
shall take place in Chicago, Illinois The demand shall be made within a
reasonable time after the claim, dispute, or other matter in question has
arisen. In no event shall the demand for arbitration be made after the date
when institution of legal or equitable proceedings based on such claim, dispute
or other matter in question would be barred by the applicable statue of
limitations. The award rendered by the arbitrators shall be final, and judgment
may be entered upon it in accordance with applicable law, in any court having
jurisdiction thereof.
18
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
by its duly authorized officer as of the day and year first above written.
THE FEMALE HEALTH COMPANY MAYER LABORATORIES, INC.
By By
------------------------------ ------------------------------------
Name: Mary Ann Leeper, Ph.D. Name: David P. Mayer
Title: President Title: President
19
<PAGE>
APPENDIX A
Definition of Product(s):
Tubular prophylactic plastic barrier device, designed for insertion and
retention in the vaginal canal, for protection against transfer of infectious
matter and against pregnancy during sexual intercourse.
20
<PAGE>
APPENDIX B
Trade Mark:
Class Registration No.
----- -----------------
Reality
21
<PAGE>
APPENDIX C
Details of FHC's and MLI's product liability insurances:
(to be provided)
22
<PAGE>
APPENDIX D
For purposes of Section 5.04, "marketing" shall mean:
- Advertising/promotion materials
- Tradeshow promotion
- In-store promotion
- Coupons
- Additional media advertising, such as radio
provided, that the above shall not include any travel or trade commission
expenditures.
23
